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Office Depot’s new QB scores lucrative deal…

If we applied football terms to recent events at Office Depot, Inc. (ODP), we might call it a two-point conversion. But even in business terms, it’s a really nice (and lucrative) promotion.

The guy at the center of all this activity is Neil R. Austrian, who has served as Office Depot’s interim Chairman of the Board and CEO since November 1, 2010, and whose past experience also includes an 8-year stint as the President and Chief Operating Officer of the National Football League.

While Austrian’s salary isn’t quite as lavish as a real NFL player’s, it’s still good – even compared to what he has earned in the past seven months. As we reported in this post last November, the interim job paid Austrian $200,000 per month (per this Offer Letter), plus it gave him 400,000 stock options.

The new Letter Agreement, dated May 23, 2011 and attached to an 8-K filed the same day, will pay Austrian $1.10 million for an annual base salary. Crunching the numbers, that gives him a base salary of “only” $91,667 per month, which might appear to be a pay cut. But that doesn’t factor in Austrian’s bonus: If Office Depot hits its performance targets, he can also earn a target bonus of 140% of his salary (pro-rated for 2011), which could give him another $1.54 million in cash. Thus, although the bonus isn’t guaranteed because it’s tied to performance, Austrian could end up with $2.64 million in cash rather than the $2.4 million in cash that the interim job paid.

As part of the new, permanent appointment, Office Depot changed the vesting schedule for the 400,000 options that it gave Austrian last November. Whereas before, one-third of the options vested when they were given to Austrian and another third would vest on the first and second anniversaries of the grant, now the remaining unvested two-thirds will vest on April 30, 2013.

But there’s more to the new compensation arrangement, as well. The Offer Letter disclosed that “…in lieu of a sign on cash bonus and to incentivize future performance,” Office Depot gave Austrian an award of 600,000 shares of time-vesting restricted stock, as well as a second award of 600,000 shares of performance-vesting restricted stock. And Austrian also got a Change in Control Agreement that will assure that he doesn’t leave empty-handed if the company changes hands.

In yesterday’s press release, director Marty Evans, said:

“Our search for a new leader to guide Office Depot through these challenging economic times was very thorough. While we met many qualified candidates who were excited about the opportunity, we kept coming back to Neil. Over his seven months at the helm, Neil has had a profound effect on the Company, its culture, and its relationships with key stakeholders…. The Board firmly believes that Neil is the best person to lead Office Depot’s return to profitable growth and to attract and build talent for the future.”

The stock price got a nice spike in this morning’s trading, suggesting that investors – as well as the board’s directors – believe that Austrian is the right person to lead Office Depot to victory.

Image source: Matthew Tosh via flickr

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