-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JqQcG0V8sIMTEPIhCy1hudhTgiRO4uTyZ4/f1DOQOS36l2B5r2jGxfxNhBKDyQKR a+gKssPvuOfKY5HY8yKLvg== 0000950144-03-005180.txt : 20030421 0000950144-03-005180.hdr.sgml : 20030421 20030418195726 ACCESSION NUMBER: 0000950144-03-005180 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 20030202 FILED AS OF DATE: 20030421 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOME DEPOT INC CENTRAL INDEX KEY: 0000354950 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-LUMBER & OTHER BUILDING MATERIALS DEALERS [5211] IRS NUMBER: 953261426 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08207 FILM NUMBER: 03656257 BUSINESS ADDRESS: STREET 1: 2455 PACES FERRY ROAD CITY: ATLANTA STATE: GA ZIP: 30339-4024 BUSINESS PHONE: 770-433-82 MAIL ADDRESS: STREET 1: 2455 PACES FERRY ROAD CITY: ATLANTA STATE: GA ZIP: 30339-4024 10-K 1 g81844e10vk.txt THE HOME DEPOT, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 2, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-8207 THE HOME DEPOT, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE (State or Other Jurisdiction of Incorporation or Organization) 95-3261426 (I.R.S. Employer Identification No.) 2455 PACES FERRY ROAD, ATLANTA, GEORGIA 30339-4024 (Address of Principal Executive Offices, including Zip Code) Registrant's telephone number, including area code: (770) 433-8211 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED -------------------------------------- ----------------------- Common Stock, $.05 Par Value Per Share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [ ] The aggregate market value of the Common Stock of the Registrant held by nonaffiliates of the Registrant on August 2, 2002 was $64.5 billion. The number of shares outstanding of the Registrant's Common Stock as of April 1, 2003 was 2,293,783,938 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's 2002 Annual Report to Stockholders are incorporated by reference in Part II. Portions of the Registrant's Proxy Statement for the 2003 Annual Meeting of Stockholders to be held on May 30, 2003, are incorporated by reference in Part III. CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements made herein regarding strategic alliances with suppliers, implementation of store initiatives, store openings and capital expenditures constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations. These risks and uncertainties include, but are not limited to, fluctuations in and the overall condition of the U.S. economy, stability of costs and availability of sourcing channels, conditions affecting new store development, our ability to implement new technologies and processes, our ability to attract, train and retain highly-qualified associates, unanticipated weather conditions, the impact of competition and the effects of regulatory and litigation matters. You should not place undue reliance on such forward-looking statements as such statements speak only as of the date on which they are made. Additional information concerning these and other risks and uncertainties is contained in our periodic filings with the Securities and Exchange Commission. PART I ITEM 1. BUSINESS The Home Depot, Inc. ("Home Depot" or the "Company") is the world's largest home improvement retailer and the second largest retailer in the United States, based on net sales volume for fiscal 2002. At the end of the fiscal year ended February 2, 2003 ("fiscal 2002"), we were operating 1,532 stores. Most of our stores are either Home Depot(R) stores or EXPO Design Center(R) stores. A description of each of these types of stores is as follows: - HOME DEPOT STORES: Home Depot stores sell a wide assortment of building materials and home improvement and lawn and garden products and provide a number of services. Home Depot stores average approximately 108,000 square feet of enclosed space, with an additional approximately 22,000 square feet in the outside garden area. At the end of fiscal 2002, we had 1,471 Home Depot stores located throughout the United States (including Puerto Rico), Canada and Mexico. In February 2002, the Company sold its four stores in Argentina. - EXPO DESIGN CENTER STORES: EXPO Design Center stores sell products and services primarily for home decorating and remodeling projects. Unlike Home Depot stores, EXPO Design Center stores do not sell building materials and lumber. EXPO Design Center stores offer interior design products, such as kitchen and bathroom cabinetry, soft and hard flooring, appliances, window treatments, lighting fixtures and installation services. An average EXPO Design Center has approximately 100,000 square feet of enclosed space. At the end of fiscal 2002, we were operating 52 EXPO Design Center stores in the United States. In addition to Home Depot and EXPO Design Center Stores, we also have two new store formats focused on the professional customer called Home Depot Supply and Home Depot Landscape Supply. At the end of fiscal 2002, we were operating five Home Depot Supply stores and three Home Depot Landscape Supply stores. We also have one test store located in Texas called The Home Depot Floor Store(SM) that sells only flooring products. We operate four wholly-owned subsidiaries, Georgia Lighting, Inc., Apex Supply Company, Inc., Your "other" Warehouse, Inc. and HD Builder Solutions Group, Inc. Georgia Lighting(R), a specialty lighting designer, distributor and retailer, has five showroom locations in Georgia. Apex Supply 2 Company is a wholesale supplier of plumbing, HVAC, appliances and other related professional products with 23 locations in Florida, Georgia, South Carolina and Tennessee. Your "other" Warehouse(R) is a plumbing distributor that focuses on special order fulfillment through its five distribution centers and one call center located in Louisiana and Nevada. HD Builder Solutions Group, Inc. provides products and arranges flooring installation services for professional homebuilders through 16 locations in Maryland, Virginia, New Jersey, Ohio, Pennsylvania, Kentucky, Florida, Colorado and Arizona. This business was acquired in October 2002 when the Company acquired substantially all of the assets of FloorWorks, Inc. and Arvada Hardwood Floor Company, and all of the common stock of Floors, Inc. In addition to these subsidiaries, we offer products through two direct marketing subsidiaries. Maintenance Warehouse(R), a wholly-owned subsidiary, is a direct marketer of maintenance, repair and operations products serving primarily the multi-family housing and lodging facilities management market. The company fills orders through its 21 distribution centers, which are located in the United States. National Blinds & Wallpaper(SM), a wholly-owned subsidiary operating under the name Designplace Direct(SM), is a mail order service for wallpaper, custom window treatments and rugs. The Home Depot, Inc. is a Delaware corporation that was incorporated in 1978. Our Store Support Center (corporate office) is located at 2455 Paces Ferry Road, Atlanta, Georgia 30339-4024. The telephone number is (770) 433-8211. We maintain an internet website at www.homedepot.com. We make available on the website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after filing such material electronically with, or furnishing such material to, the Securities and Exchange Commission. We have included our website addresses throughout this filing only as textual references. The information contained on our websites is not incorporated by reference into this Form 10-K. RETAIL BUSINESSES HOME DEPOT STORES OPERATING STRATEGY. The operating strategy of Home Depot is to offer a broad assortment of high-quality merchandise and services at competitive prices using highly knowledgeable, service-oriented personnel and aggressive advertising. We believe that our associates' knowledge of products and home improvement techniques and applications is very important to our marketing approach and our ability to maintain customer satisfaction. We regularly check our competitors' prices to ensure that our prices are competitive within each market. CUSTOMERS. Home Depot stores serve three primary customer groups: - DO-IT-YOURSELF ("D-I-Y") CUSTOMERS: These customers are typically homeowners who purchase products and complete their own projects and installations. To complement the in-store expertise of our associates, Home Depot stores offer many D-I-Y "how-to" clinics taught by associates and merchandise vendors. 3 - DO-IT-FOR-ME ("D-I-F-M") CUSTOMERS: These customers are typically homeowners who purchase materials themselves and hire third parties to complete the project and/or installation. We offer these customers installation services for a variety of products through third party contractors. - PROFESSIONAL CUSTOMERS: These customers are professional remodelers, general contractors, repairmen and tradesmen. In many stores we offer a variety of programs to these professional customers, including additional delivery and will-call services, dedicated staff, extensive merchandise selections and expanded credit programs, all of which we believe increase sales. PRODUCTS. A typical Home Depot store stocks approximately 40,000 to 50,000 products during the year, including both national brand name and proprietary items. The following table shows the percentage of revenues of each major product group (and related services) for each of the last three fiscal years:
Percentage of Revenues for Fiscal Year Ended ---------------------------------- Feb. 2, Feb. 3, Jan. 28, Product Group 2003 2002 2001 - ------------- ------- ------- -------- Building materials, lumber and millwork .... 23.1% 23.6% 23.6% Plumbing, electrical and kitchen ........... 28.7 28.1 27.6 Hardware and seasonal ...................... 27.4 27.6 28.3 Paint, flooring and wall coverings ......... 20.8 20.7 20.5 ----- ----- ----- Total ...................................... 100.0% 100.0% 100.0% ===== ===== =====
We buy our store merchandise from vendors located throughout the world. We are not dependent on any single vendor. Most of our merchandise is purchased directly from manufacturers, which eliminates "middleman" costs. We believe that competitive sources of supply are readily available for substantially all of the products we sell in Home Depot stores. We maintain a global sourcing merchandise program to source high-quality products directly from overseas manufacturers, which gives our customers a broader selection of products and better values while enhancing our gross margin. Our product development merchants travel internationally to identify opportunities to purchase items directly for our stores. Additionally, we have opened two sourcing offices located in Shanghai and Shenzhen, China, and have a product development merchant located in Bonn, Germany. These initiatives enable us to improve product quality, to import products not currently available to our customers and to offer products at a lower price than would otherwise be available if purchased from third-party importers. We currently source products from more than 500 factories in approximately 40 countries. To complement and enhance our current product selection, we have formed strategic alliances and exclusive relationships with certain suppliers to market products under a variety of well-recognized brand names. At the end of fiscal year 2002, we offered a number of proprietary and exclusive brands, including, but not limited to, John Deere(R) lawn and garden tractors; Thomasville(R) kitchen and bathroom cabinets; Silestone(R) countertops; RIDGID(R) power tools; Behr Premium Plus(R) paint; Mill's Pride(R) cabinets; Husky(R) hand tools; GE SmartWater(TM) water heaters; Philips(R) light bulbs; Toro(R) lawn mowers; Vigoro(R) lawn care products GAF(R) roofing products, Honda(R) lawn mowers and Lithonia Lighting(TM) fluorescent lighting products. In the future, we may consider additional strategic alignments with other suppliers and will continue to assess opportunities to expand the range of products available under brand names that are exclusive to the Home Depot. 4 AT-HOME SERVICES. Home Depot stores offer a variety of installed sales and home maintenance programs through its At-Home Services(R) business. This service targets the Do-It-For-Me customer who will select and purchase materials for a project and prefers the Company to arrange professional installation. We implement our installed sales programs through independent qualified contractors and strategic partners in the U.S., Canada and Mexico. These programs include the installation of products that are sold in our stores, such as carpeting, hard flooring, cabinets and solid surface countertops, as well as the installation by strategic partners of products such as roofing, generators and furnace and central air systems. STORE-RELATED PROGRAMS. We continually assess our business to find opportunities to increase customer loyalty, thereby increasing sales. Accordingly, we implemented or expanded a number of in-store initiatives in Home Depot stores and programs aimed at supporting store operations during fiscal 2002, including: - Professional Business Customer Initiative. We are committed to being the supplier of choice to a variety of professional customers, including remodelers, carpenters, plumbers, painters, electricians, building maintenance professionals and designers. During fiscal 2002, we continued to expand our "Pro" initiative, which adds service-related programs to our stores that are designed to increase sales to professional customers. Stores participating in the program have added associates at a sales desk dedicated to providing more personalized service to professional customers, including managing accounts and taking and filling orders for pick-up or delivery. Additionally, during the hours when professionals typically shop, these stores have assigned sales associates in certain departments to assist these customers. To better serve our professional customers, we have also increased quantities of existing products typically purchased by professionals in bulk quantities, and we offer certain items in each department packaged in bulk to offer additional savings. While aimed at the professional customer, this program also enables us to better serve our D-I-Y customer with improved customer service, including delivery and will-call services, expanded credit programs and additional merchandise. Through this initiative, we have identified best practices in serving our professional customers that are being implemented in many of our stores without material additional costs. By the end of fiscal 2002, we had expanded the Pro initiative into 1,135 stores, 600 of which were added during the year. We anticipate that during fiscal 2003, we will expand this initiative to more than 204 additional stores. - SPI Program. During fiscal 2002, we implemented the Service Performance Improvement or "SPI" program in all of our new stores. Through the program, certain associates are assigned specific tasks, allowing others to focus on assisting customers. Additionally, we schedule associates to receive shipments and stock merchandise when our stores are closed or during hours when they have fewer customers. - Appliance Sales. During fiscal 2002, we continued the roll-out of our appliance sales program to our stores in the U.S. Through this program we sell appliances manufactured by General Electric(R), Maytag(R) and other manufacturers through 1,500 to 2,000 feet of dedicated appliance selling space in selected stores. We display and stock the more popular appliances in our stores and offer the ability to special order over 2,300 additional products through computer kiosks located in the stores. Through the computer kiosks we can check inventory and arrange for delivery to the customer directly from the manufacturer as soon as 48 hours after the order is placed. 743 of our stores had appliance showrooms at the end of fiscal 2002, and we anticipate adding the appliance sales program to an additional 671 stores by the end of fiscal 2003. 5 - Designplace Initiative. We continued to implement our Designplace initiative during fiscal 2002, rolling the initiative out to an additional 668 stores. The initiative offers an enhanced shopping experience to our design and decor customers by providing personalized service from specially trained associates and enhanced merchandise selection in an attractive setting. We expect to add the Designplace initiative to an additional 556 stores during fiscal 2003. - Tool Rental. As part of our efforts to satisfy a broad range of the needs of our professional and D-I-Y customers, we offer a tool rental service in certain stores. Under this program, we rent approximately 200 commercial-quality tools in ten categories, including saws, floor sanders, generators, gas powered lawn equipment and plumbing tools. Customers can rent the tools on an hourly, daily, weekly or monthly basis. Our associates who work in the tool rental area receive special training in the use and maintenance of the tools. At the end of fiscal 2002, we offered tool rental service in 601 stores compared to 466 stores at the end of fiscal 2001. By the end of fiscal 2003, we anticipate having tool rental services in approximately 800 stores. We believe that offering this service increases the sales of related merchandise without reducing the sales of equipment similar to that available for rental. - Customer Contact Center. During fiscal 2001, we began testing the use of a customer contact center to assist with expediting special orders and managing installation projects. The customer contact center also supports the sale and installation of water heaters and HVAC equipment nationwide. Calls come into the center where customer service representatives assist customers with product selection and scheduling installations. The orders are then fulfilled through our stores. We believe that the customer contact center will allow us to provide better customer service, both in our stores and on the phone, while reducing costs. We anticipate continuing this test during fiscal 2003. - Customer Education Programs. We offer several programs to enhance the skills and confidence of our D-I-Y customers. Our associates and vendors teach "how-to" clinics that focus on D-I-Y projects, such as installing garbage disposals, laying patio pavers or building a deck. In addition to the clinics, we offer Home Depot University(SM), which presents four-week modules allowing our customers to learn about several facets of a home improvement topic. For example, a room enhancement module may provide instruction on paint, wallpaper and window treatments. Through The Home Depot's Kids Workshop(SM) program, children are instructed in tool safety and complete a small building project, such as a birdhouse or tool box. We believe that these types of educational programs increase our sales by encouraging our customers to undertake more projects, differentiating us from our competition and reinforcing our position as experts in home improvement. STORE GROWTH United States. At the end of fiscal 2002, we were operating 1,370 Home Depot stores in the United States, including Puerto Rico. During fiscal 2002, we opened 167 new Home Depot stores in the U.S. Although these new store openings occurred primarily in existing markets, we continued our geographic expansion by opening stores in a number of new markets. To increase customer service levels, gain incremental sales and enhance long-term market penetration, we often open new stores near the edge of market areas served by existing stores. While these openings may initially have a negative impact on comparable store-for-store sales, we believe this "cannibalization" strategy increases customer satisfaction and overall market share by reducing delays in shopping, increasing utilization by existing customers and attracting new customers to more 6 convenient locations. At the end of fiscal 2002, we believe that approximately 21% of our stores were cannibalized by certain new stores. Canada. At the end of fiscal 2002, we were operating 89 Home Depot stores in seven Canadian provinces. Of these stores, 11 were opened during fiscal 2002. Mexico. In June 2002, we purchased the assets of Madereria Del Norte, a four-store chain of home improvement stores in Juarez, Mexico. At the end of fiscal 2002, we were operating 12 stores in Mexico. HOME DEPOT URBAN STORES We opened our first two urban stores in fiscal 2002. The first opened in Brooklyn with approximately 61,000 square feet and the second opened in Staten Island with approximately 79,000 square feet. These stores will carry approximately 20,000 items, which are selected specifically for the neighborhood in which the store is located. We plan to open two other urban stores in fiscal 2003. We are continuing to analyze other urban and high-density suburban markets throughout the country for additional sites to test this smaller store concept. EXPO DESIGN CENTER STORES OPERATING STRATEGY. The operating strategy behind our EXPO Design Center stores is to be a complete home decorating and remodeling resource. Each of these stores offers 10 specialty businesses under one roof and features design showrooms with full-size displays to help customers visualize the end result of possible interior design projects. To assist our customers, we also offer complete project management and installation services. Accordingly, we employ associates who have expertise in designing, planning and completing decorating and remodeling projects. CUSTOMERS. Typically, customers at EXPO Design Center stores are middle to upper income D-I-F-M customers, who purchase merchandise for installation by others. Accordingly, we offer installation services for most of the products we sell at these stores. Additionally, our trade customers are generally custom builders, remodelers, designers and architects. PRODUCTS. EXPO Design Center stores offer interior design products and installation services for kitchens, baths and appliances, as well as products for lighting, decorating and storage and organization projects. EXPO Design Center stores offer a broad range of merchandise in an effort to meet the needs of shoppers whose interior design preferences may go beyond the items available in a Home Depot store. While there is minimal overlap between the products offered in Home Depot stores and EXPO Design Center stores, those products available at EXPO Design Center stores represent a broader and more unique assortment of merchandise. In addition to nationally advertised brand name products, we also offer items that must be special ordered or that are typically offered through showrooms open only to design professionals. IN-STORE SERVICES. We have associates at our EXPO Design Center stores to assist with every phase of a project. Certified kitchen and bath designers are on staff, as well as design professionals to help our customers design lighting, tile and flooring, custom upholstery and bedding, custom closets and window treatments. Installation services are available for most products at EXPO Design Center stores, including kitchens, baths, flooring, wallpaper, tile, lighting fixtures and window treatments. Our project managers ensure that the products are available and then schedule licensed third party 7 contractors to complete the work. We also offer special trade services, such as dedicated outside sales people and designers who are dedicated to helping professional customers. STORE GROWTH. At the end of fiscal 2002, we were operating 52 EXPO Design Center stores, 11 of which were opened during 2002. We currently anticipate opening two additional EXPO Design Center stores in 2003. These new stores are expected to average approximately 90,000 square feet and will incorporate a showroom environment. We currently plan to open total of 206 stores during fiscal 2003, including Home Depot stores, EXPO Design Center stores and other formats. OTHER BUSINESSES APEX SUPPLY COMPANY Apex Supply Company is a wholesale distributor of plumbing, HVAC, appliances and other related products. The Company employs approximately 570 associates through 23 locations in Florida, Georgia, South Carolina and Tennessee. Apex assisted us with the development of our HVAC installation program. GEORGIA LIGHTING Georgia Lighting is a specialty lighting designer, distributor and retailer based in Atlanta, Georgia. The company, which has five showroom locations, offers an extensive collection of decorative lighting fixtures, supplies, accents and accessories to commercial and retail customers. We believe that the acquisition of Georgia Lighting has allowed us to strengthen our sourcing, training and merchandising in lighting for both The Home Depot and EXPO Design Center stores. In fiscal 2003, Georgia Lighting will transfer its retail operations to EXPO Design Center and its distribution operations to Your "other" Warehouse. HD BUILDER SOLUTIONS GROUP In October 2002, we became the largest residential floor covering company servicing the new home construction industry through our acquisition of Floors, Inc., Arvada Hardwood Floor Company and FloorWorks, Inc. As a result of these acquisitions, HD Builder Solutions Group has relationships with each of the top 10 homebuilders in the United States, as well as other regional and local homebuilders. Through these operations we manage the complete new-home flooring process, from helping the homebuilder's customer make flooring design choices to scheduling and overseeing the installation of flooring for entire housing developments. We currently conduct operations from 16 facilities and employ approximately 1,100 associates. HOME DEPOT LANDSCAPE SUPPLY During fiscal 2002, we opened three Home Depot Landscape Supply stores in the Atlanta, Georgia market. Home Depot Landscape Supply locations are designed to extend the reach of Home Depot's garden departments, focusing on the professional landscapers and avid do-it-yourself garden enthusiasts. Each location has a heated/cooled space of about 12,000 square feet, complete with a tool rental department, in front of a covered greenhouse. Each site also features a 1 to 3 acre fenced-in "Pro-Yard." During fiscal 2003, we plan to open six additional stores in Georgia and Texas. 8 HOME DEPOT SUPPLY Home Depot Supply stores offer personal service to contractors and other professional customers by providing experienced account managers, expanded assortments, greater quantities of merchandise and expanded delivery services. At the end of fiscal 2002, we were operating 5 of these stores in California, Arizona, Texas and Colorado. MAINTENANCE WAREHOUSE Our Maintenance Warehouse subsidiary is a leading distributor of maintenance, repair and operating supplies to the multi-family housing and lodging industries. Through its catalogs and direct mail programs, Maintenance Warehouse offers approximately 12,500 items. Maintenance Warehouse, which employs approximately 1,400 people, emphasizes accurate order taking, delivery and personalized service. Orders are typically placed over the telephone, through a field sales representative or through the company's website at www.mwh.com. Orders are filled through one of Maintenance Warehouse's 21 distribution centers and are shipped for same-day or next-day delivery to customers across the United States. NATIONAL BLINDS & WALLPAPER National Blinds and Wallpaper sells decor products through telephone sales under the name Designplace Direct(SM). Designplace Direct markets primarily through Home Depot advertising and direct mail pieces. Designplace Direct maintains no inventory, as orders are shipped directly from the supplier to the customer. THE HOME DEPOT FLOOR STORE During fiscal 2000, we opened a test store in Plano, Texas that offers only flooring products. The Home Depot Floor Store's merchandise assortment includes carpet, ceramic, wood, laminate and vinyl flooring. We continue to analyze the results of this test. YOUR "OTHER" WAREHOUSE Acquired in November 2001, Your "other" Warehouse is a distributor of special order faucet and plumbing fixture products, serving both Home Depot and other third party resellers. Your "other" Warehouse carries over 36,000 products from over 100 plumbing vendors, including Kohler(R), American Standard(R) and other major manufacturers. Your "other" Warehouse operates five distribution facilities and a call center. INTERNET Our primary website is located at www.homedepot.com. The site offers an assortment of products available for sale on-line, information about projects and our products, calculators to estimate the amount and kinds of materials needed to complete a project, as well as information about our Company and links to our other on-line businesses. As with our stores, the focus of our website is customer service. We believe our Internet site provides us with an opportunity to build relationships with our customers, educate our customers, improve service, provide convenient shopping from home and increase store sales. Customers may also order select products from www.expo.com, the website of our EXPO Design Center stores, and obtain information about these stores and the products and services they offer. 9 Through www.homedepot.com, we offer an assortment of approximately 18,000 items for sale. These items are chosen based on their potential for online sales and their ability to be delivered via United Parcel Service(R) and FedEx(R). Managing product selection and pricing nationally allows us to promote the same product and price to all www.homedepot.com visitors and allows us to leverage certain online marketing channels that reach across many or all Home Depot store pricing markets. During fiscal 2002, we enhanced the content of the website associated with our At-Home Services Division to describe each of the services offered and added the capability to allow potential customers to conveniently sign up online for in-home consultations. We anticipate continuing to improve the quality and quantity of services-related content on the site. In fiscal 2002, the website www.homedepot.ca was launched to service our Canadian customers. The site is informational only and provides information on The Home Depot, a store locator, as well as a link to www.homedepot.com. The website is bilingual (English and French) to service our customers in Canada's two official languages. STORE SUPPORT SERVICES INFORMATION TECHNOLOGIES. During fiscal 2002, the Company increased its focus on the information technology needs of our growing business and family of companies. Currently we provide business information through extensive fault-tolerant, high-speed networks and through an array of approximately 135,000 personal computers, 7,000 servers and 125,000 other network-connected devices. These systems provide store, corporate, financial, merchandising and other back office function support. During fiscal 2002, the Company began the installation of self-checkout systems, as well as a total replacement and upgrade of our POS systems. In addition, store managers received new tools for labor planning, staffing, scheduling and workload management to better allocate associates to support customer service and improve execution of in-store initiatives. The Company also deployed automated tools to assist our merchants with assortment planning, pricing, markdown management and space management. We have also implemented an enterprise-wide data warehouse to capture, manage and report information relating to our customers and associates. We believe these system enhancements will provide more efficient customer check-out and returns, store-based inventory management, rapid order replenishment, labor planning support and improved analytical tools. While our technology investments are primarily focused on our stores, we are also making technology improvements in logistics and the administrative functions of the Company. During fiscal 2002, we continued multi-year projects to upgrade our human resources and enterprise financial systems. We believe these investments will help us manage and control the growth and increasing complexity of our business, as well as provide more comprehensive management reporting. ASSOCIATE DEVELOPMENT. At the end of fiscal 2002, we employed over 280,000 associates, of whom approximately 17,000 were salaried, with the remainder compensated on an hourly basis. Approximately 63% of our associates are employed on a full-time basis. We believe that our employee relations are good. To attract and retain qualified personnel, we seek to maintain competitive salary and wage levels in each market area. Store managers have access to information regarding competitive salary rates in their respective markets. 10 We develop our training programs in a continuing effort to service the needs of our associates. These programs, including mandatory product knowledge training classes, are designed to increase associates' knowledge of merchandising departments and products, and to educate, develop and test the skills of those associates who are interested in being promoted. Because we promote or relocate current associates to serve as managers and assistant managers for new stores, training and assessment of our associates is essential to our growth. Our district managers and store managers typically meet with our human resources managers to discuss the development of assistant managers and certain department heads and consider possible candidates for promotion. We have implemented programs in our stores and divisional offices to ensure we hire and promote the most qualified associates in a non-discriminatory way. One of the most significant programs we have is our annual Human Resources Review process, which assesses leaders and teams, reviews succession planning and executive pipeline, high potential associates, staffing, retention, diversity, training and compliance. The program is closely linked to our Performance Management Process, which evaluates the performance, leadership and potential of all associates. We also maintain a list of qualified associates who are interested in new assignments and of qualified outside applicants that can be reviewed when positions become available. MARKETING. We are one of the nation's largest retail advertisers, and we utilize all forms of mass media and selected forms of highly targeted media. We also incorporate major sponsorships into our marketing plan, such as NASCAR(R), the Olympic(R) games, The Home Depot Center, CBS(R) College Football and home and garden shows. We extend our reach and educate our customers through proprietary publications, such as the 1-2-3(SM) home improvement book series and Style Ideas(SM) magazine. We execute our marketing campaigns on both a national and local basis. Because the vast majority of our stores are located throughout the United States and Canada, we can achieve greater efficiencies than smaller retailers by using national advertising. At the same time, we tailor the majority of our advertising locally to respond to market differences, both in terms of products and the competitive environment. CREDIT SERVICES. Home Depot offers credit purchase programs through third-party credit providers to both professional customers and D-I-Y and D-I-F-M customers. In fiscal 2002, 3.3 million of these new Home Depot credit accounts were opened, bringing the total number of Home Depot account holders to approximately 12 million. Proprietary credit card sales accounted for approximately 23% of all Home Depot sales in fiscal 2002. We also offer an unsecured Home Improvement Loan that gives our customers the opportunity to purchase products and services in our stores. We believe that this loan program not only increases large sales, such as kitchen and bath remodels, but also generates incremental sales from our customers. INTELLECTUAL PROPERTY. Through our wholly-owned subsidiary, Homer TLC, Inc., we have registered or applied for registration for a variety of trade names, service marks, trademarks and copyrights for use in our business, including The Home Depot(R), the "Homer"(R) character, EXPO Design Center(R) stores, Hampton Bay(R) fans, lighting and accessories, Glacier Bay(R) toilets, sinks and faucets, Pegasus(R) faucets and bath accessories, Traffic Master(R) carpet, Commercial Electric(R) lighting fixtures, Workforce(R) tools, tool boxes and shelving and PremiumCut(R) lumber. We regard our intellectual property as having significant value and as being an important factor in the marketing of our Company and our stores. We are not aware of any facts that could be expected to negatively impact our intellectual property. 11 QUALITY ASSURANCE PROGRAM. For our globally sourced products that we directly import, we have a quality assurance program. Through this program, we have established criteria for vendor or factory and product performance, which measure factors including product quality, timely shipments and fill rate. The performance record is made available to the factories to allow them to strive for improvement. The quality assurance program has four components: - we authorize laboratories to test products prior to purchase to ensure compliance with requirements; - we develop and document product requirements, based on test results, applicable national and international standards and features determined by our merchants; - we assess the capability of factories to manufacture quality products that meet the expectations we have developed, as well as to assess their compliance with Home Depot policies; and - we routinely assess product quality and factory performance by conducting inspections at the factory on shipments to assure continued compliance with our product requirements. LOGISTICS. We use several mechanisms to lower distribution costs and increase our efficiencies. Import distribution centers process our globally-sourced merchandise. At the end of fiscal 2002, we had eight import distribution centers located in the United States and Canada. At the end of fiscal 2002, we also had 30 lumber distribution centers in the United States and Canada to support the lumber demands of our stores. During fiscal 2002, we opened seven transit facilities, increasing our transit facility network to ten. At these facilities, we receive merchandise from manufacturers and immediately cross dock it onto trucks for delivery to our stores. We plan to add between four and six transit facilities in fiscal 2003. The transit facility network will provide service to all stores in the continental United States and to eastern Canada by the end of 2003. We also operate other specialty distribution centers for specific merchandise needs. The distribution centers and transit facilities allow us to provide high service levels to our stores at relatively low costs. At the end of fiscal 2002, approximately 30% of the merchandise shipped to our stores was processed through our network of distribution centers and transit facilities. As our networks evolve, we expect to increase the percent of merchandise processed by our facilities. The remaining merchandise will be shipped directly from our vendors to our stores. In addition to replenishing merchandise supplies at our stores, we also provide delivery services directly to our customers. We continually assess opportunities to improve our distribution network to better satisfy the needs of our stores and our customers and to lower costs. SAFETY. We are committed to maintaining a safe environment for our customers and associates. Our Safety Department consists of a team of directors and managers in the field focused primarily on education and training, as well as an Atlanta-based team of dedicated safety professionals who evaluate and implement policies and processes Company-wide. Our Safety Department is responsible for managing our Company's safety program, which is implemented in conjunction with store-level associates, store and Division management, and the Human Resources and Merchandising Departments. The primary elements of our safety program are (1) establishment of safety standards and processes for all aspects of store operations and merchandising, (2) effective training of appropriate associates on all applicable standards and (3) monitoring compliance with established safety standards. 12 COMPETITION. Our business is highly competitive, based in part on price, store location, customer service and depth of merchandise. In each of the markets we serve, there are a number of other home improvement stores, electrical, plumbing and building materials supply houses and lumber yards. With respect to some products, we also compete with discount stores, local, regional and national hardware stores, mail order firms, warehouse clubs, independent building supply stores and, to a lesser extent, other retailers. In addition to these entities, our EXPO Design Center stores also compete with specialty design stores or showrooms, some of which are only open to interior design professionals. Due to the variety of competition we face, we are unable to precisely measure the impact on our sales by our competitors. We estimate that our share of the home improvement industry is approximately 10% and we believe that we are an effective and significant competitor in our markets. 13 ITEM 2. PROPERTIES The following tables show locations of the 1,370 Home Depot stores in the United States and the 101 stores outside of the United States at the end of fiscal 2002:
U.S. Locations Number of Stores - -------------- ---------------- Alabama 15 Alaska 2 Arizona 37 Arkansas 5 California 163 Colorado 28 Connecticut 21 Delaware 5 District of Columbia 1 Florida 109 Georgia 56 Hawaii 4 Idaho 8 Illinois 47 Indiana 19 Iowa 6 Kansas 12 Kentucky 11 Louisiana 18 Maine 8 Maryland 35 Massachusetts 33 Michigan 59 Minnesota 25 Mississippi 7 Missouri 23 Montana 5 Nebraska 5 Nevada 14 New Hampshire 12 New Jersey 56 New Mexico 9 New York 76 North Carolina 33 North Dakota 1 Ohio 55 Oklahoma 10 Oregon 15 Pennsylvania 48 Puerto Rico 8 Rhode Island 5 South Carolina 18 South Dakota 1 Tennessee 25 Texas 121 Utah 12 Vermont 2 Virginia 34 Washington 25 Wisconsin 21 Wyoming 2 - -------------------- ----- Total U.S. 1,370
International Locations Number of Stores - ------------- ---------------- Canada: Alberta 10 British Columbia 12 Manitoba 3 Nova Scotia 2 Ontario 49 Quebec 11 Saskatchewan 2 - -------------------- --- Total Canada 89 Mexico: Nuevo Leon 3 Chihuahua 4 Distrito Federal 1 Baja California 2 San Luis Potosi 1 Sinaloa 1 - -------------------- ----- Total Mexico 12
14 The following table shows the number of the EXPO Design Center stores in the U.S. at the end of fiscal 2002:
U.S. Locations Number of Stores - -------------- ---------------------- California 14 Colorado 1 Florida 5 Georgia 3 Illinois 5 Kansas 1 Maryland 2 Massachusetts 2 Michigan 3 Missouri 1 New Jersey 3 New York 5 Tennessee 1 Texas 5 Virginia 1 - -------------------------- -- Total EXPO Design Center 52
Additionally, at the end of fiscal 2002, we were operating five Georgia Lighting showroom locations that are open to the public, all of which are located in Georgia; 23 Apex Supply locations, of which two are located in Florida, 15 are located in Georgia, four are located in Tennessee and two are located in South Carolina; five Home Depot Supply Stores located in California, Arizona, Texas and Colorado; three Home Depot Landscape Supply stores located in Georgia; one The Home Depot Floor Store location in Texas; and six Your "other" Warehouse locations in Louisiana and Nevada. HD Builder Solutions Group conducts its operations through 16 distribution centers located in Arizona, Colorado, Florida, Kentucky, Maryland, New Jersey, Ohio, Pennsylvania and Virginia. Maintenance Warehouse conducts its operations through 21 distribution centers located in Arizona, California, Colorado, Connecticut, Florida, Georgia, Maryland, Missouri, Ohio, Texas, Virginia, Washington and Wisconsin. Of our 1,532 Home Depot stores, EXPO Design Center stores, Home Depot Landscape Supply, Home Depot Supply and The Home Depot Floor Store, at fiscal 2002 year end, approximately 82% were owned (including those owned subject to a ground lease) consisting of approximately 137,001,000 square feet, and approximately 18% were leased consisting of approximately 29,122,000 square feet. In recent years, we have increased the relative percentage of new stores that are owned. Although we take advantage of lease financing opportunities, we generally prefer to own stores because of greater operating control and flexibility, generally lower occupancy costs and certain other economic advantages. We believe that at the end of existing lease terms, our current leased space can be either relet or replaced by alternate space for lease or purchase that is readily available. Our executive, corporate staff and financial offices occupy approximately 1,774,000 square feet of leased and owned space in Atlanta, Georgia. In addition, at the end of fiscal 2002, we occupied an aggregate of approximately 3,301,000 square feet, of which approximately 759,000 square feet is owned and approximately 2,542,000 square feet is leased, for divisional store support centers, subsidiary store support centers and subsidiary customer support centers. At the end of fiscal 2002, 15 the primary support centers were located in Orange, California; Tampa, Florida; Atlanta, Georgia; Arlington Heights, Illinois; Canton, Massachusetts; South Plainfield, New Jersey; Dallas, Texas; Tukwila, Washington; Scarborough, Ontario and Quebec, Canada; Monterrey and Juarez, Mexico; and Shenzen and Shanghai, China. At the end of fiscal 2002, we utilized approximately 12,398,000 square feet of warehousing and distribution space, of which approximately 3,166,000 is owned and approximately 9,232,000 is leased. ITEM 3. LEGAL PROCEEDINGS The Company is a party to various legal proceedings arising in the ordinary course of its business, but is not currently a party to any legal proceeding that management believes will have a material adverse effect on our consolidated financial position or our results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2002. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated herein by reference to the section entitled "Corporate and Stockholder Information" in the Company's 2002 Annual Report, and is also attached in Exhibit 13. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The information required by this item is incorporated herein by reference to the section entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition - Selected Consolidated Statements of Earnings Data" in the Company's 2002 Annual Report, and attached in Exhibit 13 hereto. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The information required by this item is incorporated herein by reference to the section entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Company's 2002 Annual Report, and is also attached in Exhibit 13 hereto. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this item is incorporated herein by reference to the section entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition - Quantitative and Qualitative Disclosures about Market Risk" in the Company's 2002 Annual Report, and is also attached in Exhibit 13 hereto. 16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is incorporated herein by reference to the sections entitled "Consolidated Statements of Earnings," "Consolidated Balance Sheets," "Consolidated Statements of Stockholders' Equity and Comprehensive Income," "Consolidated Statements of Cash Flows," "Notes to Consolidated Financial Statements" and "Independent Auditors' Report" in the Company's 2002 Annual Report, and is also attached in Exhibit 13 hereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning the directors of the Company and compliance with Section 16(a) of the Securities and Exchange Act of 1934, as amended, is incorporated herein by reference to the sections entitled "Board of Directors Information," "Election of Directors" and "General - Compliance with Section 16(a) Beneficial Ownership Reporting Requirements," in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on May 30, 2003 (the "Proxy Statement"). The Company intends to file the Proxy Statement within 120 days after the end of its fiscal year. EXECUTIVE OFFICERS Executive officers of The Home Depot are elected by, and serve at the pleasure of, the Board of Directors. At the end of fiscal 2002, the Executive Officers of the Company were as follows: ROBERT L. NARDELLI, age 54, has been President and Chief Executive Officer since December 2000 and Chairman since January 1, 2002. Prior thereto, Mr. Nardelli served as President and Chief Executive Officer of GE Power Systems, a division of General Electric Company, since 1995. Mr. Nardelli serves as a director of The Coca-Cola Company. FRANCIS S. BLAKE, age 53, has been Executive Vice President - Business Development and Corporate Operations since March 2002. He was formerly the Deputy Secretary of Energy from May 2001 until March 2002. From June 2000 until May 2001 he was a Senior Vice President at General Electric Company and was Vice President of GE Power Systems, a division of General Electric Company, from February 1996 until June 2000. JOHN H. COSTELLO, age 55, has been Executive Vice President - Chief Marketing Officer since November 2002. He was previously the Advisor and Chief Global Marketing Officer for Yahoo! from September 2001 until November 2002. From September 1999 until August 2001 he was the Chief Executive Officer of MVP.com. He was President of AutoNation from December 1998 until August 1999 and Senior Executive Vice President of Sears from April 1993 until December 1998. ROBERT P. DERODES, age 52, has been Executive Vice President - Information Technology and Chief Information Officer since February 2002. He previously served as President and Chief Executive Officer of Delta Technology, Inc. and Chief Information Officer for Delta Airlines, Inc. from September 1999 until February 2002. From February 1995 until September 1999 he was Senior 17 Vice President - Operations and Technology for Delta Technology, Inc. From February 1995 to September 1999, he served as Senior Technology Officer at Citibank for the Card Products Group. DENNIS M. DONOVAN, age 54, has been Executive Vice President - Human Resources since April 2001. From October 1998 until that time he served as Senior Vice President - Human Resources of Raytheon Company, and from February 1986 until September 1998 he served as Vice President - Human Resources of GE Power Systems, a division of General Electric Company. JERRY W. EDWARDS, age 61, has been Executive Vice President - Merchandising since February 2002. From August 2001 until that time he was Senior Vice President - Merchandising. He served as President of the South American Division from November 2000 until August 2001 and President of the Southwest Division from January 1999 until November 2000. From January 1997 until December 1998 he was Vice President - Merchandising of the Southwest Division. FRANK L. FERNANDEZ, age 52, has been Executive Vice President - Corporate Secretary & General Counsel since April 2001. From 1990 until that time he was managing partner at Fernandez, Burstein, Tuckzinski and Collura, P.C., in Albany, New York. TROY A. RICE, age 39, has been Senior Vice President - Operations since August 2002. He was previously President of the Northwest Division from August 2001 until August 2002. From July 1999 until August 2001 he was a Regional Vice President. From August 1996 to July 1999 he was a District Manager. CAROL B. TOME, age 46, has been Executive Vice President and Chief Financial Officer since May 2001, and prior thereto had been Senior Vice President - Finance and Accounting/Treasurer since February 2000. From 1995 until 2000, she served as Vice President and Treasurer. From 1992 until 1995, when she joined The Home Depot, Ms. Tome was Vice President and Treasurer of Riverwood International Corporation. Ms. Tome serves as a director of United Parcel Service, Inc. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the sections entitled "Executive Compensation," "Compensation Committee Report," "Board of Directors Information" and "General - Compensation Committee Interlocks and Insider Participation" in the Company's Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference to the sections entitled "Beneficial Ownership of Common Stock" and "Executive Compensation" in the Company's Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to the sections entitled "Executive Compensation" and "General - Insider Transactions" in the Company's Proxy Statement. ITEM 14. CONTROLS AND PROCEDURES The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange 18 Commission's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. During the 90-day period prior to the date of this report, an evaluation was performed under the supervision and with the participation of the Company's Disclosure Committee and management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls, and no corrective actions taken with regard to significant deficiencies or material weaknesses in such controls, subsequent to the date of our most recent evaluation of internal controls. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements The following financial statements are incorporated by reference from our fiscal 2002 Annual Report, as provided in Item 8 hereof: - Consolidated Statements of Earnings for the fiscal years ended February 2, 2003, February 3, 2002 and January 28, 2001; - Consolidated Balance Sheets as of February 2, 2003 and February 3, 2002; - Consolidated Statements of Stockholders' Equity and Comprehensive Income for the fiscal years ended February 2, 2003, February 3, 2002 and January 28, 2001; - Consolidated Statements of Cash Flows for the fiscal years ended February 2, 2003, February 3, 2002 and January 28, 2001; - Notes to Consolidated Financial Statements, and - Independent Auditors' Report. (c) Financial Statement Schedules All schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. (c) Reports on Form 8-K There were no Current Reports on Form 8-K filed during the fourth quarter of fiscal 2002. 19 (c) Exhibits Exhibits marked with an asterisk (*) are incorporated by reference to exhibits or appendices previously filed with the SEC, as indicated by the references in brackets. The Registrant agrees to furnish a copy of all agreements relating to long-term debt upon request of the Commission. *3.1 Amended and Restated Certificate of Incorporation of The Home Depot, Inc., as amended. [FORM 10-Q FOR THE FISCAL QUARTER ENDED AUGUST 4, 2002, EXHIBIT 3.1] *3.2 By-laws, as amended and restated. [FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 30, 2000, EXHIBIT 3.2] *4.1 Indenture, dated as of September 27, 1999 among The Home Depot, Inc., Credit Suisse First Boston Corporation and Invemed Associates. [FORM S-4 (FILE NO. 333-89935) FILED OCTOBER 29, 1999, EXHIBIT 4.1] *4.2 Indenture, dated as of April 12, 2001, between The Home Depot, Inc. and The Bank of New York. [FORM S-4 (FILE NO. 333-61548) FILED MAY 24, 2001, EXHIBIT 4.1] *4.3 Form of 5-3/8% Note due April 1, 2006 [FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2002, EXHIBIT 4.2] *10.1 Credit Agreement dated September 17, 1999 (the "Credit Agreement") by and among The Home Depot, Inc., Bank of America, N.A., as Administrative Agent, Wachovia Bank, N.A., as Syndication Agent, First Union National Bank and The Bank of New York, as Co-Documentation Agents, and banks party thereto. [FORM 10-Q FOR THE FISCAL QUARTER ENDED OCTOBER 31, 1999, EXHIBIT 10.1] *10.2 Assignment and Acceptance of the Credit Agreement dated February 23, 2000 by and among The Home Depot, Inc., the banks party thereto, Bank of America, N.A., as Administrative Agent, Wachovia Bank, N.A., as Syndication Agent, and First Union National Bank and Bank of New York, as Co-Documentation Agents. [FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 30, 2000, EXHIBIT 10.2] *10.3 Assignment and Acceptance of the Credit Agreement dated March 31, 2000 by and among The Home Depot, Inc., the banks party thereto, Bank of America, N.A., as Administrative Agent, Wachovia Bank, N.A., as Syndication Agent, and First Union National Bank and The Bank of New York, as Co-Documentation Agents. [FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 30, 2000, EXHIBIT 10.3] *10.4 +Employee Stock Purchase Plan, as amended. [FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 28, 2001, EXHIBIT 10.5] *10.5 +Senior Officers' Bonus Pool Plan, as amended. [APPENDIX A TO REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS HELD MAY 26, 1999] *10.6 +Executive Officers' Bonus Plan. [APPENDIX B TO REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS HELD MAY 27, 1998] *10.7 +The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan. [FORM 10-Q FOR THE QUARTER ENDED AUGUST 4, 2002, EXHIBIT 10.1]
20 *10.8 +The Home Depot FutureBuilder Restoration Plan. [FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2002, EXHIBIT 10.10] *10.9 Participation Agreement dated as of October 22, 1998 among The Home Depot, Inc. as Guarantor; Home Depot U.S.A., Inc. as Lessee; HD Real Estate Funding Corp. II as Facility Lender; Credit Suisse Leasing 92A L.P. as Lessor; The Bank of New York as Indenture Trustee; and Credit Suisse First Boston Corporation and Invemed Associates, Inc. as Initial Purchasers. [FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999, EXHIBIT 10-10.] *10.10 Participation Agreement dated as of June 25, 1996 among The Home Depot, Inc. as Guarantor; Home Depot U.S.A., Inc. as Lessee and Construction Agent; HD Real Estate Funding Corp. as Facility Lender; the lenders named on the Schedule thereto as Lenders; Credit Suisse First Boston Corporation as Agent Bank and Lender; and Credit Suisse Leasing 92A L.P. as Lessor. [FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999, EXHIBIT 10.11] *10.11 First Amendment and Supplement to the Participation Agreement dated as of May 8, 1997 among The Home Depot, Inc. as Guarantor; Home Depot U.S.A., Inc. as Lessee and Construction Agent; HD Real Estate Funding Corp. as Facility Lender; the lenders named on the Schedule thereto as Lenders; Credit Suisse First Boston Corporation as Agent Bank and Lender; and Credit Suisse Leasing 92A L.P. as Lessor. [FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999, EXHIBIT 10-12.] *10.12 Master Modification Agreement dated as of April 20, 1998 among The Home Depot, Inc. as Guarantor; Home Depot U.S.A., Inc., as Lessee and Construction Agent; HD Real Estate Funding Corp., as Facility Lender; Credit Suisse Leasing 92A L.P. as Lessor; the lenders named on the Schedule thereto as Lenders; and Credit Suisse First Boston Corporation as Agent Bank. [FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999, EXHIBIT 10.13] *10.13 +Supplemental Executive Choice Program, effective January 1, 1999. [FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2002, EXHIBIT 10.15] *10.14 +Employment Agreement between Robert L. Nardelli and The Home Depot, Inc., dated as of December 4, 2000. [FORM 10-Q FOR THE QUARTER ENDED OCTOBER 28, 2001, EXHIBIT 10.1] *10.15 +Promissory Note between Robert L. Nardelli and The Home Depot, Inc. dated as of December 4, 2000. [FORM 10-K FOR THE YEAR ENDED JANUARY 28, 2001, EXHIBIT 10.18] *10.16 +Deferred Stock Units Plan and Agreement between Robert L. Nardelli and The Home Depot, Inc., effective as of September 17, 2001. [FORM 10-Q FOR THE QUARTER ENDED OCTOBER 28, 2001, EXHIBIT 10.2] *10.17 Commercial Paper Dealer Agreement between Credit Suisse First Boston Corporation, as Dealer, and The Home Depot, Inc., dated as of January 24, 2001. [FORM 10-K FOR THE YEAR ENDED JANUARY 28, 2001, EXHIBIT 10.19] *10.18 +Non-Qualified Stock Option and Deferred Stock Unit Plan and Agreement dated as of December 4, 2001. [FORM 10-K FOR THE YEAR ENDED JANUARY 28, 2001, EXHIBIT 10.20]
21 *10.19 +Agreement between Bernard Marcus and The Home Depot, Inc. dated as of February 22, 2001. [FORM 10-K FOR THE YEAR ENDED JANUARY 28, 2001, EXHIBIT 10.21] *10.20 +Employment Agreement between Dennis M. Donovan and The Home Depot, Inc., dated March 16, 2001. [FORM S-4 (FILE NO. 333-61548) FILED MAY 24, 2001, EXHIBIT 10.1] *10.21 +Employment Agreement between Frank L. Fernandez and The Home Depot, Inc., dated April 2, 2001. [FORM S-4 (FILE NO. 333-61548) FILED MAY 24, 2001, EXHIBIT 10.2] *10.22 +Deferred Stock Units Plan and Agreement between Frank L. Fernandez and The Home Depot, Inc. dated April 2, 2001. [FORM S-4 (FILE NO. 333-61548) FILED MAY 24, 2001, EXHIBIT 10.3] *10.23 +Deferred Stock Units Plan and Agreement between Dennis M. Donovan and The Home Depot, Inc., dated as of May 30, 2001. [FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2002, EXHIBIT 10.25] *10.24 +Promissory Note between Dennis M. Donovan and The Home Depot, Inc. dated June 7, 2001. [FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2002, EXHIBIT 10.26] *10.25 +Promissory Note between Frank L. Fernandez and The Home Depot, Inc. dated June 18, 2001. [FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2002, EXHIBIT 10.27] *10.26 +Employment Agreement between Frank Blake and The Home Depot, Inc., effective as of March 9, 2002. [FORM 10-Q FOR THE QUARTER ENDED NOVEMBER 3, 2002, EXHIBIT 10.1] *10.27 +Employment Agreement between Robert DeRodes and The Home Depot, Inc., effective as of February 7, 2002. [FORM 10-Q FOR THE QUARTER ENDED NOVEMBER 3, 2002, EXHIBIT 10.2] *10.28 +Employment Agreement between John Costello and The Home Depot, Inc., effective as of September 28, 2002. [FORM 10-Q FOR THE QUARTER ENDED NOVEMBER 3, 2002, EXHIBIT 10.3] *10.29 +Separation Agreement and Release between Larry M. Mercer and The Home Depot, Inc., effective as of October 7, 2002. [FORM 10-Q FOR THE QUARTER ENDED NOVEMBER 3, 2002, EXHIBIT 10.4] 10.30 +Non-Competition Agreement between Home Depot U.S.A., Inc. and Carol Tome dated as of March 24, 2003. 10.31 +Separation Agreement and Release between Home Depot U.S.A., Inc. and Dennis J. Carey effective as of August 21, 2002. 10.32 +Consulting Agreement between Home Depot U.S.A., Inc. and Dennis J. Carey effective as of August 14, 2002.
