-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jxp4LiaNh2jrupFBZLGNlcxbyslI/tFvvnOWA++FQm7lzy8wusNwDMWGnGQOKiWD MeahN1S+ySnsr/aOERXw8w== 0000950144-01-005194.txt : 20010424 0000950144-01-005194.hdr.sgml : 20010424 ACCESSION NUMBER: 0000950144-01-005194 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20010128 FILED AS OF DATE: 20010423 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOME DEPOT INC CENTRAL INDEX KEY: 0000354950 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-LUMBER & OTHER BUILDING MATERIALS DEALERS [5211] IRS NUMBER: 953261426 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08207 FILM NUMBER: 1608102 BUSINESS ADDRESS: STREET 1: 2455 PACES FERRY ROAD CITY: ATLANTA STATE: GA ZIP: 30339-4024 BUSINESS PHONE: 770-433-82 MAIL ADDRESS: STREET 1: 2455 PACES FERRY ROAD CITY: ATLANTA STATE: GA ZIP: 30339-4024 10-K 1 g68482e10-k.txt THE HOME DEPOT, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 28, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-8207 THE HOME DEPOT, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE (State or Other Jurisdiction of Incorporation or Organization) IRS NO. 95-3261426 (I.R.S. Employer Identification No.) 2455 PACES FERRY ROAD, ATLANTA, GEORGIA (Address of Principal Executive Offices) 30339-4024 (Zip Code) Registrant's telephone number, including area code: (770) 433-8211 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- -------------------- Common Stock, $.05 Par Value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ------------ The aggregate market value of the Common Stock of the Registrant held by nonaffiliates of the Registrant on April 2, 2001, was $93,798,491,076. The aggregate market value was computed by reference to the closing price of the Common Stock on the New York Stock Exchange on such date. For the purposes of this response, executive officers and directors are deemed to be the affiliates of the Registrant and the holdings by nonaffiliates was computed at 2,204,590,489 shares. The number of shares outstanding of the Registrant's Common Stock as of April 2, 2001 was 2,327,253,241 shares. 2 INCORPORATION BY REFERENCE Filings made by companies with the Securities and Exchange Commission sometimes "incorporate information by reference." This means that the company is referring you to information that was previously filed with the SEC, and this information is considered to be part of the filing you are reading. The following materials are incorporated by reference into this Form 10-K: - Information contained in our Proxy Statement for the 2001 Annual Meeting of Stockholders is incorporated by reference in response to Items 10 through 13 of Part III. - Information contained on pages 20 through 31 of our 2000 Annual Report to Stockholders is incorporated by reference in response to Item 8 of Part II. FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE Certain statements we make in this report, and other written and oral statements made by us or our authorized executive officers on our behalf may constitute "forward-looking statements" within the meaning of the federal securities laws. Words or phrases such as "should result," "are expected to," "we anticipate," "we estimate," "we project," "we believe" or similar expressions are intended to identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company's historical experience and its present expectations or projections. These risks and uncertainties include, but are not limited to: - - unanticipated weather conditions; - - stability of costs and availability of sourcing channels; - - our ability to attract, train and retain highly-qualified associates; - - conditions affecting the availability, acquisition, development and ownership of real estate; - - general economic conditions; - - the impact of competition; and - - regulatory and litigation matters. You should not place undue reliance on forward-looking statements, since such statements speak only as of the date they are made. Additional information concerning the risks and uncertainties listed above and other factors you may wish to consider are provided beginning on page 22 under "Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition - Forward-Looking Statements May Prove Inaccurate." 3 PART I ITEM 1. BUSINESS The Home Depot, Inc. is the world's largest home improvement retailer and the second largest retailer in the United States based on net sales volume for fiscal 2000. At the end of our 2000 fiscal year, we were operating 1,103 Home Depot(R) stores and 26 EXPO Design Center(R) stores. A description of these two types of stores is as follows: - HOME DEPOT STORES: Home Depot stores sell a wide assortment of building materials and home improvement and lawn and garden products and provide a number of services. Home Depot stores average approximately 108,000 square feet of enclosed space, with an additional approximately 24,000 square feet in the outside garden area. At fiscal year end, we had 1,096 Home Depot stores located throughout the United States and Canada, as well as seven in South America. - EXPO DESIGN CENTER STORES: EXPO Design Center stores sell products and services primarily for design and renovation projects. Unlike Home Depot stores, EXPO Design Center stores do not sell building materials and lumber. Rather, EXPO Design Center stores offer interior design products, such as kitchen and bathroom cabinetry, tiles, flooring and lighting fixtures, and installation services. The prototypical EXPO Design Center is approximately 100,000 square feet. Additionally, at the end of fiscal 2000 we were operating four Villager's(R) Hardware test stores in New Jersey. Villager's Hardware stores offer products for home enhancement and small projects. We also have one test store called The Home Depot Floor Store(SM) in Texas that sells only flooring products. We also offer products through two direct marketing subsidiaries. Our Maintenance Warehouse(R) subsidiary is a leading direct mail marketer of maintenance, repair and operations products serving primarily the multi-family housing and lodging facilities management market. The company fills orders through its 19 distribution centers, which are located throughout the United States. During fiscal 2000, Maintenance Warehouse expanded its operations in Texas, Arizona and Georgia through the acquisition of N-E Thing Supply Company, Inc. National Blinds & Wallpaper(SM), a wholly owned subsidiary, is a telephone mail order service for wallpaper and custom window treatments. We also operate two wholly owned subsidiaries, Georgia Lighting, Inc. and Apex Supply Company, Inc. Georgia Lighting(R), a leading specialty lighting designer, distributor and retailer, has six retail locations in Georgia. Apex Supply Company is a wholesale supplier of plumbing, HVAC, appliances and other related professional products with 22 locations in Georgia, Tennessee and South Carolina. Our Store Support Center (corporate office) is located at 2455 Paces Ferry Road, Atlanta, Georgia 30339-4024. The telephone number is (770) 433-8211. 4 RETAIL BUSINESSES HOME DEPOT STORES OPERATING STRATEGY. The operating strategy for Home Depot stores is to offer a broad assortment of high-quality merchandise and services at competitive prices using highly knowledgeable, service-oriented personnel and aggressive advertising. We believe that our associates' knowledge of products and home improvement techniques and applications is very important in our marketing approach and our ability to maintain customer satisfaction. We regularly check our competitors' prices to ensure that our prices are competitive within each market. CUSTOMERS. Home Depot stores serve three primary customer groups: - DO-IT-YOURSELF (D-I-Y) CUSTOMERS: These customers are typically homeowners who purchase products and complete their own projects and installations. To complement the in-store expertise of our associates, Home Depot stores offer many D-I-Y "how-to" clinics taught by associates and merchandise vendors. - BUY-IT-YOURSELF (B-I-Y) CUSTOMERS: These customers are typically homeowners who purchase materials themselves and hire third parties to complete the project and/or installation. We offer B-I-Y customers installation services for a variety of products through third party contractors. - PROFESSIONAL CUSTOMERS: These customers are professional repair remodelers, general contractors and tradesmen. In many stores we offer a variety of programs to these professional customers, including additional delivery and will-call services; dedicated staff; extensive merchandise selections; and expanded credit programs, all of which we believe increase sales. PRODUCTS. A typical Home Depot store stocks approximately 40,000 to 50,000 product items, including variations in color and size. Each store carries a wide selection of high-quality and nationally advertised brand name merchandise. The following table shows the percentage of sales of each major product group for each of the last three fiscal years:
Percentage of Sales for Fiscal Year Ended ------------------------------------ Jan. 28, Jan. 30, Jan. 31, 2001 2000 1999 ------- ------- -------- Product Group Building materials, lumber and millwork........ 23.6% 24.7% 24.4% Plumbing, electrical and kitchen............... 27.6 26.6 26.8 Hardware and seasonal.......................... 28.3 28.5 28.5 Paint, flooring and wall coverings............. 20.5 20.2 20.3 ----- ----- ----- Total.......................................... 100.0% 100.0% 100.0% ===== ===== =====
2 5 We buy our store merchandise from vendors located throughout the world. No single vendor accounts for more than six percent of our total purchases, and we are not dependent on any single vendor. Most of our merchandise is purchased directly from manufacturers, which eliminates "middleman" costs. We believe that competitive sources of supply are readily available for substantially all of the products we sell in Home Depot stores. We maintain a global sourcing merchandise program to source high-quality products directly from overseas manufacturers, which gives our customers a broader selection of products and better values while enhancing our gross margin. Our product development managers travel internationally to identify opportunities to purchase items directly for our stores. This enables us to improve product quality, to import products not currently available to our customers and to offer at a lower price products that would otherwise be purchased from third party importers. We currently source products from more than 260 manufacturers in approximately 35 countries. To complement the established national brand name products we offer, we have formed strategic alliances with vendor partners to market products under brand names that are only offered through The Home Depot. At the end of fiscal year 2000, we offered products under more than 30 proprietary and other exclusive brands, including Thomasville(TM) kitchen and bathroom cabinets; RIDGID(R) power tools; Behr Premium Plus(R) paint; Mill's Pride(R) cabinets; GE SmartWater(TM) water heaters; and Vigoro(R) fertilizer. In the future, we may consider additional strategic alignments with other vendors to offer products under proprietary brand names. Additionally, we will continue to assess opportunities to expand the range of products available under existing proprietary brands. INSTALLED SALES SERVICES. Home Depot stores offer a variety of installed sales programs through its At-Home Services business. This service targets the B-I-Y customer who will select and purchase materials for a project and prefers the Company to provide professional installation. We implement our installed sales programs through approximately 6,800 independent qualified contractors in the U.S. and Canada. These programs include the installation of carpeting, hard flooring, cabinets, solid surface countertops, exterior doors, garage doors, roofing, siding and windows. During fiscal 2000, we also began testing a residential HVAC program in Tennessee and Georgia and plan to expand the offering during fiscal 2001. IN-STORE INITIATIVES. We continually assess our business to find opportunities to increase customer loyalty, thereby increasing sales. Accordingly, we implemented or expanded a number of in-store initiatives in Home Depot stores during fiscal 2000, including: - Professional Business Customer Initiative. We are committed to being the supplier of choice to a variety of professional customers, including certain repair remodelers, carpenters, plumbers, painters, electricians, building maintenance professionals and designers. During fiscal 2000, we continued to expand an initiative that adds service-related programs to our stores that are designed to increase sales to professional customers. Stores participating in the program add associates at a sales desk dedicated to providing more personalized service to professional customers, including managing accounts and taking and filling orders for pick-up or same-day delivery. Additionally, during the hours when professionals typically shop, these stores assign sales associates in certain departments to assist these customers. To better serve our professional customers, we also increase quantities of existing products typically purchased by 3 6 professionals in bulk quantities and offer certain items in each department packaged in bulk to offer additional savings. While aimed at the professional customer, this program also enables us to better serve our D-I-Y customer with improved customer service, including delivery and will-call services, expanded credit programs and additional merchandise. Through this initiative, we have identified best practices in serving our professional customers that are being implemented in many of our stores without material additional costs. By the end of fiscal 2000, we had expanded the professional customer initiative into 29 markets with approximately 165 stores. We anticipate that during fiscal year 2001, we will expand this initiative to approximately 335 additional stores. - SPI Initiative. We began testing the Service Performance Improvement, or "SPI," initiative during fiscal 2000 in approximately 51 stores in three markets. The program focuses on making it easier to shop in our stores while emphasizing safety and improving customer service. Stores that have implemented the initiative assign some associates specific tasks while others focus on assisting customers. Additionally, these stores schedule associates to receive shipments and stock merchandise when our stores are closed or during hours when they have fewer customers. We believe this separation of assignments will allow us to provide better customer service while improving labor productivity, managing inventory more efficiently and increasing sales. We currently anticipate rolling this program out to most of our stores during fiscal 2001. - Appliance Sales. During fiscal 2000, we completed the roll-out of our appliance sales program to most of our stores in the U.S. Through this program we sell appliances manufactured by General Electric(R), Maytag(R) and other manufacturers. We display and stock the more popular appliances in our stores and offer the ability to special order over 2,000 additional products through computer kiosks located in the store. Through the computer kiosks we can check inventory and arrange for delivery to the customer directly from the manufacturer as soon as 48 hours after the order is placed. During fiscal 2001, we plan to expand the appliances we sell and to continue to test new formats for selling appliances. - Tool Rental. As part of our efforts to satisfy a broad range of the needs of our professional customers and our D-I-Y customers, we offer a tool rental service in certain stores. Under this program, we rent approximately 200 commercial-quality tools in ten categories, including saws, floor sanders, generators, gas powered lawn equipment and plumbing tools. Customers can lease the tools on an hourly, daily, weekly or monthly basis. Our associates who work in the tool rental area receive special training concerning the use and maintenance of the tools. As of January 28, 2001, we offered tool rental service in approximately 342 stores compared to 150 stores at the end of fiscal 1999. During fiscal 2001, we anticipate expanding tool rental services into additional stores, and we believe that ultimately tool rental centers will be in approximately 60% of our stores. We believe that offering this service increases the sales of related merchandise without reducing the sales of equipment similar to that available for rental. 4 7 - Special Order Center Test. Currently, the special order center processes water heater orders nationwide through a toll-free number and special order blinds and wallpaper through a separate toll-free number that is available to approximately 95 stores in three markets. Stores currently participating in the program have experienced increased water heater sales and reductions in customer transaction times for placing orders for blinds and wallpaper. - Customer Education Programs. We offer several programs to enhance the skills and confidence of our D-I-Y customers. Our associates and vendors teach "how-to" clinics that focus on D-I-Y projects, such as installing garbage disposals, laying patio pavers or building a deck. In addition to the clinics, we offer Home Depot University(SM), which presents four-week modules allowing our customers to learn about several facets of a home improvement topic. For example, a room enhancement module may provide instruction on paint, wallpaper and window treatments. Through The Home Depot's Kids Workshop(SM) program, children are instructed in tool safety and complete a small project, such as building a birdhouse or tool box. We believe that these types of educational programs increase our sales by encouraging our customers to undertake more projects, differentiating us from our competition and reinforcing our position as experts in home improvement. STORE GROWTH United States. At the end of fiscal 2000, we were operating 1,029 Home Depot stores in the United States, including Puerto Rico. During fiscal 2000 in the U.S., we opened 173 new Home Depot stores and relocated eight existing Home Depot stores. Although these new store openings occurred primarily in existing markets, we continued our geographic expansion by opening stores in a number of new markets. We currently anticipate opening approximately 200 new stores and relocating nine existing stores during fiscal 2001. To increase customer service levels, gain incremental sales and enhance long-term market penetration, we often open new stores near the edge of the market areas served by existing stores. While these openings may initially have a negative impact on comparable store-for-store sales, we believe this "cannibalization" strategy increases customer satisfaction and overall market share by reducing delays in shopping, increasing utilization by existing customers and attracting new customers to more convenient locations. During fiscal 2000, approximately 30% of our stores were cannibalized by new store openings. Canada. At the end of fiscal 2000, we were operating 67 Home Depot stores in seven Canadian provinces. Of these stores, 14 were opened during fiscal 2000, including our first stores in Quebec and Nova Scotia. During fiscal 2001, we plan to open approximately 13 additional stores in Canada. Our Canadian stores are operated through a wholly owned Canadian subsidiary of The Home Depot. South America. At the end of fiscal 2000, we were operating seven Home Depot stores in Chile and Argentina, and we anticipate opening additional stores in South America during fiscal 2001. We operate our Chilean Home Depot stores through a joint venture with S.A.C.I. Falabella, a leading department store retailer in Chile. Our controlling share of the joint venture is 66.67%. 5 8 Our Argentina stores are operated through a wholly owned Argentine subsidiary. We have offices in both Argentina and Chile from which day-to-day operations are handled by a management team comprised of local nationals and seasoned U.S. Home Depot managers. EXPO DESIGN CENTER STORES OPERATING STRATEGY. The operating strategy for our EXPO Design Center stores is to offer complete interior design services, high-quality, competitively priced products and installation services to assist our customers in their home decor and remodeling projects. Each EXPO Design Center store features up to eight different showrooms, each with full-size displays to help customers visualize the end result of possible interior design projects. To assist our customers, we employ associates who provide exceptional customer service and who have expertise in designing, planning and completing projects. CUSTOMERS. Typically, customers at EXPO Design Center stores are middle to upper income B-I-Y customers, who purchase merchandise for installation by others. Accordingly, we offer installation services for most of the products we sell at these stores. PRODUCTS. EXPO Design Center stores offer interior design products and installation services in the following core product categories: - Kitchens - Baths - Decor - Lighting - Flooring - Appliances - Patio - Window Treatments EXPO Design Center stores offer a broad range of merchandise in an effort to meet all the needs of shoppers whose interior design preferences may go beyond the items available in a Home Depot store. While there is minimal overlap between the products offered in Home Depot stores and EXPO Design Center stores, those products available at EXPO Design Center stores are typically higher-end or more unique items. In addition to nationally advertised brand name products, we also offer items that must be special ordered or that are typically offered through showrooms open only to design professionals. STORE GROWTH. At the end of fiscal 2000, we were operating 26 EXPO Design Center stores, eleven of which were opened that year. We currently anticipate opening 17 additional stores in fiscal 2001. These new stores are expected to average approximately 100,000 square feet and will incorporate a showroom environment. IN-STORE SERVICES. We have associates at our EXPO Design Center stores to assist with every phase of a project. Certified kitchen and bath designers are on staff. We also have design professionals to help our customers design lighting, tile and flooring, custom upholstery and bedding, custom closets and window treatments. Installation services are available for most 6 9 products at EXPO Design Center stores, including kitchens, baths, flooring, wallpaper, tile, lighting fixtures and window treatments. Our project managers ensure that the products are available and then schedule licensed third party contractors to complete the work. We warrant the workmanship of each installation for as long as the customer owns the home. GEORGIA LIGHTING We acquired our wholly owned subsidiary Georgia Lighting in June 1999. Georgia Lighting is a leading specialty lighting designer, distributor and retailer based in Atlanta. The company, which has six retail locations, offers an extensive collection of decorative lighting fixtures, supplies, accents and accessories to commercial and retail customers. We believe that the acquisition of Georgia Lighting has allowed us to strengthen our sourcing, training and merchandising in lighting for both The Home Depot and EXPO Design Center stores. APEX SUPPLY COMPANY In January 2000, we acquired Apex Supply Company, a wholesale distributor of plumbing, HVAC, appliances and other related products. The Company offers these products through 22 locations in Georgia, Tennessee and South Carolina and employs approximately 570 associates. Apex assisted us with the development of our HVAC program, and we believe this acquisition will help us to increase our penetration of the professional plumbing trades and to be able to handle special orders for plumbing products more efficiently in Home Depot stores. VILLAGER'S HARDWARE STORES During fiscal 1999, we opened the first two Villager's Hardware test stores, and in fiscal 2000 we opened an additional two stores, all of which are in New Jersey. These stores stock approximately 40,000 items, including variations in color and size, including hardware, fasteners, tools, plumbing, electrical and seasonal, as well as a broad selection of home enhancement products, including paint and wallpaper, window treatments, lighting, storage, housewares and giftware. We believe that the primary focus for these stores will be home enhancement and small projects. Each Villager's Hardware store has approximately 35,000 to 40,000 square feet of selling space in a retail environment, emphasizing customer service and education. During fiscal 2001, we will continue to analyze the results of this test. THE HOME DEPOT FLOOR STORE During fiscal 2000, we opened a test store in Plano, Texas that offers flooring products. The Floor Store's merchandise assortment includes carpet, ceramic, wood, laminate and vinyl flooring. During fiscal 2001, we will continue to analyze the results of this test. INTERNET Our website is located at www.homedepot.com. The site offers information about projects and our products, calculators to estimate the amount and kinds of materials needed to complete a project, as well as information about our company. As with our stores, the focus of our website is customer service. We believe our Internet site provides us with an opportunity to build 7 10 relationships with our customers, educate our customers, improve service and increase incremental store sales. During fiscal 2000, we began selling Home Depot products over the Internet in three markets. We offer customers the products available at stores in their local market on our website, and the products are priced based on the market in which the customer lives. Orders are fulfilled from our stores, and customers can either pick up their purchases or have them delivered. By integrating Internet purchases with our stores, we hope to provide our customers with greater flexibility and service. During fiscal 2001, we have begun to offer products that can be shipped by United Parcel Service for sale through the Internet in additional areas of the U.S. DIRECT MARKETING SALES We have two subsidiaries that sell merchandise through direct marketing: - - MAINTENANCE WAREHOUSE. Our Maintenance Warehouse subsidiary is a leading provider of maintenance, repair and operations products primarily to the multi-family housing and lodging facilities management market. Through its catalog, which is published semi-annually, Maintenance Warehouse offers approximately 16,000 items, including variations in color and size. Maintenance Warehouse, which employs approximately 1,100 people, emphasizes accurate order taking, delivery and personalized service. Orders are typically placed over the telephone, through a field sales representative or through the company's website at www.mwh.com, are filled through one of Maintenance Warehouses' 19 distribution centers and are shipped for same-day or next-day delivery. During fiscal 2000, Maintenance Warehouse expanded its operations in Texas, Arkansas and Georgia through the acquisition of N-E Thing Supply Company, Inc. - - NATIONAL BLINDS & WALLPAPER. National Blinds and Wallpaper sells decor products through telephone sales and over the Internet. The company markets primarily through magazine advertising aimed at customers seeking the lowest prices. The company maintains no inventory, but rather acts as a broker to fill special order sales. STORE SUPPORT SERVICES INFORMATION SYSTEMS. Each Home Depot, EXPO Design Center and Villager's Hardware store is equipped with a computerized point of sale system, electronic bar code scanning system and a UNIX server. Store information is communicated to the Store Support Center's computers via a land-based Asynchronous Transfer Mode ("ATM") network in the U.S. and a frame relay network internationally. These computers provide corporate, financial, merchandising and other back office function support. We believe our systems provide efficient customer check-out and returns, store-based inventory management, rapid order replenishment, labor planning support and item movement information. Fast registers, credit authorizations and check approvals expedite transactions in our stores at a pace that we believe sets the standard for our industry. For example, to better serve the increasing number of customers applying for credit while in our stores, the charge card approval process time has been reduced to less than 30 seconds. We have implemented a mobile ordering system in our Home Depot stores using portable carts with 8 11 computers to assist our associates in placing accurate orders for inventory. Through the system, an associate on the sales floor can see the supply the store has for a given item, review the suggested re-order quantities based on the store's historical experience and place an order with the vendor. We believe the system increases the efficiency and productivity of our associates because it requires less time and fewer people to assess and order inventory. We have also implemented a mobile signing system to help ensure that our signing is consistent with our point-of-sale price data. Additionally, we are in the process of rolling out additional systems tools to assist with labor scheduling to help ensure the best possible customer service levels. We are continuously assessing and upgrading our information systems to support growth, reduce and control costs and enable our associates to make better decisions. We continue to realize greater efficiency as a result of our electronic data interchange ("EDI") program. Currently, most of our high volume vendors are participating in the EDI program, which represents more than 70% of our total transactional volume. EDI is a paperless system, which processes orders from buying offices to vendors, alerts the stores when the merchandise is to arrive and transmits invoice data from the vendors and freight carriers to the Store Support Center. ASSOCIATE DEVELOPMENT. As of January 28, 2001, we employed approximately 227,000 associates, of whom approximately 12,800 were salaried, with the remainder compensated on an hourly basis. Approximately 74% of our associates are employed on a full-time basis. To attract and retain qualified personnel, we seek to maintain salary and wage levels equal to or above those of our competitors in each market area. Store managers have access to information regarding competitive salary rates in their respective markets. We develop our training programs in a continuing effort to service the needs of our associates. These programs are designed to increase associates' knowledge of merchandising departments and products, including mandatory product knowledge training classes, and to educate, develop and test the skills of those associates who are interested in being promoted. Because our policy is to promote or relocate current associates to serve as managers and assistant managers for new stores, training and assessment of our associates is essential to our growth. Our district managers and store managers typically meet with our human resources associates to discuss the development of assistant managers and certain department heads and consider possible candidates for promotion. We have implemented programs in our stores to ensure that we hire and promote the best qualified associates in a non-discriminatory way. These programs integrate validated computerized tests for all applicants, as well as specialized tests for certain positions. If an applicant passes the computer test, he or she may be selected for a structured interview in which questions to be asked are selected by the computer based on the answers given on the original computer test. We also maintain a list of qualified associates who are interested in a new assignment and of qualified outside applicants that can be reviewed when positions become available. We have never experienced a strike or any work stoppage, and we believe that our employee relations are good. There are no collective bargaining agreements covering any of our associates. MARKETING. We are one of the nation's largest retail advertisers, and we utilize all forms of mass media and selected forms of highly targeted media. We also incorporate major sponsorships into our marketing plan, such as NASCAR(R), the Olympic games, CBS College Football and home and garden shows. We extend our reach and educate our customers through proprietary publications, 9 12 such as the Home Improvement 1-2-3(TM) series and the Style Ideas magazine. We execute our marketing campaigns on both a national and local basis. Because the vast majority of our stores are located throughout the United States and Canada, we can achieve greater efficiencies than smaller retailers by using national advertising. At the same time, we tailor the majority of our advertising locally to respond to market differences, both in terms of products and the competitive environment. CREDIT SERVICES. Home Depot offers credit purchase programs to both professional and D-I-Y and B-I-Y customers. In fiscal 2000, 2.6 million new Home Depot credit accounts were opened, bringing the total number of Home Depot account holders to almost 8 million. Proprietary credit card sales accounted for approximately 19% of all Home Depot sales in fiscal 2000. During fiscal 2000, we rolled-out a program to all U.S. stores that gives our customers the opportunity to apply for unsecured Home Improvement Loans to purchase products and services in our stores. We believe that this loan program not only increases large sales, such as kitchen and bath remodels, but also generates incremental sales from our customers. INTELLECTUAL PROPERTY. Through our wholly owned subsidiary, Homer TLC, Inc., we have registered or applied for registration of a variety of trade names, service marks, trademarks and copyrights for use in our business, including The Home Depot(R), the "Homer" (R) character, EXPO Design Center(R) stores, Hampton Bay(R) fans, lighting and accessories and PremiumCut(TM) lumber. We regard our intellectual property as having significant value and as being an important factor in the marketing of the Company and our stores and direct marketing efforts. We are not aware of any facts that could be expected to negatively impact our intellectual property. QUALITY ASSURANCE PROGRAM. For our globally sourced products that we directly import, we have implemented a quality assurance program. Through this program, we have established criteria for both vendor/factory and product performance, which measure factors including product quality, timely shipments and fill rate. The performance record is monitored relative to our requirements and is also made available to the factories to allow them to strive for improvement. This quality assurance program, which is applied to products directly imported by Home Depot, has four components: - we authorize laboratories to test products prior to purchase to ensure compliance with requirements; - we develop and document product requirements, based on test results, applicable national and international standards and features determined by our merchants; - we assess the capability of factories to manufacture quality products that meet the expectations we have developed, as well as to assess their compliance with Home Depot policies on child labor; and - we routinely assess product quality and factory performance by conducting inspections at the factory on shipments to assure continued compliance with our product requirements, and we reserve the right to perform random audits on child labor policies. 10 13 LOGISTICS. We use several mechanisms to lower distribution costs and increase our efficiencies. A large percentage of our merchandise is shipped directly from our vendors to the stores. We operate a number of facilities to distribute the remaining merchandise to our stores. For example, certain import products require the use of distribution centers. Accordingly, we have seven import distribution centers, located in the United States, Canada, Argentina and Chile. Additionally, at the end of fiscal 2000, we had 27 lumber distribution facilities in the United States and Canada to support the lumber demands of our stores. We also operated one cross-docking transit facility, and we currently plan to add several additional facilities during fiscal 2001. At these facilities, we receive merchandise from manufacturers and immediately load it onto trucks for delivery to our stores. We continually assess opportunities to improve our distribution network to better satisfy the needs of our stores and to lower costs. SAFETY. We are committed to maintaining a safe environment for our customers and associates. The Safety Department consists of a team of directors and managers in the field focused primarily on education and training, as well as an Atlanta-based team of dedicated safety resources who evaluate and implement policies and processes Company-wide. The goal of the Safety Department is to implement a safety program designed to engineer safety into the fabric of our Company, establishing a "safety first" approach to all facets of our business. Our Safety Department is responsible for managing the Company's safety program, which is implemented in conjunction with store-level associates, store and Division management, and the Human Resources and Merchandising Departments. The primary focuses of our safety program are (1) to establish safety standards and processes for all aspects of store operations and merchandising, (2) to effectively train appropriate associates on all applicable standards, and (3) to monitor compliance with established safety standards. COMPETITION. Our business is highly competitive, based in part on price, store location, customer service and depth of merchandise. In each of the markets we serve, there are a number of other home improvement stores, electrical, plumbing and building materials supply houses and lumber yards. With respect to some products, we also compete with discount stores, local, regional and national hardware stores, mail order firms, warehouse clubs, independent building supply stores and, to a lesser extent, other retailers. In addition to these entities, our EXPO Design Center stores also compete with specialty design stores or showrooms, some of which are only open to interior design professionals. Due to the variety of competition we face, we are unable to precisely measure our market share in existing market areas. We believe that we are an effective and significant competitor in our markets. Based on U.S. Census data estimates, internal estimates and data provided by the Home Improvement Research Institute, we believe that our market share in the U.S. and Canada, currently defined as including the Do-It-Yourself/Buy-It-Yourself, Tradesmen, Builders/General Contractors, Heavy Industrial, Repair and Remodeling and Property Maintenance markets, is approximately 9.4%. 11 14 EXECUTIVE OFFICERS Executive officers of Home Depot are elected by, and serve at the pleasure of, the Board of Directors. The following provides information as of January 28, 2001 concerning our executive officers: BERNARD MARCUS, age 71, is a co-founder of The Home Depot and serves as Co-Chairman of the Board. From inception of the Company in 1978 until 1997, he served as Chairman of the Board and Chief Executive Officer, at which time the title of CEO was passed on to Mr. Arthur M. Blank. In December 2000, Mr. Marcus became Co-Chairman of the Board. Mr. Marcus serves as a director on the boards of ChoicePoint Inc., and Westfield America, Inc. ARTHUR M. BLANK, age 58, is a co-founder of The Home Depot and has been Co-Chairman of the Board since December 2000. Prior thereto he had been President and Chief Executive Officer since 1997 and President, Chief Operating Officer and a director of The Home Depot since its inception in 1978. Mr. Blank is a member of the Board of Directors of Cox Enterprises, Inc. and Post Properties, Inc. ROBERT L. NARDELLI, age 52, has been President and Chief Executive Officer since December 2000. Prior thereto, Mr. Nardelli served as President and Chief Executive Officer of GE Power Systems, a division of General Electric Company, since 1995. LAURENCE B. APPEL, age 39, has been Senior Vice President - Legal since August 2000. Prior thereto, Mr. Appel was Vice President - Legal from 1999 until his most recent promotion. He joined the Company in 1997 as Senior Counsel. From 1995 until 1997, he was an attorney with the firm of Altman, Kritzer & Levick. MARK R. BAKER, age 43, has been Executive Vice President - Merchandising since October 2000, and prior to such time, had been Group President and Senior Vice President - Merchandising since June 1999. From 1997 until 1999, he was President of the Midwest Division. Mr. Baker joined the Company in 1996 as Vice President-Merchandising for the Midwest Division. Prior to joining The Home Depot, from 1992 until 1996, Mr. Baker was an Executive Vice President - Merchandising for HomeBase Inc. in Fullerton, California. In March 2000, Mr. Baker was promoted to Executive Vice President and Chief Operating Officer of Home Depot U.S. stores. DENNIS J. CAREY, age 54, has been Executive Vice President and Chief Financial Officer since May 1998. From 1994 to 1998, Mr. Carey was employed by AT&T Corp., most recently as Vice President and General Manager - Corporate Productivity and Mergers and Acquisitions. Prior to joining AT&T, Mr. Carey held a number of positions during his 25 year tenure with General Electric Company, including Vice President and General Manager of International Operations. JEFFREY W. COHEN, age 42, has been Division President - Service Business since January 2001 and prior to that time he had been Group President - Direct Marketing Businesses since May 1998. From January 1997 until he joined The Home Depot, Mr. Cohen was President of Cohen & Associates Management Consultants. From 1995 through 1997, he was Executive Vice President of Harte-Hanks Direct Marketing, and prior thereto he was a Senior Vice President - General 12 15 Manager at GE Capital Corp. He also spent seven years at American Express Company where he held various marketing positions. VERNON JOSLYN, age 49, has been Division President - Midwest since January 2001, and he served as Group President from April 2000 until that time. He previously served as President of the Northeast Division from 1996 until April 2000. Mr. Joslyn also previously served as Vice President-Operations for the Northeast Division from 1993 until 1996. LYNN MARTINEAU, age 44, has been Division President - New Growth Businesses since January 2001. He previously served as Group President from April 2000 until he assumed his current position, was President - Western Division from 1996 through 2000 and was Vice President - Merchandising for the Southeast Division from 1994 through 1996. LARRY M. MERCER, age 54, is Executive Vice President of Operations. He is responsible for the functional leadership across the entire Home Depot enterprise, both domestically since March 1996 and internationally since January 2000. Prior to his promotion Mr. Mercer was President of the Northeast Division for five years. Mr. Mercer joined the Company in 1979 as an Assistant Store Manager and has risen through the ranks to his current position. ANDERS C. MOBERG, age 51, has served as Division President - International since January 2001. He joined the Company as Group President - International and Global Resourcing in August 1999. Prior to such time, Mr. Moberg was President of The IKEA Group for more than the previous five years. BARRY L. SILVERMAN, age 52, has been Division President - EXPO Design Center since January 2001 and prior thereto had served as Group President since January 2000. Prior thereto he was President - Southwest Division since 1997, and he was Vice President - Merchandising of the Northeast Division from 1991 through 1997. CAROL B. TOME, age 44, has been Senior Vice President - Finance and Accounting/ Treasurer since February 2000. She previously served as Vice President and Treasurer from 1995 until her most recent promotion. From 1992 until 1995, when she joined The Home Depot, Ms. Tome was Vice President and Treasurer of Riverwood International Corporation. M. FAYE WILSON, age 63, has served as Senior Vice President - Risk Management since January 2001 and has served on the Board of Directors for the Company since 1992. Prior to assuming her current position, Ms. Wilson was Senior Vice President - Value Initiatives since joining the Company in 1998. From 1992 until joining The Home Depot, she was an Executive Vice President of Bank of America NT&SA and Chairman and President of Security Pacific Financial Services, Inc. Ms. Wilson serves as a director of Farmers Insurance Group. 13 16 Item 2. PROPERTIES The following tables show locations of the 1,029 Home Depot stores in the United States and the 74 stores outside of the United States as of January 28, 2001:
Number of Stores Number of Stores State in State State in State --------------------------------------- --------------------------------------- Alabama 13 Missouri 18 Alaska 1 Montana 3 Arizona 28 Nebraska 1 Arkansas 3 Nevada 11 California 140 New Hampshire 5 Colorado 22 New Jersey 40 Connecticut 16 New Mexico 5 Delaware 3 New York 58 Florida 94 North Carolina 25 Georgia 48 Ohio 36 Hawaii 1 Oklahoma 7 Idaho 5 Oregon 11 Illinois 36 Pennsylvania 39 Indiana 5 Puerto Rico 2 Iowa 4 Rhode Island 1 Kansas 6 South Carolina 14 Kentucky 7 South Dakota 1 Louisiana 16 Tennessee 21 Maine 6 Texas 88 Maryland 24 Utah 9 Massachusetts 26 Vermont 1 Michigan 43 Virginia 30 Minnesota 16 Washington 19 Mississippi 5 Wisconsin 16
International Number of Stores Location in Location --------------------------------------- Canada: Alberta 9 British Columbia 9 Manitoba 3 Nova Scotia 2 Ontario 39 Quebec 3 Saskatchewan 2 South America: Chile 5 Argentina 2
14 17 The following table shows the location of the 26 EXPO Design Center stores by state as of January 28, 2001:
Number of Stores State in State --------------------------------------- California 7 Florida 3 Georgia 2 Illinois 1 Massachusetts 2 Michigan 2 New Jersey 1 New York 2 Texas 5 Virginia 1
Additionally, as of January 28, 2001, we were operating four Villager's Hardware test stores, all of which are located in New Jersey, six Georgia Lighting retail locations open to the public, all of which are located in Georgia, 22 Apex Supply locations, of which 15 are located in Georgia, five are located in Tennessee and two are located in South Carolina, and one The Home Depot Floor Store location in Texas. Of our 1,134 Home Depot stores, EXPO Design Center stores, Villager's Hardware stores and The Floor Store at January 28, 2001, approximately 78% were owned (including those owned subject to a ground lease) consisting of approximately 95,667,000 square feet and approximately 22% were leased consisting of approximately 27,097,000 square feet. In recent years, we have increased the relative percentage of new stores that are owned. Although we take advantage of lease financing opportunities, we generally prefer to own stores because of greater operating control and flexibility, generally lower occupancy costs and certain other economic advantages. Our executive, corporate staff and financial offices occupy approximately 1,665,000 square feet of leased and owned space in Atlanta, Georgia. In addition, as of January 28, 2001, we occupied an aggregate of approximately 1,368,000 square feet, of which approximately 305,000 square feet is owned and approximately 1,063,000 square feet is leased, for divisional store support centers and subsidiary customer support centers. These support centers are located in Orange and San Leandro, California; Tampa, Florida; Atlanta, Georgia; Arlington Heights, Illinois; Canton, Massachusetts; Plymouth, Michigan; South Plainfield, New Jersey; Dallas, Texas; Tukwila, Washington; Scarborough, Ontario and Quebec, Canada; Santiago, Chile; and Buenos Aires, Argentina. At January 28, 2001, we utilized approximately 8,277,000 square feet of warehousing and distribution space, of which approximately 620,000 is owned and approximately 7,657,000 is leased. We believe that at the end of existing lease terms, our current leased space can be either relet or replaced by alternate space for lease or purchase that is readily available. 15 18 Item 3. LEGAL PROCEEDINGS We have litigation arising from the normal course of business. In our opinion, this litigation will not materially affect our consolidated financial position or our results of operations. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter of fiscal 2000. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Since April 19, 1984, our common stock has been listed on the New York Stock Exchange under the symbol "HD." The table below sets forth the low and high sales prices of our common stock on the New York Stock Exchange Composite Tape as reported in The Wall Street Journal and the quarterly cash dividends declared per share of common stock during the periods indicated.
