Equity-Based Employee Compensation and Benefit Plans

Under the Amended and Restated 2004 Stock Incentive Plan, the Company grants restricted stock and restricted stock units (collectively, “Restricted Shares”) and nonqualified stock options to associates. Shares issued pursuant to restricted stock awards are restricted in that they are not transferable until they vest. Shares underlying awards of restricted stock units are not issued until the units vest. Nonqualified stock options cannot be exercised until they vest. Vesting of the Restricted Shares and nonqualified stock options occurs over different periods, depending on the terms of the individual award, but expenses relating to these awards are all recognized on a straight line basis over the applicable vesting period.

The following table summarizes the activity year-to-date in 2012 related to nonqualified stock options and Restricted Shares:



	Nonqualified Stock Options				Restricted Shares (1)
	Number of Shares		Weighted Average Exercise Price per Share		Number of Shares		Weighted Average Grant Date Fair Value per Share
Outstanding at January 28, 2012	45,995,348		$	19.89	16,799,262		$	18.13
Granted	2,990,051		12.79		5,002,035		12.99
Exercised/Released	(1,961,860	)	11.29		(5,324,926	)	19.98
Canceled	(4,008,438	)	19.45		(1,851,713	)	18.98
Outstanding at October 27, 2012	43,015,101		$	19.83	14,624,658		$	15.59

Exercisable at October 27, 2012	33,307,004		$	20.89
Vested or expected to vest at October 27, 2012	42,084,403		$	19.90

(1)

Restricted Shares do not include 0.4 million special performance and retention shares ("Performance Shares") which Staples granted to certain employees in 2010 with a fair market value of $19.27 per share. Performance Shares are awards under which restricted stock is issued only if the Company meets minimum performance targets. The fair value of Performance Shares is based upon the market price of the underlying common stock as of the date of grant.

In connection with its equity-based employee compensation and benefit plans, Staples included $27.3 million and $90.4 million in compensation expense for the third quarter and year-to-date 2012, respectively, and $35.6 million and $117.1 million in compensation expense for the third quarter and year-to-date 2011, respectively. As of October 27, 2012, Staples had $152.9 million of unamortized stock compensation expense associated with nonqualified stock options, Restricted Shares and Performance Shares which will be expensed over the period through September, 2016.

Staples offers its associates the opportunity for share ownership pursuant to the 2012 Employee Stock Purchase Plan and, prior to January 1, 2012, through the Amended and Restated 1998 Employee Stock Purchase Plan (collectively the “Employee Stock Purchase Plans”). Under the Employee Stock Purchase Plans, U.S. and International associates may purchase shares of Staples common stock at 85% of the lower of the market price of the common stock at the beginning or end of an offering period through payroll deductions in an amount not to exceed 10% of an employee’s annual base compensation. During year-to-date 2012 and 2011, the Company issued 2.1 million shares and 1.7 million shares, respectively, pursuant to these plans.