22 10.33 Commercial Paper Dealer Agreement between Home Depot U.S.A., Inc. and Chase Securities, Inc. dated as of April 19, 2001. 10.34 +The Maintenance Warehouse FutureBuilder, together with the First, Second and Third Amendments thereto. 10.35 +The Home Depot FutureBuilder for Puerto Rico, together with the First and Second Amendments thereto. 10.36 +The Home Depot, Inc. Non-U.S. Employee Stock Purchase Plan. 10.37 +The Home Depot, Inc. Non-Employee Director's Deferred Stock Compensation Plan. 10.38 +Home Depot U.S.A., Inc. Deferred Compensation Plan for Officers. 10.39 +The Home Depot Executive Life Insurance, Death Benefit Only Plan. 10.40 +The Home Depot Executive Physical Program. *10.41 +The Home Depot Management Incentive Plan. [APPENDIX A TO REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 30, 2003] 10.42 +The Home Depot Long-Term Incentive Plan. *11 Computation of Earnings Per Common and Common Equivalent Share. [NOTE 7 TO THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S 2002 ANNUAL REPORT TO STOCKHOLDERS FILED HEREWITH AS EXHIBIT 13.] 13 The Registrant's Annual Report to Stockholders for the fiscal year ended February 2, 2003. Only those portions of the report which are specifically designated in this Form 10-K as being incorporated by reference are being electronically filed pursuant to the Securities Exchange Act of 1934, as amended. 21 List of Subsidiaries of the Registrant. 23 Consent of Independent Auditors. 99.1 Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
- --------- + Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(c) of this report. 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE HOME DEPOT, INC. By: /s/ Robert L. Nardelli ---------------------------------------- (Robert L. Nardelli, Chairman, President & CEO) Date: April 14, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, The Home Depot, Inc., and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Robert L. Nardelli Chairman, President & CEO April 14, 2003 - ---------------------------- (Principal Executive Officer) (Robert L. Nardelli) /s/ Carol B. Tome Executive Vice President and April 14, 2003 - ---------------------------- Chief Financial Officer (Carol B. Tome) (Principal Financial Officer and Principal Accounting Officer)
24
Signature Title Date - --------- ----- ---- /s/ Gregory D. Brenneman Director 4/11/03 - ---------------------------- ------------------ (Gregory D. Brenneman) /s/ Richard H. Brown Director 4/16/03 - ---------------------------- ------------------ V(Richard H. Brown) /s/ John L. Clendenin Director 4/14/03 - ---------------------------- ------------------ V(John L. Clendenin) /s/ Berry R. Cox Director 4/11/03 - ---------------------------- ------------------ (Berry R. Cox) /s/ William S. Davila Director 4/10/03 - ---------------------------- ------------------ (William S. Davila) /s/ Claudio X. Gonzalez Director 4/11/03 - ---------------------------- ------------------ (Claudio X. Gonzalez) /s/ Richard A. Grasso Director 4/14/03 - ---------------------------- ------------------ Richard A. Grasso /s/ Milledge A. Hart, III Director 4/14/03 - ---------------------------- ------------------ (Milledge A. Hart, III) /s/ Bonnie G. Hill Director 4/13/03 - ---------------------------- ------------------ (Bonnie G. Hill) /s/ Kenneth G. Langone Director 4/15/03 - ---------------------------- ------------------ (Kenneth G. Langone) /s/ Roger S. Penske Director 4/14/03 - ---------------------------- ------------------ (Roger S. Penske)
25 CERTIFICATIONS I, Robert L. Nardelli, certify that: 1. I have reviewed this annual report on Form 10-K of The Home Depot, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 14, 2003 /s/ Robert L. Nardelli Robert L. Nardelli Chairman, President and Chief Executive Officer CERTIFICATIONS I, Carol B. Tome, certify that: 1. I have reviewed this annual report on Form 10-K of The Home Depot, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 4, 2003 /s/ Carol B. Tome Carol B. Tome Executive Vice President and Chief Financial Officer INDEX OF ATTACHED EXHIBITS 10.30 +Non-Competition Agreement between Home Depot U.S.A., Inc. and Carol Tome dated as of March 24, 2003. 10.31 +Separation Agreement and Release between Home Depot U.S.A., Inc. and Dennis J. Carey effective as of August 21, 2002. 10.32 +Consulting Agreement between Home Depot U.S.A., Inc. and Dennis J. Carey effective as of August 14, 2002. 10.33 Commercial Paper Dealer Agreement between Home Depot U.S.A., Inc. and Chase Securities, Inc. dated as of April 19, 2001. 10.34 +The Maintenance Warehouse FutureBuilder, together with the First, Second and Third Amendments thereto. 10.35 +The Home Depot FutureBuilder for Puerto Rico, together with the First and Second Amendments thereto. 10.36 +The Home Depot, Inc. Non-U.S. Employee Stock Purchase Plan. 10.37 +The Home Depot, Inc. Non-Employee Director's Deferred Stock Compensation Plan. 10.38 +Home Depot U.S.A., Inc. Deferred Compensation Plan for Officers. 10.39 +The Home Depot Executive Life Insurance, Death Benefit Only Plan. 10.40 +The Home Depot Executive Physical Program. *10.41 +The Home Depot Management Incentive Plan. [APPENDIX A TO THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 30, 2003] 10.42 +The Home Depot Long-Term Incentive Plan. 13 The Registrant's Annual Report to Stockholders for the fiscal year ended February 2, 2003. Only those portions of the report which are specifically designated in this Form 10-K as being incorporated by reference are being electronically filed pursuant to the Securities Exchange Act of 1934, as amended. 21 List of Subsidiaries of the Registrant. 23 Consent of Independent Auditors. 99.1 Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
- --------- + Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(c) of this report. EX-10.30 3 g81844exv10w30.txt EX-10.30 NON-COMPETITION AGREEMENT EXHIBIT 10.30 HOME DEPOT U.S.A., INC. NON-COMPETITION AGREEMENT This Non-Competition Agreement (the "Agreement") is entered into as of the 24th day of March, 2003, by and between Home Depot U.S.A., Inc., a Delaware corporation ("Home Depot" or the "Company") and Carol B. Tome ("Executive"). WITNESSETH: WHEREAS, the Company desires to provide certain additional benefits to Executive as approved by the Compensation Committee of the Company's Board of Directors (the "Committee"); and WHEREAS, in consideration for such benefits, Executive agrees to be bound by the terms and conditions as set forth in this Agreement; WHEREAS, to further the interests of the Company and Executive, the parties hereto have set forth the terms of such benefits and conditions in writing in the Agreement; NOW, THEREFORE, for and in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. SEVERANCE PAYMENTS. (a) In the event Home Depot terminates Executive's employment involuntarily and without cause, Executive will be eligible to receive, in exchange for Executive's execution of a general release in a form acceptable to Home Depot's legal counsel, twenty-four (24) months of base salary continuation (less applicable taxes and withholdings) in accordance with the Company's normal payroll practices. The end of the salary continuation period will be Executive's last day of employment ("Termination Date"). During the period of salary continuation, outstanding options will continue to vest and restrictions on outstanding restricted shares will continue to lapse. Executive will have ninety (90) days from the Termination Date to exercise any options that are vested at that time. (b) Executive will not be entitled to receive these payments and benefits in the event Executive voluntarily resigns from Home Depot, but all other provisions of this Agreement shall remain in effect. Executive will be entitled to receive the payments and benefits set forth in this Agreement if Executive resigns for "good reason." "Good reason" shall mean, without Executive's consent: (i) an assignment or restructured role outside the Atlanta Metropolitan area; (ii) an assignment or restructured role with a decrease in base salary; or (iii) an assignment to a position other than Executive Vice President (EVP), or a position that does not report to the CEO. (c) Executive will not be entitled to receive these payments and benefits in the event Executive is unable to continue employment due to a death or disability; however, in such an event, Executive may be eligible for disability or death benefits under the Company employee benefit plans or programs in which Executive then participates, pursuant to the terms and conditions of such plans and programs. (d) Executive will not be entitled to receive these payments and benefits, or any other type of payment or benefit, if Executive is terminated "for cause." All other provisions of this Agreement shall remain in effect. For purposes of this Agreement, "for cause" shall mean: (i) Conviction of a felony involving theft or moral turpitude; (ii) Conduct that constitutes willful gross neglect or willful gross misconduct with respect to Executive's employment duties which results in material economic harm to the Company; or (iii) Willful conduct that constitutes a material violation of the Company's mutual attraction policy, substance abuse policy, or compliance policies (each as shall be in place from time to time). To the extent that any plan or program has a different definition of "for cause," such definition shall control for purposes of benefits under such plan or program. 2. CHANGE IN EMPLOYMENT STATUS. If Executive is demoted to or voluntarily accepts a position that the Company deems to be ineligible for the severance payments and benefits set forth in Paragraph 1, Executive will not be entitled to receive such payments and benefits upon termination. 2 3. NON-COMPETITION AND NON-SOLICITATION. (a) The Executive agrees that Executive will not, for a period of thirty-six (36) months subsequent to the earlier of either (a) the beginning of the salary continuation period referenced in Paragraph 1 or (b) the Executive's Termination Date, enter into or maintain an employment or contractual relationship, either directly or indirectly, to provide financial, executive or managerial services in the same or similar manner as Executive did for the Company to any company or entity in the home improvement industry engaged in any way in a business that competes directly or indirectly with the Company, its parents, subsidiaries, affiliates or related entities, in the United States, Canada, Puerto Rico, Mexico, or any other location in which the Company currently conducts business or may conduct business prior to the end of the above-referenced thirty-six month period, without the prior written consent of the Company. Businesses that compete with the Company in the home improvement industry specifically include, but are not limited to, the following entities and each of their subsidiaries, affiliates, assigns, or successors in interest: Lowe's Companies, Inc. (including, but not limited to, Eagle Hardware and Garden); Sears (including, but not limited to, Orchard Supply and Hardware Company); Wal-Mart; and Menard, Inc. (b) In the event the Executive wishes to enter into any relationship or employment prior to the end of the period referenced in Paragraph 3(a), which would be covered by the above non-compete provision, Executive agrees to request written permission from the Executive Vice President, Human Resources of the Company prior to entering any such relationship or employment. The Company may approve or not approve of the relationship or employment at its absolute discretion. (c) The Executive agrees that for a period of thirty-six (36) months subsequent to the termination of her employment, she will not directly or indirectly solicit any person who is an employee of the Company to terminate his or her relationship with the Company without prior written approval from the Executive Vice President, Human Resources of the Company. 4. CONFIDENTIAL INFORMATION. The Executive acknowledges that through her employment with the Company she has acquired and had access to the Company's confidential and proprietary business information and trade secrets. The Executive agrees that the Company may prevent the use or disclosure of its confidential information and proprietary business information and trade secrets and acknowledges that the Company has taken all reasonable steps necessary to protect the secrecy of the information. "Confidential Information" shall include any data or information that is valuable to the Company and not generally known to competitors of the Company or other outsiders, regardless of whether the confidential information is in printed, written or electronic form, retained in the Executive's memory or has been compiled or created by the Executive. This includes, but is not limited to: technical, financial, personnel, staffing, payroll, computer systems, marketing, advertising, merchandising, product, vendor, customer or store planning data, trade secrets, or other information similar to the foregoing. The Executive agrees that she 3 has not and in the future will not use or disclose to any third party Confidential Information, unless compelled by law and after notice to the Company. 5. MISCELLANEOUS. (a) LIMITATION OF RIGHTS. The granting of the benefits set forth in this Agreement and the execution of the Agreement shall not give Executive any right to be retained in the employ or service of the Company, its parents, subsidiaries, or affiliates or interfere in any way with the right of the Company, its parents, subsidiaries, or affiliates to terminate Executive's services at any time or to assign Executive to a position that is ineligible for the severance benefits set forth herein, or the right of Executive to terminate Executive's services at any time. (b) SEVERABILITY. If any term, provision, covenant or restriction contained in the Agreement is held by a court or a federal regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in the Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. (c) CONTROLLING LAW. This Agreement shall be construed, interpreted and applied in accordance with the law of the State of Delaware, without giving effect to the choice of law provisions thereof. Executive and the Company hereby irrevocably submit to the exclusive concurrent jurisdiction of the courts of Delaware. Executive and the Company also both irrevocably waive, to the fullest extent permitted by applicable law, any objection either may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute, and both parties agree to accept service of legal process in Delaware. (d) CONSTRUCTION. The Agreement contains the entire understanding between the parties and supersedes any prior understanding and agreements between them representing the subject matter hereof. There are no representations, agreements, arrangements or understandings, oral or written, between and among the parties hereto relating to the subject matter hereof which are not fully expressed herein. Any modifications to this Agreement must be in writing and signed by the Executive and an authorized executive of the Company. 4 (e) HEADINGS. Section and other headings contained in the Agreement are for reference purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of the Agreement or any provision hereof. IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of day and year first set forth above. HOME DEPOT U.S.A., INC. /s/ Robert L. Nardelli - ------------------------------- By: Robert L. Nardelli Chairman, President and Chief Executive Officer EXECUTIVE: /s/ Carol B. Tome - ------------------------------- By: Carol B. Tome 5 EX-10.31 4 g81844exv10w31.txt EX-10.31 SEPARATION AGREEMENT EXHIBIT 10.31 SEPARATION AGREEMENT & RELEASE This is an Agreement between Home Depot U.S.A., Inc. (hereinafter "Home Depot" or the "Company") and Dennis J. Carey (the "Executive"). WHEREAS, the Company and the Executive intend the terms and conditions of this Agreement to govern all issues related to the Executive's employment and termination from the Company; and, WHEREAS, the Executive acknowledges that he has been given a reasonable period of time, up to and including twenty-one (21) days, to consider the terms of this Agreement; and, WHEREAS, the Company advises the Executive to consult with a lawyer before signing this Agreement; and, WHEREAS, the Executive acknowledges that the consideration provided him under this Agreement is sufficient to support the releases provided by him under this Agreement; and, WHEREAS, the Executive represents that he has not filed any charges, claims or lawsuits against the Company involving any aspect of his employment which have not been terminated as of the date of this Agreement; and, WHEREAS, the Executive understands that the Company regards the representations by him as material and that the Company is relying on these representations in entering into this Agreement, NOW, THEREFORE, the Company and the Executive agree as follows: 1. Employment Status and Termination Date. The Executive will provide services at the direction of the Chief Executive Officer and/or the Executive Vice President of Strategy, Business Development and Corporate Operations from April 1, 2002 until September 30, 2002. The Executive will maintain his current salary and benefits during this time. The Executive will be placed on a paid Leave of Absence ("LOA") commencing on September 30, 2002 and extending through September 30, 2003. Executive's last day of employment will be September 30, 2003 ("Termination Date"), or as otherwise provided in Paragraph 10 (Breach by Executive) below. Executive shall not accrue any vacation days or credit subsequent to September 30, 2002. 2. Annual Salary. Executive shall continue at his current salary level during the paid LOA. 3. Annual Bonus. Executive will receive a bonus of $300,000 for Fiscal Year 2001 and $600,000 for Fiscal Year 2002, such payments to be paid at the same time as the Company normally pays its other officers their bonuses for those respective years. Executive will not receive or be eligible for any other bonus payments of any kind, including any bonus payments relating to Fiscal Year 2003. 4. Benefits. The Executive will be eligible to continue to participate in the Company's Executive benefit plans and programs during the paid LOA. 5. Stock Options. (a) All of Executive's outstanding, non-vested stock options will vest in accordance with the terms of the original grant except that none of such options shall vest after the Termination Date. All of Executive's vested stock options must be exercised within 90 days of the Termination Date. (b) On the Termination Date, the restrictions on all of Executive's outstanding shares of restricted stock will lapse immediately. (c) Executive shall not be eligible to receive any other equity-based awards after the Effective Date set forth in Paragraph 17. 6. Outplacement Services. The Company shall provide outplacement services for the Executive during the paid LOA. Such services shall be provided through an agency selected by the Company. The Company shall also reimburse Executive for the reasonable expenses for up to four (4) trips during the paid LOA for job search purposes, pursuant to the Company's standard expense reimbursement policies. The expenses for each trip may not exceed $2,500. To be eligible to receive this reimbursement, Executive must not receive reimbursement from other parties for the trip(s) and Executive must submit documentation of the expenses in a form acceptable to the Company. 7. Release of Claims. The Executive and his heirs, assigns, and agents release, waive and discharge the Company and its past and present directors, officers, employees, parents, subsidiaries, affiliates, related entities, and agents from each and every claim, action or right of any sort, known or unknown, arising on or before the Effective Date. (a) The foregoing release includes, but is not limited to, any claim of discrimination on the basis of race, sex, religion, sexual orientation, national origin, disability, age, or citizenship status; any other claim based on any local, state, or federal prohibition, including but not limited to claims under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, or the Americans With Disabilities Act; any claim arising out of or related to any alleged express or implied employment contract, any other alleged contract affecting terms and conditions of employment, or an alleged covenant of good faith and fair dealing; or any claim for severance pay, bonus, salary, sick leave, stocks, attorneys' fees, holiday pay, vacation pay, life insurance, health or medical insurance or any other fringe benefit, workers' compensation or disability. (b) The Executive represents that he understands the foregoing release, that rights and claims under the Age Discrimination in Employment Act of 1967, as amended, are among the rights and claims against the Company he is releasing, and that he understands that he is not presently releasing any future rights or claims that might arise after the Effective Date. 2 (c) The Executive further agrees never to sue the Company or cause the Company to be sued regarding any matter within the scope of the above release. If the Executive violates this Release by suing the Company or causing the Company to be sued, the Company may recover all damages as allowed by law, including all costs and expenses, including reasonable attorneys' fees, incurred by the Company in defending against the suit. 8. Confidential Information. The Executive acknowledges that through his employment with the Company he has acquired and had access to the Company's confidential and proprietary business information and trade secrets. The Executive agrees that the Company may prevent the use or disclosure of its confidential information and proprietary business information and trade secrets and acknowledges that the Company has taken all reasonable steps necessary to protect the secrecy of the information. "Confidential Information" shall include any data or information that is valuable to the Company and not generally known to competitors of the Company or other outsiders, regardless of whether the confidential information is in printed, written or electronic form, retained in the Executive's memory or has been compiled or created by the Executive. This includes, but is not limited to: technical, financial, personnel, staffing, payroll, computer systems, marketing, advertising, merchandising, product, vendor, customer or store planning data, trade secrets, or other information similar to the foregoing. The Executive agrees that he has not and in the future will not use or disclose to any third party Confidential Information, unless compelled by law and after notice to the Company, and further agrees to return all documents, disks, or any other item or source containing Confidential Information, or any other Company property, to the Company on or before September 30, 2002. If the Executive has any question regarding what data or information would be considered by the Company to be information subject to this provision, the Executive agrees to contact the Executive Vice President, Human Resources for written clarification. 9. Non-Competition and Non-Solicitation. (a) The Executive agrees that he will not, prior to October 1, 2006, enter into or maintain an employment or contractual relationship, either directly or indirectly, to provide financial, executive or managerial services in the same or similar manner as he did for the Company to any company or entity engaged in any way in a business that competes directly or indirectly with the Company, its parents, subsidiaries, affiliates or related entities, in the United States, Canada, Puerto Rico, Mexico, or any other location in which the Company, its parents, subsidiaries, affiliates or related entities currently conduct business or may conduct business prior to October 1, 2006, without the prior written consent of the Company. Businesses that compete with the Company specifically include, but are not limited to, the following entities and each of their subsidiaries, affiliates, assigns, or successors in interest: Lowe's Companies, Inc. (including, but not limited to, Eagle Hardware and Garden); Hechinger Investment Company, Inc. (including, but not limited to, Home Quarters, Hechinger, and Builder's Square); Payless Cashways, Inc.; Dekor; Sears (including, but not limited to, Orchard Supply and Hardware Company); Wal-Mart; Home Base, Inc; and Menard, Inc. (b) In the event the Executive wishes to enter into any relationship or employment prior to October 1, 2006 which would be covered by the above non-compete provision, 3 Executive agrees to request written permission from the Executive Vice President, Human Resources of the Company prior to entering any such relationship or employment. The Company may approve or not approve of the relationship or employment at its absolute discretion. (c) The Executive agrees that prior to October 1, 2006, he will not directly or indirectly solicit any person who is an employee of the Company to terminate his or her relationship with the Company without prior written approval from the Executive Vice President, Human Resources of the Company. 10. Breach by Executive. The Company's obligations to the Executive under this Agreement are contingent on Executive's performance of his obligations under this Agreement. Any material breach by Executive of this Agreement will result in the immediate cancellation of all Executive's stock options and shares of restricted stock, the immediate termination of Executive's employment, as well as entitle the Company to all its other remedies allowed in law or equity, including but not limited to the return of any payments that it made to Executive under this Agreement and the return to the Company of any proceeds Executive received from stock options exercised after April 1, 2002 or from shares of restricted stock. 11. Executive Availability. (a) During the paid LOA, the Executive agrees to make himself reasonably available to the Company to respond to requests by the Company for information pertaining to or relating to the Company and/or the Company's affiliates, subsidiaries, agents, officers, directors or employees which may be within the knowledge of the Executive. (b) At all times, including after the Termination Date, Executive agrees to cooperate fully with the Company in connection with any and all existing or future litigation, charges, or investigations brought by or against the Company or any of its past or present affiliates, agents, officers, directors or employees, whether administrative, civil or criminal in nature, in which and to the extent the Company deems the Executive's cooperation necessary. (c) In conjunction with Executive's commitments under subsections (a) or (b) of this paragraph, the Company will reimburse the Executive for reasonable out-of-pocket expenses incurred as a result of such cooperation. 12. Non-Disparagement. The Executive agrees that he will not make or cause to be made any statements that disparage, are inimical to, or damage the reputation of the Company or any of its past or present affiliates, subsidiaries, agents, officers, directors or employees. In the event such a communication is made to anyone, including but not limited to the media, public interest groups and publishing companies, it will be considered a material breach of the terms of this Agreement and the Executive will be required to reimburse the Company for any and all compensation and benefits paid under the terms of this Agreement and all commitments to make additional payments to the Executive will be null and void. 4 13. Insider Trading. The Executive acknowledges that prior to the Termination Date, he remains subject to the restrictions of the Company's Insider Trading Policy. After the Termination Date, the Insider Trading Policy will no longer apply to the Executive. However, the Executive acknowledges that through his employment with the Company he may have learned material, non-public information regarding the Company. The federal securities laws prohibit trading by persons while aware of material, non-public information. The Executive should seek advice of his legal counsel prior to conducting any transactions in the Company's stock if the Executive thinks he may possess such information. 14. Future Employment. The Executive hereby understands and agrees that he will not be re-employed by the Company in the future and that Executive will never knowingly apply to the Company, its subsidiaries, affiliates, parents or divisions for any job or position in the future. 15. Severability of Provisions. In the event that any provision in this Agreement is determined to be legally invalid or unenforceable by any court of competent jurisdiction, and cannot be modified to be enforceable, the affected provision shall be stricken from the Agreement, and the remaining terms of the Agreement and its enforceability shall remain unaffected. 16. Right to Revoke this Agreement. The Executive may revoke this Agreement in writing within seven (7) days of signing it. The Agreement will not take effect until the Effective Date. If the Executive revokes this Agreement, all of its provisions shall be void and unenforceable. 17. Effective Date. The Effective Date shall be the day after the end of the revocation period described in Paragraph 16. 18. Confidentiality. The Executive shall keep strictly confidential all the terms and conditions, including amounts, in this Agreement and shall not disclose them to any person other than the Executive's spouse and the Executive's legal or financial advisor, unless compelled by law to do so. If a person not a party to this Agreement requests or demands, by subpoena or otherwise, that the Executive disclose or produce this Agreement or any terms or conditions thereof, the Executive shall immediately notify the Company and shall give the Company an opportunity to respond to such notice before taking any action or making any decision in connection with such request or subpoena. 19. Arbitration. Any dispute regarding any aspect of this Agreement or any act which allegedly has or would violate any provision of this Agreement ("arbitrable dispute") will be submitted for final and binding arbitration in Delaware before an experienced employment arbitrator licensed to practice law in Delaware and selected in accordance with the rules of the American Arbitration Association, as the exclusive remedy for such claim or dispute. The decision of the arbitrator shall be final and binding and judgment on the award may be entered in any court of competent jurisdiction. Should any party to this Agreement hereafter institute any legal action or administrative proceeding against the other with respect to any claim waived by this Agreement or pursue any arbitrable dispute by any method other than said arbitration, the responding party shall be entitled to recover from the initiating party all damages as allowed by law, including but not limited to reasonable attorneys' fees, costs and expenses incurred as a 5 result of such action. This paragraph is not applicable to claims of violation of Paragraphs 8, 9, 12 or 18 (Confidential Information; Non-Competition and Non-Solicitation; Non-Disparagement; Confidentiality) of this Agreement. 20. Non-Assignment. The Executive represents and warrants that as of the date of this Agreement he has not assigned or transferred, or purported to assign or transfer, to any person, firm, corporation, association or entity whatsoever any released claim. Executive hereby agrees to indemnify and hold the Company harmless against, without any limitation, any and all rights, claims, warranties, demands, debts, obligations, liabilities, costs, court costs, expenses, including attorneys' fees, causes of action or judgments based on or arising out of any such assignment or transfer. 21. Entire Agreement. This Agreement constitutes the entire understanding between the parties. The parties have not relied on any oral statements that are not included in this Agreement. Any modifications to this Agreement must be in writing and signed by the Executive and an authorized Executive or agent of the Company. 22. Governing Law. This Agreement shall be construed, interpreted and applied in accordance with the law of the State of Delaware, without giving effect to the choice of law provisions thereof. Executive and the Company hereby irrevocably submit to the exclusive concurrent jurisdiction of the courts of Delaware. Executive and the Company also both irrevocably waive, to the fullest extent permitted by applicable law, any objection either may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute, and both parties agree to accept service of legal process in Delaware. THE EXECUTIVE UNDERSTANDS AND ACKNOWLEDGES THE SIGNIFICANCE AND CONSEQUENCES OF THIS AGREEMENT, THAT THE CONSIDERATION PROVIDED HEREIN IS FAIR AND ADEQUATE, AND REPRESENTS THAT THE TERMS OF THIS AGREEMENT ARE FULLY UNDERSTOOD AND VOLUNTARILY ACCEPTED. Home Depot U.S.A., Inc. By: /s/ Dennis Donovan 8/14/02 --------------------------- ------------------------- Dennis Donovan Date /s/ Dennis J. Carey --------------------------- ------------------------- Dennis J. Carey Date 6 EX-10.32 5 g81844exv10w32.txt EX-10.32 CONSULTING AGREEMENT EXHIBIT 10.32 CONSULTING AGREEMENT This Consulting Agreement is made and entered into as of the last day set forth in the signature area below, by and between Home Depot U.S.A., Inc. ("Home Depot") and Dennis J. Carey ("Consultant"). WHEREAS, Home Depot desires to utilize and avail itself of the training and experience of Consultant as an independent contractor in a consulting capacity, as more fully set forth herein; and WHEREAS, Consultant desires to provide consulting services to Home Depot in the manner, for the purposes, and under the terms and conditions hereinafter set forth; and NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereby agree as follows: 1. Engagement and Duties. Commencing on October 1, 2003, Home Depot engages Consultant, and Consultant agrees to serve, as an independent contractor, to perform consulting services for the Chief Executive Officer ("CEO") and/or the Executive Vice President of Strategy, Business Development and Corporate Operations ("EVP") of Home Depot relating to Six Sigma processes and merger and acquisition issues, as may be requested by the CEO or EVP from time to time. Consultant shall be available for consultation for a maximum of forty (40) hours per month. 2. Term. This Consulting Agreement shall have a term commencing on October 1, 2003 and ending on October 1, 2006. The parties may mutually agree to terminate this Consulting Agreement at any time prior to October 1, 2006. Home Depot has the sole discretion to terminate this Consulting Agreement at any time prior to October 1, 2006. In the event Home Depot exercises this right, and the termination of the Consulting Agreement is not pursuant to Paragraph 9 (below), Home Depot will continue to pay Consultant as set forth in Paragraph 3 (below). 3. Compensation. As compensation for the services to be rendered hereunder during the term of this Consulting Agreement, Home Depot shall pay Consultant a consulting fee at the rate of $600,000 per year, paid on a bi-weekly basis, from October 1, 2003 through October 1, 2006. Such consulting fee shall be payable to consultant irrespective of the actual amount of time Consultant spends in consultation with Home Depot. Home Depot shall issue Consultant a Form 1099 reflecting the payments to Consultant for such services. 4. Reimbursable Expenses. Home Depot shall reimburse Consultant only for those reasonable and necessary expenses incurred by Consultant in performing his duties hereunder as required by the CEO or EVP. Consultant shall include receipts for all individual expenditures for which Consultant seeks reimbursement. 5. Ownership of Materials. (a) Home Depot, or its assignee, will own and have all right and title in all ideas, concepts, plans, creations or work product produced at the request of Home Depot during the term of this Consulting Agreement, including, without limitation, any writings, drawings and documentation of any kind (collectively, the "Works") and, to the extent possible, all Works shall be considered a work made for hire for Home Depot within the meaning of Title 17 of the United States Code (the Copyright Act). Consultant hereby grants, transfers and assigns any and all right, title and interest in and to the Works and all materials contained therein or prepared therefor, including all copyrights and rights under copyright, to Home Depot worldwide and in perpetuity. In addition, Consultant shall assign and hereby so assigns to Home Depot all of its interest in the Works. Consultant grants to Home Depot an irrevocable, non-exclusive, worldwide, royalty-free license to use, execute and copy for its internal purposes any pre-existing materials contained in the Works. Consultant shall cooperate fully with Home Depot and shall execute such further documentation as Home Depot may request in order to establish, secure, maintain or protect Home Depot's, or its assignee's, ownership of the Works and of all rights therein. Furthermore, Consultant agrees that he shall never transfer or assign the Works, or any rights therein, to any third party. (b) Consultant hereby (i) waives any so-called "moral rights" with respect to the Works; (ii) agrees never to use the Works without the prior express written consent of Home Depot; (iii) agrees never to contest Home Depot's or its assignee's exclusive, complete and unrestricted ownership in and to the Works (including all copyright rights therein), or to claim adverse rights therein; and (iv) acknowledges that it shall not be entitled to any compensation beyond that specifically provided herein for any of the Works. 6. Relationship Between Parties. Consultant is retained by Home Depot only for the purposes and to the extent set forth in this Consulting Agreement, and Consultant's relationship to Home Depot and its affiliated companies shall, during the term of this Consulting Agreement, be that of an INDEPENDENT CONTRACTOR. Consultant shall not be considered under the provisions of this Consulting Agreement or otherwise as being an employee or as being entitled to participate in any plans, arrangements or distributions by Home Depot or its affiliated companies pertaining to or in connection with any pension, stock, bonus, insurance or similar benefits available to employees. Consultant is exclusively responsible for payment of all contributions and taxes due under federal and/or state income, social security, FICA, old age benefit, unemployment insurance or worker's compensation laws with respect to payment of consulting fees from Home Depot to Consultant. 7. Injuries to Consultant. Consultant hereby waives, for Consultant and Consultant's heirs, personal representatives, successors and assigns, any and all rights that Consultant might otherwise have to any recovery from Home Depot, whether for costs and expenses incurred, for damages or otherwise, in the event Consultant suffers any personal injury or property damage in rendering services hereunder. 2 8. Confidential Information. Consultant acknowledges an obligation of confidence to Home Depot and agrees that, during the term of this Consulting Agreement and subsequent thereto, Consultant will not disclose to any third party or use (other than as authorized by Home Depot) any of its confidential or proprietary business information or trade secrets. "Confidential Information" shall include any data or information that is valuable to Home Depot and not generally known to competitors of Home Depot or other outsiders, regardless of whether the confidential information is in printed, written or electronic form, retained in the Consultant's memory or has been compiled or created by the Consultant. This includes, but is not limited to: technical, financial, personnel, staffing, payroll, computer systems, marketing, advertising, merchandising, product, vendor, customer or store planning data, trade secrets, or other information similar to the foregoing. Upon termination of this Consulting Agreement, Consultant shall promptly deliver to Home Depot all Confidential Information, including any analyses, reports or summaries thereof, and all equipment and supplies of Home Depot which are then in Consultant's possession. 9. Early Termination. This Consulting Agreement shall terminate in advance of the time set forth in Paragraph 2, without any further liability on the part of Home Depot except to pay any undisputed consulting fees or to reimburse any undisputed expenses then owed to Consultant pursuant to Paragraphs 3 or 4, in the event of Consultant's inability or refusal to comply with the terms of this Consulting Agreement, or in the event Consultant breaches this Consulting Agreement. 10. Non-Competition and Non-Solicitation. Consultant agrees to comply with the non-competition and non-solicitation provisions of the Separation Agreement & Release executed by him on June 14, 2002. Any breach of these provisions shall result in the automatic termination of this Consulting Agreement and Executive will be required to reimburse Home Depot for any and all compensation paid to him under the terms of this Consulting Agreement. Home Depot would also have no further obligation to pay Consultant pursuant to Paragraphs 3 or 4 and all commitments to make additional payments to the Consultant will be null and void. 11. Consultant's Right to Engage in Other Independent Contractor Relationships or to Obtain Employment. Nothing in this Consulting Agreement shall restrict or prohibit Consultant from engaging in other independent contractor relationships, or from obtaining employment with an entity other than Home Depot, except that Consultant agrees not to engage in an independent contractor or employer-employee relationship with a competitor of Home Depot, as defined in the Separation Agreement & Release referenced in Paragraph 10 above. 12. Warranty. (a) Consultant warrants to Home Depot that the services will be performed in a competent manner in compliance with all applicable laws and regulations. In performing the services, Consultant shall use his best efforts in a diligent manner and shall dedicate such time as necessary to perform them on a timely basis. Consultant shall report to and keep informed such persons as Home Depot shall designate and shall maintain for Home Depot archival copies of its work on a weekly basis or, if requested to do so by Home Depot, on a daily basis. 3 (b) Subject to Paragraph 12(a), Consultant shall be solely responsible for determining the means, location and manner by which Consultant provides consulting services to Home Depot. (c) As Home Depot's remedy for Consultant's failure to meet the warranty of best efforts set forth in Paragraph 12(a), Consultant will correct any failure, provided that Home Depot reports the failure to Consultant in writing within thirty (30) days after the date that Home Depot becomes aware of the failure and makes available adequate information concerning the failure. If Consultant is unable to provide a mutually agreeable temporary solution to the failure within ten (10) days after receipt of notice from Home Depot, or if Consultant is unable to provide a permanent solution acceptable to Home Depot within an additional twenty (20) days, Consultant will refund to Home Depot all amounts paid by Home Depot for the failed services. 13. Indemnity. Consultant shall indemnify, defend and hold harmless Home Depot against any and all loss, damage, claim, lawsuit, judgment, liability, taxes, penalties, cost or expense (including attorney's fees) arising out of (a) the services provided by Consultant pursuant to this Consulting Agreement, including for claims of infringement of any third party right or entitlement, (b) any injury to persons or damage to property caused by Consultant during the term of this Consulting Agreement, (c) any of the matters covered by the warranties and representations contained in this Consulting Agreement, or (d) any audits by any government entity resulting from the services provided by Consultant or Consultant's receipt of the consulting fee paid by the Company. 14. Entire Agreement. This Consulting Agreement contains the complete and exclusive understanding of the parties with respect to the matters contained herein. No waiver, alteration or modification of any of the provisions of this Consulting Agreement will be binding unless in writing and signed by a duly authorized representative of the party to be bound. Neither the course of conduct between the parties nor trade usage will act to modify or alter the provisions of this Consulting Agreement. 15. Assignment. The rights and obligations of Consultant hereunder may not be assigned or subjected to any security interest. 16. Binding Effect. This Consulting Agreement shall be binding upon and inure to the benefit of Consultant and its heirs and personal representatives and Home Depot and its successors and assigns. 17. Severability. The invalidity, illegality or unenforceability of any provision of this Consulting Agreement shall not affect the validity, legality or enforceability of any other provision of this Consulting Agreement, which shall remain in full force and effect. 18. No Waiver. The waiver of either party of any breach of this Consulting Agreement by the other party shall not waive subsequent breaches of the same or different kind. The failure of either party to enforce any rights under this Consulting Agreement in a particular instance shall not operate as a waiver of said party's right to enforce the same or different rights in subsequent instances. 4 19. Governing Law. This Consulting Agreement shall be controlled, construed and enforced in accordance with the laws of the State of Delaware without regards to any conflict of laws provisions incorporated therein. Home Depot U.S.A., Inc. By: /s/ Dennis Donovan 8/14/02 -------------------------------- ------------------------- Dennis Donovan Date /s/ Dennis J. Carey -------------------------------- ------------------------- Dennis J. Carey Date 5 EX-10.33 6 g81844exv10w33.txt EX-10.33 COMMERCIAL DEALER PAPER AGREEMENT EXHIBIT 10.33 COMMERCIAL PAPER DEALER AGREEMENT [4(2) PROGRAM] BETWEEN THE HOME DEPOT, INC., AS ISSUER AND CHASE SECURITIES INC., AS DEALER CONCERNING NOTES TO BE ISSUED PURSUANT TO AN ISSUING AND PAYING AGENCY AGREEMENT DATED AS OF JANUARY 5, 1998 BETWEEN THE ISSUER AND BANK ONE, NATIONAL ASSOCIATION, SUCCESSOR TO THE FIRST NATIONAL BANK OF CHICAGO, AS ISSUING AND PAYING AGENT DATED AS OF APRIL 19, 2001 COMMERCIAL PAPER DEALER AGREEMENT [4(2) PROGRAM] This agreement ("Agreement") sets forth the understandings between the Issuer and the Dealer in connection with the issuance and sale by the Issuer of its short-term promissory notes pursuant to the Issuing and Paying Agency Agreement dated as of January 5, 1998 between the Issuer and Bank One, National Association, successor to The First National Bank of Chicago, as Issuing and Paying Agent (the "Notes") through the Dealer. Certain terms used in this Agreement are defined in Section 6 hereof. The Addendum to this Agreement, and any Annexes or Exhibits described in this Agreement or such Addendum, are hereby incorporated into this Agreement and made fully a part hereof. Section 1. Offers, Sales and Resales of Notes. 1.1 While (i) the Issuer has and shall have no obligation to sell the Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for the account of the Issuer, and (ii) the Dealer has and shall have no obligation to purchase the Notes from the Issuer or to arrange any sale of the Notes for the account of the Issuer, the parties hereto agree that in any case where the Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the Issuer, such Notes will be purchased and sold in reliance on the representations, warranties, covenants and agreements of the parties contained herein or made pursuant hereto and on the terms and conditions and in the manner provided herein. 1.2 So long as this Agreement shall remain in effect, and in addition to the limitations contained in Section 1.7 hereof, the Issuer shall not, without the consent of the Dealer (which consent shall not be unreasonably withheld), offer, solicit or accept offers to purchase, or sell, any Notes except (a) in transactions with one or more dealers which may from time to time after the date hereof become dealers with respect to the Notes by executing with the Issuer one or more agreements which contain provisions substantially identical to Section I of this Agreement, of which the Issuer hereby undertakes to provide the Dealer prompt notice or (b) in transactions with the other dealers listed on the Addendum hereto, which are executing agreements with the Issuer which contain provisions substantially identical to Section 1 of this Agreement contemporaneously herewith. In no event shall the Issuer offer, solicit or accept offers to purchase, or sell, any Notes directly on its own behalf in transactions with persons other than broker-dealers as specifically permitted in this Section 1.2. 1.3 The Notes shall be in a minimum denomination or minimum amount, whichever is applicable, of $250,000 or integral multiples of $1,000 in excess thereof, will bear such interest rates, if interest bearing, or will be sold at such discount from their face amounts, as shall be agreed upon by the Dealer and the Issuer, shall have a maturity not exceeding 270 days from the date of issuance (exclusive of days of grace) and shall not contain any provision for extension, renewal or automatic "rollover." 2 1.4 The authentication, delivery and payment of the Notes shall be effected in accordance with the Issuing and Paying Agency Agreement and the Notes shall be either individual bearer physical certificates or represented by book-entry Notes registered in the name of DTC or its nominee in the form or forms annexed to the Issuing and Paying Agency Agreement. 1.5 If the Issuer and the Dealer shall agree on the terms of the purchase of any Note by the Dealer or the sale of any Note arranged by the Dealer (including, but not limited to, agreement with respect to the date of issue, purchase price, principal amount, maturity and interest rate (in the case of interest-bearing Notes) or discount thereof (in the case of Notes issued on a discount basis), and appropriate compensation for the Dealer's services hereunder) pursuant to this Agreement, the Issuer shall cause such Note to be issued and delivered in accordance with the terms of the Issuing and Paying Agency Agreement and payment for such Note shall be made by the purchaser thereof, either directly or through the Dealer, to the Issuer. Except as otherwise agreed, in the event that the Dealer is acting as an agent and a purchaser shall either fail to accept delivery of or make payment for a Note on the date fixed for settlement, the Dealer shall promptly notify the Issuer, and if the Dealer has theretofore paid the Issuer for the Note, the Issuer will promptly return such funds to the Dealer against its return of the Note to the Issuer, in the case of a certificated Note, and upon notice of such failure in the case of a book-entry Note. If such failure occurred for any reason other than default by the Dealer, the Issuer shall reimburse the Dealer on an equitable basis for the Dealer's loss of the use of such funds for the period such funds were credited to the Issuer's account. 