SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
The Home Depot, Inc
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[THE HOME DEPOT LOGO]
PROXY STATEMENT AND NOTICE OF 2002
ANNUAL STOCKHOLDERS' MEETING
[THE HOME DEPOT LOGO]
TO OUR STOCKHOLDERS:
It is my pleasure to invite you to attend our 2002 Annual Meeting of
Stockholders, which will be held this year on Wednesday, May 29, 2002, at the
Cobb Galleria Centre in Atlanta, Georgia. The meeting will start at 10:00 a.m.
local time.
On the ballot at this year's meeting are company proposals (1) for the
election of the full board of directors, (2) to ratify the appointment of KPMG
LLP as independent auditors for the Company for the fiscal year 2002, (3) to
amend our Certificate of Incorporation to eliminate Article Eighth and (4) to
re-approve our 1997 Omnibus Stock Incentive Plan, as amended to add additional
performance objectives. Additionally, you will vote on a stockholder proposal.
We also look forward to answering your questions at the meeting in the manner
discussed in the proxy statement. If you will need special assistance at the
meeting because of a disability, please contact Audrey Davies at 770-433-8211,
ext. 17598. We will provide an interpreter for the hearing impaired.
PLEASE NOTE THAT YOU WILL NEED TO SHOW THAT YOU ARE A STOCKHOLDER OF
HOME DEPOT TO ATTEND THE ANNUAL MEETING. If your shares are registered in your
name, your admission card is attached to your proxy card, and you will need to
bring this card with you to the meeting. If your shares are in the name of your
broker or bank or you received your proxy materials electronically, you will
need to bring evidence of your stock ownership, such as your most recent
brokerage account statement. All stockholders will be required to present valid
picture identification. IF YOU DO NOT HAVE VALID PICTURE IDENTIFICATION AND
EITHER AN ADMISSION CARD OR PROOF THAT YOU OWN HOME DEPOT STOCK, YOU MAY NOT BE
ADMITTED INTO THE MEETING.
If you are unable to attend the meeting, you can listen to it live over
the Internet. You can access the audio by going to our website,
www.homedepot.com. A replay will also be available until June 5, 2002.
We are continuing to offer you the option to receive future proxy
materials electronically through the Internet. You can sign up by following the
simple instructions contained in this mailing. Receiving future annual reports
and proxy statements through the Internet will be simpler for you, will save
your company money and is friendlier to the environment. If you have a computer
with Internet access, we hope you will follow the instructions and sign up.
Whether or not you plan to attend, you can be sure your shares are
represented at the meeting by promptly voting and submitting your proxy by
phone, by Internet or by completing, signing and returning the enclosed proxy
card.
Thank you for your support.
Sincerely,
---------------------------------------------------
Robert L. Nardelli
Chairman, President and Chief Executive Officer
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
TIME:
10:00 a.m. on Wednesday, May 29, 2002
PLACE:
Cobb Galleria Centre
2 Galleria Parkway
Atlanta, Georgia 30339
ITEMS OF BUSINESS:
(1) To elect the full board of directors.
(2) To ratify the appointment of KPMG LLP as independent auditors for the
Company for the fiscal year 2002.
(3) To amend the Company's Certificate of Incorporation to eliminate
Article Eighth.
(4) To re-approve our 1997 Omnibus Stock Incentive Plan, as amended to add
additional performance objectives.
(5) To transact other business properly coming before the meeting,
including the consideration of stockholder proposals.
WHO CAN VOTE:
You can vote if you were a stockholder of record on April 1, 2002.
ANNUAL REPORT:
A copy of our 2001 Annual Report is enclosed.
DATE OF MAILING:
This notice and the proxy statement are first being mailed to stockholders on or
about April 22, 2002.
By Order of the Board of Directors
Frank L. Fernandez, Secretary
ABOUT THE MEETING
WHAT AM I VOTING ON?
You will be voting on the following:
- To elect the full board of directors;
- To ratify the appointment of KPMG LLP as independent auditors
for the Company for the fiscal year 2002;
- To amend the Company's Certificate of Incorporation to
eliminate Article Eighth, which sets forth our "fair price"
provision;
- To re-approve our 1997 Omnibus Stock Incentive
Plan, as amended to add additional performance objectives
- To consider stockholder proposals properly coming before the
meeting.
WHO IS ENTITLED TO VOTE?
You may vote if you owned stock as of the close of business on April 1,
2002. Each share of common stock is entitled to one vote. As of April 1, 2002,
we had ______ shares of common stock outstanding.
HOW DO I VOTE BEFORE THE MEETING?
You have three voting options:
- Over the Internet, which we encourage if you have Internet
access, at the address shown on your proxy card;
- By telephone through the number shown on your proxy card; or
- By mail by completing, signing and returning the enclosed
proxy card.
If you hold your shares in the name of a bank or broker, your ability
to vote by telephone or the Internet depends on their voting processes. Please
follow the directions on your proxy card carefully.
CAN I VOTE AT THE MEETING?
You may vote your shares at the meeting if you attend in person. Even
if you plan to attend the meeting, we encourage you to vote your shares by
proxy. You may vote by proxy through the Internet, by telephone or by mail.
CAN I CHANGE MY MIND AFTER I VOTE?
You may change your vote at any time before the polls close at the
meeting. You may do this by (1) signing another proxy card with a later date and
returning it to us prior to the meeting, (2) voting again by telephone or over
the Internet prior to 10:00 a.m. on May 29, 2002 or (3) voting again at the
meeting.
WHAT IF I RETURN MY PROXY CARD BUT DO NOT PROVIDE VOTING INSTRUCTIONS?
Proxies that are signed and returned but do not contain instructions
will be voted (1) FOR the election of the nominee directors named on pages [5
through 8] of this proxy statement, (2) FOR the amendment of the Certificate of
Incorporation to eliminate Article Eighth, (3) FOR the re-approval of our 1997
Omnibus Stock Option Plan, as amended to add additional performance objectives,
and (4) AGAINST the stockholder proposal.
ABOUT THE MEETING
HOW DO I VOTE IF I PARTICIPATE IN THE DIVIDEND REINVESTMENT PLAN?
The proxy card you have received includes your dividend reinvestment
plan shares. You may vote your shares through the Internet, by telephone or by
mail, all as described on the enclosed proxy card.
HOW DO I VOTE IF I PARTICIPATE IN THE FUTUREBUILDER PLAN FOR HOME DEPOT
ASSOCIATES?
Shares credited to your FutureBuilder account are included on your
proxy card. You may vote your shares by Internet, telephone or mail, all as
described on the enclosed proxy card. If you do not vote, the shares credited to
your account will be voted by the trustee in the same proportion that it votes
shares in other accounts for which it did receive timely instructions. If you
also own stock in your own name and not through a broker, your proxy card
includes both those shares and shares credited to your FutureBuilder account.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
It means that you have multiple accounts with brokers and/or our
transfer agent. Please vote all of these shares. We recommend that you contact
your broker and/or our transfer agent to consolidate as many accounts as
possible under the same name and address. Our transfer agent is EquiServe Trust
Company, N.A., which may be reached at 1-800-577-0177 or at www.equiserve.com.
WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY?
Your shares may be voted if they are held in the name of a brokerage
firm, even if you do not provide the brokerage firm with voting instructions.
Brokerage firms have the authority under the New York Stock Exchange rules to
vote shares for which their customers do not provide voting instructions on
certain "routine" matters. The election of directors, the ratification of KPMG
LLP as independent auditors of the Company for fiscal year 2002 and the
re-approval of the 1997 Omnibus Stock Incentive Plan, as amended to add
additional performance objectives, are considered routine matters for which
brokerage firms may vote unvoted shares. The other proposals to be voted on at
our meeting are not considered "routine" under applicable rules. When a proposal
is not a routine matter and the brokerage firm has not received voting
instructions from the beneficial owner of the shares with respect to that
proposal, the brokerage firm cannot vote the shares on that proposal. This is
called a "broker non-vote."
HOW CAN I ATTEND THE MEETING?
The annual meeting is open to all holders of Home Depot common stock.
To attend the meeting, you will need to bring evidence of your stock ownership.
If your shares are registered in your name, your admission card is attached to
your proxy card, and you will need to bring it with you to the meeting. If your
shares are in the name of your broker or bank or you received your proxy
materials electronically, you will need to bring evidence of your stock
ownership, such as your most recent brokerage account statement. All
stockholders will be required to present valid picture identification. IF YOU DO
NOT HAVE VALID PICTURE IDENTIFICATION AND EITHER AN ADMISSION CARD OR PROOF THAT
YOU OWN HOME DEPOT STOCK, YOU MAY NOT BE ADMITTED INTO THE MEETING.
HOW CAN I LISTEN TO THE MEETING OVER THE INTERNET?
You can listen to the meeting live by logging onto our website,
www.homedepot.com. A replay will also be available until June 5, 2002.
2
ABOUT THE MEETING
MAY STOCKHOLDERS ASK QUESTIONS AT THE MEETING?
Yes. Representatives of the Company will answer stockholders' questions
of general interest at the end of the meeting. In order to give a greater number
of stockholders an opportunity to ask questions, individuals or groups will be
allowed to ask only one question and no repetitive or follow-up questions will
be permitted.
HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?
Your shares are counted as present at the meeting if you attend the
meeting and vote in person or if you properly return a proxy by Internet,
telephone or mail. In order for us to conduct our meeting, a majority of our
outstanding shares of common stock as of April 1, 2002, must be present in
person or by proxy at the meeting. This is referred to as a quorum. Abstentions
and broker non-votes will be counted for purposes of establishing a quorum at
the meeting.
HOW MANY VOTES ARE NEEDED TO ELECT DIRECTORS?
The nominees receiving the highest number of "For" votes will be
elected as directors. This number is called a plurality. Shares not voted,
whether by marking "Abstain" on your proxy card or otherwise, will have no
impact on the election of directors. The proxy given will be voted FOR each of
the nominees for director unless a properly executed proxy card is marked
"Withhold Authority" as to a particular nominee or nominees for director.
HOW MANY VOTES ARE NEEDED TO APPROVE THE COMPANY'S PROPOSALS?
Each of the Company's proposals will be considered separately. The
ratification of the appointment of KPMG LLP as independent auditors of the
Company for the fiscal year 2002 must receive the "yes" vote of a majority of
the votes cast at the meeting. The proposal to re-approve our 1997 Omnibus Stock
Incentive Plan, as amended to add additional performance objectives, must
receive the "yes" vote of a majority of the votes cast at the meeting. A
properly executed proxy card marked "Abstain" with respect to these proposals
will not be voted.
The amendment of our Certificate of Incorporation to eliminate Article
EIGHTH must receive the "yes" vote of a majority of the outstanding shares. A
properly executed proxy card marked "Abstain" with respect to this proposal will
not be voted. Accordingly, abstentions will have the effect of a vote "Against"
this proposal. Broker non-votes will not be voted with respect to this proposal.
HOW MANY VOTES ARE NEEDED TO APPROVE THIS YEAR'S STOCKHOLDER PROPOSAL?
The stockholder proposal must receive the "For" vote of a majority of
the shares present at the meeting in order to be approved. A properly executed
proxy card marked "Abstain" with respect to this proposal will not be voted.
Broker non-votes will not be voted with respect to any stockholder proposals
presented at the meeting.
3
BOARD OF DIRECTORS INFORMATION
WHAT IS THE MAKEUP OF THE BOARD OF DIRECTORS AND HOW OFTEN ARE MEMBERS ELECTED?
Our Board of Directors currently has 13 members. Each director stands
for election every year.
ARE ANY DIRECTORS NOT STANDING FOR RE-ELECTION?
Yes. Bernard Marcus is retiring from the Board effective as of the
Annual Meeting because he has reached our mandatory retirement age of 72. Under
the terms of our Certificate of Incorporation and By-laws, the Board has reduced
the size of the Board to twelve members effective as of the Annual Meeting. In
the future, the Board may increase the size of the Board and appoint new
directors.
WHAT IF A NOMINEE IS UNWILLING OR UNABLE TO SERVE?
That is not expected to occur. If it does, proxies will be voted for a
substitute nominated by the Board of Directors.
HOW ARE DIRECTORS COMPENSATED?
Each director who is not an employee of The Home Depot receives $60,000
each year, $30,000 of which is in the form of restricted shares of our common
stock. Directors may elect to receive all or any portion of their cash
compensation in deferred stock units. Additionally, these directors receive
options to purchase 5,000 shares of common stock upon election or appointment to
the Board and 3,750 additional options each year. These directors also receive
$1,000 for each meeting they attend other than by telephone and are reimbursed
for reasonable expenses in attending meetings and conducting store visits. Due
to their large holdings of Home Depot common stock, Messrs. Cox, Hart and
Langone waived receipt of the portion of their retainers for fiscal 2001 that
was payable in restricted shares. Directors who are also employees of The Home
Depot are not separately compensated for their services as directors.
As part of the Company's overall support of charitable organizations,
and in order to preserve its ability to attract directors with outstanding
experience and ability, the Company maintains a program that permits each
director to recommend charitable organizations to receive up to $1 million from
the Company upon the director's retirement upon reaching the Board's mandatory
retirement age or upon death. Additionally, through the program the Company will
match up to $50,000 of charitable donations made by each director during each
calendar year. The directors will not receive any financial benefit from this
program because the charitable deductions accrue solely to the Company.
Donations are not made to any charity from which the director or any party
related to the director directly or indirectly receives compensation. The
overall program is not expected to result in a material cost to the Company.
WHAT DOES THE LEAD DIRECTOR DO?
The Lead Director helps the Chairman of the Board develop the agenda
for Board meetings and reviews the Board's governance procedures and policies.
The Lead Director is also the Chairman of the Nominating and Corporate
Governance Committee and chairs any meetings of outside directors. The Lead
Director is elected by the Board of Directors for a three-year term. Kenneth G.
Langone was elected as the first Lead Director in 1998, and he was re-elected in
2001. His current term expires in 2004.
HOW OFTEN DID THE BOARD MEET IN FISCAL 2001?
The Board of Directors met six times during fiscal 2001. During fiscal
2001, each director attended at least 75% of the meetings of the board and of
the committees of which he or she was a member.
4
ELECTION OF DIRECTORS AND DIRECTOR BIOGRAPHIES
(ITEM 1 ON THE PROXY CARD)
WHO ARE THIS YEAR'S NOMINEES?
The directors standing for election this year to hold office until the
2003 annual meeting of stockholders and until his or her successor is elected
are:
GREGORY D. BRENNEMAN, 40, Director since 2000
- Chairman and Chief Executive Officer of Turnworks, Inc., a
private equity firm, since 2001
- President of Continental Airlines, Inc. from 1996 to 2001 and
member of the Board and Chief Operating Officer of Continental
Airlines from 1995 to 2001
- Member of the Board of:
- Automatic Data Processing, Inc.
- J. Crew Group, Inc.
RICHARD H. BROWN, 54, Director since 2000
- Chairman and Chief Executive Officer of Electronic Data
Systems Corporation since 1999
- Chief Executive Officer of Cable & Wireless plc from 1996 to
1998
- President and Chief Executive Officer of H&R Block, Inc. from
1995 to 1996
- Member of the Board of:
- Vivendi Universal SA
- E.I. du Pont de Nemours and Company
- Member of:
- The Business Council
- The Business Roundtable
- The U.S. - France Business Council
- The U.S. - Japan Business Council
- Member of the Board of Trustees of Southern Methodist
University
JOHN L. CLENDENIN, 67, Director since 1996
- Retired as Chairman in 1997 and as President and Chief
Executive Officer in 1996 of BellSouth Corporation
- Member of the Board of:
- Acuity Brands, Inc.
