<SUBMISSION>
<ACCESSION-NUMBER>0000912057-00-010998
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>15
<PERIOD>20000129
<FILING-DATE>20000310
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>STAPLES INC
<CIK>0000791519
<ASSIGNED-SIC>5940
<IRS-NUMBER>042896127
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0127
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>000-17586
<FILM-NUMBER>566700
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>500 STAPLES DRIVE
<STREET2>P O BOX 9328
<CITY>FRAMINGHAM
<STATE>MA
<ZIP>01702
<PHONE>508-253-5000
</BUSINESS-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<DESCRIPTION>FORM 10-K
<TEXT>

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<P ALIGN="CENTER"><FONT SIZE=5><B>SECURITIES AND EXCHANGE COMMISSION<BR></B></FONT><FONT SIZE=2><B>Washington, D.C. 20549</B></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=5><B>FORM 10-K</B></FONT></P>

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<P><FONT SIZE=2><B>(Mark One)</B></FONT></P>

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<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=3>/x/</FONT></TD>
<TD WIDTH="91%" ALIGN="CENTER"><FONT SIZE=3><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
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<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=3>&nbsp;</FONT></TD>
<TD WIDTH="91%" ALIGN="CENTER"><FONT SIZE=3><B>or</B></FONT></TD>
</TR>
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<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=3>/&nbsp;/</FONT></TD>
<TD WIDTH="91%" ALIGN="CENTER"><FONT SIZE=3><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934<BR></B></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>For the fiscal year ended</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>Commission File Number</B></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>January 29, 2000</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>0-17586</B></FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=5><B>STAPLES, INC.<BR></B></FONT><FONT SIZE=2>(Exact name of registrant as specified in its charter)</FONT></P>

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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>Delaware</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>04-2896127</B></FONT></TD>
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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2>(State of Incorporation)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2>(I.R.S. Employer Identification No.)</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2><B>Five Hundred Staples Drive, Framingham, Massachusetts 01702<BR></B></FONT><FONT SIZE=2>(Address of principal executive offices and zip code)</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>508-253-5000<BR></B></FONT><FONT SIZE=2>(Registrant's telephone number, including area code)</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Securities
registered pursuant to Section 12(b) of the Act:</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>None</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Securities registered pursuant to Section 12(g) of the Act:<BR></FONT> <FONT SIZE=2><B>Staples Retail and Delivery Common Stock, par value $0.0006 per share<BR></B></FONT><FONT SIZE=2>(Title of each class)</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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.&nbsp;&nbsp;Yes&nbsp;/x/&nbsp;&nbsp;No&nbsp;/&nbsp;/</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is not contained herein, and will not be contained, to the best of the
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form&nbsp;10-K or any amendment to this
Form&nbsp;10-K.&nbsp;&nbsp;/&nbsp;/</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
aggregate market value of the voting stock held by non-affiliates of the registrant, based on the last sale price of Staples Retail and Delivery Common Stock on January&nbsp;29,
2000, as reported by Nasdaq, was approximately $9.6&nbsp;billion. In determining the market value of non-affiliate voting stock, shares of Staples Retail and Delivery Common Stock beneficially owned
by each executive officer and director have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
registrant had 457,942,409 shares of Staples Retail and Delivery Common Stock and 27,348,094 shares of Staples.com Common Stock, both par value $.0006, outstanding as of
March&nbsp;7, 2000.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Documents Incorporated By Reference</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Listed below is the document incorporated by reference and the part of the Form&nbsp;10-K into which the document is incorporated:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Portions
of the Proxy Statement for the 2000 Annual Part III</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Meeting
of Stockholders</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This
Annual Report on Form 10-K contains a number of forward-looking statements. Any statements contained herein (including without limitation statements to the effect that Staples or
its management "believes", "expects", "anticipates", "plans" and similar expressions) that are not statements of historical fact should be considered forward-looking statements. There are a number of
important factors that could cause Staples' actual results to differ materially from those indicated by such forward-looking statements. These factors include, without limitation, those set forth in
"Management's Discussion and Analysis of Financial Condition and Results of Operations&#151;Future Operating Results."</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>PART I</B></FONT></P>

<P><FONT SIZE=2><B>Item 1. Business</B></FONT></P>

<P><FONT SIZE=2><B>Staples</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples, Inc. and subsidiaries ("Staples" or "the Company") pioneered the office products superstore concept and is a leading office products distributor, with
a total of 1,129 retail stores located in the United States, Canada, the United Kingdom, Germany, the Netherlands and Portugal as of January 29, 2000. In addition, Staples has a catalog business, an
electronic commerce business and contract stationer operations.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During
1999, our stockholders approved a Tracking Stock Proposal which allowed us to issue a new series of common stock, Staples.com Stock, intended to reflect the performance of our
electronic commerce business, which operates under the name Staples.com. Staples' existing common stock was reclassified as Staples Retail and Delivery common stock ("Staples&nbsp;RD Stock"),
intended to reflect the performance of our non electronic commerce businesses and a retained interest in Staples.com. From an accounting standpoint, we have separated Staples.com from Staples Retail
and Delivery ("Staples RD"). We have allocated all of our consolidated assets, liabilities, revenue, expenses and cash flow between Staples.com and Staples RD. These two businesses are each sometimes
referred to in this 10-K as a "</FONT><FONT SIZE=2><I>Business</I></FONT><FONT SIZE=2>" and collectively as "</FONT><FONT SIZE=2><I>Businesses.</I></FONT><FONT SIZE=2>"</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples'
executive offices are located at 500 Staples Drive, Framingham, Massachusetts 01702 (telephone: (508) 253-5000). Staples was organized in November 1985 and is incorporated in
the State of Delaware.</FONT></P>

<P><FONT SIZE=2><B>Staples Retail and Delivery</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD includes Staples' retail stores, catalog business, contract stationer operations and a retained interest in Staples.com. This retained interest in
Staples.com was 88% as of January 29, 2000, but will decline as we issue Staples.com Stock under either our stock plans or in one or more public or private financings.</FONT></P>

<P><FONT SIZE=2><B>Staples.com</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com is creating a leading business-to-business electronic marketplace offering a comprehensive solution for the office needs of business customers. We
currently provide an electronic marketplace where small, mid-sized and large businesses can procure office products and business services and obtain business information and expert content. Our
principal web sites, </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> and</FONT> <FONT SIZE=2><I>StaplesLink.com</I></FONT><FONT SIZE=2>, leverage the brand recognition and
fulfillment infrastructure of Staples. By aggregating business customers, we are creating a sales
channel that will provide buyers and sellers with opportunities to realize operating efficiencies by streamlining complex purchasing and distribution decisions and to increase revenue by reaching a
broader customer base.</FONT></P>

<P><FONT SIZE=2><B>Business Strategy&#151;Staples Retail and Delivery</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We view the office products market as a large, diversified market for office supplies and equipment, business machines and computers, and various business
services. Although there are no clear demarcations among segments, we target four principal end-user groups:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>consumers
and home offices;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>small
businesses and organizations with fewer than 100 office workers;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>medium-size
businesses and organizations, which have between 100 and 499 office workers;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>large
businesses with more than 500 office workers.</FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>


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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our
ability to address all four major end-user groups increases and diversifies our available market opportunities, increases awareness of the Staples name among customers in all four
end-user groups, who often shop across distribution channels, and allows us to enjoy a number of important economies of scale such as increased buying power, enhanced efficiencies in distribution and
advertising, and improved capacity to leverage general and administrative functions.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
effectively reach different sectors of the office products market through different channels of distribution designed to be convenient to each targeted market sector. Our in-store
operations seek to address the retail needs of customers, while our delivery operations focus on customers who desire delivery of their office products and other specialized services.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
maintain our historical focus on being a low cost operator and believe that we have significant opportunities to reduce costs as a percentage of sales. We believe that our future
expansion will enable us to leverage certain fixed costs in store operations, marketing, distribution and administration. We also seek to enhance productivity through improvements in operating
practices.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
continue to increase staffing levels in stores and delivery operations and to make other investments to provide better customer service. In addition, we continue to drive a
corporate-wide C.A.R.E. (Customers, Associates, Real Communications and Execution) program designed to empower associates to exceed customer expectations for service by providing "great service, every
day, every way" and have implemented programs that tie a portion of incentive compensation to achievement of customer satisfaction goals.</FONT></P>

<UL>

<P><FONT SIZE=2><B><I>North American Superstores</I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our North American retail operations, consisting of 991 stores as of January 29, 2000, are our core business, generating a substantial majority of our sales
and profits. Our retail operations focus on serving the needs of customers primarily in the consumer, home office and small business segments of the office products market. We are devoting significant
resources and efforts to profitably increasing our retail sales per store in both North America and Europe. These initiatives cover a wide-range of store operations, including product and service
offerings, inventory planning, staffing, customer satisfaction and improvements in store design.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
are continuing our store growth program. In fiscal year 1999, we opened 152 stores in North America and 23 stores in Europe. In fiscal 2000, we intend to open approximately 150
stores in North America and 20 stores in Europe. Our store growth strategy follows a three-pronged approach of
continuing the growth of our store network in existing markets, entering smaller markets within both existing and new geographic areas, and entering major new markets. To support this commitment, we
are also taking steps to strengthen our infrastructure, including our distribution capabilities.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Superstores.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our North American superstores are located in 44 states, the District of Columbia and 10 Canadian
provinces in both major metropolitan markets and smaller outlying markets. Our current superstore prototype is approximately 24,000 square feet. Our strategy for our North American superstores focuses
on four key objectives:</FONT></P>

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<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>provide
superior customer value through a combination of broad product selection, everyday low prices, outstanding customer service and convenient
locations;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>increase
our presence in targeted markets by adding new superstores and achieving economies of scale in most of the major markets where we compete;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reduce
operating costs to the lowest level consistent with providing quality merchandise and service; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>offer
a comfortable, easy to shop store environment with skilled sales associates available to assist the customer.</FONT></DD></DL>
</UL>
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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Express Stores.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In select urban markets, we operate a smaller store format, "Staples Express", which offers a more
focused assortment of products. These smaller stores give us the opportunity to meet the office supply needs of customers in a store format that is efficient and economical in an urban environment.
Staples Express stores range from approximately 6,000 to 10,000 square feet. During fiscal year 1999, Staples introduced two airport stores to meet the needs of the business traveler each of which are
approximately 1,500 square feet.</FONT></P>

<UL>

<P><FONT SIZE=2><B><I>North American Delivery Operations</I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our delivery operations of Staples RD are comprised of two principal operations:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Our
catalog businesses, operating under the names "Staples Direct" and "Quill Corporation;" and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Our
contract stationer businesses, operating under the names "Staples National Advantage" and "Staples Business Advantage."</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
are implementing a number of actions to grow our delivery business. These actions include: broadening product offerings; offering specialized, more focused marketing initiatives;
and expanding distribution capacity.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples Direct.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Operating since 1990, Staples Direct, our direct mail catalog business, reaches all targeted segments
of the office products market seeking the convenience of telephone ordering and free next day delivery for orders over $50. Delivery orders are shipped from our delivery distribution centers and are
distributed through dedicated delivery hubs. In some markets, we also deliver products directly from our retail stores. We market Staples Direct through both direct mail catalogs and a sales force
primarily focused on generating new accounts.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Quill Corporation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Acquired in May 1998, Quill is a direct mail catalog business with a targeted approach to servicing
the business product needs of more than 750,000 medium sized businesses in the
United States. Quill markets primarily through the distribution of catalogs designed to meet the needs of specific customer segments. Quill offers outstanding customer service, a superior private
label product, and special services to attract and retain its customers.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples National Advantage and Staples Business Advantage.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our contract stationer operations focus primarily on serving
the needs of medium- to large-size businesses that sometimes may seek more services than are provided by a traditional retail or mail order business, such as customized pricing, payment terms, usage
reporting and the stocking of certain proprietary items. Our contract stationer business is divided into two segments. Staples National Advantage is a nationwide contract stationer business focused on
selling to large multi-regional businesses. Staples Business Advantage focuses on selling to medium- and large-size regional companies and has the flexibility to handle smaller accounts. We initially
established this business through acquisitions of regional contract stationers, and more recently have entered certain metropolitan markets through the expanded sales and distribution capabilities of
Staples Business Advantage.</FONT></P>

<UL>

<P><FONT SIZE=2><B><I>International</I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We started doing business in Europe in 1992. As of January 29, 2000, Staples, through its wholly owned subsidiaries, operates 63 stores in the United Kingdom,
47 stores in Germany, 21 stores in the Netherlands and 7 stores in Portugal, with delivery operations in the United Kingdom and Germany. During 1999, we completed the acquisition of three European
office supply companies which included 42 office supply superstores, with 15 stores in Germany, 21 stores in the Netherlands and 6 stores in Portugal. We also expanded Quill's operations into the
United Kingdom during fiscal year 1999.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<P><FONT SIZE=2><B>Business Strategy&#151;Staples.com</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our three principal web sites, </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> and</FONT> <FONT SIZE=2><I>StaplesLink.com</I></FONT><FONT
SIZE=2>, leverage the brand recognition and fulfillment infrastructure of Staples. Each of our web sites is targeted to the needs of a
particular segment of our customer base:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Staples.com&nbsp;</I></FONT><FONT SIZE=2>is our core electronic marketplace for small businesses, home offices and
consumers. The web site provides complete, on-site transaction processing for the purchase of over 130,000 office products and services. </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>also
hosts our Business Solutions Center, which will be the site of our business-to-business trading hub, messaging boards and other interactive features.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Quilcorp.com&nbsp;</I></FONT><FONT SIZE=2>leverages the strength of the Quill brand name in the catalog-order office
products market to sell to small and mid-sized businesses. Quill, which was acquired by Staples in 1998, has been a direct retailer of office products through catalogs for over 40 years.
&nbsp;</FONT><FONT SIZE=2><I>Quillcorp.com </I></FONT><FONT SIZE=2>&nbsp;offers over 20,000 office products from Quill's direct mail catalogs, including Quill's private label
products.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>StaplesLink.com&nbsp;</I></FONT><FONT SIZE=2>leverages the strength of the Staples brand name in the contract stationers
market to provide online procurement of office products for large businesses. </FONT><FONT SIZE=2><I>StaplesLink.com&nbsp;</I></FONT><FONT SIZE=2>offers the highest level of procurement
functionality of our web sites, including customized pricing, payment terms, usage reporting and full service account management designed to appeal to businesses which require high levels of
procurement control.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our
objective is to create the leading business-to-business electronic marketplace offering a comprehensive solution for the office needs of our business customers. We seek to provide
a single online destination where businesses can procure a broad array of office products and business services, access
and exchange business information and expert content and conduct electronic commerce transactions with each other. Key elements of Staples.com's strategy include:</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Capitalize on Staples Relationship.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's relationship with Staples provides it with significant competitive
advantages. We plan to continue to leverage these advantages, such as Staples' top brand name among small businesses, large product selection, purchasing power and national distribution capabilities,
to generate sales and traffic on our web sites.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Grow Customer Base.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We plan to aggressively acquire new business customers and drive repeat purchases by leveraging our
strong brand franchise, providing easy access to a wide selection of products, services and information and utilizing Staples' and Quill's extensive direct marketing experience, sophisticated
marketing techniques and high-quality customer service. Additionally, we intend to generate incremental sales from Staples' existing customers by offering them an additional distribution channel for
their purchases and by offering them a variety of business services. We conduct various cross-marketing, co-promotion and customer acquisition programs with Staples to leverage Staples' database of
approximately 8,000,000 business customers. We utilize information about our customers to help us identify market needs, enhance our web sites and effectively tailor our market strategy. We also
expect to generate sales from our electronic kiosks in Staples' retail stores where customers can purchase products online that are not available in the store.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Leverage High-Quality Customer Traffic.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's product and service offerings drive high quality and high
frequency traffic to our web sites. We plan to further grow our sales by offering a complement of business services, both through our partners and our RFQ marketplace, which are intended to cause
buyers and sellers to visit our web sites to access this network of small and mid-sized businesses and vendors. As the number of visitors to our electronic marketplace grows, we believe that a greater
diversity of buyers and service providers will be attracted, which, in turn, should create a viral network effect increasing the amount of customer traffic to our web sites.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>


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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Apply Sophisticated Direct Marketing Techniques.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We plan to take advantage of Staples' and Quill's significant direct
marketing expertise, as well as the customer profile information that we gather through our web sites, to tailor our products and service offerings to the individual needs of our customers.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Build Online Brand Awareness.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We will continue to invest in building our online brands and in communicating the
benefits and convenience of shopping at our web sites. We believe that we are well positioned to establish </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>,</FONT> <FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> and </FONT><FONT
SIZE=2><I>StaplesLink.com</I></FONT><FONT SIZE=2> as premier online brands for office products and services, related
business information and community. We benefit from our relationship with Staples through multiple cross-marketing initiatives. For example, Staples' print advertising and circulars typically contain
the </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> web site address. We plan to continue to use local and national media, including online, television, radio, print and outdoor
advertising, to further enhance our online brand. In addition, we will continue to enter into online marketing arrangements. For example, we are featured as the premier office supply and services
merchant on Yahoo! Small Business.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Continually Enhance the Customer Experience.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We seek to continually enhance our web sites based on our targeted
customers' preferences and needs. Our web sites allow us to gather significant data on customer browsing and shopping preferences. We use this information to dynamically change our product offerings
to meet the changing preferences and needs of our targeted customers. We also use this information, as well as online questionnaires, to refine the layout and performance of our web sites. In early
2000, we plan to launch newly designed versions of our web sites with enhanced functionality. We expect that continued enhancements of our web sites will make shopping with us more efficient and
generate increased customer satisfaction.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Expand Strategic Alliances.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We will continue to use strategic alliances and equity investments, such as those we have
with BizBuyer.com, DSL.net, HotOffice Technologies, Register.com and Point.com, to expand our business service offerings, gain entry into new markets and drive traffic to our web sites. Staples.com's
relationship with Staples enables it to establish strategic alliances with partners seeking to establish cross-marketing relationships with Staples and Staples.com.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Expand Internationally.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We plan to expand our offerings in Canada through Staples.com of Canada,</FONT> <FONT SIZE=2><I>BusinessDepot.com</I></FONT><FONT SIZE=2> and Bureau
en Gros, the online outlets of Staples' Canadian retail stores. These sites are available in French and English. We believe
that the experience we gain in Canada will enable us to expand efficiently into Europe and other international markets in the future.</FONT></P>


<P><FONT SIZE=2><B>Products, Services and Purchasing</B></FONT></P>

<P><FONT SIZE=2><I>Products and Services</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We tailor our product mix to meet the needs of our customers by regularly evaluating sales and profit performance for each of our SKUs. In order to minimize
unit costs and selling prices, we sell most products in multi-unit packages. The lot sizes are designed to be large enough to be cost effective without being burdensome to our small business
customers.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
guarantee low prices to our customers and will not only match competitive prices but will also pay 55% of the price difference (up to $55) as a credit towards future purchases. We
continuously compare our pricing against other discount office supply stores, local stationers, warehouse clubs, mass merchants, computer superstores, consumer electronics retailers, electronic
commerce distributors and mail order stationers to ensure that our strategy of maintaining everyday low prices is achieved.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
offer our customers an array of services. Customers may place orders by telephone for delivery or for customer pickup or via the Internet. Customers may pay with MasterCard, Visa,
American Express, Discover, or the Staples private label credit card, in addition to check or cash. We also offer customers an option to lease business machines and computers through a third party
lessor with varying terms. In our retail stores we offer high-speed and self-service copying, overnight mailing, faxing and other print services</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>as
well as payroll services, build to order computers, telecommunications through Staples Communications and other such services for our customers. Our return policy entitles customers to return all
goods, except computers, business machines, printers and software, in original packaging within 30 days after the date of sale for a full refund; computers, business machines and printers must be
returned in original packaging within 14 days to obtain a full refund. Software packages must be unopened to obtain a full refund within 30 days; open packages will be exchanged only for the same
title.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our
delivery operations carry many of the same products that are sold in retail stores. The contract stationer catalog typically offers products with unique pricing, billing and other
services available to each customer.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com
offers a wide range of competitively priced products selected to meet the needs of the customers. Staples.com's merchandisers work closely with the Staples and Quill
merchandise departments to select quality brands and products to feature on the web sites. Staples.com's products are organized into categories similar to those of Staples RD but Staples.com includes
a more expansive array of products including approximately 130,000 products.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com
is creating a leading business-to-business electronic marketplace offering a comprehensive solution for the business service needs of small, mid-sized and large
businesses. </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> currently offers multiple business services in conjunction with strategic partners who are selected for their quality and
reliability. </FONT><FONT SIZE=2><I>Staples.com's</I></FONT><FONT SIZE=2> business service offerings are designed to reduce the time that small businesses expend researching, finding and engaging
quality service providers. </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> seeks to provide a full suite of services which assists customers in every aspect of establishing and managing
their office. </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> currently offers Internet services which include web site hosting and electronic commerce, web site domain registration and
Internet access; office services which include online business printing and intranet services; financial services which include payroll processing and credit; and communication services which include
business communications systems and software, voice, data and network solutions and cellular products and services. In addition, </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> plans to
expand its electronic marketplace, through its relationship with BizBuyer.com to enable customers to request quotes from a network of over 20,000 service providers offering over 40 services.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows sales by each major product line for Staples as a percentage of total sales for the periods indicated:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="52%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="44%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="52%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>January 29, 2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>January 30, 1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>January 31, 1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Office supplies, services and other supplies</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>43.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>45.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>48.6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Business machines and telecommunications services</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>26.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>23.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>22.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Computers and related products</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>23.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>22.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>20.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Office furniture</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>8.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>8.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2><I>Purchasing and Vendor Selection</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We select our vendors based upon quality, price, delivery reliability and, where appropriate, customer brand recognition for all Staples sales channels. We
believe we are able to purchase merchandise at attractive costs in large part because of our centralized distribution facilities. We can purchase truckload quantities of attractively priced,
high-quality products from multiple vendors and thereby achieve substantial cost savings in each product category. In addition, we are able to obtain favorable pricing due to the volumes in which we
purchase our products.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
offer several hundred private label items, including copy paper, staplers, envelopes, mailing and shipping supplies, a variety of fastening supplies, chairs, computer accessories,
calculators and diskettes. Through our global product sourcing program, we are able to procure private label products at a lower
cost than brand name products.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Currently,
we purchase products from several hundred active vendors worldwide. We believe that competitive sources of supply are available for substantially all products we carry. Our
buying and merchandising staff centrally perform all product purchasing and merchandise planning for all customer channels with the assistance of integrated computer systems.</FONT></P>

<P><FONT SIZE=2><B>Supply Chain Initiatives</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We operate centrally located distribution centers across the United States to service the majority of our replenishment and delivery requirements for our U.S.
retail, catalog and electronic commerce operations. Most products are shipped from our suppliers to the distribution centers for reshipment to our stores and delivery hubs, or are directly shipped to
customers. The distribution centers employ state of the art warehouse management systems and radio frequency technology, just-in-time replenishment procedures and material handling equipment that help
to minimize overall inventory levels while maintaining optimal in-stock positions at the store level. Product processing and ticketing are performed at the distribution center to improve labor
efficiency and reduce cost. Products generally are delivered to our stores within 48 hours after our automated replenishment system generates an order for the product based on daily point of sale
information. </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> and </FONT><FONT SIZE=2><I>StaplesLink.com</I></FONT><FONT SIZE=2> are directly tied to Staples' fulfillment centers enabling
customers to promptly determine whether ordered products are available.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
believe our distribution centers provide us with significant labor, merchandise and inventory shrinkage savings by centralizing receiving and handling functions and by enabling us
to purchase in full truckloads from suppliers. We believe that the reduction in the number of purchase orders and invoices processed results in significant administrative cost savings. Our centralized
purchasing and distribution systems also permit store employees to spend more time on customer service and store presentation.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Since
the distribution centers maintain backup inventory, in-store inventory requirements are reduced and we operate smaller gross square footage stores than would otherwise be
required. Smaller store size reduces our rental costs in the expensive markets in which we currently operate and allows us improved flexibility in locating stores more closely to our target customers.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
continue to enhance our distribution network to support our operations. We recently opened two new distribution centers: Terre Haute, Indiana (550,000 sq. ft.) in January 2000 and
Rialto, California (495,000 sq. ft.) in January 1999 . During fiscal year 1997, we also opened Killingly, Connecticut (310,000 sq. ft.) in January 1998 and Hagerstown, Maryland (840,000 sq. ft.) in
March 1997 . These four new facilities are expected to replace a network of approximately 11 distribution centers formerly used to support U.S. retail operations.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
1999, Staples opened distribution centers in three new markets, Stockton, California, Charlotte, North Carolina, and Vancouver, Canada, to further support the catalog and contract
division. In late 1998, Staples retrofitted the former retail Putnam/Plainfield, Connecticut distribution center (380,000 sq. ft.) to support all three channels of its catalog and contract division.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com
maintains no inventory but rather sells products maintained as inventory in Staples' delivery operations' nationwide network.</FONT> <FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> and </FONT><FONT SIZE=2><I>StaplesLink.com</I></FONT><FONT
SIZE=2> are directly tied to Staples' fulfillment centers enabling customers to
promptly determine whether ordered products are available. Staples.com typically can fill approximately 80% of all U.S. orders from Staples' in-stock inventory. Staples.com products are delivered
through third-party couriers and Staples' delivery fleet.</FONT></P>

<P><FONT SIZE=2><B>Marketing Strategy&#151;Staples Retail and Delivery</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We pursue a variety of marketing strategies to attract and retain target customers. These strategies include broad-based media advertising such as radio,
television, newspaper circulars, Internet and print advertising as well as catalogs and a sophisticated direct marketing system. In addition, we market to larger companies through a combination of
direct mail catalogs, customized catalogs and a field sales force. We</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>change
our level of marketing spending as well as the mix of media employed depending upon market, competitive and cost factors. This flexible approach allows us to optimize the effectiveness and
efficiency of our marketing expenditures.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
1999, we continued to invest in our nationally recognized television campaign and began to supplement our spot television schedule with network ads. This television advertising is
designed to raise awareness of Staples and penetration levels for both the household and business customer segments across the country. In addition, we expanded our print advertising campaign in order
to support key product categories. We also have the naming rights agreement with L.A. Arena Company, LLC, which designed the Staples Center, a new state of the art sports and entertainment complex in
downtown Los Angeles, which opened in 1999. This agreement provides us with marketing, promotional and signage rights, community-based programs and various amenities in the Staples Center for 20
years.</FONT></P>

<P><FONT SIZE=2><B>Marketing Strategy&#151;Staples.com</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com has designed its marketing strategy to build awareness of the Staples.com brands, increase traffic to its web sites, encourage repeat business and
expand its customer base. We use both online and offline marketing to carry out our marketing strategy. Our online marketing includes e-mail promotions and special programs, such as special pricing on
key items. We have established online marketing relationships with several leading web sites that feature integrated links to our web sites. For example, we are featured as the premier office supply
and services merchant on Yahoo! Small Business. Our offline marketing includes traditional advertising on television and in other media, which is often combined with advertising for Staples'
superstores. Advertising for Staples.com is often included in direct marketing for Staples' retail stores and catalogs. As part of Staples' multi-channel promotions, Staples includes the</FONT> <FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> web
site address in its print advertisements and catalogs and promotes </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> as one of
its "three ways to save", in addition to its well established retail stores and catalog operations. In marketing to small and mid-sized businesses, we utilize sales representatives in Staples' catalog
operations, which consisted of 250 employees as of February 16, 2000. In marketing to </FONT><FONT SIZE=2><I>StaplesLink.com's</I></FONT><FONT SIZE=2> large business customers, we utilize Staples
contract stationers' sales force, which consisted of 505 employees as of February 16, 2000. We also take advantage of the telemarketing resources of both Staples and Quill to market our web sites. We
seek to further benefit from our relationship with Staples by placing kiosks linked to our web sites in Staples' retail stores.</FONT></P>


<P><FONT SIZE=2><B>Operations&#151;Staples Retail and Delivery</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We strive to be the lowest cost operator of office products servicing our targeted customers. We seek to create stores that appeal to our target customers for
their broad selection, everyday low prices, convenience, shopability and helpful service. Our stores typically are open seven days per week.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our
retail stores display inventory according to a plan-o-gram that designates graphically the place each item in each section of the store is displayed and specifies the quantity to
be stocked. Related items are
typically grouped together for customer convenience. Store layouts are as uniform as the various facilities allow, so that products destined for stores can be picked at the distribution center to
match store aisles.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our
computer systems replenish inventory levels for each SKU by store based on our rate of sale and variability in rate of sale. Sales and inventory levels are tracked by SKU at each
store through our point-of-sale system and are transmitted nightly to our host computer. Reorders from the distribution center are processed so that inventory arrives at our stores as needed.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Stores
are brightly lit and products are attractively displayed. Employees are available to consult on purchases, particularly in our furniture, business machines and computer
sections, where customers often need assistance in decision-making. This positions us to offer our customers more technology solutions such as Build to Order computers as well as computer upgrades and
services through the Staples Tech</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>Center.
Also included are enhanced product assortments in furniture, paper and technical office supplies. In the services category, the current store model promotes the Staples Copy Center and
Business Solution Center with enhanced services and, where market conditions warrant, expanded copy centers. Our current superstore prototype is approximately 24,000 square feet, which allows for
enhanced business services, product depth and capital goods sales. Where possible, we have expanded existing stores to fit the current format. We committed to a plan during 1998 to close and relocate
stores that are not deemed appropriate for expansion or upgrade to the current store model.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
have continued to make an investment in computer-based, multi-media training programs to upgrade staff selling skills and improve customer service at our retail stores and delivery
operations. Much of the training targets sales of capital goods such as fax machines, copiers, furniture and computers. Additionally, we continue to increase our efforts to improve our in-stock
position as well as expand the product depth in certain key categories in order to best serve our customers.</FONT></P>


<P><FONT SIZE=2><B>Operations&#151;Staples.com</B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Technology:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com has implemented a broad array of scalable electronic commerce, site management, search, and
customer interaction services and systems that we use to process customers' orders and interact with customers. These services and systems use a combination of our own technologies, Staples'
technologies and commercially available, licensed technologies. The systems that we use to accept and process customers' orders are integrated with the order management, payment processing,
distribution, accounting and financial systems of Staples. We focus our internal development efforts on creating and enhancing specialized software that is unique to our online business. We use a set
of applications for:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>accepting
and validating customer orders for products;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>transmitting
orders to Staples for processing and fulfillment;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>interacting
with customers for customer service and other purposes; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>connecting
to third parties for sale and delivery of certain products and services to customers.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our
systems have been designed based on industry standard architectures and have been designed to reduce downtime in the event of outages or catastrophic occurrences. Our web systems
hardware is
hosted at third-party facilities in Beltsville, Maryland, Hopkinton, Massachusetts and Philadelphia, Pennsylvania. The associated Staples systems hardware resides at Staples facilities in Framingham,
Massachusetts and Quill facilities in Lincolnshire, Illinois. We have implemented load balancing systems and our own redundant servers to provide for fault tolerance of our web systems.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Customer Service:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com has a dedicated customer service staff and also utilizes Staples' customer service
representatives. They handle questions about orders and assist customers in finding desired products and services. Staples.com's customer service representatives share the call center infrastructure
of Staples. Staples.com's sophisticated e-mail management system and Staples' telephone Automatic Call Distributor allow Staples.com to prioritize incoming contacts, route them to the appropriate
customer service representatives and respond in a timely fashion. Staples.com's customer service representatives, customer phone calls and customer e-mails are valuable sources of feedback regarding
customer satisfaction. In addition, by providing Staples.com's customer service function in-house, Staples.com maintains a direct relationship with its customers. Staples.com also uses an online
market research company to obtain monthly customer feedback. This information is used to determine opportunities for improvement and to evaluate areas of success. Our web sites also provide several
service options, including FAQs, e-mail, live help through toll free 800 numbers, as well as a list of nearby store locations.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

<P><FONT SIZE=2><HR
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<P><FONT SIZE=2><B>Associates and Training</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples places great importance on recruiting, training and providing the proper incentives for quality store level personnel. Staples recruits actively on
college campuses and also hires talented individuals with experience in successful retail operations. Additionally, current associates are rewarded for recruiting new associates.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
considers customer relations and its associates' knowledge of office products and office-related capital goods to be significant to its marketing approach and its ability to
maintain customer satisfaction. New management trainees advance through the store management structure by taking on assignments in different areas as they are promoted. Store and call center employees
prepare for new assignments by studying training modules, including written manuals, video instruction and self-testing, that are prepared by Staples and others. These associates are trained in a
number of areas, including, where appropriate, sales techniques, management techniques and product knowledge.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com
uses Staples' personnel for certain functions, including financial and accounting services, information system services, certain selling and marketing activities, certain
merchandising and replenishment services, transportation and warehouse management services, certain customer service activities, executive management, human resources, legal and corporate planning
activities. As a result, Staples.com pays an allocated portion of Staples' expenses.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
offers eligible associates the opportunity to acquire equity in the Company through an employee stock purchase plan, and also grants stock options and restricted stock to
certain of its associates as an incentive to attract and retain such associates.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As
of January 29, 2000, Staples employed 27,573 full-time and 22,420 part-time associates.</FONT></P>


<P><FONT SIZE=2><B>Expansion Strategy&#151;Staples Retail and Delivery</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our expansion strategy involves the establishment of a strong market position by increasing our presence in targeted metropolitan markets by operating a full
network of stores, entering small markets and
focusing growth in those markets where products can be cost effectively replenished through our distribution centers. Our delivery channel then infiltrates the new markets entered by the stores and
increases their catalog opportunities. We believe that the network of stores, catalog and e-business in a metropolitan market enhances profitability by leveraging marketing costs, distribution expense
and supervision costs.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
currently plan to open approximately 150 stores in North America and approximately 20 stores in Europe in fiscal 2000. Our growth strategy calls for continuing to increase our
presence along both the East and West coasts of the United States as well as portions of the Southeast and Midwest regions. Additionally, we plan to expand into one or more major new markets per year
as well as numerous smaller markets.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
determining where to open new stores and actively market our catalog, we evaluate the concentration of small- and medium-sized businesses and organizations, the number of home
offices, household income levels, the availability of quality real estate locations, competitive factors and other factors. While most of our stores have been located in conventional strip shopping
centers, we have also successfully converted non-retail properties to Staples stores. Although we often lease second-use properties, we have also entered into ground leases where we plan to build a
store or arrange to have landlords construct free-standing buildings to our specifications</FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2> In addition, we have on numerous occasions acquired lease
rights from prior tenants. We believe that this flexibility in selecting sites will prove helpful as we seek to locate additional stores in the challenging real estate markets in which we operate.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>

<P><FONT SIZE=2><B>Expansion Strategy&#151;Staples.com</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We plan to expand our Internet operation, Staples.com, during fiscal 2000 by dedicating additional investments in personnel, technology and marketing. We
recognize the long-term potential of electronic commerce and plan to aggressively address this market. Staples.com plans to expand its electronic marketplace through its relationship with BizBuyer.com
to enable its customers to request quotes from a network of over 20,000 service providers offering over 40 services. By the end of fiscal year 2000, Staples.com expects to offer approximately 100
business services, including human resources, sales and marketing, and insurance services.</FONT></P>

<P><FONT SIZE=2><B>Competition&#151;Staples Retail and Delivery</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We compete with a variety of retailers, dealers and distributors in the highly competitive office products market. We believe our customers choose among
suppliers on the basis of price, breadth of selection, service and convenience.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our
target customers have historically been serviced by traditional office products dealers. We believe we have competed favorably against these dealers in the past because we
generally offer lower prices. In addition, we believe that our broad product line, depth of in-stock inventory, extended store hours, customer service and shopping environment offer us competitive
advantages. Recently, however, some traditional office product dealers have lowered prices and increased their service levels to become more competitive with discount retailers.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
also compete in most of our geographic markets with other high-volume office supply chains that are similar in concept to Staples in terms of store format, pricing strategy, and
product selection, including Office Depot, OfficeMax, and Office World as well as mass merchants, such as Wal-Mart, warehouse clubs, computer and electronics superstores, and other discount retailers.
In addition, our retail stores, as well as our delivery operations business, compete with numerous mail order firms, contract stationer businesses, electronic commerce distributors and direct
manufacturers. Such competitors have increased their presence in our markets in recent years. Some of our current and potential competitors in the office products industry are larger than us and have
substantially greater financial resources. No assurance can be given that such increased competition will not have an adverse effect on our business.</FONT></P>

<P><FONT SIZE=2><B>Competition&#151;Staples.com</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The online commerce market and Internet content sites are rapidly evolving and, like the office products and services market, are intensely competitive.
Primary competitive factors in our markets include brand recognition, selection, convenience, price, speed and accessibility, depth, breadth and presentation of site content, customer service, and
reliability and speed of order shipment.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
currently compete with a variety of other companies offering office products and services including traditional store-based retailers that sell office products, online office
product retailers, traditional providers of services for small business, such as telephone, credit card and insurance companies, and online service providers, such as small business portals, that
target the small business market or sell to small business customers.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
believe that we currently compete favorably with respect to each of the above factors. However, as the market is still rapidly evolving, we may not be able to compete successfully
against current and new
competitors in the future. Some of Staples.com's current and potential competitors are larger than it and have substantially greater financial resources. No assurance can be given that such increased
competition will not have an adverse effect on Staples.com's business.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>

<P><FONT SIZE=2><B>Trademarks</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Company has registered the marks "Staples" and "Staples-The Office Superstore" on the Principal Register of the United States Patent and Trademark Office,
the trademark "Staples" in Canada, the United Kingdom and Germany, and the trademark "Quill" in the United States, Canada, Israel, Japan, Mexico and the United Kingdom.</FONT></P>

<P><FONT SIZE=2><B>Item 2. Properties</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As of January 29, 2000, Staples operated 1,129 superstores in 44 states, the District of Columbia, 10 provinces in Canada, 10 regions in the United Kingdom, 5
states in Germany, 6 regions in the Netherlands and in Lisbon, Portugal. Staples also operates 38 distribution centers. The following table sets forth the locations of Staples' facilities as of
January 29, 2000.</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="83%" ALIGN="CENTER"><FONT SIZE=1><B>STATE/PROVINCE/REGION</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>NUMBER<BR>
OF STORES</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><U>United States</U></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Alabama</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Arizona</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Arkansas</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>California</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>135</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Colorado</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Connecticut</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>30</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Delaware</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Florida</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>22</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Georgia</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Idaho</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Iowa</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Illinois</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Indiana</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Kansas</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Kentucky</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Maine</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Maryland</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>28</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Massachusetts</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>39</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Michigan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>32</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Minnesota</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Missouri</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Montana</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Nebraska</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>New Hampshire</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>New Jersey</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>60</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>New Mexico</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>New York</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>86</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>North Carolina</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>19</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>North Dakota</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Ohio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>48</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Oklahoma</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Oregon</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>15</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Pennsylvania</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>61</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Rhode Island</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>South Carolina</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>South Dakota</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Tennessee</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Texas</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Utah</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Vermont</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Virginia</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>27</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Washington</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Washington DC</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>West Virginia</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Wisconsin</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>840</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><U>Canada</U></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Alberta</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>British Columbia</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Manitoba</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>New Brunswick</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Newfoundland</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Nova Scotia</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Ontario</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>60</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Quebec</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>31</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Saskatchewan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Prince Edward Island</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>151</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><U>United Kingdom</U></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Anglia</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Central/Midlands</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Lakes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>London</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>North</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>North East</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>North West</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>South</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Wales &amp; Avon</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>West</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>63</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=2,SEQ=13,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=157182,FOLIO=13,FILE='DISK018:[00BOS8.00BOS1458]DF1458A.;31',USER='VNEVILL',CD=';9-MAR-2000;18:51 -->
<!-- end of table folio -->
<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><U>Germany</U></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Mitte (Midlands)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Nord (North)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Nordrhein-Westpfalen</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>15</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Osten (East)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Sud (South)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>47</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><U>Netherlands</U></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Middel (Midlands)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Noord (North)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Oos (East)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Suid (South)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Suid-Wes (South West)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Wes (West)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><U>Portugal</U></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Lisbon</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="80%" ALIGN="CENTER"><FONT SIZE=1><B>STATE/PROVINCE/REGION</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>NUMBER OF<BR>
DISTRIBUTION<BR>
CENTERS</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2><U>United States</U></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>California</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Colorado</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Connecticut</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Florida</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Georgia</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Illinois</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Indiana</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Maryland</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Massachusetts</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Michigan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>New Jersey</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>New York</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>North Carolina</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Ohio</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Oregon</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Pennsylvania</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Texas</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Washington</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2><U>Canada</U></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>British Columbia</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Ontario</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2><U>United Kingdom</U></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Pensnett</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2><U>Germany</U></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Schleswig-Holstein</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Most
of the existing stores are leased by Staples with initial lease terms expiring between 2000 and 2023. In most instances, the Company has renewal options at increased rents.
Leases for 167 of the existing stores provide for contingent rent based upon sales.</FONT></P>

<P><FONT SIZE=2><B>Item 3. Legal Proceedings</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples is not party to any material legal proceedings.</FONT></P>

<P><FONT SIZE=2><B>Item 4. Submission of Matters to a Vote of Security Holders.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Company held a Special Meeting of Stockholders on November 9, 1999, at which the following actions were taken:</FONT></P>

<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2>The
stockholders approved an amendment to the Company's Restated Certificate of Incorporation (i) to authorize a new series of common stock called Staples.com Stock, (ii) to
increase the number of authorized shares of common stock from 1,500,000,000 to 2,100,000,000, initially comprised of 1,500,000,000 shares of Staples Stock and 600,000,000 shares of Staples.com Stock,
and (iii) to reclassify each outstanding share of existing common stock into a share of Staples RD Stock by a vote of 331,556,155 shares of Common Stock for, 4,314,870 shares of Common Stock against
and 1,798,744 shares of Common Stock not voting.
<BR><BR></FONT></DD><DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2>The
stockholders approved an amendment to the Company's 1992 Equity Incentive Plan by a vote of 238,291,812 shares of Common Stock for, 96,812,164 shares of Common Stock against and
2,565,793 shares of Common Stock not voting.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<UL>
</UL>
<DL compact>
<DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2>The
stockholders approved an amendment to the Company's Amended and Restated 1990 Director Stock Option Plan by a vote of 256,940,397 shares of Common Stock for, 86,610,486 shares
of Common Stock against and 2,642,928 shares of Common Stock not voting.
<BR><BR></FONT></DD><DT><FONT SIZE=2>4.</FONT></DT><DD><FONT SIZE=2>The
stockholders approved an amendment to the Company's 1998 Employee Stock Purchase Plan by a vote of 339,553,206 shares of Common Stock for, 4,763,719 shares of Common Stock
against and 1,876,886 shares of Common Stock not voting.</FONT></DD></DL>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>PART II</B></FONT></P>

<P><FONT SIZE=2><B>Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples' Retail and Delivery Common Stock is traded on the Nasdaq National Market under the symbol "SPLS."</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;At
March&nbsp;1, 2000, the number of holders of record of Staples Retail and Delivery Common Stock was 9,458 and the holders of record of Staples.com Stock was 379.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth for the periods indicated the high and low sale prices per share of Staples RD Stock on the Nasdaq National Market, as reported by Nasdaq, retroactively
adjusted for the three-for-two stock split in January 1999.</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="82%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="77%" ALIGN="LEFT"><FONT SIZE=1><B>Fiscal Year Ended January 29, 2000<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>High</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Low</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>35.94</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>26.50</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>32.25</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>26.00</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>Third Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>28.88</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>18.63</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>Fourth Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>28.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>16.44</FONT></TD>
</TR>
</TABLE>
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<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="82%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="77%" ALIGN="LEFT"><FONT SIZE=1><B>Fiscal Year Ended January 30, 1999<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>17.13</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>12.25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>22.83</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>15.67</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>Third Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>23.42</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>17.00</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="77%"><FONT SIZE=2>Fourth Quarter</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>32.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>21.13</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
has never paid a cash dividend on its Staples RD Stock. Staples presently intends to retain earnings for use in the operation and expansion of its business and, therefore,
does not anticipate paying any cash dividends in the foreseeable future. In addition, Staples' revolving credit agreement restricts the payment of dividends.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Between
November 17, 1999 and February 7, 2000, we sold 12,892,308 shares of unregistered Staples.com Stock to investors and members of the Board for an aggregate purchase price of
$20,787,000 in reliance upon the exemption from registration under Section 4(2) of the Securities Act.</FONT></P>


<P><FONT SIZE=2><B>Item 6. Selected Financial Data</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item is attached as </FONT><FONT SIZE=2><B>Appendix A</B></FONT><FONT SIZE=2>.</FONT></P>

<P><FONT SIZE=2><B>Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item is attached as part of </FONT><FONT SIZE=2><B>Appendix B</B></FONT><FONT SIZE=2>.</FONT></P>

<P><FONT SIZE=2><B>Item 7A. Quantitative and Qualitative Disclosures about Market Risks</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item is attached as part of </FONT><FONT SIZE=2><B>Appendix B</B></FONT><FONT SIZE=2>.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><B>Item 8. Financial Statements and Supplementary Data</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item is attached as </FONT><FONT SIZE=2><B>Appendix C</B></FONT><FONT SIZE=2>.</FONT></P>

<P><FONT SIZE=2><B>Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>PART III</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Certain information required by Part III is omitted from this Annual Report on Form 10-K, and incorporated herein by reference to the definitive proxy
statement with respect to the 2000 Annual Meeting of Stockholders (the "Proxy Statement") which Staples will file with the Securities and Exchange Commission not later than 120 days after the end of
the fiscal year covered by this Report.</FONT></P>

<P><FONT SIZE=2><B>Item 10. Directors and Executive Officers of the Registrant</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item will appear under the headings "Election of Directors" and "Directors and Executive Officers of Staples" in the Company's
Proxy Statement, which sections are incorporated herein by reference.</FONT></P>

<P><FONT SIZE=2><B>Item 11. Executive Compensation</B></FONT></P>

<P><FONT SIZE=2><I>Summary Compensation</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information concerning the compensation for each of the last three fiscal years of Staples' Chief Executive Officer and
the four other most highly compensated executive officers during the fiscal year ended January&nbsp;29, 2000 (the "Senior Executives").</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>SUMMARY COMPENSATION TABLE</B></FONT></P>

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<TH WIDTH="20%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Annual Compensation (1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="54%" COLSPAN=7 ALIGN="CENTER"><FONT SIZE=1><B>Long Term Compensation</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="20%" ALIGN="CENTER"><FONT SIZE=1><B>Name and Principal<BR>
Position</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Fiscal<BR>
Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Salary ($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Bonus ($) (2)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Restricted<BR>
Stock<BR>
Awards<BR>
($) (3)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Staples<BR>
RD Stock<BR>
Options<BR>
(#) (3)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Staples.com<BR>
Stock<BR>
Options<BR>
(#)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>All Other<BR>
Compensation<BR>
($) (4)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>Thomas G. Stemberg<BR>
Chairman and CEO</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1999<BR>
1998<BR>
1997</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>682,083<BR>
645,883<BR>
587,500</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>525,147<BR>
673,556<BR>
446,172</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>2,075,000<BR>
2,606,250<BR>
1,543,434</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>(5)<BR>(6)<BR>(7)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>300,000<BR>
2,400,000<BR>
360,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>2,129,120<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>22,844<BR>
17,769<BR>
13,924</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>Ronald L. Sargent<BR>
President, Chief<BR>
Operating Officer</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1999<BR>
1998<BR>
1997</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>522,917<BR>
449,083<BR>
392,084</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>322,078<BR>
349,261<BR>
218,235</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,556,250<BR>
1,282,032<BR>
1,005,552</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>(8)<BR>(9)<BR>(10)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>225,000<BR>
1,361,250<BR>
375,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,096,840<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>31,934<BR>
32,193<BR>
29,583</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>John J. Mahoney<BR>
Exec. Vice President,<BR>
Chief Financial Officer,<BR>
Chief Administrative Officer</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1999<BR>
1998<BR>
1997</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>463,000<BR>
439,250<BR>
395,834</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>261,413<BR>
335,880<BR>
220,160</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>933,750<BR>
1,172,813<BR>
1,033,614</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>(11)<BR>(12)<BR>(13)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>90,000<BR>
585,000<BR>
330,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>638,736<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>41,876<BR>
42,848<BR>
35,553</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>Joseph S. Vassalluzzo<BR>
Vice Chairman</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1999<BR>
1998<BR>
1997</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>463,000<BR>
439,250<BR>
391,250</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>261,413<BR>
325,636<BR>
198,007</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>933,750<BR>
1,064,202<BR>
776,394</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>(14)<BR>(15)<BR>(16)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>90,000<BR>
585,000<BR>
220,312</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>638,736<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>46,947<BR>
48,150<BR>
43,774</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>John C. Bingleman<BR>
President&#151;Staples<BR>
International</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1999<BR>
1998<BR>
1997</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>428,292<BR>
410,735<BR>
385,883</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;<BR>&nbsp;<BR>(19)</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>225,865<BR>
311,889<BR>
215,555</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;<BR>
5,460,947<BR>
&#151;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;<BR>(17)<BR>(20)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;<BR>
450,000<BR>
&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;<BR>&nbsp;<BR>(20)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>51,966<BR>
150,152<BR>
56,976</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;<BR>(18)<BR></FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>In
accordance with the rules of the Securities and Exchange Commission, other compensation in the form of perquisites and other personal benefits has been omitted because such
perquisites and other personal benefits constituted less than the lesser of $50,000 or 10% of the total annual salary and bonus for the Senior Executive for each year shown.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<DL compact>
<DT><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Represents
amounts paid under Staples' Executive Officer Incentive plan or executive bonus plan for the relevant fiscal year.
<BR><BR></FONT></DD><DT><FONT SIZE=1>(3)</FONT></DT><DD><FONT SIZE=1>Amounts
reflect the three-for-two stock splits effected on January&nbsp;30, 1998 and January&nbsp;28, 1999, as applicable.
<BR><BR></FONT></DD><DT><FONT SIZE=1>(4)</FONT></DT><DD><FONT SIZE=1>Except
as noted below, represents an actuarial equivalent benefit to the Senior Executive from payment of annual premiums by the Company under a split dollar insurance program.
Because of differences in Mr.&nbsp;Stemberg's insurance policy, Mr.&nbsp;Stemberg's benefit is calculated using a method that, at this time, results in a lower benefit.
<BR><BR></FONT></DD><DT><FONT SIZE=1>(5)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1999, Mr.&nbsp;Stemberg was awarded 100,000 shares of PARS with a per share value of $20.75. As of January&nbsp;29, 2000, these restricted shares owned by
Mr.&nbsp;Stemberg had a total value of $2,150,000. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(6)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1998, Mr.&nbsp;Stemberg was awarded 150,000 shares of PARS with a per share value of $17.375. As of January&nbsp;29, 2000, these restricted shares owned by
Mr.&nbsp;Stemberg had a total value of $3,225,000. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(7)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1997, Mr.&nbsp;Stemberg was awarded 123,750 shares of PARS with a per share value of $12.4722. As of May&nbsp;1, 1999, these shares were no longer
restricted and had a total value of $3,712,500. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(8)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1999, Mr.&nbsp;Sargent was awarded 75,000 shares of PARS with a per share value of $20.75. As of January&nbsp;29, 2000, these restricted shares owned by
Mr.&nbsp;Sargent had a total value of $1,612,500. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(9)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1998, Mr.&nbsp;Sargent was awarded 67,500 shares of PARS with a per share value of $17.375. On January&nbsp;1, 1999, Mr.&nbsp;Sargent was awarded 3,750
shares of PARS with a per share value of $29.125. As of January&nbsp;29, 2000, these restricted shares owned by Mr.&nbsp;Sargent had a combined total value of $1,531,875. See "Performance
Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(10)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1997, Mr.&nbsp;Sargent was awarded 80,623 shares of PARS with a per share value of $12.4722. As of May&nbsp;1, 1999, these shares were no longer restricted
and had a total value of $2,418,690. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(11)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1999, Mr.&nbsp;Mahoney was awarded 45,000 shares of PARS with a per share value of $20.75. As of January&nbsp;29, 2000, these restricted shares owned by
Mr.&nbsp;Mahoney had a total value of $967,500. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(12)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1998, Mr.&nbsp;Mahoney was awarded 67,500 shares of PARS with a per share value of $17.375. As of January&nbsp;29, 2000, these restricted shares owned by
Mr.&nbsp;Mahoney had a total value of $1,451,250. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(13)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1997, Mr.&nbsp;Mahoney was awarded 82,873 shares of PARS with a per share value of $12.4722. As of May&nbsp;1, 1999, these shares were no longer restricted
and had a total value of $2,486,190. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(14)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1999, Mr.&nbsp;Vassalluzzo was awarded 45,000 shares of PARS with a per share value of $20.75. As of January&nbsp;29, 2000, these restricted shares owned
by Mr.&nbsp;Vassalluzzo had a total value of $967,500. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(15)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1998, Mr.&nbsp;Vassalluzzo was awarded 61,249 shares of PARS with a per share value of $17.375. As of January&nbsp;29, 2000, these restricted shares owned
by Mr.&nbsp;Vassalluzzo had a total value of $1,316,854. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(16)</FONT></DT><DD><FONT SIZE=1>On
October&nbsp;1, 1997, Mr.&nbsp;Vassalluzzo was awarded 62,250 shares of PARS with a per share value of $12.4722. As of May&nbsp;1, 1999, these shares were no longer
restricted and had a total value of $1,867,500. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(17)</FONT></DT><DD><FONT SIZE=1>On
September&nbsp;1, 1998, Mr.&nbsp;Bingleman was awarded 281,250 shares of PARS with a per share value of $19.4167. As of January&nbsp;29, 2000, these restricted shares
owned by Mr.&nbsp;Bingleman had a total value of $6,046,875. See "Performance Accelerated Restricted Stock Awards."
<BR><BR></FONT></DD><DT><FONT SIZE=1>(18)</FONT></DT><DD><FONT SIZE=1>Includes
reimbursement of $95,886 for relocation expenses.
<BR><BR></FONT></DD><DT><FONT SIZE=1>(19)</FONT></DT><DD><FONT SIZE=1>Includes
payment of $25,420 paid to Mr.&nbsp;Bingleman by Staples' Canadian subsidiary, The Business Depot,&nbsp;Ltd.
<BR><BR></FONT></DD><DT><FONT SIZE=1>(20)</FONT></DT><DD><FONT SIZE=1>Mr.&nbsp;Bingleman
was not granted options or PARS during fiscal 1997 as a result of his assumption of new responsibilities for international operations. Staples developed a
long-term compensation strategy for certain international executives, including Mr.&nbsp;Bingleman, that was implemented during fiscal 1998.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><I>Performance Accelerated Restricted Stock ("PARS") Awards</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In order to maintain Staples' high risk-high reward philosophy, the Compensation Committee adopted, as part of the Amended and Restated 1992 Equity
Incentive Plan, a PARS plan (the "Plan") for certain key executives. Under the Plan, shares of Staples RD Stock are granted to executives in consideration for services. The shares are "restricted" in
that they may not be sold or transferred by the executive until they "vest." Staples' PARS issued in fiscal 1999 will vest on February&nbsp;1, 2004 subject to acceleration upon achievement of
certain pre-determined earnings per share ("EPS") growth targets over the next two to five fiscal years. Staples' PARS issued in fiscal 1998 will vest on May&nbsp;1, 2000 as a result of
Staples exceeding EPS targets for fiscal 1999.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples'
PARS that were issued in fiscal 1997 vested on May&nbsp;1, 1999 as a result of Staples exceeding target EPS for such PARS for fiscal 1998. EPS growth targets are determined
by the Compensation Committee and approved by the Board of Directors each year for grants under the Plan in that year. Once the PARS have vested, they become "unrestricted" and may be freely sold or
transferred. Generally, the PARS are forfeited if the executive's employment with Staples terminates prior to vesting.</FONT></P>


<P><FONT SIZE=2><B><I>Option Grants</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information concerning grants of stock options during the fiscal year ended January&nbsp;29, 2000 for each of the
Senior Executives.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>OPTION GRANTS IN LAST FISCAL YEAR</B></FONT></P>

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<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="71%" COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Individual Grants<BR></B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Options Granted(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Percent of<BR>
Total Options<BR>
Granted to<BR>
Employees in<BR>
Fiscal Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Exercise<BR>
Price per<BR>
Share(2)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Expiration<BR>
Date</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Grant Date<BR>
Present Value(3)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Thomas G. Stemberg</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>300,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4.33</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>30.9375</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7/1/2009</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,784,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>2,129,120</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>8.42</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1.6250</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11/9/2009</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,064,560</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Ronald L. Sargent</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>225,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3.25</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>30.9375</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7/1/2009</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,088,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1,096,840</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4.34</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1.6250</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11/9/2009</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>548,420</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>John J. Mahoney</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>90,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1.30</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>30.9375</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7/1/2009</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>835,200</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>638,736</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2.53</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1.6250</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11/9/2009</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>319,368</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Joseph S. Vassalluzzo</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>90,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1.30</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>30.9375</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7/1/2009</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>835,200</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>638,736</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2.53</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1.6250</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11/9/2009</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>319,368</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>John C. Bingleman</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Each
of the Staples RD Stock options granted becomes exercisable in full on the third anniversary of the date of grant, provided that the optionee continues to be employed by
Staples on such date. Each of the Staples.com Stock options granted is exercisable in full on the date of grant, however the shares are restricted by the following vesting schedule: 25% of such shares
will vest one year after the date of grant and the remaining 75% of such shares shall vest in equal monthly installments (2.083% per month) over the following 36&nbsp;months, provided that the
optionee continues to be employed by Staples</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=18,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=542670,FOLIO=18,FILE='DISK018:[00BOS8.00BOS1458]DG1458A.;9',USER='RSEIBER',CD='10-MAR-2000;15:37 -->
<UL>

<P><FONT SIZE=2>on
such dates. The exercisability of the Staples RD Stock options and the vesting of the Staples.com Stock options are accelerated under certain circumstances.</FONT></P>

</UL>
<DL compact>
<DT><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>The
exercise price is equal to the fair market value per share of Common Stock on the date of grant.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>The
estimated present value at grant date has been calculated using a Black-Scholes option pricing model, based upon the following assumptions: a six year expected life of option; a
dividend yield of 0.0%; expected volatility of 36.1% for Staples RD Stock options and 35.8% for Staples.com Stock options; and a risk-free interest rate of 5.82% for Staples RD Stock
options and 6.11% for Staples.com Stock options, representing the interest rate on a U.S. Government zero-coupon bond on the date of grant, with a maturity corresponding to the expected
life of the option. Values are adjusted to reflect a risk of forfeiture due to vesting requirements.</FONT></DD></DL>
<BR>

<P><FONT SIZE=2><I>Option Exercises and Holdings</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information concerning each exercise of stock options during the fiscal year ended January&nbsp;29, 2000 by each of
the Senior Executives and the number and value of unexercised options held by each of the Senior Executives on January&nbsp;29, 2000.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR END<BR>
FISCAL YEAR-END OPTION VALUES</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="96%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="23%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>No. of Shares<BR>
of Common Stock<BR>
Acquired<BR>
On Exercise</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Value<BR>
Realized(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="21%" ALIGN="CENTER"><FONT SIZE=1><B>No. of Shares of Common Stock Underlying Unexercised Options at Fiscal Year End<BR>
Exercisable/Unexercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="24%" ALIGN="CENTER"><FONT SIZE=1><B>Value of Unexercised<BR>
In-The-Money Options at<BR>
Fiscal Year End (2)<BR>
Exercisable/Unexercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Thomas G. Stemberg</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>500,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,298,100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="CENTER"><FONT SIZE=2>1,940,544/3,060,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>$30,418,808/$7,440,072</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>2,129,120</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="CENTER"><FONT SIZE=2>0/0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>$0/$0</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Ronald L. Sargent</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>99,029</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,917,612</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="CENTER"><FONT SIZE=2>685,313/1,792,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>$7,386,441/$4,627,407</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1,096,840</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="CENTER"><FONT SIZE=2>0/0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>$0/$0</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>John J. Mahoney</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="CENTER"><FONT SIZE=2>416,250/937,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>$4,559,362/$4,178,658</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>638,736</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="CENTER"><FONT SIZE=2>0/0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>$0/$0</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Joseph S. Vassalluzzo</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="CENTER"><FONT SIZE=2>1,322,872/827,812</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>$21,139,028/$3,028,577</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>638,736</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="CENTER"><FONT SIZE=2>0/0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>$0/$0</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>John C. Bingleman</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>123,750</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,058,565</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="CENTER"><FONT SIZE=2>810,842/450,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>$13,882,742/$637,515</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="CENTER"><FONT SIZE=2>0/0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>$0/$0</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Represents
the difference between the exercise price and the fair market value of the common stock on the date of exercise.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Based
on the fair market value of the common stock on January&nbsp;29, 2000 ($21.50 per share), less the option exercise price.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<UL>
</UL>

<P><FONT SIZE=2><B>Director Compensation</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under the Amended and Restated 1990 Director Stock Option Plan (the "Amended and Restated Director Plan") during the fiscal year ended January&nbsp;29, 2000,
Directors were compensated exclusively through equity rather than receiving a portion of their compensation in cash. Accordingly, other than as indicated below, non-employee Directors did
not receive any fees or other cash compensation for their services as Directors, other than reimbursement for expenses incurred in attending meetings of the Directors. Senator Mitchell provides
consulting services to the Company in return for an annual fee of $75,000, which during the fiscal year ended January&nbsp;29, 2000 the Company paid to Senator Mitchell in Staples RD Stock.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under
the Amended and Restated Director Plan, options and Performance Accelerated Restricted Stock ("PARS") awards may be granted with respect to either Staples RD Stock or
Staples.com Stock (collectively, "Common Stock"). All options or PARS granted under the Plan, as provided below, shall be granted with respect to either series of Common Stock, or a combination of
both series, as determined in the sole discretion of the Board of Directors. Pursuant to the Amended and Restated Director Plan, each new member of the Board of Directors is granted an option to
purchase 15,000 shares of Common Stock upon such person's initial election to the Board. In addition, the Amended and Restated Director Plan provides for an annual stock option grant to each
non-employee Director to purchase a number of shares equal to 3,000 multiplied by the number of regularly scheduled meeting days attended by such non-employee Director during
the preceding year (up to a maximum of 15,000 shares). In addition, at the first regularly scheduled Board of Directors meeting following the end of each fiscal year of the Company in which
performance targets are established relating to PARS awarded to executive officers of the Company, each non-employee Director is granted 400 PARS for each regularly scheduled meeting day
attended by such Director during the preceding year (up to a
maximum of 2,000 PARS); and each of the Lead Director and the Chairman of the Audit, Compensation and Governance Committees of the Board of Directors is granted 200 PARS for each regularly scheduled
meeting day of the Board of Directors attended by such Director during the previous twelve months (up to a maximum of 1,000 PARS).</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;With
respect to the fiscal year ended January&nbsp;29, 2000 and in accordance with the Amended and Restated Director Plan, on March&nbsp;7, 2000 each of Ms.&nbsp;Burton and
Messrs.&nbsp;Anderson, Heisey, Moriarty, Nakasone, Trust and Walsh was granted an option to purchase 15,000 shares of Common Stock, Messrs.&nbsp;Mitchell, Moody and Romney were granted an option
to purchase 12,000 shares; and Ms.&nbsp;Whitman was granted an option to purchase 9,000 shares of Common Stock, each at an exercise price of $19.375 per share. Pursuant to the Amended and Restated
Director Plan, at the next Board of Directors meeting in which performance targets are established relating to PARS, the following will be awarded: Mr.&nbsp;Moody will be awarded 3,200 PARS;
Mr.&nbsp;Anderson will be awarded 3,000 PARS; Mr.&nbsp;Trust will be awarded 2,600 PARS; Mr.&nbsp;Nakasone will be awarded 2,400 PARS; Ms.&nbsp;Burton and Messrs.&nbsp;Heisey, Moriarty and
Walsh will be awarded 2,000 PARS; Senator Mitchell and Mr.&nbsp;Romney will be awarded 1,600 PARS and Ms.&nbsp;Whitman will be awarded 1,200 PARS.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
addition, on March&nbsp;7, 2000, the Board of Directors approved amendments to the Amended and Restated Director Plan, which, upon stockholder approval, will entitle the
non-employee Directors to receive options to purchase Staples.com Stock. Accordingly, upon stockholder approval of such amendments, each of Ms.&nbsp;Burton and Messrs.&nbsp;Anderson, Heisey,
Moriarty, Nakasone, Trust and Walsh will be granted an option to purchase 6,500 shares of Staples.com Stock; Messrs.&nbsp;Mitchell, Moody and Romney will be granted an option to purchase 5,200
shares of Staples.com Stock; and Ms.&nbsp;Whitman will be granted an option to purchase 3,900 shares of Staples.com Stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All
stock options under the Amended and Restated Director Plan are granted at an exercise price equal to the fair market value of the Common Stock on the date of grant, and generally
become exercisable on a cumulative basis in four equal annual installments, commencing on the first anniversary of the date of grant.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Recipients
of PARS own shares of Staples RD Stock under terms that provide for vesting over a period of time and a right to repurchase in favor of the Company with respect to unvested
stock, at a price equal to their original purchase price (if any), when the recipient ceases to be a Director of the Company. Except as otherwise determined by the Board of Directors, all PARS issued
under the Amended and Restated Director Plan shall be issued without the payment of any cash purchase price by the recipient. The restrictions on transfer and forfeiture provisions of the PARS to be
granted to the non-employee Directors shall lapse on the same basis as PARS awarded to the Company's executive officers for the fiscal year ended January&nbsp;29, 2000. "See "Executive
Compensation&#151;Performance Accelerated Restricted Stock Awards".</FONT></P>

<P><FONT SIZE=2><B>Employment Contracts, Termination of Employment and Change-in-Control Agreements with Senior Executives</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples has entered into Severance Benefit Agreements (the "Severance Agreements") with each of the Senior Executives. Under the Severance Agreements, the
Senior Executives would be entitled to continuation of salary and other benefits for (i)&nbsp;18&nbsp;months in the case of Mr.&nbsp;Stemberg, and (ii)&nbsp;12&nbsp;months in the case of
Messrs.&nbsp;Bingleman, Mahoney, Sargent and Vassalluzzo, following termination of employment by Staples without cause (or "constructive discharge" as provided in the Severance Agreements). Each
Senior Executive would receive such benefits for an additional period of six months if such termination occurred within two years following a "change in control" of Staples (as defined in the
Severance
Agreements). A change in control of Staples also results in a partial acceleration of the exercisability of outstanding options held by the Senior Executives (and all Staples associates) and a
discharge without cause (or resignation for good reason) within one year after a change in control results in the acceleration in full of all options and PARS. In the event Mr.&nbsp;Mahoney is
terminated without cause within one year after a change of control, Staples would also guarantee to him that the sum of all severance payments plus the total gain realized and realizable upon the sale
and/or exercise of his PARS and/or options would equal at least $2,000,000.</FONT></P>

<P><FONT SIZE=2><B>Compensation Committee Interlocks and Insider Participation</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Messrs.&nbsp;Heisey, Nakasone and Trust, all non-employee Directors of Staples, served on the Compensation Committee for the entire fiscal year
ended January&nbsp;29, 2000. Ms.&nbsp;Whitman joined the Committee in June&nbsp;1999.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
leases its Cedar Rapids, Iowa store from Toys "R" Us. Mr.&nbsp;Nakasone was Chief Executive Officer of Toys "R" Us from February&nbsp;1998 to August&nbsp;1999. The
initial term of this lease, which commenced on October&nbsp;8, 1996, is 15&nbsp;years. Staples may renew the lease for two additional five year periods.</FONT></P>

<P><FONT SIZE=2><B>Compensation Committee Report on Executive Compensation</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples' executive compensation program is administered by the Compensation Committee composed of the non-employee Directors listed below. Staples'
executive compensation program is designed to retain and reward executives who are responsible for leading Staples in achieving its business objectives. All decisions by the Compensation Committee
relating to the compensation of Staples' executive officers are reviewed by the full Board. This report is submitted by the Compensation Committee and addresses Staples' compensation policies for
fiscal 1999 and forward as they affected the Chief Executive Officer and the other executive officers of Staples.</FONT></P>

<P><FONT SIZE=2><I>Compensation Philosophy</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The objectives of the executive compensation program are to (i)&nbsp;align compensation with business objectives, individual performance and the interests of
Staples' stockholders, (ii)&nbsp;motivate and reward high</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>levels
of performance, (iii)&nbsp;recognize and reward the achievement of Company and/or business unit goals, and (iv)&nbsp;enable Staples to attract, retain and reward executive officers who
contribute to the long-term success of Staples.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Committee's executive compensation philosophy is that a significant portion of executive compensation should be tied directly to the performance of Staples as a whole. The base
salaries paid to executives are targeted by the Committee to fall at or below the 40th percentile of the pay practices of publicly traded companies in the retail industry (including companies in the
Standard&nbsp;&amp; Poor's Retail Composite Index contained in the stock performance graph contained in this Annual Report on Form 10-K, as determined by The Hay Group ("Hay"), an international
compensation and human resource consulting firm. The Committee seeks, however, to provide its executives with opportunities for compensation substantially higher than base salary through
performance-based bonuses, stock options and PARS. The Committee also believes that bonus awards tied to achievement of pre-approved performance goals serve as an influential motivator to
its executives and help to align the executives' interests with those of the stockholders of Staples. The Committee also continues to believe that a substantial portion of the compensation of Staples'
executives should be linked through Staples' stock option and
PARS program to the success of Staples' stock in the marketplace. Stock options and PARS further align the interests of management and stockholders and assist in the retention of valued executives.</FONT></P>


<P><FONT SIZE=2><I>Status of the Executive Compensation Program</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Based on information provided by Hay and consistent with Staples' objectives and philosophy, the Committee targeted total annual compensation (salary, cash
bonus and stock) to fall above the median for total annual compensation for similar positions in the group of retail companies used in the Hay study.</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><B>Salaries</B></FONT><FONT SIZE=2>: The Committee targets base annual salary for executive officers including the Senior Executives
to be at the 40th percentile of the annual base salary for comparable positions in the Hay study group.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><B>Bonus</B></FONT><FONT SIZE=2>: Each of Staples' executive officers, including the Senior Executives, was eligible to participate in
Staples' Executive Officer Incentive Plan in fiscal 1999 (the "Bonus Plan"). The Bonus Plan provided for the payment of a range of cash bonuses to executive officers based on "stretch" objectives
relating to company-wide earnings per share, return on net assets, and customer service goals.</FONT>
<BR>

<P><FONT SIZE=2>The
earnings per share, return on net assets and customer service goals for the Bonus Plan were determined by the Committee and approved by the Board of Directors at the beginning of fiscal 1999. In
each case, these bonus goals represented "stretch" objectives, requiring performance in excess of amounts set for budget purposes to achieve target bonus payouts. The Committee established target
bonus payouts for executives in an attempt to bring the cash portion of total annual compensation (base salary plus target bonus) to approximately the median of the cash compensation paid to the Hay
comparison group.</FONT></P>

<P><FONT SIZE=2>For
fiscal 1999, Staples exceeded stretch objectives for earnings per share and fell short of the customer service and return on net assets objectives.</FONT></P>

</DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><B>Stock Options</B></FONT><FONT SIZE=2>: In addition to base salary and bonus, Staples' executives are also granted annually
performance-based long-term incentives represented by stock options. The intent of these awards is to further encourage retention and promote identity of interest with Staples'
stockholders. The 1992 Equity Incentive Plan was amended and restated in 1999 to provide for awards of options of either Staples RD Stock and/or Staples.com Stock. In determining whether awards of
Staples RD Stock or Staples.com stock, or both, will be made to specific employees, consideration is given to, among other things, the identity of the Business to which the employee provides services.
The incentive compensation committee also considers the fact that in the emerging Internet economy in which</FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<UL>
<UL>

<P><FONT SIZE=2>Staples
competes for executives, stock options are an important part of executive compensation packages and are frequently offered in substantial amounts to attract talented and experienced executives
to join startups and other less established businesses. The continued future success of Staples, in general, and Staples.com, in particular, is dependent on the ability to attract and retain key
executives. Accordingly, the incentive plan committee considers data about the level of stock options awarded, not only in companies in its competitive business group, but also in the competitive
labor market in which we compete for executive talent. Annual stock option awards were made to executive officers in July&nbsp;1999, the same time that stock option awards were made to all stock
option eligible employees of the Company. At that time, Staples RD Stock was the only authorized series of Company common stock. In November&nbsp;1999, subsequent to shareholder approval of the
Amended and Restated 1992 Equity Incentive Plan, options to purchase shares of Staples.com Stock were granted to all stock option
eligible employees, including the Senior Executives. In granting these options, the Committee considered the influence and business drivers within each executives' area of responsibility on the
Staples.com business and Staples Retail and Delivery business. Loans were arranged through a third party for certain senior executives to encourage and promote the purchase of Staples.com options.</FONT></P>

</UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><B>Performance Accelerated Restricted Stock (PARS)</B></FONT><FONT SIZE=2>: In order to maintain Staples' high risk-high
reward philosophy, help retain key executives, maintain focus on stockholder returns and deliver the possibility of total direct compensation above the median of the Hay comparison group, the
Committee has adopted the use of PARS for certain key management, including its executive officers. The shares are "restricted" in that they may not be sold or transferred by the executive until they
"vest". Staples' PARS issued in fiscal 1999 will vest on February&nbsp;1, 2004 subject to acceleration if Staples achieves certain pre-determined compound EPS growth over the next two to
five fiscal years. EPS growth targets are determined by the Committee and approved by the Board of Directors each year for grants of PARS in that year. Once the PARS have vested, they become
"unrestricted" and may be sold or transferred.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
1998, Staples developed a long term compensation strategy specifically for Mr.&nbsp;Bingleman, President&#151;International. This plan provided Mr.&nbsp;Bingleman with a
restricted stock grant vesting five years from date of grant, subject to accelerated vesting based on the attainment of certain event based and financial objectives relating to Mr.&nbsp;Bingleman's
responsibilities for certain of Staples international operations. This grant is in lieu of certain annual stock options and PARS grants under the stock option/ PARS program.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Stemberg,
Staples' Chief Executive Officer, is eligible to participate in the same executive compensation program available to other Staples executives, and his total
annual compensation, including compensation derived from the Bonus Plan and stock option/PARS program, was set by the Committee in accordance with the same criteria. Mr.&nbsp;Stemberg's annual
salary was increased in fiscal 1999 from $650,000 to $685,000. Mr.&nbsp;Stemberg's annual salary remained below the 25<SUP>th</SUP> percentile for the Chief Executive Officer position within the
Hay comparison group. Under the Bonus Plan, Mr.&nbsp;Stemberg was paid a bonus of $526,567 placing his total cash compensation below the 40<SUP>th</SUP> percentile of the Hay comparison group. In
fiscal 1999, the Committee granted Mr.&nbsp;Stemberg 100,000 PARS and options to purchase 300,000 shares of Staples RD Stock under the options/PARS program. In addition, Mr.&nbsp;Stemberg was
granted an option to purchase 2,129,120 shares of Staples.com Stock in November&nbsp;1999. These grants were valued and based on the same factors the Committee considered in fixing the size of other
executive PARS and stock option grants. Using the Hay/Black-Scholes valuation for options, total annual compensation to Mr.&nbsp;Stemberg in fiscal 1999 placed him above the median of the Hay
comparison group.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><I>Tax Considerations</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Section&nbsp;162(m) of the Internal Revenue Code of 1986, as amended, certain executive compensation in excess of $1&nbsp;million paid to a public
company's five most highly-paid executives is not deductible for federal income tax purposes unless the executive compensation is awarded under a performance-based plan approved by the
stockholders. In 1998, the Committee adopted and Staples shareholders approved the Bonus Plan in compliance with Section&nbsp;162 (m). The Company's stock option plans are performance based, and
accordingly, comply with Section&nbsp;162(m). Finally, while the Company's PARS program has a significant performance component, it cannot be qualified under 162(m) without compromising valuable
executive incentives which the Committee believes outweigh any tax benefit to the Company.</FONT></P>

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<CENTER><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2><B>Compensation Committee:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="57%"><FONT SIZE=2>Martin Trust, Chairman<BR>
W. Lawrence Heisey<BR>
Robert C. Nakasone<BR>
Margaret C. Whitman</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><B>Stock Performance Graph</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following graph compares the cumulative total stockholder return on Staples RD Stock between January&nbsp;28, 1995 and January&nbsp;29, 2000 (the end
of fiscal 1999) with the cumulative total return of (i)&nbsp;Standard&nbsp;&amp; Poor's 500 Composite Index and (ii)&nbsp;the Standard&nbsp;&amp; Poor's Retail Store Composite Index. This graph
assumes the investment of $100.00 on January&nbsp;28, 1995 in Staples RD Stock, the Standard&nbsp;&amp; Poor's 500 Composite Index and the Standard&nbsp;&amp; Poor's Retail Store Composite Index, and
assumes dividends are reinvested. Measurement points are February&nbsp;3, 1996, February&nbsp;1, 1997, January&nbsp;31, 1998, January&nbsp;30, 1999 and January&nbsp;29, 2000 (Staples' last
five fiscal year ends).</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Dividends Reinvested<BR>
TOTAL RETURN TO STOCKHOLDERS</B></FONT></P>

<P><FONT SIZE=2><B>EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="20%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>28-Jan-95<BR></FONT>
<BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2>3-Feb-96<BR></FONT>
<BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2>1-Feb-97<BR></FONT>
<BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>31-Jan-98<BR></FONT>
<BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>30-Jan-99<BR></FONT>
<BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>29-Jan-00<BR></FONT>
<BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=2>SPLS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>157.73</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>190.21</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>252.84</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>597.58</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>448.84</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=2>S&amp;P Retail Composite</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>106.90</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>123.92</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>184.69</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>301.05</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>296.03</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=2>S&amp;P 500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>135.17</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>167.13</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>208.40</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>272.04</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>289.16</FONT></TD>
</TR>
</TABLE>
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<BR>

<P><FONT SIZE=2><B>Item 12. Security Ownership of Certain Beneficial Owners and Management</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item will appear under the heading "Beneficial Ownership of Common Stock" in the Company's Proxy Statement, which section is
incorporated herein by reference.</FONT></P>

<P><FONT SIZE=2><B>Item 13. Certain Relationships and Related Transactions</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The information required by this item will appear under the heading "Directors and Executive Officers of Staples&#151;Executive Compensation" in the
Company's Proxy Statement, which section is incorporated
herein by reference.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>PART IV</B></FONT></P>

<P><FONT SIZE=2><B>Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K</B></FONT></P>

<DL compact>
<DT><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Index
to Consolidated Financial Statements.
<BR><BR></FONT>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2><B>Financial Statements. </B></FONT><FONT SIZE=2>The following financial statements and schedules of Staples, Inc. are included as&nbsp;</FONT> <FONT SIZE=2><B>Appendix C </B></FONT><FONT SIZE=2>
&nbsp;of this Report:<BR></FONT></DD></DL>
</DD></DL>
<UL>
<UL>
<BR>

<P><FONT SIZE=2><B>Staples, Inc.:</B></FONT><FONT SIZE=2><BR>
Consolidated Balance Sheets&#151;January 29, 2000 and January 30, 1999.<BR>
Consolidated Statements of Income&#151;Fiscal years ended January 29, 2000, January 30, 1999,<BR>
&nbsp;&nbsp;and January 31, 1998.<BR>
Consolidated Statements of Stockholders' Equity&#151;Fiscal years ended January 29, 2000,<BR>
&nbsp;&nbsp;January&nbsp;30, 1999, and January 31, 1998.<BR>
Consolidated Statements of Cash Flows&#151;Fiscal years ended January 29, 2000, January 30,<BR>
&nbsp;&nbsp;1999, and January 31, 1998.<BR>
Notes to Consolidated Financial Statements.</FONT></P>

<P><FONT SIZE=2><B>Staples Retail and Delivery:</B></FONT><FONT SIZE=2><BR>
Combined Balance Sheets&#151;January 29, 2000 and January 30, 1999.<BR>
Combined Statements of Income&#151;Fiscal years ended January 29, 2000, January 30, 1999,<BR>
&nbsp;&nbsp;and January 31, 1998.<BR>
Combined Statements of Group Equity&#151;Fiscal years ended January 29, 2000, January 30,<BR>
&nbsp;&nbsp;1999, and January 31, 1998.<BR>
Combined Statements of Cash Flows&#151;Fiscal years ended January 29, 2000, January 30, 1999,<BR>
&nbsp;&nbsp;and January 31, 1998.<BR>
Notes to Combined Financial Statements.</FONT></P>

<P><FONT SIZE=2><B>Staples.com:</B></FONT><FONT SIZE=2><BR>
Combined Balance Sheets&#151;January 29, 2000 and January 30, 1999.<BR>
Combined Statements of Operations&#151;Fiscal years ended January 29, 2000, January 30, 1999,<BR>
&nbsp;&nbsp;and January 31, 1998.<BR>
Combined Statements of Group Equity&#151;Fiscal years ended January 29, 2000, January 30,<BR>
&nbsp;&nbsp;1999, and January 31, 1998.<BR>
Combined Statements of Cash Flows&#151;Fiscal years ended January 29, 2000, January 30, 1999,<BR>
&nbsp;&nbsp;and January 31, 1998.<BR>
Notes to Combined Financial Statements.</FONT></P>

</UL>
<DL compact>
<DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2><B>Financial Statement Schedules</B></FONT></DD></DL>
<UL>
<BR>

<P><FONT SIZE=2>All
schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable, and,
therefore, have been omitted.</FONT></P>

</UL>
<DL compact>
<DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2><B>Exhibits. </B></FONT><FONT SIZE=2>The exhibits which are filed with this report or which are incorporated herein by reference are set forth in the Exhibit
Index on page E-1.</FONT></DD></DL>
<BR>
</UL>
<DL compact>
<DT><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>Reports
on Form 8-K.</FONT></DD></DL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Not
applicable.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>26</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>Signatures</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section 13 or 15(d) 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, on March&nbsp;7, 2000.</FONT></P>

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<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%" COLSPAN=2><FONT SIZE=2>STAPLES, INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2>By:</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>THOMAS G. STEMBERG</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Thomas G. Stemberg<BR></FONT> <FONT SIZE=2><I>Chairman of the Board and<BR>
Chief Executive Officer</I></FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the date indicated above.</FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="CENTER"><FONT SIZE=1><B>Signature</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="50%" ALIGN="CENTER"><FONT SIZE=1><B>Capacity</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;</FONT><FONT SIZE=2>THOMAS G. STEMBERG</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Thomas G. Stemberg</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>Chairman of the Board and Chief Executive Officer<BR>
(Principal Executive Officer)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>BASIL L. ANDERSON</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Basil L. Anderson</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>MARY ELIZABETH BURTON</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Mary Elizabeth Burton</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>W. LAWRENCE HEISEY</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> W. Lawrence Heisey</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>GEORGE J. MITCHELL</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> George J. Mitchell</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>JAMES L. MOODY, JR.</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> James L. Moody, Jr.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>ROWLAND T. MORIARTY</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Rowland T. Moriarty</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>27</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>ROBERT C. NAKASONE</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Robert C. Nakasone</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>W. MITT ROMNEY</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> W. Mitt Romney</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>RONALD L. SARGENT</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Ronald L. Sargent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>MARTIN TRUST</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Martin Trust</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>PAUL F. WALSH</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Paul F. Walsh</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>MARGARET C. WHITMAN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Margaret C. Whitman</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Director</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>JOHN J. MAHONEY</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> John J. Mahoney</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Executive Vice President, Chief Administrative Officer and Chief Financial Officer (Principal Financial Officer)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
/s/&nbsp;</FONT><FONT SIZE=2>PATRICK HICKEY</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Patrick Hickey</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
Senior Vice President and Corporate Controller (Principal Accounting Officer)</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>28</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="84%"><FONT SIZE=2><B>Item 6.</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2><B>APPENDIX A</B></FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2><B>FINANCIAL HIGHLIGHTS(1)</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in thousands, Except Per Share Amounts)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="99%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="65%" COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000<BR>
(52 weeks)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999(3)<BR>
(52 weeks)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998(4)<BR>
(52 weeks)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>February 1,<BR>
1997<BR>
(52 weeks)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>February 3,<BR>
1996<BR>
(53 weeks)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2><B>Statement of Income Data:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,936,809</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,123,189</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,732,145</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4,493,589</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,565,235</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,215,246</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,726,266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,060,245</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,354,455</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>809,451</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Historical net income</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>314,988</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>185,370</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>144,742</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>108,428</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Pro forma net income attributed to Staples RD Stock(2)(5)(6)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>316,074</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>183,583</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>153,140</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>129,421</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>94,539</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Pro forma net loss attributed to Staples.com Stock(5)(6)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,086</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(27</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(12</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(8</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Basic earnings/(loss) per common share:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Historical net income per common<BR>
share(2)(7)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.43</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.36</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.28</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Historical net income per common share for the 39 weeks ended October 30, 1999&#151;Staples Inc. Stock(2)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.42</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Historical net income per common share for the 13 weeks ended January 29, 2000&#151;Staples RD Stock(2)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Historical net loss per common share for the 13 weeks ended January 29, 2000&#151;Staples.com Stock(2)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Pro forma net income per common share&#151;Staples RD Stock(5)(6)(7)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.69</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.43</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.38</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.32</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.24</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Pro forma net loss per common share&#151;Staples.com Stock(5)(6)(7)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Diluted earnings/(loss) per common share:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Historical net income per common share for the 39 weeks ended October 30, 1999&#151;Staples Inc. Stock(2)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Historical net income per common share for the 13 weeks ended January 29, 2000&#151;Staples RD Stock(2)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Historical net loss per common share for the 13 weeks ended January 29, 2000&#151;Staples.com Stock(2)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Historical net income per common share(2)(7)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.39</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.35</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.27</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Pro forma net income per common share&#151;Staples RD Stock(5)(6)(7)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.67</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.36</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.31</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.23</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Pro forma net loss per common share&#151;Staples.com Stock(5)(6)(7)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Dividends</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>A-1</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=29,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=865622,FOLIO=A-1,FILE='DISK018:[00BOS8.00BOS1458]DK1458A.;17',USER='VNEVILL',CD=';9-MAR-2000;18:51 -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="98%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="65%" COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000<BR>
(52 weeks)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999(3)<BR>
(52 weeks)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998(4)<BR>
(52 weeks)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>February 1,<BR>
1997<BR>
(52 weeks)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>February 3,<BR>
1996<BR>
(53 weeks)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2><B>Selected Operating Data (at period end):</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Stores open</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,129</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>913</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>742</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>557</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>443</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Balance Sheet Data:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Working capital</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>738,547</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>798,768</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>803,660</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>623,835</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>580,244</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,846,076</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,179,266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,638,862</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,955,636</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,552,199</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Total long-term debt, less current portion</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>500,903</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>205,015</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>518,959</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>402,985</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>351,508</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Stockholders' equity</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,828,813</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,656,886</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,094,485</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>875,823</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>712,141</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>On
May 21, 1998, the Company acquired Quill Corporation ("Quill"). This transaction has been accounted for using the pooling of interests method. As a result, the financial
information shown above has been restated to include the accounts and results of operations of Quill for all periods presented.</FONT></DD></DL>
<UL>
<BR>