PRICE RANGE* CASH -------------------------- DIVIDENDS LOW HIGH DECLARED* ------ ----- --------- FISCAL YEAR 1999 First Quarter ended May, 2, 1999 $35.88 $45.29 $.020 Second Quarter ended August 1, 1999 36.75 46.63 .027 Third Quarter ended October 31, 1999 35.75 52.33 .027 Fourth Quarter ended January 30, 2000 49.92 69.75 .040 FISCAL YEAR 2000 First Quarter ended April 30, 2000 $51.00 $70.00 $.040 Second Quarter ended July 30, 2000 44.13 58.75 .040 Third Quarter ended October 29, 2000 34.69 60.00 .040 Fourth quarter ended January 28, 2001 35.44 52.50 .040
- --------- *On December 30, 1999, there was a three-for-two stock split on all shares of stock owned by stockholders as of December 2, 1999. The stock prices and dividends in the table set forth above have been adjusted to reflect this stock split. The Company paid its first cash dividend on June 22, 1987, and has paid dividends during each subsequent quarter. Future dividend payments will depend on the Company's earnings, capital requirements, financial condition and other factors considered relevant by the Board of Directors. The number of record holders of The Home Depot's Common Stock as of April 2, 2001 was 212,010 (excluding individual participants in nominee security position listings). 16 19 RECENT SALES OF UNREGISTERED SECURITIES On April 12, 2001, the Company issued $500 million aggregate principal amount of 5 3/8% Senior Notes due 2006 (the "Notes") in an unregistered private placement to the initial purchasers, Credit Suisse First Boston Corporation and Invemed Associates LLC. The aggregate offering price for the Notes was $499,215,000, or 99.843% of par value, and the initial purchasers received an aggregate discount of $3,000,000, or .6%. The initial purchasers subsequently placed the Notes with certain qualified institutional buyers in reliance upon Rule 144A promulgated under the Securities Act of 1933, as amended, and with certain persons in offshore transactions in reliance on Regulation S promulgated under the Securities Act. The Company intends to file a registration statement on Form S-4 under Securities Act pursuant to which it will offer to exchange registered notes for the Notes. The terms of the registered notes will be substantially the same as the terms of the Notes. Item 6. SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data of The Home Depot, Inc. for and as of the end of each of the periods indicated in the five-year period ended January 28, 2001 have been derived from the audited consolidated financial statements of The Home Depot, Inc., which consolidated financial statements have been audited by KPMG LLP. The selected consolidated financial data should be read in conjunction with the consolidated financial statements of The Home Depot, Inc., including the notes to those consolidated financial statements, and the audit reports of KPMG LLP, which are incorporated by reference elsewhere herein.
Fiscal Year(1) ------------------------------------------------------------------------------ 2000 1999 1998 1997 1996 ------- ------- ------- ------- ------- (amounts in millions, except per share data) Net Sales ........................ $45,738 $38,434 $30,219 $24,156 $19,535 Net Earnings ..................... 2,581 2,320 1,614 1,160(2) 938 Diluted Earnings per Share(3) .... 1.10 1.00 0.71 0.52(2) 0.43 Total Assets ..................... 21,385 17,081 13,465 11,229 9,342 Long-Term Debt ................... 1,545 750 1,566 1,303 1,247 Cash Dividends per Share(3) ...... 0.16 0.11 0.08 0.06 0.05
(1) Fiscal 2000, 1999, 1998, 1997 and 1996 refer to the fiscal years ended January 28, 2001; January 30, 2000; January 31, 1999; February 1, 1998; and February 2, 1997, respectively. Fiscal year 1996 consisted of 53 weeks; all other fiscal years noted consisted of 52 weeks. (2) Includes the effect of a $104 million pre-tax non-recurring charge. (3) All per share data have been adjusted for a three-for-two stock split on December 30, 1999, a two-for-one stock split on July 2, 1998 and a three-for-one stock split on July 3, 1997. 17 20 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The data below reflect sales data, the percentage relationship between sales and major categories in the Consolidated Statements of Earnings and the percentage change in the dollar amounts of each of the items.
PERCENTAGE SELECTED CONSOLIDATED INCREASE (DECREASE) STATEMENTS OF EARNINGS DATA IN DOLLAR AMOUNTS - --------------------------- FISCAL YEAR(1) ------------------- ---------------------------------------- 2000 1999 2000 1999 1998 vs. 1999 vs. 1998 -------- -------- -------- -------- -------- NET SALES ........................................ 100.0% 100.0% 100.0% 19.0% 27.2% GROSS PROFIT ..................................... 29.9 29.7 28.5 19.9 32.6 OPERATING EXPENSES: Selling and Store Operating .................. 18.6 17.8 17.7 24.8 27.9 Pre-Opening .................................. 0.3 0.3 0.3 25.7 28.4 General and Administrative ................... 1.8 1.7 1.7 24.4 30.3 ----- ----- ----- ----- ----- Total Operating Expenses ................. 20.7 19.8 19.7 24.8 28.1 ----- ----- ----- ----- ----- OPERATING INCOME ......................... 9.2 9.9 8.8 10.1 42.6 INTEREST INCOME (EXPENSE): Interest and Investment Income ............... 0.1 0.1 0.1 27.0 23.3 Interest Expense ............................. (0.1) (0.1) (0.1) (48.8) (10.9) ----- ----- ----- ----- ----- Interest, net ............................ -- -- -- 750.0 (75.0) ----- ----- ----- ----- ----- Earnings Before Income Taxes ............. 9.2 9.9 8.8 10.9 43.3 Income Taxes ..................................... 3.6 3.9 3.5 10.2 42.7 ----- ----- ----- ----- ----- NET EARNINGS ............................. 5.6% 6.0% 5.3% 11.3% 43.7% ===== ===== ===== ===== ===== SELECTED CONSOLIDATED SALES DATA(2) Number of Transactions (000s) .................... 936,519 797,229 665,125 17.5% 19.9% Average Sale per Transaction ..................... $ 48.65 $ 47.87 $ 45.05 1.6 6.3 Weighted Average Weekly Sales per Operating Store .............................. $864,000 $876,000 $844,000 (1.4) 3.8 Weighted Average Sales per Square Foot ........... $ 414.68 $ 422.53 $ 409.79 (1.9) 3.1
(1) Fiscal years 2000, 1999 and 1998 refer to the fiscal years ended January 28, 2001; January 30, 2000; and January 31, 1999, respectively. (2) Excludes wholly owned subsidiaries: Apex Supply Company, Georgia Lighting, Maintenance Warehouse, and National Blinds and Wallpaper. RESULTS OF OPERATIONS For an understanding of the significant factors that influenced the Company's performance during the past three fiscal years, the following discussion should be read in conjunction with the consolidated financial statements and the notes to consolidated financial statements presented in this annual report. FISCAL YEAR ENDED JANUARY 28, 2001 COMPARED TO JANUARY 30, 2000 Net sales for fiscal 2000 increased 19.0% to $45.7 billion from $38.4 billion in fiscal 1999. This increase was attributable to, among other things, full year sales from the 169 new stores opened during fiscal 1999, a 4% comparable store-for-store sales increase and 204 new store openings. Gross profit as a percent of sales was 29.9% for fiscal 2000 compared to 29.7% for fiscal 1999. The rate increase was primarily attributable to a lower cost of merchandise resulting from product line reviews, benefits from global sourcing programs and an increase in the number of tool rental centers from 150 at the end of fiscal 1999 to 342 at the end of fiscal 2000. 18 21 Operating expenses as a percent of sales were 20.7% for fiscal 2000 compared to 19.8% for fiscal 1999. Selling and store operating expenses as a percent of sales increased to 18.6% in fiscal 2000 from 17.8% in fiscal 1999. The increase was primarily attributable to higher store selling payroll expenses resulting from market wage pressures and an increase in employee longevity. In addition, medical costs increased due to higher family enrollment in the Company's medical plans, rising health care costs and higher prescription drug costs. Finally, store occupancy costs, such as property taxes, property rent, depreciation and utilities, increased due to new store growth and energy rate increases. Pre-opening expenses as a percent of sales were 0.3% for both fiscal 2000 and 1999. The Company opened 204 new stores and relocated 8 stores in fiscal 2000, compared to opening 169 new stores and relocating 6 stores in fiscal 1999. Pre-opening expenses averaged $671,000 per store in fiscal 2000 compared to $643,000 per store in fiscal 1999. The higher average expense was primarily due to the opening of more EXPO Design Center stores and expansion of Home Depot stores into certain new markets including international locations, which involved longer pre-opening periods and higher training, travel and relocation costs. General and administrative expenses as a percent of sales were 1.8% for fiscal 2000 compared to 1.7% for fiscal 1999. The increase was primarily due to investments in Internet development and international operations, as well as a full year of payroll and other costs associated with operating four new divisional offices, which opened during the fourth quarter of fiscal 1999. Interest and investment income as a percent of sales was 0.1% for both fiscal 2000 and 1999. Interest expense as a percent of sales was 0.1% for both comparable periods. The Company's combined federal and state effective income tax rate decreased to 38.8% for fiscal 2000 from 39.0% for fiscal 1999. The decrease was attributable to higher tax credits in fiscal 2000 compared to fiscal 1999. Net earnings as a percent of sales were 5.6% for fiscal 2000 compared to 6.0% for fiscal 1999, reflecting higher selling and store operating expenses as a percent of sales partially offset by a higher gross profit rate as described above. Diluted earnings per share were $1.10 for fiscal 2000 compared to $1.00 for fiscal 1999. FISCAL YEAR ENDED JANUARY 30, 2000 COMPARED TO JANUARY 31, 1999 Net sales for fiscal 1999 increased 27.2% to $38.4 billion from $30.2 billion in fiscal 1998. This increase was attributable to, among other things, full year sales from the 138 new stores opened during fiscal 1998, a 10% comparable store-for-store sales increase, and 169 new store openings and 6 store relocations during fiscal 1999. Gross profit as a percent of sales was 29.7% for fiscal 1999 compared to 28.5% for fiscal 1998. The rate increase was primarily attributable to a lower cost of merchandise resulting from product line reviews and increased sales of imported products, and other merchandising initiatives begun in prior years and continued during fiscal 1999, as well as to sales mix shifts to higher gross margin product categories and assortments. In addition, inventory and refund 19 22 systems improvements and more effective training resulted in better inventory shrink results and lower product markdowns. Operating expenses as a percent of sales were 19.8% for fiscal 1999 compared to 19.7% for fiscal 1998. Selling and store operating expenses as a percent of sales increased to 17.8% in fiscal 1999 from 17.7% in fiscal 1998. The increase was primarily attributable to higher store selling payroll expenses resulting from market wage pressures and an increase in employee longevity, as well as by the Company's continued investment in new customer service initiatives. In addition, medical costs increased due to higher family enrollment in the Company's medical plans, increased claims and higher prescription drug costs. The Company's strong financial performance during fiscal 1999 also resulted in higher bonus expenses as a percent of sales. Credit card discounts increased as a result of higher penetrations of credit card sales and increases in non-private label discount rates. Partially offsetting these increases were lower net advertising expenses resulting from higher cooperative advertising participation by vendors and economies realized from the increased use of national advertising. Pre-opening expenses as a percent of sales were 0.3% for both fiscal 1999 and 1998. The Company opened 169 new stores and relocated 6 stores in fiscal 1999, compared to 138 new stores and 4 store relocations in fiscal 1998. Pre-opening expenses averaged $643,000 per store in fiscal 1999 compared to $618,000 per store in fiscal 1998. The higher average expense was primarily due to the opening of more EXPO Design Center stores and expansion of Home Depot stores into certain new markets, which involved longer pre-opening periods and higher training, travel and relocation costs. General and administrative expenses as a percent of sales were 1.7% for both fiscal 1999 and 1998. Incremental expenses related to long-term growth and business planning initiatives, including Internet development, international operations and the opening of four new divisional offices during the fourth quarter of fiscal 1999, were offset by efficiencies realized from increased sales. Interest and investment income as a percent of sales was 0.1% for both fiscal 1999 and 1998. Interest expense as a percent of sales was 0.1% for both comparable periods. The Company's combined federal and state effective income tax rate decreased to 39.0% for fiscal 1999 from 39.2% for fiscal 1998. The decrease was attributable to higher tax credits in fiscal 1999 compared to fiscal 1998. Net earnings as a percent of sales were 6.0% for fiscal 1999 compared to 5.3% for fiscal 1998, reflecting a higher gross profit rate partially offset by higher operating expenses as a percent of sales as described above. Diluted earnings per share were $1.00 for fiscal 1999 compared to $0.71 for fiscal 1998. LIQUIDITY AND CAPITAL RESOURCES Cash flow generated from store operations provides the Company with a significant source of liquidity. Additionally, a portion of the Company's inventory is financed under vendor credit terms. 20 23 The Company currently plans to open approximately 200 new stores and relocate 9 existing stores during fiscal 2001. It is anticipated that approximately 92% of these locations will be owned, and the remainder will be leased. The Company has two operating lease agreements totaling $882 million for the purpose of financing construction costs of certain new stores. Under the operating lease agreements, the lessor purchases the properties, pays for the construction costs and subsequently leases the facilities to the Company. The leases provide for substantial residual value guarantees and include purchase options at original cost on each property. The Company financed a portion of its new stores opened from fiscal 1997 through fiscal 2000, as well as office buildings in fiscal 1999 and 2000, under the operating lease agreements. The cost of new stores to be constructed and owned by the Company varies widely, principally due to land costs, and is currently estimated to average approximately $14.1 million per location. The cost to remodel and/or fixture stores to be leased is expected to average approximately $4.9 million per store. In addition, each new store will require approximately $3.5 million to finance inventories, net of vendor financing. During fiscal 1999, the Company issued $500 million of 6 1/2% Senior Notes ("Senior Notes"). The Senior Notes are due on September 15, 2004 and pay interest semi-annually. The Senior Notes may be redeemed by the Company at any time, in whole or in part, at a defined redemption price plus accrued interest up to the redemption date. The net proceeds from the offering were used to finance a portion of the Company's capital expenditure program, including store expansions and renovations, for working capital needs and for general corporate purposes. The Company has a commercial paper program that allows borrowings up to a maximum of $1 billion. As of January 28, 2001, there were $754 million of borrowings outstanding under the program. In connection with the program, the Company has a back-up credit facility with a consortium of banks for up to $800 million. The credit facility, which expires in September 2004, contains various restrictive covenants, none of which is expected to impact the Company's liquidity or capital resources. As of January 28, 2001, the Company had $167 million in cash and cash equivalents. Management believes that its current cash position, internally generated funds, funds available from its $1 billion commercial paper program and the ability to obtain alternate sources of financing should enable the Company to complete its capital expenditure programs, including store openings and renovations, through the next several fiscal years. IMPACT OF INFLATION AND CHANGING PRICES Although the Company cannot accurately determine the precise effect of inflation on its operations, it does not believe inflation has had a material effect on sales or results of operations. 21 24 RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 requires all derivatives to be carried on the balance sheet at fair value. Changes in the fair value of derivatives must be recognized in the Company's statements of earnings when they occur; however, there is an exception for derivatives that qualify as hedges as defined by SFAS 133. If a derivative qualifies as a hedge, a company can elect to use "hedge accounting" to eliminate or reduce the income statement volatility that would arise from reporting changes in a derivative's fair value. The Company will adopt SFAS 133 in the quarter ending April 29, 2001 and will record its derivatives at fair value. Based on the Company's derivative positions at January 28, 2001, the adoption of SFAS 133 will not have a material impact on the Company's financial results. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. As of January 28, 2001, the Company was in compliance with SAB 101. FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE Certain statements we make in this report, and other written or oral statements made by or on behalf of the Company, may constitute "forward-looking statements" within the meaning of the federal securities laws. Words or phrases such as "should result," "are expected to," "we anticipate," "we estimate," "we project," "we believe," or similar expressions are intended to identify forward-looking statements. Examples of such statements in this report include descriptions of our plans with respect to new store openings and relocations, our plans to enter new markets and expectations relating to our continuing growth. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company's historical experience and its present expectations or projections. Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. Such statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. The following are some of the factors that could cause the Company's actual results to differ materially from the expected results described in the Company's forward-looking statements: - - Adverse or unanticipated weather conditions, which may affect the Company's overall level of sales and sales of particular lines of products, such as building materials, lumber and lawn and garden supplies. - - Instability of costs and availability of sourcing channels, which may affect the prices that the Company pays for certain commodity products, such as lumber and plywood, as well as the Company's ability to improve its mix of merchandise. Our cost of sales is affected by our ability to maintain favorable arrangements and relationships with our suppliers. Our sources of supply may be affected by trade restrictions, tariffs, currency exchange rates, transport costs and capacity, and other factors affecting domestic and international markets. 22 25 - - Our ability to attract, train and retain highly qualified associates to staff both existing and new stores. - - Conditions affecting the availability, acquisition, development and ownership of real estate, including local zoning and land use issues, environmental regulations and general conditions in the commercial real estate market. - - General economic conditions, which affect consumer confidence and home improvement and home-building spending, including interest rates, the overall level of economic activity, the availability of consumer credit and mortgage financing and unemployment rates. - - The impact of competition, including competition for customers, locations and products and in other important aspects of our business. Our primary competitors include electrical, plumbing and building materials supply houses, lumber yards, home improvement stores and other local, regional or national hardware stores, as well as discount department stores and any other channel of distribution that offers products that we sell. Our business is highly competitive, and we may face new types of competitors as we enter new markets or lines of business. - - Changes in laws and regulations, including changes in accounting standards, tax statutes or regulations and environmental and land use regulations, and uncertainties of litigation. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We use derivative financial instruments at various times to manage the risk associated with foreign currency and interest rate fluctuations. These contracts are insignificant to the Company's operations and financial position. We believe that our exposure to market risk associated with other financial instruments (such as investments and borrowings), interest rate risk and foreign currency rate risk is not material. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA We refer you to the "Consolidated Statements of Earnings," "Consolidated Balance Sheets," "Consolidated Statements of Stockholders' Equity and Comprehensive Income," "Consolidated Statements of Cash Flows," "Notes to Consolidated Financial Statements" and "Independent Auditors' Report" contained in our Annual Report to Stockholders for the fiscal year ended January 28, 2001. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 23 26 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT We refer you to our Proxy Statement for the 2001 Annual Meeting of Stockholders under the headings "Election of Directors and Director Biographies," "Board of Directors Information" and "General - Compliance with Section 16(a) Beneficial Ownership Reporting Requirements." Biographical information on our executive officers is contained in Item I of this Annual Report on Form 10-K. Item 11. EXECUTIVE COMPENSATION We refer you to the information in our Proxy Statement for the 2001 Annual Meeting of Stockholders under the headings "Executive Compensation," "Board of Directors Information" and "General - Compensation Committee Interlocks and Insider Participation." Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT We refer you to the information in our Proxy Statement for the 2001 Annual Meeting of Stockholders under the heading "Stock Ownership." Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS We refer you to the information in our Proxy Statement for the 2001 Annual Meeting of Stockholders under the heading "General - Insider Transactions." PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements The following financial statements are incorporated by reference from pages 20 through 31 of our Annual Report to Stockholders for the fiscal year ended January 28, 2001, as provided in Item 8 hereof: - Consolidated Statements of Earnings for the fiscal years ended January 28, 2001; January 30, 2000; and January 31, 1999. - Consolidated Balance Sheets as of January 28, 2001 and January 30, 2000. - Consolidated Statements of Stockholders' Equity and Comprehensive Income for the fiscal years ended January 28, 2001; January 30, 2000; and January 31, 1999. - Consolidated Statements of Cash Flows for the fiscal years ended January 28, 2001; 24 27 January 30, 2000; and January 31, 1999. - Notes to Consolidated Financial Statements. - Independent Auditors' Report. 2. Financial Statement Schedules All schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. (b) Reports on Form 8-K There were no Current Reports on Form 8-K filed during the fourth quarter of fiscal 2000. (c) Exhibits Exhibits marked with an asterisk (*) are incorporated by reference to exhibits or appendices previously filed with the SEC, as indicated by the references in brackets. The Registrant agrees to furnish a copy of all agreements relating to long-term debt upon request of the Commission. *3.l Restated Certificate of Incorporation of The Home Depot, Inc., as amended. [FORM 10-Q FOR THE FISCAL QUARTER ENDED JULY 30, 2000, EXHIBIT 3.1] *3.2 By-laws, as amended and restated. [FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 30, 2000, EXHIBIT 3.2] *10.1 Credit Agreement dated September 17, 1999 (the "Credit Agreement") by and among The Home Depot, Inc., Bank of America, N.A., as Administrative Agent, Wachovia Bank, N.A., as Syndication Agent, First Union National Bank and The Bank of New York, as Co-Documentation Agents, and banks party thereto. [FORM 10-Q FOR THE FISCAL QUARTER ENDED OCTOBER 31, 1999, EXHIBIT 10.1] *10.2 Assignment and Acceptance of the Credit Agreement dated February 23, 2000 by and among The Home Depot, Inc., the banks party thereto, Bank of America, N.A., as Administrative Agent, Wachovia Bank, N.A., as Syndication Agent, and First Union National Bank and Bank of New York, as Co-Documentation Agents. [FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 30, 2000, EXHIBIT 10.2] *10.3 Assignment and Acceptance of the Credit Agreement dated March 31, 2000 by and among The Home Depot, Inc., the banks party thereto, Bank of America, N.A., as Administrative Agent, Wachovia Bank, N.A., as Syndication Agent, and First Union National Bank and The Bank of New York, as Co-Documentation Agents. [FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 30, 2000, EXHIBIT 10.3]
25 28 *10.4 +Corporate Office Management Bonus Plan of the Registrant dated March 1, 1991. [FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1998, EXHIBIT 10.2] 10.5 +Employee Stock Purchase Plan, as amended. *10.6 +Senior Officers' Bonus Pool Plan, as amended. [APPENDIX A TO REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS HELD MAY 26, 1999] *10.7 +Executive Officers' Bonus Plan. [APPENDIX B TO REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS HELD MAY 27, 1998] *10.8 +The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan. [FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1998, EXHIBIT 10.5] *10.9 +Executive Medical Reimbursement Plan, effective January 1, 1992. [FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 1999, EXHIBIT 10.7] 10.10 +The Home Depot ESOP Restoration Plan. *10.11 Participation Agreement dated as of October 22, 1998 among The Home Depot, Inc. as Guarantor; Home Depot U.S.A., Inc. as Lessee; HD Real Estate Funding Corp. II as Facility Lender; Credit Suisse Leasing 92A L.P. as Lessor; The Bank of New York as Indenture Trustee; and Credit Suisse First Boston Corporation and Invemed Associates, Inc. as Initial Purchasers. [FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999, EXHIBIT 10-10.] *10.12 Participation Agreement dated as of June 25, 1996 among The Home Depot, Inc. as Guarantor; Home Depot U.S.A., Inc. as Lessee and Construction Agent; HD Real Estate Funding Corp. as Facility Lender; the lenders named on the Schedule thereto as Lenders; Credit Suisse First Boston Corporation as Agent Bank and Lender; and Credit Suisse Leasing 92A L.P. as Lessor. [FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999, EXHIBIT 10.11] *10.13 First Amendment and Supplement to the Participation Agreement dated as of May 8, 1997 among The Home Depot, Inc. as Guarantor; Home Depot U.S.A., Inc. as Lessee and Construction Agent; HD Real Estate Funding Corp. as Facility Lender; the lenders named on the Schedule thereto as Lenders; Credit Suisse First Boston Corporation as Agent Bank and Lender; and Credit Suisse Leasing 92A L.P. as Lessor. [FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999, EXHIBIT 10-12.] *10.14 Master Modification Agreement dated as of April 20, 1998 among The Home Depot, Inc. as Guarantor; Home Depot U.S.A., Inc., as Lessee and Construction Agent; HD Real Estate Funding Corp., as Facility Lender; Credit Suisse Leasing 92A L.P. as Lessor; the lenders named on the Schedule thereto as Lenders; and Credit Suisse First Boston Corporation as Agent Bank. [FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999, EXHIBIT 10.13]
26 29 *10.15 Indenture, dated as of September 27, 1999 among The Home Depot, Inc., Credit Suisse First Boston Corporation and Invemed Associates. [FORM S-4 (FILE NO. 333-89935) FILED OCTOBER 29, 1999, EXHIBIT 4.1] *10.16 +Supplemental Executive Choice Program, effective January 1, 1999. [FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999, EXHIBIT 10.14] 10.17 +Employment Agreement between Robert L. Nardelli and The Home Depot, Inc., dated January 19, 2001. 10.18 +Promissory Note between Robert L. Nardelli and The Home Depot, Inc. dated as of December 4, 2000. 10.19 Commercial Paper Dealer Agreement between Credit Suisse First Boston Corporation, as Dealer, and The Home Depot, Inc., dated as of January 24, 2001. 10.20 +Non-Qualified Stock Option and Deferred Stock Unit Plan and Agreement dated as of December 4, 2001. 10.21 +Agreement between Bernard Marcus and The Home Depot, Inc. dated as of February 22, 2001. 10.22 +Promissory Note between Mark Baker and Home Depot U.S.A., Inc. dated December 29, 2000. *11 Computation of Earnings Per Common and Common Equivalent Share. [ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED JANUARY 28, 2001, FILED HEREWITH AS EXHIBIT 13, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, NOTE 7] 13 The Registrant's Annual Report to Stockholders for the fiscal year ended January 28, 2001. Only those portions of said report which are specifically designated in this Form 10-K as being incorporated by reference are being electronically filed pursuant to the Securities Exchange Act of 1934. 21 List of Subsidiaries of the Registrant. 23 Consent of Independent Auditors.
27 30 24 Special Powers of Attorney authorizing execution of this Form 10-K Annual Report have been granted and are filed herewith as follows: Power of Attorney from Frank Borman. Power of Attorney from Gregory D. Brenneman. Power of Attorney from Richard H. Brown. Power of Attorney from John L. Clendenin. Power of Attorney from Berry R. Cox. Power of Attorney from William S. Davila. Power of Attorney from Milledge A. Hart, III. Power of Attorney from Bonnie G. Hill. Power of Attorney from Kenneth G. Langone. Power of Attorney from M. Faye Wilson.