- Coca-Cola Enterprises Inc.
- Equifax Inc.
- The Kroger Co.
- Powerwave Technologies, Inc.
- Past Chairman/President of:
- The Committee for Economic Development
- Junior Achievement
- The Boy Scouts of America
- U.S. Chamber of Commerce
5
ELECTION OF DIRECTORS AND DIRECTOR BIOGRAPHIES
(ITEM 1 ON THE PROXY CARD)
BERRY R. COX, 48, Director since 1978
- Chairman of Berry R. Cox, Inc., a privately held investment
management company
- Principally engaged in investments in public and private
securities, real estate development and oil and gas
exploration for over 20 years
WILLIAM S. DAVILA, 70, Director since 1999
- President Emeritus of The Vons Companies, Inc. from 1993
through 1999
- Member of the Board of:
- Hormel Foods Corporation
- Pacific Gas and Electric Company
- Methodist Hospital, Arcadia, California
CLAUDIO X. GONZALEZ, 67, Director since 2001
- Chairman and Chief Executive Officer of Kimberly-Clark de
Mexico, S.A. de C.V. since 1973
- Member of the Board of:
- America Movil
- General Electric Company
- Kellogg Company
- Kimberly-Clark Corporation
- The Mexico Fund, Inc.
- Grupo Carso
- Grupo Industrial ALFA
- Grupo Modelo
- Grupo Televisa
- Investment Co. of America
- Chairman of Consejo Coordinador Empresarial
RICHARD A. GRASSO, 55, Director since 2002
- Chairman and Chief Executive Officer of The New York Stock
Exchange since 1995
- Member of the Board of:
- Computer Associates International, Inc.
- The Centurion Foundation
- Lower Manhattan Development Corp.
- New York City Police Foundation
- New York City Public Private Initiatives Inc.
- New York University
- Member of the Advisory Board of the Yale School of Management
- Trustee of the Stony Brook Foundation
- Member of the International Capital Markets Advisory Committee
of the Federal Reserve Bank of New York
- Chairman of the Economic Club of New York
- Vice Chairman of the National Italian American Foundation
6
ELECTION OF DIRECTORS AND DIRECTOR BIOGRAPHIES
(ITEM 1 ON THE PROXY CARD)
MILLEDGE A. HART, III, 68, Director since 1978
- Member of the Board since 1985 and Chairman since 1997 of
DocuCorp International, Inc.
- Chairman of the Board of:
- Hart Group, Inc., a private management service and
investment company, since 1988
- Rmax, Inc., an insulation manufacturing company,
since 1978
- Member of the Board of Trustees and Chairman of the Investment
Committee of Southern Methodist University
- Member of the Board of Patton Medical Corporation
BONNIE G. HILL, 60, Director since 1999
- President of B. Hill Enterprises, LLC, a consulting firm
specializing in corporate governance and board organizational
and public policy issues, since 2001
- President and Chief Executive Officer of The Times Mirror
Foundation from 1997 to 2001
- Senior Vice President, Communications and Public Affairs of
the Los Angeles Times from 1998 to 2001
- Vice President of The Times Mirror Company, a newspaper and
publishing company, from 1997 to 2000
- Dean of McIntire School of Commerce at the University of
Virginia from 1993 to 1996
- Member of the Board of:
- AK Steel Holding Corporation
- Albertson's Inc.
- ChoicePoint Inc.
- Hershey Foods Corporation
- The National Grid Group plc
- Goodwill Industries of Southern California
- Police Assessment Resource Center
- United Way of Greater Los Angeles
- Member of the National Advisory Panel of the Institute for
Research on Women and Gender at Stanford University
KENNETH G. LANGONE, 66, Director since 1978
- Co-founder of The Home Depot
- Lead Director of The Home Depot since 1998
- Chairman of the Board, Chief Executive Officer and President
of Invemed Associates, Inc., an investment banking and
brokerage firm, for more than five years
- Member of the Board of:
- ChoicePoint Inc.
- General Electric Company
- Tricon Global Restaurants, Inc.
- Unifi, Inc.
- Damon Runyon Cancer Research Foundation
- The Children's Oncology Society of New York (The
Ronald McDonald House of New York)
7
ELECTION OF DIRECTORS AND DIRECTOR BIOGRAPHIES
(ITEM 1 ON THE PROXY CARD)
- New York Philharmonic
- The New York Stock Exchange, Inc.
- Robin Hood Foundation
- Trustee of New York University
- Trustee of New York University Leonard Stern School of
Business
- Chairman of New York University School of Medicine
ROBERT L. NARDELLI, 53, Director since 2000
- Chairman of The Home Depot since January 2002
- President and Chief Executive Officer of The Home Depot since
December 2000
- President and Chief Executive Officer of GE Power Systems from
1995 through December 2000
ROGER S. PENSKE, 65, Director since 2001
- Founder and Chairman of Penske Corporation since 1969
- Chairman of Penske Truck Leasing Corporation since 1982
- Chairman of United Auto Group, Inc. since 1999
- Vice Chairman and Member of the Board of International
Speedway Corporation
- Member of the Board of:
- Delphi Automotive Systems Corporation
- General Electric Company
- Detroit Renaissance
- Member of The Business Council
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WE RECOMMEND THAT YOU
VOTE FOR THE ELECTION OF
THESE DIRECTORS
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8
BOARD OF DIRECTORS COMMITTEES
WHAT ARE THE COMMITTEES OF THE BOARD?
OUR BOARD OF DIRECTORS HAS THE FOLLOWING COMMITTEES:
NUMBER OF MEETINGS
NAME OF COMMITTEE AND MEMBERS FUNCTIONS OF THE COMMITTEE IN FISCAL 2001
----------------------------- -------------------------- ------------------
EXECUTIVE: - Exercises the authority of the full 4
Bernard Marcus, Chair(1) Board on specified matters between
John Clendenin Board meetings
Berry R. Cox
Milledge A. Hart, III
Kenneth G. Langone
Robert L. Nardelli
AUDIT: - Oversees auditing procedures 5
Berry R. Cox, Chair - Receives and accepts the report of
Richard H. Brown independent auditors
William S. Davila - Oversees internal systems of accounting
Claudio X. Gonzalez and management control
Milledge A. Hart, III - Makes recommendations regarding the
selection of independent auditors
COMPENSATION:(2) - Reviews and recommends compensation 5
John L. Clendenin, Chair of directors and executive officers
Gregory D. Brenneman - Administers stock incentive plans
Berry R. Cox - Makes grants of stock awards
William S. Davila pursuant to stock incentive plans
Roger S. Penske
NOMINATING AND
CORPORATE GOVERNANCE: - Makes recommendations for nominees 4
Kenneth G. Langone, Chair for director(3)
John L. Clendenin - Reviews and monitors activities of
Milledge A. Hart, III Board members
Bonnie G. Hill - Oversees corporate compliance program
Roger S. Penske - Develops, sets and maintains corporate
governance standards
HUMAN RESOURCES: - Reviews and recommends policies, 4
Bonnie G. Hill, Chair practices and procedures concerning
Gregory D. Brenneman human resource-related matters
Claudio X. Gonzalez
Richard A. Grasso
Kenneth G. Langone
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(1) Not standing for re-election.
(2) During fiscal 2001, the Compensation Committee assumed the
responsibilities of the Stock Option Committee.
(3) The Nominating and Corporate Governance Committee will consider
nominees recommended by the Company's stockholders. Any recommendations
should be submitted to the Corporate Secretary, The Home Depot, Inc.,
2455 Paces Ferry Road, Atlanta, Georgia 30339.
9
PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG
(ITEM 2 ON THE PROXY CARD)
WHAT AM I VOTING ON?
A proposal to ratify the appointment of KPMG LLP as independent
auditors for the Company for fiscal year 2002. Based upon the recommendation of
the Audit Committee, the Board of Directors has appointed KPMG to serve as
independent auditors. Although the Company's governing documents do not require
the submission of the selection of independent auditors to the stockholders for
approval, the Board of Directors considers it desirable that its appointment of
KPMG be ratified by the stockholders.
WHAT SERVICES DO THE INDEPENDENT AUDITORS PROVIDE?
Audit services of KPMG for fiscal 2001 included the examination of the
consolidated financial statements of the Company and services related to
periodic filings made with the Securities and Exchange Commission. Additionally,
KPMG provided certain services relating to the consolidated quarterly reports
and annual and other periodic reports at international locations and tax and
other services as described on page [30] of this proxy statement.
WILL A REPRESENTATIVE OF KPMG BE PRESENT AT THE MEETING?
One or more representatives of KPMG will be present at the meeting. The
representatives will have an opportunity to make a statement if they desire and
will be available to respond to appropriate questions from stockholders.
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL?
Approval of this proposal requires the affirmative vote of a majority
of the shares present at the meeting. If the appointment of KPMG is not
ratified, the Audit Committee and the Board of Directors will reconsider the
appointment.
---------------
WE RECOMMEND THAT YOU
VOTE FOR ADOPTION OF
THIS PROPOSAL
---------------
10
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION TO ELIMINATE ARTICLE EIGHTH
(ITEM 3 ON THE PROXY CARD)
WHAT AM I VOTING ON?
A proposal to amend our Certificate of Incorporation to eliminate
ARTICLE EIGHTH, which is a "fair price provision." This provision requires that
certain significant changes involving the Company, such as a merger or changes
to stockholders' voting rights, must be approved by the holders of at least 80%
of our outstanding shares of common stock. This is sometimes called a
"super-majority" vote requirement. ARTICLE EIGHTH is the only provision of our
governing documents requiring a super-majority vote.
WHAT IS A FAIR PRICE PROVISION?
Fair price provisions are designed to protect stockholders in the event
of certain types of unsolicited attempts to acquire control of a company, such
as certain tender offers. In the case of a tender offer, the bidder may launch
an offer to acquire a majority of the shares of a company and, if successful,
then propose another transaction to acquire the remainder of the company's
outstanding shares. Under our fair price provision, the transaction to acquire
the remaining shares must be approved by at least 80% of our outstanding shares
unless the bidder pays the remaining stockholders a fair price compared to the
price paid to acquire its other shares, as specified in detail in our
Certificate of Incorporation, and complies with other requirements in our
Certificate of Incorporation.
WHY IS THE COMPANY RECOMMENDING THAT THE FAIR PRICE PROVISION BE ELIMINATED?
While fair price provisions can provide important protections for
stockholders, the super-majority vote requirement can make it more difficult to
acquire a company and may discourage transactions that stockholders may view as
beneficial. After careful consideration, the Company has concluded that it is in
the best interests of our stockholders to remove the provision from our
Certificate of Incorporation. In reaching this conclusion, the Company
considered the fact that at our last two Annual Meetings holders of a majority
of our outstanding shares approved a proposal recommending that the Board of
Directors act to eliminate all provisions of our governing documents requiring a
super-majority vote of stockholders.
WHAT CHANGES WOULD BE MADE IN OUR CERTIFICATE OF INCORPORATION?
The proposed amendment would result in the deletion of ARTICLE EIGHTH
of our Certificate of Incorporation, which sets forth the fair price provision
requiring a super-majority vote.
WHAT VOTE IS REQUIRED TO APPROVE THE AMENDMENT?
The Board of Directors has unanimously authorized this amendment and
voted to recommend it to the Company's stockholders. As a result, approval of
the amendment requires the affirmative vote of holders of a majority of our
shares outstanding and entitled to vote at the Annual Meeting.
WHEN WOULD THE AMENDMENT BECOME EFFECTIVE?
If approved by the stockholders, the amendment will become effective
upon filing an appropriate certificate with the Delaware Secretary of State.
---------------
WE RECOMMEND THAT YOU
VOTE FOR ADOPTION OF
THIS PROPOSAL
---------------
11
PROPOSAL TO RE-APPROVE THE 1997 OMNIBUS STOCK INCENTIVE PLAN, AS AMENDED
(ITEM 4 ON THE PROXY CARD)
WHAT AM I VOTING ON?
Stockholders approved the 1997 Omnibus Stock Incentive Plan in 1997.
This proposal is to obtain re-approval of the plan to meet the requirements for
tax deductibility under Section 162(m) of the Internal Revenue Code. This code
section requires that stockholders re-approve the plan every five years to
qualify certain awards for exemption from Section 162(m). Additionally, this
proposal is to approve the amendment of the plan to add additional performance
objectives. The Compensation Committee of the Board of Directors and the full
Board have approved this proposal.
WHAT IS THE SECTION 162(M) EXEMPTION?
Section 162(m) prevents a publicly held corporation from claiming tax
deductions for compensation in excess of $1 million paid to certain of its
senior executives. Compensation is exempt from this limitation if it is
"qualified performance-based compensation." Stock options and stock
appreciation rights are two examples of performance-based compensation. Other
types of awards, such as restricted stock, deferred shares and performance
shares, that are granted pursuant to pre-established objective performance
formulas, may also qualify as performance-based compensation, so long as
certain requirements are met, including the prior approval by stockholders of
the performance formulas or measures. Although the plan sets forth a list of
objective performance measures on which such awards may be based, the
Compensation Committee has discretion to establish targets or numerical goals
based on these measures. Because this discretion exists, Section 162(m)
requires that the material terms of the plan related to performance-based
awards be approved by stockholders at least once every five years. The last
time these terms were approved by our stockholders was 1997, when the plan was
implemented. In order to maintain our exemption from Section 162(m), the
material terms of the plan must be re-approved now by stockholders.
WHAT ARE THE PERFORMANCE OBJECTIVES? WHAT ARE THE ADDITIONAL PERFORMANCE
OBJECTIVES BEING PROPOSED?
The plan provides that grants of performance shares, performance units
or, when determined by the Compensation Committee, deferred shares or restricted
stock may be made based upon "performance objectives." Performance objectives
applicable to awards that are intended to be exempt from the limitations of
Section 162(m) are currently limited to specified levels of, or increases in,
the Company's or a subsidiary's: return on equity, earnings per share, total
earnings, earnings growth, return on capital, return on assets, economic value
added, earnings before interest and taxes, sales growth, gross margin return on
investment or increase in the fair market value of the Company's stock.
We are proposing the addition to the plan of the following performance
objectives: share price (including, but not limited to, growth measures and
total shareholder return), net operating profit, cash flow (including, but not
limited to, operating cash flow and free cash flow), cash flow return on
investment (which equals net cash flow divided by total capital), internal rate
of return, increase in net present value and expense targets. If the change is
approved by our stockholders, the plan would be amended to add these measures as
additional performance objectives.
WHO IS ELIGIBLE TO RECEIVE PERFORMANCE-BASED AWARDS?
Employees of the Company and its subsidiaries and members of the Board
who are not employees may be selected by the Compensation Committee to receive
benefits under the plan. The benefits or amounts that may be received by or
allocated to participants in the plan as amended by this proposal will be
determined in the discretion of the Compensation Committee and are not presently
determinable.
12
PROPOSAL TO RE-APPROVE THE 1997 OMNIBUS STOCK INCENTIVE PLAN, AS AMENDED
(ITEM 4 ON THE PROXY CARD)
WHAT KIND OF PERFORMANCE-BASED AWARDS MAY BE GRANTED?