<P><FONT SIZE=2>Also,
all share numbers and earnings per share data have been restated to give retroactive effect to the three-for-two splits of the Company's common stock effected in January 1999, January 1998,
March 1996 and July 1995. See Note K of Notes to Consolidated Financial Statements.</FONT></P>

</UL>
<DL compact>
<DT><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Historical
earnings per share is omitted for the fourth quarter of fiscal year ending January&nbsp;29, 2000 for Staples Inc. as a result of the approval of the Tracking Stock
Proposal which changed Staples' capital structure by creating Staples.com Stock and reclassifying Staples common stock as Staples RD Stock. In its place, historical earnings per share is presented for
Staples RD Stock and Staples.com Stock for this period. See Note&nbsp;A of Notes to Consolidated Financial Statements.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Results
of operations for this period include a $41,000,000 charge relating to costs incurred in connection with the merger with Quill and a $49,706,000 charge relating to store
closure costs.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Results
of operations for this period include a $29,665,000 charge relating to costs incurred in connection with the proposed merger with Office Depot, Inc.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Pro
forma net income/(loss) for periods January 31, 1998 through February 3, 1996 include a provision for income taxes on the previously untaxed earnings of Quill, which had been an
S Corporation prior to its acquisition by the Company.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Pro
forma information is calculated to give effect to the sale of 12,792,308 shares of Staples.com Stock in private placements. In presenting this pro forma information, those
transactions were assumed to have occurred on February 4, 1996, its 1<SUP>st</SUP> year of operation.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Earnings
per common share have been restated to reflect three-for-two stock splits effective January 1999, January 1998, March 1996 and July 1995.</FONT></DD></DL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Company's fiscal year is the 52 or 53 weeks ending the Saturday closest to January 31 of the following calendar year.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-2</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><B>Item 7.</B></FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2><B>APPENDIX B</B></FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES, INC. AND SUBSIDIARIES<BR>
Management's Discussion and Analysis<BR>
of Financial Condition and Results of Operations</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
November 9, 1999, the stockholders of Staples, Inc. ("Staples" or the "Company") approved a proposal, "the Tracking Stock Proposal," which amended the Company's certificate of
incorporation to (i) authorize the issuance of a new series of common stock, to be designated as Staples.com common stock ("Staples.com Stock"), and intended to reflect the performance of Staples.com,
the Company's e-commerce business, (ii) increase the aggregate number of shares of common stock that the Company may issue from 1,500,000,000 to 2,100,000,000, initially comprised of 1,500,000,000
shares of Staples Retail and Delivery common stock ("Staples RD Stock") and 600,000,000 shares of Staples.com Stock, and (iii) re-classify Staples' existing common stock as Staples RD Stock, intended
to reflect the performance of Staples Retail and Delivery ("Staples RD"), which consists of all of the Company's non e-commerce businesses and a retained interest in Staples.com.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD had an 88% retained interest in Staples.com as of January&nbsp;29, 2000. During the fiscal year ended January&nbsp;29, 2000, Staples.com issued 12,792,308 shares of
Staples.com Stock in private placements and 14,459,878 shares through the exercise of employee stock options. Staples.com may issue additional shares of Staples.com Stock in one or more additional
public or private financings. The specific terms of the financings, including the amount of Staples.com Stock issued, and the timing of the financings, will depend upon factors such as stock market
conditions and the performance of Staples.com. The effect of those financings on the retained interest percentage and the outstanding interest percentage would depend upon the number of shares of
Staples.com Stock sold and whether the Company elects to attribute the net proceeds of such financing to the equity of Staples.com or to Staples RD in respect of its retained interest. The book value
associated with Staples RD's retained interest in Staples.com will be increased proportionately for net income (or decreased proportionately for net loss) of Staples.com. The Company filed a
registration statement with the Securities and Exchange Commission on February 18, 2000 for an initial public offering of Staples.com Stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Staples RD and Staples.com combined financial statements comprise all of the accounts included in the consolidated financial statements of Staples. The separate business combined
financial statements give effect to all allocation and related party transaction policies as adopted by the Board of Directors (the "Board").</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Company now provides to the holders of both Staples RD Stock and Staples.com Stock separate financial statements, financial reviews, descriptions of the business, and other
relevant information for
Staples RD and Staples.com, as well as consolidated financial information of the Company. Notwithstanding the allocation of assets and liabilities, including contingent liabilities between Staples RD
and Staples.com for the purposes of preparing their respective combined financial statements, this allocation and the change in the capital structure of the Company as a result of the approval of the
Tracking Stock Proposal did not result in the distribution or spin-off to stockholders of any of the Company's assets and liabilities and will not affect ownership of its assets or responsibility for
its liabilities or those of its subsidiaries. The assets the Company attributes to one business are subject to the liabilities of the other business, even if such liabilities arise from lawsuits,
contracts or indebtedness attributed to the other business. If the Company is unable to satisfy one business's liabilities out of the assets attributed to it, the Company may be required to satisfy
those liabilities with the assets the Company has attributed to the other business. Further, holders of Staples RD Stock and Staples.com Stock will not have any legal rights related to specific assets
of either business and in any liquidation will receive a fixed share of the net assets of the Company which may not reflect the actual trading prices, if any, of the respective businesses at such
time.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-1</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Financial
effects from one business that affect the Company's consolidated results of operations or financial condition could, if significant, affect the results of operations or
financial condition of the other businesses and the market price of the stock relating to the other businesses. In addition, net losses of either business and dividends and distributions on, or
repurchases of, either class of common stock or repurchases of common stock at a price per share greater than par value will reduce the funds we can pay on each class of common stock under Delaware
Law. Accordingly, the Staples consolidated financial statements should be read in conjunction with the Annual Report and the combined financial information of Staples RD and Staples.com contained in
this report.</FONT></P>

<P><FONT SIZE=2><B>Results of Operations</B></FONT></P>

<P><FONT SIZE=2><I>Comparison of Fiscal Years Ended January&nbsp;29, 2000, January 30, 1999, and January&nbsp;31, 1998</I></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;General.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;During the fiscal year ended January&nbsp;30, 1999, Staples acquired, in a pooling of interests transaction,
Quill Corporation and certain related entities (collectively referred to as "Quill") with 1997 net sales of approximately $551,000,000. The financial information set forth below includes adjustments
to give effect to the acquisition of Quill for all periods presented. Prior to its acquisition by Staples, Quill elected to be treated as an S Corporation under the Internal Revenue Code, and
accordingly, its earnings were not subject to taxation at the corporate level. Pro forma adjustments have been made to reflect a provision for income taxes on such previously untaxed earnings for each
period presented at an assumed rate of 40%. The statement of income combines Staples' historical operating results for the fiscal year ended January&nbsp;31, 1998 with corresponding Quill operating
results for the year ended December 31, 1997.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Sales.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Sales increased 25.5% to $8,936,809,000 in the fiscal year ended January&nbsp;29, 2000 from $7,123,189,000 in
the fiscal year ended January 30, 1999. Sales increased 24.3% to $7,123,189,000 in the fiscal year ended January&nbsp;30, 1999 from $5,732,145,000 in the fiscal year ended January&nbsp;31, 1998.
The
growth in each year was attributable to an increase in the number of open stores, and increased sales in existing stores and in the delivery and contract stationer segments of our business. Comparable
store and delivery hub sales for the fiscal year ended January&nbsp;29, 2000 increased 9% over the fiscal year ended January&nbsp;30, 1999. Comparable store and delivery hub sales for the year
ended January&nbsp;30, 1999 increased 11% over the year ended January&nbsp;31, 1998. Staples had 1,129 open stores as of January&nbsp;29, 2000, 913 open stores as of January&nbsp;30, 1999, and
742 open stores as of January&nbsp;31, 1998. The January&nbsp;29, 2000 total includes 175 stores opened, 42 stores acquired and one store closed during the twelve months ended January&nbsp;29,
2000.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Gross Profit.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Gross profit as a percentage of sales was 24.8% for the fiscal year ended January&nbsp;29, 2000, 24.2%
for the fiscal year ended January 30, 1999, and 23.6% for the fiscal year ended January&nbsp;31, 1998. The gross profit rate was increased by continually improving margins in the retail and delivery
business segments due to lower product costs from vendors and increased buying efficiencies as well as the leveraging of fixed distribution center and delivery costs over a larger sales base.
Furthermore, the addition of Staples Communications, which has higher gross profit margins than Staples' traditional business units, contributed to the increase in gross profit over the prior year.
These increases were partially offset by continued price reductions.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Operating and Selling Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Operating and selling expenses, which consist of payroll, advertising and other
operating expenses, were 14.5% of sales for the fiscal year ended January&nbsp;29, 2000, 13.9% of sales for the fiscal year ended January&nbsp;30, 1999, and 14.1% of sales for the fiscal year
ended January&nbsp;31, 1998. The increase as a percentage of sales for the year ended January&nbsp;29, 2000 was primarily due to</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-2</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>increased
costs of investing in our selling operations, including mainly retail and call center personnel, increased marketing costs in our delivery operations and Staples.com and the addition of
Staples Communications. Staples Communications has higher operating and selling expenses as a percentage of sales than Staples' traditional business units. These increases were partially offset by the
continued leveraging of fixed store and delivery operating costs as sales have increased.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Pre-opening expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Pre-opening expenses relating to new store openings, consisting primarily of salaries, supplies,
marketing and occupancy costs, are expensed by Staples as incurred and therefore fluctuate from period to period depending on the timing and number of new store openings. Pre-opening expenses averaged
$94,000 per store for the stores opened during fiscal year ended January&nbsp;29, 2000, $80,000 per store for stores opened during fiscal year ended January&nbsp;30, 1999, and $73,000 per store
for the stores opened during fiscal year ended January&nbsp;31, 1998. The increase during the fiscal year ended January&nbsp;29, 2000 was due primarily to increased openings outside of the United
States which generally involve higher pre-opening expenses per store.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;General and Administrative.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;General and administrative expenses as a percentage of sales were 4.0% for the fiscal year
ended January&nbsp;29, 2000, 4.2% for the fiscal year ended January&nbsp;30, 1999, and 3.9% for the fiscal year ended January&nbsp;31, 1998. The decrease as a percentage of sales for the year
ended January&nbsp;29, 2000 compared to the year ended January&nbsp;30, 1999 was primarily due to decreased Year 2000 compliance and other information systems ("IS") costs, synergies realized from
the Quill integration and Staples' ability to increase sales without proportionately increasing overhead expenses in its core retail
and direct businesses. These decreases were partially offset by costs incurred for new businesses, including Staples Communications and Staples.com, which have higher general and administrative
expenses as a percentage of sales than Staples' traditional business units.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Amortization of Goodwill.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Amortization of goodwill totaled $12,014,000 in fiscal year January&nbsp;29, 2000,
$3,739,000 in fiscal year January&nbsp;30, 1999 and $3,581,000 in fiscal year January&nbsp;31, 1998. The increase in amortization is due to the goodwill from the acquisitions of Ivan Allen
Corporation on November 1, 1998, Claricom Holdings, Inc., now referred to as Staples Communications, on February 26, 1999, and Sigma Burowelt in Germany, Office Centre in the Netherlands and Office
Centre in Portugal on October&nbsp;6, 1999.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Merger-Related and Integration Costs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In connection with the acquisition of Quill, Staples recorded a charge to
operating expense of $41,000,000 during the year ended January&nbsp;30, 1999. These costs consist of direct merger related and integration costs from the transaction. The merger transaction costs of
approximately $10,500,000 consist primarily of fees for investment bankers, attorneys, accountants and other related charges. The integration costs primarily include employee costs of approximately
$7,000,000, contract and lease termination costs of approximately $14,100,000, the write-down of leasehold improvements of approximately $3,500,000 and other merger-related costs of approximately
$5,900,000. Through January&nbsp;29, 2000, Staples paid approximately $24,000,000, which consists primarily of transaction and employee related costs. During the year ended January&nbsp;31, 1998,
Staples charged to expense non-recurring costs of $29,665,000 in connection with the proposed merger with Office Depot, Inc.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Store Closure Charge.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In December 1998, Staples committed to a plan to close and relocate stores which cannot be
expanded and upgraded to the Company's current store model. In connection with this plan, Staples recorded a charge to operating expense of $49,706,000. This charge includes $29,620,000 for future
rental payments under operating lease agreements that will be paid after the store is closed and will not be subsidized by subtenant income, $4,966,000 in fees, settlement costs and other expenses
related to</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-3</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>store
closure and $15,120,000 in asset impairment charges. At January&nbsp;29, 2000, the Company had executed lease agreements for a majority of the stores identified in 1998 and continues to
actively negotiate lease agreements for the remaining relocation sites. Negotiations for relocation sites have taken longer to complete than originally anticipated. Any sites that the Company is
unable to complete negotiations for by the end of the first quarter 2000 will not be closed and the related charges will be reversed. Through January&nbsp;29, 2000, the Company has paid
approximately $476,000 in costs related to the store closures and $34,110,000 remains accrued for future rental payments, fees, settlement costs, and other expenses related to the store closures.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Interest and Other Expense, Net.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Net interest and other expense totaled $17,101,000 in the fiscal year ended
January&nbsp;29, 2000, $17,370,000 in the fiscal year ended January&nbsp;30, 1999 and $21,955,000 in the fiscal year ended January&nbsp;31, 1998. The interest expense relates primarily to
existing borrowings. The decrease in interest expense during the years ended January 29, 2000 and January 30, 1999 is due primarily to the conversion of the Company's $300,000,000 of
4<SUP>1</SUP>/<SMALL>2</SMALL>% Debentures into common stock in December 1998.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Equity in Loss of Affiliates.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples' equity in loss of affiliates was $5,953,000 in the year ended January&nbsp;31,
1998. Staples recorded no equity in loss of affiliates for the year ended January&nbsp;29, 2000 and January&nbsp;30, 1999, due to the acquisition of Staples UK on May 6, 1997 and Staples Germany
on May 7, 1997. As a result of the acquisitions, Staples' ownership interest in Staples UK increased to 100% and its ownership of Staples Germany increased to approximately 92% which was increased to
100% in December 1998. The transactions were accounted for in accordance with the purchase method of accounting, and accordingly, the consolidated results of these entities are reflected in Staples'
financial statements since the respective dates of acquisition. Prior to the acquisitions, Staples UK and Staples Germany were accounted for under the equity method which resulted in Staples' share of
losses from operations being included in Equity in Loss of Affiliates.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The provision for income taxes as a percentage of pre-tax income was 39% for fiscal year ended
January&nbsp;29, 2000, 39.5% for fiscal year ended January&nbsp;30, 1999 and 32.8% for fiscal year ended January&nbsp;31, 1998. On a pro forma basis, to reflect a provision for income taxes on
previously untaxed earnings of Quill, Staples' effective tax rate would have been 40.1% for the fiscal year ended January&nbsp;30, 1999 and 38.7% for the year ended January&nbsp;31, 1998. The
increase in the pro forma tax rate in fiscal year 1998 and 1999 was primarily due to non-deductible merger-related costs.</FONT></P>

<P><FONT SIZE=2><B>Liquidity and Capital Resources</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples has traditionally used a combination of cash generated from operations and debt or equity offerings to fund its expansion and acquisition activities.
During the years ended January&nbsp;29, 2000, January&nbsp;30, 1999 and January&nbsp;31, 1998, Staples also utilized its revolving credit facility to support its various growth initiatives.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
opened 175 stores and closed one store in the fiscal year ended January&nbsp;29, 2000, opened 174 stores and closed three stores in the fiscal year ended January&nbsp;30,
1999, and opened 130 stores and closed one store in the fiscal year ended January&nbsp;31, 1998. In addition, in the fiscal year ended January&nbsp;29, 2000, 42 stores were added as a result of
the acquisition of Sigma Burowelt in Germany, Office Centre in the Netherlands and Office Centre in Portugal. In the fiscal year ended January&nbsp;31, 1998, 56 stores were added through the
acquisition of Staples UK and Staples Germany. To the extent that the store base matures and becomes more profitable, cash generated from store operations is expected to provide a greater portion of
funds required for new store inventories and other working capital requirements. Sales generated by the</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-4</FONT></P>

<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>contract
stationer business segment and certain direct mail customers are made under regular credit terms, which requires that Staples carry its own receivables from these sales. As the Company
expands its contract and direct mail businesses worldwide, Staples anticipates that its accounts receivable portfolio will grow. Receivables from its vendors under rebate, cooperative advertising and
marketing programs are a significant percentage of Staples' total receivables and tend to fluctuate somewhat seasonally. Staples also utilized capital equipment financings to fund current working
capital requirements. During the year ended January&nbsp;30, 1999, Staples paid approximately $14 million of mortgages in full on five distribution centers acquired from Quill.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As
of January&nbsp;29, 2000, cash, cash equivalents, and short-term investments totaled $111,554,000 a decrease of $263,867,000 from the January&nbsp;30, 1999 balance of
$375,421,000. This decrease was primarily attributable to cash used in investing activities of $609,030,000, including cash used in the acquisition of businesses of $244,021,000 and the acquisition of
property and equipment of $355,081,000, primarily for the 175 new stores opened. This decrease was partially offset by cash provided by operating activities of $299,525,000. Cash provided by operating
activities was comprised primarily of net income, depreciation and amortization of $174,145,000 and an increase in accounts payable, accrued expenses and other current liabilities of $117,855,000,
which was partially offset by an increase in merchandise inventories of $221,463,000 and an increase in accounts receivables of $112,980,000. Cash provided by financing activities of $60,469,000
includes $281,468,000 of net borrowings and $89,239,000 of proceeds from the sale of capital stock, the exercise of stock options and the employee stock purchase plan offset by net treasury stock
purchases of $310,238,000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
expects to open approximately 170 stores during fiscal 2000. Management estimates that the Company's cash requirements, including pre-opening expenses, leasehold improvements
and fixtures, will be approximately $1,500,000 for each new store (excluding the cost of any acquisitions of lease rights). Accordingly, Staples expects to use approximately $255,000,000 for store
openings during this period.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During
the fiscal year ended January&nbsp;29, 2000, Staples executed a stock repurchase program of Staples Stock intended to provide shares for employee stock programs. The Board
authorized up to $700,000,000 to be used for these repurchases. During the year ended January&nbsp;29, 2000, the Company repurchased 12,843,000 shares for approximately $300,105,000 under this
program and 339,000 shares for approximately $10,143,000 from employees upon exercise of PARS. In addition, on July 2, 1999, Staples entered into an equity forward purchase agreement to hedge against
stock price fluctuations for the repurchase of its common stock in connection with the annual stock option grant to employees and directors. Under the agreement, Staples may purchase 2,600,000 shares
at an average price of $30.263 or may elect to settle the contract on a net share basis in lieu of physical settlement.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During
the fiscal year ended January&nbsp;29, 2000, Staples made investments of approximately $23,780,000 in Internet related companies. Investments that qualify as marketable
securities are carried at fair value and all other investments are accounted for on a cost basis as each investment represents an interest of no greater than fifteen percent of the outstanding stock
of that company. As of January&nbsp;29, 2000, Staples has recognized an unrealized gain on these investments of $10,975,000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
February 1999, Staples completed the acquisition of Claricom Holdings, Inc. and certain related entities, now referred to as Staples Communications, for a purchase price of
approximately $137,600,000, net of cash acquired. In October 1999, Staples completed the acquisition of three European office supply companies: Sigma Burowelt in Germany, Office Centre in the
Netherlands and Office Centre in Portugal for a purchase price of approximately $106,400,000, net of cash acquired.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-5</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
also plans to continue to make investments in information systems, distribution centers and store remodels to improve operational efficiencies and customer service, and may
expend additional funds to acquire businesses or lease rights from tenants occupying retail space that is suitable for a
Staples store. Staples expects to meet these cash requirements through a combination of operating cash flow and borrowings from our existing revolving lines of credit.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
August 12, 1997, Staples issued $200,000,000 of 7.125% senior notes (the "Notes") with interest payable semi-annually on February 15 and August 15 of each year commencing on
February 15, 1998. Net proceeds of approximately $198,000,000 from the sale of the Notes were used for repayment of indebtedness under Staples' revolving credit agreement and for general working
capital purposes, including the financing of new store openings, distribution facilities and corporate offices.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
issued notes in the aggregate principal amount of 150,000,000 euros on November 15, 1999 (the "Euro Bonds"). Net proceeds of approximately $148,000,000 from the Euro Bonds
were used to fund international expansion. The Euro Bonds bear interest at a rate of 5.875% per annum and are due on November 15, 2004. The Euro Bonds have been designated as a foreign currency hedge
on our net foreign investments in Europe and gains or losses are recorded in the cumulative translation adjustment line in Stockholders' Equity.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
also maintains a revolving credit facility, effective through November 2002, with a syndicate of banks which provides up to $350,000,000 of available borrowings. Borrowings
made pursuant to this facility will bear interest at either the lead bank's prime rate, the federal funds rate plus 0.50%, the LIBOR rate plus a percentage spread based upon certain defined ratios, a
competitive bid rate or a swing line loan rate. This agreement, among other conditions, contains certain restrictive covenants, including net worth maintenance, minimum fixed charge interest coverage
and limitations on indebtedness and sales of assets.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As
of January&nbsp;29, 2000, $150,000,000 was outstanding under the revolving credit agreement. Staples also has available $35,000,000 in uncommitted, short-term bank credit lines,
of which no borrowings were outstanding as of January 29, 2000. Staples UK has a $48,600,000 line of credit which had an outstanding balance of $4,455,000 at January&nbsp;29, 2000. Staples Germany
has a $19,900,000 line of credit, Office Centre Netherlands has a $6,600,000 line of credit, Office Centre Portugal has a $500,000 line of credit and Business Depot has a $6,900,000 line of credit,
all with no outstanding balances at January&nbsp;29, 2000. Total cash, short-term investments and available revolving credit amounts totaled $424,740,000 as of January&nbsp;29, 2000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
expects that income from operations, together with its current short-term investments, funds available under its revolving credit facility and the funds received through the
issuance of the Euro Bond, will be sufficient to fund Staples' planned store openings and other recurring operating cash needs for at least the next twelve to eighteen months. Staples continually
evaluates financing possibilities, and it may seek to raise additional funds through any one or a combination of public or private debt or equity-related offerings, dependent upon market conditions,
or through an additional commercial bank debt arrangement.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Company filed a registration statement with the Securities and Exchange Commission on February 18, 2000 for an initial public offering of Staples.com Stock.</FONT></P>

<P><FONT SIZE=2><B>Inflation and Seasonality</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;While neither inflation nor deflation has had, and Staples does not expect it to have, a material impact upon operating results, there can be no assurance that
our business will not be affected by inflation or</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-6</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>deflation
in the future. We believe that our business is somewhat seasonal, with sales and profitability slightly lower during the first and second quarters of our fiscal year.</FONT></P>

<P><FONT SIZE=2><B>Future Operating Results</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This annual report on Form 10-K includes or incorporates 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. You can identify these forward-looking statements by the use of the words "believes", "anticipates", "plans", "expects", "may", "will", "would", "intends",
"estimates" and other similar expressions, whether in the negative or affirmative. We cannot guarantee that we actually will achieve the plans, intentions or expectations disclosed in the forward
looking statements made. We have included important factors in the cautionary statements below that we believe could cause actual results to differ materially from the forward-looking statements
contained herein. The forward-looking statements do not reflect the potential impact of any future acquisitions, mergers or dispositions. We do not assume any obligation to update any forward-looking
statement contained herein.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Our market is highly competitive and we may not continue to compete successfully.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We compete in a highly competitive
marketplace with a variety of retailers, dealers and distributors. In most of our geographic markets, we compete with other high-volume office supply chains, such as Office Depot, OfficeMax and Office
World, that have store formats, pricing strategies and product selections that are similar to ours. We also compete with mass merchants, such as Wal-Mart, warehouse clubs, computer and electronic
superstores, and other discount retailers. In addition, our retail stores and delivery and contract businesses compete with numerous mail order firms, contract stationer businesses and direct
manufacturers. Many of our competitors, including Office Depot, OfficeMax and Wal-Mart, have in recent years significantly increased the number of stores they operate within our markets. Some of our
current and potential competitors are larger than us and have substantially greater financial resources. It is possible that increased competition or improved performance by our competitors may reduce
our market share, may force the Company to charge lower prices than it otherwise would, and may adversely affect our business and financial performance in other ways.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;We may be unable to continue to successfully open new stores.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;An important part of our business plan is to aggressively
increase the number of our stores. We opened 175 stores in the United States, Canada and Europe in fiscal 1999 and plan to open approximately 170 new stores in fiscal 2000. For our growth strategy to
be successful, we must identify and lease favorable store sites, hire and train employees and adapt the Company's management and operational systems to meet the needs of our expanded operations. These
tasks may be difficult to accomplish successfully. If we are unable to open new stores as quickly as we plan, the Company's future sales and profits could be materially and adversely affected. Even if
we succeed in opening new stores, new stores may not achieve the same sales or profit levels as Staples' existing stores. Also, our expansion strategy includes opening new stores in markets where we
have a presence so that we can take advantage of economies of scale in marketing, distribution and
supervision costs. However, these new stores may result in the loss of sales in existing stores in nearby areas.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Our quarterly operating results are subject to significant fluctuation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;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. Our earnings may not continue to grow at rates similar to the growth rates achieved in recent years and
may fall short of either a prior fiscal period or investors' expectations. Factors that could cause these quarterly fluctuations include the following:</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-7</FONT></P>


<P><FONT SIZE=2><HR
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<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
number of new store openings, primarily because we expense pre-opening costs as incurred and newer stores are less profitable than mature stores;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
extent to which sales in new stores result in the loss of sales in existing stores;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
mix of products sold;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>pricing
actions of competitors;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
level of advertising and promotional expenses;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>seasonality,
primarily because the sales and profitability of our stores are typically slightly lower in the first and second quarter of its fiscal year
than in other quarters; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>charges
associated with acquisitions.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Most
of our operating expenses, such as rent expense, advertising expense and employee salaries, do not vary directly with the amount of our sales and are difficult to adjust in the
short term. As a result, if sales in a particular quarter are below our expectations for that quarter, we could not proportionately reduce operating expenses for that quarter, and therefore this sales
shortfall would have a disproportionate effect on the Company's expected net income for the quarter.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Our stock price may fluctuate based on the expectations of professional security analysts.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The market price of our two
classes of common stock is based in large part on professional securities analysts' expectations that our business will continue to grow and that the Company will achieve certain levels of net income.
If the financial performance of one or both of our businesses in a particular quarter does not meet the expectations of securities analysts, this may adversely affect the views of those securities
analysts concerning the growth potential and future financial performance of that business or of Staples as a whole. If the securities analysts that regularly follow one or both classes or our common
stock lower their rating or lower their projections for future growth and financial performance, the market price of one or both classes of our common stock is likely to drop significantly. In
addition, in those circumstances the decrease in the stock price would probably be disproportionate to the shortfall in the Company's financial performance.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Our rapid growth may continue to strain operations, which could adversely affect the business and financial
results.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our business, including sales, number of stores and number of employees, has grown dramatically over the past several years. In addition, we have
acquired a number of significant companies in the last few years and may make additional acquisitions in the future. This growth has placed significant demands on our management and operational
systems. If we are not successful in upgrading our operational and financial systems, expanding our management team and increasing and effectively managing our employee base, this growth is likely to
result in operational inefficiencies and ineffective management of our businesses and employees, which will in turn adversely affect the Company's business and financial performance.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Our international operations may not become profitable.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We currently operate in international markets through The
Business Depot Ltd. in Canada, Staples UK in the United Kingdom, Staples Deutschland and Sigma Burowelt in Germany and Office Centre in the Netherlands and Portugal. Consolidated European operations
are currently unprofitable, and we cannot guarantee that they will become profitable. We may seek to expand into other international markets in the future. Our foreign operations encounter risks
similar to those faced by our US stores, as well as risks inherent in foreign operations, such as local customs and competitive conditions and foreign currency fluctuations.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-8</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;We may be unable to obtain adequate future financing.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;It is possible that we will require additional sources of
financing earlier than anticipated, as a result of unexpected cash needs or opportunities, an expanded growth strategy or disappointing operating results. Additional funds may not be available on
satisfactory terms when needed, whether within the next twelve to eighteen months or thereafter.</FONT></P>

<P><FONT SIZE=2><B>Year 2000 Compliance</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We completed a comprehensive assessment of our internal computer systems and applications to identify those that might be affected by computer programs using
two digits rather than four to define the applicable year (the "Year 2000 issue"). We used internal personnel as well as external contractors and consultants to identify those systems and applications
which might be affected by the Year 2000 issue. All systems, applications and infrastructure identified as needing remediation have been replaced or modified and successfully tested for compliance. In
addition, we completed full "end to end" testing of leap year dating in January 2000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
did not experience any disruption of our computer systems, non-IT related systems, product replenishment from our suppliers or any order entry issues with our contract and/or
commercial customers as we entered the Year 2000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
total cost of Year 2000 compliance was $27 million, which had been spent as of January&nbsp;29, 2000. Most of the costs incurred related to remediation and testing of software
using outside contracted services. The cost of compliance was included in the 1999 IT budgets. The inclusion of Year 2000 compliance has not caused any critical IT projects to be delayed or
eliminated.</FONT></P>

<P><FONT SIZE=2><B>Euro Currency</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On January 1, 1999, certain member countries of the European Union established fixed conversion rates between their existing currencies and the European
Union's common currency, ("the euro"). The former currencies of the participating countries are scheduled to remain legal tender as denominations of the euro until January 1, 2002 when the euro will
be adopted as the sole legal currency.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
has evaluated the potential impact of the euro on its business, including the ability of its information systems to handle euro-denominated transactions and the impact on
exchange costs and currency exchange rate risks. The conversion to the euro is not expected to have a material impact on Staples' operations or financial position.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-9</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2><B>Item 7A. Quantitative and Qualitative Disclosures about Market Risks</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples is exposed to market risk from changes in interest rates and foreign exchange rates and has a risk management control process to monitor such risks.
The risk management process uses analytical techniques including market value, sensitivity analysis, and value at risk estimates. Staples does not believe that the potential exposure is significant in
light of the size of our business.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
May 11, 1999 and August 3, 1999, Staples entered into interest rate swaps, each for an aggregate notional amount of $100,000,000, in order to minimize financing costs associated
with our $200,000,000 of 7.125% senior notes due August 15, 2007. The swap agreements are both scheduled to terminate on August 15, 2007. Under the interest rate swap agreements, Staples is entitled
to receive semi-annual interest payments at a fixed rate of approximately 7.125% and is obligated to pay interest based on 30 day Non-Financial US Commercial Paper Rate of 5.69%, plus a fixed basis
point adjustment, at January&nbsp;29, 2000. The interest rate swaps are being accounted for as a 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. If Staples and the counterparty to the agreements terminate the swaps prior to their original maturity, any gain or
loss upon termination will be amortized to interest expense over the remaining original life of the agreements. Staples uses interest rate and currency swap agreements for purposes other than trading
and they are treated as off-balance sheet items. Staples uses interest rate swap agreements to modify fixed rate obligations to variable rate obligations, thereby adjusting the interest rates to
current market rates and ensuring that debt instruments are always reflected at fair value.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
July 2, 1999, Staples entered into an equity forward purchase agreement to hedge against stock price fluctuations for the repurchase of Staples Stock in connection with the annual
stock option grant to employees and directors. Under the agreement Staples may purchase 2,600,000 shares at an average price of $30.263 or elect to settle the contract on a net share basis in lieu of
physical settlement.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
November 15, 1999, Staples entered into an interest rate swap for an aggregate notional amount of 150,000,000 euro in order to minimize financing costs on the notes issued the same
date. The swap agreement is scheduled to terminate on November 15, 2004. Under the interest rate swap agreement, Staples is entitled to receive annual interest payments at a fixed rate of
approximately 5.875% and is required to make quarterly interest payments at a floating rate of the one month EURIBOR plus 1.1175%, currently approximately 4.1475%. Staples has designated its
150,000,000 Euro Bonds and its interest rate swap agreement to be an integrated transaction. Accordingly, the interest rate swap agreement is being accounted for as a 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.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
is exposed to foreign exchange risks through subsidiaries in Canada, the United Kingdom, Germany, the Netherlands and Portugal. Staples has not entered into any derivative
financial instruments to hedge this exposure, and Staples believes that the potential exposure is not material to our overall financial position or our results of operations.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This
risk management discussion and discussion of the effects of changes in interest rates and foreign exchange rates are forward-looking statements. Actual future results may differ
materially from these projected results due to developments in the global financial markets. The analytical methods used by Staples to assess and mitigate risk discussed above should not be considered
projections of future events or losses.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-10</FONT></P>


<P><FONT SIZE=2><HR
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<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES RETAIL AND DELIVERY<BR>
Management's Discussion and Analysis<BR>
of Financial Condition and Results of Operations</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;You
should read this discussion along with the Staples consolidated financial statements and with the Staples.com combined financial statements contained in this Form 10-K. Historical
results and percentage relationships may not necessarily be indicative of operating results for any future periods. The combined financial statements of Staples RD include the balance sheets,
statements of operations, cash flows and group equity of Staples' retail stores, catalog businesses and contract stationer business. The Staples RD combined financial statements also include its
retained interest in Staples.com, which was 88% as of January&nbsp;29, 2000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
November 9, 1999, the stockholders of Staples approved the Tracking Stock Proposal, which amended the Company's certificate of incorporation to (i) authorize the issuance of a new
series of common stock, designated as Staples.com Stock and intended to reflect the performance of Staples.com, the Company's e-commerce business, (ii) increase the aggregate number of shares of
common stock that the Company may issue from 1,500,000,000 to 2,100,000,000, initially comprised of 1,500,000,000 shares of Staples RD Stock and 600,000,000 shares of Staples.com Stock, and (iii) re-
&nbsp;classify Staples' existing common stock as Staples RD Stock, intended to reflect the performance of Staples RD, which consists of all of the Company's non e-commerce businesses and a
retained interest in Staples.com. The Company filed a registration statement with the Securities and Exchange Commission on February 18, 2000 for an initial public offering of Staples.com Stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD had an 88% retained interest in Staples.com as of January&nbsp;29, 2000. During the fiscal year ended January&nbsp;29, 2000, Staples.com issued 12,792,308 shares of
Staples.com Stock in private placements and 14,459,878 shares through the exercise of employee stock options. Staples.com may issue additional shares of Staples.com Stock in one or more additional
public or private financings. The specific terms of the financings, including the amount of Staples.com Stock issued, and the timing of the financings, will depend upon factors such as stock market
conditions and the performance of Staples.com. The effect of those financings on the retained interest percentage and the outstanding interest percentage would depend upon the number of shares of
Staples.com Stock sold and whether the Company elects to attribute the net proceeds of such financing to the equity of Staples.com or to Staples RD in respect of its retained interest. The book value
associated with Staples RD's retained interest in Staples.com
will be increased proportionately for net income (or decreased proportionately for net loss) of Staples.com.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Staples RD and Staples.com combined financial statements comprise all of the accounts included in the consolidated financial statements of Staples. The separate combined financial
statements give the effect to all allocation and related party transaction policies as adopted by the Board. These policies are described in Note C to the Staples RD combined financial statements. The
Staples RD combined financial statements have been prepared in a manner which management believes is reasonable and appropriate. Such combined financial statements include (i) the financial position,
results of operations and cash flows of Staples RD, (ii) the Company's debt and the effects that such debt had on the related Staples RD statements of income and cash flows, and (iii) the effects of a
92.6% weighted average retained interest in Staples.com on the combined statements of income and combined balance sheets.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Company now provides to the holders of both Staples RD Stock and Staples.com Stock separate financial statements, financial reviews, descriptions of the business, and other
relevant information for Staples RD and Staples.com as well as consolidated financial information of the Company. Notwithstanding the allocation of assets and liabilities, including contingent
liabilities between Staples RD and Staples.com for the purposes of preparing their respective combined financial statements, this allocation and the change in the capital structure of the Company as a
result of the approval of the Tracking Stock Proposal did not result in the distribution or spin-off to stockholders of any of the Company's assets and</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-11</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>liabilities
and will not affect ownership of its assets or responsibility for its liabilities or those of its subsidiaries. The assets the Company attributes to one business are subject to the
liabilities of the other business, even if such liabilities arise from lawsuits, contracts or indebtedness attributed to the other business. If the Company is unable to satisfy one business's
liabilities out of the assets attributed to it, the Company may be required to satisfy those liabilities with the assets the Company has attributed to the other business. Further, holders of Staples
RD Stock and Staples.com Stock will not have any legal rights related to specific assets of either business and in any liquidation will receive a fixed share of the net assets of the Company which may
not reflect the actual trading prices, if any, of the respective businesses at such time.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Financial
effects from one business that affect the Company's consolidated results of operations or financial condition could, if significant, affect the results of operations or
financial condition of the other businesses and the market price of the stock relating to the other businesses. In addition, net losses of either business and dividends and distributions on, or
repurchases of, either class of common stock or repurchases of common stock at a price per share greater than par value will reduce the funds we can pay on each class of common stock under Delaware
Law. Accordingly, the Staples RD combined financial statements should be read in conjunction with the Company's audited consolidated financial information and Annual Report on Form 10-K and the
combined financial information of Staples.com contained in this report.</FONT></P>

<P><FONT SIZE=2><B>Results of Operations</B></FONT></P>

<P><FONT SIZE=2><I>Comparison of Fiscal Years Ended January&nbsp;29, 2000, January&nbsp;30, 1999, and January&nbsp;31, 1998</I></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;General.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;During the fiscal year ended January&nbsp;30, 1999, Staples acquired, in a pooling of interests transaction,
Quill Corporation and certain related entities (collectively referred to as "Quill") with 1997 net sales of approximately $551 million. The financial information set forth below includes adjustments
to give effect to the acquisition of Quill for all periods presented. Prior to its acquisition by Staples, Quill elected to be treated as an S-Corporation under the Internal Revenue Code, and
accordingly, its earnings were not subject to taxation at the corporate level. Pro forma adjustments have been made to reflect a provision for income taxes on such previously untaxed earnings for each
period presented at an assumed rate of 40%. The statement of income combines Staples' historical operating results for the fiscal year ended January&nbsp;31, 1998 with corresponding Quill operating
results for the year ended December 31, 1997.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Sales.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Sales increased 24.4% to $8,842,460,000 in the fiscal year ended January&nbsp;29, 2000 from $7,106,303,000 in
the fiscal year ended January&nbsp;30, 1999. Sales increased 24.1% in the fiscal year ended January&nbsp;30, 1999 from $5,728,439,000 in the fiscal year ended January&nbsp;31, 1998. The growth
in each year was attributable to an increase in the number of open stores, increased sales in existing stores and in the delivery and contract stationer segments. Staples RD had 1,129 open stores as
of January&nbsp;29, 2000, 913 open stores as of January&nbsp;30, 1999, and 742 open stores as of January&nbsp;31, 1998. The January&nbsp;29, 2000 total includes 175 stores opened, 42 stores
acquired and one store closed during the twelve months ended January&nbsp;29, 2000.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Gross Profit.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Gross profit as a percentage of sales was 24.8% for the fiscal year ended January&nbsp;29, 2000, 24.2%
for the fiscal year ended January&nbsp;30, 1999, and 23.6% for the fiscal year ended January&nbsp;31, 1998. The gross profit rate was increased by continually improving margins in the retail and
delivery business segments due to lower product costs from vendors and increased buying efficiencies as well as the leveraging of fixed distribution center and delivery costs over a larger sales base.
Furthermore, the addition of Staples Communications, which has higher gross profit margins than Staples RD's traditional business</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-12</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>units,
contributed to the increase in gross profit over the prior year. These increases were partially offset by continued price reductions.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Operating and Selling Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Operating and selling expenses, which consist of payroll, advertising and other
operating expenses, were 14.3% of sales for the fiscal year ended January&nbsp;29, 2000, 13.9% of sales for the fiscal year ended January&nbsp;30, 1999, and 14.1% of sales for the fiscal year
ended January&nbsp;31, 1998. The increase as a percentage of sales for the year ended January&nbsp;29, 2000 was primarily due to increased costs of investing in our selling operations, including
mainly retail and call center personnel, increased marketing costs in our delivery operations and the addition of Staples Communications. Staples Communications has higher operating and selling
expenses as a percentage of sales than Staples RD's traditional business units. These increases were partially offset by the continued leveraging of fixed store and delivery operating costs as sales
have increased.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Pre-opening expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Pre-opening expenses relating to new store openings, consisting primarily of salaries, supplies,
marketing and occupancy costs, are expensed by Staples RD as incurred and therefore fluctuate from period to period depending on the timing and number of new store openings. Pre-opening expenses
averaged $94,000 per store for the stores opened during the fiscal year ended January&nbsp;29, 2000, $80,000 per store for the stores opened during the fiscal year ended January&nbsp;30, 1999, and
$73,000 per store for the stores opened during the fiscal year ended January&nbsp;31, 1998. The increase during the fiscal year ended January&nbsp;29, 2000 was due primarily to increased openings
outside of the United States which generally involve higher pre-opening expenses per store. These increases were partially offset by the continued leveraging of fixed store and delivery operating
costs as sales have increased.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;General and Administrative.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;General and administrative expenses as a percentage of sales were 3.8% for the fiscal year
ended January&nbsp;29, 2000, 4.2% for the fiscal year ended January&nbsp;30, 1999, and 3.9% for the fiscal year ended January&nbsp;31, 1998. The decrease as a percentage of sales for the year
ended January&nbsp;29, 2000 compared to the year ended January&nbsp;30, 1999 was primarily due to decreased Year 2000 compliance and other information systems ("IS") costs, synergies realized from
the Quill integration and Staples RD's ability to increase sales without proportionately increasing overhead expenses in its core retail and direct businesses. These decreases were partially offset by
costs incurred for new businesses, including Staples Communications, which has a higher general and administrative expenses as a percentage of sales than Staples RD's traditional business units.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Amortization of Goodwill.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Amortization of goodwill totaled $12,014,000 in the fiscal year ended January&nbsp;29,
2000, $3,739,000 in the fiscal year ended January&nbsp;30, 1999 and $3,581,000 in the fiscal year ended January&nbsp;31, 1998. The increase in amortization is due to the goodwill from the
acquisitions of Ivan Allen Corporation on November 1, 1998; Claricom Holdings, Inc., now referred to as Staples Communications, on February 26, 1999; and the Sigma Burowelt in Germany, Office Centre
in the Netherlands and Office Centre in Portugal on October&nbsp;6, 1999.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Merger-Related and Integration Costs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In connection with the acquisition of Quill, Staples RD recorded a charge to
operating expense of $41,000,000 during the year ended January&nbsp;30, 1999. These costs consist of direct merger-related and integration costs from the transaction. The merger transaction costs of
approximately $10,500,000 consist primarily of fees for investment bankers, attorneys, accountants and other related charges. The integration costs primarily include employee costs of approximately
$7,000,000, contract and lease termination costs of approximately $14,100,000, the write-down of leasehold improvements of approximately $3,500,000 and other merger-related costs of approximately
$5,900,000. Through January&nbsp;29, 2000 Staples paid approximately $24,000,000, which consists primarily of transaction and</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-13</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>employee
related costs. During the year ended January&nbsp;31, 1998, Staples RD charged to expense non-recurring costs of $29,665,000 in connection with the proposed merger with Office Depot, Inc.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Store Closure Charge.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In December 1998, Staples RD committed to a plan to close and relocate stores which cannot be
expanded and upgraded to its current store model. In connection with this plan, Staples RD recorded a charge to operating expense of $49,706,000. This charge includes $29,620,000 for future rental
payments under operating lease agreements that will be paid after the store is closed
and will not be subsidized by subtenant income, $4,966,000 in fees, settlement costs and other expenses related to store closure and $15,120,000 in asset impairment charges. At January&nbsp;29,
2000, Staples RD had executed lease agreements for a majority of the stores identified in 1998 and continues to actively negotiate lease agreements for the remaining relocation sites. Negotiations for
relocation sites have taken longer to complete than originally anticipated. Any sites that Staples RD is unable to complete negotiations for by the end of the first quarter 2000 will not be closed and
the related charges will be reversed. Through January&nbsp;29, 2000, Staples RD has paid approximately $476,000 in costs related to the store closures and $34,110,000 remains accrued for future
rental payments, fees, settlement costs, and other expenses related to the store closures.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Interest and Other Expense, Net.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Net interest and other expense totaled $17,183,000 in the fiscal year ended
January&nbsp;29, 2000, $17,342,000 in the fiscal year ended January&nbsp;30, 1999 and $21,947,000 in the fiscal year ended January&nbsp;31, 1998. The interest expense relates primarily to
existing borrowings. The decrease in interest expense during the years ended January 29, 2000 and January 30, 1999 is due primarily to the conversion of the Company's $300,000,000 of
4<SUP>1</SUP>/<SMALL>2</SMALL>% Debentures into common stock in December 1998.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Equity in Loss of Affiliates.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples' equity in loss of affiliates was $5,953,000 in the year ended January&nbsp;31,
1998. Staples recorded no equity in loss of affiliates for the year ended January&nbsp;29, 2000 and January&nbsp;30, 1999, due to the acquisition of Staples UK on May 6, 1997 and Staples Germany
on May 7, 1997. As a result of the acquisitions, Staples' ownership interest of Staples UK increased to 100% and its ownership of Staples Germany increased to approximately 92% which was increased to
100% in December 1998. The transactions were accounted for in accordance with the purchase method of accounting, and accordingly, the consolidated results of these entities are reflected in Staples'
financial statements since the respective dates of acquisition. Prior to the acquisitions, Staples UK and Staples Germany were accounted for under the equity method which resulted in Staples' share of
losses from operations being included in equity in loss of affiliates.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Retained Interest In Staples.com.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD had a 92.6% weighted average retained interest in Staples.com for the
fiscal year ended January&nbsp;29, 2000 and a 100% retained interest for fiscal years ended January 30, 1999 and January&nbsp;31, 1998. Accordingly, the loss related to the retained interest in
Staples.com of $15,628,000 for the fiscal year ended January&nbsp;29, 2000, $487,000 for the fiscal year ended January&nbsp;30, 1999 and $300,000 for the fiscal year ended January&nbsp;31, 1998
represents the net loss of Staples.com for each of those years.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The provision for income taxes as a percentage of pre-tax income was 39% for the fiscal year ended
January&nbsp;29, 2000, 39.5% for the fiscal year ended January&nbsp;30, 1999 and 32.8% for the fiscal year January&nbsp;31, 1998. On a pro forma basis, to reflect a provision for income taxes on
previously untaxed earnings of Quill, Staples' effective tax rate would have been 40.1% for the fiscal year ended January&nbsp;30, 1999 and 38.7% for the fiscal year ended January 31, 1998. The
increase in the pro forma tax rate in fiscal years 1999 and 1998 was primarily due to non-deductible merger-related costs.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-14</FONT></P>

<P><FONT SIZE=2><HR
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<P><FONT SIZE=2><B>Liquidity and Capital Resources</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples manages most finance activities on a centralized, consolidated basis. These activities include the investment of surplus cash, the issuance, repayment
and repurchase of short-term and long-term debt, and the issuance and repurchase of common stock. Staples currently attributes each incurrence or issuance of external debt, and the proceeds thereof,
to Staples RD and will continue to do so in the future unless the Board determines otherwise. Whenever Staples.com holds cash, Staples.com will normally, but will not be obligated to, transfer that
cash to Staples RD. Conversely, whenever Staples.com has a cash need, Staples RD will normally, but not be obligated to, fund that cash need. The Board will determine, in its sole discretion, whether
either business will provide any particular funds on any particular occasion to the other business, but will not be obligated to cause such cash transfers.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All
cash transfers from one business to or for the account of the other business (other than transfers in return of assets or services rendered or transfers in respect of Staples RD's
retained interest that correspond to dividends paid on Staples.com Stock), are accounted for as inter-business revolving credit advances unless:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
Board determines that a given transfer, or type of transfer, should be accounted for as a long-term loan;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
Board determines that a given transfer, or type of transfer, should be accounted for as a capital contribution increasing Staples RD's retained
interest in Staples.com; or
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
Board determines that a given transfer, or type of transfer, should be accounted for as a return of capital reducing Staples RD's retained interest in
Staples.com.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;There
are no specific criteria to determine when Staples RD will account for a cash transfer as a long-term loan, a capital contribution or a return of capital rather than an
inter-business revolving credit advance. The Board will make such a determination based on its judgement at the time of such transfer, or at the time of the first of such type of transfer, based upon
all relevant circumstances. Factors the Board will consider include:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
current and projected capital structure of each business;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
relative levels of internally generated funds of each business;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
financing needs and objectives of the recipient business; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
investment objectives of the transferring business; the availability, cost and time associated with the alternative financing sources and prevailing
interest rates and general economic conditions.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any
cash transfer accounted for as an inter-business revolving credit advance will bear interest at a rate at which the Board, in its sole discretion, determines Staples could borrow
such funds on a revolving credit basis. Any cash transfer accounted for as a long-term loan will have interest rate, amortization,
maturity, redemption and other terms that generally reflect the then prevailing terms on which the Board, in its sole discretion, determines Staples could borrow such funds.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any
cash transfer from Staples RD to Staples.com, or for Staples.com's account, accounted for as a capital contribution will correspondingly increase Staples.com's equity and Staples
RD's retained interest in Staples.com. As a result, the number of shares issuable with respect to Staples RD's retained interest in Staples.com will increase by the amount of such capital contribution
divided by the market value of Staples.com Stock on the date of transfer. Any cash transfer from Staples.com to Staples RD, or for</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-15</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>Staples
RD's account, accounted for as a return of capital will correspondingly reduce Staples.com's equity and Staples RD's retained interest in Staples.com. As a result, the number of shares
issuable with respect to Staples RD's retained interest in Staples.com will decrease by the amount of such return of capital divided by the market value of Staples.com Stock on the date of transfer.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As
a result of the cash management policies in place between Staples RD and Staples.com, Staples.com is heavily dependent on Staples RD for its continued funding. Accordingly, Staples
RD's liquidity could be adversely affected by the liquidity needs of Staples.com.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD has traditionally used a combination of cash generated from operations and debt or equity offerings to fund its expansion and acquisition activities. During the years ended
January&nbsp;29, 2000, January&nbsp;30, 1999 and January&nbsp;31, 1998, Staples RD also utilized its revolving credit facility to support its various growth initiatives.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD opened 175 stores and closed one store in the fiscal year ended January&nbsp;29, 2000, opened 174 stores and closed three stores in the fiscal year ended
January&nbsp;30, 1999, and opened 130 stores and closed one store in the fiscal year ended January&nbsp;31, 1998. In addition, in the fiscal year ended January&nbsp;29, 2000, 42 stores were
added as a result of the acquisition of Sigma Burowelt in Germany, Office Centre in the Netherlands and Office Centre in Portugal. In the fiscal year ended January&nbsp;31, 1998, 56 stores were
added through the acquisition of Staples UK and Staples Germany. To the extent that the store base matures and becomes more profitable, cash generated from store operations is expected to provide a
greater portion of funds required for new store inventories and other working capital requirements. Sales generated by the contract stationer business segment and certain direct mail customers are
made under regular credit terms, which requires that Staples RD carry its own receivables from these sales. As Staples RD expands its contract and direct mail businesses worldwide, Staples RD
anticipates that its accounts receivable portfolio will grow. Receivables from Staples RD's vendors under rebate, cooperative advertising and marketing programs are a significant percentage of its
total receivables and tend to fluctuate somewhat seasonally. Staples RD also utilized capital equipment financings to fund current working capital requirements. During the year ended
January&nbsp;30, 1999, Staples RD paid approximately $14 million of mortgages in full on five distribution centers acquired from Quill.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As
of January&nbsp;29, 2000, cash, cash equivalents, and short-term investments totaled $111,554,000 a decrease of $263,867,000 from the January&nbsp;30, 1999 balance of
$375,421,000. This decrease was primarily attributable to cash used in investing activities of $602,704,000, including cash used in the acquisition
of businesses of $244,021,000 and the acquisition of property and equipment of $342,615,000, primarily for the 175 new stores opened. This decrease was partially offset by cash provided by operating
activities of $307,995,000. Cash provided by operating activities was comprised primarily of net income, depreciation and amortization of $173,093,000 and an increase in accounts payable, accrued
expenses and other current liabilities of $110,474,000, which was partially offset by an increase in merchandise inventories of $221,463,000 and an increase in accounts receivables of $112,980,000.
Cash provided by financing activities of $45,673,000 includes $281,468,000 of net borrowings and $46,503,000 of proceeds from sales of capital stock for the exercise of stock options and the employee
stock purchase plan and $27,940,000 of inter-business advances from Staples.com for proceeds from sale of Staples.com Stock offset by net treasury stock purchases of $310,238,000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD expects to open approximately 170 stores during fiscal 2000. Management estimates that the Company's cash requirements, including pre-opening expenses, leasehold
improvements and fixtures, will be approximately $1,500,000 for each new store (excluding the cost of any acquisitions of lease rights). Accordingly, Staples RD expects to use approximately
$255,000,000 for store openings during this period.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-16</FONT></P>

<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During
the fiscal year ended January&nbsp;29, 2000, Staples RD executed a stock repurchase program of Staples RD Stock intended to provide shares for employee stock programs. The
Board authorized up to $700,000,000 to be used for these repurchases. During the year ended January&nbsp;29, 2000, Staples RD repurchased 12,843,000 shares for approximately $300,105,000 under this
program and 339,000 shares for approximately $10,143,000 from employees upon exercise of PARS. In addition, on July 2, 1999, Staples RD entered into an equity forward purchase agreement to hedge
against stock price fluctuations for the repurchase of its common stock in connection with the annual stock option grant to employees and directors. Under the agreement Staples RD may purchase
2,600,000 shares at an average price of $30.263 or may elect to settle the contract on a net share basis in lieu of physical settlement.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
February 1999, Staples RD completed the acquisition of Claricom Holdings, Inc. and certain related entities, now referred to as Staples Communications, for a purchase price of
approximately $137,600,000, net of cash acquired. In October 1999, Staples RD completed the acquisition of three European office supply companies: Sigma Burowelt in Germany, Office Centre in the
Netherlands and Office Centre in Portugal for a purchase price of approximately $106,400,000, net of cash acquired.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD also plans to continue to make investments in information systems, distribution centers and store remodels to improve operational efficiencies and customer service, and may
expend additional funds to acquire businesses or lease rights from tenants occupying retail space that is suitable for a Staples store. Staples RD expects to meet these cash requirements through a
combination of operating cash flow and borrowings from our existing revolving lines of credit.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
August 12, 1997, Staples RD issued $200,000,000 of 7.125% senior notes (the "Notes") with interest payable semi-annually on February 15 and August 15 of each year commencing on
February 15, 1998. Net proceeds of approximately $198,000,000 from the sale of the Company's Notes were used for
repayment of indebtedness under our revolving credit agreement and for general working capital purposes, including the financing of new store openings, distribution facilities and corporate offices.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD issued notes in the aggregate principal amount of 150,000,000 euros on November 15, 1999 ("the Euro Bonds"). Net proceeds from the Euro Bonds of approximately $148,000,000
were used to fund international expansion. The Euro Bonds bear interest at a rate of 5.875% per annum and are due on November 15, 2004. The Euro Bonds have been designated as a foreign currency hedge
on our net foreign investments in Europe and gains or losses are recorded in the cumulative translation adjustment line in Stockholders' Equity.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD also maintains a revolving credit facility, effective through November 2002, with a syndicate of banks which provides up to $350,000,000 of available borrowings. Borrowings
made pursuant to this facility will bear interest at either the lead bank's prime rate, the federal funds rate plus 0.50%, the LIBOR rate plus a percentage spread based upon certain defined ratios, a
competitive bid rate or a swing line loan rate. This agreement, among other conditions, contains certain restrictive covenants, including net worth maintenance, minimum fixed charge interest coverage
and limitations on indebtedness and sales of assets.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As
of January&nbsp;29, 2000, $150,000,000 was outstanding under the revolving credit agreement. Staples RD also has available $35,000,000 in uncommitted, short-term bank credit
lines, of which no borrowings were outstanding as of January&nbsp;29, 2000. Staples UK has a $48,600,000 line of credit which had an outstanding balance of $4,500,000 at January&nbsp;29, 2000.
Staples Germany has a $19,900,000 line of credit, Office Centre Netherlands has a $6,600,000 line of credit, Office Centre Portugal has a $500,000 line of credit and Business Depot has a $6,900,000
line of credit, all with no outstanding balances at January&nbsp;29,</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-17</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>2000.
Total cash, short-term investments and available revolving credit amounts totaled $424,740,000 as of January&nbsp;29, 2000.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD expects that income from operations, together with its current short-term investments, funds available under its revolving credit facility and the funds received through
the issuance of the Euro Bond will be sufficient to fund Staples RD's planned store openings and other recurring operating cash needs for at least the next twelve to eighteen months. Staples RD
continually evaluates financing possibilities, and it may seek to raise additional funds through any one or a combination of public or private debt or equity-related offerings, dependent upon market
conditions, or through an additional commercial bank debt arrangement.</FONT></P>

<P><FONT SIZE=2><B>Inflation and Seasonality</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;While neither inflation nor deflation has had, and Staples RD does not expect it to have, a material impact upon operating results, there can be no assurance
that Staples RD's business will not be affected by inflation or deflation in the future. Staples RD believes that its business is somewhat seasonal, with sales and profitability slightly lower during
the first and second quarters of its fiscal year.</FONT></P>

<P><FONT SIZE=2><B>Future Operating Results</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This annual report on Form 10-K includes or incorporates 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. You can identify these forward-looking statements by the use of the words "believes", "anticipates", "plans", "expects", "may", "will", "would", "intends",
"estimates" and other similar expressions, whether in the negative or affirmative. Staples RD cannot guarantee that they actually will achieve the plans, intentions or expectations disclosed in the
forward looking statements made. Staples RD has included important factors in the cautionary statements below that it believes could cause actual results to differ materially from the forward-looking
statements contained herein. The forward-looking statements do not reflect the potential impact of any future acquisitions, mergers or dispositions. Staples RD does not assume any obligation to update
any forward-looking statement contained herein.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD's market is highly competitive and Staples RD may not continue to compete successfully.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD competes
in a highly competitive marketplace with a variety of retailers, dealers and distributors. In most of its geographic markets, it competes with other high-volume office supply chains, such as Office
Depot, OfficeMax and Office World, that have store formats, pricing strategies and product selections that are similar to Staples RD. Staples RD also competes with mass merchants, such as Wal-Mart,
warehouse clubs, computer and electronic superstores, and other discount retailers. In addition, its retail stores and delivery and contract businesses compete with numerous mail order firms, contract
stationer businesses and direct manufacturers. Many of Staples RD's competitors, including Office Depot, OfficeMax and Wal-Mart, have in recent years significantly increased the number of stores they
operate within Staples RD's markets. Some of Staples RD's current and potential competitors are larger than Staples RD and have substantially greater financial resources. It is possible that increased
competition or improved performance by its competitors may reduce Staples RD's market share, may force Staples RD to charge lower prices than it otherwise would, and may adversely affect Staples RD's
business and financial performance in other ways.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD may be unable to continue to successfully open new stores.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;An important part of Staples RD's business plan
is to aggressively increase the number of its stores. Staples RD opened 175 stores in the United States, Canada and Europe in fiscal 1999 and plans to open approximately 170 new stores in fiscal</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-18</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>2000.
For Staples RD's growth strategy to be successful, it must identify and lease favorable store sites, hire and train employees and adapt its management and operational systems to meet the needs
of its expanded operations. These tasks may be difficult to accomplish successfully. If Staples RD is unable to open new stores as quickly as it planned, its future sales and profits could be
materially adversely affected. Even if Staples RD succeeds in opening new stores, new stores may not achieve the same sales or profit levels as its existing stores. Also, Staples RD's expansion
strategy includes opening new stores in markets where Staples RD has a presence so that it can take advantage of economies of scale in marketing, distribution and supervision costs. However, these new
stores may result in the loss of sales in existing stores in nearby areas.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD's quarterly operating results are subject to significant fluctuation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD's operating results have
fluctuated from quarter to quarter in the past, and it expects that it will continue to do so in the
future. Staples RD's earnings may not continue to grow at rates similar to the growth rates achieved in recent years and may fall short of either a prior fiscal period or investors' expectations.
Factors that could cause these quarterly fluctuations include the following:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
number of new store openings, primarily because Staples RD expenses pre-opening costs as incurred and newer stores are less profitable than mature
stores;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
extent to which sales in new stores result in the loss of sales in existing stores;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
mix of products sold;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>pricing
actions of competitors;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
level of advertising and promotional expenses;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>seasonality,
primarily because the sales and profitability of Staples RD stores are typically slightly lower in the first and second quarter of Staples
RD's fiscal year than in other quarters; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>charges
associated with acquisitions.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Most
of Staples RD's operating expenses, such as rent expense, advertising expense and employee salaries, do not vary directly with the amount of its sales and are difficult to adjust
in the short term. As a result, if sales in a particular quarter are below expectations for that quarter, Staples RD could not proportionately reduce operating expenses for that quarter, and therefore
this sales shortfall would have a disproportionate effect on its expected net income for the quarter.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD's stock price may fluctuate based on the expectations of professional security analysts.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The market price of
Staples RD Stock is based in large part on professional securities analysts' expectations that its business will continue to grow and that it will achieve certain levels of net income. If Staples RD's
financial performance in a particular quarter does not meet the expectations of securities analysts, this may adversely affect the views of those securities analysts concerning Staples RD's growth
potential and future financial performance. If the securities analysts that regularly follow Staples RD Stock lower their rating of the common stock or lower their projections for Staples RD's future
growth and financial performance, the market price of Staples RD Stock is likely to drop significantly. In addition, in those circumstances, the decrease in the price of Staples RD Stock would
probably be disproportionate to the shortfall in financial performance.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD's rapid growth may continue to strain operations, which could adversely affect the business and financial
results.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD's business, including sales, number of stores and number of employees, has</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-19</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>grown
dramatically over the past several years. In addition, Staples RD has acquired a number of significant companies in the last few years and may make additional acquisitions in the future. This
growth has placed significant demands on Staples RD's management and operational systems. If Staples RD is not successful in upgrading its operational and financial systems, expanding its management
team and increasing and effectively managing its employee base, this growth is likely to result in operational
inefficiencies and ineffective management of Staples RD's business and employees, which will in turn adversely affect its business and financial performance.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD's international operations may not become profitable.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD currently operates in international markets
through The Business Depot Ltd. in Canada, Staples UK in the United Kingdom, Staples Deutschland and Sigma Burowelt in Germany and Office Centre in the Netherlands and Portugal. Consolidated European
operations are currently unprofitable, and Staples RD cannot guarantee that they will become profitable. Staples RD may seek to expand into other international markets in the future. Staples RD's
foreign operations encounter risks similar to those faced by its US stores, as well as risks inherent in foreign operations, such as local customs and competitive conditions and foreign currency
fluctuations.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD may be unable to obtain adequate future financing.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;It is possible that Staples RD will require additional
sources of financing earlier than anticipated, as a result of unexpected cash needs or opportunities, an expanded growth strategy or disappointing operating results. Additional funds may not be
available on satisfactory terms when needed, whether within the next twelve to eighteen months or thereafter.</FONT></P>

<P><FONT SIZE=2><B>Year 2000 Compliance</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD completed a comprehensive assessment of its internal computer systems and applications to identify those that might be affected by computer programs
using two digits rather than four to define the applicable year (the "Year 2000 issue"). Staples RD used internal personnel as well as external contractors and consultants to identify those systems
and applications which are affected by the Year 2000 issue. All systems, applications and infrastructure identified as needing remediation have been replaced or modified and successfully tested for
compliance. In addition, Staples RD completed full "end to end" testing of leap year dating in January 2000.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD did not experience any disruption of its computer systems, non-IT related systems, product replenishment from its suppliers or any order entry issues with its contract
and/or commercial customers as it entered the Year 2000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
total cost of Year 2000 compliance was $27 million, which had been spent as of January&nbsp;31, 2000. Most of the costs incurred related to remediation and testing of software
using outside contracted services. The cost of compliance was included in the 1999 IT budgets. The inclusion of Year 2000 compliance has not caused any critical IT projects to be delayed or
eliminated.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-20</FONT></P>

<P><FONT SIZE=2><HR
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<BR>

<P><FONT SIZE=2><B>Euro Currency</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On January 1, 1999, certain member countries of the European Union established fixed conversion rates between their existing currencies and the European
Union's common currency, ("the euro"). The former currencies of the participating countries are scheduled to remain legal tender as denominations of the euro until January&nbsp;1, 2002 when the euro
will be adopted as the sole legal currency.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD has evaluated the potential impact of the euro on its business, including the ability of its information systems to handle euro-denominated transactions and the impact on
exchange costs and currency exchange rate risks. Based on the results of this evaluation, Staples RD does not expect the conversion to the euro to have a material impact on its operations or financial
position.</FONT></P>

<P><FONT SIZE=2><B>Item 7A. Quantitative and Qualitative Disclosures about Market Risks</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD is exposed to market risk from changes in interest rates and foreign exchange rates and has a risk management control process to monitor such risks.
The risk management process uses analytical techniques including market value, sensitivity analysis, and value at risk estimates. Staples RD does not believe that the potential exposure is significant
in light of the size of its business.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
May 11, 1999 and August 3, 1999, Staples RD entered into interest rate swaps, each for an aggregate notional amount of $100,000,000, in order to minimize financing costs associated
with the $200,000,000 of 7.125% senior notes due August 15, 2007. The swap agreements are both scheduled to terminate on August 15, 2007. Under the interest rate swap agreements, Staples RD is
entitled to receive semi-annual interest payments at a fixed rate of approximately 7.125% and is obligated to pay interest based on 30 day Non-Financial US Commercial Paper Rate of 5.69%, plus a fixed
basis point adjustment, at January&nbsp;29, 2000. The interest rate swaps are being accounted for as a 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. If Staples RD and the counterparty to the agreements terminate the swaps prior to their original maturity,
any gain or loss upon termination will be amortized to interest expense over the remaining original life of the agreements. Staples RD uses interest rate and currency swap agreements for purposes
other than trading and they are treated as off-balance sheet items. Staples RD uses interest rate swap agreements to modify fixed rate obligations to variable rate obligations, thereby adjusting the
interest rates to current market rates and ensuring that the debt instruments are always reflected at fair value.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
July 2, 1999, Staples entered into an equity forward purchase agreement to hedge against stock price fluctuations for the repurchase of Staples Stock in connection with the annual
stock option grant to employees and directors. Under the agreement, Staples may purchase 2,600,000 shares at an average price of $30.263 or elect to settle the contract on a net share basis in lieu of
physical settlement.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
November 15, 1999, Staples RD entered into an interest rate swap for an aggregate notional amount of 150,000,000 euro in order to minimize financing costs on the notes issued the
same date. The swap agreement is scheduled to terminate on November&nbsp;15, 2004. Under the interest rate swap agreement, Staples RD is entitled to receive annual interest payments at a fixed rate
of approximately 5.875% and is required to make quarterly interest payments at a floating rate of the one month EURIBOR plus 1.1175%, currently approximately 4.2455%. Staples RD has designated its
150,000,000 Euro Bonds and its interest rate swap agreement to be an integrated transaction. Accordingly, the interest rate swap agreement is being accounted for as a 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.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-21</FONT></P>


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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD is exposed to foreign exchange risks through subsidiaries in Canada, the United Kingdom, Germany, the Netherlands and Portugal. Staples RD has not entered into any
derivative financial instruments to hedge this exposure, and Staples RD believes that the potential exposure is not material to our overall financial position or our results of operations.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This
risk management discussion and discussion of the effects of changes in interest rates and foreign exchange rates are forward-looking statements. Actual future results may differ
materially from these projected results due to developments in the global financial markets. The analytical methods used by Staples RD to assess and mitigate risk discussed above should not be
considered projections of future events or losses.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-22</FONT></P>


<P><FONT SIZE=2><HR
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<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES.COM<BR>
Management's Discussion and Analysis<BR>
of Financial Condition and Results of Operations</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;You
should read this discussion along with the Staples consolidated financial statements and with the Staples RD combined financial statements contained in this Form 10-K. Historical
results and percentage relationships may not necessarily be indicative of operating results for any future periods. From an accounting standpoint, Staples has separated Staples.com from Staples RD.
Staples has allocated all of its consolidated assets, liabilities, revenue, expenses and cash flows between Staples.com and Staples RD. Staples intends Staples.com Stock to track the performance of
Staples.com and for Staples RD Stock to track the performance of Staples RD.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
combined financial statements of Staples.com include the balance sheets, statements of operations, cash flows and group equity of Staples' e-commerce businesses, including
principally the </FONT><FONT SIZE=2><I>Staples.com, Quillcorp.com and StaplesLink.com</I></FONT><FONT SIZE=2> web sites. The financial statements of Staples.com give effect to all allocation and
related party transaction policies adopted by the Board. For a description of these policies, see Note C to the combined financial statements of Staples.com.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD had an 88% retained interest in Staples.com as of January&nbsp;29, 2000. During the fiscal year ended January&nbsp;29, 2000, Staples.com issued 12,792,308 shares of
Staples.com Stock in private placements
and 14,459,878 shares through the exercise of employee stock options. Staples.com may issue additional shares of Staples.com Stock in one or more additional public or private financings. The specific
terms of the financings, including the amount of Staples.com Stock issued, and the timing of the financings, will depend upon factors such as stock market conditions and the performance of
Staples.com. The effect of those financings on the retained interest percentage and the outstanding interest percentage would depend upon the number of shares of Staples.com Stock sold and whether the
Company elects to attribute the net proceeds of such financing to the equity of Staples.com or to Staples RD in respect of its retained interest. The book value associated with Staples RD's retained
interest in Staples.com will be increased proportionately for net income (or decreased proportionately for net loss) of Staples.com. The Company filed a registration statement with the Securities and
Exchange Commission on February 18, 2000 for an initial public offering of Staples.com Stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Holders
of Staples.com stock are common stockholders of Staples. The assets Staples attributes to one business will be subject to the liabilities of the other business, even if such
liabilities arise from lawsuits, contracts or indebtedness that are attributed to the other business. If Staples is unable to satisfy one business's liabilities out of the assets attributed to it,
Staples may be required to satisfy those liabilities with assets it has attributed to the other business. Further, holders of Staples.com Stock and Staples RD Stock do not have any legal rights
related to specific assets of either business and in any liquidation will receive a fixed share of the net assets of Staples which may not reflect the actual trading prices, if any, of the respective
businesses at such time. Accordingly, the Staples.com combined financial statements should be read in conjunction with the Company's audited consolidated financial information and Annual Report on
Form 10-K and the combined financial information of Staples RD contained in this report.</FONT></P>

<P><FONT SIZE=2><B>Results of Operations</B></FONT></P>

<P><FONT SIZE=2><I>Comparison of Fiscal Years Ended January&nbsp;29, 2000, January&nbsp;30, 1999, and January&nbsp;31, 1998</I></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;General.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples' electronic commerce business, or e-business, sells office products and services over the Internet to
Staples' entire spectrum of business customers, including small, medium-sized and large businesses, as well as consumers. Our e-commerce business operates under the name Staples.com and is comprised
of three principal web sites</FONT><FONT SIZE=2><I>, Staples.com, Quillcorp.com and StaplesLink.com.</I></FONT><FONT SIZE=2> Staples launched the</FONT> <FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> web site in November 1998 and markets over
130,000 products primarily to home office and small business customers. Quill sold its first
products through </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2>, the e-commerce business</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-23</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>portal
of its Quill catalog business, in November 1996. </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> markets products to small to medium-sized business customers such as legal and
medical offices. Quill's private label products are among the products Staples.com sells on the </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> web site. Staples established the</FONT> <FONT SIZE=2><I>StaplesLink.com</I></FONT><FONT
SIZE=2> web site, the e-commerce business portal of its Staples Network Advantage contract stationer business, in August 1998. The</FONT> <FONT SIZE=2><I>StaplesLink.com</I></FONT><FONT SIZE=2> web site focuses on meeting the needs of medium to large
sized business customers by offering simple order entry and contract pricing.
</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During
the fiscal year ended January&nbsp;30, 1999, Staples acquired, in a pooling of interests transaction, Quill Corporation and certain related entities, including the operations
of </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2>, which had 1997 net sales of approximately $3,700,000. The financial information set forth below includes adjustments to give effect to
the acquisition of the operations of </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> for all periods presented. Prior to its acquisition by Staples, Quill elected to be treated as an S
Corporation under the Internal Revenue Code, and accordingly, its earnings and the earnings of </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> were not subject to taxation at the
corporate level. Pro forma adjustments have been made to reflect an income tax benefit on such previously untaxed earnings for each period presented at an assumed rate of 39%. The statements of
operations combine Staples.com's historical operating results for the fiscal year ended January&nbsp;31, 1998 with corresponding </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2>&nbsp;operating results for the year ended December 31,
1997.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Net Sales.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Net sales are comprised of the selling price of products and services, net of returns. Sales increased to
$94,349,000 in the fiscal year ended January&nbsp;29, 2000 as compared to $16,886,000 in the fiscal year ended January&nbsp;30, 1999 and $3,706,000 in the fiscal year ended January&nbsp;31,
1998. The results for the fiscal years ended January 29, 2000 and January&nbsp;30, 1999 include sales from all three of Staples.com's web sites,</FONT> <FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>, </FONT><FONT
SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2>, and </FONT><FONT SIZE=2><I>StaplesLink.com</I></FONT><FONT SIZE=2>, while
the results for the fiscal year ended January&nbsp;31, 1998 includes only </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> which was launched in November 1996.</FONT> <FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> was launched in the
quarter ended January&nbsp;30, 1999. Growth in net sales for fiscal years ended January&nbsp;29, 2000 and
January&nbsp;30, 1999 reflects a significant increase in products and services sold due to the growth of Staples.com's customer base and repeat purchases from Staples.com's existing customers.
Staples.com had approximately 44,000 repeat customers in fiscal year 1999, which accounted for over 35% of the total sales.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Gross Profit.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Gross profit consists of sales less the cost of sales, which consists of the cost of merchandise sold to
customers as well as occupancy costs and delivery and distribution costs. Gross profit increased for the fiscal years ended January&nbsp;29, 2000 and January&nbsp;30, 1999 in absolute dollars,
reflecting Staples.com's increase in sales volume. Gross profit as a percentage of sales was 21.8% for the fiscal year ended January&nbsp;29, 2000, 24.7% for the fiscal year ended January&nbsp;30,
1999, and 25.1% for the fiscal year ended January 31, 1998. The decrease in the fiscal years ended January&nbsp;29, 2000 and January 30, 1999 is attributable to aggressive product pricing and
customer mix shifts. As Staples.com expands its web site offerings and its breadth and depth of its product and service offerings, gross profits may be lower than those associated with Staples.com's
existing business activities. For example, in November 1998, Staples.com launched its new web site, </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>, which typically has lower gross profits
than </FONT><FONT SIZE=2><I>Stapleslink.com</I></FONT><FONT SIZE=2> and </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2>. To the extent this site becomes a larger portion of
Staples.com's product mix, it is expected to have a larger proportionate impact on overall gross margin. This decrease was partially offset by the benefit provided by the inter-business allocation
arrangement with Staples RD which passed on the benefit of lower product costs from vendors and the leveraging of distribution and delivery costs over a higher sales volume.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Operating and Selling Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Operating and selling expenses, which consist of payroll, marketing and advertising,
and other operating expenses, were 28.7% of sales for the fiscal year ended January&nbsp;29, 2000, 12.2% of sales for the fiscal year ended January&nbsp;30, 1999, and 17.2% of sales for the fiscal
year ended</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-24</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>January&nbsp;31,
1998. Operating expenses increased for the fiscal year ended January&nbsp;29, 2000 primarily due to increases in Staples.com's marketing and advertising expenditures, increased
call center and sales force payroll and related costs associated with fulfilling customer demand resulting from higher sales. These expenses are expected to decrease as a percentage of sales as sales
volume increases, leveraging fixed and start up expenses over time.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Site Development Costs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Site development costs consist principally of payroll and related expenses for development and
network operations personnel and consultants, hosting charges and certain system design costs. Site development costs decreased as a percentage of sales in the fiscal year ended January&nbsp;29,
2000 to 4.3% compared to 5.6% for the fiscal year ended January&nbsp;30, 1999. The decrease as a percentage of sales was due to sales increasing at a greater rate than these costs during this
period. The increase in absolute dollars was primarily due to increased staffing and associated costs related to building and enhancing the features, content and functionality of the web sites. Such
increases for the fiscal year ended January&nbsp;29, 2000 include our </FONT><FONT SIZE=2><I>StaplesLink.com</I></FONT><FONT SIZE=2> relaunch of SNAP and</FONT> <FONT SIZE=2><I>Staples.com's</I></FONT><FONT SIZE=2> backend integration as well as
various additional site improvements. Staples.com expects product development expenses to increase as it
continues to enhance its sites, expand staff and incur additional costs related to the growth of the business.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;General and Administrative Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;General and administrative expenses as a percentage of sales were 17.3% for the
fiscal year ended January&nbsp;29, 2000, 11.4% for the fiscal year ended January&nbsp;30, 1999, and 15.8% for the fiscal year ended January&nbsp;31, 1998. The primary components of these
expenses are investments in staffing and infrastructure. Included in general and administrative expenses was an allocation of certain Staples RD services provided on a centralized basis amounting to
$5,573,000 for the fiscal year ended January&nbsp;29, 2000, $1,264,000 for the fiscal year ended January&nbsp;30, 1999 and $320,000 for the fiscal year ended January&nbsp;31, 1998.</FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Interest and Other Expense, Net.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Net interest and other expense (income) totaled ($82,000) for the fiscal year ended
January&nbsp;29, 2000, $28,000 for the fiscal year ended January&nbsp;30, 1999, and $8,000 for the fiscal year ended January 31, 1998. The interest (income) expense is calculated based upon the
inter-business revolving credit advances to and from Staples RD at an incremental borrowing rate of 6% for the fiscal years ended January&nbsp;29, 2000, January&nbsp;30, 1999, and
January&nbsp;31, 1998. These credit advances from Staples RD fund the operating needs of Staples.com as most finance activities are managed on a centralized basis and attributed to Staples RD. These
advances were funded as a capital contribution by Staples RD at the end of each fiscal year.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Income Tax Benefit.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The income tax benefit as a percentage of pre-tax income was 39% for the fiscal year ended
January&nbsp;29, 2000, 38.4% for the fiscal year ended January&nbsp;30, 1999 and 0% for the fiscal year ended January&nbsp;31, 1998. On a pro forma basis, to reflect a provision for income taxes
on previously untaxed earnings of Quill, Staples.com's effective tax rate would have been 41% for the fiscal years ended January&nbsp;30, 1999, and January&nbsp;31, 1998.</FONT></P>


<P><FONT SIZE=2><B>Liquidity and Capital Resources</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples manages most finance activities on a centralized, consolidated basis. These activities include the investment of surplus cash, the issuance, repayment
and repurchase of short-term and long-term debt,
and the issuance and repurchase of common stock. Staples currently attributes each incurrence or issuance of external debt, and the proceeds thereof, to Staples RD and will continue to do so in the
future unless the Board determines otherwise. Whenever Staples.com holds cash, Staples.com will normally, but will not</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-25</FONT></P>


<P><FONT SIZE=2><HR
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<BR>

<P><FONT SIZE=2>be
obligated to, transfer that cash to Staples RD. Conversely, whenever Staples.com has a cash need, Staples RD will normally, but will not be obligated to, fund that cash need. The Board will
determine, in its sole discretion, whether either business will provide any particular funds on any particular occasion to the other business, but will not be obligated to cause such cash transfers.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During
the fiscal year ended January&nbsp;29, 2000, cash used in operations was $8,470,000, primarily due to the net loss from operations of $16,358,000, partially offset by an
increase in accounts payable, accrued expenses and other liabilities of $7,381,000. Cash used in investing activities of $36,246,000 represents investments made in Internet related companies of
$23,780,000 and acquisitions of property and equipment of $12,466,000. Cash provided by financing activities of $44,716,000 represents net proceeds from sale of capital stock of $42,736,000 capital
contributions from Staples RD of $29,920,000, partially offset by an inter-business advance to Staples RD of $27,940,000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During
the fiscal year ended January&nbsp;29, 2000, Staples.com made investments of approximately $23,780,000 in Internet related companies. Investments that qualify as marketable
securities are carried at fair value and all other investments are accounted for on a cost basis as each investment represents an interest of no greater than fifteen percent of the outstanding stock
of that company. As of January&nbsp;29, 2000, Staples has recognized an unrealized gain on these investments of $10,975,000.</FONT></P>


<P><FONT SIZE=2><B>Inflation and Seasonality</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;While neither inflation nor deflation has had, and Staples.com does not expect either to have, a material impact upon operating results, there can be no
assurance that Staples.com's business will not be affected by inflation or deflation in the future. Staples.com believes that its business is somewhat seasonal, with sales and profitability slightly
lower during the first and second quarters of its fiscal year.</FONT></P>

<P><FONT SIZE=2><B>Future Operating Results</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This annual report on Form 10-K includes or incorporates 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. You can identify these forward-looking statements by our use of the words "believes", "anticipates", "plans", "expects", "may", "will", "would", "intends",
"estimates" and other similar expressions, whether in the negative or affirmative. Staples.com cannot guarantee that it actually will achieve the plans, intentions or expectations disclosed in the
forward-looking statements it makes. Staples.com has included important factors in the cautionary statements below that it believes could cause its actual results to differ materially from the
forward-looking statements that it makes. The forward-looking statements do not reflect the potential impact of any future acquisitions, mergers or dispositions. Staples.com does not assume any
obligation to update any forward-looking statement contained herein.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com has a history of losses and expects to incur significant future losses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com has never achieved
profitability and it expects to incur significant losses for the foreseeable future in light of the level of its planned operating and capital expenditures. If its sales grow more slowly than it
anticipates, or if its operating expenses exceed its expectations and cannot be adjusted in a timely manner, its business, results of operations, financial condition and prospects would be materially
and adversely affected. Staples.com's losses may increase in the future and it may not be able to achieve or sustain profitability. Even if it achieves profitability, it may not be able to sustain or
increase profitability on a quarterly or annual basis in the future.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-26</FONT></P>