- --------- +Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14(c) of this report. 28 31 SIGNATURES 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. THE HOME DEPOT, INC. By: /s/ Robert L. Nardelli ---------------------------------------- (Robert L. Nardelli, President & CEO) Date: April 20, 2001 -------------------------------------- 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, The Home Depot, Inc., and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Bernard Marcus Co-Chairman of the Board April 20, 2001 - ------------------------------- (Bernard Marcus) /s/ Arthur M. Blank Co-Chairman of the Board April 20, 2001 - ------------------------------- (Arthur M. Blank) /s/ Robert L. Nardelli President & CEO April 20, 2001 - ------------------------------- (Principal Executive Officer) (Robert L. Nardelli) /s/ Dennis J. Carey Executive Vice President and April 20, 2001 - ------------------------------- Chief Financial Officer (Dennis J. Carey) (Principal Financial Officer)
29 32
Signature Title Date - --------- ----- ---- /s/ Carol B. Tome Senior Vice President-Finance April 20, 2001 - ------------------ and Accounting (Principal (Carol B. Tome) Accounting Officer) * Director - ------------------------------- (Frank Borman) * Director - ------------------------------- (Gregory D. Brenneman) * Director - ------------------------------- (Richard H. Brown) * Director - ------------------------------- (John L. Clendenin) * Director - ------------------------------- (Berry R. Cox) * Director - ------------------------------- (William Davila) * Director - ------------------------------- (Milledge A. Hart, III) * Director - ------------------------------- (Bonnie G. Hill) * Director - ------------------------------- (Kenneth G. Langone) * Director - ------------------------------- (M. Faye Wilson)
30 33 * The undersigned, by signing his name hereto, does hereby sign this report on behalf of each of the above-indicated directors of the Registrant pursuant to powers of attorney, executed on behalf of each such director. By: /s/ Robert L. Nardelli ---------------------------------------- (Robert L. Nardelli, Attorney-in-fact) 31 34
EXHIBIT INDEX - ------------- 10.5 +Employee Stock Purchase Plan, as amended. 10.10 +The Home Depot ESOP Restoration Plan. 10.17 +Employment Agreement between Robert L. Nardelli and The Home Depot, Inc., dated January 19, 2001. 10.18 +Promissory Note between Robert L. Nardelli and The Home Depot, Inc. dated as of December 4, 2000. 10.19 Commercial Paper Dealer Agreement between Credit Suisse First Boston Corporation, as Dealer, and The Home Depot, Inc., dated as of January 24, 2001. 10.20 +Non-Qualified Stock Option and Deferred Stock Unit Plan and Agreement dated as of December 4, 2001. 10.21 +Agreement between Bernard Marcus and The Home Depot, Inc. dated as of February 22, 2001. 10.22 +Promissory Note between Mark Baker and Home Depot U.S.A., Inc. dated December 29, 2000. 13 The Registrant's Annual Report to Stockholders for the fiscal year ended January 28, 2001. Only those portions of said report which are specifically designated in this Form 10-K as being incorporated by reference are being electronically filed pursuant to the Securities Exchange Act of 1934. 21 List of Subsidiaries of the Registrant. 23 Consent of Independent Auditors. 24 Special Powers of Attorney authorizing execution of this Form 10-K Annual Report have been granted and are filed herewith as follows: Power of Attorney from Frank Borman. Power of Attorney from Gregory D. Brenneman. Power of Attorney from Richard H. Brown. Power of Attorney from John L. Clendenin. Power of Attorney from Berry R. Cox. Power of Attorney from William S. Davila. Power of Attorney from Milledge A. Hart, III. Power of Attorney from Bonnie G. Hill. Power of Attorney from Kenneth G. Langone. Power of Attorney from M. Faye Wilson.
- --------- +Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14(c) of this report. EX-10.5 2 g68482ex10-5.txt RESTATED AND AMENDED EMPLOYEE STOCK PURCHASE PLAN 1 EXHIBIT 10.5 THE HOME DEPOT, INC. RESTATED AND AMENDED EMPLOYEE STOCK PURCHASE PLAN 1. Purpose. The purpose of The Home Depot, Inc. Employee Stock Purchase Plan (the "Plan") is to encourage and enable eligible employees of The Home Depot, Inc. (the "Company") to acquire proprietary interests in the Company through the ownership of Common Stock of the Company. The Company believes that employees who participate in the Plan will have a closer identification with the Company by virtue of their ability as stockholders to participate in the Company's growth and earnings. It is the intention of the Company to have the Plan qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the provisions of the Plan shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. 2. Definitions. The following words or terms have the following meanings: (a) "Plan" shall mean this The Home Depot, Inc. Employee Stock Purchase Plan. (b) "Company" shall mean The Home Depot, Inc. (c) "Board of Directors" shall mean Board of Directors of the Company or the Executive Committee of such Board. (d) "Shares", "Stock" or "Common Stock" shall mean shares of the $.05 par value Common Stock of the Company. (e) "Committee" shall mean the committee of the Board of Directors of the Company appointed to administer the Plan. (f) "Subsidiary" shall mean any corporation if, at the time of the granting of an option to purchase Common Stock under the Plan, the Company owns or controls directly or indirectly more than 50 percent of the total voting power represented by all classes of stock issued by such corporation. (g) "Eligible Employee" shall mean a person regularly employed by the Company or a Subsidiary on the effective date of any offering of stock pursuant to the Plan; provided, however, that no person shall be considered an Eligible Employee unless he or she is customarily employed by the Company or a Subsidiary for more than twenty hours per week and more than five months in a 2 calendar year; and provided further, that the Board of Directors may exclude the employees of any specified Subsidiaries from any offering under the Plan. (h) "Annual Pay" shall mean an amount equal to the sum of (i) the annual basic rate of pay of an Eligible Employee as determined from the payroll records of the Company or a Subsidiary on the effective date of an offer of Stock made pursuant to the Plan, and (ii) the amount paid to the Eligible Employee by the Company or a Subsidiary under any incentive compensation or bonus plan during the twelve-month period immediately preceding the effective date of an offer of Stock made pursuant to the Plan. (i) "Market Price" shall mean the closing price of the Company's Common Stock on the New York Stock Exchange. (j) "Options" shall mean the right or rights granted to Eligible Employees to purchase the Company's Common Stock under an Offering made under the Plan and pursuant to such Eligible Employees' elections to purchase. (k) "Purchase Period" shall mean the number of calendar months during which installment payments for stock purchased under the Plan shall be made. (l) "Subscription Period" shall mean that period of time prescribed in any offer of Stock under the Plan beginning on the first day employees may elect to purchase Shares and ending on the last day such elections to purchase are authorized to be received and accepted. 3. Shares Reserved for Plan. The Shares of the Company's Common Stock to be sold to Eligible Employees under the Plan may, at the election of the Company, be either treasury shares or shares originally issued for such purpose. The maximum number of Shares which shall be reserved and made available for sale under the Plan shall be 129,618,750. The Shares reserved may be issued and sold pursuant to one or more offerings under the Plan. With respect to each offering, the Board of Directors, or the Committee will specify the number of Shares to be made available, the length of the Subscription Period, the length of the Purchase Period and such other terms and conditions not inconsistent with the Plan as may be necessary or appropriate. In no event shall the Subscription Period and the Purchase Period together exceed 27 months for any offering. In the event of a subdivision or combination of the Company's Shares, the maximum number of Shares which may thereafter be issued and sold under the 3 Plan and the number of Shares under elections to purchase at the time of such subdivision or combination will be proportionately increased or decreased, the terms relating to the price at which Shares under the elections to purchase will be sold will be appropriately adjusted, and such other action will be taken as in the opinion of the Board of Directors deems appropriate under the circumstances. In case of a reclassification or other change in the Company's Shares, the Board of Directors also will make appropriate adjustments. 4. Administration of the Plan. The Plan shall be administered by a Committee consisting of not less than two directors of the Company who shall be appointed by the Board of Directors. The Committee shall be vested with full authority to make, administer and interpret such equitable rules and regulations regarding the Plan or to make amendments to the Plan itself as it may deem advisable; provided, however, that no such amendment shall increase the maximum number of shares available for sale under the Plan, otherwise than as required to reflect a subdivision or a combination as provided in Article 3 hereof, nor shall any such amendment act to expand the persons eligible to participate in the Plan beyond the employees of the Company and Subsidiaries. Any determination, decision, or action of the Committee in connection with the construction, interpretation, administration, or application of the Plan shall be final, conclusive and binding upon all Eligible Employees and any and all persons claiming under or through an Eligible Employee. The Committee may act by a majority vote at a regular or special meeting of the Committee or by decision reduced to writing and signed by a majority of the members of the Committee without holding a formal meeting, vacancies in the membership of the Committee arising from death, resignation or other inability to serve shall be filled by the Board of Directors. 5. Participation in the Plan. Options to purchase the Company's Common Stock under the Plan shall be granted only to Eligible Employees. Options to purchase Shares shall be granted to all Eligible Employees of the Company or Subsidiaries whose Eligible Employees are granted such rights; provided, however, that the Board of Directors may determine that any offering of Common Stock under the Plan will not be extended to highly compensated employees as defined in Section 414(q) of the Code, and provided further that in no event may an employee be granted an option under this Plan if such employee, immediately after the option is granted, owns Stock possessing five percent or more of the total combined voting power or value of all classes of capital stock of the Company or Subsidiaries. For the purposes of determining stock ownership and the limitations to purchase under this section, the rules of Section 424(d) of the Code shall apply and Stock which the employee may purchase under all outstanding options shall be treated as Stock owned by the employee. 4 6. Purchase Price. The purchase price for Shares purchased pursuant to the Plan (except as otherwise provided herein) shall be the lower of (a) 85 percent of the Market Price on the first day of the Purchase Period; or (b) 85 percent of the Market Price on the last day of the Purchase Period; or if no Shares were traded on such day, on the last day prior thereto on which Shares were traded. 7. Method of Payment. Except as provided in Sections 15 and 16, all payments for Shares purchased pursuant to the Plan shall be made in installments through payroll deductions, with no right of prepayment. Each Eligible Employee electing to purchase Shares will authorize the Company to withhold a designated amount from his regular weekly, bi-weekly, semimonthly or monthly pay for each payroll period during the Purchase Period. All such payroll deductions made for an Eligible Employee shall be credited to his account under the Plan. At the end of the Purchase Period, each Eligible Employee shall receive in cash the balance remaining in his account, if any, after the purchase of the number of Shares covered by his option to purchase Shares. 8. Employee's Election To Purchase - Grants of Options. In order to participate in the Plan, an Eligible Employee must sign an election to purchase Shares on a form provided by the Company stating the Eligible Employee's desire to purchase Shares under the Plan and showing the amount which the Eligible Employee elects to have withheld from his pay for such payroll period during the Purchase Period. The election to purchase Shares must be delivered on or before the last day of the Subscription Period to the person or office designated to receive and accept such elections. Subject to the limitations set forth in Paragraph 9, each participating Eligible Employee shall be granted an option to purchase a fixed maximum number of Shares determined by the following procedure: Step 1 - Determine the aggregate amount which will be withheld from the Eligible Employee's pay during the Purchase Period; Step 2 - Determine the figure which represents the lower of (a) 85 percent of the Market Price on the first day of the Purchase Period; or (b) 85 percent of the Market Price on the last day of the Purchase Period; or if no Shares were traded on such day, on the last day prior thereto on which Shares were traded. Step 3 - Divide the figure determined in Step 1 by the figure determined in Step 2. This final figure shall be the fixed maximum number of Shares for which the Eligible Employee may be granted an option to purchase. 5 In the event the total maximum number of Shares resulting from all elections to purchase under any offering of Shares under the Plan exceeds the number of Shares offered, the Company reserves the right to reduce the maximum number of Shares which Eligible Employees may purchase pursuant to their elections to purchase, to allot the Shares available in such manner as it shall determine, but generally prorata to subscriptions received and to grant options to purchase only for such reduced number of Shares. All Shares included in any offering under the Plan in excess of the total number of Shares which all Eligible Employees elect to purchase and all Shares with respect to which elections to purchase are canceled as provided in Paragraph 12 shall continue to be reserved for the Plan and shall be available for inclusion in any subsequent offering under the Plan. 9. Limitations Of Number Of Shares Which May Be Purchased. The following limitations shall apply with respect to the number of Shares which may be purchased by each Eligible Employee who elects to participate in an offering under the Plan; (a) No Eligible Employee may purchase Shares during any one offering pursuant to the Plan for an aggregate purchase price (which shall be computed on an annual basis in the event the Purchase Period is more or less than 12 months) in excess of 20 percent of his Annual Pay; and (b) No Eligible Employee shall be granted an option to purchase Shares under the Plan if such Eligible Employee immediately after such option is granted, owns stock or holds options to purchase stock possessing five percent or more of the total combined voting power or value of the capital stock of the Company or of any Subsidiary; and (c) No Eligible Employee may be granted an option to purchase Shares which permits his right to purchase Stock under the Plan and all other stock option plans of the Company and of any Subsidiary pursuant to Section 423 of the Code to accrue at a rate which exceeds in any one calendar year $25,000 of the fair market value of such Stock (determined on the date the option to purchase is granted). An Eligible Employee may elect to purchase less than the number of Shares which he is entitled to elect to purchase. 10. Stockholder Rights. Only upon the issuance of Shares to an Eligible Employee or his agent (and only in respect to such Shares purchased) shall an Eligible Employee obtain the rights of stockholders, including, without limitation, the right to vote the shares or receive dividends or other distributions thereon. The 6 Shares purchased will be issued as soon as practicable after the last day of the Purchase Period. 11. Rights To Purchase Shares Not Transferable. An Eligible Employee's rights under his election to purchase Shares may not be sold, pledged, assigned or transferred in any manner otherwise than by will or the laws of descent and distribution. If this provision is violated the right of the Eligible Employee to purchase Shares shall terminate and the only right remaining under such Eligible Employee's election to purchase will be to have paid over to the person entitled thereto the amount then credited to the Eligible Employee's account. 12. Cancellation of Election to Purchase. An Eligible Employee who has elected to purchase Shares may cancel his election in its entirety or may partially cancel his election by reducing the amount which he has authorized the Company to withhold from his pay for each payroll period during the Purchase Period. Any such full or partial cancellation shall be effective upon the delivery by the Eligible Employee of written notice of cancellation to the office or person designated to receive elections. Such notice of cancellation must be so delivered before the close of business on the last business day of the Purchase Period. If an Eligible Employee partially cancels his original election by reducing the amount authorized to be withheld from his pay, he shall continue to make installment payments at the reduced rate for the remainder of the Purchase Period. Only one partial cancellation may be made during a Purchase Period. An Eligible Employee's rights upon the full or partial cancellation of his election to purchase Shares shall be limited to the following: (a) He may receive in cash, as soon as practicable after delivery of the notice of cancellation, the amount then credited to his account, except, in the case of a partial cancellation, he must retain in his account the cumulative installment payments made through the date of cancellation until the end of the Purchase Period, or (b) He may have the amount credited to his account at the time the cancellation becomes effective applied to the purchase of the number of shares such amount will then purchase at the end of the Purchase Period. 13. Leave Of Absence Or Layoff. An Eligible Employee purchasing Stock under the Plan who is granted a leave of absence (including a military leave) or is laid off during the Purchase Period may at that time (on a form provided by the Company) elect one of the following: 7 (a) He may suspend payments during the leave of absence, or, in the case of a layoff, he may suspend payments for not more than 90 days, but not in either case beyond the last month of the Purchase Period, or (b) He may cancel his election in accordance with Paragraph 12. If Option (a) is elected, the Eligible Employee at the end of the suspension period must make up the deficiency in his account either by immediate lump sum payment or with installment payments so that, assuming the maximum purchase price per share, payment for the maximum number of Shares covered by his option will be completed in the last month of the Purchase Period. If the Eligible Employee elects to make increased installment payments, he may, nevertheless, at any time make up his remaining deficiency by a lump sum payment. If an Eligible Employee does not return to active service upon the expiration of his leave of absence or within 90 days from the date of his layoff, his election to purchase shall be deemed to have been canceled at the time of the leave of absence or layoff. In no event shall an Eligible Employee be permitted to complete payment for any Shares after 27 months from the date of the commencement of the Subscription Period. 14. Effect of Failure To Make Payments When Due. If in any payroll period, for any reason not set forth in Paragraph 13, an Eligible Employee who has filed an election to purchase Shares under the Plan has no pay or his pay is insufficient (after other authorized deductions) to permit deduction of his installment payment, such payment may be made in cash at the time. If not so made, the Eligible Employee, when his pay is again sufficient to permit the resumption of installment payments, must pay in cash the amount of the deficiency in his account or arrange for uniformly increased installment payments so that, assuming the maximum purchase price per share, payment for the maximum number of Shares covered by his option will be completed in the last month of the Purchase Period. If the Eligible Employee elects to make increased installment payments, he may, nevertheless, at any time make up the remaining deficiency by a lump sum payment. Subject to the above and other provisions of the Plan permitting postponement, the Company may treat the failure by an Eligible Employee to make any payment as a cancellation of his election to purchase shares. Such cancellation will be affected by mailing notice to him at his last known business or home address. Upon such mailing, his only right will be to receive in cash the amount credited to his account. 8 15. Retirement and Disability. If an Eligible Employee who has elected to purchase Shares retires or becomes disabled within 3 months prior to the end of a Purchase Period, he may, by delivering written notice to the office or person designated to receive elections no later than the end of the Purchase Period, elect to: (a) Have the amount credited to his account at the time of his retirement or disability applied to the purchase of the number of Shares such amount will purchase at the end of the Purchase Period; or (b) Make a lump sum payment in the amount of any deficiency for the remaining portion of the Purchase Period; or (c) Cancel his election to purchase Shares in accordance with the provisions of Paragraph 12. If no such notice is given within such period, the election will be deemed canceled as of the date of retirement or disability and the only right of the Eligible Employee will be to receive in cash the amount credited to his account. For purposes of the Plan, an Eligible Employee shall be considered to have retired if he terminates employment with the Company or a Subsidiary after having completed at least 10 years of continuous employment and attained age 55. An Eligible Employee shall be considered disabled if he becomes eligible for permanent and total disability benefits under the Company's long-term disability plan. 16. Death. If an Eligible Employee, including a retired or disabled Eligible Employee described in Section 15, dies and has an election to purchase Shares in effect at the time of his death, the legal representative of the deceased Eligible Employee may, by delivering written notice to the office or person designated to receive elections no later than the end of the Purchase Period, elect to: (a) Have the amount credited to the Participant's account at the time of his death applied to the purchase of the number of Shares such amount will purchase at the end of the Purchase Period; or (b) Make a lump sum payment in the amount of any deficiency for the remaining portion of the Purchase Period; or (c) Cancel the election to purchase Shares in accordance with the provisions of Paragraph 12. If no such notice is given within such period, the election will be deemed canceled as of the date of death, and the only right of such legal representative will be to receive in cash the amount credited to the deceased Eligible Employee's account. 9 17. Termination of Employment Other Than For Retirement, Disability Or Death. If an Eligible Employee's employment with the Company and all Subsidiaries and other affiliates of the Company is terminated for any reason other than retirement or disability within 3 months prior to the end of a Purchase Period or death prior to the end of the Purchase Period, his election to purchase shall thereupon be deemed canceled as of the date on which his employment ended. In such an event, no further payments under such election will be permitted, and the Eligible Employee's only right will be to receive in cash the amount credited to his account. 18. Application of Funds. All funds received by the Company in payment for Shares purchased under the Plan and held by the Company at any time may be used for any valid corporate purpose. 19. Governmental Approvals or Consents. The Plan shall not be effective unless it is approved by the stockholders of the Company within 12 months after the Plan is adopted by the Board of Directors of the Company. The Plan and any offerings and sales to Eligible Employees under it are subject to any governmental approvals or consents that may be or become applicable in connection therewith. The Board of Directors of the Company may make such changes in the Plan and include such terms in any offering under the Plan as may be necessary or desirable, in the opinion of counsel, so that the Plan will comply with the rules and regulations of any governmental authority and so that Eligible Employees participating in the Plan will be eligible for tax benefits under the United States Internal Revenue Code or the laws of any state. EX-10.10 3 g68482ex10-10.txt ESOP RESTORATION PLAN 1 EXHIBIT 10.10 THE HOME DEPOT ESOP RESTORATION PLAN THE HOME DEPOT ESOP RESTORATION PLAN Effective as of the 1st day of January, 1994, The Home Depot, Inc., a corporation duly organized and existing under the laws of the State of Delaware (the "Controlling Company"), hereby establishes The Home Depot ESOP Restoration Plan. BACKGROUND AND PURPOSE A. Background. The Controlling Company sponsors The Home Depot Employee Stock Ownership Plan ("the "ESOP"), an employee stock ownership plan qualified under Sections 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986, as amended (the "Code"). B. General Purpose. The primary purpose of the Plan is to provide additional retirement income to certain key executive employees of the Controlling Company and its affiliates that are participating companies in the Plan, in order to reduce the impact of certain provisions of the Code that limit the maximum benefits that may accrue under the ESOP. In particular, the Controlling Company intends for the Plan to at least partially offset the effects of the maximum compensation limitation under Code Section 401(a)(17), by providing the amount of supplemental retirement income specified in the Plan. C. Type of Plan. The Plan constitutes an unfunded, nonqualified deferred compensation plan that benefits certain designated employees who are within a select group of key management or highly compensated employees. STATEMENT OF AGREEMENT To establish the Plan with the purposes and goals as hereinabove described, the Controlling Company hereby sets forth the terms and provisions as follows: 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS .............................................. 1 1.1 Account .................................................. 1 1.2 Administrative Committee ................................. 1 1.3 Allocation Date .......................................... 1 1.4 Beneficiary .............................................. 1 1.5 Board .................................................... 1 1.6 Code ..................................................... 1 1.7 Company .................................................. 1 1.8 Company Stock ............................................ 1 1.9 Controlled Group ......................................... 1 1.10 Controlling Company ...................................... 1 1.11 Disability ............................................... 2 1.12 Effective Date ........................................... 2 1.13 Eligible Employee ........................................ 2 1.14 Employee ................................................. 2 1.15 ERISA .................................................... 2 1.16 ESOP ..................................................... 2 1.17 Participant .............................................. 2 1.18 Participating Company .................................... 2 1.19 Plan ..................................................... 2 1.20 Plan Year ................................................ 3 1.21 Section 401(a)(17) Limitation ............................ 3 1.22 Stock Unit ............................................... 3 1.23 Surviving Spouse ......................................... 3 1.24 Trust or Trust Agreement ................................. 3 1.25 Trustee .................................................. 3 1.26 Trust Fund ............................................... 3 ARTICLE II ELIGIBILITY AND PARTICIPATION ............................ 4 2.1 Eligibility .............................................. 4 2.2 Participation ............................................ 4 2.3 Cessation of Eligibility and Participation ............... 4 ARTICLE III PARTICIPANTS' ACCOUNTS; BENEFITS AND CREDITING ........... 5 3.1 Participants' Accounts ................................... 5 (a) Establishment of Accounts .................. 5 (b) Nature of Contributions and Accounts ....... 5 3.2 Benefit Amount ........................................... 5 (a) Account Balance ............................ 5 (b) Amount Credited ............................ 5 (c) Crediting of Stock Units ................... 6 (d) Cash Dividends ............................. 6 (e) Adjustments for Stock Dividends and Splits . 6 (f) Value of Account ........................... 6 (g) Value of Company Stock ..................... 7 3.3 Vesting .................................................. 7 3.4 Notice to Participants of Account Balances ............... 7 3.5 Good Faith Valuation Binding ............................. 8 3.6 Errors and Omissions in Accounts ......................... 8
3 ARTICLE IV PAYMENT OF ACCOUNT BALANCES .............................. 9 4.1 Benefit Payments ......................................... 9 (a) General Rule Concerning Benefit Payments ... 9 (b) Timing of Distribution ..................... 9 4.2 Form of Distribution ..................................... 9 4.3 Beneficiary Designation .................................. 10 (a) General .................................... 10 (b) No Designation or Designee Dead or Missing . 10 4.4 Taxes .................................................... 10 ARTICLE V CLAIMS ................................................... 11 5.1 Claims ................................................... 11 (a) Initial Claim .............................. 11 (b) Appeal ..................................... 11 (c) Satisfaction of Claims ..................... 11 ARTICLE VI SOURCE OF FUNDS; TRUST ................................... 12 6.1 Source of Funds .......................................... 12 6.2 Trust .................................................... 12 ARTICLE VII ADMINISTRATIVE COMMITTEE ................................. 13 7.1 Action ................................................... 13 7.2 Rights and Duties ........................................ 13 7.3 Compensation, Indemnity and Liability .................... 14 ARTICLE VIII AMENDMENT AND TERMINATION ............................. 15 8.1 Amendments ............................................... 15 8.2 Termination of Plan ...................................... 15 ARTICLE IX MISCELLANEOUS ............................................ 16 9.1 Taxation ................................................. 16 9.2 No Employment Contract ................................... 16 9.3 Headings ................................................. 16 9.4 Gender and Number ........................................ 16 9.5 Assignment of Benefits ................................... 16 9.6 Legally Incompetent ...................................... 16 9.7 Governing Law ............................................ 17
4 ARTICLE I DEFINITIONS For purposes of the Plan, the following terms, when used with an initial capital letter, shall have the meaning set forth below unless a different meaning plainly is required by the context. 1.1 Account shall mean, with respect to a Participant or his Beneficiary, the total dollar amount, value and/or number of Stock Units evidenced by the last balance posted in accordance with the terms of the Plan to the account record established for such Participant or Beneficiary. 1.2 Administrative Committee shall mean the administrative committee of the ESOP, or such other committee as shall be appointed by the Board to administer the Plan. 1.3 Allocation Date shall mean the last day of each Plan Year. 1.4 Beneficiary shall mean, with respect to a Participant, the person(s) designated or otherwise determined in accordance with Section 4.3 to receive any death benefits that may be payable under the Plan upon the death of the Participant. 1.5 Board shall mean the Board of Directors of the Controlling Company. In the event the Plan provides that the Controlling Company shall act, such action shall be taken by the Board unless the Board has authorized and directed the Administrative Committee or other person or entity to act in its stead. 1.6 Code shall mean the Internal Revenue Code of 1986, as amended. 1.7 Company shall mean, collectively, the Controlling Company and each of the other Participating Companies. 1.8 Company Stock shall mean the $.05 par value per share voting common stock of the Controlling Company. 1.9 Controlled Group shall mean all of the companies that are either (i) members of the same controlled group of corporations (within the meaning of Code Section 414(b)), or (ii) under common control (within the meaning of Code Section 414(c)), with the Controlling Company. 1.10 Controlling Company shall mean The Home Depot, Inc., a Delaware corporation with its principal place of business in Atlanta, Georgia. 1.11 Disability shall mean, with respect to a Participant, his disability as provided under the terms of the ESOP. 1.12 Effective Date shall mean January 1, 1994, the date that the Plan initially shall be effective; provided, for purposes of ERISA, the Plan shall be established on the date it is approved by the Board. 1.13 Eligible Employee shall mean, for a Plan Year, an individual: 5 (a) Who is a member of a select group of highly compensated or key management Employees of the Company; (b) Who participates in and receives allocations under the ESOP for such Plan Year; and (c) Whose Compensation for such Plan Year exceeds the Section 401(a)(17) Limitation. The Administrative Committee shall determine, from time to time and in its sole discretion, which Employees satisfy said criteria, and the Administrative Committee's determination shall be binding. 1.14 Employee shall mean an individual who is considered an employee of the Company for purposes of the ESOP. 1.15 ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.16 ESOP shall mean The Home Depot Employee Stock Ownership Plan, an employee stock ownership plan qualified under Code Sections 401(a) and 4975(e)(7) and sponsored by the Controlling Company, and all amendments thereto. 1.17 Participant shall mean any individual who has been admitted to, and has not been removed from, participation in the Plan pursuant to the provisions of Article II. 1.18 Participating Company shall mean, individually, the Controlling Company and each of its affiliates that is a participating company in the ESOP, unless the Board or Administrative Committee has specifically excluded such a company from participation in the Plan. 1.19 Plan shall mean The Home Depot ESOP Restoration Plan as contained herein and all amendments hereto. The Plan is intended to be an unfunded, nonqualified deferred compensation plan covering certain designated Employees who are within a select group of key management or highly compensated Employees. 1.20 Plan Year shall mean the 12-consecutive-month period ending on December 31 of each year. 1.21 Section 401(a)(17) Limitation shall mean the limitation imposed under Code Section 401(a)(17) that establishes, subject to cost-of-living adjustments, a maximum amount of compensation that can be taken into account for any year under a retirement plan qualified under Code Section 401(a). 1.22 Stock Unit shall mean an accounting entry on a Participating Company's books, that is equal in value at any time to the current fair market value of one share of Company Stock, and that represents an unsecured obligation of the Participating Company to pay that amount to a Participant in accordance with the terms of the Plan. A Stock Unit shall not carry any voting, 6 dividend or other similar rights and shall not constitute an option or any other right to acquire any equity securities of the Company. 1.23 Surviving Spouse shall mean, with respect to a Participant, the person who is treated as married to such Participant under the laws of the state in which the Participant resides. The determination of a Participant's Surviving Spouse shall be made as of the date of such Participant's death. 1.24 Trust or Trust Agreement shall mean the separate agreement or agreements between the Participating Companies and the Trustee governing the creation of the Trust Fund, and all amendments thereto. 1.25 Trustee shall mean the party or parties so designated from time to time pursuant to the terms of the Trust Agreement. 1.26 Trust Fund shall mean the total amount of Company Stock, cash and other property held by the Trustee (or any nominee thereof) at any time under the Trust Agreement. ARTICLE II ELIGIBILITY AND PARTICIPATION 2.1 Eligibility. Each Eligible Employee for a Plan Year shall be eligible to participate in the Plan for such Plan Year. 2.2 Participation. Each Eligible Employee for a Plan Year shall actively participate in the Plan (that is, shall be an active Participant) for such Plan Year only if (i) his employment, with the Company, all other members of the Controlled Group and any other company that the Administrative Committee designates for purposes of the Plan as an affiliate of the Company, does not terminate prior to the March 1 succeeding such Plan Year, and (ii) he completes such forms and provides such data, if any, as may be required by the Administrative Committee as a precondition of participation in the Plan. Such forms and data may include, without limitation, the Eligible Employee's acceptance of the terms and conditions of the Plan and the designation of a Beneficiary to receive any death benefits payable hereunder. 2.3 Cessation of Eligibility and Participation. If during a Plan Year an individual ceases to satisfy any of the criteria that qualified him as an Eligible Employee, or if his employment, with the Company, all members of the Controlled Group and any other company that the Administrative Committee designates for purposes of the Plan as an affiliate of the Company, ceases for any reason prior to the March 1 immediately succeeding such Plan Year, his active participation (that is, his status as an active Participant) in the Plan shall cease commencing with and for 7 such Plan Year; provided, such employee shall remain an inactive Participant in the Plan until the earlier of (i) the date the full value of his Account (if any) is forfeited and/or paid in accordance with the terms of the Plan, or (ii) the date he again becomes an Eligible Employee and qualifies under Section 2.2 to actively participate in the Plan. During the time that an employee is an inactive Participant in the Plan, his Account shall continue to be adjusted for cash dividends and changes in Company Stock as provided in Sections 3.2(d) and (e). ARTICLE III PARTICIPANTS' ACCOUNTS; BENEFITS AND CREDITING 3.1 Participants' Accounts. (a) Establishment of Accounts. The Administrative Committee shall establish and maintain, on behalf of each Participant, an Account. Each Account shall be credited with the amount of Stock Units described in Section 3.2. Each Account of a Participant shall be maintained until the value thereof has been forfeited and/or paid to or on behalf of such Participant or his Beneficiary. (b) Nature of Contributions and Accounts. The Stock Units credited to a Participant's Account shall be represented solely by bookkeeping entries, and no moneys or other assets shall actually be set aside for such Participant. Except as provided in Article VI, all payments to a Participant under the Plan shall be made from the general assets of the Company. The Administrative Committee or the Board shall allocate the total liability to pay benefits under the Plan among the Participating Companies in such manner and amount as the Administrative Committee or the Board (as applicable) in its sole discretion deems appropriate. Any assets which may be acquired by a Participating Company in anticipation of its obligations under the Plan shall be part of the general assets of such Participating Company. A Participating Company's obligation to pay benefits under the Plan constitutes a mere promise of such Participating Company to pay such benefits, and a Participant or Beneficiary shall be and remain no more than an unsecured, general creditor of such Participating Company. 