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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950144-01-005194.txt : 20010424
<SEC-HEADER>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
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>g68482e10-k.txt
<DESCRIPTION>THE HOME DEPOT, INC.
<TEXT>
<PAGE> 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:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- --------------------
<S> <C>
Common Stock, $.05 Par Value New York Stock Exchange
</TABLE>
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.
<PAGE> 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."
<PAGE> 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.
<PAGE> 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:
<TABLE>
<CAPTION>
Percentage of Sales for
Fiscal Year Ended
------------------------------------
Jan. 28, Jan. 30, Jan. 31,
2001 2000 1999
------- ------- --------
<S> <C> <C> <C>
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%
===== ===== =====
</TABLE>
2
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Number of Stores Number of Stores
State in State State in State
--------------------------------------- ---------------------------------------
<S> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
International Number of Stores
Location in Location
---------------------------------------
<S> <C>
Canada:
Alberta 9
British Columbia 9
Manitoba 3
Nova Scotia 2
Ontario 39
Quebec 3
Saskatchewan 2
South America:
Chile 5
Argentina 2
</TABLE>
14
<PAGE> 17
The following table shows the location of the 26 EXPO Design Center stores by
state as of January 28, 2001:
<TABLE>
<CAPTION>
Number of Stores
State in State
---------------------------------------
<S> <C>
California 7
Florida 3
Georgia 2
Illinois 1
Massachusetts 2
Michigan 2
New Jersey 1
New York 2
Texas 5
Virginia 1
</TABLE>
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
<PAGE> 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.
<TABLE>
<CAPTION>
PRICE RANGE* CASH
-------------------------- DIVIDENDS
LOW HIGH DECLARED*
------ ----- ---------
<S> <C> <C> <C>
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
</TABLE>
- ---------
*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
<PAGE> 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.
<TABLE>
<CAPTION>
Fiscal Year(1)
------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
(amounts in millions, except per share data)
<S> <C> <C> <C> <C> <C>
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
</TABLE>
(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
<PAGE> 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.
<TABLE>
<CAPTION>
PERCENTAGE
SELECTED CONSOLIDATED INCREASE (DECREASE)
STATEMENTS OF EARNINGS DATA IN DOLLAR AMOUNTS
- --------------------------- FISCAL YEAR(1) -------------------
---------------------------------------- 2000 1999
2000 1999 1998 vs. 1999 vs. 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
(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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<S> <C>
*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]
</TABLE>
25
<PAGE> 28
<TABLE>
<S> <C>
*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]
</TABLE>
26
<PAGE> 29
<TABLE>
<S> <C>
*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.
</TABLE>
27
<PAGE> 30
<TABLE>
<S> <C>
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.
</TABLE>
- ---------
+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
<PAGE> 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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/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)
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/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)
</TABLE>
30
<PAGE> 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
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT INDEX
- -------------
<S> <C>
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.
</TABLE>
- ---------
+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.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>2
<FILENAME>g68482ex10-5.txt
<DESCRIPTION>RESTATED AND AMENDED EMPLOYEE STOCK PURCHASE PLAN
<TEXT>
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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:
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>3
<FILENAME>g68482ex10-10.txt
<DESCRIPTION>ESOP RESTORATION PLAN
<TEXT>
<PAGE> 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:
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
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
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 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:
<PAGE> 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,
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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;
<PAGE> 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.
<PAGE> 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
<PAGE> 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
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>4
<FILENAME>g68482ex10-17.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT, DATED JANUARY 19, 2001
<TEXT>
<PAGE> 1
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
BETWEEN
ROBERT L. NARDELLI
AND
THE HOME DEPOT, INC.
<PAGE> 2
EMPLOYMENT AGREEMENT
BETWEEN
ROBERT L. NARDELLI
AND
THE HOME DEPOT, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
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
</TABLE>
- 2 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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.
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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
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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
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<PAGE> 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;
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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
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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
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<PAGE> 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;
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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.
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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
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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
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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
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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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 20
APPENDIX A
SCHEDULE FOR DEFERRED STOCK UNITS
<TABLE>
<CAPTION>
VESTING DATE DEFERRAL ELECTION DATE DISTRIBUTION DATE
<S> <C> <C> <C>
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
</TABLE>
- 20 -
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>5
<FILENAME>g68482ex10-18.txt
<DESCRIPTION>PROMISSORY NOTE, DATED DECEMBER 4, 2000
<TEXT>
<PAGE> 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
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>6
<FILENAME>g68482ex10-19.txt
<DESCRIPTION>COMMERCIAL PAPER DEALER AGREEMENT
<TEXT>
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>7
<FILENAME>g68482ex10-20.txt
<DESCRIPTION>NON-QUALIFIED STOCK OPTION AGREEMENT
<TEXT>
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 8
APPENDIX A
SCHEDULE FOR DEFERRED STOCK UNITS
<TABLE>
<CAPTION>
NUMBER OF
DEFERRED DISTRIBUTION DATE
STOCK UNITS VESTING DATE LATEST DEFERRAL DATE IF NO DEFERRAL
<S> <C> <C> <C> <C>
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
</TABLE>
8
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>8
<FILENAME>g68482ex10-21.txt
<DESCRIPTION>AGREEMENT, DATED FEBRUARY 22, 2001
<TEXT>
<PAGE> 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
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>9
<FILENAME>g68482ex10-22.txt
<DESCRIPTION>PROMISSORY NOTE, DATED DECEMBER 29, 2000.