<P><FONT SIZE=2><HR
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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com has a limited operating history which makes an evaluation of the business and prospects
difficult.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com has a limited operating history on which to evaluate the business, strategies and performance. Staples.com's prospects must be considered
in light of the risks, expenses and difficulties frequently encountered by early stage companies in new and rapidly growing markets, particularly those companies whose business depends on the Internet
and serves small businesses.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com's business model is new and unproven and we do not know if it will generate significant revenue on a sustained basis or achieve
profitability.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's business model is new, unproven and continues to evolve. In particular, its business model is based on several fundamental
assumptions, any one of which may not prove to be true, including the following:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
significant number of small businesses will purchase office products and business services online;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Staples.com
will be able to take advantage of Staples' and Quill's brand recognition as distributors of office products to develop its own online brand
recognition and drive traffic to its web sites;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>A
significant number of small businesses and small business service providers will use the </FONT><FONT SIZE=2><I>Staples.com </I></FONT><FONT SIZE=2>web
site as an electronic marketplace to buy and sell products and services; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>At
</FONT><FONT SIZE=2><I>Staples.com,</I></FONT><FONT SIZE=2> online sales of office products will lead to increased online sales of business services,
and online sales of business services will lead to increased online sales of office products, and an active information exchange and electronic marketplace for small businesses will lead to increased
sales of both products and services.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If
any of these assumptions does not prove to be true, Staples.com's business prospects may be materially diminished.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com's quarterly operating results may be subject to significant fluctuation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's operating results
may fluctuate from quarter to quarter as a result of any of the following:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
mix of products and services sold;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>pricing
actions of competitors and Staples.com;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
level of advertising and promotional expenses;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>seasonality,
primarily because of stronger sales in the fourth quarter of our fiscal year associated with holiday and beginning of the year office supply
purchases; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>charges
associated with acquisitions and investments.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Most
of Staples.com's operating expenses, such as rent expense, advertising expense and employee 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 for that quarter, Staples.com may not proportionately reduce operating expenses for that quarter, and therefore
this sales shortfall would have a disproportionate effect on Staples.com's net income for the quarter.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com's future growth may be limited unless small businesses increase their use of the Internet to conduct
commerce.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's success depends in part on the increasing use of the Internet by small businesses. If use of the Internet as a medium for business
communications and commerce does not continue to increase, demand for Staples.com's products and services will be limited and its financial results will suffer. If Staples.com fails to expand its
online brand recognition among small businesses, its future revenue and business prospects could be materially and adversely affected.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-27</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com's
success depends in part on its ability to develop </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> as a web site that small businesses regard not only as a
place to purchase office products, but as a general resource center where they can purchase reliable services and share information with other small businesses. Staples.com may fail to provide the
services and information and to foster communications among visitors to </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2> necessary to attract regular visits and repeat purchases by small
businesses. Further, Staples.com's marketing and promotional techniques for generating traffic from targeted customers to its web sites may fail to be effective. In the event of any such failure,
Staples.com's sales of products and services would fail to grow and our business prospects would be materially diminished.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Intense competition in the office products and business services markets may impede Staples.com's ability to gain market share and achieve
profitability.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The market for selling office products and business services is intensely competitive. The growing use of the Internet has significantly
increased this competition. Minimal barriers to entry allow new online competitors to easily launch web sites offering products and services that compete with those that Staples.com currently offers
or anticipates offering. Staples.com's current and potential competitors include:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Internet
sites that target the small business market with a full line of business products or service offerings and offer business content, such as small
business portals;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Internet
sites that sell or resell office products and business services; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Traditional
retailers that sell or resell office products and business services, whether through storefront locations or through the Internet, such as mass
merchants, warehouse clubs and computer and electronic superstores.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;To
compete successfully and to gain market share, Staples.com must increase the online brand recognition and traffic to its web sites. Some of Staples.com's current and potential
competitors may have more developed technologies and more extensive marketing and advertising campaigns. Staples.com's competitors may develop web sites that are more sophisticated than its web sites
and have better online tools and service and product offerings. As a result, the web sites of Staples.com's competitors may achieve greater market acceptance than its web sites. In this event,
Staples.com's ability to gain or maintain market share and customer loyalty and to generate sufficient revenue to achieve profitability would be materially and adversely affected.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>If Staples.com does not develop additional and maintain existing relationships with third party business service providers, it may be unable to increase
revenue from business services.</I></FONT><FONT SIZE=2> Staples.com depends on relationships with third parties to provide business services offered through</FONT> <FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>. Most of these relationships are
for terms of one to three years and many of them are cancelable by either party without cause upon limited
notice. Staples.com must maintain existing relationships and develop new relationships on terms acceptable to it to continue to provide business services offered through</FONT> <FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>. The termination of
any of these existing agreements, or the failure to secure similar relationships with new third parties, would limit
Staples.com's ability to provide business services on </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>, and would likely impede its rate of growth. Additionally, Staples.com does not know
if it will be able to renew any or all of these agreements on acceptable terms.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;The failure of third party service providers to provide reliable high quality service to Staples.com's customers could damage its
reputation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com endorses the services of third parties on </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>, and sometimes offers co-branded
services. If a third party business service provider fails to provide reliable high quality service at attractive prices to Staples.com customers, it could damage Staples.com's reputation and
adversely affect its business.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-28</FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;If Staples.com cannot keep up with rapid technological and industry changes, its business and prospects will be materially and adversely
affected.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The Internet and online commerce markets are characterized by rapid technological change, frequent introductions of new or enhanced hardware and
software products, evolving industry standards and changes in customer preferences and requirements. Staples.com may not be able to keep up with any of these or other rapid technological changes, and
if it does not, its business will be harmed. These changes and the emergence of new industry standards and practices could render Staples.com's existing web sites and operational infrastructure
obsolete. The widespread adoption of new Internet, networking or telecommunications technologies or other technological changes could require Staples.com to incur substantial expenditures to modify or
adapt its operating practices or infrastructure. To be successful, Staples.com must enhance its web sites' responsiveness, functionality and features, acquire and license leading technologies, enhance
its existing service and product offerings, and respond to technological advances and emerging industry standards and practices, none of which may be possible in a timely and cost effective manner.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;If Staples.com fails to expand its current technology infrastructure, it will be unable to accommodate its anticipated
growth.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;To be successful, Staples.com must continue to increase substantially traffic to its web sites and convert web site visitors into customers.
Accommodating this potential growth in web site
traffic and customer transactions will require Staples.com to continue to develop its technology infrastructure. To maintain the necessary technological platform in the future, Staples.com must
continue to expand and stabilize the performance of its web servers, improve its transaction processing system, optimize the performance of its network servers and ensure the stable performance of its
entire network. Staples.com may not be successful in its ongoing efforts to upgrade its systems, or if it does successfully upgrade its systems, it may not do so on time and within budget. If
Staples.com fails to achieve a stable technological platform in time to handle increasing web site traffic or customer order volume, potential customers could be discouraged from using its web sites,
its reputation could be damaged and its business could be harmed.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Frequent or prolonged operational interruptions on Staples.com's web sites could lead to customer dissatisfaction, customer loss or both, which could
materially and adversely affect Staples.com's reputation and business.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Any system failure that causes an interruption in the operation of Staples.com's web
sites or a decrease in their responsiveness could result in reduced user traffic and reduced revenue. Further, prolonged or ongoing performance problems on its web sites could damage its reputation
and result in the permanent loss of customers. Staples.com has occasionally experienced system interruptions that have made its web sites totally unavailable, slowed their response time or prevented
it from efficiently fulfilling orders, and these types of problems may occur in the future. Staples.com has an agreement with Digex to maintain the web servers and database servers for its</FONT> <FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>
web site in its Beltsville, Maryland location. Staples.com has an agreement with Millstar to maintain the web servers and database servers
for its </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> web site in its Philadelphia, Pennsylvania location. Staples.com has an agreement with EMC Corporation to maintain the web servers
and database servers for its </FONT><FONT SIZE=2><I>StaplesLink.com</I></FONT><FONT SIZE=2> web site in its Hopkinton, Massachusetts location. Staples.com's operations depend on the ability of each
of Digex, Millstar and EMC to protect itself and its systems against damage from fire, power loss, water damage, telecommunications failures, vandalism and similar unexpected adverse events. Any
disruption in the services provided by Digex, Millstar or EMC could severely disrupt Staples.com's operations. Staples.com's backup systems may not be sufficient to prevent major interruptions to its
operations, and Staples.com does not have a formal disaster recovery plan. Staples.com may not have sufficient business interruption insurance to cover losses from major interruptions. Staples.com's
customers and visitors to its web sites depend on their own Internet service providers, and other web site operators for access to web sites. Many</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-29</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>of
these providers have experienced significant outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to Staples.com's systems.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com's network and software are vulnerable to security breaches and similar threats which could result in liability for damages and harm to our
reputation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's web sites and network infrastructure are vulnerable to computer viruses, break-ins, network attacks and similar disruptive problems.
This could result in liability for damages, and Staples.com's reputation could suffer, thus deterring potential customers from transacting with it. Security problems caused by third parties could lead
to interruptions and delays or to the cessation of service to its customers. Furthermore, inappropriate use of the network by third parties could also jeopardize the security of confidential
information stored in its computer systems. The costs and resources required to alleviate security problems may be significant and could adversely affect Staples.com's business and results of
operations.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com depends on continued expansion of the Internet infrastructure.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The recent growth in Internet traffic has
caused periods of decreased performance, requiring Internet service providers to upgrade their infrastructures. If usage continues to grow rapidly, the Internet infrastructure may not be able to
support the demands placed on it by this growth and its performance and reliability may decline. If these outages or delays on the Internet occur frequently, overall Internet usage, as well as usage
of its web sites in particular, could grow more slowly or decline. Staples.com's ability to increase the scope of its product and service offerings and the speed and ease of access to its web sites by
its customers is ultimately limited by and dependent upon the speed and reliability of both the Internet and the capacity of the computer equipment of its users. Consequently, the emergence and growth
of the market for Staples.com's products and services is dependent on improvements being made to the entire Internet and to personal computer equipment in general to alleviate overloading and
congestion.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com's products and services depend upon the continued availability of licensed technology from third
parties.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com licenses and will continue to license technology integral to its products and services from third parties. If Staples.com is unable to
acquire or retain key third-party product licenses or integrate the related third-party products into its products and services, its product and service development may be delayed or additional
operating costs may be incurred if substitute products or arrangements are required. Staples.com also expects to require new licenses in the future as its business grows and as technology evolves.
Staples.com may not be able to obtain these licenses on commercially reasonable terms, if at all.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Staples.com relies on intellectual property rights which may not be adequately protected under current laws.</I></FONT><FONT SIZE=2> To establish and protect
the Staples.com trademark, service mark, copyright and other proprietary rights in its products and services, Staples.com relies on a combination of:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>trademark,
service mark, copyright, unfair competition, and trade secret laws;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>trademark
usage policies;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>confidentiality
agreements with third parties; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>confidentiality
agreements and policies covering our employees.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com
cannot assure that these measures will be adequate, that it will be able to secure registrations for all of its marks in the United States or internationally or that third
parties will not infringe upon or misappropriate its proprietary rights. Any infringement, misappropriation, or litigation relating to</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-30</FONT></P>


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<P><FONT SIZE=2>intellectual
property rights may divert management's attention and would require significant funds to litigate such claims. The loss of these rights could materially and adversely affect Staples.com's
business.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Legal
standards relating to the validity, enforceability and scope of protection of certain proprietary rights in Internet-related businesses are uncertain and evolving. In
particular, new domain name registration and ownership priority procedures may be adopted which may make it more difficult for Staples.com to retain or obtain desirable domain names.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
recent years, an increasing number of patents purporting to cover business methods relating to the Internet have been filed. Patent applications remain confidential for a period of
up to two years after filing. Thus, Staples.com can offer no assurance that applications for patents covering certain aspects of our business methods have not been, or will not be, filed. To the
extent such patents are granted, Staples.com may be forced to alter its practices or incur costs defending its practices.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;If privacy concerns prevent Staples.com from recording the behavior of visitors on its web sites, its business prospects could decline
significantly.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The future success of Staples.com's web sites will depend, in part, on its ability to track the behavior of visitors on its web sites so that it
can effectively market its products and services to them. The adoption of new federal, state or foreign laws or regulations that restrict Staples.com's ability to assemble and utilize demographic and
other information about its users, such as the European Union Privacy Directive which took effect in October 1998, could materially and adversely affect its business and prospects. Currently,
Staples.com tracks this information by the use of "cookies". A cookie is a small file of information that uniquely identifies a user. It is stored on the hard drive of the user's computer and passed
through the user's browser. Notwithstanding the lack of legal restrictions, Internet users may avoid web sites where their online behavior is likely to be tracked. If this occurred on a widespread
basis, it could adversely affect Staples.com's business.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com may incur liability for its Internet content and user data.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Since Staples.com provides content on its web
sites, it may face potential liability for intellectual property infringement, defamation, invasion of privacy and other claims. In addition, Staples.com may incur liability for unauthorized
duplication or distribution of third-party content or materials or for information collected from and about its users. Staples.com cannot assure that third parties or users will not bring claims
against it relating to proprietary rights or the use of personal information. Although Staples.com seeks to obtain indemnification from strategic partners for any liability resulting from licensed
content or linked sites, such indemnities may not always be obtainable or adequate. Staples.com's general liability insurance may not cover or be adequate for potential claims of this type.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;If Staples.com fails to manage effectively the rapid growth of its operations, its business and prospects will be materially and adversely
affected.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's business has grown significantly since its inception. This growth has placed great demands on its management and operational systems. If
Staples.com is not successful in expanding its management team and increasing and effectively managing its employee base, this growth is likely to result in operational inefficiencies and ineffective
management of its business and employees, which will in turn adversely affect its business and financial performance.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;If Staples.com fails to hire and retain highly qualified employees, its business will be materially and adversely
affected.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's future success depends on its ability to identify, hire, train and retain highly qualified sales and marketing, technical, managerial
and administrative personnel. As Staples.com continues to introduce new services, products and features on its web sites, and as its customer base and revenue continue to grow, it will need to hire a
significant number of qualified
personnel. Competition for qualified personnel, especially those with Internet experience, is intense, and Staples.com may not be able</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-31</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>

<P><FONT SIZE=2>to
attract, train, assimilate or retain qualified personnel in the future. The failure to attract, train, assimilate and retain qualified personnel could seriously disrupt its operations and could
increase its costs.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;If Staples.com loses any of its key employees, its business and prospects will be materially and adversely
affected.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's business and operations are substantially dependent on the performance of its key employees. All of Staples.com's employees are employed
on an at-will basis. Staples.com does not maintain "key person" life insurance on any of its executives.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;If Staples.com expands its international sales and marketing activities, its business will be susceptible to numerous risks associated with international
operations.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com may expand its international operations and hire additional personnel outside of the United States and Canada. Therefore, Staples.com
may commit significant resources to expand its international sales and marketing activities. If successful, Staples.com will be subject to a number of risks associated with international business
activities. These risks generally include:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>currency
exchange rate fluctuations;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>seasonal
fluctuations in purchasing patterns;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>unexpected
changes in regulatory requirements;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>tariffs,
export controls and other trade barriers;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>longer
accounts receivable payment cycles and difficulties in collecting accounts receivable;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>difficulties
in managing and staffing international operations;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>potentially
adverse tax consequences, including restrictions on the repatriation of earnings;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>burdens
of complying with a wide variety of foreign laws;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>risks
related to the recent global economic turbulence; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>political
instability.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2><B>Year 2000 Compliance</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com has completed implementation of its year 2000 remediation plan on a timely basis, and such remediation plan as implemented addresses all mission
critical systems. Staples.com is not aware of any adverse effects of year 2000 issues on Staples.com, including its systems and operations.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-32</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>
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<P ALIGN="RIGHT"><FONT SIZE=2><B>APPENDIX C</B></FONT></P>

<P><FONT SIZE=2><B>ITEM 8.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="86%" ALIGN="LEFT"><FONT SIZE=1><B>Financial Statements.<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2><B>Staples, Inc.:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Report of Independent Auditors</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Consolidated Balance Sheets&#151;January 29, 2000 and January 30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Consolidated Statements of Income&#151;Fiscal years ended January 29, 2000,<BR>
January&nbsp;30, 1999, and January&nbsp;31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-4</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Consolidated Statements of Stockholders' Equity&#151;Fiscal years ended January&nbsp;29, 2000, January&nbsp;30, 1999, and January&nbsp;31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-5</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Consolidated Statements of Cash Flows&#151;Fiscal years ended January&nbsp;29, 2000, January&nbsp;30, 1999, and January&nbsp;31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-6</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Notes to Consolidated Financial Statements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-7 to C-39</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Staples Retail and Delivery:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>&nbsp;<BR>
Report of Independent Auditors</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
C-40</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Combined Balance Sheets&#151;January&nbsp;29, 2000 and January&nbsp;30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-41</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Combined Statements of Income&#151;Fiscal years ended January&nbsp;29, 2000,<BR>
January&nbsp;30, 1999, and January&nbsp;31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-42</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Combined Statements of Group Equity&#151;Fiscal years ended January&nbsp;29, 2000, January&nbsp;30, 1999, and January&nbsp;31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-43</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Combined Statements of Cash Flows&#151;Fiscal years ended January&nbsp;29, 2000,<BR>
January&nbsp;30, 1999, and January&nbsp;31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-44</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Notes to Combined Financial Statements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-45 to C-73</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Staples.com:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>&nbsp;<BR>
Report of Independent Auditors</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
C-74</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Combined Balance Sheets&#151;January&nbsp;29, 2000 and January&nbsp;30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-75</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Combined Statements of Operations&#151;Fiscal years ended January&nbsp;29, 2000,<BR>
January&nbsp;30, 1999, and January&nbsp;31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-76</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Combined Statements of Group Equity&#151;Fiscal years ended January&nbsp;29, 2000,<BR>
January&nbsp;30, 1999, and January&nbsp;31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-77</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Combined Statements of Cash Flows&#151;Fiscal years ended January&nbsp;29, 2000,<BR>
January&nbsp;30, 1999, and January&nbsp;31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-78</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="86%"><FONT SIZE=2>Notes to Combined Financial Statements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>C-79 to C-93</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>C-1</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>Report of Independent Auditors</B></FONT></P>

<P><FONT SIZE=2>Board
of Directors and Shareholders<BR>
Staples, Inc.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying consolidated balance sheets of Staples, Inc. and subsidiaries as of January 29, 2000 and January 30, 1999, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years in the period ended January 29, 2000. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits. We did not audit the 1997 financial statements of Quill Corporation, a wholly owned subsidiary, which
statements reflect 20% of net income for the year ended January 31, 1998. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates
to data included for Quill Corporation, is based solely on the report of the other auditors.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits and the report of other auditors provide a reasonable basis for our opinion.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, based on our audits and, for 1997, the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Staples, Inc. and subsidiaries at January 29, 2000 and January 30, 1999 and the consolidated results of their operations and their cash flows for each of the three years in the
period ended January 29, 2000 in conformity with accounting principles generally accepted in the United States.</FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="70%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="28%"><FONT SIZE=2>/s/ Ernst &amp; Young LLP</FONT><HR NOSHADE><FONT SIZE=2> ERNST &amp; YOUNG LLP<BR></FONT>
</TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>Boston,
Massachusetts<BR>
March 3, 2000</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-2</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES,&nbsp;INC. AND SUBSIDIARIES</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Consolidated Balance Sheets</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands, Except Share Data)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="71%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>ASSETS</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>Current Assets:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>110,483</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>357,993</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,071</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>17,428</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Merchandise inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,607,516</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,340,432</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Receivables, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>360,901</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>221,836</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Deferred income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>39,730</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>75,261</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Prepaid expenses and other current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>73,750</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>51,150</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>Total current assets</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>2,193,451</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>2,064,100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B>Property and Equipment:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Land and buildings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>328,994</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>231,378</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Leasehold improvements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>442,119</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>372,451</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>547,309</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>400,225</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Furniture and fixtures</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>286,260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>239,755</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>Total property and equipment</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,604,682</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,243,809</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Less accumulated depreciation and amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>509,920</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>403,520</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>Net property and equipment</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,094,762</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>840,289</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B>Other Assets:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Lease acquisition costs, net of amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>68,832</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>75,127</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>34,755</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Goodwill, net of amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>387,595</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>148,201</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Deferred income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>34,912</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>28,735</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>31,769</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>22,814</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>Total other assets</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>557,863</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>274,877</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>3,846,076</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>3,179,266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B>LIABILITIES AND STOCKHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>Current Liabilities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>897,523</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>794,427</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Accrued expenses and other current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>545,162</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>438,311</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Debt maturing within one year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>12,219</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>32,594</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>Total current liabilities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,454,904</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,265,332</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B>Long-Term Debt</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;<BR>
500,903</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;<BR>
205,015</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>Other Long-Term Obligations</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>61,456</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>52,033</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>Stockholders' Equity:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Preferred stock, $.01 par value-authorized 5,000,000 shares; no shares issued</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Common stock:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Staples RD Stock, $.0006 par value-authorized 1,500,000,000 shares;<BR>
issued 470,752,253 shares at January 29, 2000<BR>
and 461,538,061 shares at January 30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>282</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>277</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Staples.com Stock, $.0006 par value-authorized 600,000,000 shares;<BR>
issued 27,252,186 shares at January 29, 2000<BR>
and 0 at January 30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Additional paid-in capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,196,504</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,043,194</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Cumulative foreign currency translation adjustments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(4,473</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(11,675</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Unrealized gain on investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>6,651</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Retained earnings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>948,309</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>633,321</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>Less: treasury stock at cost, 13,668,743 shares at January 29, 2000<BR>
and 488,922 shares at January 30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(318,476</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(8,238</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1><B>Total stockholders' equity</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,828,813</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,656,886</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>3,846,076</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>3,179,266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See notes to consolidated financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-3</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=65,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=21591,FOLIO=C-3,FILE='DISK018:[00BOS8.00BOS1458]DR1458A.;8',USER='VNEVILL',CD=';9-MAR-2000;18:51 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES,&nbsp;INC. AND SUBSIDIARIES</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Consolidated Statements of Income</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands, Except Share Data)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="92%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="54%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="43%" COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="54%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>8,936,809</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>7,123,189</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>5,732,145</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Cost of goods sold and occupancy costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>6,721,563</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>5,396,923</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>4,377,690</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1><B>Gross profit</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>2,215,246</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,726,266</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,354,455</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B>Operating and other expenses:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Operating and selling</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,299,212</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>993,236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>808,517</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Pre-opening</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>16,485</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>13,836</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>9,443</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>General and administrative</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>354,060</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>301,118</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>225,587</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Amortization of goodwill</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>12,014</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>3,739</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>3,581</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Merger-related and integration costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>41,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>29,665</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Store closure charge</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>49,706</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Interest and other expense, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>17,101</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>17,370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>21,955</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1><B>Total operating and other expenses</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,698,872</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,420,005</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,098,748</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B>Income before equity in loss of affiliates and income taxes</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;<BR>
516,374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;<BR>
306,261</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;<BR>
255,707</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Equity in loss of affiliates</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(5,953</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B>Income before income taxes</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;<BR>
516,374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;<BR>
306,261</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;<BR>
249,754</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Income tax expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>201,386</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>121,026</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>81,924</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1><B>Net income before minority interest</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>314,988</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>185,235</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>167,830</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Minority interest</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>135</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>84</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1><B>Net income</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>314,988</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>185,370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B>Net income (loss) attributed to:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Staples.com Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(730</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Staples RD Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>315,718</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>185,370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>314,988</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>185,370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B><I><U>Basic earnings per common share</U></I></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Historical net income per common share Staples, Inc. Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.43</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.41</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Historical net income per common share for the 39 weeks<BR>
ended October 30, 1999&#151;Staples, Inc. Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.42</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Historical net income per common share for the 13 weeks<BR>
ended January 29, 2000&#151;Staples RD Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Historical net loss per common share for the 13 weeks<BR>
ended January 29, 2000&#151;Staples.com Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(0.05</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B><I><U>Diluted earnings per common share</U></I></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Historical net income per common share Staples, Inc. Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.39</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Historical net income per common share for the 39 weeks<BR>
ended October 30, 1999&#151;Staples, Inc. Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Historical net income per common share for the 13 weeks<BR>
ended January 29, 2000&#151;Staples RD Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Historical net loss per common share for the 13 weeks<BR>
ended January 29, 2000&#151;Staples.com Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(0.05</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B>Pro forma earnings per common share calculation for tracking stock and S-Corporation Conversion:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1><B>&nbsp;<BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1><B>&nbsp;<BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1><B>&nbsp;<BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><B>&nbsp;<BR>&nbsp;</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1><B><I><U>Basic earnings per common share</U></I></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Pro forma net income per common share&#151;Staples RD Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.69</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.43</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.38</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Pro forma net loss per common share&#151;Staples.com Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><B><I><U>Diluted earnings per common share</U></I></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Pro forma net income per common share&#151;Staples RD Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.67</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>0.36</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=1>Pro forma net loss per common share&#151;Staples.com Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See notes to consolidated financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-4</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=66,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=675416,FOLIO=C-4,FILE='DISK018:[00BOS8.00BOS1458]DS1458A.;20',USER='VNEVILL',CD=';9-MAR-2000;18:51 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES,&nbsp;INC. AND SUBSIDIARIES</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Consolidated Statements of Stockholders' Equity</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands, Except Share Data)</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>For the Fiscal Years Ended January 29, 2000, January 30, 1999, and January 31, 1998</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="20%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Common<BR></B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="20%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Unrealized<BR>
Gain<BR>
(Loss) on<BR>
Investments</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="20%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Staples<BR>
RD Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Staples.com<BR>
Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Additional<BR>
Paid-In<BR>
Capital</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Cumulative<BR>
Translation<BR>
Adjustments</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Retained<BR>
Earnings</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Treasury<BR>
Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Comprehensive<BR>
Income</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1><B>Balances at February 1, 1997</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>162</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>508,833</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(147</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>367,301</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(346</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Issuance of common stock for stock options exercised</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>5</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>32,178</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Tax benefit on exercise of options</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>32,873</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Contribution of common stock to Employees' 401(K) Savings Plan</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>2,318</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Sale of common stock under Employee Stock Purchase Plan</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>10,499</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Issuance of Performance Accelerated Restricted Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>7,182</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Unrealized gain on investments, net of tax</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,036</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>1,036</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Translation adjustments</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(10,168</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(10,168</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Dividends to shareholders of acquired S-Corp.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(25,175</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Net income for the year</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1><B>Balances at January 31, 1998</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>167</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>593,883</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(10,315</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,056</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>510,040</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(346</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>158,782</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Issuance of common stock for stock options exercised</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>5</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>50,118</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Issuance of common stock for conversion of debentures, net of interest and deferred charges</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>13</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>298,520</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Stock split and cash paid in lieu of fractional shares</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>92</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(607</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Tax benefit on exercise of options</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>74,157</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Contribution of common stock to Employees' 401(K) Savings Plan</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>3,288</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Sale of common stock under Employee Stock Purchase Plan</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>13,210</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Issuance of Performance Accelerated Restricted Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>10,654</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Unrealized loss on investments, net of tax</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,049</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(1,049</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Translation adjustments</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,360</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>(1,360</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Purchase and retirement of S-Corporation shares</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(29</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(48,073</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Dividends to shareholders of acquired S-Corp</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(15,904</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Adjustment to conform fiscal year of Quill Corporation</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,888</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Net income for the year</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>185,370</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>185,370</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Purchase of treasury shares</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(7,892</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1><B>Balances at January 30, 1999</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>277</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>1,043,194</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(11,675</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>633,321</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(8,238</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>182,961</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Issuance of common stock for stock options exercised</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>9</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>50,834</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Premium on Forward Hedge</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(3,269</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Issuance of shares of Staples.com Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>19,618</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Tax benefit on exercise of options</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>40,129</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Contribution of common stock to Employees' 401(K) Savings Plan</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>1</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>3,543</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Sale of common stock under</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Employee Stock Purchase Plan</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>1</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>21,989</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Issuance of Performance Accelerated Restricted Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>20,420</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Unrealized loss on investments, net of tax</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>6,644</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>6,644</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Translation adjustments</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>7,202</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>7,202</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Reissuance of Treasury Stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>46</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Net income for the year</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>314,988</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>314,988</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1>Purchase of treasury shares</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(310,248</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="20%"><FONT SIZE=1><B>Balances at January 29, 2000</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>282</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>16</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>1,196,504</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(4,473</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>6,651</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>948,309</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(318,476</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>328,834</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See notes to consolidated financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-5</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=67,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=155086,FOLIO=C-5,FILE='DISK018:[00BOS8.00BOS1458]DT1458A.;17',USER='MLAING',CD='10-MAR-2000;11:01 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES,&nbsp;INC. AND SUBSIDIARIES</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Consolidated Statements of Cash Flows</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="59%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="38%" COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="59%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1><B>Operating Activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>314,988</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>185,370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Adjustments to reconcile net income to net cash provided by (used in) operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Minority interest</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(135</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(84</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Depreciation and amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>174,145</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>126,928</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>90,714</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Merger-related and integration costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>41,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>29,665</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Store closure charge</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>49,706</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Expense from 401K and PARS stock contribution</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>18,374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>12,764</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>10,409</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Equity in loss of affiliates</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>5,953</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Deferred income taxes (benefit)/expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>29,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(55,569</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,877</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Change in assets and liabilities, net of companies acquired<BR>
using purchase accounting:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Increase in merchandise inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(221,463</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(211,052</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(227,076</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>(Increase)/Decrease in receivables</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(112,980</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(15,993</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>17,569</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Increase in prepaid expenses and other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(28,406</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(9,839</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(5,026</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Increase in accounts payable, accrued expenses and other current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>117,855</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>273,280</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>293,831</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Increase in other long-term obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>7,747</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>9,597</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>5,074</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(15,463</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>220,687</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>224,906</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1><B>Net cash provided by operating activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>299,525</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>406,057</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>392,820</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1><B>Investing Activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Acquisition of property and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(355,081</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(350,029</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(190,659</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Acquisition of businesses, net of cash acquired</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(244,021</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(13,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(79,325</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Proceeds from sales and maturities of short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>32,927</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>10,338</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>13,618</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Purchase of short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(16,651</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(22,913</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(4,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Proceeds from sales and maturities of long-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>18,995</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>265</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Purchase of long-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(23,780</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(2,545</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(5,714</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Investment in affiliates</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(3,788</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Acquisition of lease rights</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(549</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(37,182</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(2,717</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(1,875</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,208</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(11,998</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1><B>Net cash used in investing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(609,030</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(395,628</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(284,818</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1><B>Financing Activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Proceeds from sale of capital stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>89,239</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>63,996</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>48,043</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Proceeds from borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,589,779</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>392,261</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>965,921</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Payments on borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(1,308,311</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(417,323</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(830,018</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Purchase of dissenting shareholder S-Corporation stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(48,102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Purchase of treasury stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(310,238</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(7,892</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Dividends to shareholders of acquired S-Corp</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(15,904</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(25,175</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1><B>Net cash (used in) provided by financing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>60,469</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(32,964</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>158,771</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Effect of exchange rate changes on cash</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,526</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(560</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(2,720</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1><B>Net (decrease) increase in cash and cash equivalents</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(247,510</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(23,095</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>264,053</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1>Cash and cash equivalents at beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>357,993</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>381,088</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>117,035</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="59%"><FONT SIZE=1><B>Cash and cash equivalents at end of period</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>110,483</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>357,993</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>381,088</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See notes to consolidated financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-6</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES, INC. AND SUBSIDIARIES</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P><FONT SIZE=2><B>NOTE A&nbsp;Basis of Presentation</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements include the accounts of Staples, Inc. ("Staples" or the "Company") and its wholly-owned subsidiaries. All intercompany
accounts and transactions are eliminated in consolidation.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
November 9, 1999, the stockholders of Staples approved a proposal (the "Tracking Stock Proposal") which amended the Company's certificate of incorporation to (i)&nbsp;authorize
the issuance of a new series of common stock, designated as Staples.com common Stock ("Staples.com Stock"), intended to reflect the performance of Staples.com, the Company's e-commerce business,
(ii)&nbsp;increase the aggregate number of shares of common stock that the Company may issue from 1,500,000,000 to 2,100,000,000, initially comprised of 1,500,000,000 shares of Staples Retail and
Delivery common stock ("Staples RD Stock") and 600,000,000 shares of Staples.com Stock, and (iii)&nbsp;re-classify Staples' existing common stock as Staples RD Stock, intended to reflect the
performance of Staples Retail and Delivery ("Staples RD"), which consists of all of the Company's other businesses and a retained interest in Staples.com.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD has an 88% and 100% retained interest in Staples.com at January&nbsp;29, 2000 and January&nbsp;30, 1999, respectively. During the fiscal year ended January&nbsp;29,
2000, Staples.com issued 12,792,308 shares of Staples.com Stock in private placements and 14,459,878 shares through the exercise of employee stock options. Staples.com may issue additional shares of
Staples.com Stock in one or more additional private or public financings. The specific terms of the financings, including the amount of Staples.com Stock issued and the timing of the financings, will
depend upon factors such as stock market conditions and the performance of Staples.com. The effect of those financings on the retained interest percentage and the outstanding interest percentage would
depend upon the number of shares of Staples.com Stock sold and whether the Company elects to attribute the net proceeds of such financings to the equity of Staples.com or to Staples RD in respect of
its retained interest. The book value associated with Staples RD's retained interest in Staples.com will be increased proportionately for net income (or decreased proportionately for net loss) of
Staples.com. The Company filed a registration statement with the Securities and Exchange Commission on February 18, 2000 for an initial public offering of Staples.com Stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
preparing separate financial statements for Staples RD and Staples.com, the Company has allocated, for financial reporting purposes, all of its consolidated assets, liabilities,
revenue, expenses and cash
flows between Staples RD and Staples.com. Thus, the combined financial statements of Staples RD and Staples.com, taken together, comprise all of the accounts included in the corresponding consolidated
financial statements of Staples.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Allocation
and related party transaction policies adopted by the Board of Directors of Staples ("the Board") can be rescinded or amended at the sole discretion of the Board without
approval by the stockholders, although no such changes are currently contemplated. Any such changes adopted by the Board would be made in its good faith business judgement of the Company's best
interests, taking into consideration the interests of all stockholders.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the allocation of assets and liabilities, including contingent liabilities between Staples RD and Staples.com for the purposes of preparing their respective combined
financial statements, this allocation and the change in the capital structure of the Company as a result of the approval of the Tracking Stock Proposal did not result in the distribution or spin-off
to stockholders of any of the Company's assets and liabilities and will not affect ownership of its assets or responsibility for its liabilities or those of its subsidiaries. Holders of Staples RD
Stock are common stockholders of the Company and, as such will be subject to the risks associated with an investment in Staples and all of its businesses, assets and</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-7</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>liabilities.
The assets the Company attributes to one business are subject to the liabilities of the other business, even if such liabilities arise from lawsuits, contracts or indebtedness attributed
to the other business. If the Company is unable to satisfy one business' liabilities out of the assets attributed to it, the Company may be required to satisfy those liabilities with the assets the
Company has attributed to the other business. Further, holders of Staples RD Stock and Staples.com Stock will not have any legal rights related to specific assets of either business and in any
liquidation will receive a fixed share of the net assets of the Company, which may not reflect the actual trading prices, if any, of the respective businesses at such time.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Financial
effects from one business that affect the Company's consolidated results of operations or financial condition could, if significant, affect the results of operations or
financial condition of the other businesses and the market price of the stock relating to the other businesses. In addition, net losses of either business and dividends and distributions on, or
repurchases of, either class of common stock or repurchases of common stock at a price per share greater than par value will reduce the funds we can pay on each class of common stock under Delaware
Law.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Certain
previously reported amounts have been reclassified to conform with the current period presentation.</FONT></P>

<P><FONT SIZE=2><B>NOTE B&nbsp;Summary of Significant Accounting Polices</B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Nature of Operations:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples operates as two business groups, Staples RD and Staples.com. Staples RD represents a
chain of office supply stores and contract stationer/delivery warehouses throughout North America and Europe. Staples.com represents the e-commerce operations of Staples.</FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Fiscal Year:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples' fiscal year is the 52 or 53 weeks ending the Saturday closest to January&nbsp;31. Fiscal years
1999, 1998 and 1997, consisted of the 52 weeks ended January&nbsp;29, 2000, January&nbsp;30, 1999 and January&nbsp;31, 1998 respectively. As more fully described in Note&nbsp;K, the statement
of income for the fiscal year ended January&nbsp;31, 1998 combines Staples' historical operating results for that fiscal year with the corresponding Quill Corporation ("Quill") operating results for
the calendar year ended December&nbsp;31, 1997. Accordingly, to conform fiscal years for 1998, an adjustment for Quill's operating results for January 1998 was made to retained earnings.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Use of Estimates:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The preparation of financial statements in conformity with generally accepted accounting principles
requires management of Staples to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Cash Equivalents:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples considers all highly liquid investments with an original maturity of three months or less to
be cash equivalents.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Short-Term Investments:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples' securities are classified as available for sale and consist principally of high-grade
state and municipal securities having an original maturity of more than three months. The investments are carried at fair value, with the unrealized holding gains and losses reported as a component of
Staples' stockholders' equity. The cost of securities sold is based on the specific identification method. No individual issue in the portfolio constitutes greater than one percent of the total assets
of Staples.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-8</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Merchandise Inventories:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Merchandise inventories are valued at the lower of weighted-average cost or market.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Receivables:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Receivables relate principally to amounts due from vendors under various incentive and promotional
programs and trade receivables financed under regular commercial credit terms. Concentrations of credit risk with respect to trade receivables are limited due to Staples' large number of customers and
their dispersion across many industries and geographic regions.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Advertising:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples expenses the production costs of advertising the first time the advertising takes place, except
for the direct-response advertising, which is capitalized and amortized over its expected period of future benefits. Direct-response advertising consists primarily of the direct catalog production
costs. The capitalized costs of the advertising are amortized over the six month period following the publication of the catalog in which it appears. Direct catalog production costs included in
prepaid and other assets totaled $16,133,000 at January&nbsp;29, 2000 and $9,854,000 at January&nbsp;30, 1999. Total advertising and marketing expense was $449,385,000, $356,928,000, and
$288,838,000 for the years ended January&nbsp;29, 2000, January&nbsp;30, 1999, January&nbsp;31, 1998, respectively.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Property and Equipment:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Property and equipment are recorded at cost. Depreciation and amortization, which includes the
amortization of assets recorded under capital lease obligations, are provided using the straight-line method over the estimated useful lives of the assets or the terms of the respective leases.
Depreciation and amortization periods are as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Buildings</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%"><FONT SIZE=2>40 years</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Leasehold improvements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%"><FONT SIZE=2>10 years or term of lease</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Furniture and fixtures</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%"><FONT SIZE=2>5 to 10 years</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%"><FONT SIZE=2>3 to 10 years</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Lease Acquisition Costs:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Lease acquisition costs are recorded at cost and amortized on the straight-line method over
the respective lease terms, including option renewal periods if renewal of the lease is probable, which range from 5 to 40 years. Accumulated amortization at January&nbsp;29, 2000 and
January&nbsp;30, 1999 totaled $28,729,000 and $24,674,000, respectively.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Goodwill:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Goodwill arising from business acquisitions is amortized on a straight-line basis over periods ranging from
20 to 40 years. Accumulated amortization was $25,066,000 and $13,053,000 as of January&nbsp;29, 2000 and January&nbsp;30, 1999, respectively. Management periodically evaluates the recoverability
of goodwill, which would be adjusted for a permanent decline in value, if any, as measured by the recoverability from projected future cash flows from the acquired businesses.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Investments:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples' securities are classified as available for sale and consist of stock purchased in Internet
related companies. Investments that qualify as marketable equity securities are carried at fair value using quoted market prices and all other investments have been accounted for on a cost basis as
each investment represents an interest of no greater than fifteen percent of the outstanding stock of that company. Unrealized gains and losses are reported as a separate component of stockholders'
equity.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Pre-opening Costs:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Pre-opening costs, which consist primarily of salaries, supplies, marketing and occupancy costs, are
charged to expense as incurred.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-9</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Private Label Credit Card Receivables:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples offers a private label credit card which is managed by a financial
services company. Under the terms of the agreement, Staples is obligated to pay fees which approximate the financial institution's cost of processing and collecting the receivables, which are
primarily non-recourse to Staples.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Foreign Currency Translation:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The assets and liabilities of Staples' foreign subsidiaries, The Business Depot Ltd.
("Business Depot"), Staples UK, Staples Germany, Sigma Burowelt and The Office Centre are translated into U.S. dollars at current exchange rates as of the balance sheet date, and revenues
and expenses are translated at average monthly exchange rates. The resulting translation adjustments, and the net exchange gains and losses resulting from the translation of investments in Staples'
foreign subsidiaries during the years ended January&nbsp;29, 2000, January&nbsp;30, 1999 and January&nbsp;31, 1998 are recorded as a separate component of stockholders' equity.</FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Stock Option Plans:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples has adopted Statement of Financial Accounting Standards No.&nbsp;123, "Accounting for
Stock-Based Compensation" ("FAS&nbsp;123"). As permitted by FAS&nbsp;123, Staples continues to account for its stock-based plans under Accounting Principles Board Opinion No.&nbsp;25,
"Accounting for Stock Issued to Employees", and provides pro forma disclosures of the compensation expense determined under the fair value provisions of FAS&nbsp;123.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Earnings Per Share:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples calculates earnings per share in accordance with Statement of Financial Accounting
Standards No.&nbsp;128 "Earnings per Share" ("FAS&nbsp;128") which requires disclosure of basic and diluted earnings per share. Subsequent to the to the approval of the Tracking Stock Proposal,
the Company calculates earnings per share under the two class method. Accordingly, historical earnings per share have been presented for the nine months ended October&nbsp;30, 1999 for Staples, Inc.
common stock and for the three months ended January&nbsp;29, 2000 for Staples.com Stock and Staples RD Stock. Basic earnings per share for Staples RD Stock is computed by dividing the net earnings
or losses of Staples RD, including Staples RD's retained interest in the net earnings or losses of Staples.com, by the weighted average number of shares of Staples RD Stock. Basic net loss per share
for Staples.com Stock is computed by dividing (i)&nbsp;the loss of Staples.com multiplied by the "Outstanding Staples.com Fraction" by (ii)&nbsp;the weighted average number of shares of
Staples.com Stock and dilutive Staples.com Stock equivalents outstanding during the applicable period. The "Outstanding Staples.com Fraction" is a fraction, the numerator of which is the weighted
average number of shares of Staples.com Stock outstanding and the denominator of which is the number of shares of Staples.com Stock that, if issued, would represent 100 percent of the equity of
Staples.com. Diluted earnings per share includes the effects of applying the treasury stock method to outstanding stock options, performance accelerated restricted stock ("PARS") and derivative
instruments when dilutive. Pro forma earnings/(loss) per share have been calculated to give effect to the sale of 12,792,308 shares of Staples.com Stock in private placements. In presenting this pro
forma information, this transaction was assumed to have occurred on February&nbsp;2, 1997. In addition, the pro forma information includes a provision for income taxes on previously untaxed earnings
of pooled S-Corporation.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Revenue Recognition:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Revenue from retail operations is recognized at the point of sale. The Company allows for
merchandise to be returned under most circumstances. The Company does not provide a reserve for estimated returns, as the amount does not have a material impact on the financial statements. Sales to
delivery customers are considered final upon acceptance of delivery, however, the Company does allow merchandise returns under certain circumstances. The Company does not provide a</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-10</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>reserve
for estimated returns on these sales as such returns are infrequent and the amount does not have a material impact on the financial statements.</FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Fair Value of Financial Instruments:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Pursuant to Statement of Financial Accounting Standards No.&nbsp;107,
"Disclosure About Fair Value of Financial Instruments" ("FAS&nbsp;107"), Staples has estimated the fair value of its financial instruments using the following methods and assumptions:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
carrying amount of cash and cash equivalents, receivables and accounts payable approximates fair value;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
fair values of short-term and long-term investments are based on quoted market prices or other readily available sources where applicable;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
carrying amounts of Staples' debt approximates fair value, estimated by discounted cash flow analyses based on Staples' current incremental borrowing
rates for similar types of borrowing arrangements.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Long-Lived Assets:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples adopted Statement of Financial Accounting Standards No.&nbsp;121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of" ("FAS&nbsp;121"), which requires impairment losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flow estimated to be generated by those assets are less than the assets' carrying amount. Staples' policy is to evaluate long-lived assets for
impairment at a store level.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Interest Rate and Currency Swap Agreements:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples uses interest rate and currency swap agreements for purposes other
than trading and they are treated as off-balance sheet items. Staples uses interest rate swap agreements to modify fixed rate obligations to variable rate obligations, thereby adjusting the interest
rates to current market rates and ensuring that the debt instruments are always reflected at fair value.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;New Accounting Standards:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The new standard requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives will be reported in the statement of operations or as a deferred item, depending on the use of the derivatives and whether they qualify for
hedge accounting. The key criterion for hedge accounting is that the derivative must be highly effective in achieving offsetting changes in fair value or cash flows of the hedged items during the term
of the hedge. The effective date of SFAS No.&nbsp;133 was delayed to fiscal 2001 by the issuance of SFAS No.&nbsp;137 "Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date to FASB Statement No. 133-an amendment of FASB Statement 133". The Company has not yet determined the effect, if any, of adopting this new standard.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-11</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><B>NOTE C&nbsp;Investments</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of available-for-sale investments as of January&nbsp;29, 2000 and January&nbsp;30, 1999 (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="27%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="20%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized Gains</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="21%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized Losses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Estimated<BR>
Fair Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>January&nbsp;29, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>&nbsp;<BR>
Short-term:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>Agency Bonds</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,143</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,071</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>&nbsp;<BR>
Long-term:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>Equity securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>23,780</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>10,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34,755</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>&nbsp;<BR>
January&nbsp;30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>&nbsp;<BR>
Short-term:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>Municipal obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10,515</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,561</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>Agency Bonds</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,902</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(42</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,867</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>Total short-term</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>17,417</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>53</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>(42</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>17,428</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="27%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Proceeds
from the sale of investment securities were $16,651,000 and $14,599,000 during the years ended January&nbsp;29, 2000 and January&nbsp;30, 1999, respectively. Other
reductions in the cost balance resulted from maturities of securities. The net adjustment to unrealized holding gains and losses on available-for-sale investments included as a separate component of
stockholders' equity totaled $6,644,000,
($1,049,000) and $1,036,000 for the years ended January&nbsp;29, 2000, January&nbsp;30, 1999 and January&nbsp;31, 1998, respectively.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
amortized cost and estimated fair value of debt securities at January&nbsp;29, 2000, by contractual maturity, are shown below. Expected maturities will differ from contractual
maturities because the issuers of securities may have the right to prepay obligations without prepayment penalties. Marketable equity securities are considered long-term based upon the intent and
business purposes of the investments.</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="67%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Estimated<BR>
Fair Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Due in one year or less</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,143</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,071</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-12</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=6,SEQ=74,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=658075,FOLIO=C-12,FILE='DISK018:[00BOS8.00BOS1458]DW1458A.;7',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->

<P><FONT SIZE=2><B>NOTE D&nbsp;Accrued Liabilities</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities consist of the following (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="61%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January&nbsp;29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January&nbsp;30,<BR>
1999</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>124,074</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>114,179</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Acquisition and store closure reserves</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>103,978</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>91,484</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Employee related</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>100,909</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>88,551</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Advertising and direct marketing</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>42,973</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>30,543</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>173,228</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>113,554</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>545,162</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>438,311</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2><B>NOTE E Long-Term Debt and Credit Agreement</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt consists of the following (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="61%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January&nbsp;29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January&nbsp;30,<BR>
1999</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2>Senior notes with a fixed rate of 7.125%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>200,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>200,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2>Lines of credit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>150,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>29,849</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2>Euro notes with a fixed rate of 5.875%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>148,185</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2>Capital lease obligations and other notes payable in monthly installments with effective interest rates from 4% to 16%; collateralized by the related equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>14,937</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7,760</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>513,122</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>237,609</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2>Less current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12,219</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>32,594</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>500,903</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>205,015</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Aggregate
annual maturities of long-term debt and capital lease obligations are as follows (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="82%" ALIGN="LEFT"><FONT SIZE=1><B>Fiscal year:<BR></B></FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>12,219</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>391</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>228</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>148,196</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>Thereafter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>352,078</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>513,122</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Included
in property and equipment are capital lease obligations for equipment recorded at the net present value of the minimum lease payments of $10,995,000. Future minimum lease
payments of $1,226,000, excluding $112,000 of interest, are included in aggregate annual maturities shown above. Staples did not enter into any new capital lease agreements during the fiscal years
ended January&nbsp;29, 2000 and January&nbsp;30, 1999.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-13</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>Senior
Notes:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
issued $200,000,000 of senior notes (the "Notes") on August&nbsp;12, 1997 with an interest rate of 7.125% payable semi-annually on February&nbsp;15 and August&nbsp;15 of
each year commencing on February&nbsp;15, 1998. The Notes are due August&nbsp;15, 2007. Net proceeds of approximately $198,000,000 from the sale of Staples' Notes were used for repayment of
indebtedness under Staples' revolving credit facility and for general working capital purposes, including the financing of new store openings, distribution facilities and corporate offices.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
May 11, 1999 and August 3, 1999, Staples entered into interest rate swaps, each for an aggregate notional amount of $100,000,000, in order to minimize financing costs associated
with the Notes. The swap agreements are both scheduled to terminate on August 15, 2007. Under the interest rate swap agreements, Staples is entitled to receive semi-annual interest payments at a fixed
rate of approximately 7.125% and is obligated to pay interest based on a 30 day Non-Financial U.S. Commercial Paper Rate of 5.69% plus a fixed basis point adjustment at January&nbsp;29, 2000.
Staples has designated its $200,000,000 of senior notes and its interest rate swap agreements to be an integrated transaction. Accordingly, the interest rate swaps are being accounted for as a hedge
and the differential to be paid or received on the interest rate swap agreements is accrued and recognized as an adjustment to interest rate expense over the life of the agreements.</FONT></P>

<P><FONT SIZE=2>Credit
Agreements:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Effective
November 13, 1997, Staples entered into a revolving credit facility, effective through November 2002, with a syndicate of banks, which provides up to $350,000,000 of
borrowings. Borrowings made pursuant to this facility will bear interest at either the lead bank's prime rate, the federal funds rate plus 0.50%, the LIBOR rate plus a percentage spread based upon
certain defined ratios, a competitive bid rate, or a swing line loan rate, and this rate was approximately 5.9% at January&nbsp;29, 2000. This agreement, among other conditions, contains certain
restrictive covenants including net worth maintenance, minimum fixed charge interest coverage and limitations on indebtedness and sales of assets. As of January&nbsp;29, 2000, $150,000,000 was
outstanding under the revolving credit facility. Staples also has available $35,000,000 in uncommitted, short-term bank credit lines, of which no borrowings were outstanding as of January&nbsp;29,
2000. Staples UK has a $48,600,000 line of credit which had an outstanding balance of $4,500,000 at January&nbsp;29, 2000. Staples Germany has a $19,900,000 line of credit, Office Centre Netherlands
has a $6,600,000 line of credit, Office Centre Portugal has a $500,000 line of credit and The Business Depot has a $6,900,000 line of credit, all with no outstanding balances at January&nbsp;29,
2000.</FONT></P>

<P><FONT SIZE=2>Euro
Notes:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
issued notes in the aggregate principal amount of 150,000,000 euro on November&nbsp;15, 1999. Net proceeds of approximately $148,000,000 were used to fund international
expansion. These notes bear interest at a rate of 5.875% per annum and are due on November 15, 2004. These notes have been designated as a foreign currency hedge on our net foreign investments in
Europe and gains or losses are recorded in the cumulative translation adjustment line in Stockholders' Equity.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-14</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Also
on November 15, 1999 Staples entered into an interest rate swap for an aggregate notional amount of 150,000,000 euro in order to minimize financing costs on the notes issued the
same date. The swap agreement is scheduled to terminate on November&nbsp;15, 2004. Under the interest rate swap agreement, Staples is entitled to receive annual interest payments at a fixed rate of
approximately 5.875% and is required to make quarterly interest payments at a floating rate of the one month EURIBOR plus 1.1175%, currently approximately 4.2455%. Staples has designated its
150,000,000 euro notes and its interest rate swap agreement to be an integrated transaction. Accordingly, the interest rate swap agreement is being accounted for as a 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 agreement.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest
paid by Staples totaled $18,937,000, $29,600,000 and $23,012,000 for the fiscal years ended January&nbsp;29, 2000, January&nbsp;30, 1999, and January&nbsp;31, 1998,
respectively. Capitalized interest totaled $433,000, $2,254,000 and $1,387,000 in the years ended January&nbsp;29, 2000, January&nbsp;30, 1999 and January&nbsp;31, 1998, respectively.</FONT></P>


<P><FONT SIZE=2><B>NOTE F&nbsp;Convertible Debentures</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On October 5, 1995, Staples issued $300,000,000 of 4<SUP>1</SUP>/<SMALL>2</SMALL>% Convertible Subordinated Debentures due October&nbsp;1, 2000 with interest payable
semi-annually (the "4<SUP>1</SUP>/<SMALL>2</SMALL>% Debentures"). During fiscal 1998, $299,995,000 of Staples' $300,000,000 of 4<SUP>1</SUP>/<SMALL>2</SMALL>% Debentures were converted into an aggregate of 30,674,276
shares of common stock at a conversion price of $9.78 per share. The remaining $5,000 were called at par value plus a premium of 1.8% and accrued interest. The total principal amount converted was
credited to common stock and additional paid-in capital, net of unamortized expenses of the original debt issue and accrued but unpaid interest.</FONT></P>


<P><FONT SIZE=2><B>NOTE G&nbsp;Stockholders' Equity</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On November 9, 1999, the stockholders of Staples approved the Tracking Stock Proposal which reclassified Staples existing common stock as Staples RD Stock,
intended to reflect the performance of Staples RD and its retained interest in Staples.com, and created a new class of stock called Staples.com Stock intended to reflect the performance of Staples'
e-commerce business. The approval of the Tracking Stock Proposal increased the number of authorized shares to 2,100,000,000 shares of common stock, initially comprised of 1,500,000,000 shares of
Staples RD Stock and 600,000,000 shares of Staples.com Stock. During the fiscal year ended January&nbsp;29, 2000 Staples.com issued 12,792,308 shares of Staples.com Stock in private placements and
14,459,878 shares through the exercise of employee stock options. Additional shares may be issued from time to time upon exercise of stock options or at the discretion of the Board.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;With
the approval of the Tracking Stock Proposal, if Staples disposes of all or substantially all of the assets of a Staples RD or Staples.com, and the disposition is not an exempt
disposition, Staples would be required to pay a mandatory dividend to the holders of that series of stock, redeem outstanding shares of that series of stock equal to their proportionate interest in
the net proceeds of the disposition
or exchange shares of that series of stock for shares of the other series at a 10% premium. At any time within one year after completing a special dividend or partial redemption, Staples will have the
right to issue shares of the other series of stock, at a 10% premium, in exchange for the remaining shares of the series of stock which received the dividend or was partially redeemed.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-15</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
will have the right, at any time, to issue shares of one series of stock in exchange for the other at a premium that was initially 25% and will decline ratably each quarter
over a period of three years to 15%. Notwithstanding these exchange provisions, in the event that certain adverse tax law changes were to take place, Staples will have the right to issue shares of
either series of common stock in exchange for outstanding shares of the other series of common stock at a 10% premium, regardless of when such adverse tax law changes take place. In addition, Staples
will have the right, at any time Staples.com Stock exceeds the 40% of total market capitalization threshold but is below the 60% of total market capitalization threshold, to issue shares of either
series of common stock in exchange for outstanding shares of the other series of common stock on a value for value basis. The exchange ratio that will result in the specified premium or value for
value exchange will be calculated based on a comparison of the average market values of the two series of common stock during the 20 consecutive trading day period ending on, and including, the
5<SUP>th</SUP> trading day immediately preceding the date on which Staples mails the notice of exchange to holders of the outstanding shares being exchanged. Staples will have the right at any time
to transfer all of the assets and liabilities of one or both series of stock to a subsidiary and deliver all of the stock of that subsidiary in exchange for all of the outstanding stock of that series
of stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon
liquidation of Staples, holders of Staples RD Stock and Staples.com Stock will be entitled to receive the net assets of Staples, if any, available for distribution to
stockholders. Amounts due upon liquidation in respect of shares of Staples RD Stock and shares of Staples.com Stock will be distributed pro rata in accordance with the average market value of Staples
RD Stock and Staples.com Stock over a 20-Trading Day period ending 300 days after the implementation of the Tracking Stock Proposal. In the absence of a public trading market for Staples.com Stock,
market value would be determined in good faith by the Board.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
November 12, 1998, December 30, 1997, March&nbsp;5, 1996 and June&nbsp;29, 1995, the Board approved three-for-two splits of Staples' common stock to be effected in the form of
50% stock dividends. The dividends were distributed on January&nbsp;28, 1999 to shareholders of record as of January&nbsp;18, 1999, January&nbsp;30, 1998 to shareholders of record as of
January&nbsp;20, 1998, March&nbsp;25, 1996 to shareholders of record as of March&nbsp;15, 1996 and July&nbsp;24, 1995 to shareholders of record as of July&nbsp;14, 1995, respectively. The
consolidated financial statements have been retroactively restated to give effect to these stock splits.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
March 4, 1999, the Board approved a stock repurchase program intended to provide shares for employee stock programs. During fiscal year 1999, Staples repurchased approximately
$300,105,000 of Staples RD Stock under this program. In addition, Staples purchased treasury stock of $10,143,000 and $7,892,000 from employees and directors to fund the income taxes incurred by those
employees and directors associated with the vesting of performance accelerated restricted stock (PARS).</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
July 2, 1999, Staples entered into an equity forward purchase agreement to hedge against stock price fluctuations for the repurchase of Staples RD Stock in connection with the
annual stock option grant to employees and directors. Under the agreement, Staples may purchase 2,600,000 shares at an average price of $30.263 or elect to settle the contract on a net share basis in
lieu of physical settlement.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;At
January 29, 2000, 89,811,472 shares of common stock were reserved for issuance under Staples' stock option, 401(k), employee stock purchase and director stock option plans.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-16</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><B>NOTE H&nbsp;Employee Benefit Plans</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations in
accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No.&nbsp;123, "Accounting for Stock-Based Compensation"
("FAS&nbsp;123") requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB&nbsp;25, since the exercise price of Staples' employee stock
options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;At
the Special Stockholders Meeting on November 9, 1999 the stockholders of Staples approved proposals to amend Staples' 1992 Equity Incentive Plan (the
"</FONT><FONT SIZE=2><I>Incentive Plan</I></FONT><FONT SIZE=2>"), Staples' Amended and Restated 1990 Director Stock Option Plan (the "</FONT><FONT SIZE=2><I>Director Plan</I></FONT><FONT SIZE=2>")
and Staples' 1998 Employee Stock Purchase Plan (the "</FONT><FONT SIZE=2><I>Stock Purchase Plan</I></FONT><FONT SIZE=2>") (1)&nbsp;to permit grants of awards under each such plan to be made with
respect to either series of common stock of Staples, and (2)&nbsp;to increase the number of shares authorized for issuance under each plan.</FONT></P>

<P><FONT SIZE=2><B>Employee Stock Purchase Plan</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The amended Stock Purchase Plan authorizes a total of up to 8,400,000 shares of common stock, regardless of series, to be sold to participating employees.
Participating employees may purchase shares of either series of common stock at 85% of its fair market value at the beginning or end of an offering period, whichever is lower, through payroll
deductions in an amount not to exceed 10% of an employee's base compensation.</FONT></P>

<P><FONT SIZE=2><B>Stock Option Plans</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Staples' Incentive Plan, as amended by stockholders on November 9, 1999, Staples may grant to management and key employees incentive and nonqualified
options to purchase up to 122,850,000 shares of common stock and Performance Accelerated Restricted Stock ("PARS"), regardless of series. As of February&nbsp;27, 1997, Staples' 1987 Stock Option
Plan (the "1987 Plan") expired, however, unexercised options under this plan remain outstanding. The exercise price of options granted under the plans may not be less than 100% of the fair market
value of Staples' common stock at the date of grant. Options generally have an exercise price equal to the fair market value of the common stock on the date of grant. Some options outstanding are
exercisable at various percentages of the total shares subject to the option starting one year after the grant, while other options are exercisable in their entirety three to five years after the
grant date. Staples.com options are exercisable immediately and vest over a period of one to four years. All options expire ten years after the grant date, subject to earlier termination in the event
of employment termination.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under
Staples' Director Plan, as amended by stockholders on November&nbsp;9, 1999, up to 3,350,000 shares of options and awards of PARS can be made with respect to shares of
existing common stock, regardless of series to be issued to non-employee directors. The exercise price of options granted is equal to the fair market value of Staples RD Stock or Staples.com Stock at
the date of grant. Options become
exercisable in equal amounts over four years and expire ten years from the date of grant, subject to earlier termination, in certain circumstances, in the event the optionee ceases to serve as a
director.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Pro
forma information regarding net income and earnings per share is required by FAS&nbsp;123, which also requires that the information be determined as if Staples has accounted for
its employee stock options</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-17</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>of
Staples RD Stock granted subsequent to January&nbsp;28, 1995 under the fair valued method of that Statement. The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average assumptions for 1996, 1997, 1998 and 1999: risk-free interest rates ranging from 5.21% to 6.69%; expected dividend yield of zero;
volatility factor of the expected market price of Staples RD Stock of .30 for fiscal year 1996, .35 for fiscal year 1997, .36 for fiscal year 1998 and .41 for fiscal 1999; and a weighted-average
expected life of the option of 4.0 years for the 1987 Plan and the Incentive Plan and 2.0 to 5.0 years for the Director Plan. As for Staples.com Stock the fair value for these options was estimated at
the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1999: a risk-free interest rate of 6.67%; volatility factor of the expected market
price of Staples.com Stock of 0.00 for fiscal year 1999 and a weighted-average expected life of the option of 2.0 to 5.0 years.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. For purposes of FAS 123's disclosure
requirements, the amended Stock Purchase Plan is considered a compensatory plan. The expense was calculated based on the fair value of the employees' purchase rights. Staples' pro forma information,
which includes the pro forma results of Quill for fiscal years 1998 and 1997, follows (in thousands except for earnings per share information):</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD Stock:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29, 2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30, 1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31, 1998</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Pro forma net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>277,369</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>156,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>138,983</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Pro forma basic earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.60</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.34</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Pro forma diluted earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.59</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.35</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.33</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com
Stock:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Pro forma net loss attributed to Staples.com Stock</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(1,118</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Pro forma basic earnings per common share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Pro forma diluted earnings per common share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This
pro forma impact only takes into account options granted since January&nbsp;28, 1995 and is likely to increase in future years as additional options are granted and amortized
ratably over the vesting period.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Information
with respect to Staples RD Stock options granted under the above plans is as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="23%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-Average<BR>
Exercise Price<BR>
Per Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Outstanding at February 1, 1997</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>45,894,855</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>4.26</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>9,656,558</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>10.43</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(10,147,409</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>2.78</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(2,807,883</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>7.43</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-18</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=4,SEQ=80,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=999371,FOLIO=C-18,FILE='DISK018:[00BOS8.00BOS1458]DX1458A.;27',USER='MLAING',CD='10-MAR-2000;11:14 -->

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="23%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-Average<BR>
Exercise Price<BR>
Per Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;<BR>
Outstanding at January 31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
42,596,121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
5.34</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>13,698,644</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>20.22</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(13,965,713</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>3.64</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(1,938,669</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>11.55</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;<BR>
Outstanding at January 30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
40,390,383</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
11.58</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>7,101,885</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>29.58</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(5,212,791</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>5.59</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(2,162,227</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>17.21</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;<BR>
Outstanding at January 29, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
40,117,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
15.26</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes information concerning currently outstanding and exercisable options for Staples Stock:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="101%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="33%" COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="29%" COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Options Exercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Range of<BR>
Exercise Prices</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Remaining<BR>
Contractual Life</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=1>$&nbsp;0.82&#150;$&nbsp;2.46</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,385,080</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=1>3.38</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>2.37</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>1,385,080</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>2.37</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=1>$&nbsp;2.52&#150;$&nbsp;3.90</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>4,837,655</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=1>4.20</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>3.65</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>4,837,655</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>3.65</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=1>$&nbsp;4.12&#150;$&nbsp;9.17</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>7,374,735</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=1>5.95</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>8.32</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>7,088,080</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>8.32</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=1>$&nbsp;9.47&#150;$11.53</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>6,833,401</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=1>7.50</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>10.49</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>124,623</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>10.40</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=1>$11.67&#150;$19.42</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,267,574</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=1>8.10</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>14.84</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>47,924</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>15.56</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=1>$20.08&#150;$20.08</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>10,140,445</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=1>8.42</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>20.08</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>433,125</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>20.08</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=1>$20.63&#150;$25.38</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>2,096,227</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=1>9.13</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>22.49</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>145,272</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>23.02</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=1>$26.88&#150;$30.00</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,115,739</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=1>9.15</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>28.75</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=1>$30.94&#150;$33.56</FONT><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>5,066,394</FONT><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=1>9.41</FONT><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><FONT SIZE=1>30.97</FONT><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>18,000</FONT><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><FONT SIZE=1>30.94</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="12%"><FONT SIZE=1>$0.82&#150;$33.56</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>40,117,250</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=1>7.30</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>15.26</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1>14,079,759</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=1>6.71</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The weighted-average fair values of options granted during the years ended January&nbsp;29, 2000, January&nbsp;30, 1999 and
January&nbsp;31, 1998 were $10.70, $7.18 and $3.80, respectively.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Information
with respect to Staples.com Stock options granted under the above plans is as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="23%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-Average<BR>
Exercise Price<BR>
Per Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Outstanding at January 30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>25,274,138</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(14,459,878</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(144,398</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Outstanding at January 29, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>10,699,862</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-19</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=5,SEQ=81,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=295592,FOLIO=C-19,FILE='DISK018:[00BOS8.00BOS1458]DX1458A.;27',USER='MLAING',CD='10-MAR-2000;11:14 -->

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes information concerning currently outstanding and exercisable options for Staples.com Stock:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="99%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="10%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="33%" COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="30%" COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Options Exercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="10%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Exercise Price<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Remaining<BR>
Contractual Life</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,669,862</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>9.78</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,669,862</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2><B>Performance Accelerated Restricted Stock ("PARS")</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;PARS are shares of Staples RD Stock or Staples.com Stock granted outright to employees and non-employee directors without cost to the employee or director. The
shares, however, are restricted in that they are not transferable (e.g. they may not be sold) by the employee or director until they vest, generally after the end of five years. Such vesting date may
accelerate if Staples achieves certain compound annual earnings per share growth over a certain number of interim years. If the employee leaves Staples, or the director ceases to serve as a director
of Staples, prior to the vesting date for any reason, the PARS shares will be forfeited by the employee or director, as the case may be, and will be returned to Staples. Once the PARS have vested,
they become unrestricted and may be transferred and sold like any other Staples shares.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD Stock PARS issued in the fiscal year ended January&nbsp;29, 2000, totaling approximately 580,000 shares which have a weighted average fair value of $20.75, initially vest
on February&nbsp;1, 2005 or will accelerate on May&nbsp;1, in 2002, 2003, or 2004 upon attainment of certain compound annual earnings per share targets. PARS totaling approximately 1,381,000
shares, which have a weighted average fair value of $17.56, issued in fiscal year 1998 will vest on May&nbsp;1, 2000 as a result of Staples achieving its target earnings goal for the fiscal year
ended January&nbsp;29, 2000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the issuance of the PARS, Staples included $14,832,000, $9,796,000 and $7,496,000 in compensation expense for the fiscal years ended January&nbsp;29, 2000,
January&nbsp;30, 1999 and January&nbsp;31, 1998, respectively.</FONT></P>

<P><FONT SIZE=2><B>Employees' 401(k) Savings Plan</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Staples' Employees' 401(k) Savings Plan (the "401(k) Plan"), and Supplemental Executive Retirement Plan (the "SERP Plan"), Staples may contribute up to a
total of 2,503,125 shares of common stock to these plans, regardless of series. The 401(k) Plan is available to all employees of Staples who meet minimum age and length of service requirements.
Company contributions are based upon a matching formula applied to employee contributions with additional contributions made at the
discretion of the Board. In connection with these plans, Staples included approximately $4,000,000, $3,000,000 and $2,000,000 in expense for fiscal years ended January&nbsp;29, 2000,
January&nbsp;30, 1999 and January&nbsp;31, 1998, respectively.</FONT></P>

<P><FONT SIZE=2><B>NOTE I&nbsp;Income Taxes</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-20</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=6,SEQ=82,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=850206,FOLIO=C-20,FILE='DISK018:[00BOS8.00BOS1458]DX1458A.;27',USER='MLAING',CD='10-MAR-2000;11:14 -->

<P><FONT SIZE=2>purposes.
Significant components and the approximate tax effect of Staples' deferred tax assets and liabilities as of January&nbsp;29, 2000 and January&nbsp;30, 1999, are as follows (in
thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="61%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Deferred Tax Assets:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Inventory</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>27,328</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Deferred rent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>20,310</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>19,713</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Acquired NOL's</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,251</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>8,743</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Other net operating loss carryforwards</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>37,106</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>27,259</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Insurance</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,455</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,639</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Employee benefits</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>18,368</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>9,746</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Merger related charges</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>21,965</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>10,823</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Store closure charge</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>19,694</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>20,274</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Other&#151;net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>22,157</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>17,711</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Total Deferred Tax Assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>159,306</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>149,236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;<BR>
Deferred Tax Liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Depreciation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(6,847</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(2,312</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Inventory</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(21,501</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Other&#151;net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(7,424</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(5,164</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Total Deferred Tax Liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(35,772</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(7,476</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Total Valuation Allowance</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(48,892</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(37,765</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Net Deferred Tax Assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>74,642</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>103,995</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
deferred tax assets disclosed as acquired NOL's and other net operating loss carryforwards totaled $49,357,000, of which $48,098,000 have been fully reserved due to the
uncertainty of the realization of the asset within the local country jurisdiction. Further, if this asset is utilized when income is earned within the foreign jurisdiction, Staples will not have a
consolidated tax benefit, as Staples will be required to pay U.S. income taxes on the income offset by the foreign NOL.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For
financial reporting purposes, income before taxes includes the following components (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="51%" COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Pretax income:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>United States</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>446,726</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>262,067</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>213,549</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Foreign</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>69,648</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>44,194</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>36,205</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>516,374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>306,261</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>249,754</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-21</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=7,SEQ=83,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=857209,FOLIO=C-21,FILE='DISK018:[00BOS8.00BOS1458]DX1458A.;27',USER='MLAING',CD='10-MAR-2000;11:14 -->

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
provision for income taxes consists of the following (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="51%" COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Current tax expense:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Federal</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>117,389</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>135,922</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>53,248</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>State</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>23,625</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>18,875</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>10,707</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Foreign</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>31,107</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>21,798</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>14,092</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>172,121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>176,595</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>78,047</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;<BR>
Deferred tax expense (benefit)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
29,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
(55,569</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
3,877</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>201,386</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>121,026</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>81,924</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A
reconciliation of the federal statutory tax rate to Staples' effective tax rate on historical net income is as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="46%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Federal statutory rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>State taxes, net of federal benefit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>5.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>6.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>6.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Goodwill</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Income of S-Corporation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(0.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%)</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(0.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%)</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(5.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%)</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%)</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(2.9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Effective tax rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>39.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>39.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>32.8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A
reconciliation of the federal statutory tax rate to Staples' effective tax rate on pro forma net income is as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="46%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Federal statutory rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>State taxes, net of federal benefit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>5.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>6.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>6.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Goodwill</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%)</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%)</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(2.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Effective tax rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>39.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>40.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>38.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Income
tax payments were $168,155,055, $94,729,602, and $23,487,877 during fiscal years ended January&nbsp;29, 2000, January&nbsp;30, 1999, and January&nbsp;31, 1998,
respectively. Staples has net operating losses of approximately $157,950,000 that can be carried forward indefinitely, $21,900,000 of which is attributable to Staples' increased ownership in Staples
UK and Staples Germany, and $8,500,000 which is attributable to Staples' purchase of Office Centre Portugal and Sigma.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-22</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Undistributed
earnings of Staples' foreign subsidiaries amounted to approximately $109,300,000 at January 29, 2000. Those earnings are considered to be indefinitely reinvested and,
accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, Staples would be subject to both
U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income
tax liability is not practicable because of the complexities associated with its hypothetical calculation. Withholding taxes of approximately $5,500,000 would be payable upon remittance of all
previously unremitted earnings at January 29, 2000.</FONT></P>


<P><FONT SIZE=2><B>NOTE J&nbsp;Leases and other Off-Balance Sheet Commitments</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples leases certain retail and support facilities under long-term noncancellable lease agreements. Most lease agreements contain renewal options and rent
escalation clauses and require Staples to pay
real estate taxes in excess of specified amounts and, in some cases, allow termination within a certain number of years with notice and a fixed payment. Certain agreements provide for contingent
rental payments based on sales.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Other
long-term obligations at January 29, 2000 include $55,000,000 relating to future rent escalation clauses and lease incentives under certain existing store operating lease
arrangements. These rent expenses are recognized following the straight-line basis over the respective terms of the leases. Future minimum lease commitments for retail and support facilities
(including lease commitments for 154 retail stores not yet opened at January&nbsp;29, 2000) under noncancellable operating leases are due as follows (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Fiscal year:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>2000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>335,343</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>341,719</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>331,120</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>319,365</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>303,494</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Thereafter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,398,174</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>4,029,215</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Rent
expense approximated $292,872,000, $234,609,000, and $193,990,000, for the fiscal years ended January&nbsp;29, 2000, January&nbsp;30, 1999, and January&nbsp;31, 1998,
respectively.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Letters
of credit are issued by Staples during the ordinary course of business through major financial institutions as required by certain vendor contracts. As of January&nbsp;29,
2000, Staples had available open letters of credit totaling $7,940,000.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Company has provided financial guarantees relating to loans taken by certain executives used to exercise the options of Staples.com Stock granted to them. The balance of the loans
fully guaranteed by the Company was $17,889,918, including deferred interest of $1,680,982, at January 29, 2000. The loans are 50% non-recourse to the individuals and the interest payable on the loans
is with full recourse to the individuals. Each of these persons entered into a pledge agreement with the bank pursuant to which they pledge their shares of Staples.com Stock as collateral for the loan
they received. Staples entered into a line of credit and guaranty agreement with the bank pursuant to which Staples agreed to guarantee these loans.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-23</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><B>NOTE K&nbsp;Business Acquisitions</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On May 21, 1998, Staples acquired Quill. The Merger was structured as an exchange of shares in which the stockholders of Quill received approximately 26
million shares of Staples' common stock, at an
exchange ratio established at a combination of fixed and variable prices, and cash paid to a dissenting shareholder of approximately $48,000,000, which equates to a purchase price of approximately
$690,000,000. The Merger was accounted for as a pooling of interests, and accordingly, Staples' consolidated financial statements have been restated to include the operations of Quill for all periods
prior to the merger. The statements of income combine Staples' historical operating results for the fiscal year ended January&nbsp;31, 1998 with the corresponding Quill operating results for the
year ended December&nbsp;31, 1997. Prior to the acquisition, Quill elected to be taxed as an S&nbsp;Corporation under the Internal Revenue Code. Accordingly, the current taxable income of Quill
was taxable to its shareholders who were responsible for the payment of taxes thereon. Quill has been included in Staples' U.S. federal income tax return subsequent to the date of the acquisition. Pro
forma adjustments have been made to the restated statements of operations to reflect the income taxes that would have been provided had Quill been subject to income taxes.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the acquisition of Quill, Staples committed to a plan that results in the integration of the two businesses. As a result of the acquisition and integration plan,
Staples recorded a charge to operating expense of $41,000,000 during the year ended January&nbsp;30, 1999. These costs consist of direct merger-related and integration costs from the transaction.
The merger transaction costs of approximately $10,500,000 consist primarily of fees for investment bankers, attorneys, accountants, and other related charges. The integration costs primarily include
employee costs of approximately $7,000,000, contract and lease termination costs of approximately $14,100,000, the write-down of leasehold improvements of approximately $3,500,000 and other
merger-related costs of approximately $5,900,000. Through January&nbsp;29, 2000, Staples paid approximately $24,000,000, which consists primarily of transaction and employee related costs.
Approximately $13,500,000 is included in accrued expense at January&nbsp;29, 2000, which is considered to be sufficient to cover the remaining merger related and integration costs to be paid in
connection with the Quill acquisition.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-24</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Separate
net sales and net income of the merged entities prior to the merger are presented in the following table (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="65%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="79%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31, 1998</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Net sales:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Staples</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>5,181,035</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Quill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>551,110</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Combined</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>5,732,145</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;<BR>
Net income</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Staples</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>130,949</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Quill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>36,965</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Combined</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>167,914</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;<BR>
Pro forma net income</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Staples</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>130,949</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Quill(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>22,179</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Combined</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>153,128</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Reflects
adjustment for provision for income taxes on previously untaxed earnings of S-Corporation.</FONT></DD></DL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
February 26, 1999, Staples completed the acquisition of Claricom Holdings, Inc. and certain related entities, now referred to as Staples Communications, for a purchase price of
approximately $137,600,000, net of cash acquired. Staples Communications is a full-service supplier of telecommunications services to small and medium sized businesses in the United States. The
acquisition has been accounted for using the purchase method of accounting, and accordingly, Staples has recognized goodwill of approximately $158,400,000, which will be amortized over 20 years using
the straight-line method. As a result of a merger and integration plan that the Company began to formulate at the date of acquisition, the Company recorded a liability in purchase accounting of
approximately $6,882,000 for merger and integration costs. The merger transaction costs of approximately $1,852,000 consist of direct costs of the transaction, primarily fees paid for investment
bankers, attorneys, accountants and other related costs. The integration costs primarily include employee costs of $4,650,000 and other merger related costs of approximately $380,000. Through
January&nbsp;29, 2000, Staples paid approximately $3,096,000 related to this liability. Approximately $3,786,000 is included in accrued expenses at January&nbsp;29, 2000, which is considered
sufficient to cover the remaining merger and integration costs to be paid in connection with the Claricom acquisition.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
October 7, 1999, Staples completed the acquisition of three European office supply companies: Sigma Burowelt in Germany, Office Centre in the Netherlands and Office Centre in
Portugal, for a purchase price of approximately $106,400,000, net of cash acquired. The acquisition includes 42 office supply superstores, with 15 stores in Germany, 21 stores in the Netherlands and 6
stores in Portugal. The acquisitions have been accounted for using the purchase method of accounting, and accordingly, Staples has recognized goodwill of approximately $96,900,000, which will be
amortized over 40 years using the straight-line method. As a result of a merger and integration plan that the Company began to
formulate at</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-25</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>

<P><FONT SIZE=2>the
date of acquisition, the Company recorded adjustments in purchase accounting of approximately $30,000,000 for merger and integration costs. The merger transaction costs of approximately $2,275,000
consist primarily of direct costs of the transaction, including fees paid to investment bankers, attorneys, accountants and other related costs. The integration costs primarily include employee
related costs of approximately $8,094,000, store closure and conversion costs of approximately $6,948,000, write-down of inventory of approximately $5,778,000 and other merger related costs of
approximately $6,905,000. Through January&nbsp;29, 2000, Staples paid approximately $4,300,000 related to this liability. Approximately $19,922,000 is included in accrued expenses at
January&nbsp;29, 2000, which is considered sufficient to cover the remaining merger and integration costs to be paid in connection with the acquisition of these companies.</FONT></P>

<P><FONT SIZE=2><B>NOTE L&nbsp;Store Closure Charge</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the fourth quarter of 1998, Staples committed to a plan to relocate certain stores which cannot be expanded and upgraded to Staples current store model and
reported a pre-tax store closure charge of $49,706,000. The charge includes $29,620,000 for future rental payments under operating lease agreements that will be paid after the store is closed and will
not be subsidized by subtenant income, $4,966,000 in fees, settlement costs and other expenses related to store closure and $15,120,000 in asset impairment charges. In 1998, the Company committed to
execute lease agreements for the relocation sites during fiscal year 1999 with the stores to be closed and relocated during fiscal years 1999 and 2000. At January&nbsp;29, 2000, the Company has
executed lease agreements for a substantial majority of the stores identified in 1998 and continues to actively negotiate lease agreements for the remaining relocation sites. Negotiations for
relocation sites have taken longer to complete than originally anticipated. Any sites that the Company is unable to complete negotiations for by the end of the first quarter 2000 will not be closed
and the related charges will be reversed. Through January&nbsp;29, 2000, the Company has paid approximately $476,000 in costs related to the store closures and $34,110,000 remains accrued for future
rental payments, fees, settlement costs, and other expenses related to the store closures.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As
a result of Staples' commitment to exit these stores, the Company evaluated the long-lived assets at each location in accordance with FAS 121. The analysis indicated that the
long-lived assets of the designated stores were impaired. Accordingly, Staples estimated the fair value of these assets based on discounted cash flows and recorded an impairment charge of $15,120,000,
which is included in the store closure charge. Staples will continue to depreciate these assets based on their revised useful life.</FONT></P>

<P><FONT SIZE=2><B>NOTE M&nbsp;Segment Reporting</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples has three reportable segments: North American Retail, North American Delivery Operations, and European Operations. Staples' North American Retail
segment consists of two operating units that operate office supply stores throughout the US and Canada. Staples' North American Delivery Operations segment consists of four operating units, including
Staples.com, that sell office products and supplies directly to businesses throughout the US and Canada. The European Operations segment consists of seven operating units that operate office supply
stores in the United Kingdom, Germany,
the Netherlands and Portugal and sell office products and supplies directly to businesses throughout the United Kingdom and Germany.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-26</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->

<P><FONT SIZE=2><B>Information about segment profit/loss and segment assets (in thousands)</B></FONT></P>

<P><FONT SIZE=2><B>Measurement of Segment Profit or Loss and Segment Assets</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples evaluates performance and allocates resources based on profit or loss from operations before income taxes, excluding gains and losses on Staples'
investment portfolio an interest expense. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Intersegment sales and
transfers are recorded at Staples' cost, therefore there is no intercompany profit or loss recognized on these transactions.</FONT></P>

<P><FONT SIZE=2><B>Factors Management Used to Identify the Enterprise's Reportable Segments</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples' reportable segments are business units that distribute office products in different manners. The reportable segments are each managed separately
because they distribute products to different classes of customer with different distribution methods. The European operations are considered a separate operating segment because of the significant
difference in the operating environment from the North American operations.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Year
ended January 29, 2000:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="26%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American Retail</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Delivery Operations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>European<BR>
Operations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All Other(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Totals</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Revenues from external<BR>
customers</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,996,072</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>2,456,706</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>484,031</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,936,809</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Depreciation and amortization expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>125,769</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>34,820</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13,556</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>174,145</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Segment profit (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>571,138</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>187,518</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(37,248</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(205,034</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>516,374</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Segment assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,415,413</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>724,915</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>583,096</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4,723,424</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Expenditures for long-lived<BR>
assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>301,832</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>215,181</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>106,418</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>623,431</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Year
ended January 30, 1999:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="93%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Retail</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Operations<BR>
Delivery</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>European<BR>
Operations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All Other(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Totals</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Revenues from external<BR>
customers</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,867,124</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,914,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>341,090</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,123,189</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Merger and store closure</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>49,706</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>41,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>90,706</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Depreciation and amortization expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>98,586</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>20,151</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,191</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>126,928</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Segment profit (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>381,900</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>118,548</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(17,077</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(177,110</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>306,261</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Segment assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,886,114</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>448,452</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>162,693</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,497,259</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Expenditures for long-lived<BR>
assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>333,021</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>40,712</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10,528</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>384,261</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-27</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=89,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=868032,FOLIO=C-27,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Year
ended January 31, 1998:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="93%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Retail</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Operations<BR>
Delivery</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>European<BR>
Operations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All Other(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Totals</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Revenues from external<BR>
customers</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,854,745</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,652,215</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>225,185</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,732,145</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Merger expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>29,665</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>29,665</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Depreciation and amortization expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>66,345</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>18,760</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,609</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>90,714</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Segment profit (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>319,939</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>112,031</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(8,049</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(174,167</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>249,754</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Segment assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,432,696</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>386,053</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>130,088</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,948,837</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Expenditures for long-lived<BR>
assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>208,304</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>23,977</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>49,657</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>281,938</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>All
other includes corporate general and administrative expenses and merger related costs in connection with the then proposed merger with Office Depot, Inc. for the fiscal year
ended January&nbsp;31, 1998.</FONT></DD></DL>
<BR>

<P><FONT SIZE=2>Assets</FONT></P>


<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="68%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="58%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29, 2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30, 1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>Total assets for reportable segments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>4,723,424</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>3,497,259</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>Elimination of intercompany receivables</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(124,229</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(89,664</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>Elimination of intercompany investments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(753,119</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(228,329</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>Total consolidated assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>3,846,076</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>3,179,266</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2><B>Geographic Information</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Year
ended January 29, 2000:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="66%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="59%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Revenues</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Long-Lived Assets</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=2>North America</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>8,452,777</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,497,909</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=2>Europe</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>484,032</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>88,035</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=2>Consolidated Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>8,936,809</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,585,944</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Year
ended January 30, 1999:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="66%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="59%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Revenues</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Long-Lived Assets</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=2>North America</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>6,782,099</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,027,704</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=2>Europe</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>341,090</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>35,913</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=2>Consolidated Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>7,123,189</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,063,617</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="59%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-28</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=2,SEQ=90,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=107332,FOLIO=C-28,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->

<P><FONT SIZE=2><B>NOTE N&nbsp;Guarantor Subsidiaries</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The 7.125% senior notes due August 15, 2007, the Euro Notes due November 15, 2004 and the obligations under the $350,000,000 revolving credit facility
effective through November, 2002 with a syndicate of banks are fully and unconditionally guaranteed on an unsecured, joint and several basis by certain wholly owned subsidiaries of Staples (the
"Guarantor Subsidiaries"). The following condensed consolidating financial data illustrates the composition of Staples, Inc. (the "Parent Company"), Guarantor Subsidiaries, and non-guarantor
subsidiaries as of and for the years ended January 29, 2000 and January 30, 1999. Prior to February 1, 1998 the Company's debt was registered with Staples, Inc., which held the assets and operations
that guaranteed the related debt, therefore the consolidated financial statements represent those of Staples and separate disclosure is not necessary for the year ended January 31, 1998. The
non-guarantor subsidiaries represent more than an inconsequential portion of the consolidated assets and revenues of Staples. Separate complete financial statements of the respective Guarantors
Subsidiaries would not provide additional information which would be useful in assessing the financial condition of the Guarantor Subsidiaries and thus are not presented.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Condensed Consolidating Balance Sheet<BR>
As of January 29, 2000<BR>
(in thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="99%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Staples, Inc.<BR>
(Parent Co.)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Non-<BR>
Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Eliminations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Consolidated</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Cash, cash equivalents and short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>23,577</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>24,677</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>63,300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>111,554</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Merchandise inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(925</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,239,768</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>368,673</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,607,516</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Other current assets and Intercompany</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>661,540</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>453,174</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>553,570</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,193,903</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>474,381</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>684,192</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,717,619</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>985,543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,193,903</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,193,451</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Net property, equipment and other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>513,143</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>835,971</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,056,632</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(753,121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,652,625</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,197,335</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,553,590</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,042,175</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,947,024</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,846,076</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>66,199</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>762,233</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>347,062</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>279,410</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,454,904</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total long-term liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>300,908</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>238,961</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>22,490</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>562,359</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total stockholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>830,228</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,552,396</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,672,623</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,226,434</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,828,813</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total liabilities and stockholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,197,335</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,553,590</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,042,175</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,947,024</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,846,076</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-29</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=3,SEQ=91,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=221731,FOLIO=C-29,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->
<P ALIGN="CENTER"><FONT SIZE=2><B>Condensed Consolidating Balance Sheet<BR>
As of January 30, 1999<BR>
(in thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="99%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Staples, Inc.<BR>
(Parent Co.)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Non-<BR>
Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Eliminations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Consolidated</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Cash, cash equivalents and short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>219,426</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>16,348</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>139,647</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>375,421</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Merchandise inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(5,561</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,095,906</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>250,087</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,340,432</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Other current assets and Intercompany</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>780,629</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>396,920</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>552,395</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,381,697</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>348,247</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>994,494</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,509,174</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>942,129</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,381,697</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,064,100</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Net property, equipment and other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>271,129</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>710,049</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>362,178</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(228,190</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,115,166</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,265,623</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,219,223</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,304,307</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,609,887</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,179,266</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>86,206</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>830,728</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>266,789</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>81,609</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,265,332</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total long-term liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,581</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>237,128</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,339</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>257,048</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total stockholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,171,836</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,151,367</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,025,179</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,691,496</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,656,886</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%"><FONT SIZE=2>Total liabilities and stockholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,265,623</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,219,223</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,304,307</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,609,887</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,179,266</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-30</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=4,SEQ=92,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=662983,FOLIO=C-30,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->
<P ALIGN="CENTER"><FONT SIZE=2><B>Condensed Consolidated Statement of Income<BR>
For the year ended January 29, 2000<BR>
(in thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="96%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="40%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Staples, Inc.<BR>
(Parent Co.)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Non-<BR>
Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Consolidated</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,633,780</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,303,029</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,936,809</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Cost of goods sold and occupancy costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,152</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,999,326</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,721,085</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,721,563</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,152</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,634,454</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>581,944</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,215,246</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Operating and other expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>29,269</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,236,117</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>433,486</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,698,872</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Income before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(30,421</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>398,337</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>148,458</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>516,374</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(168,841</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,293</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(34,838</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(201,386</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>Net income/(loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(199,262</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>400,630</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>113,620</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>314,988</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2><B>Condensed Consolidated Statement of Income<BR>
For the year ended January 30, 1999<BR>
(in thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Staples, Inc.<BR>
(Parent Co.)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Non-<BR>
Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Consolidated</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,428,414</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,694,775</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,123,189</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Cost of goods sold and occupancy costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,477</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,110,968</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,284,478</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,396,923</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,477</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,317,446</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>410,297</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,726,266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Operating and other expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>30,096</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,075,613</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>314,296</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,420,005</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Income before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(31,573</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>241,833</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>96,001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>306,261</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>24,057</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(98,808</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(46,275</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(121,026</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Minority interest</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>135</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>135</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Net income/(loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(7,516</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>143,025</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>49,861</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>185,370</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-31</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=5,SEQ=93,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=112044,FOLIO=C-31,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->
<P ALIGN="CENTER"><FONT SIZE=2><B>Condensed Consolidated Statement of Cash Flows<BR>
For the year ended January 29, 2000<BR>
(in thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Staples, Inc.<BR>
(Parent Co.)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Non-<BR>
Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Consolidated</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Net cash (used in)/provided by operating activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(215,203</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>286,024</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>228,704</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>299,525</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Investing Activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Acquisition of property, equipment and<BR>
lease rights</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(38,216</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(277,695</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(39,719</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(355,630</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(23,780</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(229,620</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(253,400</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Cash used in by investing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(61,996</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(277,695</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(269,339</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(609,030</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Financing Activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Payments on borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,262,857</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(45,454</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,308,311</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,344,207</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>24,573</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,368,780</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Cash provided by/(used) in financing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>81,350</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(20,881</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>60,469</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Effect of exchange rate changes on cash</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,526</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,526</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Net (decrease) increase in cash</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(195,849</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,329</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(59,990</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(247,510</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Cash and cash equivalents at beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>219,426</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>16,348</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>122,219</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>357,993</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Cash and cash equivalents at end of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>23,577</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>24,677</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>62,229</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>110,483</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-32</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=6,SEQ=94,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=49732,FOLIO=C-32,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->
<P ALIGN="CENTER"><FONT SIZE=2><B>Condensed Consolidated Statement of Cash Flows<BR>
For the year ended January 30, 1999<BR>
(in thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Staples, Inc.<BR>
(Parent Co.)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Non-<BR>
Guarantor<BR>
Subsidiaries</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Consolidated</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Net cash (used in)/provided by operating activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(136,712</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>364,166</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>178,603</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>406,057</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Investing Activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Acquisition of property, equipment and lease rights</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(62,535</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(289,296</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(35,380</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(387,211</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>211,299</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(66,776</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(152,940</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(8,417</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Cash (used in)/provided by investing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>148,764</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(356,072</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(188,320</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(395,628</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Financing Activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Payments on borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(393,713</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(23,610</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(417,323</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>411,835</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(27,476</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>384,359</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Cash provided by/(used) in financing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>18,122</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(51,086</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(32,964</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Effect of exchange rate changes on cash</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(560</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(560</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Net (decrease) increase in cash</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>30,174</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,094</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(61,363</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(23,095</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Cash and cash equivalents at beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>189,252</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,253</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>183,583</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>381,088</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="38%"><FONT SIZE=2>Cash and cash equivalents at end of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>219,426</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>16,347</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>122,220</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>357,993</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-33</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=7,SEQ=95,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=602975,FOLIO=C-33,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->