3.2 Benefit Amount. (a) Account Balance. A Participant's accrued benefit under the Plan at any time shall be equal to the value of his Account balance; provided, as described in Section 3.3 and Article IV, only the portion of a Participant's Account balance that is vested shall be payable to him. (b) Amount Credited. For each Plan Year, each active Participant shall have credited to his Account an amount equal to the difference between: (i) the value of the shares of Company Stock that would have been allocated to his account under the ESOP as a 8 result of Company contributions (exclusive of forfeitures) actually made to the ESOP for such Plan Year, if the maximum dollar limit applied to the definition of "compensation" under the ESOP was $1 million rather than the Section 401(a)(17) Limitation; and (ii) the value of the shares of Company Stock actually allocated to his account under the ESOP for such Plan Year as a result of Company contributions actually made to the ESOP for such Plan Year; provided, the value of the shares of Company Stock to be credited to a Participant's Account under this section for a Plan Year, when aggregated with the value of Company Stock and other assets allocated to the Participant's account under the ESOP for such Plan Year as a result of (i) Company contributions actually made to the ESOP for such Plan Year and (ii) forfeitures allocated for such Plan Year, may not exceed the dollar or percentage limits established for annual additions under Code Section 415 (that is, for 1994, $30,000 or 25 percent of Form W-2 compensation) and, to the extent such maximum limit would be exceeded, the amount otherwise to be credited to a Participant's Account hereunder shall be reduced. (c) Crediting of Stock Units. The amount determined pursuant to subsection (b) hereof for a Participant for a Plan Year shall be credited to his Account as of the March 1 immediately succeeding such Plan Year and shall be expressed in terms of whole and fractional Stock Units. The number of Stock Units credited to a Participant's Account for a Plan Year shall be determined by dividing (i) the amount determined for him in subsection (b) hereof for such Plan Year, by (ii) the per share fair market value of Company Stock on the Allocation Date for such Plan Year. (d) Cash Dividends. For Stock Units that have been credited to a Participant's Account on or before a record date for Company Stock cash dividends and that remain credited to his Account through the corresponding dividend payment date, the Administrative Committee shall credit to such Participant's Account a dollar amount equal to the amount of cash dividends that would have been paid on his Stock Units if each Stock Unit constituted one share of Company Stock. Such dollar amount then will be converted into a number of Stock Units equal to the number of full and fractional shares of Company Stock that could have been purchased, at fair market value on the dividend payment date, with such dollar amount. (e) Adjustments for Stock Dividends and Splits. In the event of any subdivision or combination of the outstanding shares of Company Stock, by reclassification, stock split, reverse stock split or otherwise, or in the event of the payment of a stock dividend on Company Stock, or in the event of any other increase or decrease in the number of outstanding shares of Company Stock, other than the issuance of shares for value received by the Company or the redemption of shares for value, the number of Stock Units credited to a Participant's Account shall be adjusted upward or 9 downward, as the case may be, to reflect the subdivision or combination of the outstanding shares. The amount of increase or decrease in the number of Stock Units in such event will be equal to the adjustment that would have been made if each Stock Unit credited to a Participant's Account immediately prior to the event constituted one share of Company Stock. (f) Value of Account. The value of a Participant's Account as of any date shall be equal to the product of (i) the number of Stock Units credited to his Account as of such date (as determined in accordance with the preceding subsections), and (ii) the per share fair market value of Company Stock on such date. (g) Value of Company Stock. (i) For all purposes under the Plan for which the value of Company Stock must be determined as of any particular date as of which Company Stock is trading on the New York Stock Exchange, the fair market value per share of Company Stock on such date shall be the closing price of Company Stock on the New York Stock Exchange on such date. If, for any reason, the fair market value per share of Company Stock cannot be ascertained or is unavailable for a particular date, the fair market value of Company Stock on such date shall be determined as of the nearest preceding date on which the fair market value can be ascertained pursuant to the terms hereof. (ii) For all purposes under the Plan for which the value of Company Stock must be determined as of any particular date on which Company Stock is not trading on the New York Stock Exchange but on which Company Stock is trading on another national securities exchange in the United States, the fair market value per share of Company Stock shall be the closing price of the Company Stock on such national securities exchange on such date. If Company Stock is trading on such other national securities exchange in the United States on such date but no sales of shares of Company Stock occurred thereon, the fair market value per share of Company Stock shall be the closing price of the Stock on the nearest preceding date. If on any particular date a public market shall exist for Company Stock but Company Stock is not trading on a national securities exchange in the United States, then, if Company Stock is listed on the National Market List by the National Association of Securities Dealers, Inc. (the "NASD"), the fair market value per share of Company Stock shall be the last sale price for such shares reflected on said market list for such date, and if Company Stock is not listed on the National Market List of the NASD, then the fair market value per share of Company Stock shall be the mean between the bid and asked quotations in the over-the-counter market for such shares on such date. If there is no bid and asked quotation for Company Stock on such date, the fair market value per share of Company Stock shall be the mean between the bid and asked quotations in the over-the-counter market for such shares on the nearest preceding date. If the fair market value per share of Company Stock cannot otherwise be 10 determined under this section as of a particular date, such value shall be determined by the Administrative Committee, in its sole discretion, based on all relevant available facts. 3.3 Vesting. Stock Units credited to a Participant's Account shall vest in accordance with the same vesting schedule and service, and/or based on the same events, as provided in the ESOP. 3.4 Notice to Participants of Account Balances. At least once for each Plan Year, the Administrative Committee shall cause a written statement of a Participant's Account balance to be distributed to the Participant. 3.5 Good Faith Valuation Binding. In determining the value of the Accounts, the Administrative Committee shall exercise its best judgment, and all such determinations of value (in the absence of bad faith) shall be binding upon all Participants and their Beneficiaries. 3.6 Errors and Omissions in Accounts. If an error or omission is discovered in the Account of a Participant or in the amount credited to a Participant's Account, the Administrative Committee, in its sole discretion, shall cause appropriate, equitable adjustments to be made as soon as administratively practicable following the discovery of such error or omission. ARTICLE IV PAYMENT OF ACCOUNT BALANCES 4.1 Benefit Payments. (a) General Rule Concerning Benefit Payments. In accordance with the terms of subsection (b) hereof, if a Participant's employment, with the Company, all other members of the Controlled Group and any other company that the Administrative Committee designates for purposes of the Plan as an affiliate of the Company, terminates for any reason including his death, he (or the Beneficiary or Beneficiaries designated by such Participant in his latest beneficiary designation form filed with the Administrative Committee) shall be entitled to receive a distribution of the value of the vested number of Stock Units credited to the Participant's Account, determined as of the last day of the calendar quarter immediately preceding the date payment of such distribution is to be made. For purposes of this subsection, the "date payment of such distribution is to be made" refers to the date established for such purpose by administrative practice, even if actual payment is made at a later date due to delays in valuation, administration or any other procedure. 11 (b) Timing of Distribution. (1) If a Participant's employment terminates (i) on account of retirement on or after he attains age 65, or (ii) on account of his Disability or death during a Plan Year and prior to October 1 of that Plan Year, the vested benefit payable to him or his Beneficiary or Beneficiaries under this Section shall be distributed as soon as administratively feasible after the date his employment so terminates. (2) If a Participant's employment terminates on account of his Disability or death during a Plan Year and after September 30 of that Plan Year, the vested benefit payable to him or his Beneficiary or Beneficiaries under this Section shall be distributed as soon as administratively feasible after December 31 of that Plan Year. (3) If a Participant's employment terminates for any reason other than the reasons specified in the preceding paragraphs, the vested benefit payable to him (or his Beneficiary or Beneficiaries, if he dies after such termination of employment but before distribution of his Account) under this Section shall be distributed as soon as administratively feasible after the last day of the second calendar quarter following the calendar quarter in which his employment so terminates. 4.2 Form of Distribution. The benefit payable to a Participant (or his Beneficiary or Beneficiaries) under Section 4.1 shall be paid in a single payment in the form of a number of shares of Company Stock equal to the whole number of Stock Units credited to his Account, with any fractional Stock Unit being paid, at its fair market value as if it were a fractional share of Company Stock, in a single-sum, cash payment. 4.3 Beneficiary Designation. (a) General. Participants shall designate and from time to time may redesignate their Beneficiaries in such form and manner as the Administrative Committee may determine. (b) No Designation or Designee Dead or Missing. In the event that: (1) a Participant dies without designating a Beneficiary; (2) the Beneficiary designated by a Participant is not surviving when a payment is to be made to such person under the Plan, and no contingent Beneficiary has been designated; or 12 (3) the Beneficiary designated by a Participant cannot be located by the Administrative Committee within 1 year from the date benefits are to be paid to such person; then, in any of such events, the Beneficiary of such Participant with respect to any benefits that remain payable under the Plan shall be the Participant's Surviving Spouse, if any, and if not, the estate of the Participant. 4.4 Taxes. If the whole or any part of any Participant's or Beneficiary's benefit hereunder shall become subject to any estate, inheritance, income or other tax which the Company (or its agent) shall be required to pay or withhold, the Company (or its agent, as applicable) shall have the full power and authority (i) to withhold and pay such tax out of any monies or other property in its hand for the account of the Participant or Beneficiary whose interests hereunder are so affected and/or (ii) to require the Participant or Beneficiary to pay to the Company (or its agent, as applicable), in cash or cash equivalent, the amount of any such tax. Prior to making any payment, the Company (or its agent, as applicable) may require such releases or other documents from any lawful taxing authority as it shall deem necessary. ARTICLE V CLAIMS 5.1 Claims. (a) Initial Claim. Claims for benefits under the Plan may be filed in writing with the Administrative Committee on forms or in such other written documents, as the Administrative Committee may prescribe. The Administrative Committee shall furnish to the claimant written notice of the disposition of a claim within 90 days after the application therefor is filed. In the event the claim is denied, the notice of the disposition of the claim shall provide the specific reasons for the denial, citations of the pertinent provisions of the Plan, and, where appropriate, an explanation as to how the claimant can perfect the claim and/or submit the claim for review. (b) Appeal. Any Participant or Beneficiary who has been denied a benefit shall be entitled, upon request to the Administrative Committee, to appeal the denial of his claim. The claimant (or his duly authorized representative) may review pertinent documents related to the Plan and in the Administrative Committee's possession in order to prepare the appeal. The request for review, together with written statement of the claimant's position, must be filed with the Administrative Committee no later than 60 days after receipt of the written notification of denial of a claim provided for in subsection (a). The Administrative Committee's decision shall be made within 60 days following the filing of the request for review. If unfavorable, the notice of 13 the decision shall explain the reasons for denial and indicate the provisions of the Plan or other documents used to arrive at the decision. (c) Satisfaction of Claims. Any payment to a Participant or Beneficiary shall to the extent thereof be in full satisfaction of all claims hereunder against the Administrative Committee and the Company, any of whom may require such Participant or Beneficiary, as a condition to such payment, to execute a receipt and release therefor in such form as shall be determined by the Administrative Committee or the Company. If receipt and release is required but the Participant or Beneficiary (as applicable) does not provide such receipt and release in a timely enough manner to permit a timely distribution in accordance with the general timing of distribution provisions in the Plan, the payment of any affected distribution may be delayed until the Administrative Committee or the Company receive a proper receipt and release. ARTICLE VI SOURCE OF FUNDS; TRUST 6.1 Source of Funds. Except as provided in this Section and Section 6.2, each Participating Company shall provide the benefits described in the Plan from the general assets of such Participating Company. In any event, each Participating Company ultimately shall have the obligation to pay all benefits due to Participants and Beneficiaries under the Plan to the extent liability therefor has been allocated hereunder to such Participating Company. A Participating Company may, but shall not be required to, establish a Trust and may pay over funds from time to time to such Trust (as described in Section 6.2), and, to the extent that funds in such Trust allocable to the benefits payable under the Plan by such Participating Company are sufficient, the Trust assets shall be used to pay such benefits. If such Trust assets are not sufficient to pay all such benefits due under the Plan, then such Participating Company shall have the obligation, and the Participant or Beneficiary, who is due such benefits, shall look to such Participating Company to provide such benefits. The Administrative Committee or the Board shall allocate the total liability to pay benefits under the Plan among the Participating Companies in such manner and amount as the Administrative Committee or the Board (as applicable) in its sole discretion deems appropriate. 6.2 Trust. A Participating Company may transfer all or any portion of the funds necessary to fund benefits accrued hereunder to the Trustee to be held and administered by the Trustee pursuant to the terms of the Trust Agreement. Each transfer into the Trust Fund shall be irrevocable as long as such Participating Company has any liability or obligations under the Plan to pay benefits, such that 14 the Trust property is in no way subject to use by such Participating Company; provided, it is the intent of such Participating Company that the assets held by the Trust are and shall remain at all times subject to the claims of the general creditors of such Participating Company. No Participant or Beneficiary shall have any interest in the assets held by the Trust or in the general assets of any Participating Company other than as a general, unsecured creditor. Accordingly, no Participating Company shall grant a security interest in the assets held by the Trust in favor of the Participants, Beneficiaries or any creditor. ARTICLE VII ADMINISTRATIVE COMMITTEE 7.1 Action. Action of the Administrative Committee may be taken with or without a meeting of committee members; provided, action shall be taken only upon the vote or other affirmative expression of a majority of the committee members qualified to vote with respect to such action. If a member of the committee is a Participant or Beneficiary, he shall not participate in any decision which solely affects his own benefit under the Plan. For purposes of administering the Plan, the Administrative Committee shall choose a secretary who shall keep minutes of the committee's proceedings and all records and documents pertaining to the administration of the Plan. The secretary may execute any certificate or any other written direction on behalf of the Administrative Committee. 7.2 Rights and Duties. The Administrative Committee shall administer the Plan and shall have all powers necessary to accomplish that purpose, including (but not limited to) the following: (a) To construe, interpret and administer the Plan; (b) To make determinations required by the Plan, and to maintain records regarding Participants' and Beneficiaries' benefits hereunder; (c) To compute and certify to the Company the amount and kinds of benefits payable to Participants and Beneficiaries, and to determine the time and manner in which such benefits are to be paid; (d) To authorize all disbursements by the Company pursuant to the Plan; (e) To maintain all the necessary records of the administration of the Plan; (f) To make and publish such rules for the regulation of the Plan as are not inconsistent with the terms hereof; 15 (g) To delegate to other individuals or entities from time to time the performance of any of its duties or responsibilities hereunder; (h) To hire agents, accountants, actuaries, consultants and legal counsel to assist in operating and administering the Plan. The Administrative Committee shall have the exclusive right to construe and interpret the Plan, to decide all questions of eligibility for benefits and to determine the amount of such benefits, and its decisions on such matters shall be final and conclusive on all parties. 7.3 Compensation, Indemnity and Liability. The Administrative Committee and its members shall serve as such without bond and without compensation for services hereunder. All expenses of the Administrative Committee shall be paid by the Company. No member of the committee shall be liable for any act or omission of any other member of the committee, nor for any act or omission on his own part, excepting his own willful misconduct. The Company shall indemnify and hold harmless the Administrative Committee and each member thereof against any and all expenses and liabilities, including reasonable legal fees and expenses, arising out of his membership on the committee, excepting only expenses and liabilities arising out of his own willful misconduct. ARTICLE VIII AMENDMENT AND TERMINATION 8.1 Amendments. The Controlling Company, through action of the Board or the Administrative Committee, shall have the right, in its sole discretion, to amend the Plan in whole or in part at any time and from time to time; provided, the Administrative Committee may not amend the Plan to increase the level of benefits hereunder without Board approval; and, provided further, Section 3.2 (relating to the amount of benefits to be accrued under the Plan) may not be amended more frequently than once every 6 months other than to comport with changes in the Code or ERISA, or rules thereunder. Any amendment shall be in writing and executed by a duly authorized officer of the Controlling Company or a member of the Administrative Committee. An amendment to the Plan may modify its terms in any respect whatsoever, and may include, without limitation, a permanent or temporary freezing of the Plan such that the Plan shall remain in effect with respect to existing Account balances without permitting any new contributions; provided, no such action may reduce the amount already credited to a Participant's Account without the affected Participant's written consent. All Participants and Beneficiaries shall be bound by such amendment. 16 8.2 Termination of Plan. The Controlling Company expects to continue the Plan but reserves the right to discontinue and terminate the Plan at any time, for any reason. Any action to terminate the Plan shall be taken by the Board in the form of a written Plan amendment executed by a duly authorized officer of the Controlling Company. If the Plan is terminated, each Participant shall become 100 percent vested in his Account which shall be distributed in a single payment of Company Stock and cash, in the manner prescribed in Section 4.2, as soon as practicable after the date the Plan is terminated. The amount of any such distribution shall be determined as of the date such termination distribution is to be processed. Such termination shall be binding on all Participants and Beneficiaries. ARTICLE IX MISCELLANEOUS 9.1 Taxation. It is the intention of the Company that the benefits payable hereunder shall not be deductible by the Company nor taxable for federal income tax purposes to Participants or Beneficiaries until such benefits are paid by the Company, or the Trust, as the case may be, to such Participants or Beneficiaries. When such benefits are so paid, it is the intention of the Company that they shall be deductible by the Company under Code Section 162. 9.2 No Employment Contract. Nothing herein contained is intended to be nor shall be construed as constituting a contract or other arrangement between the Company and any Participant to the effect that the Participant will be employed by the Company for any specific period of time. 9.3 Headings. The headings of the various articles and sections in the Plan are solely for convenience and shall not be relied upon in construing any provisions hereof. Any reference to a section shall refer to a section of the Plan unless specified otherwise. 9.4 Gender and Number. Use of any gender in the Plan will be deemed to include all genders when appropriate, and use of the singular number will be deemed to include the plural when appropriate, and vice versa in each instance. 9.5 Assignment of Benefits. The right of a Participant or his Beneficiary to receive 17 payments under the Plan may not be anticipated, alienated, sold, assigned, transferred, pledged, encumbered, attached or garnished by creditors of such Participant or Beneficiary, except by will or by the laws of descent and distribution and then only to the extent permitted under the terms of the Plan. 9.6 Legally Incompetent. The Administrative Committee, in its sole discretion, may direct that payment be made to an incompetent or disabled person, whether because of minority or mental or physical disability, to the guardian of such person or to the person having custody of such person, without further liability on the part of the Company for the amount of such payment to the person on whose account such payment is made. 9.7 Governing Law. The Plan shall be construed, administered and governed in all respects in accordance with applicable federal law (including ERISA) and, to the extent not preempted by federal law, in accordance with the laws of the State of Georgia. If any provisions of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. IN WITNESS WHEREOF, the Controlling Company has caused the Plan to be executed by its duly authorized officer on the 15th day of March, 1995. THE HOME DEPOT, INC. By: /s/ Marshall L. Day Title: Senior Vice President-Finance EX-10.17 4 g68482ex10-17.txt EMPLOYMENT AGREEMENT, DATED JANUARY 19, 2001 1 EXHIBIT 10.17 EMPLOYMENT AGREEMENT BETWEEN ROBERT L. NARDELLI AND THE HOME DEPOT, INC. 2 EMPLOYMENT AGREEMENT BETWEEN ROBERT L. NARDELLI AND THE HOME DEPOT, INC. TABLE OF CONTENTS
Page 1. EMPLOYMENT....................................................................................................5 2. PERIOD OF EMPLOYMENT..........................................................................................5 3. DUTIES DURING THE PERIOD OF EMPLOYMENT........................................................................5 3.1 DUTIES..............................................................................................5 3.2 SCOPE...............................................................................................5 4. COMPENSATION AND OTHER PAYMENTS...............................................................................5 4.1 SALARY..............................................................................................6 4.2 MAKE WHOLE PAYMENT..................................................................................6 4.3 ANNUAL BONUS........................................................................................7 4.4 ANNUAL STOCK OPTION GRANTS..........................................................................7 4.5 DEFERRED STOCK UNITS................................................................................8 4.6 PAYMENT OF PROFESSIONAL FEES........................................................................8 5. OTHER EXECUTIVE BENEFITS......................................................................................8 5.1 DEFERRED COMPENSATION...............................................................................8 5.2 REGULAR REIMBURSED BUSINESS EXPENSES...............................................................10 5.3 BENEFIT PLANS......................................................................................10 5.4 RELOCATION.........................................................................................10 5.5 PERQUISITES........................................................................................11 6. TERMINATION..................................................................................................11 6.1 DEATH OR DISABILITY................................................................................11 6.2 BY THE COMPANY FOR CAUSE...........................................................................11 6.3 BY EXECUTIVE FOR GOOD REASON.......................................................................12 6.4 OTHER THAN FOR CAUSE OR GOOD REASON................................................................12 6.5 NOTICE OF TERMINATION..............................................................................13 6.6 DATE OF TERMINATION................................................................................13 7. OBLIGATIONS OF THE COMPANY UPON TERMINATION..................................................................13 7.1 TERMINATION BY THE COMPANY FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON............................13 7.2 RESIGNATION WITH GOOD REASON; CHANGE IN CONTROL; TERMINATION WITHOUT CAUSE; DEATH; DISABILITY......14 7.3 RETIREMENT AFTER AGE SIXTY-TWO.....................................................................16 7.4 COBRA RIGHTS.......................................................................................16 8. CHANGE IN CONTROL............................................................................................16 9. MITIGATION...................................................................................................16 10. INDEMNIFICATION.............................................................................................17 11. CONFIDENTIAL INFORMATION....................................................................................17 12. REMEDY FOR VIOLATION OF SECTION 11..........................................................................17 13. WITHHOLDING.................................................................................................17 14. ARBITRATION.................................................................................................17 15. REIMBURSEMENT OF LEGAL EXPENSES.............................................................................18 16. TAXES.......................................................................................................18 17. SUCCESSORS..................................................................................................19 18. REPRESENTATIONS.............................................................................................19 19. MISCELLANEOUS...............................................................................................20
- 2 - 3 EMPLOYMENT AGREEMENT THIS AGREEMENT ("Agreement"), by and between The Home Depot, Inc., a Delaware corporation ("Company"), and Robert L. Nardelli ("Executive") is effective as of December 4, 2000 (the "Effective Date"). In consideration of the mutual covenants set forth herein, the Company and the Executive hereby agree as follows: 1. EMPLOYMENT. The Company hereby agrees to employ the Executive, and the Executive agrees to serve the Company, in the capacities described herein during the Period of Employment (as defined in Section 2 of this Agreement), in accordance with the terms and conditions of this Agreement. 2. PERIOD OF EMPLOYMENT. The term "Period of Employment" shall mean the period which commences on the Effective Date and, unless earlier terminated pursuant to Section 6, ends on December 31, 2005; provided, however, that the Period of Employment shall automatically be extended on a day by day basis effective on and after January 1, 2003 (so that the remaining term shall always be three (3) years) until such date as either the Company or the Executive shall have terminated such automatic extension provision by giving written notice to the other. 3. DUTIES DURING THE PERIOD OF EMPLOYMENT. 3.1 DUTIES. During the Period of Employment, the Executive shall be employed as the President and Chief Executive Officer of the Company with overall charge and responsibility for the business and affairs of the Company. The Executive shall report directly to the Company's Board of Directors (the "Board") and shall perform such duties as the Executive shall reasonably be directed to perform by the Board. The Company shall cause the Executive to be elected as follows: (i) to the Board, as of the Effective Date, (ii) to the Executive Committee of the Board, as of the first regularly scheduled Board meeting following the Effective Date, and (iii) as sole Chairman of the Board, on or before December 31, 2001 or as of such date as Executive shall designate upon not less than thirty (30) days' notice to the Company as provided under Section 19.2 of this Agreement. 3.2 SCOPE. During the Period of Employment, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote substantially all of his business time and attention to the business and affairs of the Company. It shall not be a violation of this Agreement for the Executive to (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach occasional courses or seminars at educational institutions, or (iii) manage personal investments, so long as such activities under clauses (i), (ii) and (iii) do not interfere, in any substantial respect, with the Executive's responsibilities hereunder. 4. COMPENSATION AND OTHER PAYMENTS. 4.1 SALARY. During the Period of Employment, the Company shall pay the Executive an annualized base salary of not less than one million five hundred thousand dollars - 3 - 4 ($1,500,000) per year (the "Base Salary"). The Executive's Base Salary shall be paid in accordance with the Company's executive payroll policy. The Base Salary shall be reviewed by the Compensation Committee of the Board of the Company (the "Committee") as soon as practicable after the end of each fiscal year during the Period of Employment, beginning with the fiscal year ending on February 3, 2002. Based upon such reviews, the Committee may increase, but shall not decrease, the Base Salary. Any increase in Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. 4.2 MAKE WHOLE PAYMENT. As of the Effective Date, the Company shall grant the Executive: 4.2.1 A stock option grant with respect to two million five hundred thousand (2,500,000) shares of the Company's stock, which shall vest and become exercisable in equal five hundred thousand (500,000) share increments on the Effective Date and each of the next four anniversaries of the Effective Date, provided that each tranche shall vest only if the Executive is employed by the Company on that tranche's vesting date, except as provided in this Agreement. Each tranche will have a 10-year exercise period beginning at its vesting date. The exercise price for this option shall be forty dollars and seventy-five cents ($40.75) per share, which is the closing price of the Company's stock on the New York Stock Exchange (as reported in The Wall Street Journal) on the Effective Date. 4.2.2 A fully vested and exercisable 10-year stock option grant under the Company's 1997 Omnibus Stock Incentive Plan with respect to one million (1,000,000) shares of Company stock, with an exercise price equal to forty dollars and seventy-five cents ($40.75), which is the closing price of the Company's stock on the New York Stock Exchange (as reported in The Wall Street Journal) on the Effective Date. 4.2.3 A lump-sum cash payment of fifty thousand four hundred dollars ($50,400). 4.2.4 A ten million dollar ($10,000,000) loan at the interest rate of five and eight tenths percent (5.8%) per annum, compounded annually, to be disbursed within three business days of the Effective Date (the "Executive Loan"). This loan, and the Executive's obligation to repay principal and the associated accrued interest thereunder, (the term "Loan" covering both principal and accrued interest) shall be forgiven (a) twenty percent (20%) on each of the first five (5) anniversaries of the Effective Date, provided that the Executive is employed by the Company on any such anniversary, or (b) earlier, in full on the date of a Change in Control of the Company (as defined in Section 7.2.12), if the Executive is employed by the Company on such date, or (c) earlier, in full upon the date of the termination of the Executive's employment with the Company prior to December 4, 2005 if such termination is by the Company without Cause (as defined in subsection 6.2), by the Executive for Good Reason (as defined in subsection 6.3) or by reason of the Executive's death or Disability (as defined in subsection 6.1). In addition, if the Loan, or any part of the Loan, is forgiven pursuant to - 4 - 5 the preceding sentence, the Company shall pay the Executive, on or prior to such date as the Executive shall be required to pay federal, state or local taxes with respect to the forgiveness of the Loan, an additional payment (the "Gross-Up Payment") in an amount sufficient to fully reimburse the Executive with respect to all federal, state and local taxes with respect to the forgiveness of accrued interest and with respect to receipt of the Gross-Up Payment. If, prior to the fifth anniversary of the Effective Date, the Executive's employment with the Company is terminated by the Company for Cause or by the Executive other than for Good Reason, then the remaining principal balance (not including accrued interest) of the Executive Loan shall be repaid by the Executive in annual two million dollar ($2,000,000) installments, which shall be made on the next anniversary or anniversaries, as the case may be, of the Effective Date. 4.3 ANNUAL BONUS. Beginning with the Company's fiscal year ending on the last Sunday in January 2002, as soon as practicable after the end of each fiscal year, the Committee shall review the Executive's performance under this Agreement as part of Executive's participation under the appropriate bonus plan of the Company as in effect from time to time. The Executive's annual bonus shall be at a target of no less than three million dollars ($3,000,000) (the "Target Amount") and a maximum of no less than four million dollars ($4,000,000) (the "Maximum Amount"). Nothing contained herein shall prevent the Committee from paying an annual bonus in excess of the Maximum Amount. The Executive shall be paid his annual bonus no later than other senior executives of the Company are paid their annual bonuses. For each year during the Period of Employment, and for any period during the Period of Employment which is less than one year due to termination of the Executive's employment for any reason other than Cause, the Executive will receive an annual bonus of no less than the full Target Amount. 4.4 ANNUAL STOCK OPTION GRANTS. The Committee shall in 2002 and subsequent calendar years grant to the Executive ten-year options with respect to shares of Company stock, with such grants to be made at the same time during the calendar year as grants are generally made to senior executives of the Company. Such annual grants shall be consistent with competitive pay practices generally and appropriate relative to awards made to other senior executives of the Company; provided, however, that each such annual grant shall be to purchase no less than four hundred fifty thousand (450,000) shares of Company Stock, with such number to be adjusted appropriately in the event of any change in the outstanding shares of Company Stock by reason of a stock dividend or split, recapitalization, merger, consolidation or other similar corporate change or distribution of stock or property by the Company. These option grants shall vest in four equal increments, with one tranche vesting on the second anniversary of the grant date and one tranche vesting on each of the next three anniversaries of the grant date (the "Vesting Scheme"); provided, however that an annual option grant shall instead vest pursuant to normal Company practice at the time of grant, so long as such then-current practice is no slower than the Vesting Scheme. Any annual option grant may vest subject to a different vesting schedule, so long as such vesting schedule is no slower than the faster of the Vesting Scheme or the then-current normal Company practice at the time of such stock option grant. - 5 - 6 4.5 DEFERRED STOCK UNITS. As of the Effective Date, the Company shall grant the Executive an award of deferred stock units corresponding to seven hundred fifty thousand (750,000) shares of Company stock. Such award shall vest in equal one hundred fifty thousand (150,000) share increments on the Effective Date and each of the first four anniversaries of the Effective Date; provided that each tranche shall vest only if the Executive is employed by the Company on that tranche's vesting date, except as provided in this Agreement. On the January 1 following the second anniversary of each vesting date (as illustrated in the schedule on Appendix A hereto) one share of stock for each unit shall be distributed to the Executive, unless such distribution is further deferred by the Executive by the second December 31 following the vesting date (as illustrated in the schedule on Appendix A hereto). The Executive shall receive a dividend equivalent cash payment on all vested deferred stock units when dividends are paid to shareholders. Unless otherwise agreed to by the Executive and the Company, the Company shall, within ten (10) days after termination of the Executive's employment for any reason, deliver to the Executive one share of Company stock for each vested deferred stock unit for which stock has not yet been distributed to the Executive. 4.6 PAYMENT OF PROFESSIONAL FEES. The Company shall pay on the Executive's behalf all statements rendered to the Executive by the Executive's attorneys, accountants and other advisors for reasonable fees and expenses in connection with the negotiation and preparation of this Agreement. The Company shall pay the Executive, on or prior to such date as the Executive shall be required to pay federal, state or local taxes with respect to the Company's payment of such professional fees, an additional payment (the "Gross-Up Payment") in an amount sufficient to fully reimburse the Executive with respect to all federal, state and local taxes with respect to the Company's payment of such professional fees and with respect to receipt of the Gross-Up Payment. 5. OTHER EXECUTIVE BENEFITS. 5.1 DEFERRED COMPENSATION. 5.1.1 Upon termination of the Executive's employment, the Executive shall be entitled to a cash benefit (the "Deferred Compensation") in the form of a single life annuity for the life of Executive, commencing on the later of his 62nd birthday or termination of employment, in an annual amount equal to 50% of the Executive's Final Earnings. Final Earnings shall equal the sum of the Executive's (i) then-current Base Salary as of the date of termination and (ii) most recent annual bonus (or then-current Target Amount, if greater) as of the date of termination; provided, however, that Final Earnings shall not be less than four million five hundred thousand dollars ($4,500,000) (the sum of the original Base Salary and original Target Amount under this Agreement). The Deferred Compensation shall be subject to offset for all employer-funded qualified and non-qualified defined benefit pension benefits paid or payable to the Executive from the Company or the Executive's prior employers. In the event any amount taken into account as an offset is not paid (other than as a result of the death of the Executive, or of any action by Executive), and a final determination is made that such amount will not be paid to Executive, then the Executive shall be entitled to receive an additional amount - 6 - 7 from the Company equivalent to such unpaid amount. The Executive and the Company shall cooperate with each other in connection with any proceeding or claim against a prior employer relating to the payment of such an amount to Executive, and all expenses incurred by the Executive in connection therewith shall be paid by the Company promptly upon notice from Executive. 5.1.2 In the event the Executive's employment is terminated either (i) by the Company for Cause or (ii) by the Executive without Good Reason, and such termination occurs prior to the Executive's 62nd birthday, the Deferred Compensation amount at age 62 shall be reduced by 3% for each full year during the period between such termination and the Executive's 62nd birthday. 