1.6 The Dealer and the Issuer hereby establish and agree to observe the following procedures in connection with offers, sales and subsequent resales or other transfers of the Notes: (a) Offers and sales of the Notes by or through the Dealer shall be made only to the following types of investors: (i) investors reasonably believed by the Dealer to be Institutional Accredited Investors, (ii) non-bank fiduciaries or agents that will be purchasing Notes for one or more accounts, each of which is an Institutional Accredited Investor, and (iii) Qualified Institutional Buyers. (b) Resales and other transfers of the Notes by the holders thereof shall be made only in accordance with the restrictions in the legends described in clause (e) below. No general solicitation or general advertising shall be used in connection with the offering of the Notes. Without limiting the generality of the foregoing, without the prior written approval of Dealer, the Issuer shall not issue any press release or place or publish any "tombstone" or other advertisement relating to the Notes. (c) No general solicitation or general advertising shall be used in connection with the offering of the Notes. Without limiting the generality of the foregoing, without the prior written approval of Dealer, the Issuer shall not issue any press release or place or publish any "tombstone" or other advertisement relating to the Notes. (d) No sale of Notes to any one purchaser shall be for less than $250,000 principal or face amount, and no Note shall be issued in a smaller principal or face 3 amount. If the purchaser is a non-bank fiduciary acting on behalf of others, each person for whom such purchaser is acting must purchase at least $250,000 principal or face amount of Notes. (e) Offers and sales of the Notes by the Issuer through the Dealer acting as agent for the Issuer shall be made in accordance with Rule 506 under the Securities Act, and shall be subject to the restrictions described in the legend appearing on Exhibit A hereto. A legend substantially to the effect of such Exhibit A shall appear as part of the Private Placement Memorandum used in connection with offers and sales of Notes hereunder, as well as on each Note offered and sold pursuant to this Agreement. (f) Dealer shall furnish or shall have furnished to each purchaser of Notes being sold to an ultimate purchaser for the first time a copy of the then current Private Placement Memorandum unless such purchaser has previously received a copy of the Private Placement Memorandum as then in effect. The Private Placement Memorandum shall expressly state that any person to whom Notes are offered shall have an opportunity to ask questions of, and receive information from, the Issuer and the Dealer and shall provide the names, addresses and telephone numbers of the persons from whom information regarding the Issuer may be obtained. (g) The Issuer agrees, for the benefit of the Dealer and each of the holders and prospective purchasers from time to time of the Notes that, if at any time the Issuer shall not be subject to Section 13 or 15(d) of the Exchange Act, the Issuer will furnish, upon request and at its expense, to the Dealer and to holders and prospective purchasers of Notes information required by Rule 144A(d)(4)(i) in compliance with Rule 144A(d). (h) In the event that any Note offered or to be offered by Dealer would be ineligible for resale under Rule 144A, the Issuer shall immediately notify Dealer (by telephone, confirmed in writing) of such fact and shall promptly prepare and deliver to Dealer an amendment or supplement to the Private Placement Memorandum describing the Notes that are ineligible, the reason for such ineligibility and any other relevant information relating thereto. (i) The Issuer represents that it is currently issuing commercial paper in the United States market in reliance upon, and in compliance with, the exemption provided by Section 3(a)(3) of the Securities Act. In that connection, the Issuer agrees that: (a) the proceeds from the sale of the Notes will be segregated from the proceeds of the sale of any such commercial paper by being placed in a separate account; and (b) the Issuer has instituted appropriate corporate procedures to ensure that the offers and sales of notes issued by the Issuer pursuant to the Section 3(a)(3) exemption are not integrated with offerings and sales of Notes hereunder. (j) The Issuer hereby agrees that, not later than 15 days after the first sale of Notes as contemplated by this Agreement, it will file with the SEC a notice on Form D in accordance with Rule 503 under the Securities Act and that it will thereafter file such amendments to such notice as Rule 503 may require. 4 1.7 The Issuer hereby represents and warrants to the Dealer, in connection with offers, sales and resales of Notes, as follows: (a) Issuer hereby confirms to the Dealer that (except as permitted by Section 1.6(i)) within the preceding six months neither the Issuer nor any person other than the Dealer or the other dealers referred to in Section 1.2 hereof acting on behalf of the Issuer has offered or sold any Notes, or any substantially similar security of the Issuer (including, without limitation, medium-term notes issued by the Issuer), to, or solicited offers to buy any such security from, any person other than the Dealer or the other dealers referred to in Section 1.2 hereof. The Issuer also agrees that, as long as the Notes are being offered for sale by the Dealer and the other dealers referred to in Section 1.2 hereof as contemplated hereby and until at least six months after the offer of Notes hereunder has been terminated, neither the Issuer nor any person other than the Dealer or the other dealers referred to in Section 1.2 hereof (except as contemplated by Section 1.2 hereof) will offer the Notes or any substantially similar security of the Issuer for sale to, or solicit offers to buy any such security from, any person other than the Dealer and the other dealers referred to in Section 1.2 hereof, it being understood that such agreement is made with a view to bringing the offer and sale of the Notes within the exemption provided by Section 4(2) of the Securities Act and Rule 506 thereunder and shall survive any termination of this Agreement. The Issuer hereby represents and warrants that it has not taken or omitted to take, and will not take or omit to take, any action that would cause the offering and sale of Notes hereunder to be integrated with any other offering of securities, whether such offering is made by the Issuer or some other party or parties. (b) In the event that the Dealer purchases Notes as principal and does not resell such Notes on the day of such purchase, to the extent necessary to comply with Regulation T and the interpretations thereunder, the Dealer will sell such Notes only to offerees it reasonably believes to be QIBs or to QIBs it reasonably believes are acting for other QIBs, in each case in accordance with Rule 144A. Section 2. Representations and Warranties of Issuer. The Issuer represents and warrants that: 2.1 The Issuer is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all the requisite corporate power and authority to execute, deliver and perform its obligations under the Notes, this Agreement and the Issuing and Paying Agency Agreement. 2.2 This Agreement and the Issuing and Paying Agency Agreement have been duly authorized, executed and delivered by the Issuer and constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is 5 sought in a proceeding in equity or at law) and except insofar as rights to indemnifications and contributions may be limited by applicable law. 2.3 The Notes have been duly authorized, and when issued and delivered as provided in the Issuing and Paying Agency Agreement, will be duly and validly issued and delivered and will constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.4 The offer and sale of Notes in the manner contemplated hereby do not require registration of the Notes under the Securities Act, pursuant to the exemption from registration contained in Section 4(2) thereof and Regulation D thereunder, and no indenture in respect of the Notes is required to be qualified under the Trust Indenture Act of 1939, as amended. 2.5 The Notes will rank at least pari passu with all other unsecured and unsubordinated indebtedness of the Issuer. 2.6 Except as provided in Section 1.6(j), no consent or action of, or filing or registration with, any governmental or public regulatory body or authority, including the SEC, is required to be obtained by the Issuer to authorize, or is otherwise required to be obtained by the Issuer in connection with the execution, delivery or performance of, this Agreement, the Notes or the Issuing and Paying Agency Agreement, except as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Notes. 2.7 Neither the execution and delivery of this Agreement and the Issuing and Paying Agency Agreement, nor the issuance and delivery of the Notes in accordance with the Issuing and Paying Agency Agreement, nor the fulfillment of or compliance with the terms and provisions hereof or thereof by the Issuer, will (i) result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Issuer, or (ii) violate or result in a breach or an event of default under any of the terms of the Issuer's charter documents or by-laws, any contract or instrument to which the Issuer is a party or by which it or its property is bound and that is material to the Issuer, or any law or regulation, or any order, writ, injunction or decree of any court or government instrumentality, to which the Issuer is subject or by which it or its property is bound, which violation, breach or event of default might reasonably be expected to have a material adverse effect on the earnings, business or operations of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 2.8 Except as disclosed in the Company Information, there is no litigation or governmental proceeding pending, or to the knowledge of the Issuer threatened, against or affecting the Issuer or any of its subsidiaries which might reasonably be expected to have a material adverse effect on the earnings, business or operations of the Issuer or the ability of the Issuer to perform its obligations under this Agreement, the Notes or the Issuing and Paying Agency Agreement. 6 2.9 The Issuer is not an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 2.10 Neither the Private Placement Memorandum nor the Company Information contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided that the Issuer makes no representation or warranty relating to Dealer Information. 2.11 Each (a) issuance of Notes by the Issuer hereunder and (b) amendment or supplement of the Private Placement Memorandum shall be deemed a representation and warranty by the Issuer to the Dealer, as of the date thereof, that, both before and after giving effect to such issuance and after giving effect to such amendment or supplement, (i.) the representations and warranties given by the Issuer set forth above in this Section 2 remain true and correct on and as of such date as if made on and as of such date, (ii) in the case of an issuance of Notes, the Notes being issued on such date have been duly and validly issued and constitute legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and (iii) in the case of an issuance of Notes, since the date of the most recent Private Placement Memorandum, there has been no material adverse change in the earnings, business or operations of the Issuer which has not been disclosed in the Company Information. Section 3. Covenants and Agreements of Issuer. The Issuer covenants and agrees that: 3.1 The Issuer will give the Dealer prompt notice (but in any event prior to any subsequent issuance of Notes hereunder) of any amendment to, modification of, or waiver with respect to, the Notes, the Issuing and Paying Agency Agreement, including a complete copy of any such amendment, modification or waiver. 3.2 The Issuer shall, whenever there shall occur any change in the Issuer's earnings, business or operations that would be material to holders of the Notes or potential holder of the Notes (including any downgrading or receipt of any notice of intended or potential downgrading or any review for potential change in the rating accorded any of the Issuer's securities by any nationally recognized statistical rating organization which has published a rating of the Notes), promptly, and in any event prior to any subsequent issuance of Notes hereunder, notify the Dealer (by telephone, confirmed in writing) of such change, development, or occurrence. 3.3 The Issuer shall from time to time furnish to the Dealer such information as the Dealer may reasonably request, including, without limitation, any press releases or material provided by the Issuer to any national securities exchange or rating agency, regarding the due authorization and execution of the Notes and the Issuer's ability to pay the Notes as they mature. 7 3.4 The Issuer will take all such action as the Dealer may reasonably request to ensure that each offer and each sale of the Notes will comply with any applicable state Blue Sky laws; provided , that the Issuer shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. 3.5 The Issuer shall not issue Notes hereunder until the Dealer shall have received (a) an opinion of counsel to the Issuer, addressed to the Dealer, satisfactory in form and substance to the Dealer, (b) a copy of the executed Issuing and Paying Agency Agreement as then in effect, (c) a copy of resolutions adopted by the Board of Directors of the Issuer, satisfactory in form and substance to the Dealer and certified by the Secretary or similar officer of the Issuer, authorizing execution and delivery by the Issuer of this Agreement the Issuing and Paying Agency Agreement and the Notes and consummation by the Issuer of the transactions contemplated hereby and thereby, (d) prior to the issuance of any Notes represented by a book-entry note registered in the name of DTC or its nominee, a copy of the executed Letter of Representations among the Issuer, the Issuing and Paying Agent and DTC and (e) such other certificates, opinions, letters and documents as the Dealer shall have reasonably requested. 3.6 The Issuer shall reimburse the Dealer for all of the Dealer's reasonable out-of-pocket expenses actually incurred by the Dealer related to this Agreement, including expenses incurred in connection with its preparation and negotiation, and the transactions contemplated hereby (including, but not limited to, the printing and distribution of the Private Placement Memorandum), and, if applicable, for the reasonable fees and out-of-pocket expenses of the Dealer's counsel, not to exceed $5,000. Section 4. Disclosure 4.1 The Private Placement Memorandum and its contents (other than the Dealer Information) shall be the sole responsibility of the Issuer. The Private Placement Memorandum shall contain a statement expressly offering an opportunity for each prospective purchaser to ask questions of, and receive answers from, the Issuer concerning the offering of Notes and to obtain relevant additional information which the Issuer possesses or can acquire without unreasonable effort or expense. 4.2 The Issuer agrees promptly to furnish the Dealer the Company Information as it becomes publicly available. 4.3 (a) The Issuer further agrees, if the Issuer has any Notes outstanding (whether or not with a purchaser or in inventory with the Dealer) or in connection with any proposed issuance of Notes by the Issuer, to notify the Dealer promptly upon the occurrence of any event relating to or affecting the Issuer that would cause the Company Information then in existence to include an untrue statement of material fact or to omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they are made, not misleading. 8 (b) In the event that the Issuer gives the Dealer notice pursuant to Section 4.3(a) and the Dealer notifies the Issuer that it then has Notes it is holding in inventory, (i) the Issuer agrees promptly to supplement or amend the Private Placement Memorandum so that such Private Placement Memorandum, as amended or supplemented, shall not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Issuer shall make such supplement or amendment available to the Dealer or (ii) if the Issuer chooses not to promptly amend or supplement the Private Placement Memorandum, the Dealer shall have the right to resell to the Issuer any such Notes held in inventory at a price equal to the face amount thereof discounted on a ratable basis based on the Issuer's market rate reflecting the remaining period until maturity in relation to the original term. (c) In the event that (i) the Issuer gives the Dealer notice pursuant to Section 4.3(a) and (ii) the Dealer does not notify the Issuer that it is then holding Notes in inventory and (iii) the Issuer chooses not to promptly amend or supplement the Private Placement Memorandum in the manner described in clause (b) above, then all solicitations and sales of Notes shall be suspended until such time as the Issuer has so amended or supplemented the Private Placement Memorandum, and made such amendment or supplement available to the Dealer. Section 5. Indemnification and Contribution. 5.1 The Issuer will indemnify and hold harmless the Dealer, each individual, corporation, partnership, trust, association or other entity controlling the Dealer, any affiliate of the Dealer or any such controlling entity and their respective directors, officers, employees, partners, incorporators, shareholders, servants, trustees and agents (hereinafter the "Dealer Indemnitees") against any and all liabilities, penalties, suits, causes of action, losses, damages, claims, costs and expenses (including, without limitation, fees and disbursements of counsel) or judgments of whatever kind or nature (each a "Claim"), imposed upon, incurred by or asserted against the Dealer Indemnitees arising out of or based upon (i) any allegation that the Private Placement Memorandum or the Company Information included (as of any relevant time) or includes an untrue statement of a material fact or omitted (as of any relevant time) or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (ii) arising out of or based upon the breach by the Issuer of any agreement, covenant or representation made in or pursuant to this Agreement. This indemnification shall not apply to the extent that the Claim arises out of or is based upon Dealer Information or, with respect to (ii) only, the gross negligence or willful misconduct of any Dealer Indemnitee. 5.2 Provisions relating to claims made for indemnification under this Section 5 are set forth on Exhibit B to this Agreement. 5.3 In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 5 is held to be unavailable or insufficient to hold 9 harmless the Indemnitees, although applicable in accordance with the terms of this Section 5, the Issuer shall contribute to the aggregate costs incurred by the Dealer in connection with any Claim in the proportion of the respective economic interests of the Issuer and the Dealer; provided, however, that such contribution by the Issuer shall be in an amount such that the aggregate costs incurred by the Dealer do not exceed the aggregate of the commissions and fees earned by the Dealer hereunder with respect to the issue or issues of Notes to which such Claim relates. The respective economic interests shall be calculated by reference to the aggregate proceeds to the Issuer of the Notes issued hereunder and the aggregate commissions and fees earned by the Dealer hereunder. Section 6. Definitions. 6.1 "Claim" shall have the meaning set forth in Section 5.1. 6.2 "Company Information" at any given time shall mean the Private Placement Memorandum (other than the Dealer Information) together with, to the extent applicable, (i) the Issuer's most recent report on Form 10-K filed with the SEC and each report on Form 10-Q or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, (ii) the Issuer's most recent annual audited financial statements and each interim financial statement or report prepared subsequent thereto, if not included in item (i) above, (iii) the Issuer's other publicly available reports, including, but not limited to, any publicly available filings or reports provided to its shareholders, (iv) any other information or disclosure prepared pursuant to Section 4.3 hereof and (v) any information prepared or approved by the Issuer in writing expressly for dissemination to investors or potential investors in the Notes. 6.3 "Dealer Information" shall mean material concerning the Dealer and provided by the Dealer in writing expressly for inclusion in the Private Placement Memorandum, as set forth under the sections thereof entitled "Chase Securities Inc. and Affiliates" and "Additional Information." 6.4 "DTC" shall mean The Depository Trust Company, 6.5 "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as amended. 6.6 "Indemnitee" shall have the meaning set forth in Section 5.1. 6.7 "Institutional Accredited Investor" shall mean an institutional investor that is an accredited investor within the meaning of Rule 501 under the Securities Act and that has such knowledge and experience in financial and business matters that it is capable of evaluating and bearing the economic risk of an investment in the Notes, including, but not limited to, a bank, as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity. 10 6.8 "Issuing and Paying Agency Agreement" shall mean the issuing and paying agency agreement described on the cover page of this Agreement, as such agreement may be amended or supplemented from time to time. 6.9 "Issuing and Paying Agent" shall mean the party designated as such on the cover page of this Agreement, as issuing and paying agent under the Issuing and Paying Agency Agreement. 6.10 "Non-bank fiduciary or agent" shall mean a fiduciary or agent other than (a) a bank, as defined in Section 3(a)(2) of the Securities Act, or (b) a savings and loan association, as defined in Section 3(a)(5)(A) of the Securities Act. 6.11 "Private Placement Memorandum" shall mean offering materials prepared in accordance with Section 4 (including materials referred to therein or incorporated by reference therein) provided to purchasers and prospective purchasers of the Notes, and shall include amendments and supplements thereto which may be prepared from time to time in accordance with this Agreement (other than any amendment or supplement that has been completely superseded by a later amendment or supplement). 6.12 "Qualified Institutional Buyer" shall have the meaning assigned to that term in Rule 144A under the Securities Act. 6.13 "Regulation D" shall mean Regulation D (Rules 501 et seq.) under the Securities Act. 6.14 "Rule 144A" shall mean Rule 144A under the Securities Act. 6.15 "SEC" shall mean the U.S. Securities and Exchange Commission. 6.16 "Securities Act" shall mean the U.S. Securities Act of 1933, as amended. Section 7. General 7.1 Unless otherwise expressly provided herein, all notices under this Agreement to parties hereto shall be in writing and shall be effective when received at the address of the respective party set forth in the Addendum to this Agreement. 7.2 This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws provisions. 7.3 The Issuer agrees that any suit, action or proceeding brought by the Issuer against the Dealer in connection with or arising out of this Agreement or the Notes or the offer and sale of the Notes shall be brought solely in the United States federal courts located in the borough of Manhattan or the courts of the State of New York located in the Borough of Manhattan. EACH OF THE DEALER AND THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY 11 SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 7.4 This Agreement may be terminated, at any time, by the Issuer, upon one business day's prior notice to such effect to the Dealer, or by the Dealer upon one business day's prior notice to such effect to the Issuer. Any such termination, however, shall not affect the obligations of the Issuer under Sections 3.7, 5 and 7.3 hereof, the obligations of the Dealer under Sections 5 and 7.3, or the respective representations, warranties, agreements, covenants, rights or responsibilities of the parties made or arising prior to the termination of this Agreement. 7.5 This Agreement is not assignable by either party hereto without the written consent of the other party; provided, however, that the Dealer may assign its rights and obligations under this Agreement to any affiliate. 7.6 This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. THE HOME DEPOT, INC., AS ISSUER By: /s/ Carol B. Tome ---------------------------------------- Name: CAROL B. TOME Title: SVP - FINANCE, TREASURER CHASE SECURITIES INC., AS DEALER By: ---------------------------------------- Name: Title: 13 ADDENDUM 1. The other dealers referred to in clause (b) of Section 1.2 of the Agreement are as follows: Credit Suisse First Boston Corporation 2. The addresses of the respective parties for purposes of notices under Section 7.1 are as follows: For the Issuer: The Home Depot, Inc. Address: 2455 Paces Ferry Road Atlanta, GA 30339-4024 Attention: Rebecca Flick Telephone number: 770-384-2657 Fax number: 770-384-4929 For the Dealer: Chase Securities Inc. Address: Money Market Division 270 Park Avenue, 9th Floor New York, N.Y. 10017 Attention: Short & Medium Term Finance Telephone number: 212-325-7198 Fax number: 212-325-8183 14 EXHIBIT A FORM OF LEGEND FOR PRIVATE PLACEMENT MEMORANDUM AND NOTES THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT THAT IT HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER AND THE NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY DISTRIBUTION THEREOF AND THAT IT IS EITHER (A) AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501 (a) UNDER THE ACT AND THAT EITHER IS PURCHASING NOTES FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(A) OF THE ACT) ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S. BANK OR SAVINGS AND LOAN ASSOCIATION) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS EACH OF WHICH IS AN INSTITUTIONAL ACCREDITED INVESTOR (i) WHICH ITSELF POSSESSES SUCH KNOWLEDGE AND EXPERIENCE OR (ii) WITH RESPECT TO WHICH SUCH PURCHASER HAS SOLE INVESTMENT DISCRETION; OR (B) A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE ACT WHICH IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR MORE ACCOUNTS, EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER HAS SOLE INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE THAT THE SELLER MAY RELY UPON THE EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF ALSO SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT, EITHER (1) TO THE ISSUER OR TO CHASE SECURITIES INC. OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR OR A QIB, OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000. 15 EXHIBIT B FURTHER PROVISIONS RELATING TO INDEMNIFICATION (a) The Issuer agrees to reimburse each Indemnitee for all expenses (including reasonable fees and disbursements of internal and external counsel) as they are incurred by it in connection with investigating or defending any loss, claim, damage, liability or action in respect of which indemnification may be sought under Section 5 of the Agreement (whether or not it is a party to any such proceedings). (b) Promptly after receipt by an Indemnitee of notice of the existence of a Claim, such Indemnitee will, if a claim in respect thereof is to be made against the Issuer, notify the Issuer in writing of the existence thereof; provided that (i) the omission so to notify the Issuer will not relieve it from any liability which it may have hereunder unless and except to the extent it did not otherwise learn of such Claim and such failure results in the forfeiture by the Issuer of substantial rights and defenses, and (ii) the omission so to notify the Issuer will not relieve it from liability which it may have to an Indemnitee otherwise than on account of this indemnity agreement. In case any such Claim is made against any Indemnitee and it notifies the Issuer of the existence thereof, the Issuer will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the Indemnitee, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnitee; provided that if the defendants in any such Claim include both the Indemnitee and the Issuer and the Indemnitee shall have concluded that there may be legal defenses available to it which are different from or additional to those available to the Issuer, the Issuer shall not have the right to direct the defense of such Claim on behalf of such Indemnitee, and the Indemnitee shall have the right to select separate counsel to assert such legal defenses on behalf of such Indemnitee. Upon receipt of notice from the Issuer to such Indemnitee of the Issuer's election so to assume the defense of such Claim and approval by the Indemnitee of counsel, the Issuer will not be liable to such Indemnitee for expenses incurred thereafter by the Indemnitee in connection with the defense thereof (other than reasonable costs of investigation) unless (i) the Indemnitee shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the Issuer shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel in the jurisdiction in which any Claim is brought), approved by the Dealer, representing the Indemnitee who is party to such Claim), (ii) the Issuer shall not have employed counsel reasonably satisfactory to the Indemnitee to represent the Indemnitee within a reasonable time after notice of existence of the Claim or (iii) the Issuer has authorized in writing the employment of counsel for the Indemnitee. The indemnity, reimbursement and contribution obligations of the Issuer hereunder shall be in addition to any other liability the Issuer may otherwise have to an Indemnitee and shall be binding upon and inure to the benefit of any successors, assigns, 16 heirs and personal representatives of the Issuer and any Indemnitee. The Issuer agrees that without the Dealer's prior written consent, it will not settle, compromise or consent to the entry of any judgment in any Claim in respect of which indemnification may be sought under the indemnification provision of the Agreement (whether or not the Dealer or any other Indemnitee is an actual or potential party to such Claim), unless such settlement, compromise or consent includes an unconditional release of each Indemnitee from all liability arising out of such Claim. EX-10.34 7 g81844exv10w34.txt EX-10.34 MAINTENANCE WAREHOUSE FUTUREBUILDER EXHIBIT 10.34 THE MAINTENANCE WAREHOUSE FUTUREBUILDER A 401(k) AND STOCK OWNERSHIP PLAN AMENDMENT AND RESTATEMENT EFFECTIVE JANUARY 1,2001 THE MAINTENANCE WAREHOUSE FUTUREBUILDER A 401(K) AND STOCK OWNERSHIP PLAN On this 21st day of November, 2001, Maintenance Warehouse/America Corp. (the "Controlling Company") hereby amends and restates The Maintenance Warehouse FutureBuilder (the "Plan"). STATEMENT OF PURPOSE A. The Plan initially was named the Maintenance Warehouse 401(k) Savings Plan and was adopted effective as of March 17, 1997. It was renamed the Maintenance Warehouse FutureBuilder and was last restated effective as of December 1, 1999, and has been amended since that date. Generally effective January 1, 2001, the Plan, as set forth in this document, is intended and should be construed as a restatement and continuation of the Plan as previously in effect. In addition to operational changes, this restatement of the Plan is intended to bring the Plan into compliance with the requirements of current laws and regulations enacted or issued prior to the adoption date of this restatement, including, but not limited to, the General Agreement on Tariffs and Trade as amended in 1994, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997 (the previous four laws and regulations are collectively known as the "GUST Amendments"), and the Internal Revenue Service Restructuring and Reform Act of 1998. B. The primary purpose of the Plan is to recognize the contributions made to the Controlling Company and its participating affiliates by employees and to reward those contributions by providing eligible employees with an opportunity to accumulate savings for their future security. C. The Controlling Company intends that the Plan be a profit sharing plan qualified under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended. STATEMENT OF AGREEMENT To amend and restate the Plan with the purposes and goals as hereinabove described, the Controlling Company hereby sets forth the terms and provisions as follows: TABLE OF CONTENTS
PAGE STATEMENT OF PURPOSE............................................................................................1 ARTICLE I DEFINITIONS...........................................................................................1 1.1 Account................................................................................................1 1.2 ACP or Actual Contribution Percentage..................................................................1 1.3 ACP Tests..............................................................................................1 1.4 Active Participant.....................................................................................1 1.5 Administrative Committee...............................................................................2 1.6 ADP or Actual Deferral Percentage......................................................................2 1.7 ADP Tests..............................................................................................2 1.8 Affiliate..............................................................................................2 1.9 Annual Addition........................................................................................2 1.10 Basic Matching Contribution............................................................................2 1.11 Before-Tax Account.....................................................................................3 1.12 Before-Tax Contributions...............................................................................3 1.13 Beneficiary............................................................................................3 1.14 Board..................................................................................................3 1.15 Break in Service.......................................................................................3 (a) Leave of Absence.......................................................................................3 (b) Maternity or Paternity Leave...........................................................................3 (c) Effect of Family and Medical Leave Act.................................................................3 1.16 Business Day...........................................................................................3 1.17 Code...................................................................................................3 1.18 Company Stock..........................................................................................4 1.19 Company Stock Fund.....................................................................................4 1.20 Compensation...........................................................................................4 (a) Benefit Compensation...................................................................................4 (b) Section 404 Compensation...............................................................................5 (c) Top-Heavy Compensation.................................................................................5 (d) Section 415 Compensation...............................................................................5 (e) Key Employee and Highly Compensated Employee Compensation..............................................5 (f) Testing Compensation...................................................................................5 1.21 Contributions..........................................................................................5 1.22 Controlling Company....................................................................................5 1.23 Covered Employee.......................................................................................5 1.24 Deferral Election......................................................................................6 1.25 Defined Benefit Minimum................................................................................6 1.26 Defined Benefit Plan...................................................................................6 1.27 Defined Contribution Minimum...........................................................................6 1.28 Defined Contribution Plan..............................................................................6 1.29 Determination Date.....................................................................................6 1.30 Disability or Disabled.................................................................................6 1.31 Effective Date.........................................................................................7 1.32 Elective Deferrals.....................................................................................7
i 1.33 Eligible Nonhighly Compensated Participant.............................................................7 1.34 Eligible Participant...................................................................................7 1.35 Eligible Retirement Plan...............................................................................7 1.36 Eligible Rollover Distribution.........................................................................7 1.37 Employee...............................................................................................7 1.38 Employment Date........................................................................................8 1.39 Entry Date.............................................................................................8 1.40 ERISA..................................................................................................8 1.41 Forfeiture.............................................................................................8 1.42 Highly Compensated Employee............................................................................8 (a) General Rule...........................................................................................8 (b) Excluded Employees.....................................................................................9 (c) Former Employees.......................................................................................9 (d) Nonresident Aliens.....................................................................................9 (e) Compliance with Code Section 414(q)....................................................................9 1.43 Home Depot.............................................................................................9 1.44 Home Depot Board.......................................................................................9 1.45 Hour of Service........................................................................................9 (a) General Rule...........................................................................................9 (b) Equivalencies.........................................................................................10 (c) Changes by Administrative Committee...................................................................10 (d) Computation Period....................................................................................11 1.46 Investment Committee..................................................................................11 1.47 Investment Fund or Funds..............................................................................11 1.48 Key Employee..........................................................................................11 1.49 Leave of Absence......................................................................................11 1.50 Limitation Year.......................................................................................11 1.51 Matching Account......................................................................................11 1.52 Matching Contributions................................................................................11 1.53 Maternity or Paternity Leave..........................................................................11 1.54 Maximum Deferral Amount...............................................................................11 1.55 Named Fiduciary.......................................................................................11 1.56 Non-Key Employee......................................................................................11 1.57 Normal Retirement Age.................................................................................12 1.58 Participant...........................................................................................12 1.59 Participating Company.................................................................................12 1.60 Permissive Aggregation Group..........................................................................12 1.61 Plan..................................................................................................12 1.62 Plan Year.............................................................................................12 1.63 Prior Plan............................................................................................12 1.64 Qualified Nonelective Account.........................................................................12 1.65 Qualified Nonelective Contributions...................................................................12 1.66 Qualified Spousal Waiver..............................................................................12 1.67 Required Aggregation Group............................................................................12 1.68 Restoration Contributions.............................................................................12 1.69 Rollover Account......................................................................................13
ii 1.70 Rollover Contribution.................................................................................13 1.71 Spouse or Surviving Spouse............................................................................13 1.72 Supplemental Annual Matching Contributions............................................................13 1.73 Top-Heavy Group.......................................................................................13 1.74 Top-Heavy Plan........................................................................................13 1.75 Transfer Account......................................................................................13 1.76 Transfer Contributions................................................................................13 1.77 Trust or Trust Agreement..............................................................................13 1.78 Trustee...............................................................................................14 1.79 Trust Fund............................................................................................14 1.80 Valuation Date........................................................................................14 1.81 Year of Eligibility Service...........................................................................14 (a) Computation Period....................................................................................14 (b) Predecessor Employer..................................................................................14 (c) Service Counted under The Home Depot FutureBuilder....................................................14 (d) Reemployed Veterans...................................................................................14 1.82 Years of Vesting Service..............................................................................14 (a) Pre-Break Service.....................................................................................15 (b) Post-Break Service....................................................................................15 (c) Predecessor Plan......................................................................................15 (d) Predecessor Employer..................................................................................15 (e) Service Counted under The Home Depot FutureBuilder....................................................15 (f) Reemployed Veterans...................................................................................15 ARTICLE II ELIGIBILITY.........................................................................................16 2.1 Initial Eligibility Requirements......................................................................16 (a) General Rule..........................................................................................16 (b) Participation Upon Effective Date.....................................................................16 (c) New Participating Companies...........................................................................16 (d) Predecessor Employer..................................................................................16 2.2 Treatment of Interruptions of Service.................................................................16 (a) Leave of Absence or Layoff............................................................................16 (b) Termination Before Participation......................................................................16 (c) Termination After Participation.......................................................................16 2.3 Change in Status......................................................................................17 (a) Exclusion Before Participation........................................................................17 (b) Exclusion After Participation.........................................................................17 (c) Change to Covered Employee Status.....................................................................17 ARTICLE III CONTRIBUTIONS......................................................................................18 3.1 Before-Tax Contributions.............................................................................18 (a) Generally.............................................................................................18 (b) Deferral Elections....................................................................................18 (1) Effective Date...............................................................................18 (2) Term.........................................................................................18 (3) Revocation...................................................................................19 (4) Modification by Participant..................................................................19 (5) Modification by Administrative Committee.....................................................19
iii 3.2 Matching Contributions................................................................................19 (a) Basic Matching Contributions..........................................................................19 (b) Supplemental Annual Matching Contributions............................................................19 (1) General......................................................................................19 (2) Conditions for Eligibility...................................................................20 (3) Limitations on Supplemental Annual Matching Contributions Made on Behalf of Highly Compensated Employees....................................................20 3.3 Qualified Nonelective Contributions...................................................................20 3.4 Form of Contributions.................................................................................21 3.5 Timing of Contributions...............................................................................21 (a) Before-Tax Contributions..............................................................................21 (b) Matching and Qualified Nonelective Contributions......................................................21 3.6 Contingent Nature of Company Contributions............................................................21 3.7 Restoration Contributions.............................................................................21 (a) Restoration of Forfeitures............................................................................21 (b) Restoration Contribution..............................................................................21 3.8 Reemployed Veterans...................................................................................22 ARTICLE IV ROLLOVERS AND TRANSFERS BETWEEN PLANS...............................................................23 4.1 Rollover Contributions................................................................................23 (a) Request by Active Participant.........................................................................23 (b) Acceptance of Rollover................................................................................23 4.2 Transfer Contributions................................................................................23 (a) Direct Transfers Permitted............................................................................23 (b) Mergers and Spin-offs Permitted.......................................................................23 (c) Establishment of Transfer Accounts....................................................................23 (d) Transfer Accounts.....................................................................................24 4.3 Spin-offs to Other Plans..............................................................................24 ARTICLE V PARTICIPANTS' ACCOUNTS; CREDITING AND ALLOCATIONS....................................................25 5.1 Establishment of Participants' Accounts...............................................................25 5.2 Allocation and Crediting of Before-Tax, Basic Matching, Rollover and Transfer Contributions............................................................................25 5.3 Allocation and Crediting of Supplemental Annual Matching Contributions................................25 5.4 Allocation and Crediting of Qualified Nonelective Contributions.......................................25 (a) General Provision.....................................................................................25 (b) Per Capita Qualified Nonelective Contributions........................................................26 (c) Proportional Qualified Nonelective Contributions......................................................26 (d) Section 415 Qualified Nonelective Contributions.......................................................26 (e) Qualified Nonelective Matching Contributions..........................................................26 5.5 Crediting of Restoration Contributions................................................................26 5.6 Adjustments to Accounts...............................................................................27 5.7 Allocation of Adjustments Upon Change in Capitalization...............................................27 5.8 Allocation of Forfeitures.............................................................................27 5.9 Notice to Participants of Account Balances............................................................27 5.10 Good Faith Valuation Binding..........................................................................27 5.11 Errors and Omissions in Accounts......................................................................28
iv ARTICLE VI CONTRIBUTION AND SECTION 415 LIMITATIONS AND NONDISCRIMINATION REQUIREMENTS...................................................................29 6.1 Deductibility Limitations.............................................................................29 6.2 Maximum Limitation on Elective Deferrals..............................................................29 (a) Maximum Elective Deferrals Under Participating Company Plans..........................................29 (b) Return of Excess Before-Tax Contributions.............................................................29 (c) Return of Excess Elective Deferrals Provided by Other Participating Company Arrangements.......................................................................................29 (d) Discretionary Return of Elective Deferrals............................................................29 (e) Return of Excess Annual Additions.....................................................................30 6.3 Nondiscrimination Requirements for Before-Tax Contributions...........................................30 (a) ADP Test..............................................................................................30 (b) Multiple Plans........................................................................................30 (c) Adjustments to Actual Deferral Percentages............................................................31 6.4 Nondiscrimination Requirements for Matching Contributions.............................................32 (a) ACP Test..............................................................................................32 (b) Multiple Plans........................................................................................32 (c) Adjustments to Actual Contribution Percentages........................................................32 6.5 Multiple Use of Tests.................................................................................34 (a) Aggregate Limitation..................................................................................34 (b) Multiple Plans........................................................................................34 (c) Correction............................................................................................34 (d) Application...........................................................................................35 6.6 Order of Application..................................................................................35 6.7 Code Section 415 Limitations on Maximum Contributions.................................................35 (a) General Limit on Annual Additions.....................................................................35 (b) Combined Plan Limit...................................................................................35 (c) Correction of Excess Annual Additions.................................................................35 (d) Annual Addition.......................................................................................36 (e) Compliance with Code Section 415......................................................................37 6.8 Construction of Limitations and Requirements..........................................................37 ARTICLE VII INVESTMENTS........................................................................................38 7.1 Establishment of Trust Account........................................................................38 7.2 Investment Funds......................................................................................38 (a) Establishment of Investment Funds.....................................................................38 (b) Reinvestment of Cash Earnings.........................................................................38 7.3 Participant Direction of Investments..................................................................38 (a) Investment of Contributions...........................................................................38 (b) Investment of Existing Account Balances...............................................................39 (c) Conditions Applicable to Elections....................................................................39 (d) Restrictions on Investments...........................................................................39 7.4 Valuation.............................................................................................40 7.5 Voting and Tender Offer Rights with Respect to Investment Funds.......................................40 7.6 Purchase of Life Insurance............................................................................40 7.7 Fiduciary Responsibilities for Investment Directions..................................................40