Performance-based awards may be granted in the form of
- restricted shares;
- deferred shares;
- performance shares; or
- performance units.
Upon the achievement of the specified performance objectives or a
predetermined minimum level of acceptable achievement, the restrictions will
terminate or the shares or units will be earned, in whole or in part.
HOW ARE THE PERFORMANCE OBJECTIVES FOR AN AWARD DETERMINED?
The Compensation Committee decides what performance objectives will be
used for a specific award. Performance objectives may be described in terms of
either Company-wide objectives or objectives that are related to the performance
of the individual participant or subsidiary, division, department or function
within the Company or a subsidiary in which the participant is employed. Except
in the case of an award intended to qualify under Section 162(m), if the
committee determines that a change in the business, operation, corporate
structure or capital structure of the Company, or the manner in which it
conducts its business, or other events or circumstances render the performance
objectives unsuitable, the committee may modify the performance objectives, or
the related minimum acceptable level of achievement, in whole or in part, as the
committee deems equitable or appropriate.
WHAT IS THE MAXIMUM AMOUNT PAYABLE UPON ATTAINMENT OF THE SPECIFIED
PERFORMANCE-BASED OBJECTIVES?
No individual may receive stock options or stock appreciation rights
representing more than 1,000,000 shares of common stock in any one year. In
addition, the maximum number of performance units that may be granted to an
individual in any one year is 5,000,000. No more than 5% of the shares
authorized for issuance under the plan may be made subject to grants of
restricted stock with performance-based vesting restrictions of less than three
years or time-based vesting of less than one year, or performance shares that
are not issued in lieu of a salary or cash bonus.
WHAT IF THIS PROPOSAL IS NOT APPROVED?
If this proposal is not approved, awards granted under the plan (other
than options and stock appreciation rights) will not qualify for the
performance-based exemption from Section 162(m), and therefore may not be tax
deductible by the Company going forward (unless later approved). Any awards made
to individuals prior to the date of the annual meeting of stockholders based on
the performance objectives that are being proposed to be added to the plan will
be contingent upon stockholder approval of the amendment of the plan. This
proposal must be approved by a majority of the shares present at the meeting.
13
PROPOSAL TO RE-APPROVE THE 1997 OMNIBUS STOCK INCENTIVE PLAN, AS AMENDED
(ITEM 4 ON THE PROXY CARD)
HOW MANY SHARES ARE AVAILABLE FOR ISSUANCE PURSUANT TO THE PLAN?
As of February 3, 2002, there were 121 million shares authorized for
issuance under the plan and 69 million shares subject to outstanding awards. The
number of shares available increases each year in an amount equal to 0.5% of the
total number of issued shares (including treasury shares) as of the first day of
each fiscal year. Shares issued under the plan may be shares of original
issuance, shares held in Treasury or shares that have been reacquired by the
Company. The Compensation Committee can make adjustments in the number of shares
as it, in its sole discretion, may in good faith determine to be appropriate in
order to reflect certain transactions or events described in the plan. The fair
market value of the stock on April 1, 2002 was $______________.
WHAT OTHER KINDS OF GRANTS CAN BE MADE UNDER THE PLAN?
In addition to the performance-based awards, the Compensation Committee
may also award grants of stock options and stock appreciation rights. Subject to
the terms of the plan, the committee has the discretion to determine the terms
of each award.
UPON WHAT TERMS MAY OPTIONS AND STOCK APPRECIATION RIGHTS BE AWARDED?
The Compensation Committee may grant stock options that entitle the
optionee to purchase shares at a price equal to or greater than the fair market
value on the date of grant. The option may specify that the option price is
payable (i) in cash, (ii) by the transfer to the Company of unrestricted shares,
(iii) with any other legal consideration the committee may deem appropriate or
(iv) any combination of these. No stock option may be exercised more than ten
years from the date of grant. Each grant may specify a period of continuous
employment with the Company or any subsidiary (or in the case of a non-employee
director, service on the Board) that is necessary before the stock option or any
portion thereof will become exercisable and may provide for the earlier exercise
of the option in the event of a change in control of the Company or similar
event. The committee may also grant stock appreciation rights to participants.
The grant may specify that the amount payable upon exercise of the stock
appreciation right may be paid by the Company (i) in cash, (ii) in shares of the
Company or (iii) any combination of these. Any grant may specify a waiting
period or periods before the stock appreciation rights may become exercisable
and permissible dates or periods on or during which the stock appreciation
rights shall be exercisable, and may specify that the stock appreciation rights
may be exercised only in the event of a change of control of the Company or
similar event. The committee may grant "tandem" stock appreciation awards in
connection with an option or "freestanding" stock appreciation awards unrelated
to an option. No freestanding stock appreciation right may be exercised more
than ten years from the grant date and each grant of a freestanding stock
appreciation right must specify the period of continuous employment of the
participant by the Company or any subsidiary that is necessary before the
freestanding stock appreciation right or installments thereof may be
exercisable.
UPON WHAT TERMS MAY RESTRICTED SHARES BE AWARDED?
The Compensation Committee may authorize grants to participants of
restricted shares. An award of restricted shares involves the immediate transfer
by the Company to a participant of ownership of a specific number of shares in
return for the performance of services. The participant is entitled immediately
to voting, dividend and other ownership rights in such shares, subject to the
discretion of the committee. The transfer may be made without additional
consideration from the participant. As discussed above, the committee may
specify performance objectives that must be achieved for the restrictions to
lapse. Restricted shares must be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Internal Revenue Code for a period to be
determined by the committee on the grant date and any grant or sale may provide
for the earlier termination of such risk of forfeiture in the event of a change
of control of the Company or similar event.
14
PROPOSAL TO RE-APPROVE THE 1997 OMNIBUS STOCK INCENTIVE PLAN, AS AMENDED
(ITEM 4 ON THE PROXY CARD)
UPON WHAT TERMS MAY DEFERRED SHARES BE GRANTED?
The Compensation Committee may authorize grants to participants of
deferred shares. An award of deferred shares granted under the plan represents
the right to receive a specific number of shares at the end of a specified
deferral period. Any grant of deferred shares may be further conditioned upon
the attainment of performance objectives (as described above). The grant may
provide for the early termination of the deferral period in the event of a
change in control of the Company or similar event. During the deferral period,
the participant is not entitled to vote or receive dividends on the shares
subject to the award, but the committee may provide for the payment of dividend
equivalents on a current or deferred basis. The grant of deferred shares may be
made without any consideration from the participant other than the performance
of future services.
UPON WHAT TERMS MAY PERFORMANCE SHARES BE GRANTED?
A performance share is the equivalent of one share, and a performance
unit is the equivalent of $1.00. Each grant will specify one or more performance
objectives to be met within a specified period (the "performance period"), which
may be subject to earlier termination in the event of a change in control of the
Company or a similar event. If by the end of the performance period the
participant has achieved the specified performance objectives, the participant
will be deemed to have fully earned the performance shares or performance units.
If the participant has not achieved the level of acceptable achievement, the
participant may be deemed to have partly earned the performance shares or
performance units in accordance with a predetermined formula. To the extent
earned, the performance shares or performance units will be paid to the
participant at the time and in the manner determined by the committee in cash,
shares or any combination thereof.
ARE AWARDS MADE UNDER THE PLAN TRANSFERABLE?
Except as provided below, no award under the plan may be transferred by
a participant other than by will or the laws of descent and distribution, and
stock options and stock appreciation rights may be exercised during the
participant's lifetime only by the participant or, in the event of the
participant's legal incapacity, the guardian or legal representative acting on
behalf of the participant. The committee may expressly provide in an award
agreement (other than an incentive stock option) that the participant may
transfer the option to a spouse or lineal descendant, a trust for the exclusive
benefit of such family members, a partnership or other entity in which all the
beneficial owners are such family members, or any other entity affiliated with
the participant that the committee may approve.
WHEN DOES THE PLAN TERMINATE?
The plan will terminate on February 27, 2007, and no award will be
granted under the plan after that date.
HOW CAN THE PLAN BE AMENDED?
The plan may be amended from time to time by the Board of Directors,
but without further approval by the stockholders of the Company, no such
amendment may increase the limitations set forth in the plan on the number of
performance units, or shares underlying awards, that may be granted or issued in
the aggregate, or to individual participants during any given time period, under
the plan.
15
PROPOSAL TO RE-APPROVE THE 1997 OMNIBUS STOCK INCENTIVE PLAN, AS AMENDED
(ITEM 4 ON THE PROXY CARD)
WHAT ARE THE TAX CONSEQUENCES OF THE PLAN?
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the plan. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
In general, an optionee will not recognize income at the time a
nonqualified stock option is granted. At the time of exercise, the optionee will
recognize ordinary income in an amount equal to the difference between the
option price paid for the shares and the fair market value of the shares on the
date of exercise. At the time of sale of shares acquired pursuant to the
exercise of a nonqualified stock option, any appreciation (or depreciation) in
the value of the shares after the date of exercise generally will be treated as
capital gain (or loss).
An optionee generally will not recognize income upon the grant or
exercise of an incentive stock option. If shares issued to an optionee upon the
exercise of an incentive stock option are not disposed of in a disqualifying
disposition within two years after the date of grant or within one year after
the transfer of the shares to the optionee, then upon the sale of the shares any
amount realized in excess of the option price generally will be taxed to the
optionee as long-term capital gain and any loss sustained will be a long-term
capital loss. If shares acquired upon the exercise of an incentive stock option
are disposed of prior to the expiration of either holding period described
above, the optionee generally will recognize ordinary income in the year of
disposition in an amount equal to any excess of the fair market value of the
shares at the time of exercise (or, if less, the amount realized on the
disposition of the shares) over the option price paid for the shares. Any
further gain (or loss) realized by the optionee generally will be taxed as
short-term or long-term capital gain (or loss) depending on the holding period.
Subject to certain exceptions for death or disability, if an optionee
exercises an incentive stock option more than three months after termination of
employment, the exercise of the option will be taxed as the exercise of a
nonqualified stock option. In addition, if an optionee is subject to federal
"alternative minimum tax," the exercise of an incentive stock option will be
treated essentially the same as a nonqualified stock option for purposes of the
alternative minimum tax.
A recipient of restricted shares generally will be subject to tax at
ordinary income rates on the fair market value of the restricted shares (reduced
by any amount paid by the recipient) at such time as the shares are no longer
subject to a risk of forfeiture or restrictions on transfer for purposes of
Section 83 of the Code. However, a recipient who so elects under Section 83(b)
of the Code within 30 days of the date of transfer of the restricted shares will
recognize ordinary income on the date of transfer of the shares equal to the
excess of the fair market value of the restricted shares (determined without
regard to the risk of forfeiture or restrictions on transfer) over any purchase
price paid for the shares. If a Section 83(b) election has not been made, any
dividends received with respect to restricted shares that are subject at that
time to a risk of forfeiture or restrictions on transfer generally will be
treated as compensation that is taxable as ordinary income to the recipient.
A recipient of deferred shares generally will not recognize income
until shares are transferred to the recipient at the end of the deferral period
and are no longer subject to a substantial risk of forfeiture or restrictions on
transfer for purposes of Section 83 of the Code. At that time, the participant
will recognize ordinary income equal to the fair market value of the shares,
reduced by any amount paid by the recipient.
A participant generally will not recognize income upon the grant of
performance shares or performance units. Upon payment, in respect of performance
shares or performance units, the participant generally will recognize as
ordinary income an amount equal to the amount of cash received and the fair
market value of any unrestricted shares received.
16
PROPOSAL TO RE-APPROVE THE 1997 OMNIBUS STOCK INCENTIVE PLAN, AS AMENDED
(ITEM 4 ON THE PROXY CARD)
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
participant performs services will be entitled to a corresponding deduction,
provided that, among other things, the income meets the test of reasonableness,
is an ordinary and necessary business expense, is not an "excess parachute
payment" within the meaning of Section 280G of the Code and is not disallowed by
the $1 million limitation on certain executive compensation under Section 162(m)
of the Code.
WHERE CAN I GET A COPY OF THE PLAN, AS AMENDED?
This summary is not a complete description of all the provisions of the
plan. You can obtain a copy of the actual plan document, as amended, by sending
a written request to our Corporate Secretary at 2455 Paces Ferry Road, NW,
Atlanta, Georgia 30339.
---------------
WE RECOMMEND THAT YOU
VOTE FOR THE ADOPTION OF
THIS PROPOSAL
---------------
17
STOCKHOLDER PROPOSAL A
(ITEM 5 ON THE PROXY CARD)
We have been notified that this proposal will be presented for
consideration at the meeting:
WHEREAS, Home Depot currently has extensive overseas operations, and
WHEREAS, reports of human rights abuses in the overseas subsidiaries
and suppliers of some U.S.-based corporations has led to an increased public
awareness of the problems of child labor, "sweatshop" conditions, and the denial
of labor rights in U.S. corporate overseas operations, and
WHEREAS, corporate violations of human rights in these overseas
operations can lead to negative publicity, public protests, and a loss of
consumer confidence which can have a negative impact on shareholder value, and
WHEREAS, a number of corporations have implemented independent
monitoring programs with respected human rights and religious organizations to
strengthen compliance with international human rights norms in subsidiary and
supplier factories, and
WHEREAS, these standards incorporate the conventions of the United
Nations International Labor Organization (ILO) on workplace human rights which
include the following principles:
1) All workers have the right to form and join trade unions and to
bargain collectively. (ILO Conventions 87 and 98)
2) Workers representatives shall not be the subject of discrimination
and shall have access to all workplaces necessary to enable them to carry out
their representation functions. (ILO Convention 135)
3) There shall be no discrimination or intimidation in employment.
Equality of opportunity and treatment shall be provided regardless of race,
color, sex, religion, political opinion, age, nationality, social origin, or
other distinguishing characteristics. (ILO Convention 100 and 111)
4) Employment shall be freely chosen. There shall be no use of force,
including bonded or prison labor. (ILO Conventions 29 and 105)
5) There shall be no use of child labor. (ILO Convention 138), and
WHEREAS, independent monitoring of corporate adherence to these
standards is essential if consumer and investor confidence in our company's
commitment to human rights is to be maintained,
THEREFORE, be it resolved that shareholders request that the company
commit itself to the implementation of a code of corporate conduct based on the
aforementioned ILO human rights standards by its international suppliers and in
its own international production facilities and commit to a program of outside,
independent monitoring of compliance with these standards.
Promptly upon receipt of an oral or written request, we will provide
you with the name and address of each proponent and the number of shares of
stock held by each proponent.
18
COMPANY RESPONSE TO STOCKHOLDER PROPOSAL A
WHAT IS THE RECOMMENDATION OF THE COMPANY?
THE COMPANY RECOMMENDS THAT YOU VOTE AGAINST THE ADOPTION OF THIS STOCKHOLDER
PROPOSAL.
WHAT IS THE COMPANY'S POSITION REGARDING HUMAN RIGHTS IN THE WORKPLACE?
Our values require that we have the highest commitment to protecting
the rights of our associates throughout the world. We are also committed to
doing business with vendor partners who respect the rights of their employees.
Our vendors and suppliers must comply with the standards of ethical and legal
behavior prevailing in their respective locations as a condition of their
continuing a business relationship with our Company.