5.1.3 In the event the Executive's employment is terminated either (i) by the Company for Cause or (ii) by the Executive without Good Reason, and such termination occurs prior to the fifth anniversary of the Effective Date, the Deferred Compensation amount at age 62 (after any applicable reduction under subsection 5.1.2) shall be reduced by 20% for each full year during the period between such termination and the fifth anniversary of the Effective Date. 5.1.4 Termination of the Executive's employment for any reason other than (i) by the Company for Cause or (ii) by the Executive without Good Reason shall not cause a reduction in the Deferred Compensation under subsection 5.1.2 or 5.1.3. In the event of the Executive's death prior to commencement of the payment of the Deferred Compensation, the Executive's surviving spouse (or, if there is no surviving spouse, Executive's estate), shall be entitled to receive a lump sum payment equal to the lump sum payment to which Executive would have been entitled if his Deferred Compensation was payable (without reduction under subsection 5.1.2 or 5.1.3) as of the date immediately preceding his death and he had elected to receive such amount in a lump sum on that date. 5.1.5 In the event the Executive commences receipt of (or in the event of his death, was deemed to have elected to receive) his Deferred Compensation prior to age 62, the Deferred Compensation amount (after any applicable reduction(s) under subsections 5.1.2 and/or 5.1.3) shall be subject to a discount of 4% for each full year between the date the Executive receives or begins to receive (or is deemed to have received) the Deferred Compensation and the date of the Executive's 62nd birthday. In the event of a Change in Control of the Company, this subsection shall be revised by substituting "age 55" for "age 62" in the immediately preceding sentence. 5.1.6 With the consent of the Company, or by written election delivered to the Company by the Executive at least twelve (12) months prior to the termination of the Executive's employment with the Company, the Executive may elect, in lieu of a single life annuity, to receive the Deferred Compensation in a lump sum or deferred lump sum or installment payments, or a life and term certain or joint and survivor annuity, or such other optional form as Executive may elect. The amount of such lump sum benefit - 7 - 8 shall be the actuarially equivalent present value of the Deferred Compensation that would otherwise have been payable, commencing immediately as of the date such lump sum payment is made. Any optional form of payment shall have an actuarially equivalent present value equal to the amount of such lump sum. For purposes of this Agreement, any actuarially equivalent present value shall not be less than the present value determined on the basis of the applicable mortality table and applicable interest rate prescribed in Internal Revenue Code Section 417(e)(3)(A)(ii), in each case as would be applicable to a distribution made during the second calendar month immediately preceding the calendar month in which such lump sum distribution is made or optional form of payment is commenced. 5.2 REGULAR REIMBURSED BUSINESS EXPENSES. The Company shall promptly reimburse the Executive for all expenses and disbursements reasonably incurred by the Executive in the performance of his duties hereunder during the Period of Employment. 5.3 BENEFIT PLANS. The Executive and his eligible family members shall be entitled to participate immediately (except for the Company's 401(k) plan, in which the Executive shall be entitled to participate after satisfying the one-year waiting period), on terms no less favorable to the Executive than the terms offered to other senior executives of the Company who perform or have performed in the same capacity as the Executive, in any group and/or executive life, hospitalization or disability insurance plan, health program, vacation policy, pension, profit sharing, ESOP, 401(k) and similar benefit plans (qualified, non-qualified and supplemental) or other fringe benefits (it being understood that items such as stock options are not fringe benefits) of the Company (collectively referred to as the "Benefits"); provided, however, that such Benefits shall be no less, in both scope of coverage and value of coverage, than the benefits provided to the Executive by the Executive's immediately preceding employer. The benefit adjustments necessary to meet the requirements of this paragraph are described in the letter from the Company to the Executive of even date herewith. In the event that any health programs or insurance policies applicable to the Benefits provided hereunder contain a preexisting conditions clause, the Company shall reimburse the Executive for any COBRA premiums on a tax grossed-up basis. Anything contained herein to the contrary notwithstanding, the Benefits described herein shall not duplicate benefits made available to the Executive pursuant to any other provision of this Agreement. 5.4 RELOCATION. The Company shall pay all costs of relocation of the Executive and his family to the Atlanta metropolitan area in accordance with the Company's relocation policy supplemented as follows: 5.4.1 The Company shall reimburse the Executive for reasonable temporary living expenses (including reasonable travel expenses between the Executive's primary residence as of the Effective Date and the Atlanta metropolitan area) for the Executive and his family in the Atlanta metropolitan area for a period not to exceed one year from the Effective Date; - 8 - 9 5.4.2 The Company will make available to the Executive the opportunity to sell his present primary residence at appraised value through a relocation firm mutually acceptable to the Executive and the Company; and 5.4.3 All relocation payments and benefits will be fully grossed-up for any applicable taxes. 5.5 PERQUISITES. The Company shall provide the Executive such perquisites of employment as are commonly provided to other senior executives of the Company. 6. TERMINATION. 6.1 DEATH OR DISABILITY. This Agreement and the Period of Employment shall terminate automatically upon the Executive's death. If the Company determines in good faith that the Disability of the Executive has occurred (pursuant to the definition of "Disability" set forth below), it may give to the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the thirtieth day after receipt by the Executive of such notice given at any time after a period of one hundred twenty (120) consecutive days of Disability or a period of one hundred eighty (180) days of Disability within any twelve (12) consecutive months, and, in either case, while such Disability is continuing ("Disability Effective Date"); provided that, within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means the Executive's inability to substantially perform his duties hereunder, with reasonable accommodation, as evidenced by a certificate signed either by a physician mutually acceptable to the Company and the Executive or, if the Company and the Executive cannot agree upon a physician, by a physician selected by agreement of a physician designated by the Company and a physician designated by the Executive; provided, however, that if such physicians cannot agree upon a third physician within thirty (30) days, such third physician shall be designated by the American Arbitration Association. Until the Disability Effective Date, the Executive shall be entitled to all compensation provided for under Section 4 hereof. It is understood that nothing in this Section 6.1 shall serve to limit the Company's obligations under Section 7.2 hereof. 6.2 BY THE COMPANY FOR CAUSE. During the Period of Employment after the Effective Date, the Company may terminate the Executive's employment immediately for "Cause." For purposes of this Agreement, "Cause" shall mean that (i) the Executive has been convicted of a felony involving theft or moral turpitude, or (ii) engaged in conduct that constitutes willful gross neglect or willful gross misconduct with respect to employment duties which results in material economic harm to the Company; provided, however, that for the purposes of determining whether conduct constitutes willful gross misconduct, no act on Executive's part shall be considered "willful" unless it is done by the Executive in bad faith and without reasonable belief that the Executive's action was in the best interests of the Company. Notwithstanding the foregoing, the Company may not terminate the Executive's employment for Cause unless (i) a determination that Cause exists is made and approved by a majority of the Company's Board of Directors, (ii) the Executive is given at least thirty (30) days written notice - 9 - 10 of the Board meeting called to make such determination, and (iii) the Executive and his legal counsel are given the opportunity to address such meeting. 6.3 BY EXECUTIVE FOR GOOD REASON. During the Period of Employment, the Executive's employment hereunder may be terminated by the Executive for Good Reason upon fifteen (15) days' written notice. For purposes of this Agreement, "Good Reason" shall mean, without the Executive's consent: 6.3.1 Assignment to the Executive of any duties inconsistent in any material respect with the Executive's position (including status, offices, titles and reporting relationships), authority, duties or responsibilities as contemplated by Section 3 of this Agreement, or any other action by the Company which results in a significant diminution in such position, authority, duties or responsibilities, excluding any isolated and inadvertent action not taken in bad faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by the Executive; 6.3.2 Any failure by the Company to comply with any of the provisions of Section 4 or 5 of this Agreement other than an isolated and inadvertent failure not committed in bad faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by the Executive; 6.3.3 The Executive being required to relocate to a principal place of employment more than twenty-five (25) miles from his principal place of employment with the Company in Atlanta, Georgia as of the Effective Date; 6.3.4 Delivery by the Company of a notice discontinuing the automatic extension provision of Section 2 of this Agreement; 6.3.5 Failure by the Company to elect the Executive to the position of sole Chairman of the Board of Directors, in compliance with the terms of Section 3.1; or 6.3.6 Any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement. 6.4 OTHER THAN FOR CAUSE OR GOOD REASON. The Executive or the Company may terminate this Agreement for any reason other than for Good Reason or Cause, respectively, upon thirty (30) days written notice to the Company or Executive, as the case may be. If the Executive terminates the Agreement for any reason, he shall have no liability to the Company or its subsidiaries or affiliates as a result thereof. If the Company terminates the Agreement, or if the Agreement terminates because of the death of the Executive, the obligations of the Company shall be as set forth in Section 7 hereof. 6.5 NOTICE OF TERMINATION. Any termination by the Company or by the Executive shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 19.2 of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this - 10 - 11 Agreement relied upon, (ii) sets forth in reasonable detail, if necessary, the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by the Executive or Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of the basis for termination shall not waive any right of such party hereunder or preclude such party from asserting such fact or circumstance in enforcing his or its rights hereunder. 6.6 DATE OF TERMINATION. "Date of Termination" means the date specified in the Notice of Termination; provided, however, that if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. The following provisions describe the obligations of the Company to the Executive under this Agreement upon termination of his employment. However, except as explicitly provided in this Agreement, nothing in this Agreement shall limit or otherwise adversely affect any rights which the Executive may have under applicable law, under any other agreement with the Company, or under any compensation or benefit plan, program, policy or practice of the Company. 7.1 TERMINATION BY THE COMPANY FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON. In the event this Agreement terminates by reason of the termination of the Executive's Employment by the Company for Cause or by reason of the resignation of the Executive other than for Good Reason, the Company shall pay to the Executive all Accrued Obligations (as defined below) in a lump sum in cash within thirty (30) days after the Date of Termination. "Accrued Obligations" shall mean, as of the Date of Termination, the sum of (A) the Executive's Base Salary through the Date of Termination to the extent not theretofore paid, (B) except as otherwise previously requested by the Executive, the amount of any bonus, incentive compensation, deferred compensation (not including the amounts described in subsection 5.1 of this Agreement, which will be governed by subsection 5.1) and other cash compensation accrued by the Executive as of the Date of Termination to the extent not theretofore paid and (C) any vacation pay, expense reimbursements and other cash entitlements accrued by the Executive as of the Date of Termination to the extent not theretofore paid. 7.2 RESIGNATION WITH GOOD REASON; CHANGE IN CONTROL; TERMINATION WITHOUT CAUSE; DEATH; DISABILITY. If (i) the Company shall terminate the Executive's employment other than for Cause, (ii) the Executive shall terminate his employment at any time for Good Reason or for any reason within twelve (12) months after a Change in Control or (iii) the Executive's employment shall terminate due to death or Disability, the Executive shall receive in addition to the Accrued Obligations, the following: 7.2.1 Twenty million dollars ($20,000,000), within thirty (30) days after the Date of Termination; - 11 - 12 7.2.2 Immediate full vesting in (i.e., full exercisability for) any options previously granted and not yet vested as of the Date of Termination, including but not limited to any such options granted under subsection 4.2.1 or subsection 4.4; 7.2.3 Continued exercisability, through the end of their respective full original terms, for all vested options, whether previously vested or vesting under this subsection 7.2; 7.2.4 Delivery of one share of Company stock for each deferred stock unit vested to the Executive for which stock has not yet been distributed to the Executive, as provided under subsection 4.5; 7.2.5 Immediate vesting of any deferred stock units described in subsection 4.5 which have not yet vested to the Executive, and delivery of one share of Company stock for each deferred stock unit subject to accelerated vesting pursuant to this subsection 7.2.5; 7.2.6 For each year prior to 2006 for which the annual option award required by subsection 4.4 has not yet been granted, immediate grant of a ten-year stock option award having an exercise price equal to the fair market value of a share of Company stock on the Date of Termination and otherwise complying with the requirements of subsection 4.4, with each such award being fully vested immediately upon such grant and remaining exercisable for the full ten-year term; 7.2.7 Immediate full vesting in all other otherwise unvested shares of restricted stock of the Company, deferred stock units or other equity-based awards (if any) previously awarded to the Executive, with immediate termination of all restrictions on such awards; 7.2.8 Immediate full vesting in the Deferred Compensation described in Section 5.1 (i.e., no reductions pursuant to subsection 5.1.2 or 5.1.3); 7.2.9 Immediate full forgiveness of any outstanding balance of principal and accrued interest on the Executive Loan, as provided under subsection 4.2.4; 7.2.10 Receipt of any other compensation and Benefits accrued or earned and vested (if applicable) by the Executive as of the Date of Termination (but not duplicative of the Accrued Obligations); and 7.2.11 For the remainder of the Period of Employment (determined without regard to the termination thereof pursuant to Section 6) or for three (3) years (whichever is longer), the Company shall continue health, prescription drug, dental, disability and life insurance benefits to the Executive and/or the Executive's eligible family members at least equal to those which would have been provided to them in accordance with Section 5.3 of this Agreement if the Executive's employment had not been terminated. - 12 - 13 7.2.12 For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred if: 7.2.12.1 Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, (i) the Company or any subsidiary of the Company, or (ii) any employee benefit plan of the Company or 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 which acquires beneficial ownership of voting securities 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 more than 20% of the combined voting power of the Company's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Company; or 7.2.12.2 During any two (2) consecutive years (not including any period beginning prior to December 3, 2000), individuals who at the beginning of such two (2) year period constitute the Board of Directors of the Company and any new director (except for a director designated by a person who has entered into an agreement with the Company to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board 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 either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director being referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; or 7.2.12.3 Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding voting securities of the Company; or - 13 - 14 7.2.12.4 Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. 7.2.13 Any other provision of this Section 7.2 notwithstanding, termination of the Executive's employment due to involuntary retirement on or after the Executive reaching age seventy-two (72) will not be a termination of employment covered by this Section 7.2. 7.3 RETIREMENT AFTER AGE SIXTY-TWO. If the Executive's employment with the Company terminates due to his retirement from the Company after he attains age sixty-two (62), all equity-based awards made to the Executive shall become fully vested and, if applicable, shall remain exercisable through the end of their original term. 7.4 COBRA RIGHTS. It is understood that the Executive's rights under this Section 7 are in lieu of all other rights which the Executive may otherwise have had upon termination of employment under this Agreement; provided, however, that no provision of this Agreement is intended to adversely affect the Executive's rights under the Consolidated Omnibus Budget Reconciliation Act of 1985. 8. CHANGE IN CONTROL. In the event of a Change in Control of the Company: (i) all prior grants to the Executive of stock options, restricted stock, deferred stock units or other equity-based awards (including but not limited to grants under subsections 4.2.1, 4.4 and 4.5) shall become fully vested (and, if applicable, shall remain exercisable through the end of their respective full original terms); and (ii) the Executive shall be entitled to receive any other Change-in-Control protection applicable to other senior executives of the Company, except to the extent that the application thereof would reduce the Executive's rights or benefits under this Agreement. 9. MITIGATION. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. Any severance benefits payable to the Executive shall not be subject to reduction for any compensation received from other employment. 10. INDEMNIFICATION. The Company shall maintain, for the benefit of the Executive, director and officer liability insurance in form at least as comprehensive as, and in an amount that is at least equal to, that maintained by the Company on the Effective Date. In addition, the Executive shall be indemnified by the Company against liability as an officer and director of the Company and any subsidiary or affiliate of the Company to the maximum extent permitted by applicable law. The Executive's rights under this Section 10 shall continue so long as he may be subject to such liability, whether or not this Agreement may have terminated prior thereto. 11. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company, or any of its subsidiaries, affiliates and businesses, which shall have been obtained - 14 - 15 by the Executive pursuant to his employment by the Company or any of its subsidiaries and affiliates and which shall not have become public knowledge (other than by acts by the Executive or his representatives in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 11 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 12. REMEDY FOR VIOLATION OF SECTION 11. The Executive acknowledges that the Company has no adequate remedy at law and will be irreparably harmed if the Executive breaches or threatens to breach the provisions of Section 11 of this Agreement, and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any breach or threatened breach of such Section and that the Company shall be entitled to specific performance of the terms of such Section in addition to any other legal or equitable remedy it may have. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have or any other rights that it may have under any other agreement. 13. WITHHOLDING. Anything in this Agreement to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Executive shall be subject to withholding, at the time payments are actually made to the Executive and received by him, of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company may, in its sole discretion, accept other provision for payment of taxes as required by law, provided that it is satisfied that all requirements of law as to its responsibilities to withhold such taxes have been satisfied. 14. ARBITRATION. Any dispute or controversy between the Company and the Executive, whether arising out of or relating to this Agreement, the breach of this Agreement, or otherwise, shall be settled by arbitration administered by the American Arbitration Association ("AAA") in accordance with its Commercial Arbitration Rules then in effect, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Any arbitration shall be held before a single arbitrator who shall be selected by the mutual agreement of the Company and the Executive, unless the parties are unable to agree to an arbitrator, in which case, the arbitrator will be selected under the procedures of the AAA. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. However, either party may, without inconsistency with this arbitration provision, apply to any court having jurisdiction over such dispute or controversy and seek interim provisional, injunctive or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved. Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Company and the Executive. The Company and the Executive - 15 - 16 acknowledge that this Agreement evidences a transaction involving interstate commerce. Notwithstanding any choice of law provision included in this Agreement, the United States Federal Arbitration Act shall govern the interpretation and enforcement of this arbitration provision. The arbitration proceeding shall be conducted in Atlanta, Georgia or such other location to which the parties may agree. The Company shall pay the costs of any arbitrator appointed hereunder. 15. REIMBURSEMENT OF LEGAL EXPENSES. In the event that the Executive is successful, whether in mediation, arbitration or litigation, in pursuing any claim or dispute involving the Executive's employment with the Company, including any claim or dispute relating to (a) this Agreement, (b) termination of the Executive's employment with the Company or (c) the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall promptly reimburse the Executive for all costs and expenses (including, without limitation, attorneys' fees) relating solely, or allocable, to such successful claim. In any other case, the Executive and the Company shall each bear all their own respective costs and attorneys' fees. 16. TAXES. In the event that the aggregate of all payments or benefits made or provided to, or that may be made or provided to, the Executive under this Agreement and under all other plans, programs and arrangements of the Company (the "Aggregate Payment") is determined to constitute a "parachute payment," as such term is defined in Section 280G(b)(2) of the Internal Revenue Code, the Company shall pay to the Executive, prior to the time any excise tax imposed by Section 4999 of the Internal Revenue Code ("Excise Tax") is payable with respect to such Aggregate Payment, an additional amount which, after the imposition of all income and excise taxes thereon, is equal to the Excise Tax on the Aggregate Payment. The determination of whether the Aggregate Payment constitutes a parachute payment and, if so, the amount to be paid to the Executive and the time of payment pursuant to this Section 16 shall be made by an independent auditor (the "Auditor") jointly selected by the Company and the Executive and paid by the Company. The Auditor shall be a nationally recognized United States public accounting firm which has not, during the two (2) years preceding the date of its selection, acted in any way on behalf of the Company or any affiliate thereof. If the Executive and the Company cannot agree on the firm to serve as the Auditor, then the Executive and the Company shall each select one accounting firm and those two firms shall jointly select the accounting firm to serve as the Auditor. Notwithstanding the foregoing, in the event that the amount of the Executive's Excise Tax liability is subsequently determined to be greater than the Excise Tax liability with respect to which an initial payment to the Executive under this Section 16 has been made, the Company shall pay to the Executive an additional amount with respect to such additional Excise Tax (and any interest and penalties thereon) at the time and in the amount determined by the Auditor so as to make the Executive whole, on an after-tax basis, with respect to such Excise Tax (and any interest and penalties thereon) and such additional amount paid by the Company. In the event the amount of the Executive's Excise Tax liability is subsequently determined to be less than the Excise Tax liability with respect to which an initial payment to the Executive has been made, the Executive shall, as soon as practical after the determination is made, pay to the Company the amount of the overpayment by the Company, reduced by the amount of any relevant taxes already paid by the Executive and not refundable, all as determined - 16 - 17 by the Auditor. The Executive and the Company shall cooperate with each other in connection with any proceeding or claim relating to the existence or amount of liability for Excise Tax, and all expenses incurred by the Executive in connection therewith shall be paid by the Company promptly upon notice of demand from the Executive. 17. SUCCESSORS. 17.1 This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's heirs and legal representatives. 17.2 This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. 17.3 The Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) to all or a substantial portion of its assets, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform this Agreement if no such succession had taken place. Regardless of whether such an agreement is executed, this Agreement shall be binding upon any successor of the Company in accordance with the operation of law, and such successor shall be deemed the "Company" for purposes of this Agreement. 17.4 As used in this Agreement, the term "Company" shall include any successor to the Company's business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 18. REPRESENTATIONS. 18.1 The Company represents and warrants that (i) the execution of this Agreement has been duly authorized by the Company, including action of the Board and Committee, (ii) the execution, delivery and performance of this Agreement by the Company does not and will not violate any law, regulation, order, judgment or decree or any agreement, plan or corporate governance document of the Company and (iii) upon the execution and delivery of this Agreement by the Executive, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). 18.2 The Executive represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by the Executive does not and will not violate any law, regulation, order, judgment or decree or any agreement to which the Executive is a party or by which he is bound, (ii) although the Executive is bound by certain - 17 - 18 noncompetition, nonsolicitation and confidentiality covenants in an agreement with his immediately preceding employer, the Executive is not a party to or bound by any employment agreement, noncompetition agreement or confidentiality agreement with any person or entity that would interfere materially with this Agreement or his performance of services hereunder, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Executive, enforceable in accordance with its terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). 19. MISCELLANEOUS. 19.1 This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, without reference to principles of conflicts of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. 19.2 All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party, by overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Robert L. Nardelli 1 Cobble Court Loudonville, NY 12211 with a copy to: Robert J. Stucker, Esq. Vedder, Price, Kaufman & Kammholz 222 N. LaSalle Street 26th Floor Chicago, IL 60601 If to the Company: The Home Depot, Inc. 2455 Paces Ferry Road Atlanta, GA 30339 Attn: General Counsel - 18 - 19 or to such other address as either of the parties shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. 19.3 None of the provisions of this Agreement shall be deemed to impose a penalty. 19.4 The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 19.5 Any party's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision hereof. 19.6 This Agreement supersedes any prior employment agreement or understandings, written or oral between the Company and the Executive and contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. 19.7 This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates written below. THE HOME DEPOT, INC. By: /s/ Bernard Marcus ------------------ Bernard Marcus Co-Chairman of the Board Date: By: --------------------- John L. Clendenin Chairman of the Compensation Committee of the Board Date: By: /s/ Robert L. Nardelli ---------------------- Robert L. Nardelli President and Chief Executive Officer Date: - 19 - 20 APPENDIX A SCHEDULE FOR DEFERRED STOCK UNITS
VESTING DATE DEFERRAL ELECTION DATE DISTRIBUTION DATE 1. December 4, 2000 December 31, 2001 January 1, 2003 2. December 4, 2001 December 31, 2002 January 1, 2004 3. December 4, 2002 December 31, 2003 January 1, 2005 4. December 4, 2003 December 31, 2004 January 1, 2006 5. December 4, 2004 December 31, 2005 January 1, 2007
- 20 - 21 [Home Depot Letterhead] January 19, 2001 Mr. Robert L. Nardelli 1 Cobble Court Loudonville, New York 12211 Dear Bob: This letter is delivered to you as a supplement to your Employment Agreement (the "Agreement") with The Home Depot, Inc. (the "Company") of even date herewith, as provided for in Paragraph 5.3 of the Agreement. During your Period of Employment with the Company and subject to the terms of the Agreement, the Company will provide you with the following benefits, which shall satisfy the Company's obligation to provide you with benefits no less than, in both scope and value of coverage, the benefits provided you by General Electric Company: 1. Life Insurance. The Company will assume from General Electric Company, its obligations under the following three insurance policies: (1) GE Executive Life Policy number 918490013U; (2) Executive Life Policy number 955190365UE; and (3) Leadership Life Policy number 945192518UE. Alternatively, at your option, the Company shall provide you with term life insurance with a death benefit of $25 million, with a guaranteed minimum term of fifteen (15) years. The Company will pay you, on or prior to such date as you are required to pay federal, state or local taxes with respect to the provision of the life insurance described in this item 1, an additional payment in an amount sufficient to fully reimburse you with respect to all federal, state and local taxes with respect to this life insurance and with respect to receipt of the additional payment. 2. Basic Life Insurance. In addition to the life insurance described in paragraph 1, the Company will provide you with the life insurance benefits generally provided to executives of the Company, subject the usual terms under which such life insurance is normally offered from time to time. 3. Health Insurance. The Company shall provide you and your eligible family members with full health care insurance under its Cigna Preferred Provider Access plan (or similar plan), in accordance with its terms as in effect from time to time. 22 4. Prescription Drug Program. You and your family will be entitled to participate in the Company's prescription drug program, in accordance with its terms as in effect from time to time. 5. Dental Insurance. You and your family will be able to participate in the Company's dental insurance program, in accordance with its terms as in effect from time to time. 6. Salary Continuation and Disability Insurance. You will be covered by the Company's salary continuation and long-term disability insurance programs, in accordance with their terms as in effect from time to time. 7. Automobile. The Company shall provide you with the use of an automobile, to be selected by you, such automobile to be similar in class to that of the current Mercedes Benz S600. It is anticipated that the automobile will be leased by the Company for a period up to three years. The Company will provide you with a new leased or purchased vehicle every three years. In addition, the Company shall pay for all maintenance, repairs, insurance and similar cost related to the automobile. The Company will pay you, on or prior to such date as you are required to pay federal, state or local taxes with respect to the provision of the automobile benefit described in this item 7, an additional payment in an amount sufficient to fully reimburse you with respect to all federal, state and local taxes with respect to this automobile benefit and with respect to receipt of the additional payment. 8. Aircraft. The Company will make available a private aircraft for use by you and your family. The Company requires, where practicable, that you travel by use of such aircraft, for security purposes. Your family's personal use of such aircraft will require the inclusion in your taxable income, an amount equal to the related benefit of such accommodations. Such inclusion shall be made as required under the Internal Revenue Code and related regulations. The Company will pay you, on or prior to such date as you are required to pay federal, state or local taxes with respect to the provision of the aircraft benefit described in this item 8, an additional payment in an amount sufficient to fully reimburse you with respect to all federal, state and local taxes with respect to this aircraft benefit and with respect to receipt of the additional payment. 9. Professional Services. The Company shall, in addition to the benefits provided to you under Paragraph 4.6 of the Agreement, reimburse you for financial planning and tax consultation and services up to $150,000 per three-year period. The Company will pay you, on or prior to such date as you are required to pay federal, state or local taxes with respect to the provision of the professional services benefit described in this item 9, an additional payment in an amount sufficient to fully reimburse you with respect to all federal, state and local taxes with respect to this professional services benefit and with respect to receipt of the additional payment. 10. Retirement and 401(k) Plans. You will be entitled to participate in the Company's retirement and 401(k) plans, in accordance with the terms of such plans in effect from time to time. 23 11. Employee Stock Purchase Plan. You will be entitled to participate in the Company's voluntary stock contribution plan, in accordance with its terms as in effect from time to time. 12. Cafeteria Plan. You will be entitled to participate in the Company's Cafeteria plan, in accordance with its terms as in effect from time to time. 13. Vacation. You will be entitled to six weeks of paid vacation, to be taken at your discretion. 14. Other Benefit Plans. You and your family will be entitled to participate in any and all of the Company's other benefits plans applicable to senior executives, in accordance with their respective terms as in effect from time to time. Very truly yours, By: /s/ Bernard Marcus ---------------------------------------- Bernard Marcus Co-Chairman of the Board By: /s/ John L. Clendenin ---------------------------------------- John L. Clendenin Chairman of the Compensation Committee of the Board EX-10.18 5 g68482ex10-18.txt PROMISSORY NOTE, DATED DECEMBER 4, 2000 1 EXHIBIT 10.18 PROMISSORY NOTE $10,000,000.00 December 4, 2000 FOR VALUE RECEIVED, Robert L. Nardelli (the "Borrower"), promises to pay to The Home Depot, Inc., a Delaware corporation ("Lender"), or its assignee, the principal sum of Ten Million Dollars ($10,000,000.00) with interest from the date hereof at a rate of five and eight tenths percent (5.8%) per annum, compounded annually, on the unpaid balance of such principal sum. Such principal and interest shall be due and payable and/or forgiven (as the case may be) in accordance with Sections 4.2.4 and 7.2.9 of that certain Employment Agreement effective as of December 4, 2000, by and between the Borrower and the Lender (the "Employment Agreement"). If the Borrower's employment with the Company is terminated prior to payment in full of this Note, this Note shall be immediately due and payable and/or forgiven (as the case may be) in accordance with Sections 4.2.4 and 7.2.9 of the Employment Agreement. All payments by the Borrower under this Note shall be in immediately available funds. This Note may be prepaid in whole or in part at any time or from time to time. Any such prepayment shall be without premium or penalty. If any amount due under this Note becomes due and payable on a Saturday, Sunday, or public or other banking holiday under the laws of the State of Georgia, the due date thereof shall be extended to the next succeeding business day. Upon the failure to pay principal under this Note when due, which shall remain unremedied for twenty days following the date when principal was due hereunder; then, the Lender may declare, by written notice of default given to the Borrower, the entire principal amount of this Note to be due and payable, whereupon the entire principal amount of this Note outstanding shall become due and payable. No delay or failure by the Lender in the exercise of any right or remedy shall constitute a waiver thereof, and no single or partial exercise by the Lender of any right or remedy shall preclude other or future exercise thereof or the exercise of any other right or remedy. None of the terms or provisions of this Note may be excluded, modified or amended except by a written instrument duly executed on behalf of the holder expressly referring to this Note and setting forth the provision so excluded, modified, or amended. As used herein, the Borrower includes the successors, assigns and distributees of the undersigned. As used herein, the Lender includes the successors, assigns and distributees of the Lender, as well as a holder in due course of this Note. THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES). /s/ Robert L. Nardelli ------------------------- Robert L. Nardelli EX-10.19 6 g68482ex10-19.txt COMMERCIAL PAPER DEALER AGREEMENT 1 EXHIBIT 10.19 COMMERCIAL PAPER DEALER AGREEMENT [4(2) PROGRAM] BETWEEN THE HOME DEPOT, INC., AS ISSUER AND CREDIT SUISSE FIRST BOSTON CORPORATION, AS DEALER CONCERNING NOTES TO BE ISSUED PURSUANT TO AN ISSUING AND PAYING AGENCY AGREEMENT DATED AS OF JANUARY 5, 1998 BETWEEN THE ISSUER AND BANK ONE, NATIONAL ASSOCIATION, SUCCESSOR TO THE FIRST NATIONAL BANK OF CHICAGO, AS ISSUING AND PAYING AGENT DATED AS OF JANUARY 24, 2001 2 COMMERCIAL PAPER DEALER AGREEMENT [4(2) PROGRAM] This agreement ("Agreement") sets forth the understandings between the Issuer and the Dealer in connection with the issuance and sale by the Issuer of its short-term promissory notes pursuant to the Issuing and Paying Agency Agreement dated as of January 5, 1998 between the Issuer and Bank One, National Association, successor to The First National Bank of Chicago, as Issuing and Paying Agent (the "Notes") through the Dealer. Certain terms used in this Agreement are defined in Section 6 hereof. The Addendum to this Agreement, and any Annexes or Exhibits described in this Agreement or such Addendum, are hereby incorporated into this Agreement and made fully a part hereof. Section 1. Offers, Sales and Resales of Notes. 1.1 While (i) the Issuer has and shall have no obligation to sell the Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for the account of the Issuer, and (ii) the Dealer has and shall have no obligation to purchase the Notes from the Issuer or to arrange any sale of the Notes for the account of the Issuer, the parties hereto agree that in any case where the Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the Issuer, such Notes will be purchased and sold in reliance on the representations, warranties, covenants and agreements of the parties contained herein or made pursuant hereto and on the terms and conditions and in the manner provided herein. 1.2 So long as this Agreement shall remain in effect, and in addition to the limitations contained in Section 1.7 hereof, the Issuer shall not, without the consent of the Dealer (which consent shall not be unreasonably withheld), offer, solicit or accept offers to purchase, or sell, any Notes except (a) in transactions with one or more dealers which may from time to time after the date hereof become dealers with respect to the Notes by executing with the Issuer one or more agreements which contain provisions substantially identical to Section I of this Agreement, of which the Issuer hereby undertakes to provide the Dealer prompt notice or (b) in transactions with the other dealers listed on the Addendum hereto, which are executing agreements with the Issuer which contain provisions substantially identical to Section 1 of this Agreement contemporaneously herewith. In no event shall the Issuer offer, solicit or accept offers to purchase, or sell, any Notes directly on its own behalf in transactions with persons other than broker-dealers as specifically permitted in this Section 1.2. 1.3 The Notes shall be in a minimum denomination or minimum amount, whichever is applicable, of $250,000 or integral multiples of $1,000 in excess thereof, will bear such interest rates, if interest bearing, or will be sold at such discount from their face amounts, as shall be agreed upon by the Dealer and the Issuer, shall have a maturity not exceeding 270 days from the date of issuance (exclusive of days of grace) and shall not contain any provision for extension, renewal or automatic "rollover." 