v 7.8 Appointment of Investment Manager; Authorization to Invest in Collective Trust........................40 (a) Investment Manager....................................................................................40 (b) Collective Trust......................................................................................41 7.9 Value of Company Stock................................................................................41 7.10 Voting and Tender Offer Rights With Respect to Company Stock..........................................41 (a) Voting Rights.........................................................................................41 (b) Tender Offer Rights...................................................................................41 (c) Confidentiality.......................................................................................42 (d) Dissemination of Pertinent Information................................................................42 ARTICLE VIII VESTING IN ACCOUNTS...............................................................................43 8.1 Vesting...............................................................................................43 (a) General Vesting Rule..................................................................................43 (1) Fully Vested Accounts........................................................................43 (2) Matching Account.............................................................................43 (b) Grandfathered Vesting.................................................................................43 8.2 Vesting Upon Attainment of Normal Retirement Age, Death or Disability.................................43 8.3 Timing of Forfeitures and Vesting after Restoration Contributions.....................................44 8.4 Vesting following Partial Distributions...............................................................44 8.5 Amendment to Vesting Schedule.........................................................................44 ARTICLE IX PAYMENT OF BENEFITS FROM ACCOUNTS...................................................................46 9.1 Benefits Payable for Reasons Other Than Death.........................................................46 (a) General Rule..........................................................................................46 (b) Timing of Distribution................................................................................46 (c) Restrictions on Distributions from Before-Tax and Qualified Nonelective Accounts......................47 (d) Delay Upon Reemployment or Termination of Disability..................................................48 (e) Distribution Upon Sale of Business....................................................................48 9.2 Death Benefits........................................................................................49 9.3 Forms of Distribution.................................................................................49 (a) Method................................................................................................49 (b) Direct Rollover Distributions.........................................................................49 (c) Assets Distributed....................................................................................49 9.4 Cash-Out Payment of Benefits..........................................................................49 9.5 Qualified Domestic Relations Orders...................................................................50 9.6 Beneficiary Designation...............................................................................50 (a) General...............................................................................................50 (b) No Designation or Designee Dead or Missing............................................................51 9.7 Claims................................................................................................51 (a) Procedure.............................................................................................51 (b) Review Procedure......................................................................................51 (c) Satisfaction of Claims................................................................................52 9.8 Explanation of Rollover Distributions.................................................................52 9.9 Unclaimed Benefits....................................................................................52 9.10 Recordkeeper Transition Rule..........................................................................53 ARTICLE X WITHDRAWALS AND LOANS................................................................................54
vi 10.1 Hardship Withdrawals..................................................................................54 (a) Parameters of Hardship Withdrawals....................................................................54 (b) Immediate and Heavy Financial Need....................................................................54 (c) Necessary to Satisfy a Financial Need.................................................................54 (d) Form of Distribution..................................................................................55 (e) Source of Funds.......................................................................................55 10.2 Age 65 Withdrawals....................................................................................55 (a) Conditions............................................................................................55 (b) Source of Funds.......................................................................................55 (c) Method................................................................................................55 10.3 Rollover Account Withdrawals..........................................................................55 10.4 Election to Withdraw..................................................................................55 10.5 Payment of Withdrawal.................................................................................56 10.6 Distributions and Withdrawals from Transfer Accounts..................................................56 10.7 Loans to Participants.................................................................................56 (a) Grant of Authority....................................................................................56 (b) Nondiscriminatory Policy..............................................................................56 (c) Minimum Loan Amount...................................................................................57 (d) Maximum Loan Amount...................................................................................57 (e) Maximum Loan Term.....................................................................................57 (f) Terms of Repayment....................................................................................58 (g) Adequacy of Security..................................................................................58 (h) Rate of Interest......................................................................................58 (i) Source of Loan Amounts................................................................................58 (j) Crediting Loan Payments to Accounts...................................................................59 (k) Remedies in the Event of Default......................................................................59 (1) Qualified Military Service............................................................................59 10.8 Transition Rule.......................................................................................59 ARTICLE XI ADMINISTRATION......................................................................................60 11.1 Administrative Committee; Appointment and Term of Office..............................................60 (a) Appointment...........................................................................................60 (b) Certification.........................................................................................60 11.2 Organization of Administrative Committee..............................................................60 11.3 Powers and Responsibility.............................................................................60 11.4 Records of Administrative Committee...................................................................61 (a) Notices and Directions................................................................................61 (b) Records...............................................................................................61 11.5 Delegation............................................................................................61 11.6 Reporting and Disclosure..............................................................................62 11.7 Construction of the Plan..............................................................................62 11.8 Assistants and Advisors...............................................................................62 (a) Engaging Advisors.....................................................................................62 (b) Reliance on Advisors..................................................................................62 11.9 Investment Committee..................................................................................63 (a) Appointment...........................................................................................63 (b) Duties................................................................................................63
vii 11.10 Direction of Trustee..................................................................................63 11.11 Bonding...............................................................................................63 11.12 Indemnification.......................................................................................63 ARTICLE XII ALLOCATION OF AUTHORITY AND RESPONSIBILITIES.......................................................65 12.1 Controlling Company and Board.........................................................................65 (a) General Responsibilities..............................................................................65 (b) Authority of Participating Companies..................................................................65 12.2 Administrative Committee..............................................................................65 12.3 Investment Committee..................................................................................65 12.4 Trustee...............................................................................................65 12.5 Limitations on Obligations of Fiduciaries.............................................................65 12.6 Delegation............................................................................................66 12.7 Multiple Fiduciary Roles..............................................................................66 ARTICLE XIII AMENDMENT, TERMINATION AND ADOPTION...............................................................67 13.1 Amendment.............................................................................................67 13.2 Termination...........................................................................................67 (a) Right to Terminate....................................................................................67 (b) Vesting Upon Complete Termination.....................................................................67 (c) Dissolution of Trust..................................................................................67 (d) Vesting Upon Partial Termination......................................................................68 13.3 Adoption of the Plan by a Participating Company.......................................................68 (a) Procedures for Participation..........................................................................68 (b) Single Plan...........................................................................................68 (c) Authority under Plan..................................................................................69 (d) Contributions to Plan.................................................................................69 (e) Withdrawal from Plan..................................................................................69 13.4 Merger, Consolidation and Transfer of Assets or Liabilities...........................................69 ARTICLE XIV TOP-HEAVY PROVISIONS...............................................................................70 14.1 Top-Heavy Plan Years..................................................................................70 14.2 Determination of Top-Heavy Status.....................................................................70 (a) Application...........................................................................................70 (b) Special Definitions...................................................................................70 (1) Determination Date...........................................................................70 (2) Key Employee.................................................................................70 (3) Non-Key Employee.............................................................................71 (4) Permissive Aggregation Group.................................................................71 (5) Required Aggregation Group...................................................................71 (6) Top-Heavy Group..............................................................................72 (c) Special Rules.........................................................................................72 14.3 Top-Heavy Minimum Contribution........................................................................73 (a) Multiple Defined Contribution Plans...................................................................73 (b) Defined Contribution and Benefit Plans................................................................73 (c) Defined Contribution Minimum..........................................................................73 (d) Defined Benefit Minimum...............................................................................74 14.4 Top-Heavy Minimum Vesting.............................................................................74 14.5 Construction of Limitations and Requirements..........................................................74
viii ARTICLE XV MISCELLANEOUS.......................................................................................76 15.1 Nonalienation of Benefits and Spendthrift Clause......................................................76 (a) General Nonalienation Requirements....................................................................76 (b) Exception for Qualified Domestic Relations Orders.....................................................76 (c) Exception for Loans from the Plan.....................................................................76 (d) Exception for Crimes against the Plan.................................................................76 15.2 Headings..............................................................................................77 15.3 Construction, Controlling Law.........................................................................77 15.4 No Contract of Employment.............................................................................77 15.5 Legally Incompetent...................................................................................77 15.6 Heirs, Assigns and Personal Representatives...........................................................77 15.7 Title to Assets, Benefits Supported Only By Trust Fund................................................78 15.8 Legal Action..........................................................................................78 15.9 No Discrimination.....................................................................................78 15.10 Severability..........................................................................................78 15.11 Exclusive Benefit; Refund of Contributions............................................................78 (a) Permitted Refunds.....................................................................................79 (b) Payment of Refund.....................................................................................79 (c) Limitation on Refund..................................................................................79 15.12 Plan Expenses.........................................................................................79 15.13 Special Effective Dates...............................................................................79 (a) Intent of Plan........................................................................................79 (b) Compliance............................................................................................79 SCHEDULE A PARTICIPATING COMPANIES AND EFFECTIVE DATES........................................................A-l SCHEDULE B SERVICE WITH PREDECESSOR EMPLOYERS.................................................................B-l
ix ARTICLE I DEFINITIONS For purposes of the Plan, the following terms, when used with an initial capital letter, shall have the meanings set forth below unless a different meaning plainly is required by the context. 1.1 Account shall mean, with respect to a Participant or Beneficiary, the amount of money or other property in the Trust Fund, as is evidenced by the last balance posted in accordance with the terms of the Plan to the account record established for such Participant or Beneficiary. The Administrative Committee, as required by the terms of the Plan and otherwise as it deems necessary or desirable in its sole discretion, may establish and maintain separate subaccounts for each Participant and Beneficiary. "Account" shall refer to the aggregate of all separate subaccounts or to individual, separate subaccounts, as may be appropriate in context. 1.2 ACP or Actual Contribution Percentage shall mean, with respect to a specified group of Participants for a Plan Year, the average of the ratios (calculated separately for each Participant in such group and rounded to the nearest 1/100th of a percent) of (i) the total of the amount of Matching Contributions and, to the extent designated by the Administrative Committee, the Before-Tax and/or Qualified Nonelective Contributions, as well as other before-tax and/or qualified nonelective contributions (excluding Before-Tax Contributions and Qualified Nonelective Contributions counted for purposes of Section 6.3 and any Contributions returned to a Participant or otherwise removed from his Account to correct excess Annual Additions) actually paid to the Trustee on behalf of each such Participant for a specified Plan Year, to (ii) such Participant's Compensation for such specified Plan Year. If a Highly Compensated Employee participates in the Plan and one or more other plans of any Affiliates to which matching or after-tax contributions are made (other than a plan for which aggregation with the Plan is not permitted), the matching and after-tax contributions made with respect to such Highly Compensated Employee shall be aggregated for purposes of determining his ACP. The ACP shall be rounded to the nearest 1/100th of a percent and shall be calculated in a manner consistent with the terms of Code Section 401(m) and the regulations promulgated thereunder. If a Participant is eligible to participate in the Plan for all or a portion of a Plan Year by reason of satisfying the eligibility requirements of Article II but makes no Before-Tax Contributions which are taken into account (as described above) for purposes of calculating his ACP, and if he receives no allocations of Matching Contributions or qualified nonelective contributions which are taken into account (as described above) for purposes of calculating his ACP, such Participant's ACP for such Plan Year shall be zero. 1.3 ACP Tests shall mean the nondiscrimination tests described in Sections 6.4 and 6.5. 1.4 Active Participant shall mean, for any Plan Year (or any portion thereof), any Covered Employee who, pursuant to the terms of Article II, has been admitted to, and not removed from, active participation in the Plan since the last date his employment commenced or recommenced; provided, to the extent applicable, "Active Participant" shall apply separately to each type of Contribution which has a different eligibility requirement under Section 2.1(a). 1 1.5 Administrative Committee shall mean the committee which shall act on behalf of the Controlling Company to administer the Plan as provided in Article XI The Administrative Committee shall be the plan administrator, as that term is defined in Code Section 414(g). 1.6 ADP or Actual Deferral Percentage shall mean, with respect to a specified group of Participants for a Plan Year, the average of the ratios (calculated separately for each Participant in such group and rounded to the nearest 1/100th of a percent) of (i) the total of the amount of Before-Tax Contributions (excluding Before-Tax Contributions, if any, designated by the Administrative Committee to be taken into account under Section 6.4 to help satisfy the ACP Tests, or removed from a Participant's Account to correct excess Annual Additions) and, to the extent designated under Section 6.3(c) by the Administrative Committee, the Qualified Nonelective Contributions [excluding Qualified Nonelective Contributions counted for purposes of Section 6.4(c)] as well as other before-tax and/or qualified nonelective contributions actually paid to the Trustee on behalf of each such Participant for a specified Plan Year, to (ii) such Participant's Compensation for such specified Plan Year. If a Highly Compensated Employee participates in the Plan and one or more other plans of any Affiliates to which before-tax contributions are made (other than a plan for which aggregation with the Plan is not permitted), the before-tax contributions made with respect to such Highly Compensated Employee shall be aggregated for purposes of determining his ADP. The ADP shall be rounded to the nearest 1/100th of a percent and shall be calculated in a manner consistent with the terms of Code Section 401(k)and the regulations promulgated thereunder. If a Participant is eligible to participate in the Plan for all or a portion of a Plan Year by reason of satisfying the eligibility requirements of Article II but makes no Before-Tax Contributions and receives no allocation of Qualified Nonelective Contributions that are taken into account for purposes of the ADP Tests, such Participant's ADP for such Plan Year shall be zero. 1.7 ADP Tests shall mean the nondiscrimination tests described in Sections 6.3 and 6.5. 1.8 Affiliate shall mean, as of any date, (i) a Participating Company, and (ii) any company, person or organization which, on such date, (A) is a member of the same controlled group of corporations [within the meaning of Code Section 414(b)] as is a Participating Company; (B) is a trade or business (whether or not incorporated) which controls, is controlled by or is under common control [within the meaning of Code Section 414(c)] with a Participating Company; (C) is a member of an affiliated service group [as defined in Code Section 414(m)] which includes a Participating Company; or (D) is required to be aggregated with a Participating Company pursuant to regulations promulgated under Code Section 414(o). Solely for purposes of Sections 6.7 and 1.20(d), the term "Affiliate" as defined in this Section shall be deemed to include any entity that would be an Affiliate if the phrase "more than 50 percent" were substituted for the phrase "at least 80 percent" in each place the latter phrase appears in Code Section 1563(a)(l). 1.9 Annual Addition shall mean the sum of the amounts described in Section 6.7(d). 1.10 Basic Matching Contribution shall mean the amounts paid by each Participating Company to the Trust Fund as a basic match to Participants' Before-Tax Contributions as provided in Section 3.2(a). 2 1.11 Before-Tax Account shall mean the separate subaccount established and maintained on behalf of a Participant or Beneficiary to reflect his interest in the Trust Fund attributable to his Before-Tax Contributions. 1.12 Before-Tax Contributions shall mean the amount paid by each Participating Company to the Trust Fund at the election of Participants pursuant to the terms of Section 3.l(a). 1.13 Beneficiary shall mean the person(s) designated in accordance with Section 9.6 to receive any death benefits that may be payable under the Plan upon the death of a Participant. 1.14 Board shall mean the board of directors of the Controlling Company or any committee(s) or individual(s) authorized to act on behalf of such board of directors. 1.15 Break in Service means any Plan Year during which an Employee fails to complete at least 1 Hour of Service; provided, in determining whether a Break in Service has occurred, the terms of subsections (a), (b) and (c) hereof shall apply. (a) Leave of Absence. A Break in Service shall not be deemed to have occurred during any period for which he is granted a Leave of Absence. (b) Maternity or Paternity Leave. For purposes of determining whether or not an Employee has incurred a Break in Service, an Employee absent from work due to a Maternity or Paternity Leave shall be credited with at least 1 Hour of Service in the year in which the Maternity or Paternity Leave begins, unless such Hour of Service is not required to prevent the Employee from incurring a Break in Service in such year, in which event such Hour of Service shall be credited to the Employee in the immediately following year. No Hour of Service shall be credited due to Maternity or Paternity Leave as described in this Section unless the Employee furnishes proof satisfactory to the Administrative Committee (A) that his absence from work was due to a Maternity or Paternity and (B) of the number of days he was absent due to the Maternity or Paternity Leave. The Administrative Committee shall prescribe uniform and nondiscriminatory procedures by which to make the above determinations. (c) Effect of Family and Medical Leave Act. For purposes of determining whether or not an Employee has incurred a Break in Service, and solely for the purpose of avoiding a Break in Service, to the extent required under the Family and Medical Leave Act of 1993 and the regulations thereunder, an Employee shall be deemed to be performing services for an Affiliate during any period the Employee is granted leave under such Act (i) for the birth of a child, (ii) the placement with the Employee of a child for adoption or foster care, (iii) to care for the spouse or a child or parent of the Employee with a serious health condition, or (iv) for a serious health condition that makes the Employee unable to perform the functions of the Employee's job. 1.16 Business Day shall mean any day other than a Saturday, Sunday or a day designated as a holiday by the Federal Government. 1.17 Code shall mean the Internal Revenue Code of 1986, as amended, and any succeeding federal tax provisions. 3 1.18 Company Stock shall mean the $.05 par value per share common stock of Home Depot. 1.19 Company Stock Fund shall mean the Investment Fund invested primarily in shares of Company Stock. 1.20 Compensation shall have the meaning set forth in subsection (a), (b), (c), (d), (e) or (f) hereof, whichever is applicable: (a) Benefit Compensation. For purposes of determining the amount of Before-Tax Contributions pursuant to Section 3.1, determining the amount of Matching Contributions pursuant to Section 3.2, allocating Qualified Nonelective Contributions pursuant to Section 5.4, and for all other purposes except those set forth in subsections (b), (c), (d), (e) and (f) hereof, "Compensation" shall mean, for any Plan Year, the total of the amounts described in subsections (1) and (2) minus the amounts described in subsections (3), (4), (5) and (6), as follows: (1) all amounts that are wages within the meaning of Code Section 3401 (a) and all other payments of compensation to an Employee by an Affiliate (in the course of the Affiliate's trade or business) for which the Affiliate is required to furnish the Employee a written statement under Code Sections 6041(d), 6051(a)(3) and 6052 (i.e., all amounts reportable by Affiliates on IRS Form W-2); provided, such amounts shall be determined without regard to any rules that limit the remuneration included in wages based on the nature or location of employment or the services performed [such as the exception for agricultural labor in Code Section 3401(a)(2)]; plus (2) any elective deferral (as defined in Section 402(g)(3)), and any amount which is contributed or deferred by an Affiliate at the election of the Employee and which is not includible in the gross income of the Employee by reason of Code Section 125 or 457, or for Plan Years beginning on or after January 1, 2001, by reason of Code Section 132(f)(4); minus (3) all amounts included in subsection (1) that consist of any reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation and welfare benefits (even if includible in gross income); minus (4) any amounts included in subsection (1) or (2) that consist of amounts paid or made available to a Participant during the Plan Year while he is not an Active Participant; minus (5) any payments under a legal settlement or judgment involving the Controlling Company or an Affiliate, unless such settlement or judgment expressly provides that such payments are to be taken into account for purposes of determining a Participant's benefits under the Plan; minus (6) all Compensation in excess of $170,000 (or such other limit as is applicable for the Plan Year under Code Section 401(a)(17)). 4 (b) Section 404 Compensation. Solely for purposes of Section 6.1 (relating to maximum deductible contribution limitations under Code Section 404), "Compensation" shall mean, with respect to a Participant for a specified period, the amounts from all Affiliates referred to in subsection (a)(l) hereof minus the amount described in (a)(6) hereof. (c) Top-Heavy Compensation. Solely for purposes of Section 14.3 (relating to minimum Contributions under a Top-Heavy Plan), "Compensation" shall mean, with respect to a Participant for a specified period, the amounts from all Affiliates referred to in subsections (a)(l) and (a)(2) hereof minus the amount described in (a)(6) hereof. (d) Section 415 Compensation. Solely for purposes of Section 6.7 (relating to maximum contribution and benefit limitations under Code Section 415), "Compensation" shall mean, with respect to a Participant for a Limitation Year, the total of the amounts from all Affiliates referred to in subsections (a)(l) and (a)(2) hereof if "Limitation Year" were substituted for "Plan Year"; provided, prior to January 1, 1998, only the amounts in subsection (a)(l) shall be included. (e) Key Employee and Highly Compensated Employee Compensation. Solely for purposes of determining which Employees are Key Employees under Section 14.2(b)(2) and which Employees are Highly Compensated Employees under Section 1.42 for any applicable Plan Year, "Compensation" shall mean, with respect to an Employee for a specified Plan Year, the total of the amounts from all Affiliates referred to in subsections (a)(l) and (a)(2) hereof; provided that for determining Highly Compensated Employees for Plan Years beginning prior to January 1, 2002, amounts described in Code Section 132(f)(4) shall be disregarded. (f) Testing Compensation. For purposes of performing discrimination testing to ensure compliance with Code Sections 401(a)(4), 401(k)and 401(m)and for purposes of allocating Qualified Nonelective Contributions under Section 5.4(d), "Compensation" generally shall mean the total of the amounts from all Affiliates determined under subsection (a) without regard to subsection (a)(5); provided, on a plan year-by-plan year basis, the Administrative Committee may elect to use any other definition that satisfies the nondiscrimination requirements of Code Section 414(s). 1.21 Contributions shall mean, individually or collectively, the Before-Tax, Matching, Qualified Nonelective, Rollover, Restoration and Transfer Contributions permitted under the Plan. 1.22 Controlling Company shall mean Maintenance Warehouse/America Corp., a Texas corporation, and its successors which adopt the Plan. 1.23 Covered Employee shall mean an Employee of a Participating Company other than: (a) An Employee who is a leased employee within the meaning of Code Section 414(n); 5 (b) An individual classified as an independent contractor or leased employee under a Participating Company's customary worker classification procedures (whether or not such individual is actually an Employee); (c) An Employee who is a member of a collective bargaining unit, unless the terms of the collective bargaining agreement require that the Employee be eligible to participate in the Plan; or (d) An Employee who is a nonresident alien who receives no earned income from an Affiliate which constitutes income from sources within the United States. 1.24 Deferral Election shall mean an election by an Active Participant directing the Participating Company of which he is an Employee to withhold a percentage of his current Compensation from his paychecks and to contribute such withheld amount to the Plan as Before-Tax Contributions, pursuant to the terms of Section 3.1. 1.25 Defined Benefit Minimum shall mean the minimum benefit level as described in Section 14.3(d). 1.26 Defined Benefit Plan shall mean any qualified retirement plan maintained by an Affiliate which is not a Defined Contribution Plan. 1.27 Defined Contribution Minimum shall mean the minimum contribution level as described in Section 14.3(c). 1.28 Defined Contribution Plan shall mean any qualified retirement plan maintained by an Affiliate which provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant's account and any income, expenses, gains, losses and forfeitures of accounts of other participants, which may be allocated to such participant's account. 1.29 Determination Date shall mean the date described in Section 14.2(b)(l). 1.30 Disability or Disabled shall mean that a Participant is wholly prevented from engaging in his regular duties for the Controlling Company or an Affiliate by reason of a medically determinable physical or mental impairment that can be expected to result in death or to be of long-continued and indefinite duration. The determination of Disability shall be made by the Administrative Committee or an entity or person appointed by the Administrative Committee; provided, until the Administrative Committee determines otherwise, such determination shall be made by an insurance carrier that offers long-term disability insurance to the public and that is selected by the Administrative Committee. In determining whether a Participant has suffered a Disability, the Administrative Committee or its designee may require such medical proof as it deems necessary, including the certificate of one or more licensed physicians selected by the Administrative Committee. The decision of the Administrative Committee as to Disability shall be final and binding. Notwithstanding anything herein to the contrary, a Participant shall be deemed to be Disabled upon a determination by the Social Security Administration, while the Participant is an Employee, that the Participant is eligible for Social Security disability benefits. 6 1.31 Effective Date shall mean January 1, 2001, the date that this restatement of the Plan generally shall be effective; provided, any effective date specified herein for any provision, if different from the "Effective Date," shall control (see also Section 15.14). The effective date of participation in the Plan for each Participating Company shall be the date set forth with respect to the Participating Company in Schedule A hereto. 1.32 Elective Deferrals shall mean, with respect to a Participant for any calendar year, the total amount of his Before-Tax Contributions plus such other amounts as shall be determined pursuant to the terms of Code Section 402(g)(3). 1.33 Eligible Nonhighly Compensated Participant shall mean, for a Plan Year, a Participant who (i) is taken into account in performing the ADP and ACP Tests for the Plan Year, and (ii) is not a Highly Compensated Employee. 1.34 Eligible Participant shall mean, for purposes of allocating Qualified Nonelective Contributions for a Plan Year, an Employee (i) who is not a Highly Compensated Employee, and (ii) who is taken into account in performing the ADP and ACP Tests for such Plan Year. 1.35 Eligible Retirement Plan shall mean a plan which is a defined contribution plan, the terms of which permit the acceptance of rollover distributions and which is either (i) an individual retirement account described in Code Section 408(a), (ii) an individual retirement annuity described in Code Section 408(b) (other than an endowment contract), (iii) a qualified trust described in Code Section 401(a) and exempt from tax under Code Section 501(a), or (iv) an annuity plan described in Code Section 403(a). In the case of a distribution to the Surviving Spouse, Eligible Retirement Plan shall mean the Plan described in either clause (i) or (ii) hereof. 1.36 Eligible Rollover Distribution shall mean any distribution to (i) a Participant, (ii) his Surviving Spouse (after his death), or (iii) his Spouse or former Spouse who is his alternate payee under a qualified domestic relations order (see Sections 9.5 and 15.1), of all or any portion of the balance to his credit in a qualified trust (including any distribution to a Participant of all or any portion of his Account); provided, an "Eligible Rollover Distribution" shall not include (i) any distribution which is one of a series of substantially equal periodic payments made, not less frequently than annually, (A) for the life (or life expectancy) of the Participant or the joint lives (or joint life expectancies) of the Participant and his Beneficiary, or (B) for a specified period of 10 years or more, (ii) any distribution to the extent such distribution is required under Code Section 401(a)(9), (iii) the portion of any distribution that is not includible in gross income of the distributee, (iv) as of December 1, 1999, withdrawals on account of hardship, as described in Code Section 401(k)(2)(B)(i)(IV) and the regulations promulgated thereunder, to the extent such withdrawals are made from Before-Tax Contributions, and (v) distributions which total less than $200 in a Plan Year. 1.37 Employee shall mean any individual who is employed by an Affiliate (including officers, but excluding independent contractors and directors who are not officers or otherwise employees) and shall include leased employees of an Affiliate within the meaning of Code Section 414(n). Notwithstanding the foregoing, if leased employees constitute 20 percent or less of an Affiliate's non-highly compensated work force within the meaning of Code Section 1.24 7 414(n)(5)(C)(ii), the term "Employee" shall not include those leased employees covered by a plan described in Code Section 414(n)(5)(B). Effective March 17, 1997, the term "leased employee" shall include only persons performing services under the primary direction and control of an Affiliate and otherwise meeting the definition of Code Section 414(n). 1.38 Employment Date shall mean, with respect to any Employee, the date on which he first completes an Hour of Service. Unless otherwise determined by the Administrative Committee, if an Employee was employed by one or more companies or enterprises acquired by or merged into, or all or a portion of the assets or business of which are acquired by, an Affiliate, such Employee's Employment Date shall be the date on which he first completed an Hour of Service with such company, enterprise or business. 1.39 Entry Date shall mean the first day of every calendar quarter during the period in which the Plan remains in effect. In addition, the Administrative Committee may prescribe and set forth on a schedule hereto or in its records a special Entry Date for individuals who are employed by a predecessor employer or a new Participating Company, and who otherwise have satisfied the requirements for eligibility. 1.40 ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.41 Forfeiture shall mean, for any Plan Year, the dollar amount that is removed from the Account of a former Employee during such Plan Year. 1.42 Highly Compensated Employee shall mean an Employee who is described either in subsection (a)(l) or (2), as modified by subsections (b), (c), (d) or (e) hereof. (a) General Rule. (1) An Employee who at any time during the current Plan Year or the immediately preceding Plan Year owned [or was considered as owning within the constructive ownership rules of Code Section 318 as modified by Code Section 416(i)(l)(B)(iii)] more than 5 percent of the outstanding stock of a corporate Affiliate or stock possessing more than 5 percent of the total combined voting power of all stock of a corporate Affiliate or more than 5 percent of the capital or profits interest in a noncorporate Affiliate; or (2) An Employee who at any time during the immediately preceding Plan Year: (A) received Compensation in excess of $85,000 (as adjusted by the Internal Revenue Service under Code Section 414(q) [which references Code Section 415(d)] and the regulations promulgated thereunder for cost of living increases); and (B) if the Controlling Company so elects by an amendment, was within the group consisting of the most highly compensated 20 percent of all 8 Employees (determined on the basis of "Compensation" as defined in Section 1.20(e). (b) Excluded Employees. For purposes of subsection (a)(2)(B) hereof, the following may be excluded when determining the most highly compensated 20 percent of all Employees: (1) Employees who have not completed 6 months of service; (2) Employees who normally work fewer than 17 1/2 hours per week; (3) Employees who normally work not more than 6 months during any Plan Year; and (4) Employees who have not attained age 21. (c) Former Employees. For purposes of this Section, a former Employee shall be treated as a Highly Compensated Employee if (i) the former Employee was a Highly Compensated Employee at the time the Employee separated from service with all Affiliates, or (ii) the former Employee was a Highly Compensated Employee at any time after he attained age 55. (d) Nonresident Aliens. For purposes of this Section, nonresident aliens who receive no earned income from an Affiliate which constitutes income from sources within the United States [as described in Code Section 414(q)(8)] shall not be treated as Employees. (e) Compliance with Code Section 414(q). Notwithstanding the foregoing, the determination of who is a Highly Compensated Employee shall be made in accordance with Code Section 414(q) and the regulations promulgated thereunder. 1.43 Home Depot shall mean The Home Depot, Inc., a Delaware corporation, and its successors. 1.44 Home Depot Board shall mean the board of directors of Home Depot. 1.45 Hour of Service shall mean the increments of time described in subsection (a) hereof, as modified by subsections (b), (c) and (d) hereof: (a) General Rule. (1) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Affiliate during the applicable computation period; (2) Each hour for which an Employee is paid, or entitled to payment, by an Affiliate on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including Disability), layoff, jury duty, military duty or Leave of Absence; provided: 9 (A) No more than 501 Hours of Service shall be credited under this subsection (2) to an Employee for any single continuous period during which he performs no duties as an Employee (whether or not such period occurs in a single computation period); (B) An hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which he performs no duties as an Employee shall not be credited as an Hour of Service if such payment is made or due under a plan maintained solely to comply with applicable workers' compensation, unemployment compensation or disability insurance laws; and (C) Hours of Service shall not be credited to an Employee for a payment which solely reimburses such Employee for medical or medically related expenses incurred by him. For purposes of this subsection (2), a payment shall be deemed to be made by or due from an Affiliate regardless of whether such payment is made by or due from an Affiliate directly, or indirectly through, among others, a trust fund or insurer, to which the Affiliate contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular Employees or are on behalf of a group of Employees in the aggregate; (3) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Affiliate; provided, the same Hours of Service shall not be credited both under subsection (1) or subsection (2), as the case may be, and under this subsection (3); and, provided further, crediting of Hours of Service for back pay awarded or agreed to with respect to periods described in subsection (2) shall be subject to the limitations set forth in that subsection; and (4) Each hour for which an Employee is required to be granted leave under the Uniformed Services Employment and Reemployment Rights Act of 1994; provided, the same Hours of Service shall not be credited under subsections (1), (2) or (3), as the case may be, and under this subsection (4). (b) Equivalencies. Notwithstanding anything herein to the contrary, in accordance with applicable regulations promulgated by the Department of Labor, any Employees designated by the Administrative Committee (including but not limited to Employees for whom accurate Hours of Service are not available) shall be credited with 45 Hours of Service for each week for which such Employee would be required to be credited with at least 1 Hour of Service. (c) Changes by Administrative Committee. The rate or manner used for crediting Hours of Service may be changed at the direction of the Administrative Committee from time to time so as to facilitate administration and to equitably reflect the purposes of the Plan; provided, no change shall be effective as to any Plan Year for which allocations have been made pursuant to Article V at the time such change is made. Hours of Service shall be credited and determined in compliance with Department of Labor Regulation Section 2530.200b-2(b) and 10 (c), 29 CFR Part 2530, as may be amended from time to time, or such other federal regulations as may from time to time be applicable. (d) Computation Period. For purposes of this Section, a "computation period" shall mean the 12-month period that forms the basis for determining an Employee's Years of Eligibility Service or Years of Vesting Service, whichever is applicable. 1.46 Investment Committee shall mean the committee which shall make and effect investment decisions, all as provided in Article XI. 1.47 Investment Fund or Funds shall mean one or all of the investment funds established from time to time pursuant to the terms of Section 7.2. 1.48 Key Employee shall mean the persons described in Section 14.2(b)(2). 1.49 Leave of Absence shall mean an excused leave of absence granted to an Employee by an Affiliate in accordance with applicable federal or state law or the Affiliate's personnel policy. Among other things, Leave of Absence shall be granted to an Employee under such circumstances as the Administrative Committee shall determine are fair, reasonable and equitable, as applied uniformly among Employees under similar circumstances. 1.50 Limitation Year shall mean the 12-month period ending on each December 31, which shall be the "limitation year" for purposes of Code Section 415 and the regulations promulgated thereunder. 1.51 Matching Account shall mean the separate subaccount established and maintained on behalf of a Participant or Beneficiary to reflect his interest in the Trust Fund attributable to Matching Contributions. 1.52 Matching Contributions shall mean the amounts paid by each Participating Company to the Trust Fund as a match on Participant's Before-Tax Contributions. 1.53 Maternity or Paternity Leave shall mean any period during which an Employee is absent from work as an Employee of an Affiliate (i) because of the pregnancy of such Employee, (ii) because of the birth of a child of such Employee, (iii) because of the placement of a child with such Employee in connection with the adoption of such child by such Employee, or (iv) for purposes of such Employee caring for a child immediately after the birth or placement of such child. 1.54 Maximum Deferral Amount shall mean $10,500 (or such other limit as is applicable for a Plan Year under Code Section 402(g)), as adjusted by the Secretary of the Treasury under Code Section 402(g)(5) for cost of living expenses. 1.55 Named Fiduciary shall mean the Controlling Company, the Board, the Administrative Committee and the Investment Committee. 1.56 Non-Key Employee shall mean the persons described in Section 14.2(b)(3). 11 1.57 Normal Retirement Age shall mean age 65. 1.58 Participant shall mean any person who has been admitted to, and has not been removed from, participation in the Plan pursuant to the provisions of Article II. "Participant" shall include an Active Participant and a former Employee who has an Account under the Plan. 1.59 Participating Company shall mean a company that has adopted or hereafter may adopt the Plan for the benefit of its Employees and that continues to participate in the Plan, all as provided in Section 13.3. 1.60 Permissive Aggregation Group shall mean the group of plans described in Section 14.2(b)(4). 1.61 Plan shall mean The Maintenance Warehouse FutureBuilder as contained herein and all amendments hereto. The Plan is intended to be a profit sharing plan qualified under Code Sections 401 (a) and 401(k). 1.62 Plan Year shall mean the 12-month period ending on each December 31. 1.63 Prior Plan shall mean a qualified retirement plan from which the Plan accepts Transfer Contributions. 1.64 Qualified Nonelective Account shall mean the separate subaccount established and maintained on behalf of a Participant or Beneficiary to reflect his interest in the Trust Fund attributable to Qualified Nonelective Contributions. 1.65 Qualified Nonelective Contributions shall mean the qualified nonelective contributions paid to the Trust Fund by each Participating Company pursuant to the terms of Section 3.3. 1.66 Qualified Spousal Waiver shall mean a written election executed by a Spouse, delivered to the Administrative Committee and witnessed by a notary public or a Plan representative, which consents to the payment of all or a specified portion of a Participant's death benefit to a Beneficiary other than such Spouse and which acknowledges that such Spouse has waived his right to be the Participant's Beneficiary under the Plan. A Qualified Spousal Waiver shall be valid only with respect to the Spouse who signs it and shall apply only to the alternative Beneficiary designated therein, unless the written election expressly permits other designations without further consent of the Spouse. A Qualified Spousal Waiver shall be irrevocable unless revoked by the Participant by way of (i) a written statement delivered to the Administrative Committee or (ii) a written revocation of the non-Spouse Beneficiary designation to which such Spouse has consented; provided, any such revocation must be received by the Administrative Committee prior to the Participant's date of death. 1.67 Required Aggregation Group shall mean the group of plans described in Section 14.2(b)(5). 1.68 Restoration Contributions means the amounts paid to the Trust Fund on behalf of a rehired individual pursuant to Section 3.7. 12 1.69 Rollover Account shall mean the separate subaccount established and maintained on behalf of a Covered Employee, Participant or Beneficiary to reflect his interest in the Trust Fund attributable to Rollover Contributions. 1.70 Rollover Contribution shall mean an amount contributed to the Trust Fund (and received and accepted by the Trustee) which constitutes an "eligible rollover contribution" as defined in Code Section 402(f)(2)(A). An amount shall be treated as a Rollover Contribution only to the extent that its acceptance by the Trustee is permitted under the Code (including the regulations and rulings promulgated thereunder). 