<P><FONT SIZE=2><B>NOTE O&nbsp;Computation of Earnings per Common Share</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subsequent to the to the approval of the tracking stock proposal, the Company calculates earnings per share under the two class method. Accordingly, historical
earnings per share have been presented for the nine months ended October 30, 1999 for Staples, Inc. common stock and for the three months ended January 29, 2000 for Staples.com Stock and Staples RD
Stock. Pro forma earnings/(loss) per share has been calculated as though Staples RD Stock had existed for all periods presented, to give effect to the sale of Staples.com in private placements and
includes a provision for income taxes on untaxed earnings of pooled S-Corporation. (Amounts in thousands, except for per share data):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="32%" COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>13 Weeks Ended<BR>
January 29, 2000<BR></B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>39 Weeks Ended<BR>
October 30, 1999<BR>
Staples, Inc.</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Staples RD</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Staples.com</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Historical Earnings Per Share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Numerator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>195,591</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>120,127</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(730</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;<BR>
Denominator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>461,711,992</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>455,978,860</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>16,108,177</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>221,936</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,571</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Denominator for basic earnings per common share&#151;weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>461,933,928</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>455,991,431</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>16,108,177</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;<BR>
Effect of dilutive securities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Incremental and windfall shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>13,125,190</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>9,945,465</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,131,386</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Historical Earnings Per Share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Dilutive potential common shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>13,125,190</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>11,076,851</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Denominator for diluted earnings per common share&#151;adjusted weighted-average shares and assumed conversions</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>475,059,118</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>467,068,283</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>16,108,177</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Basic earnings/(loss) per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.42</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Diluted earnings/(loss) per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-34</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=8,SEQ=96,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=941063,FOLIO=C-34,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="36%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Staples, Inc.</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30, 1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31, 1998</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Historical Earnings Per Share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Numerator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>185,370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>167,914</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Effect of dilutive securities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>4<SUP>1</SUP>/<SMALL>2</SMALL>% convertible debentures(a)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7,451</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>9,365</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Numerator for diluted earnings per common share&#151;income available to common stockholders after assumed conversion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>192,821</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>177,279</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;<BR>
Denominator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>429,308,638</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>408,095,647</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,314</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,330</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Denominator for basic earnings per common share&#151;weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>429,310,952</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>408,097,977</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;<BR>
Effect of dilutive securities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Incremental and windfall shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12,648,979</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12,769,769</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>208,300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>209,592</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>4<SUP>1</SUP>/<SMALL>2</SMALL>% convertible debentures</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>25,856,165</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>30,681,819</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Dilutive potential common shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>38,713,444</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>43,661,180</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Denominator for diluted earnings per common share&#151;adjusted weighted-average shares and assumed conversions</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>468,024,396</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>451,759,157</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Basic earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.43</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Diluted earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.39</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-35</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=9,SEQ=97,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=83599,FOLIO=C-35,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="45%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31, 1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29, 2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30, 1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Pro forma Earnings Per Share&#151;Staples RD</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Numerator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Historical Net Income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>315,718</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>185,370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Pro forma provision for taxes on previously untaxed earnings of S-Corporation Income(b)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(1,814</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(14,786</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Adjustment for pro forma retained interest in Staples.com(c)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>356</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Pro forma net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>316,074</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>183,583</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>153,140</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Effect of dilutive securities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>4<SUP>1</SUP>/<SMALL>2</SMALL>% convertible debentures(a)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7,451</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>9,365</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Numerator for diluted earnings per common share&#151;pro forma income available to common stockholders after assumed conversion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>316,074</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>191,034</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>162,505</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Denominator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>460,278,709</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>429,308,638</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>408,095,647</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>169,595</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,314</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,330</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Pro forma Earnings Per Share&#151;Staples RD</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Denominator for basic pro forma earnings per common share&#151;weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>460,448,304</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>429,310,952</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>408,097,977</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;<BR>
Effect of dilutive securities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Incremental and windfall shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12,330,260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12,648,979</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12,769,769</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>282,846</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>208,300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>209,592</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>4<SUP>1</SUP>/<SMALL>2</SMALL>% convertible debentures</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>25,856,165</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>30,681,819</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Dilutive potential common shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12,613,106</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>38,713,444</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>43,661,180</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Denominator for diluted earnings per common share &#151;adjusted weighted-average shares and assumed conversion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>473,061,410</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>468,024,396</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>451,759,157</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Pro forma basic earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.69</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.43</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.38</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%"><FONT SIZE=2>Pro forma basic earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.67</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.36</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-36</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=10,SEQ=98,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=708685,FOLIO=C-36,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="87%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="46%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31, 1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29, 2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30, 1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Pro forma Earnings Per Share&#151;Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Numerator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Historical net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(16,358</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(487</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Pro forma provision for taxes on previously untaxed earnings of S-Corporation Income(b)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>120</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Adjustment for Staples RD's pro forma retained interest(c)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>15,272</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>448</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>168</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Pro forma net loss with S-Corporation conversion and pro forma adjustment for Staples RD's retained interest in Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1,086</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(12</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Denominator for basic net loss per common share&#151;weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>14,235,107</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12,792,308</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,792,308</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;<BR>
Denominator for diluted net loss per common share&#151;weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
14,235,107</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
12,792,308</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
12,792,308</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;<BR>
Pro forma basic net loss per common share with S-Corporation conversion and adjustment for Staples RD's retained interest in Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
(0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
(0.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
(0.00</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Pro forma diluted net loss per common share with S-Corporation conversion and adjustment for Staples RD's retained interest in Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(0.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(0.00</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>The
4<SUP>1</SUP>/<SMALL>2</SMALL>% Debentures were substantially converted into common stock on December 2, 1998 (see Note F). For the computation of earnings per common share, this
conversion of 30,674,276 shares is assumed to have occurred at the beginning of the fiscal year (February 1, 1998), and is included in the weighted-average shares outstanding for the year. Therefore,
the interest expense and amortization of deferred charges related to the 4<SUP>1</SUP>/<SMALL>2</SMALL>% Debentures incurred by Staples through December 2, 1998, net of tax, is added back to reported net income
to compute earnings per common share for the years ended January 30, 1999 and January 31, 1998.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>Pro
forma adjustment to reflect provision for income taxes on previously untaxed earnings of pooled S-Corporation.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(c)</FONT></DT><DD><FONT SIZE=2>Adjustment
to give effect to the sale of 12,792,308 shares of Staples.com Stock in a private placement. In presenting this pro forma information, this transaction was assumed to
have occurred on February&nbsp;2, 1997.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>C-37</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=11,SEQ=99,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=979928,FOLIO=C-37,FILE='DISK018:[00BOS8.00BOS1458]DZ1458A.;36',USER='MNAY',CD='10-MAR-2000;14:09 -->
<UL>
</UL>
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<BR>

<P><FONT SIZE=2><B>NOTE P&nbsp;Quarterly Summary (Unaudited)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="93%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>First<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Second<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Third<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fourth<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="LEFT"><FONT SIZE=1><B>Fiscal Year Ended January 29, 2000<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="49%" COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>(In thousands, except per share amounts)<BR></B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>2,072,066</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>1,840,110</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>2,393,811</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>2,630,822</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Gross Profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>494,753</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>454,559</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>594,247</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>671,687</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Historical net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>50,314</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>52,744</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>92,534</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>119,396</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Historical net income attributed to Staples RD Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>120,126</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Historical net loss attributed to Staples.com Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(730</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Pro forma net income attributed to Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>50,438</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>52,842</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>92,705</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>120,229</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Pro forma net loss attributed to Staples.com Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(124</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(98</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(171</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(833</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><I>Basic earnings/(loss) per common share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Historical net income per common share(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Historical net income per common share&#151;Staples RD Stock(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.26</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Historical net loss per common share&#151;Staples.com Stock(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.05</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Pro forma net income per common share&#151;Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.26</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Pro forma net loss per common share&#151;Staples.com Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.04</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><I>Diluted earnings/(loss) per share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Historical net income per common share(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Historical net income per common share&#151;Staples RD Stock(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.26</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Historical net loss per common share&#151;Staples.com Stock(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.05</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Pro forma net income per common share&#151;Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>0.26</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=1>Pro forma net loss per common share&#151;Staples.com Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(0.04</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<BR>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="95%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="41%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>First<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Second<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Third<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fourth<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="41%" ALIGN="LEFT"><FONT SIZE=1><B>Fiscal Year Ended January 30, 1999<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="53%" COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>(In thousands, except per share amounts)<BR></B></FONT><BR></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,670,611</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,475,705</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,899,770</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>2,077,103</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Gross Profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>388,015</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>354,925</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>475,913</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>538,534</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Historical net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>35,950</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>8,974</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>69,186</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>71,260</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(5)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Pro forma net income attributed to Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>34,138</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>8,977</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>69,192</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>71,277</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(5)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Pro forma net loss attributed to Staples.com Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(2</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(3</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(6</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(17</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><I>Basic earnings/(loss) per share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Historical net income per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.09</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.02</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.16</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.16</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(5)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Pro forma net income per common share&#151;Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.08</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.02</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.16</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.16</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(5)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Pro forma net loss per common share&#151;Staples.com Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>&nbsp;<BR></FONT> <FONT SIZE=1><I>Diluted earnings/(loss) per share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Historical net income per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.08</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(6)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.02</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.15</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(6)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.15</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(5)(6)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Pro forma net income per common share&#151;Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.08</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(6)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.02</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.15</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(6)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>0.15</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;(5)(6)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=1>Pro forma net loss per common share&#151;Staples.com Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Historical
earnings per share is omitted for the 4th Quarter of fiscal year ending January 29, 2000 for Staples Inc. as a result of the approval of the Tracking Stock Proposal which
changed Staples capital structure by creating Staples.com Stock and reclassifying Staples common stock as Staples RD Stock. In its place, historical earnings per share is presented for Staples RD
Stock and Staples.com Stock for this period.
<BR><BR></FONT></DD><DT><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Pro
forma information is calculated to give effect to the sale of 12,792,308 shares of Staples.com Stock in private placements. In presenting this pro forma information, those
transactions were assumed to have occurred on February&nbsp;2,&nbsp;1997.
<BR><BR></FONT></DD><DT><FONT SIZE=1>(3)</FONT></DT><DD><FONT SIZE=1>Net
income for the quarter ended August 1, 1998 includes a pre-tax charge of $41,000 resulting from costs incurred in connection with the merger with Quill Corporation.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>C-38</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=100,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=960938,FOLIO=C-38,FILE='DISK018:[00BOS8.00BOS1458]EB1458A.;21',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->
<UL>
</UL>
<DL compact>
<DT><FONT SIZE=1>(4)</FONT></DT><DD><FONT SIZE=1>Pro
forma net income includes the earnings of Quill with provision for income taxes on previously untaxed earnings of pooled S-Corporation income.
<BR><BR></FONT></DD><DT><FONT SIZE=1>(5)</FONT></DT><DD><FONT SIZE=1>Net
income for the quarter ended January 30, 1999 includes a pre-tax charge of $49,706 resulting from a store closure charge.
<BR><BR></FONT></DD><DT><FONT SIZE=1>(6)</FONT></DT><DD><FONT SIZE=1>Earnings
per share&#151;assuming dilution is calculated considering the $300 million of 4<SUP>1</SUP>/<SMALL>2</SMALL>% Convertible Subordinated Debentures as common stock equivalents
for the entire quarter.</FONT></DD></DL>
<BR>

<P><FONT SIZE=2><B>NOTE Q&nbsp;Subsequent Events</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In February 2000, Staples.com completed a 10% investment in BizBuyer.com of approximately $19,000,000. The investment will be accounted for on a cost basis as
it only represents an interest of no greater than 15% of the outstanding stock of BizBuyer.com and its fair value using readily available market data cannot be determined. BizBuyer.com is a leading
business-to-business marketplace where buyers and sellers connect to buy and sell products and services.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
February 18, 2000, Staples.com filed a registration statement for an initial public offering of shares of Staples.com Stock. It is intended that these shares will reflect the
performance of Staples.com, the e-commerce business of Staples, Inc.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
March&nbsp;3, 2000, Register.com, an investment recorded at cost by Staples, Inc. of approximately $8,000,000 at January&nbsp;29, 2000, completed an initial public offering of
its common stock. The closing stock price of Register.com on that date was $57.25 per share. At the date of the initial public offering, Staples owned approximately 2,160,000 shares of common stock,
and warrants to purchase approximately 1,640,000 additional shares, resulting in an unrealized gain of approximately $215,000,000. Staples accounts for its investment in Register.com in accordance
with SFAS&nbsp;115 and the resulting unrealized gain or loss resulting from fluctuations in the market price of Register.com would be recorded as a component of stockholders' equity.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-39</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=2,SEQ=101,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=310030,FOLIO=C-39,FILE='DISK018:[00BOS8.00BOS1458]EB1458A.;21',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->
<BR>
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>Report of Independent Auditors</B></FONT></P>

<P><FONT SIZE=2>Board
of Directors and Shareholders<BR>
Staples, Inc.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying combined balance sheets of the Staples Retail and Delivery (as described in Notes A and C) as of January 29, 2000 and January 30, 1999, and the
related combined statements of income, group equity, and cash flows for each of the three years in the period ended January&nbsp;29, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit 1997 financial statements of Quill Corporation, a wholly owned
subsidiary, which statements reflect 22% of net income of the Staples Retail and Delivery for the year ended January 31, 1998. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to data included in the Staples Retail and Delivery as it relates to Quill Corporation is based solely on the report of the other auditors.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits and the report of other auditors provide a reasonable basis for our opinion.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, based on our audits and, for 1997, the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial
position of the Staples Retail and Delivery at January 29, 2000 and January 30, 1999 and the results of its operations and its cash flows for each of the three years in the period ended January 29,
2000 in conformity with accounting principles generally accepted in the United States.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As
more fully described in Notes A and C to these financial statements, the Staples Retail and Delivery is a business group of Staples, Inc., accordingly, the combined financial
statements of Staples Retail and Delivery should be read in conjunction with the audited financial statements of Staples, Inc.</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="25%"><FONT SIZE=2>/s/ Ernst &amp; Young LLP</FONT><HR NOSHADE><FONT SIZE=2> ERNST &amp; YOUNG LLP<BR></FONT>
</TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<BR>

<P><FONT SIZE=2>Boston,
Massachusetts<BR>
March 3, 2000</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-40</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES RETAIL AND DELIVERY</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Combined Balance Sheets</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>ASSETS</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Current Assets:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>110,483</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>357,993</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,071</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>17,428</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Merchandise inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,607,516</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,340,432</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Receivables, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>360,901</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>221,836</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Deferred income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>39,730</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>75,261</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Prepaid expenses and other current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>72,172</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>50,117</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Total current assets</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,191,873</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,063,067</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Property and Equipment:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Land and buildings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>328,994</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>231,378</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Leasehold improvements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>442,119</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>372,451</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>533,771</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>399,153</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Furniture and fixtures</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>286,260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>239,755</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Total property and equipment</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,591,144</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,242,737</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Less accumulated depreciation and amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>508,810</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>403,462</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Net property and equipment</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,082,334</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>839,275</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Other Assets:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Retained interest in Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>16,254</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,962</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Lease acquisition costs, net of amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>68,832</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>75,127</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Goodwill, net of amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>387,595</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>148,201</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Deferred income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>34,912</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>28,735</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>31,769</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>22,814</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Total other assets</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>539,362</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>276,839</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,813,569</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,179,181</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>LIABILITIES AND GROUP EQUITY</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Current Liabilities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>897,523</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>794,427</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Inter-business payable to Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>23,600</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Accrued expenses and other current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>537,696</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>438,226</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Debt maturing within one year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>12,219</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>32,594</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Total current liabilities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,471,098</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,265,247</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Long-Term Debt</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>500,903</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>205,015</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Other Long-Term Obligations</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>61,456</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>52,033</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Group Equity</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,780,112</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,656,886</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,813,569</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,179,181</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See
notes to combined financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-41</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=103,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=329923,FOLIO=C-41,FILE='DISK018:[00BOS8.00BOS1458]EE1458A.;7',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES RETAIL AND DELIVERY</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Combined Statements of Income</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands, Except Share Data)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="92%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="52%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="45%" COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="52%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,842,460</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,106,303</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,728,439</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Cost of goods sold and occupancy costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,647,769</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,384,202</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,374,915</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><B>Gross profit</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,194,691</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,722,101</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,353,524</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Operating and other expenses:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Operating and selling</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,268,099</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>990,239</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>807,880</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Pre-opening</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>16,485</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,836</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,443</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>General and administrative</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>337,719</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>299,187</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>225,001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Amortization of goodwill</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,014</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,739</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,581</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Merger-related and integration costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>41,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>29,665</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Store closure charge</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>49,706</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Interest and other expense, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>17,183</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>17,342</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>21,947</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><B>Total operating and other expenses</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,651,500</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,415,049</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,097,517</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><B>Income before equity in loss of affiliates, retained interest and income taxes</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>543,191</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>307,052</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>256,007</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;<BR>
Equity in loss of affiliates</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
(5,953</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><B>Income before income taxes</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>543,191</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>307,052</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>250,054</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Income tax expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>211,845</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>121,330</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>81,924</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><B>Net income before minority interest</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>331,346</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>185,722</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>168,130</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Minority interest</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>135</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>84</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><B>Net income before retained interest in Staples.com</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>331,346</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>185,857</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>168,214</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Loss related to retained interest in Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(15,628</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(487</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><B>Net income</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>315,718</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>185,370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><I><U>Basic earnings per common share</U></I></FONT><FONT SIZE=2><BR>
Historical net income per common share for the 13 weeks ended January 29, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><I><U>Diluted earnings per common share</U></I></FONT><FONT SIZE=2><BR>
Historical net income per common share for the 13 weeks ended January 29, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><B>Pro forma earnings per common share for Staples RD Stock and S-Corporation conversion:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><B><I><U>Basic earnings per common share</U></I></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Pro forma historical net income per common share&#151;Staples RD Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.69</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.43</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2><B><I><U>Diluted earnings per common share</U></I></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="52%"><FONT SIZE=2>Pro forma historical net income per common share&#151;Staples RD Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.67</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.39</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See
notes to combined financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-42</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=104,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=724229,FOLIO=C-42,FILE='DISK018:[00BOS8.00BOS1458]EF1458A.;10',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES RETAIL AND DELIVERY</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Combined Statements of Group Equity</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands)</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>For the Fiscal Years Ended January 29, 2000, January 30, 1999,<BR>
and January 31, 1998</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="65%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Group<BR>
Equity</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Comprehensive<BR>
Income</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2><B>Balances at February 1, 1997</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>875,823</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>146,656</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Net income for the year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>167,914</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Cumulative translation adjustment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(10,168</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(10,168</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Unrealized gain (loss) on investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,036</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,036</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Issuance of common stock for stock options exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>32,183</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Tax benefit on exercise of options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>32,873</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Dividends to shareholders of acquired S-Corp</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(25,175</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Sale of common stock under Employee Stock Purchase Plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,499</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Issuance of Performance Accelerated Restricted Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,182</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Contribution of common stock to Employees' 401(k) Savings Plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,318</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2><B>Balances at January 31, 1998</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,094,485</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>158,782</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Net income for the year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>185,370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>185,370</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Cumulative translation adjustment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,360</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(1,360</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Unrealized gain (loss) on investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,049</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(1,049</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Issuance of common stock for conversion of debentures, net of interest and deferred charges</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>298,533</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Issuance of common stock for stock options exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>50,123</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Tax benefit on exercise of options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>74,157</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Dividends to shareholders of acquired S-Corp</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(15,904</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Purchase and retirement of S-Corp shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(48,102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Sale of common stock under Employee Stock Purchase Plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,210</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Issuance of Performance Accelerated Restricted Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,654</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Purchase of treasury shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(7,892</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Contribution of common stock to Employees' 401(k) Savings Plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,288</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Other equity changes, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,373</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2><B>Balances at January 30, 1999</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,656,886</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>182,961</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Net income for the year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>315,718</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>315,718</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Cumulative translation adjustment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,202</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7,202</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Unrealized gain (loss) on investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(51</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(51</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Issuance of common stock for stock options exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>27,735</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Tax benefit on exercise of options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>40,129</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Sale of common stock under Employee Stock Purchase Plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>21,990</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Issuance of Performance Accelerated Restricted Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>20,420</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Purchase of treasury shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(310,248</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Contribution of common stock to Employees' 401(k) Savings Plan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,544</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2>Other equity changes, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,213</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="65%"><FONT SIZE=2><B>Balances at January 29, 2000</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,780,112</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>322,869</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See notes to combined financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-43</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=105,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=895509,FOLIO=C-43,FILE='DISK018:[00BOS8.00BOS1458]EG1458A.;15',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES RETAIL AND DELIVERY</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Combined Statements of Cash Flows</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="90%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="39%" COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1><B>Operating Activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>315,718</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>185,370</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Adjustments to reconcile net income to net cash provided by (used in) operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Minority interest</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(135</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(84</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Retained interest in loss of Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>15,628</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>487</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Depreciation and amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>173,093</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>126,870</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>90,714</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Merger-related and integration costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>41,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>29,665</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Store closure charge</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>49,706</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Expense from 401K and PARS stock contribution</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>18,374</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>12,764</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>10,409</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Equity in loss of affiliates</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>5,953</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Deferred income taxes (benefit)/expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>29,265</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(55,569</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>3,877</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Change in assets and liabilities, net of companies acquired using purchase accounting:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Increase in merchandise inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(221,463</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(211,052</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(227,076</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Decrease (increase) in receivables</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(112,980</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(15,993</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>17,569</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Increase in prepaid expenses and other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(27,861</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(8,806</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(5,026</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Increase in accounts payable, accrued expenses and other current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>110,474</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>273,195</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>293,831</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Increase in other long-term obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>7,747</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>9,597</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>5,074</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(7,723</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>222,064</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>225,206</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1><B>Net cash provided by operating activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>307,995</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>407,434</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>393,120</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1><B>Investing Activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Acquisition of property and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(342,615</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(348,957</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(190,659</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Acquisition of businesses, net of cash acquired</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(244,021</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(13,500</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(79,325</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Proceeds from sales and maturities of short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>32,927</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>10,338</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>13,618</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Purchase of short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(16,651</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(22,913</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(4,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Proceeds from sales and maturities of long-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>18,995</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>265</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Purchase of long-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(2,545</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(5,714</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Capital contribution to Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(29,920</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(2,449</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Investment in affiliates</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(3,788</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Acquisition of lease rights</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(549</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(37,182</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(2,717</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(1,875</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,208</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(11,998</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1><B>Net cash used in investing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(602,704</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(397,005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(285,118</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1><B>Financing Activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Proceeds from sale of capital stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>46,503</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>63,996</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>48,043</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Proceeds from borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,589,779</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>392,261</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>965,921</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Payments on borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(1,308,311</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(417,323</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(830,018</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Purchase of dissenting shareholder S-Corporation stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(48,102</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Purchase of treasury stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(310,238</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(7,892</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Inter-business advance from Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>27,940</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Dividends to shareholders of acquired S-Corp.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(15,904</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(25,175</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1><B>Net cash (used in) provided by financing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>45,673</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(32,964</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>158,771</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Effect of exchange rate changes on cash</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>1,526</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(560</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(2,720</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1><B>Net decrease in cash and cash equivalents</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>(247,510</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(23,095</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>264,053</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1>Cash and cash equivalents at beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>357,993</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>381,088</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>117,035</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="57%"><FONT SIZE=1><B>Cash and cash equivalents at end of period</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=1>110,483</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>357,993</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>381,088</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See notes to combined financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-44</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=106,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=1009234,FOLIO=C-44,FILE='DISK018:[00BOS8.00BOS1458]EH1458A.;19',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES RETAIL AND DELIVERY</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>NOTES TO COMBINED FINANCIAL STATEMENTS</B></FONT></P>

<P><FONT SIZE=2><B>NOTE A&nbsp;&nbsp;Basis of Presentation</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;These combined financial statements and notes to combined financial statements of Staples Retail and Delivery ("Staples RD") should be read in conjunction with
the audited consolidated financial statements and Annual Report of Staples, Inc. ("Staples" or the "Company") and the audited combined financial information of Staples.com contained in this report.
The combined financial statements of Staples RD include the balance sheets, statements of income, cash flows and group equity of Staples' retail stores, catalog businesses and contract stationer
business. The Staples RD combined financial statements also include its retained interest in Staples.com, which was 88% and 100% at January 29, 2000 and January 30, 1999, respectively.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
November 9, 1999 the stockholders of Staples approved a proposal (the "Tracking Stock Proposal") which amended the Company's certificate of incorporation to (i) authorize the
issuance of a new series of common stock, designated as Staples.com common stock ("Staples.com Stock"), intended to reflect the performance of Staples.com, the Company's e-commerce business, (ii)
increase the aggregate number of shares of common stock that the Company may issue from 1,500,000,000 to 2,100,000,000, initially comprised of 1,500,000,000 shares of Staples Retail and Delivery
common stock ("Staples RD Stock") and 600,000,000 shares of Staples.com Stock, and (iii) re-classify Staples' existing common stock as Staples Stock, intended to reflect the performance of Staples RD,
which consists of all of the Company's other businesses and a retained interest in Staples.com.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During
the fiscal year ended January 29, 2000, Staples.com issued 12,792,308 shares of Staples.com Stock in private placements and 14,459,878 shares through the exercise of employee
stock options. Staples.com may issue additional shares of Staples.com Stock in one or more additional private or public financings. The specific terms of the financings, including the amount of
Staples.com Stock issued, and the timing of the financings, will depend upon factors such as stock market conditions and the performance of Staples.com. The effect of those financings on the retained
interest percentage and the outstanding interest percentage would depend upon the number of shares of Staples.com Stock sold and whether the Company elects to attribute the net proceeds of such
financings to the equity of Staples.com or to Staples RD in respect of its retained interest. The book value associated with Staples RD's retained interest in Staples.com will be increased
proportionately for net income (or decreased proportionately for net loss) of Staples.com.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
preparing separate financial statements for Staples RD and Staples.com, the Company has allocated, for financial reporting purposes, all of its consolidated assets, liabilities,
revenue, expenses and cash flows between Staples RD and Staples.com. Thus, the combined financial statements of Staples RD and Staples.com, taken together, comprise all of the accounts included in the
corresponding consolidated financial statements of Staples. Staples RD's combined financial statements reflect the application of certain cash management and allocation policies adopted by the Board
of Directors of Staples (the "Board"). These policies are summarized in Note C under "Corporate Activities". Staples RD's combined financial statements include the financial position, results of
operations, cash flows of Staples RD and the effects of its retained interest in Staples.com on the statements of income and balance sheets. These financial statements do not represent Staples primary
financial statement presentation.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Allocation
and related party transaction policies adopted by the Board can be rescinded or amended at the sole discretion of the Board without approval by the stockholders, although
no such changes are currently contemplated. Any such changes adopted by the Board would be made in its good faith business judgement of the Company's best interests, taking into consideration the
interests of all stockholders.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-45</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=107,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=438136,FOLIO=C-45,FILE='DISK018:[00BOS8.00BOS1458]EI1458A.;7',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Company now provides to the holders of both Staples RD Stock and Staples.com Stock separate financial statements, financial reviews, descriptions of the business, and other
relevant information for Staples RD and Staples.com, as well as consolidated financial information of the Company. Notwithstanding the allocation of assets and liabilities, including contingent
liabilities between Staples RD and Staples.com for the purposes of preparing their respective combined financial statements, this allocation and the change in the capital structure of the Company as a
result of the approval of the Tracking Stock Proposal did not result in the distribution or spin-off to stockholders of any of the Company's assets and liabilities and will not affect ownership of its
assets or responsibility for its liabilities or those of its subsidiaries. Holders of Staples RD Stock are common stockholders of the Company and, as such will be subject to the risks associated with
an investment in Staples and its businesses, assets and liabilities. The assets the Company attributes to one business are subject to the liabilities of the other business, even if such liabilities
arise from lawsuits, contracts or indebtedness attributed to the other business. If the Company is unable to satisfy one business's liabilities with the assets attributed to it, the Company may be
required to satisfy those liabilities with the assets the Company has attributed to the other business. Further, holders of Staples RD Stock and Staples.com Stock will not have any legal rights
related to specific assets of either business and in any liquidation will receive a fixed share of the net assets of the Company which may not reflect the actual trading prices, if any, of the
respective businesses at such time.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Financial
effects from one business that affect the Company's consolidated results of operations or financial condition could, if significant, affect the results of operations or
financial condition of Staples RD and the market price of Staples RD Stock. In addition, net losses of Staples.com and any dividends or distributions on, or repurchases of, Staples.com Stock or
repurchases of Staples.com Stock at a price per share greater than par value will reduce the funds we can pay on each class of common stock under Delaware Law. Accordingly, financial information for
Staples RD should be read in conjunction with the Annual Report on Form 10-K of Staples, Inc and the combined financial information of Staples.com contained this report.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Certain
previously reported amounts have been reclassified to conform with the current period presentation.</FONT></P>

<P><FONT SIZE=2><B>NOTE B&nbsp;&nbsp;Summary of Significant Accounting Policies</B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Nature of Operations:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD operates a chain of office supply stores and contract stationer/delivery warehouses
throughout North America and Europe. Staples.com is the business of Staples that sells product through web-based superstores and portals. Staples RD represents the other businesses of Staples,
including its retail stores, catalog businesses and contract stationer business.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Fiscal Year:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD's fiscal year is the 52 or 53 weeks ending the Saturday closest to January 31. Fiscal years
1999, 1998 and 1997 consisted of the 52 weeks ended January 29, 2000, January 30, 1999 and January 31, 1998, respectively. As more fully described in Note M, the statement of income for the fiscal
year ended January 31, 1998 combine Staples RD's historical operating results for that fiscal year with the corresponding Quill Corporation ("Quill") operating results for the calendar year ended
December 31, 1997. Accordingly, to conform for fiscal year 1998, an adjustment for Quill's operating results for January 1998 was made to group equity.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Use of Estimates:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The preparation of combined financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-46</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=2,SEQ=108,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=604758,FOLIO=C-46,FILE='DISK018:[00BOS8.00BOS1458]EI1458A.;7',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->

<P><FONT SIZE=2>amounts
reported in the combined financial statements and accompanying notes. Actual results could differ from those estimates.</FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Cash Equivalents:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD considers all highly liquid investments with an original maturity of three months or less
to be cash equivalents.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Short-Term Investments:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD's securities are classified as available for sale and consist principally of
high-grade state and municipal securities having an original maturity of more than three months. The investments are carried at fair value, with the unrealized holding gains and losses reported as a
component of Staples RD's equity. The cost of securities sold is based on the specific identification method. No individual issue in the portfolio constitutes greater than one percent of the total
assets of Staples RD.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Merchandise Inventories:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Merchandise inventories are valued at the lower of weighted-average cost or market.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Receivables:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Receivables relate principally to amounts due from vendors under various incentive and promotional
programs and trade receivables financed under regular commercial credit terms. Concentrations of credit risk with respect to trade receivables are limited due to Staples RD's large number of customers
and their dispersion across many industries and geographic regions.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Advertising:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD expenses the production costs of advertising the first time the advertising takes place, except
for the direct-response advertising, which is capitalized and amortized over its expected period of future benefits. Direct-response advertising consists primarily of the direct catalog production
costs. The capitalized costs of the advertising are amortized over the six month period following the publication of the catalog in which it appears. Direct catalog production costs included in
prepaid and other assets totaled $16,133,000 at January 29, 2000 and $9,854,000 at January 30, 1999. Total advertising and marketing expense was $429,384,000, $355,333,000, and $288,341,000 for the
years ended January 29, 2000, January 30, 1999, and January 31, 1998, respectively.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Property and Equipment:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Property and equipment are recorded at cost. Depreciation and amortization, which includes the
amortization of assets recorded under capital lease obligations, are provided using the straight-line method over the estimated useful lives of the assets or the terms of the respective leases.
Depreciation and amortization periods are as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Buildings</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=2>40 years</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Leasehold improvements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=2>10 years or term of lease</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Furniture and fixtures</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=2>5 to 10 years</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="29%"><FONT SIZE=2>3 to 10 years</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Lease Acquisition Costs:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Lease acquisition costs are recorded at cost and amortized on the straight-line method over
the respective lease terms, including option renewal periods if renewal of the lease is probable, which range from 5 to 40 years. Accumulated amortization at January 29, 2000 and January 30, 1999
totaled $28,729,000 and $24,674,000, respectively.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Retained Interest in Staples.com:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD had an 88% and 100% retained interest in Staples.com at January 29, 2000
and January 30, 1999, respectively. During the fiscal year ended January 29, 2000,</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-47</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>Staples.com
issued 12,792,308 shares of Staples.com Stock in private placements and 14,459,878 shares through the exercise of employee stock options. Staples.com may issue additional shares of
Staples.com Stock in one or more additional private or public financings. The specific terms of the financings, including the amount of Staples.com Stock issued, and the timing of the financings, will
depend upon factors such as stock market conditions and the performance of Staples.com. The effect of the financings on the retained interest percentage and the outstanding interest percentage would
depend upon the number of shares of Staples.com Stock sold and whether the Company elects to attribute the net proceeds of such financings to the equity of Staples.com or to Staples RD in respect of
its retained interest. The book value associated with Staples RD's retained interest in Staples.com will be increased proportionately for net income (or decreased proportionately for net loss) of
Staples.com</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD accounts for its investment in Staples.com in a manner similar to the method prescribed under APB No. 18, "The Equity Method of Accounting for Investments in Common Stock".
For the
purposes of these separate group financial statements, Staples RD's interest in the equity and net income or loss of Staples.com has been included in Staples RD's balance sheets and statements of
income as "retained interest in Staples.com." The amount included in the balance sheets and statements of income as retained interest in Staples.com represents Staples RD's proportional interest in
the assets and liabilities and revenue and expenses of Staples.com. The carrying value of Staples RD's retained interest in Staples.com is increased or decreased by Staples RD's proportional interest
in the net income or loss of Staples.com. Additionally, if dividends or other distributions are made on Staples.com Stock, including deemed dividends in respect of Staples RD's retained interest in
Staples.com, an amount representing Staples RD's proportional interest in such distributions would be transferred to Staples RD from Staples.com and would reduce the book value of Staples RD's
retained interest in Staples.com.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Goodwill:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Goodwill arising from business acquisitions is amortized on a straight-line basis over periods ranging from
20 to 40 years. Accumulated amortization was $25,066,000 and $13,053,000 as of January 29, 2000 and January 30, 1999, respectively. Management periodically evaluates the recoverability of goodwill,
which would be adjusted for a permanent decline in value, if any, as measured by the recoverability from projected future cash flows from the acquired businesses.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Pre-opening Costs:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Pre-opening costs, which consist primarily of salaries, supplies, marketing and occupancy costs, are
charged to expense as incurred.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Private Label Credit Card Receivables:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD offers a private label credit card which is managed by a financial
services company. Under the terms of the agreement, Staples RD is obligated to pay fees which approximate the financial institution's cost of processing and collecting the receivables, which are
primarily non-recourse to Staples RD.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Foreign Currency Translation:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The assets and liabilities of Staples RD's foreign subsidiaries, The Business Depot Ltd.
("Business Depot"), Staples UK, Staples Germany, Sigma Burowelt in Germany and Office Centre in the Netherlands and Portugal are translated into U.S. dollars at current exchange rates as of the
balance sheet date, and revenues and expenses are translated at average monthly exchange rates. The resulting translation adjustments, and the net exchange gains and losses resulting from the
translation of investments in Staples RD's foreign subsidiaries during the years ended January 29, 2000, January 30, 1999 and January 31, 1998 are recorded as a separate component of group equity.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-48</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Stock Option Plans:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The Company has adopted Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123"). As permitted by FAS 123, the Company continues to account for its stock-based plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and provides pro forma disclosures of the compensation expense determined under the fair value provisions of FAS 123.</FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Earnings Per Share:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD calculates earnings per share in accordance with Statement of Financial Accounting
Standards No. 128 "Earnings per Share" ("FAS 128") which requires disclosure of basic and diluted earnings per share. Historical earnings per share for Staples RD Stock is presented for periods
subsequent to the approval of the Tracking Stock Proposal, since Staples RD Stock was not
previously part of the capital structure of the Company. Basic earnings per share for Staples RD Stock is computed by dividing the net earnings of Staples RD, including Staples RD's retained interest
in the net losses of Staples.com, by the weighted average number of shares of Staples RD Stock. Diluted earnings per share includes the effects of applying the treasury stock method to outstanding
stock options, performance accelerated restricted stock ("PARS") and derivative instruments when dilutive. Pro forma earnings per share has been calculated as though Staples RD Stock existed for all
periods presented and to give effect to the sale of 12,792,308 shares of Staples.com Stock in the private placements. In presenting this pro forma information this transaction was assumed to have
occurred on February 2, 1997. In addition the pro forma information includes a provision for income taxes on previously untaxed earnings of pooled S-Corporation.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Revenue Recognition:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Revenue from retail operations is recognized at the point of sale. Staples RD allows for
merchandise to be returned under most circumstances. Staples RD does not provide a reserve for estimated returns, as the amount does not have a material impact on the financial statements. Sales to
delivery customers are considered final upon acceptance of delivery, however, the Staples RD does allow merchandise returns under certain circumstances. Staples RD does not provide a reserve for
estimated returns on these sales as such returns are infrequent and the amount does not have a material impact on the financial statements.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Fair Value of Financial Instruments:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Pursuant to Statement of Financial Accounting Standards No. 107, "Disclosure About
Fair Value of Financial Instruments" ("FAS 107"), Staples RD has estimated the fair value of its financial instruments using the following methods and assumptions:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>The
carrying amount of cash and cash equivalents, receivables and accounts payable approximates fair value;
<BR><BR></FONT></DD><DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>The
fair values of short-term investments is based on quoted market prices;
<BR><BR></FONT></DD><DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>The
carrying amounts of Staples RD's debt approximates fair value, estimated by discounted cash flow analyses based on Staples RD's current incremental borrowing rates for similar
types of borrowing arrangements.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Long-Lived Assets:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of" ("FAS 121"), which requires impairment losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flow estimated to be generated by those assets are less than the assets' carrying amount. Staples RD's policy is to evaluate long-lived assets for
impairment at a store level.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-49</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Interest Rate and Currency Swap Agreements:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD uses interest rate and currency swap agreements for purposes
other than trading and they are treated as off-balance sheet items. Staples RD uses interest rate swap agreements to modify fixed rate obligations to variable rate obligations, thereby adjusting the
interest rates to current market rates and ensuring that the debt instruments are always reflected at fair value.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;New Accounting Standards:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The new standard requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives will be reported in the statement of operations or as a deferred item, depending on the use of the derivatives and whether they qualify for
hedge accounting. The key criterion for hedge accounting is that the derivative must be highly effective in achieving offsetting changes in fair value or cash flows of the hedged items during the term
of the hedge. The effective date of SFAS No. 133 was delayed to fiscal 2001 by the issuance of SFAS No. 137 "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date
to FASB Statement No. 133-an amendment of FASB Statement 133". The Company has not yet determined the effect, if any, of adopting this new standard.</FONT></P>

<P><FONT SIZE=2><B>NOTE C&nbsp;&nbsp;Corporate Activities</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD's financial statements reflect the application of the management and allocation policies adopted by the Board to various corporate activities, as
described below:</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Cash Management and Allocation Policies:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In order to prepare separate financial statements for Staples RD and
Staples.com, Staples has allocated, for financial reporting purposes, all of its consolidated assets, liabilities, revenue, expenses and cash flow between Staples RD and Staples.com. Thus, the
financial statements of Staples RD and Staples.com, taken together, comprise all of the accounts included in the corresponding financial statements of Staples. The financial statements of Staples RD
and Staples.com reflect the application of cash management and allocation policies adopted by the Board. These policies are summarized below. The Board may, in its sole discretion, modify, rescind or
add to any of these policies, although it has no present intention to do so. The decision of the Board to modify, rescind or add to any of these policies would, however, be subject to the Board's
general fiduciary duties. Even though Staples has allocated all of its consolidated assets, liabilities, revenue, expenses and cash flow between Staples RD and Staples.com, holders of Staples.com
stock will be common stockholders of Staples and, as such, will be subject to all risks associated with an investment in Staples and all of its businesses, assets and liabilities.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Finance Activities:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples manages most finance activities on a centralized, consolidated basis. These activities
include the investment of surplus cash, the issuance, repayment and repurchase of short-term and long-term debt, and the issuance and repurchase of common stock. Staples.com generally remits its cash
receipts to Staples RD, but is not obligated to do so, and Staples RD generally funds Staples.com's cash disbursements on a regular basis, but is not obligated to do so.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-50</FONT></P>

<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
the combined financial statements of Staples RD and combined financial statements of Staples.com:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>all
equity transactions, and the proceeds thereof, were attributed to the business whose stock was affected.;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whenever
Staples.com held cash, that cash was transferred to Staples RD and accounted for as an inter-business revolving credit advance; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whenever
Staples.com had a cash need, that cash need was funded by Staples RD and accounted for as an inter-business revolving credit advance. The
inter-business revolving credit arrangement bears interest at a rate at which the Board, in its sole discretion, determines Staples could borrow such funds on a revolving credit basis, which was 6%
for the fiscal years 1997, 1998 and 1999. The Board, at its sole discretion, may elect an alternative financing mechanism between Staples RD and Staples.com based upon the facts and circumstances. The
Board has adopted the following additional policies related to the Staples.com stock:
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Staples
will attribute each future incurrence or issuance of external debt or preferred stock, and the proceeds thereof, to Staples RD, unless the Board
determines otherwise. The Board may, but is not required to, attribute an incurrence or issuance of debt or preferred stock, and the proceeds thereof, to Staples.com to the extent that Staples incurs
or issues the debt or preferred stock for the benefit of Staples.com.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Staples
will attribute each future issuance of Staples RD Stock, and the proceeds thereof, to Staples RD. Staples may attribute any future issuance of
Staples.com Stock, and the proceeds thereof, to Staples RD in respect of its Retained Interest in Staples.com, in a manner analogous to a secondary offering of common stock of a subsidiary owned by a
corporate parent, or to Staples.com, in a manner analogous to a primary offering of common stock. Dividends on and repurchases of Staples RD Stock will be charged against Staples RD, and dividends on
and repurchases of Staples.com Stock will be charged against Staples.com. In addition, at the time of any dividend on Staples.com stock, Staples will credit to Staples RD, and charge against
Staples.com, a corresponding amount in respect of Staples RD's retained interest in Staples.com.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Staples
will account for all cash transfers from one business to or for the account of the other business (other than transfers in return for assets or
services rendered or transfers inrespect of Staples RD's retained interest that correspond to dividends paid on Staples.com stock), as inter-business revolving credit advances unless:
<BR><BR></FONT>
<UL>
<DL compact>
<DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>the
Board determines that a given transfer, or type of transfer, should be accounted for as a long-term loan;
<BR><BR></FONT></DD><DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>the
Board determines that a given transfer, or type of transfer, should be accounted for as a capital contribution increasing Staples RD's retained interest in Staples.com; or
<BR><BR></FONT></DD><DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>the
Board determines that a given transfer, or type of transfer, should be accounted for as a return of capital reducing Staples RD's retained interest in Staples.com.</FONT></DD></DL>
</UL>
</DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;There
are no specific criteria to determine when Staples will account for a cash transfer as a long-term loan, a capital contribution or a return of capital rather than an
inter-business revolving credit advance.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-51</FONT></P>


<P><FONT SIZE=2><HR
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<P><FONT SIZE=2>The
Board would make such a determination in the exercise of its business judgment at the time of
such transfer, or the first of such type of transfer, based upon all relevant circumstances. Factors the Board would consider include:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>the
current and projected capital structure of each business;
<BR><BR></FONT></DD><DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>the
relative levels of internally generated funds of each business;
<BR><BR></FONT></DD><DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>the
financing needs and objectives of the recipient business;
<BR><BR></FONT></DD><DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>the
investment objectives of the transferring business;
<BR><BR></FONT></DD><DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>the
availability, cost and time associated with alternative financing sources; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>-</FONT></DT><DD><FONT SIZE=2>prevailing
interest rates and general economic conditions.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Any
cash transfer accounted for as an inter-business revolving credit advance will bear interest at the rate at which the Board, in its sole discretion,
determines Staples could borrow such funds on a revolving credit basis. Any cash transfer accounted for as a long-term loan will have interest rate, amortization, maturity, redemption and other terms
that generally reflect the then prevailing terms on which the Board, in its sole discretion, determines Staples could borrow such funds.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Any
cash transfer from Staples RD to Staples.com, or for Staples.com's account, accounted for as a capital contribution will correspondingly increase
Staples.com's group equity and Staples RD's Retained Interest in Staples.com. As a result, the Number of Shares Issuable with Respect to Staples RD's Retained Interest in Staples.com will increase by
the amount of such capital contribution divided by the Market Value of Staples.com stock on the date of transfer.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Any
cash transfer from Staples.com to Staples RD, or for Staples RD's account, accounted for as a return of capital will correspondingly reduce
Staples.com's group equity and Staples RD's Retained Interest in Staples.com. As a result, the Number of Shares Issuable with Respect to Staples RD's Retained Interest in Staples.com will decrease by
the amount of such return of capital divided by the Market Value of Staples.com stock on the date of transfer.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Through
the quarter ending October 30, 1999, fixed asset and investment purchases have been treated as capital contributions from Staples RD. Also, operating cash flow losses in 1999
were funded by Staples RD as an inter-business payable and has been offset by the proceeds received from the issuance of Staples.com Stock, which was distributed to Staples RD. Operating cash flow
losses and fixed asset and investment purchases subsequent to October 30, 1999 were absorbed by Staples.com.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Shared Services and Support Activities:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The cost of services shared by Staples RD and Staples.com, including general
and administrative expenses, has been allocated between Staples RD and Staples.com based upon the use of such services and the good faith judgement of the Board or Staples' management. Where
determinations based on use alone were not practical, other methods and criteria were used to provide a reasonable allocation of the cost of shared services, including support activities attributable
between Staples RD or Staples.com. Such allocated shared services represent, among other
things, financial and accounting services, information system services, certain selling and marketing activities, certain merchandising and replenishment services, transportation and warehouse
management services, certain customer service activities, executive management, human resources, legal and corporate planning activities. For example, for printed advertisements and commercials that
include both Staples RD and</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-52</FONT></P>


<P><FONT SIZE=2><HR
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<BR>

<P><FONT SIZE=2>Staples.com,
we currently reimburse Staples RD for that amount of space or air time devoted to Staples.com, plus a proportionate part of the total cost of the rest of the advertisements or commercials
based on varying metrics, such as the relative sales of Staples RD and Staples.com.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Taxes:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Federal income taxes, which are determined on a consolidated basis, are allocated between the businesses of
Staples RD and Staples.com, and reflected in their respective financial statements, in accordance with Staples' tax allocation policy. In general, this policy provides that the consolidated tax
provision, deferred tax accounts and related tax payments or refunds, are allocated between Staples RD and Staples.com based principally upon the financial income, taxable income, credits and other
amounts directly related to their respective businesses. Tax benefits that cannot be used by the business generating such attributes, but can be utilized on a consolidated basis, are allocated to the
business that generated such benefits. As a result, the allocated business amounts of taxes payable or refundable are not necessarily comparable to those that would have resulted if Staples RD and
Staples.com had filed separate tax returns. State income taxes generally are computed on a separate business basis.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Carrying Charge:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD sells inventory to Staples.com for resale. The cost per inventory unit purchased by
Staples.com equals Staples RD's product cost. Staples RD maintains inventory to support Staples.com's inventory needs and the processing of receivables for Staples.com. Staples RD charges Staples.com
a carrying charge for use of their capital for these purposes as determined by the Board. The carrying charge is reflected in Staples.com's financial statements as part of operating and selling
expenses and in Staples RD's financial statements as a credit to operating and selling expenses. This charge is calculated based on the amount of receivables and inventory that Staples RD is required
to carry for Staples.com. In addition, inventory, shrink, obsolescence and other inventory costs are allocated to Staples.com based on Staples.com's share of such costs. The Board may, in its sole
discretion, change the carrying charge charged to Staples.com as it deems appropriate in light of the circumstances from time to time.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Employee Benefits:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD and Staples.com participate in the following Staples employee benefit plans: an Employee
Stock Purchase Plan, an Employee 401(k) Savings Plan, a Supplemental Executive Retirement Plan and a contributory Medical and Dental Plan. The costs of these plans are allocated based on the benefits
received under the plans by the employees comprising Staples RD and Staples.com or such other basis as Staples' management believes to be an equitable and reasonable estimate of such costs.</FONT></P>

<P><FONT SIZE=2><B>NOTE D&nbsp;&nbsp;Related Party Transactions</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD sells inventory to Staples.com based on Staples RD's product cost. Staples RD does not include these transactions in its reported sales. Inventory
purchased by Staples.com totaled $62,706,000, $10,796,000, and $2,364,000 for the fiscal years ended January 29, 2000, January 30, 1999 and January 31, 1998, respectively. Had these sales been
included in Staples RD's combined financial statements, Staples RD would have reported sales of $8,905,166,000, $7,117,099,000, and $5,730,803,000, and gross profit of 24.6%, 24.2% and 23.6% for the
fiscal years ended January 29, 2000, January 30, 1999 and January 31, 1998, respectively.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-53</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>

<P><FONT SIZE=2><B>NOTE E&nbsp;&nbsp;Investments</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of available-for-sale investments as of January 29, 2000 and January 30, 1999 (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="53%" ALIGN="LEFT"><FONT SIZE=1><B>January 29, 2000<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized<BR>
Gains</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized<BR>
Losses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Estimated<BR>
Fair Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>Short-term:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>Agency Bonds</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,143</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(72</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,071</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>Total short-term</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,143</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(72</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,071</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<BR>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=1><B>January 30, 1999<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized<BR>
Gains</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized<BR>
Losses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Estimated<BR>
Fair Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Short-term:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Municipal obligations</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>10,515</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10,561</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Agency Bonds</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6,902</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(42</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,867</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Total short-term</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>17,417</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>53</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(42</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>17,428</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Proceeds
from the sale of investment securities were $16,651,000 and $14,599,000 during the years ended January 29, 2000 and January 30, 1999, respectively. Other reductions in the
cost balance resulted from maturities of securities. The net adjustment to unrealized holding gains and losses on available-for-sale investments included as a separate component of group equity
totaled ($51,000), ($1,049,000) and $1,036,000 for the years ended January 29, 2000, January 30, 1999 and January 31, 1998, respectively.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
amortized cost and estimated fair value of debt securities at January 29, 2000, by contractual maturity, are shown below. Expected maturities will differ from contractual
maturities because the issuers of securities may have the right to prepay obligations without prepayment penalties.</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="73%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Estimated<BR>
Fair Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Due in one year or less</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,143</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,071</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2><B>NOTE F&nbsp;&nbsp;Accrued Liabilities</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities consist of the following (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>124,069</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>114,179</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Acquisition and store closure reserves</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>103,978</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>91,484</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Employee related</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>100,918</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>88,551</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Advertising and direct marketing</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>38,804</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>30,458</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>169,927</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>113,554</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>537,696</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>438,226</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-54</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=116,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=683418,FOLIO=C-54,FILE='DISK018:[00BOS8.00BOS1458]EJ1458A.;16',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->

<P><FONT SIZE=2><B>NOTE G&nbsp;&nbsp;Long-Term Debt and Credit Agreement</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples manages most financial activities on a centralized basis. Such financial activities include the issuance and repayment of short-term and long-term
debt. Staples currently attributes each incurrence or issuance of external debt, and the proceeds thereof, to Staples RD and will continue to do so in the future unless the Board determines otherwise.
The Board may, but is not required to, attribute an incurrence or issuance of debt, and the proceeds thereof, to Staples.com at a current incremental borrowing rate of 6%, to the extent that Staples
incurs or issues the debt for the benefit of Staples.com.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Long-term
debt on the books of Staples RD consists of the following (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>Senior notes with a fixed rate of 7.125%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>200,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>200,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>Lines of credit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>150,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>29,849</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>Euro notes with a fixed rate of 5.875%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>148,185</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>Capital lease obligations and other notes payable in monthly installments with effective interest rates from 4% to 16%; collateralized by the related equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>14,937</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,760</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>513,122</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>237,609</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>Less current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,219</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>32,594</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>500,903</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>205,015</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Aggregate
annual maturities of long-term debt and capital lease obligations are as follows (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="82%" ALIGN="LEFT"><FONT SIZE=1><B>Fiscal year:<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>12,219</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>391</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>228</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>148,196</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>Thereafter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>352,078</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>513,122</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Included
in property and equipment are capital lease obligations for equipment recorded at the net present value of the minimum lease payments of $10,995,000. Future minimum lease
payments of $1,226,000, excluding $112,000 of interest, are included in aggregate annual maturities shown above. Staples RD did not enter into any new capital lease agreements during the fiscal years
ended January 29, 2000 and January 30, 1999.</FONT></P>

<P><FONT SIZE=2>Senior Notes:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD issued $200,000,000 of senior notes (the "Notes") on August 12, 1997 with an interest rate of 7.125% payable semi-annually on February 15 and August 15 of each year
commencing on February 15, 1998. The Notes are due August 15, 2007. Net proceeds of approximately $198,000,000 from the sale of Staples RD's Notes were used for repayment of indebtedness under Staples
RD's revolving credit facility</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-55</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>and
for general working capital purposes, including the financing of new store openings, distribution facilities and corporate offices.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
May 11, 1999 and August 3, 1999, Staples RD entered into interest rate swaps, each for an aggregate notional amount of $100,000,000, in order to minimize financing costs associated
with the Notes. The swap agreements are both scheduled to terminate on August 15, 2007. Under the interest rate swap agreements, Staples RD is entitled to receive semi-annual interest payments at a
fixed rate of approximately 7.125% and is obligated to pay interest based on a 30 day Non-Financial U.S. Commercial Paper Rate of 5.69% plus a fixed basis point adjustment at January 29, 2000. Staples
RD has designated its $200,000,000 of senior notes and its interest rate swap agreements to be an integrated transaction. Accordingly, the interest rate swaps are being accounted for as a hedge and
the differential to be paid or received on the interest rate swap agreements is accrued and recognized as an adjustment to interest rate expense over the life of the agreements.</FONT></P>


<P><FONT SIZE=2>Credit Agreements:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Effective
November 13, 1997, Staples RD entered into a revolving credit facility, effective through November 2002, with a syndicate of banks, which provides up to $350,000,000 of
borrowings. Borrowings made pursuant to this facility will bear interest at either the lead bank's prime rate, the federal funds rate plus 0.50%, the LIBOR rate plus a percentage spread based upon
certain defined ratios, a competitive bid rate, or a swing line loan rate, approximately 5.9% at January 29, 2000. This agreement, among other conditions, contains certain restrictive covenants,
including net worth maintenance, minimum fixed charge interest coverage and limitations on indebtedness and sales of assets. As of January 29, 2000, $150,000,000 was outstanding under the revolving
credit facility. Staples RD also has available $35,000,000 in uncommitted, short-term bank credit lines, of which no borrowings were outstanding as of January 29, 2000. Staples UK has a $48,600,000
line of credit which had an outstanding balance of $4,500,000 at January 29, 2000. Staples Germany has a $19,900,000 line of credit, Office Centre Netherlands has a $6,600,000 line of credit, Office
Centre Portugal has a $500,000 line of credit and The Business Depot has a $6,900,000 line of credit, all with no outstanding balances at January 29, 2000.</FONT></P>

<P><FONT SIZE=2>Euro Notes:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD issued notes in the aggregate principal amount of 150,000,000 euro on November 15,1999. Net proceeds of approximately $148,000,000 were used fund international expansion.
These notes bear interest at a rate of 5.875% per annum and are due on November 15, 2004. These notes have been designated as a foreign currency hedge on our net foreign investments in Europe and
gains or losses are recorded in the cumulative translation adjustment line in Stockholders' Equity.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Also
on November 15, 1999 Staples RD entered into an interest rate swap for an aggregate notional amount of 150,000,000 euros in order to minimize financing costs on the notes issued
the same date. The swap agreement is scheduled to terminate on November 15, 2004. Under the interest rate swap agreement, Staples RD is entitled to receive annual interest payments at a fixed rate of
approximately
5.875% and is required to make quarterly interest payments at a floating rate of the one month EURIBOR plus 1.1175%, currently approximately 4.2455%. Staples RD has designated its 150,000,000 euro
notes and its interest rate swap agreement to be an integrated transaction. Accordingly, the interest rate swap agreement is being accounted for as a 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.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-56</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest
paid by Staples RD totaled $18,937,000, $29,600,000 and $23,012,000 for the fiscal years ended January 29, 2000, January 30, 1999, and January 31, 1998, respectively.
Capitalized interest totaled $433,000, $2,254,000 and $1,387,000 in the years ended January 29, 2000, January 30, 1999 and January 31, 1998, respectively.</FONT></P>

<P><FONT SIZE=2><B>NOTE H&nbsp;&nbsp;Convertible Debentures</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On October 5, 1995, Staples RD issued $300,000,000 of 4<SUP>1</SUP>/<SMALL>2</SMALL>% Convertible Subordinated Debentures due October 1, 2000 with interest payable
semi-annually (the "4<SUP>1</SUP>/<SMALL>2</SMALL>% Debentures"). During fiscal 1998, $299,995,000 of Staples RD's $300,000,000 of 4<SUP>1</SUP>/<SMALL>2</SMALL>% Debentures were converted into an aggregate of 30,674,276
shares of common stock at a conversion price of $9.78 per share. The remaining $5,000 were called at par value plus a premium of 1.8% and accrued interest. The total principal amount converted was
credited to common stock and additional paid-in capital, net of unamortized expenses of the original debt issue and accrued but unpaid interest.</FONT></P>

<P><FONT SIZE=2><B>NOTE I&nbsp;&nbsp;Group Equity</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On November 9, 1999, the stockholders of Staples approved the Tracking Stock Proposal which reclassified Staples existing common stock as Staples RD Stock,
intended to reflect the performance of Staples RD and its retained interest in Staples.com, and created a new class of stock called Staples.com Stock intended to reflect the performance of Staples'
e-commerce business. Additional shares may be issued from time to time upon exercise of stock options or at the discretion of the Board. The approval of the Tracking Stock Proposal increased the
number of authorized shares to 2,100,000,000 shares of common stock, initially comprised of 1,500,000,000 shares of Staples RD Stock and 600,000,000 shares of Staples.com Stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;With
the approval of the Tracking Stock Proposal, if Staples disposes of all or substantially all of the assets of Staples RD or Staples.com, and the disposition is not an exempt
disposition, Staples would be required to pay a mandatory dividend to the holders of that series of stock, redeem outstanding shares of that series of stock equal to their proportionate interest in
the net proceeds of the disposition or exchange shares of that series of stock for shares of the other series at a 10% premium. At any time within one year after completing a special dividend or
partial redemption, Staples will have the right to issue shares of the other series of stock, at a 10% premium, in exchange for the remaining shares of the series of stock which received the dividend
or was partially redeemed.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
will have the right, at any time, to issue shares of one series of stock in exchange for the other at a premium that will initially be 25% and will decline ratably each
quarter over a period of three
years to 15%. Notwithstanding these exchange provisions, in the event that certain adverse tax law changes were to take place, Staples will have the right to issue shares of either series of common
stock in exchange for outstanding shares of the other series of common stock at a 10% premium, regardless of when such adverse tax law changes take place. In addition, Staples will have the right, at
any time Staples.com Stock exceeds the 40% of Total Market Capitalization Threshold but is below the 60% of Total Market Capitalization Threshold, to issue shares of either series of common stock in
exchange for outstanding shares of the other series of common stock on a value for value basis. The exchange ratio that will result in the specified premium or value for value exchange will be
calculated based on a comparison of the average market values of the two series of common stock during the 20 consecutive trading day period ending on, and including, the 5<SUP>th</SUP> trading day
immediately preceding the date on which Staples mails the notice of</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-57</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>

<P><FONT SIZE=2>exchange
to holders of the outstanding shares being exchanged. Staples will have the right at any time to transfer all of the assets and liabilities of on or both series of stock to a subsidiary and
deliver all of the stock of that subsidiary in exchange for all of the outstanding stock of that series of stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon
liquidation of Staples, holders of Staples RD Stock and Staples.com Stock will be entitled to receive the net assets of Staples, if any, available for distribution to
stockholders. Amounts due upon liquidation in respect of shares of Staples RD Stock and shares of Staples.com Stock will be distributed pro rata in accordance with the average market value of Staples
RD Stock and Staples.com Stock over a 20-Trading Day period ending 300 days after the implementation of the Tracking Stock Proposal. In the absence of a public trading market for Staples.com Stock,
market value would be determined in good faith by the Board.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
November 12, 1998, December 30, 1997, March 5, 1996 and June 29, 1995, the Board approved three-for-two splits of Staples Stock to be effected in the form of 50% stock dividends.
The dividends were distributed on January 28, 1999 to shareholders of record as of January 18, 1999, January 30, 1998 to shareholders of record as of January 20, 1998, March 25, 1996 to shareholders
of record as of March 15, 1996 and July 24, 1995 to shareholders of record as of July 14, 1995, respectively.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
March 4, 1999, the Board approved a stock repurchase program intended to provide shares for employee stock programs. During the fiscal year 1999 Staples RD repurchased
approximately $300,105,000 of Staples RD Stock under this program. In addition, Staples RD purchased treasury stock of $10,143,000 and $7,892,000 from employees and directors to fund the income taxes
incurred by those employees and directors associated with the vesting of performance accelerated restricted stock (PARS).</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
July 2, 1999, Staples RD entered into an equity forward purchase agreement to hedge against stock price fluctuations for the repurchase of Staples RD Stock in connection with the
annual stock option grant to employees and directors. Under the agreement Staples RD may purchase 2,600,000 shares at an average price of $30.263 or elect to settle the contract on a net share basis
in lieu of physical settlement.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;At
January 29, 2000, 89,811,472 shares of common stock, regardless of series, were reserved for issuance under Staples' stock option, 401(k), employee stock purchase and director
stock option plans.</FONT></P>

<P><FONT SIZE=2><B>NOTE J Employee Benefits Plans</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations in
accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123, "Accounting for Stock-Based Compensation" ("FAS
123") requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, since the exercise price of Staples' employee stock options equals the
market price of the underlying stock on the date of grant, no compensation expense is recognized.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;At
the Special Stockholders Meeting on November 9, 1999 the stockholders of Staples approved proposals to amend Staples' 1992 Equity Incentive Plan (the
"</FONT><FONT SIZE=2><I>Incentive Plan</I></FONT><FONT SIZE=2>"), Staples' Amended and Restated 1990 Director Stock Option Plan (the "</FONT><FONT SIZE=2><I>Director Plan</I></FONT><FONT SIZE=2>")
and Staples' 1998 Employee Stock Purchase Plan (the "</FONT><FONT SIZE=2><I>Stock Purchase Plan</I></FONT><FONT SIZE=2>") (1) to permit grants of awards under each such plan to be made with respect
to either series of common stock of Staples, and (2) to increase the number of shares authorized for issuance under each Plan.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-58</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><B>Employee Stock Purchase Plan</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Amended Stock Purchase Plan authorizes a total of up to 8,400,000 shares of common stock, regardless of series, to be sold to participating employees.
Participating employees may purchase shares of either series of common stock at 85% of its fair market value at the beginning or end of an offering period, whichever is lower, through payroll
deductions in an amount not to exceed 10% of an employee's base compensation.</FONT></P>

<P><FONT SIZE=2><B>Stock Option Plans</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Staples' Incentive Plan, as amended by shareholders on November 9, 1999, Staples may grant to management and key employees incentive and nonqualified
options to purchase up to 122,850,000 shares of common stock and Performance Accelerated Restricted Stock ("PARS"), regardless of series. As of February 27, 1997, Staples' 1987 Stock Option Plan (the
"1987 Plan") expired; however unexercised options under this plan remain outstanding. The exercise price of options granted under the plans may not be less than 100% of the fair market value of
Staples' common stock at the date of grant. Options generally have an exercise price equal to the fair market value of the common stock on the date of grant. Some options outstanding are exercisable
at various percentages of the total shares subject to the option starting one year after the grant, while other options are exercisable in their entirety three to five years after the grant date. All
options expire ten years after the grant date, subject to earlier termination in the event of employment termination.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under
Staples Director's Plan, as amended by shareholders on November 9, 1999, up to 3,350,000 grants of options and awards of PARS can be made with respect to shares of existing
common stock, regardless of series to be issued to non-employee directors. The exercise price of options granted is equal to the fair market value of Staples RD Stock or Staples.com Stock at the date
of grant. Options become exercisable in equal amounts over four years and expire ten years from the date of grant, subject to earlier termination, in certain circumstances, in the event the optionee
ceases to serve as a director.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Pro
forma information regarding net income and earnings per share is required by FAS 123, which also requires that the information be determined as if Staples has accounted for its
employee stock options granted subsequent to January 28, 1995 under the fair valued method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1996, 1997, 1998 and 1999: risk-free interest rates
ranging from 5.21% to 6.69%; expected dividend yield of zero; volatility factor of the expected market price of Staples' common stock of .30 for fiscal year 1996, .35 for fiscal year 1997, .36 for
fiscal year 1998 and .41 for fiscal 1999; and a weighted-average expected life of the option of 4.0 years for the 1987 Plan and the 1992 Plan and 2.0 to 5.0 years for the Director's Plan.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. For purposes of FAS 123's disclosure
requirements, the Employee Stock Purchase Plan is considered a compensatory plan. The expense was calculated based on the fair value of</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-59</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>the
employees' purchase rights. Staples' pro forma information, which includes the pro forma results of Quill for fiscal years 1998 and 1997, follows (in thousands except for earnings per share
information):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Pro forma net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>277,369</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>156,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>138,983</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Pro forma basic earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.60</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.36</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.34</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Pro forma diluted earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.59</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.35</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.33</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This
pro forma impact only takes into account options granted since January 28, 1995 and is likely to increase in future years as additional options are granted and amortized ratably
over the vesting period.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Information
with respect to options granted under the above plans is as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="63%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-Average<BR>
Exercise Price<BR>
Per Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Outstanding at February 1, 1997</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>45,894,855</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>4.26</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>9,656,558</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>10.43</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(10,147,409</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>2.78</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(2,807,883</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>7.43</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Outstanding at January 31, 1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>42,596,121</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>5.34</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>13,698,644</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>20.22</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(13,965,713</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>3.64</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(1,938,669</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>11.55</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Outstanding at January 30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>40,390,383</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>11.58</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7,101,885</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>29.58</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(5,212,791</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>5.59</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(2,162,227</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>17.21</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Outstanding at January 29, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>40,117,250</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>15.26</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-60</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=7,SEQ=122,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=707096,FOLIO=C-60,FILE='DISK018:[00BOS8.00BOS1458]EJ1458A.;16',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes information concerning currently outstanding and exercisable options:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="15%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="34%" COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="30%" COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Options Exercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="15%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Range of Exercise<BR>
Prices<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Weighted Average<BR>
Remaining<BR>
Contractual Life</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.82&#151; $2.46</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,385,080</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3.38</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2.37</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,385,080</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2.37</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2.52&#151; $3.90</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,837,655</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4.20</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3.65</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,837,655</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3.65</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4.12&#151; $9.17</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,374,735</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>5.95</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8.32</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,088,080</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8.32</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>9.47&#151;$11.53</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,833,401</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7.50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.49</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>124,623</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>10.40</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>11.67&#151;$19.42</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,267,574</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8.10</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>14.84</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>47,924</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>15.56</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>20.08&#151;$20.08</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,140,445</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8.42</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>20.08</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>433,125</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>20.08</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>20.63&#151;$25.38</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,096,227</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>9.13</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>22.49</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>145,272</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>23.02</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>26.88&#151;$30.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,115,739</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>9.15</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>28.75</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.00</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>30.94&#151;$33.56</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,066,394</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>9.41</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>30.97</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>18,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>30.94</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.82&#151;$33.56</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>40,117,250</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7.30</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>15.26</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>14,079,759</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6.71</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
weighted-average fair values of options granted during the years ended January 29, 2000, January 30, 1999 and January 31, 1998 were $10.70, $7.18 and $3.80, respectively.</FONT></P>

<P><FONT SIZE=2><B>Performance Accelerated Restricted Stock ("PARS")</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;PARS are shares of Staples RD Stock granted outright to employees and non-employee directors without cost to the employee or director. The shares, however, are
restricted in that they are not transferable (e.g. they may not be sold) by the employee or director until they vest, generally after the end of five years. Such vesting date may accelerate if Staples
achieves certain compound annual earnings per share growth over a certain number of interim years. If the employee leaves Staples, or the director ceases to serve as a director of Staples, prior to
the vesting date for any reason, the PARS shares will be forfeited by the employee or director, as the case may be, and will be returned to Staples. Once the PARS have vested, they become unrestricted
and may be transferred and sold like any other Staples RD Stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;PARS
issued in the fiscal year ended January 29, 2000 totaling approximately 580,000 shares which have a weighted average fair value of $20.75, initially vest on February 1, 2005 or
will accelerate on May 1, in 2002, 2003, or 2004 upon attainment of certain compound annual earnings per share targets. PARS totaling approximately 1,381,000 shares, which have a weighted average fair
value of $17.56, issued in fiscal year 1998 will vest on May 1, 2000 as a result of Staples achieving its target earnings goal for the fiscal year ended January 29, 2000.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the issuance of the PARS, Staples RD included $14,832,000, $9,796,000 and $7,496,000 in compensation expense for the fiscal years ended January 30, 1999, January
30, 1999 and January 31, 1998, respectively.</FONT></P>

<P><FONT SIZE=2><B>Employees' 401(k) Savings Plan</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Staples' Employees' 401(k) Savings Plan (the "401(k) Plan"), and Supplemental Executive Retirement Plan (the "SERP Plan"), Staples may contribute up to a
total of 2,503,125 shares of common stock, regardless of series, to these plans. The 401(k) Plan is available to all employees of Staples who meet</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-61</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=8,SEQ=123,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=783045,FOLIO=C-61,FILE='DISK018:[00BOS8.00BOS1458]EJ1458A.;16',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->

<P><FONT SIZE=2>minimum
age and length of service requirements. Company contributions are based upon a matching formula applied to employee contributions with additional contributions made at the discretion of the
Board. In connection with these plans, Staples RD included approximately $4,000,000, $3,000,000 and $2,000,000 in expense for the fiscal years ended January 29, 2000, January 30, 1999 and January 31,
1998, respectively.</FONT></P>

<P><FONT SIZE=2><B>NOTE K&nbsp;&nbsp;Income Taxes</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components and the approximate tax effect of Staples RD's deferred tax assets and liabilities as of January 29, 2000 and January 30,
1999, are as follows (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="87%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Deferred Tax Assets:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Inventory</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>27,328</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Deferred rent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>20,310</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>19,713</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Acquired NOL's</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,251</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,743</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Other net operating loss carryforwards</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>37,106</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>27,259</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Insurance</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,455</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,639</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Employee benefits</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>18,368</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,746</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Merger related charges</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>21,965</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,823</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Store closure charge</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>19,694</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>20,274</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Other&#151;net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>22,157</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>17,711</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Total Deferred Tax Assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>159,306</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>149,236</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Deferred Tax Liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Depreciation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(6,847</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,310</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Inventory</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(21,501</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Other&#151;net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(7,424</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(5,165</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Total Deferred Tax Liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(35,772</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(7,475</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Total Valuation Allowance</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(48,892</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(37,765</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Net Deferred Tax Assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>74,642</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>103,996</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-62</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=9,SEQ=124,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=685520,FOLIO=C-62,FILE='DISK018:[00BOS8.00BOS1458]EJ1458A.;16',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net
deferred tax assets disclosed as acquired NOL's and other net operating loss carryforwards, totaling $49,357,000, of which $48,098,000 have been fully reserved due to the
uncertainty of the realization of the asset within the local country jurisdiction. Further, if this asset is utilized when income is earned within the foreign jurisdiction, Staples RD will not have a
consolidated tax benefit, as Staples RD will be required to pay U.S. income taxes on the income offset by the foreign NOL.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For
financial reporting purposes, income before taxes includes the following components (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="43%" COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Pretax income:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>United States</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>473,543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>262,371</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>213,549</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Foreign</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>69,648</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>44,194</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>36,205</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>543,191</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>306,565</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>249,754</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
provision for income taxes consists of the following (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="43%" COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Current tax expense:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Federal</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>127,848</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>136,226</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>53,248</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>State</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>23,625</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>18,875</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,707</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Foreign</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>31,107</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>21,798</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>14,092</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>182,580</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>176,899</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>78,047</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Deferred tax expense (benefit)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>29,265</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(55,569</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,877</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>211,845</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>121,330</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>81,924</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>A
reconciliation of the federal statutory tax rate to Staples RD's effective tax rate on historical net income is as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="39%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Federal statutory rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>State taxes, net of federal benefit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Goodwill</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Income of S-Corporation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(5.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2.9)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Effective tax rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>39.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>39.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>32.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-63</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=125,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=225914,FOLIO=C-63,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->

<P><FONT SIZE=2>A
reconciliation of the federal statutory tax rate to Staples RD's effective tax rate on pro forma net income is as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="39%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Federal statutory rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>35.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>State taxes, net of federal benefit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Goodwill</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Effective tax rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>39.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>40.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>38.7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Income
tax payments were $168,155,055, $94,729,602, and $23,487,877 during fiscal years ended January 29, 2000, January 30, 1999, and January 31, 1998, respectively. Staples RD has
net operating losses of approximately $157,950,000 that can be carried forward indefinitely, $21,900,000 of which is attributable to Staples' increased ownership in Staples UK and Staples Germany, and
$8,500,000 which is attributable to Staples' purchase of Office Centre Portugal and Sigma.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Undistributed
earnings of Staples' foreign subsidiaries amounted to approximately $109,300,000 at January 29, 2000. Those earnings are considered to be indefinitely reinvested and,
accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, Staples would be subject to both
U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income
tax liability is not practicable because of the complexities associated with its hypothetical calculation. Withholding taxes of approximately $5,500,000 would be payable upon remittance of all
previously unremitted earnings at January 29, 2000.</FONT></P>

<P><FONT SIZE=2><B>NOTE L&nbsp;&nbsp;Leases and Other Off-Balance Sheet Commitments</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD leases certain retail and support facilities under long-term noncancellable lease agreements. Most lease agreements contain renewal options and rent
escalation clauses and require Staples RD to pay real estate taxes in excess of specified amounts and, in some cases, allow termination within a certain number of years with notice and a fixed
payment. Certain agreements provide for contingent rental payments based on sales.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Other
long-term obligations at January 29, 2000 include $55,000,000 relating to future rent escalation clauses and lease incentives under certain existing store operating lease
arrangements. These rent expenses are recognized following the straight-line basis over the respective terms of the leases. Future minimum</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-64</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=2,SEQ=126,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=577751,FOLIO=C-64,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->

<P><FONT SIZE=2>lease
commitments for retail and support facilities (including lease commitments for 154 retail stores not yet opened at January 29, 2000) under noncancellable operating leases are due as follows (in
thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Fiscal year:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>2000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>335,343</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>341,719</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>331,120</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>319,365</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>303,494</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>Thereafter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,398,174</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>4,029,215</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Rent
expense approximated $292,872,000, $234,609,000, and $193,990,000, for the fiscal years ended January 29, 2000, January 30, 1999, and January 31, 1998, respectively.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Letters
of credit are issued by Staples RD during the ordinary course of business through major financial institutions as required by certain vendor contracts. As of January 29, 2000,
Staples RD had available open letters of credit totaling $7,940,000.</FONT></P>

<P><FONT SIZE=2><B>NOTE M&nbsp;&nbsp;Business Acquisitions</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On May 21, 1998, Staples acquired Quill. The merger was structured as an exchange of shares in which the stockholders of Quill received approximately
26,000,000 shares of Staples' common stock, at an exchange ratio established at a combination of fixed and variable prices, and cash paid to dissenting shareholder of approximately $48,000,000, which
equates to a purchase price of approximately $690,000,000. The merger was accounted for as a pooling of interests, and accordingly, Staples' consolidated financial statements have been restated to
include the operations of Quill for all periods prior to the merger. The statements of income combine Staples' historical operating results for the fiscal year ended January 31, 1998 with the
corresponding Quill operating results for the year ended December 31, 1997. Prior to the acquisition, Quill elected to be taxed as an S Corporation under the Internal Revenue Code. Accordingly, the
current taxable income of Quill was taxable to its shareholders who were responsible for the payment of taxes thereon. Quill has been included in Staples' U.S. federal income tax return subsequent to
the date of the acquisition. Pro forma adjustments have been made to the restated statements of operations to reflect the income taxes that would have been provided had Quill been subject to income
taxes.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the acquisition of Quill, Staples committed to a plan that results in the integration of the two businesses. As a result of the acquisition and integration plan,
Staples recorded a charge to operating expense of $41,000,000 during the year ended January 30, 1999. These costs consist of direct merger-related and integration costs from the transaction. The
merger transaction costs of approximately $10,500,000 consist primarily of fees for investment bankers, attorneys, accountants, and other related charges. The integration costs primarily include
employee costs of approximately $7,000,000, contract and lease termination costs of approximately $14,100,000, the write-down of leasehold improvements of approximately $3,500,000 and other
merger-related costs of approximately $5,900,000. Through January 29, 2000, Staples RD paid approximately $24,000,000, which consists primarily of transaction and employee related costs. Approximately
$13,500,000 is included in accrued expense at January 29, 2000, which is</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-65</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=3,SEQ=127,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=83106,FOLIO=C-65,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->

<P><FONT SIZE=2>considered
to be sufficient to cover the remaining merger related and integration costs to be paid in connection with the Quill acquisition.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Separate
net sales and net income of the merged entities prior to the merger are presented in the following table (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="65%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="79%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31, 1998</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Net sales:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Staples</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>5,181,035</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Quill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>551,110</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Combined</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>5,732,145</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Staples</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>130,949</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Quill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>36,965</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Combined</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>167,914</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Pro forma net income</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Staples</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>130,949</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Quill(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>22,179</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>Combined</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>153,128</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="79%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Reflects
adjustment for provision for income taxes on previously untaxed earnings.</FONT></DD></DL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
February 26, 1999, Staples RD completed the acquisition of Claricom Holdings, Inc. and certain related entities, now referred to as Staples Communications, for a purchase price of
approximately $137,600,000, net of cash acquired. Staples Communications is a full-service supplier of telecommunications services to small and medium sized businesses in the United States. The
acquisition has been
accounted for using the purchase method of accounting and accordingly Staples has recognized goodwill of approximately $158,400,000, which will be amortized over 20 years using the straight- line
method. As a result of a merger and integration plan that Staples RD began to formulate at the date of acquisition, it recorded a liability in purchase accounting of approximately $6,882,000 for
merger and integration costs. The merger transaction costs of approximately $1,852,000 consist of direct costs of the transaction, primarily fees paid for investment bankers, attorneys, accountants
and other related costs. The integration costs primarily include employee costs of $4,650,000 and other merger related costs of approximately $380,000. Through January, 29, 2000, Staples RD paid
approximately $3,096,000 related to this liability. Approximately $3,786,000 is included in accrued expenses at January 29, 2000, which is considered sufficient to cover the remaining merger and
integration costs to be paid in connection with the Claricom acquisition.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
October 7, 1999, Staples RD completed the acquisition of three European office supply companies: Sigma Burowelt in Germany, Office Centre in the Netherlands and Office Centre in
Portugal, for a purchase price of approximately $106,400,000, net of cash acquired. The acquisition includes 42 office supply superstores, with 15 stores in Germany, 21 stores in the Netherlands and 6
stores in Portugal. The acquisitions have been accounted for using the purchase method of accounting and accordingly Staples has recognized goodwill of approximately $96,900,000, which will be
amortized over 40 years using the straight-</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-66</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=4,SEQ=128,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=108871,FOLIO=C-66,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->

<P><FONT SIZE=2>line
method. As a result of a merger and integration plan that Staples RD began to formulate at the date of acquisition, it recorded adjustments in purchase accounting of approximately $30,000,000 for
merger and integration costs. The merger transaction costs of approximately $2,275,000 consist primarily of direct costs of the transaction, including fees paid to investment bankers, attorneys,
accountants and other related costs. The integration costs primarily include employee related costs of approximately $8,094,000, store closure and conversion costs of approximately $6,948,000,
write-down of inventory of approximately $5,778,000 and other merger related costs of approximately $6,905,000. Through January 29, 2000, Staples RD paid approximately $4,300,000 related to this
liability. Approximately $19,922,000 is included in accrued expenses at January 29, 2000, which is considered sufficient to cover the remaining merger and integration costs to be paid in connection
with the acquisition of these companies.</FONT></P>

<P><FONT SIZE=2><B>NOTE N&nbsp;&nbsp;Store Closure Charge</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the fourth quarter of 1998, Staples RD committed to a plan to relocate certain stores which cannot be expanded and upgraded to Staples RD's current store
model and reported a pre-tax store closure charge of $49,706,000. The charge includes $29,620,000 for future rental payments under operating lease agreements that will be paid after the store is
closed and will not be subsidized by subtenant income, $4,966,000 in fees, settlement costs and other expenses related to store closure, and $15,120,000 in asset impairment charges. In 1998, the
Company committed to execute lease agreements for the relocation sites during fiscal year 1999 with the stores to be closed and relocated during fiscal years 1999 and 2000. At January 29, 2000,
Staples RD had executed lease agreements for a substantial majority of the stores identified in 1998 and continues to actively negotiate lease agreements for the remaining relocation sites.
Negotiations for relocation sites have taken longer to complete than originally anticipated. Any site that the Company is unable to complete negotiations for by the end of the first quarter 2000 will
not be closed and the related charges will be reversed. Through January 29, 2000, Staples RD had paid approximately $476,000 in costs related to the store closures and $34,110,000 remains accrued for
future rental payments, fees, settlement costs, and other expenses related to the store closures</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As
a result of Staples RD's commitment to exit these stores, Staples RD evaluated the long-lived assets at each location in accordance with FAS 121. The analysis indicated that the
long-lived assets of the designated stores were impaired. Accordingly, Staples RD estimated the fair value of these assets based on discounted cash flows and recorded an impairment charge of
$15,120,000, which is included in the store closure charge. Staples RD will continue to depreciate these assets based on their revised useful life.</FONT></P>

<P><FONT SIZE=2><B>NOTE O&nbsp;&nbsp;Segment Reporting</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD has three reportable segments: North American Retail, North American Delivery Operations, and European Operations. Staples RD's North American
Retail division consists of two operating units that operate stores throughout the US and Canada. Staples RD's North American Delivery Operations division consists of four operating units that sell
office products and supplies directly to businesses. The European Operations segment consists of seven operating units which operate office supply stores and sell directly to businesses throughout the
United Kingdom, Germany and the Netherlands and Portugal.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-67</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=5,SEQ=129,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=892427,FOLIO=C-67,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->