WHAT DOES HOME DEPOT REQUIRE OF ITS VENDORS RELATED TO WORKPLACE STANDARDS?
We require vendors located outside of the United States with whom we
directly contract to purchase merchandise to comply with our ethical standards
for vendors and suppliers as stated in our vendor buying agreements.
WHAT HAS HOME DEPOT DONE RECENTLY TO IMPLEMENT THESE STANDARDS?
During the past year, we formed a cross-functional team including
members of senior management to review and update our code of ethical standards
for vendors and suppliers. As a result, we required our vendors to sign an
agreement stating that they would comply with our ethical standards, in areas
including:
- health and safety of workers;
- legal employment; and
- wages and hours.
HOW DO YOU ENSURE COMPLIANCE WITH THESE STANDARDS?
We use independent firms to inspect the quality of the merchandise we
directly source and to assess the compliance of our vendors with a broad range
of our policies and standards.
WHAT IF THESE VENDORS FAIL TO COMPLY WITH THESE POLICIES?
If we discover that a particular factory used by a global vendor from
whom we directly source merchandise violates our standards, we take appropriate
corrective actions, which could include, among other things, canceling the
outstanding orders for merchandise, prohibiting future use of the non-complying
factory or terminating our relationship with the vendor.
WHY DOES THE COMPANY OPPOSE THIS PROPOSAL?
Our philosophy toward our associates and the requirements we place on
our global vendors from whom we directly purchase merchandise reflect principles
that are similar to the goals espoused by the proponent of this proposal and
similar groups. We already commit resources in this area. Having addressed the
issues presented by the proposal, we do not believe that adoption of the
proposal would enhance our values, our commitment to our associates or the
standards required of our vendors.
---------------
WE RECOMMEND THAT YOU VOTE
AGAINST THE ADOPTION OF THIS
STOCKHOLDER PROPOSAL
---------------
19
EXECUTIVE COMPENSATION
The following tables discuss the compensation earned by our former
Chairman of the Board, our Chief Executive Officer and the four other most
highly compensated executive officers in fiscal years 2001, 2000 and 1999:
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------- --------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) ($) ($)(2) (#) ($)(3)
--------------------------- ------ --------- --------- ------------ ---------- ---------- ------------
Bernard Marcus 2001 917,307 2,000,000 11,548 -- -- 52,231
Former Chairman of the 2000 900,000 --(6) 10,561 -- -- 55,705
Board(4)(5) 1999 900,000 2,000,000 60,652(7) -- -- 56,478
Robert L. Nardelli 2001 1,528,845 5,000,000(8) 7,250,757(9) 9,050,000 1,000,000 9,822
Chairman, President and 2000 202,531 -- -- 30,562,500 3,500,000 50,400(10)
Chief Executive Officer(4) 1999 -- -- -- -- -- --
Larry M. Mercer 2001 551,922 550,000 6,928 2,658,840 150,000 21,887
Executive Vice President - 2000 496,153 -- 7,184 -- 17,886 31,557
Operations 1999 474,230 320,880 1,897 -- 25,137 28,855
Dennis M. Donovan 2001 444,230 1,005,795(11) 189,081(12) 19,536,881 370,000 4,058
Executive Vice President - 2000 -- -- -- -- -- --
Human Resources 1999 -- -- -- -- -- --
Frank L. Fernandez 2001 444,230 775,000(13) 143,117(14) 4,786,340 370,000 4,712
Executive Vice President - 2000 -- -- -- -- -- --
Secretary & General Counsel 1999 -- -- -- -- -- --
Carol B. Tome 2001 400,576 525,000 6,280 1,549,560 210,000 15,120
Executive Vice President - 2000 288,076 -- 2,077 -- 11,886 15,637
Chief Financial Officer 1999 -- -- -- -- -- --
---------------
(1) The Company's 2001 fiscal year consisted of 53 weeks.
(2) Amounts set forth in the restricted stock awards column include grants
of restricted stock and deferred stock units. Restricted stock awards
made to executive officers vest according to the following schedule:
25% on the third anniversary of grant, 25% on the sixth anniversary of
grant and 50% when the officer reaches age 62. Messrs. Nardelli,
Donovan and Fernandez were granted awards of deferred stock units
corresponding to 250,000 shares, 328,821 shares and 50,000 shares,
respectively, in fiscal 2001. The units held by Mr. Nardelli vest
one-fifth on the date of grant and one-fifth on the first four
anniversaries of his employment date, the units held by Mr. Donovan
vest in one-third increments on the first, third and fifth
anniversaries of his employment date, and the units held by Mr.
Fernandez vest one-fourth per year beginning on the second anniversary
of the date of his employment. These awards were made to Messrs.
Donovan and Fernandez pursuant to the terms of their employment
agreements. Pursuant to the terms of his employment agreement, in
fiscal 2001 Mr. Nardelli received an award of deferred stock units
corresponding to 750,000 shares, which vests one-fifth per year
beginning on his employment date. Mr. Nardelli does not hold any shares
of restricted stock. Mr. Marcus did not receive equity awards.
20
EXECUTIVE COMPENSATION
The number and value at fiscal 2001 year-end of shares of restricted stock and
deferred stock units held by each executive named in the table was,
respectively, for Mr. Nardelli: 1,000,000 units and $48,650,000; for Mr. Mercer:
60,000 shares and $2,919,000; for Mr. Donovan: 400,821 shares and units and
$19,499,941; for Mr. Fernandez: 110,000 shares and units and $5,351,500; and for
Ms. Tome: 36,000 shares and $1,751,400.
Dividends on restricted stock and vested deferred stock unit awards are
paid at the same rate as paid to all stockholders.
(3) "All other compensation" consists of:
- Matching contributions under the 401(k) component of our
FutureBuilder plan;
- Allocations of "stock units" under the 401(k) restoration plan
valued based on the market value of our common stock on the
day such amounts were credited to the participants' accounts;
and
- Payment of annual life insurance premiums.
The following table shows the amount of each category of "all other
compensation" received by each of the named individuals in fiscal 2001:
NAME 401(K) MATCHING CONTRIBUTION ALLOCATION UNDER RESTORATION PLAN INSURANCE PREMIUMS
---- ---------------------------- --------------------------------- ------------------
Bernard Marcus ............ $5,950 $25,576 $20,705
Robert L. Nardelli ........ $4,038 -- $ 5,784
Larry M. Mercer ........... $6,084 $12,849 $ 2,954
Dennis M. Donovan ......... -- -- $ 4,058
Frank L. Fernandez ........ -- -- $ 4,712
Carol B. Tome ............. $6,313 $ 7,338 $ 1,469
(4) Mr. Marcus served as Chairman of the Board until January 1, 2002, when
Mr. Nardelli became Chairman.
(5) Mr. Marcus does not participate in any of the Company's stock option
plans.
(6) Mr. Marcus earned a bonus for fiscal 2000 of $2,000,000, but declined
to accept any bonus.
(7) "Other annual compensation" includes the benefit for personal use of
airplanes owned by the Company in the amount of $31,021 in fiscal 1999
for Mr. Marcus.
(8) The amount in the bonus column includes $3,000,000, which was required
to be paid pursuant to the terms of Mr. Nardelli's employment
agreement.
(9) Mr. Nardelli's other annual compensation includes $2,587,000 for the
forgiveness of a loan and accrued interest and $2,149,360 for related
tax payments, $1,255,658 related to his relocation and sale of his
house and $954,159 for related tax payments, and $50,325 for the
payment of life insurance premiums and $41,812 for related tax
payments, all of which were paid pursuant to the terms of his
employment agreement. Other annual compensation also includes $83,255
for personal use of Company aircraft and $69,171 for related tax
payments. Mr. Nardelli is required to use Company aircraft for all
travel.
(10) Mr. Nardelli received this payment from the Company to reimburse him
for certain payments related to restricted stock he forfeited from his
former employer.
(11) The amount in the bonus column includes a signing bonus of $430,795 and
a bonus for fiscal 2001 of $525,000 that were required to be paid
pursuant to the terms of Mr. Donovan's employment agreement.
(12) Mr. Donovan's other annual compensation includes $96,933 of expenses
related to his relocation and $66,426 of related tax payments, which
were paid pursuant to the terms of his employment agreement.
21
EXECUTIVE COMPENSATION
(13) The amount in the bonus column includes a signing bonus of $250,000 and
a bonus for fiscal 2001 of $341,250 that were required to be paid
pursuant to the terms of Mr. Fernandez's employment agreement.
(14) Mr. Fernandez's other annual compensation includes $75,384 of expenses
related to his relocation and $43,401 of related tax payments, which
were paid pursuant to the terms of his employment agreement.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------
POTENTIAL REALIZABLE VALUE AT
PERCENT OF TOTAL ASSUMED ANNUAL RATE OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION FOR OPTION
SECURITIES GRANTED TO TERM (10 YEARS)*
UNDERLYING EMPLOYEES EXERCISE OR ------------------------------
OPTIONS GRANTED IN FISCAL YEAR BASE PRICE EXPIRATION
NAME (#) (%) ($/SH) DATE 5%($) 10%($)
---- --------------- --------------- ----------- ---------- ---------- ----------
Bernard Marcus .......... -- -- -- -- -- --
Robert L. Nardelli ...... 1,000,000 3.95 36.20 9/16/11 22,765,985 57,693,477
Larry M. Mercer ......... 100,000 .39 40.00 2/21/11 2,515,578 6,374,969
50,000 .19 36.69 9/17/11 1,153,707 2,923,720
Dennis M. Donovan ....... 320,000 1.26 42.55 4/1/11 8,563,029 21,700,397
50,000 .19 36.69 9/17/11 1,153,707 2,923,720
Frank L. Fernandez ...... 320,000 1.26 42.55 4/1/11 8,563,029 21,700,397
50,000 .19 36.69 9/17/11 1,153,707 2,923,720
Carol B. Tome ........... 60,000 .23 40.00 2/21/11 1,509,347 3,824,981
100,000 .39 49.99 5/29/11 3,143,844 7,967,118
50,000 .19 36.69 9/17/11 1,153,707 2,923,720
* These amounts represent assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on future
performance of our stock. There can be no assurance that the amounts
reflected in these columns will be achieved or, if achieved, will exist
at the time of any option exercise.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END(#) FISCAL YEAR-END($)
------------------------------ -------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
Bernard Marcus ....... -- -- -- -- -- --
Robert L. Nardelli ... -- -- 2,200,000 2,300,000 19,940,000 23,535,000
Larry M. Mercer ...... 225,000 9,894,802 356,265 226,158 13,628,948 3,092,238
Dennis M. Donovan .... -- -- -- 370,000 -- 2,827,500
Frank L. Fernandez ... -- -- -- 370,000 -- 2,827,500
Carol B. Tome ........ -- -- 150,555 253,908 5,670,489 1,873,394
22
EXECUTIVE COMPENSATION
WHAT ARE THE TERMS OF EMPLOYMENT AGREEMENTS WITH THE COMPANY'S EXECUTIVE
OFFICERS?
The Company has an Employment Agreement dated as of December 4, 2000
with Robert L. Nardelli retaining him as the President and Chief Executive
Officer of the Company. The initial term of the agreement expires on December
31, 2005, and, beginning on January 1, 2003, the term automatically extends so
that the remaining term is always three years.
In determining Mr. Nardelli's compensation, the Board focused on
competitive levels of compensation for CEOs managing operations of similar
size, complexity and performance level and the importance of hiring a President
and CEO with the strategic, financial and leadership skills to ensure the
Company's continued growth into the foreseeable future. Based on these factors,
the Board determined that Mr. Nardelli's annual base salary shall be not less
than $1,500,000 and his annual bonus shall be not less than $3,000,000.
The Company believes it is essential that a large portion of our
executive officers' total compensation is tied to stock performance, which more
closely aligns their interests with the long-term interests of stockholders. To
reflect this belief and in recognition that Mr. Nardelli forfeited substantial
equity ownership rights provided by his former employer, Mr. Nardelli received
two stock option awards. The first entitles him to purchase 1,000,000 shares of
common stock at $40.75 per share. This stock option was immediately exercisable
as of the date of the employment agreement. The second stock option award
entitles him to purchase 2,500,000 shares of common stock at $40.75 per share
and vests in 500,000 share increments on the date of the employment agreement
and each of the first four anniversaries of such date. Beginning in 2002, Mr.
Nardelli will receive additional annual option awards to purchase no less than
450,000 shares of common stock. The Company also granted him deferred stock
units corresponding to 750,000 shares of common stock, which vest one-fifth per
year beginning on the date of the employment agreement. In addition, Mr.
Nardelli received a lump sum payment of $50,400 when he entered into the
employment agreement.
Mr. Nardelli received a loan from the Company in the amount of
$10,000,000, which accrues interest at the rate of 5.87% per year, compounded
annually. As a long-term employment incentive, the obligation to repay the loan
and accrued interest is forgiven 20% per year on each of the first five
anniversaries of the date Mr. Nardelli's employment began if he is employed by
the Company on each such date. The loan (and any accrued interest) will be
forgiven upon a change of control (as defined in the employment agreement) if
Mr. Nardelli is employed by the Company on such date, or upon the date of
termination of Mr. Nardelli's employment with the Company prior to December 4,
2005 if such termination is by the Company without cause, by Mr. Nardelli for
good reason or by reason of Mr. Nardelli's death or disability. If Mr.
Nardelli's employment is terminated by the Company for cause or by Mr. Nardelli
other than for good reason, then Mr. Nardelli is required to repay the
outstanding principal amount.
To compensate Mr. Nardelli in part for forfeiting retirement benefits
made available by his former employer, the Company agreed to provide him with
deferred compensation upon any termination of his employment. Beginning on the
later of his 62nd birthday or termination of employment, Mr. Nardelli will be
entitled to a cash benefit in an annual amount equal to 50% of his salary as of
the date of his termination and his most recent annual bonus (or, if greater,
the then-current target amount for his bonus), subject to offset for certain
pension benefits paid or payable to Mr. Nardelli by the Company or his prior
employers. The amount of the benefit may be reduced if Mr. Nardelli's
employment is terminated under certain circumstances, such as if Mr. Nardelli
is terminated by the Company for cause or if Mr. Nardelli terminates his
employment without good reason, prior to his 62nd birthday and/or prior to the
fifth anniversary of the date of the employment agreement.
In addition, if Mr. Nardelli's employment is terminated either by the
Company for cause or by Mr. Nardelli other than for good reason, then the
Company will pay him all cash compensation accrued but not paid as of the
termination date. If Mr. Nardelli's employment is terminated by the Company
other than for cause, by Mr. Nardelli for good reason or for any reason within
12 months after a change in control or due to death or disability, Mr. Nardelli
will
23
EXECUTIVE COMPENSATION
receive certain benefits, including: (1) all cash compensation accrued but not
paid as of the termination date; (2) $20,000,000; (3) immediate vesting of
unvested equity-based awards and deferred compensation; (4) for each year prior
to 2006 for which an annual option award has not yet been granted, a fully
vested stock option award in accordance with the agreement; and (5) immediate
forgiveness of any outstanding principal and accrued interest of the loan. If
Mr. Nardelli's employment terminates due to his retirement after he attains age
62 or upon a change in control of the Company, all equity-based awards made
under his employment agreement or otherwise will fully vest and remain
exercisable through the end of their original term.
