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Office Depot Tells Shareholders To Reject Proxy Bid

3/31/2008 04:17:00 PM Eastern

Delray Beach, Fla. — Office Depot urged shareholders in a March 31 mailing to back current management in next month’s expected proxy fight with activist investor Alan Levan.

Levan, who heads real estate development company Levitt Corp., wants to replace present and former Office Depot chairmen/CEOs Steve Odland and David Fuente with past president/COO Mark Begelman and Martin Hanaka, former president/COO of Staples.

The mailing, which included a letter, fact sheet and proxy card, stressed that the current board has significant retailing experience and is committed to profitable growth and success, as witnessed by a turnaround initiative launched by Odland three years ago that has helped grow earnings per share 62 percent and increase the company’s share price by 70 percent.

By contrast, the mailing noted, Levitt Corp.’s share price has dropped 93 percent over the same time period and its Levitt and Sons subsidiary is in bankruptcy.

“We strongly believe that removing two of the most experienced retailing executives from our board, including our current chief executive officer who is driving the implementation of our strategic turnaround plan, would be highly disruptive, could delay the implementation of internal and external initiatives and could damage prospects for a successful turnaround,” the letter read.

The mailing also took Begelman and Hanaka to task, citing the former’s “track record of failed business ventures” and reported disdain for selling “staples and paper clips,” while recalling the latter’s arrest for assaulting a female Staples employee with whom he was allegedly having an affair, according to a Wall Street Journal article.

In announcing his proxy challenge, Levan said, “Under the current board and management team, Office Depot has lost its vision, its competitive position in the office supply retailing space and its drive for leadership.” The announcement followed the release of disappointing fourth-quarter financial results, which included a drop in Office Depot’s net earnings, from $127 million, to $19 million, year-over-year.