<P><FONT SIZE=2><B>Measurement of Segment Profit or Loss and Segment Assets</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD evaluates performance and allocates resources based on profit or loss from operations before income taxes, excluding gains and losses on Staples
RD's investment portfolio and interest expense. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Intersegment sales
and transfers are recorded at Staples RD's cost, therefore there is no intercompany profit or loss recognized on these transactions.</FONT></P>

<P><FONT SIZE=2><B>Factors Management Used to Identify the Enterprise's Reportable Segments</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD's reportable segments are business units that distribute office products in different manners. The reportable segments are each managed separately
because they distribute products to different classes of customer with different distribution methods. The European operations are considered a separate operating segment because of the significant
difference in the operating environment from the North American operations.</FONT></P>

<P><FONT SIZE=2><B>Information about segment profit/loss and segment assets (in thousands)</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Year ended January 29, 2000:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="26%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Retail</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Delivery Operations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>European<BR>
Operations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All Other(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Totals</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Revenues from external customers</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,996,072</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>2,362,357</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>484,031</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,842,460</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Depreciation and amortization expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>125,769</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>33,768</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13,556</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>173,093</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Segment profit (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>571,138</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>211,365</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(37,248</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(202,064</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>543,191</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Segment assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,415,413</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>692,408</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>583,096</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4,690,917</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Expenditures for long-lived assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>301,832</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>208,855</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>106,418</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>617,105</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>Year
ended January 30, 1999:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="26%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Retail</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Delivery Operations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>European<BR>
Operations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All Other(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Totals</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Revenues from external customers</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4,867,124</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1,898,089</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>341,090</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,106,303</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Merger and store closure</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>49,706</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>41,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>90,706</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Depreciation and amortization expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>98,586</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>20,093</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,191</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>126,870</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Segment profit (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>381,900</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>118,075</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(17,077</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(175,846</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>307,052</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Segment assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,886,114</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>448,367</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>162,693</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,497,174</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="26%"><FONT SIZE=2>Expenditures for long-lived assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>333,021</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>42,089</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10,528</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>385,638</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-68</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=6,SEQ=130,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=93099,FOLIO=C-68,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->

<P><FONT SIZE=2>Year
ended January 31, 1998:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="101%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="26%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Retail</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>N. American<BR>
Delivery Operations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>European<BR>
Operations</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All Other(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Totals</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>Revenues from external customers</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,854,745</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1,648,509</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>225,185</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,728,439</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>Merger expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>29,665</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>29,665</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>Depreciation expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>66,345</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>18,760</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,609</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>90,714</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>Segment profit (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>319,939</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>112,011</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(8,049</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(173,847</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>250,054</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>Segment assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,432,696</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>386,053</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>130,088</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,948,837</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>Expenditures for long-lived assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>208,304</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>24,277</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>49,657</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>282,238</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>All
other includes corporate general and administrative expenses and merger related costs in connection with the then proposed merger with Office Depot, Inc for the year ended
January 31, 1998.</FONT></DD></DL>
<BR><BR>
<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="67%" ALIGN="LEFT"><FONT SIZE=1><B>Assets<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Total assets for reportable segments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,690,917</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,497,174</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Elimination of intercompany receivables</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(124,229</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(89,664</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Elimination of intercompany investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(753,119</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(228,329</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Total consolidated assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,813,569</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,179,181</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2><B>Geographic Information</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Year ended January 29, 2000:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="82%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="67%" ALIGN="LEFT"><BR>
<BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Revenues</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Long-Lived Assets</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>North American</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8,358,428</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,466,980</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Europe</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>484,032</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>88,035</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Consolidated Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8,842,460</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,555,015</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Year
ended January 30, 1999:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="82%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="67%" ALIGN="LEFT"><BR>
<BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Revenues</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Long-Lived Assets</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>North American</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,765,213</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,028,652</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Europe</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>341,090</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>35,913</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Consolidated Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7,106,303</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,064,565</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<BR><BR>

<P><FONT SIZE=2><B>NOTE P&nbsp;&nbsp;Computation of Earnings per Common Share</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The computation of historical earnings per share has been included for the period subsequent to the approval of the tracking stock proposal. The pro forma
earnings per share has been calculated to give the effect to the sale of Staples.com Stock in private placements and includes a provision for income taxes on</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-69</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=7,SEQ=131,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=642570,FOLIO=C-69,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->

<P><FONT SIZE=2>untaxed
earnings of pooled S-Corporation as though Staples RD Stock had existed for all periods presented (amounts in thousands, except for per share data):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="80%" ALIGN="LEFT"><FONT SIZE=1><B>Historical Earnings Per Share<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>13 weeks ended<BR>
January 29, 2000</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Numerator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>120,127</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Denominator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>455,978,860</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>12,571</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Denominator for basic earnings per common share&#151;weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>455,991,431</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Effect of dilutive securities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Incremental and windfall shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>9,945,465</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,131,386</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Dilutive potential common shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>11,076,851</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Denominator for diluted earnings per common share&#151;adjusted weighted-average shares and assumed conversions</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>467,068,283</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Basic earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Diluted earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-70</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=8,SEQ=132,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=388963,FOLIO=C-70,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="LEFT"><FONT SIZE=1><B>Pro forma Earnings Per Share&#151;Staples RD<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Numerator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Historical net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>315,718</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>185,370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>167,914</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Pro forma provision for taxes on previously untaxed earnings of S-Corporation Income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1,814</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(14,786</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Adjustment for pro forma retained interest in Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>356</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Pro forma net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>316,074</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>183,583</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>153,140</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Effect of dilutive securities:<BR>
4<SUP>1</SUP>/<SMALL>2</SMALL>% convertible debentures(a)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,451</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>9,365</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Numerator for diluted earnings per common share&#151;pro forma income available to common stockholders after assumed conversion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>316,074</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>191,034</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>162,505</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Denominator</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>460,278,709</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>429,308,638</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>408,095,647</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>169,595</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,314</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,330</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Denominator for basic pro forma earnings per common share&#151;weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>460,448,304</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>429,310,952</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>408,097,977</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Effect of dilutive securities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Incremental and windfall shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,330,260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,648,979</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,769,769</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>282,846</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>208,300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>209,592</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>4<SUP>1</SUP>/<SMALL>2</SMALL>% convertible debentures</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>25,856,165</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>30,681,819</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Dilutive potential common shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,613,106</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>38,713,444</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>43,661,180</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Denominator for diluted earnings per common share&#151;adjusted weighted-average shares and assumed conversion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>473,061,410</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>468,024,396</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>451,759,157</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Pro forma basic earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.69</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.43</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.38</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="48%"><FONT SIZE=2>Pro forma diluted earnings per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.67</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.36</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>The
4<SUP>1</SUP>/<SMALL>2</SMALL>% Debentures were substantially converted into common stock on December 2, 1998 (see Note H). For the computation of earnings per common share, this
conversion of 30,674,276 shares is assumed to have occurred at the beginning of the fiscal year (February 1, 1998), and is included in the weighted-average shares outstanding for the year. Therefore,
the interest expense and amortization of deferred charges related to the 4<SUP>1</SUP>/<SMALL>2</SMALL>% Debentures incurred by Staples RD through December 2, 1998, net of tax, is added back to reported net
income to compute earnings per common share for the years ended January 30, 1999 and January 31, 1998.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>C-71</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=9,SEQ=133,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=30694,FOLIO=C-71,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->
<UL>
</UL>

<P><FONT SIZE=2><B>NOTE Q&nbsp;&nbsp;Quarterly Summary (Unaudited)</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples Retail and Delivery</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="93%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="41%" ALIGN="LEFT"><FONT SIZE=1><B>Fiscal Year Ended January 29, 2000<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>First<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Second<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Third<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fourth<BR>
Quarter</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="41%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="57%" COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>(In thousands, except per share amounts)<BR></B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,060,374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,824,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,369,382</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,587,754</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Gross Profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>492,083</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>450,924</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>588,742</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>662,942</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Historical net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>50,314</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>52,744</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>92,534</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>120,126</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Pro forma net income attributed to Staples RD Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>50,438</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>52,842</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>92,705</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>120,229</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2><I>Basic earnings per common share:</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Historical net income per common share attributed to Staples RD Stock(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Pro forma net income per common share attributed to Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2><I>Diluted earnings per share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Historical net income per common share attributed to Staples RD Stock(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="41%"><FONT SIZE=2>Pro forma net income per common share attributed to Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.11</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.20</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0.26</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<BR><BR>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="98%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1><B>Fiscal Year Ended January 30, 1999<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>First<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Second<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Third<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fourth<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="55%" COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>(In thousands, except per share amounts)<BR></B></FONT><BR></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,668,367</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,472,890</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,895,724</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,069,322</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Gross Profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>380,209</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>347,145</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>467,097</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>527,650</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>35,950</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,974</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>69,186</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>71,260</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(5)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Pro forma net income attributed to Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>34,137</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,977</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>69,192</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>71,277</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(5)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2><I>Basic earnings per share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Pro forma net income per common share attributed to Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.02</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.16</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.16</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(5)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2><I>Diluted earnings per share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=2>Pro forma net income per common share attributed to Staples RD Stock(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(6)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.02</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.15</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>(6)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0.15</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(5)(6)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Historical
earnings per share is omitted for the 1<SUP>st</SUP>, 2<SUP>nd</SUP> and 3<SUP>rd</SUP> quarters of fiscal year ending January&nbsp;29, 2000 and for the entire
fiscal year ending January 30, 1999 as Staples RD Stock was not created until the quarter ended January 29, 2000 as a result of the approval of the "Tracking Stock Proposal" which changed Staples
capital structure by creating Staples.com Stock and reclassifying Staples common stock as Staples RD Stock.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>C-72</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=10,SEQ=134,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=39712,FOLIO=C-72,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->
<UL>
</UL>
<DL compact>
<DT><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Pro
forma information is calculated to give effect to the sale of 12,792,308 shares of Staples.com Stock in private placements. In presenting pro forma information, those
transactions were assumed to have occurred on February 2, 1997.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Net
income for the quarter ended August 1, 1998 includes a pre-tax charge of $41,000 resulting from costs incurred in connection with the merger with Quill Corporation.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Pro
forma net income includes the earnings of Quill with provision for income taxes on previously untaxed earnings of pooled S-Corporation income.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Net
income for the quarter ended January 30, 1999 includes a pre-tax charge of $49,706 resulting from a store closure charge.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Earnings
per share&#151;assuming dilution is calculated considering the $300 million of 4<SUP>1</SUP>/<SMALL>2</SMALL>% Convertible Subordinated Debentures as common stock equivalents
for the entire quarter.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>C-73</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=11,SEQ=135,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=1039103,FOLIO=C-73,FILE='DISK018:[00BOS8.00BOS1458]EK1458A.;12',USER='MLAING',CD='10-MAR-2000;11:07 -->
<UL>
</UL>
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>Report of Independent Auditors</B></FONT></P>

<P><FONT SIZE=2>Board of Directors and Shareholders<BR>
Staples,&nbsp;Inc.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying combined balance sheets of Staples.com (as described in Notes A and C) as of January&nbsp;29, 2000 and January&nbsp;30, 1999, and the related
combined statements of operations, group equity and cash flows for each of the three years in the period ended January&nbsp;29, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Staples.com at January&nbsp;29, 2000 and
January&nbsp;30, 1999 and the results of its operations and its cash flows for each of the three years in the period ended January&nbsp;29, 2000 in conformity with accounting principles generally
accepted in the United States.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As
more fully described in Notes&nbsp;A and C to these financial statements, Staples.com is a business group of Staples, Inc., accordingly, the combined financial statements of
Staples.com should be read in conjunction with the audited financial statements of Staples, Inc.</FONT></P>

<P ALIGN="RIGHT"><FONT SIZE=2>/s/
Ernst&nbsp;&amp; Young LLP<BR>
ERNST&nbsp;&amp; YOUNG LLP</FONT></P>

<P><FONT SIZE=2>Boston,
Massachusetts<BR>
March&nbsp;3, 2000</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-74</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=136,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=341896,FOLIO=C-74,FILE='DISK018:[00BOS8.00BOS1458]EM1458A.;9',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES.COM</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Combined Balance Sheets</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>ASSETS</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Current Assets:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Prepaid expenses and other current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,578</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,033</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Inter-business receivable from Staples RD</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>23,660</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Total current assets</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>25,238</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,033</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Equipment:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,538</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,072</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Less accumulated depreciation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,110</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>58</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Net equipment</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,428</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,014</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Other Assets</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34,755</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>72,421</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,047</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>LIABILITIES AND GROUP EQUITY</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Current Liabilities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Accrued expenses and other current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,466</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>85</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2><B>Total current liabilities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,466</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>85</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Group Equity</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
64,955</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
1,962</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>72,421</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,047</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See
notes to combined financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-75</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=137,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=450833,FOLIO=C-75,FILE='DISK018:[00BOS8.00BOS1458]EN1458A.;9',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->
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<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES.COM</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Combined Statements of Operations</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands, Except Share Data)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="53%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="44%" COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="53%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>94,349</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>16,886</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,706</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Cost of goods sold and occupancy costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>73,794</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,721</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,775</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2><B>Gross profit</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>20,555</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,165</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>931</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Operating and other expenses:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Operating and selling</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>27,063</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,058</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>637</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Site development costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,050</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>939</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>General and administrative</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>16,341</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,931</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>586</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Interest and other expense, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(82</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2><B>Total operating and other expenses</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>47,372</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,956</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,231</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Loss before income taxes</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
(26,817</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;<BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
(791</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Income tax benefit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(10,459</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(304</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2><B>Net loss</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(16,358</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(487</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Net loss attributed to (Note A):</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Staples.com Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(730</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>Staples RD Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(15,628</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(487</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(16,358</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(487</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2><I><U>Basic net loss per common share</U></I></FONT><FONT SIZE=2><BR>
Historical net loss per common share for the 13 weeks ended January 29, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2><I><U>Diluted net loss per common share</U></I></FONT><FONT SIZE=2><BR>
Historical net loss per common share for the 13 weeks ended January 29, 2000.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Pro forma net loss per common share for tracking stock and S-Corporation conversion:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2><I><U>Basic net loss per common share</U></I></FONT><FONT SIZE=2><BR>
Pro forma net loss per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="53%"><FONT SIZE=2><I><U>Diluted net loss per common share</U></I></FONT><FONT SIZE=2><BR>
Pro forma net loss per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See
notes to combined financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-76</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=138,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=148001,FOLIO=C-76,FILE='DISK018:[00BOS8.00BOS1458]EO1458A.;12',USER='MLAING',CD='10-MAR-2000;11:08 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES.COM</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Combined Statements of Equity</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands)</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>For the Fiscal Years Ended January 29, 2000, January 30, 1999, and January 31, 1998</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="67%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Group<BR>
Equity</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Comprehensive<BR>
Income</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2><B>Balances at February 1, 1997</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;<BR>
Capital contribution by Staples RD</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Net loss for the year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2><B>Balances at January 31, 1998</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;<BR>
Capital contribution by Staples RD</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
2,449</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Net loss for the year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(487</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(487</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2><B>Balances at January 30, 1999</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,962</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(487</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Capital contribution by Staples RD</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>29,920</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Issuance of common stock for stock options exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23,111</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Net issuance of common stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>19,625</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Net loss for the year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(16,358</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(16,358</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Unrealized gain on investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,695</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6,695</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Balances at January 29, 2000</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
64,955</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
(9,663</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See
notes to combined financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-77</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=139,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=868520,FOLIO=C-77,FILE='DISK018:[00BOS8.00BOS1458]EP1458A.;7',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES.COM</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Combined Statements of Cash Flows</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Dollar Amounts in Thousands)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="92%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="54%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="43%" COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Fiscal Year Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="54%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30,<BR>
1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31,<BR>
1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2><B>Operating Activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(16,358</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(487</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Adjustments to reconcile net loss to net cash provided by (used&nbsp;in) operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,052</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>58</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Change in assets and liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Increase in prepaid expenses and other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(545</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,033</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Increase in accounts payable, accrued expenses and other current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,381</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>85</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,888</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(890</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2><B>Net cash used in operating activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(8,470</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,377</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Investing Activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Acquisition of property and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(12,466</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,072</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Purchase of long-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(23,780</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2><B>Net cash used in investing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(36,246</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,072</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Financing Activities:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;<BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Net proceeds from sale of capital stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>42,736</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Inter-business advance to Staples RD</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(27,940</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Proceeds from borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>14,796</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,377</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Repayment of borrowings</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(14,796</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,377</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Capital contributions from Staples RD</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>29,920</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,449</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2><B>Net cash provided by financing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>44,716</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,449</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;<BR></FONT> <FONT SIZE=2><B>Net (decrease) increase in cash and cash equivalents</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2>Cash and cash equivalents at beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="54%"><FONT SIZE=2><B>Cash and cash equivalents at end of period</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="54%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>See
notes to combined financial statements.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-78</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=140,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=990230,FOLIO=C-78,FILE='DISK018:[00BOS8.00BOS1458]EQ1458A.;10',USER='MLAING',CD='10-MAR-2000;11:57 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><B>STAPLES.COM</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>NOTES TO COMBINED FINANCIAL STATEMENTS</B></FONT></P>

<P><FONT SIZE=2><B>NOTE A&nbsp;&nbsp;Basis Of Presentation</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;These combined financial statements and notes to combined financial statements of Staples.com should be read in conjunction with the audited consolidated
financial statements and Annual Report of Staples, Inc. ("Staples" or the "Company") for the year ended January 29, 2000 and the audited combined financial information of Staples Retail and Delivery
("Staples RD") contained in this report. Staples.com provides an electronic marketplace where small, mid-sized and large businesses can buy office products and services and obtain information and
expert content. Our principal web sites are </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> and</FONT> <FONT SIZE=2><I>StaplesLink.com,</I></FONT><FONT SIZE=2> each of which
operates its own web site and serves a separate target customer base.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
November 9, 1999, the stockholders of Staples approved a proposal ("the Tracking Stock Proposal") which amended the Company's certificate of incorporation to (i) authorize the
issuance of a new series of common stock, designated as Staples.com common stock ("Staples.com Stock"), intended to reflect the performance of Staples.com, the Company's e-commerce business, (ii)
increase the aggregate number of shares of common stock that the Company may issue from 1,500,000,000 to 2,100,000,000, initially comprised of 1,500,000,000 shares of Staples Retail and Delivery
common stock ("Staples RD Stock") and 600,000,000 shares of Staples.com Stock, and (iii) re-classify Staples' existing common stock as Staples RD Stock, intended to reflect the performance of Staples
RD, which consists of all of the Company's other businesses and a retained interest in Staples.com.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD had an 88% and 100% retained interest in Staples.com at January 29, 2000 and January 30, 1999, respectively. During the fiscal year ended January 29, 2000, Staples.com
issued 12,792,308 shares of Staples.com Stock in private placements and 14,459,878 shares through the exercise of employee stock options. Staples.com may issue additional shares of Staples.com Stock
in one or more additional public or private financings. The specific terms of those financings, including the amount of Staples.com Stock issued, and the timing of the financings, will depend upon
factors such as stock market conditions and the performance of Staples.com. The effect of those financings on the retained interest percentage and the outstanding interest percentage would depend upon
the number of shares of Staples.com Stock sold and whether the Company elects to attribute the net proceeds of such financings to the equity of Staples.com or to Staples RD in respect of its retained
interest. The Company filed a registration statement with the Securities and Exchange Commission on February 18, 2000 for an initial public offering of Staples.com common stock</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
preparing separate financial statements for Staples RD and Staples.com, the Company has allocated, for financial reporting purposes, all of its consolidated assets, liabilities,
revenue, expenses and cash flows between Staples RD and Staples.com. Thus, the combined financial statements of Staples RD and Staples.com, taken together, comprise all of the accounts included in the
corresponding consolidated financial statements of Staples. Staples.com's combined financial statements reflect the application of certain cash management and allocation policies adopted by the board
of directors of Staples (the "Board"). These policies are summarized in Note C under "Corporate Activities". Staples.com's combined financial statements include the financial position, results of
operations, and cash flows of Staples.com. These financial statements do not represent Staples' primary financial statement presentation.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Allocation
and related party transaction policies adopted by the Board can be rescinded or amended at the sole discretion of the Board without approval by the stockholders, although
no such changes are currently contemplated. Any such changes adopted by the Board would be made in its good faith business judgement of the Company's best interests, taking into consideration the
interests of all stockholders.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-79</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=141,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=889045,FOLIO=C-79,FILE='DISK018:[00BOS8.00BOS1458]ES1458A.;11',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Company now provides to the holders of both Staples RD Stock and Staples.com Stock separate financial statements, financial reviews, descriptions of the business, and other
relevant information for Staples RD and Staples.com as well as consolidated financial information of the Company. Notwithstanding the allocation of assets and liabilities, including contingent
liabilities between Staples RD and Staples.com for the purposes of preparing their respective combined financial statements, this allocation and the change in the capital structure of the Company as a
result of the approval of the Tracking Stock Proposal did not result in the distribution or spin-off to stockholders of any of the Company's assets and liabilities and will not affect ownership of its
assets or responsibility for its liabilities or those of its subsidiaries. Holders of Staples RD Stock will remain common stockholders of the Company. The assets the Company attributes to one business
are subject to the liabilities of the other business, even if such liabilities arise from lawsuits, contracts or indebtedness attributed to the other business. If the Company is unable to satisfy one
business's liabilities with the assets attributed to it, the Company may be required to satisfy those liabilities with the assets the Company has attributed to the other business. Further, holders of
Staples RD Stock and Staples.com Stock will not have any legal rights related to specific assets of either business and in any liquidation will receive a fixed share of the net assets of the Company,
which may not reflect the actual trading prices, if any, of the respective businesses at such time.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Financial
effects from one business that affect the Company's consolidated results of operations or financial condition could, if significant, affect the results of operations or
financial condition of the other businesses and the market price of the stock relating to the other businesses. In addition, net losses of either business and dividends and distributions on, or
repurchases of, either class of common stock or repurchases of common stock at a price per share greater than par value will reduce the funds we can pay on each class of common stock under Delaware
Law. Accordingly, financial information for Staples.com's combined financial statements should be read in conjunction with the Company's audited consolidated financial information and the combined
financial information of Staples RD contained in this report</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Certain
previously reported amounts have been reclassified to conform with the current period presentation.</FONT></P>

<P><FONT SIZE=2><B>NOTE B&nbsp;&nbsp;Summary of Significant Accounting Policies</B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Nature of Operations:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com represents the e-commerce business of Staples and is comprised of three principal web
sites, including </FONT><FONT SIZE=2><I>Staples.com</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> and</FONT> <FONT SIZE=2><I>StaplesLink.com</I></FONT><FONT SIZE=2>. Staples RD represents the other businesses
of Staples, including its retail stores, catalog business and contract stationer business.
</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Fiscal Year:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's fiscal year is the 52 or 53 weeks ending the Saturday closest to January 31. Fiscal years
1999, 1998 and 1997, consisted of the 52 weeks ended January 29, 2000, January 30, 1999 and January 31, 1998, respectively. As more fully described in Note K, the statements of operations combine
Staples' historical operating results for the fiscal year with the corresponding Quill Corporation ("Quill") operating results for the calendar year ended December 31, 1997.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Use of Estimates:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The preparation of financial statements in conformity with generally accepted accounting principles
requires management of Staples.com to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those
estimates.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-80</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=2,SEQ=142,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=425970,FOLIO=C-80,FILE='DISK018:[00BOS8.00BOS1458]ES1458A.;11',USER='VNEVILL',CD=';9-MAR-2000;18:52 -->

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Concentration of Credit Risk:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com does not carry any inventory or receivables and is solely reliant upon
Staples RD to provide funding for its operations, and the Board will determine, in its sole discretion, whether to provide any particular funds on any particular occasion to either group, but will not
be obligated to do so.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Advertising:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Advertising production costs are expensed the first time advertising takes place. Total advertising and
promotion expenses were $20,001,000, $1,595,000 and $497,000 for the years ended January 29, 2000, January 30, 1999, and January 31, 1998, respectively. Included in prepaid and other assets was
$1,033,000 at January 30, 1999, relating to prepaid advertising and promotion expenses. There was no prepaid advertising and promotion expenses at January 29, 2000.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Site Development Costs:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Site development costs consist principally of payroll and related expenses for development,
editorial, systems and network operations personnel and consultants, hosting costs and system design costs.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Equipment:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Equipment is recorded at cost. Depreciation is provided using the straight-line method over the estimated
useful lives of the assets. Certain system and telecommunications, relating to the site development infrastructure, have been capitalized in accordance with Statement of Position 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". Depreciation periods for equipment are three to five years.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Investments:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com's securities are classified as available for sale and consist of stock purchased in Internet
related companies. Investments that qualify as marketable equity securities are carried at fair value using quoted market prices and other investments have been accounted for on a cost basis as each
investment represents an interest of no greater than fifteen percent of the outstanding stock of that company. Unrealized gains and losses are reported as a component of Staples.com's group equity.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Stock Option Plans:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com has adopted Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123"). As permitted by FAS 123, Staples continues to account for its stock-based plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), and provides pro forma disclosures of the compensation expense determined under the fair value provisions of FAS 123.</FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Net Loss Per Share:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com calculates net loss per share in accordance with Statement of Financial Accouning
Standards No. 128 "Earnings per Share" ("FAS 128") which requires disclosure of basic and diluted earnings per share. Historical net loss per share for Staples.com is presented for periods subsequent
to the approval of Tracking Stock Proposal since Staples.com stock was not previously part of the capital structure of the Company. Basic net loss per share for Staples.com Stock is computed by
dividing (i) the loss of Staples.com multiplied by the "Outstanding Staples.com Fraction" by (ii) the weighted average number of shares of Staples.com Stock outstanding during the applicable period.
The "Outstanding Staples.com Fraction" is a fraction, the numerator of which is the weighted average number of shares of Staples.com Stock outstanding and the denominator of which is the number of
shares of Staples.com Stock that, if issued, would represent 100 percent of the equity of Staples.com. Diluted earnings per share includes the effects of applying the treasury stock method to
outstanding stock options, performance accelerated restricted stock ("PARS") and derivative instruments when dilutive. Pro forma loss per share has been calculated to give the effect to the sale of
12,792,308 shares of Staples.com Stock in the private placements. In presenting this pro forma information, these transactions were assumed to have</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-81</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>occurred
on February 2, 1997. In addition, the pro forma information includes a benefit for income taxes on previously unbenefited losses of pooled S-Corporation.</FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Long-Lived Assets:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of", which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flow estimated to be generated by those assets are less than the assets' carrying amounts.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Segment Reporting:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Management's approach to segment reporting, establishes requirements to report selected segment
information quarterly and to report entity-wide disclosures about products and services, major customers, and the major countries in which Staples.com holds assets and reports revenues. Staples.com
holds assets and reports revenues in one operating segment.</FONT></P>

<P><FONT SIZE=2><B>NOTE C&nbsp;&nbsp;Corporate Activities</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com's financial statements reflect the application of the management and allocation policies adopted by the Board to various corporate activities, as
described below:</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Cash Management and Allocation Policies:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In order to prepare separate financial statements for Staples RD and
Staples.com, Staples has allocated, for financial reporting purposes, all of its consolidated assets, liabilities, revenue, expenses and cash flow between Staples RD and Staples.com. Thus, the
financial statements of Staples RD and Staples.com, taken together, comprise all of the accounts included in the corresponding financial statements of Staples. The financial statements of Staples RD
and Staples.com reflect the application of cash management and allocation policies adopted by the Board. These policies are summarized below. The Board may, in its sole discretion, modify, rescind or
add to any of these policies, although it has no present intention to do so. The decision of the Board to modify, rescind or add to any of these policies would, however, be subject to the Board's
general fiduciary duties. Even though Staples has allocated all of its consolidated assets, liabilities, revenue, expenses and cash flow between Staples RD and Staples.com, holders of Staples.com
stock will be common stockholders of Staples and, as such, will be subject to all risks associated with an investment in Staples and all of its businesses, assets and liabilities.</FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Finance Activities:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples manages most finance activities on a centralized, consolidated basis. These activities
include the investment of surplus cash, the issuance, repayment and repurchase of short-term and long-term debt, and the issuance and repurchase of common stock. Staples.com generally remits its cash
receipts to Staples RD, but is not obligated to do so, and Staples RD generally funds Staples.com's cash disbursements on a regular basis, but is not obligated to do so.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In
the combined financial statements of Staples RD and combined financial statements of Staples.com:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>all
equity transactions, and the proceeds thereof, were attributed to the business whose stock was affected;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whenever
Staples.com held cash, that cash was transferred to Staples RD and accounted for as an inter-business revolving credit advance; and</FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>C-82</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whenever
Staples.com had a cash need, that cash need was funded by Staples RD and accounted for as an inter-business revolving credit advance. The
inter-business revolving credit arrangement bears interest at a rate at which the Board, in its sole discretion, determines Staples could borrow such funds on a revolving credit basis, which was 6%
for the fiscal years 1997, 1998 and 1999. The Board, at its sole discretion, may elect an alternative financing mechanism between Staples RD and Staples.com based upon the facts and circumstances. The
Board has adopted the following additional policies related to the Staples.com Stock:
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Staples
will attribute each future incurrence or issuance of external debt or preferred stock, and the proceeds thereof, to Staples RD, unless the Board
determines otherwise. The Board may, but is not required to, attribute an incurrence or issuance of debt or preferred stock, and the proceeds thereof, to Staples.com to the extent that Staples incurs
or issues the debt or preferred stock for the benefit of Staples.com.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Staples
will attribute each future issuance of Staples RD Stock, and the proceeds thereof, to Staples RD. Staples may attribute any future issuance of
Staples.com Stock, and the proceeds thereof, to Staples RD in respect of its retained interest in Staples.com, in a manner analogous to a secondary offering of common stock of a subsidiary owned by a
corporate parent, or to Staples.com, in a manner analogous to a primary offering of common stock. Dividends on and repurchases of Staples RD Stock will be charged against Staples RD, and dividends on
and repurchases of Staples.com Stock will be charged against Staples.com. In addition, at the time of any dividend on Staples.com Stock, Staples will credit to Staples RD, and charge against
Staples.com, a corresponding amount in respect of Staples RD's retained interest in Staples.com.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Staples
will account for all cash transfers from one business to or for the account of the other business (other than transfers in return for assets or
services rendered or transfers in respect of Staples RD's retained interest that correspond to dividends paid on Staples.com Stock), as inter-business revolving credit advances unless:
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#150;</FONT></DT><DD><FONT SIZE=2>the
Board determines that a given transfer, or type of transfer, should be accounted for as a long-term loan;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#150;</FONT></DT><DD><FONT SIZE=2>the
Board determines that a given transfer, or type of transfer, should be accounted for as a capital contribution increasing Staples RD's retained
interest in Staples.com; or
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#150;</FONT></DT><DD><FONT SIZE=2>the
Board determines that a given transfer, or type of transfer, should be accounted for as a return of capital reducing Staples RD's retained interest in
Staples.com.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;There
are no specific criteria to determine when Staples will account for a cash transfer as a long-term loan, a capital contribution or a return of capital rather than an
inter-business revolving credit advance. The Board would make such a determination in the exercise of its business judgment at the time of such transfer, or the first of such type of transfer, based
upon all relevant circumstances. Factors the Board would consider include:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>&#150;</FONT></DT><DD><FONT SIZE=2>the
current and projected capital structure of each business;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#150;</FONT></DT><DD><FONT SIZE=2>the
relative levels of internally generated funds of each business;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#150;</FONT></DT><DD><FONT SIZE=2>the
financing needs and objectives of the recipient business;</FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>C-83</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT><FONT SIZE=2>&#150;</FONT></DT><DD><FONT SIZE=2>the
investment objectives of the transferring business;
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#150;</FONT></DT><DD><FONT SIZE=2>the
availability, cost and time associated with alternative financing sources; and
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#150;</FONT></DT><DD><FONT SIZE=2>prevailing
interest rates and general economic conditions.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Any
cash transfer accounted for as an inter-business revolving credit advance will bear interest at the rate at which the Board, in its sole discretion,
determines Staples could borrow such funds on a revolving credit basis. Any cash transfer accounted for as a long-term loan will have interest rate, amortization, maturity, redemption and other terms
that generally reflect the then prevailing terms on which the Board, in its sole discretion, determines Staples could borrow such funds.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Any
cash transfer from Staples RD to Staples.com, or for Staples.com's account, accounted for as a capital contribution will correspondingly increase
Staples.com's group equity and Staples RD's retained interest in Staples.com. As a result, the number of shares issuable with respect to Staples RD's retained interest in Staples.com will increase by
the amount of such capital contribution divided by the market value of Staples.com Stock on the date of transfer.
<BR><BR></FONT></DD><DT><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Any
cash transfer from Staples.com to Staples RD, or for Staples RD's account, accounted for as a return of capital will correspondingly reduce
Staples.com's group equity and Staples RD's retained interest in Staples.com. As a result, the number of shares issuable with respect to Staples RD's retained interest in Staples.com will decrease by
the amount of such return of capital divided by the market value of Staples.com Stock on the date of transfer.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Through
the quarter ending October 30, 1999, fixed asset and investment purchases have been treated as capital contributions from Staples RD. Also, operating cash flow losses in 1999
were funded by Staples RD as an inter-business payable and has been offset by the proceeds received from the issuance of Staples.com Stock, which was distributed to Staples RD. Operating cash flow
losses and fixed asset and investment purchases subsequent to October 30, 1999 were absorbed by Staples.com.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Shared Services and Support Activities:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The cost of services shared by Staples RD and Staples.com, including general
and administrative expenses, have been allocated between Staples RD and Staples.com based upon the use of such services and the good faith judgement of the Board or Staples' management. Where
determinations based on use alone were not practical, other methods and criteria were used to provide a reasonable allocation of the cost of shared services, including support activities attributable
between Staples RD or Staples.com. Such allocated shared services represent, among other things, financial and accounting services, information system services, certain selling and marketing
activities, certain merchandising and replenishment services, transportation and warehouse management services, certain customer service activities, executive management, human resources, legal and
corporate planning activities. For example, for printed advertisements and commercials that include both Staples RD and Staples.com, we currently reimburse Staples RD for that amount of space or air
time devoted to Staples.com, plus a proportionate part of the total cost of the rest of the advertisements or commercials based on varying metrics, such as the relative sales of Staples RD and
Staples.com.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Taxes:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Federal income taxes, which are determined on a consolidated basis, are allocated between the businesses of
Staples RD and Staples.com, and reflected in their respective financial statements, in accordance with Staples' tax allocation policy. In general, this policy provides that the consolidated tax
provision, deferred tax accounts and related tax payments or refunds, are allocated between Staples RD and Staples.com based principally upon the financial income, taxable income, credits and other
amounts</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-84</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>directly
related to their respective businesses. Tax benefits that cannot be used by the business generating such attributes, but can be utilized on a consolidated basis, are allocated to the business
that generated such benefits. As a result, the allocated business amounts of taxes payable or refundable are not necessarily comparable to those that would have resulted if Staples RD and Staples.com
had filed separate tax returns. State income taxes generally are computed on a separate business basis.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Carrying Charge:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples RD sells inventory to Staples.com for resale. The cost per inventory unit purchased by
Staples.com equals Staples RD's product cost. Staples RD maintains inventory to support Staples.com's inventory needs and the processing of receivables for Staples.com. Staples RD charges Staples.com
a carrying charge for use of their capital for these purposes as determined by the Board. The carrying charge is reflected in Staples.com's financial statements as part of operating and selling
expenses and in Staples RD's financial statements as a credit to operating and selling expenses. This charge is calculated based on the amount of receivables and inventory that Staples RD is required
to carry for Staples.com. In addition, inventory, shrink, obsolescence and other inventory costs are allocated to Staples.com based on Staples.com's share of such costs. The Board may, in its sole
discretion, change the carrying charge charged to Staples.com as it deems appropriate in light of the circumstances from time to time.</FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Employee Benefits:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Staples.com participates in the following Staples employee benefit plans: an Employee Stock Purchase
Plan, an Employee 401(k) Savings Plan, a Supplemental Executive Retirement Plan and a contributory Medical and Dental Plan. The costs of these plans are allocated based on the benefits received under
the plans by the employees comprising Staples RD and Staples.com or such other basis as Staples' management believes to be an equitable and reasonable estimate of such costs.</FONT></P>

<P><FONT SIZE=2><B>NOTE D&nbsp;&nbsp;Related Party Transactions</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples RD sells inventory to Staples.com for resale. Under this arrangement, Staples.com purchases inventory from Staples RD for resale. The cost per
inventory unit purchased by Staples.com is based on Staples RD's product cost. Inventory purchased by Staples.com totaled $62,706,000, $10,796,000 and $2,364,000 for the fiscal years ended January 29,
2000, January 30, 1999 and January 31, 1998, respectively.</FONT></P>

<P><FONT SIZE=2><B>NOTE E&nbsp;&nbsp;Investments</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of available-for-sale investments as of January 29, 2000 (in thousands):</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="81%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Cost</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized<BR>
Gains</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross<BR>
Unrealized<BR>
Losses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Estimated<BR>
Fair Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Long-term:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Equity securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23,780</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>34,755</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2><B>NOTE F&nbsp;&nbsp;Long-Term Debt and Credit Agreement</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples manages most financial activities on a centralized basis. Such financial activities include the issuance and repayment of short-term and long-term
debt. Staples currently attributes each incurrence or issuance of external debt, and the proceeds thereof, to Staples RD and will continue to do so in the future unless the Board determines otherwise.
The Board may, but is not required to, attribute an incurrence or issuance of debt, and the proceeds thereof, to Staples.com at a current incremental borrowing rate of 6%, to the extent that Staples
incurs or issues the debt for the benefit of Staples.com.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-85</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<BR>

<P><FONT SIZE=2><B>NOTE G&nbsp;&nbsp;Group Equity</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On November 9, 1999, the stockholders of Staples approved the Tracking Stock Proposal which reclassified Staples existing common stock as Staples RD Stock,
intended to reflect the performance of Staples RD and its retained interest in Staples.com, and created a new class of stock called Staples.com Stock intended to reflect the performance of Staples'
e-commerce business. Additional shares may be issued from time to time upon exercise of stock options or at the discretion of the Board. The approval of the Tracking Stock Proposal increased the
number of authorized shares to 2,100,000,000 shares of common stock, initially comprised of 1,500,000,000 shares of Staples RD Stock and 600,000,000 shares of Staples.com Stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;With
the approval of the Tracking Stock Proposal, if Staples disposes of all or substantially all of the assets of Staples RD or Staples.com, and the disposition is not an exempt
disposition, Staples would be required to pay a mandatory dividend to the holders of that series of stock, redeem outstanding shares of that series of stock equal to their proportionate interest in
the net proceeds of the disposition or exchange shares of that series of stock for shares of the other series at a 10% premium. At any time within one year after completing a special dividend or
partial redemption, Staples will have the right to issue shares of the other series of stock, at a 10% premium, in exchange for the remaining shares of the series of stock which received the dividend
or was partially redeemed.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
will have the right, at any time, to issue shares of one series of stock in exchange for the other at a premium that will initially be 25% and will decline ratably each
quarter over a period of three years to 15%. Notwithstanding these exchange provisions, in the event that certain adverse tax law changes were to take place, Staples will have the right to issue
shares of either series of common stock in exchange for outstanding shares of the other series of common stock at a 10% premium, regardless of when such adverse tax law changes take place. In
addition, Staples will have the right, at any time Staples.com Stock exceeds the 40% of total market capitalization threshold but is below the 60% of total market capitalization threshold, to issue
shares of either series of common stock in exchange for outstanding shares of the other series of common stock on a value for value basis. The exchange ratio that will result in the specified premium
or value for value exchange will be calculated based on a comparison of the average market values of the two series of common stock during the 20 consecutive trading day period ending on, and
including, the 5<SUP>th</SUP> trading day immediately preceding the date on which Staples mails the notice of exchange to holders of the outstanding shares being exchanged. Staples will have the
right at any time to transfer all of the assets and liabilities of on or both series of stock to a subsidiary and deliver all of the stock of that subsidiary in exchange for all of the outstanding
stock of that series of stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon
liquidation of Staples, holders of Staples RD Stock and Staples.com Stock will be entitled to receive the net assets of Staples, if any, available for distribution to
stockholders. Amounts due upon liquidation in respect of shares of Staples RD Stock and shares of Staples.com Stock will be distributed pro rata in accordance with the average market value of Staples
RD Stock and Staples.com Stock over a 20-Trading Day period ending 300 days after the implementation of the Tracking Stock Proposal. In the absence of a public trading market for Staples.com Stock,
market value would be determined in good faith by the Board.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples
RD had an 88% and 100% retained interest in Staples.com, at January&nbsp;29, 2000 and January&nbsp;30, 1999, respectively. During the fiscal year ended January&nbsp;29,
2000, Staples.com issued 12,792,308 shares of Staples.com Stock in private placements, and 14,459,878 shares through the exercise of employee stock options. Staples.com may issue additional shares of
Staples.com Stock in one or more additional public or private financings. The specific terms of those financings, including the amount of</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-86</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>Staples.com
Stock issued, and the timing of the financings, will depend upon factors such as stock market conditions and the performance of Staples.com. The effect of those financings on the retained
interest percentage and the outstanding interest percentage would depend upon the number of shares of Staples.com Stock sold and whether the Company elects to attribute the net proceeds of such
financings to the equity of Staples.com or to Staples RD in respect of its retained interest. The book value associated with Staples RD's retained interest in Staples.com will be increased
proportionately for net income (or decreased proportionately for net loss) of Staples.com.</FONT></P>


<P><FONT SIZE=2><B>NOTE H&nbsp;&nbsp;Employee Benefit Plans</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Staples.com elected to follow Accounting Principles Board Opinion No.&nbsp;25 "Accounting for Stock Issued to Employees" ("APB&nbsp;25") and related
interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No.&nbsp;123, "Accounting for
Stock-Based Compensation" ("FAS&nbsp;123") requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB&nbsp;25, since the exercise price of
Staples' employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;At
the Special Stockholders Meeting on November&nbsp;9, 1999 the stockholders of Staples approved proposals to amend each of the following: Staples' 1992 Equity Incentive Plan (the
"</FONT><FONT SIZE=2><I>Incentive Plan</I></FONT><FONT SIZE=2>"), Staples' Amended and Restated 1990 Director Stock Option Plan (the "</FONT><FONT SIZE=2><I>Director Plan</I></FONT><FONT SIZE=2>")
and Staples' 1998 Employee Stock Purchase Plan (the "</FONT><FONT SIZE=2><I>Stock Purchase Plan</I></FONT><FONT SIZE=2>") (1)&nbsp;to permit grants of awards under each such plan to be made with
respect to either series of common stock of Staples, and (2)&nbsp;to increase the number of shares authorized for issuance under each Plan.</FONT></P>


<P><FONT SIZE=2><B>Employee Stock Purchase Plan</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Amended Stock Purchase Plan authorizes a total of up to 8,400,000 shares of common stock, regardless of series, to be sold to participating employees.
Participating employees may purchase shares of either series of common stock at 85% of its fair market value at the beginning or end of an offering period, whichever is lower, through payroll
deductions in an amount not to exceed 10% of an employee's base compensation.</FONT></P>

<P><FONT SIZE=2><B>Stock Option Plans</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Staples' Incentive Plan, as amended by shareholders on November&nbsp;9, 1999, Staples may grant to management and key employees incentive and
nonqualified options to purchase up to 122,850,000 shares of common stock and Performance Accelerated Restricted Stock ("PARS"), regardless of series. As of February&nbsp;27, 1997, Staples' 1987
Stock Option Plan (the "1987 Plan") expired, however, unexercised options under this plan remain outstanding. The exercise price of options granted under the plans may not be less than 100% of the
fair market value of Staples' common stock at the date of grant. The options granted to date were based on the fair market value from a private placement around the same
time. Staples.com options are exercisable immediately and vest over a period of one to four years The options expire ten years after the grant date, subject to earlier termination in the event of
employment termination.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under
Staples Director's Plan, as amended by shareholders on November 9, 1999, up to 3,350,000 grants of options and awards of PARS can be made with respect to shares of existing
common stock,</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-87</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2>regardless
of the series to be issued to non-employee directors. The exercise price of options granted is equal to the fair market value of Staples RD Stock or Staples.com Stock at the date of grant.
Options become exercisable in equal amounts over four years and expire ten years from the date of grant, subject to earlier termination, in certain circumstances, in the event the optionee ceases to
serve as a director.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Pro
forma information regarding net income and earnings per share is required by FAS 123, which also requires that the information be determined as if Staples has accounted for its
employee stock options of Staples.com Stock granted subsequent to January 28, 1995 under the fair valued method of that Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average assumptions for 1999: a risk-free interest rate of 6.67%; volatility factor of the expected market price of Staples.com
Stock of 0.00 for fiscal year 1999, expected dividend yield of zero and a weighted-average expected life of the options of 2.0 to 5.0 years</FONT></P>

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<CENTER><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=1><B>Staples.com Stock:<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29,<BR>
2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Pro forma net loss</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(1,118</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Pro forma basic net loss per common share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>Pro forma diluted net loss per common share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Information
with respect to options granted under the above plans is as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="23%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-Average<BR>
Exercise Price<BR>
Per Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Outstanding at January 30, 1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>25,274,138</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(14,459,878</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(144,398</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>Outstanding at January 29, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>10,699,862</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
weighted-average fair values of options granted during the year ended January 29, 2000 was $0.33.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes information concerning currently outstanding and exercisable options for Staples.com Stock:</FONT></P>

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<CENTER><TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="14%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="35%" COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="14%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="32%" COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Options Exercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="14%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Remaining<BR>
Contractual Life</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Exercise Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="14%" ALIGN="CENTER"><FONT SIZE=2>$1.63</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>10,699,862</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>9.78</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>10,699,862</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1.63</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-88</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<P><FONT SIZE=2><B>Performance Accelerated Restricted Stock ("PARS")</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;PARS are shares of Staples' common stock granted outright to employees and non-employee directors without cost to the employee or director. The shares,
however, are restricted in that they are not
transferable (e.g. they may not be sold) by the employee or director until they vest, generally after the end of five years. Such vesting date may accelerate if Staples achieves certain compound
annual earnings per share growth over a certain number of interim years. If the employee leaves Staples, or the director ceases to serve as a director of Staples, prior to the vesting date for any
reason, the PARS shares will be forfeited by the employee or director, as the case may be, and will be returned to Staples. Once the PARS have vested, they become unrestricted and may be transferred
and sold like any other Staples shares. There have been no Staples.com PARS issued to date.</FONT></P>

<P><FONT SIZE=2><B>Employees' 401(k) Savings Plan</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under Staples' Employees' 401(k) Savings Plan (the "401(k) Plan"), and Supplemental Executive Retirement Plan (the "SERP Plan"), Staples may contribute up to a
total of 2,503,125 shares of common stock, regardless of series, to these plans. The 401(k) Plan is available to all employees of Staples who meet minimum age and length of service requirements.
Company contributions are based upon a matching formula applied to employee contributions with additional contributions made at the discretion of the Board.</FONT></P>

<P><FONT SIZE=2><B>NOTE I&nbsp;&nbsp;Income Taxes</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The provision (benefit) for income taxes and related assets and liabilities attributed to Staples.com are determined in accordance with Staples' tax allocation
policy. In general, this policy provides that the consolidated tax provision, and related tax payments or refunds, are allocated between the businesses based principally upon the financial income,
taxable income, credits and other amounts directly related to the respective businesses. Tax benefits that cannot be used by the business generating such attributes, but can be utilized on a
consolidated basis, are allocated to the business generating such benefits. As a result, the allocated amounts of taxes payable or refundable are not necessarily comparable to those that would have
resulted if the businesses had filed separate tax returns.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Deferred
income taxes reflect the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components and the approximate tax effect of Staples.com's deferred tax assets and liabilities as of January&nbsp;29, 2000 and January&nbsp;30, 1999 are as
follows:</FONT></P>

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<CENTER><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="58%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29, 2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30, 1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>Net Operating Losses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>27,608,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>791,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>Depreciation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>(58,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(30,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>Net Deferred Tax Assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>27,550,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>761,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="58%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></CENTER>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Because
Staples.com has been fully reimbursed for the benefit of the net operating loss under Staples' tax allocation policy, no valuation allowance has been provided on the net
operating loss and the balance is</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-89</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>

<P><FONT SIZE=2>included
in the inter-business revolver balance. The provision for income tax for the fiscal years January&nbsp;29, 2000 and January&nbsp;30, 1999 is comprised solely of income tax benefits of
$10,459,000 and $304,000, respectively.</FONT></P>

<P><FONT SIZE=2><B>NOTE J&nbsp;&nbsp;Financial Guarantees</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Company has provided financial guarantees relating to loans taken by certain executives used to exercise the options of Staples.com Stock granted to them.
The balance of the loans guaranteed by the Company was $17,889,918, including deferred interest of $1,680,982, at January 29, 2000. The loans are 50% non-recourse to the individuals and the interest
payable on the loans is with full recourse to the individuals. Each of these persons entered into a pledge agreement with the bank pursuant to which they pledged their shares of Staples.com Stock as
collateral for the loan they received. Staples entered into a line of credit and guaranty agreement with the bank pursuant to which Staples agreed to guarantee these loans.</FONT></P>

<P><FONT SIZE=2><B>NOTE K&nbsp;&nbsp;Business Acquisitions</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On May 21, 1998, Staples acquired Quill Corporation and certain related entities, including the operations of</FONT> <FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2>. The merger was structured as an
exchange of shares in which the stockholders of Quill received approximately 26,000,000 shares of Staples
RD Stock, at an exchange ratio established at a combination of fixed and variable prices, and cash paid to dissenting shareholder of approximately $48,000,000, which equates to a purchase price of
approximately $690,000,000. The merger was accounted for as a pooling of interests and, accordingly, Staples.com's consolidated financial statements have been restated to include the operations of</FONT> <FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT
SIZE=2> for all periods prior to the merger. The statements of operations combine Staples.com's historical operating results for the fiscal year
ended January 31, 1998 with the corresponding </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> operating results for the year ended December 31, 1997. Prior to the acquisition, Quill
elected to be taxed as an S Corporation under the Internal Revenue Code. Accordingly, the current taxable income of </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2> was taxable to its
shareholders who were responsible for the payment of taxes thereon. Quill will be included in Staples' U.S. federal income tax return subsequent to the date of the acquisition. Pro forma adjustments
have been made to the restated statements of operations to reflect the income taxes that would have been provided had </FONT><FONT SIZE=2><I>Quillcorp.com</I></FONT><FONT SIZE=2>'s income been
subject to income taxes.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-90</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=5,SEQ=152,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=329384,FOLIO=C-90,FILE='DISK018:[00BOS8.00BOS1458]ET1458A.;24',USER='WMACDON',CD='10-MAR-2000;15:23 -->

<P><FONT SIZE=2><B>NOTE L&nbsp;&nbsp;Computation of Net Loss per Common Share</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The computation of historical net loss per share has been included for the periods subsequent to the approval of the Tracking Stock Proposal. The pro forma net
loss per share has been calculated to give effect to the sale of Staples.com Stock in private placements and includes a benefit for income taxes on
previously unbenefited losses of pooled S-Corporation. (Amounts in thousands, except for per share data):</FONT></P>

<P><FONT SIZE=2><B>Historical Net Loss Per Share</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="80%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>13 weeks ended<BR>
January 29, 2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Numerator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(730</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Denominator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>16,108,177</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Denominator for basic net loss per common share&#151;weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>16,108,177</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Effect of dilutive securities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Incremental and windfall shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Performance accelerated restricted stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Dilutive potential common shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Denominator for diluted net loss per common share&#151;adjusted weighted-average shares and assumed conversions</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>16,108,177</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Basic net loss per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="80%"><FONT SIZE=2>Diluted net loss per common share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-91</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=6,SEQ=153,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=227645,FOLIO=C-91,FILE='DISK018:[00BOS8.00BOS1458]ET1458A.;24',USER='WMACDON',CD='10-MAR-2000;15:23 -->

<P><FONT SIZE=2><B>Pro forma Net Loss Per Share</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 29, 2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 30, 1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>January 31, 1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Numerator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Historical net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(16,358</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(487</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Pro forma provision for taxes on previously untaxed earnings of S-Corporation Income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>120</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Adjustment for Staples RD's pro forma retained interest</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>15,272</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>448</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>168</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Pro forma net loss with S-Corporation conversion and adjustment for Staples RD's retained interest</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1,086</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(27</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(12</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Denominator:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Denominator for basic net loss per common share&#151;weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>14,235,107</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,792,308</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,792,308</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Denominator for diluted net loss per common share&#151;weighted-average shares</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>14,235,107</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,792,308</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>12,792,308</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Pro forma basic net loss per common share with S-Corporation conversion and adjustment for Staples RD's retained interest in Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(0.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(0.00</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="47%"><FONT SIZE=2>Pro forma diluted net loss per common share with S-Corporation conversion and adjustment for Staples RD's retained interest in Staples.com</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(0.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(0.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(0.00</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2><B>NOTE M&nbsp;&nbsp;Quarterly Summary (Unaudited)</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>First<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Second<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Third<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fourth<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="45%" COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>(In thousands, except per share amounts)<BR></B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2><B>Fiscal Year Ended January 29, 2000</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,692</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,610</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>23,979</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>43,068</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Gross Profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,670</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,635</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,505</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,745</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Historical net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,069</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,637</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,844</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(9,808</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Historical net loss attributed to Staples.com Stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(730</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Pro forma net loss attributed to Staples.com Stock<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(124</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(98</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(171</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(833</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2><I>Basic net loss per common share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Historical net loss per common share<SUP>(1)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Pro forma net loss per common share<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.04</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2><I>Diluted net loss per common share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Historical net loss per common share<SUP>(1)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Pro forma net loss per common share<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(0.04</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>C-92</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=7,SEQ=154,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=20595,FOLIO=C-92,FILE='DISK018:[00BOS8.00BOS1458]ET1458A.;24',USER='WMACDON',CD='10-MAR-2000;15:23 -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>First<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Second<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Third<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fourth<BR>
Quarter</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="45%" COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>(In thousands, except per share amounts)<BR></B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2><B>Fiscal Year Ended January 30, 1999</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,244</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,815</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,046</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,781</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Gross Profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>569</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>783</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,077</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,736</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Historical net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(53</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(99</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(285</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Pro forma net loss attributed to Staples.com Stock<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)<SUP>(3)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(6</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(17</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2><I>Basic net loss per common share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Pro forma net loss per common share<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2><I>Diluted net loss per common share</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Pro forma net loss per common share<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2><SUP>(1)</SUP></FONT></DT><DD><FONT SIZE=2>Historical
net loss per share is omitted for the 1<SUP>st</SUP>, 2<SUP>nd</SUP>, and 3<SUP>rd</SUP> quarters of fiscal year ending January&nbsp;29, 2000 and
for the entire year ending January&nbsp;30, 1999 as Staples.com Stock was not created unitl the quarter ended January 29, 2000 as a result of the approval of the Tracking Stock Proposal which
changed Staples capital structure by creating Staples.com Stock and reclassifying Staples common stock as Staples RD Stock.
<BR><BR></FONT></DD><DT><FONT SIZE=2><SUP>(2)</SUP></FONT></DT><DD><FONT SIZE=2>Pro
forma information is calculated to give effect to the sale of 12,792,308 shares of Staples.com Stock in private placements. In presenting this pro forma
information, these transactions were assumed to have occurred on February&nbsp;2, 1997.
<BR><BR></FONT></DD><DT><FONT SIZE=2><SUP>(3)</SUP></FONT></DT><DD><FONT SIZE=2>Pro
forma net loss includes the earnings of Quill with provision for income taxes on previously untaxed earnings of pooled S-Corporation income.</FONT></DD></DL>
<BR>

<P><FONT SIZE=2><B>NOTE N&nbsp;&nbsp;Subsequent Events</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In February 2000, Staples.com completed a 10% investment in BizBuyer.com of approximately $19,000,000. The investment will be accounted for on a cost basis as
it only represents an interest of no greater than 15% of the outstanding stock of the company and its fair value cannot be determined using readily available market data. BizBuyer.com is a leading
business-to-business marketplace where buyers and sellers connect to buy and sell products and services.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
February 18, 2000, Staples.com filed a registration statement for an initial public offering of shares of Staples.com Stock.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On
March 3, 2000, Register.com, an investment recorded at cost by Staples.com of approximately $8,000,000 at January&nbsp;29, 2000, completed an initial public offering of its
common stock. The closing stock price of Register.com on that date was $57.25 per share. At the date of the initial public offering, Staples.com owned approximately 2,160,000 shares of common stock,
and warrants to purchase approximately 1,640,000 additional shares, resulting in an unrealized gain of approximately $215,000,000. Staples.com accounts for its investment in Register.com in accordance
with SFAS 115 and the resulting unrealized gain or loss resulting from fluctuations in the market price of Register.com would be recorded as a component of group equity.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-93</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=8,SEQ=155,EFW="2005363",CP="STAPLES,INC.",DN="1",CHK=480097,FOLIO=C-93,FILE='DISK018:[00BOS8.00BOS1458]ET1458A.;24',USER='WMACDON',CD='10-MAR-2000;15:23 -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>EXHIBIT INDEX</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Exhibit</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="2%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="84%" ALIGN="CENTER"><FONT SIZE=1><B>Description of Exhibit</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Restated Certificate of Incorporation of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(1)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Certificate of Amendment to Certificate of Incorporation of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3.3</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(8)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Amended and Restated By-laws of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Rights Agreement, dated as of October&nbsp;25, 1999, between the Company and Chase Mellon Shareholder Services, L.L.C.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(7)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Indenture, dated as of August&nbsp;12, 1997, for the $200,000,000 7.125% Senior Notes due August&nbsp;15, 2007, between the Company and The Chase Manhattan Bank</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4.3</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Indenture, dated as of November&nbsp;15, 1999, for the $150,000,000 5.875% Notes due Novemeber&nbsp;15, 2004, by and among the Company, Staples the Office Superstore, Inc., Staples the Office Superstore East, Inc.,
Staples Contract &amp; Commercial, Inc. and the Chase Manhattan Bank.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.1*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Amended and Restated 1990 Director Stock Option Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.2*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Amended and Restated 1992 Equity Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.3*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(5)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>1997 United Kingdom Company Share Option Scheme</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.4*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(5)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Executive Officer Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.5</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(6)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Revolving Credit Agreement, dated as of Novemeber&nbsp;13, 1997, between the Company and BancBoston, N.A. and the banks named therein</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.6*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Form of Agreement Not to Compete signed by executive officers of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.7*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(10)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Form of Proprietary and Confidential Information Agreement signed by executive officers of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.8*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(9)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Form of Severance Benefits Agreement signed by executive officers of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.9</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>First Supplemental Indenture (Senior Debt Securities), dated as of August&nbsp;12, 1997, between Staples, Inc., Staples Contract &amp; Commercial, Inc., Staples the Office Superstore, Inc., Staples the Office Superstore
East, Inc. and Marine Midland Bank.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.10</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Staples.com Common Stock Purchase Agreement, dated as of December&nbsp;7, 1999</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.11</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Staples.com Common Stock Purchase Agreement, dated as of November&nbsp;9, 1999</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.12*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Line of Credit and Guaranty Agreement, dated December 6, 1999, between Staples and Boston Safe Deposit &amp; Trust Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10.13*</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Line of Credit and Guaranty Agreement, dated January 25, 2000, between Staples and Boston Safe Deposit &amp; Trust Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Computation of Ratio of Earnings to Fixed Charges</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>21.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Subsidiaries of the Company</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>23.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Consent of Ernst &amp; Young, LLP, Independent Auditors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>23.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Consent of Independent Auditor Kupferberg, Goldberg &amp; Neimark, LLC</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>27.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Financial Data Schedule for Fiscal Year 1999</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>99.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Indenpendent Auditors' Report of Kupferberg, Goldberg &amp; Neimark, LLC</FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Management
contract or compensatory plan or arrangement filed as an exhibit to this Form pursuant to Items&nbsp;14(a) and 14(c) of Form&nbsp;10-K.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference from the Prozy Statement filed on October&nbsp;12, 1999.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference from the Annual Report on Form&nbsp;10-K for the fiscal year ended January&nbsp;30, 1999.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference from the Quarterly Report of Form&nbsp;10-Q for the quarter ended October&nbsp;30, 1999.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>E-1</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<DL compact>
<DT><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference from the Quarterly Report of Form&nbsp;10-Q for the quarter ended may&nbsp;2, 1998.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference from the Annual Report on Form&nbsp;10-K for the fiscal year ended January&nbsp;31, 1998.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference from the Quarterly Report of Form&nbsp;10-Q for the quarter ended November&nbsp;1, 1997.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference from the Registration Statement on Form&nbsp;S-3 (File No. 333-31249).
<BR><BR></FONT></DD><DT><FONT SIZE=2>(8)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference from the Quarterly Report of Form&nbsp;10-Q for the quarter ended May&nbsp;3, 1997.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(9)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference from the Annual Report on Form&nbsp;10-K for the fiscal year ended February&nbsp;3, 1996.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(10)</FONT></DT><DD><FONT SIZE=2>Incorporated
by reference from the Quarterly Report of Form&nbsp;10-Q for the quarter ended April&nbsp;29, 1995.</FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>E-2</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>2
<DESCRIPTION>EXHIBIT 4.1
<TEXT>


<PAGE>

                                                                     Exhibit 4.1

--------------------------------------------------------------------------------



                                  STAPLES, INC.

                                       and

                    CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,

                                 as Rights Agent

                                 ---------------


                      Amended and Restated Rights Agreement

                          Dated as of October 25, 1999

--------------------------------------------------------------------------------




<PAGE>



                                RIGHTS AGREEMENT

                  AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of October 25,
1999 (the "Agreement"), between Staples, Inc., a Delaware corporation (the
"Company"), and ChaseMellon Shareholder Services, L.L.C., a New Jersey limited
liability company, as Rights Agent (the "Rights Agent").

                               W I T N E S S E T H

                  WHEREAS, on February 3, 1994, the Board of Directors of the
Company (the "Board") authorized and declared a dividend distribution of one
Right for each share of Common Stock (as hereinafter defined) of the Company
outstanding at the Close Of Business (as hereinafter defined) on February 15,
1994 (the "Record Date"), and authorized the issuance of one Right (as such
number may hereinafter be adjusted pursuant to the provisions of Section 11(p)
hereof) for each share of Common Stock of the Company issued between the Record
Date (whether originally issued or delivered from the Company's treasury) and
the Distribution Date, each Right initially representing the right to purchase
one one-hundredth of a share of Series A Junior Participating Preferred Stock of
the Company having the rights, powers and preferences set forth in the form of
Certificate of Designations attached hereto as EXHIBIT A, upon the terms and
subject to the conditions hereinafter set forth (the "Rights");

                  WHEREAS, the Company entered into a Rights Agreement, dated as
of February 3, 1994 (the "Original Agreement"), with The First National Bank of
Boston ("FNBB") as the original rights agent;

                  WHEREAS, FNBB has been terminated as the original rights agent
and the Company has appointed the Rights Agent as FNBB's successor; and

                  WHEREAS, the Company and the Rights Agent have agreed to make
certain changes to the Original Agreement as reflected herein.

                  NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:

     Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:

                  (a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the shares of Common Stock then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii)
any employee benefit plan of the Company or of any Subsidiary of the Company, or
(iv) any Person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan. Notwithstanding the foregoing, no
Person shall become an "Acquiring Person" as the result of an acquisition of
Common Stock by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares Beneficially Owned by such Person
to 20% or more of the Common Stock of the Company then outstanding; PROVIDED,
HOWEVER, that if a Person shall become the Beneficial


<PAGE>

Owner of 20% or more of the Common Stock of the Company then outstanding by
reason of share purchases by the Company and shall, after such share purchases
by the Company, become the Beneficial Owner of any additional Common Stock of
the Company, then such Person shall be deemed to be an "Acquiring Person."
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of shares of Common Stock so that such Person
would no longer be an "Acquiring Person, " as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement.

                  (b) "Act" shall mean the Securities Act of 1933, as amended.

                  (c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in effect
on the date of this Agreement (the "Exchange Act").

                  (d) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "Beneficially Own," any securities:

                      (i) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities), whether or not in writing, or upon the
exercise of conversion rights, exchange rights, other rights, warrants or
options, or otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed the
"Beneficial Owner" of, or to "Beneficially Own," (A) securities tendered
pursuant to a tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange, or (B) securities issuable upon exercise of Rights at
any time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a Triggering
Event which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to Section
3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section 11(i)
hereof in connection with an adjustment made with respect to any Original
Rights;

                      (ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote or dispose of or
has "Beneficial Ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act, or any comparable or
successor rule) , including pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), whether or not in writing; PROVIDED, HOWEVER, that a Person shall
not be deemed the "Beneficial Owner" of, or to "Beneficially Own," any security
under this subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable provisions of the


                                       2
<PAGE>

General Rules and Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or

                      (iii) which are Beneficially Owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities), whether or not in writing, for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
the proviso to subparagraph (ii) of this paragraph (d)) or disposing of any
voting securities of the Company.

                  Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company, shall
mean the number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder.

                  (e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New Jersey or the
State of Connecticut are authorized or obligated by law or executive order to
close.

                  (f) "Close of Business" on any given date shall mean 5:00
P.M., Boston time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day it shall mean 5:00 P.M., Boston time, on the next succeeding
Business Day.

                  (g) "Common Stock", when used in reference to the Company,
shall mean the common stock, $.0006 par value, of the Company, except that
"Common Stock" when used with reference to any Person other than the Company
shall mean the capital stock of such Person with the greatest voting power, or
the equity securities or other equity interest having power to control or direct
the management, of such Person.

                  (h) "Common stock equivalents" shall have the meaning set
forth in Section 11(a) (iii) hereof.

                  (i) "Continuing Director" shall mean (i) any member of the
Board, while such Person is a member of the Board, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, and was a member
of the Board prior to the date of this Agreement, or (ii) any Person who
subsequently becomes a member of the Board, while such Person is a member of the
Board, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person or of any such
Affiliate or Associate, if such Person's nomination for election or election to
the Board is recommended or approved by a majority of the Continuing Directors.

                  (j) "Current market price" shall have the meaning set forth in
Section 11(d) (i) hereof.


                                       3
<PAGE>

                  (k) "Current Value" shall have the meaning set forth in
Section 11(a) (iii) hereof.

                  (l) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.

                  (m) "Exchange Act" shall have the meaning set forth in Section
1(c) hereof.

                  (n) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.

                  (o) "Final Expiration Date" shall mean the Close Of Business
on February 15, 2004.

                  (p) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity.

                  (q) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, $.01 par value, of the Company having the rights
and preferences set forth in the form of Certificate of Designations attached to
this Agreement as EXHIBIT A and, to the extent that there is not a sufficient
number of shares of Series A Junior Participating Preferred Stock authorized to
permit the full exercise of the Rights, any other series of Preferred Stock,
$.01 par value, of the Company designated f or such purpose containing terms
substantially similar to the terms of the Series A Junior Participating
Preferred Stock.

                  (r) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.

                  (s) "Purchase Price" shall have the meaning set forth in
Section 4(a) hereof.

                  (t) "Record Date" shall have the meaning set forth in the
WHEREAS clause at the beginning of the Agreement.

                  (u) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.

                  (v) "Rights" shall have the meaning set forth in the WHEREAS
clause at the beginning of the Agreement.

                  (w) "Rights Certificates" shall have the meaning set forth in
Section 3(a) hereof.

                  (x) "Section 11(a) (ii) Event" shall mean any event described
in Section 11(a) (ii) (A), (B) or (C) hereof.

                  (y) "Section 11(a) (ii) Trigger Date" shall have the meaning
set forth in Section 11(a) (iii) hereof.

                  (z) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.


                                       4
<PAGE>

                  (aa) "Spread" shall have the meaning set forth in Section
11(a) (iii) hereof.

                  (bb) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.

                  (cc) "Subsidiary" shall mean, with reference to any Person,
any corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is Beneficially Owned,
directly or indirectly, by such Person, or otherwise controlled by such Person.

                  (dd) "Substitution Period" shall have the meaning set forth in
Section 11(a) (iii) hereof.

                  (ee) "Trading Day" shall have the meaning set forth in Section
11(d) (i) hereof.

                  (ff) "Triggering Event" shall mean any Section 11(a) (ii)
Event or any Section 13 Event.

          Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. The Rights Agent shall have no duty to supervise, and in
no event shall be liable for, the acts or omissions of any such Co-Rights Agent.

          Section 3. ISSUE OF RIGHTS CERTIFICATES.

                  (a) Until the earlier of (i) the Close Of Business on the
tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date), or (ii) the Close of Business on the tenth business day after the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 30% or more of the shares
of Common Stock then outstanding (the earlier of (i) and (ii) being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Company shall promptly notify the
Rights Agent thereof and provide the Rights Agent with a shareholders list of
Common Stock, and the Rights Agent will send by first-class, insured, postage
prepaid mail,


                                       5
<PAGE>

to each record holder of the Common Stock as of the Close Of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of EXHIBIT B
hereto (the "Rights Certificates"), evidencing one Right for each share of
Common Stock so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per share of Common Stock has been
made pursuant to Section 11(p) hereof, at the time of distribution of the Right
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.

                  (b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form attached hereto as EXHIBIT C, by first-class, postage
prepaid mail, to each record holder of the Common Stock as of the Close Of
Business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for the Common Stock outstanding as
of the Close Of Business on the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates for the Common Stock and the
registered holders of the Common Stock shall also be the registered holders of
the associated Rights. Until the earlier of the Distribution Date or the
Expiration Date (as such term is defined in Section 7 hereof), the transfer of
any certificates representing shares of Common Stock in respect of which Rights
have been issued shall also constitute the transfer of the Rights associated
with such shares of Common Stock.

                  (c) Rights shall be issued in respect of all shares of Common
Stock that are issued (either as an original issuance or from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date. Certificates representing such shares of Common
Stock (including, without limitation, certificates issued upon transfer or
exchange of Common Stock) shall also be deemed to be certificates for Rights,
and shall bear the following legend:

                  This certificate also evidences and entitles the holder hereof
                  to certain Rights as set forth in the Rights Agreement between
                  Staples, Inc. (the "Company") and ChaseMellon Shareholder
                  Services, L.L.C. (the "Rights Agent") dated as of October 25,
                  1999 (the "Rights Agreement"), the terms of which are hereby
                  incorporated herein by reference and a copy of which is on
                  file at the principal offices of the Company. Under certain
                  circumstances, as set forth in the Rights Agreement, such
                  Rights will be evidenced by separate certificates and will no
                  longer be evidenced by this certificate. The Company will mail
                  to the holder of this certificate a copy of the Rights
                  Agreement, as in effect on the date of mailing, without charge
                  promptly after receipt of a written request therefor. Under
                  certain circumstances set forth in the Rights Agreement,
                  Rights issued to, or held by, any Person who is, was or
                  becomes an Acquiring Person or any Affiliate or Associates
                  thereof (as such terms are defined in the Rights Agreement),
                  whether currently held


                                       6
<PAGE>

                  by or on behalf of such Person or by any subsequent holder,
                  may become null and void.

With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates. In the event
that the Company purchases or acquires any shares of Common Stock after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed cancelled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common Shares which
are no longer outstanding.

          Section 4. FORM OF RIGHTS CERTIFICATES.

                  (a) The Rights Certificates (and the forms of election to
purchase, certification and assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth in EXHIBIT B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement and which do not affect the
rights, duties or responsibilities of the Rights Agent, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or over-the-counter
market on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever distributed, shall entitle the holders thereof to
purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one one-hundredth of a share, the "Purchase Price"), but the amount and type
of securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.

                  (b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights Beneficially Owned by persons known to
be: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
that has as a primary purpose or effect avoidance of Section 7(e) hereof, and,
provided that the Company shall have notified the Rights Agent that this Section
4(b) applies, any Rights Certificate issued pursuant to Section 6 or Section 11
hereof upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent feasible)
the following legend:


                                       7
<PAGE>

                  The Rights represented by this Rights Certificate are or were
                  Beneficially Owned by a Person who was or became an Acquiring
                  Person or an Affiliate or Associate of an Acquiring Person (as
                  such terms are defined in the Rights Agreement). Accordingly,
                  this Rights Certificate and the Rights represented hereby may
                  become null and void in the circumstances specified in Section
                  7(e) of such Agreement.

          Section 5. COUNTERSIGNATURE AND REGISTRATION.

                  (a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof, which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless so countersigned. In case
any officer of the Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.

                  (b) Following the Distribution Date and receipt by the Rights
Agent of all relevant information, the Rights Agent will keep or cause to be
kept, at its office designated as the appropriate place for surrender of Rights
Certificates upon exercise or transfer, books for registration and transfer of
the Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates, the Certificate
number and the date of each of the Rights Certificates.

          Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.

                  (a) Subject to the provisions of Section 4(b), Section 7(e)
and Section 14 hereof, at any time after the Close Of Business on the
Distribution Date, and at or prior to the Close Of Business on the Expiration
Date, any Rights Certificate or Certificates (other than Rights Certificates
representing Rights that have become void pursuant to Section 7(e) hereof or
that have been exchanged pursuant to Section 24 hereof) may be transferred,
split up, combined or exchanged for another Rights Certificate or Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a share of Preferred Stock (or, following a Triggering Event, Common Stock,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled such holder (or former
holder in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or


                                       8
<PAGE>

exchange any Rights Certificate or Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged,
with the form of assignment and certificate appropriately executed, at the
office of the Rights Agent designated for such purpose. Neither the Rights Agent
nor the Company shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Rights Certificate until the registered
holder shall have properly completed and signed the certificate contained in the
form of assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company or
the Rights Agent shall reasonably request. Thereupon the Rights Agent shall,
subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates. The Rights Agent shall have no duty or obligation under
this Section 6 or under any provision of this Agreement which requires the
payment of taxes or governmental charges unless and until it is satisfied that
all such taxes and/or charges as required by the Company have been paid in full.

                  (b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

     Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.

                  (a) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a) (iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the office of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-hundredths of a share (or other securities, cash or other assets, as the
case may be) as to which such surrendered Rights are then exercisable, at or
prior to the earlier of (i) the Final Expiration Date, (ii) the time at which
the Rights expire as provided in Section 13(d) hereof, (iii) the time at which
the Rights are redeemed as provided in Section 23 hereof, or (iv) the time at
which such Rights are exchanged as provided in Section 24 hereof (the earlier of
(i), (ii), (iii) and (iv) being herein referred to as the "Expiration Date").

                  (b) The Purchase Price for each one one-hundredth of a share
of Preferred Stock pursuant to the exercise of a Right shall initially be
$110.00, and shall be subject to


                                       9
<PAGE>

adjustment from time to time as provided in Sections 11 and 13(a) hereof and
shall be payable in accordance with paragraph (c) below.

                  (c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-hundredth of a share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable tax or
governmental charge, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) (A) requisition from any transfer agent of the shares of
Preferred Stock (or make available, if the Rights Agent is the transfer agent
for such shares) certificates for the total number of one one-hundredths of a
share of Preferred Stock to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if the
Company shall have elected to deposit the total number of shares of Preferred
Stock issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one one-hundredths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to Section 11(a)
(iii) hereof) may be made in cash or by certified bank check or money order
payable to the order of the Company. In the event that the Company is obligated
to issue other securities (including Common Stock) of the Company, pay cash
and/or distribute other property pursuant to Section 11(a) hereof, the Company
will make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when
appropriate.

                  (d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 6 and
Section 14 hereof.

                  (e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a) (ii) Event, any
Rights Beneficially Owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board


                                       10
<PAGE>

of Directors of the Company has determined is part of a plan, arrangement or
understanding that has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall notify the Rights Agent when this Section 7(e) applies and shall use all
reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but neither the Company nor the Rights
Agent shall have any liability to any holder of Rights Certificates or other
Person as a result of the Company's failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.

                  (f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported transfer or exercise as set forth in this Section 7 unless such
registered holder shall have (i) properly completed and signed the certificate
following the form of assignment or election to purchase set forth on the
reverse side of the Rights Certificate surrendered for such assignment or
exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.

          Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.

          Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.

                  (a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section 11(a) (iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.

                  (b) So long as the shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights are eligible for
listing on any stock exchange, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares


                                       11
<PAGE>

reserved for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.

                  (c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a) (ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a) (iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the Act,
with respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the Expiration
Date. The Company will also take such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the various states
in connection with the exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed ninety (90) days after the date set
forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall promptly notify the Rights Agent thereof and issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement (with prompt notice thereof to the
Rights Agent) at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained.

                  (d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all one one-hundredths of a share
of Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.

                  (e) The Company further covenants and agrees that it will pay
when due and payable any and all taxes and governmental charges that may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any tax
or governmental charge that may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of one one-hundredths of a share of Preferred Stock (or
Common Stock and/ or other securities, as the case may be) in respect of a name
other than that of, the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise or to issue or deliver any certificates for a
number of one one-hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax or charge shall
have been paid (any such tax or charge being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax or charge is due.


                                       12
<PAGE>

          Section 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any
certificate for a number of one one-hundredths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable taxes and governmental charges) was made; PROVIDED, HOWEVER,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate, as such, shall not be
entitled to any rights of a stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.

          Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.

                  (a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares, or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital stock, as the case may
be, issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs that would
require an adjustment under both this Section 11(a) (i) and Section 11(a) (ii)
hereof, the adjustment provided for in this Section 11(a) (i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a) (ii) hereof.

                      (ii) Subject to Section 24 of this Agreement, in the
event:


                                       13
<PAGE>

                      (A) any Acquiring Person or any Associate or Affiliate of
any Acquiring Person, at any time after the date of this Agreement, directly or
indirectly, (1) shall merge into the Company or otherwise combine with the
Company and the Company shall be the continuing or surviving corporation of such
merger or combination and the Common Stock of the Company shall remain
outstanding and unchanged, (2) shall, in one transaction or a series of
transactions, transfer any assets to the Company or to any of its Subsidiaries
in exchange (in whole or in part) for shares of Common Stock, for shares of
other equity securities of the Company, or for securities exercisable for or
convertible into shares of equity securities of the Company (Common Stock or
otherwise) or otherwise obtain from the Company, with or without consideration,
any additional shares of such equity securities or securities exercisable for or
convertible into shares of such equity securities (other than pursuant to a pro
rata distribution to all holders of Common Stock or upon the exercise of Rights
or the conversion of a convertible security of the Company in accordance with
its terms), (3) shall sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise acquire or dispose of, in one transaction or a series of
transactions, to, from or with (as the case may be) the Company or any of its
Subsidiaries, assets (including securities) on terms and conditions less
favorable to the Company than the Company would be able to obtain in arm's
length negotiation with an unaffiliated third party, other than pursuant to a
transaction set forth in Section 13(a) hereof, (4) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose of in one
transaction or a series of transactions, to, from or with (as the case may be)
the Company or any of the Company's Subsidiaries (other than incidental to the
lines of business, if any, engaged in as of the date hereof between the Company
and such Acquiring Person or Associate or Affiliate) assets having an aggregate
fair market value of more than $2,500,000, other than pursuant to a transaction
set forth in Section 13(a) hereof, (5) shall receive any compensation from the
Company or any of the Company's Subsidiaries other than compensation for
full-time employment as a regular employee at rates in accordance with the
Company's (or its Subsidiaries') past practices, or (6) shall receive the
benefit, directly or indirectly (except proportionately as a stockholder and
except if resulting from a requirement of law or governmental regulation), of
any loans, advances, guarantees, pledges or other financial assistance or any
tax credits or other tax advantage provided by the Company or any of its
Subsidiaries, or

                     (B) any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan), alone or together with
its Affiliates and Associates, shall, at any time after the Record Date, become
the Beneficial Owner of 25% or more of the shares of Common Stock then
outstanding, unless the event causing the 25% threshold to be crossed is a
transaction set forth in Section 13(a) hereof, or is an acquisition of shares of
Common Stock pursuant to a tender offer or an exchange offer for all outstanding
shares of Common Stock at a price and on terms determined by at least a majority
of the members of the Board of Directors of the Company who are not officers of
the Company and who are not representatives, nominees, Affiliates or Associates
of the Person making such offer, after receiving advice from a nationally
recognized investment banking firm selected by the Board of Directors of the
Company, to be (a) at a price that is fair to stockholders (taking into account
all factors which such members of the Board deem relevant including, without
limitation, prices which could reasonably be achieved if


                                       14
<PAGE>

the Company or its assets were sold on an orderly basis designed to realize
maximum value) and (b) otherwise in the best interests of the Company and its
stockholders, or

                      (C) during such time as there is an Acquiring Person,
there shall be any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of its
Subsidiaries, other than a transaction or transactions to which the
provisions of Section 13(a) apply (whether or not with or into or otherwise
involving an Acquiring Person), which has the effect, directly or indirectly,
of increasing by more than 1% the proportionate share of the outstanding
shares of any class of equity securities of the Company or any of its
Subsidiaries which is directly or indirectly Beneficially Owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring Person, then,
promptly following the first occurrence of a Section 11(a) (ii) Event, proper
provision shall be made so that each holder of a Right (except as provided
below and in Section 7(e) hereof) shall thereafter have the right to receive,
upon exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, in lieu of a number of one one-hundredths of a
share of Preferred Stock, such number of shares of Common Stock of the
Company that equals the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a) (ii) Event, and (y) dividing that product
(which, following such first occurrence, shall thereafter be referred to as
the "Purchase Price" for each Right and for all purposes of this Agreement)
by 50% of the Current Market Price (determined pursuant to Section 11(d)
hereof) per share of Common Stock on the date of such first occurrence (such
number of shares, the "Adjustment Shares")

                  (iii) In the event that the number of shares of Common Stock
that are authorized by the Company's certificate of incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess, the "Spread"), and (B) with respect to each Right,
make adequate provision to substitute for the Adjustment Shares, upon payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price,
(3) Common Stock or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock which the Board of
Directors of the Company has deemed to have the same value as shares of Common
Stock (such shares of preferred stock, "common stock equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the Company
based upon the advice of a nationally recognized investment banking firm
selected by the Board of Directors of the Company; PROVIDED, HOWEVER, if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a) (ii) Event and (y) the date on which the Company's
right of redemption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the "Section 11(a) (ii) Trigger Date"), then the
Company shall be


                                       15
<PAGE>

obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors of the Company
shall determine in good faith that it is likely that sufficient additional
shares of Common Stock could be authorized for issuance upon exercise in full of
the Rights, the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the Section 11(a)
(ii) Trigger Date, in order that the Company may seek shareholder approval for
the authorization of such additional shares (such period, as it may be extended,
the "Substitution Period"). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second sentences of this
Section 11(a) (iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights, and
(y) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of any such
suspension, the Company shall promptly notify the Rights Agent thereof and issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement (with prompt notice
thereof to the Rights Agent) at such time as the suspension is no longer in
effect. For purposes of this Section 11(a) (iii), the value of the Common Stock
shall be the Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of the Common Stock on the Section 11(a) (ii) Trigger Date and
the value of any "common stock equivalent" shall be deemed to have the same
value as the Common Stock on such date.

                  (b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("equivalent preferred stock")) or securities convertible into Preferred
Stock or equivalent preferred stock at a price per share of Preferred Stock or
per share of equivalent preferred stock (or having a conversion price per share,
if a security convertible into Preferred Stock or equivalent preferred stock)
less than the Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or equivalent preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock and/or equivalent preferred stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any


                                       16
<PAGE>

such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights, options or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.

          (c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to a
share of Preferred Stock and the denominator of which shall be such Current
Market Price (as determined pursuant to Section 11(d) hereof) per share of
Preferred Stock. Such adjustments shall be made successively whenever such a
record date is fixed, and in the event that such distribution is not so made,
the Purchase Price shall be adjusted to be the Purchase Price which would have
been in effect if such record date had not been fixed.

          (d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a) (iii) hereof, the "Current Market
Price" per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to but not including such date, and for purposes of computations made pursuant
to Section 11(a) (iii) hereof, the "Current Market Price" per share of Common
Stock on any date shall be deemed to be the average of the daily closing prices
per share of such Common Stock for the ten (10) consecutive Trading Days
immediately following but not including such date; PROVIDED, HOWEVER, that in
the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the "Current Market Price" shall be properly adjusted to take
into account ex-dividend trading. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the shares of Common Stock are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities


                                       17
<PAGE>

listed on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common Stock
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the Nasdaq National
Market ("Nasdaq") or such other system then in use, or, if on any such date the
shares of Common Stock are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board of Directors of the
Company. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith by
the Board of Directors of the Company shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, a Business Day. If the
Common Stock is not publicly held or not so listed or traded, "Current Market
Price" per share shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive for all
purposes.

              (ii) For the purpose of any computation hereunder, the "Current
Market Price" per share of Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock in clause (i) of this Section
11(d) (other than the last sentence thereof). If the Current Market Price per
share of Preferred Stock cannot be determined in the manner provided above or if
the Preferred Stock is not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the "Current Market Price" per
share of Preferred Stock shall be conclusively deemed to be an amount equal to
100 (as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current Market
Price per share of the Common Stock. If neither the Common Stock nor the
Preferred Stock is publicly held or so listed or traded, "Current Market Price"
per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. For all purposes of this Agreement, the
"Current Market Price" of one one-hundredth of a share of Preferred Stock shall
be equal to the "Current Market Price" of one share of Preferred Stock divided
by 100.

          (e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
PROVIDED, HOWEVER, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one-millionth of a share of Preferred
Stock, or ten-thousandth of a share of Common Stock or other share, as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.


                                       18
<PAGE>

          (f) If as a result of an adjustment made pursuant to Section 11(a)
(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.

          (g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.

          (h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of a share covered by a
Right immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.

          (i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-hundredths of a share of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of one one-hundredths
of a share of Preferred Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such adjustment of
the number of Rights shall become that number of Rights (calculated to the
nearest one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement (with prompt notice thereof to the Rights Agent) of
its election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be at
least ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be


                                       19
<PAGE>

entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.

          (j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-hundredth of a
share and the number of one one-hundredths of a share which were expressed in
the initial Rights Certificates issued hereunder.

          (k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of one
one-hundredths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one one-hundredths of a share
of Preferred Stock at such adjusted Purchase Price.

          (l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer (with prompt notice thereof to
the Rights Agent) until the occurrence of such event the issuance to the holder
of any Right exercised after such record date the number of one one-hundredths
of a share of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the number of one
one-hundredths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; PROVIDED, HOWEVER, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.