The Company also has an employment agreement with Dennis M. Donovan,
Executive Vice President - Human Resources, dated as of March 16, 2001, and
with Frank L. Fernandez, Executive Vice President, Secretary and General
Counsel, dated as of April 2, 2001. The initial term of Mr. Donovan's contract
terminates on December 31, 2005, and beginning on January 1, 2003,
automatically extends so that the remaining term is always three years. The
initial term of Mr. Fernandez's contract terminates on April 2, 2004, and
beginning on April 2, 2002, automatically extends so that the remaining term is
always two years. Each contract provides that the automatic extensions will
continue until either the Company or the employee gives written notice of
termination of the extension provision.
The employment agreements provide for each of Messrs. Donovan and
Fernandez to receive a base salary of not less than $525,000 per year. Mr.
Donovan is eligible for an annual bonus of no less than his then-current base
salary. Mr. Fernandez is eligible for an annual bonus of no less than 65% and
no more than 100% of his then-current base salary. Both Messrs. Donovan and
Fernandez were guaranteed a bonus for fiscal 2001. In connection with the
commencement of employment, Messrs. Donovan and Fernandez each received awards
of stock options exercisable for 320,000 shares and awards of deferred
restricted stock units corresponding to 328,821 shares and 50,000 shares,
respectively. Beginning in 2002, Messrs. Donovan and Fernandez are eligible for
annual grants of stock options exercisable for at least 90,000 and 70,000
shares, respectively.
In connection with their relocations, Messrs. Donovan and Fernandez
received loans in the amount of $3 million and $500,000, respectively. Interest
on the loans accrue at the rate of 5.8% per year. Interest will be forgiven 20%
per year on each of the first five anniversaries of the loans. The loans must
be repaid upon the earlier of (1) the fifth anniversary of the date of the loan
in the case of Mr. Donovan, and the fourth anniversary of the date of the loan,
in the case of Mr. Fernandez, and (2) ninety days following the termination of
the employee's employment by the Company for cause or by the employee without
good reason. In addition, Messrs. Donovan and Fernandez received lump sum
payments of $430,795 and $250,000, respectively, when they entered into the
employment agreements. Mr. Donovan will also be reimbursed for up to $15,000 of
expenses he incurred in connection with the preparation and execution of his
employment agreement.
Upon the termination of the employment of either Mr. Donovan or Mr.
Fernandez by the Company for cause or by the employee without good reason, the
Company will pay the employee all cash compensation accrued but not paid as of
the termination date. If the employment of Mr. Donovan or Mr. Fernandez is
terminated by the Company other than for cause, by the employee for good reason
or for any reason within 12 months after a change in control or due to death or
disability, the employee will receive all cash compensation accrued but not
paid as of the termination date and certain additional benefits, including
salary and bonus continuation for 24 months and immediate vesting of all
unvested equity-based awards. In the event of a change in control, in addition
to receiving any protection that is applicable to other senior executives, all
grants of equity-based awards to Messrs. Donovan and Fernandez shall become
fully vested and exercisable.
Pursuant to their respective agreements, each of Messrs. Donovan and
Fernandez has agreed that during the term of his employment and for two years
thereafter, he shall not, without the prior written consent of the Company,
participate (as defined in the agreements) in the management of certain
competitors of the Company. During the same period, each executive has also
agreed not to solicit any employee of the Company to accept a position with
another entity or to solicit any vendor or customer of the Company to alter its
relationship with the Company in any way that would be adverse to the Company.
24
EXECUTIVE COMPENSATION
Under the terms of the agreements with Messrs. Nardelli, Donovan and
Fernandez, termination of employment for good reason generally means the
occurrence of certain events without the employee's consent, including, among
other things, (1) the Company assigning him duties inconsistent in any material
respect with his duties and responsibilities as contemplated by the employment
agreement or taking any other action that results in a significant diminution
in such employee's position, duties or responsibilities, or (2) failure of the
Company to comply with any material provision of the employment agreement.
Termination for cause means, among other things, that the employee (1) has
engaged in conduct that constitutes willful gross neglect or willful gross
misconduct with respect to employment duties that results in material economic
harm to the Company, subject to certain conditions, or (2) has been convicted
of a felony involving theft or moral turpitude. Any determination that cause
exists must be approved by a majority of the Company's Board of Directors after
giving notice of such meeting to the employee and providing the employee and
his legal counsel an opportunity to address such meeting.
In addition to these and other benefits set forth in the applicable
employment agreements, Messrs. Nardelli, Donovan and Fernandez are entitled to
participate in the benefit plans offered to all executive officers of the
Company and to receive the same perquisites as are commonly provided to other
senior executives of the Company. The Company will also reimburse them for
income taxes applicable to certain specified benefits and payments under the
agreement and for excise taxes imposed in the event payments or benefits
received by the employee under their respective agreements, or otherwise,
result in "parachute payments" under the Internal Revenue Code.
25
COMPENSATION COMMITTEE REPORT
Filings made by companies with the Securities and Exchange Commission
sometimes "incorporate information by reference." This means the Company is
referring you to information that has been previously filed with the SEC and
that this information should be considered as part of the filing you are
reading. The Compensation Committee Report, Audit Committee Report and Stock
Performance Graph in this proxy statement are not incorporated by reference
into any other filings with the SEC.
The Compensation Committee of the Board of Directors has furnished
the following report on executive compensation:
WHAT ARE THE COMPONENTS OF EXECUTIVE COMPENSATION?
Our compensation program for executives consists of three key
elements:
- Annual base salary
- Performance-based annual bonus
- Long-term stock incentive compensation
WHAT IS THE PHILOSOPHY OF EXECUTIVE COMPENSATION?
We have a "pay for performance" philosophy, which rewards executives
for long-term strategic management and enhancement of stockholder value. This
philosophy is implemented by setting base salaries near retail industry
averages. Annual performance-based bonuses and long-term stock incentive awards
make it possible for total executive compensation packages to exceed retail
industry averages.
We believe it is important for our executives to have ownership
incentives in our company and to operate in an environment that measures
rewards against personal and Home Depot goals. We believe this philosophy
attracts, retains and motivates key executives critical to the long-term
success of our company.
HOW IS THE CHIEF EXECUTIVE OFFICER COMPENSATED?
On December 4, 2000, the Company hired Mr. Nardelli as President and
Chief Executive Officer. The Board of Directors approved Mr. Nardelli's
employment agreement after an extensive search had been conducted by the Board
with the assistance of an executive search firm. Pursuant to the terms of his
employment agreement, in fiscal 2001, Mr. Nardelli's base salary was
$1,500,000. Mr. Nardelli received a bonus of $5,000,000, $3,000,000 of which
was required to be paid pursuant to the terms of his employment agreement. In
addition during fiscal 2001, the Compensation Committee determined it was
appropriate to grant Mr. Nardelli a stock option to purchase 1,000,000 shares
at an exercise price of $36.20 per share, 450,000 of which shares were required
to be awarded pursuant to his employment agreement. This stock option vests in
200,000 share increments on the date of grant and on each of the first four
anniversaries of such date. Mr. Nardelli also received a discretionary award of
deferred stock units during fiscal 2001 corresponding to 250,000 shares of
common stock, one fifth of which vested on the date of grant and one fifth of
which vests on each of the next four anniversaries of the date of his
employment agreement. In determining Mr. Nardelli's cash and equity
compensation for fiscal 2001, the Board focused on the Company's financial
performance during the year (net income increase of 18%, sales increase of 17%,
earnings per share of $1.29), the number of initiatives begun, expanded and/or
completed by the Company since Mr. Nardelli's employment began, competitive
levels of compensation for CEOs managing operations of similar size, complexity
and performance level and the importance of retaining a President and Chief
Executive Officer with the strategic, financial and leadership skills to ensure
the Company's continued growth into the foreseeable future. The terms of Mr.
Nardelli's employment agreement are set forth under "Executive Compensation" in
this proxy statement.
26
COMPENSATION COMMITTEE REPORT
HOW ARE OTHER EXECUTIVE OFFICERS COMPENSATED?
In setting all other executive officer annual salaries for fiscal
2001, the Compensation Committee reviewed an annual salary plan recommended by
Mr. Nardelli. The annual salary plan was based on numerous subjective factors,
which included performance, merit increases and responsibility levels. All
executive officers (other than Mr. Marcus) participate in the officers' bonus
plans. Under these plans, officers are eligible to earn a bonus of up to an
established percentage of their annual base salary, depending on the Company's
performance relative to criteria such as gross margin, return on investment,
return on assets and sales target levels. The exact objective criteria employed
depend on the officer's responsibilities. Performance criteria may be computed
by various methods depending on the Compensation Committee's assessment of the
best match between job duties and performance criteria. The Compensation
Committee believes that disclosure of actual targets under these plans could
adversely affect the Company since, among other things, such projections are
not publicly disclosed and could place the Company at a competitive
disadvantage with respect to hiring and retaining key employees. Disclosure
could potentially expose the Company to claims by third parties based on the
projections, especially because these projections are not intended as a
predictor of future performance. During fiscal 2001, although these targets
were not achieved, the named executive officers other than Messrs. Marcus and
Nardelli were awarded bonuses as reflected in the Summary Compensation Table
contained in this proxy statement. These bonuses were awarded based on the
Compensation Committee's recognition of the individual contributions made by
these executive officers that enabled the Company to perform well both
financially and operationally despite the very difficult economic environment
and based on competitive levels of compensation at similar companies. Bonuses
paid to Messrs. Donovan and Fernandez were, in part, based on the terms of
their respective employment agreements, which are described under "Executive
Compensation" in this proxy statement.
Mr. Marcus was eligible for a maximum cash bonus of $2,000,000 for
fiscal 2001 under the Company's Senior Officers' Bonus Pool Plan. This plan
pays a total bonus equal to 10% of the Company's earnings in excess of a
threshold amount. For fiscal 2001, the threshold amount was $2.58 billion,
which is approximately equal to Home Depot's net earnings for fiscal 2000. In
fiscal 2001, Home Depot's earnings exceeded the threshold amount, and Mr.
Marcus received the maximum bonus.
A large portion of the executive officers' total compensation is tied
to stock performance, more closely aligning their interests with the long-term
interests of stockholders. This is accomplished through our 1997 Omnibus Stock
Incentive Plan. Stock options are granted to all executive officers to purchase
stock at the then current market price. Shares of restricted stock are granted
to certain executive officers. Stock options are typically exercisable at a
rate of 25% per year commencing on the first or second year after the date of
grant depending on the type of stock option granted. Stock options are
typically exercisable for ten years after the date of grant. The restrictions
on shares of restricted stock typically lapse with regard to 25% of the shares
on each of the third anniversary and sixth anniversary of the date of grant and
with regard to 50% of the shares when the holder reaches age 62. The number of
shares subject to equity awards is determined by the Compensation Committee and
is based on the individual's position within the Company, job performance,
future potential, awards made to executives at comparable companies and other
factors. Additionally, certain executive officers have employment agreements
that provide that awards of a specified number of stock options be made to such
officers, as described under "Executive Compensation" in this proxy statement.
DOES THE COMPENSATION COMMITTEE COMPARE COMPANY SALARIES TO OTHER COMPANIES?
Salaries are based on the Compensation Committee's assessment of each
officer's past performance and the expectation for future contributions in
leading the Company. In addition, the Compensation Committee reviews
compensation data for the retail industry and other companies similar in size.
The Compensation Committee uses other company compensation data for
informational purposes only, and also considers subjective factors relating to
the differences between companies.
27
COMPENSATION COMMITTEE REPORT
HOW ARE LIMITATIONS ON THE DEDUCTIBILITY OF COMPENSATION HANDLED?
Section 162(m) of the Internal Revenue Code limits the deductibility
of executive compensation paid by publicly held corporations to $1 million per
employee. The $1 million limitation generally does not apply to compensation
based on performance goals if certain requirements are met. The Company
believes its officers' bonus plans each satisfy Section 162(m). The
Compensation Committee, as much as possible, uses and intends to use
performance-based compensation, which should minimize the effect of these tax
limits. However, the committee believes that the Company must attract, retain
and reward the executive talent necessary to maximize the return to
stockholders and that the loss of a tax deduction may be necessary and
appropriate in some circumstances.
WHO PREPARED THIS REPORT?
This report has been furnished by the members of the Compensation
Committee:
- John L. Clendenin, Chair
- Gregory D. Brenneman
- Berry R. Cox
- William S. Davila
- Roger S. Penske
28
AUDIT COMMITTEE REPORT AND AUDIT FEES
AUDIT COMMITTEE REPORT
WHO SERVES ON THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS?
The members of the committee are Berry R. Cox, Chair, Richard H.
Brown, William S. Davila, Claudio X. Gonzalez and Milledge A. Hart, III. Each
member of the committee is independent under the rules of The New York Stock
Exchange.
WHAT DOCUMENT GOVERNS THE ACTIVITIES OF THE AUDIT COMMITTEE?
The Audit Committee acts under a written charter, which sets forth
its responsibilities and duties, as well as requirements for the committee's
composition and meetings.
HOW DOES THE AUDIT COMMITTEE CONDUCT ITS MEETINGS?
During the fiscal year 2001, at each of its meetings, the Committee met
the senior members of the Company's financial management team, our vice
president of internal audit and our independent auditors. The Committee's agenda
was established by the chairman and the chief financial officer. At each
meeting, the Committee reviewed and discussed various business risks of the
Company. The Committee had private, separate sessions at each of its meetings
with each of KPMG, the chief financial officer and the vice president of
internal audit, at which candid discussions of financial management, accounting
and internal control issues took place. Additionally, the chairman had separate
discussions regularly with each of KPMG, the chief financial officer and the
vice president of internal audit.
WHAT MATTERS HAVE MEMBERS OF THE AUDIT COMMITTEE DISCUSSED WITH THE INDEPENDENT
AUDITORS?
In its meetings with representatives of the independent auditors, the
Committee asked them to address, and discussed their responses to several
questions that the Committee believed were particularly relevant to its
oversight. These questions included:
- Are there any significant judgments made by management in
preparing the financial statements that would have been made
differently had the auditors themselves prepared and been
responsible for the financial statements?
- Based on the auditors' experience, and their knowledge of the
Company, do the Company's financial statements fairly present
to investors, with clarity and completeness, the Company's
financial position and performance for the reporting period
in accordance with generally accepted accounting principles
and SEC disclosure requirements?
- Based on the auditors' experience, and their knowledge of the
Company, has the Company implemented internal controls and
internal audit procedures that are appropriate for the
Company?
- During the course of the fiscal year, have the auditors
received any communication or discovered any information
indicating any improprieties with respect to the Company's
accounting and reporting procedures or reports?
The Audit Committee has also discussed with the auditors that they are
retained by the committee and that the auditors must raise any concerns about
the Company's financial reporting and procedures directly with the committee.
Based on these discussions with the independent auditors, the Committee
believes it has a basis for its oversight judgments and for recommending that
the Company's audited financial statements be included in the Company's Annual
Report on Form 10-K.
WHAT HAS THE AUDIT COMMITTEE DONE WITH REGARD TO THE COMPANY'S AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2002?
The Audit Committee has:
- reviewed and discussed the audited financial statements with
the Company's management; and
- discussed with KPMG LLP, independent accountants for the
Company, the matters required to be discussed by Statement on
Auditing Standards No. 61, Communication with Audit
Committees, as amended.