1.71 Spouse or Surviving Spouse shall mean, with respect to a Participant, the person who is treated as married to such Participant under the laws of the state in which the Participant resides. The determination of a Participant's Spouse or Surviving Spouse shall be made as of the earlier of the date as of which benefit payments from the Plan to such Participant are made or commence (as applicable) or the date of such Participant's death. In addition, a Participant's former Spouse shall be treated as his Spouse or Surviving Spouse to the extent provided under a qualified domestic relations order, as defined in Code Section 414(p). 1.72 Supplemental Annual Matching Contributions shall mean the amounts paid by each Participating Company to the Trust Fund as a supplemental annual matching contribution to Participants' Before-Tax Contributions as provided in Section 3.2(b). 1.73 Top-Heavy Group shall mean the group of plans described in Section 14.2(b)(6). 1.74 Top-Heavy Plan shall mean a plan to which the conditions set forth in Article XIV apply. 1.75 Transfer Account shall mean one or more separate subaccounts established and maintained on behalf of a Participant or Beneficiary to reflect his interest in the Trust Fund attributable to Transfer Contributions; provided, to the extent that the Administrative Committee (in conjunction with the Plan's recordkeeper) deems appropriate, other subaccounts may be used to reflect Participant's interests attributable to Transfer Contributions. "Transfer Account" shall refer to the aggregate of all separate subaccounts established for Transfer Contributions or to individual, separate subaccounts appropriately described, as may be appropriate in context. Transfer Accounts shall be reflected and described on a schedule hereto. 1.76 Transfer Contributions shall mean amounts which are received either (i) by a direct trustee-to-trustee transfer or (ii) as part of a spin-off, merger or other similar event by the Trustee from the trustee or custodian of the Prior Plan and held in the Trust Fund on behalf of a Participant or Beneficiary. Transfer Contributions shall retain the character that those contributions had under the Prior Plan; for example, after-tax contributions under the Prior Plan shall continue to be treated as after-tax contributions when held in the Transfer Account. 1.77 Trust or Trust Agreement shall mean each agreement entered into between the Controlling Company and a Trustee governing the creation of a Trust Fund, and all amendments thereto. If more than one Trust Fund is used to hold Plan assets, there shall be a separate and distinct Trust and Trust Agreement for each such Trust Fund. To the extent indicated by the 13 context, "Trust" or "Trust Agreement" may refer collectively to all Trusts and Trust Agreements creating Trust Funds. 1.78 Trustee shall mean the party or parties so designated from time to time pursuant to a Trust Agreement. If more than one Trust Fund is used to hold Plan assets, there may be a separate and distinct Trustee for each such Trust Fund. To the extent indicated by the context, "Trustee" may refer to all of the Trustees or Trustee groups for the Trust Funds. 1.79 Trust Fund shall mean the total amount of cash and other property held by a Trustee (or any nominee thereof) at any time under a Trust Agreement. To the extent indicated by context, "Trust Fund" may refer to all of the Trust Funds under the Plan. 1.80 Valuation Date shall mean each day the New York Stock Exchange is open for trading. The value of an Account or the Trust Fund on any other date shall be the value determined as of the immediately preceding date on which the New York Stock Exchange was open for trading. 1.81 Year of Eligibility Service shall mean a 12-consecutive month period during which an Employee completes no less than 1,000 Hours of Service, subject to subsections (a), (b), (c) and (d) below: (a) Computation Period. For purposes of determining whether an Employee has completed a Year of Eligibility Service, the computation period initially shall be the 12-consecutive-month period beginning on the Employee's Employment Date and thereafter shall be each Plan Year, beginning with the Plan Year that includes the first anniversary of the Employee's Employment Date. (b) Predecessor Employer. Unless otherwise determined by the Administrative Committee and not otherwise counted hereunder, an Employee's periods of employment with one or more companies or enterprises (i) acquired in whole or in party by, (ii) merged into, or (iii) all or a portion of the assets or business of which are acquired by, an Affiliate shall be taken into account in determining whether he has completed a Year of Eligibility Service. (c) Service Counted under The Home Depot FutureBuilder. For the purpose of determining a Year of Eligibility Service, any service credited for eligibility purposes under The Home Depot FutureBuilder shall be included in the determination of whether an Employee has completed a Year of Eligibility Service. (d) Reemployed Veterans. Notwithstanding any provision to the contrary, periods of qualified military service shall be taken into account in determining whether an Employee has completed a Year of Eligibility Service in accordance with the requirements of Code Section 414(u). 1.82 Years of Vesting Service shall mean, with respect to an Employee, and subject to the terms of subsections (a), (b), (c), (d), (e) and (f) hereof, the number of Plan Years during which the Employee completes at least 1,000 Hours of Service: 14 (a) Pre-Break Service. If a Participant incurs a Break in Service, the Participant shall not be credited with Years of Vesting Service completed prior to such Break in Service unless and until such Participant has completed a Year of Vesting Service following his reemployment. In addition, Years of Vesting Service completed prior to a period in which the Participant incurred 5 or more consecutive Breaks in Service shall be disregarded under the Plan if the Participant had no vested interest in his Account attributable to employer contributions at the time the first Break in Service commenced. (b) Post-Break Service. Years of Vesting Service completed after a period in which the Participant had at least 5 consecutive Breaks in Service shall be disregarded for the purpose of determining his vested interest in that portion of his Account which accrued before such Breaks in Service. (c) Predecessor Plan. To the extent required by Code Section 414(a)(l) and not otherwise counted hereunder, if an Affiliate maintains a plan that is or was the qualified retirement plan of a predecessor employer, an Employee's periods of employment with such predecessor employer shall be taken into account in determining his Years of Vesting Service. (d) Predecessor Employer. Unless otherwise determined by the Administrative Committee and not otherwise counted hereunder, an Employee's periods of employment with one or more companies or enterprises acquired by or merged into, or all or a portion of the assets or business of which are acquired by, an Affiliate shall be taken into account in determining his Years of Vesting Service. (e) Service Counted under The Home Depot FutureBuilder. Any service credited for vesting purposes under The Home Depot FutureBuilder shall be included in the determination of an Employee's Years of Vesting Service. (f) Reemployed Veterans. Notwithstanding any provision to the contrary, periods of qualified military service shall be taken into account in determining an Employee's Years of Vesting Service in accordance with the requirements of Code Section 414(u). 15 ARTICLE II ELIGIBILITY 2.1 Initial Eligibility Requirements. (a) General Rule. Except as provided in subsections (b), (c) or (d) hereof, every Covered Employee shall become an Active Participant on the Entry Date coincident with or next following the date on which he first completes 1 Year of Eligibility Service, provided that he is a Covered Employee on such Entry Date. (b) Participation Upon Effective Date. Each Covered Employee who is an Active Participant in the Plan on the day immediately preceding the Effective Date shall continue as an Active Participant in the Plan in accordance with the terms of the Plan. (c) New Participating Companies. For Employees of companies that become Participating Companies after the Effective Date, each Covered Employee employed by a Participating Company on the date such Participating Company first becomes a Participating Company shall become an Active Participant as of such Participating Company's effective date under the Plan, if, as of the Participating Company's effective date, the Covered Employee has met the eligibility requirements set forth in this Section 2.1. (d) Predecessor Employer. The Administrative Committee may prescribe and set forth on a schedule hereto or in its records special eligibility rules for individuals who are employed by a predecessor employer acquired by or merged into, or all or a portion of the assets or business of which are acquired by, an Affiliate. 2.2 Treatment of Interruptions of Service. (a) Leave of Absence or Layoff. If a Covered Employee satisfies the eligibility requirements set forth in Section 2.1 but is on a Leave of Absence or layoff on the Entry Date on which he otherwise would have become an Active Participant, he shall become an Active Participant on the date he subsequently resumes the performance of duties as a Covered Employee in accordance with the terms of his Leave of Absence or layoff. (b) Termination Before Participation. If a Covered Employee satisfies the eligibility requirements set forth in Section 2.1, terminates employment with a Participating Company (and all other Participating Companies) before the Entry Date on which he otherwise would become an Active Participant, and then is reemployed by a Participating Company, he shall become an Active Participant as of the later of (i) the Entry Date on which he otherwise would have become an Active Participant if he had not terminated employment or (ii) the Entry Date coinciding with or immediately preceding the date he is reemployed as a Covered Employee. (c) Termination After Participation. If an Active Participant terminates employment with a Participating Company (and all other Participating Companies), his active participation in the Plan shall cease immediately, and he again shall become an Active Participant as of the day he again becomes a Covered Employee. However, regardless of 16 whether he again becomes an Active Participant, he shall continue to be a Participant until he no longer has an Account under the Plan. 2.3 Change in Status. (a) Exclusion Before Participation. If a Covered Employee (i) satisfies the eligibility requirements set forth in Section 2.1, (ii) changes his employment status (but remains employed) so that he ceases to be a Covered Employee before the Entry Date on which he otherwise would become an Active Participant, and (iii) then again changes his employment status and becomes a Covered Employee, he shall become an Active Participant as of the later of (A) the date that would have been his Entry Date, or (B) the date he again becomes a Covered Employee. (b) Exclusion After Participation. If an Active Participant changes his status of employment (but remains employed) so that he is no longer a Covered Employee, his active participation in the Plan shall cease immediately, and he shall again become an Active Participant in the Plan as of the day he again becomes a Covered Employee. However, regardless of whether he again becomes an Active Participant, he shall continue to be a Participant until he no longer has an Account under the Plan. (c) Change to Covered Employee Status. If an Employee who first satisfies the eligibility requirements of Section 2.1 while he is not a Covered Employee subsequently changes his employment status so that he becomes a Covered Employee, he shall become an Active Participant as of the later of (i) the date that would have been his Entry Date, or (ii) the date of his change in status. 17 ARTICLE III CONTRIBUTIONS 3.1 Before-Tax Contributions. (a) Generally. Each Participating Company shall contribute to the Plan, on behalf of each Active Participant employed by such Participating Company and for each regular payroll period, a Before-Tax Contribution in an amount equal to the amount by which such Active Participant's Compensation has been reduced for such period pursuant to his Deferral Election. The amount of the Before-Tax Contribution shall be determined in increments of 1 percent of such Active Participant's Compensation for each payroll period. The Active Participant may elect to reduce his Compensation for any period by a minimum of 1 percent and a maximum of 15 percent (or such other minimum or maximum percentages and/or amounts established by the Administrative Committee from time to time), subject to the limitations in Article VI. (b) Deferral Elections. Each Active Participant who desires that his Participating Company make a Before-Tax Contribution on his behalf shall make a Deferral Election on a form provided by the Administrative Committee, through an interactive telephone or internet-based system, or in such other manner as the Administrative Committee may prescribe. Such Deferral Election shall provide for the reduction of his Compensation from each payment of eligible Compensation made while he is an Active Participant. The Administrative Committee, in its sole discretion, may prescribe such nondiscriminatory terms and conditions governing Deferral Elections as it deems appropriate. Subject to any modifications, additions or exceptions which the Administrative Committee, in its sole discretion, deems necessary, appropriate or helpful, the following terms shall apply to Deferral Elections: (1) Effective Date. An Active Participant's initial Deferral Election shall be effective for the first paycheck payable on or after an Entry Date. If an Active Participant fails to submit a Deferral Election in a timely manner, he shall be deemed to have elected a deferral of zero percent. (2) Term. Each Active Participant's Deferral Election shall remain in effect in accordance with its original terms until the earlier of (A) the date the Active Participant ceases to be a Covered Employee of all Participating Companies, (B) the date the Active Participant revokes such Deferral Election pursuant to the terms of subsection (b)(3) hereof, or (C) the date the Active Participant or the Administrative Committee modifies such Deferral Election pursuant to the terms of subsections (b)(4) or (b)(5) hereof. If the final payment of Compensation to an Active Participant is not made through the Participating Company's regular payroll process, the Active Participant's Deferral Election shall not apply to such payment. If a Participant is transferred from the employment of a Participating Company to the employment of another Participating Company, his Deferral Election with the first Participating Company will remain in effect and will apply to his Compensation from the second Participating Company until the earlier of (A), (B) or (C) of the preceding sentence. 18 (3) Revocation. An Active Participant's Deferral Election shall terminate upon his ceasing to be a Covered Employee. In addition, an Active Participant may revoke his Deferral Election with a Participating Company in the manner prescribed by the Administrative Committee, and such revocation shall be effective as soon as administratively practicable after being submitted in accordance with procedures established for the Plan. An Active Participant who revokes a Deferral Election may enter into a new Deferral Election in the manner prescribed by the Administrative Committee, effective as soon as administratively practicable after being submitted in accordance with procedures established under the Plan; provided, the Administrative Committee, in its sole discretion, may specify a suspension period for all Participants who voluntarily revoke their Deferral Elections, such that any new Deferral Election shall not be effective until a later date. (4) Modification by Participant. Effective as soon as administratively practicable after being submitted in accordance with procedures established under the Plan, an Active Participant may modify his existing Deferral Election to increase or decrease the percentage of his Before-Tax Contribution by making a new Deferral Election in the manner prescribed by the Administrative Committee. (5) Modification by Administrative Committee. Notwithstanding anything herein to the contrary, the Administrative Committee may modify any Deferral Election of any Active Participant at any time by decreasing the percentage of any Before-Tax Contributions to any extent the Administrative Committee believes necessary to comply with the limitations described in Article VI. 3.2 Matching Contributions. (a) Basic Matching Contributions. For each Active Participant on whose behalf a Participating Company has made any Before-Tax Contributions, such Participating Company shall make, with respect to such payroll period or other payment of Compensation, a Basic Matching Contribution to the Plan equal to: (1) 150 percent of the amount of such Before-Tax Contributions to the extent such Before-Tax Contributions do not exceed 2 percent of a Participant's Compensation for a payroll period (that is, such Matching Contributions shall not exceed 3 percent of the Active Participant's Compensation for such payroll period); and (2) 100 percent of the amount of such Before-Tax Contributions to the extent such Before-Tax Contributions exceed 2 percent but do not exceed 5 percent of a Participant's Compensation for such payroll period; (that is, the aggregate Matching Contributions made under subsection (a)(l) and this subsection (a)(2) shall not exceed 3 percent of the Active Participant's Compensation for such payroll period). (b) Supplemental Annual Matching Contributions. (1) General. For each Plan Year commencing on or after January 1, 2000, for each Active Participant who satisfies all of the conditions set forth in subsection (b)(2) hereof for all periods through the last day of such Plan Year, such 19 Participating Company shall make a Supplemental Annual Matching Contribution equal to 4.5 percent of such Active Participant's Compensation for such Plan Year; provided, the Supplemental Annual Matching Contribution made with respect to any Active Participant who is a Highly Compensated Employee for such Plan Year shall equal 4 percent of such Active Participant's Compensation for such Plan Year. (2) Conditions for Eligibility. In order to be eligible for a Supplemental Annual Matching Contribution under this subsection (b) for a Plan Year, the Active Participant must meet the following eligibility conditions: (A) The individual must have been employed by the Controlling Company on July 1, 1999; (B) Commencing on or before the later of December 31, 1999, or the individual's Entry Date into the Plan, the individual (i) must have enrolled in the Plan, and (ii) must have in effect at all times while he is employed by the Controlling Company (to the extent permitted by the maximum limits under the Plan) a Deferral Election pursuant to which he has elected to contribute at least 3 percent of his Compensation as a Before-Tax Contribution to the Plan; and (C) The individual must be in the active employ of the Controlling Company or an Affiliate on the last day of such Plan Year. In the event a Participant fails to satisfy any of these conditions with respect to a Plan Year, such Participant shall not be eligible to receive a Supplemental Annual Matching Contribution for such Plan Year and shall permanently forfeit the right to receive Supplemental Annual Matching Contributions under this subsection (b) in all future Plan Years. (3) Limitations on Supplemental Annual Matching Contributions Made on Behalf of Highly Compensated Employees. Notwithstanding the foregoing, to the extent (if any) necessary to satisfy the nondiscrimination requirements of Code Section 401(a)(4) with respect to a Plan Year, the number of Highly Compensated Employees who are otherwise eligible to receive a Supplemental Annual Matching Contribution pursuant to this subsection (b) shall be reduced to the number of Highly Compensated Employees that the Administrative Committee determines is necessary to satisfy the requirements of Code Section 401(a)(4). Such limitation on the number of Highly Compensated Employees eligible to receive a Supplemental Annual Matching Contribution for such Plan Year shall be made beginning with the Highly Compensated Employee(s) with the highest dollar amount of Compensation for such Plan Year. Those Highly Compensated Employee(s) with the highest dollar amount of Compensation who are affected by this reduction shall not be eligible for a Supplemental Annual Matching Contribution for such Plan Year. 3.3 Qualified Nonelective Contributions. To the extent and in such amounts as the Administrative Committee, in its sole discretion, deems desirable or helpful as a method to help satisfy the ADP and/or ACP Tests for 20 any Plan Year and subject to the requirements and limitations set forth in Article VI of the Plan, each Participating Company shall make a Qualified Nonelective Contribution for a Plan Year. 3.4 Form of Contributions. All Contributions shall be paid to the Trustee in the form of cash or shares of Company Stock, as determined by the Board. 3.5 Timing of Contributions. (a) Before-Tax Contributions. Each Participating Company that withholds Before-Tax Contributions from an Active Participant's paycheck pursuant to a Deferral Election shall make best efforts to pay such Before-Tax Contributions to the Trustee as of the earliest date on which such Contributions can reasonably be segregated from the Participating Company's general assets (generally not to exceed 15 business days after the end of the month within which such amounts otherwise would have been payable to such Active Participant in cash) or such earlier time as may be required by law. (b) Matching and Qualified Nonelective Contributions. Each Participating Company shall make best efforts to pay its Matching and Qualified Nonelective Contributions to the Trustee (i) on or before the date for filing its federal income tax return (including extensions thereof) for the tax year to which such Matching and Qualified Nonelective Contributions relate, or (ii) on or before such other date as shall be within the time allowed to permit the Participating Company to properly deduct, for federal income tax purposes and for the tax year of the Participating Company in which the obligation to make such Contributions was incurred, the full amount of such Matching and Qualified Nonelective Contributions; provided, in the event the amount of Qualified Nonelective Contributions cannot be calculated by the latest date described hereinabove, such Qualified Nonelective Contributions may be made at a later date (subject to the limitations under Code Section 415) which is on or before the last day of the Plan Year following the Plan Year to which such Qualified Nonelective Contributions relate. 3.6 Contingent Nature of Company Contributions. Notwithstanding any other provision of this Article III and subject to the terms of Section 15.11, Contributions made to the Plan by a Participating Company are made expressly contingent upon the deductibility thereof for federal income tax purposes for the taxable year of the Participating Company with respect to which such Contributions are made. 3.7 Restoration Contributions. (a) Restoration of Forfeitures. If a Participant has forfeited his nonvested Accounts in accordance with Section 8.3 and such Participant subsequently is rehired as a Covered Employee prior to the occurrence of 5 consecutive Breaks in Service, his Accounts shall be credited with all of the benefits (unadjusted for gains or losses) which were forfeited, as determined pursuant to the terms of Section 8.4. (b) Restoration Contribution. The assets necessary to fund the Account of the rehired individual shall be provided no later than as of the end of the Plan Year following the 21 Plan Year in which the individual is rehired and shall be provided in the discretion of the Administrative Committee from (i) income or gain to the Trust Fund, (ii) Forfeitures arising from the Accounts of Participants employed or formerly employed by the Participating Companies, or (iii) Contributions by the Participating Companies. 3.8 Reemployed Veterans. Notwithstanding any provision in this Plan to the contrary, contributions and benefits with respect to qualified military service shall be provided in accordance with Code Section 414(u). 22 ARTICLE IV ROLLOVERS AND TRANSFERS BETWEEN PLANS 4.1 Rollover Contributions. (a) Request by Active Participant. An Active Participant may make a written request (in writing or in such other format as permitted by the Administrative Committee) to the Administrative Committee that he be permitted to contribute, or cause to be contributed, to the Trust Fund a Rollover Contribution which is received by such Active Participant or to which such Active Participant is entitled. Such written request shall contain information concerning the type of property constituting the Rollover Contribution and a statement, satisfactory to the Administrative Committee, that the property constitutes a Rollover Contribution. (b) Acceptance of Rollover. Subject to the terms of the Plan and the Code (including regulations and rulings promulgated thereunder), the Administrative Committee, in its sole discretion, shall determine whether (and if so, under what conditions and in what form) a Rollover Contribution shall be accepted at any time by the Trustee. For example, the Administrative Committee, in its sole discretion, may decide to allow Rollover Contributions from Participants and/or direct Rollover Contributions from another qualified retirement plan [as described in Code Section 401(a)(31)] and may decide to pass through to the Active Participant making the Rollover Contribution any recordkeeping fees directly attributable to his Rollover Contribution. In the event the Administrative Committee permits an Active Participant to make a Rollover Contribution, the amount of the Rollover Contribution shall be transferred to the Trustee and allocated as soon as practicable thereafter to a Rollover Account for the Active Participant. Unless the Administrative Committee permits otherwise, all Rollover Contributions shall be made in cash. 4.2 Transfer Contributions. (a) Direct Transfers Permitted. The Administrative Committee, in its sole discretion, shall permit direct trustee-to-trustee transfers of assets and liabilities to the Plan [which shall be distinguished from direct Rollover Contributions as described in Code Section 401(a)(31)] as a Transfer Contribution on behalf of an Active Participant. (b) Mergers and Spin-offs Permitted. The Administrative Committee, in its sole discretion, shall permit other qualified retirement plans to transfer assets and liabilities to the Plan as part of a merger, spin-off or similar transaction. Any such transfer shall be made in accordance with the terms of the Code and subject to such rules and requirements, as the Administrative Committee may deem appropriate. Without limitation, the Administrative Committee shall determine the schedule under which such Transfer Contributions shall vest. Notwithstanding anything herein to the contrary, in no event shall a Transfer Contribution be accepted if the transferring plan is subject to the requirements of providing any alternative form of benefit not permitted under the Plan unless approved by the Administrative Committee. (c) Establishment of Transfer Accounts. As soon as practicable after the date the Trustee receives a Transfer Contribution, there shall be credited to one or more Transfer Accounts of each Participant the total amount received from the respective accounts of such 23 Participant in the transferring qualified retirement plan. Any amounts so credited as a result of any such merger or spin-off or other transfer shall be subject to all of the terms and conditions of the Plan from and after the date of such transfer. (d) Transfer Accounts. The rules and terms applicable to Transfer Contributions and resulting Transfer Accounts shall be reflected on a schedule hereto. 4.3 Spin-offs to Other Plans. The Administrative Committee, in its sole discretion, may cause the Plan to transfer to another qualified retirement plan (as part of a spin-off, change in control or similar transaction) all or part of the assets and liabilities maintained under the Plan. Any such transfer shall be made in accordance with the terms of the Code and subject to such rules and requirements, as the Administrative Committee may deem appropriate. Upon the effectiveness of any such transfer, the Plan and Trust shall have no further responsibility or liability with respect to the transferred assets and liabilities. 24 ARTICLE V PARTICIPANTS' ACCOUNTS: CREDITING AND ALLOCATIONS 5.1 Establishment of Participants' Accounts. To the extent appropriate, the Administrative Committee shall establish and maintain, on behalf of each Participant and Beneficiary, an Account which shall be divided into segregated subaccounts. The subaccounts shall include (to the extent applicable) Before-Tax, Matching, Qualified Nonelective, Rollover and Transfer Accounts and such other subaccounts as the Administrative Committee shall deem appropriate or helpful. Each Account shall be credited with Contributions allocated to such Account and generally shall be credited with income on investments derived from the assets of such Accounts. Notwithstanding anything herein to the contrary, while Contributions may be allocated to a Participant's Account as of a particular date (as specified in the Plan), such Contributions shall actually be added to a Participant's Account and shall be credited with investment experience only from the date such Contributions are received and credited to the Participant's Account by the Trustee. Each Account of a Participant or Beneficiary shall be maintained until the value thereof has been distributed to or on behalf of such Participant or Beneficiary. 5.2 Allocation and Crediting of Before-Tax, Basic Matching, Rollover and Transfer Contributions. As of each Valuation Date coinciding with or occurring as soon as practicable after the date on which Before-Tax, Basic Matching, Rollover and Transfer Contributions are received on behalf of an Active Participant, such Contributions shall be allocated and credited directly to the appropriate Before-Tax Account, Basic Matching Account, Rollover Account and Transfer Accounts, respectively, of such Active Participant. 5.3 Allocation and Crediting of Supplemental Annual Matching Contributions. As of the last day of each Plan Year for which Participating Companies make (or are deemed to have made) Supplemental Annual Matching Contributions, each Participant who satisfies the eligibility requirements of Section 3.2(b)(2) for such Plan Year shall have allocated and credited to his Matching Account a portion of such Supplemental Annual Matching Contributions. 5.4 Allocation and Crediting of Qualified Nonelective Contributions. (a) General Provision. As of the last day of each Plan Year for which the Participating Companies make (or are deemed to have made) Qualified Nonelective Contributions, each Eligible Nonhighly Compensated Participant who is eligible to receive an allocation of Qualified Nonelective Contributions for such Plan Year (pursuant to the terms of subsection (b), (c), (d) or (e) hereof, whichever is applicable) shall have allocated and credited to his Qualified Nonelective Account a portion of the Qualified Nonelective Contributions made for such Plan Year by the Participating Companies. The Administrative Committee shall cause a portion of such Qualified Nonelective Contributions to be allocated to the Qualified Nonelective Account of each such Participant in accordance with the terms of subsection (b), (c), (d) or (e) hereof, whichever is applicable. 25 (b) Per Capita Qualified Nonelective Contributions. To the extent that the Administrative Committee designates all or any portion of the Qualified Nonelective Contributions for a Plan Year as "Per Capita Qualified Nonelective Contributions," such Contributions shall be allocated to the Qualified Nonelective Accounts of all Eligible Nonhighly Compensated Participants who were in the active employ of an Affiliate on the last day of the Plan Year, on a per capita basis (that is, the same dollar amount shall be allocated to the Qualified Nonelective Account of each Eligible Nonhighly Compensated Participant). (c) Proportional Qualified Nonelective Contributions. To the extent that the Administrative Committee designates all or any portion of the Qualified Nonelective Contributions for a Plan Year as "Proportional Qualified Nonelective Contributions," such Contributions shall be allocated to the Qualified Nonelective Account of each Eligible Nonhighly Compensated Participant who was in the active employ of an Affiliate on the last day of the Plan Year, in the same proportion that (i) the Compensation of such Eligible Nonhighly Compensated Participant for such Plan Year bears to (ii) the total Compensation of all such Eligible Nonhighly Compensated Participants for such Plan Year. (d) Section 415 Qualified Nonelective Contributions. To the extent that the Administrative Committee designates all or any portion of the Qualified Nonelective Contributions for a Plan Year as "Section 415 Qualified Nonelective Contributions," such Contributions shall be allocated to the Qualified Nonelective Account of some or all Eligible Nonhighly Compensated Participants, (A) beginning with such Eligible Nonhighly Compensated Participant(s) who have the lowest Compensation [within the meaning of "Testing Compensation" as described in Section 1.20(f)] until such Eligible Nonhighly Compensated Participant(s) reach their annual addition limits (as described in Section 6.7) or the amount of the Qualified Nonelective Contributions is fully allocated, and then (B) continuing with successive individuals or groups of such Eligible Nonhighly Compensated Participants in the same manner until the amount of the Section 415 Qualified Nonelective Contributions is fully allocated. (e) Qualified Nonelective Matching Contributions. To the extent that the Administrative Committee designates all or any portion of the Qualified Nonelective Contributions for a Plan Year as "Qualified Nonelective Matching Contributions," such contributions shall be allocated to the Qualified Nonelective Account of each Eligible Nonhighly Compensated Participant who was in the active employ of an Affiliate on the last day of the Plan Year, in the same proportion that (i) such Eligible Nonhighly Compensated Participant's Plan Year Before-Tax Contributions that do not exceed the maximum amount of Before-Tax Contributions taken into account in determining Matching Contributions for such Plan Year bears to (ii) the total of all such Eligible Nonhighly Compensated Participants' Plan Year Before-Tax Contributions (calculated by taking into account for such Eligible Nonhighly Compensated Participant only the maximum amount of Before-Tax Contributions taken into account in determining Matching Contributions for such Plan Year). 5.5 Crediting of Restoration Contributions. As of the Valuation Date coinciding with or immediately following the date on which the Plan restores the forfeitable portion of a Participant's Account pursuant to Section 3.7, such amount shall be credited to the appropriate Matching and Transfer Accounts of the 26 Participant, in the amounts forfeited from such Accounts upon the earlier distribution to such Participant. 5.6 Adjustments to Accounts. As of each Valuation Date, the Trustee shall determine the fair market value of the Trust Fund which shall be the sum of the fair market values of the Investment Funds, as determined by the institutions maintaining the Investment Funds. Each Participant's or Beneficiary's Account shall be allocated and credited with a portion of such earnings or debited with a portion of such losses in each Investment Fund, in the proportion that the amount credited to such Account is invested in each Investment Fund. Each Account shall also be appropriately adjusted to reflect any contributions, distributions, withdrawals or transfers between Investment Funds and other disbursements from such Account. 5.7 Allocation of Adjustments Upon Change in Capitalization. If the outstanding shares of Company Stock held in the Plan increase or decrease by reason of a recapitalization, reclassification, stock split, combination of shares or dividend payable in shares of Company Stock, such increase or decrease shall be allocated to each Account as of the date on which the event requiring such adjustments occurs, in the same manner as the share to which it is attributable is then allocated. 5.8 Allocation of Forfeitures. To the extent Forfeitures for a Plan Year are not used to pay plan expenses as provided in Section 15.12, Restoration Contributions pursuant to Section 3.7 or to replace abandoned Accounts as provided in Section 9.9, the Administrative Committee, in its sole discretion, may use such Forfeitures to pay the reasonable administrative expenses of the Plan or may deem such Forfeitures to Matching, Supplemental or ESOP Contributions (that shall first be used to reduce the Participating Companies' obligation, if any, to make such Contributions pursuant to the terms of the Plan and then shall be added to, and combined with, any such other Contributions made for such Plan year by the Participating Companies). 5.9 Notice to Participants of Account Balances. At least once for each Plan Year, the Administrative Committee shall cause a written statement of a Participant's or Beneficiary's Account balance to be distributed to the Participant or Beneficiary. 5.10 Good Faith Valuation Binding. In determining the value of the Trust Fund and the Accounts, the Trustee and the Administrative Committee shall exercise their best judgment, and all such determinations of value (in the absence of bad faith) shall be binding upon all Participants and Beneficiaries. 27 5.11 Errors and Omissions in Accounts. If an error or omission is discovered in the Account of a Participant or Beneficiary, the Administrative Committee shall cause appropriate, equitable adjustments to be made to such Account as of the Valuation Date coinciding with or immediately following the discovery of such error or omission. 28 ARTICLE VI CONTRIBUTION AND SECTION 415 LIMITATIONS AND NONDISCRIMINATION REQUIREMENTS 6.1 Deducibility Limitations. In no event shall the total Contribution amount for any taxable year of a Participating Company exceed that amount which is properly deductible for federal income tax purposes under the then appropriate provisions of the Code. For purposes of this Section, a Contribution may be deemed made by a Participating Company for a taxable year if it is paid to the Trustee on or before the date of filing the Participating Company's federal income tax return (including extensions thereof) for that year or on or before such other date as shall be within the time allowed to permit proper deduction by the Participating Company of the amount so contributed for federal income tax purposes for the year in which the obligation to make such Contribution was incurred. 6.2 Maximum Limitation on Elective Deferrals. (a) Maximum Elective Deferrals Under Participating Company Plans. The aggregate amount of a Participant's Elective Deferrals made for any calendar year under the Plan and any other plans, contracts or arrangements with the Participating Companies shall not exceed the Maximum Deferral Amount. (b) Return of Excess Before-Tax Contributions. If the aggregate amount of a Participant's Before-Tax Contributions made for any calendar year by itself exceeds the Maximum Deferral Amount, the Participant shall be deemed to have notified the Administrative Committee of such excess, and the Administrative Committee shall cause the Trustee to distribute to such Participant, on or before April 15 of the next succeeding calendar year, the total of (i) the amount by which such Before-Tax Contributions exceed the Maximum Deferral Amount, plus (ii) any earnings allocable thereto (including, in the Administrative Committee's discretion, any gap income). In addition, Matching Contributions made on behalf of the Participant which are attributable to the distributed Before-Tax Contributions shall be forfeited. (c) Return of Excess Elective Deferrals Provided by Other Participating Company Arrangements. If after the reduction described in subsection (b) hereof, a Participant's aggregate Elective Deferrals under plans, contracts and arrangements with the Controlling Company and all Affiliates still exceed the Maximum Deferral Amount, then, the Participant shall be deemed to have notified the Administrative Committee of such excess, and, unless the Administrative Committee directs otherwise, such excess shall be reduced by distributing to the Participant Elective Deferrals that were made for the calendar year under such plans, contracts and/or arrangements with the Controlling Company and all Affiliates other than the Plan. However, if the Administrative Committee decides to make any such distributions from Before- Tax Contributions made to the Plan, such distributions (including forfeiture of Matching Contributions) shall be made in a manner similar to that described in subsection (b) hereof. (d) Discretionary Return of Elective Deferrals. If after the reductions described in subsections (b) and (c) hereof, (i) a Participant's aggregate Elective Deferrals made 29 for any calendar year under the Plan and any other plans, contracts or arrangements with Participating Companies and any other employers still exceed the Maximum Deferral Amount, and (ii) such Participant submits to the Administrative Committee, on or before the March 1 following the end of such calendar year, a written request that the Administrative Committee distribute to such Participant all or a portion of his remaining Before-Tax Contributions made for such calendar year, and any earnings attributable thereto (including in the Administrative Committee's discretion, any gap income), then the Administrative Committee may, but shall not be required to, cause the Trustee to distribute such amount to such Participant on or before the April 15 following the end of the year in which the Maximum Deferral Amount was exceeded. However, if the Administrative Committee decides to make any such distributions from Before-Tax Contributions made to the Plan, such distributions (including forfeiture of Matching Contributions) shall be made in a manner similar to that described in subsection (b) hereof. (e) Return of Excess Annual Additions. Any Before-Tax Contributions returned to a Participant to correct excess Annual Additions shall be disregarded for purposes of determining whether the Maximum Deferral Amount has been exceeded. 6.3 Nondiscrimination Requirements for Before-Tax Contributions. (a) ADP Test. The allocation of the aggregate of all (i) Before-Tax Contributions, (ii) to the extent designated by the Administrative Committee pursuant to subsection (c) hereof, Qualified Nonelective Contributions, and (iii) to the extent taken into account under subsection (b) hereof, before-tax and/or qualified nonelective contributions made under another plan, shall satisfy at least one of the following ADP Tests (which have been applied consistently since the Plan's inception) for each Plan Year: (1) The ADP of the Active Participants who are Highly Compensated Employees during the Plan Year shall not exceed the product of (A) the ADP for such Plan Year of the Active Participants who are not Highly Compensated Employees during the Plan Year, multiplied by (B) 1.25; or (2) The ADP of the Active Participants who are Highly Compensated Employees during the Plan Year shall not exceed the ADP for such Plan Year of the Active Participants who are not Highly Compensated Employees during the Plan Year by more than 2 percentage points, nor shall it exceed the product of (A) the ADP for such Year of the Active Participants who are not Highly Compensated Employees during the Plan Year, multiplied by (B) 2. (b) Multiple Plans. If before-tax and/or qualified nonelective contributions are made to one or more other plans [other than employee stock ownership plans as described in Code Section 4975 (e)(7)] which, along with the Plan, are considered as a single plan for purposes of Code Section 401(a)(4) or Section 410(b), such plans shall be treated as one plan for purposes of this Section, and the before-tax and applicable qualified nonelective contributions made to those other plans shall be combined with the Before-Tax and applicable Qualified Nonelective Contributions for purposes of performing the tests described in subsection (a) hereof. In addition, the Administrative Committee may elect to treat the Plan as a single plan along with the one or more other plans [other than employee stock ownership plans as described 30 in Code Section 4975 (e)(7)] to which before-tax and/or qualified nonelective contributions are made for purposes of this Section; provided, the Plan and all of such other plans also must be treated as a single plan for purposes of satisfying the requirements of Code Sections 401(a)(4) and 410(b) [other than the requirements of Code Section 410(b)(2)(A)(ii)]. However, plans may be aggregated for purposes of this subsection only if they have the same plan year. (c) Adjustments to Actual Deferral Percentages. In the event that the allocation of the Before-Tax Contributions and Qualified Nonelective Contributions for a Plan Year does not satisfy one of the ADP Tests of subsection (a) hereof, the Administrative Committee shall cause the Before-Tax and Qualified Nonelective Contributions for such Plan Year to be adjusted in accordance with one or a combination of the following options: (1) The Administrative Committee may cause the Participating Companies to make, with respect to such Plan Year, Qualified Nonelective Contributions on behalf of, and allocable to, the Participants described in Section 5.4 with respect to such Plan Year, in the minimum amount necessary to satisfy one of the ADP Tests. Such Qualified Nonelective Contributions shall be allocated among such Participants pursuant to one of the methods described in Section 5.4. (2) By the last day of the Plan Year following the Plan Year in which the annual allocation failed both of the ADP Tests, the Administrative Committee may direct the Trustee to reduce the Before-Tax Contributions taken into account with respect to Highly Compensated Employees under such failed ADP Tests by the dollar amount necessary to satisfy one of the ADP Tests. Any amount by which Before-Tax Contributions are so reduced, plus any earnings attributable thereto (including in the Administrative Committee's discretion any gap income or loss), shall be distributed to the Highly Compensated Employees from whose Before-Tax Accounts such reductions shall have been made. Such reductions in Before-Tax Contributions shall be made in accordance with, and solely to the Accounts of those Highly Compensated Employees who are affected by, the following procedure: (A) First, the Before-Tax Contributions of the Highly Compensated Employee(s) with the highest dollar amount of Before-Tax Contributions for such Plan Year shall be reduced by the lesser of (i) the entire amount necessary to satisfy one of the ADP Tests, or (ii) that part of the entire amount necessary to satisfy one of the ADP Tests as shall cause the amount of Before-Tax Contributions of each such Highly Compensated Employee to equal the amount of Before-Tax Contributions of each of the Highly Compensated Employees with the next highest dollar amount of Before-Tax Contributions for such Plan Year. In addition, to the extent that a Highly Compensated Employee's Before-Tax Contributions are reduced pursuant to this Section, any Matching Contributions made on behalf of a Highly Compensated Employee which are attributable to the distributed Before-Tax Contributions shall be forfeited. (B) Substantially identical steps shall be followed for making further reductions in the Before-Tax Contributions of each of the Highly 31 Compensated Employees with the next highest dollar amount of Before-Tax Contributions for such Plan Year until one of the ADP Tests has been satisfied. 6.4 Nondiscrimination Requirements for Matching Contributions. (a) ACP Test. The allocation of the aggregate of all (i) after-tax, (ii) Matching Contributions, (iii) to the extent designated by the Administrative Committee pursuant to subsection (c) hereof, Qualified Nonelective Contributions, and (iv) to the extent designated by the Administrative Committee pursuant to subsection (b) hereof, other before-tax and/or qualified nonelective contributions made under another plan shall satisfy at least one of the following ACP Tests (which have been applied consistently since the Plan's inception) for such Plan Year: (1) The ACP of the Active Participants who are Highly Compensated Employees during the Plan Year shall not exceed the product of (A) the ACP for such Plan Year of the Active Participants who are not Highly Compensated Employees during the Plan Year, multiplied by (B) 1.25; or (2) The ACP of the Active Participants who are Highly Compensated Employees during the Plan Year shall not exceed the ACP for such Plan Year of the Active Participants who are not Highly Compensated Employees during the Plan Year by more than 2 percentage points, nor shall it exceed the product of (A) the ACP for such Plan Year of the Active Participants who are not Highly Compensated Employees during the Plan Year, multiplied by (B) 2. (b) Multiple Plans. If matching, after-tax, before-tax and/or qualified nonelective contributions are made to one or more other plans [other than employee stock ownership plans as described in Code Section 4975 (e)(7)] which, along with the Plan, are considered as a single plan for purposes of Code Section 401(a)(4) or Section 410(b), such plans shall be treated as one plan for purposes of this Section, and the matching, after-tax, applicable before-tax and qualified nonelective contributions made to those other plans shall be combined with the Matching, applicable Before-Tax and Qualified Nonelective Contributions for purposes of performing the tests described in subsection (a) hereof. In addition, the Administrative Committee may elect to treat the Plan as a single plan along with one or more other plans [other than employee stock ownership plans as described in Code Section 4975 (e)(7)] to which matching, after-tax, applicable before-tax and/or qualified nonelective contributions are made for purposes of this Section; provided, the Plan and all of such other plans also must be treated as a single plan for purposes of satisfying the requirements of Code Sections 401(a)(4) and 410(b) [other than the requirements of Code Section 410(b)(2)(A)(ii)]. However, plans may be aggregated for purposes of this subsection only if they have the same plan year. (c) Adjustments to Actual Contribution Percentages. In the event that the allocation of the Before-Tax, Matching and Qualified Nonelective Contributions and other after tax, before-tax and qualified nonelective contributions for a Plan Year does not satisfy one of the ACP Tests of subsection (a) hereof, the Administrative Committee shall cause such Matching Contributions for the Plan Year to be adjusted in accordance with one or a combination of the following options: 32 (1) The Administrative Committee may cause the Participating Companies to make, with respect to such Plan Year, Qualified Nonelective Contributions on behalf of, and specifically allocable to, the Participants described in Section 5.4 with respect to such Plan Year, in the minimum amount necessary to satisfy one of the ACP Tests; such Qualified Nonelective Contributions shall be allocated among the Participants pursuant to the methods described in Section 5.4. Alternatively or in addition, the Administrative Committee may add a portion of the Before-Tax Contributions that are made for the Plan Year by the Participants who are not Highly Compensated Employees and that are not needed for the Plan to satisfy the ADP Tests for the Plan Year to the Matching Contributions for such Participants to increase the ACP for such Participants. (2) By the last day of the Plan Year following the Plan Year in which the annual allocation failed both of the ACP Tests, the Administrative Committee may direct the Trustee to reduce the Matching Contributions taken into account with respect to Highly Compensated Employees under such failed ACP Tests by the dollar amount necessary to satisfy one of the ACP Tests. The amount by which Matching Contributions are to be reduced, plus any earnings attributable thereto, shall be forfeited; provided, if the Matching Contributions to be reduced are vested and therefore may not be forfeited, those Matching Contributions (plus any earnings attributable thereto) shall be distributed to the Highly Compensated Employees from whose Matching Accounts such reductions have been made. Such reductions in Contributions shall be made in accordance with, and solely to the Accounts of those Highly Compensated Employees who are affected by, the following procedure: (A) First, the Matching Contributions of the Highly Compensated Employee(s) with the highest dollar amount of Matching Contributions for such Plan Year shall be reduced by the lesser of (i) the entire amount necessary to satisfy one of the ACP Tests, or (ii) that part of the entire amount necessary to satisfy one of the ACP Tests as shall cause the dollar amount of Matching Contributions of each such Highly Compensated Employee to equal the amount of Matching Contributions of each of the Highly Compensated Employees with the next highest dollar amount of Matching Contributions for such Plan Year. (B) Substantially identical steps shall be followed for making further reductions in the Matching Contributions of each of the Highly Compensated Employees with the next highest dollar amount of Matching Contributions for such Plan Year until one of the ACP Tests has been satisfied. 