          (m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.

          (n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets


                                       20
<PAGE>

or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
if (x) at the time of or immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments or securities outstanding or
agreements in effect that would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale, the
shareholders of the Person who constitutes, or would constitute, the "Principal
Party" for purposes of Section 13(a) hereof shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates and
Associates.

          (o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23, Section 24 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.

          (p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Record Date and prior to the
Distribution Date (i) declare or pay any dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
shares of Common Stock, or (iii) combine the outstanding shares of Common Stock
into a smaller number of shares, the number of Rights associated with each share
of Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the occurrence of such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately following the occurrence of such event.

     Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief, reasonably detailed, statement of the facts and
computations accounting for such adjustment, (b) promptly file with the Rights
Agent, and with each transfer agent for the Preferred Stock and the Common
Stock, a copy of such certificate, and (c) mail a brief summary thereof to each
holder of a Rights Certificate (or, if prior to the Distribution Date, to each
holder of a certificate representing shares of Common Stock) in accordance with
Section 26 hereof. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment therein contained and shall not be deemed
to have knowledge of any such adjustment unless and until it shall have received
such certificate.

     Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.

          (a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o)


                                       21
<PAGE>

hereof), and the Company shall not be the continuing or surviving corporation of
such consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction that complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof), then, and in
each such case and except as contemplated by Section 13(d) hereof, proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, such number of validly authorized and issued, fully paid,
non-assessable and freely tradeable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then current Purchase Price by the
number of one one-hundredths of a share of Preferred Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13 Event (or,
if a Section 11(a) (ii) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one one-hundredths of a share
for which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a) (ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by (2) 50% of the Current
Market Price (determined pursuant to Section 11(d) (i) hereof) per share of the
Common Stock of such Principal Party on the date of consummation of such Section
13 Event; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a) (ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.

          (b) "Principal Party" shall mean

              (i) in the case of any transaction described in clause (x) or (y)
of the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and


                                       22
<PAGE>

              (ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions;

PROVIDED, HOWEVER, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.

          (c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms, set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will

              (i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an appropriate form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times meeting the requirements of
the Act) until the Expiration Date; and

             (ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that comply in all
respects with the requirements for registration on Form 10 under the Exchange
Act.

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a) (ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).

          (d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a tender offer
or exchange offer for all outstanding shares of Common Stock which complies with
the provisions of Section 11(a) (ii) (B) hereof regarding the determination of
the Board of Directors (or a wholly owned subsidiary of any such Person or
Persons), (ii) the price per share of Common Stock offered in such transaction
is not less than the price per share of Common Stock paid to all holders of
shares of Common Stock whose shares were purchased pursuant to such tender offer
or exchange offer, and (iii) the form of consideration being offered to the
remaining holders of shares of Common Stock pursuant to such transaction is the
same as


                                       23
<PAGE>

the form of consideration paid pursuant to such tender offer or exchange offer.
Upon consummation of any such transaction contemplated by this Section 13(d),
all Rights hereunder shall expire.

     Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.

          (a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates that evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last sum quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professorial market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.

          (b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates that evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock) . In lieu of fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock), the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
one-hundredth of a share of Preferred Stock. For purposes of this Section 14(b),
the current market value of one one-hundredth of a share of Preferred Stock
shall be one one-hundredth of the closing price of a share of Preferred Stock
(as determined pursuant to Section 11(d) (ii) hereof) for the Trading Day
immediately prior to the date of such exercise.

          (c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates


                                       24
<PAGE>

at the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one (1) share of Common
Stock. For purposes of this Section 14(c), the current market value of one share
of Common Stock shall be the closing price of one share of Common Stock (as
determined pursuant to Section 11(d) (i) hereof) for the Trading Day immediately
prior to the date of such exercise.

          (d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.

     Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, except the rights of action expressly given to the Rights Agent in
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

     Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:

          (a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;

          (b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates duly completed and fully executed;

          (c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and


                                       25
<PAGE>

          (d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree, judgment or ruling (whether interlocutory or
final) issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
PROVIDED, HOWEVER, the Company must use its best efforts to have any such order,
decree, judgment or ruling lifted or otherwise overturned as soon as possible.

     Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of one one-hundredths of a
share of Preferred Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.

     Section 18. CONCERNING THE RIGHTS AGENT.

          (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the preparation, delivery
administration, execution and amendment of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, damage,
judgment, fine, penalty, claim, demand, settlement, cost or expense, incurred
without gross negligence, bad faith or willful misconduct on the part of the
Rights Agent (as finally determined by a court of competent jurisdiction), for
any action taken, suffered or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including, without limitation,
the costs and expenses of defending against any claim of liability in the
premises.

          (b) The Rights Agent shall be authorized to rely on, shall be
protected and shall incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with the acceptance and administration
of this Agreement in reliance upon any Rights Certificate or certificate for
Common Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.


                                       26
<PAGE>

          (c) Anything in this Agreement to the contrary notwithstanding, in no
event shall the Rights Agent be liable for special, punitive, indirect,
incidental or consequential loss or damage of any kind whatsoever (including,
but not limited to, lost profits), even if the Rights Agent has been advised of
the possibility of such loss or damage.

     Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.

          (a) Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the
shareholder services business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; PROVIDED, HOWEVER, that such Person would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

          (b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.

     Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties
and obligations, and only the duties and obligations expressly imposed by this
Agreement (and no implied duties or obligations) upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

          (a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent, and the Rights
Agent shall incur no liability for or in respect of any action taken, suffered
or omitted by it in good faith and in accordance with such advice opinion.

          (b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Market Price) be proved or established by the Company
prior to taking, suffering or omitting any action


                                       27
<PAGE>

hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization and protection to the Rights Agent, and
the Rights Agent shall incur no liability for or in respect of any action taken,
suffered or omitted in good faith by it under the provisions of this Agreement
in reliance upon such certificate.

          (c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct (as finally determined by a court of
competent jurisdiction.

          (d) The Rights Agent shall not have any liability for, nor be liable
for or by reason of any of the statements of fact or recitals contained in this
Agreement or in the Rights Certificates or be required to verify the same
(except as to its countersignature on such Rights Certificates), but all such
statements and recitals are and shall be deemed to have been made by the Company
only.

          (e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11,
Section 13 or Section 24 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt of a certificate describing any
such adjustment, delivered pursuant to Section 12); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.

          (f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.

          (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and such advice or instructions shall be full authorization and
protection to the Rights Agent and the Rights Agent shall incur no liability for
or in respect of any action taken, suffered or omitted by it in good faith in
accordance with instructions of any such officer. Any application by the Rights
Agent for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or


                                       28
<PAGE>

omitted by the Rights Agent with respect to its duties or obligations under this
Rights Agreement and the date on and/or after which such action shall be taken
or omitted and the Rights Agent shall not be liable for any action taken or
omitted in accordance with a proposal included in any such application on or
after the date specified therein (which date shall not be less than five
business days after the date any such officer actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking or omitting any such action, the Rights
Agent has received written instructions in response to such application
specifying the action to be taken or omitted.

          (h) The Rights Agent and any stockholder, affiliate, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniary interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other Person.

          (i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company or any other Person resulting from any
such act, default, neglect or misconduct; absent gross negligence, bad faith or
willful misconduct in the selection and continued employment thereof.

          (j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
it believes that repayment of such funds or adequate indemnification against
such risk or liability is not assured it.

          (k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.

     Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights


                                       29
<PAGE>

Certificate for inspection by the Company), then any registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a Person organized and doing
business under the laws of the United States (or of any state of the United
States) in good standing, and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an
affiliate of a Person described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.

     Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; PROVIDED, HOWEVER,
that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.

     Section 23. REDEMPTION AND TERMINATION.

          (a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the Close of Business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the Close of Business on the tenth day
following the Record Date), or (ii) Close of Business on the Final Expiration
Date, redeem all but not less than all the then outstanding Rights at a
redemption price of $.02 per Right, as such amount may be appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after February 3, 1994 (such redemption price


                                       30
<PAGE>

being hereinafter referred to as the "Redemption Price") and the Company may, at
its option, pay the Redemption Price either in shares of Common Stock (based on
the "Current Market Price", as defined in Section 11(d)(i) hereof, of the shares
of Common Stock at the time of redemption) or cash; PROVIDED, HOWEVER, that
notwithstanding the foregoing if, following the occurrence of a Stock
Acquisition Date and following the expiration of the right of redemption set
forth above in this Section 23(a) but prior to any Triggering Event, either (i)
(A) a Person who is an Acquiring Person shall have transferred or otherwise
disposed of a number of shares of Common Stock in one transaction or series of
transactions, not directly or indirectly involving the Company or any of its
Subsidiaries, which did not result in the occurrence of a Triggering Event such
that such Person is thereafter a Beneficial Owner of 10% or less of the
outstanding shares of Common Stock, and (B) there are no other Persons,
immediately following the occurrence of the event described in clause (A), who
are Acquiring Persons, and (C) a majority of the members of the Board of
Directors approve the reinstatement of the right of redemption pursuant to this
Section 23, or (ii) (A) the Board approves the consolidation, merger or other
combination of the Company with or into, or the sale or other transfer (either
by the Company or one or more of its Subsidiaries), in one transaction or a
series of related transactions, of more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole), to a Person other than
the Acquiring Person (or any Associate or Affiliate of such Acquiring Person)
who caused the occurrence of such Stock Acquisition Date, and (B) the Board of
Directors of the Company, as part of the approval of such an event described in
the preceding clause (ii) (A), approves the reinstatement of the right of
redemption pursuant to this Section 23, then, in either such case, the right of
redemption shall be reinstated and thereafter be subject to the provisions of
this Section 23. Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable after the first occurrence of a
Section 11(a) (ii) Event until such time as the Company's right of redemption
hereunder has expired (such right of redemption hereunder being deemed to have
expired notwithstanding the existence of the possibility of the reinstatement
thereof as provided above in this Section 23 (a)).

          (b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.

     Section 24. EXCHANGE.

          (a) The Board of Directors of the Company may, at its option, at any
time after a Section 11(a) (ii) Event, exchange all or part, of the then
outstanding and exercisable Rights (which (i) shall not include Rights that have
become null and void pursuant to the provisions of Section 7(e) hereof, and (ii)
shall include, without limitation, any Rights issued after the Distribution Date
in connection with the exercise of options pursuant to the Company's


                                       31
<PAGE>

employee benefit plans, where such option is exercised for securities of the
Company or surrendered for cash) for shares of Common Stock at an exchange ratio
of one share of Common Stock per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio").

          (b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of the
holders of such Rights shall be to receive that number of shares of Common Stock
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange (with prompt notice thereof to the Rights Agent); PROVIDED, HOWEVER,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange of shares of Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become void pursuant to the provisions of Section 7(e)
hereof) held by each holder of Rights.

          (c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or equivalent preferred stock, as such
term is defined in Section 11(b) hereof) for shares of Common Stock exchangeable
for Rights, at the initial rate of one one-hundredth of a share of Preferred
Stock (or equivalent preferred stock) for each share of Common Stock, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Stock pursuant to Section 3(A) of the Certificate of Designations
attached hereto as EXHIBIT A, so that the fraction of a share of Preferred Stock
delivered in lieu of each share of Common Stock shall have the same voting
rights as one share of Common Stock.

          (d) In the event that there shall not be sufficient shares of Common
Stock or Preferred Stock issued but not outstanding or authorized but unissued
to permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock or Preferred Stock for issuance upon exchange
of the Rights.

          (e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Right Certificates with regard to which
such fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this subsection (e), the current market value
of a whole share of Common Stock shall be the closing price per share of Common
Stock (as determined pursuant to the second sentence of Section 11(d) (1)
hereof) for the Trading Day immediately prior to the date of exchange pursuant
to this Section 24.


                                       32
<PAGE>

     Section 25. NOTICE OF CERTAIN EVENTS.

          (a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to the Rights Agent and each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock whichever
shall be the earlier.

          (b) In case any of the events set forth in Section 11(a) (ii) hereof
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to the Rights Agent and each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a) (ii) hereof,
and (ii) all references in the preceding paragraph to Preferred Stock shall be
deemed thereafter to refer also to Common Stock and/or, if appropriate, other
securities.

     Section 26. NOTICES. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

                  Staples, Inc.
                  500 Staples Drive
                  Framingham, Massachusetts 01702
                  Attention:  Corporate Secretary


                                       33
<PAGE>

Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:

                  ChaseMellon Shareholder Services, L.L.C.
                  111 Founders Plaza
                  11th Floor
                  East Hartford, CT 06108

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.

     Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date and
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder (which shortening or
lengthening shall require the concurrence of a majority of the members of the
Board of Directors), or (iv) to change or supplement the provisions hereunder in
any manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the Rights Agent or the holders of Rights
Certificates (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); PROVIDED, this Agreement may not be supplemented or amended
to lengthen, pursuant to clause (iii) of this sentence, (A) a time period
relating to when the Rights may be redeemed at such time as the Rights are not
then redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Without limiting the generality of the
foregoing, the Company may at any time prior to such time as any Person first
becomes an Acquiring Person amend this Agreement to lower the thresholds set
forth in Sections 1(a) and/or 3(a) hereof from 20% and/or 30%, respectively, to
not less than, in either case, the greater of (i) any percentage greater than
the largest percentage of the outstanding shares of Common Stock then known by
the Company to be Beneficially Owned by any Person or (ii) 10%. Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, and, provided such supplement or amendment does not change
or increase the Rights Agent's duties, liabilities or obligations hereunder, the
Rights Agent shall execute such supplement or amendment. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price, the Final Expiration Date, the
Purchase Price or the number of one one-hundredths of a share of Preferred Stock
for which a Right is exercisable. Prior to the Distribution Date, the


                                       34
<PAGE>

interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.

     Section 28. SUCCESSORS. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.

     Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule l3d-3 (d) (1) (i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other Persons, and (y) not
subject the Board to any liability to the holders of the Rights. The Rights
Agent is always entitled to assume the Board of Directors acted in good faith
and shall be fully protected an incur no liability in reliance thereon.

     Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).

     Section 31. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

     Section 32. CONFIDENTIALITY. The Rights Agent shall treat the Company's
shareholder list and any of the Company's shareholder information (collectively
"Shareholder Information") as confidential information and agrees not to
disclose or otherwise make available Shareholder Information to any third party,
except as required by law, regulation or governmental or administrative action,
without the prior written consent of the Company. The Rights Agent shall not use
Shareholder Information in connection with its own marketing or other internal
purposes except to the extent necessary to fulfill its obligations under this
Agreement.


                                       35
<PAGE>

     Section 33. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.

     Section 34. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

     Section 35. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.




                      [This Space Intentionally Left Blank]



                                       36
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate or limited
liability company seals to be hereunto affixed and attested, all as of the day
and year first above written.

Attest:                               STAPLES, INC.

By:________________________           By:______________________________
Name:                                 Name:
Title:                                Title:

Attest:                               CHASEMELLON SHAREHOLDER SERVICES, L.L.C.

By:________________________           By:______________________________
Name:                                 Name:
Title:                                Title:


<PAGE>


                                                                       EXHIBIT A

                                      FORM

                                       of

                           CERTIFICATE OF DESIGNATIONS

                                       of

                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

                                       of

                                  STAPLES, INC.

                         (Pursuant to Section 151 of the
                        Delaware General Corporation Law)

                          ----------------------------


                  Staples, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on February 3, 1994:

                  RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation (as amended to date, the "Certificate of Incorporation"), the
Board of Directors hereby creates a series of Preferred Stock, $.01 par value
per share (the "Preferred Stock"), of the Corporation and hereby states the
designation and number of shares, and fixes the relative rights, preferences and
limitations thereof as follows:

                  Series A Junior Participating Preferred Stock:

     Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 1,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; PROVIDED, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.


<PAGE>

     Section 2. DIVIDENDS AND DISTRIBUTIONS.

          (a) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of Common Stock, par
value $.0006 per share (the "Common Stock"), of the Corporation, and of any
other junior stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds of the Corporation legally available for the
payment of dividends, quarterly dividends payable in cash on March 31, June 30,
September 30 and December 31 in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

          (b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (a) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock) and the Corporation
shall pay such dividend or distribution on the Series A Preferred Stock before
the dividend or distribution declared on the Common Stock is paid or set apart;
provided that, in the event no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1
per share on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.

          (c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of



                                       2
<PAGE>


Series A Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.

     Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred Stock
shall have the following voting rights:

          (a) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

          (b) Except as otherwise provided herein, by law, or in any other
Certificate of Designations creating a series of Preferred Stock or any similar
stock, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.

          (c) (i) If any time dividends on any Series A Preferred Stock shall be
in arrears in an amount equal to six quarterly dividends thereon, the holders of
the Series A Preferred Stock, voting as a separate series from all other series
of Preferred Stock and classes of capital stock, shall be entitled to elect two
members of the Board of Directors in addition to any Directors elected by any
other series, class or classes of securities and the authorized number of
Directors will automatically be increased by two. Promptly thereafter, the Board
of Directors of this Corporation shall, as soon as may be practicable, call a
special meeting of holders of Series A Preferred Stock for the purpose of
electing such members of the Board of Directors. Said special meeting shall in
any event be held within 45 days of the occurrence of such arrearage.

              (ii) During any period when the holders of Series A Preferred
Stock, voting as a separate series, shall be entitled and shall have exercised
their right to elect two Directors, then and during such time as such right
continues (a) the then authorized number of Directors shall be increased by two,
and the holders of Series A Preferred Stock, voting as a separate series, shall
be entitled to elect the additional Director so provided for, and (b) each such


                                       3
<PAGE>

additional Director shall not be a member of any existing class of the Board of
Directors, but shall serve until the next annual meeting of stockholders for the
election of Directors, or until his successor shall be elected and shall
qualify, or until his right to hold such office terminates pursuant to the
provisions of this Section 3(c).

             (iii) A Director elected pursuant to the terms hereof may be
removed with or without cause by the holders of Series A Preferred Stock
entitled to vote in an election of such Director.

             (iv) If, during any interval between annual meetings of
stockholders for the election of Directors and while the holders of Series A
Preferred Stock shall be entitled to elect two Directors, there is no such
Director in office by reason of resignation, death or removal, then, promptly
thereafter, the Board of Directors shall cause a special meeting of the holders
of Series A Preferred Stock for the purpose of filling such vacancy and such
vacancy shall be filled at such special meeting. Such special meeting shall in
any event be held within 45 days of the occurrence of such vacancy.

             (v) At such time as the arrearage is fully cured, and all dividends
accumulated and unpaid on any shares of Series A Preferred Stock outstanding are
paid, and, in addition thereto, at least one regular dividend has been paid
subsequent to curing such arrearage, the term of office of any Director elected
pursuant to this Section 3(c), or his successor, shall automatically terminate,
and the authorized number of Directors shall automatically decrease by two, the
rights of the holders of the shares of the Series A Preferred Stock to vote as
provided in this Section 3(c) shall cease, subject to renewal from time to time
upon the same terms and conditions, and the holders of shares of the Series A
Preferred Stock shall have only the limited voting rights elsewhere herein set
forth.

          (d) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.

     Section 4. CERTAIN RESTRICTIONS.

          (a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:

             (i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;

             (ii) declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;


                                       4
<PAGE>

             (iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or

             (iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.

          (b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

     Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.

     Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.

          (a) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $100 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, provided that the holders
of shares of Series A Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per share to holders
of shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.

          (b) Neither the consolidation, merger or other business combination of
the Corporation with or into any other corporation nor the sale, lease, exchange
or conveyance of all


                                       5
<PAGE>

or any part of the property, assets or business of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 6.

          (c) In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of paragraph (a) of this Section 6 shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

     Section 7. CONSOLIDATION, MERGER, ETC. Notwithstanding anything to the
contrary contained herein, in case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision, combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

     Section 8. NO REDEMPTION. The shares of Series A Preferred Stock shall not
be redeemable.

     Section 9. RANK. The Series A Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of the Preferred Stock issued either before or after the
issuance of the Series A Preferred Stock, unless the terms of any such series
shall provide otherwise.

     Section 10. AMENDMENT. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.


                                       6
<PAGE>

     Section 11. FRACTIONAL SHARES. Series A Preferred Stock may be issued in
fractions of a share which are integral multiples of one-hundredth of a share
which shall entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends, participate in
distributions and have the benefit of all other rights of holders of Series A
Preferred Stock.

                  IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its Chairman of the Board of Directors
and attested by its Secretary this ___ day of February, 1994.




                                   ---------------------------------------------
                                   John B. Wilson
                                   Executive Vice President-Finance and Strategy

Attest:



------------------------------------
Peter M. Schwarzenbach
Secretary




                                       7
<PAGE>

                                                                       EXHIBIT B

                          [Form of Rights Certificate]

Certificate No. R-                                                 ______ Rights

NOT EXERCISABLE AFTER FEBRUARY 15, 2004 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.02 PER RIGHT AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERN IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]1

                               Rights Certificate

                                  STAPLES, INC.

                  This certifies that _______________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Amended and Restated Rights Agreement, dated as of October 25,
1999 (the "Rights Agreement"), between Staples, Inc., a Delaware corporation
(the "Company"), and ChaseMellon Shareholder Services, L.L.C., a New Jersey
limited liability company (the "Rights Agent"), to purchase from the Company
after the Distribution Date (as such term is defined on the Rights Agreement)
and at any time prior to 5:00 P.M. (Boston time) on February 15, 2004 at the
office of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth of a fully paid, non-assessable share of Series
A Junior Participating Preferred Stock (the "Preferred Stock") of the Company,
$.0l par value per share, at a purchase price of $110.00 in cash per one
one-hundredth of a share (the "Purchase Price"), upon presentation and surrender
of this Rights Certificate with the Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of one one-hundredths of a share of Preferred Stock
which may be purchased upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of the Close of
Business on February 15, 1994, based on the Preferred Stock as constituted at
such date. Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms in the Rights Agreement.


--------
1     The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.


<PAGE>

                  Upon the occurrence of a Section 11(a) (ii) Event, if the
Rights evidenced by this Rights Certificate are beneficially owned by (i) an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement), (ii) a transferee of any such
Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a person who, after such
transfer, became an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11(a) (ii) Event.

                  As provided in the Rights Agreement, the Purchase Price and
the number and kind of shares of Preferred Stock or other securities which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Section 11(a) (ii) Events.

                  This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the principal
offices of the Company and are available upon written request to the Company.

                  This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office of the Rights Agent designated for
such purpose, with the Form of Election and Certificate set forth on the reverse
side duly executed, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.

                  Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.02 per Right at any time prior to the earlier of the Close
of Business on (i) the tenth day following the Stock Acquisition Date (as such
time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. After the expiration of the redemption period, the
Company's right of redemption may be reinstated if either (A) an Acquiring
Person reduces his beneficial ownership to 10% or less of the outstanding shares
of Common Stock in a transaction or series of transactions not involving the
Company, there are no other Acquiring Persons, and such reinstatement is
approved by a majority of the Continuing Directors (as such term is defined in
the Rights Agreement), or (B) the Board approves the merger of the Company with,
or acquisition of the Company by, a Person unrelated to the Acquiring Person,
such reinstatement is part of the approval by the Board of such transaction and
a majority of the Continuing Directors approve such reinstatement.


                                       2
<PAGE>

                  Subject to the provisions of the Rights Agreement, the Company
may, at its option, at any time after a Section 11(a) (ii) Event, subject to the
approval of a majority of the Continuing Directors, exchange all or part of the
Rights evidenced by this Certificate for shares of the Company's Common Stock or
for Preferred Stock (or shares of a class or series of the Company's preferred
stock having the same rights, privileges and preferences as the Preferred
Stock).

                  No fractional shares of Preferred Stock will be issued upon
the exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.

                  No holder of this Rights Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose the holder of
shares of Preferred Stock or of any other securities of the Company which may at
any time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.

                  This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.



                                       3
<PAGE>


                  WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.

Dated as of ________________, 199___

ATTEST:                                      STAPLES, INC.



                                             By:
------------------------------------------      -------------------------------
Secretary

                                             Title:
                                                   ----------------------------

Countersigned:

CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
     as Rights Agent


By:
   ---------------------------------------
     Authorized Signature


                                       4
<PAGE>


(Form of Reverse Side of Rights Certificate)




                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Rights Certificate.)

FOR VALUE RECEIVED ______________________________________ hereby sells, assigns
and transfers unto

--------------------------------------------------------------------------------
                  (Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.

Dated: __________________, 199_

                                                 -------------------------------
                                                 Signature

Signature Guaranteed:

                                   CERTIFICATE

                  The undersigned hereby certifies that the Rights evidenced by
this Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement).

Dated: __________________, 199_

                                                 -------------------------------
                                                 Signature

Signature Guaranteed:


<PAGE>


             [Form of Reverse Side of Rights Certificate--Continued]




                          FORM OF ELECTION TO PURCHASE

                  (To be executed if holder desires to exercise
                 Rights represented by the Rights Certificate.)

To:      STAPLES, INC.

                  The undersigned hereby irrevocably elects to exercise
____________ Rights represented by this Rights Certificate to purchase the
shares of Preferred Stock issuable upon the exercise of the Rights (or such
other securities of the Company or of any other person which may be issuable
upon the exercise of the Rights) and requests that certificates for such shares
be issued in the name of and delivered to:

Please insert social security
or other identifying number ____________________________________________________


--------------------------------------------------------------------------------
                         (Please print name and address)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

                  If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:

Please insert social security
or other identifying number ____________________________________________________


--------------------------------------------------------------------------------
                         (Please print name and address)

--------------------------------------------------------------------------------

Dated: __________________, 199_

                                                 -------------------------------
                                                 Signature


Signature Guaranteed:




                                       2
<PAGE>


                                   CERTIFICATE

                  The undersigned hereby certifies by the Rights evidenced by
this Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement).

Dated: __________________, 199_

                                                 -------------------------------
                                                 Signature


Signature Guaranteed:

                                     NOTICE

                  The signature to the foregoing Form of Assignment or Form of
Election to Purchase must correspond to the name as written upon the face of
this Rights Certificate in every particular, without alteration or enlargement
or any change whatsoever.

                  In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.



                                       3
<PAGE>


                                                                       EXHIBIT C

                          SUMMARY OF RIGHTS TO PURCHASE
                                 PREFERRED STOCK

                  On February 3, 1994, the Board of Directors of Staples, Inc.
(the "Company") declared a dividend of one preferred stock purchase right (a
"Right") for each outstanding share of the Company's Common Stock to
stockholders of record at the Close of Business on February 15, 1994 (the
"Record Date"). Each Right entitles the registered holder to purchase from the
Company a unit consisting of one one-hundredth of a share (a "Unit") of Series A
Junior Participating Preferred Stock, $.0l par value (the "Preferred Stock"), at
a purchase price of $110.00 in cash per Unit (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in an Amended
and Restated Rights Agreement dated as of October 25, 1999(the "Rights
Agreement") between the Company and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent.

                  Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will separate from the Common Stock
and a Distribution Date will occur upon the earlier of (i) 10 days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of Common Stock
(the "Stock Acquisition Date"), or (ii) 10 business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 30% or more of such outstanding shares of Common
Stock. Until the Distribution Date (or earlier redemption or expiration of the
rights), (i) the Rights will be evidenced by the Common Stock certificates and
will be transferred with and only with such Common Stock certificates, (ii) new
Common Stock certificates issued after the Record Date will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Common Stock outstanding, even without such
notation, will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.

                  The Rights are not exercisable until the Distribution Date and
will expire at the Close of Business on February 15, 2004, unless earlier
redeemed or exchanged by the Company as described below.

                  As soon as practicable after the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Stock as of the Close of Business on the
Distribution Date and, thereafter, such separate Rights Certificates alone will
represent the Rights. Except as otherwise determined by the Board of Directors
and except in connection with shares of Common Stock issued upon the exercise of
employee stock options, issuances under other employee stock benefit plans or
the conversion of convertible securities issued hereafter, only shares of Common
Stock issued prior to the Distribution Date will be issued with Rights.

                  In the event that (i) the Company is the surviving corporation
in a merger with an Acquiring Person and its Common Stock is not changed or
exchanged, (ii) a Person becomes the beneficial owner of more than 25% of the
then outstanding shares of Common Stock except

<PAGE>

pursuant to an offer that all outstanding shares of Common Stock which the
independent directors determine to be fair to, and otherwise in the best
interests of, shareholders, (iii) an Acquiring Person engages in one or more
"self-dealing" transactions as set forth in the Rights Agreement, or (iv) during
such time as there is an Acquiring Person, an event occurs which results in such
Acquiring Person's ownership interest being increased by more than 1% (E.G., a
reverse stock split), each holder of a Right will thereafter have the right to
receive, upon exercise, that number of shares of Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) which equals
the exercise price of the Right divided by one-half of the Current Market Price
(as defined in the Rights Agreement) of the Common Stock at the date of the
occurrence of the event. However, Rights are not exercisable following the
occurrence of any of the events set forth above until such time as the Rights
are no longer redeemable by the Company as set forth below. Notwithstanding any
of the foregoing, following the occurrence of any of the events set forth in
this paragraph, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by any Acquiring Person will
be null and void. The events set forth in this paragraph are referred to as
"Section 11(a) (ii) Events."

                  For example, at an exercise price of $110 per Right, each
Right not owned by an Acquiring Person (or by certain related parties) following
an event set forth in the preceding paragraph would entitle its holder to
purchase for $110 such number of shares of Common Stock (or other consideration,
as noted above) as equals $110 divided by one-half of the Current Market Price
(as defined in the Rights Agreement) of the Common Stock. Assuming that the
Common Stock had a per share value of $55 at such time, the holder of each valid
Right would be entitled to purchase four shares of Common Stock for $110.

                  In the event that, at any time following the Stock Acquisition
Date, (i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation or its Common
Stock is changed or exchanged (other than a merger which follows an offer
determined by the Board to be fair as described in clause (ii) of the second
preceding paragraph), or (ii) 50% or more of the Company's assets or earning
power is sold or transferred, each holder of a Right (except Rights which
previously have been voided as set forth above) shall thereafter have the right
to receive, upon exercise, that number of shares of common stock of the
acquiring company which equals the exercise price of the Right divided by
one-half of the Current Market Price of such common stock at the date of the
occurrence of the event.

                  For example, at an exercise price of $110 per Right, each
Right following an event set forth in the preceding paragraph would entitle its
holder to purchase for $110 such number of shares of common stock of the
acquiring company as equals $110 divided by one-half of the Current Market Price
(as defined in the Rights Agreement) of such common stock. Assuming that such
common stock had a per share value of $55 at such time, the holder of each valid
Right would be entitled to purchase four shares of common stock of the acquiring
company for $110.

                  At any time after the occurrence of a Section 11(a) (ii)
Event, and subject to the concurrence of a majority of the Continuing Directors
(as defined in the Rights Agreement), the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such


                                       2
<PAGE>

Acquiring Person which have become void), in whole or in part, at an exchange
ratio of one share of Common Stock, or one one-hundredth of a share of Preferred
Stock (or of a share of a class or series of the Company's preferred stock
having equivalent rights, preferences and privileges), per Right (subject to
adjustment).

                  The Purchase Price payable, and the number of Units of
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock
are granted certain rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the then-Current Market Price of the
Preferred Stock, or (iii) upon the distribution to holders of the Preferred
Stock of evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings) or of subscription rights
or warrants (other than those referred to above).

                  The number of Rights associated with each share of Common
Stock is also subject to adjustment in the event of a stock split of the Common
Stock or a stock dividend on the Common Stock payable in Common Stock or
subdivisions, consolidations or combinations of the Common Stock occurring, in
any such case, prior to the Distribution Date.

                  Preferred Stock purchasable upon exercise of the Rights will
not be redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $1 per share and will be entitled to
an aggregate dividend of 100 times the dividend declared per share of Common
Stock. In the event of liquidation, the holders of the Preferred Stock will be
entitled to a minimum preferential liquidation payment of $100 per share and
will be entitled to an aggregate payment of 100 times the payment made per share
of Common Stock. Each share of Preferred Stock will have 100 votes, voting
together with the Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which Common Stock is exchanged, each
share of Preferred Stock will be entitled to receive 100 times the amount
received per share of Common Stock. These rights are protected by customary
antidilution provisions.

                  Because of the nature of the Preferred Stock's dividend,
liquidation and voting rights, the value of one one-hundredth of a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock.

                  With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments amount to at least 1% of the
Purchase Price. No fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred Stock
on the last trading date prior to the date of exercise.

                  At any time until ten days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in part, at a price of
$.02 per Right (the "Redemption Price"), payable in cash or stock. After the
redemption period has expired, the Company's right of redemption may be
reinstated if either (i) an Acquiring Person reduces his beneficial ownership to
10% or less of the outstanding shares of Common Stock in a transaction or series
of transactions not involving the Company, there are no other Acquiring Persons
and such


                                       3
<PAGE>

reinstatement is approved by a majority of the Continuing Directors, or (ii) the
Board approves the merger of the Company with, or acquisition of the Company by,
a Person unrelated to the Acquiring Person, such reinstatement is part of the
approval by the Board of such transaction and a majority of the Continuing
Directors approve such reinstatement. Immediately upon the action of the Board
of Directors ordering redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.

                  Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Company or for common stock of the acquiring company as set forth above.

                  Other than those provisions relating to the principal economic
terms of the Rights, any of the provisions of the Rights Agreement may be
amended by the Board of Directors of the Company prior to the Distribution Date.
After the Distribution Date, the provisions of the Rights Agreement may be
amended by the Board in order to cure any ambiguity, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; PROVIDED, HOWEVER, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable. In addition, prior to such time as a person or group first becomes
an Acquiring Person, the Board may lower the threshold for (i) beneficial
ownership to become an Acquiring Person from 20%, or (ii) exercisability of the
Rights upon a tender or exchange offer from 30% beneficial ownership, to not
less than, in the case of either clause (i) or clause (ii), the greater of (x)
any percentage larger than the largest percentage of the outstanding shares of
Common Stock then known to the Company to be beneficially owned by any person or
group or (y) 10%.

                  A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration _____________
on Form ________ dated ________________. A copy of the Rights Agreement is
available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is incorporated herein by reference.




                                       4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<DESCRIPTION>EXHIBIT 10.1
<TEXT>

<PAGE>

                                                                    Exhibit 10.1

                                  STAPLES, INC.

              AMENDED AND RESTATED 1990 DIRECTOR STOCK OPTION PLAN

1.   PURPOSE.

     The purpose of this Amended and Restated 1990 Director Stock Option Plan
(the "Plan") of Staples, Inc. (the "Company") is to encourage ownership in the
Company by the Company's outside directors, whose continued services the Company
considers essential to its future progress, and to provide these individuals
with a further incentive to remain as directors of the Company.

2.   ADMINISTRATION.

     The Board of Directors shall supervise and administer the Plan. Grants of
stock options ("Options") and awards of performance accelerated restricted stock
("PARS") under the Plan and the amount and nature of the Options and PARS to be
granted shall be made in accordance with Section 4. All questions concerning
interpretation of the Plan or any Options or PARS issued under it shall be
resolved by the Board of Directors and such resolution shall be final and
binding upon all persons having an interest in the Plan.

3.   PARTICIPATION IN THE PLAN.

     Directors of the Company who are not employees of the Company or any
subsidiary of the Company ("outside directors") shall be eligible to receive
Options and PARS under the Plan.

4. TERMS, CONDITIONS AND FORM OF OPTIONS AND PARS.

     All Options and PARS granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions.

          (a) STOCK SUBJECT TO PLAN. Options and PARS may be granted under the
     Plan with respect to either Staples Retail and Delivery common stock or
     Staples.com common stock (collectively, "Common Stock"). Subject to
     adjustment as provided in the Plan, the maximum number of shares of Common
     Stock which may be issued under the Plan is 3,350,000 shares of Common
     Stock (regardless of series). All Options or PARS granted under the Plan,
     as provided below, shall be granted with respect to either series of Common
     Stock, or a combination of both series, as determined in the sole
     discretion of the Board of Directors. If an Option shall expire or
     terminate for any reason without having been exercised in full, the
     unpurchased shares subject to such Option shall again be available for
     subsequent Option grants or PARS under the Plan; and if the shares subject
     to a PARS shall be repurchased by the Company, the repurchased shares shall
     again be available for subsequent Option grants or PARS under the Plan.

          (b)     GRANTS OF OPTIONS AND PARS.

               (i) INITIAL OPTION GRANT. An Option to purchase 15,000 shares of
          Common Stock, shall be granted automatically to outside directors who
          are initially elected to the Board of Directors subsequent to the
          approval of the Plan by the Company's stockholders at the close of
          business on the date of such director's initial election to the Board
          of Directors.

               (ii) ANNUAL OPTION GRANTS. On the date of the first regularly
          scheduled Board of Directors meeting following the end of each fiscal
          year of the Company, commencing with the fiscal year ending January
          30, 1999, an Option shall be granted automatically to each outside
          director to purchase a number of shares of Common Stock equal to 3,000
          multiplied by the number of regularly scheduled meeting days of the
          Board of Directors attended by such director in the previous 12 months
          (up to a maximum of 15,000 shares).



<PAGE>

               (iii) ANNUAL AWARDS OF PARS. At the first regularly scheduled
          Board of Directors meeting following the end of each fiscal year of
          the Company, at which performance targets are established for PARS
          awarded to executive officers of the Company, but no later than July
          31 of each year (each, an "Award Date), (x) the Company shall grant to
          each outside director 400 PARS for each regularly scheduled meeting
          day of the Board of Directors attended by such director in the
          previous 12 months (up to a maximum of 2,000 PARS) and (y) in
          addition, the Company shall grant to the Lead Director and the
          Chairman of each of the Audit, Compensation, and Governance Committee
          of the Board of Directors 200 PARS for each regularly scheduled
          meeting day of the Board of Directors attended by such director in the
          previous 12 months (up to a maximum of 1,000 PARS).

          (c)     TERMS OF OPTIONS.

               (i) OPTION EXERCISE PRICE. The option exercise price per share
          for each Option granted under the Plan shall be determined as follows:
          if such series of Common Stock is listed on the Nasdaq National Market
          on the date of grant, the option exercise price per share shall be
          equal to the last reported sale price per share of such series of
          Common Stock on the Nasdaq National Market on the date of grant (or,
          if no such price is reported on such date, such price as is reported
          on the nearest preceding date); if the applicable series of Common
          Stock is not listed on the Nasdaq National Market on the date of
          grant, the option exercise price per share shall be the fair market
          value per share of such series of Common Stock on the date of grant,
          as determined in good faith by the Board of Directors.

               (ii) NATURE OF OPTIONS. All Options granted under the Plan shall
          be nonstatutory options not entitled to special tax treatment under
          Section 422 of the Internal Revenue Code of 1986, as amended (the
          "Code").

               (iii) VESTING. Except as otherwise provided in the Plan, each
          Option shall become exercisable, on a cumulative basis, in four equal
          annual installments on each of the first, second, third and fourth
          anniversary dates of its date of grant, provided the optionee
          continues to serve as a director of the Company on such dates.
          Notwithstanding the foregoing, each outstanding Option shall
          immediately become exercisable in full in the event (A) a Change in
          Control (as defined in Section 8) of the Company occurs or (B) the
          optionee ceases to serve as a director of the Company due to his or
          her death, disability (within the meaning of Section 22(e)(3) of the
          Code or any successor provision) or retires pursuant to a retirement
          policy adopted by the Company.

               (iv) OPTION EXERCISE PROCEDURE. An Option may be exercised only
          by written notice to the Company at its principal office accompanied
          by payment in cash of the exercise price with respect to the Option
          being exercised or by the tender (actual or constructive) of shares of
          Common Stock owned by the director having a value as of the date of
          exercise equal to the exercise price. In the case of a constructive
          tender of shares of Common Stock, the optionee and the Company may
          enter into an agreement to defer until an agreed-upon date the
          issuance, transfer and delivery of shares of Common Stock with a value
          equal to the difference between the fair market value of the Common
          Stock on the date of exercise and the exercise price of the Option
          being exercised. The Board of Directors may impose such restrictions
          on the tender of shares as it deems appropriate.

               (v) TERMINATION. Each Option shall terminate, and may no longer
          be exercised, on the date six months after the optionee ceases to
          serve as a director of the Company; provided that, in the event (A) an
          optionee ceases to serve as a director due to his or her death or
          disability (within the meaning of Section 22(e)(3) of the Code or any
          successor provision), or (B) an optionee dies within six months after
          he or she ceases to serve as a director of the Company, then the
          exercisable portion of the Option may be exercised, within the period
          of one year following the date the optionee ceases to serve as a
          director, by the optionee or by the person to whom the Option is
          transferred by will, by the laws of descent and distribution, or by
          written notice


<PAGE>

          pursuant to Section 4(c)(vii). Notwithstanding the foregoing, each
          Option shall terminate, and may no longer be exercised, on the date 10
          years after the date of grant.

               (vi) OPTIONS NONTRANSFERABLE. Except as otherwise provided by the
          Board of Directors, each Option granted under the Plan by its terms
          shall not be transferable by the optionee otherwise than by will or
          the laws of descent and distribution, and shall be exercised during
          the lifetime of the optionee only by the optionee or his or her legal
          representative. No Option or interest therein may be transferred,
          assigned, pledged or hypothecated by the optionee during his or her
          lifetime, whether by operation of law or otherwise, or be made subject
          to execution, attachment or similar process.

               (vii) OPTION EXERCISE BY REPRESENTATIVE FOLLOWING DEATH OF
          DIRECTOR. An optionee, by written notice to the Company, may designate
          one or more persons (and from time to time change such designation),
          including his or her legal representative, who, by reason of the
          optionee's death, shall acquire the right to exercise all or a portion
          of the Option. If the person or persons so designated wish to exercise
          any portion of the Option, they must do so within the term of the
          Option as provided herein. Any exercise by a representative shall be
          subject to the provisions of the Plan.

          (d)     TERMS OF PARS.

               (i) NATURE OF PARS. All PARS hereunder shall consist of the
          issuance by the Company of shares of Common Stock or an agreement for
          the future delivery of shares of Common Stock at an agreed-upon date
          ("PARS Deferred Units") and the purchase by the recipient thereof of
          such shares, subject to the terms, conditions and restrictions
          described in the document evidencing the PARS and in this Plan.

               (ii) EXECUTION OF PARS AGREEMENT. In the case of the actual
          issuance of Common Stock, the Company shall, upon the date of the PARS
          grant, issue the shares of Common Stock subject to the PARS by
          registering such shares in book entry form with the Company's transfer
          agent in the name of the recipient. No certificate(s) representing all
          or a part of such shares shall be issued until the conclusion of the
          vesting period described in paragraph (iv) below.

               (iii) PRICE. Except as otherwise determined by the Board of
          Directors, all PARS issued hereunder shall be issued without the
          payment of any cash purchase price by the recipients (in which case
          the "price per share originally paid" for purposes of clause (2) of
          paragraph (v) below shall be zero).

               (iv) VESTING. Except as otherwise provided in the Plan, the
          restrictions on transfer and the forfeiture provisions of each PARS
          shall lapse on the same basis as PARS that have been awarded to the
          Company's executive officers for the fiscal year in which the Award
          Date relating to such PARS occurs. If no PARS have been awarded to any
          executive officer of the Company during the six months preceding an
          Award Date, then the restrictions on transfer and the forfeiture
          provisions of all PARS granted pursuant to this Plan on such Award
          Date shall lapse on such terms as shall be determined by the Board of
          Directors. Notwithstanding the foregoing, the restrictions on transfer
          and the forfeiture provisions of all PARS granted under this Plan
          shall immediately lapse in the event (A) a Change in Control of the
          Company occurs, or (B) the recipient ceases to serve as a director of
          the Company due to his or her death, disability (within the meaning of
          Section 22(e)(3) of the Code or any successor provision) or retires
          pursuant to a retirement policy adopted by the Company.

               (v) RESTRICTIONS ON TRANSFER. In addition to such other terms,
          conditions and restrictions on PARS contained in the Plan or the
          applicable PARS Agreement, all PARS shall be subject to the following
          restrictions:


<PAGE>

                    (1) No PARS shall be sold, assigned, transferred, pledged,
               hypothecated or otherwise disposed of until they become vested
               pursuant to paragraph (iv) above. The period during which such
               restrictions are applicable is referred to as the "Restricted
               Period."

                    (2) Except as set forth in the last sentence of paragraph
               (iv) above, if a recipient ceases to be a director of the Company
               within the Restricted Period for any reason, the Company shall
               have the right and option for a period of three months following
               the date of such cessation to buy for cash that number of PARS as
               to which the restrictions on transfer and the forfeiture
               provisions contained in the PARS have not then lapsed, at a price
               equal to the price per share originally paid by the recipient. If
               such cessation occurs within the last three months of the
               applicable Restricted Period, the restrictions and repurchase
               rights of the Company shall continue to apply until the
               expiration of the Company's three month option period.

                    (3) Notwithstanding subparagraphs (1) and (2) above, the
               Board of Directors may, in its discretion, either at the time
               that PARS are awarded or at any time thereafter, waive the
               Company's right to repurchase shares of Common Stock or PARS
               Deferred Units upon the occurrence of any of the events described
               in this paragraph (v) or remove or modify any part or all of the
               restrictions. In addition, the Board of Directors may, in its
               discretion, impose upon the recipient of PARS at the time that
               such PARS are granted such other restrictions on any PARS as the
               Board of Directors may deem advisable.

               (vi) ADDITIONAL SHARES. Any shares received by a recipient of
          PARS as a stock dividend or any PARS Deferred Units received in
          respect of a stock dividend, or as a result of stock splits,
          combinations, exchanges of shares, reorganizations, mergers,
          consolidations or otherwise with respect to such PARS shall have the
          same status and shall bear the same restrictions, all on a
          proportionate basis, as the shares or PARS Deferred Units initially
          subject to such.

               (vii) TRANSFERS IN BREACH OF PARS. If any transfer of PARS is
          made or attempted contrary to the terms of the Plan and of such PARS,
          the Board of Directors shall have the right to purchase for the
          account of the Company those shares from the owner thereof or his or
          her transferee at any time before or after the transfer at the price
          paid for such shares by the person to whom they were awarded under the
          Plan. In addition to any other legal or equitable remedies which it
          may have, the Company may enforce its rights by specific performance
          to the extent permitted by law. The Company may refuse for any purpose
          to recognize as a shareholder of the Company any transferee who
          receives any shares contrary to the provisions of the Plan and the
          applicable PARS or any recipient of PARS who breaches his or her
          obligation to resell shares as required by the provisions of the Plan
          and the applicable PARS, and the Company may retain and/or recover all
          dividends on such shares which were paid or payable subsequent to the
          date on which the prohibited transfer or breach was made or attempted.

               (viii) ADDITIONAL PARS PROVISIONS. The Board of Directors may, in
          its sole discretion, include additional provisions in any PARS granted
          under the Plan.

5.   LIMITATION OF RIGHTS.

          (a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
     granting of an Option or PARS nor any other action taken pursuant to the
     Plan, shall constitute or be evidence of any agreement or understanding,
     express or implied, that the Company will retain the optionee or recipient
     of PARS as a director for any period of time.

          (b)     RIGHTS AS A STOCKHOLDER.

               (i) OPTIONS. An optionee shall have no rights as a stockholder
          with respect to the shares covered by his or her Option until the date
          of the issuance to him or her of a stock certificate


<PAGE>

          therefor, and no adjustment will be made for dividends or other rights
          (except as provided in Section 6) for which the record date is prior
          to the date such certificate is issued.

               (ii) PARS. Subject to the limitations set forth in Section 4(d)
          and except as otherwise provided herein, a recipient of PARS, other
          than PARS Deferred Units, shall have all rights as a shareholder with
          respect to the shares subject to such PARS including, without
          limitation, any rights to receive dividends or non-cash distributions
          with respect to such shares and to vote such shares and act in respect
          of such shares at any meeting of shareholders. A recipient of PARS
          Deferred Units shall have no rights as a shareholder with respect to
          the Common Stock until the date of issuance to him or her of a stock
          certificate therefor, but the agreement evidencing the PARS Deferred
          Units may include the crediting of additional PARS Deferred Units
          equal in value to the cash amount of dividends paid with respect to
          same number of shares of Common Stock as the PARS Deferred Units.

6. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS AND RELATED TRANSACTIONS.

          (a) If, through or as a result of any merger, consolidation, sale of
     all or substantially all of the assets of the Company, reorganization,
     recapitalization, reclassification, stock dividend, stock split, reverse
     stock split, or other similar transaction, (i) the outstanding shares of
     one or both series of Common Stock are increased or decreased or are
     exchanged for a different number or kind of shares or other securities of
     the Company, or (ii) additional shares or new or different shares or other
     securities of the Company or other non-cash assets are distributed with
     respect to one or both series of Common Stock or other securities, except
     as otherwise determined by the Board of Directors, an appropriate and
     proportionate adjustment shall be made in (x) the number and kind of shares
     of such series of Common Stock subject to Options or the number and kind of
     shares of such series of Common Stock or PARS Deferred Units subject to
     PARS to be granted to outside directors after such event pursuant to
     Section 4(b), (y) the number and kind of shares of such series of Common
     Stock subject to then outstanding Options or the number and kind of shares
     of such series of Common Stock or PARS Deferred Units subject to any then
     outstanding PARS under the Plan, and (z) the exercise price for each share
     of such series of Common Stock subject to any then outstanding Options or
     repurchase rights of the Company under the Plan, without changing the
     aggregate purchase price as to which such Options or repurchase rights of
     the Company remain exercisable. No fractional shares or PARS Deferred Units
     will be issued under the Plan on account of any such adjustments.

          (b) All share numbers herein have been adjusted to reflect the
     three-for-two stock split declared on November 12, 1998.

7.   MERGERS, CONSOLIDATIONS, ASSET SALES, LIQUIDATIONS, ETC.

     Subject to the provisions of Section 4(c)(iii) and 4(d)(iv), in the event
of a merger or consolidation or sale of all or substantially all of the assets
of the Company in which outstanding shares of one or both series 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 the Company, the Board of
Directors of the Company, or the board of directors of any corporation assuming
the obligations of the Company, shall take one or more of the following actions,
as to outstanding Options for such series of Common Stock: (i) provide that such
Options shall be assumed, or equivalent Options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof); (ii) upon written
notice to the optionees, provide that all unexercised Options shall (A)
immediately become exercisable in full and (B) terminate immediately prior to
the consummation of such transaction unless exercised by the optionee within a
specified period following the date of such notice; or (iii) in the event of a
merger under the terms of which holders of one or both series of Common Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the merger (the "Merger Price"), make or provide for a cash
payment to such optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such outstanding Options
(to the extent then exercisable) with exercise prices not in excess of the
Merger Price and (B) the aggregate exercise price of all such Options, in
exchange for the termination of such Options.


<PAGE>

8.   CHANGE IN CONTROL.

     For purposes of the Plan, a "Change in Control" shall be deemed to have
occurred if (i) any "person", as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities (other than
pursuant to a merger or consolidation described in clause (A) or (B) of
subsection (iii) below); (ii) during any period of two consecutive years ending
during the term of the Plan (not including any period prior to the adoption of
the Plan), individuals who at the beginning of such period constitute the Board
of Directors of the Company, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect any transaction described in clause (i), (iii) or (iv) of this Section 8)
whose election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were either directors at the beginning of the
period or whose election or nomination for election was previously so approved
(collectively, the "Disinterested Directors"), cease for any reason to
constitute a majority of the Board of Directors; (iii) the closing of a merger
or consolidation of the Company or any subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as defined above) acquires more than
30% of the combined voting power of the Company's then outstanding securities;
or (iv) a complete liquidation of the Company or a sale by the Company of all or
substantially all of the Company's assets.

9. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS AND PARS.

     The Board of Directors shall have the power to modify or amend outstanding
Options and PARS; provided, however, that no modification or amendment may (i)
have the effect of altering or impairing any rights or obligations of any Option
or PARS previously granted without the consent of the optionee or holder
thereof, as the case may be, (ii) modify the number of shares of Common Stock
subject to the Option or number of shares of Common Stock or PARS Deferred Units
subject to the PARS (except as provided in Section 6) or (iii) reprice, replace
or regrant options issued through cancellation or by lowering the option
exercise price of a previously granted award unless approved by the stockholders
of the Company .

10.  AMENDMENT OF THE PLAN.

     The Board of Directors may suspend or discontinue the Plan or amend it in
any respect whatsoever; provided, however, that without approval of the
stockholders of the Company, no amendment may (i) materially modify the
requirements as to eligibility to receive Options or PARS under the Plan, or
(ii) materially increase the benefits accruing to participants in the Plan.

11.  WITHHOLDING.

          (a) The Company shall have the right to deduct from payments of any
     kind otherwise due to the optionee or recipient of PARS any federal, state
     or local taxes of any kind required by law to be withheld with respect to
     any shares issued upon exercise of Options under the Plan or upon the
     expiration or termination of the Restricted Period relating to the PARS.
     Subject to the prior approval of the Company, the optionee or recipient of
     PARS may elect to satisfy such obligations, in whole or in part, (i) by
     causing the Company to withhold shares of Common Stock otherwise issuable
     pursuant


<PAGE>

     to the exercise of an Option or upon the expiration or termination of
     the Restricted Period relating to the PARS or (ii) by delivering to the
     Company shares of Common Stock already owned by the optionee or PARS
     recipient. The shares so delivered or withheld shall have a fair market
     value equal to such withholding obligation. The fair market value of the
     shares used to satisfy such withholding obligation shall be determined by
     the Company as of the date that the amount of tax to be withheld is to be
     determined. An optionee or PARS recipient who has made an election pursuant
     to this Section 11(a) may only satisfy his or her withholding obligation
     with shares of Common Stock which are not subject to any repurchase,
     forfeiture, unfulfilled vesting or other similar requirements.

          (b) If the recipient of PARS under the Plan elects, in accordance with
     Section 83(b) of the Code, to recognize ordinary income in the year of
     acquisition of any shares awarded under the Plan, the Company will require
     at the time of such election an additional payment for withholding tax
     purposes based on the difference, if any, between the purchase price of
     such shares and the fair market value of such shares as of the date
     immediately preceding the date on which the PARS are awarded.

12.  NOTICE.

     Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.

13.  GOVERNING LAW.

     The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.

14.  STOCKHOLDER APPROVAL.

     The Plan is conditional upon stockholder approval of the Plan, and the Plan
shall be null and void if the Plan is not so approved by the Company's
stockholders.

                                  Amended and restated by the Board of
                                  Directors on September 10, 1998 and approved
                                  by stockholders on January 21, 1999; amended
                                  by the Board of Directors on September 14,
                                  1999 and approved by stockholders on
                                  November 9, 1999; amended by the Compensation
                                  Committee on November 30, 1999.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<DESCRIPTION>EXHIBIT 10.2
<TEXT>

<PAGE>


                                  STAPLES, INC.


                 AMENDED AND RESTATED 1992 EQUITY INCENTIVE PLAN

1.   PURPOSE.

     The purpose of this plan (the "Plan") is to secure for Staples, Inc. (the
"Company") and its shareholders the benefits arising from capital stock
ownership by employees or officers of, and consultants to, the Company and its
parent and subsidiary corporations who are expected to contribute to the
Company's future growth and success. Except where the context otherwise
requires, the term "Company" shall include the parent and all present and future
subsidiaries of the Company 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"). Those provisions of the Plan which make express reference to Section
422 shall apply only to Incentive Stock Options (as that term is defined
herein).

2.   TYPES OF OPTIONS AND AWARDS; ADMINISTRATION.

          a. TYPES OF OPTIONS AND AWARDS. Options granted pursuant to the Plan
     shall be authorized by action of the Board of Directors of the Company (or
     a Committee designated by the Board of Directors) and may be either
     incentive stock options ("Incentive Stock Options") meeting the
     requirements of Section 422 of the Code or non-statutory options which are
     not intended to meet the requirements of Section 422 of the Code. Awards of
     restricted stock made pursuant to Section 13 of the Plan shall be
     authorized by action of the Board of Directors of the Company (or a
     Committee designated by the Board of Directors) and shall meet the
     requirements of Section 13 of the Plan.

          b. Administration.

               i. The Plan will be administered by the Board of Directors of the
          Company, whose construction and interpretation of the terms and
          provisions of the Plan shall be final and conclusive. The Board of
          Directors may in its sole discretion (x) grant options to purchase
          shares of Staples Retail and Delivery common stock or Staples.com
          common stock (collectively, "Common Stock") and issue shares upon
          exercise of such options as provided in the Plan and (y) make
          restricted stock awards pursuant to Section 13 of the Plan. The Board
          shall have authority, subject to the express provisions of the Plan,
          to construe the respective option agreements, awards and the Plan, to
          prescribe, amend and rescind rules and regulations relating to the
          Plan, to determine the terms and provisions of the respective option
          agreements and restricted stock awards, which need not be identical,
          and to make all other determinations in the judgment of the Board of
          Directors necessary or desirable for the administration of the Plan.
          The Board of Directors may correct any defect or supply any omission
          or reconcile any inconsistency in the Plan or in any option agreement
          or restricted stock award in the manner and to the extent it shall
          deem expedient to carry the Plan into effect and it shall be the sole
          and final judge of such expediency. No director or person acting
          pursuant to authority delegated by the Board of Directors shall be
          liable for any action or determination under the Plan made in good
          faith.

               ii. The Board of Directors may, to the full extent permitted by
          or consistent with applicable laws or regulations and Section 3(b) of
          this Plan, delegate any or all of its powers under the Plan to a
          committee (the "Committee") appointed by the Board of Directors, and
          if the Committee is so appointed all references to the Board of
          Directors in the Plan shall mean and relate to such Committee. Unless
          all members of the Board of Directors are "outside directors" within
          the meaning of Section 162(m) of the Code, as such term is interpreted
          from time to time, the Board shall appoint such a Committee of two or
          more directors, all of whom are outside directors, and shall delegate
          to such Committee all of its powers under the Plan, except that the
          Board's concurrent approval shall be required for any amendment to the
          Plan which may be adopted by


<PAGE>


          the Committee; and provided, that any failure of any director or
          Committee member to satisfy the definition of outside director shall
          not invalidate any action taken by the Board or Committee with respect
          to any participant in the Plan, whether or not such person is a
          "covered employee" within the meaning of Section 162(m) of the Code,
          as such term is interpreted from time to time.

          c. APPLICABILITY OF RULE 16b-3. Those provisions of the Plan
     which make express reference to Rule 16b-3 promulgated under the Securities
     and Exchange Act of 1934 (the "Exchange Act") or, any successor rules
     ("Rule 16b-3") or which are required in order for certain option
     transactions to qualify for exemption under Rule 16b-3 shall apply only to
     such persons as are required to file reports under Section 16(a) of the
     Exchange Act (a "Reporting Person").

3.   ELIGIBILITY.

     Options and restricted stock awards may be granted or made to persons
who are, at the time of grant, employees or officers of the Company (including
any persons who have entered into an agreement with the Company under which they
will be employed by the Company in the future) or consultants to the Company;
PROVIDED, that the class of employees to whom Incentive Stock Options may be
granted shall be limited to employees of the Company. A person who has been
granted an option or award may, if he or she is otherwise eligible, be granted
additional options or awards if the Board of Directors shall so determine;
PROVIDED, that the maximum number of shares for which options or restricted
stock awards may be granted to any one employee during any fiscal year shall be
3,037,500* shares, subject to adjustment as provided in Section 15 below.

4.   STOCK SUBJECT TO PLAN.

     Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock of the Company which may be issued and sold
under the Plan is 122,850,000 shares* of Common Stock (regardless of series).
Except as prohibited by Rule 16b-3, (i) if an option granted under the Plan
shall expire or terminate for any reason without having been exercised in full,
the unpurchased shares subject to such option shall again be available for
subsequent option grants or awards under the Plan and (ii) if restricted stock
awarded under the Plan shall be repurchased by the Company, the repurchased
shares subject to such award shall again be available for subsequent option
grants or awards under the Plan.

5.   FORMS OF OPTION AGREEMENTS.

     As a condition to the grant of an option under the Plan, each recipient
of an option shall execute an option agreement in such form not inconsistent
with the Plan as may be approved by the Board of Directors. Such option
agreements may differ among recipients.

6.   PURCHASE PRICE UPON EXERCISE OF OPTIONS.

          a. GENERAL. Subject to Section 3(b), the purchase price per share of
     stock deliverable upon the exercise of an option shall be determined by the
     Board of Directors but shall in no event be less than 100% of the fair
     market value of such stock, as determined by the Board of Directors, at the
     time of grant of such option, or, in the case of an Incentive Stock Option
     described in Section 11(b), be less than 110% of such fair market value.

 *  Adjusted for stock splits through September 14, 1999

          b. PAYMENT OF PURCHASE PRICE. Options granted under the Plan may
     provide for the payment of the exercise price by delivery of cash or a
     check to the order of the Company in an amount equal to the exercise price
     of such options, or, to the extent provided in the applicable option
     agreement, (i) by delivery to the Company of shares of Common Stock of the
     Company already owned by the optionee having a fair market value equal in
     amount to the exercise price of the options being exercised, (ii) by any
     other means (including, without limitation, by delivery of a promissory
     note of the optionee


                                       2


<PAGE>


     payable on such terms as are specified by the Board of Directors) 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 and Regulation T promulgated by the Federal
     Reserve Board) or (iii) by any combination of such methods of payment. The
     fair market value of any shares of Common Stock or other non-cash
     consideration which may be delivered upon exercise of an option shall be
     determined in such manner as may be prescribed by the Board of Directors.

7.   OPTION PERIOD.

     Each option and all rights thereunder shall expire on such date as
shall be set forth in the applicable option agreement, except that, in the case
of an Incentive Stock Option, such date shall not be later than ten years after
the date on which the option is granted (or five years in the case of options
described in Section 11(b)), and, in the case of non-statutory options, in no
event after the expiration of ten years plus 30 days from the date on which the
option is granted, and, in either case, options shall be subject to earlier
termination as provided in the Plan.

8.   EXERCISE OF OPTIONS.

     Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.

9.   NONTRANSFERABILITY OF OPTIONS.

     No option granted under the Plan shall be assignable or transferable by
the person to whom it is granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution. During the life of the
optionee, the options shall be exercisable only by the optionee. Notwithstanding
the foregoing, non-statutory options may be transferred pursuant to a qualified
domestic relations order (as defined in Rule 16b-3).

10.  EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.

     Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, the Board of Directors shall
determine the period of time during which an optionee may exercise an option
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the agreement evidencing such option.

11.  INCENTIVE STOCK OPTIONS.

     Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:

          a. EXPRESS DESIGNATION. All Incentive Stock Options granted under the
     Plan shall, at the time of grant, be specifically designated as such in the
     option agreement covering such Incentive Stock Options.

          b. 10% SHAREHOLDER. If any employee to whom an Incentive Stock Option
     is to be granted under the Plan is, at the time of the grant of such
     option, the owner of stock possessing more than 10% of the total combined
     voting power of all classes of stock of the Company (after taking into
     account the attribution of stock ownership rules of Section 424(d) of the
     Code), then the following special provisions shall be applicable to the
     Incentive Stock Option granted to such individual:


                                       3


<PAGE>


               i. The purchase price per share of the Common Stock subject to
          such Incentive Stock Option shall not be less than 110% of the fair
          market value of one share of such series of Common Stock at the time
          of grant; and

               ii. The option exercise period shall not exceed five years from
          the date of grant.

          c. DOLLAR LIMITATION. For so long as the Code shall so provide,
     options granted to any employee under the Plan (and any other incentive
     stock option plans of the Company) which are intended to constitute
     Incentive Stock Options shall not constitute Incentive Stock Options to the
     extent that such options, in the aggregate, become exercisable for the
     first time in any one calendar year for shares of Common Stock with an
     aggregate fair market value (determined as of the respective date or dates
     of grant) of more than $100,000.

         d. DETERMINATION OF EMPLOYMENT, DEATH OR DISABILITY. No Incentive
     Stock Option may be exercised unless, at the time of such exercise, the
     optionee is, and has been continuously since the date of grant of his or
     her option, employed by the Company, except that:

               i. an Incentive Stock Option may be exercised within the period
          of three months after the date the optionee ceases to be an employee
          of the Company (or within such lesser period as may be specified in
          the applicable option agreement), PROVIDED, that the agreement with
          respect to such option may designate a longer exercise period and that
          the exercise after such three-month period shall be treated as the
          exercise of a non-statutory option under the Plan;

               ii. if the optionee dies while in the employ of the Company, or
          within three months after the optionee ceases to be such an employee,
          the Incentive Stock Option may be exercised by the person to whom it
          is transferred by will or the laws of descent and distribution within
          the period of one year after the date of death (or within such lesser
          period as may be specified in the applicable option agreement); and

               iii. if the optionee becomes disabled (within the meaning of
          Section 22(e)(3) of the Code or any successor provision thereto) while
          in the employ of the Company, the Incentive Stock Option may be
          exercised within the period of one year after the date the optionee
          ceases to be such an employee because of such disability (or within
          such lesser period as may be specified in the applicable option
          agreement).

     For all purposes of the Plan and any option or restricted stock award
granted hereunder, "employment" shall be defined in accordance with the
provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor
regulations). Notwithstanding the foregoing provisions, no stock option may be
exercised after its expiration date.

12.  ADDITIONAL PROVISIONS.

          a. ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in its
     sole discretion, include additional provisions in option agreements
     covering options granted under the Plan, including without limitation
     restrictions on transfer, repurchase rights, commitments to pay cash
     bonuses, to make, arrange for or guaranty loans or to transfer other
     property to optionees upon exercise of options, or such other provisions as
     shall be determined by the Board of Directors; PROVIDED THAT such
     additional provisions shall not be inconsistent with any other term or
     condition of the Plan and such additional provisions shall not cause any
     Incentive Stock Option granted under the Plan to fail to qualify as an
     Incentive Stock Option within the meaning of Section 422 of the Code.

          b. ACCELERATION, EXTENSION, ETC. The Board of Directors may, in its
     sole discretion, (i) accelerate the date or dates on which all or any
     particular option or options granted under the Plan may be exercised or
     (ii) extend the dates during which all, or any particular, option or
     options granted under


                                       4
<PAGE>


     the Plan may be exercised; PROVIDED, HOWEVER, that no such extension
     shall be permitted if it would cause the Plan to fail to comply with
     Section 422 of the Code or with Rule 16b-3.

13.  AWARDS.

     A restricted stock award ("award") shall consist of the issuance by the
Company of shares of Common Stock (of either series), and purchase by the
recipient of such shares, subject to the terms, conditions and restrictions
described in the document evidencing the award and in this Section 13 and
elsewhere in the Plan.

          a. EXECUTION OF RESTRICTED STOCK AWARD AGREEMENT. As a condition to an
     award under the Plan, each recipient of an award shall execute an agreement
     in such form, which may differ among recipients, as shall be specified by
     the Board of Directors at the time of such award.

          b. PRICE. The Board of Directors shall determine the price at which
     shares of Common Stock shall be sold to recipients of awards under the
     Plan. The Board of Directors may, in its discretion, issue shares pursuant
     to awards without the payment of any cash purchase price by the recipients
     (in which case the "price per share originally paid" for purposes of
     Section 13(d)(3) below shall be zero) or issue shares pursuant to awards at
     a purchase price below the then fair market value of such series of Common
     Stock. If a purchase price is required to be paid, it shall be paid in cash
     or by check payable to the order of the Company at the time that the award
     is accepted by the recipient, or by such other means as may be approved by
     the Board of Directors.

          c. NUMBER OF SHARES. The award shall specify the number of shares and
     series of Common Stock issued thereunder.

          d. RESTRICTIONS ON TRANSFER. In addition to such other terms,
     conditions and restrictions upon awards as shall be imposed by the Board of
     Directors, all shares issued pursuant to an award shall be subject to the
     following restrictions:

               i. All shares of Common Stock subject to an award (including any
          shares issued pursuant to paragraph (e) of this Section) shall be
          subject to certain restrictions on disposition and obligations of
          resale to the Company as provided in subparagraph (2) below for the
          period specified in the document evidencing the award, and shall not
          be sold, assigned, transferred, pledged, hypothecated or otherwise
          disposed of until such restrictions lapse. The period during which
          such restrictions are applicable is referred to as the "Restricted
          Period." Notwithstanding the foregoing, the Restricted Period on (i)
          stock awards that vest based on performance shall not vest earlier
          than the first anniversary of the date of grant and (ii) stock awards
          that vest based on the passage of time alone will vest no earlier than
          the third anniversary of the date of grant.

               ii. In the event that a recipient's employment with the Company
          is terminated within the Restricted Period, whether such termination
          is voluntary or involuntary, with or without cause, or because of the
          death or disability of the recipient, the Company shall have the right
          and option for a period of three months following such termination to
          buy for cash that number of the shares of Common Stock purchased under
          the award as to which the restrictions on transfer and the forfeiture
          provisions contained in the award have not then lapsed, at a price
          equal to the price per share originally paid by the recipient. If such
          termination occurs within the last three months of the applicable
          restrictions, the restrictions and repurchase rights of the Company
          shall continue to apply until the expiration of the Company's three
          month option period.

               iii. Notwithstanding subparagraphs (1) and (2) above, the Board
          of Directors may, in its discretion, either at the time that an award
          is made or at any time thereafter, waive its right to repurchase
          shares of Common Stock upon the occurrence of any of the events
          described in this paragraph (d) or remove or modify any part or all of
          the restrictions provided that the Board may only exercise such rights
          in extraordinary circumstances which shall include, without
          limitation,


                                       5
<PAGE>


          death or disability of the employee; a merger, consolidation, sale,
          reorganization, recapitalization, or change in control of the Company
          or any other nonrecurring significant event affecting the Company, an
          employee or the Plan. In addition, the Board of Directors may, in its
          discretion, impose upon the recipient of an award at the time of such
          award such other restrictions on any shares of Common Stock issued
          pursuant to such award as the Board of Directors may deem advisable.

          e. ADDITIONAL SHARES. Any shares received by a recipient of an award
     as a stock dividend on, or as a result of stock splits, combinations,
     exchanges of shares, reorganizations, mergers, consolidations or otherwise
     with respect to, shares of Common Stock received pursuant to such award
     shall have the same status and shall bear the same restrictions, all on a
     proportionate basis, as the shares initially purchased pursuant to such
     award.

          f. TRANSFERS IN BREACH OF AWARD. If any transfer of shares purchased
     pursuant to an award is made or attempted contrary to the terms of the Plan
     and of such award, the Board of Directors shall have the right to purchase
     for the account of the Company those shares from the owner thereof or his
     or her transferee at any time before or after the transfer at the price
     paid for such shares by the person to whom they were awarded under the
     Plan. In addition to any other legal or equitable remedies which it may
     have, the Company may enforce its rights by specific performance to the
     extent permitted by law. The Company may refuse for any purpose to
     recognize as a shareholder of the Company any transferee who receives any
     shares contrary to the provisions of the Plan and the applicable award or
     any recipient of an award who breaches his or her obligation to resell
     shares as required by the provisions of the Plan and the applicable award,
     and the Company may retain and/or recover all dividends on such shares
     which were paid or payable subsequent to the date on which the prohibited
     transfer or breach was made or attempted.

          g. ADDITIONAL AWARD PROVISIONS. The Board of Directors may, in its
     sole discretion, include additional provisions in any award granted under
     the Plan as shall be determined by the Board of Directors.

14.  RIGHTS AS A SHAREHOLDER.

     The holder of an option or recipient of an award shall have no rights
as a shareholder with respect to any shares covered by the option or award
(including, without limitation, any rights to receive dividends or non-cash
distributions with respect to such shares) until the date of issue of a stock
certificate to him or her for such shares. 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. Notwithstanding the foregoing, in the event the
Company effects a split of either class of Common Stock by means of a stock
dividend and the exercise price of and the number of shares subject to such
Option are adjusted as of the date of the distribution of the dividend (rather
than as of the record date for such dividend), then an optionee who exercises an
Option between the record date and the distribution date for such stock dividend
shall be entitled to receive, on the distribution date, the stock dividend with
respect to the shares of such class of Common Stock acquired upon such Option
exercise, notwithstanding the fact that such shares were not outstanding as of
the close of business on the record date for such stock dividend.

15.  ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS AND RELATED TRANSACTIONS.

          a. GENERAL. If, through or as a result of any merger, consolidation,
     sale of all or substantially all of the assets of the Company,
     reorganization, recapitalization, reclassification, stock dividend, stock
     split, reverse stock split or other similar transaction, (i) the
     outstanding shares of one or both series of Common Stock are increased or
     decreased or are exchanged for a different number or kind of shares or
     other securities of the Company, or (ii) additional shares or new or
     different shares or other securities of the Company or other non-cash
     assets are distributed with respect to such shares of one or both series of
     Common Stock or other securities, an appropriate and proportionate
     adjustment shall be made in (w) the maximum number of shares for which
     awards may be granted to any one employee during any fiscal year, as set
     forth in the last sentence of Section 3, (x) the maximum number and kind of


                                       6
<PAGE>


     shares reserved for issuance under the Plan, (y) the number and kind of
     shares or other securities subject to any then outstanding options under
     the Plan for such series of Common Stock, and (z) the price for each share
     subject to any then outstanding options under the Plan or repurchase rights
     of the Company for such series of Common Stock, without changing the
     aggregate purchase price as to which such options or repurchase rights
     remain exercisable. Notwithstanding the foregoing, no adjustment shall be
     made pursuant to this Section 15 if such adjustment would cause the Plan to
     fail to comply with Section 422 of the Code or with Rule 16b-3.

          b. BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under this
     Section 15 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 under
     the Plan on account of any such adjustments.

16.  MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.

          a. GENERAL. In the event of a consolidation or merger or sale of all
     or substantially all of the assets of the Company in which outstanding
     shares of one or both series 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 the Company, the Board of Directors of the
     Company, or the board of directors of any corporation assuming the
     obligations of the Company, may, in its discretion, take any one or more of
     the following actions, as to outstanding options for such series of Common
     Stock: (i) provide that such options shall be assumed, or equivalent
     options shall be substituted, by the acquiring or succeeding corporation
     (or an affiliate thereof), PROVIDED that any such options substituted for
     Incentive Stock Options shall meet the requirements of Section 424(a) of
     the Code, (ii) upon written notice to the optionees, provide that all
     unexercised options will terminate immediately prior to the consummation of
     such transaction unless exercised by the optionee within a specified period
     following the date of such notice, (iii) in the event of a merger under the
     terms of which holders of one or both series of Common Stock of the Company
     will receive upon consummation thereof a cash payment for each share
     surrendered in the merger (the "Merger Price"), make or provide for a cash
     payment to such optionees equal to the difference between (A) the Merger
     Price times the number of shares of Common Stock subject to such
     outstanding options (to the extent then exercisable at prices not in excess
     of the Merger Price) and (B) the aggregate exercise price of all such
     outstanding options in exchange for the termination of such options, and
     (iv) provide that all or any such outstanding options shall become
     exercisable in full immediately prior to such event.

          b. SUBSTITUTE OPTIONS. The Company may grant options under the Plan in
     substitution for options held by employees of another corporation who
     become employees of the Company, or a subsidiary of the Company, as the
     result of a merger or consolidation of the employing corporation with the
     Company or a subsidiary of the Company, or as a result of the acquisition
     by the Company, or one of its subsidiaries, of property or stock of the
     employing corporation. The Company may direct that substitute options be
     granted on such terms and conditions as the Board of Directors considers
     appropriate in the circumstances so long as the ratio of the option
     exercise price to the fair market value of the stock for the substitute
     option is no more favorable to the optionee than the ratio of the option
     exercise price to the fair market value of the original option immediately
     before such substitution.

17.  NO SPECIAL EMPLOYMENT RIGHTS.

     Nothing contained in the Plan or in any option or award shall confer
upon any optionee or any recipient of an award any right with respect to the
continuation of his or her employment by the Company or consulting relationship
with the Company or interfere in any way with the right of the Company at any
time to terminate such employment or consulting relationship or to increase or
decrease the compensation of the optionee.


                                       7
<PAGE>


18.  OTHER EMPLOYEE BENEFITS.

     Except as to plans which by their terms include such amounts as
compensation, neither the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise nor the value of an award granted to an employee will
constitute compensation with respect to which any other employee benefits of
such employee are determined, including, without limitation, benefits under any
bonus, pension, profit-sharing, life insurance or salary continuation plan,
except as otherwise specifically determined by the Board of Directors.

19.  AMENDMENT OF THE PLAN.

          a. The Board of Directors may at any time, and from time to time,
     modify or amend the Plan in any respect, provided, however, that without
     approval of the stockholders of the Company, no amendment may (i) increase
     the number of shares covered by the Plan, (ii) materially increase the
     benefits provided under the Plan or (iii) add a class of participants to
     the Plan. In addition, if at any time the approval of the shareholders of
     the Company is required as to any other modification or amendment under
     Section 422 of the Code or any successor provision with respect to
     Incentive Stock Options, or under Rule 16b-3, the Board of Directors may
     not effect such modification or amendment without such approval.

          b. The termination or any modification or amendment of the Plan shall
     not, without the consent of an optionee or recipient of an award, affect
     his or her rights under an option or award previously granted to him or
     her. With the consent of the optionee or recipient of an award affected,
     the Board of Directors may amend outstanding option agreements or awards in
     a manner not inconsistent with the Plan. The Board of Directors shall have
     the right to amend or modify (i) the terms and provisions of the Plan and
     of any outstanding Incentive Stock Options granted under the Plan to the
     extent necessary to qualify any or all such options for such favorable
     federal income tax treatment (including deferral of taxation upon exercise)
     as may be afforded incentive stock options under Section 422 of the Code
     and (ii) the terms and provisions of the Plan and of any outstanding option
     or award to the extent necessary to ensure the qualification of the Plan
     under Rule 16b-3 or is required to ensure that any compensation
     attributable to any option under the Plan is deductible by the Company for
     federal income tax purposes under Section 162(m), or any successor rule.

20.  WITHHOLDING.

          a. The Company shall have the right to deduct from payments of any
     kind otherwise due to the optionee or recipient of an award any federal,
     state or local taxes of any kind required by law to be withheld with
     respect to any shares issued upon exercise of options under the Plan or
     upon the expiration or termination of the Restricted Period relating to
     shares subject to the award. Subject to the prior approval of the Company,
     which may be withheld by the Company in its sole discretion, the optionee
     or recipient of an award may elect to satisfy such obligations, in whole or
     in part, (i) by causing the Company to withhold shares of Common Stock
     otherwise issuable pursuant to the exercise of an option or upon the
     expiration or termination of the Restricted Period relating to shares
     subject to the award or (ii) by delivering to the Company shares of Common
     Stock already owned by the optionee or award recipient. The shares so
     delivered or withheld shall have a fair market value equal to such
     withholding obligation. The fair market value of the shares used to satisfy
     such withholding obligation shall be determined by the Company as of the
     date that the amount of tax to be withheld is to be determined. An optionee
     or award recipient who has made an election pursuant to this Section 20(a)
     may only satisfy his or her withholding obligation with shares of Common
     Stock which are not subject to any repurchase, forfeiture, unfulfilled
     vesting or other similar requirements.

          b. Notwithstanding the foregoing, in the case of a Reporting Person,
     no election to use shares for the payment of withholding taxes shall be
     effective unless made in compliance with any applicable requirements of
     Rule 16b-3 (unless it is intended that the transaction not qualify for
     exemption under Rule 16b-3).


                                       8
<PAGE>


          c. If the recipient of an award under the Plan elects, in accordance
     with Section 83(b) of the Code, to recognize ordinary income in the year of
     acquisition of any shares awarded under the Plan, the Company will require
     at the time of such election an additional payment for withholding tax
     purposes based on the difference, if any, between the purchase price of
     such shares and the fair market value of such shares as of the date
     immediately preceding the date of the award.

21.  CANCELLATION AND NEW GRANT OF OPTIONS, ETC.

     Subject to the approval of the stockholders of the Company, the Board
of Directors shall have the authority to effect, with the consent of the
affected optionees, (i) the cancellation of any or all outstanding options under
the Plan and the grant in substitution therefor of new options under the Plan
covering the same or different numbers of shares of Common Stock (of either
series) and having an option exercise price per share which may be lower or
higher than the exercise price per share of the cancelled options or (ii) the
amendment of the terms of any and all outstanding options under the Plan to
provide an option exercise price per share which is higher or lower than the
then-current exercise price per share of such outstanding options.

22.  EFFECTIVE DATE AND DURATION OF THE PLAN.

          a. EFFECTIVE DATE. The Plan shall become effective when adopted by the
     Board of Directors, but no Incentive Stock Option granted under the Plan
     shall become exercisable unless and until the Plan shall have been approved
     by the Company's shareholders. If such shareholder approval is not obtained
     within twelve months after the date of the Board's adoption of the Plan, no
     options previously granted under the Plan shall be deemed to be Incentive
     Stock Options and no Incentive Stock Options shall be granted thereafter.
     Amendments to the Plan not requiring shareholder approval shall become
     effective when adopted by the Board of Directors; amendments requiring
     shareholder approval (as provided in Section 19) shall become effective
     when adopted by the Board of Directors, but no Incentive Stock Option
     granted after the date of such amendment shall become exercisable (to the
     extent that such amendment to the Plan was required to enable the Company
     to grant such Incentive Stock Option to a particular optionee) unless and
     until such amendment shall have been approved by the Company's
     shareholders. If such shareholder approval is not obtained within twelve
     months of the Board's adoption of such amendment, any Incentive Stock
     Options granted on or after the date of such amendment shall terminate to
     the extent that such amendment to the Plan was required to enable the
     Company to grant such option to a particular optionee. Subject to this
     limitation, options may be granted under the Plan at any time after the
     effective date and before the date fixed for termination of the Plan.

          b. TERMINATION. Unless sooner terminated in accordance with Section
     16, the Plan shall terminate, with respect to Incentive Stock Options, upon
     the earlier of (i) the close of business on the day next preceding the
     tenth anniversary of the date of its adoption by the Board of Directors, or
     (ii) the date on which all shares available for issuance under the Plan
     shall have been issued pursuant to the exercise or cancellation of options
     granted under the Plan or the grant of awards. Unless sooner terminated in
     accordance with Section 16, the Plan shall terminate with respect to awards
     and options which are not Incentive Stock Options on the date specified in
     (ii) above. If the date of termination is determined under (i) above, then
     options outstanding on such date shall continue to have force and effect in
     accordance with the provisions of the instruments evidencing such options.

23.  PROVISION FOR FOREIGN PARTICIPANTS.

     The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.


                                       9
<PAGE>


                                        ADOPTED BY THE BOARD OF DIRECTORS ON
                                        APRIL 16, 1992 AND APPROVED BY THE
                                        STOCKHOLDERS ON JUNE 18, 1992; AMENDED
                                        BY THE BOARD OF DIRECTORS ON MARCH 25,
                                        1993 AND APPROVED BY THE STOCKHOLDERS ON
                                        JUNE 25, 1993; AS FURTHER AMENDED BY THE
                                        BOARD OF DIRECTORS ON JUNE 25, 1993,
                                        WHICH AMENDMENT DID NOT REQUIRE
                                        STOCKHOLDER APPROVAL; AS FURTHER
                                        AMENDED, RESTATED AND RENAMED BY THE
                                        BOARD OF DIRECTORS ON APRIL 27, 1994,
                                        AND APPROVED BY THE STOCKHOLDERS ON JUNE
                                        30, 1994; AS FURTHER AMENDED ON
                                        SEPTEMBER 3, 1996, AND APPROVED BY THE
                                        STOCKHOLDERS ON JUNE 18, 1997; AS
                                        FURTHER AMENDED ON SEPTEMBER 14, 1999,
                                        AND APPROVED BY STOCKHOLDERS ON NOVEMBER
                                        9, 1999; AND AS FURTHER AMENDED BY THE
                                        COMPENSATION COMMITTEE OF THE BOARD OF
                                        DIRECTORS ON NOVEMBER 30, 1999; AND AS
                                        FURTHER AMENDED BY THE BOARD OF
                                        DIRECTORS ON MARCH 7, 2000.




                                       10
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>5
<DESCRIPTION>EXHIBIT 10.6
<TEXT>

<PAGE>

                                                                    Exhibit 10.6

                  NON-COMPETE AND NON-SOLICITATION AGREEMENT *

         This AGREEMENT is dated as of ____________________ by and between
STAPLES, INC., a Delaware Corporation having offices at 500 Staples Drive,
Framingham, Massachusetts 01702 (the "Company," which term includes any
affiliates and subsidiaries), and _______________________ ("Executive").

                                   WITNESSETH:

         WHEREAS the Company operates in the highly competitive, diversified
office products market and competes across delivery channels with various types
of businesses which presently include but are not limited to office supply
chains, mass merchants, warehouse clubs, computer and electronic superstores,
mail order firms, contract stationer businesses, electronic commerce
distributors, and telecommunications providers;

         WHEREAS, Executive is an officer and stock option-holder of the
Company;

         WHEREAS, such relationship creates a relationship of confidence and
trust between the parties;

         WHEREAS, the Company in reliance on this Agreement has and will entrust
Executive with information, knowledge, and know-how which would be detrimental
to Company if Executive were to provide services to, or otherwise participate in
the operation of, a competitor of the Company;

         WHEREAS, the conduct of the Company's business entails the disclosure
of confidential information and trade secrets to its employees and by virtue of
the services which Executive will render or intends to render pursuant to this
Agreement, Executive will become privy, solely through his/her relationship with
the Company and its employees to confidential business information of the
Company, including but not limited to financial information, marketing plans and
techniques, strategies, forecasts, operations structures and methods, pricing
policies and information, customer lists and information, vendor programs and
other proprietary, private, confidential business matters.

         WHEREAS, the Company entrusts Executive with maintaining contacts,
business relationships and goodwill with Staples' customers.

         NOW, THEREFORE, in consideration of the promises and mutual covenants
and agreements herein contained, the parties hereto agree as follows:

1. In addition to compensation paid to Executive by the Company from time to
time and the issuance of any future grants of stock options and/or restricted
stock (PARS) as may be granted at the discretion of the Board of Directors, the
Company shall pay to Executive the sum of One

<PAGE>

Dollar ($1.00), receipt of which is hereby acknowledged, in exchange for
Executive's promises as set forth herein. Executive acknowledges that a grant of
stock options and/or PARS has value sufficient to constitute consideration by
itself for this Agreement regardless of whether Executive actually profits from
the grant.