HAS THE AUDIT COMMITTEE CONSIDERED THE INDEPENDENCE OF THE COMPANY'S
ACCOUNTANTS?
The committee has received from KPMG the written disclosures and the
letter required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and the committee has discussed with KPMG
that firm's independence. The committee has concluded that KPMG is independent
from the Company and its management.
HAS THE AUDIT COMMITTEE MADE A RECOMMENDATION REGARDING THE AUDITED FINANCIAL
STATEMENTS FOR FISCAL 2001?
Based upon its review and the discussions with management and the
independent accountants, the Audit Committee recommended to the Board of
Directors of the Company that the audited consolidated financial statements for
the Company be included in the Company's Annual Report on Form 10-K for the
fiscal year ended February 3, 2002 for filing with the Securities and Exchange
Commission.
HAS THE AUDIT COMMITTEE REVIEWED THE FEES PAID TO THE INDEPENDENT ACCOUNTANTS
DURING FISCAL 2001?
The Audit Committee has reviewed and discussed the fees paid to KPMG
during the last fiscal year for audit and non-audit services, which are set
forth in this proxy statement under "Audit Fees," and has determined that the
provision of the non-audit services are compatible with the firm's
independence.
29
AUDIT COMMITTEE REPORT AND AUDIT FEES
WHO PREPARED THIS REPORT?
This report has been furnished by the members of the Audit Committee:
- Berry R. Cox, Chair
- Richard H. Brown
- William S. Davila
- Claudio X. Gonzalez
- Milledge A. Hart, III
AUDIT FEES
During fiscal 2001, the Company paid KPMG LLP fees in the aggregate
amount of $1,160,000 for the annual audit of our financial statements for
fiscal 2001 and the quarterly reviews of the financial statements included in
our Forms 10-Q.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
KPMG did not render any services related to financial information
systems design and implementation during fiscal 2001.
ALL OTHER FEES
Aggregate fees billed for all other services rendered by KPMG for
fiscal 2001 were $5,006,000. Of that amount, bills incurred for audit related
services consisting primarily of audits of financial statements of certain
employee benefit plans and other entities, audits of certain businesses
acquired during the year and review of SEC related filings and issuances of
consents were approximately $453,000. The remaining amount of $4,533,000 was
incurred for non-audit services consisting primarily of tax compliance and
advisory services and services related to litigation and training.
30
STOCK PERFORMANCE GRAPH
This graph compares our cumulative total stockholder returns
(assuming quarterly reinvestment of dividends), with that of the Standard &
Poor's 500 Composite Stock Index, and our industry peer group as compiled by
the S&P Retail Composite for the five-year period commencing February 2, 1997.
The graph assumes $100 invested at the per share closing price of the common
stock of The Home Depot and of each of the other indices on the New York Stock
Exchange on February 2, 1997.
[GRAPH]
02/02/1997 02/01/1998 01/31/1999 01/30/2000 01/28/2001 02/03/2002
---------- ---------- ---------- ---------- ---------- ----------
HD $100.00 $183.33 $366.67 $514.77 $438.17 $485.50
S&P 500 $100.00 $124.69 $162.76 $177.37 $173.75 $145.88
S&P Retail $100.00 $146.74 $238.78 $237.81 $252.82 $283.66
Composite
31
STOCK OWNERSHIP
This table shows how much of our common stock is owned by directors,
each of the executive officers named in the table on page [20], owners of more
than 5% of our outstanding common stock and all directors and executive
officers as a group as of April [1], 2002.
SHARES RIGHT TO PERCENT
NAME OF BENEFICIAL OWNER OWNED(1) ACQUIRE(2) OF CLASS
------------------------ --------- ----------- --------
Bernard Marcus ................................. 60,062,766(3) -- 2.6%
Robert L. Nardelli ............................. -- 2,200,000 *
Gregory D. Brenneman ........................... 600 -- *
Richard H. Brown ............................... 2,600(4) -- *
John L. Clendenin .............................. 10,786 23,437 *
Berry R. Cox ................................... 3,275,922(5) 937 *
William S. Davila .............................. 21,063 4,687 *
Claudio X. Gonzalez ............................ 6,100 -- *
Richard A. Grasso .............................. 10,000 -- *
Milledge A. Hart, III .......................... 4,274,179(6) 937 *
Bonnie G. Hill ................................. 1,638 4,687 *
Kenneth G. Langone ............................. 18,007,936(7) 937 *
Roger S. Penske ................................ 3,100 -- *
Larry M. Mercer ................................ 381,886 396,320 *
Dennis M. Donovan .............................. 72,130 0 *
Frank L. Fernandez ............................. 60,000 0 *
Carol B. Tome .................................. 43,087 166,610 *
Directors and executive officers as a group
(20 people) .................................. 86,340,175 2,835,578 3.8%
* Less than one percent.
---------
(1) These amounts include shares for which the named person has sole
voting and investment power or shares such powers with his or her
spouse. They also include shares credited to the named person's
account under our FutureBuilder plan, in the following amounts:
- Bernard Marcus - 39,875 shares
- Larry M. Mercer - 31,599 shares
- Carol B. Tome - 1,909 shares
- All directors and executive officers as a group (20 people) -
76,689 shares
(2) These amounts reflect shares that could be purchased by exercise of
stock options as of April 1, 2002, or by May 31, 2002, under the
Company's stock incentive plans.
(3) This amount includes the following shares for which Mr. Marcus may be
deemed to have shared voting and investment power, but disclaims
beneficial ownership:
- 493,322 shares held by Mr. Marcus' wife as trustee of a trust
for his children
- 300,185 shares held by a private foundation of which Mr.
Marcus' wife serves as a director
- 90,000 shares held by a private foundation of which Mr.
Marcus serves as a director
32
STOCK OWNERSHIP
(4) This amount includes 1,000 shares held by Mr. Brown's wife for which
Mr. Brown may be deemed to have shared voting and investment power.
(5) This amount includes 4,500 shares held by a private foundation for
which Mr. Cox may be deemed to have shared voting and investment
power.
(6) This amount includes 457,855 shares held by a limited partnership
whose general partner is a corporation owned by Mr. Hart and his wife.
(7) This amount includes 6,139 shares held by Mr. Langone's wife but for
which he disclaims beneficial ownership.
33
GENERAL
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee, who are identified
under "Compensation Committee Report" in this proxy statement, were at any time
officers or employees of the Company or any of its subsidiaries or had any
relationship with the Company requiring disclosure under Securities and
Exchange Commission regulations.
INSIDER TRANSACTIONS
The Marcus Foundation, of which Bernard Marcus is Chairman, and Mr.
Marcus lease office space from the Company. During fiscal 2001, The Marcus
Foundation and Mr. Marcus paid the Company $140,000 in rent and reimbursed the
Company $530,000 for leasehold improvements.
On February 22, 2001, the Company and Mr. Marcus entered into an
agreement under which Mr. Marcus purchased an aircraft from the Company at fair
market value, and Mr. Marcus leased the aircraft to the Company on a
non-exclusive basis, subject to Mr. Marcus' right to use the aircraft. The
Company has also agreed to make another airplane available for Mr. Marcus to
lease if the Company is using Mr. Marcus' aircraft. The gross rental rate per
month is based on 1% of the purchase price, with certain costs shared with Mr.
Marcus. The Company pays rent to Mr. Marcus based upon the Company's percentage
usage of the plane, subject to a minimum required rent equal to 50% usage by
the Company. The Company manages and maintains the aircraft and provides
pilots, and Mr. Marcus reimburses the Company quarterly for the costs
associated with certain of these services based on the percentage of time the
aircraft is used by Mr. Marcus, up to 50%. During fiscal 2001, Mr. Marcus
reimbursed the Company for $182,000 pursuant to the terms of these agreements.
Among other things, the agreement also provides that the Company will provide
Mr. Marcus with security services at his discretion during his life. Until 18
months after Mr. Marcus' death, the Company will continue to lease space to Mr.
Marcus and organizations affiliated with him at the Store Support Center. Mr.
Marcus or the affiliated organizations will pay rent at the fair market value,
subject to increase based on the Consumer Price Index. Subject to a pro rata
reimbursement, the Company will also provide one or more employees to assist
Mr. Marcus with Home Depot work and will provide him with healthcare, life
insurance and similar benefits during his life.
In April 2001, the Company issued $500 million of its 5-3/8% Senior
Notes. Invemed Associates, Inc., of which Kenneth Langone is Chairman, Chief
Executive Officer and President, acted as an underwriter in connection with the
issuance of the Senior Notes.
In connection with their employment, each of Robert L. Nardelli,
Dennis M. Donovan and Frank L. Fernandez received a loan of $10 million, $3
million and $500,000, respectively, from the Company. The terms of these loans
are more fully described under "Executive Compensation."
Home Depot has purchase, finance and other transactions and
relationships in the normal course of business with companies with which Home
Depot directors are associated, but which are not sufficiently significant to
be reportable. We believe that all of these transactions and relationships
during fiscal 2001 were on terms that were reasonable and competitive.
Additional transactions and relationships of this nature may be expected to
take place in the ordinary course of business in the future.
COMPLIANCE WITH SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities to file with
the SEC and the New York Stock Exchange reports of ownership and changes in
ownership of the Company's common stock. Directors, executive officers and
greater than ten percent stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of these reports furnished to the Company or
written representations that no other reports were required, with the exception
of Mark Baker and Larry Mercer, each of whom were late in filing a Form 4, we
believe that during fiscal year 2001, all our directors, executive officers and
greater than ten percent beneficial owners complied with these requirements.
34
GENERAL
AVAILABILITY OF FORM 10-K AND ANNUAL REPORT TO STOCKHOLDERS
SEC rules require us to provide an Annual Report to stockholders who
receive this proxy statement. We will also provide copies of the Annual Report
to brokers, dealers, banks, voting trustees and their nominees for the benefit
of their beneficial owners of record. Additional copies of the Annual Report,
along with copies of our Annual Report on Form 10-K for the fiscal year ended
February 3, 2002 (not including documents incorporated by reference), are
available without charge to stockholders upon written request to Investor
Relations, The Home Depot, Inc., 2455 Paces Ferry Rd., Atlanta, Georgia 30339,
by calling (770) 384-4388 or via the Internet at www.homedepot.com.
STOCKHOLDER PROPOSALS
To be considered for inclusion in next year's proxy statement,
stockholder proposals must be submitted in writing by December 21, 2002. Any
stockholder proposal, including nomination of a director, to be considered at
next year's meeting, but not included in the proxy statement, must be submitted
in writing by February 27, 2003, or the persons appointed as proxies may
exercise their discretionary voting authority with respect to the proposal. All
written proposals should be submitted to Frank L. Fernandez, Corporate
Secretary, The Home Depot, Inc., 2455 Paces Ferry Road, Atlanta, Georgia 30339.
OTHER PROPOSED ACTIONS
If any other items or matters properly come before the meeting, the
proxies received will be voted on those items or matters in accordance with the
discretion of the proxy holders. A stockholder has indicated his intention to
present proposals recommending that the Company adopt (1) a policy that auditors
not perform any work for the Company in addition to auditing and (2) a policy to
name annually the directors who have philanthropic links to the Company and the
latest annual sum. If these proposals are properly presented, it is intended
that the persons named in the proxy forms will use their discretionary authority
to vote against such proposals.
SOLICITATION BY BOARD; EXPENSES OF SOLICITATION
Our Board of Directors has sent you this proxy statement. Our
directors, officers and associates may solicit proxies by telephone or in
person. In addition, we have hired D.F. King & Co., Inc. to assist us in
soliciting proxies, which it may solicit by telephone or in person. We
anticipate paying D.F. King a fee of $15,000, plus expenses. We will also
reimburse brokers, nominees and fiduciaries to send proxies and proxy materials
to our stockholders so they can vote their shares.
35
[THE HOME DEPOT LOGO]
[PRINTED ON RECYCLED PAPER LOGO]
THE HOME DEPOT, INC.
1997 OMNIBUS STOCK INCENTIVE PLAN, AS AMENDED
1. HISTORY AND PURPOSE. The Home Depot, Inc. Omnibus Stock Incentive
Plan (this Plan) is an amendment and restatement of The Home Depot, Inc. 1991
Omnibus Stock Option Plan. The purpose of this Plan is to attract and retain
employees and directors for The Home Depot, Inc. and its subsidiaries and to
provide such persons with incentives and rewards for superior performance.
2. DEFINITIONS. As used in this Plan, the following terms shall be
defined as set forth below:
"AWARD" means any Option, Stock Appreciation Right,
Restricted Shares, Deferred Shares, Performance Shares or Performance Unit.
"BASE PRICE" means the price to be used as the basis for
determining the Spread upon the exercise of a Freestanding Stock Appreciation
Right.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMMITTEE" means the committee described in Section 4 of
this Plan.
"COMPANY" means The Home Depot, Inc., a Delaware corporation,
or any successor corporation.
"DEFERRAL PERIOD" means the period of time during which
Deferred Shares are subject to deferral limitations under Section 8 of this
Plan.
"DEFERRED SHARES" means an Award pursuant to Section 8 of
this Plan of the right to receive Shares at the end of a specified Deferral
Period.
"EMPLOYEE" means any person, including an officer, employed
by the Company or a Subsidiary.
"FAIR MARKET VALUE" means the fair market value of the Shares
as determined by the Committee from time to time. Unless otherwise determined
by the Committee, the fair market value shall be the closing price for the
Shares reported on a consolidated basis on the New York Stock Exchange on the
relevant date or, if there were no sales on such date, the closing price on the
nearest preceding date on which sales occurred.
"FREESTANDING STOCK APPRECIATION RIGHT" means a Stock
Appreciation Right granted pursuant to Section 6 of this Plan that is not
granted in tandem with an Option or similar right.
"GRANT DATE" means the date specified by the Committee on
which a grant of an Award shall become effective, which shall not be earlier
than the date on which the Committee takes action with respect thereto.
"INCENTIVE STOCK OPTIONS" means any Option that is intended
to qualify as an "incentive stock option" under Section 422 of the Code or any
successor provision.
"NONEMPLOYEE DIRECTOR" means a member of the Board who is not
an Employee.
"NONQUALIFIED STOCK OPTION" means an Option that is not
intended to qualify as an Incentive Stock Option.
"OPTION" means any option to purchase Shares granted under
Section 5 of this Plan.
"OPTIONEE" means the person so designated in an agreement
evidencing an outstanding Option.
"OPTION PRICE" means the purchase price payable upon the
exercise of an Option.
"PARTICIPANT" means an Employee or Nonemployee Director who
is selected by the Committee to receive benefits under this Plan, provided that
Nonemployee Directors shall not be eligible to receive grants of Incentive
Stock Options.