<TEXT>
<PAGE> 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.
<PAGE> 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
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>10
<FILENAME>g68482ex13.txt
<DESCRIPTION>THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS
<TEXT>
<PAGE> 1
EXHIBIT 13
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
amounts in millions, except per share data Fiscal Year Ended
- ------------------------------------------------------------------------------------------------------------------------------------
JANUARY 28, 2001 JANUARY 30, 2000 JANUARY 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 2
Consolidated Balance Sheets
The Home Depot, Inc. and
Subsidiaries
<TABLE>
<CAPTION>
amounts in millions, except share data
- --------------------------------------------------------------------------------------------------------
January 28, 2001 January 30, 2000
========================================================================================================
<S> <C> <C>
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
========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
20
--
21
<PAGE> 3
Consolidated Statements of Stockholders' Equity and Comprehensive Income
The Home Depot, Inc. and
Subsidiaries
<TABLE>
<CAPTION>
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)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
====================================================================================================================================
</TABLE>
(1) Components of comprehensive income are reported net of related taxes.
See accompanying notes to consolidated financial statements.
<PAGE> 4
Consolidated Statements of Cash Flows
The Home Depot, Inc. and
Subsidiaries
<TABLE>
<CAPTION>
amounts in millions Fiscal Year Ended
- -----------------------------------------------------------------------------------------------------------------
January 28, 2001 January 30, 2000 January 31, 1999
=================================================================================================================
<S> <C> <C> <C>
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
=================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
22
--
23
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Life
- -------------------------------------------------------------------------------
<S> <C>
Buildings 10-45 years
Furniture, fixtures and equipment 5-20 years
Leasehold improvements 5-30 years
Computer software 3-5 years
- -------------------------------------------------------------------------------
</TABLE>
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
<PAGE> 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):
<TABLE>
<CAPTION>
January 28, 2001 January 30, 2000
================================================================================
<S> <C> <C>
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
================================================================================
</TABLE>
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.
<PAGE> 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):
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
January 28, 2001 January 30, 2000 January 31, 1999
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
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
===========================================================================
</TABLE>
26
--
27
<PAGE> 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):
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
January 28, 2001 January 30, 2000 January 31, 1999
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
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
================================================================================
</TABLE>
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):
<TABLE>
<CAPTION>
January 28, 2001 January 30, 2000
- --------------------------------------------------------------------------------
<S> <C> <C>
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)
================================================================================
</TABLE>
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.
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Stock Options
Granted in Fiscal Year
----------------------------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
==================================================================================================
</TABLE>
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):
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------
January 28, 2001 January 30, 2000 January 31, 1999
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
===========================================================================================
</TABLE>
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):
<TABLE>
<CAPTION>
Weighted
Number Average
of Shares Option Price
- -----------------------------------------------------------------------------
<S> <C> <C>
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
=============================================================================
</TABLE>
<PAGE> 12
The following table summarizes information regarding stock options outstanding
as of January 28, 2001 (shares in thousands):
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Average
Range of Options Remaining Outstanding Options Exercisable
Exercise Prices Outstanding Life (Years) Option Price Exercisable Option Price
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 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
- ----------------------------------------------------------------------------------------
</TABLE>
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.
<PAGE> 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):
<TABLE>
<CAPTION>
Capital Operating
Fiscal Year Leases Leases
- -------------------------------------------------------------------------------
<S> <C> <C>
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
- -----------------------------------------------------------
</TABLE>
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):
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
JANUARY 28, 2001 JANUARY 30, 2000 JANUARY 31, 1999
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- ----------------------------------------------------------------------------------------------------
</TABLE>
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
<PAGE> 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):
<TABLE>
<CAPTION>
INCREASE BASIC DILUTED
IN COMPARABLE GROSS NET EARNINGS EARNINGS
NET SALES STORE SALES PROFIT EARNINGS PER SHARE PER SHARE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
=========================================================================================================
</TABLE>
Note: The quarterly data may not sum to fiscal year totals due to rounding.
<PAGE> 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
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>11
<FILENAME>g68482ex21.txt
<DESCRIPTION>LIST OF SUBSIDIARIES
<TEXT>
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OR JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION D/B/A
- ------------------ --------------------- -----
<S> <C> <C>
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
</TABLE>
Certain subsidiaries were omitted pursuant to Item 601(21)(ii) of Regulation SK
under the Securities Exchange Act of 1934, as amended.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>12
<FILENAME>g68482ex23.txt
<DESCRIPTION>CONSENT OF INDEPENDENT AUDITORS
<TEXT>
<PAGE> 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
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>13
<FILENAME>g68482ex24.txt
<DESCRIPTION>POWERS OF ATTORNEY
<TEXT>
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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