2 3 1.4 The authentication, delivery and payment of the Notes shall be effected in accordance with the Issuing and Paying Agency Agreement and the Notes shall be either individual bearer physical certificates or represented by book-entry Notes registered in the name of DTC or its nominee in the form or forms annexed to the Issuing and Paying Agency Agreement. 1.5 If the Issuer and the Dealer shall agree on the terms of the purchase of any Note by the Dealer or the sale of any Note arranged by the Dealer (including, but not limited to, agreement with respect to the date of issue, purchase price, principal amount, maturity and interest rate (in the case of interest-bearing Notes) or discount thereof (in the case of Notes issued on a discount basis), and appropriate compensation for the Dealer's services hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be issued and delivered in accordance with the terms of the Issuing and Paying Agency Agreement and payment for such Note shall be made by the purchaser thereof, either directly or through the Dealer, to the Issuer. Except as otherwise agreed, in the event that the Dealer is acting as an agent and a purchaser shall either fail to accept delivery of or make payment for a Note on the date fixed for settlement, the Dealer shall promptly notify the Issuer, and if the Dealer has theretofore paid the Issuer for the Note, the Issuer will promptly return such funds to the Dealer against its return of the Note to the Issuer, in the case of a certificated Note, and upon notice of such failure in the case of a book-entry Note. If such failure occurred for any reason other than default by the Dealer, the Issuer shall reimburse the Dealer on an equitable basis for the Dealer's loss of the use of such funds for the period such funds were credited to the Issuer's account. 1.6 The Dealer and the Issuer hereby establish and agree to observe the following procedures in connection with offers, sales and subsequent resales or other transfers of the Notes: (a) Offers and sales of the Notes by or through the Dealer shall be made only to the following types of investors: (i) investors reasonably believed by the Dealer to be Institutional Accredited Investors, (ii) non-bank fiduciaries or agents that will be purchasing Notes for one or more accounts, each of which is an Institutional Accredited Investor, and (iii) Qualified Institutional Buyers. (b) Resales and other transfers of the Notes by the holders thereof shall be made only in accordance with the restrictions in the legends described in clause (e) below. No general solicitation or general advertising shall be used in connection with the offering of the Notes. Without limiting the generality of the foregoing, without the prior written approval of Dealer, the Issuer shall not issue any press release or place or publish any "tombstone" or other advertisement relating to the Notes. (c) No general solicitation or general advertising shall be used in connection with the offering of the Notes. Without limiting the generality of the foregoing, without the prior written approval of Dealer, the Issuer shall not issue any press release or place or publish any "tombstone" or other advertisement relating to the Notes. (d) No sale of Notes to any one purchaser shall be for less than $250,000 principal or face 3 4 amount, and no Note shall be issued in a smaller principal or face amount. If the purchaser is a non-bank fiduciary acting on behalf of others, each person for whom such purchaser is acting must purchase at least $250,000 principal or face amount of Notes. (e) Offers and sales of the Notes by the Issuer through the Dealer acting as agent for the Issuer shall be made in accordance with Rule 506 under the Securities Act, and shall be subject to the restrictions described in the legend appearing on Exhibit A hereto. A legend substantially to the effect of such Exhibit A shall appear as part of the Private Placement Memorandum used in connection with offers and sales of Notes hereunder, as well as on each Note offered and sold pursuant to this Agreement. (f) Dealer shall furnish or shall have furnished to each purchaser of Notes being sold to an ultimate purchaser for the first time a copy of the then current Private Placement Memorandum unless such purchaser has previously received a copy of the Private Placement Memorandum as then in effect. The Private Placement Memorandum shall expressly state that any person to whom Notes are offered shall have an opportunity to ask questions of, and receive information from, the Issuer and the Dealer and shall provide the names, addresses and telephone numbers of the persons from whom information regarding the Issuer may be obtained. (g) The Issuer agrees, for the benefit of the Dealer and each of the holders and prospective purchasers from time to time of the Notes that, if at any time the Issuer shall not be subject to Section 13 or 15(d) of the Exchange Act, the Issuer will furnish, upon request and at its expense, to the Dealer and to holders and prospective purchasers of Notes information required by Rule 144A(d)(4)(i) in compliance with Rule 144A(d). (h) In the event that any Note offered or to be offered by Dealer would be ineligible for resale under Rule 144A, the Issuer shall immediately notify Dealer (by telephone, confirmed in writing) of such fact and shall promptly prepare and deliver to Dealer an amendment or supplement to the Private Placement Memorandum describing the Notes that are ineligible, the reason for such ineligibility and any other relevant information relating thereto. (i) The Issuer represents that it is currently issuing commercial paper in the United States market in reliance upon, and in compliance with, the exemption provided by Section 3(a)(3) of the Securities Act. In that connection, the Issuer agrees that: (a) the proceeds from the sale of the Notes will be segregated from the proceeds of the sale of any such commercial paper by being placed in a separate account; and (b) the Issuer has instituted appropriate corporate procedures to ensure that the offers and sales of notes issued by the Issuer pursuant to the Section 3(a)(3) exemption are not integrated with offerings and sales of Notes hereunder. (j) The Issuer hereby agrees that, not later than 15 days after the first sale of Notes as contemplated by this Agreement, it will file with the SEC a notice on Form D in accordance with Rule 503 under the Securities Act and that it will thereafter file such amendments to such notice as Rule 503 may require. 4 5 1.7 The Issuer hereby represents and warrants to the Dealer, in connection with offers, sales and resales of Notes, as follows: (a) Issuer hereby confirms to the Dealer that (except as permitted by Section 1.6(i)) within the preceding six months neither the Issuer nor any person other than the Dealer or the other dealers referred to in Section 1.2 hereof acting on behalf of the Issuer has offered or sold any Notes, or any substantially similar security of the Issuer (including, without limitation, medium-term notes issued by the Issuer), to, or solicited offers to buy any such security from, any person other than the Dealer or the other dealers referred to in Section 1.2 hereof. The Issuer also agrees that, as long as the Notes are being offered for sale by the Dealer and the other dealers referred to in Section 1.2 hereof as contemplated hereby and until at least six months after the offer of Notes hereunder has been terminated, neither the Issuer nor any person other than the Dealer or the other dealers referred to in Section 1.2 hereof (except as contemplated by Section 1.2 hereof) will offer the Notes or any substantially similar security of the Issuer for sale to, or solicit offers to buy any such security from, any person other than the Dealer and the other dealers referred to in Section 1.2 hereof, it being understood that such agreement is made with a view to bringing the offer and sale of the Notes within the exemption provided by Section 4(2) of the Securities Act and Rule 506 thereunder and shall survive any termination of this Agreement. The Issuer hereby represents and warrants that it has not taken or omitted to take, and will not take or omit to take, any action that would cause the offering and sale of Notes hereunder to be integrated with any other offering of securities, whether such offering is made by the Issuer or some other party or parties. (b) In the event that the Dealer purchases Notes as principal and does not resell such Notes on the day of such purchase, to the extent necessary to comply with Regulation T and the interpretations thereunder, the Dealer will sell such Notes only to offerees it reasonably believes to be QIBs or to QIBs it reasonably believes are acting for other QIBs, in each case in accordance with Rule 144A. Section 2. Representations and Warranties of Issuer. The Issuer represents and warrants that: 2.1 The Issuer is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all the requisite corporate power and authority to execute, deliver and perform its obligations under the Notes, this Agreement and the Issuing and Paying Agency Agreement. 2.2 This Agreement and the Issuing and Paying Agency Agreement have been duly authorized, executed and delivered by the Issuer and constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is 5 6 sought in a proceeding in equity or at law) and except insofar as rights to indemnifications and contributions may be limited by applicable law. 2.3 The Notes have been duly authorized, and when issued and delivered as provided in the Issuing and Paying Agency Agreement, will be duly and validly issued and delivered and will constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.4 The offer and sale of Notes in the manner contemplated hereby do not require registration of the Notes under the Securities Act, pursuant to the exemption from registration contained in Section 4(2) thereof and Regulation D thereunder, and no indenture in respect of the Notes is required to be qualified under the Trust Indenture Act of 1939, as amended. 2.5 The Notes will rank at least pari passu with all other unsecured and unsubordinated indebtedness of the Issuer. 2.6 Except as provided in Section 1.6(j), no consent or action of, or filing or registration with, any governmental or public regulatory body or authority, including the SEC, is required to be obtained by the Issuer to authorize, or is otherwise required to be obtained by the Issuer in connection with the execution, delivery or performance of, this Agreement, the Notes or the Issuing and Paying Agency Agreement, except as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Notes. 2.7 Neither the execution and delivery of this Agreement and the Issuing and Paying Agency Agreement, nor the issuance and delivery of the Notes in accordance with the Issuing and Paying Agency Agreement, nor the fulfillment of or compliance with the terms and provisions hereof or thereof by the Issuer, will (i) result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Issuer, or (ii) violate or result in a breach or an event of default under any of the terms of the Issuer's charter documents or by-laws, any contract or instrument to which the Issuer is a party or by which it or its property is bound and that is material to the Issuer, or any law or regulation, or any order, writ, injunction or decree of any court or government instrumentality, to which the Issuer is subject or by which it or its property is bound, which violation, breach or event of default might reasonably be expected to have a material adverse effect on the earnings, business or operations of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.8 Except as disclosed in the Company Information, there is no litigation or governmental proceeding pending, or to the knowledge of the Issuer threatened, against or affecting the Issuer or any of its subsidiaries which might reasonably be expected to have a material adverse effect on the earnings, business or operations of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 6 7 2.9 The Issuer is not an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 2.10 Neither the Private Placement Memorandum nor the Company Information contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided that the Issuer makes no representation or warranty relating to Dealer Information. 2.11 Each (a) issuance of Notes by the Issuer hereunder and (b) amendment or supplement of the Private Placement Memorandum shall be deemed a representation and warranty by the Issuer to the Dealer, as of the date thereof, that, both before and after giving effect to such issuance and after giving effect to such amendment or supplement, (i) the representations and warranties given by the Issuer set forth above in this Section 2 remain true and correct on and as of such date as if made on and as of such date, (ii) in the case of an issuance of Notes, the Notes being issued on such date have been duly and validly issued and constitute legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and (iii) in the case of an issuance of Notes, since the date of the most recent Private Placement Memorandum, there has been no material adverse change in the earnings, business or operations of the Issuer which has not been disclosed in the Company Information. Section 3. Covenants and Agreements of Issuer. The Issuer covenants and agrees that: 3.1 The Issuer will give the Dealer prompt notice (but in any event prior to any subsequent issuance of Notes hereunder) of any amendment to, modification of, or waiver with respect to, the Notes, the Issuing and Paying Agency Agreement, including a complete copy of any such amendment, modification or waiver. 3.2 The Issuer shall, whenever there shall occur any change in the Issuer's earnings, business or operations that would be material to holders of the Notes or potential holder of the Notes (including any downgrading or receipt of any notice of intended or potential downgrading or any review for potential change in the rating accorded any of the Issuer's securities by any nationally recognized statistical rating organization which has published a rating of the Notes), promptly, and in any event prior to any subsequent issuance of Notes hereunder, notify the Dealer (by telephone, confirmed in writing) of such change, development, or occurrence. 3.3 The Issuer shall from time to time furnish to the Dealer such information as the Dealer may reasonably request, including, without limitation, any press releases or material provided by the Issuer to any national securities exchange or rating agency, regarding the due authorization and execution of the Notes and the Issuer's ability to pay the Notes as they mature. 7 8 3.4 The Issuer will take all such action as the Dealer may reasonably request to ensure that each offer and each sale of the Notes will comply with any applicable state Blue Sky laws; provided , that the Issuer shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. 3.5 The Issuer shall not issue Notes hereunder until the Dealer shall have received (a) an opinion of counsel to the Issuer, addressed to the Dealer, satisfactory in form and substance to the Dealer, (b) a copy of the executed Issuing and Paying Agency Agreement as then in effect, (c) a copy of resolutions adopted by the Board of Directors of the Issuer, satisfactory in form and substance to the Dealer and certified by the Secretary or similar officer of the Issuer, authorizing execution and delivery by the Issuer of this Agreement the Issuing and Paying Agency Agreement and the Notes and consummation by the Issuer of the transactions contemplated hereby and thereby, (d) prior to the issuance of any Notes represented by a book-entry note registered in the name of DTC or its nominee, a copy of the executed Letter of Representations among the Issuer, the Issuing and Paying Agent and DTC and (e) such other certificates, opinions, letters and documents as the Dealer shall have reasonably requested. 3.6 The Issuer shall reimburse the Dealer for all of the Dealer's reasonable out-of-pocket expenses actually incurred by the Dealer related to this Agreement, including expenses incurred in connection with its preparation and negotiation, and the transactions contemplated hereby (including, but not limited to, the printing and distribution of the Private Placement Memorandum), and, if applicable, for the reasonable fees and out-of-pocket expenses of the Dealer's counsel, not to exceed $5,000. Section 4. Disclosure 4.1 The Private Placement Memorandum and its contents (other than the Dealer Information) shall be the sole responsibility of the Issuer. The Private Placement Memorandum shall contain a statement expressly offering an opportunity for each prospective purchaser to ask questions of, and receive answers from, the Issuer concerning the offering of Notes and to obtain relevant additional information which the Issuer possesses or can acquire without unreasonable effort or expense. 4.2 The Issuer agrees promptly to furnish the Dealer the Company Information as it becomes publicly available. 4.3 (a) The Issuer further agrees, if the Issuer has any Notes outstanding or in connection with any proposed issuance of Notes by the Issuer, to notify the Dealer promptly upon the occurrence of any event relating to or affecting the Issuer that would cause the Company Information then in existence to include an untrue statement of material fact or to omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. 8 9 (b) In the event that the Issuer gives the Dealer notice pursuant to Section 4.3(a) and the Dealer notifies the Issuer that it then has Notes it is holding in inventory, (i) the Issuer agrees promptly to supplement or amend the Private Placement Memorandum so that such Private Placement Memorandum, as amended or supplemented, shall not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Issuer shall make such supplement or amendment available to the Dealer or (ii) if the Issuer chooses not to promptly amend or supplement the Private Placement Memorandum, the Dealer shall have the right to resell to the Issuer any such Notes held in inventory at a price equal to the face amount thereof discounted on a ratable basis based on the Issuer's market rate reflecting the remaining period until maturity in relation to the original term. (c) In the event that (i) the Issuer gives the Dealer notice pursuant to Section 4.3(a) and (ii) the Dealer does not notify the Issuer that it is then holding Notes in inventory and (iii) the Issuer chooses not to promptly amend or supplement the Private Placement Memorandum in the manner described in clause (b) above, then all solicitations and sales of Notes shall be suspended until such time as the Issuer has so amended or supplemented the Private Placement Memorandum, and made such amendment or supplement available to the Dealer. Section 5. Indemnification and Contribution. 5.1 The Issuer will indemnify and hold harmless the Dealer, each individual, corporation, partnership, trust, association or other entity controlling the Dealer, any affiliate of the Dealer or any such controlling entity and their respective directors, officers, employees, partners, incorporators, shareholders, servants, trustees and agents (hereinafter the "Dealer Indemnitees") against any and all liabilities, penalties, suits, causes of action, losses, damages, claims, costs and expenses (including, without limitation, fees and disbursements of counsel) or judgments of whatever kind or nature (each a "Claim"), imposed upon, incurred by or asserted against the Dealer Indemnitees arising out of or based upon (i) any allegation that the Private Placement Memorandum or the Company Information included (as of any relevant time) or includes an untrue statement of a material fact or omitted (as of any relevant time) or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (ii) arising out of or based upon the breach by the Issuer of any agreement, covenant or representation made in or pursuant to this Agreement. This indemnification shall not apply to the extent that the Claim arises out of or is based upon Dealer Information or the gross negligence or willful misconduct of any Dealer Indemnitee. 5.2 The Dealer will indemnify and hold harmless the Issuer, each individual, corporation, partnership, trust, association or other entity controlling the Issuer, any affiliate of the Issuer or any such controlling entity and their respective directors, officers, employees, partners, incorporators, shareholders, servants, trustees and agents (hereinafter the "Issuer Indemnitees") against any and all liabilities, penalties, suits, causes of action, losses, damages, claims, costs and expenses (including, without limitation, fees and disbursements of counsel) or 9 10 judgments of whatever kind or nature (each a "Claim"), imposed upon, incurred by or asserted against the Issuer Indemnitees arising out of or based upon any allegation that the Private Placement Memorandum included (as of any relevant time) or includes an untrue statement of a material fact or omitted (as of any relevant time) or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case, to the extent, but only to the extent, that such untrue statement or alleged untrue statement, or omission or alleged omission, relates to Dealer Information. 5.3 Provisions relating to claims made for indemnification under this Section 5 are set forth on Exhibit B to this Agreement. 5.4 In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 5 is held to be unavailable or insufficient to hold harmless the Indemnitees, although applicable in accordance with the terms of this Section 5, the Issuer shall contribute to the aggregate costs incurred by the Dealer in connection with any Claim in the proportion of the respective economic interests of the Issuer and the Dealer; provided , however, that such contribution by the Issuer shall be in an amount such that the aggregate costs incurred by the Dealer do not exceed the aggregate of the commissions and fees earned by the Dealer hereunder with respect to the issue or issues of Notes to which such Claim relates. The respective economic interests shall be calculated by reference to the aggregate proceeds to the Issuer of the Notes issued hereunder and the aggregate commissions and fees earned by the Dealer hereunder. Section 6. Definitions. 6.1 "Claim" shall have the meaning set forth in Section 5.1. 6.2 "Company Information" at any given time shall mean the Private Placement Memorandum (other than the Dealer Information) together with, to the extent applicable, (i) the Issuer's most recent report on Form 10-K filed with the SEC and each report on Form 10-Q or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, (ii) the Issuer's most recent annual audited financial statements and each interim financial statement or report prepared subsequent thereto, if not included in item (i) above, (iii) the Issuer's other publicly available reports, including, but not limited to, any publicly available filings or reports provided to its shareholders, (iv) any other information or disclosure prepared pursuant to Section 4.3 hereof and (v) any information prepared or approved by the Issuer in writing expressly for dissemination to investors or potential investors in the Notes. 6.3 "Dealer Information" shall mean material concerning the Dealer and provided by the Dealer in writing expressly for inclusion in the Private Placement Memorandum. 6.4 "DTC" shall mean The Depository Trust Company. 6.5 "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as amended. 10 11 6.6 "Indemnitee" shall have the meaning set forth in Section 5.1. 6.7 "Institutional Accredited Investor" shall mean an institutional investor that is an accredited investor within the meaning of Rule 501 under the Securities Act and that has such knowledge and experience in financial and business matters that it is capable of evaluating and bearing the economic risk of an investment in the Notes, including, but not limited to, a bank, as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity. 6.8 "Issuing and Paying Agency Agreement" shall mean the issuing and paying agency agreement described on the cover page of this Agreement, as such agreement may be amended or supplemented from time to time. 6.9 "Issuing and Paying Agent" shall mean the party designated as such on the cover page of this Agreement, as issuing and paying agent under the Issuing and Paying Agency Agreement. 6.10 "Non-bank fiduciary or agent "shall mean a fiduciary or agent other than (a) a bank, as defined in Section 3(a)(2) of the Securities Act, or (b) a savings and loan association, as defined in Section 3(a)(5)(A) of the Securities Act. 6.11 "Private Placement Memorandum" shall mean offering materials prepared in accordance with Section 4 (including materials referred to therein or incorporated by reference therein) provided to purchasers and prospective purchasers of the Notes, and shall include amendments and supplements thereto which may be prepared from time to time in accordance with this Agreement (other than any amendment or supplement that has been completely superseded by a later amendment or supplement). 6.12 "Qualified Institutional Buyer" shall have the meaning assigned to that term in Rule 144A under the Securities Act. 6.13 "Regulation D" shall mean Regulation D (Rules 501 et seq.) under the Securities Act. 6.14 "Rule 144A" shall mean Rule 144A under the Securities Act. 6.15 "SEC" shall mean the U.S. Securities and Exchange Commission. 6.16 "Securities Act" shall mean the U.S. Securities Act of 1933, as amended. Section 7. General 7.1 Unless otherwise expressly provided herein, all notices under this Agreement to parties hereto shall be in writing and shall be effective when received at the address of the respective party set forth in the Addendum to this Agreement. 11 12 7.2 This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws provisions. 7.3 The Issuer agrees that any suit, action or proceeding brought by the Issuer against the Dealer in connection with or arising out of this Agreement or the Notes or the offer and sale of the Notes shall be brought solely in the United States federal courts located in the borough of Manhattan or the courts of the State of New York located in the Borough of Manhattan. EACH OF THE DEALER AND THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 7.4 This Agreement may be terminated, at any time, by the Issuer, upon one business day's prior notice to such effect to the Dealer, or by the Dealer upon one business day's prior notice to such effect to the Issuer. Any such termination, however, shall not affect the obligations of the Issuer under Sections 3.7, 5 and 7.3 hereof, the obligations of the Dealer under Sections 5 and 7.3, or the respective representations, warranties, agreements, covenants, rights or responsibilities of the parties made or arising prior to the termination of this Agreement. 7.5 This Agreement is not assignable by either party hereto without the written consent of the other party; provided, however, that the Dealer may assign its rights and obligations under this Agreement to any affiliate. 7.6 This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12 13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. THE HOME DEPOT, INC., AS ISSUER By: /s/ Carol B. Tome -------------------------------- Name: Carol B. Tome Title: SVP-Finance/Treasurer CREDIT SUISSE FIRST BOSTON CORPORATION, AS DEALER By: /s/ Helena Willner -------------------------------- Name: Helena Willner Title: Director 13 14 ADDENDUM 1. As of the date hereof, there are no other dealers as referred to in clause (b) of Section 1.2 of the Agreement. 2. The addresses of the respective parties for purposes of notices under Section 7.1 are as follows: For the Issuer: The Home Depot, Inc. Address: 2455 Paces Ferry Road Atlanta, GA 30339-4024 Attention: Rebecca Flick Telephone number: 770-384-2657 Fax number: 770-384-4929 For the Dealer: Credit Suisse First Boston Corporation Address: 11 Madison Avenue New York, N.Y. 10010 Attention: Short & Medium Term Finance Telephone number: 212-325-7198 Fax number: 212-325-8183 14 15 EXHIBIT A FORM OF LEGEND FOR PRIVATE PLACEMENT MEMORANDUM AND NOTES THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT THAT IT HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER AND THE NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY DISTRIBUTION THEREOF AND THAT IT IS EITHER (A) AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a) UNDER THE ACT AND THAT EITHER IS PURCHASING NOTES FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(A) OF THE ACT) ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S. BANK OR SAVINGS AND LOAN ASSOCIATION) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS EACH OF WHICH IS AN INSTITUTIONAL ACCREDITED INVESTOR (i) WHICH ITSELF POSSESSES SUCH KNOWLEDGE AND EXPERIENCE OR (ii) WITH RESPECT TO WHICH SUCH PURCHASER HAS SOLE INVESTMENT DISCRETION; OR (B) A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE ACT WHICH IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR MORE ACCOUNTS, EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER HAS SOLE INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE THAT THE SELLER MAY RELY UPON THE EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF ALSO SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT, EITHER (1) TO THE ISSUER OR TO CREDIT SUISSE FIRST BOSTON CORPORATION OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR OR A QIB, OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000. 15 16 EXHIBIT B FURTHER PROVISIONS RELATING TO INDEMNIFICATION (a) The Issuer agrees to reimburse each Indemnitee for all expenses (including reasonable fees and disbursements of internal and external counsel) as they are incurred by it in connection with investigating or defending any loss, claim, damage, liability or action in respect of which indemnification may be sought under Section 5 of the Agreement (whether or not it is a party to any such proceedings). (b) Promptly after receipt by an Indemnitee of notice of the existence of a Claim, such Indemnitee will, if a claim in respect thereof is to be made against the Issuer, notify the Issuer in writing of the existence thereof; provided that (i) the omission so to notify the Issuer will not relieve it from any liability which it may have hereunder unless and except to the extent it did not otherwise learn of such Claim and such failure results in the forfeiture by the Issuer of substantial rights and defenses, and (ii) the omission so to notify the Issuer will not relieve it from liability which it may have to an Indemnitee otherwise than on account of this indemnity agreement. In case any such Claim is made against any Indemnitee and it notifies the Issuer of the existence thereof, the Issuer will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the Indemnitee, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnitee; provided that if the defendants in any such Claim include both the Indemnitee and the Issuer and the Indemnitee shall have concluded that there may be legal defenses available to it which are different from or additional to those available to the Issuer, the Issuer shall not have the right to direct the defense of such Claim on behalf of such Indemnitee, and the Indemnitee shall have the right to select separate counsel to assert such legal defenses on behalf of such Indemnitee. Upon receipt of notice from the Issuer to such Indemnitee of the Issuer's election so to assume the defense of such Claim and approval by the Indemnitee of counsel, the Issuer will not be liable to such Indemnitee for expenses incurred thereafter by the Indemnitee in connection with the defense thereof (other than reasonable costs of investigation) unless (i) the Indemnitee shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Issuer shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel in the jurisdiction in which any Claim is brought), approved by the Dealer, representing the Indemnitee who is party to such Claim), (ii) the Issuer shall not have employed counsel reasonably satisfactory to the Indemnitee to represent the Indemnitee within a reasonable time after notice of existence of the Claim or (iii) the Issuer has authorized in writing the employment of counsel for the Indemnitee. The indemnity, reimbursement and contribution obligations of the Issuer hereunder shall be in addition to any other liability the Issuer may otherwise have to an Indemnitee and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Issuer and any Indemnitee. The Issuer agrees that without the Dealer's prior written consent, it will not settle, compromise or consent to the entry of any judgment in any Claim in respect of which indemnification may be sought under the indemnification provision of the Agreement (whether or not the Dealer or any other Indemnitee is an actual or potential party to such Claim), unless such settlement, compromise or consent includes an unconditional release of each Indemnitee from all liability arising out of such Claim. 16 EX-10.20 7 g68482ex10-20.txt NON-QUALIFIED STOCK OPTION AGREEMENT 1 EXHIBIT 10.20 THE HOME DEPOT, INC. NON-QUALIFIED STOCK OPTION AND DEFERRED STOCK UNITS PLAN AND AGREEMENT THIS NON-QUALIFIED STOCK OPTION AND DEFERRED STOCK UNITS PLAN AND AGREEMENT evidences that, subject to the following terms and conditions, on December 4, 2000 (the "Grant Date"), The Home Depot, Inc., a Delaware Corporation, (the "Company") granted to Robert L. Nardelli (the "Executive") the following: (i) a non-qualified stock option (the "Option"), for the purchase of two million five hundred thousand (2,500,000) shares of the Company's Common Stock, $.05 par value ("Common Stock"), at an option price of forty dollars and seventy-five cents ($40.75) per share (the "Option Price"), and (ii) an award of deferred stock units corresponding to seven hundred fifty thousand (750,000) shares of Common Stock (each a "Deferred Stock Unit"). 1. DEFINITIONS. As used herein, the following terms shall be defined as set forth below: (a) "CAUSE" shall mean that Executive has been convicted of a felony involving theft or moral turpitude, or engaged in conduct that constitutes willful gross neglect or willful gross misconduct with respect to Executive's employment duties which results in material economic harm to the Company; provided, however, that for purposes of determining whether conduct constitutes willful gross misconduct, no act on Executive's part shall be considered "willful" unless it is done by Executive in bad faith and without reasonable belief that his action was in the best interests of the Company. Notwithstanding the foregoing, the Company may not terminate Executive's employment for Cause unless (1) a determination that Cause exists is made and approved by a majority of the Company's Board of Directors (the "Board"), (2) Executive is given at least thirty (30) days' written notice of the Board meeting called to make such determination, and (3) Executive and his legal counsel are given the opportunity to address such meeting. (b) A "CHANGE IN CONTROL" shall be deemed to have occurred if: (1) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), excluding for this purpose, (A) the Company or any subsidiary of the Company, or (B) any employee benefit plan of the Company or 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 which acquires beneficial ownership of voting securities 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 more than twenty percent (20%) of the combined voting power of the Company's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership 2 percentage resulting solely from an acquisition of securities by the Company; or (2) During any two (2) consecutive years (not including any period beginning prior to December 3, 2000), individuals who at the beginning of such two (2) year period constitute the Board and any new director (except for a director designated by a person who has entered into an agreement with the Company to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board 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 either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority of the Board; or (3) Consummation of a reorganization, merger or consolidation or sale of the Company or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of the Company; or (4) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. (c) "COMMITTEE" means the Compensation Committee of the Board. (d) "DISABILITY" means Executive's inability to substantially perform his duties under that certain employment agreement entered into between the Company and Executive effective as of December 4, 2000 (the "Employment Agreement"), with reasonable accommodation, as evidenced by a certificate signed either by a physician mutually acceptable to the Company and Executive or, if the Company and Executive cannot agree upon a physician, by a physician selected by agreement of a physician designated by the Company and a physician designated by Executive; provided, however, that if such physicians cannot agree upon a third physician within thirty (30) days, such third physician shall be designated by the American Arbitration Association. 2 3 (e) "GOOD REASON" shall mean, without Executive's consent, (1) the assignment to Executive of any duties inconsistent in any material respect with Executive's position (including status, offices, titles and reporting relationships), authority, duties or responsibilities as contemplated by Section 3 of the Employment Agreement, or any other action by the Company which results in a significant diminution in such position, authority, duties or responsibilities, excluding any isolated and inadvertent action not taken in bad faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive; (2) any failure by the Company to comply with any of the provisions of Sections 4 or 5 of the Employment Agreement other than an isolated and inadvertent failure not committed in bad faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive; (3) Executive being required to relocate to a principal place of employment more than twenty-five (25) miles from his principal place of employment with the Company as of December 4, 2000; (4) delivery by the Company of a notice discontinuing the automatic extension provision of Section 2 of the Employment Agreement; (5) failure by the Company to elect Executive to the position of sole Chairman of the Board in compliance with the terms of Section 3.1 of the Employment Agreement; or (6) any purported termination by the Company of Executive's employment otherwise than as expressly permitted by the Employment Agreement. 2. STOCK OPTION. (a) INITIAL EXERCISE. Twenty percent (20%) of the total number of shares of Common Stock subject to the Option shall be exercisable immediately on or after the Grant Date, and an additional twenty percent (20%) of the total number of shares of Common Stock subject to the Option shall become exercisable on or after the first, second, third and fourth anniversaries of the Grant Date if Executive remains an employee of the Company through such dates, subject to subparagraph (c) below. In addition, the Option shall be fully exercisable immediately upon the occurrence of a Change in Control while Executive is employed by the Company. (b) EXPIRATION. The Option shall expire with respect to any share of Common Stock on the tenth anniversary of the date that the Option first becomes exercisable with respect to such share, unless the Option expires earlier in accordance with subparagraph (c) below upon a termination of employment by the Company for Cause or by Executive without Good Reason. (c) TERMINATION OF EMPLOYMENT. If (1) the Company terminates Executive's employment other than for Cause, (2) Executive, upon fifteen (15) days' prior written notice, terminates his employment for Good Reason, or (3) Executive's employment terminates due to death or Disability, the Option shall immediately become fully exercisable as of the date of termination. In the event of discharge by the Company for Cause or termination by Executive without Good Reason, the Option shall immediately lapse and become null and void on and as of the date of termination with respect to all shares of Common Stock subject to the Option (whether or not then exercisable), unless a Change in Control has occurred prior to such date of termination, in which case the Option shall remain exercisable in accordance with subparagraph (b) above without regard to Executive's termination. (d) METHOD OF EXERCISE. Exercisable shares under the Option may be exercised in whole or in part, with respect to whole shares of Common Stock, from time to time until the tenth anniversary of the date that the Option first becomes exercisable with respect to such 3 4 shares. Exercise shall be by notice of exercise to the Stock Administration Department of the Company, specifying the number of shares to be purchased, the Option Price of each share and the aggregate Option Price for all shares being purchased under said notice. The notice shall be accompanied by payment of the aggregate Option Price for the number of shares purchased and any applicable withholding taxes. Such exercise (subject to Paragraph 5 below) shall be effective upon the actual receipt of such payment and notice to the Company. The aggregate Option Price for all shares purchased pursuant to an exercise of the Option shall be paid by check payable to the order of the Company, shares of Common Stock of the Company held by Executive for at least six (6) months, the fair market value of which at the time of such exercise is equal to the aggregate Option Price (or portion thereof to be paid with previously owned Common Stock), or a combination of both. Payment of the Option Price in shares of Common Stock shall be made by delivering properly endorsed stock certificates to the Company or otherwise causing such Common Stock to be transferred to the account of the Company, or constructively exchanging such shares by a procedure established by the Committee so that Executive receives the excess of shares exercised under the Option over the shares owned by Executive and shares retained by the Company to satisfy withholding requirements. In addition, the aggregate Option Price for all shares purchased pursuant to an exercise of the Option may be paid from the proceeds of sale through a bank or broker on the date of exercise of some or all of the shares to which the exercise relates. There shall be furnished with each notice of the exercise of any portion of the Option such documents as the Company in its discretion may deem necessary to assure compliance with applicable rules and regulations of any stock exchange or governmental authority. No rights or privileges of a stockholder of the Company in respect to such shares issuable upon the exercise of any part of the Option shall accrue to Executive unless and until certificates representing such shares have been registered in Executive's name. 3. DEFERRED STOCK UNITS. (a) VESTING SCHEDULE; ISSUANCE OF SHARES. One hundred fifty thousand (150,000) Deferred Stock Units shall become vested on the Grant Date and each of the first four anniversaries of the Grant Date (the "Vesting Dates"); provided that, except as provided in subparagraph (c) below, Executive is employed by the Company on the applicable Vesting Date. The Company shall issue one share of Common Stock to Executive for each vested Deferred Stock Unit on January 1 of the third calendar year following the calendar year in which the Deferred Stock Unit vests (as illustrated in the schedule on Appendix A hereto), unless (1) Executive has elected to defer the issuance of such shares pursuant to subparagraph (b) below, or (2) Executive's employment terminates prior to such date (in which case shares shall be issued as provided under subparagraph (c) below). Each Deferred Stock Unit shall be cancelled upon the issuance of a share of Common Stock with respect thereto. (b) DEFERRAL. Executive may elect in writing on or before December 31 of the calendar year following the calendar year in which the Deferred Stock Units vest (the "Latest Deferral Date"), to defer the issuance of shares of Common Stock with respect to all or a part of such vested Deferred Stock Units. Any such election shall specify the date of issuance for the deferred shares and shall be irrevocable after the Latest Deferral Date. 4 5 (c) TERMINATION OF EMPLOYMENT; CHANGE IN CONTROL. If (1) the Company terminates Executive's employment other than for Cause, (2) Executive, upon fifteen (15) days' prior written notice, terminates his employment for Good Reason, (3) Executive's employment terminates due to death or Disability, or (4) a Change in Control occurs while Executive is employed by the Company, any Deferred Stock Units that have not yet vested shall immediately vest. Unless Executive has elected pursuant to subparagraph (b) above to defer issuance to a later date, the Company shall issue to Executive, within ten (10) days after the termination of Executive's employment for any reason, one share of Common Stock for each outstanding vested Deferred Stock Unit, and each outstanding Deferred Stock Unit shall be cancelled. (d) LIMITATION OF RIGHTS; DIVIDEND EQUIVALENTS. Executive shall not have any right to transfer any rights under the Deferred Stock Units except as permitted by Paragraph 6 below, shall not have any rights of ownership in the shares of Common Stock subject to the Deferred Stock Units prior to the issuance of such shares, and shall not have any right to vote such shares. Executive, however, shall receive a cash payment equal to the cash dividends paid on shares underlying outstanding vested Deferred Stock Units when cash dividends are paid to shareholders of the Company. 