"PERFORMANCE OBJECTIVES" means the performance objectives
established pursuant to this Plan for Participants who have received grants of
Performance Shares or Performance Units or, when so determined by the
Committee, Deferred Shares or Restricted Shares. Performance Objectives may be
described in terms of Company-wide objectives or objectives that are related to
the performance of the individual Participant or the Subsidiary, division,
department or function within the Company or Subsidiary in which the
Participant is employed. Any Performance Objectives applicable to Awards to the
extent that such an Award is intended to qualify as "performance-based
compensation" under Section 162(m) of the Code shall be limited to specified
levels of or increases in the Company's or Subsidiary's return on equity,
earnings per share, total earnings, earnings growth, return on capital, return
on assets, economic value added, earnings before interest and taxes, sales
growth, gross margin return on investment, increase in the Fair Market Value of
the Shares, share price (including, but not limited to, growth measures and
total shareholder return), net operating profit, cash flow (including, but not
limited to, operating cash flow and free cash flow), cash flow return on
investments (which equals net cash flow divided by total capital), internal
rate of return, increase in net present value or expense targets. Except in the
case of such an Award intended to qualify under Section 162(m) of the Code, if
the Committee determines that a change in the business, operations, corporate
structure or capital structure of the Company, or the manner in which it
conducts its business, or other events or circumstances render the Performance
Objectives unsuitable, the Committee may modify such Performance Objectives or
the related minimum acceptable level of achievement, in whole or in part, as
the Committee deems appropriate and equitable.
"PERFORMANCE PERIOD" means a period of time established under
Section 9 of this Plan within which the Performance Objectives relating to a
Performance Share, Performance Unit, Deferred Shares or Restricted Shares are
to be achieved.
"PERFORMANCE SHARE" means a bookkeeping entry that records
the equivalent of one Share awarded pursuant to Section 9 of this Plan.
"PERFORMANCE UNIT" means a bookkeeping entry that records a
unit equivalent to $1.00 awarded pursuant to Section 9 of this Plan.
"PREDECESSOR PLAN" means The Home Depot, Inc. 1991 Omnibus
Stock Option Plan.
"RESTRICTED SHARES" mean Shares granted under Section 7 of
this Plan subject to a substantial risk of forfeiture.
"SHARES" means shares of the Common Stock of the Company,
$.05 par value, or any security into which Shares may be converted by reason of
any transaction or event of the type referred to in Section 11 of this Plan.
"SPREAD" means, in the case of a Freestanding Stock
Appreciation Right, the amount by which the Fair Market Value on the date when
any such right is exercised exceeds the Base Price specified in such right or,
in the case of a Tandem Stock Appreciation Right, the amount by which the Fair
Market Value on the date when any such right is exercised exceeds the Option
Price specified in the related Option.
"STOCK APPRECIATION RIGHT" means a right granted under
Section 6 of this Plan, including a Freestanding Stock Appreciation Right or a
Tandem Stock Appreciation Right.
"SUBSIDIARY" means a corporation or other entity (i) more
than 50 percent of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) are,
or (ii) which does not have outstanding shares or securities (as may be the
case in a partnership, joint venture or unincorporated association), but more
than 50 percent of whose ownership interest (representing the right generally
to make decisions for such other entity) is, now or hereafter owned or
controlled directly or indirectly by the Company, provided that for purposes of
determining whether any person may be a Participant for purposes of any grant
of Incentive Stock Options, "Subsidiary" means any corporation in which the
Company owns or controls directly or indirectly more than 50 percent of the
total combined voting power represented by all classes of stock issued by such
corporation at the time of such grant.
"TANDEM STOCK APPRECIATION RIGHT" means a Stock Appreciation
Right granted pursuant to Section 6 of this Plan that is granted in tandem with
an Option or any similar right granted under any other plan of the Company.
3. SHARES AVAILABLE UNDER THE PLAN.
(a) Subject to adjustment as provided in Section 11 of this Plan, the
number of Shares that may be (i) issued or transferred upon the exercise of
Options or Stock Appreciation Rights, (ii) awarded as Restricted Shares and
released from substantial risk of forfeiture, or (iii) issued or transferred in
payment of Deferred Shares or Performance Shares, on or after the effective
date specified in Section 17 shall not in the aggregate exceed (y) the number
of Shares then remaining available under the Predecessor Plan, plus (z)
one-half percent (1/2%) of the total number of issued Shares (including
Treasury Shares) as of the first day of each fiscal year of the Company that
the Plan is in effect. The number of Shares available for issuance in any one
fiscal year shall be increased by any Shares available in prior fiscal years
but not issued in such fiscal years. In no event, however, shall the number of
Shares issued upon the exercise of Incentive Stock Options exceed 50,000,000
Shares or the number of Restricted Shares released from substantial risk of
forfeiture exceed 5,000,000 Shares, subject to adjustment as provided in
Section 11. Such Shares may be Shares of original issuance, Shares held in
Treasury, or Shares that have been reacquired by the Company.
(b) Upon payment of the Option Price upon exercise of a Nonqualified
Stock Option by the transfer to the Company of Shares or upon satisfaction of
tax withholding obligations under the Plan by the transfer or relinquishment of
Shares, there shall be deemed to have been issued or transferred only the
number of Shares actually issued or transferred by the Company, less the number
of Shares so transferred or relinquished. Upon the payment in cash of a benefit
provided by any Award under the Plan, any Shares that were subject to such
Award shall again be available for issuance or transfer under the Plan.
(c) No Participant may receive Awards representing more than 1,000,000
Shares in any one calendar year. In addition, the maximum number of Performance
Units that may be granted to a Participant in any one calendar year is
5,000,000.
(d) In addition to the foregoing limitations, the number of Shares
made subject to grants of (i) Restricted Shares with vesting restrictions of
less than three years if performance-based objectives or one year if time-based
objectives are established for the Performance Objectives or (ii) Performance
Shares that are not issued in lieu of a salary or cash bonus, shall not exceed
five percent (5%) of the Shares authorized for issuance under the Plan. This
limitation shall be applied as of any date by taking into account the
number of Shares available to be made the subject of new Awards as of such
date, plus the number of Shares previously issued under the Plan and the number
of Shares subject to outstanding Awards as of such date.
4. ADMINISTRATION OF THE PLAN. This Plan shall be administered by one
or more committees appointed by the Board. The interpretation and construction
by the Committee of any provision of this Plan or of any agreement or document
evidencing the grant of any Award and any determination by the Committee
pursuant to any provision of this Plan or any such agreement, notification or
document, 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. OPTIONS. The Committee may from time to time authorize grants to
Participants of options to purchase Shares upon such terms and conditions as
the Committee may determine in accordance with the following provisions:
(a) Each grant shall specify the number of Shares to which it
pertains.
(b) Each grant shall specify an Option Price per Share, which
shall be equal to or greater than the Fair Market Value on the Grant Date.
(c) Each grant shall specify the form of consideration to be
paid in satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent acceptable to the Company, (ii) nonforfeitable,
unrestricted Shares owned by the Optionee which have a value at the time of
exercise that is equal to the Option Price, (iii) any other legal consideration
that the Committee may deem appropriate, including without limitation any form
of consideration authorized under Section 5(d) below, on such basis as the
Committee may determine in accordance with this Plan, or (iv) any combination
of the foregoing.
(d) On or after the Grant Date of any Option other than an
Incentive Stock Option, the Committee may determine that payment of the Option
Price may also be made in whole or in part in the form of Restricted Shares or
other Shares that are subject to risk of forfeiture or restrictions on
transfer. Unless otherwise determined by the Committee, whenever any Option
Price is paid in whole or in part by means of any of the forms of consideration
specified in this Section 5(d), the Shares received by the Optionee upon the
exercise of the Options shall be subject to the same risks of forfeiture or
restrictions on transfer as those that applied to the consideration surrendered
by the Optionee, provided that such risks of forfeiture and restrictions on
transfer shall apply only to the same number of Shares received by the Optionee
as applied to the forfeitable or restricted Shares surrendered by the Optionee.
(e) Any grant may provide for deferred payment of the Option
Price 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.
(f) On or after the Grant Date of any Option, the Committee
may provide for the automatic grant to the Optionee of a reload Option in the
event the Optionee surrenders Shares in satisfaction of the Option Price upon
the exercise of an Option as authorized under Sections 5(c) and (d) above. Each
reload Option shall pertain to a number of Shares equal to the number of Shares
utilized by the Optionee to exercise the original Option. Each reload Option
shall have an exercise price equal to Fair Market Value on the date it is
granted and shall expire on the stated exercise date of the original Option.
(g) Each Option grant may specify a period of continuous
employment of the Optionee by the Company or any Subsidiary (or, in the case of
a Nonemployee Director, service on the Board) that is necessary before the
Options or installments thereof shall become exercisable, and any grant may
provide for the earlier exercise of such rights in the event of a change in
control of the Company or other similar transaction or event.
(h) Options granted under this Plan may be Incentive Stock
Options, Nonqualified Stock Options or a combination of the foregoing, provided
that only Nonqualified Stock Options may be granted to Nonemployee Directors.
Each grant shall specify whether (or the extent to which) the Option is an
Incentive Stock Option or a Nonqualified Stock Option. Notwithstanding any such
designation, to the extent that the aggregate Fair Market Value of the Shares
with respect to which Options designated as Incentive Stock Options are
exercisable for the first time by an Optionee during any calendar year (under
all plans of the Company) exceeds $100,000, such Options shall be treated as
Nonqualified Stock Options.
(i) No Option granted under this Plan may be exercised more
than ten years from the Grant Date.
(j) Each grant shall be evidenced by an agreement delivered
to and accepted by the Optionee and containing such terms and provisions as the
Committee may determine consistent with this Plan.
6. STOCK APPRECIATION RIGHTS. The Committee may also authorize grants
to Participants of Stock Appreciation Rights. A Stock Appreciation Right is the
right of the Participant to receive from the Company an amount, which shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100 percent) of the Spread at the time of the exercise of such right.
Any grant of Stock Appreciation Rights under this Plan shall be upon such terms
and conditions as the Committee may determine in accordance with the following
provisions:
(a) Any grant may specify that the amount payable upon the
exercise of a Stock Appreciation Right may be paid by the Company in cash,
Shares or any combination thereof and may (i) either grant to the Participant
or reserve to the Committee the right to elect among those alternatives or (ii)
preclude the right of the Participant to receive and the Company to issue
Shares or other equity securities in lieu of cash.
(b) Any grant may specify that the amount payable upon the
exercise of a Stock Appreciation Right shall not exceed a maximum specified by
the Committee on the Grant Date.
(c) Any grant may specify (i) a waiting period or periods
before Stock Appreciation Rights shall become exercisable and (ii) permissible
dates or periods on or during which Stock Appreciation Rights shall be
exercisable.
(d) Any grant may specify that a Stock Appreciation Right may
be exercised only in the event of a change in control of the Company or other
similar transaction or event.
(e) On or after the Grant Date of any Stock Appreciation
Rights, the Committee may provide for the payment to the Participant of
dividend equivalents thereon in cash or Shares on a current, deferred or
contingent basis.
(f) Each grant shall be evidenced by an agreement delivered
to and accepted by the Optionee, which shall describe the subject Stock
Appreciation Rights, identify any related Options, state that the Stock
Appreciation Rights are subject to all of the terms and conditions of this Plan
and contain such other terms and provisions as the Committee may determine
consistent with this Plan.
(g) Each grant of a Tandem Stock Appreciation Right shall
provide that such Tandem Stock Appreciation Right may be exercised only (i) at
a time when the related Option (or any similar right granted under any other
plan of the Company) is also exercisable and the Spread is positive; and (ii)
by surrender of the related Option (or such other right) for cancellation.
(h) Regarding Freestanding Stock Appreciation Rights only:
(i) Each grant shall specify in respect of each
Freestanding Stock
Appreciation Right a Base Price per Share, which shall be equal to or greater
than the Fair Market Value on the Grant Date;
(ii) Successive grants may be made to the same
Participant regardless of whether any Freestanding Stock Appreciation Rights
previously granted to such Participant remain unexercised;
(iii) Each grant shall specify the period or periods
of continuous employment of the Participant by the Company or any Subsidiary
that are necessary before the Freestanding Stock Appreciation Rights or
installments thereof shall become exercisable, and any grant may provide for
the earlier exercise of such rights in the event of a change in control of the
Company or other similar transaction or event; and
(iv) No Freestanding Stock Appreciation Right
granted under this Plan may be exercised more than ten years from the Grant
Date.
7. RESTRICTED SHARES. The Committee may also authorize grants to
Participants of Restricted Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each grant shall constitute an immediate transfer of the
ownership of Shares to the Participant in consideration of the performance of
services, subject to the substantial risk of forfeiture and restrictions on
transfer hereinafter referred to.
(b) Each grant may be made without additional consideration
from the Participant or in consideration of a payment by the Participant that
is less than the Fair Market Value on the Grant Date.
(c) Each grant shall provide that the Restricted Shares
covered thereby shall be subject to a "substantial risk of forfeiture within
the meaning of Section 83 of the Code for a period to be determined by the
Committee on the Grant Date, and any grant or sale may provide for the earlier
termination of such risk of forfeiture in the event of a change in control of
the Company or other similar transaction or event.
(d) Unless otherwise determined by the Committee, an award of
Restricted Shares shall entitle the Participant to dividend, voting and other
ownership rights during the period for which such substantial risk of
forfeiture is to continue.
(e) Each grant shall provide that, during the period for
which such substantial risk of forfeiture is to continue, the transferability
of the Restricted Shares shall be prohibited or restricted in the manner and to
the extent prescribed by the Committee on the Grant Date. Such restrictions may
include, without limitation, rights of repurchase or first refusal in the
Company or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee.
(f) Any grant or the vesting thereof may be further
conditioned upon the attainment of Performance Objectives established by the
Committee in accordance with the applicable provisions of Section 9 of this
Plan regarding Performance Shares and Performance Units.
(g) Any grant may require that any or all dividends or other
distributions paid on the Restricted Shares during the period of such
restrictions be automatically sequestered and reinvested on an immediate or
deferred basis in additional Shares, which may be subject to the same
restrictions as the underlying Award or such other restrictions as the
Committee may determine.
(h) Each grant shall be evidenced by an agreement delivered
to and accepted by the Participant and containing such terms and provisions as
the Committee may determine consistent with this Plan. Unless otherwise
directed by the Committee, all certificates representing Restricted Shares,
together
with a stock power that shall be endorsed in blank by the Participant with
respect to such Shares, shall be held in custody by the Company until all
restrictions thereon lapse.
8. DEFERRED SHARES. The Committee may authorize grants of Deferred
Shares to Participants upon such terms and conditions as the Committee may
determine in accordance with the following provisions:
(a) Each grant shall constitute the agreement by the Company
to issue or transfer Shares to the Participant in the future in consideration
of the performance of services, subject to the fulfillment during the Deferral
Period of such conditions as the Committee may specify.
(b) Each grant may be made without additional consideration
from the Participant or in consideration of a payment by the Participant that
is less than the Fair Market Value on the Grant Date.
(c) Each grant shall provide that the Deferred Shares covered
thereby shall be subject to a Deferral Period, which shall be fixed by the
Committee on the Grant Date, and any grant or sale may provide for the earlier
termination of such period in the event of a change in control of the Company
or other similar transaction or event.
(d) During the Deferral Period, the Participant shall not
have any right to transfer any rights under the subject Award, shall not have
any rights of ownership in the Deferred Shares and shall not have any right to
vote such shares, but the Committee may on or after the Grant Date authorize
the payment of dividend equivalents on such shares in cash or additional Shares
on a current, deferred or contingent basis.
(e) Any grant or the vesting thereof may be further
conditioned upon the attainment of Performance Objectives established by the
Committee in accordance with the applicable provisions of Section 9 of this
Plan regarding Performance Shares and Performance Units.
(f) Each grant shall be evidenced by an agreement delivered
to and accepted by the Participant and containing such terms and provisions as
the Committee may determine consistent with this Plan.
9. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Committee may also
authorize grants of Performance Shares and Performance Units, which shall
become payable to the Participant upon the achievement of specified Performance
Objectives, upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall specify the number of Performance Shares
or Performance Units to which it pertains, which may be subject to adjustment
to reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Performance
Share or Performance Unit shall commence on the Grant Date and may be subject
to earlier termination in the event of a change in control of the Company or
other similar transaction or event.
(c) Each grant shall specify the Performance Objectives that
are to be achieved by the Participant.
(d) Each grant may specify in respect of the specified
Performance Objectives a minimum acceptable level of achievement below which no
payment will be made and may set forth a formula for determining the amount of
any payment to be made if performance is at or above such minimum acceptable
level but falls short of the maximum achievement of the specified Performance
Objectives.
(e) Each grant shall specify the time and manner of payment
of Performance Shares
or Performance Units that shall have been earned, and any grant may specify
that any such amount may be paid by the Company in cash, Shares or any
combination thereof and may either grant to the Participant or reserve to the
Committee the right to elect among those alternatives.
(f) Any grant of Performance Shares may specify that the
amount payable with respect thereto may not exceed a maximum specified by the
Committee on the Grant Date. Any grant of Performance Units may specify that
the amount payable, or the number of Shares issued, with respect thereto may
not exceed maximums specified by the Committee on the Grant Date.
(g) Any grant of Performance Shares may provide for the
payment to the Participant of dividend equivalents thereon in cash or
additional Shares on a current, deferred or contingent basis.
(h) If provided in the terms of the grant, the Committee may
adjust Performance Objectives and the related minimum acceptable level of
achievement if, in the sole judgment of the Committee, events or transactions
have occurred after the Grant Date that are unrelated to the performance of the
Participant and result in distortion of the Performance Objectives or the
related minimum acceptable level of achievement.
(i) Each grant shall be evidenced by an agreement delivered
to and accepted by the Participant, which shall state that the Performance
Shares or Performance Units are subject to all of the terms and conditions of
this Plan and such other terms and provisions as the Committee may determine
consistent with this Plan.
10. TRANSFERABILITY.
(a) Except as provided in Section 10(b), no Award granted
under this Plan shall be transferable by a Participant other than by will or
the laws of descent and distribution, and Options and Stock Appreciation Rights
shall be exercisable during a Participant's lifetime only by the Participant
or, in the event of the Participant's legal incapacity, by his guardian or
legal representative acting in a fiduciary capacity on behalf of the
Participant under state law. Any attempt to transfer an Award in violation of
this Plan shall render such Award null and void.
(b) The Committee may expressly provide in an Award agreement
(or an amendment to an Award agreement) that a Participant may transfer such
Award (other than an Incentive Stock Option), in whole or in part, to a spouse
or lineal descendant (a Family Member), a trust for the exclusive benefit of
Family Members, a partnership or other entity in which all the beneficial
owners are Family Members, or any other entity affiliated with the Participant
that may be approved by the Committee. Subsequent transfers of Awards shall be
prohibited except in accordance with this Section 10(b). All terms and
conditions of the Award, including provisions relating to the termination of
the Participant's employment or service with the Company or a Subsidiary, shall
continue to apply following a transfer made in accordance with this Section
10(b).
(c) Any Award made under this Plan may provide that all or
any part of the Shares that are (i) to be issued or transferred by the Company
upon the exercise of Options or Stock Appreciation Rights, upon the termination
of the Deferral Period applicable to Deferred Shares or upon payment under any
grant of Performance Shares or Performance Units, or (ii) no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 7 of this Plan, shall be subject to further restrictions upon transfer.
11. ADJUSTMENTS. The Committee may make or provide for such
adjustments in the (a) number of Shares covered by outstanding Options, Stock
Appreciation Rights, Deferred Shares, Restricted Shares and Performance Shares
granted hereunder, (b) prices per share applicable to such Options and Stock
Appreciation Rights, and (c) kind of Shares covered thereby, as the Committee
in its sole discretion may in good faith determine to be equitably required in
order to prevent dilution or enlargement of the rights of Participants that
otherwise would result from (x) any stock dividend, stock split, combination or
exchange of Shares, recapitalization or other change in the capital structure
of the Company, (y) 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 (z) 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 any or all
outstanding Awards under this Plan 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 all Awards so replaced. The Committee may
also make or provide for such adjustments in the number of Shares specified in
Section 3 of this Plan as the Committee in its sole discretion may in good
faith determine to be appropriate in order to reflect any transaction or event
described in this Section 11.
12. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional Shares pursuant to this Plan. The Committee may provide for the
elimination of fractions or for the settlement thereof in cash.
13. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements
satisfactory to the Company for payment of all such taxes required to be
withheld. At the discretion of the Committee, such arrangements may include
relinquishment of a portion of such benefit.
14. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND APPROVED LEAVES
OF ABSENCE. Notwithstanding any other provision of this Plan to the contrary,
in the event of termination of employment by reason of death, disability,
normal retirement, early retirement with the consent of the Company or leave of
absence approved by the Company, or in the event of hardship or other special
circumstances, of a Participant who holds an Option or Stock Appreciation Right
that is not immediately and fully exercisable, any Restricted Shares as to
which the substantial risk of forfeiture or the prohibition or restriction on
transfer has not lapsed, any Deferred Shares as to which the Deferral Period is
not complete, any Performance Shares or Performance Units that have not been
fully earned, or any Shares that are subject to any transfer restriction
pursuant to Section 10(c) of this Plan, the Committee may in its sole
discretion take any action that it deems to be equitable under the
circumstances or in the best interests of the Company, including, without
limitation, waiving or modifying any limitation or requirement with respect to
any Award under this Plan.
15. FOREIGN EMPLOYEES. In order to facilitate the making of any grant
or combination of grants under this Plan, the Committee may provide for such
special terms for Awards to Participants who are foreign nationals, or who are
employed by the Company or any Subsidiary outside of the United States of
America, as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to, or amendments, restatements or alternative
versions of, this Plan as it may consider necessary or appropriate for such
purposes without thereby affecting the terms of this Plan as in effect for any
other purpose, provided that no such supplements, amendments, restatements or
alternative versions shall include any provisions that are inconsistent with
the terms of this Plan, as then in effect, unless this Plan could have been
amended to eliminate such inconsistency without further approval by the
Stockholders of the Company.
16. AMENDMENTS AND OTHER MATTERS.
(a) This Plan may be amended from time to time by the Board,
but no such amendment shall increase any of the limitations specified in
Section 3 of this Plan, other than to reflect an adjustment made in accordance
with Section 11, without the further approval of the Stockholders of the
Company.
(b) With the concurrence of the affected Optionee, the
Committee may cancel any agreement evidencing Options or any other Award
granted under this Plan. In the event of such
cancellation, the Committee may authorize the granting of new Options or other
Awards hereunder, which may or may not cover the same number of Shares that had
been the subject of the prior Award, in such manner, at such Option Price and
subject to such other terms, conditions and discretions as would have been
applicable under this Plan had the canceled Options or other Award not been
granted.
(c) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the Company or
any Subsidiary and shall not interfere in any way with any right that the
Company or any Subsidiary would otherwise have to terminate any Participant's
employment or other service at any time.
(d) To the extent that any provision of this Plan would
prevent any Option that was intended to qualify under particular provisions of
the Code from so qualifying, such provision of this Plan shall be null and void
with respect to such Option, provided that such provision shall remain in
effect with respect to other Options, and there shall be no further effect on
any provision of this Plan.
17. EFFECTIVE DATE AND STOCKHOLDER APPROVAL. This Plan, as an
amendment and restatement of the Predecessor Plan, shall become effective upon
its approval by the Board, subject to approval by the Stockholders of the
Company at the next Annual Meeting of Stockholders. The Committee may grant
Awards subject to the condition that this Plan shall have been approved by the
Stockholders of the Company.
18. TERMINATION. This Plan shall terminate on February 27, 2007, and
no Award shall be granted after that date.
19. GOVERNING LAW. The validity, construction and effect of this Plan
and any Award hereunder will be determined in accordance with (i) the Delaware
General Corporation Law, and (ii) to the extent applicable, other laws
(including those governing contracts) of the State of Georgia.
THE THE HOME DEPOT, INC. ADMISSION CARD
HOME DEPOT 2455 PACES FERRY ROAD
LOGO ATLANTA, GEORGIA 30339-4024
THE HOME DEPOT, INC.
2002 ANNUAL STOCKHOLDERS' MEETING
May 29, 2002 -- 10:00 a.m.
Cobb Galleria Centre
Atlanta, Georgia
(Please detach card at perforation.)
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VOTE BY TELEPHONE OR INTERNET
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY *
7 DAYS/WEEK UNTIL 10:00 A.M., E.T., MAY 29, 2002
The Home Depot, Inc. encourages you to take advantage of either of two
cost-effective and convenient ways to vote your shares. You may now vote your
proxy 24 hours a day, 7 days a week, using either a touch-tone telephone or
through the Internet. Your telephone or Internet vote authorizes you to vote
your shares in the same manner as if you marked, signed and returned your proxy
card.
TO VOTE BY TELEPHONE: CALL TOLL-FREE ON A TOUCH-TONE TELEPHONE
1-877-PRX-VOTE (1-877-779-8683) ANYTIME (THERE IS NO
CHARGE TO YOU FOR THIS CALL) You will be asked to
enter the voter control number located above your
name and address in the lower left corner of this
form. Then simply follow the instructions.
OR
TO VOTE BY INTERNET: POINT YOUR BROWSER TO THE WEB ADDRESS:
http://www.eproxyvote.com/hd
You will be asked to enter the voter control number
located above your name and address in the lower
left corner of this form. Then simply follow the
instructions. You may also indicate if you would be
interested in receiving future proxy materials via
the Internet.
OR
TO VOTE BY MAIL: Simply mark, sign and date your proxy card and
return it in the enclosed postage-paid envelope.
IF YOU ARE VOTING BY TELEPHONE OR THE INTERNET,
PLEASE DO NOT MAIL YOUR PROXY CARD.
Our proxy statement and annual report are mailed to
every account of record. If you would like to
receive future stockholder materials
electronically, please read the information on the
reverse side.
DETACH PROXY CARD HERE
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PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE
UNLESS VOTING ELECTRONICALLY OR BY PHONE, PLEASE MARK, SIGN AND DATE THIS PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. TO VOTE ELECTRONICALLY OR
BY PHONE, FOLLOW THE INSTRUCTIONS ABOVE.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ITEMS 1, 2, 3 AND 4 AND AGAINST ITEM 5.
-------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Directors: 2. Approval of Company Proposal to
Nominees: ratify the appointment of KPMG
]01) Gregory D. Brenneman, (02) Richard H. Brown, LLP as independent auditors for the
(03) John L. Clendenin, (04) Berry R. Cox, Company for the fiscal year 2002. [ ] [ ] [ ]
(05) William S. Davila, (06) Claudio X. Gonzalez, FOR WITHHELD 3. Approval of Company Proposal to
(07) Richard A. Grasso, (08) Milledge A. Hart, III, [ ] [ ] amend Certificate of Incorporation
(09) Bonnie G. Hill, (10) Kenneth G. Langone, to eliminate Article Eighth, which
(11) Robert L. Nardelli, (12) Roger S. Penske sets forth a "fair price provision." [ ] [ ] [ ]
4. Approval of Company Proposal to amend
The Home Depot, Inc. 1997 Omnibus Stock
Incentive Plan to add additional
performance measurements. [ ] [ ] [ ]
5. Approval of Stockholder Proposal
[ ] -------------------------------------- regarding global workplace standards. [ ] [ ] [ ]
For all nominees except as noted above
DISCONTINUE
DUPLICATE
ANNUAL REPORT [ ]
MARK HERE FOR
ADDRESS CHANGE
AND NOTE AT LEFT [ ]
Please sign exactly as name appears at left. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign
in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by
authorized person.
Signature(s) Date Signature(s) Date
------------------------ ----------------------- ------------------------ -----------------------
PLEASE SIGN THIS PROXY AS NAME(S) APPEAR(S) ABOVE.
DIRECTIONS TO THE HOME DEPOT, INC. 2002 ANNUAL STOCKHOLDERS' MEETING
From I-285 (Atlanta Bypass) exit onto Cobb Parkway (also known as U.S. Highway
41). Proceed southbound on Cobb Parkway. Turn left onto Galleria Drive. The
first entrance on the right is Cobb Galleria Centre's main (rotunda) entrance
and drop-off area. Additional parking may be found at the second and third
rights in the 100 Building parking deck. If you have questions, call Investor
Relations at 770-384-3049.
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NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
TIME:
10:00 a.m. on Wednesday, May 29, 2002
PLACE:
Cobb Galleria Centre, 2 Galleria Parkway, Atlanta, Georgia 30339
ITEMS OF BUSINESS:
1. To elect the full board of directors.
2. To ratify the appointment of KPMG LLP as independent auditors for the
Company for the fiscal year 2002.
3. To amend the Company's Certificate of Incorporation to eliminate Article
Eighth.
4. To re-approve our 1997 Omnibus Stock Incentive Plan, as amended to add
additional performance objectives.
5. To transact other business properly coming before the meeting, including the
consideration of stockholder proposals.
WHO CAN VOTE:
You can vote if you were a stockholder of record on April 1, 2002.
ANNUAL REPORT:
A copy of our 2001 Annual Report is enclosed with the Proxy Statement.
DATE OF MAILING:
This notice and the proxy statement are first being mailed to stockholders on
or about April 22, 2002.
By Order of the Board of Directors
Frank L. Fernandez, Secretary
- Detach here if mailing -
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PROXY/VOTING INSTRUCTIONS
THE HOME DEPOT, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON MAY 29, 2002.
The undersigned stockholder hereby appoints ROBERT L. NARDELLI and FRANK L.
FERNANDEZ, and each of them, attorneys and proxies for the undersigned with
full power of substitution, to act and vote, with the powers the undersigned
would possess if personally present, at the Annual Meeting of Stockholders of
The Home Depot, Inc., to be held at the Cobb Galleria Centre, Atlanta, Georgia,
on Wednesday, May 29, 2002, at 10:00 a.m. and any adjournments or postponements
thereof, as directed on the reverse side, with respect to the matters set forth
on the reverse side and with discretionary authority on all other matters that
come before the meeting, all as more fully described in the proxy statement
received by the undersigned stockholder. If no direction is made, the proxy
will be voted "FOR" the approval of item number 1, "FOR" the approval of item
number 2, "FOR" the approval of item number 3, "FOR" the approval of item
number 4 and "AGAINST" the approval of item number 5 and in accordance with the
recommendations of the Board of Directors.
Participants in the Company's 401(k) plan, FutureBuilder, may vote their
proportionate share of The Home Depot, Inc. common stock held in the plan, by
signing and returning this card. By doing so, you are instructing the trustee
to vote all of your shares at the meeting and at any adjournment, as you have
indicated on the reverse side of this card with respect to Proposals 1-5. If
this card is signed and returned without voting instructions, the shares
represented by this proxy will be voted by the plan trustee as indicated in the
preceding paragraph. If this card is not returned or is returned unsigned,
shares will be voted by the plan trustee in the same proportion as the shares
for which voting instructions are received from other participants in the plan.
SEE REVERSE UNLESS VOTING ELECTRONICALLY OR BY PHONE, SEE REVERSE
SIDE PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE SIDE