33 6.5 Multiple Use of Tests. (a) Aggregate Limitation. For Plan Years beginning prior to January 1, 2002, the sum of the ADP and the ACP for the Plan Year being tested for the entire group of eligible Highly Compensated Employees who are Active Participants, following and taking into account the application of Sections 6.3(c) and 6.4(c) for such Plan Year, may not exceed the greater of (1) or (2) below (or such other applicable limits as may be established under the Code, regulations or otherwise): (1) the sum of: (A) 125 percent of the greater of (i) the ADP for such Plan Year of the group of non-Highly Compensated Employees eligible under the Plan beginning with or within the plan year of the Code Section 401(k) arrangement, or (ii) ACP for such Plan Year for the group of non-Highly Compensated Employees who are eligible under the Plan beginning with or within the plan year of the Code Section 401(k) arrangement; plus (B) the lesser of 2 plus or 2 times the lesser of the amount determined in subsection (a)(l)(A)(i) or (a)(l)(A)(ii) hereof; or (2) the sum of: (A) 125 percent of the lesser of (i) the ADP for such Plan Year of the group of non-Highly Compensated Employees eligible under the Plan beginning with or within the plan year of the Code Section 401(k) arrangement, or (ii)the ACP for such Plan Year of the group of non-Highly Compensated Employees who are eligible under the Plan beginning with or within the plan year of the Code Section 401(k) arrangement; plus (B) the lesser of 2 plus or 2 times the greater of the amount determined in subsection (a)(2)(A)(i) or (a)(2)(A)(ii) hereof. (b) Multiple Plans. If at least one Highly Compensated Employee participates in another qualified retirement plan maintained by the Participating Company which (i) permits before-tax contributions and/or after-tax contributions or matching contributions, and (ii) is not aggregated with the Plan for purposes of nondiscrimination testing, then the multiple use aggregate limitations described in subsection (a) shall apply separately with respect to each such other plan. (c) Correction. If the maximum limitation of the combination of the Highly Compensated Employees' ADPs and ACPs, as described in subsection (a) hereof, is exceeded, this excess shall be reduced or otherwise corrected by any method permissible under Section 6.3 for satisfying the ADP Test or through any method permitted under Section 6.4 to satisfy the ACP Test, or any combination thereof. 34 (d) Application. This Section shall be applied and interpreted in a manner consistent with regulations promulgated under Code Section 401(m). 6.6 Order of Application. For any Plan Year in which adjustments shall be necessary or otherwise made pursuant to the terms of Sections 6.3, 6.4 and/or 6.5, such adjustments shall be applied in the order prescribed by the Secretary of Treasury in Treasury Regulations or other published authority. 6.7 Code Section 415 Limitations on Maximum Contributions. (a) General Limit on Annual Additions. In no event shall the Annual Addition to a Participant's Account for any Limitation Year, under the Plan and any other Defined Contribution Plan maintained by an Affiliate, exceed the lesser of: (1) $35,000 (as adjusted by the Secretary of the Treasury under Code Section 415(d) to reflect cost-of-living increases); or (2) 25 percent of such Participant's Compensation. (b) Combined Plan Limit. If an Employee is a participant in the Plan and any one or more other defined contribution plans maintained by any Affiliates and a corrective adjustment in such Employee's benefits is required to comply with this Section 6.7, such adjustment shall be made under the other plan(s). Effective for Limitation Years commencing prior to January 1, 2000, the Plan was subject to the combined defined benefit and defined contribution plan limit under former Code Section 415 (e). (c) Correction of Excess Annual Additions. If, as a result of either the allocation of Forfeitures to an Account, a reasonable error in estimating a Participant's Compensation or Elective Deferrals, or such other circumstances as permitted by the Internal Revenue Service, the Annual Addition made on behalf of a Participant exceeds the limitations set forth in this Section, the Administrative Committee shall direct the Trustee to take such of the following actions as it shall deem appropriate, specifying in each case the amount of Contributions involved: (1) A Participant's Annual Addition first shall be reduced by reducing his Before-Tax Contributions in the amount of the excess, up to the total amount of Before-Tax Contributions made on behalf of such Participant on which the Participating Company has made no Matching Contribution, and the amount of the reduction (plus any earnings thereon) shall be returned to the Participant. (2) If further reductions are necessary, a Participant's Annual Addition shall be reduced by reducing his Before-Tax Contributions (not previously reduced) in the amount of the remaining excess, up to the total amount of Before-Tax Contributions made on behalf of such Participant. The amount of the reduction (plus investment earnings thereon) shall be returned to such Participant and the Matching Contributions (and investment earnings thereon) attributable to the returned Before-Tax Contributions 35 shall be forfeited, placed in a suspense account and reallocated in a manner similar to that described in subsection (c)(3) hereof. (3) If further reduction is necessary, the Qualified Nonelective Contributions allocated to the Participant's Account shall be reduced in the amount of the remaining excess, shall be held in a suspense account and shall be applied to reduce permissible Contributions in each successive Plan Year until such amount is fully allocated; provided, so long as any suspense account is maintained pursuant to this Section: (A) no Contributions shall be made to the Plan which would be precluded by this Section; (B) investment gains and losses of the Trust Fund shall be allocated to such suspense account; and (C) amounts in the suspense account shall be allocated in the same manner as Contributions as of the earliest Valuation Date possible, until such suspense account is exhausted. (d) Annual Addition. For purposes of this Section, the term "Annual Addition" for any Participant means the sum for any Limitation Year of: (1) contributions made by an Affiliate on behalf of the Participant under all Defined Contribution Plans; (2) contributions made by the Participant under all Defined Contribution Plans of an Affiliate [excluding rollover contributions as defined in Code Sections 402(c)(4), 403(a)(4), 403(b)(8) and 408(d)(3) and contributions of previously distributed benefits which result in such a Plan's restoration of previously forfeited benefits pursuant to Treasury Regulation Section 1.41 l(a)-7(d)]; (3) forfeitures allocated to the Participant under all Defined Contribution Plans of an Affiliate; (4) amounts allocated for the benefit of the Participant after March 31, 1984, to an individual medical account established under a pension or annuity plan maintained by an Affiliate, as described in Code Section 415(1); and (5) if the Participant was a Key Employee at any time during the Plan Year during which or coincident with which the Limitation Year ends or during any preceding Plan Year, any amount paid or accrued after December 31, 1985 by an Affiliate to a special account under a welfare benefit fund [as defined in Code Section 419(e)] to provide post-retirement medical or life insurance benefits to the Participant, as described in Code Section 419A(d)(2). Contributions do not fail to be Annual Additions merely because they are (i) Before-Tax Contributions that exceed the Maximum Deferral Amount, (ii) Before-Tax Contributions that cause the Plan to fail the ADP Tests, or (iii) Matching Contributions that cause the Plan to fail the ACP Tests, or merely because the Contributions described in clauses (ii) and (iii) immediately above are corrected through distribution or recharacterization; Contributions described in clause (i) immediately above that are distributed in accordance with the terms of Section 6.2 shall not be Annual Additions. 36 (e) Compliance with Code Section 415. The limitations in this Section are intended to comply with the provisions of Code Section 415 so that the maximum benefits permitted under plans of the Affiliates shall be exactly equal to the maximum amounts allowed under Code Section 415 and the regulations promulgated thereunder. The provisions of this Section generally are effective as of the Effective Date, but to the extent the Code requires an earlier or later effective date with respect to any portion(s) of this Section, such other effective date shall apply. If there is any discrepancy between the provisions of this Section and the provisions of Code Section 415 and the regulations promulgated thereunder, such discrepancy shall be resolved in such a way as to give full effect to the provisions of the Code. 6.8 Construction of Limitations and Requirements. The descriptions of the limitations and requirements set forth in this Article are intended to serve as statements of the legal requirements necessary for the Plan to remain qualified under the applicable terms of the Code. The Participating Companies do not desire or intend, and the terms of this Article shall not be construed, to impose any more restrictions on the operation of the Plan than required by law. Therefore, the terms of this Article and any related terms and definitions in the Plan shall be interpreted and operated in a manner which imposes the least restrictions on the Plan. For example, if use of a more liberal definition of "Compensation" or a more liberal multiple use test is permissible at any time under the law, then the more liberal provisions may be applied as if such provisions were included in the Plan. 37 ARTICLE VII INVESTMENTS 7.1 Establishment of Trust Account. All Contributions are to be paid over to the Trustee, to be held in the Trust Fund and invested in accordance with the terms of the Plan and the Trust. 7.2 Investment Funds. (a) Establishment of Investment Funds. In accordance with instructions from the Investment Committee and the terms of the Plan and the Trust, the Trustee shall establish and maintain, for the investment of assets of the Trust Fund, Investment Funds for the investment of Contributions and Accounts. Such Investment Funds shall include a "Company Stock Fund" in which all Contributions may be invested. Other Investment Funds shall be established and modified from time to time without necessity of amendment to the Plan and shall have the investment objectives prescribed by the Investment Committee. Investment Funds also may be established and maintained for any limited purpose(s) the Investment Committee may direct (for example, for the investment of certain specified Accounts transferred from a Prior Plan). Similarly, at the authorized direction of the Investment Committee, the Trustee may eliminate one or more of the then existing Investment Funds. The Trustee may invest Contributions it receives in interest-bearing accounts until such time as a Participant's investment directions can be effected. (b) Reinvestment of Cash Earnings. Any investment earnings received in the form of cash with respect to any Investment Fund (in excess of the amounts necessary to make cash distributions or to pay Plan or Trust expenses) shall be reinvested in such Investment Fund. 7.3 Participant Direction of Investments. Each Participant or Beneficiary generally may direct the manner in which his Accounts and Contributions shall be invested in and among the Investment Funds described in Section 7.2. Participant investment directions shall be made in accordance with the following terms: (a) Investment of Contributions. Except as otherwise provided in this Section, each Participant may elect, on a form provided by the Administrative Committee, through an interactive telephone or internet-based system, or in such other manner as the Administrative Committee may prescribe, the percentage of his future Contributions (other than Matching Contributions) that will be invested in each Investment Fund. An initial election of a Participant shall be made as of the Entry Date on which the Participant commences or recommences participation in the Plan and shall apply to all such specified Contributions credited to such Participant's Account after such Entry Date. Such Participant may make subsequent elections as of any Valuation Date, and such elections shall apply to all such Contributions credited to such Participant's Accounts following such date; for purposes hereof, Contributions and/or Forfeitures that are credited to a Participant's or Beneficiary's Account shall be subject to the investment election in effect on the date on which such amounts are actually received and credited, regardless of any prior date "as of which such Contributions may 38 have been allocated to his Account. Any election made pursuant to this subsection with respect to future Contributions shall remain effective until changed by the Participant. In the event a Participant never makes an investment election or makes an incomplete or insufficient election in some manner, the Trustee, based on authorized directions from the Administrative Committee, shall direct the investment of the Participant's future Contributions. Notwithstanding anything in this subsection (a) to the contrary, all Matching Contributions (both Basic and Supplemental Annual) shall be initially invested in the Company Stock Fund; provided, the Participant or Beneficiary may elect to direct the investment of his existing Matching Account among other Investment Funds in accordance with subsection (b) below (b) Investment of Existing Account Balances. Except as otherwise provided in this Section, each Participant or Beneficiary may elect, on a form provided by the Administrative Committee, through an interactive telephone or internet-based system, or in such other manner as the Administrative Committee may prescribe, the percentage of his existing Accounts that will be invested in each Investment Fund; provided, as part of making an election, the Participant or Beneficiary may elect different Investment Funds or combinations of Investment Funds for each such type of Account. Such Participant or Beneficiary may make such elections effective as of any Valuation Date following his Entry Date into the Plan (or the crediting of his Rollover Contribution). Each such election shall remain in effect until changed by such Participant or Beneficiary. In the event a Participant or Beneficiary fails to make an election for his existing Account balance pursuant to the terms of this subsection which is separate from his election made for his Contributions pursuant to the terms of this subsection (a) hereof, or if a Participant's or Beneficiary's investment election form is incomplete or insufficient in some manner, the Participant's or Beneficiary's existing Account balance will continue to be invested in the same manner provided under the terms of the most recent election affecting that portion of his Account. Notwithstanding anything in this subsection (b) to the contrary, a Participant's or Beneficiary's Matching Account shall remain invested in the Company Stock Fund until the Participant or Beneficiary elects to change such investment; and, thereafter, that portion of the Matching Account which has been invested in other Investment Funds shall be reinvested according to the Participant's or Beneficiary's subsequent investment elections along with all other Accounts. (c) Conditions Applicable to Elections. The Administrative Committee shall have complete discretion to adopt and revise procedures to be followed in making such investment elections. Such procedures may include, but are not limited to, the process of the election, the permitted frequency of making elections, the deadline for making elections and the effective date of such elections; provided, elections must be permitted at least once every 3 months. Any procedures adopted by the Administrative Committee that are inconsistent with the deadlines or procedures specified in this Section shall supersede such provisions of this Section without the necessity of a Plan amendment. (d) Restrictions on Investments. To the extent any investment or reinvestment restrictions apply with respect to any Investment Funds (for example, restrictions on changes of investments between competing funds) or as a result of unanticipated depletion of cash liquidity within an Investment Fund, a Participant's or Beneficiary's ability to direct investments hereunder may be limited. 39 7.4 Valuation. As of each Valuation Date, the Trustee shall determine the fair market value of each of the Investment Funds after first deducting any expenses which have not been paid by the Participating Companies. All costs and expenses incurred in connection with Plan investments and, unless paid by the Participating Companies, all costs and expenses incurred in connection with the general administration of the Plan and the Trust shall be allocated between the Investment Funds in the proportion in which the amount invested in each Investment Fund bears to the amount invested in all Investment Funds as of the appropriate Valuation Date; provided, all costs and expenses directly identifiable to one Investment Fund shall be allocated to that Investment Fund. 7.5 Voting and Tender Offer Rights with Respect to Investment Funds. Except as provided in Section 7.10, only if, to the extent and in the manner, permitted by the Trust and/or any documents establishing or controlling any of the Investment Funds, shall Participants and Beneficiaries be given the opportunity to vote and tender their interests in each such Investment Funds. Otherwise, such interests shall be voted and/or tendered by the Investment Manager or other fiduciary that controls such Investment Fund, as may be provided in the controlling documents. 7.6 Purchase of Life Insurance. Life insurance contracts shall not be purchased. 7.7 Fiduciary Responsibilities for Investment Directions. All fiduciary responsibility with respect to the selection of Investment Funds for the investment of a Participant's or Beneficiary's Accounts shall be allocated to the Participant or Beneficiary who directs the investment. Neither the Administrative Committee, the Investment Committee, the Trustee, nor any Participating Company shall be accountable for any loss sustained by reason of any action taken, or investment made, pursuant to an investment direction. 7.8 Appointment of Investment Manager; Authorization to Invest in Collective Trust. (a) Investment Manager. The Investment Committee may appoint any one or more individuals or entities to serve as the investment manager or managers of the entire Trust or of all or any designated portion of a particular Investment Fund or Investment Funds. The investment manager shall certify that it is qualified to act as an "investment manager" within the meaning of Section 3(38) of ERISA and shall acknowledge in writing its fiduciary status with respect to the assets placed under its control. The appointment of the investment manager shall be effective upon the Trustee's receipt of a copy of an appropriate Investment Committee resolution (or such later effective date as may be contained therein), and the appointment shall continue in effect until receipt by the Trustee of a copy of an Investment Committee resolution removing or accepting the resignation of the investment manager (or such later effective date as may be specified therein). If an investment manager is appointed, the investment manager shall have the power to manage, acquire and dispose of any and all assets of the Trust Fund, as the 40 case may be, which have been placed under its control, except to the extent that such power is reserved to the Trustee by the Controlling Company. If an investment manager is appointed, the Trustee shall be relieved of any and all liability for the acts or omissions of the investment manager, and the Trustee shall not be under any obligation to invest or otherwise manage any assets which are subject to the management of the investment manager. (b) Collective Trust. The Investment Committee may designate that all or any portion of the Trust Fund shall be invested in a collective trust fund, in accordance with the provisions of Revenue Ruling 81-100 or any successor ruling, which collective trust fund shall have been specifically identified in the Trust and adopted thereby as a part of the Plan, effective upon the Trustee's receipt of a copy of an appropriate Investment Committee resolution (or such later effective date as may be contained therein), and the investment in said collective trust shall continue in effect until receipt by the Trustee of a copy of an Investment Committee resolution terminating said investment (or such later effective date as may be contained therein). Such designation or direction shall be in addition to the powers to invest in commingled funds maintained by the Trustee provided for in the Trust. 7.9 Value of Company Stock. For all purposes under the Plan for which the value of Company Stock must be determined, the value of Company Stock shall be its fair market value. If the Company Stock is listed on an established stock exchange, the fair market value per share of Company Stock on any particular date shall be the closing price of the stock on such exchange on the last business day of such exchange which immediately precedes the date of valuation. If, for any reason, the fair market value per share of Company Stock cannot be ascertained or is unavailable for a particular date, the fair market value of such stock shall be determined as of the nearest preceding date on which such fair market value can be ascertained pursuant to the terms hereof. In the case of a transaction between the Plan and a person described in Code Section 4975 (e)(2), the value shall be determined as of the date of the transaction; for all other purposes, the value shall be determined as of the most recent Valuation Date. 7.10 Voting and Tender Offer Rights With Respect to Company Stock. (a) Voting Rights. Each Participant or Beneficiary shall have the right to direct the Trustee as to the exercise of all voting rights with respect to the whole shares of Company Stock in his Account. The Trustee shall vote fractional shares and shares with respect to which voting directions are not received in the same proportion as the whole shares of Company Stock are voted by the voting Participants or Beneficiaries. (b) Tender Offer Rights. Each Participant or Beneficiary also shall have the responsibilities of a Named Fiduciary for purposes of directing, and shall have the right to direct, the Trustee as to whether, in accordance with the terms of any tender offer for shares of Company Stock, to tender the whole shares of Company Stock in his Account, and the Trustee shall follow such directions. To the extent possible, the Trustee shall combine fractional shares of Company Stock in the same proportion as the whole shares of such Company Stock are tendered by the tendering Participants or Beneficiaries. Unless otherwise required by ERISA, the Trustee shall not tender whole shares of Company Stock credited to a Participant's or 41 Beneficiary's Account for which it has received no directions from such Participant or Beneficiary. (c) Confidentiality. The Administrative Committee shall establish procedures to protect the voting and tender offer rights of the Participants and Beneficiaries and to assure that the manner in which each Participant or Beneficiary exercises his voting or tender offer rights is confidential with respect to the Administrative Committee and the management of the Company. (d) Dissemination of Pertinent Information. The Administrative Committee shall deliver, or cause to be delivered, to each Participant or Beneficiary, all notices, financial statements, proxies and proxy soliciting materials, relating to the voting of Company Stock in his Account. In addition, the Administrative Committee shall deliver, or cause to be delivered, to each Participant and Beneficiary all materials relating to any tender offer, including the materials distributed by any tender offer (that is, any bidder). The Administrative Committee shall notify each Participant or Beneficiary of each occasion for the exercise of voting or tender offer rights within a reasonable time before such rights are to be exercised, and such notification shall include all of the relevant information that the Controlling Company distributes to stockholders regarding the exercise of such rights. 42 ARTICLE VIII VESTING IN ACCOUNTS 8.1 Vesting. (a) General Vesting Rule. (1) Fully Vested Accounts. All Participants shall at all times be fully vested in their Before-Tax, Qualified Nonelective and Rollover Accounts. Transfer Accounts shall be subject to the vesting schedule in subsection (a)(2) hereof unless a different vesting schedule is specified on a Schedule to the Plan. (2) Matching Account. Except as provided in Sections 8.1(b) and 8.2, the Matching Account of each Participant (i) who is not employed on July 1, 1999 by the Controlling Company, and (ii) who either (A) is first employed by the Controlling Company after July 1, 1999, or (B) is a former Employee who is rehired after July 1, 1999 at a time when he has a Matching Account balance remaining in the Plan which is less than 25 percent vested, shall vest in accordance with the following vesting schedule, based on the total of the Participant's Years of Vesting Service:
Years of Vesting Service Vested Percentage of Participant's Completed by Participant Matching Account ------------------------ ---------------------------------- Less than 3 Years 0% 3 Years or more 100%
(b) Grandfathered Vesting. The Matching Account of each Participant who either (i) is employed by the Controlling Company on July 1, 1999, or (ii) is a former Employee of the Controlling Company who is rehired after July 1, 1999 at a time when he has a Matching Account balance remaining in the Plan which is at least 25 percent vested, shall vest in accordance with the following schedule, based on the total of the Participant's Years of Vesting Service:
Years of Vesting Service Vested Percentage of Participant's Completed by Participant Matching Account ------------------------- ---------------------------------- Less than 2 Years 0% 2 Years, but less than 3 25% 3 Years or more 100%
8.2 Vesting Upon Attainment of Normal Retirement Age, Death or Disability. Notwithstanding Section 8.1, a Participant's Account shall become 100 percent vested and nonforfeitable upon the occurrence of any of the following events: (a) The Participant's attainment of Normal Retirement Age while still employed as an Employee of any Affiliate; 43 (b) The Participant's death while still employed as an Employee of any Affiliate; or (c) The Participant's becoming Disabled while still employed as an Employee of any Affiliate. 8.3 Timing of Forfeitures and Vesting after Restoration Contributions. If a Participant who is not yet 100 percent vested in his Accounts separates from service with all Affiliates, the unvested portion of his Account shall be immediately forfeited and shall become available for allocation as a Forfeiture (in accordance with the terms of Section 5.6) as soon as practicable after such separation occurs. If a Participant has no vested interest in his Matching Account and/or Transfer Account at the time he separates from service, he shall be deemed to have received a cash-out distribution at the time he separates from service, and the forfeiture provisions of this Section shall apply. If such a Participant resumes employment with an Affiliate after he has incurred 5 or more consecutive Breaks in Service, such nonvested amount shall not be restored. If such a Participant resumes employment with an Affiliate before he has incurred 5 consecutive Breaks in Service, the nonvested amount shall be restored pursuant to the terms of Section 3.7 and shall be credited to his Matching Account and/or Transfer Account. The Participant's Matching Account and/or Transfer Account then shall be subject to all of the vesting rules in this Article VIII as if no Forfeitures had occurred. 8.4 Vesting following Partial Distributions. In the event that a Participant receives a distribution from an Account in which he is less than fully vested, the vested interest of the Participant in such Account prior to the date such Participant (i) separates from service with all Affiliates, (ii) incurs 5 consecutive Breaks in Service (such that the nonvested portions of such Account are forfeited), or (iii) becomes 100 percent vested pursuant to the terms of Sections 8.1 or 8.2 hereof (whichever is earliest), shall be determined pursuant to the following formula: X=P (AB + [R x D]) - (R x D), Where X is the vested interest at the relevant time (that is, the time at which the vested percentage in such Account cannot increase), P is the vested percentage at the relevant time; AB is the balance of his Matching Account or Transfer Account at the relevant time; D is the amount of the distribution; and R is the ratio of such Account's Balance at the relevant time to such Account's balance immediately after the distribution. 8.5 Amendment to Vesting Schedule. Notwithstanding anything herein to the contrary, in no event shall the terms of any amendment to the Plan reduce the vested percentage that any Participant has earned under the Plan. In the event that the Plan provides for Participants to vest in their Accounts at a rate which is faster than that provided under any amendment hereto (or in the event any other change is made that directly has an adverse effect on Participants' vested percentage), any Participant who has 3 or more Years of Vesting Service [calculated in a manner consistent with Treasury 44 Regulation Section 1.411(a)-8T (or any successor Section)] may elect to have his vested percentage calculated under the schedule in the Plan before any such change, and the Administrative Committee shall give each such Participant notice of his rights to make such an election. The period during which the election may be made shall commence with the date the amendment is adopted or deemed to be made and shall end on the latest of: (i) 60 days after the amendment is adopted; (ii) 60 days after the amendment becomes effective; or (iii) 60 days after the Participant is issued written notice of the amendment by a Participating Company or Administrative Committee. 45 ARTICLE IX PAYMENT OF BENEFITS FROM ACCOUNTS 9.1 Benefits Payable for Reasons Other Than Death. (a) General Rule. In accordance with the terms of subsection (b) hereof and subject to the restrictions set forth in subsections (c) and (d) hereof, if a Participant becomes Disabled or separates from service with all Affiliates for any reason other than death he (or his Beneficiary, if he dies after such Disability or separation from service) shall be entitled to receive a distribution of (i) the vested amount credited to his Account, determined as of the Valuation Date on which such distribution is processed, plus (ii) the vested amount of any Contributions made on his behalf since such Valuation Date. For purposes of this Article, the "date on which such distribution is processed" refers to the date established for such purpose by administrative practice, even if actual payment and/or processing is made at a later date due to delays in the valuation, administrative or any other procedure. (b) Timing of Distribution. (1) Except as provided in subsections (b)(2), (b)(3), (b)(4), (d) and (e) hereof, benefits payable to a Participant under this Section shall be distributed as soon as administratively practicable following the last Business Day of the first full calendar month following the later of (i) the date on which the Participant affirmatively elects to receive such payment, or (ii) the date on which the Participant's separation from service or Disability has been processed by the Controlling Company's payroll system and communicated to the Plan's third-party recordkeeper (that is, the Administrative Committee's designee for processing distributions. The Administrative Committee shall establish terms and conditions governing elections made under this subsection (b)(l). (2) Notwithstanding the foregoing, in the event that (A) the value of the Participant's Account exceeds $5,000 (or, for distributions made prior to December 1, 1999, exceeded $3,500 at the time of such distribution or any prior distribution) and (B) the distribution date described in subsection (b)(l) hereof occurs or is to occur prior to the Participant's attainment of Normal Retirement Age, benefits shall not be distributed to such Participant at the time set forth in subsection (b)(l) hereof without the Participant's election (including an on-line election) in such form as provided by the Administrative Committee. In order for such Participant's election to be valid, his election must be filed with the Administrative Committee within the 90-day period ending on such date, and the Administrative Committee (no later than 30 days and no earlier than 90 days before such distribution date) must have presented him with a notice informing him of his right to defer his distribution; provided, the Participant may elect to waive the minimum 30-day notice period and to receive his distribution before the end of such period. If the Participant does not consent in writing to the distribution of his benefit at such time, his benefit shall be distributed as soon as practicable after the date he files a written election with the Administrative Committee requesting such payment. (3) Notwithstanding anything in the Plan to the contrary, unless a Participant elects to further defer the distribution of his benefit or fails to submit a claim 46 for such distribution, in no event shall payment of the Participant's benefit be later than 60 days after the end of the Plan Year which includes the latest of (i) the date on which the Participant attained Normal Retirement Age, (ii)the date which is the 10th anniversary of the date he commenced participation in the Plan, or (iii) the date he actually separates from service with all Affiliates; provided, if the amount of the payment cannot be ascertained by the date as of which payments are scheduled to be made or commence hereunder, payment shall be made or commence no later than 60 days after the earliest date on which such payment can be ascertained under the Plan. (4) Notwithstanding anything in the Plan to the contrary, commencing with the original effective date of the Plan, the Participant's Account shall be distributed (or commenced) no later than the April 1 following the later of (i) the calendar year in which the Participant attains age 70-1/2, or (ii) the calendar year in which the Participant actually separates from service with all Affiliates [for Plan Years prior to January 1, 1996, the earlier of (i) and (ii)]; provided, if such Participant is a 5 percent owner (as defined in Code Section 416), benefit payments shall be made (or commence) no later than the April 1 following the calendar year in which the Participant attains age 70-1/2. Unless a Participant who is a 5 percent owner and whose minimum distributions begin while he is still employed elects to take a distribution of his entire Account balance, his benefits, payable under this Article IX commencing as of his required beginning date, shall be paid in the form of substantially equal monthly payments over a period equal to the life expectancy of the Participant. All distributions will be made in accordance with Code Section 401(a)(9) and the regulations thereunder, including Treasury Regulation Section 1.401(a)(9)-2 (relating to incidental benefit limitations; and the terms of the Plan reflecting the requirements of Code Section 401(a)(9) override the distribution options (if any) in the Plan which are inconsistent with those requirements. The life expectancy of a Participant will be recalculated annually. (c) Restrictions on Distributions from Before-Tax and Qualified Nonelective Accounts. Notwithstanding anything in the Plan to the contrary, (i) amounts in a Participant's Before-Tax and Qualified Nonelective Accounts and (ii) amounts in a Participant's Transfer Accounts credited with before-tax contributions and company contributions used to satisfy the Code Section 401(k) actual deferral percentage test and company contributions used to satisfy the Code Section 40 l(m) actual contribution percentage test shall not be distributable to such Participant earlier than the earliest of the following to occur: (1) The Participant's death, Disability or separation from service with all Affiliates; (2) The termination of the Plan without the establishment or maintenance of a successor defined contribution plan [other than an employee stock ownership plan as defined in Code Section 4975 (e)] at the time the Plan is terminated or within the period ending 12 months after the final distribution of all assets in all Before-Tax, Qualified Nonelective and Transfer Accounts described above in this subsection (c); provided, if fewer than 2 percent of the Employees who are or were eligible under the Plan at the time of its termination are or were eligible under another defined contribution 47 plan at any time during the 24-month period beginning 12 months before the time of termination, such other plan shall not be a successor plan; (3) The date of disposition by the Participating Company employing such Participant of substantially all of its assets [within the meaning of Code Section 409(d)(2)] that were used by such Participating Company in a trade or business; provided, such Participant continues employment with the corporation acquiring such assets; provided, the sale of 85 percent of the assets used in a trade or business will be deemed a sale of "substantially all" of the assets used in such trade or business; (4) The date of disposition by the Participating Company employing such Participant of its interest in a subsidiary [within the meaning of Code Section 409(d)(3)], provided that such Participant continues employment with such subsidiary; (5) The attainment by such Participant of age 59-1/2; or (6) The Participant's incurrence of a financial hardship as described in Section 10.1; provided, for an event described in subsections (c)(2), (c)(3) or (c)(4) hereof to constitute events permitting a distribution from the Before-Tax and Qualified Nonelective Accounts (or the affected Transfer Accounts), such distribution must be made on account of such event in the form of a lump sum distribution, as defined in Code Section 402(e)(4)(D) (without regard to subclauses (I), (II), (III) and (IV) of clause (i) thereof); and provided, further, for the events described in subsections (c)(3) or (c)(4) hereof to constitute events permitting such a distribution, the Participating Company must maintain the Plan after the disposition. (d) Delay Upon Reemployment or Termination of Disability. If a Participant becomes eligible to receive a benefit payment in accordance with the terms of subsection (a) and subsequently is reemployed by an Affiliate (or ceases to be Disabled, as applicable) prior to the time his Account has been distributed in full, the distribution to such Participant shall be delayed until such Participant again becomes eligible to receive a distribution from the Plan. (e) Distribution Upon Sale of Business. In addition to making distributions based on a Participant's separation from service, distributions shall be made to a Participant, in accordance with the terms of Section 401(k)(10) as a result of a sale by the Participating Company to another corporation of (i) substantially all of the assets [within the meaning of Code Section 409(d)(2)] that were used by the Participating Company in a separate trade or business, or (ii) the Participating Company's interest in a subsidiary [within the meaning of Code Section 409(d)(3)]. For a sale of "substantially all" of the assets used in a trade or business to have occurred, at least 85 percent of such assets must have been sold. For a sale to trigger a distribution as provided in this Section, such Participant must have continued employment with the purchaser of the assets or with the subsidiary, the distribution must have been made on account of such event in the form of a lump-sum distribution (as defined in Code Section 402(d)(4), without regard to subparagraphs (A)(i) through (iv), (B) and (F) thereof), and the Participating Company, and not the purchaser, must maintain the plan after the disposition. Distributions made pursuant to this Section shall be made as soon as practicable after the sale 48 and after the Administrative Committee is able to determine that the disposition and distribution satisfy the requirements of this Section, subject to the valuation and consent rules set forth herein. 9.2 Death Benefits. If a Participant dies before payment of his benefits from the Plan is made or commences to be made, the Beneficiary or Beneficiaries designated by such Participant in his latest beneficiary designation form filed with the Administrative Committee in accordance with the terms of Section 9.6 shall be entitled to receive a distribution of the total of (i) the entire vested amount credited to such Participant's Account, determined as of the Valuation Date on which the distribution is processed, plus (ii) any Contributions made on such Participant's behalf since such Valuation Date. Benefits shall be distributed to such Beneficiary or Beneficiaries as soon as administratively feasible following the second month after the date of the Participant's death (or, if later, after timing restrictions and requirements under the Code are satisfied). As required by Code Section 401(a)(9), in no event shall any such distribution be made later than 5 years after the date of the Participant's death, except for distributions made to such Participant's Spouse. The Administrative Committee may direct the Trustee to distribute a Participant's Account to a Beneficiary without the written consent of such Beneficiary. 9.3 Forms of Distribution. (a) Method. The payment of any distribution to a Participant or Beneficiary from the Plan shall be in the form of a single-sum payment. (b) Direct Rollover Distributions. If a Participant, Surviving Spouse or a spousal alternate payee under a qualified domestic relations order who is the recipient of any Eligible Rollover Distribution elects to have such Eligible Rollover Distribution paid directly to an Eligible Retirement Plan and specifies (in such form and at such time as the Administrative Committee may prescribe) the Eligible Retirement Plan to which such distribution is to be paid, such distribution shall be made in the form of a direct trustee-to-trustee transfer to the specified Eligible Retirement Plan; provided, such transfer shall be made only to the extent that the Eligible Rollover Distribution would be included in gross income if not so transferred [determined without regard to Code Sections 402(c) and 403(a)(4)]. (c) Assets Distributed. Any distribution made to a Participant or Beneficiary shall be made in the form of cash; provided, to the extent a Participant's or Beneficiary's Account is invested in Company Stock, the Participant or Beneficiary may elect to receive whole shares of Company Stock, with any fractional shares paid in cash. 9.4 Cash-Out Payment of Benefits. Notwithstanding anything to the contrary in this Article IX, in the event that the vested portion of the Account of any Participant who separates from the service of all Affiliates is less than or equal to $5,000 (or, for distributions made prior to December 1, 1999, was less than or equal to $3,500 at the time of such distribution or any prior distribution), the full vested amount of such benefit automatically shall be paid to such Participant in one single-sum, cash-out distribution as soon as practicable following the end of the second month following the 49 month in which the Participant separates from service. In the event a Participant has no vested interest in his Matching and/or Transfer Account at the time of his separation from service, he shall be deemed to have received a cash-out distribution of such Matching and/or Transfer Account at the time of his separation from service, and the forfeiture provisions of Section 8.3 shall apply. 9.5 Qualified Domestic Relations Orders. In the event the Administrative Committee receives a domestic relations order which it determines to be a qualified domestic relations order, the Plan shall pay such benefit to the prescribed alternate payee(s) at such time and in such form as shall be described in the qualified domestic relations order and permitted under Section 15.1(b). If the qualified domestic relations order requires immediate payment, the specified benefit shall be paid to the alternate payee as soon as practicable following the end of the month within which the Administrative Committee determines that the order is qualified or, if later, after timing restrictions and requirements under the Code are satisfied. To the extent consistent with the qualified domestic relations order, the amount of the payment to an alternate payee shall include earnings, interest and other investment proceeds through (but not after) the Valuation Date as of which the Trustee processes the distribution. If a Participant's Account is partially paid or payable to an alternate payee, the Participant's remaining portion of his Account shall be reduced accordingly and shall be subject to the distribution provisions in this Article IX. 9.6 Beneficiary Designation. (a) General. In accordance with the terms of this Section, Participants shall designate and from time to time may redesignate their Beneficiary or Beneficiaries of the benefits described in this Article IX in such form and manner as the Administrative Committee may determine. A Participant shall be deemed to have named his Surviving Spouse, if any, as his sole Beneficiary unless his Spouse consents to the payment of all or a specified portion of the Participant's benefit to a Beneficiary other than or in addition to the Surviving Spouse in a manner satisfying the requirements of a Qualified Spousal Waiver and such other procedures as the Administrative Committee may establish. Notwithstanding the foregoing, a married Participant may designate a non-Spouse Beneficiary without a Qualified Spousal Waiver (unless otherwise required by a qualified domestic relations order) if the Participant establishes to the satisfaction of the Administrative Committee: (i) that he has no Spouse or that his Spouse cannot be located; (ii) that he is legally separated from his Spouse or that he has been abandoned by his Spouse (within the meaning of local law) and he has a court order to such effect; or (iii) that such other permissible circumstances exist as the Secretary of the Treasury may by regulations prescribe. 50 (b) No Designation or Designee Dead or Missing. In the event that: (1) a Participant dies without designating a Beneficiary; (2) the Beneficiary designated by a Participant is not surviving when a payment is to be made to such person under the Plan, and no contingent Beneficiary has been designated; or (3) the Beneficiary designated by a Participant cannot be located by the Administrative Committee within 1 year after the date benefits are to commence to such person; then, in any of such events, the Beneficiary of such Participant with respect to any benefits that remain payable under this Article IX shall be the Participant's Surviving Spouse, if any, and if not, then the estate of the Participant. 9.7 Claims. (a) Procedure. Claims for benefits under the Plan may be filed with the Administrative Committee on forms supplied by the Administrative Committee. The Administrative Committee shall furnish to the claimant written notice of the disposition of a claim within 90 days after the application therefor is filed; provided, if special circumstances require an extension of time for processing the claim, the Administrative Committee shall furnish written notice of the extension to the claimant prior to the end of the initial 90-day period, and such extension shall not exceed one additional, consecutive 90-day period. In the event the claim is denied, the notice of the disposition of the claim shall provide the specific reasons for the denial, cites of the pertinent provisions of the Plan, and, where appropriate, an explanation as to how the claimant can perfect the claim and/or submit the claim for review. (b) Review Procedure. Any Participant or Beneficiary who has been denied a benefit, or his duly authorized representative, shall be entitled, upon request to the Administrative Committee, to appeal the denial of his claim. The claimant or his duly authorized representative may review pertinent documents related to the Plan and in the Administrative Committee's possession in order to prepare the appeal. The form containing the request for review, together with a written statement of the claimant's position, must be filed with the Administrative Committee no later than 60 days after receipt of the written notification of denial of a claim provided for in subsection (a) hereof. The Administrative Committee's decision shall be made within 60 days following the filing of the request for review and shall be communicated in writing to the claimant; provided, if special circumstances require an extension of time for processing the appeal, the Administrative Committee shall furnish written notice to the claimant prior to the end of the initial 60-day period, and such an extension shall not exceed one additional 60-day period. If unfavorable, the notice of decision shall explain the reason or reasons for denial and indicate the provisions of the Plan or other documents used to arrive at the decision. 51 (c) Satisfaction of Claims. Any payment to a Participant or Beneficiary, or to his legal representative or heirs at law, all in accordance with the provisions of the Plan, shall to the extent thereof be in full satisfaction of all claims hereunder against the Trustee, the Administrative Committee, and the Participating Companies, any of whom may require such Participant, Beneficiary, legal representative or heirs at law, as a condition to such payment, to execute a receipt and release therefor in such form as shall be determined by the Trustee, the Administrative Committee or the Participating Companies, as the case may be. If receipt and release shall be required but execution by such Participant, Beneficiary, legal representative or heirs at law shall not be accomplished so that the terms of Section 9.l(b) (dealing with the timing of distributions) may be fulfilled, such benefits may be distributed or paid into any appropriate court or to such other place as such court shall direct, for disposition in accordance with the order of such court, and such distribution shall be deemed to comply with the requirements of Section 9.1(b). 9.8 Explanation of Rollover Distributions. Within a reasonable period of time [as defined for purposes of Code Section 402(f)] before making an Eligible Rollover Distribution (which may include certain withdrawals permitted under Article X hereof) from the Plan to a Participant or Beneficiary, the Administrative Committee shall provide such Participant or Beneficiary with a written explanation of (i) the provisions under which the distributee may have the distribution directly transferred to another Eligible Retirement Plan, (ii) the provisions which require the withholding of tax on the distribution if it is not directly transferred to another Eligible Retirement Plan, (iii) the provisions under which the distribution will not be subject to tax if transferred to an Eligible Retirement Plan within 60 days after the date on which the distributee receives the distribution, and (iv) such other terms and provisions as may be required under Code Section 402(f) and the regulations promulgated thereunder. 9.9 Unclaimed Benefits. In the event a Participant or Beneficiary becomes entitled to a distribution from the Plan and the Administrative Committee is unable to locate such Participant or Beneficiary after such diligent efforts as the Administrative Committee in its sole discretion deems appropriate, then the full Account of the Participant or Beneficiary shall be deemed abandoned and treated as a Forfeiture; provided, in the event such Participant or Beneficiary is located or makes a claim subsequent to the allocation of the abandoned Account, the amount of such abandoned Account (unadjusted for any investment gains or losses from the time of abandonment) shall be restored (from abandoned Accounts, Forfeitures, Trust earnings or Contributions made by the Participating Companies) to such Participant or Beneficiary, as appropriate. 