4. ADMINISTRATION. This Plan and Agreement shall be administered by the Committee. The interpretation and construction by the Committee of any provision herein and any determination by the Committee pursuant to any provision of this Plan and Agreement shall be final and conclusive. No member of the Committee shall be liable to any person for any such action taken or determination made in good faith. 5. COMPLIANCE WITH LAWS. The Option shall not be exercised and no related share certificates shall be delivered if in the sole discretion of the Company: (a) such exercise or delivery would constitute a violation of any provision of, or any regulation or order entered pursuant to, any law purporting to regulate wages, salaries or compensation; or (b) any requisite approval, consent, registration or other qualification of any stock exchange upon which the securities of the Company may then be listed, the Securities and Exchange Commission or other governmental authority having jurisdiction over the exercise of the Option or the issuance of shares shall not have been secured. 6. TRANSFERABILITY. Except as otherwise provided in this Paragraph 6, the Option and Deferred Stock Units granted pursuant to this Plan and Agreement shall not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner, other than, in the case of the Option, by will or under the laws of descent and distribution, whether by the operation of law or otherwise. Additionally, Executive may transfer the Option and Deferred Stock Units, in whole or in part, to a spouse or lineal descendant (a "Family Member"), a trust for the exclusive benefit of Executive and/or Family Members, a partnership or other entity in which all the beneficial owners are Executive and/or Family Members, or any other entity affiliated with Executive that may be approved by the Committee (a "Permitted Transferee"). Subsequent transfers of the Option and Deferred Stock Units shall be prohibited except in accordance with this Paragraph 6. All terms and conditions of the Option and Deferred Stock Units, including provisions relating to the termination of Executive's employment with the Company, shall continue to apply following a transfer made in accordance with this Paragraph 6. The Option may be exercised, during Executive's lifetime, only by Executive or, in the event of Executive's legal incapacity, by 5 6 Executive's guardian or legal representative acting in a fiduciary capacity on behalf of Executive under state law, or a Permitted Transferee to whom Executive has transferred the Option. Upon any attempt of a transfer of the Option and Deferred Stock Units prohibited by this Paragraph 6, the Option and Deferred Stock Units shall immediately become null and void. 7. ADJUSTMENTS. The number of shares covered by the Option and the Deferred Stock Units, the price per share applicable to the Option and, if applicable, the kind of shares covered by the Option and Deferred Stock Units shall be adjusted to reflect any stock dividend, stock split, or combination of shares of the Company's Common Stock. In addition, the Committee may make or provide for such adjustment in the number of shares covered by the Option and the Deferred Stock Units, the price per share applicable to the Option, and the kind of shares covered the Option and the Deferred Stock Units, as the Committee in its sole discretion may in good faith determine to be equitably required in order to prevent dilution or enlargement of Executive's rights that otherwise would result from (a) any exchange of shares of the Company's Common Stock, recapitalization or other change in the capital structure of the Company, (b) any merger, consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial or complete liquidation or other distribution of assets (other than a normal cash dividend), issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event, the Committee may provide in substitution for the Option and the Deferred Stock Units such alternative consideration as it may in good faith determine to be equitable under the circumstances and may require in connection therewith the surrender of the Option and the Deferred Stock Units so replaced. 8. FRACTIONAL SHARES. The Company shall not be required to issue any fractional shares pursuant to this Plan and Agreement, and the Committee may round fractions down. 9. TAXES. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any benefit realized by Executive or any other person under this Plan and Agreement, it shall be a condition to the realization of such benefit that Executive or such other person make arrangements satisfactory to the Company for payment of all such taxes required to be withheld, which arrangements may include Executive's delivery to the Company of a check equal to the amount of such taxes. Upon the payment of any dividend equivalents payable pursuant to Paragraph 3(d) above, Executive agrees that the Company shall deduct therefrom such amounts as are necessary to satisfy applicable withholding requirements. 10. NO IMPACT ON OTHER BENEFITS AND EMPLOYMENT. This Plan and Agreement shall not confer upon Executive any right with respect to continuance of employment or other service with the Company and shall not interfere in any way with any right that the Company would otherwise have to terminate Executive's employment at any time, subject to the terms of the Employment Agreement. Nothing herein contained shall affect Executive's right to participate in and receive benefits under and in accordance with the then current provisions of any pension, insurance or other employment plan or program of the Company or any of its subsidiaries nor constitute an obligation for continued employment. 6 7 11. CANCELLATION. With Executive's concurrence, the Committee may cancel this Plan and Agreement. In the event of such cancellation, the Committee may authorize the granting of a new option and deferred stock units, which may or may not cover the same number of shares that had been the subject of the Option and Deferred Stock Units, in such manner, at such option price and subject to such other terms and conditions as then determined by the Committee. 12. GOVERNING LAW. The validity, construction and effect of this Plan and Agreement and the Option will be determined in accordance with (a) the Delaware General Corporation Law, and (b) to the extent applicable, other laws (including those governing contracts) of the State of Georgia (without regard to the choice of law provisions thereof). 13. MERGER CLAUSE. This Plan and Agreement supersedes any and all understandings between the Company and Executive with respect to the Option and the Deferred Stock Units, except in the case of an inconsistency with terms and conditions expressly provided in the Employment Agreement, in which case such Employment Agreement terms and conditions will govern, and, except as otherwise provided herein, this Plan and Agreement may be amended only in writing signed by the Company and Executive. PLEASE INDICATE YOUR UNDERSTANDING AND ACCEPTANCE OF THE FOREGOING BY SIGNING AND RETURNING A COPY OF THIS PLAN AND AGREEMENT. THE HOME DEPOT, INC. /s/ Bernard Marcus ------------------------------------ By: Bernard Marcus Co-Chairman of the Board I hereby acknowledge receipt of the Option and the Deferred Stock Units granted on December 4, 2000, which have been granted to me under the foregoing terms and conditions. I further agree to conform to all of the terms and conditions of the Option and such Deferred Stock Units. EXECUTIVE /s/ Robert L. Nardelli -------------------------------------- Robert L. Nardelli Date: ------------------------------- 7 8 APPENDIX A SCHEDULE FOR DEFERRED STOCK UNITS
NUMBER OF DEFERRED DISTRIBUTION DATE STOCK UNITS VESTING DATE LATEST DEFERRAL DATE IF NO DEFERRAL 1. 150,000 December 4, 2000 December 31, 2001 January 1, 2003 2. 150,000 December 4, 2001 December 31, 2002 January 1, 2004 3. 150,000 December 4, 2002 December 31, 2003 January 1, 2005 4. 150,000 December 4, 2003 December 31, 2004 January 1, 2006 5. 150,000 December 4, 2004 December 31, 2005 January 1, 2007
8 EX-10.21 8 g68482ex10-21.txt AGREEMENT, DATED FEBRUARY 22, 2001 1 EXHIBIT 10.21 AGREEMENT THIS AGREEMENT ("Agreement") is made as of the 22nd day of February, 2001, in Atlanta, Georgia. THE PARTIES to it are THE HOME DEPOT, INC., a Delaware corporation, and its subsidiaries and affiliates ("Home Depot"), and BERNARD MARCUS, a resident of the State of Georgia ("Mr. Marcus"). THE BACKGROUND of this Agreement is as follows: (A) Mr. Marcus is one of the original founders of Home Depot and the current Co-Chairman of the Board. (B) On August 19, 1999, the Board of Directors of Home Depot unanimously adopted a resolution under which Mr. Marcus will receive certain benefits pertaining to the use of an aircraft and the provision of security services from Home Depot for the rest of his life. (C) This Agreement sets forth the benefits the Board of Directors of Home Depot has directed Home Depot to provide Mr. Marcus and the terms upon which those benefits will be available to Mr. Marcus. This Agreement includes certain other provisions to which Home Depot and Mr. Marcus have agreed. THE TERMS of this Agreement are as follows: 1. TERM. Unless otherwise expressly provided herein, the term of this Agreement shall be the life of Mr. Marcus; and this Agreement shall continue in full force and effect until Mr. Marcus's death. 2. PURCHASE OF AIRCRAFT; LEASES; PILOT AND MANAGEMENT SERVICES. The parties have agreed that Home Depot will sell, and Mr. Marcus (or his designee(s)) will purchase, one of the Home Depot aircraft (1994 Falcon 900 aircraft, tail #N707WB). Home Depot will provide, or will have provided, pilot and management services for the aircraft and Mr. Marcus (or his designee(s)). Mr. Marcus (or his designee(s)) will dry-lease the aircraft to Home Depot on a non-exclusive basis. A separate purchase and sale agreement, lease[s], and/or pilot services agreement[s], as appropriate, with all related documentation, are being entered into by the parties with respect to this transaction. Key provisions of these agreements will include: - The purchase price for the aircraft will be the current fair market value of the aircraft. - Home Depot will lease the aircraft from Mr. Marcus (or his designee(s)) at a fair market rental rate based on 1% of the purchase price per month, with 2 certain costs passed through on a shared basis, subject to a minimum required rent equal to 50% usage by Home Depot. - Home Depot will pay applicable sales/use taxes attributable to its usage of the aircraft. - Home Depot will reimburse Mr. Marcus (or his designee(s)) for ad valorem taxes paid for the aircraft based upon Home Depot's percentage of use of the aircraft, subject to a minimum reimbursement of 50% of such taxes. - Home Depot will provide aircraft management and maintenance as well as pilot services for the aircraft. Home Depot will provide these services during the term of this Agreement, subject in all events to Mr. Marcus's option to terminate at any time and Home Depot's option to terminate if Home Depot ceases to operate its own aircraft. - Management services will include hangar space, maintenance, insurance, fueling, inspections, training, scheduling, and other general services related to the aircraft. - Mr. Marcus or his designee(s) will partially reimburse Home Depot quarterly for the costs of insurance and maintenance, based on the percentage of time the aircraft is used by Mr. Marcus and his designee(s). Mr. Marcus will not reimburse Home Depot for any more than 50% of these costs, regardless of the actual percentage of use, consistent with Home Depot's minimum rent of 50% of the aircraft's usage. - Use of the aircraft by Mr. Marcus or his designee(s) for Home Depot business purposes shall be treated for all purposes of this Agreement as use of the aircraft by Home Depot. - Fuel and lubricants will either be billed directly to each user of the aircraft for each user's flights, at Home Depot's cost, or prorated quarterly as with insurance and non-routine maintenance, as appropriate to comport with Home Depot's normal procedures. - Mr. Marcus or his designee(s) will pay Home Depot an hourly rate for Home Depot pilot services. - Home Depot's right to use the aircraft will be subordinate to the right of Mr. Marcus or his designee(s) to use the aircraft. - If the aircraft is not available for Mr. Marcus or his designee(s), Home Depot will arrange for a comparable aircraft, at no greater cost to Mr. Marcus or his designee(s). - Mr. Marcus or his designee(s) shall have the right to use Home Depot's larger intercontinental aircraft for international travel, if such aircraft is available. Any additional costs associated with Mr. Marcus's or his designee(s)' use of Home Depot's larger intercontinental aircraft shall be charged to Mr. Marcus at the same periodic intervals that other aircraft-related costs are charged to the parties hereunder. - Anything herein to the contrary notwithstanding, Mr. Marcus and his designee(s) shall have the right at any time during the term of this Agreement to sell the aircraft purchased from Home Depot and to purchase another aircraft. In the event Mr. Marcus or his designee(s) purchases another aircraft, such aircraft shall be used by Mr. Marcus and his designee(s) and leased to - 2 - 3 Home Depot on the same terms and subject to the same conditions provided in this Agreement and in any other agreements pertaining to the original aircraft purchased by Mr. Marcus or his designee(s) from Home Depot. - The 1994 Falcon 900 aircraft purchased by Mr. Marcus (or his designee) and any replacement aircraft subject to this arrangement with Home Depot must at all times meet Home Depot criteria and guidelines for aircraft owned and operated by Home Depot. - Mr. Marcus and/or his designee will be named as an additional insured on any Home Depot policies of insurance applicable to the ownership and operation of the aircraft. 3. SECURITY SERVICES. As directed by the resolution unanimously adopted by the Board of Directors of Home Depot, during Mr. Marcus's lifetime Home Depot will continue to provide Mr. Marcus the same security services Mr. Marcus has been receiving from Home Depot. Such security services will be provided at Mr. Marcus's discretion. 4. USE AND AVAILABILITY OF HOME DEPOT FACILITIES. (A) For a term ending eighteen (18) months after the date of Mr. Marcus's death, Home Depot will make available to Mr. Marcus, for his use and for the use of certain persons and organizations affiliated with Mr. Marcus ("Affiliates"), office and related space in its facilities. As used in this Agreement, the term "Affiliates" shall include such persons and organizations as Mr. Marcus may designate from time to time. (B) The space initially available to Mr. Marcus will be that space which Mr. Marcus and his Affiliates currently occupy on the 21st floor of Building C of the Home Depot facilities, together with such additional space on the same floor up to a total of fifty percent (50%) of the 21st floor, and Mr. Marcus and his Affiliates may continue to occupy that space (and any additional space up to fifty percent (50%) of the 21st floor) for at least twelve (12) months from the date of this Agreement. Beginning after twelve (12) months from the date of this Agreement, Home Depot shall have the option to move Mr. Marcus and his Affiliates to different but acceptable space elsewhere in the Home Depot Store Support Center. Any space to which Home Depot moves Mr. Marcus and his Affiliates shall be at least as large as the space they now occupy in the Home Depot facilities, plus the additional space Home Depot has committed to them. (C) The Home Depot space provided to Mr. Marcus and his Affiliates under this Agreement will be operated and maintained by Home Depot; but Mr. Marcus (or his designee(s)) will pay rent to Home Depot for the use of any space occupied by Mr. Marcus or any of his Affiliates at the fair market rate for comparable space in the same geographical area (hereinafter "Base Rent"), with the Consumer Price Index increases described below. - 3 - 4 (D) The Base Rent payable for Home Depot facilities hereunder is based on the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers for Atlanta, Georgia, U.S. Cities Average All Items (1982-1984 = 100) ("Consumer Price Index") published by the Bureau of Labor Statistics, United States Department of Labor. On the second January 1 occurring after the date of this Agreement and on each January 1 thereafter during the term of this Agreement, the Base Rent shall be increased by fifty percent (50%) of the percentage increase in the Consumer Price Index for the preceding year. This increase in Base Rent shall be determined as follows: (i) Multiply the Base Rent (annualized) for the calendar year immediately preceding the January 1 in question by a fraction, the numerator of which is the Consumer Price Index for the month of December immediately prior to the January in question, and the denominator of which is the Consumer Price Index for the month of December one year and one month prior to the January in question, (ii) subtract from the resulting product the Base Rent for the calendar year immediately prior to the January 1 in question, (iii) multiply the remainder by 50%, and (iv) add the resulting product to the Base Rent for the calendar year immediately prior to the January 1 in question. In no event, however, shall the Base Rent for any calendar year during the term of this Agreement exceed the previous calendar year's Base Rent by more than 2.5%. If the index for any December in question is not published as of the effective date of adjustment, then Mr. Marcus shall continue to pay the existing Base Rent until the index necessary to perform the calculations described herein is published, and Home Depot is able to calculate the revised amount of Base Rent due from Mr. Marcus. Upon the submission of such calculation from Home Depot, Mr. Marcus shall thereafter pay the adjusted Base Rent. Mr. Marcus shall also pay within thirty (30) days after such calculation the difference between what they have paid in Base Rent for the year in question and what they would have paid, had the adjustment in question been made and Base Rent at the adjusted rate paid as of January 1 of said year. (E) During the term of this Agreement, Home Depot shall continue to provide Mr. and Mrs. Marcus the same secured access to Mr. Marcus's Home Depot facilities (including without limitation secured elevator access, etc.) that Mr. and Mrs. Marcus now enjoy. 5. PARKING. Home Depot will continue to provide Mr. and Mrs. Marcus the same secured parking arrangements and facilities in Building C of the Home Depot facilities which they now enjoy. Mr. Marcus now has six (6) reserved parking spaces at the Home Depot facilities, and Mr. Marcus, Mrs. Marcus and staff members working for Mr. and Mrs. Marcus or the Affiliates shall have the right to continue to use those spaces. 6. STAFF. It is anticipated that during the term of this Agreement Mr. Marcus's personal secretary, as an employee of Home Depot, will provide personal services to Mr. Marcus as well as services to Home Depot. In addition, Home Depot will also provide the services of an additional staff member to handle internal correspondence and related matters. Home Depot will provide such employees to Mr. Marcus in - 4 - 5 accordance with the loaned employee agreement with Home Depot. At the end of each annual accounting period Mr. Marcus shall determine what portion of both employees' time was devoted to Home Depot-related work, and Mr. Marcus shall reimburse Home Depot for that portion of the employee's time that was expended on non-Home Depot services. 7. HOME DEPOT BENEFITS. Home Depot has provided Mr. Marcus, and Mr. Marcus has had available to him during Mr. Marcus's tenure with Home Depot, a number of health and welfare-related benefits and other benefits, including without limitation medical benefits, prescription drug benefits, dental benefits, and split-dollar life insurance policies. Home Depot agrees that it will continue to provide those benefits or comparable benefits acceptable to Mr. Marcus during the term of this Agreement, that is, until the death of Mr. Marcus. 8. LIMITATION ON LIABILITY. Mr. Marcus's receipt of the services and facilities provided by Home Depot under this Agreement shall not subject Mr. Marcus or any of the Affiliates to any liability arising out of the provision of such services and facilities, except to the extent, and only to the extent, such liability arose from the willful misconduct of Mr. Marcus or the Affiliates. NEITHER MR. MARCUS NOR THE AFFILIATES SHALL BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSS SUFFERED BY ANY THIRD PARTY ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. Home Depot shall be solely responsible for, and shall hold harmless and indemnify Mr. Marcus and the Affiliates from and against all losses, claims, damages, liabilities and expenses arising in connection with Home Depot's provision of services and facilities under this Agreement unless such loss, claim, damage, liability or expense results from the willful misconduct of Mr. Marcus or the Affiliates. 9. MISCELLANEOUS. (A) FURTHER ASSURANCES. Each party shall in good faith undertake to perform its obligations under this Agreement and to cause the transactions contemplated by this Agreement to be carried out promptly in accordance with the terms of this Agreement. Upon execution of this Agreement and thereafter, each party shall do such things and take such actions as may be reasonably requested by the other in order more effectively to consummate or document the transactions contemplated by this Agreement. Each party shall cooperate with each other and their respective counsel, accountants or representatives in connection with any actions required to be taken as part of their respective rights and obligations under this Agreement. (B) AMENDMENT. This Agreement may not be amended or modified without the prior written consent of all parties. (C) BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. - 5 - 6 (D) HEADINGS. Headings and captions contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend or prescribe the scope of this Agreement or the intent of any provision. (E) ENTIRE AGREEMENT. This Agreement, and any and all documentation related to the purchase and sale of the aircraft, constitute the entire agreement of the parties with respect to matters set forth in this Agreement and supersede any prior understanding or agreement, oral or written, with respect to such matters. (F) EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, and all such counterparts shall constitute one and the same Agreement, binding on all the parties notwithstanding that all the parties are not signatories to the same counterpart. (G) GOVERNING LAW. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Georgia. (H) APPROVAL BY BOARD OF DIRECTORS OF HOME DEPOT. This Agreement shall be submitted to the Board of Directors of Home Depot for approval in accordance with all applicable requirements, including without limitation requirements pertaining to directors' conflicting interest transactions. DULY EXECUTED AND DELIVERED, by the parties to this Agreement, as of the date set forth above. THE HOME DEPOT, INC. By: /s/ Robert L.Nardelli -------------------------- Name: Robert L. Nardelli ------------------------- Title: CEO ------------------------ [CORPORATE SEAL] /s/ Bernard Marcus [SEAL] ------------------------- BERNARD MARCUS - 6 - EX-10.22 9 g68482ex10-22.txt PROMISSORY NOTE, DATED DECEMBER 29, 2000. 1 EXHIBIT 10.22 PROMISSORY NOTE $170,000 December 29, 2000 Atlanta, Georgia FOR VALUE RECEIVED, the undersigned Mark Baker (hereinafter referred to as "Maker"), promises to pay to the order of HOME DEPOT U.S.A., INC. (hereinafter referred to as "Payee") the principal sum of ONE HUNDRED SEVENTY THOUSAND DOLLARS ($170,000), such amount to be due and payable on or before the six month anniversary of the date hereof, upon the terms and conditions set forth herein. The outstanding principal amount of this promissory note (the "Note"), shall be payable in immediately available funds when due. Such payment shall be delivered on the date due to Payee at 2455 Paces Ferry Road, N.W., Atlanta, GA 30339, Attention: Treasurer, or at such other place as the holder hereof may from time to time designate in writing. This Note may be prepaid in whole or in part at any time without the prior written consent of Payee and without penalty or premium. The following events shall constitute an event of default hereunder: (a) if any amounts due hereunder are not paid as and when due, or (b) if any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any liquidation proceeding is commenced by Maker and is not dismissed for thirty days, or (c) if a receiver is appointed for any part of the property or assets of Maker. Upon the occurrence of an event of default, any and all of the liabilities of Maker pursuant hereto may, at the option of Payee and without demand or notice of any kind, be declared and thereupon immediately shall become due and payable, and Payee may exercise any rights available to it by operation of law. Upon default, Payee has the right to assess interest at the rate of prime plus 2%, calculated from the date of default. Failure on the part of Payee to insist on the strict performance of any or all of the terms, provisions, and covenants contained in this Note shall not be construed as a waiver or relinquishment of any term, provisions or covenants herein. Time is of the essence of this Note. Presentment for payment, demand, protest, and notice of demand, protest and non-payment, and all other notices are hereby waived by Maker. No extension of the time for the payment of this Note, made by agreement with any person now or hereafter liable for the payment of this Note, shall operate to release, discharge, modify, change or affect the original liability of Maker under this Note, either in whole or in part unless Payee agrees otherwise in writing. This Note may not be changed orally. This Note can only be changed by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought. 2 If any provisions of this Note or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Note and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. This Note is intended as a contract under, and shall be construed and enforceable in accordance with, the laws of the State of Georgia. As used herein, the terms "Maker" and "Payee" shall be deemed to include each party's respective heirs, successors, legal representatives, subsidiaries, parent companies, affiliates, and assigns, whether by voluntary action of the parties or by operation of law. IN WITNESS WHEREOF, Maker and Payee have executed this Note under seal effective as of the date first above written. Maker /s/ Mark Baker --------------------------------------- Mark Baker HOME DEPOT U.S.A., INC. Payee By: /s/ Carol B. Tome ---------------------------------- Name: Carol B. Tome Title: Sr. Vice President - Finance and Accounting EX-13 10 g68482ex13.txt THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS 1 EXHIBIT 13 CONSOLIDATED STATEMENTS OF EARNINGS
amounts in millions, except per share data Fiscal Year Ended - ------------------------------------------------------------------------------------------------------------------------------------ JANUARY 28, 2001 JANUARY 30, 2000 JANUARY 31, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Net Sales $45,738 $38,434 $30,219 Cost of Merchandise Sold 32,057 27,023 21,614 - ------------------------------------------------------------------------------------------------------------------------------------ Gross Profit 13,681 11,411 8,605 Operating Expenses: Selling and Store Operating 8,513 6,819 5,332 Pre-Opening 142 113 88 General and Administrative 835 671 515 - ------------------------------------------------------------------------------------------------------------------------------------ Total Operating Expenses 9,490 7,603 5,935 - ------------------------------------------------------------------------------------------------------------------------------------ Operating Income 4,191 3,808 2,670 Interest Income (Expense): Interest and Investment Income 47 37 30 Interest Expense (21) (41) (46) - ------------------------------------------------------------------------------------------------------------------------------------ Interest, net 26 (4) (16) - ------------------------------------------------------------------------------------------------------------------------------------ Earnings Before Income Taxes 4,217 3,804 2,654 Income Taxes 1,636 1,484 1,040 - ------------------------------------------------------------------------------------------------------------------------------------ Net Earnings $ 2,581 $ 2,320 $ 1,614 ==================================================================================================================================== Basic Earnings Per Share $ 1.11 $ 1.03 $ 0.73 Weighted Average Number of Common Shares Outstanding 2,315 2,244 2,206 ==================================================================================================================================== Diluted Earnings Per Share $ 1.10 $ 1.00 $ 0.71 Weighted Average Number of Common Shares Outstanding Assuming Dilution 2,352 2,342 2,320 ====================================================================================================================================
See accompanying notes to consolidated financial statements. 2 Consolidated Balance Sheets The Home Depot, Inc. and Subsidiaries
amounts in millions, except share data - -------------------------------------------------------------------------------------------------------- January 28, 2001 January 30, 2000 ======================================================================================================== Assets Current Assets: Cash and Cash Equivalents $ 167 $ 168 Short-Term Investments, including current maturities of long-term investments 10 2 Receivables, net 835 587 Merchandise Inventories 6,556 5,489 Other Current Assets 209 144 - -------------------------------------------------------------------------------------------------------- Total Current Assets 7,777 6,390 - -------------------------------------------------------------------------------------------------------- Property and Equipment, at cost: Land 4,230 3,248 Buildings 6,167 4,834 Furniture, Fixtures and Equipment 2,877 2,279 Leasehold Improvements 665 493 Construction in Progress 1,032 791 Capital Leases 261 245 - -------------------------------------------------------------------------------------------------------- 15,232 11,890 Less Accumulated Depreciation and Amortization 2,164 1,663 - -------------------------------------------------------------------------------------------------------- Net Property and Equipment 13,068 10,227 - -------------------------------------------------------------------------------------------------------- Long-Term Investments 15 15 Notes Receivable 77 48 Cost in Excess of the Fair Value of Net Assets Acquired, net of accumulated amortization of $41 at January 28, 2001 and $33 at January 30, 2000 314 311 Other 134 90 - -------------------------------------------------------------------------------------------------------- $ 21,385 $ 17,081 ======================================================================================================== Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable $ 1,976 $ 1,993 Accrued Salaries and Related Expenses 627 541 Sales Taxes Payable 298 269 Other Accrued Expenses 1,402 763 Income Taxes Payable 78 61 Current Installments of Long-Term Debt 4 29 - -------------------------------------------------------------------------------------------------------- Total Current Liabilities 4,385 3,656 - -------------------------------------------------------------------------------------------------------- Long-Term Debt, excluding current installments 1,545 750 Other Long-Term Liabilities 245 237 Deferred Income Taxes 195 87 Minority Interest 11 10 Stockholders' Equity Common Stock, par value $0.05. Authorized: 10,000,000,000 shares; issued and outstanding - 2,323,747,000 shares at January 28, 2001 and 2,304,317,000 shares at January 30, 2000 116 115 Paid-In Capital 4,810 4,319 Retained Earnings 10,151 7,941 Accumulated Other Comprehensive Income (67) (27) - -------------------------------------------------------------------------------------------------------- 15,010 12,348 Less Shares Purchased for Compensation Plans 6 7 - -------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 15,004 12,341 - -------------------------------------------------------------------------------------------------------- $ 21,385 $ 17,081 ========================================================================================================
See accompanying notes to consolidated financial statements. 20 -- 21 3 Consolidated Statements of Stockholders' Equity and Comprehensive Income The Home Depot, Inc. and Subsidiaries
Accumulated Common Stock Other Total ---------------- Paid-In Retained Comprehensive Stockholders' amounts in millions, except per share data Shares Amount Capital Earnings Income Other Equity Income(1) - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, FEBRUARY 1, 1998 2,196 $110 $2,589 $ 4,430 $ (28) $ (3) $ 7,098 ==================================================================================================================================== Shares Issued Under Employee Stock Purchase and Option Plans 17 1 165 -- -- -- 166 Tax Effect of Sale of Option Shares by Employees -- -- 63 -- -- -- 63 Net Earnings -- -- -- 1,614 -- -- 1,614 $1,614 Translation Adjustments -- -- -- -- (33) -- (33) (33) Cash Dividends ($0.077 per share) -- -- -- (168) -- -- (168) ------- Comprehensive Income for Fiscal 1998 $1,581 - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, JANUARY 31, 1999 2,213 $111 $2,817 $ 5,876 $(61) $(3) $8,740 ==================================================================================================================================== Shares Issued Under Employee Stock Purchase and Option Plans 19 1 273 -- -- -- 274 Tax Effect of Sale of Option Shares by Employees -- -- 132 -- -- -- 132 Conversion of 3 1/4% Convertible Subordinated Notes, net 72 3 1,097 -- -- -- 1,100 Net Earnings -- -- -- 2,320 -- -- 2,320 2,320 Translation Adjustments -- -- -- -- 34 -- 34 34 Shares Purchased for Compensation Plans -- -- -- -- -- (4) (4) Cash Dividends ($0.113 per share) -- -- -- (255) -- -- (255) ------- Comprehensive Income for Fiscal 1999 $2,354 - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, JANUARY 30, 2000 2,304 $115 $4,319 $ 7,941 $(27) $(7) $12,341 ==================================================================================================================================== Shares Issued Under Employee Stock Purchase and Option Plans 20 1 348 -- -- -- 349 Tax Effect of Sale of Option Shares by Employees -- -- 137 -- -- -- 137 Net Earnings -- -- -- 2,581 -- -- 2,581 2,581 Translation Adjustments -- -- -- -- (40) -- (40) (40) Stock Compensation Expense -- -- 6 -- -- -- 6 Shares Purchased for Compensation Plans -- -- -- -- -- 1 1 Cash Dividends ($0.16 per share) -- -- -- (371) -- -- (371) ------- Comprehensive Income for Fiscal 2000 $2,541 - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE, JANUARY 28, 2001 2,324 $116 $4,810 $10,151 $ (67) $ (6) $15,004 ====================================================================================================================================
(1) Components of comprehensive income are reported net of related taxes. See accompanying notes to consolidated financial statements. 4 Consolidated Statements of Cash Flows The Home Depot, Inc. and Subsidiaries
amounts in millions Fiscal Year Ended - ----------------------------------------------------------------------------------------------------------------- January 28, 2001 January 30, 2000 January 31, 1999 ================================================================================================================= CASH PROVIDED FROM OPERATIONS: Net Earnings $ 2,581 $ 2,320 $ 1,614 Reconciliation of Net Earnings to Net Cash Provided by Operations: Depreciation and Amortization 601 463 373 (Increase) Decrease in Receivables, net (246) (85) 85 Increase in Merchandise Inventories (1,075) (1,142) (698) Increase in Accounts Payable and Accrued Expenses 754 820 423 Increase in Income Taxes Payable 151 93 59 Other 30 (23) 61 - ----------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operations 2,796 2,446 1,917 - ----------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures, net of $16, $37 and $41 of non-cash capital expenditures in fiscal 2000, 1999 and 1998, respectively (3,558) (2,581) (2,053) Purchase of Remaining Interest in The Home Depot Canada -- -- (261) Payments for Businesses Acquired, net (26) (101) (6) Proceeds from Sales of Property and Equipment 95 87 45 Purchases of Investments (39) (32) (2) Proceeds from Maturities of Investments 30 30 4 Advances Secured by Real Estate, net (32) (25) 2 - ----------------------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (3,530) (2,622) (2,271) - ----------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance (Repayments) of Commercial Paper Obligations, net 754 (246) 246 Proceeds from Long-Term Borrowings 32 522 -- Repayments of Long-Term Debt (29) (14) (8) Proceeds from Sale of Common Stock, net 351 267 167 Cash Dividends Paid to Stockholders (371) (255) (168) Minority Interest Contributions to Partnership -- 7 11 - ----------------------------------------------------------------------------------------------------------------- Net Cash Provided by Financing Activities 737 281 248 - ----------------------------------------------------------------------------------------------------------------- Effect of Exchange Rate Changes on Cash and Cash Equivalents (4) 1 (4) - ----------------------------------------------------------------------------------------------------------------- (Decrease) Increase in Cash and Cash Equivalents (1) 106 (110) Cash and Cash Equivalents at Beginning of Year 168 62 172 - ----------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 167 $ 168 $ 62 ================================================================================================================= SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR: Interest, net of interest capitalized $ 16 $ 26 $ 36 Income Taxes $ 1,386 $ 1,396 $ 940 =================================================================================================================