2. For all periods beginning upon the date hereof and ending two years from the
date of termination of his/her employment with the Company (the "Non-compete and
Non-solicitation Period"), Executive shall not:

         (a) Directly or indirectly as owner, partner, joint venturer,
stockholder, employee, broker, agent, principal, trustee, corporate officer,
director, licensor, licensee, franchisee, or in any capacity whatsoever engage
in, become financially interested in, be employed by or have any business or
professional connection with any business that competes with the Company,
including but not limited to any business engaged in, or which plans to engage
in, the sale or distribution of office products or related services, including
without limitation consumable office supplies, business machines and computers,
office technology, telecommunication systems and services, and/or office
furniture in any country where the Company or any of its subsidiaries is then
engaged in such sales or distribution; provided, however, that Executive may own
any securities of any corporation which is engaged in such business and is
publicly owned and traded but in an amount not to exceed at any one time one
percent of any class of stock or securities of such corporation. Notwithstanding
anything to the contrary herein, in the event that Executive's employment is
terminated involuntarily other than for "Cause," the Non-compete Period set
forth in this Paragraph 2(a) shall be modified as follows. The modified period
shall be equal to the duration of any period during which Executive is entitled
to severance pay in accordance with Company policy or any applicable Severance
Benefits Agreement. For the purpose of this Paragraph, "Cause" shall be defined
as Executive's willful and continued failure to substantially perform his or her
job duties, Executive's violation of Staples' Business Conduct & Ethics Policy,
Executive's breach of either this Agreement or the Proprietary and Confidential
Information Agreement, or Executive's willful misconduct.

         (b) Solicit, hire, offer employment to, or in any manner encourage
employees of the Company to leave its employ. Executive further agrees that
during such period he/she shall not directly or indirectly solicit, hire, or
offer employment to any former employees who were employed by the Company at any
time during Executive's final six months of employment with the Company.

3. In the event that Executive believes that employment otherwise in violation
of this Agreement would not harm the Company's legitimate business interests,
Executive may request Staples to waive the restrictions contained in this
Agreement. Any such request shall be made in writing to the Executive Vice
President, Human Resources at the Company and shall identify the business with
which Executive seeks to associate and describe the duties that Executive seeks
to perform. The Company has the sole discretion whether to grant such a waiver
and no waiver of any restrictions under this Agreement shall be effective unless
in writing and signed by the President or CEO of the Company.

4. In the event that any one or more of the terms contained in subparagraphs (a)
or (b) of Paragraph 2 for any reason becomes invalid, illegal, or unenforceable,
such invalidity, illegality or unenforceability shall not affect any other terms
herein, but such terms shall be deemed deleted


                                       2

<PAGE>

and such deletion shall not affect the validity of the other terms of Paragraph
2. In addition, if any one or more of the terms contained in subparagraphs (a)
or (b) of Paragraph 2 shall for any reason be held to be excessively broad with
regard to time, duration, geographic scope or activity such terms shall be
construed in a manner to enable them to be enforced to the extent compatible
with applicable law.

5. The parties agree that failure to comply with subparagraphs (a) or (b) of
Paragraph 2 cannot be reasonably or adequately compensated in damages in an
action at law and breach of these provisions of this Agreement will cause the
Company irreparable harm. Therefore, in addition to the other remedies which may
be available to it, in law or in equity, the Company shall be entitled to
injunctive relief without bond or other security with respect to the breach of
subparagraphs (a) or (b) of Paragraph 2.

6. If Executive breaches any of the covenants set forth in this Agreement,
Executive agrees to pay all costs (including attorney's fees) incurred by the
Company in establishing that breach and in otherwise enforcing any of the
covenants or provisions of this Agreement.

7. In the event that Executive breaches any of the provisions of Paragraph 2 of
this Agreement, the Non-compete and Non-solicitation period shall be tolled
until such breach has been duly cured. If, during the Non-compete and
Non-solicitation Period, Executive has, or intends to have, any business or
professional connection with any business that competes with the Company as set
forth in subparagraph (a) of Paragraph 2, Executive shall provide the Company
with thirty days prior written notice of the name, address, and telephone number
of such company or business, regardless of its location. Written notice under
this paragraph shall be delivered to the Company's Executive Vice President of
Human Resources via personal delivery, certified mail, or other equally reliable
means.

8. The termination of Executive's employment with the Company shall not affect
the enforceability of this Agreement. Nothing in this Agreement shall be deemed
to imply any obligation of continued employment of Executive by the Company
which employment shall be "at will" unless otherwise specifically agreed in
writing.

9. This Agreement shall be binding upon the legal representatives, heirs,
successors and assigns of the parties hereto. It may not be changed orally, but
only by a writing signed by the party against whom enforcement of any such
change is sought. It is agreed that a waiver by either party of a breach of any
provisions of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by the same party. This Agreement shall be governed by the
laws of the Commonwealth of Massachusetts, and Executive agrees that any claims
or causes of action which arise out of this Agreement shall be instituted and
litigated only in, and Executive voluntarily submits to the jurisdiction over
his or her person by, a court of competent jurisdiction located within the
Commonwealth of Massachusetts.

    STAPLES, INC.                        EXECUTIVE:

    By: __________________________       Signature:_____________________________
    Its:  Executive Vice President,
              Human Resources            Please print your name here:

                                         ---------------------------------------




                                       3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>6
<DESCRIPTION>EXHIBIT 10.10
<TEXT>


<PAGE>

                                                                   Exhibit 10.10

                                  STAPLES, INC.




                            STAPLES.COM COMMON STOCK
                               PURCHASE AGREEMENT




                          Dated as of December 7, 1999


<PAGE>




                                  STAPLES, INC.

                   STAPLES.COM COMMON STOCK PURCHASE AGREEMENT

         This Agreement dated as of December 7, 1999 is entered into by and
between Staples, Inc., a Delaware corporation (the "Company), and the
undersigned outside Director of the Company or his or her designee, provided
that the designee is either the spouse or minor child of the outside Director or
a trust solely for the benefit of any of the foregoing (the "Purchaser").

         In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:

         1. SALE OF SHARES. Subject to the terms and conditions of this
Agreement, the Company hereby sells and issues to the Purchaser, and the
Purchaser hereby purchases, 100,000 shares of the Company's Staples.com Common
Stock, $0.0006 par value per share (the "Staples.com Stock"), for the purchase
price of $162,500 (the "Purchase Price"). The shares of Staples.com Stock sold
under this Agreement are referred to as the "Shares." Promptly after the
execution of this Agreement, the Company shall deliver to the Purchaser a
certificate for the number of Shares being purchased by the Purchaser,
registered in the name of the Purchaser, against payment to the Company of the
Purchase Price, by wire transfer or other method acceptable to the Company.

         2. REPRESENTATIONS OF THE COMPANY. The Company hereby represents and
warrants to the Purchasers that the statements contained in this Section 2 are
true, complete and correct.

            2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it and to enter into and
perform this Agreement and to carry out the transactions contemplated by this
Agreement. The Company is duly qualified to do business as a foreign corporation
and is in good standing in every jurisdiction in which the failure so to qualify
would have a material adverse effect on the business, prospects, assets or
condition (financial or otherwise) of the Company (a "Company Material Adverse
Effect").

            2.2 ISSUANCE OF SHARES. The issuance, sale and delivery of the
Shares in accordance with this Agreement, have been duly authorized by the
Board of Directors of the Company, and all such Shares have been, or will be
on or prior to the Closing, duly reserved for issuance. The Shares when so
issued, sold and delivered against payment therefor in accordance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable and will have been issued in compliance with the registration
and qualification requirements of all applicable federal and state securities
laws.

            3. REPRESENTATIONS OF THE PURCHASER. The Purchaser severally
represents and warrants to the Company as follows:

            3.1 INVESTMENT. The Purchaser is acquiring the Shares for his or her
own account for investment and not with a view to, or for sale in connection
with, any distribution

<PAGE>

thereof, nor with any present intention of distributing or selling the same,
except for possible sales to Affiliates (as that term is defined in Rule 144
adopted under the Securities Act of 1933, as amended (the "Securities Act"), of
the Purchaser; and, except as contemplated by this Agreement the Purchaser has
no present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof. The Purchaser
is an "accredited investor" as defined in Rule 501(a) under the Securities Act.
The Purchaser has carefully reviewed the representations concerning the Company
contained in this Agreement, and has made detailed inquiry concerning the
Company, its business and its personnel. The officers of the Company have made
available to the Purchaser any and all written information which he or she has
requested and have answered to the Purchaser's satisfaction all inquiries made
by the Purchaser. The Purchaser has sufficient knowledge and experience in
finance and business that he or she is capable of evaluating the risks and
merits of its investment in the Company and the Purchaser is able financially to
bear the risks thereof.

         4. TRANSFER RESTRICTIONS.

            4.1 SECURITIES RESTRICTIONS. The Purchaser acknowledges that the
Shares have not been registered under the Securities Act and shall not be sold
or transferred unless either (i) they first shall have been registered under the
Securities Act, or (ii) the Company first shall have been furnished with an
opinion of legal counsel to such Purchaser, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act.


                4.2 LEGEND. The Purchaser acknowledges that, until such time as
the Shares become eligible for resale pursuant to Rule 144(k) under the
Securities Act, each certificate representing the Shares shall bear a legend
substantially in the following form:

                "The shares represented by this certificate have not been
                registered under the Securities Act of 1933, as amended, and
                may not be offered, sold or otherwise transferred, pledged or
                hypothecated unless and until such shares are registered under
                such Act or an opinion of counsel satisfactory to the Company
                is obtained to the effect that such registration is not
                required."

                4.3 RIGHT OF FIRST OFFER. The Purchaser shall not sell, assign,
pledge or otherwise transfer (collectively, "transfer") any of the Shares or any
right or interest therein, whether voluntarily, by gift or otherwise, except to
an Affiliate of such Purchaser who agrees in a writing addressed to the Company
to be bound by the terms of this Agreement (a "Permitted Transferee"), other
than in accordance with the following requirements:

                (a) OFFERING NOTICE. If the Purchaser wishes to transfer all or
any portion of his or her Shares to any person (a "Third Party Purchaser"), the
Purchaser shall offer such Shares first to the Company, by sending written
notice (an "Offering Notice") to the Company, which shall state (i) the number
of Shares proposed to be transferred (the "Offered Securities"); (ii) the
proposed purchase price per Share for the Offered Securities (the "Offer
Price"); and (iii) the terms and conditions of such sale. Upon delivery of the
Offering Notice, such offer shall be irrevocable unless and until the rights of
first offer provided for herein shall have been waived or shall have expired.


                                       2
<PAGE>

                (b) COMPANY OPTION; EXERCISE. For a period of 15 days after
the giving of the Offering Notice pursuant to Section 4.3(a) (the "Company
Option Period"), the Company shall have the right (the "Company Option") but
not the obligation to purchase any or all of the Offered Securities at a
purchase price equal to the Offer Price and upon the terms and conditions set
forth in the Offering Notice. The right of the Company to purchase any or all
of the Offered Securities under this Section 4.3(b) shall be exercisable by
delivering written notice of the exercise thereof, prior to the expiration of
the 15-day period referred to above, to the Purchaser, which notice shall
state the number of Offered Securities proposed to be purchased by the
Company. The failure of the Company to respond within such 15-day period
shall be deemed to be a waiver of the Company Option, PROVIDED that the
Company may waive its rights under this Section 4.3(b) prior to the
expiration of such 15-day period by giving written notice to the Purchaser.

                (c) SALE TO THIRD PART PURCHASER. If the Company does not elect
to purchase all of the Offered Securities pursuant to Section 4.3(b), the
Purchaser may sell all, but not less than all, of the remaining Offered
Securities to a Third Party Purchaser on the terms and conditions set forth in
the Offering Notice; PROVIDED, HOWEVER, that such sale is bona fide and
consummated within 60 days after the earlier to occur of (i) the waiver by the
Company of its option to purchase the Offered Securities and (ii) the expiration
of the Company Option Period (the "Contract Date"); and PROVIDED FURTHER, that
such sale shall not be consummated unless and until, prior to the purchase by
such Third Party Purchaser of any of such Offered Securities, such Third Party
Purchaser shall become a party to this Agreement and shall agree to be bound by
the terms and conditions hereof. If such sale is not consummated by the Contract
Date for any reason, then the restrictions provided for herein shall again
become effective, and no transfer of such Offered Securities may be made
thereafter by the Purchaser without again offering the same to the Company in
accordance with this Section 4.3.

                (d) NON-COMPLYING TRANSFERS. Any sale or transfer, or purported
sale or transfer, of Shares shall be null and void unless the terms, conditions
and provisions of this Section 4 are strictly observed and followed.

                (e) TERMINATION. The terms of this Section 4.3 shall terminate
upon (i) the first anniversary of the closing of the first public offering of
shares of Staples.com Stock which is effected pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission under the Securities Act (other than an offering registered on Form
S-4, Form S-8 or any successor forms), (ii) the sale of all or substantially all
of the assets or business of the Company, whether by merger, sale of assets or
otherwise (except a merger or consolidation in which the holders of capital
stock of the Company immediately prior to such merger or consolidation continue
to hold immediately following such merger or consolidation at least 75% by
voting power of the capital stock of the surviving corporation in approximately
the same relative proportions) or (iii) at such time as all of the outstanding
shares of Staples.com Stock are exchanged for shares of Staples Retail and
Delivery Common Stock, or all of the outstanding shares of Staples Retail and
Delivery Common Stock are exchanged for shares of Staples.com Stock, pursuant to
the terms of the Certificate of Incorporation of the Company, as amended.

                (f) LEGEND. The certificates representing the Shares shall bear
a legend that indicates that the Shares are subject to a right of first offer in
favor of the Company as set forth in


                                       3
<PAGE>

this Section 4.3 (in addition to, or in combination with, any legend required by
applicable federal and state securities laws).

           5.   MISCELLANEOUS.

                5.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement, and any rights and obligations of a Purchaser
hereunder, may be assigned by such Purchaser to any person or entity to which
Shares are transferred by such Purchaser in accordance with the terms of this
Agreement, PROVIDED that such transferee agrees in writing with the Company to
be bound by the terms of this Agreement.

                5.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements,
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby.

                5.3 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

                5.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts (without reference to the conflicts of law provisions thereof).

                5.5 NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:

           If to the Company, at 500 Staples Drive, Framingham, Massachusetts
01702, Attention: Jack A. VanWoerkom or at such other address or addresses as
may have been furnished in writing by the Company to the Purchaser; or

           If to a Purchaser, at such Purchaser's address as set forth on the
records of the Company.

           Any party may give any notice, request, consent or other
communication under this Agreement using any other means (including, without
limitation, personal delivery, messenger service, telecopy, first class mail or
electronic mail), but no such notice, request, consent or other communication
shall be deemed to have been duly given unless and until it is actually received
by the party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section 5.5.

                5.6 COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter.


                                       4
<PAGE>

                5.7 AMENDMENTS AND WAIVERS. The terms of this Agreement may be
amended only with the prior written consent of all parties to this Agreement.

                5.8 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.

                5.9 SECTION HEADINGS. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.

         Executed as of the date first written above.

                                             COMPANY:

                                             STAPLES, INC.

                                             By:____________________________
                                                Name:
                                                Title:

                                             PURCHASER:

                                             -------------------------------
                                             Name:




                                       5

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>7
<DESCRIPTION>EX-10.11
<TEXT>

<PAGE>

                                                            Exhibit 10.11

                                  STAPLES, INC.




                            STAPLES.COM COMMON STOCK
                               PURCHASE AGREEMENT




                          Dated as of November 9, 1999



<PAGE>

                                  STAPLES, INC.


                   STAPLES.COM COMMON STOCK PURCHASE AGREEMENT

         This Agreement dated as of November 9, 1999 is entered into by and
between Staples, Inc., a Delaware corporation (the "Company"), General Atlantic
Partners 59, L.P., a Delaware limited partnership ("GAP LP"), GAP Coinvestment
Partners II, L.P., a Delaware limited partnership ("GAPCO II") and, together
with GAP LP, the "General Atlantic Entities") and the other investors listed on
SCHEDULE I hereto (each (including the GAP Entities), a "Purchaser and
collectively the "Purchasers").

         In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:

         1.       AUTHORIZATION AND SALE OF SHARES.

                  1.1 AUTHORIZATION. The Company has duly authorized (subject to
the stockholder approval referenced in Section 5.3) the sale and issuance,
pursuant to the terms of this Agreement, of 12,138,462 shares of its Staples.com
Common Stock, $0.0006 par value per share (the "Staples.com Stock"), having the
rights, restrictions, privileges and preferences set forth in the Certificate of
Amendment attached hereto as EXHIBIT A (the "Certificate of Amendment"). The
Company has adopted (subject to the stockholder approval referenced in Section
5.3) and before the Closing (as defined in Section 2) will have filed the
Certificate of Amendment with the Secretary of State of the State of Delaware.

                  1.2 SALE OF SHARES. Subject to the terms and conditions of
this Agreement, at the Closing the Company will sell and issue to each
Purchaser, and each Purchaser will purchase, the number of shares of Staples.com
Stock set forth next to such Purchaser's name on SCHEDULE I hereto for the
purchase price of $1.625 per share (the "Purchase Price"). The shares of
Staples.com Stock sold under this Agreement are referred to as the "Shares." The
Company's agreement with each of the Purchasers is a separate agreement, and the
sale of Shares to each Purchaser is a separate sale.


         2.       THE CLOSING.

                  (a) Subject to the satisfaction or waiver of the conditions
set forth in Sections 5 and 6, the closing (the "Closing") of the sale and
purchase of the Shares under this Agreement shall take place at the offices of
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts at 3:00 p.m. on
Tuesday, November 9, 1999, or at such other time, date and place as are mutually
agreeable to the Company and the Purchasers. At the Closing, the Company shall
deliver to each of the Purchasers a certificate for the number of Shares being
purchased by such Purchaser, registered in the name of such Purchaser, against
payment to the Company of the Purchase Price, by wire transfer or other method
acceptable to the Company. The date of the Closing is hereinafter referred to as
the "Closing Date." If the Closing does not occur on or before November 19, 1999
(the "Termination Date"), this Agreement shall automatically terminate,

<PAGE>

unless the Termination Date is extended by the written consent of the Company
and the Purchasers.

                  (b) The Company may sell, at any time prior to 60 days after
the Closing, in one or more closings (each, a "Subsequent Closing"), up to
500,000 additional Shares at the Purchase Price, to such purchasers (each, an
"Additional Purchaser") as may be approved by the Board of Directors of the
Company. At each Subsequent Closing, (i) the Company and each Additional
Purchaser shall execute and deliver a counterpart signature page hereto,
whereupon such Additional Purchaser shall become a "Purchaser" hereunder and the
Shares purchased by such Additional Purchaser shall be deemed to be "Shares" for
purposes of this Agreement, and (ii) the Company shall cause SCHEDULE I hereto
be amended to reflect the purchases made by the Additional Purchasers at each
Subsequent Closing. At each Subsequent Closing, the Company shall deliver to
each Additional Purchaser a certificate for the number of Shares being purchased
at the Subsequent Closing by such Additional Purchaser, registered in the name
of such Additional Purchaser, against payment to the Company of the Purchase
Price in the manner specified above.

         3. REPRESENTATIONS OF THE COMPANY. The Company hereby represents and
warrants to the Purchasers that the statements contained in this Section 3 are
true, complete and correct.

                  3.1 ORGANIZATION AND STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted and as proposed to be conducted by it and to
enter into and perform this Agreement and to carry out the transactions
contemplated by this Agreement. The Company is duly qualified to do business as
a foreign corporation and is in good standing in every jurisdiction in which the
failure so to qualify would have a material adverse effect on the business,
prospects, assets or condition (financial or otherwise) of the Company (a
"Company Material Adverse Effect").

                  3.2 CAPITALIZATION. The authorized capital stock of the
Company (immediately prior to the Closing and after giving effect to the filing
of the Certificate of Amendment) consists of (i) 2,100,000,000 shares of common
stock, $0.0006 par value per share (the "Common Stock"), of which 1,500,000,000
shares are designated as Staples Retail and Delivery Common Stock and
600,000,000 shares are designated as Staples.com Common Stock and (ii) 5,000,000
shares of preferred stock, $0.01 par value per share (the "Preferred Stock"). As
of October 31, 1999, (a) 459,529,480 shares of Staples Retail and Delivery
Common Stock were issued and outstanding and (b) an aggregate of 59,631,363
shares of Common Stock (regardless of series) were reserved for future issuance
under the 1992 Equity Incentive Plan, 1990 Director Stock Option Plan, 1998
Employee Stock Purchase Plan and 1999 United Kingdom Company Share Option Scheme
of the Company. Immediately prior to the Closing, no shares of Staples.com Stock
or Preferred Stock were issued or outstanding. The Company has designated
200,000,000 shares of Staples.com Stock as the Number of Shares Issuable with
Respect to Staples Retail and Delivery's Retained Interest in Staples.com (as
defined in the Certificate of Amendment). All of the issued and outstanding
shares of Staples Retail and Delivery Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable.


                                       3
<PAGE>

                  3.3 ISSUANCE OF SHARES. The issuance, sale and delivery of the
Shares in accordance with this Agreement, have been duly authorized by the Board
of Directors of the Company and will be, on or prior to the Closing, duly
authorized by the stockholders of the Company, and all such Shares have been, or
will be on or prior to the Closing, duly reserved for issuance. The Shares when
so issued, sold and delivered against payment therefor in accordance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable and will have been issued in compliance with the registration and
qualification requirements of all applicable federal and state securities laws.

                  3.4 AUTHORITY FOR AGREEMENT; NO CONFLICT. The execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action (subject to the stockholder
approval referenced in Section 5.3). This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms, subject as to enforcement of
remedies to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting generally the enforcement of creditors' rights and
subject to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies. The execution
of and performance of the transactions contemplated by this Agreement by the
Company will not (a) conflict with or violate any provision of the Certificate
of Incorporation or By-laws of the Company, (b) require on the part of the
Company any filing with, or any permit, authorization, consent or approval of,
any court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (other than the filing of a Form
D with the Securities and Exchange Commission), (c) conflict with, result in a
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest (as defined below) or other arrangement to which
the Company is a party or by which the Company is bound or to which its assets
are subject, other than any of the foregoing events listed in this clause (c)
which do not and will not, individually or in the aggregate, have a Company
Material Adverse Effect, (d) result in the imposition of any Security Interest
upon any assets of the Company or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any of its
properties or assets. For purposes of this Agreement, "Security Interest" means
any mortgage, pledge, security interest, encumbrance, charge, or other lien
(whether arising by contract or by operation of law).

                  3.5      REPORTS AND FINANCIAL STATEMENTS.

                  (a) The Company has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange Commission ("SEC")
since January 30, 1997 (collectively, the "Company Reports"). Except as
disclosed in any amendment to any Company Report filed with the SEC, as of the
respective dates on which they were filed, (i) the Company Reports complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (together with the rules and regulations promulgated thereunder, the
"Securities Act"), and the Securities Exchange Act of 1934, as amended ( the
"Exchange Act"), as the case may be,

                                       4
<PAGE>

and (ii) none of the Company Reports contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.

                  (b) Except as disclosed in any amendment to any Company Report
filed with the SEC, each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the Company Reports was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated ("GAAP") (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q and Regulation S-X of the SEC), and each presented fairly, in all material
respects, the consolidated financial position, results of operations and cash
flows of the Company as at the respective dates thereof and for the respective
periods indicated therein, except as otherwise noted therein (subject, in the
case of unaudited statements, to normal and recurring year-end adjustments that
would not, individually or in the aggregate, be reasonably expected to have a
Company Material Adverse Effect).

                  3.6 ABSENCE OF MATERIAL ADVERSE CHANGE. Since January 30,
1999, there has occurred no event or development (other than any event or
development disclosed in a Company Report) which has had, or could reasonably be
expected to have in the future, a Company Material Adverse Effect.

                  3.7 ADVISORY BOARD. The Company agrees that within 45 days
following the Closing Date, it will establish a Business Advisory Board to
provide advice and guidance to the management and Board of Directors of the
Company with respect to Staples.com (as defined in the Certificate of
Amendment). The Business Advisory Board's members will be appointed by the Board
of Directors or the Chairman of the Company and will serve as consultants to
Staples.com with respect to its business and not as a governing body. The
Company agrees that William O. Grabe and Marc McMorris shall be members of the
Business Advisory Board for so long as the GAP Entities, together with their
Affiliates (as defined below), hold at least 2,307,692 shares of Staples.com
Stock (as equitably adjusted to give effect to any stock split, reverse stock
split or similar recapitalization event affecting the Staples.com Stock). The
Company agrees that two persons designated by Highland Capital Partners IV
Limited Partnership and Highland Entrepeneurs' IV Limited Partnership (the
"Highland Entities") shall be members of the Business Advisory Board for so long
as the Highland Entities, together with their Affiliates, hold at least
2,307,692 shares of Staples.com Stock (as equitably adjusted to give effect to
any stock split, reverse stock split or similar recapitalization event affecting
the Staples.com Stock). For purposes of this Agreement (other than Section 8.1
hereof), "Affiliate" shall mean any person who is an "affiliate" as defined in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act . The
following shall be deemed to be Affiliates of GAP LP: (a) General Atlantic
Partners, LLC, a Delaware limited liability company ("GAP LLC"), the members of
GAP LLC and the limited partners of GAP LP; (b) any Affiliate of the limited
partners of GAP LP; and (c) any limited liability company or partnership a
majority of whose members or partners, as the case may be, are members, former
members, consultants or key employees of GAP LLC. GAP LP and GAPCO II shall be
deemed to be Affiliates of one another. The following shall be deemed to be
Affiliates of Summit Accelerator Partners, LLC:

                                       5
<PAGE>

(a) Summit Accelerator Fund L.P.; (b) Summit Accelerator Founders Fund, L.P.;
and (c) Summit (SAF) Investors IV, L.P.

         4. REPRESENTATIONS OF THE PURCHASERS. Each of the Purchaser severally
represents and warrants to the Company as follows:

                  4.1 INVESTMENT. Such Purchaser is acquiring the Shares for
his, her or its own account for investment and not with a view to, or for sale
in connection with, any distribution thereof, nor with any present intention of
distributing or selling the same, except for possible sales to Affiliates of
such Purchaser; and, except as contemplated by this Agreement such Purchaser has
no present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof. Such Purchaser
is an "accredited investor" as defined in Rule 501(a) under the Securities Act
or 1933, as amended (the "Securities Act").

                  4.2 AUTHORITY. Such Purchaser has full power and authority to
enter into and to perform this Agreement in accordance with its terms. No
Purchaser which is not a natural person has been organized, reorganized or
recapitalized specifically for the purpose of investing in the Company.

                  4.3 EXPERIENCE. Such Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement, and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to such Purchaser any and all
written information which he, she or it has requested and have answered to such
Purchaser's satisfaction all inquiries made by such Purchaser; and such
Purchaser has sufficient knowledge and experience in finance and business that
it is capable of evaluating the risks and merits of its investment in the
Company and such Purchaser is able financially to bear the risks thereof.

                  4.4 HART-SCOTT-RODINO MATTERS. The Shares to be acquired by
such Purchaser will be acquired and held "solely for the purpose of investment",
as defined by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules promulgated thereunder. Such Purchaser has no intention
of participating in the formulation, determination or direction of the basic
business decisions of the Company or its subsidiaries, including as a director
or officer of the Company or its subsidiaries. Such Purchaser is not presently a
competitor of the Company or its subsidiaries, and as a result of this
transaction will hold less than 10% of the outstanding voting securities of the
Company.

         5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligation of
each of the Purchasers to purchase the Shares at the Closing is subject to the
fulfillment, or the waiver by such Purchaser, of each of the following
conditions on or before the Closing:

                  5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty contained in Section 3 shall be true on and as of
the Closing Date with the same effect as though such representation and warranty
had been made on and as of that date.

                  5.2 CERTIFICATES AND DOCUMENTS. The Company shall have
delivered to the Purchasers:

                                       6
<PAGE>

                  (a) The Certificate of Incorporation of the Company, as
amended and in effect as of the Closing Date (including the Certificate of
Amendment), certified by the Secretary of State of the State of Delaware;

                  (b) A certificate, as of the most recent practicable date, as
to the corporate good standing of the Company issued by the Secretary of State
of the State of Delaware;

                  (c) A certificate of the Secretary or Assistant Secretary of
the Company as of the Closing Date certifying that:

                      (i) the By-laws of the Company are true and complete and
in full force and effect;

                      (ii) the resolutions of the Board of Directors and
stockholders of the Company, authorizing and approving all matters in connection
with this Agreement and the transactions contemplated hereby, are true and
complete and in full force and effect; and

                      (iii) the Certificate of Amendment has been filed with the
Delaware Secretary of State and representing that the Certificate of Amendment
constitutes the only amendment to the Certificate of Incorporation since the
date on which it was certified pursuant to Section 5.2(a).

                  (d) If the Closing Date is after the date of this Agreement, a
certificate of the Chief Executive Officer or Chief Financial Officer of the
Company as to the continued truth and accuracy of the representations and
warranties contained in Section 3 on and as of the Closing Date.

                  5.3 STOCKHOLDER APPROVAL. The Certificate of Amendment shall
have been approved by the affirmative vote of the holders of a majority of the
outstanding shares of Staples Common Stock.

         6. CONDITION TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company under Section 1.2 of this Agreement are subject to fulfillment, or the
waiver, of the following conditions on or before the Closing:

                  6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Purchasers contained in Section 4 shall be
true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of that date. Each
Purchaser agrees to notify the Company in writing prior to the Closing if any of
the representations and warranties of such Purchaser contained in Section 4
shall no longer be true on and as of the Closing Date with the same effect as
though such representation and warranty had been made on and as of that date.

                  6.2 STOCKHOLDER APPROVAL. The Certificate of Amendment shall
have been approved by the affirmative vote of the holders of a majority of the
outstanding shares of Staples Common Stock.

                                       7
<PAGE>

         7.       TRANSFER RESTRICTIONS.

                  7.1 SECURITIES RESTRICTIONS. Each Purchaser acknowledges that
the Shares have not been registered under the Securities Act and shall not be
sold or transferred unless either (i) they first shall have been registered
under the Securities Act, or (ii) the Company first shall have been furnished
with an opinion of legal counsel to such Purchaser, reasonably satisfactory to
the Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act.

                  7.2 LEGEND. Each Purchaser acknowledges that, until such time
as the Shares become eligible for resale pursuant to Rule 144(k) under the
Securities Act, each certificate representing the Shares shall bear a legend
substantially in the following form:

                  "The shares represented by this certificate have not been
                  registered under the Securities Act of 1933, as amended, and
                  may not be offered, sold or otherwise transferred, pledged or
                  hypothecated unless and until such shares are registered under
                  such Act or an opinion of counsel satisfactory to the Company
                  is obtained to the effect that such registration is not
                  required."


                  7.3 NO RIGHTS TO TRANSFER. No Purchaser shall sell, assign,
pledge or otherwise transfer (collectively, "transfer") any of the Shares or any
right or interest therein, whether voluntarily, by gift or otherwise on or prior
to December 31, 2000, except to an Affiliate of such Purchaser who agrees in a
writing addressed to the Company to be bound by the terms of this Agreement (a
"Permitted Transferee").

                  7.4 RIGHT OF FIRST OFFER. After December 31, 2000, no
Purchaser may transfer the Shares, except to a Permitted Transferee, other than
in accordance with the following requirements:

                  (a) OFFERING NOTICE. If any Purchaser (a "Selling Purchaser")
wishes to transfer all or any portion of its Shares to any person (a "Third
Party Purchaser"), such Selling Purchaser shall offer such Shares first to the
Company, by sending written notice (an "Offering Notice") to the Company, which
shall state (i) the number of Shares proposed to be transferred (the "Offered
Securities"); (ii) the proposed purchase price per Share for the Offered
Securities (the "Offer Price"); and (iii) the terms and conditions of such sale.
Upon delivery of the Offering Notice, such offer shall be irrevocable unless and
until the rights of first offer provided for herein shall have been waived or
shall have expired. The Company shall promptly deliver a copy of the Offering
Notice to each of the Venture Purchasers (as designated on SCHEDULE I hereto).

                  (b) COMPANY OPTION; EXERCISE. For a period of 15 days after
the giving of the Offering Notice pursuant to Section 7.4(a) (the "Company
Option Period"), the Company shall have the right (the "Company Option") but not
the obligation to purchase any or all of the Offered Securities at a purchase
price equal to the Offer Price and upon the terms and conditions set forth in
the Offering Notice. The right of the Company to purchase any or all of the
Offered Securities under this Section 7.4(b) shall be exercisable by delivering
written notice of the exercise thereof, prior to the expiration of the 15-day
period referred to above, to the Selling Purchaser, with a copy to the Venture
Purchasers, which notice shall state the number of Offered

                                       8
<PAGE>


Securities proposed to be purchased by the Company. The failure of the Company
to respond within such 15-day period shall be deemed to be a waiver of the
Company Option, PROVIDED that the Company may waive its rights under this
Section 7.4(b) prior to the expiration of such 15-day period by giving written
notice to the Selling Purchaser, with a copy to the Venture Purchasers.

                  (c)      RIGHTHOLDER OPTION; EXERCISE.

                           (i) If the Company does not elect to purchase all of
the Offered Securities pursuant to Section 7.4(b), then for a period of 10 days
after the earlier to occur of (a) the expiration of the Company Option Period
pursuant to Section 7.4(b) and (b) the date upon which the Selling Purchaser
shall have received written notice from the Company of its exercise the Company
Option pursuant to Section 7.4(b) (or its desire to exercise such option for
only a portion of the Offered Securities) or its waiver thereof (the
"Rightholder Option Period"), each of the Venture Purchasers, other than the
Selling Purchaser (for the purpose of Section 7.4, each, a "Rightholder" and
collectively, the "Rightholders") shall have the right to purchase all, but not
less than all, of the remaining Offered Securities at a purchase price equal to
the Offer Price and upon the terms and conditions set forth in the Offering
Notice. Each such Rightholder shall have the right to purchase that percentage
of the Offered Securities determined by dividing (i) the total number of shares
of Staples.com Stock then owned by such Rightholder by (ii) the total number of
shares of Staples.com Stock then owned by all such Rightholders. If any
Rightholder fails to fully subscribe for the number of Offered Securities it is
entitled to purchase, then the other participating Rightholders shall have the
right to purchase the remaining Offered Securities not so subscribed for (for
the purposes of this Section 7.4(c), the "Excess Offered Securities"). If the
Company and/or the Rightholders do not purchase all of the Offered Securities
pursuant to Section 7.4(b) and/or Section 7.4(c), then the Selling Purchaser may
sell the Offered Securities to a Third Party Purchaser in accordance with
Section 7.4(e).

                           (ii) The right of each Rightholder to purchase the
remaining Offered Securities under subsection (i)
above shall be exercisable by delivering written notice of the exercise thereof,
prior to the expiration of the Rightholder Option Period, to the Selling
Purchaser with a copy to the Company and the other Rightholders. Each such
notice shall state (a) the number of shares of Staples.com Stock held by such
Rightholder and (b) the number of Offered Securities that such Rightholder is
willing to purchase pursuant to this Section 7.4(c). The failure of a
Rightholder to respond within the Rightholder Option Period to the Selling
Purchaser shall be deemed to be a waiver of such Rightholder's rights under
subsection (i) above, PROVIDED that each Rightholder may waive its rights under
subsection (i) above prior to the expiration of the Rightholder Option Period by
giving written notice to the Selling Purchaser, with a copy to the Company. The
right of a Rightholder to purchase the Excess Offered Securities under
subsection (i) above shall be exercisable by delivering written notice of the
exercise thereof, within five days following the expiration of the Rightholder
Option Period, to the Selling Purchaser with a copy to the Company and the other
Rightholders, stating the number of Excess Offered Securities that such
Rightholder is willing to purchase pursuant to this Section 7.4(c); provided
that if two or more Rightholders choose to exercise such right with respect to
the Excess Offered Securities for a total number of Excess Offered Securities
greater than the aggregate number of Excess Offered Securities, the Excess
Offered Securities shall be allocated


                                       9
<PAGE>

among such exercising Rightholders pro rata based on the number of shares of
Staples.com Stock owned by each.

                  (d) CLOSING. The closing of the purchases of Offered
Securities subscribed for by the Company under Section 7.4(b) and/or the
Rightholders under Section 7.4(c) shall be held at the executive office of the
Company at 11:00 a.m., local time, on the 60th day after the giving of the
Offering Notice pursuant to Section 7.4(a) or at such other time and place as
the parties to the transaction may agree. At such closing, the Selling Purchaser
shall deliver certificates representing the Offered Securities, duly endorsed
for transfer and accompanied by all requisite transfer taxes, if any. The
Company and/or each Rightholder, as the case may be, purchasing Offered
Securities shall deliver at the closing payment in full in immediately available
funds for the Offered Securities purchased by it. At such closing, all of the
parties to the transaction shall execute such additional documents as are
otherwise necessary or appropriate.

                  (e) SALE TO A THIRD PARTY PURCHASER. Unless the Company and/or
the Rightholders elect to purchase all, but not less than all, of the Offered
Securities under Sections 7.4(b) and 7.4(c), the Selling Purchaser may sell all,
but not less than all, the Offered Securities to a Third Party Purchaser on the
terms and conditions set forth in the Offering Notice; PROVIDED, HOWEVER, that
such sale is bona fide and made pursuant to a contract entered into within 60
days after the earlier to occur of (i) the waiver by the Company and all of the
Rightholders of their options to purchase the Offered Securities and (ii) the
expiration of the Rightholder Option Period (the "Contract Date"); and PROVIDED
FURTHER, that such sale shall not be consummated unless and until prior to the
purchase by such Third Party Purchaser of any of such Offered Securities, such
Third Party Purchaser shall become a party to this Agreement and shall agree to
be bound by the terms and conditions hereof. If a contract for such sale is not
executed by the Contract Date or such sale is not consummated within 30 days
after the Contract Date for any reason, then the restrictions provided for
herein shall again become effective, and no transfer of such Offered Securities
may be made thereafter by the Selling Purchaser without again offering the same
to the Company and the Rightholders in accordance with this Section 7.4.

                  (f)      EXEMPT TRANSACTIONS.  The following transactions
shall be exempt from the provisions of this Section 7.4

                           (1) in the case of any Purchaser that is not a
natural person, the transfer of any or all of the Shares pursuant to and in
accordance with the terms of any merger, consolidation, reclassification of
shares or capital reorganization of such Purchaser, or pursuant to a sale of
substantially all of the stock or assets of such Purchaser, provided, however,
that in any such case, the transferee shall receive and hold such Shares subject
to the provisions of this Section 7 and there shall be no further transfer of
such stock except in accordance with this Section 7; and

                           (2) any transfer pursuant to an effective
registration statement filed by the Company with the
Securities and Exchange Commission.

                  (g) NON-COMPLYING TRANSFERS. Any sale or transfer, or
purported sale or transfer, of Shares shall be null and void unless the terms,
conditions and provisions of this Section 7 are strictly observed and followed.

                                       10
<PAGE>

                  (h) TERMINATION. The terms of this Section 7.4 shall terminate
upon (i) the closing of the first public offering of shares of Staples.com Stock
which is effected pursuant to a registration statement filed with, and declared
effective by, the Securities and Exchange Commission under the Securities Act of
1933, as amended (other than an offering registered on Form S-4, Form S-8 or any
successor forms) (an "IPO") , (ii) the sale of all or substantially all of the
assets or business of the Company, whether by merger, sale of assets or
otherwise (except a merger or consolidation in which the holders of capital
stock of the Company immediately prior to such merger or consolidation continue
to hold immediately following such merger or consolidation at least 75% by
voting power of the capital stock of the surviving corporation in approximately
the same relative proportions) or (iii) at such time as all of the outstanding
shares of Staples.com Stock are exchanged for shares of Staples Retail and
Delivery Common Stock, or all of the outstanding shares of Staples Retail and
Delivery Common Stock are exchanged for shares of Staples.com Stock, pursuant to
the terms of the Certificate of Incorporation of the Company, as amended by the
Certificate of Amendment.

                  (i) LEGEND. The certificates representing the Shares shall
bear a legend that indicates that the Shares are subject to a right of first
refusal in favor of the Company as set forth in this Section 7.4 (in addition
to, or in combination with, any legend required by applicable federal and state
securities laws).

         8. RESTRICTIONS. In order to induce the Company to issue and sell the
Shares to the Purchasers, each of the Purchasers agrees as follows:

                  8.1      NON-COMPETITION AND NON-SOLICITATION.

                  (a) Until the first anniversary of the date upon which a
Purchaser owns less than 25% of the Shares purchased hereunder by such Purchaser
(the "Restricted Period"), such Purchaser will not, and will cause its
Affiliates (excluding its Portfolio Companies) not to, directly or indirectly,
engage in (whether as owner, partner, director, employee, consultant, investor,
lender or otherwise, except as the holder of not more than 5% of the outstanding
stock of a publicly-held company), or invest in, any business or enterprise,
similar to and in competition with the Company's business as currently
conducted, that is engaged primarily in the sale of a broad array of office
product offerings offered directly to small business customers, provided that
(i) any Purchaser or its Affiliate may invest in a business or enterprise that
is engaged in selling products exclusively in a single category of office
products, (ii) the foregoing shall in no way restrict any Purchaser or its
Affiliates from purchasing the securities of any company in connection with such
Purchaser's or Affiliate's investment advisory and asset management business,
(iii) the foregoing shall not prevent any Purchaser or its Affiliates from
remaining a stockholder or a director of or continuing to hold its investment
(but not to make any new investment) in any Portfolio Company that, on or after
the time of such Purchaser's or Affiliate's initial investment, began engaging
in the activity prohibited by this Section 8.1 and (iv) the foregoing shall in
no way restrict any Purchaser or its Affiliates from investing in less than 5%
of the outstanding stock of a publicly-held company.

                  (b) During its Restricted Period, each Purchaser will not, and
will cause its Affiliates (excluding Portfolio Companies) not to, directly or
indirectly, either alone or in association with others (i) solicit any employee
of the Company to leave the employ of the

                                       11
<PAGE>

Company or (ii) solicit for employment, hire or engage as an independent
contractor (on its own behalf or on the behalf of any other party) any person
who was employed by the Company at any time during the Restricted Period, except
for any person whose employment or other affiliation with the Company has been
terminated for at least three months and except that the foregoing shall not
prohibit general solicitations to the public.

                  (c) For purposes of this Section 8.1, (i) the term "Affiliate"
shall include the sponsor and/or general partner of a Purchaser, and all
entities or persons controlled by, in control of or in common control with, the
sponsor and/or general partner (in the case of Essex Private Placement Fund II
Limited Partnership ("Essex"), other than Affiliated Managers Group, Inc. and
those of its affiliates that are not also affiliates controlled by Essex
Investment Management Company, LLC or its members who are individuals),
including without limitation any affiliated partnerships or funds, but excluding
any Portfolio Company and (ii) the term "Portfolio Company" shall include all
companies in which a Purchaser or any other Affiliate partnership or fund is a
stockholder.

                  (d) Notwithstanding the foregoing, the following companies and
individuals and employees, officers and directors thereof are excluded from the
non-competition and non-solicitation provisions of this Section 8.1:
Greenberg-Summit Management, L.L.C., Greenberg-Summit Partners, L.L. C., Summit
Retained Earnings, L.P., Mt. Everest Fund, L.P., Mt Everest QP Fund, L.P., Mt.
Everest Fund Limited and Lawrence D. Greenberg (including any family member of
Lawrence D. Greenberg and any trust set up for the benefit of Lawrence D.
Greenberg and any such family member). In addition, an indirect investment
through a hedge fund, registered investment company or other investment fund
will be deemed not to violate the non-competition and non-solicitation
provisions of this Section 8.1.

                  (e) CONFIDENTIALITY. Each Purchaser agrees that it will keep
confidential and will not disclose, divulge or use for any purpose other than to
monitor its investment in the Company any confidential, proprietary or secret
information which such Purchaser may obtain from the Company pursuant to
information disclosed to such Purchaser by virtue of its position as an investor
in the Company ("Confidential Information"), unless such Confidential
Information is known, or until such Confidential Information becomes known, to
the public (other than as a result of a breach of this Section 8.2 by such
Purchaser); PROVIDED, however, that a Purchaser may disclose Confidential
Information (i) to its employees, members, attorneys, accountants, consultants,
and other professionals to the extent reasonably necessary to obtain their
services in connection with monitoring its investment in the Company, (ii) to
any Affiliate or stockholder of such Purchaser (but not to a Portfolio Company)
of such Purchaser, provided that such Affiliate or stockholder agrees in writing
to be bound by the provisions of this Section 8.2, (iii) to a partner, including
a limited partner, of such Purchaser pursuant to such Purchaser's periodic
review and reporting obligations to its partners, provided that such partner
agrees in writing to be bound by the provisions of this Section 8.2 or (iv) as
may otherwise be required by law, regulation or legal process, provided that the
Purchaser takes reasonable steps to minimize the extent of any such required
disclosure. In addition, each Purchaser may disclose (including on its World
Wide Web site) the name of the Company, the name of its Chief Executive Officer,
the amount of such Purchaser's investment in the Company and a brief description
of the business of the Company.

                                       12
<PAGE>

         9.       FUTURE ISSUANCE OF SHARES; PREEMPTIVE RIGHTS.

                  9.1 OFFERING NOTICE. Except for Exempt Issuances (as defined
below), if the Company wishes at any time to issue to any person any Staples.com
Stock or any other securities convertible into or exchangeable for Staples.com
Stock (collectively, "New Securities") to any person (the "Subject Purchaser"),
then the Company shall offer such New Securities first to each of the Venture
Purchasers (each, a "Preemptive Rightholder" and collectively, the "Preemptive
Rightholders") by sending written notice (the "New Issuance Notice") to the
Preemptive Rightholders, which New Issuance Notice shall state (a) the number of
New Securities proposed to be issued and (b) the proposed purchase price per
share of the New Securities (the "Proposed Price"). Upon delivery of the New
Issuance Notice, such offer shall be irrevocable unless and until the rights
provided for in Section 9.2 shall have been waived or shall have expired. For
purposes of this Agreement, "Exempt Issuances" shall mean (i) the sale of shares
of Staples.com Stock under this Agreement; (ii) the issuance of shares of
Staples.com Stock as a stock dividend to holders of Common Stock or pursuant to
any subdivision or combination of shares of Common Stock; (iii) the issuance of
shares of Staples.com Stock in exchange for outstanding shares of Staples Retail
and Delivery Common Stock in accordance with the terms of the Certificate of
Incorporation of the Company; (iv) the issuance of shares of Staples.com Stock,
or the grant of options or other rights therefor, to officers, directors,
consultants and employees of the Company or a subsidiary pursuant to any plan or
agreement approved by the Board of Directors of the Company; (v) the issuance of
shares of Staples.com Stock solely in consideration for the acquisition (whether
by merger or otherwise) by the Company or a subsidiary of all or substantially
all of the stock or assets of any other entity, approved by the Board of
Directors of the Company; (vi) the sale of shares of Staples.com Stock in an
IPO; or (vii) the sale of up to 1,500,000 shares of Staples.com Stock to
directors of the Company within 60 days after the Closing Date at a price not
less than $1.625 per share.

                  9.2      PREEMPTIVE RIGHTS; EXERCISE.

                           (i) For a period of 20 days after the giving of the
New Issuance Notice pursuant to Section 9.1, each of the Preemptive Rightholders
shall have the right to purchase its Proportionate Percentage (as hereinafter
defined) of the New Securities at a purchase price equal to the Proposed Price
and upon the terms and conditions set forth in the New Issuance Notice. Each
such Preemptive Rightholder shall have the right to purchase that percentage of
the New Securities determined by dividing (a) the total number of shares of
Staples.com Stock then owned by such Preemptive Rightholder exercising its
rights under this Section 9.2 by (b) the total number of shares of Staples.com
Stock then outstanding, including any shares of Staples.com Stock subject to
outstanding options, warrants or other rights to purchase (the "Proportionate
Percentage"). If any Preemptive Rightholder does not fully subscribe for the
number of New Securities that it is entitled to purchase pursuant to the
preceding sentence, then the Preemptive Rightholders which elected to purchase
New Securities shall have the right to purchase the remaining New Securities not
so subscribed for (for the purposes of this Section 9.2(i), the "Excess New
Securities").

                           (ii) The right of each Preemptive Rightholder to
purchase the New Securities under subsection (i) above
shall be exercisable by delivering written notice of the exercise thereof, prior
to the expiration of the 20-day period referred to in subsection (i) above,

                                       13
<PAGE>

to the Company, which notice shall state the number of New Securities that such
Preemptive Rightholder elects to purchase pursuant to Section 9.2(i) (including,
if applicable, such number of Excess New Securities that such Preemptive
Rightholder elects to purchase, to the extent any are available). The failure of
a Preemptive Rightholder to respond within such 20-day period shall be deemed to
be a waiver of such Preemptive Rightholder's rights under Section 9.2(i),
PROVIDED that each Preemptive Rightholder may waive its rights under Section
9.2(i) prior to the expiration of such 20-day period by giving written notice to
the Company.

                  9.3 CLOSING. The closing of the purchase of New Securities
subscribed for by the Preemptive Rightholders under Section 9.2 shall be held at
the executive office of the Company at 10:00 a.m., local time, on (a) the 45th
day after the giving of the New Issuance Notice pursuant to Section 9.1, if the
Preemptive Rightholders elect to purchase all of the New Securities under
Section 9.2, (b) the date of the closing of the sale to the Subject Purchaser
made pursuant to Section 9.4 if the Preemptive Rightholders elect to purchase
some, but not all, of the New Securities under Section 9.2 or (c) at such other
time and place as the parties to the transaction may agree. At such closing, the
Company shall deliver certificates representing the New Securities, and such New
Securities shall be issued free and clear of all liens and encumbrances and the
Company shall so represent and warrant, and further represent and warrant that
such New Securities shall be, upon issuance thereof to the Preemptive
Rightholders and after payment therefor, duly authorized, validly issued, fully
paid and non-assessable. Each Preemptive Rightholder purchasing the New
Securities shall deliver at the closing payment in full in immediately available
funds for the New Securities purchased by it. At such closing, all of the
parties to the transaction shall execute such additional documents as are
otherwise necessary or appropriate.

                  9.4 SALE TO SUBJECT PURCHASER. The Company may sell to the
Subject Purchaser all of the New Securities not purchased by the Preemptive
Rightholders pursuant to Section 9.2 on terms and conditions that are no more
favorable to the Subject Purchaser than those set forth in the New Issuance
Notice; PROVIDED, HOWEVER, that such sale is bona fide and made pursuant to a
contract entered into within three months following the earlier to occur of (i)
the waiver by the Preemptive Rightholders of their option to purchase New
Securities pursuant to Section 9.2, and (ii) the expiration of the 20-day period
referred to in Section 9.2. If such sale is not consummated within such three
month period for any reason, then the restrictions provided for herein shall
again become effective, and no issuance and sale of New Securities may be made
thereafter by the Company without again offering the same in accordance with
this Section 9. The closing of any issuance and purchase pursuant to this
Section 9.4 shall be held at a time and place as the Company and the Subject
Purchaser may agree, subject to the consent of the participating Preemptive
Rightholders, which consent shall not be unreasonably withheld or delayed.

                  9.5 TERMINATION. The terms of this Section 9 shall terminate
upon (i) the closing of the IPO, (ii) the sale of all or substantially all of
the assets or business of the Company, whether by merger, sale of assets or
otherwise (except a merger or consolidation in which the holders of capital
stock of the Company immediately prior to such merger or consolidation continue
to hold immediately following such merger or consolidation at least 60% by
voting power of the capital stock of the surviving corporation in approximately
the same relative proportions) or (iii) at such time as all of the outstanding
shares of Staples.com Stock are

                                       14
<PAGE>

exchanged for shares of Staples Retail and Delivery Common Stock, or all of the
outstanding shares of Staples Retail and Delivery Common Stock are exchanged for
shares of Staples.com Stock, pursuant to the terms of the Certificate of
Incorporation of the Company.

         10.      REGISTRATION RIGHTS.

                  10.1 REQUEST FOR REGISTRATION At any time after 180 days
following the effectiveness of the IPO, the General Atlantic Entities (the
"INITIATING HOLDERS") may request in a written notice (which notice shall state
the number of Registrable Securities (as defined below) to be so registered)
that the Company file a registration statement under the Securities Act (or a
similar document pursuant to any other statute then in effect corresponding to
the Securities Act) covering the registration of any or all Registrable
Securities held by such Initiating Holders; PROVIDED, HOWEVER, that the
Initiating Holders may not so request more than once in any 12-month period and
more than three times in the aggregate. The Company shall notify in writing all
other Purchasers of such request within 10 days following receipt of any notice
under this Section 10.1. The Company shall file with the SEC, within 30 days
following the receipt by the Company of the notice under this Section 10.1, a
registration statement covering the resale to the public by the Initiating
Holders and the other Purchasers of all Registrable Securities requested by
them, within 15 days after the Company has delivered the notice referred to in
the preceding sentence, to be included in such registration. The Company shall
use its reasonable best efforts to cause the such registration statement to be
declared effective by the SEC as soon as practicable, and to cause such
registration statement to remain effective until the date nine months after its
effective date or such earlier time as all of the Registrable Securities covered
by such registration statement have been sold pursuant thereto. "Registrable
Securities" shall mean the Shares purchased by the Purchasers under this
Agreement and any and all additional shares of Staples.com Stock purchased by
the Purchasers pursuant to Sections 7.4 or 9 of this Agreement.

                  10.2     INCIDENTAL REGISTRATION.

                  (a) Whenever the Company proposes to file a registration
statement registering shares of Staples.com Stock under the Securities Act
(other than pursuant to Section 10.1 or a registration statement on Form S-4,
Form S-8 or any successor forms) at any time and from time to time, it will,
prior to such filing, give written notice to all Purchasers of its intention to
do so. Upon the written request of a Purchaser or Purchasers given within 20
days after the Company provides such notice (which request shall state the
intended method of disposition of such Registrable Securities), the Company
shall use its best efforts to cause all Registrable Securities which the Company
has been requested by such Purchaser or Purchasers to register to be registered
under the Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of such Purchaser or Purchasers; provided that the Company shall
have the right to postpone or withdraw any registration effected pursuant to
this Section 10.2(a) without obligation to any Purchaser.

                  (b) If the registration for which the Company gives notice
pursuant to Section 10.2 (a) is a registered public offering involving an
underwriting, the Company shall so advise the Purchasers as a part of the
written notice given pursuant to Section 10.2(a). In such event,

                                       15
<PAGE>

the right of any Purchaser to include its Registrable Securities in such
registration shall be conditioned upon such Purchaser's participation in such
underwriting on the terms set forth herein. All Purchasers proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for the underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the managing underwriter determines that the
inclusion of all Registrable Securities requested to be registered would
materially adversely affect the offering, the Company may limit the number of
Registrable Securities to be included in the registration and underwriting. The
Company shall so advise all holders of Registrable Securities requesting
registration, and the number of Registrable Securities that are entitled to be
included in the registration and underwriting by any Purchaser shall be
allocated among all Purchasers in proportion, as nearly as practicable, to the
respective number of shares of Staples.com Stock which they held at the time the
Company gives the notice specified in Section 10.2(a). If any Purchaser
disapproves of the terms of any such underwriting, such Purchaser may elect to
withdraw therefrom, within 15 days following receipt of a copy of the proposed
underwriting agreement and related documents, by written notice to the Company,
and any Registrable Securities or other securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration.

                  10.3     REGISTRATION PROCEDURES.

                  (a) If and whenever the Company is required by Section 10.1 to
file a registration, or elects to file a registration statement in which
Registrable Securities are included pursuant to Section 10.2, the Company shall:

                           (i)      as expeditiously as practicable prepare
and file with the SEC any amendments and supplements to the registration
statement and the prospectus included in the registration statement as may be
necessary to comply with the provisions of the Securities Act (including the
anti-fraud provisions thereof);

                           (ii) as expeditiously as possible furnish to each
Purchaser whose Registrable Securities are included
in such registration statement (each, a "Selling Stockholder") such reasonable
numbers of copies of the prospectus, including any preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as such Selling Stockholder may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities included in the
registration statement that are owned by such Selling Stockholder;

                           (iii) as expeditiously as possible use its best
efforts to register or qualify the Registrable
Securities included in the registration statement under the securities or Blue
Sky laws of such states as the Selling Stockholders shall reasonably request,
and do any and all other acts and things that may be necessary or desirable to
enable the Selling Stockholders to consummate the public sale or other
disposition in such states of such Registrable Securities that are included in
the registration statement; provided, however, that the Company shall not be
required in connection with this paragraph (ii) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction;

                                       16
<PAGE>

                           (iv) as expeditiously as possible, cause all
Registrable Securities included in the registration statement to be listed on
each securities exchange or automated quotation system on which Staples.com
Stock then listed;

                           (v) promptly provide a transfer agent and registrar
for all Registrable Securities included in the registration statement not later
than the effective date of such registration statement;

                           (vi) promptly make available for inspection by the
Selling Stockholder, any managing underwriter
participating in any disposition pursuant to such registration statement, and
any attorney or accountant retained by any such underwriter or selected by the
Selling Stockholder, all financial and other records and pertinent corporate
documents reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;

                           (vii) as expeditiously as possible, notify each
Selling Stockholder, promptly after it shall receive
notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed; and

                           (viii) as expeditiously as possible following the
effectiveness of such registration statement, notify
each Selling Stockholder of any request by the SEC for the amending or
supplementing of such registration statement or prospectus.

                  (b) If the Company has delivered a prospectus to the Selling
Stockholders and after having done so the prospectus is amended to comply with
the requirements of the Securities Act, the Company shall promptly notify the
Selling Stockholders and, if requested, the Selling Stockholders shall
immediately cease making offers of Registrable Securities pursuant to such
prospectus and return all prospectuses to the Company. The Company shall
promptly provide the Selling Stockholders with revised prospectuses and,
following receipt of the revised prospectuses, the Selling Stockholders shall be
free to resume making offers of the Registrable Securities pursuant to such
revised prospectus.

                  (c) In the event that, in the judgment of the Company, it is
advisable to suspend use of a prospectus included in a registration statement
filed under this Section 10 due to pending material developments or other events
that have not yet been publicly disclosed and as to which the Company reasonably
believes public disclosure would be detrimental to the Company, the Company
shall notify all Selling Stockholders to such effect, and, upon receipt of such
notice, each such Selling Stockholder shall immediately discontinue any sales of
Registrable Securities pursuant to such registration statement until such
Selling Stockholder has received copies of a supplemented or amended prospectus
or until such Selling Stockholder is advised in writing by the Company that the
then current prospectus may be used and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such prospectus. Notwithstanding anything to the contrary herein, the Company
shall not exercise its rights under this Section 10.3(c) to suspend sales of
Registrable Securities pursuant to any prospectus more than two times (and in
each case, for a period not in excess of 60 days) in any 365-day period.

                                       17
<PAGE>

                  10.4 ALLOCATION OF EXPENSES. The Company will pay all
Registration Expenses for all registrations under this Section 10. For purposes
of this Section 10.4, the term "Registration Expenses" shall mean all expenses
incurred by the Company in complying with this Section 10, including, without
limitation, all registration and filing fees, exchange listing fees, printing
expenses, fees and expenses of counsel for the Company, the reasonable fees and
expenses of one counsel for the Selling Stockholders, state Blue Sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, but excluding underwriting discounts and selling commissions.

                  10.5     INDEMNIFICATION AND CONTRIBUTION.

                  (a) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless each Selling Stockholder, each underwriter of such
Registrable Securities, and each other person, if any, who controls such Selling
Stockholder or underwriter within the meaning of the Securities Act or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which such Selling Stockholder, underwriter or controlling person
may become subject under the Securities Act, the Exchange Act, state securities
or Blue Sky laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the registration statement, or any amendment or
supplement to such registration statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse such Selling Stockholder, underwriter and each such
controlling person for any legal or any other expenses reasonably incurred by
such Selling Stockholder, underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission made in such registration statement,
preliminary prospectus or prospectus, or any such amendment or supplement, in
reliance upon and in conformity with information furnished to the Company, in
writing, by or on behalf of such Selling Stockholder, underwriter or controlling
person specifically for use in the preparation thereof.

                  (b) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Agreement, each Selling
Stockholder, severally and not jointly, will indemnify and hold harmless the
Company, each of its directors and officers and each underwriter (if any) and
each person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any registration statement under which
such Registrable Securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the registration
statement, or any

                                       18
<PAGE>

amendment or supplement to the registration statement, or arise out of or are
based upon any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in conformity with
information relating to such Selling Stockholder furnished in writing to the
Company by or on behalf of such Selling Stockholder specifically for use in
connection with the preparation of such registration statement, prospectus,
amendment or supplement; provided, however, that the obligations of a Selling
Stockholder hereunder shall be limited to an amount equal to the net cash
proceeds to such Selling Stockholder of Registrable Securities sold in
connection with such registration.

                  (c) Each party entitled to indemnification under this Section
10.5 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 10.5 except to the
extent that the Indemnifying Party is adversely affected by such failure. The
Indemnified Party may participate in such defense at such party's expense;
provided, however, that the Indemnifying Party shall pay such expense if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding; provided further that in no event shall the
Indemnifying Party be required to pay the expenses of more than one law firm per
jurisdiction as counsel for the Indemnified Party. The Indemnifying Party also
shall be responsible for the expenses of such defense if the Indemnifying Party
does not elect to assume such defense. No Indemnifying Party, in the defense of
any such claim or litigation shall, except with the consent of each Indemnified
Party (such consent not to be unreasonably withheld), consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation, and no
Indemnified Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.

                  (d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 10.5 is
due in accordance with its terms but for any reason is held to be unavailable to
an Indemnified Party in respect to any losses, claims, damages and liabilities
referred to herein, then the Indemnifying Party shall, in lieu of indemnifying
such Indemnified Party, contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities to
which such party may be subject in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Selling Stockholder on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Selling Stockholders
shall be determined by reference to, among other things, whether the untrue or

                                       19
<PAGE>

alleged untrue statement of material fact related to information supplied by the
Company or the Selling Stockholders and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Selling Stockholders agree that it would not be
just and equitable if contribution pursuant to this Section 10.5 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph of Section 10.5, (i) in no case shall any one
Selling Stockholder be liable or responsible for any amount in excess of the net
cash proceeds received by such Selling Stockholder from the offering of
Registrable Securities and (ii) the Company shall be liable and responsible for
any amount in excess of such proceeds; provided, however, that no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 10.5, notify such
party or parties from whom contribution may be sought, but the omission so to
notify such party or parties from whom contribution may be sought shall not
relieve such party from any other obligation it or they may have thereunder or
otherwise under this Section 10.5. No party shall be liable for contribution
with respect to any action, suit, proceeding or claim settled without its prior
written consent, which consent shall not be unreasonably withheld.

                  10.6 INFORMATION BY HOLDER. Each holder of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such holder and the distribution proposed by such holder
as the Company may reasonably request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.

                  10.7 "STAND-OFF" AGREEMENT; CONFIDENTIALITY OF NOTICES. Each
Purchaser, if requested by the Company and the managing underwriter of an
underwritten public offering by the Company of Staples.com Stock, shall not sell
or otherwise transfer or dispose of any Registrable Securities or other
securities of the Company held by such Purchaser (except pursuant to such
offering) (i) for a period of 180 days (in the case of the IPO) and 90 days (in
the case of any subsequent offering) following the effective date of the
registration statement or such shorter period as may be requested by the
managing underwriter; provided that, in the case of any offering other than the
IPO, this restriction shall not apply to any Purchaser that owns (together with
its Affiliates), at the time of the filing of the registration statement for
such offering, less than 1% of the then outstanding shares of Staples.com Stock.
The Company may impose stop-transfer instructions with respect to the
Registrable Securities or other securities subject to the foregoing restriction
until the end of such restricted period. Any Purchaser receiving any written
notice from the Company regarding the Company's plans to file a registration
statement shall treat such notice confidentially and shall not disclose such
information to any person other than as necessary to exercise its rights under
this Section 10.

                  10.8 TERMINATION. All of the Company's obligations to register
the Registrable Securities held by any particular Purchaser under this Agreement
shall terminate upon the earlier of (a) three years after the IPO or (b) at such
time as such Registrable Securities may be sold by such Purchaser pursuant to
Rule 144(k) under the Securities Act and such Registrable Securities

                                       20
<PAGE>

(together with any other shares of Staples.com Stock held by Affiliates of such
Purchaser) represent less than 1% of the then outstanding shares of Staples.com
Stock.

         11.      MISCELLANEOUS.

                  11.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement, and any rights and obligations of a Purchaser
hereunder, may be assigned by such Purchaser to any person or entity to which
Shares are transferred by such Purchaser in accordance with the terms of this
Agreement, provided that such transferee agrees in writing with the Company to
be bound by the terms of this Agreement.

                  11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
agreements, representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the transactions
contemplated hereby.

                  11.3 EXPENSES. Except as provided in Section 10, the Company
and each Purchaser shall each pay their respective costs and expenses in
connection with the preparation of this Agreement and the closing of the
transactions contemplated hereby.

                  11.4 BROKERS. Each of the Company and the Purchasers,
severally and not jointly, (i) represents and warrants to the other that it has
not retained a finder or broker in connection with the transactions contemplated
by this Agreement, other than Wit Capital Corporation, which has been retained
by the Company, and (ii) will indemnify and save the other party harmless from
and against any and all claims, liabilities or obligations with respect to
brokerage or finders' fees or commissions, or consulting fees in connection with
the transactions contemplated by this Agreement asserted by any person on the
basis of any statement or representation alleged to have been made by such
indemnifying party.

                  11.5 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

                  11.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts (without reference to the conflicts of law provisions thereof).

                  11.7 NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:

         If to the Company, at 500 Staples Drive, Framingham, Massachusetts
01702, Attention: Jack A. VanWoerkom or at such other address or addresses as
may have been furnished in writing by the Company to the Purchaser; or

                                       21
<PAGE>

         If to a Purchaser, at such Purchaser's address set forth below such
Purchaser's name on SCHEDULE I hereto, or at such other address or addresses as
may have been furnished to the Company in writing by such Purchaser.

         Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section 11.7.

                  11.8 COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter.

                  11.9 AMENDMENTS AND WAIVERS. Except as otherwise expressly set
forth in this Agreement, any term of this Agreement may be amended or terminated
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the holders of at least 65% of the Shares.
Notwithstanding the foregoing, this Agreement may be amended with the consent of
the holders of less than all of the Shares only in a manner which applies to all
such holders in the same fashion, and if any amendment or waiver adversely
affects any particular Purchaser in a manner different than the other
Purchasers, such Purchaser's written consent to such amendment or waiver shall
be required. Any amendment, termination or waiver effected in accordance with
this Section 11.9 shall be binding upon each holder of any Shares even if they
do not execute such consent, each future holder of all such securities and the
Company. No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.

                  11.10 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original, and all of which shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.

                  11.11 SECTION HEADINGS. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       22
<PAGE>

         Executed as of the date first written above.


                         COMPANY:

                         STAPLES, INC.

                         By:_______________________________


                         PURCHASERS:

                         GENERAL ATLANTIC PARTNERS 59, L.P.

                         By: General Atlantic Partners, LLC,
                             its general partner

                         By:_______________________________
                         Name:_____________________________
                         Title:____________________________

                         GAP COINVESTMENT PARTNERS II, L.P.

                         By:_______________________________
                         Name:_____________________________
                         Title:____________________________


                         HIGHLAND CAPITAL PARTNERS IV LIMITED
                         PARTNERSHIP

                         By:_______________________________
                         Name:_____________________________
                         Title:____________________________


                         HIGHLAND ENTREPENEURS' IV LIMITED
                         PARTNERSHIP

                         By:_______________________________
                         Name:_____________________________
                         Title:____________________________


                                       23
<PAGE>

                         GREYLOCK IX LIMITED PARTNERSHIP

                         By:_______________________________
                         Name:_____________________________
                         Title:____________________________


                         ESSEX PRIVATE PLACEMENT FUND II
                         LIMITED PARTNERSHIP

                         By:_______________________________
                         Name:_____________________________
                         Title:____________________________


                         SUMMIT ACCELERATOR PARTNERS LLC
                         (SAP LLC)

                        By:_______________________________
                        Name:_____________________________
                        Title:____________________________


                        PH INVESTMENTS, LLC

                        By:_______________________________
                        Name:_____________________________
                        Title:____________________________


                        -----------------------------------
                        Benjamin M. Rosen


                        -----------------------------------
                        Bill Sahlman


                                       24
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>8
<DESCRIPTION>EXHIBIT 10.12
<TEXT>

<PAGE>


                                                                Exhibit 10.12


                      LINE OF CREDIT AND GUARANTY AGREEMENT

                                                              December 6, 1999

Boston Safe Deposit & Trust Company
One Boston Place
Boston, Massachusetts  02108

Ladies and Gentlemen:

     Staples, Inc., with a mailing address at 500 Staples Drive, Framingham,
Massachusetts 01702 ("Customer") hereby agrees with your bank ("Bank") as
follows regarding a line of credit for demand loans to be made by your Bank from
time to time to employees of Customer ("Loans"):

     1. Line of Credit. Subject to the terms and conditions hereof, Bank shall
make available a line of credit (the "Line of Credit") for demand loans of U.S.
dollars to Eligible Employees (as defined herein) during the period from the
date hereof through the earlier of: (i) November 30, 2000 or (ii) the date on
which the Tracking Stock (as hereinafter defined) becomes publicly-traded. The
maximum principal amount of Loans outstanding at any one time under the Line of
Credit shall at no time exceed $30,000,000.

     2. Loans. (a) Each Loan shall be in a minimum amount of $100,000 and a
maximum amount of $3,500,000. Each Loan shall be evidenced by a demand
promissory note of the Eligible Employee obligated thereon in the form of
Exhibit A hereto (a "Note") and shall be secured by such Eligible Employee's
Staples.com common stock and, prior to the issuance of such stock, all of such
Eligible Employee's rights or options with respect to the same (the "Tracking
Stock") pursuant to a Pledge Agreement in the form of Exhibit B hereto (a
"Pledge Agreement"). As used herein, the term "Eligible Employee" shall mean an
employee of Customer designated by the Customer as eligible to obtain Loans who:
(i) is not a debtor in any pending case under the federal Bankruptcy Code or any
state insolvency or receivership law and whose assets are not subject to any
receivership, assignee or trust mortgage for the benefit of creditors, (ii) has
delivered to the bank a short-form personal financial statement on a form
supplied by the Bank, and (iii) has a prior credit history acceptable to Bank in
its sole discretion. Each Loan shall be issued by the Bank subject to the terms
and conditions of this Agreement.

<PAGE>

     (b) The proceeds of the Loans shall be used by Eligible Employees to
finance the cost to exercise their respective rights to purchase Tracking Stock,
which shall be delivered to Bank by Customer's transfer agent within ten
Business Days of the disbursement of the proceeds of the related Loan. Upon sale
of any Tracking Stock by an Eligible Employee, the proceeds of such sale shall
be applied first to the repayment of the Loan used by such Eligible Employee to
finance the exercise of his or her right to purchase the same, plus accrued
interest and late fees thereon and costs of collection with respect thereto,
with any proceeds of sale in excess of such amount to be paid: (i) so long as an
Employee Default by such Eligible Employee shall not have occurred and be
continuing, to the Eligible Employee obligated on such Loan, or (ii) if an
Employee Default by such Eligible Employee shall have occurred and be continuing
and (A) the Customer shall have purchased the Note of such Eligible Employee
pursuant to Section 4(c), to the Customer, and (B) if the Customer shall not
have purchased the Note of such Eligible Employee pursuant to Section 4(c), to
all other obligations of such Eligible Employee to the Bank incurred on or after
the date of this Agreement in such order as Bank may determine in its sole
discretion.

     (c) Prior to the disbursement of any proceeds of a Loan, the Customer shall
provide to the Bank a certificate as to the eligibility of the employee for
whose account such proceeds shall be disbursed to purchase Tracking Stock and as
to whether or not such employee is an "affiliate" of the Customer for purposes
of Rule 144 of the Securities and Exchange Commission ("Affiliate Status"), and
a statement as to the number of shares of Tracking Stock to be issued to such
employee.

     3. Interest. (a) As used herein, the following terms shall have the
following meanings:

     i.   "Call Rate" shall mean the rate quoted from time to time in the "Money
          Rates" section of The Wall Street Journal as "Call Money," or if no
          such rate is quoted or The Wall Street Journal is not available, the
          generally prevailing rate for loans to members of the New York Stock
          Exchange secured by stock exchange collateral provided by Reuters or a
          similar source of recognized standing selected by the Bank. In the
          event Bank determines that for any reason no rate comparable to Call
          Money is available on a given day, the Loans shall bear interest on
          such date at the Prime Rate (as hereinafter defined) minus 1% per
          annum unless a penalty rate is applicable to such Loan pursuant to the
          Note evidencing the same.

     ii.  "Standard Notice" shall mean an irrevocable notice provided to the
          Bank in writing (including by facsimile) or by telephone confirmed in
          writing on a Business Day which is at least one Business Day in
          advance in case of

                                       2

<PAGE>

notification of request for a Loan. Standard Notice must be provided no later
than 1:00 p.m., Eastern Standard Time on the last day permitted for such notice.

     (b) Interest on the Loans shall be payable monthly in arrears on the first
day of each month commencing on the first day of the month succeeding that in
which the proceeds of a Loan are disbursed. Interest on the Loans shall be
calculated on the basis of the actual number of days elapsed and a year of 360
days. Each change in the Call Rate shall be reflected by a simultaneous change
in the rate of interest payable on the Loans. In the event any payment of
interest required to be made under a Note is not made within 15 calendar days of
the date when due, the Eligible Employee obligated thereon shall pay a late
charge to the Bank of 5% of the amount due or $25, whichever is greater. Such
charge must be paid within 30 days of the date it is assessed and will be
charged only once on each late payment. If any payment due under the Guaranty is
not made on or within five Business Days of the date when due, such amount shall
thereafter bear interest payable on demand at a fluctuating rate per annum equal
to the greater of: (a) two percent (2%) above the Call Rate (or one percent (1%)
above the Prime Rate, if the Call Rate is unavailable) in effect on such due
date, or (b) two percent (2%) above the Call Rate (or one percent (1%) above the
Prime Rate, if the Call Rate is unavailable) in effect from time to time
thereafter. As used in this Agreement, "Prime Rate" shall mean the rate quoted
as the "Prime Rate" in the "Money Rates" section of The Wall Street Journal. In
the event the Call Rate or the Prime Rate is reported as a range of rates, the
rate used to calculate the interest rates under this Agreement shall be the
highest such rate reported. Each change in the Call Rate or the Prime Rate shall
be reflected in a corresponding change in the fluctuating rate payable pursuant
to this subsection 3(b).

     (c) If due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), in each case after the date of this
Agreement, there shall be any increase in the cost to the Bank of agreeing to
make or making, funding or maintaining any Loan (excluding for purposes of this
subsection 3(c) any such increased costs resulting from changes in the basis of
taxation of overall net income or overall gross income of the Bank by the United
States or any political subdivision thereof), then the Eligible Employee
obligated on a Note shall, from time to time, within 5 Business Days after
demand by the Bank, pay to the Bank additional amounts sufficient to compensate
the Bank for such increased costs.

     (d) If the Bank determines that compliance with any law or regulation or
any guideline or request from any central bank or other governmental authority
(whether or not having the force of law) introduced or changed after the date of
this Agreement affects the amount of capital required to be maintained by the
Bank and that the

                                       3

<PAGE>

amount of such capital is increased by or based upon the existence of the Bank's
commitment to lend hereunder, then, within 5 Business Days after demand by the
Bank, each Eligible Employee shall pay to the Bank additional amounts sufficient
to compensate the Bank in the light of such circumstances.

     (e) Bank shall notify Eligible Employees and the Customer promptly after
the occurrence of any event described in subsections (c) and (d) above, and
Customer's liability to Bank pursuant to such subsections shall be limited to
amounts accruing after the date of such notice. Demand by the Bank pursuant to
subsections 3(c) or (d) shall be accompanied by a certificate as to the amount
of such increased cost or required capital, respectively, showing calculations
of the amount claimed in reasonable detail. Bank's determination of any such
increased cost (using any reasonable method of averaging, attribution or
allocation), as set forth in such a certificate shall, if correctly calculated,
be deemed prima facie evidence of such amount.

     4. Guaranty. (a) The Customer hereby unconditionally guarantees full and
punctual payment, performance and fulfillment to the Bank of all liabilities,
obligations and undertakings of Eligible Employees to the Bank pursuant to the
Loans, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising or acquired (the "Obligations") on November
30, 2004 or earlier upon the occurrence of an Employee Default or a Customer
Default as provided herein or under the circumstances described in subsection
9(b).

     (b) The Customer's agreement contained in this Section 4 ("the Guaranty")
shall operate as a continuing, absolute and unconditional guaranty of the full
and punctual payment and performance of the Obligations, and not of their
collectibility only, and the Bank shall be entitled to enforce the Guaranty
against all assets of the Customer for the full amount of the Obligations
notwithstanding limitations on the Bank's recourse against assets of Eligible
Employees contained in the Notes. If an Employee Default shall occur, the
liability of the Customer with respect to the Obligations of the defaulting
Eligible Employee shall become immediately due and payable, and if a Customer
Default shall occur, the liability of the Customer with respect to all
Obligations of all Eligible Employee shall become immediately due and payable to
the Bank upon written notice to Customer. The Customer waives any right that the
Customer may have to require the Bank first to proceed against an Eligible
Employee or any other person. The Customer also waives any right that the
Customer may have to require the Bank to realize on any security held by the
Bank before proceeding against the Customer for the enforcement of the Guaranty.

     (c) Bank agrees to consider joint requests by Customer and particular
Eligible Employees to sell such Eligible Employees' Tracking Stock prior to
enforcing its rights under the Guaranty with respect to such Tracking Stock, but
shall be under no obligation to do so. Bank agrees that, prior to making demand
upon an Eligible

                                       4

<PAGE>

Employee for payment of a Loan following an Employee Default, it will provide
Customer with notice of such Employee Default and, except when stayed from
enforcing the Guaranty against the Customer as a result of proceedings under the
federal Bankruptcy Code or any state insolvency or receivership law or by court
order, or under circumstances in which the prospects for obtaining repayment of
such Loan from the defaulting Eligible Employee would be impaired by delay, to
permit Customer to promptly purchase the Note of such Eligible Employee at a
purchase price equal to the outstanding principal balance thereof, accrued
interest and late fees thereon, and costs of collection with respect thereto,
prior to making demand upon such Eligible Employee, without waiving its right to
proceed first against such Eligible Employee for the enforcement of such Note.

     (d) Upon purchase by the Customer of the Note of any Eligible Employee, the
Bank shall endorse and transfer to the Customer the Note of such Eligible
Employee and (unless the Tracking Stock of such Eligible Employee has been sold
by Bank) shall deliver to the Customer the Pledge Agreement of such Eligible
Employee and the Tracking Stock of such Eligible Employee, in each case without
recourse, warranty or representation. The Customer waives any other right that
it may have against the Bank as a result of any such payment by the Customer
under the Guaranty, whether arising by way of subrogation, contribution,
reimbursement or otherwise.

     (e) The liability of the Customer under the Guaranty shall be unlimited.
The Customer agrees, as a principal and not as a surety only, to pay to the
Bank, on demand, all costs and expenses paid or incurred by the Bank (including
court costs and attorneys' fees) in connection with the Obligations or the
Guaranty and the enforcement of either of them, including without limitation
costs and expenses paid or incurred by the Bank in connection with any
proceedings under the federal Bankruptcy Code or any other law relating to
insolvency.

     (f) The Customer waives presentment, demand, protest, notice of acceptance,
notice of the Obligations incurred and all other notices of any kind and all
defenses which may be available to the Customer except for notices expressly
provided for herein. The Customer warrants to the Bank that it has adequate
means to obtain from Eligible Employees, on a continuing basis, information
concerning the financial condition of the Eligible Employees, and that it is not
relying on the Bank to provide such information, now or in the future. The
Customer agrees to the provisions of any instrument, security or other writing
evidencing or securing any of the Obligations and agrees that the obligations of
the Customer hereunder shall not be released or discharged, in whole or in part,
by: (i) any renewals, extensions or postponements of the time of payment of any
of the Obligations or any other forbearance or indulgence with respect thereto;
(ii) any rescissions, waivers, amendments or modifications of any of the terms
of any agreement evidencing, securing or otherwise executed in connection with
the Obligations; or (iii) the substitution or release of any security for the

                                       5

<PAGE>

Obligations or of any other person primarily or secondarily liable on any of the
Obligations, whether or not notice thereof shall be given to the Customer. The
enforcement of the Guaranty shall not be affected by the delay, neglect or
failure of the Bank to take any action with respect to any security, right,
obligation, endorsement, guaranty or other means of collecting the Obligations
which it may at any time hold, including perfection or enforcement thereof. The
Customer agrees that the Customer shall be and remain bound upon the Guaranty
irrespective of any action, delay or omission by the Bank in dealing with any
Eligible Employee, any of the Obligations, any Tracking Stock or other
collateral therefor, or any person at any time liable with respect to the
Obligations, and irrespective of any defense which any Eligible Employee may
assert to the underlying debt, including but not limited to failure of
consideration, breach of warranty, fraud, payment, statute of frauds,
bankruptcy, lack of legal capacity, statute of limitations, lender liability,
accord and satisfaction or usury.

     (g) If for any reason an Eligible Employee is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations shall have become
irrecoverable from an Eligible Employee by operation of law or for any other
reason, or if any security for or other guaranty of the Obligations shall be
found invalid, the Customer shall nonetheless be and remain bound on the
Guaranty. The Guaranty shall continue to be effective or be reinstated,
notwithstanding any prior termination, if at any time any payment made or value
received with respect to any of the Obligations is rescinded or must otherwise
be returned by the Bank due to the insolvency or bankruptcy of an Eligible
Employee or otherwise, all as though such payment had not been made or value
received.

     5.   Representations, Warranties and Covenants.

     (a) To induce Bank to make the Loans, the Customer makes the following
representations and warranties:

     (i) That the Customer is a duly organized and validly existing corporation
in good standing under the laws of the State of Delaware, with corporate powers
adequate for the making and performing of this Agreement, for the issuance of
the Guaranty and the other agreements of the Customer referred to herein, and
for the carrying on of the business now conducted by it. The Customer is duly
qualified as a foreign corporation to do business wherever necessary to carry on
its present operations and is in good standing in every jurisdiction where such
qualification is necessary.

     (ii) That Customer has good and marketable title in fee to such of its
fixed assets as are real property and good and marketable title to its other
properties and assets, subject to no mortgage, pledge, lien, charge, security
interest, title retention agreement or other encumbrance except for encumbrances
permitted by the Senior Credit Agreement (as hereinafter defined), and that the
obligations of the Customer

                                       6

<PAGE>

pursuant to the Senior Credit Agreement (as hereinafter defined) are unsecured
except for rights of setoff of the Banks referred to therein.

     (iii) That the financial statements of the Customer contained in the
Customer's Annual Report on Form 10-K for the fiscal year ended January 31,
1999, and the Customer's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1999, in each case filed with the Securities and Exchange
Commission, are complete and correct and present fairly the financial position
of the Customer as of the dates thereof and for the periods included therein,
and have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, subject, as to
interim statements, to audit and year-end adjustments. There are no material
contingent liabilities or liabilities for taxes of the Customer as at the date
of the aforementioned Quarterly Report on Form 10-Q which are not reflected in
said statements of financial condition.

     (iv) That there has been no material adverse change in the condition,
financial or otherwise, of the Customer since the date as of the aforementioned
Quarterly Report on Form 10-Q other than normal seasonal variations occurring in
the ordinary course of business.

     (v) That the Customer has filed or caused to be filed all federal, state
and local tax returns which are required to be filed, and has paid or caused to
be paid all taxes as shown on said returns or any assessment received by it, to
the extent that such taxes have become due, except as otherwise permitted by the
provisions of this Agreement.

     (vi) That there are no actions, suits or proceedings pending or, to the
knowledge of the Customer, threatened against the Customer at law or in equity
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, which in the reasonable
opinion of Customer is likely to result in a material adverse change to the
business, properties or assets or in the condition, financial or otherwise, of
the Customer.

    (vii) That the Customer is not a party to any contract or agreement or
subject to any restrictions which materially and adversely affects its business
or assets or financial condition. Neither the execution nor delivery nor
compliance with the terms and provisions of this Agreement or the Guaranty will
be contrary to the provisions of, or constitute a default under, the charter or
by-laws of the Customer or any agreement to which the Customer is a party.

                                       7

<PAGE>

     (viii) That the making and performance of this Agreement and the Guaranty
are within the Customer's corporate powers and have been duly authorized by all
necessary corporate action, and that this Agreement and the Guaranty are legal
and binding obligations of the Customer enforceable in accordance with their
respective terms (subject to bankruptcy and similar laws of general application
affecting the rights and remedies of creditors).

     (ix) That no approval or authorization of, or registration, qualification
or filing with, any governmental authority is required in connection with the
execution, delivery or performance by the Customer of this Agreement or the
Guaranty or the consummation of the transactions contemplated hereby or thereby.

     (x) That the Customer possesses all patents, patent rights or licenses,
trademarks, trademark rights, trade names, trade name rights and copyrights
which are required to conduct its businesses as now conducted without known
conflict with the rights of others.

     (xi) That Company is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
extension of credit under this Agreement will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.

     (xii) That the most recent annual report filed by the Customer pursuant to
Section 104 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including without limitation, all related financial and actuarial
statements, is complete and correct, and no event has occurred and is continuing
which would permit the Pension Benefit Guaranty Corporation ("PBGC") established
under ERISA to institute proceedings to terminate any pension plan or other type
of employee benefit which the PBGC has elected to insure, established or
maintained by the Customer.

     (b) The Customer hereby covenants and agrees with the Bank as follows:

     (i) To comply with the covenants contained in the Revolving Credit
Agreement dated as of November 13, 1997 among the Customer, BankBoston, N.A. as
Administrative Agent, The Chase Manhattan Bank as Syndication Agent, Fleet
National Bank as Documentation Agent and the Co-Agents named therein, or any
agreement pursuant to which the loans contemplated thereby are refinanced or the
Commitments of the Banks (as those terms are defined therein) are replaced
(together, the "Senior Credit Agreement"), as the same may be amended from time
to time.