52 9.10 Recordkeeper Transition Rule. For purposes of effectuating a change in the Plan's recordkeeper, and notwithstanding anything contained in this Article IX to the contrary, the Administrative Committee may designate a period during which no distributions shall be permitted. 53 ARTICLE X WITHDRAWALS AND LOANS 10.1 Hardship Withdrawals. (a) Parameters of Hardship Withdrawals. A Participant who is an Employee of an Affiliate may make, on account of hardship, a withdrawal from his Account in an amount up to, but not exceeding, the total of (i) 50 percent of his vested Matching Account balance, and (ii) 100% of his Rollover and Before-Tax Account balance, other than earnings attributable to Before-Tax Contributions earned after December 31, 1988. For purposes of this subsection, a withdrawal will be on account of "hardship" if it is necessary to satisfy an immediate and heavy financial need of the Participant. A withdrawal based on financial hardship cannot exceed the amount necessary to meet the immediate financial need created by the hardship and not reasonably available from other resources of the Participant. The Administrative Committee shall make its determination as to whether a Participant has suffered an immediate and heavy financial need and whether it is necessary to use a hardship withdrawal from the Plan to satisfy that need on the basis of all relevant facts and circumstances. The minimum amount of any hardship withdrawal shall be $1,000 or such lesser amount established from time to time in a nondiscriminatory manner by the Administrative Committee. (b) Immediate and Heavy Financial Need. For purposes of the Plan, an immediate and heavy financial need exists if the withdrawal is on account of (i) expenses for medical care described in Code Section 213(d) previously incurred by the Participant, his Spouse or dependents, or necessary to obtain such medical care for such persons, (ii) the purchase (excluding mortgage payments) of a principal residence for the Participant, (iii) the payment of tuition and related educational fees and room and board expenses for the next 12 months of post-secondary education for the Participant, his Spouse or dependents, (iv) the need to prevent eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence, (v) the payment of funeral expenses for a member of the Participant's immediate family (that is, his parent, step-parent, father-in-law or mother-in-law, grandparent, brother or sister, half-brother or half-sister, step-brother or step-sister, Spouse, child, step-child or grandchild), (vi) the payment of federal income taxes with respect to the Participant's individual income tax returns for the two most recently ended tax years (including penalties and interest), (vii) the payment of legal fees and expenses incurred as a direct result of the adoption of a child by the Participant, and (viii) the payment of uninsured costs for repairs to the Participant's principal residence as a result of unforeseen damages caused by a natural disaster or accident. (c) Necessary to Satisfy a Financial Need. In determining whether the withdrawal is necessary to relieve the Participant's immediate and heavy financial need, the Administrative Committee shall rely upon the Participant's reasonable representation that the need cannot be relieved: (i) through reimbursement or compensation by insurance or otherwise; (ii) by reasonable liquidation of the Participant's assets to the extent that liquidation would not itself cause an immediate and heavy financial need; (iii) by cessation of Before-Tax Contributions to the Plan; or (iv) by other distributions or nontaxable (at the time of the loan) loans from plans maintained by one or more Participating Companies or by borrowing from commercial sources on reasonable commercial terms. In determining the amount of a 54 Participant's assets, the resources of his Spouse and minor dependents are considered to be reasonably available to the Participant unless they are held for his child or children under an irrevocable trust or under the Uniform Gifts to Minors Act. The amount of an immediate and heavy financial need may include amounts necessary for the Participant to pay any federal, state of local taxes which are reasonably anticipated to result from the hardship withdrawal. (d) Form of Distribution. Subject to the election of a Participant, any hardship withdrawal may be paid entirely in cash or entirely in whole shares of Company Stock (with any portion of the withdrawal reprocessed by a fractional share being paid in cash). (e) Source of Funds. The amount of a Participant's hardship withdrawal shall be charged first against his Rollover Account, then against his Matching Account, and then against his Before-Tax Account. 10.2 Age 65 Withdrawals. (a) Conditions. A Participant who has attained age 65 and is an Employee of an Affiliate may request a withdrawal of all or part of his Account. A Participant may request two such withdrawals during any 12-consecutive-month period. (b) Source of Funds. The amount of such withdrawal shall be charged first against his Rollover Account, then against his Matching Account, and then against his Before-Tax Account, and shall be charged pro-rata against the Investment Funds in which such Accounts are invested. (c) Method. A withdrawal described in this Section 10.2 shall be paid in the form of a single-sum distribution which shall, except as otherwise provided herein, be paid in cash. To the extent that a portion of a Participant's Account that is to be withdrawn is invested in Company Stock, such withdrawal shall be made in the form of Company Stock or cash, at the election of the Participant. 10.3 Rollover Account Withdrawals. A Participant may request a withdrawal of all or part of his Rollover Account. A withdrawal under this Section 10.3 shall be paid in the form of a single-sum distribution which shall, except as otherwise provided herein, be paid in cash. To the extent that a portion of a Participant's Account that is to be withdrawn is invested in Company Stock, such withdrawal shall be made in the form of Company Stock or cash, at the election of the Participant. 10.4 Election to Withdraw. All applications for withdrawals shall be in writing on a form provided by the Administrative Committee and shall contain such information and be made at such time as the Administrative Committee may reasonably request. Any application for a withdrawal must be submitted to the Administrative Committee (or its delegatee) in accordance with procedures established under the Plan prior to the payment date of such withdrawal. 55 10.5 Payment of Withdrawal. The amount of any withdrawal under Sections 10.1, 10.2 or 10.3 shall be paid to a Participant in a single-sum payment as soon as practicable after the Administrative Committee receives and approves a properly completed withdrawal application. At the time of making any withdrawals for a Participant, his Account may be charged with any administrative expenses (such as check processing fees) specifically allocable against his Account pursuant to the policies of the Administrative Committee. Any withdrawal shall be treated as a payment of benefits under Articles IX and X and all of the requirements of those Articles. 10.6 Distributions and Withdrawals from Transfer Accounts. If the assets and benefits of a Prior Plan, which (i) allows Code Section 41l(d)(6) protected in-service withdrawals (other than those permitted in Section 10.1, 10.2 and 10.3) and/or (ii) allows one or more Code Section 411(d)(6) protected forms of distribution not generally permitted hereunder are transferred to or merged into the Plan, the Participants who have Transfer Accounts reflecting the accrued benefits subject to such protected withdrawals and forms of distribution under that Prior Plan shall be permitted to withdraw, and/or receive distributions of, all or a portion of the amounts from the subject Transfer Accounts in a manner and subject to rules and restrictions, similar to those provided under the Prior Plan such that the Plan will comply with the requirements of Code Section 41l(d)(6). The terms and conditions of any such withdrawals, as well as other pertinent rules and provisions relating to the transfer of such assets to the Plan, shall be set forth on a schedule hereto. 10.7 Loans to Participants. (a) Grant of Authority. Loans to Participants, Beneficiaries and alternate payees who are parties-in-interest as defined in Section 3(14) of ERISA generally shall be allowed; provided, if the Administrative Committee determines in its sole discretion that it is not administratively feasible or desirable to make such loans during any period of time, no loans shall be made during such period. Subject to the limitations set forth in this Section and to such uniform and nondiscriminatory rules as may from time to time be adopted by the Administrative Committee and set forth in a written policy statement which hereby is incorporated by reference, the Trustee, upon proper application by an eligible Participant, Beneficiary or alternate payee on forms approved by the Administrative Committee, may make a loan or loans to the borrower. (b) Nondiscriminatory Policy. Loans shall be available to all Participants, Beneficiaries and alternate payees who are parties-in-interest as defined in Section 3(14) of ERISA on a reasonably equivalent basis, without regard to an individual's race, color, religion, age, sex or national origin. Loans shall not be made available to borrowers who are Highly Compensated Employees in an amount greater than the amount available to other borrowers; provided, this limitation shall be interpreted to mean that, subject to the other limitations in this Section, the same percentage of each borrower's vested Account balance may be loaned to each such borrower regardless of the actual amount of his vested Account balance. 56 (c) Minimum Loan Amount. The minimum amount of any loan shall be the amount established by the Administrative Committee in the written loan policy statement, but such minimum may not be more than $1,000. (d) Maximum Loan Amount. The Administrative Committee will designate in the written loan policy statement the maximum number of loans that may be outstanding at any time. In addition, no loan may be made to any borrower from the Plan if the amount of such loan exceeds the lesser of (i) the limit established by the Administrative Committee, or (ii) the lesser of: (1) $50,000 minus the highest aggregate principal balance, outstanding during the year ending on the day before such loan is made, of all loans made to the borrower by the qualified employer plans [as defined in Code Section 72(p)(4)(A)] maintained by the Affiliates; (2) the difference between (A) 50 percent of the borrower's total vested interest in the Plan and all other qualified employer plans maintained by the Affiliates, minus (B) the total amount of all loans outstanding on the date the loan is made from all qualified employer plans maintained by the Affiliates; or (3) 50 percent of the borrower's vested Account balance immediately after the origination of the loan. (e) Maximum Loan Term. (1) Except as provided in subsections (e)(2) and (1) hereof, the terms of any loan made from the Plan shall require that the full amount of the loan be repaid within the 5-year period (or such other shorter maximum term as the Administrative Committee may establish in its written loan policy statement) commencing on the date the loan is made, and in no event shall the repayment period of the loan subsequently be extended beyond such 5-year period. The Trustee shall make a diligent effort to collect the full amount of the loan within this specified repayment period and shall inform the borrower that, in the event the loan is not fully repaid within the 5-year period, the borrower will be treated as having received a taxable distribution from the Plan. (2) The 5-year repayment rule set forth in subsection (e)(l) hereof shall not apply to the extent that a loan is used to acquire any dwelling unit which is used, or within a reasonable time is to be used, as a principal residence of the borrower, and the Administrative Committee shall specify the maximum loan term for any such residential purchase loan in its written loan policy statement. Whether a dwelling unit is to be used within a reasonable time as a principal residence is to be determined by the Administrative Committee at the time the loan is made, and the Administrative Committee may require such written statements and other evidence from the borrower as it deems necessary to make this determination. Loans made with respect to principal residences pursuant to this subsection shall be repaid within a 15-year period (or such shorter maximum time as the Administrative Committee may establish in its written loan policy statement). 57 (f) Terms of Repayment. All loans shall be subject to a definite repayment schedule which requires substantially level amortization over the term of the loan with payments to be made not less frequently than quarterly (and more frequently if required by the Administrative Committee's written loan policy statement). Unless the Administrative Committee provides for different methods in its written loan policy statement, payments shall be made by Participants who are Employees of Affiliates on a payroll deduction basis, and payments from other borrowers shall be made by cash, check or other cash equivalent. (g) Adequacy of Security. All loans shall be secured by the pledge of a dollar amount of the borrower's Account balance (i) which is not less than the principal amount of the loan plus an additional amount, if any, which the Administrative Committee, pursuant to its written loan policy statement, deems desirable to secure payment of interest accruing on the loan, and (ii) which in no event (when aggregated for all outstanding loans) is greater than 50 percent of the borrower's vested Account balance immediately after the origination of the loan. Notwithstanding anything herein to the contrary, the pledge of such security shall be made in such manner and amount as the Administrative Committee, pursuant to its written loan policy statement, may require for the loan to be considered adequately secured. A loan will be considered to be "adequately secured" if the security posted for such loan is in addition to and supporting a promise to pay, if it is pledged in a manner such that it may be sold, foreclosed upon, or otherwise disposed of upon default of repayment of the loan, and if the value and liquidity of that security is such that it may reasonably be anticipated that loss of principal or interest will not result from the loan. The adequacy of such security will be determined in light of the type and amount of security which would be required in the case of an otherwise identical transaction in a normal commercial setting between unrelated parties on arm's-length terms. During the period that a loan is outstanding, if a Participant becomes eligible to receive a withdrawal or a distribution, the amount of such Participant's Account which he shall be eligible to receive through withdrawal or distribution shall not exceed that amount which will reduce such Participant's Account balance below the principal amount then outstanding on such loan. (h) Rate of Interest. A loan from the Plan must bear a reasonable rate of interest. A loan will be considered to bear "a reasonable rate of interest" if such loan provides the Plan with a return commensurate with interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances. In general, the Administrative Committee's decision as to the rate of interest for any Plan loan shall be based primarily on the rate of interest that one or more local banks or other lending institutions would charge on a similar loan, taking into account, among other things, the collateral pledged to secure the loan. (i) Source of Loan Amounts. The proceeds of a loan shall be charged against the Accounts of the borrower in the manner described by the Administrative Committee in its loan policy statement. 58 (j) Crediting Loan Payments to Accounts. The loan shall be considered a directed investment of the borrower, and any principal and interest paid on the loan shall be considered a part of his total Account. Each payment of principal and interest shall be credited to the Investment Funds and subaccounts of the Participant's Account in the manner described by the Administrative Committee in its loan policy statement. (k) Remedies in the Event of Default. If any loan payments are not paid as and when due or within such period as the Administrative Committee may prescribe in its loan policy statement, the Administrative Committee may declare the loan to be in default. The Administrative Committee may take such actions, as it deems appropriate in accordance with its written loan policy statement, to allow the borrower to cure such default or to otherwise collect such overdue payments or, as the case may be, the outstanding balance of the loan. Among other things, the Administrative Committee's actions may include causing all or any portion of the borrower's Account which has been pledged to secure the loan to be used to repay such loan; provided, although the Administrative Committee may treat any portion of the loan balance that remains outstanding after a default as taxable income to the borrower in accordance with the terms of Code Section 72(p), no portion of such outstanding loan balance may be treated as a reduction of a Participant's Account balance until such time as such reduction, if treated as a distribution, will not breach the special distribution restrictions of Code Section 401(k)(2)(B). (l) Qualified Military Service. Loan repayments may be suspended under this Plan as permitted under Code Section 414(u)(4), under applicable Treasury Regulations, and as provided in the written loan policy statement. 10.8 Transition Rule. For purposes of effectuating a change in the Plan's recordkeeper, and notwithstanding anything contained in this Article X to the contrary, the Administrative Committee may designate a period during which no withdrawals or loans shall be permitted. 59 ARTICLE XI ADMINISTRATION 11.1 Administrative Committee; Appointment and Term of Office. (a) Appointment. The Administrative Committee shall consist of the Administrative Committee of The Home Depot FutureBuilder or such other Committee as is appointed by the Home Depot Board. (b) Certification. A written certification shall be given to the Trustee by the Senior Human Resources Officer of Home Depot of all members of the Administrative Committee together with a specimen signature of each member. For all purposes hereunder, the Trustee shall be conclusively entitled to rely upon such certification until the Trustee is otherwise notified in writing. 11.2 Organization of Administrative Committee. The Administrative Committee may elect a Chairman and a Secretary from among its members. In addition to those powers set forth elsewhere in the Plan, the Administrative Committee may appoint such agents, who need not be members of such Administrative Committee, as it may deem necessary for the effective performance of its duties and may delegate to such agents such powers and duties, whether ministerial or discretionary, as the Administrative Committee may deem expedient or appropriate. The compensation of such agents who are not full-time Employees of a Participating Company shall be fixed by the Administrative Committee and shall be paid by the Controlling Company (to be divided equitably among the Participating Companies) or from the Trust Fund as determined by the Administrative Committee. The Administrative Committee shall act by majority vote or by resolutions signed by a majority of the Administrative Committee members. Its members shall serve as such without compensation. 11.3 Powers and Responsibility. The Administrative Committee shall fulfill the duties of "administrator" as set forth in Section 3(16) of ERISA and shall have complete control of the administration of the Plan hereunder, with all powers necessary to enable it properly to carry out its duties as set forth in the Plan and the Trust Agreement. The Administrative Committee shall have the following duties and responsibilities: (a) to construe the Plan and to determine all questions that shall arise thereunder; (b) to have all powers elsewhere herein conferred upon it; (c) to decide all questions relating to the eligibility of Employees to participate in the benefits of the Plan; (d) to determine the benefits of the Plan to which any Participant or Beneficiary may be entitled; 60 (e) to maintain and retain records relating to Participants and Beneficiaries; (f) to prepare and furnish to Participants all information required under federal law or provisions of the Plan to be furnished to them; (g) to prepare and furnish to the Trustee sufficient employee data and the amount of Contributions received from all sources so that the Trustee may maintain separate accounts for Participants and Beneficiaries and make required payments of benefits; (h) to prepare and file or publish with the Secretary of Labor, the Secretary of the Treasury, their delegates and all other appropriate government officials all reports and other information required under law to be so filed or published; (i) as permitted in the Trust Agreement, to provide directions to the Trustee with respect to methods of benefit payment, and all other matters where called for in the Plan or requested by the Trustee; (j) to engage assistants and professional advisers; (k) to arrange for fiduciary bonding; (1) to provide procedures for determination of claims for benefits; and (m) to delegate any recordkeeping or other administerial duties hereunder to any other person or third-party; all as further set forth herein. 11.4 Records of Administrative Committee. (a) Notices and Directions. Any notice, direction, order, request, certification or instruction of the Administrative Committee to the Trustee shall be in writing and shall be signed by a member of the Administrative Committee. The Trustee and every other person shall be entitled to rely conclusively upon any and all such proper notices, directions, orders, requests, certifications and instructions received from the Administrative Committee and reasonably believed to be properly executed, and shall act and be fully protected in acting in accordance with any such directions that are proper. (b) Records. All acts and determinations of the Administrative Committee shall be duly recorded by its Secretary or under his supervision, and all such records (including records necessary to demonstrate compliance with the nondiscrimination requirements of the Code), together with such other documents as may be necessary for the administration of the Plan, shall be preserved in the custody of such Secretary. 11.5 Delegation. The Administrative Committee shall have the power to delegate specific fiduciary, administrative and ministerial responsibilities (other than Trustee responsibilities). 61 Such delegations may be to officers or Employees of a Participating Company or to other persons, all of whom shall serve at the pleasure of the Administrative Committee. References in the Plan to the Administrative Committee are deemed to include any person authorized to act on its behalf pursuant to this Section and Section 12.6. 11.6 Reporting and Disclosure. The Administrative Committee shall keep all individual and group records relating to Participants and Beneficiaries and all other records necessary for the proper operation of the Plan. Such records shall be made available to the Participating Companies and to each Participant and Beneficiary for examination during normal business hours except that a Participant or Beneficiary shall examine only such records as pertain exclusively to the examining Participant or Beneficiary and the Plan and Trust Agreement. The Administrative Committee shall prepare and shall file as required by law or regulation all reports, forms, documents and other items required by ERISA, the Code and every other relevant statute, each as amended, and all regulations promulgated thereunder. This provision shall not be construed as imposing upon the Administrative Committee the responsibility or authority for the preparation, preservation, publication or filing of any document required to be prepared, preserved or filed by the Trustee or by any other Named Fiduciary to whom such responsibilities are delegated by law or by the Plan. 11.7 Construction of the Plan. The Administrative Committee shall take such steps as are considered necessary and appropriate to remedy any inequity that results from incorrect information received or communicated in good faith or as the consequence of an administrative error. Such remedial steps may include, but are not limited to, taking any voluntary corrective action under any correction program available through the Internal Revenue Service, Department of Labor or other administrative agency. The Administrative Committee, in its sole and full discretion, shall interpret the Plan and shall determine the questions arising in the administration, interpretation and application of the Plan. The Administrative Committee shall endeavor to act, whether by general rules or by particular decisions, so as not to discriminate in favor of or against any person and so as to treat all persons in similar circumstances uniformly. The Administrative Committee shall correct any defect, reconcile any inconsistency or supply any omission with respect to the Plan. 11.8 Assistants and Advisors. (a) Engaging Advisors. The Administrative Committee shall have the right to hire, at the expense of the Controlling Company (to be divided equitably among the Participating Companies), such professional assistants and consultants as it, in its sole discretion, deems necessary or advisable. To the extent that the costs for such assistants and advisors are not so paid by the Controlling Company, they shall be paid at the direction of the Administrative Committee from the Trust Fund as an expense of the Trust Fund. (b) Reliance on Advisors. The Administrative Committee and the Participating Companies shall be entitled to rely upon all certificates and reports made by an 62 accountant, attorney or other professional adviser selected pursuant to this Section; the Administrative Committee, the Participating Companies, and the Trustee shall be fully protected in respect to any action taken by them in good faith in reliance upon the advice or opinion of any such accountant, attorney or other professional adviser; and any action so taken shall be conclusive upon each of them and upon all other persons interested in the Plan. 11.9 Investment Committee. (a) Appointment. The Investment Committee shall consist of the Investment Committee of The Home Depot FutureBuilder or such other committee as is appointed by The Home Depot Board. (b) Duties. The Investment Committee also shall carry out the Controlling Company's responsibility and authority: (1) To appoint one or more persons to serve as investment manager with respect to all or part of the Plan assets, including assets maintained under separate accounts of an insurance company; (2) To allocate the responsibility and authority being carried out by the Investment Committee among the members of the Investment Committee; (3) To take any action appropriate to ensure that the Plan assets are invested for the exclusive purpose of providing benefits to Participants and their Beneficiaries in accordance with the Plan and defraying reasonable expenses of administering the Plan, subject to the requirements of any applicable law; and (4) To employ one or more persons to render advice with respect to any responsibility or authority being carried out by the Investment Committee. To the extent that the costs for such assistants and advisors are not paid by a Participating Company, they shall be paid at the direction of the Investment Committee from the Trust Fund as an expense of the Trust Fund. 11.10 Direction of Trustee. The Investment Committee shall have the power to provide the Trustee with general investment policy guidelines and directions to assist the Trustee respecting investments made in compliance with, and pursuant to, the terms of the Plan. 11.11 Bonding. The Administrative Committee shall arrange for fiduciary bonding as is required by law, but no bonding in excess of the amount required by law shall be required by the Plan. 11.12 Indemnification. Each of the Administrative Committee and the Investment Committee and each member of those Committees shall be indemnified by the Participating Companies against 63 judgment amounts, settlement amounts (other than amounts paid in settlement to which the Participating Companies do not consent) and expenses, reasonably incurred by the Committee or him in connection with any action to which the Committee or he may be a party (by reason of his service as a member of a Committee) except in relation to matters as to which the Committee or he shall be adjudged in such action to be personally guilty of gross negligence or willful misconduct in the performance of its or his duties. The foregoing right to indemnification shall be in addition to such other rights as such Committee or each Committee member may enjoy as a matter of law or by reason of insurance coverage of any kind. Rights granted hereunder shall be in addition to and not in lieu of any rights to indemnification to which such Committee or each Committee member may be entitled pursuant to the by-laws of the Controlling Company. Service on the Administrative or Investment Committee shall be deemed in partial fulfillment of a Committee member's function as an Employee, officer and/or director of the Controlling Company or any Participating Company, if he serves in such other capacity as well. 64 ARTICLE XII ALLOCATION OF AUTHORITY AND RESPONSIBILITIES 12.1 Controlling Company and Board. (a) General Responsibilities. The Controlling Company, as Plan sponsor, and the Board each shall serve as a Named Fiduciary having the following (and only the following) authority and responsibilities: (1) To communicate such information to the Trustee, the Administrative Committee and the Investment Committee as each needs for the proper performance of its duties; (2) To provide channels and mechanisms through which the Administrative Committee and/or the Trustee can communicate with Participants and Beneficiaries; and (3) To terminate the Plan. (b) Authority of Participating Companies. Notwithstanding anything herein to the contrary, and in addition to the authority and responsibilities specifically given to the Participating Companies in the Plan, the Administrative Committee, in its sole discretion, may grant the Participating Companies such authority and charge them with such responsibilities as the Administrative Committee deems appropriate. 12.2 Administrative Committee. The Administrative Committee shall have the authority and responsibilities imposed by Article XI. With respect to said authority and responsibilities, the Administrative Committee shall be a Named Fiduciary, and as such, shall have no authority or responsibilities other than as granted in the Plan or as imposed as a matter of law. 12.3 Investment Committee. The Investment Committee, if any is appointed, shall be a Named Fiduciary with respect to its authority and responsibilities, as imposed by Article XI. The Investment Committee shall have no authority or responsibilities other than those granted in the Plan and the Trust. 12.4 Trustee. The Trustee shall be a fiduciary with respect to investment of Trust Fund assets and shall have the powers and duties set forth in the Trust Agreement. 12.5 Limitations on Obligations of Fiduciaries. No fiduciary shall have authority or responsibility to deal with matters other than as delegated to it under the Plan, under the Trust Agreement or by operation of law. A fiduciary 65 shall not in any event be liable for breach of fiduciary responsibility or obligation by another fiduciary (including Named Fiduciaries) if the responsibility or authority for the act or omission deemed to be a breach was not within the scope of such fiduciary's authority or delegated responsibility. 12.6 Delegation. Named Fiduciaries shall have the power to delegate specific fiduciary responsibilities (other than Trustee responsibilities). Such delegations may be to officers or Employees of a Participating Company or to other persons, all of whom shall serve at the pleasure of the Named Fiduciary making such delegation and, if full-time Employees of a Participating Company, without compensation. Any such person may resign by delivering a written resignation to the delegating Named Fiduciary. Vacancies created by any reason may be filled by the appropriate Named Fiduciary or the assigned responsibilities may be reabsorbed or redelegated by the Named Fiduciary. 12.7 Multiple Fiduciary Roles. Any person may hold more than one position of fiduciary responsibility and shall be liable for each such responsibility separately. 66 ARTICLE XIII AMENDMENT, TERMINATION AND ADOPTION 13.1 Amendment. The provisions of the Plan may be amended at any time and from time to time by the Administrative Committee; provided: (a) No amendment shall increase the duties or liabilities of the Trustee without the consent of such party; (b) No amendment shall decrease the balance or vested percentage of an Account or, except as permitted by applicable laws, eliminate an optional form of benefit; (c) No amendment shall be made which would divert any of the assets of the Trust Fund to any purpose other than the exclusive benefit of Participants and Beneficiaries, except that the Plan and Trust Agreement may be amended retroactively and to affect the Accounts of Participants and Beneficiaries if necessary to cause the Plan and Trust to be qualified and exempt from taxation under the Code; (d) No amendment shall be made which constitutes a restatement of the Plan that significantly changes the Plan design without approval of the Board; and (e) No amendment shall effect any changes in the contribution formula without approval of the Board. 13.2 Termination. (a) Right to Terminate. The Controlling Company expects the Plan to be continued indefinitely, but it reserves the right to terminate the Plan or to completely discontinue Contributions to the Plan at any time by action of the Board. In either event, the Administrative Committee, Investment Committee, each Participating Company and the Trustee shall be promptly advised of such decision in writing. For termination of the Plan by a Participating Company as to itself (rather than the termination of the entire Plan), refer to Section 13.3(e). (b) Vesting Upon Complete Termination. If the Plan is terminated by the Controlling Company or Contributions to the Plan are completely discontinued, the Accounts of all Participants, Beneficiaries or other successors in interest as of such date shall become 100 percent vested and nonforfeitable. Upon termination of the Plan, the Administrative Committee, in its sole discretion, shall instruct the Trustee either (i) to continue to manage and administer the assets of the Trust for the benefit of the Participants and their Beneficiaries pursuant to the terms and provisions of the Trust Agreement, or (ii) to the extent permissible under applicable law, pay over to each Participant the value of his interest in a single-sum payment and to thereupon dissolve the Trust. (c) Dissolution of Trust. In the event that the Administrative Committee decides to dissolve the Trust, as soon as practicable following the termination of the Plan or the Administrative Committee's decision, whichever is later, the assets under the Plan shall be 67 converted to cash or other distributable assets, to the extent necessary to effect a complete distribution of the Trust assets as described herein below. Following completion of the conversion, on a date selected by the Administrative Committee, each individual with an Account under the Plan on such date shall receive a distribution of the total amount then credited to his Account. The amount of cash and other property distributable to each such individual shall be determined as of the date of distribution (treating, for this purpose, such distribution date as the Valuation Date as of which the distributable amount is determined). In the case of a termination distribution as provided herein, the Administrative Committee may direct the Trustee to take any action provided in Section 9.9 (dealing with unclaimed benefits), except that it shall not be necessary to hold funds for any period of time stated in such Section. Within the expense limitations set forth in the Plan, the Administrative Committee may direct the Trustee to use assets of the Trust Fund to pay any due and accrued expenses and liabilities of the Trust and any expenses involved in termination of the Plan (other than expenses incurred for the benefit of the Participating Companies). (d) Vesting Upon Partial Termination. In the event of a partial termination of the Plan [as provided in Code Section 411(d)(3)], the Accounts of those Participants and Beneficiaries affected shall become 100 percent vested and nonforfeitable and, unless transferred to another qualified plan, shall be distributed in a manner and at a time consistent with the terms of Article IX. 13.3 Adoption of the Plan by a Participating Company. (a) Procedures for Participation. As of the Effective Date, the Controlling Company and the other Affiliates listed on Schedule A hereto shall be Participating Companies in the Plan. Any other Affiliate may become a Participating Company and commence participation in the Plan subject to the provisions of this subsection. In order for an Affiliate to become a Participating Company, the Administrative Committee must designate such company as a Participating Company and specify the effective date of such designation. The name of any Affiliate which shall commence participation in the Plan, along with the effective date of its participation, may be recorded in the records of the Administrative Committee or on Schedule A hereto which may be appropriately modified each time a Participating Company is added or deleted. To adopt the Plan as a Participating Company, the board of directors or other managing body of the company must approve a resolution expressly adopting the Plan for the benefit of its eligible Employees and accepting designation as a Participating Company, subject to all of the provisions of this Plan and of the Trust. The resolution shall specify the date as of which the designation as a Participating Company shall be effective. A copy of the resolution (certified if requested) of the board of directors of the adopting Participating Company shall be provided to the Administrative Committee. Upon adoption of the Plan by a Participating Company as herein provided, the Employees of such company shall be eligible to participate in the Plan subject to the terms hereof and of the resolution of the Administrative Committee designating the adopting company as such. (b) Single Plan. The Plan, as adopted by all Participating Companies, shall be considered a single plan for purposes of Treasury Regulation Section 1.414(l)-l(b)(l). All assets contributed to the Plan by the Participating Companies shall be held together in a single fund and shall be available to pay benefits to all Participants and Beneficiaries. Nothing contained herein 68 shall be construed to prohibit the separate accounting of assets contributed by the Participating Companies for purposes of cost allocation, Contributions, Forfeitures and other purposes, pursuant to the terms of the Plan and as directed by the Administrative Committee. (c) Authority under Plan. As long as a Participating Company's designation as such remains in effect, such Participating Company shall be bound by, and subject to, all provisions of the Plan and the Trust. The exclusive authority to amend the Plan and the Trust shall be vested in the Administrative Committee, and no Participating Company shall have any right to amend the Plan or the Trust. Any amendment to the Plan or the Trust adopted by the Administrative Committee shall be binding upon every Participating Company without further action by such Participating Company. (d) Contributions to Plan. A Participating Company shall be required to make Contributions to the Plan at such times and in such amounts as specified in Articles III and VI. The Contributions made (or to be made) to the Plan by the Participating Companies shall be allocated between and among such companies in whatever equitable manner or amounts as the Administrative Committee shall determine. (e) Withdrawal from Plan. The Administrative Committee may terminate the designation of a Participating Company, effective as of any date. A Participating Company may withdraw from participation in the Plan, with the approval of the Administrative Committee, by action of its board of directors; provided, such action is communicated in writing to the Administrative Committee. The withdrawal of a Participating Company shall be effective as of the last day of the Plan Year in which the notice of withdrawal is received by the Administrative Committee (unless the Controlling Company or Administrative Committee consents to a different effective date). Any such Participating Company which ceases to be a Participating Company shall be liable for all costs and liabilities (whether imposed under the terms of the Plan, the Code or ERISA) accrued, with respect to its Employees, through the effective date of its withdrawal or termination. The withdrawing or terminating Participating Company shall have no right to direct that assets of the Plan be transferred to a successor plan for its Employees unless such transfer is approved by the Controlling Company or Administrative Committee in its sole discretion. 13.4 Merger, Consolidation and Transfer of Assets or Liabilities. In the event of any merger or consolidation of the Plan with, or transfer of assets or liabilities of the Plan to, any other plan, each Participant and Beneficiary shall have a plan benefit in the surviving or transferee plan (determined as if such plan were then terminated immediately after such merger, consolidation or transfer of assets or liabilities) that is equal to or greater than the benefit he would have been entitled to receive under the Plan immediately before such merger, consolidation or transfer of assets or liabilities, if the Plan had terminated at that time. 69 ARTICLE XIV TOP-HEAVY PROVISIONS 14.1 Top-Heavy Plan Years. The provisions set forth in this Article XIV shall become effective for any Plan Years with respect to which the Plan is determined to be a Top-Heavy Plan and shall supersede any other provisions of the Plan which are inconsistent with these provisions; provided, if the Plan is determined not to be a Top-Heavy Plan in any Plan Year subsequent to a Plan Year in which the Plan was a Top-Heavy Plan, the provisions of this Article XIV shall not apply with respect to such subsequent Plan Year; and, provided further, to the extent that any of the requirements of this Article XIV shall no longer be required under Code Section 416 or any other Section of the Code, such requirements shall be of no force or effect. 14.2 Determination of Top-Heavy Status. (a) Application. The Plan will be considered a Top-Heavy Plan for a Plan Year if either: (1) the Plan is not part of a Required Aggregation Group or a Permissive Aggregation Group and, as of the Determination Date of such Plan Year, the value of the Accounts of the Participants who are Key Employees under the Plan exceeds 60 percent of the value of the Accounts of all Participants; or (2) the Plan is part of a Required Aggregation Group which, as of the Determination Date of such Plan Year, is a Top-Heavy Group; provided, the Plan shall not be considered a Top-Heavy Plan for a Plan Year under subsection (a)(2) hereof if the Plan also is part of a Permissive Aggregation Group which is not a Top-Heavy Group for such Plan Year. (b) Special Definitions. (1) Determination Date. The term "Determination Date" shall mean (i) in the case of the Plan Year that includes the original effective date of the Plan, the last day of such Plan Year, and (ii) with respect to any other Plan Year of the Plan, the last day of the immediately preceding Plan Year and (iii) for any plan year of each other qualified plan maintained by a Participating Company or Affiliate which is part of a Required or Permissive Aggregation Group, the date determined under (i) or (ii) above as if the term "Plan Year" means the plan year for each such other qualified plan. (2) Key Employee. The term "Key Employee" shall mean an Employee defined in Code Section 416(i) and the regulations promulgated thereunder. Generally, Key Employee shall mean an Employee, former Employee or deceased Employee (and the beneficiaries of any such Employee) who, at any time during the Plan Year or the 4 previous Plan Years, was either: 70 (A) an officer of an Affiliate having a combined annual Compensation from all Affiliates greater than 50 percent of the amount in effect under Code Section 415(b)(l)(A) for any such Plan Year; provided, no less than one nor more than fifty individuals shall be treated as officers of an Affiliate; (B) one of the ten individuals owning [or considered as owning under Code Section 318, as modified by Code Section 416(i)(l)(B)(iii)] the largest percentage ownership interests in value in the Affiliates (as more fully described in Treasury Regulation Section 1.416-1, T-19 and T-20) and having a combined annual Compensation from all Affiliates of more than the limitation in effect under Code Section 415(c)(l)(A); (C) a 5-percent owner [or constructive owner within the meaning of Code Section 318, as modified by Code Section 416(i)(l)(B)(iii)] of an Affiliate; or (D) a 1-percent owner [or constructive owner within the meaning of Code Section 318, as modified by Code Section 416(i)(l)(B)(iii) and the regulations promulgated thereunder] of an Affiliate having a combined annual Compensation from all Affiliates of more than $150,000. For purposes of subsection (B) hereof, if two individuals have the same percentage ownership interest in an Affiliate, the individual having greater combined annual Compensation from all Affiliates shall be treated as having the larger interest. In determining percentage ownership hereunder, employers that otherwise would be aggregated under Code Sections 414(b), (c) and (m) shall be treated as separate employers. (3) Non-Key Employee. The term "Non-Key Employee" shall mean any Employee who is not a Key Employee. For purposes hereof, former Key Employees shall be treated as Non-Key Employees. (4) Permissive Aggregation Group. The term "Permissive Aggregation Group" shall mean a Required Aggregation Group and any other qualified plan or plans maintained or contributed to by an Affiliate which, when considered with the Required Aggregation Group, would continue to satisfy the requirements of Code Sections 401(a)(4) and 410. (5) Required Aggregation Group. The term "Required Aggregation Group" shall mean a group of plans of the Affiliates consisting of (i) each plan which, for such Plan Year or any of the 4 preceding Plan Years, qualifies under Code Section 401(a) and in which a Key Employee is a participant, and (ii) each other plan which, during this 5-year period, qualifies under Code Section 401(a) and which enables any plan described in clause (i) hereof to satisfy the requirements of Code Sections 401(a)(4) or 410. 71 (6) Top-Heavy Group. The term "Top-Heavy Group" shall mean a Required or Permissive Aggregation Group with respect to which the sum (determined as of a Determination Date) of (i) the present value of the cumulative accrued benefits for Key Employees under all Defined Benefit Plans included in such group, and (ii) the aggregate of the accounts of Key Employees under all Defined Contribution Plans included in such group, exceeds 60 percent of a similar sum determined for all Employees. (c) Special Rules. The following rules shall apply in determining whether the Plan is a Top-Heavy Plan under subsection (a)(l) or (a)(2) above: (1) The value of any account balance under any Defined Contribution Plan and the value of any accrued benefit under any Defined Benefit Plan shall be determined as of the most recent valuation date that falls within, or ends with, the 12-month period ending on the Determination Date or, if plans are aggregated, the Determination Dates that fall within the same calendar year; (2) The value of the Accounts under the Plan or the accounts under any other Defined Contribution Plan included in a Required or Permissive Aggregation Group for any Determination Date, other than the Determination Date for the first plan year, shall include the amounts actually contributed and paid to the plan on or before the Determination Date, and shall exclude any amounts to be contributed with respect to such preceding plan year but not actually paid to the plan on or before the Determination Date. The value of the accounts under any Defined Contribution Plan for the Determination Date of the first plan year shall include all amounts contributed to the plan as of the Determination Date, regardless of whether such amounts shall have been actually paid or merely accrued as of the Determination Date; (3) The value of any account balance under any Defined Contribution Plan and the present value of any accrued benefit under any Defined Benefit Plan as of any Determination Date shall be increased by the aggregate distributions made under the plan (including distributions under a terminated plan which, if it had not been terminated, would have been included in a Required Aggregation Group) during the 5-year period ending on the Determination Date; (4) Accrued benefits and accounts of the following individuals shall not be taken into account for a Plan Year: (A) any Non-Key Employee who, in a prior Plan Year, was a Key Employee or (B) any Employee who had not performed any services for a Participating Company at any time during the 5-year period ending on the Determination Date for such Plan Year; (5) The value of any account balance shall not include deductible employee contributions, as described in Code Section 72(o)(5)(A); (6) The extent to which rollovers and plan to plan transfers are taken into account in determining the value of any account balance or accrued benefit shall be 72 determined in accordance with Code Section 416 and the regulations promulgated thereunder; and (7) Effective for plan years beginning after December 31, 1986, each Non-Key Employee's accrued benefit under the Plan and any Defined Benefit Plans shall be determined (A) under the method, if any, that uniformly applies for accrual purposes under all Defined Benefit Plans, or (B) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate set forth under Code Section 41l(b)(l)(C). 14.3 Top-Heavy Minimum Contribution. (a) Multiple Defined Contribution Plans. For any Plan Year in which the Plan is a Top-Heavy Plan, the aggregate company Contributions (when added to similar contributions made under other defined contribution plans) allocated to the Account of any Active Participant who is a Non-Key Employee shall not be less than the Defined Contribution Minimum. To the extent that the company Contributions are less than the Defined Contribution Minimum, additional company Contributions shall be provided under the Plan. For purposes hereof, a Non-Key Employee shall not fail to receive a minimum contribution hereunder for a Plan Year because (i) such Non-Key Employee fails to complete 1,000 Hours of Service for such Plan Year or (ii) such Non-Key Employee is excluded from participation (or receives no allocation) merely because his Compensation is less than a stated amount or because he failed to make a Deferral Election for such Plan Year. (b) Defined Contribution and Benefit Plans. In the event that Non-Key Employees are covered under both the Plan and one or more Defined Benefit Plans maintained by an Affiliate, the minimum contribution level set forth in subsection (a) hereof shall be satisfied if each such Non-Key Employee receives a benefit level under such Defined Contribution and Defined Benefit Plans which is not less than the Defined Benefit Minimum offset by any benefits provided under the Plan and any other Defined Contribution Plans maintained by any Affiliate. (c) Defined Contribution Minimum. The term "Defined Contribution Minimum" means, with respect to the Plan, a minimum level of company Contributions allocated with respect to a Plan Year to the Account of each Active Participant who is a Non-Key Employee; such level being the lesser of: (1) 3 percent of such Active Participant's Compensation for such Plan Year; or (2) if no Defined Benefit Plan of an Affiliate uses the Plan to satisfy the requirements of Code Sections 401(a)(4) or 410, the highest percentage of Compensation at which company Contributions are made, or are required to be made, under the Plan for such Plan Year for any Key Employee. For purposes of this subsection, (i) qualified nonelective contributions made by the Controlling Company in order to satisfy the anti-discrimination tests of Code Section 401(k) or Section 73 401(m) (for example, Supplemental Contributions) may be treated as company Contributions, (ii) Before-Tax and Matching Contributions shall be taken into account as company Contributions for Key Employees, (iii) Matching Contributions may be treated as company Contributions and may be taken into account for satisfying the Minimum Contribution Requirement for Non-Key Employees, but only if such Matching Contributions are not treated as Matching Contributions for purposes of the ADP Tests or Code Section 401(m) and instead satisfy the requirements of Code Section 401(a)(4) as company Contributions, and (iv) Before-Tax Contributions shall not be taken into account for satisfying the Minimum Contribution Requirement for Non-Key Employees. (d) Defined Benefit Minimum. The term "Defined Benefit Minimum" means, with respect to a Defined Benefit Plan, a minimum level of accrued benefit derived from employer contributions with respect to a plan year for each participant who is a Non-Key Employee; such level, when expressed as an annual retirement benefit, being not less than the product of (1) and (2), where: (1) equals the Non-Key Employee's average Compensation for the period of consecutive years (not exceeding 5) when such Non-Key Employee had the highest aggregate Compensation from all Affiliates; and (2) equals the lesser of (A) 2 percent times such Non-Key Employee's number of years of service or (B) 20 percent. For purposes of determining the Defined Benefit Minimum, "years of service" shall not include any year of service if the plan was not a Top-Heavy Plan for the plan year ending during such year of service and shall not include any years of service completed in a plan year beginning before January 1, 1984. Compensation in years before January 1, 1984, and Compensation in years after the close of the last plan year in which the plan is a Top-Heavy Plan shall be disregarded. All accruals of employer-provided benefits, whether or not attributable to years for which the Plan is top heavy, may be used in determining whether the minimum contribution requirements set forth in this Section are satisfied. 