See accompanying notes to consolidated financial statements. 22 -- 23 5 Notes to Consolidated Financial Statements The Home Depot, Inc. and Subsidiaries Note 1. Summary of Significant Accounting Policies The Company operates Home Depot stores, which are full-service, warehouse-style stores averaging approximately 108,000 square feet in size. The stores stock approximately 40,000 to 50,000 different kinds of building materials, home improvement supplies and lawn and garden products that are sold primarily to do-it-yourselfers, but also to home improvement contractors, trades people and building maintenance professionals. In addition, the Company operates EXPO Design Center stores, which offer products and services primarily related to design and renovation projects. The Company is currently testing Villager's Hardware with four stores, which offer products and services for home enhancement and smaller project needs in a convenience hardware store format. Additionally, the Company operates one Home Depot Floor Store, a test store that offers only flooring products and installation services. At the end of fiscal 2000, the Company was operating 1,134 stores, including 1,027 Home Depot stores, 26 EXPO Design Center stores, 4 Villager's Hardware stores and 1 Home Depot Floor Store in the United States; 67 Home Depot stores in Canada; 5 Home Depot stores in Chile; 2 Home Depot stores in Argentina; and 2 Home Depot stores in Puerto Rico. Included in the Company's Consolidated Balance Sheet at January 28, 2001 were $871 million of net assets of the Canada, Chile and Argentina operations. FISCAL YEAR The Company's fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31. Fiscal years 2000, 1999 and 1998, which ended January 28, 2001, January 30, 2000 and January 31, 1999, respectively, consisted of 52 weeks. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned partnership. All significant intercompany transactions have been eliminated in consolidation. Stockholders' equity, share and per share amounts for all periods presented have been adjusted for a three-for-two stock split effected in the form of a stock dividend on December 30, 1999 and a two-for-one stock split effected in the form of a stock dividend on July 2, 1998. CASH EQUIVALENTS The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The Company's cash and cash equivalents are carried at fair market value and consist primarily of commercial paper, money market funds, U.S. government agency securities and tax-exempt notes and bonds. MERCHANDISE INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market, as determined by the retail inventory method. INVESTMENTS The Company's investments, consisting primarily of high-grade debt securities, are recorded at fair value and are classified as available-for-sale. INCOME TAXES The Company provides for federal, state and foreign income taxes currently payable, as well as for those deferred because of timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Federal, state and foreign incentive tax credits are recorded as a reduction of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date. The Company and its eligible subsidiaries file a consolidated U.S. federal income tax return. Non-U.S. subsidiaries, which are consolidated for financial reporting, are not eligible to be included in consolidated U.S. federal income tax returns, and separate provisions for income taxes have been determined for these entities. The Company intends to reinvest the unremitted earnings of its non-U.S. subsidiaries and postpone their remittance indefinitely. Accordingly, no provision for U.S. income taxes for non-U.S. subsidiaries was required for any year presented. DEPRECIATION AND AMORTIZATION The Company's buildings, furniture, fixtures and equipment are depreciated using the straight-line method over the estimated useful lives 6 of the assets. Improvements to leased premises are amortized using the straight-line method over the life of the lease or the useful life of the improvement, whichever is shorter. The Company's property and equipment is depreciated using the following estimated useful lives:
Life - ------------------------------------------------------------------------------- Buildings 10-45 years Furniture, fixtures and equipment 5-20 years Leasehold improvements 5-30 years Computer software 3-5 years - -------------------------------------------------------------------------------
ADVERTISING Television and radio advertising production costs are amortized over the fiscal year in which the advertisements first appear. All media placement costs are expensed in the month the advertisement appears. Included in current assets are $20.2 million and $24.4 million at the end of fiscal 2000 and 1999, respectively, relating to prepayments of production costs for print and broadcast advertising. COST IN EXCESS OF THE FAIR VALUE OF NET ASSETS ACQUIRED Goodwill, which represents the excess of purchase price over fair value of net assets acquired, is amortized on a straight-line basis over 40 years. The Company assesses the recoverability of this intangible asset by determining whether the amortization of the goodwill balance over its remaining useful life can be recovered through undiscounted future operating cash flows of the acquired operation. The amount of goodwill impairment, if any, is measured based on projected discounted future operating cash flows using a discount rate reflecting the Company's average cost of funds. IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. Impairment is recognized to the extent the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. Accordingly, when the Company commits to relocate or close a store, the estimated unrecoverable costs are charged to selling and store operating expense. Such costs include the estimated loss on the sale of land and buildings, the book value of abandoned fixtures, equipment and leasehold improvements and a provision for the present value of future lease obligations, less estimated sub-lease income. STOCK COMPENSATION Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," encourages the use of a fair-value-based method of accounting. As allowed by SFAS 123, the Company has elected to account for its stock-based compensation plans under the intrinsic value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." Under APB 25, compensation expense is recorded on the date of grant if the current market price of the underlying stock exceeded the exercise price. The Company complies with the disclosure requirements of SFAS 123. COMPREHENSIVE INCOME Comprehensive income includes net earnings adjusted for certain revenues, expenses, gains and losses that are excluded from net earnings under generally accepted accounting principles. Examples include foreign currency translation adjustments and unrealized gains and losses on investments. 24 -- 25 7 Notes to Consolidated Financial Statements (continued) The Home Depot, Inc. and Subsidiaries FOREIGN CURRENCY TRANSLATION The assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current rate of exchange on the last day of the reporting period, revenues and expenses are translated at the average monthly exchange rates, and all other equity transactions are translated using the actual rate on the day of the transaction. USE OF ESTIMATES Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from these estimates. RECLASSIFICATIONS Certain amounts in prior fiscal years have been reclassified to conform with the presentation adopted in the current fiscal year. Note 2. Long-Term Debt The Company's long-term debt at the end of fiscal 2000 and 1999 consisted of the following (amounts in millions):
January 28, 2001 January 30, 2000 ================================================================================ Commercial Paper; weighted average interest rate of 6.1% at January 28, 2001 $ 754 $ -- 6 1/2% Senior Notes; due September 15, 2004; interest payable semi-annually on March 15 and September 15 500 500 Capital Lease Obligations; payable in varying installments through January 31, 2027 (see note 5) 230 216 Installment Notes Payable; interest imputed at rates between 7.2% and 10.0%; payable in varying installments through 2018 41 45 Other 24 18 - -------------------------------------------------------------------------------- Total long-term debt 1,549 779 Less current installments 4 29 - -------------------------------------------------------------------------------- Long-term debt, excluding current installments $1,545 $750 ================================================================================
In January 2001, the Company replaced its existing commercial paper program with a new program that increases the maximum available borrowings to $1 billion. In connection with the program, the Company has a back-up credit facility with a consortium of banks for up to $800 million. The credit facility, which expires in September 2004, contains various restrictive covenants, none of which is expected to materially impact the Company's liquidity or capital resources. Commercial paper borrowings of $754 million outstanding at January 28, 2001 were classified as non-current pursuant to the Company's intent and ability to continue to finance this obligation on a long-term basis, as necessary, through the commercial paper program and the back-up credit facility. 8 Notes to Consolidated Financial Statements (continued) The Home Depot, Inc. and Subsidiaries During fiscal 1999, the Company issued $500 million of 6 1/2% Senior Notes ("Senior Notes"). The Senior Notes may be redeemed by the Company at any time, in whole or in part, at a redemption price plus accrued interest up to the redemption date. The redemption price is equal to the greater of (1) 100% of the principal amount of the Senior Notes to be redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest to maturity. The Senior Notes are not subject to sinking fund requirements. During 1999, the Company redeemed its 3 1/4% Convertible Subordinated Notes ("3 1/4% Notes"). A total principal amount of $1.1 billion was converted into 72 million shares of the Company's common stock. Interest expense in the accompanying Consolidated Statements of Earnings is net of interest capitalized of $73 million in fiscal 2000, $45 million in fiscal 1999 and $31 million in fiscal 1998. Maturities of long-term debt are $4 million for fiscal 2001, $42 million for fiscal 2002, $5 million for fiscal 2003, $507 million for fiscal 2004 and $761 million for fiscal 2005. As of January 28, 2001, the market value of the publicly traded Senior Notes was approximately $515 million. The estimated fair value of commercial paper borrowings approximates their carrying value. The estimated fair value of all other long-term borrowings, excluding capital lease obligations, was approximately $67 million compared to the carrying value of $65 million. These fair values were estimated using a discounted cash flow analysis based on the Company's incremental borrowing rate for similar liabilities. Note 3. Income Taxes The provision for income taxes consisted of the following (in millions):
Fiscal Year Ended --------------------------------------------------------- January 28, 2001 January 30, 2000 January 31, 1999 - ----------------------------------------------------------------------------- Current: U.S. $1,267 $ 1,209 $ 823 State 216 228 150 Foreign 45 45 20 - --------------------------------------------------------------------------- 1,528 1,482 993 - --------------------------------------------------------------------------- Deferred: U.S. 98 9 46 State 9 (4) (1) Foreign 1 (3) 2 - --------------------------------------------------------------------------- 108 2 47 - --------------------------------------------------------------------------- Total $1,636 $ 1,484 $ 1,040 ===========================================================================
26 -- 27 9 Notes to Consolidated Financial Statements (continued) The Home Depot, Inc. and Subsidiaries The Company's combined federal, state and foreign effective tax rates for fiscal years 2000, 1999 and 1998, net of offsets generated by federal, state and foreign tax incentive credits, were approximately 38.8%, 39.0% and 39.2%, respectively. A reconciliation of income tax expense at the federal statutory rate of 35% to actual tax expense for the applicable fiscal years follows (in millions):
Fiscal Year Ended ---------------------------------------------------- January 28, 2001 January 30, 2000 January 31, 1999 - ---------------------------------------------------------------------------------- Income taxes at U.S. statutory rate $1,476 $1,331 $ 929 State income taxes, net of federal income tax benefit 146 145 96 Foreign rate differences 5 2 -- Other, net 9 6 15 - -------------------------------------------------------------------------------- Total $1,636 $1,484 $1,040 ================================================================================
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of January 28, 2001 and January 30, 2000 were as follows (in millions):
January 28, 2001 January 30, 2000 - -------------------------------------------------------------------------------- Deferred Tax Assets: Accrued self-insurance liabilities $ 151 $ 154 Other accrued liabilities 118 142 - -------------------------------------------------------------------------------- Total gross deferred tax assets 269 296 - -------------------------------------------------------------------------------- Deferred Tax Liabilities: Accelerated depreciation (389) (321) Other (75) (62) - -------------------------------------------------------------------------------- Total gross deferred tax liabilities (464) (383) - -------------------------------------------------------------------------------- Net deferred tax liability $(195) $ (87) ================================================================================
No valuation allowance was recorded against the deferred tax assets at January 28, 2001 and January 30, 2000. Company management believes the existing net deductible temporary differences comprising the total gross deferred tax assets will reverse during periods in which the Company generates net taxable income. 10 Notes to Consolidated Financial Statements (continued) The Home Depot, Inc. and Subsidiaries Note 4. Employee Stock Plans The 1997 Omnibus Stock Incentive Plan ("1997 Plan") provides that incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock and deferred shares may be issued to selected associates, officers and directors of the Company. The maximum number of shares of the Company's common stock available for issuance under the 1997 Plan is the lesser of 225 million shares or the number of shares carried over from prior plans plus one-half percent of the total number of outstanding shares as of the first day of each fiscal year. In addition, restricted shares issued under the 1997 Plan may not exceed 22.5 million shares. As of January 28, 2001, there were 130,691,447 shares available for future grants under the 1997 Plan. Under the 1997 Plan and prior plans, the Company has granted incentive and non-qualified options for 126,219,271 shares, net of cancellations (of which 62,918,031 had been exercised). Incentive stock options vest at the rate of 25% per year commencing on the first anniversary date of the grant and expire on the tenth anniversary date of the grant. The non-qualified options have similar terms; however, vesting does not generally begin until the second anniversary date of the grant. Under the 1997 Plan and prior plans, 92,495 shares of restricted stock, net of cancellations (of which 2,268 had been exercised) have been granted. The restricted shares vest over varying terms and are generally based on the attainment of certain performance goals. The expected fair value of the restricted shares on the vesting dates will be charged to expense ratably over the vesting periods unless it is determined that the performance goals will not be met. In December 2000, the Company entered into an agreement with a key officer. Under the Non-Qualified Stock Option and Deferred Stock Units Plan and Agreement, the Company issued 2,500,000 non-qualified stock options with an exercise price of $40.75 per share and also issued 750,000 deferred stock units. Both the non-qualified options and deferred units vest 20% per year commencing on the grant date. The non-qualified options expire on the tenth anniversary of the vesting date. Each deferred stock unit entitles the officer to one share of common stock to be received approximately two years after the vesting date of the deferred stock unit, subject to certain deferral rights of the officer. The fair value of the 750,000 deferred stock units granted is being amortized based upon the vesting dates. The Company recorded stock compensation expense of approximately $6 million in fiscal 2000. 28 -- 29 11 Consolidated Financial Statements (continued) Home Depot, Inc. and Subsidiaries The per share weighted average fair value of stock options granted during fiscal years 2000, 1999 and 1998 was $31.96, $18.86 and $9.94, respectively. The fair value of these options was determined at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Stock Options Granted in Fiscal Year ---------------------------------------------------- 2000 1999 1998 - ------------------------------------------------------------------------------------------------- Risk-free interest rate 6.4% 5.1% 5.6% Expected volatility of common stock 54.6% 51.6 45.7% Dividend yield 0.3% 0.3% 0.4% Expected option term 7 years 5 years 5 years ==================================================================================================
The Company applies APB 25 in accounting for its stock plans and, accordingly, no compensation costs have been recognized in the Company's financial statements for incentive or non-qualified stock options granted. If, under SFAS 123, the Company determined compensation costs based on the fair value at the grant date for its stock options, net earnings and earnings per share would have been reduced to the pro forma amounts below (in millions, except per share data):
Fiscal Year Ended ------------------------------------------------------ January 28, 2001 January 30, 2000 January 31, 1999 - ------------------------------------------------------------------------------------------- Net Earnings As reported $ 2,581 $ 2,320 $ 1,614 Pro forma $ 2,364 $ 2,186 $ 1,527 Basic Earnings per Share As reported $ 1.11 $ 1.03 $ 0.73 Pro forma $ 1.02 $ 0.97 $ 0.69 Diluted Earnings per Share As reported $ 1.10 $ 1.00 $ 0.71 Pro forma $ 1.01 $ 0.94 $ 0.67 ===========================================================================================
The following table summarizes options outstanding under the various stock option plans at January 28, 2001, January 30, 2000 and January 31, 1999 and changes during the fiscal years ended on these dates (shares in thousands):
Weighted Number Average of Shares Option Price - ----------------------------------------------------------------------------- Outstanding at February 1, 1998 65,727 $10.08 Granted 21,041 21.63 Exercised (11,640) 9.07 Cancelled (3,536) 13.89 - ----------------------------------------------------------------------------- Outstanding at January 31, 1999 71,592 13.45 Granted 14,006 37.81 Exercised (13,884) 10.88 Cancelled (3,295) 18.88 - ----------------------------------------------------------------------------- Outstanding at January 30, 2000 68,419 18.79 Granted 14,869 49.78 Exercised (14,689) 13.15 Cancelled (2,798) 30.51 - ----------------------------------------------------------------------------- Outstanding at January 28, 2001 65,801 $26.46 ============================================================================= Exercisable 27,856 $15.80 =============================================================================
12 The following table summarizes information regarding stock options outstanding as of January 28, 2001 (shares in thousands):
Weighted Weighted Weighted Average Average Average Range of Options Remaining Outstanding Options Exercisable Exercise Prices Outstanding Life (Years) Option Price Exercisable Option Price - ---------------------------------------------------------------------------------------- $ 6.00 to 10.00 12,814 3.9 $ 8.80 12,073 $ 8.80 10.00 to 16.00 10,919 6.0 11.50 5,876 11.50 16.00 to 24.00 15,170 7.0 21.00 6,329 20.40 24.00 to 40.00 12,457 8.1 37.30 2,021 36.90 40.00 to 60.00 14,441 9.6 49.80 1,557 41.20 - ---------------------------------------------------------------------------------------- 65,801 7.0 $26.46 27,856 $15.80 - ----------------------------------------------------------------------------------------
In addition, the Company had 30,856,904 shares available for future grants under the Employee Stock Purchase Plan ("ESPP") at January 28, 2001. The ESPP enables the Company to grant substantially all full-time associates options to purchase up to 129,618,750 shares of common stock, of which 98,761,846 shares have been exercised from inception of the plan, at a price equal to the lower of 85% of the stock's fair market value on the first day or the last day of the purchase period. Shares purchased may not exceed the lesser of 20% of the associate's annual compensation, as defined, or $25,000 of common stock at its fair market value (determined at the time such option is granted) for any one calendar year. Associates pay for the shares ratably over a period of one year (the purchase period) through payroll deductions, and cannot exercise their option to purchase any of the shares until the conclusion of the purchase period. In the event an associate elects not to exercise such options, the full amount withheld is refundable. During fiscal 2000, options for 5,395,900 shares were exercised at an average price of $34.33 per share. At January 28, 2001, there were 2,924,541 options outstanding, net of cancellations, at an average price of $42.57 per share. NOTE 5. LEASES The Company leases certain retail locations, office space, warehouse and distribution space, equipment and vehicles. While the majority of the leases are operating leases, certain retail locations are leased under capital leases. As leases expire, it can be expected that in the normal course of business, leases will be renewed or replaced. The Company has two operating lease agreements totaling $882 million comprised of an initial lease agreement of $600 million and a follow-on agreement of $282 million. The Company financed a portion of its new stores opened from fiscal 1997 through 2000, as well as office buildings in fiscal 1999 and 2000, under the operating lease agreements. Under both agreements, the lessor purchases the properties, pays for the construction costs and subsequently leases the facilities to the Company. The lease term for the $600 million agreement expires in 2004 and includes four 2-year renewal options. The lease for the $282 million agreement expires in 2008 with no renewal options. Both lease agreements provide for substantial residual value guarantees and include purchase options at original cost on each property. The Company also leases an import distribution facility, including its related equipment, under an operating lease arrangement. The lease for the import distribution facility expires in 2005 and has four 5-year renewal options. The lease agreement provides for substantial residual value guarantees and includes purchase options at the higher of the cost or fair market value of the assets. The maximum amount of the residual value guarantees relative to the assets under the lease agreement described above is projected to be $799 million. As the leased assets are placed into service, the Company estimates its liability under the residual value guarantees and records additional rent expense on a straight-line basis over the remaining lease terms. Total rent expense, net of minor sublease income for the fiscal years ended January 28, 2001, January 30, 2000 and January 31, 1999 was $479 million, $389 million and $321 million, respectively. Real estate taxes, insurance, maintenance and operating expenses applicable to the leased property are obligations of the Company under the building leases. Certain of the store leases provide for contingent rentals based on percentages of sales in excess of specified minimums. Contingent rentals for the fiscal years ended January 28, 2001, January 30, 2000 and January 31, 1999 were approximately $9 million, $11 million and $11 million, respectively. 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The approximate future minimum lease payments under capital and operating leases at January 28, 2001 were as follows (in millions):
Capital Operating Fiscal Year Leases Leases - ------------------------------------------------------------------------------- 2001 $ 38 $ 512 2002 38 512 2003 38 478 2004 38 440 2005 39 411 Thereafter 519 5,132 - ------------------------------------------------------------------------------- 710 $7,485 ========= Less imputed interest 480 - ----------------------------------------------------------- Net present value of capital lease obligations 230 Less current installments 3 - ----------------------------------------------------------- Long-term capital lease obligations, excluding current installments $227 - -----------------------------------------------------------
Short-term and long-term obligations for capital leases are included in the Company's Consolidated Balance Sheets in Current Installments of Long-Term Debt and Long-Term Debt, respectively. The assets under capital leases recorded in Net Property and Equipment, net of amortization, totaled $213 million and $208 million at January 28, 2001 and January 30, 2000, respectively. NOTE 6. EMPLOYEE BENEFIT PLANS The Company maintains a defined contribution plan ("401(k)") that covers substantially all associates meeting certain service requirements. The Company makes weekly matching cash contributions to purchase shares of the Company's common stock, up to specified percentages of associates' contributions as approved by the Board of Directors. The Company also maintains a 401(k) Restoration Plan to provide certain associates deferred compensation that they would have received under the 401(k) matching contribution if not for the maximum compensation limits under the Internal Revenue Code. The Company funds the 401(k) Restoration Plan through contributions made to a "rabbi trust," which are then used to purchase shares of the Company's common stock in the open market. Compensation expense related to this plan for fiscal years 2000, 1999 and 1998 was not material. During February 1999, the Company made its final contribution to the Employee Stock Ownership Plan and Trust ("ESOP"), which was originally established during fiscal 1988. The ESOP covered substantially all full-time associates and purchased shares of the Company's common stock in the open market through a combination of contributions and loans made by the Company. All loans made from the Company have been repaid. The Company's combined contributions to the 401(k) and ESOP were $84 million, $57 million and $41 million for Fiscal years 2000, 1999 and 1998, respectively. At January 28, 2001, the 401(k) and the ESOP held a total of 33,144,570 shares of the Company's common stock in trust for plan participants. NOTE 7. BASIC AND DILUTED EARNINGS PER SHARE The calculations of basic and diluted earnings per share for fiscal years 2000, 1999 and 1998 were as follows (amounts in millions, except per share data):
Fiscal Year Ended ----------------------------------- JANUARY 28, 2001 JANUARY 30, 2000 JANUARY 31, 1999 - ---------------------------------------------------------------------------------------------------- Calculation of Basic Earnings Per Share: Net earnings $2,581 $2,320 $1,614 Weighted average number of common shares outstanding 2,315 2,244 2,206 - ---------------------------------------------------------------------------------------------------- Basic Earnings Per Share $ 1.11 $ 1.03 $ 0.73 - ---------------------------------------------------------------------------------------------------- Calculation of Diluted Earnings Per Share: Net earnings $2,581 $2,320 $1,614 Tax-effected interest expense attributable to 3 1/4% Notes -- 17 23 - ---------------------------------------------------------------------------------------------------- Net earnings assuming dilution $2,581 $2,337 $1,637 - ---------------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding 2,315 2,244 2,206 Effect of potentially dilutive securities: 3 1/4% Notes -- 51 72 Employee stock plans 37 47 42 - ---------------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding assuming dilution 2,352 2,342 2,320 - ---------------------------------------------------------------------------------------------------- Diluted Earnings Per Share $ 1.10 $ 1.00 $ 0.71 - ----------------------------------------------------------------------------------------------------
Employee stock plans represent shares granted under the Company's employee stock purchase plan and stock option plans, as well as shares issued for deferred compensation stock plans. For fiscal years 1999 and 1998, shares issuable upon conversion of the Company's 3 1/4% Notes, issued in October 1996, were included in weighted average shares assuming dilution for purposes of calculating diluted earnings per share. To calculate diluted earnings per share, net earnings are adjusted for tax-effected net interest and issue costs on the 3 1/4% Notes (prior to conversion to equity in October 1999) and divided by weighted average shares assuming dilution. 28 -- 29 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8. COMMITMENTS AND CONTINGENCIES At January 28, 2001, the Company was contingently liable for approximately $442 million under outstanding letters of credit issued in connection with purchase commitments. The Company is involved in litigation arising from the normal course of business. In management's opinion, this litigation is not expected to materially impact the Company's consolidated results of operations or financial condition. NOTE 9. ACQUISITIONS During fiscal 2000, Maintenance Warehouse, a wholly-owned subsidiary of The Home Depot, acquired N-E Thing Supply Company, Inc. The Company acquired Apex Supply Company, Inc. and Georgia Lighting, Inc. in fiscal 1999. These acquisitions were recorded under the purchase method of accounting. Pro forma results of operations for fiscal years 2000, 1999 and 1998 would not be materially different as a result of the acquisitions of N-E Thing Supply Company, Inc., Apex Supply Company, Inc. and Georgia Lighting, Inc. and are therefore not presented. During the first quarter of fiscal 1998, the Company purchased, for $261 million, the remaining 25% partnership interest in The Home Depot Canada held by The Molson Companies. The excess purchase price over the estimated fair value of net assets of $117 million as of the acquisition date was recorded as goodwill and is being amortized over 40 years. NOTE 10. QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the quarterly results of operations for the fiscal years ended January 28, 2001 and January 30, 2000 (dollars in millions, except per share data):
INCREASE BASIC DILUTED IN COMPARABLE GROSS NET EARNINGS EARNINGS NET SALES STORE SALES PROFIT EARNINGS PER SHARE PER SHARE - --------------------------------------------------------------------------------------------------------- Fiscal year ended January 28, 2001: First quarter $11,112 7% $ 3,274 $ 629 $0.27 $0.27 Second quarter 12,618 6% 3,739 838 0.36 0.36 Third quarter 11,545 4% 3,450 650 0.28 0.28 Fourth quarter 10,463 0% 3,217 465 0.20 0.20 - --------------------------------------------------------------------------------------------------------- Fiscal year $45,738 4% $13,681 $2,581 $1.11 $1.10 ========================================================================================================= Fiscal year ended January 30, 2000: First quarter $ 8,952 9% $ 2,566 $ 489 $0.22 $0.21 Second quarter 10,431 11% 3,029 679 0.30 0.29 Third quarter 9,877 10% 2,894 573 0.26 0.25 Fourth quarter 9,174 9% 2,922 579 0.25 0.25 - --------------------------------------------------------------------------------------------------------- Fiscal year $38,434 10% $11,411 $2,320 $1.03 $1.00 =========================================================================================================
Note: The quarterly data may not sum to fiscal year totals due to rounding. 15 The Home Depot, Inc. and Subsidiaries Management's Responsibility for Financial Statements The financial statements presented in this Annual Report have been prepared with integrity and objectivity and are the responsibility of the management of The Home Depot, Inc. These financial statements have been prepared in conformity with generally accepted accounting principles and properly reflect certain estimates and judgments based upon the best available information. The Company maintains a system of internal accounting controls, which is supported by an internal audit program and is designed to provide reasonable assurance, at an appropriate cost, that the Company's assets are safeguarded and transactions are properly recorded. This system is continually reviewed and modified in response to changing business conditions and operations and as a result of recommendations by the external and internal auditors. In addition, the Company has distributed to associates its policies for conducting business affairs in a lawful and ethical manner. The financial statements of the Company have been audited by KPMG LLP, independent auditors. Their accompanying report is based upon an audit conducted in accordance with auditing standards generally accepted in the United States of America, including the related review of internal accounting controls and financial reporting matters. The Audit Committee of the Board of Directors, consisting solely of outside directors, meets quarterly with the independent auditors, the internal auditors and representatives of management to discuss auditing and financial reporting matters. The Audit Committee, acting on behalf of the stockholders, maintains an ongoing appraisal of the internal accounting controls, the activities of the outside auditors and internal auditors and the financial condition of the Company. Both the Company's independent auditors and the internal auditors have free access to the Audit Committee. /s/ Dennis J. Carey /s/ Carol B. Tome - ---------------------------- ------------------------------------- Dennis J. Carey Carol B. Tome Executive Vice President and Senior Vice President, Chief Financial Officer Finance and Accounting Independent Auditors' Report The Board of Directors and Stockholders The Home Depot, Inc.: We have audited the accompanying consolidated balance sheets of The Home Depot, Inc. and subsidiaries as of January 28, 2001 and January 30, 2000 and the related consolidated statements of earnings, stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended January 28, 2001. These consolidated 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 auditing standards generally accepted in the United States of America. 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 financial position of The Home Depot, Inc. and subsidiaries as of January 28, 2001 and January 30, 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended January 28, 2001 in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Atlanta, Georgia February 19, 2001 30 -- 31 EX-21 11 g68482ex21.txt LIST OF SUBSIDIARIES 1 EXHIBIT 21 LIST OF SUBSIDIARIES OF THE REGISTRANT
STATE OR JURISDICTION NAME OF SUBSIDIARY OF INCORPORATION D/B/A - ------------------ --------------------- ----- Home Depot U.S.A., Inc. Delaware The Home Depot EXPO Design Center Villager's Hardware Home Depot of Canada, Inc. Ontario The Home Depot Canada HD Development of Maryland, Inc. Maryland
Certain subsidiaries were omitted pursuant to Item 601(21)(ii) of Regulation SK under the Securities Exchange Act of 1934, as amended. EX-23 12 g68482ex23.txt CONSENT OF INDEPENDENT AUDITORS 1 Exhibit 23 The Board of Directors The Home Depot, Inc.: We consent to incorporation by reference in the registration statements (Nos. 333-56724, 333-56722, 333-91943, 333-38946, 333-85759, 333-61733, 333-56207, 333-46476, 333-22531, 333-22299, 333-58807, 333-16695, 333-01385) on Form S-8 and (No. 333-03497) on Form S-3 of The Home Depot, Inc. of our report dated February 19, 2001, relating to the consolidated balance sheets of The Home Depot, Inc. and subsidiaries as of January 28, 2001 and January 30, 2000, and the related consolidated statements of earnings, stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended January 28, 2001, which report is incorporated by reference in the January 28, 2001 annual report on Form 10-K of The Home Depot, Inc. /s/ KPMG LLP - ---------------------------- Atlanta, Georgia April 19, 2001 EX-24 13 g68482ex24.txt POWERS OF ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY I, Frank Borman, a director of The Home Depot, Inc., a Delaware corporation, do hereby constitute and appoint Bernard Marcus and Robert L. Nardelli, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report of the Corporation on Form 10-K for the fiscal year of the Corporation ended January 28, 2001, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, including such as are incorporated therein by reference, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact deems appropriate, and all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 14th day of April, 2001. /s/ Frank Borman ------------------------ Frank Borman 2 POWER OF ATTORNEY I, Gregory D. Brenneman, a director of The Home Depot, Inc., a Delaware corporation, do hereby constitute and appoint Bernard Marcus and Robert L. Nardelli, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report of the Corporation on Form 10-K for the fiscal year of the Corporation ended January 28, 2001, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, including such as are incorporated therein by reference, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact deems appropriate, and all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th day of April, 2001. /s/ Gregory D. Brenneman -------------------------------- Gregory D. Brenneman 3 POWER OF ATTORNEY I, Richard H. Brown, a director of The Home Depot, Inc., a Delaware corporation, do hereby constitute and appoint Bernard Marcus and Robert L. Nardelli, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report of the Corporation on Form 10-K for the fiscal year of the Corporation ended January 28, 2001, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, including such as are incorporated therein by reference, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact deems appropriate, and all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 20th day of April, 2001. /s/ Richard H. Brown ----------------------------------- Richard H. Brown 4 POWER OF ATTORNEY I, John L. Clendenin, a director of The Home Depot, Inc., a Delaware corporation, do hereby constitute and appoint Bernard Marcus and Robert L. Nardelli, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report of the Corporation on Form 10-K for the fiscal year of the Corporation ended January 28, 2001, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, including such as are incorporated therein by reference, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact deems appropriate, and all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th day of April, 2001. /s/ John L. Clendenin ----------------------------------- John L. Clendenin 5 POWER OF ATTORNEY I, Berry R. Cox, a director of The Home Depot, Inc., a Delaware corporation, do hereby constitute and appoint Bernard Marcus and Robert L. Nardelli, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report of the Corporation on Form 10-K for the fiscal year of the Corporation ended January 28, 2001, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, including such as are incorporated therein by reference, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact deems appropriate, and all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 16th day of April, 2001. /s/ Berry R. Cox -------------------------- Berry R. Cox 6 POWER OF ATTORNEY I, William S. Davila, a director of The Home Depot, Inc., a Delaware corporation, do hereby constitute and appoint Bernard Marcus and Robert L. Nardelli, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report of the Corporation on Form 10-K for the fiscal year of the Corporation ended January 28, 2001, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, including such as are incorporated therein by reference, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact deems appropriate, and all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th day of April, 2001. /s/ William S. Davila ----------------------------------- William S. Davila 7 POWER OF ATTORNEY I, Milledge A. Hart, III, a director of The Home Depot, Inc., a Delaware corporation, do hereby constitute and appoint Bernard Marcus and Robert L. Nardelli, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report of the Corporation on Form 10-K for the fiscal year of the Corporation ended January 28, 2001, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, including such as are incorporated therein by reference, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact deems appropriate, and all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th day of April, 2001. /s/ Milledge A. Hart, III -------------------------- Milledge A. Hart, III 8 POWER OF ATTORNEY I, Bonnie G. Hill, a director of The Home Depot, Inc., a Delaware corporation, do hereby constitute and appoint Bernard Marcus and Robert L. Nardelli, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report of the Corporation on Form 10-K for the fiscal year of the Corporation ended January 28, 2001, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, including such as are incorporated therein by reference, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact deems appropriate, and all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th day of April, 2001. /s/ Bonnie G. Hill ----------------------------------- Bonnie G. Hill 9 POWER OF ATTORNEY I, Kenneth G. Langone, a director of The Home Depot, Inc., a Delaware corporation, do hereby constitute and appoint Bernard Marcus and Robert L. Nardelli, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report of the Corporation on Form 10-K for the fiscal year of the Corporation ended January 28, 2001, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, including such as are incorporated therein by reference, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact deems appropriate, and all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 20th day of April, 2001. /s/ Kenneth G. Langone ---------------------------- Kenneth G. Langone 10 POWER OF ATTORNEY I, M. Faye Wilson, a director of The Home Depot, Inc., a Delaware corporation, do hereby constitute and appoint Bernard Marcus and Robert L. Nardelli, jointly and severally, my true and lawful attorneys-in-fact, each with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report of the Corporation on Form 10-K for the fiscal year of the Corporation ended January 28, 2001, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, including such as are incorporated therein by reference, and to sign on my behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact deems appropriate, and all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 20th day of April, 2001. /s/ M. Faye Wilson ----------------------------------- M. Faye Wilson -----END PRIVACY-ENHANCED MESSAGE-----