                                       8

<PAGE>

     (ii) At any time that Mellon Bank, N.A. shall cease to be a lender pursuant
to the Senior Credit Agreement, to provide to the Bank: (A) notice of the
amendment of any provision of the Senior Credit Agreement promptly after the
same is executed, (B) copies of the financial statements, certificates and
the same are provided to the Agent thereunder, and (C) copies of the notices
referred to in (167)6.5 of the Senior Credit Agreement, at the time the same are
provided to the Agent thereunder, or in the event that the Senior Credit
Agreement in effect on the date hereof is replaced, comparable notices,
financial statements, certificates and information required to be provided to
the Agent under such replacement Senior Credit Agreement.

     (iii) In the event that the Customer grants to the Agent under the Senior
Credit Agreement any collateral or rights in property of the Customer for the
benefit of the Banks referred to therein, the Customer shall grant to the Bank
an equal and ratable security interest or mortgage on such property to secure
the Customer's obligations under the Guaranty.

     (iv) That the Customer shall provide to the Bank quarterly, within 30 days
after the end of each fiscal quarter of the Customer, a list of Eligible
Employees including a statement as to any change in the Affiliate Status of any
such Eligible Employee or any individual previously identified to the Bank as an
Eligible Employee.

     (v) That the Tracking Stock is fully paid and non-assessable and is not
subject to any lien, security interest, right or claim on the part of Customer
except for: (A) the Customer's right to purchase non-vested Tracking Stock from
Eligible Employees and (B) a junior security interest therein to secure such
right. Bank acknowledges that it holds, and will cause its agents (including the
Fiduciary under any Pledge Agreement) to hold, each Eligible Employee's Tracking
Stock to perfect the Customer's junior security interest therein, and that, upon
prior payment in full of all Obligations (as defined in each Eligible Employee's
Pledge Agreement), it will deliver the Collateral described in such Pledge
Agreement to the Customer.

     (vi) The security interest of the Customer in the Collateral described in
the Pledge Agreement shall be fully subordinate and junior to Bank's security
interest in such assets, regardless of the time Bank's security interest with
regard to such assets attaches, and regardless of the future granting of loans
or credits to Eligible Employees by Bank. Customer agrees that it will do
nothing to interfere with Bank's prior security interest in such Collateral
whether by undertaking to collect or enforce its rights in such Collateral or
otherwise until all indebtedness of the Eligible Employee who owns the same to
the Bank shall be paid in full.

                                       9

<PAGE>

     6. Conditions Precedent. (a) The Bank's agreement to extend the Line of
Credit is subject to the conditions that:

     i. On or before the date hereof the Customer shall have delivered to the
Bank the documents, instruments and certificates listed on Exhibit C hereto and
such other documents and materials as the Bank may reasonably require.

     ii. On or before the date of each Loan, the Eligible Employee to be
obligated thereon shall have executed and delivered to the Bank: (i) the Note
evidencing such Loan, (ii) the Pledge Agreement securing such Note, (iii) the
document or instrument evidencing such Eligible Employee's rights with respect
to the Tracking Stock, accompanied by five stock powers or other instrument of
transfer executed in blank, and (iv) such other documents, instruments and
materials as Bank may reasonably require.

     (b) The Bank's agreement to make each Loan to an employee of the Customer
is subject to the further conditions precedent that: (i) no Customer Default
shall have occurred and be outstanding hereunder, (ii) the employee to be
obligated thereon is at the time an Eligible Employee, and (iii) no Employee
Default with respect to such employee shall have occurred and be outstanding as
to any prior Loan to such employee.

     7.   Employee Defaults.

     (a) The following shall constitute Employee Defaults with respect to a
Note:

          (i) Default in the payment or performance of any Obligation by the
Eligible Employee obligated thereon.

          (ii) Death of the Eligible Employee obligated thereon.

          (iii) Such employee shall cease to be an employee of Customer or shall
cease to be an Eligible Employee.

          (iv) Customer shall notify Bank that the employee obligated thereon is
no longer eligible to participate in Customer's program of obtaining Loans for
Eligible Employees from the Bank.

          (v) The employee obligated thereon shall become subject to any
injunction or temporary restraining order restricting the sale of the Tracking
Stock or any order prohibiting the Bank from selling such employee's Tracking
Stock shall be entered by any court, or such employee shall become the subject
of any investigative or administrative proceeding or any civil or criminal
action alleging violation of state or

                                       10

<PAGE>

federal securities laws.

          (vi) The employee obligated thereon shall sell or transfer all or
substantially all of his or her assets, or become insolvent, or fail generally
to pay his or her debts as they become due, or if a receiver is appointed for
such employee or any part of the property of such employee or if such employee
shall make an assignment or grant a trust mortgage for the benefit of (or
composition with) the creditors of such employee, or if a material adverse
change shall occur in the financial condition of such employee.

          (vii) The filing of a petition in bankruptcy by or against the
employee obligated thereon or the commencement of any proceedings by or against
such employee under any insolvency or other laws relating to the relief of
debtors; or the taking of any action by such employee to accomplish any of the
foregoing.

     (b) Upon the occurrence of an Employee Default all of the Obligations
of the defaulting employee shall become immediately due and payable, and the
liability of the Customer pursuant to the Guaranty with respect to such
Obligations shall (unless Bank otherwise elects) become immediately due and
payable without demand, presentment or notice, notwithstanding any prior
acceptance by Bank of periodic payments of interest on such employee's Note or
other Obligations.

     8.   Customer Defaults. (a) The following shall constitute Customer
Defaults:

          (i) The Customer shall default in the payment or performance of any
obligation contained in the Senior Credit Agreement, as the same may be amended
from time to time, and such default shall continue beyond any applicable grace
period, whether or not such default is waived.

          (ii) The Customer shall default in the payment or performance of any
obligation contained in this Agreement, including default in the payment of any
sums due pursuant to the Guaranty continuing for five Business Days following
demand by Bank.

     (b) Upon the occurrence of a Customer Default, all Obligations shall
become immediately due and payable, and the liability of the Customer pursuant
to the Guaranty shall (unless Bank otherwise elects) become immediately due and
payable without demand, presentment or notice.

     9. Bank's Rights and Remedies. (a) Upon the occurrence of an Employee
Default, Bank shall have the rights and remedies of a secured party under the
UCC with respect to the Tracking Stock pledged by the defaulting employee of
Customer.

                                       11

<PAGE>

Notwithstanding the enumeration of Employee Defaults, all Loans shall at all
times be payable on demand. Upon the occurrence of a Customer Default, Bank
shall have the rights and remedies of a secured party under the UCC with respect
to all Tracking Stock pledged as security for the Obligations. The Customer
hereby agrees that five Business Days' notice of the time and place of any
public sale of Tracking Stock, or the time after which a private sale or other
disposition of Tracking Stock shall take place, sent by telefacsimile to the
Customer at 508/___-____, attention: Chief Financial Officer, shall constitute
reasonable notification. The term "Business Day" shall mean a day on which the
Bank's offices in Boston, Massachusetts are open for business.

     (b) Upon the occurrence of an Employee Default or a Customer Default,
Bank may take control of any proceeds of Tracking Stock. Any deposits or other
sums at any time credited by or due from the Bank to the Customer shall at all
times constitute collateral for the Obligations and the Guaranty. Bank may apply
or set-off deposits against the Obligations and the Guaranty regardless of the
adequacy of any other collateral at any time after the occurrence and during the
continuance of a Customer Default. Upon the occurrence and during the
continuance of a Customer Default, Bank may apply the net proceeds of any sale
of Tracking Stock to the Obligations of the owner of such Tracking Stock, and
may apply the proceeds of any set-off to the Customer's obligations under the
Guaranty, in each case in such order as it may determine.

     (c) Bank shall have the option at any time within 90 days after the
date on which Mellon Bank, N.A. ceases to be a lender to the Customer pursuant
to the Senior Credit Agreement to require the Customer to refinance all
outstanding Loans or to repay all outstanding Loans pursuant to the Guaranty.

     (d) In the event that: (i) the Commitments of the Banks under the
Senior Credit Agreement are reduced or (ii) the principal balance of the Loans
outstanding thereunder is repaid following an Event of Default thereunder, the
Customer shall upon demand by Bank deliver to Bank cash collateral (and a pledge
agreement covering the same) in an amount computed by multiplying: (A) the
amount of such reduction of Commitments or repayment of Loans, by a fraction,
(B) the numerator of which shall be $30,000,000 and (C) the denominator of which
shall be the maximum amount of the Commitments, or the principal balance of the
Loans outstanding under the Senior Credit Agreement, as the case may be, prior
to such reduction or repayment.

     10. Customer's Agreement to Indemnify Bank. Customer agrees to
indemnify Bank and hold it harmless from any loss, cost (including legal costs
and reasonable attorneys' fees) or damage it may suffer as a result of: (i) any
failure of the Customer or an employee of Customer to comply with the terms of
this Agreement or a Note, (ii) obligations and responsibilities imposed by state
or federal securities laws, (iii) Bank's

                                       12

<PAGE>

foreclosure upon any Tracking Stock to satisfy an Employee Default or
enforcement of any Note, or (iv) all other claims, demands, suits, liabilities
or obligations arising out of Bank's agreement to make the Loans as provided
herein.

     11. Miscellaneous. (a) The Customer shall from time to time designate,
and shall at all times maintain, a management employee authorized to certify as
to the eligibility of employees to obtain Loans hereunder, and shall promptly
notify Bank in the event that: (i) an employee to whom a Loan is outstanding
shall cease to be so eligible or (ii) any change shall occur in the Affiliate
Status of any such employee.

     (b) This Agreement and the Guaranty represent the entire understanding
between the Bank and the Customer with regard to the Loans, and their respective
provisions may not be modified, waived or amended except by a writing signed by
the Bank and the Customer. This Agreement is entered into solely for the benefit
of the Customer and the Bank, and no other party, including Eligible Employees
designated by the Customer from time to time, shall have any rights hereunder.
THE CUSTOMER WAIVES TRIAL BY JURY IN ANY ACTION ARISING OUT OF THIS AGREEMENT OR
THE GUARANTY.

     (c) Except as provided in subsection 9(a), all notices provided for
hereunder shall be in writing to the parties at their respective addresses set
forth on page one, or to such other address as any party may designate in
writing to the other. Notices shall be deemed effective upon receipt if
delivered by hand or telephone or given by facsimile, one (1) Business Day after
delivery to a reputable overnight courier service and three (3) Business Days
after being deposited in the mails.

     (d) This Agreement and the Guaranty shall be binding upon and inure to
the benefit of the Customer and the Bank and their respective successors and
assigns. The invalidity or unenforceability of any one or more phrases, clauses
or sections of this Agreement or the Guaranty shall not affect the validity or
enforceability of the remaining portions of this Agreement or the Guaranty. This
Agreement and the Guaranty are intended to take effect as a sealed instrument
and shall be construed in accordance with and governed by the laws (other than
the conflict of laws rules) of Massachusetts.

     Please indicate below your concurrence in the terms of this Agreement and
your acceptance of the Guaranty.

                                            STAPLES, INC.

                                            By____________________________

                                       13

<PAGE>

Agreed and accepted:

BOSTON SAFE DEPOSIT & TRUST COMPANY

By_____________________________________

                                       14

<PAGE>

                                    EXHIBIT A

                                DEMAND LOAN NOTE

Maximum Principal Amount:                            Date:_______________
$_____________________                               Boston, Massachusetts

     ON DEMAND, for value received, the undersigned, jointly and severally if
more than one ("Borrower"), promise to pay to the order of BOSTON SAFE DEPOSIT
AND TRUST COMPANY (the "Bank") at such place as the Bank may from time to time
designate, the aggregate principal amount outstanding when demand is made, with
interest thereon and any fees, expenses and charges, as provided below. At no
time shall the outstanding principal amount borrowed exceed the maximum
principal amount described above. The entries on the records of the Bank,
including any appearing on this Demand Loan Note ("this Note"), will be prima
facie evidence of the aggregate principal amount outstanding under this Note,
the interest accrued on such amount and other fees and charges due.

     All payments hereunder including any prepayments of principal shall be
applied first to unpaid accrued interest, then to other fees, expenses and
charges due, including collection costs, and the balance, if any, to principal.
Principal repaid may not be reborrowed.

INTEREST

     Interest shall accrue at a floating annual rate equal to the rate quoted as
"Call Money" from time to time in the "Money Rates" section of The Wall Street
Journal, or if no such rate is quoted or The Wall Street Journal is not
available, the generally prevailing rate for loans to members of the New York
Stock Exchange secured by stock exchange collateral provided by Reuters or a
similar source of recognized standing selected by the Bank. In the event Bank
determines that for any reason no rate comparable to Call Money is available on
a given day, the Loans shall bear interest on such date at the Prime Rate (as
hereinafter defined) minus 1% per annum. "Prime Rate" shall mean the rate quoted
as the "Prime Rate" in the "Money Rates" section of The Wall Street Journal. In
the event "Call Money" or the "Prime Rate" is reported as a range of rates, the
rate used to calculate the interest rates under this Note will be the highest
such rate reported. The interest rate of this Note will change on the date
reported in The Wall Street Journal as the effective date of the change in Call
Money or the Prime Rate.

     In the event the interest rate indices stated above cease to be available,
the Bank may substitute any similar index, whether reported in The Wall Street
Journal or


<PAGE>

any other newspaper, and the Bank's selection shall be conclusive and binding on
the Borrower. In such event, and until the Bank selects a substitute index,
interest shall accrue at the rate in effect at the time the index in question
was determined by the Bank to be unavailable.

     Interest will begin to accrue on the day any proceeds of loans made under
this Note are disbursed. Interest will continue to accrue at the rate described
above, both before and after demand for payment, on the outstanding principal
until all principal amounts have been paid in full. The rate of interest shall
never exceed the maximum rate allowable under applicable law.

     Interest will be calculated on the basis of actual days elapsed in a 360
day year and will be payable in arrears. The first interest payment will be due
on the first day of the month immediately following any advance hereunder.
Subsequent interest payments will be due on the same day of every month
thereafter.

INTEREST PAYMENT OPTIONS

Borrower chooses to make monthly interest payments as indicated below:

     Payment Method #1: Borrower authorizes Lender to take payments out of
     Borrower's Checking Account maintained with Boston Safe Deposit and Trust
     Company, number ----------, titled --------------------------, on or after
     the first business day of each month. Borrower will keep a large enough
     balance in this account to cover the full amount of the required payments.

     Payment Method #2: Lender will send Borrower a bill each month, and
     Borrower will mail or deliver the required payment so that Lender will
     receive it no later than the first day of each month.

     Payment Method #3: Borrower authorizes Lender to take payments out of
     either the principal or income or both of Borrower's Investment Account,
     number ----------, titled ----------------------------, on or after the
     first business day of each month. Borrower will maintain this Investment
     Account, in order to ensure that there are sufficient funds or assets in
     the Investment Account in order to meet Borrower's monthly payments.

     Borrower may request in writing a change in the Payment Option at any time.

                                       ii

<PAGE>

LATE CHARGES AND OTHER CHARGES

     In the event any payment of interest required to be made hereunder is not
made within 15 calendar days of the first day of each month, the date it is due,
the Borrower shall pay a late charge to the Bank of 5% of the amount due or $25,
whichever is greater. This charge must be paid within 30 days of the date it is
assessed and will be charged only once on each late payment.

     If any amount due as the principal of this Note is not paid in full on or
within five business days of the date of demand, such amount shall thereafter
bear interest payable on demand at a fluctuating rate per annum equal to the
greater of: (a) two percent (2%) above the Call Money rate (or one percent (1%)
above the Prime Rate, if the Call Money rate is unavailable) in effect on such
due date, or (b) two percent (2%) above the Call Money rate (or one percent (1%)
above the Prime Rate, if the Call Money rate is unavailable) in effect from time
to time thereafter.

     If due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), in each case after the date of this
Note, there shall be any increase in the cost to the Bank of agreeing to make or
making, funding or maintaining any loan under this Note (excluding any such
increased costs resulting from changes in the basis of taxation of overall net
income or overall gross income of the Bank by the United States or any political
subdivision thereof), then the Borrower shall, from time to time, within 5
business days after demand by the Bank, pay to the Bank additional amounts
sufficient to compensate the Bank for such increased costs.

     If the Bank determines that compliance with any law or regulation or any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) introduced or changed after the date of
this Note affects the amount of capital required to be maintained by the Bank
and that the amount of such capital is increased by or based upon the existence
of the Bank's loans hereunder, then, within 5 business days after demand by the
Bank, the Borrower shall pay to the Bank additional amounts sufficient to
compensate the Bank in the light of such circumstances.

     Bank shall notify the Borrower promptly after the occurrence of any event
described in the two immediately preceding paragraphs, and Borrower's liability
to Bank pursuant to such subsections shall be limited to amounts accruing after
the date of such notice. Demand by the Bank pursuant to such paragraphs shall be
accompanied by a certificate as to the amount of such increased cost or required
capital, respectively, showing calculations of the amount claimed in reasonable
detail. Bank's determination of any such increased cost (using any reasonable
method of averaging, attribution or

                                       iii

<PAGE>

allocation), as set forth in such a certificate shall, if correctly calculated,
be deemed prima facie evidence of such amount.

WIRE TRANSFER AUTHORIZATION

     Borrower hereby authorizes the Bank to wire transfer funds upon Borrower's
telephone, oral or written request, and agrees to hold the Bank harmless from
any and all claims, liabilities or damages, including reasonable attorney's fees
arising directly or indirectly from this authorization. The Bank shall be under
no obligation to verify the authenticity of any transfer request purporting or
which the Bank reasonably believes to be made by Borrower.

PREPAYMENT

     At any time or times before the Bank has exercised its demand right under
this Note, Borrower may make partial payments of principal without penalty. All
payments shall be made to the Bank's loan servicing center in Pittsburgh,
Pennsylvania, or at such other place as the Bank may from time to time designate
in writing.

SECURITY INTEREST DISCLOSURE

     As security for payment of this note and the obligations provided for
herein, Borrower gives Lender a security interest in all the assets more fully
described in a Pledge Agreement of even date, and any modifications thereof (the
"Pledge Agreement").

     To the extent permitted by law, the Bank has the right to apply funds from
any deposit account(s) of borrower or cosigner with the Bank to pay all or any
portion of any amount outstanding under this Note or otherwise to the Bank,
subject to the limitations on recourse set forth below.

     In addition to any right of setoff given to the Bank by law against any
property of Borrower, the Bank shall have a lien on and security interest in all
property of Borrower now or hereafter on deposit with the Bank, subject to the
limitations on recourse set forth below. Such lien and security interest may be
enforced without demand upon or notice to Borrower, shall continue in full force
unless specifically waived or released by the Bank in writing, and shall not be
deemed waived by any delay of the Bank in enforcing the lien or security
interest.

     Recourse of the holder of this note against the property of the Borrower
other than the Collateral described in the Pledge Agreement above is limited to
50% of the original principal amount hereof, less any principal paid from time
to time by the Borrower (other than from such Collateral or proceeds thereof),
plus all accrued interest

                                       iv

<PAGE>

and costs of collection, as provided below.

COLLECTION COSTS

     Borrower promises to pay on demand, to the extent permitted under
applicable law, all costs and expenses, including reasonable attorneys' fees,
incurred or paid by the Bank in enforcing this Note, whether or not litigation
is commenced, and in selling or otherwise disposing of all or any part of any
property pledged to secure this Note. All such costs and expenses shall be
secured by such collateral.

JOINT LIABILITY

     If more than one person has signed this Note, their obligations shall be
joint and several, and the liability of each shall be absolute and unconditional
and without regard to the liability of any other party hereto.

WAIVER

     Unless prohibited by applicable law, Borrower, all co-Borrowers, any
endorser and any other party hereto, and each of them (1) waives presentment,
demand, notice, protest, and all other demands and notices in connection with
the delivery, acceptance, performance, default or enforcement of this Note or of
any document or instrument evidencing any security for the payment of this Note,
except for demand for payment hereunder and any notices provided for in the
Pledge Agreement; (2) assents to any one or more extensions or postponements of
the time of payment or any other indulgences, to any additions or substitutions,
exchanges or releases of collateral and/or the addition, substitution or release
of any one or more parties or persons primarily or secondarily liable hereunder,
and (3) agrees that no such action, failure to act or failure to exercise any
right or remedy, on the part of the Bank shall in any way affect or impair the
obligations of any of them or be construed as a waiver by Bank of, or otherwise
affect, any of Bank's rights under this Note, under any endorsement or guaranty
of this Note or under any document or instrument evidencing any security for
payment of this Note. No delay or omission by the Bank in exercising in whole or
in part any right or remedy hereunder shall operate as a waiver thereof or of
any other right or remedy. A waiver of any right or remedy, in whole or in part,
on any one occasion shall not be construed as a bar to enforcing or as a waiver
of that or any other right or remedy on any future occasion.

ADDRESS CHANGE

     Borrower shall notify the Bank of any change in the Borrwer's address of
record. Any such notice shall be directed to the Bank at the address for
payments, or to such other address as the Bank may direct. In the event such
notice is not given by the

                                        v

<PAGE>

Borrower, Borrower shall be deemed to have waived the right to receive any
notice which otherwise would be required under this Note or by applicable law,
unless such waiver is specifically prohibited by applicable law or regulation.

ENTIRE AGREEMENT

     The terms and conditions of the Pledge Agreement are deemed to be
incorporated herein by reference. Such terms and conditions, together with the
terms and conditions of this Note, constitute the entire agreement of the
parties and supersede all prior agreements and understandings, both written and
oral, of the parties hereto with respect to the subject matter of this Note or
of any such agreement. The captions and headings of the various sections of this
Note are for convenience only and are not to be considered as defining or
limiting, in any way the scope or intent of the provisions hereof. Neither this
Note nor such Pledge Agreement may be modified or amended except by a writing
signed by the Bank.

FINANCIAL INFORMATION/FURTHER DOCUMENTS

     At Lender's request, Borrower will give Lender a completed and signed
personal financial statement in such form as Lender may require. Borrower will
execute any documents or instruments required by Lender to perfect its security
interest or as otherwise may be required by Lender, as Lender may request from
time to time.

GENERAL PROVISIONS

     This Note inures to the benefit of the Bank and to the benefit of its
successors and assigns. This Note is binding on each Borrower and on any
executor, administrator or legal representative of any Borrower.

     No security interest granted to the Bank by Borrower in any dwelling of
any Borrower shall secure payment of this Note unless specific reference is
made to this Note. Other collateral securing other obligations of Borrower to
the Bank may also secure this Note.

GOVERNING LAW

     This Note will take effect as a sealed instrument and will be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts.
If any provision of this Note is deemed to be in conflict with applicable law,
it will considered to be modified to comply with the law or, if not capable of
such modification, such provision will be deemed to be deleted from this Note.
Notwithstanding any such modification or deletion, the remaining provisions will
remain valid and enforceable.

                                       vi

<PAGE>

By signing below, Borrower agrees to the terms of this agreement.

__________________________________________
Borrower                            (Seal)

__________________________________________
Borrower                            (Seal)

__________________________________________
Borrower                            (Seal)

__________________________________________
Borrower                            (Seal)

Borrower's Address of Record:

__________________________________________
Name

__________________________________________
Address

__________________________________________
City                 State                Zip Code

                                       vii

<PAGE>

                                    EXHIBIT B

                                PLEDGE AGREEMENT

                          (Staples.com Tracking Stock)

     This Pledge Agreement is entered into between the Borrower named below and
Boston Safe Deposit & Trust Company, a Massachusetts trust company with a
principal place of business located at One Boston Place, Boston, Massachusetts
02108 ("Bank") on the date indicated below.

     1. Collateral. The undersigned (the "Borrower"), whose place of business is
located at ___________________, Massachusetts _______ and whose residence is
located at _________________________________________ hereby grants to the Bank a
security interest in the following collateral, whether now owned or existing or
hereafter acquired or arising:

     ___ shares of Staples.com stock ("Tracking Stock"); all proceeds of the
     foregoing, including personal property purchased with cash proceeds
     (together the "Collateral").

     2. Obligations. A security interest in the Collateral is granted to Bank to
secure all obligations of the Borrower to the Bank incurred on or after the date
of this Agreement, whether direct or indirect, including without limitation: (i)
obligations arising out of loans or extensions of credit by Bank to Borrower,
including without limitation a loan evidenced by the promissory note of the
Borrower dated the date hereof in the principal amount of $____________ (the
"Note"), (ii) obligations of the Borrower hereunder, and (iii) all other fees,
costs, taxes and charges that may be assessed, advanced or incurred by Bank
hereunder or by Fiduciary under the Fiduciary Agreement (as those terms are
hereinafter defined), including legal fees and other costs of collection, plus
interest thereon, whether now existing or hereafter arising, direct or indirect,
primary or secondary, absolute or contingent, due or to become due, and whether
arising under the Note, this Agreement or otherwise (all such obligations being
referred to together herein as the "Obligations").

     3. Perfection of Security Interest. Borrower agrees to promptly deliver to
Bank all payments and distributions with respect to the Collateral in the form
received and bearing any necessary endorsements. Bank may at any time notify
Staples, Inc. to make payments and distributions on the Collateral directly to
the Bank. Borrower agrees to deliver to Bank promptly upon receipt any notices
under or amendments relating to the Collateral. Borrower agrees to execute such
financing statements under the Uniform Commercial Code as Bank may from time to
time require, and to pay the cost of filing the

<PAGE>

same. Bank may file as a financing statement a photocopy of a financing
statement or of this Agreement.

     4. Deposit Account. Bank may charge any deposit account of Borrower with
Bank for the payment of any amount due hereunder, under the Note or with respect
to any other Obligation.

     5. Representations and Warranties.

          (a) Borrower hereby represents and warrants that Borrower is the true
owner of the Collateral and the custody account referred to in the Fiduciary
Agreement (the "Custody Account") and that Borrower has good and marketable
title to the Collateral, free and clear of any option, security interest, lien
or other charge or encumbrance except the security interest created hereby, a
security interest junior to that created hereby in favor of Staples, Inc., and
the right of Staples, Inc. to repurchase unvested Tracking Stock. Borrower also
represents and warrants, if there is more than one Borrower, that, subject to
the terms of the Fiduciary Agreement, one or all of such Borrowers are the sole
and joint beneficial owners of the Custody Account and the Collateral and that
no person who is not a party to this Agreement has any ownership rights of any
nature whatsoever in the Custody Account or the Collateral. Borrower will defend
such title against the claims and demands of all persons at its own expense.

          (b) Borrower hereby represents and warrants that all of the Collateral
is and shall be genuine, has and shall have been duly and validly authorized and
issued, and is free and clear of any restriction on transfer, except for
compliance with applicable provisions of state and federal securities laws.
Borrower hereby represents and warrants to Bank that: to the extent that any
portion of the Collateral is or may be subject to Rule 144 of the Securities and
Exchange Commission ("Rule 144"), Borrower is [___] is not [___] an "affiliate"
of Staples, Inc. and the Collateral does not include any "restricted securities"
as defined in Rule 144.

     6. Bank as Borrower's Attorney. Borrower hereby makes, constitutes and
appoints the Bank as Borrower's true and lawful attorney-in-fact for Borrower
and in Borrower's name, place and stead, and on Borrower's behalf, to take any
action deemed necessary by the Bank to perfect and maintain perfection of the
security interests granted hereby or to otherwise fulfill the purposes of this
Agreement, and acknowledges that such appointment is coupled with an interest.
As Borrower's attorney-in-fact, Bank is hereby authorized, at any time after the
occurrence of an Event of Default: (i) to receive, endorse and collect all
checks and other orders or instruments for the payment of money made payable to
Borrower representing any dividend or interest payment or other distribution
payable in respect of any or all Collateral and to give full discharge for the
same, (ii) to execute endorsements, assignments or other instruments of
conveyance or transfer with

                                       ii

<PAGE>

respect to any or all of the Collateral, (iii) to demand, sue for, collect,
receive and give acquittances for any moneys due with respect to any or all of
the Collateral, (iv) to file any claims or take any action or institute any
proceedings that Bank may deem necessary or advisable for the collection of any
or all of the Collateral or otherwise to enforce the rights of Bank with respect
thereto, and (v) to complete, execute and file with the Securities and Exchange
Commission and any stock exchange on which the Tracking Stock is listed one or
more notices of sale of securities pursuant to Rule 144 or other filings deemed
necessary or desirable to comply with state and federal securities laws, hereby
granting to Bank full power and authority as such attorney to do, take and
perform all and every act and thing whatsoever requisite, proper or necessary to
be done in the exercise of the rights and powers herein granted, as fully to all
intents and purposes as Borrower might or could do if personally present.

     7. Indemnification. Borrower hereby indemnifies and holds harmless the Bank
from and against all liabilities and costs (including without limitation
attorneys' fees) arising out of any sale of securities constituting Collateral
or by reason of any breach of any representation, warranty or covenant of
Borrower contained herein, whether express or implied, and all other reasonable
expenses incurred by the Bank in enforcing the payment of any Obligations,
including without limitation expenses incurred in satisfying any applicable
securities laws or regulations and any liabilities arising under any such
securities laws.

     8. Default. If Borrower shall default in the payment of any Obligation when
due, or in the performance of any covenant contained herein, or if any
representation made by the Borrower herein shall be determined by Bank to be
false in any material respect when made, or if an event of default as defined in
any agreement between Borrower and Bank shall occur, Bank shall have the rights
and remedies of a secured party under the Uniform Commercial Code as well as the
rights and remedies provided for herein. Upon any such default, Bank may: (i)
transfer or direct the Fiduciary to transfer into Bank's name, or into the name
of its nominee, all or any part of the Collateral, (ii) subject to the Uniform
Commercial Code, retain the Collateral for its own account, and (iii) sell all
or any part of the Collateral. Whenever notice of sale or other disposition of
the Collateral is required by law, such notice shall be deemed sufficient if
given by regular mail at least 5 business days before the date of any public
sale or 5 days before the date after which a private sale or other disposition
shall be made. Expenses of retaking, holding, and preparing the Collateral for
sale or other disposition, and expenses of sale or other disposition of
Collateral, shall include reasonable attorneys' fees, and all such expenses
shall constitute an Obligation secured by the Collateral. Upon transfer of any
Collateral into the name of Bank or its nominee, Bank shall be entitled to
receive all dividends and other distributions on the Collateral, and shall hold
all the rights and privileges of ownership of the Collateral.

                                       iii

<PAGE>

     9. Restrictions on Resale. Borrower hereby confirms his or her
understanding that Bank's right to resell the Collateral or securities or
instruments issued pursuant thereto may be restricted. Borrower hereby agrees
that any sale of the Collateral in accordance with such restrictions shall be
deemed commercially reasonable notwithstanding that a better price could have
been obtained by another method or to a buyer other than those permitted by the
terms of such restrictions.

     10. Custody of Collateral. (a) Bank shall give to Collateral the same
degree of care and protection that it gives to its own property, provided,
however, that Bank shall have no liability to Borrower for any losses, costs,
expenses or damages due to any acts or omissions of brokers or other third
parties, or due to any acts of God or other causes beyond its control. Bank
shall have no duty to preserve any rights with respect to any Collateral,
including, without limitation, rights against prior parties, or to take or to
notify Borrower of the need to take, any action respecting any rights,
privileges or options relating to any Collateral. If Borrower shall request
Lender to sell or otherwise dispose of or refrain from selling or otherwise
disposing of the Collateral or any part thereof, Bank may, at its option and in
its sole discretion, proceed in accordance with such request; provided, however,
that neither Bank nor Fiduciary shall have any responsibility or liability for
any loss to Borrower that may result from their compliance or refusal to comply
with such request.

     (b) So long as this Agreement continues in effect, Borrower authorizes and
directs the Mellon Bank Corporation subsidiary identified on the signature page
hereto ("Fiduciary") that serves as custodian under the Collateral Custody
Agreement between Borrower and Fiduciary dated the date hereof, as the same may
be amended from time to time (the "Fiduciary Agreement") to hold the Collateral
in its possession as agent for the benefit of the Bank in accordance with the
provisions of this Agreement and under and subject to the exclusive direction
and control of Bank and forthwith to turn over the Collateral, or any part
thereof, to Bank upon Bank's demand. If Borrower has not already done so,
Borrower shall deliver all Collateral to Fiduciary immediately upon receipt of
the same.

     (c) Fiduciary represents and warrants that it has not consented to, and has
no knowledge of, any financing statement or notice against the Collateral or the
Custody Account or any of the assets to be placed in the Custody Account as of
the date of this Agreement, and will not consent to any such statement or notice
subsequent to this date. Fiduciary agrees, by signing where indicated below,
that it has no lien or other interest in the Collateral except to the extent
described herein, and will not request, claim or assert any such lien or
interest until Bank has notified the Fiduciary that there remain no outstanding
Obligations; provided, however, that Fiduciary will retain its prior lien on the
Collateral to secure the Borrower's obligations to

                                       iv

<PAGE>

pay for property purchased by Fiduciary for deposit or credit to the account of
the Borrower, and customary commissions and fees assessed by the Fiduciary.

     (d) Borrower hereby acknowledges that if a loan is obtained from Bank by
Borrower, and such Obligation is collaterally secured by assets in the Custody
Account, there may arise a conflict between the obligations of Bank or its
affiliate as Fiduciary under the Fiduciary Agreement and the Bank's rights as
lender and secured party. In such event, Borrower expressly agrees that Bank's
rights as lender and secured party shall take precedence over its obligations as
Fiduciary, or those of its affiliate.

     (e) This Agreement shall operate as an amendment to the Fiduciary Agreement
to the extent necessary to effect the intents and purposes hereof; provided,
however, that the Fiduciary Agreement defines the extent of the Fiduciary's
liability to Borrower in connection with the Collateral and the Custody Account,
and the Fiduciary assumes no additional liabilities to Borrower under this
Agreement. In the event that the Fiduciary Agreement is terminated, Fiduciary
shall immediately notify Bank and transfer all Collateral in its possession to
the custody of Bank.

     11. Miscellaneous. This agreement shall be governed by Massachusetts law
and shall benefit the Bank and its successors and assigns. This agreement is
executed as an instrument under seal.

                                    Borrower:

Dated:________________________      ______________________________
                                              Signature

                                    ______________________________
                                              Print name

                                    ______________________________
                                              Address

                                    ______________________________
                                              City/State/Zip

Fiduciary:

BOSTON SAFE DEPOSIT & TRUST COMPANY

By_____________________________________

                                        v
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>9
<DESCRIPTION>EXHIBIT 10.13
<TEXT>

<PAGE>


                                                                Exhibit 10.13


                      LINE OF CREDIT AND GUARANTY AGREEMENT

                                                              January 25, 2000

Boston Safe Deposit & Trust Company
One Boston Place
Boston, Massachusetts  02108

Ladies and Gentlemen:

     Staples, Inc., with a mailing address at 500 Staples Drive, Framingham,
Massachusetts 01702 ("Customer") hereby agrees with your bank ("Bank") as
follows regarding a line of credit for term loans to be made by your Bank from
time to time to employees of Customer ("Loans"):

     1.   Line Of Credit. Subject to the terms and conditions hereof, Bank
shall make available a line of credit (the "Line of Credit") for term loans
of U.S. dollars to Eligible Employees (as defined herein) during the period
from the date hereof through January 31, 2000. The maximum principal amount
of Loans outstanding at any one time under the Line of Credit shall at no
time exceed $2,000,000.

     2.   Loans. (a) Each Loan shall be in a minimum amount of $30,000 and a
maximum amount of $700,000. Each Loan shall be evidenced by a promissory note
of the Eligible Employee obligated thereon in the form of Exhibit A hereto (a
"Note") and shall be secured by such Eligible Employee's Staples.com common
stock and, prior to the issuance of such stock, all of such Eligible
Employee's rights or options with respect to the same (the "Tracking Stock")
pursuant to the Eligible Employee's Pledge Agreement covering the Tracking
Stock delivered to Bank in connection with Bank's Demand Loan (as hereinafter
defined) to such Eligible Employee. As used herein, the term "Eligible
Employee" shall mean an employee of Customer designated by the Customer as
eligible to obtain Loans who: (i) is not a debtor in any pending case under
the federal Bankruptcy Code or any state insolvency or receivership law and
whose assets are not subject to any receivership, assignment or trust
mortgage for the benefit of creditors, (ii) has delivered to the bank a
short-form personal financial statement on a form supplied by the Bank, and
(iii) has a prior credit history acceptable to Bank in its sole discretion.
Each Loan shall be issued by the Bank subject to the terms and conditions of
this Agreement.

<PAGE>

     (b)  The proceeds of the Loans shall be used by Eligible Employees to
finance interest payments due with respect to demand loans made to Eligible
Employees by Bank ("Demand Loans"). The proceeds of the Loans shall be disbursed
by Bank as such interest payments come due, and the maximum amount advanced to
any Eligible Employee with respect to a Loan shall not exceed 20% of the
principal amount of the Demand Loan owed by such Eligible Employee to Bank.

     (c)  Upon sale of any Tracking Stock by an Eligible Employee, the proceeds
of such sale shall be applied: (i) first, to the repayment of amounts due to the
Bank with respect to such Eligible Employee's Demand Loan as provided in the
Line of Credit and Guaranty Agreement between Bank and Customer dated December
6, 1999, as amended, (ii) second, to the repayment of the outstanding principal
balance of and any accrued interest on such Eligible Employee's Loan, with any
proceeds in excess of such amount to be paid: (iii) so long as an Employee
Default by such Eligible Employee shall not have occurred and be continuing, to
the Eligible Employee obligated on such Loan, or (iv) if an Employee Default by
such Eligible Employee shall have occurred and be continuing and (A) the
Customer shall have purchased the Note of such Eligible Employee pursuant to
Section 4(c), to the Customer, and (B) if the Customer shall not have purchased
the Note of such Eligible Employee pursuant to Section 4(c), to all other
obligations of such Eligible Employee to the Bank in such order as Bank may
determine in its sole discretion.

     3.   Interest. (a) As used herein, the following terms shall have the
following meanings:

     i.   "Call Rate" shall mean the rate quoted from time to time in the "Money
          Rates" section of The Wall Street Journal as "Call Money," or if no
          such rate is quoted or The Wall Street Journal is not available, the
          generally prevailing rate for loans to members of the New York Stock
          Exchange secured by stock exchange collateral provided by Reuters or a
          similar source of recognized standing selected by the Bank. In the
          event Bank determines that for any reason no rate comparable to Call
          Money is available on a given day, the Loans shall bear interest on
          such date at the Prime Rate (as hereinafter defined) minus 1% per
          annum unless a penalty rate is applicable to such Loan pursuant to the
          Note evidencing the same.

     ii.  "Standard Notice" shall mean an irrevocable notice provided to the
          Bank in writing (including by facsimile) or by telephone confirmed in
          writing on a Business Day which is at least one Business Day in
          advance in case of notification of request for a Loan. Standard Notice
          must be provided no


                                       2
<PAGE>

later than 1:00 p.m., Eastern Standard Time on the last day permitted for such
notice.

     (b)  Interest on the Loans shall be payable monthly in arrears on the first
day of each month commencing on the first day of the month succeeding that in
which the proceeds of a Loan are first disbursed. Interest on the Loans shall be
calculated on the basis of the actual number of days elapsed and a year of 360
days. Each change in the Call Rate shall be reflected by a simultaneous change
in the rate of interest payable on the Loans. In the event any payment of
interest required to be made under a Note is not made within 15 calendar days of
the date when due, the Eligible Employee obligated thereon shall pay a late
charge to the Bank of 5% of the amount due or $25, whichever is greater. Such
charge must be paid within 30 days of the date it is assessed and will be
charged only once on each late payment. If any payment due under the Guaranty is
not made on or within five Business Days of the date when due, such amount shall
thereafter bear interest payable on demand at a fluctuating rate per annum equal
to the greater of: (a) two percent (2%) above the Call Rate (or one percent (1%)
above the Prime Rate, if the Call Rate is unavailable) in effect on such due
date, or (b) two percent (2%) above the Call Rate (or one percent (1%) above the
Prime Rate, if the Call Rate is unavailable) in effect from time to time
thereafter. As used in this Agreement, "Prime Rate" shall mean the rate quoted
as the "Prime Rate" in the "Money Rates" section of The Wall Street Journal. In
the event the Call Rate or the Prime Rate is reported as a range of rates, the
rate used to calculate the interest rates under this Agreement shall be the
highest such rate reported. Each change in the Call Rate or the Prime Rate shall
be reflected in a corresponding change in the fluctuating rate payable pursuant
to this subsection 3(b).

     (c)  If due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), in each case after the date of this
Agreement, there shall be any increase in the cost to the Bank of agreeing to
make or making, funding or maintaining any Loan (excluding for purposes of this
subsection 3(c) any such increased costs resulting from changes in the basis of
taxation of overall net income or overall gross income of the Bank by the United
States or any political subdivision thereof), then the Eligible Employee
obligated on a Note shall, from time to time, within 5 Business Days after
demand by the Bank, pay to the Bank additional amounts sufficient to compensate
the Bank for such increased costs.

     (d)  If the Bank determines that compliance with any law or regulation or
any guideline or request from any central bank or other governmental authority
(whether or not having the force of law) introduced or changed after the date of
this Agreement affects the amount of capital required to be maintained by the
Bank and that the amount of such capital is increased by or based upon the
existence of the Bank's


                                       3
<PAGE>

commitment to lend hereunder, then, within 5 Business Days after demand by the
Bank, each Eligible Employee shall pay to the Bank additional amounts sufficient
to compensate the Bank in the light of such circumstances.

     (e)  Bank shall notify Eligible Employees and the Customer promptly after
the occurrence of any event described in subsections (c) and (d) above, and
Customer's liability to Bank pursuant to such subsections shall be limited to
amounts accruing after the date of such notice. Demand by the Bank pursuant to
subsections 3(c) or (d) shall be accompanied by a certificate as to the amount
of such increased cost or required capital, respectively, showing calculations
of the amount claimed in reasonable detail. Bank's determination of any such
increased cost (using any reasonable method of averaging, attribution or
allocation), as set forth in such a certificate shall, if correctly calculated,
be deemed PRIMA FACIE evidence of such amount.

     4.   Guaranty. (a) The Customer hereby unconditionally guarantees full and
punctual payment, performance and fulfillment to the Bank of all liabilities,
obligations and undertakings of Eligible Employees to the Bank pursuant to the
Loans, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising or acquired (the "Obligations") on January 31,
2002 or earlier upon the occurrence of an Employee Default or a Customer Default
as provided herein or under the circumstances described in subsection 9(b).

     (b)  The Customer's agreement contained in this Section 4 ("the Guaranty")
shall operate as a continuing, absolute and unconditional guaranty of the full
and punctual payment and performance of the Obligations, and not of their
collectibility only, and the Bank shall be entitled to enforce the Guaranty
against all assets of the Customer for the full amount of the Obligations. If an
Employee Default shall occur, the liability of the Customer with respect to the
Obligations of the defaulting Eligible Employee shall become immediately due and
payable, and if a Customer Default shall occur, the liability of the Customer
with respect to all Obligations of all Eligible Employees shall become
immediately due and payable to the Bank upon written notice to Customer. The
Customer waives any right that the Customer may have to require the Bank first
to proceed against an Eligible Employee or any other person. The Customer also
waives any right that the Customer may have to require the Bank to realize on
any security held by the Bank before proceeding against the Customer for the
enforcement of the Guaranty.

     (c)  Bank agrees to consider joint requests by Customer and particular
Eligible Employees to sell such Eligible Employees' Tracking Stock prior to
enforcing its rights under the Guaranty with respect to such Tracking Stock, but
shall be under no obligation to do so. Bank agrees that, prior to making demand
upon an Eligible Employee for payment of a Loan following an Employee Default,
it will provide Customer with notice of such Employee Default and, except when
stayed from


                                       4
<PAGE>

enforcing the Guaranty against the Customer as a result of proceedings under the
federal Bankruptcy Code or any state insolvency or receivership law or by court
order, or under circumstances in which the prospects for obtaining repayment of
such Loan from the defaulting Eligible Employee would be impaired by delay, to
permit Customer to promptly purchase the Note of such Eligible Employee at a
purchase price equal to the outstanding principal balance thereof, accrued
interest and late fees thereon, and costs of collection with respect thereto,
prior to making demand upon such Eligible Employee, without waiving its right to
proceed first against such Eligible Employee for the enforcement of such Note.

     (d)  Upon purchase by the Customer of the Note of any Eligible Employee,
the Bank shall endorse and transfer to the Customer the Note of such Eligible
Employee and (unless the Tracking Stock of such Eligible Employee has been sold
by Bank) shall deliver to the Customer the Pledge Agreement of such Eligible
Employee and the Tracking Stock of such Eligible Employee, in each case without
recourse, warranty or representation. The Customer waives any other right that
it may have against the Bank as a result of any such payment by the Customer
under the Guaranty, whether arising by way of subrogation, contribution,
reimbursement or otherwise.

     (e)  The liability of the Customer under the Guaranty shall be unlimited.
The Customer agrees, as a principal and not as a surety only, to pay to the
Bank, on demand, all costs and expenses paid or incurred by the Bank (including
court costs and attorneys' fees) in connection with the Obligations or the
Guaranty and the enforcement of either of them, including without limitation
costs and expenses paid or incurred by the Bank in connection with any
proceedings under the federal Bankruptcy Code or any other law relating to
insolvency.

     (f)  The Customer waives presentment, demand, protest, notice of
acceptance, notice of the Obligations incurred and all other notices of any kind
and all defenses which may be available to the Customer except for notices
expressly provided for herein. The Customer warrants to the Bank that it has
adequate means to obtain from Eligible Employees, on a continuing basis,
information concerning the financial condition of the Eligible Employees, and
that it is not relying on the Bank to provide such information, now or in the
future. The Customer agrees to the provisions of any instrument, security or
other writing evidencing or securing any of the Obligations and agrees that the
obligations of the Customer hereunder shall not be released or discharged, in
whole or in part, by: (i) any renewals, extensions or postponements of the time
of payment of any of the Obligations or any other forbearance or indulgence with
respect thereto; (ii) any rescissions, waivers, amendments or modifications of
any of the terms of any agreement evidencing, securing or otherwise executed in
connection with the Obligations; or (iii) the substitution or release of any
security for the Obligations or of any other person primarily or secondarily
liable on any of the Obligations, whether or not notice thereof shall be given
to the Customer. The


                                       5
<PAGE>

enforcement of the Guaranty shall not be affected by the delay, neglect or
failure of the Bank to take any action with respect to any security, right,
obligation, endorsement, guaranty or other means of collecting the Obligations
which it may at any time hold, including perfection or enforcement thereof. The
Customer agrees that the Customer shall be and remain bound upon the Guaranty
irrespective of any action, delay or omission by the Bank in dealing with any
Eligible Employee, any of the Obligations, any Tracking Stock or other
collateral therefor, or any person at any time liable with respect to the
Obligations, and irrespective of any defense which any Eligible Employee may
assert to the underlying debt, including but not limited to failure of
consideration, breach of warranty, fraud, payment, statute of frauds,
bankruptcy, lack of legal capacity, statute of limitations, lender liability,
accord and satisfaction or usury.

     (g)  If for any reason an Eligible Employee is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations shall have become
irrecoverable from an Eligible Employee by operation of law or for any other
reason, or if any security for or other guaranty of the Obligations shall be
found invalid, the Customer shall nonetheless be and remain bound on the
Guaranty. The Guaranty shall continue to be effective or be reinstated,
notwithstanding any prior termination, if at any time any payment made or value
received with respect to any of the Obligations is rescinded or must otherwise
be returned by the Bank due to the insolvency or bankruptcy of an Eligible
Employee or otherwise, all as though such payment had not been made or value
received.

     5.   Representations, Warranties And Covenants.

     (a)  To induce Bank to make the Loans, the Customer makes the following
representations and warranties:

     (i)  That the Customer is a duly organized and validly existing corporation
in good standing under the laws of the State of Delaware, with corporate powers
adequate for the making and performing of this Agreement, for the issuance of
the Guaranty and the other agreements of the Customer referred to herein, and
for the carrying on of the business now conducted by it. The Customer is duly
qualified as a foreign corporation to do business wherever necessary to carry on
its present operations and is in good standing in every jurisdiction where such
qualification is necessary.

     (ii) That Customer has good and marketable title in fee to such of its
fixed assets as are real property and good and marketable title to its other
properties and assets, subject to no mortgage, pledge, lien, charge, security
interest, title retention agreement or other encumbrance except for encumbrances
permitted by the Senior Credit Agreement (as hereinafter defined), and that the
obligations of the Customer pursuant to the Senior Credit Agreement are
unsecured except for rights of setoff of the Banks referred to therein.


                                       6
<PAGE>

     (iii) That the financial statements of the Customer contained in the
Customer's Annual Report on Form 10-K for the fiscal year ended January 31,
1999, and the Customer's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1999, in each case filed with the Securities and Exchange
Commission, are complete and correct and present fairly the financial position
of the Customer as of the dates thereof and for the periods included therein,
and have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, subject, as to
interim statements, to audit and year-end adjustments. There are no material
contingent liabilities or liabilities for taxes of the Customer as at the date
of the aforementioned Quarterly Report on Form 10-Q which are not reflected in
said statements of financial condition.

     (iv) That there has been no material adverse change in the condition,
financial or otherwise, of the Customer since the date as of the aforementioned
Quarterly Report on Form 10-Q other than normal seasonal variations occurring in
the ordinary course of business.

     (v)  That the Customer has filed or caused to be filed all federal, state
and local tax returns which are required to be filed, and has paid or caused to
be paid all taxes as shown on said returns or any assessment received by it, to
the extent that such taxes have become due, except as otherwise permitted by the
provisions of this Agreement.

     (vi) That there are no actions, suits or proceedings pending or, to the
knowledge of the Customer, threatened against the Customer at law or in equity
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, which in the reasonable
opinion of Customer is likely to result in a material adverse change to the
business, properties or assets or in the condition, financial or otherwise, of
the Customer.

     (vii) That the Customer is not a party to any contract or agreement or
subject to any restrictions which materially and adversely affects its business
or assets or financial condition. Neither the execution nor delivery nor
compliance with the terms and provisions of this Agreement or the Guaranty will
be contrary to the provisions of, or constitute a default under, the charter or
by-laws of the Customer or any agreement to which the Customer is a party.

     (viii) That the making and performance of this Agreement and the Guaranty
are within the Customer's corporate powers and have been duly authorized by all
necessary corporate action, and that this Agreement and the Guaranty are legal
and binding obligations of the Customer enforceable in accordance with their
respective



                                       7
<PAGE>

terms (subject to bankruptcy and similar laws of general application affecting
the rights and remedies of creditors).

     (ix) That no approval or authorization of, or registration, qualification
or filing with, any governmental authority is required in connection with the
execution, delivery or performance by the Customer of this Agreement or the
Guaranty or the consummation of the transactions contemplated hereby or thereby.

     (x)  That the Customer possesses all patents, patent rights or licenses,
trademarks, trademark rights, trade names, trade name rights and copyrights
which are required to conduct its businesses as now conducted without known
conflict with the rights of others.

     (xi) That Company is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
extension of credit under this Agreement will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.

     (xii) That the most recent annual report filed by the Customer pursuant to
Section 104 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including without limitation, all related financial and actuarial
statements, is complete and correct, and no event has occurred and is continuing
which would permit the Pension Benefit Guaranty Corporation ("PBGC") established
under ERISA to institute proceedings to terminate any pension plan or other type
of employee benefit which the PBGC has elected to insure, established or
maintained by the Customer.

     (b)  The Customer hereby covenants and agrees with the Bank as follows:

     (i)  To comply with the covenants contained in the Revolving Credit
Agreement dated as of November 13, 1997 among the Customer, BankBoston, N.A. as
Administrative Agent, The Chase Manhattan Bank as Syndication Agent, Fleet
National Bank as Documentation Agent and the Co-Agents named therein, or any
agreement pursuant to which the loans contemplated thereby are refinanced or the
Commitments of the Banks (as those terms are defined therein) are replaced
(together, the "Senior Credit Agreement"), as the same may be amended from time
to time.

     (ii) At any time that Mellon Bank, N.A. shall cease to be a lender pursuant
to the Senior Credit Agreement, to provide to the Bank: (A) notice of the
amendment of any provision of the Senior Credit Agreement promptly after the
same is executed, (B) copies of the financial statements, certificates and
information referred to in Section 6.4 of the




                                       8
<PAGE>

Senior Credit Agreement, at the time the same are provided to the Agent
thereunder, and (C) copies of the notices referred to in Section 6.5 of the
Senior Credit Agreement, at the time the same arE provided to the Agent
thereunder, or in the event that the Senior Credit Agreement in effect on the
date hereof is replaced, comparable notices, financial statements, certificates
and information required to be provided to the Agent under such replacement
Senior Credit Agreement.

     (iii) In the event that the Customer grants to the Agent under the Senior
Credit Agreement any collateral or rights in property of the Customer for the
benefit of the Banks referred to therein, the Customer shall grant to the Bank
an equal and ratable security interest or mortgage on such property to secure
the Customer's obligations under the Guaranty.

     (iv) That the Customer shall provide to the Bank quarterly, within 30 days
after the end of each fiscal quarter of the Customer, a list of Eligible
Employees including a statement as to any change in the status of any individual
previously identified to the Bank as an Eligible Employee.

     (v)  That the Tracking Stock is fully paid and non-assessable and is not
subject to any lien, security interest, right or claim on the part of Customer
except for: (A) the Customer's right to purchase non-vested Tracking Stock from
Eligible Employees and (B) a junior security interest therein to secure such
right. Bank acknowledges that it holds, and will cause its agents (including the
Fiduciary under any Pledge Agreement) to hold, each Eligible Employee's Tracking
Stock to perfect the Customer's junior security interest therein, and that, upon
prior payment in full of all Obligations (as defined in each Eligible Employee's
Pledge Agreement), it will deliver the Collateral described in such Pledge
Agreement to the Customer.

     (vi) The security interest of the Customer in the Collateral described in
the Pledge Agreement shall be fully subordinate and junior to Bank's security
interest in such assets, regardless of the time Bank's security interest with
regard to such assets attaches, and regardless of the future granting of loans
or credits to Eligible Employees by Bank. Customer agrees that it will do
nothing to interfere with Bank's prior security interest in such Collateral
whether by undertaking to collect or enforce its rights in such Collateral or
otherwise until all indebtedness of the Eligible Employee who owns the same to
the Bank shall be paid in full.

     6.   Conditions Precedent. (a) The Bank's agreement to extend the Line of
Credit is subject to the conditions that:

     i.   On or before the date hereof the Customer shall have delivered to the
     Bank the documents, instruments and certificates listed on Exhibit B hereto
     and


                                       9
<PAGE>

     such other documents and materials as the Bank may reasonably require.

     ii.  On or before the date of each Loan, the Eligible Employee to be
     obligated thereon shall have executed and delivered to the Bank: (i) the
     Note evidencing such Loan, (ii) the Pledge Agreement securing such Note, or
     a confirmation of a Pledge Agreement previously executed by such Eligible
     Employee, and (iii) such other documents, instruments and materials as Bank
     may reasonably require.

     (b)  The Bank's agreement to make each disbursement of proceeds of a
Loan to an employee of the Customer is subject to the further conditions
precedent that: (i) no Customer Default shall have occurred and be
outstanding hereunder, (ii) the employee to be obligated thereon is at the
time an Eligible Employee, and (iii) no Employee Default with respect to such
employee shall have occurred and be outstanding as to the Demand Loan of such
employee or as to payments of interest due with respect to principal of such
employee's Loan previously disbursed.

     7.   Employee Defaults.

     (a)  The following shall constitute Employee Defaults with respect to a
Note:

     (i)  Default in the payment or performance of any Obligation by the
Eligible Employee obligated thereon, including the Loan and the Demand Loan of
such Eligible Employee.

     (ii) Death of the Eligible Employee obligated thereon.

     (iii) Such employee shall cease to be an employee of Customer or shall
cease to be an Eligible Employee.

     (iv) Customer shall notify Bank that the employee obligated thereon is no
longer eligible to participate in Customer's program of obtaining Loans for
Eligible Employees from the Bank.

     (v)  The employee obligated thereon shall become subject to any injunction
or temporary restraining order restricting the sale of the Tracking Stock or any
order prohibiting the Bank from selling such employee's Tracking Stock shall be
entered by any court, or such employee shall become the subject of any
investigative or administrative proceeding or any civil or criminal action
alleging violation of state or federal securities laws.

     (vi) The employee obligated thereon shall sell or transfer all or
substantially all of his or her assets, or become insolvent, or fail generally
to pay his or


                                       10
<PAGE>

her debts as they become due, or if a receiver is appointed for such employee or
any part of the property of such employee or if such employee shall make an
assignment or grant a trust mortgage for the benefit of (or composition with)
the creditors of such employee, or if a material adverse change shall occur in
the financial condition of such employee.

     (vii) The filing of a petition in bankruptcy by or against the employee
obligated thereon or the commencement of any proceedings by or against such
employee under any insolvency or other laws relating to the relief of debtors;
or the taking of any action by such employee to accomplish any of the foregoing.

     (b)  Upon the occurrence of an Employee Default: (i) Bank's agreement to
make further advances under the Note of such Eligible Employee shall immediately
termination, and (ii) all of the Obligations of the defaulting employee shall
become immediately due and payable, and the liability of the Customer pursuant
to the Guaranty with respect to such Obligations shall (unless Bank otherwise
elects) become immediately due and payable without demand, presentment or
notice, notwithstanding any prior acceptance by Bank of periodic payments of
interest on such employee's Note or other Obligations.

     8.   Customer Defaults. (a) The following shall constitute Customer
Defaults:

          (i)  The Customer shall default in the payment or performance of any
obligation contained in the Senior Credit Agreement, as the same may be amended
from time to time, and such default shall continue beyond any applicable grace
period, whether or not such default is waived.

          (ii) The Customer shall default in the payment or performance of any
obligation contained in this Agreement, including default in the payment of any
sums due pursuant to the Guaranty continuing for five Business Days following
demand by Bank.

     (b)  Upon the occurrence of a Customer Default, all Obligations shall
become immediately due and payable, and the liability of the Customer pursuant
to the Guaranty shall (unless Bank otherwise elects) become immediately due and
payable without demand, presentment or notice.

     9.   Bank's Rights And Remedies. (a) Upon the occurrence of an Employee
Default, Bank shall have the rights and remedies of a secured party under the
UCC with respect to the Tracking Stock pledged by the defaulting employee of
Customer. Upon the occurrence of a Customer Default, Bank shall have the rights
and remedies of a secured party under the UCC with respect to all Tracking Stock
pledged as security for


                                       11
<PAGE>

the Obligations. The Customer hereby agrees that five Business Days' notice of
the time and place of any public sale of Tracking Stock, or the time after which
a private sale or other disposition of Tracking Stock shall take place, sent by
telefacsimile to the Customer at 508/___-____, attention: Chief Financial
Officer, shall constitute reasonable notification.

     (b)  Upon the occurrence of an Employee Default or a Customer Default,
Bank may take control of any proceeds of Tracking Stock. Any deposits or other
sums at any time credited by or due from the Bank to the Customer shall at all
times constitute collateral for the Obligations and the Guaranty. Bank may apply
or set-off deposits against the Obligations and the Guaranty regardless of the
adequacy of any other collateral at any time after the occurrence and during the
continuance of a Customer Default. Upon the occurrence and during the
continuance of a Customer Default, Bank may apply the net proceeds of any sale
of Tracking Stock to the Obligations of the owner of such Tracking Stock and may
apply the proceeds of any set-off to the Customer's obligations under the
Guaranty, in each case in such order as it may determine.

     (b)  Bank shall have the option at any time within 90 days after the date
on which Mellon Bank, N.A. ceases to be a lender to the Customer pursuant to the
Senior Credit Agreement to require the Customer to refinance all outstanding
Loans or to repay all outstanding Loans pursuant to the Guaranty.

     (c)  In the event that: (i) the Commitments of the Banks under the Senior
Credit Agreement are reduced or (ii) the principal balance of the Loans
outstanding thereunder is repaid following an Event of Default thereunder, the
Customer shall upon demand by Bank deliver to Bank cash collateral (and a pledge
agreement covering the same) in an amount computed by multiplying: (A) the
amount of such reduction of Commitments or repayment of Loans, by a fraction,
(B) the numerator of which shall be $1,700,000 and (C) the denominator of which
shall be the maximum amount of the Commitments, or the principal balance of the
Loans outstanding under the Senior Credit Agreement, as the case may be, prior
to such reduction or repayment.

     10.  Customer's Agreement To Indemnify Bank. Customer agrees to indemnify
Bank and hold it harmless from any loss, cost (including legal costs and
reasonable attorneys' fees) or damage it may suffer as a result of: (i) any
failure of the Customer or an employee of Customer to comply with the terms of
this Agreement or a Note, (ii) obligations and responsibilities imposed by state
or federal securities laws, (iii) Bank's foreclosure upon any Tracking Stock to
satisfy an Employee Default or enforcement of any Note, or (iv) all other
claims, demands, suits, liabilities or obligations arising out of Bank's
agreement to make the Loans as provided herein.


                                       12
<PAGE>

     11.  Miscellaneous. (a) The Customer shall from time to time designate, and
shall at all times maintain, a management employee authorized to certify as to
the eligibility of employees to obtain Loans hereunder, and shall promptly
notify Bank in the event that an employee to whom a Loan is outstanding shall
cease to be so eligible.

     (b)  This Agreement and the Guaranty represent the entire understanding
between the Bank and the Customer with regard to the Loans, and their respective
provisions may not be modified, waived or amended except by a writing signed by
the Bank and the Customer. This Agreement is entered into solely for the benefit
of the Customer and the Bank, and no other party, including Eligible Employees
designated by the Customer from time to time, shall have any rights hereunder.
THE CUSTOMER WAIVES TRIAL BY JURY IN ANY ACTION ARISING OUT OF THIS AGREEMENT OR
THE GUARANTY.

     (c)  All notices provided for hereunder shall be in writing to the parties
at their respective addresses set forth on page one, or to such other address or
facsimile number as either party may designate in writing to the other. Notices
shall be deemed effective upon receipt if delivered by hand or telephone or
given by facsimile, one (1) Business Day after delivery to a reputable overnight
courier service and three (3) Business Days after being deposited in the mails.
The term "Business Day" shall mean a day on which the Bank's offices in Boston,
Massachusetts are open for business.

     (d)  This Agreement and the Guaranty shall be binding upon and inure to the
benefit of the Customer and the Bank and their respective successors and
assigns. The invalidity or unenforceability of any one or more phrases, clauses
or sections of this Agreement or the Guaranty shall not affect the validity or
enforceability of the remaining portions of this Agreement or the Guaranty. This
Agreement and the Guaranty are intended to take effect as a sealed instrument
and shall be construed in accordance with and governed by the laws (other than
the conflict of laws rules) of Massachusetts.

     Please indicate below your concurrence in the terms of this Agreement and
your acceptance of the Guaranty.

                                          STAPLES, INC.

                                          By____________________________


                   13
<PAGE>


Agreed and accepted:

BOSTON SAFE DEPOSIT & TRUST COMPANY

By_____________________________________



                                       14
<PAGE>

                                    EXHIBIT A

                                 TERM LOAN NOTE

Maximum Principal Amount:                            Date:_________, 2000
$_____________________                               Boston, Massachusetts

     On January 31, 2002, for value received, the undersigned, jointly and
severally if more than one ("Borrower"), promise to pay to the order of BOSTON
SAFE DEPOSIT AND TRUST COMPANY (the "Bank") at such place as the Bank may from
time to time designate, the aggregate principal amount outstanding on such date,
or earlier if demand is made for payment following default, with interest
thereon and any fees, expenses and charges, as provided below. At no time shall
the outstanding principal amount borrowed exceed the maximum principal amount
described above. The entries on the records of the Bank, including any appearing
on this Term Loan Note ("this Note"), will be prima facie evidence of the
aggregate principal amount outstanding under this Note, the interest accrued on
such amount and other fees and charges due.

     All payments hereunder including any prepayments of principal shall be
applied first to unpaid accrued interest, then to other fees, expenses and
charges due, including collection costs, and the balance, if any, to principal.
Principal repaid may not be reborrowed.

INTEREST

     Interest shall accrue at a floating annual rate equal to the rate quoted as
"Call Money" from time to time in the "Money Rates" section of The Wall Street
Journal, or if no such rate is quoted or The Wall Street Journal is not
available, the generally prevailing rate for loans to members of the New York
Stock Exchange secured by stock exchange collateral provided by Reuters or a
similar source of recognized standing selected by the Bank. In the event Bank
determines that for any reason no rate comparable to Call Money is available on
a given day, the Loans shall bear interest on such date at the Prime Rate (as
hereinafter defined) minus 1% per annum. "Prime Rate" shall mean the rate quoted
as the "Prime Rate" in the "Money Rates" section of The Wall Street Journal. In
the event "Call Money" or the "Prime Rate" is reported as a range of rates, the
rate used to calculate the interest rates under this Note will be the highest
such rate reported. The interest rate of this Note will change on the date
reported in The Wall Street Journal as the effective date of the change in Call
Money or the Prime Rate.

     In the event the interest rate indices stated above cease to be available,
the Bank may substitute any similar index, whether reported in The Wall Street
Journal or


<PAGE>

any other newspaper, and the Bank's selection shall be conclusive and binding on
the Borrower. In such event, and until the Bank selects a substitute index,
interest shall accrue at the rate in effect at the time the index in question
was determined by the Bank to be unavailable.

     Interest will begin to accrue on the day any proceeds of loans made under
this Note are disbursed. Interest will continue to accrue at the rate described
above, both before and after demand for payment, on the outstanding principal
until all principal amounts have been paid in full. The rate of interest shall
never exceed the maximum rate allowable under applicable law.

     Interest will be calculated on the basis of actual days elapsed in a 360
day year and will be payable in arrears. The first interest payment will be due
on the first day of the month immediately following any advance hereunder.
Subsequent interest payments will be due on the same day of every month
thereafter.

INTEREST PAYMENT OPTIONS

Borrower chooses to make monthly interest payments as indicated below:

     Payment Method #1: Borrower authorizes Bank to take payments out of
     Borrower's Checking Account maintained with Boston Safe Deposit and Trust
     Company, number ------------, titled -------------------, on or after the
     first business day of each month. Borrower will keep a large enough balance
     in this account to cover the full amount of the required payments.

     Payment Method #2: Bank will send Borrower a bill each month, and Borrower
     will mail or deliver the required payment so that Bank will receive it no
     later than the first day of each month.

     Payment Method #3: Borrower authorizes Bank to take payments out of either
     the principal or income or both of Borrower's Investment Account, number
     -------------, titled ------------------, on or after the first business
     day of each month. Borrower will maintain this Investment Account, in order
     to ensure that there are sufficient funds or assets in the Investment
     Account in order to meet Borrower's monthly payments.

     Borrower may request in writing a change in the Payment Option at any time.


                                       ii
<PAGE>

LATE CHARGES AND OTHER CHARGES

     In the event any payment of interest required to be made hereunder is not
made within 15 calendar days of the first day of each month, the date it is due,
the Borrower shall pay a late charge to the Bank of 5% of the amount due or $25,
whichever is greater. This charge must be paid within 30 days of the date it is
assessed and will be charged only once on each late payment.

     If any amount due as the principal of this Note is not paid in full on or
within five business days of the date of demand, such amount shall thereafter
bear interest payable on demand at a fluctuating rate per annum equal to the
greater of: (a) two percent (2%) above the Call Money rate (or one percent (1%)
above the Prime Rate, if the Call Money rate is unavailable) in effect on such
due date, or (b) two percent (2%) above the Call Money rate (or one percent (1%)
above the Prime Rate, if the Call Money rate is unavailable) in effect from time
to time thereafter.

     If due to either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), in each case after the date of this
Note, there shall be any increase in the cost to the Bank of agreeing to make or
making, funding or maintaining any loan under this Note (excluding any such
increased costs resulting from changes in the basis of taxation of overall net
income or overall gross income of the Bank by the United States or any political
subdivision thereof), then the Borrower shall, from time to time, within 5
business days after demand by the Bank, pay to the Bank additional amounts
sufficient to compensate the Bank for such increased costs.

     If the Bank determines that compliance with any law or regulation or any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) introduced or changed after the date of
this Note affects the amount of capital required to be maintained by the Bank
and that the amount of such capital is increased by or based upon the existence
of the Bank's loans hereunder, then, within 5 business days after demand by the
Bank, the Borrower shall pay to the Bank additional amounts sufficient to
compensate the Bank in the light of such circumstances.

     Bank shall notify the Borrower promptly after the occurrence of any event
described in the two immediately preceding paragraphs, and Borrower's liability
to Bank pursuant to such subsections shall be limited to amounts accruing after
the date of such notice. Demand by the Bank pursuant to such paragraphs shall be
accompanied by a certificate as to the amount of such increased cost or required
capital, respectively, showing calculations of the amount claimed in reasonable
detail. Bank's determination of any such increased cost (using any reasonable
method of averaging, attribution or


                                      iii
<PAGE>

allocation), as set forth in such a certificate shall, if correctly calculated,
be deemed prima facie evidence of such amount.

WIRE TRANSFER AUTHORIZATION

     Borrower hereby authorizes the Bank to wire transfer funds upon Borrower's
telephone, oral or written request, and agrees to hold the Bank harmless from
any and all claims, liabilities or damages, including reasonable attorney's fees
arising directly or indirectly from this authorization. The Bank shall be under
no obligation to verify the authenticity of any transfer request purporting or
which the Bank reasonably believes to be made by Borrower.

PREPAYMENT

     At any time or times before the maturity of this Note, whether as stated or
following acceleration as provided below, Borrower may make partial payments of
principal without penalty. All payments shall be made to the Bank's loan
servicing center in Pittsburgh, Pennsylvania, or at such other place as the Bank
may from time to time designate in writing.

SECURITY INTEREST DISCLOSURE

     As security for payment of this Note and the obligations provided for
herein, Borrower gives Lender a security interest in all the assets more fully
described in a Pledge Agreement of the Borrower previously or contemporaneously
delivered to Bank, and any modifications thereof (the "Pledge Agreement").

DEFAULT

     The following shall constitute Defaults hereunder:

          (i)  Default in the payment or performance of any obligation of the
Borrower to the Bank or the occurrence of a default under the Pledge Agreement.

          (ii) Death of the Borrower.

          (iii) If the Borrower shall cease to be an employee of Staples, Inc.
("Staples").

          (iv) If Staples shall notify Bank that the Borrower is no longer
eligible to participate in Staple's program of obtaining loans pursuant to this
Note.

          (v)  If the Borrower shall become the subject of any investigative or


                                       iv
<PAGE>

administrative proceeding or any civil or criminal action alleging violation of
state or federal securities laws.

          (vi) If Borrower shall sell or transfer all or substantially all of
his or her assets, or become insolvent, or fail generally to pay his or her
debts as they become due, or if a receiver is appointed for the Borrower or any
part of the property of the Borrower or if the Borrower shall make an assignment
or grant a trust mortgage for the benefit of (or composition with) the
creditors, or if a material adverse change shall occur in the financial
condition of the Borrower.

          (vii) The filing of a petition in bankruptcy by or against the
Borrower or the commencement of any proceedings by or against the Borrower under
any insolvency or other laws relating to the relief of debtors; or the taking of
any action by the Borrower to accomplish any of the foregoing.

     Upon the occurrence of a Default all of the obligations of the Borrower to
the Bank shall become immediately due and payable, without demand, presentment
or notice, notwithstanding any prior acceptance by Bank of periodic payments of
interest on this Note or such other Obligations.

SETOFF DISCLOSURE

     To the extent permitted by law, the Bank has the right to apply funds from
any deposit account(s) of Borrower or cosigner with the Bank to pay all or any
portion of any amount outstanding under this Note or otherwise to the Bank.

     In addition to any right of setoff given to the Bank by law against any
property of Borrower, the Bank shall have a lien on and security interest in all
property of Borrower now or hereafter on deposit with the Bank. Such lien and
security interest may be enforced without demand upon or notice to Borrower,
shall continue in full force unless specifically waived or released by the Bank
in writing, and shall not be deemed waived by any delay of the Bank in enforcing
the lien or security interest.

COLLECTION COSTS

     Borrower promises to pay on demand, to the extent permitted under
applicable law, all costs and expenses, including reasonable attorneys' fees,
incurred or paid by the Bank in enforcing this Note, whether or not litigation
is commenced, and in selling or otherwise disposing of all or any part of any
property pledged to secure this Note. All such costs and expenses shall be
secured by such collateral.


                                       v
<PAGE>

JOINT LIABILITY

     If more than one person has signed this Note, their obligations shall be
joint and several, and the liability of each shall be absolute and unconditional
and without regard to the liability of any other party hereto.

WAIVER

     Unless prohibited by applicable law, Borrower, all co-Borrowers, any
endorser and any other party hereto, and each of them (1) waives presentment,
demand, notice, protest, and all other demands and notices in connection with
the delivery, acceptance, performance, default or enforcement of this Note or of
any document or instrument evidencing any security for the payment of this Note,
except for demand for payment hereunder and any notices provided for in the
Pledge Agreement; (2) assents to any one or more extensions or postponements of
the time of payment or any other indulgences, to any additions or substitutions,
exchanges or releases of collateral and/or the addition, substitution or release
of any one or more parties or persons primarily or secondarily liable hereunder,
and (3) agrees that no such action, failure to act or failure to exercise any
right or remedy, on the part of the Bank shall in any way affect or impair the
obligations of any of them or be construed as a waiver by Bank of, or otherwise
affect, any of Bank's rights under this Note, under any endorsement or guaranty
of this Note or under any document or instrument evidencing any security for
payment of this Note. No delay or omission by the Bank in exercising in whole or
in part any right or remedy hereunder shall operate as a waiver thereof or of
any other right or remedy. A waiver of any right or remedy, in whole or in part,
on any one occasion shall not be construed as a bar to enforcing or as a waiver
of that or any other right or remedy on any future occasion.

ADDRESS CHANGE

     Borrower shall notify the Bank of any change in the Borrwer's address of
record. Any such notice shall be directed to the Bank at the address for
payments, or to such other address as the Bank may direct. In the event such
notice is not given by the Borrower, Borrower shall be deemed to have waived the
right to receive any notice which otherwise would be required under this Note or
by applicable law, unless such waiver is specifically prohibited by applicable
law or regulation.

ENTIRE AGREEMENT

     The terms and conditions of the Pledge Agreement are deemed to be
incorporated herein by reference. Such terms and conditions, together with the
terms and conditions of this Note, constitute the entire agreement of the
parties and


                                       vi

<PAGE>

supersede all prior agreements and understandings, both written and oral, of
the parties hereto with respect to the subject matter of this Note or of any
such agreement. The captions and headings of the various sections of this Note
are for convenience only and are not to be considered as defining or limiting,
in any way the scope or intent of the provisions hereof. Neither this Note nor
such Pledge Agreement may be modified or amended except by a writing signed by
the Bank.

FINANCIAL INFORMATION/FURTHER DOCUMENTS

     At Bank's request, Borrower will give Bank a completed and signed personal
financial statement in such form as Bank may require. Borrower will execute any
documents or instruments required by Bank to perfect its security interest or as
otherwise may be required by Bank, as Bank may request from time to time.

GENERAL PROVISIONS

     This Note inures to the benefit of the Bank and to the benefit of its
successors and assigns. This Note is binding on each Borrower and on any
executor, administrator or legal representative of any Borrower.

     No security interest granted to the Bank by Borrower in any dwelling of any
Borrower shall secure payment of this Note unless specific reference is made to
this Note. Other collateral securing other obligations of Borrower to the Bank
may also secure this Note.

GOVERNING LAW

     This Note will take effect as a sealed instrument and will be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts.
If any provision of this Note is deemed to be in conflict with applicable law,
it will considered to be modified to comply with the law or, if not capable of
such modification, such provision will be deemed to be deleted from this Note.
Notwithstanding any such modification or deletion, the remaining provisions will
remain valid and enforceable.


                                      vii
<PAGE>

BY SIGNING BELOW, BORROWER AGREES TO THE TERMS OF THIS AGREEMENT.

__________________________________________
Borrower                            (Seal)

BORROWER'S ADDRESS OF RECORD:

__________________________________________
         Print Name

__________________________________________
Address

__________________________________________
City                 State                Zip Code


                                      viii
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>10
<DESCRIPTION>EXHIBIT 12.1
<TEXT>

<PAGE>

STAPLES, INC. AND SUBSIDIARIES
EXHIBIT 12.1
STATEMENT RE:  COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>

                                                   2/3/96        2/1/97         1/31/98        1/30/99        1/29/00
                                                   ------        ------         -------        -------        -------

<S>                                             <C>           <C>            <C>            <C>             <C>
Consolidated pre-tax income prior to
   extraordinary items .....................     $ 119,845     $ 211,363      $.279,503      $ 397,103        516,374

Interest portion of rental expense .........        31,538        44,231         56,208         69,308         87,862

Net interest expense, including amortization
   of deferred issuance costs ..............        31,353        53,458         33,947         31,057         21,980

Less: interest capitalized .................             0          (611)        (1,387)        (2,254)          (433)
                                                 ---------     ----------     ----------     ----------        -------


     Earnings ..............................     $ 182,736     $ 308,441      $ 368,271      $ 495,214      $ 625,783
                                                 ---------     ----------     ----------     ----------        -------
                                                 ---------     ----------     ----------     ----------        -------

Interest portion of rental expense .........     $  31,538     $  44,231      $  56,208      $  69,308      $  87,862

Net interest expense, including amortization
  of deferred issuance costs ...............        31,353        53,458         33,947         31,057         21,980
                                                 ---------     ----------     ----------     ----------        -------


     Fixed Charges .........................     $  62,891     $  97,689      $  90,155      $ 100,365      $ 109,842
                                                 ---------     ----------     ----------     ----------        -------
                                                 ---------     ----------     ----------     ----------        -------


     Ratio of Earnings to Fixed Charges ....          2.91          3.16           4.08           4.93           5.70
                                                 ---------     ----------     ----------     ----------        -------
                                                 ---------     ----------     ----------     ----------        -------


</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>11
<DESCRIPTION>EXHIBIT 21.1
<TEXT>

<PAGE>

                                  EXHIBIT 21.1

                           SUBSIDIARIES OF THE COMPANY

<TABLE>
<CAPTION>


                                                                                               NAME UNDER WHICH
          SUBSIDIARY                          JURISDICTION OF INCORPORATION                    THEY DO BUSINESS
----------------------------------            -----------------------------                 -----------------------
<S>                                                 <C>                                            <C>
Staples Security Corporation                        Massachusetts                                  Same

Staples Trust Company                               Massachusetts                                  Same

Staples Contract & Commercial, Inc.                 Delaware                                       Same

SOM Hagerstown, Inc.                                Delaware                                       Same

Staples Insurance Agency, Inc.                      Delaware                                       Same

Staples International, Inc.                         Delaware                                       Same

Staples of Maryland, LLC                            Delaware                                       Same

Staples the Office Superstore, Inc.                 Delaware                                       Same

Staples the Office Superstore East, Inc.            Delaware                                       Same

Staples Connecticut, Inc.                           Connecticut                                    Same

Staples NRO Limited                                 Ontario, Canada                                Same

Staples NRO(2) Limited                              Ontario, Canada                                Same

Staples NRO(3) Limited                              Ontario, Canada                                Same

Staples NRO(4) Limited                              Ontario, Canada                                Same

Staples NRO(5) Limited                              Ontario, Canada                                Same

The Business Depot, Ltd.                            Ontario, Canada                         The Business Depot
                                                                                          Staples The Business Depot
                                                                                      Staples The Office Superstore
                                                                                              Bureau en Gross

Staples (Deutschland) GmbH                          Germany                                        Same

Staples (Europe) Limited                            England                                        Same

Staples (UK) Limited                                England                                        Same

Staples UK (Partnership)                            England                                        Same

Quill Corporation                                   Delaware                                       Same

Milbro, Inc.                                        Delaware                                       Same

Staples GP, LLC                                     Delaware                                       Same
</TABLE>


                                       E-1

<PAGE>

                      SUBSIDIARIES OF THE COMPANY -             CONT'D

<TABLE>
<CAPTION>
<S>                                                 <C>                                            <C>
Agawam Mill, LP                                     Delaware                                       Same

Cherokee Mill, LP                                   Delaware                                       Same

Coppell Mill, LP                                    Delaware                                       Same

Lebanon Mill, LP                                    Delaware                                       Same

Staples Partners, LLC                               Delaware                                       Same

Staples Real Estate Trust                           Massachusetts                                  Same

Claricom Holdings, Inc.                             Delaware                                       Same

Claricom, Inc.                                      Delaware                             Staples Communications

Claricom Networks, Inc.                             Delaware                             Staples Communications Networks

Clarity Telecom Local Network Services, Inc.        Delaware                                       Same

Staples Airport Express, L.L.C.                     Delaware                                       Same

Staples Airport Terminal, L.L.C.                    Delaware                                       Same

Staples Airport, L.L.C.                             Delaware                                       Same

Staples Business Insurance Agency, L.L.C.           Massachusetts                                  Same

Staples Global Holdings, L.P.                       Bermuda                                        Same

Product Sourcing Group Europe, B.V.B.A.             Belgium                                        Same

QSDD Limited                                        United Kingdom                                 Same

Staples Netherlands B.V.                            Netherlands                                    Same

Staples International Limited                       United Kingdom                                 Same

Sigma Burowelt GmbH                                 Germany                                        Same

Idasil Investimentos Imobiliarios S.A.              Portugal                                       Same

OFCEP OFFICE CENTRE Portugal -
     Equipamento de Escritorio Lda.                 Portugal                                       Same

Clip & Paper Franchise B.V.                         Netherlands                                    Same

Business Office Supply C.V.                         Netherlands                                    Same

Clip & Paper Beheer B.V.                            Netherlands                                    Same

Damster Kantooristallaties B.V.                     Netherlands                                    Same

Clip & Paper B.V.                                   Netherlands                                    Same

Damster Drachten B.V.                               Netherlands                                    Same

</TABLE>


                                       E-2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>12
<DESCRIPTION>EXHIBIT 23.1
<TEXT>

<PAGE>

                                                                    EXHIBIT 23.1

               CONSENT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements
(Forms S-3 No. 333-31249, 333-81503, 333-58743, 333-62939 and 333-30754 and
Forms S-8 No. 33-38304, 33-52228, 33-52226, 33-68076, 33-81284, 33-79496,
333-36713, 333-36715, 333-39991, 333-39993, 333-64545, 333-73383, 333-90675,
333-90671, 333-90673, 333-87971and 333-12903) of Staples, Inc. and in the
related Prospectus of our reports dated March 3, 2000, with respect to the
consolidated financial statements of Staples, Inc. and combined financial
statements of Staples Retail and Delivery and Staples.com included in this
Annual Report (Form 10-K) for the year ended January 29, 2000.

                                                 /S/ ERNST & YOUNG LLP
                                                 ------------------------
                                                     ERNST & YOUNG LLP

Boston, Massachusetts
March 6, 2000

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>13
<DESCRIPTION>EXHIBIT 23.2
<TEXT>


<PAGE>

                                                                    EXHIBIT 23.2

                         CONSENT OF INDEPENDENT AUDITOR

We consent to the incorporation by reference in the Registration Statements
(Forms S-3 No. 333-31249, 333-81503, 333-58743, 333-62939 and 333-30754 and
Forms S-8 No. 33-38304, 33-52228, 33-52226, 33-68076, 33-81284, 33-79496,
333-36713, 333-36715, 333-39991, 333-39993, 333-64545, 333-73383, 333-90675,
333-90671, 333-90673, 333-87971 and 333-12903) of Staples, Inc. and in the
related Prospectus of our report dated February 24, 1998, with respect to the
consolidated financial statements of Quill Corporation and Subsidiary for the
year ended December 31, 1997 included in Staples, Inc.'s Annual Report (Form
10-K) for the year ended January 29, 2000.

/S/ KUPFERBERG, GOLDBERG & NEIMARK, LLC
-----------------------------------------
KUPFERBERG, GOLDBERG & NEIMARK, LLC

March 6, 2000


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>14
<DESCRIPTION>EXHIBIT 27.1
<TEXT>

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Staples, Inc. for the twelve months ended January 29,
2000 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          JAN-29-2000
<PERIOD-START>                             JAN-31-2000
<PERIOD-END>                               JAN-29-2000
<CASH>                                         110,483
<SECURITIES>                                     1,071
<RECEIVABLES>                                  365,967
<ALLOWANCES>                                     5,066
<INVENTORY>                                  1,607,516
<CURRENT-ASSETS>                             2,193,451
<PP&E>                                       1,604,682
<DEPRECIATION>                                 509,920
<TOTAL-ASSETS>                               3,846,076
<CURRENT-LIABILITIES>                        1,454,904
<BONDS>                                        500,903
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           298
<OTHER-SE>                                   1,828,515
<TOTAL-LIABILITY-AND-EQUITY>                 3,846,076
<SALES>                                      8,936,809
<TOTAL-REVENUES>                             8,936,809
<CGS>                                        6,721,563
<TOTAL-COSTS>                                8,020,775
<OTHER-EXPENSES>                               382,559
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              17,101
<INCOME-PRETAX>                                516,374
<INCOME-TAX>                                   201,386
<INCOME-CONTINUING>                            314,988
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   314,988
<EPS-BASIC>                                       0.42<F1>
<EPS-DILUTED>                                     0.41<F1>
<FN>
<F1>From January 31, 1999 to October 30, 1999:
   Staples, Inc. Stock EPS--Basic                 0.42
   Staples, Inc. Stock EPS--Diluted               0.41
From October 31, 1999 to January 29, 2000:
   Staples RD Stock EPS--Basic                    0.26
   Staples RD Stock EPS--Diluted                  0.26
   Staples.com Stock EPS--Basic                 (0.05)
   Staples.com Stock EPS--Diluted               (0.05)
</FN>


</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>15
<DESCRIPTION>EXHIBIT 99.1
<TEXT>

<PAGE>
                                                                    EXHIBIT 99.1

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Quill Corporation
Lincolnshire, Illinois

We have audited the accompanying consolidated statements of operating results
and retained earnings and cash flows of Quill Corporation and Subsidiary for the
year the ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Quill Corporation and Subsidiary for the year ended December 31,
1997, in conformity with generally accepted accounting principles.

/S/ KUPFERBERG, GOLDBERG & NEIMARK, LLC
---------------------------------------

KUPFERBERG, GOLDBERG & NEIMARK, LLC
February 24, 1998

</TEXT>
</DOCUMENT>
</SUBMISSION>