14.4 Top-Heavy Minimum Vesting. The vesting schedule set forth in Section 8.1 satisfies the top-heavy minimum vesting requirements. 14.5 Construction of Limitations and Requirements. The descriptions of the limitations and requirements set forth in this Article are intended to serve as statements of the minimum legal requirements necessary for the Plan to remain qualified under the applicable terms of the Code. The Participating Companies do not desire or intend, and the terms of this Article shall not be construed, to impose any more restrictions on the operation of the Plan than required by law. Therefore, the terms of this Article and any related terms and definitions in the Plan shall be interpreted and operated in a manner which imposes the least restrictions on the Plan. For example, if use of a more liberal definition 74 of "Compensation" is permissible at any time under the law, then the more liberal provisions may be applied as if such provisions were included in the Plan. 75 ARTICLE XV MISCELLANEOUS 15.1 Nonalienation of Benefits and Spendthrift Clause. (a) General Nonalienation Requirements. Except to the extent permitted by law and as provided in subsection (b), (c) or (d) hereof, none of the Accounts, benefits, payments, proceeds or distributions under the Plan shall be subject to the claim of any creditor of a Participant or Beneficiary or to any legal process by any creditor of such Participant or Beneficiary; and neither such Participant nor Beneficiary shall have any right to alienate, commute, anticipate or assign any of the Accounts, benefits, payments, proceeds or distributions under the Plan except to the extent expressly provided herein. (b) Exception for Qualified Domestic Relations Orders. (1) The nonalienation requirements of subsection (a) hereof shall apply to the creation, assignment or recognition of a right to any benefit, payable with respect to a Participant pursuant to a domestic relations order, unless such order is (i) determined to be a qualified domestic relations order, as defined in Code Section 414(p), entered on or after January 1, 1985, or (ii) any domestic relations order, as defined in Code Section 414(p), entered before January 1, 1985, pursuant to which a transferor plan was paying benefits on January 1, 1985. The Administrative Committee shall establish reasonable written procedures to determine the qualified status of a domestic relations order. Further, to the extent provided under a qualified domestic relations order, a former spouse of a Participant shall be treated as the Spouse or Surviving Spouse for all purposes under the Plan. (2) The Administrative Committee shall establish reasonable procedures to administer distributions under qualified domestic relations orders which are submitted to it. The Administrative Committee, to the extent provided in a qualified domestic relations order, shall direct the Trustee to pay, in a single-sum payment, the full amount of the benefit payable to any alternate payee under a qualified domestic relations order. Such cash-out payment shall be made as soon as practicable after the end of the month within which the Administrative Committee determines that a domestic relations order is a qualified domestic relations order, or if later, when the terms of the qualified domestic relations order permit such a distribution. (See also Section 9.5.) If the terms of a qualified domestic relations order do not permit an immediate cash-out payment, the benefits shall be paid to the alternate payee in accordance with the terms of such order and the applicable terms of the Plan. (c) Exception for Loans from the Plan. All loans made by the Trustee to any Participant or Beneficiary shall be secured by a pledge of the borrower's interest in the Plan. (d) Exception for Crimes against the Plan. The nonalienation requirements of subsection (a) hereof shall not apply to any offset of a Participant's Account, benefit, payments, proceeds or distributions under the Plan against an amount that the Participant is ordered or required to pay to the Plan if: 76 (1) the order or requirement to pay arises, on or after August 5, 1997, (i) under a judgment of conviction for a crime involving the Plan; (ii) under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with a violation (or alleged violation) of part 4 of subtitle B of title I of ERISA; or (iii) pursuant to a settlement agreement between the Secretary of Labor and the Participant, or a settlement agreement between the Pension Benefit Guaranty Corporation and the Participant, in connection with a violation (or alleged violation) of part 4 of such subtitle by a fiduciary or any other person; and (2) the judgment, order, decree, or settlement agreement expressly provides for the offset of all or part of the amount ordered or required to be paid to the Plan against the Participant's benefits provided under the Plan. 15.2 Headings. The headings and subheadings in the Plan have been inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. 15.3 Construction, Controlling Law. In the construction of the Plan, the masculine shall include the feminine and the feminine the masculine, and the singular shall include the plural and the plural the singular, in all cases where such meanings would be appropriate. Unless otherwise specified, any reference to a Section shall be interpreted as a reference to a Section of the Plan. The Plan shall be construed in accordance with the laws of the State of Georgia and applicable federal laws. 15.4 No Contract of Employment. Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Participant, Employee or any person whomsoever the right to be retained in the service of any Affiliate, and all Participants and other Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 15.5 Legally Incompetent. The Administrative Committee may in its discretion direct that payment be made and the Trustee shall make payment on such direction, directly to an incompetent or disabled person, whether incompetent or disabled because of minority or mental or physical disability, or to the guardian of such person or to the person having legal custody of such person, without further liability with respect to or in the amount of such payment either on the part of any Participating Company, the Administrative Committee or the Trustee. 15.6 Heirs, Assigns and Personal Representatives. The Plan shall be binding upon the heirs, executors, administrators, successors and assigns of the parties, including each Participant and Beneficiary, present and future. 77 15.7 Title to Assets, Benefits Supported Only By Trust Fund. No Participant or Beneficiary shall have any right to, or interest in, any assets of the Trust Fund upon termination of his employment or otherwise, except as provided from time to time under the Plan, and then only to the extent of the benefits payable under the Plan to such Participant out of the assets of the Trust Fund. Any person having any claim under the Plan shall look solely to the assets of the Trust Fund for satisfaction. The foregoing sentence notwithstanding, each Participating Company shall indemnify and save any of its officers, members of its board of directors or agents, and each of them, harmless from any and all claims, loss, damages, expense and liability arising from their responsibilities in connection with the Plan and from acts, omissions and conduct in their official capacity, except to the extent that such effects and consequences shall result from their own willful misconduct or gross negligence. 15.8 Legal Action. In any action or proceeding involving the assets held with respect to the Plan or Trust Fund or the administration thereof, the Participating Companies, the Administrative Committee and the Trustee shall be the only necessary parties and no Participants, Employees, or former Employees, their Beneficiaries or any other person having or claiming to have an interest in the Plan shall be entitled to any notice of process; provided, that such notice as is required by the Internal Revenue Service and the Department of Labor to be given in connection with Plan amendments, termination, curtailment or other activity shall be given in the manner and form and at the time so required. Any final judgment which is not appealed or appealable that may be entered in any such action or proceeding shall be binding and conclusive on the parties hereto, the Administrative Committee and all persons having or claiming to have an interest in the Plan. 15.9 No Discrimination. The Controlling Company, through the Administrative Committee, shall administer the Plan in a uniform and consistent manner with respect to all Participants and Beneficiaries and shall not permit impermissible discrimination in favor of Highly Compensated Employees. 15.10 Severability. If any provisions of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included. 15.11 Exclusive Benefit; Refund of Contributions. No part of the Trust Fund shall be used for or diverted to purposes other than the exclusive benefit of the Participants and Beneficiaries, subject, however, to the payment of all costs of maintaining and administering the Plan and Trust. Notwithstanding the foregoing, Contributions to the Trust by a Participating Company may be refunded to the Participating Company under the following circumstances and subject to the following limitations: 78 (a) Permitted Refunds. If and to the extent permitted by the Code and other applicable laws and regulations promulgated thereunder, upon the Participating Company's request, a Contribution which is (i) made by a mistake in fact, or (ii) conditioned upon the deductibility of the Contribution under Code Section 404, shall be returned to the Participating Company making the Contribution within 1 year after the payment of the Contribution or the disallowance of the deduction (to the extent disallowed), whichever is applicable. (b) Payment of Refund. If any refund is paid to a Participating Company hereunder, such refund shall be made without interest or other investment gains, shall be reduced by any investment losses attributable to the refundable amount and shall be apportioned among the Accounts of the Participants as an investment loss, except to the extent that the amount of the refund can be attributed to one or more specific Participants (for example, as in the case of certain mistakes of fact), in which case the amount of the refund attributable to each such Participant's Account shall be debited directly against such Account. (c) Limitation on Refund. No refund shall be made to a Participating Company if such refund would cause the balance in a Participant's Account to be less than the balance would have been had the refunded contribution not been made. 15.12 Plan Expenses. As permitted under the Code and ERISA, expenses incurred with respect to administering the Plan and Trust shall be paid by the Trustee from the Trust Fund to the extent such costs are not paid by the Participating Companies or to the extent the Controlling Company requests that the Trustee reimburse it or any other Participating Company for its payment of such expenses. The Administrative Committee may provide for any expenses specifically attributable to transactions involving an Account to be charged against such Account; provided, such expenses may not reduce a Participant's Account to an amount less than the Account balance as of the date the Administrative Committee decides to charge such expenses against such Account. 15.13 Special Effective Dates. (a) Intent of Plan. The Plan generally is effective as of the Effective Date and is intended to be in compliance with current laws and regulations, including the following laws: (1) General Agreement on Tariffs and Trade as amended in 1994; (2) Uniformed Services Employment and Reemployment Rights Act of 1994; (3) Small Business Job Protection Act of 1996; (4) Taxpayer Relief Act of 1997; and (5) Internal Revenue Service Restructuring and Reform Act of 1998. (b) Compliance. To the extent any of the changes and provisions described above have requisite effective dates other than the Effective Date, the Plan shall be deemed to be 79 effective as of such requisite effective dates solely for the purpose of satisfying the applicable legal and regulatory requirements. 80 IN WITNESS WHEREOF, the Plan has been executed by a duly authorized member of the Administrative Committee on the date first written above. ADMINISTRATIVE COMMITTEE OF THE MAINTENANCE WAREHOUSE FUTUREBUILDER By: /s/ Ileana L. Connally ------------------------------------------------- Name: Ileana L. Connally ----------------------------------------------- 81 THE MAINTENANCE WAREHOUSE FUTUREBUILDER A 401(K) AND STOCK OWNERSHIP PLAN SCHEDULE A PARTICIPATING COMPANIES AND EFFECTIVE DATES ------------------------------------------- [see Plan Sections 1.31, 1.59 and 13.3]
Name Effective Date - ---- -------------- Maintenance Warehouse/America Corp. January 1, 2001
A-1 THE MAINTENANCE WAREHOUSE FUTUREBUILDER A 401(K) AND STOCK OWNERSHIP PLAN SCHEDULE B SERVICE WITH PREDECESSOR EMPLOYERS ----------------------------------------- [see Plan Sections 1.81, 1.82 and 2.1(d)] B-l FIRST AMENDMENT TO THE MAINTENANCE WAREHOUSE FUTUREBUILDER (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2001) THIS FIRST AMENDMENT to The Maintenance Warehouse FutureBuilder (the "Plan") is made effective as of January 1, 2001 by the Administrative Committee of the Plan. WITNESSETH: WHEREAS, Maintenance Warehouse/America Corp. maintains the Plan for the benefit of its employees; and WHEREAS, Section 13.1 of the Plan provides that the Administrative Committee has the right to amend the Plan at any time; and WHEREAS, the Administrative Committee desires to amend the Plan to limit the amount of matching contributions made on behalf of highly compensated employees; NOW, THEREFORE, effective for Plan Years beginning on and after January 1, 2001, Section 3.2(b)(1) of the Plan is amended in its entirety as follows: (b) Supplemental Annual Matching Contributions. (1) General. For each Plan Year commencing on or after January 1, 2001, for each Active Participant who (i) is not a Highly Compensated Employee, and (ii) satisfies all of the conditions set forth in subsection (b)(2) hereof for all periods through the last day of such Plan Year, such Participating Company shall make a Supplemental Annual Matching Contribution equal to 4.5 percent of such Active Participant's Compensation for such Plan Year. IN WITNESS WHEREOF, this First Amendment has been executed by the duly authorized representative of the Administrative Committee as of the date first above written. ADMINISTRATIVE COMMITTEE OF THE MAINTENANCE WAREHOUSE FUTUREBUILDER By: /s/ Ileana L. Connally ---------------------------------------- Ileana L. Connally SECOND AMENDMENT TO THE MAINTENANCE WAREHOUSE FUTUREBUILDER (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2001) THIS SECOND AMENDMENT to The Maintenance Warehouse FutureBuilder (the "Plan") is made this 30th day of July, 2002, by the Administrative Committee of the Plan. WITNESSETH: WHEREAS, Maintenance Warehouse/America Corp. maintains the Plan for the benefit of its employees; and WHEREAS, Section 13.1 of the Plan provides that the Administrative Committee has the right to amend the Plan at any time; and WHEREAS, in order to obtain a favorable determination letter from the Internal Revenue Service with respect to the qualified status of the Plan, the Administrative Committee desires to amend the Plan as provided herein; 1. Section 6.3(c)(2) of the Plan is amended to read as follows: (2) By the last day of the Plan Year following the Plan Year in which the annual allocation failed both of the ADP Tests, the Administrative Committee may direct the Trustee to reduce the Before-Tax Contributions taken into account with respect to Highly Compensated Employees under such failed ADP Tests by the dollar amount necessary to satisfy one of the ADP Tests. The total dollar amount by which Before-Tax Contributions shall be reduced shall be determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of individual Actual Deferral Percentages, beginning with the highest Actual Deferral Percentage. Notwithstanding the method of determining the total dollar amount of such reductions, actual reductions in Before-Tax Contributions shall be made in accordance with, and solely from the Accounts of those Highly Compensated Employees who are affected by, the following procedure: (A) First, the Before-Tax Contributions of the Highly Compensated Employee(s) with the highest dollar amount of Before-Tax Contributions for such Plan Year shall be reduced by the lesser of (i) the entire amount of required reductions determined as described above, or (ii) that part of such amount as shall cause the amount of Before-Tax Contributions of each such Highly Compensated Employee to equal the amount of Before-Tax Contributions of each of the Highly Compensated Employees with the next highest dollar amount of Before-Tax Contributions for such Plan Year. In addition, to the extent that a Highly Compensated Employee's Before-Tax Contributions are reduced pursuant to this Section, any Matching Contributions made on behalf of a Highly Compensated Employee which are attributable to the distributed Before-Tax Contributions shall be forfeited. (B) Substantially identical steps shall be followed for making further reductions in the Before-Tax Contributions of each of the Highly Compensated Employees with the next highest dollar amount of Before-Tax Contributions for such Plan Year until the entire required reduction has been made. (C) Any amount by which Before-Tax Contributions are so reduced, plus any earnings attributable thereto (including in the Administrative Committee's discretion any gap income or loss), shall be distributed to the Highly Compensated Employees from whose Before-Tax Accounts such reductions shall have been made. 2. Section 6.4(c)(2) of the Plan is amended to read as follows: (2) By the last day of the Plan Year following the Plan Year in which the annual allocation failed both of the ACP Tests, the Administrative Committee may direct the Trustee to reduce after-tax and/or the Matching Contributions taken into account with respect to Highly Compensated Employees under such failed ACP Tests by the dollar amount necessary to satisfy one of the ACP Tests. The total dollar amount by which Contributions shall be reduced shall be determined by hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of individual Actual Contribution Percentages, beginning with the highest Actual Contribution Percentage. Notwithstanding the method of determining the total dollar amount of such reductions, actual reductions in Contributions shall be made in accordance with, and solely from the Accounts of those Highly Compensated Employees who are affected by, the following procedure: (A) First, the after-tax and Matching Contributions of the Highly Compensated Employee(s) with the highest dollar amount of after-tax and Matching Contributions for such Plan Year shall be reduced by the lesser of (i) the entire dollar amount necessary to satisfy one of the ACP Tests (determined as described above), or (ii) that part of the entire amount necessary to satisfy one of the ACP Tests as shall cause the dollar amount of after-tax and Matching Contributions of each such Highly Compensated Employee to equal the amount of after-tax and Matching Contributions of each of the Highly Compensated Employees with the next highest dollar amount of after-tax and Matching Contributions for such Plan Year. If the total amount of the required reduction in a Highly Compensated Employee's after-tax and Matching Contributions is less than the total amount of such Contributions, the required reductions first shall be charged against such Highly Compensated Employee's after-tax Contributions until they are exhausted and then against his remaining Matching Contributions. (B) Substantially identical steps shall be followed for making further reductions in the after-tax and Matching Contributions of each of the Highly Compensated Employees with the next highest dollar amount of after-tax and Matching Contributions for such Plan Year until one of the ACP Tests has been satisfied. (C) Any amount by which after-tax Contributions are reduced, plus any earnings attributable thereto (including in the Administrative Committee's discretion any gap income or loss), shall be distributed to the Highly Compensated Employees from whose Accounts such reductions have been made. If these distributions are less than the required reductions, the amount by which Matching Contributions are to be reduced, plus any earnings attributable thereto, shall be forfeited; provided, if the Matching Contributions to be reduced are vested and therefore may not be forfeited, those Matching Contributions, plus any earnings attributable thereto (including in the Administrative Committee's discretion any gap income or loss) shall be distributed to the Highly Compensated Employees from whose Matching Accounts such reductions have been made. 3. Section 9.1(b)(4) is amended to read as follows: (4) Notwithstanding anything in the Plan to the contrary, commencing with the original effective date of the Plan, the Participant's Account shall be distributed (or commenced) no later than the April 1 following the later of (i) the calendar year in which the Participant attains age 70-1/2, or (ii) the calendar year in which the Participant actually separates from service with all Affiliates; provided, if such Participant is a 5 percent owner (as defined in Code Section 416), or if such Participant attains age 70-1/2 prior to January 1, 1999 and so elects, benefit payments shall be made (or commence) no later than the April 1 following the calendar year in which the Participant attains age 70-1/2. Unless a Participant whose minimum distributions begin while he is still employed elects to take a distribution of his entire Account balance, his benefits, payable under this Article IX commencing as of his required beginning date, shall be paid in the form of substantially equal monthly payments over a period equal to the life expectancy of the Participant. All distributions will be made in accordance with Code Section 401(a)(9) and the regulations thereunder, including Treasury Regulation Section 1.401(a)(9)-2 (relating to incidental benefit limitations; and the terms of the Plan reflecting the requirements of Code Section 401(a)(9) override the distribution options (if any) in the Plan which are inconsistent with those requirements. The life expectancy of a Participant will be recalculated annually. IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Second Amendment on the date first above written. MAINTENANCE WAREHOUSE/AMERICA CORP. By: /s/ Lawrence Appel ---------------------------------------- Title: Assistant Secretary ------------------------------------- THIRD AMENDMENT TO THE MAINTENANCE WAREHOUSE FUTUREBUILDER (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2001) THIS AMENDMENT to The Maintenance Warehouse FutureBuilder (the "Plan") is made on this 20th day of December, 2002, by the Administrative Committee of the Plan. WITNESSETH: WHEREAS, Maintenance Warehouse/America Corp. (the "Company") maintains the Plan for the benefit of its employees; and WHEREAS, Section 13.1 of the Plan provides that the Administrative Committee has the authority to amend the Plan at any time; and WHEREAS, the Administrative Committee desires to amend the Plan (i) to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") and (ii) to make such other changes as provided herein; and WHEREAS, this Amendment is intended as good faith compliance with the requirements of EGTRRA and is to be construed in accordance with the terms of EGTRRA and the guidance issued thereunder; NOW, THEREFORE, the Plan is hereby amended as follows, effective as of January 1, 2002, except as otherwise specified: 1. Each place the phrase "separates from service" or "separated from service" appears in the Plan is amended to read as "severs from employment" or "severed from employment," respectively. 2. Section 1.20(a)(2) of the Plan is amended to read as follows: (2) Any elective deferral [as defined in Code Section 402(g)(3)], and any amount which is contributed or deferred by an Affiliate at the election of the Employee and which is not includible in the gross income of the Employee by reason of Code Section 125, 457 or 132(f)(4), including any amounts not available to an Employee in cash in lieu of group health coverage because the Employee is unable to certify that he has other health coverage; minus 3. Section 1.20(a)(6) of the Plan is amended to read as follows: (6) All Compensation in excess of $200,000 [or such other limit as is applicable for the Plan Year under Code Section 401(a)(17)]. 4. Section 1.20(b) of the Plan is amended to read as follows: (b) Section 404 Compensation. Solely for purposes of Section 6.1 (relating to maximum deductible contribution limitations under Code Section 404), "Compensation" shall mean, with respect to a Participant for a specified period, the amounts from all Affiliates referred to in subsections (a)(1) and (a)(2) hereof minus the amount described in subsection (a)(6) hereof. 5. Section 1.30 of the Plan is amended by adding the following sentence to the end thereof: A Participant shall be considered Disabled for purposes of the Plan only if the Participant is an Employee on the date on which the Participant's Disability commences. 6. Section 1.35 of the Plan is amended to read as follows: 1.35 Eligible Retirement Plan shall mean either (i) an individual retirement account described in Code Section 408(a), (ii) an individual retirement annuity described in Code Section 408(b) (other than an endowment contract), (iii) a qualified trust described in Code Section 401(a) which is a defined contribution plan the terms of which permit the acceptance of rollover distributions, (iv) an annuity plan described in Code Section 403(a), (v) an annuity contract described in Code Section 403(b), or (vi) an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state or any agency or instrumentality of a state or political subdivision of a state. This definition shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p). 7. Section 1.36 of the Plan is amended to read as follows: 1.36 Eligible Rollover Distribution shall mean any distribution to (i) a Participant, (ii) his Surviving Spouse (after his death), or (iii) his Spouse or former Spouse who is his alternate payee under a qualified domestic relations order (see Sections 9.5 and 15.1), of all or any portion of the balance to his credit in a qualified trust (including any distribution to a Participant of all or any portion of his Account); provided, an "Eligible Rollover Distribution" shall not include (A) any distribution which is one of a series of substantially equal periodic payments made, not less frequently than annually, (x) for the life (or life expectancy) of the Participant or the joint lives (or joint life expectancies) of the Participant and his Beneficiary, or (y) for a specified period of 10 years or more, (B) any distribution to the extent such distribution is required under Code Section 401(a)(9), (C) the portion of any distribution that is not includible in gross income of the distributee, and (D) withdrawals on account of hardship, as described in Code Section 401(k)(2)(B)(i)(IV) and the regulations thereunder, and (E) distributions which total less than $200 in a Plan Year. 8. Section 1.70 of the Plan is amended to read as follows: 2 1.70 Rollover Contribution shall mean an amount contributed to the Trust Fund (and received and accepted by the Trustee) which constitutes an "eligible rollover contribution" as defined in Code Section 402(f)(2)(A), other than an eligible rollover contribution of after-tax employee contributions. An amount shall be treated as a Rollover Contribution only to the extent that its acceptance by the Trustee is permitted under the Code (including the regulations and rulings promulgated thereunder). 9. Section 6.5 of the Plan is deleted in its entirety. 10. Section 6.7(a) of the Plan is amended to read as follows: (a) General Limit on Annual Additions. In no event shall the Annual Addition to a Participant's Account for any Limitation Year, under the Plan and any other Defined Contribution Plan maintained by an Affiliate, exceed the lesser of: (1) $40,000 (as adjusted by the Secretary of the Treasury under Code Section 415(d) to reflect cost-of-living increases); or (2) 100 percent of such Participant's Compensation. 11. Section 9.1(b)(1) of the Plan is amended to read as follows: (1) Except as otherwise provided in this subsection (b)(1) or in subsections (c) and (d) hereof, benefits payable to a Participant under this Section shall be distributed as soon as administratively practicable following the last Business Day of the first full calendar month following the later of (i) the date on which the Participant affirmatively elects to receive such payment, or (ii) the date on which the Participant's severance from employment or Disability has been processed by the Controlling Company's payroll system and communicated to the Plan's third-party recordkeeper (that is, the Administrative Committee's designee for processing distributions). In order for such Participant's election to be valid, his election must be filed with the Administrative Committee within the 90-day period ending on such distribution date, and the Administrative Committee (no later than 30 days and no earlier than 90 days before such distribution date) must have presented him with a notice informing him of his right to defer his distribution; provided, the Participant may elect to waive the minimum 30-day notice period and to receive his distribution before the end of such period. 12. Section 9.1(b)(2) of the Plan is amended to read as follows: (2) Notwithstanding the foregoing provisions of this subsection (b), in the event that the vested portion of the Account (other than the Rollover Account) of any Participant who severs from the employment of all Affiliates is less than or equal to $5,000, the full vested amount of such benefit automatically shall be paid to such Participant in one single-sum, cash-out distribution as soon as practicable following the last Business Day of the first full calendar month following 3 the month in which the Participant severs from employment. In the event a Participant has no vested interest in his Matching and/or Transfer Account from company contributions at the time of his severance from employment, he shall be deemed to have received a cash-out distribution of such Accounts at the time of his severance from employment, and the forfeiture provisions of Section 8.3 shall apply. 13. Section 9.1(b) of the Plan is amended by adding the following new subsection (6): (6) Notwithstanding any provision of the Plan to the contrary, with respect to distributions under the Plan made for calendar years beginning on or after January 1, 2003, the Plan will apply the minimum distribution requirements of Code Section 401(a)(9) in accordance with the final regulations under Code Section 401(a)(9) that were published in the Federal Register on April 17, 2002. 14. Section 9.1(c) of the Plan is amended to read as follows: (c) Restrictions on Distributions from Before-Tax and Supplemental Accounts. Notwithstanding anything in the Plan to the contrary, (i) amounts in a Participant's Before-Tax and Supplemental Accounts and (ii) amounts in a Participant's Transfer Accounts credited with before-tax contributions and company contributions used to satisfy the Code Section 401(k) actual deferral percentage test and company contributions used to satisfy the Code Section 401(m) actual contribution percentage test shall not be distributable to such Participant earlier than the earliest of the following to occur: (1) The Participant's death, Disability or severance from employment with all Affiliates; (2) The termination of the Plan without the establishment or maintenance of a successor defined contribution plan [other than an employee stock ownership plan as defined in Code Section 4975(e)] at the time the Plan is terminated or within the period ending 12 months after the final distribution of all assets in all Before-Tax, Supplemental and Transfer Accounts described above in this subsection (c); provided, if fewer than 2 percent of the Employees who are or were eligible under the Plan at the time of its termination are or were eligible under another defined contribution plan at any time during the 24-month period beginning 12 months before the time of termination, such other plan shall not be a successor plan; and, provided further, for an event described in this subsection (c)(2) to constitute an event permitting a distribution from the Before-Tax and Supplemental Accounts (or the affected Transfer Accounts), such distribution must be made on account of such event in the form of a lump sum distribution, as defined in Code Section 402(e)(4)(D) (without regard to subclauses (I), (II), (III) and (IV) of clause (i) thereof); or (3) The attainment by such Participant of age 59-1/2; or 4 (4) The Participant's incurrence of a financial hardship as described in Section 10.1. 15. Section 9.1(e) of the Plan is deleted in its entirety. 16. Section 9.4 of the Plan is deleted in its entirety. 17. Section 9.7 of the Plan is amended to read as follows: 9.7 Claims. (a) Rights. If a Participant or Beneficiary has any grievance, complaint or claim concerning any aspect of the operation or administration of the Plan or Trust, including but not limited to claims for benefits and complaints concerning the investments of Plan assets (collectively referred to herein as "claim" or "claims"), the Participant or Beneficiary shall submit the claim in accordance with the procedures set forth in this Section. All such claims must be submitted within the "applicable limitations period." The "applicable limitations period" shall be 2 years, beginning on (i) in the case of any payment, the date on which the payment was made, or (ii) for all other claims, the date on which the action complained of occurred. Additionally, upon denial of an appeal pursuant to subsection (c) hereof, a Participant or Beneficiary shall have 90 days within which to bring suit against the Plan for any grievance complaint or claim related to such denied appeal; any such suit initiated after such 90-day period shall be precluded. (b) Procedure. Claims for benefits under the Plan may be filed with the Administrative Committee on forms supplied by the Administrative Committee in accordance with subsection (b)(1) or (b)(2) hereof, as applicable. (1) Generally. Except as provided in subsection (b)(2) hereof, the Administrative Committee shall furnish to the claimant written notice of the disposition of a claim within 90 days after the application therefor is filed; provided, if special circumstances require an extension of time for processing the claim, the Administrative Committee shall furnish written notice of the extension to the claimant prior to the end of the initial 90-day period, and such extension shall not exceed one additional, consecutive 90-day period. In the event the claim is denied, the notice of the disposition of the claim shall provide the specific reasons for the denial, cites of the pertinent provisions of the Plan, an explanation as to how the claimant can perfect the claim and/or submit the claim for review (where appropriate), and a statement of the claimant's right to bring a civil action under ERISA Section 502(a) following an adverse determination on review. (2) Claims Based on an Independent Determination of Disability. With respect to a claim for benefits under the Plan based on Disability (other than (i) approval for payment of benefits, directly or indirectly, under any long-term disability plan maintained by a Participating Company, or (ii) eligibility for Social Security disability benefits), the 5 Administrative Committee shall furnish to the claimant written notice of the disposition of a claim within 45 days after the application therefor is filed; provided, if matters beyond the control of the Administrative Committee require an extension of time for processing the claim, the Administrative Committee shall furnish written notice of the extension to the claimant prior to the end of the initial 45-day period, and such extension shall not exceed one additional, consecutive 30-day period; and, provided further, if matters beyond the control of the Administrative Committee require an additional extension of time for processing the claim, the Administrative Committee shall furnish written notice of the second extension to the claimant prior to the end of the initial 30-day extension period, and such extension shall not exceed an additional, consecutive 30-day period. Notice of any extension under this subsection (b)(2) shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues. In the event the claim is denied, the notice of the disposition of the claim shall provide the specific reasons for the denial, cites of the pertinent provisions of the Plan, an explanation as to how the claimant can perfect the claim and/or submit the claim for review (where appropriate), and a statement of the claimant's right to bring a civil action under ERISA Section 502(a) following an adverse determination on review. (c) Review Procedure. Any Participant or Beneficiary who has been denied a benefit, or his duly authorized representative, shall be entitled, upon request to the Administrative Committee, to appeal the denial of his claim in accordance with subsection (c)(1) or (c)(2) hereof, as applicable. (1) Generally. Except as provided in subsection (c)(2) hereof, the claimant or his duly authorized representative may review pertinent documents related to the Plan and in the Administrative Committee's possession in order to prepare the appeal. The form containing the request for review, together with a written statement of the claimant's position, must be filed with the Administrative Committee no later than 60 days after receipt of the written notification of denial of a claim provided for in subsection (b) hereof. The Administrative Committee's decision shall be made within 60 days following the filing of the request for review and shall be communicated in writing to the claimant; provided, if special circumstances require an extension of time for processing the appeal, the Administrative Committee shall furnish written notice to the claimant prior to the end of the initial 60-day period, and such an extension shall not exceed one additional 60-day period. If unfavorable, the notice of decision shall explain the reason or reasons for denial, indicate the provisions of the Plan or other documents used to arrive at the decision, and state the claimant's right to bring a civil action under ERISA Section 502(a). (2) Claims Based on an Independent Determination of Disability. With respect to an appeal of a denial of benefits under the Plan based on Disability (other than (i) approval for payment of benefits, directly 6 or indirectly, under any long-term disability plan maintained by a Participating Company, or (ii) eligibility for Social Security disability benefits), the claimant or his duly authorized representative may review pertinent documents related to the Plan and in the Administrative Committee's possession in order to prepare the appeal. The form containing the request for review, together with a written statement of the claimant's position, must be filed with the Administrative Committee no later than 180 days after receipt of the written notification of denial of a claim provided for in subsection (b) hereof. The Administrative Committee's decision shall be made within 45 days following the filing of the request for review and shall be communicated in writing to the claimant; provided, if special circumstances require an extension of time for processing the appeal, the Administrative Committee shall furnish written notice to the claimant prior to the end of the initial 45-day period, and such an extension shall not exceed one additional 45-day period. The Administrative Committee's review shall not afford deference to the initial adverse benefit determination and shall be conducted by an individual who is neither the individual who made the adverse benefit determination that is the subject of the appeal, nor the subordinate of such individual. In deciding an appeal of any adverse benefit determination that is based in whole or in part on a medical judgment, the Administrative Committee shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment and who is neither an individual who was consulted in connection with the adverse benefit determination that is the subject of the appeal, nor the subordinate of any such individual. If unfavorable, the notice of decision shall explain the reason or reasons for denial, indicate the provisions of the Plan or other documents used to arrive at the decision, state the claimant's right to bring a civil action under ERISA Section 502(a), and identify all medical or vocational experts whose advice was obtained by the Administrative Committee in connection with a claimant's adverse benefit determination. (d) Satisfaction of Claims. Any payment to a Participant or Beneficiary, or to his legal representative or heirs at law, all in accordance with the provisions of the Plan, shall to the extent thereof be in full satisfaction of all claims hereunder against the Trustee, the Administrative Committee, and the Participating Companies, any of whom may require such Participant, Beneficiary, legal representative or heirs at law, as a condition to such payment, to execute a receipt and release therefor in such form as shall be determined by the Trustee, the Administrative Committee or the Participating Companies, as the case may be. If receipt and release shall be required but execution by such Participant, Beneficiary, legal representative or heirs at law shall not be accomplished so that the terms of Section 9.1(b) (dealing with the timing of distributions) may be fulfilled, such benefits may be distributed or paid into any appropriate court or to such other place as such court shall direct, for disposition in accordance with the order of such court, and such distribution shall be deemed to comply with the requirements of Section 9.1(b). 7 18. Section 14.1 of the Plan is amended to read as follows: 14.1 Top-Heavy Plan Years. The provisions set forth in this Article XIV shall become effective for any Plan Years with respect to which the Plan is determined to be a Top-Heavy Plan and shall supersede any other provisions of the Plan which are inconsistent with these provisions; provided, if the Plan is determined not to be a Top-Heavy Plan in any Plan Year subsequent to a Plan Year in which the Plan was a Top-Heavy Plan, the provisions of this Article XIV shall not apply with respect to such subsequent Plan Year; provided further, the provisions of this Article XIV shall not apply with respect to any Plan Year beginning after December 31, 2001, in which the Plan consists solely of a cash or deferred arrangement which meets the requirements of Code Section 401(k)(12) and matching contributions with respect to which the requirements of Code Section 401(m)(11) are met; and, provided further, to the extent that any of the requirements of this Article XIV shall no longer be required under Code Section 416 or any other Section of the Code, such requirements shall be of no force or effect. 19. Section 14.2(b)(2) of the Plan is amended to read as follows: (2) Key Employee. The term "Key Employee" shall mean an Employee defined in Code Section 416(i) and the regulations promulgated thereunder. Generally, Key Employee shall mean an Employee, former Employee or deceased Employee (and the beneficiaries of any such Employee) who, at any time during the Plan Year that includes the Determination Date, was either: (A) An officer of an Affiliate having a combined annual Compensation from all Affiliates greater than $130,000 [or such other amount as is applicable for the Plan Year under Code Section 416(i)(1)(A)(i)]; provided, no more than 50 Employees (or, if lesser, the greater of 3 or 10 percent of all Employees of an Affiliate) shall be treated as officers of an Affiliate; (B) A 5-percent owner [or constructive owner within the meaning of Code Section 318, as modified by Code Section 416(i)(1)(B)(iii)] of an Affiliate; or (C) A 1-percent owner (or constructive owner within the meaning of Code Section 318, as modified by Code Section 416(i)(1)(B)(iii) and the regulations promulgated thereunder) of an Affiliate having a combined annual Compensation from all Affiliates of more than $150,000. 20. Section 14.2(c)(3) of the Plan is amended to read as follows: (3) The value of any account balance under any Defined Contribution Plan and the present value of any accrued benefit under any Defined Benefit Plan as of any Determination Date shall be increased by the aggregate 8 distributions made under the plan (including distributions under a terminated plan which, if it had not been terminated, would have been included in a Required Aggregation Group) during the 1-year period ending on the Determination Date (or, in the case of distributions made for a reason other than severance from employment, death, or disability, the 5-year period ending on the Determination Date); 21. Section 14.2(c)(4) of the Plan is amended to read as follows: (4) Accrued benefits and accounts of the following individuals shall not be taken into account for a Plan Year: (A) any Non-Key Employee who, in a prior Plan Year, was a Key Employee or (B) any Employee who had not performed any services for a Participating Company at any time during the 1-year period ending on the Determination Date for such Plan Year; 22. The final sentence of Section 14.3(c) of the Plan is amended to read as follows: For purposes of this subsection (c), (i) qualified nonelective contributions made by the Controlling Company in order to satisfy the anti-discrimination tests of Code Section 401(k) or Section 401(m) (for example, Supplemental Contributions) may be treated as company Contributions, (ii) Before-Tax and Matching Contributions shall be taken into account as company Contributions for Key Employees, (iii) Matching Contributions may be treated as company Contributions and may be taken into account for satisfying the minimum contribution requirement for Non-Key Employees, and (iv) Before-Tax Contributions shall not be taken into account for satisfying the minimum contribution requirement for Non-Key Employees. 23. Section 15.12 of the Plan is amended to read as follows: 15.12 Plan Expenses. As permitted under the Code and ERISA, expenses incurred with respect to administering the Plan and Trust shall be paid by the Trustee from the Trust Fund to the extent such costs are not paid by the Participating Companies or to the extent the Controlling Company requests that the Trustee reimburse it or any other Participating Company for its payment of such expenses. Upon request, the Trustee shall reimburse the Controlling Company for its salary and other labor costs related to the Plan to the extent that such costs constitute proper Plan expenses. The Administrative Committee may provide for such expenses to be charged against earnings as provided in Section 7.4, Forfeitures as provided in Section 5.9 or Participants' Accounts (on a per capita basis, in proportion to the value of such Accounts or on any other basis permitted under the Code and ERISA). The 9 Administrative Committee may provide for any expenses specifically attributable to transactions involving an Account to be charged against such Account. IN WITNESS WHEREOF, the Administrative Committee has caused its duly authorized member to execute this Amendment on the date first written above. ADMINISTRATIVE COMMITTEE OF THE MAINTENANCE WAREHOUSE FUTUREBUILDER By: /s/ Ileana L. Connally ---------------------------------------- Ileana L. Connally Committee Member 10 EX-10.35 8 g81844exv10w35.txt EX-10.35 FUTUREBUILDER FOR PUERTO RICO EXHIBIT 10.35 THE HOME DEPOT FUTUREBUILDER FOR PUERTO RICO --------------------------------------- THE HOME DEPOT FUTUREBUILDER FOR PUERTO RICO On this 15th day of June, 1998, Home Depot Puerto Rico, Inc., a corporation duly organized and existing under the laws of the Commonwealth of Puerto Rico (the "Controlling Company"), hereby adopts The Home Depot FutureBuilder For Puerto Rico (the "Plan"). STATEMENT OF PURPOSE A. PURPOSE OF THE PLAN. The primary purpose of the Plan is to recognize the contributions made to the Controlling Company and its participating affiliates by eligible employees and to reward those contributions by providing eligible employees with an opportunity to accumulate savings for their future security. B. TYPE OF PLAN. The Controlling Company intends that the Plan constitute a stock bonus plan qualified under Sections 1165(a) and 1165(e) of the Puerto Rico Internal Revenue Code of 1994. STATEMENT OF AGREEMENT To adopt the Plan with the purposes and goals as hereinabove described, the Controlling Company hereby sets forth the terms and provisions as follows: THE HOME DEPOT FUTUREBUILDER FOR PUERTO RICO TABLE OF CONTENTS
PAGE Article I DEFINITIONS.........................................................................i 1.1 Account...........................................................................1 1.2 Active Participant................................................................1 1.3 Administrative Committee..........................................................1 1.4 ADP or Actual Deferral Percentage.................................................1 1.5 ADP Tests.........................................................................1 1.6 Affiliate.........................................................................2 1.7 Before-Tax Account................................................................2 1.8 Before-Tax Contributions..........................................................2 1.9 Beneficiary.......................................................................2 1.10 Board.............................................................................2 1.11 Break in Service..................................................................2 1.12 Code..............................................................................2 1.13 Company Contributions.............................................................2 1.14 Company Stock.....................................................................3 1.15 Company Stock Fund................................................................3 1.16 Compensation means................................................................3 1.17 Contributions means...............................................................3 1.18 Controlling Company...............................................................3 1.19 Covered Employee..................................................................3 1.20 Deferral Election.................................................................4 1.21 Disability or Disabled............................................................4 1.22 Effective Date....................................................................4 1.23 Elective Deferrals means..........................................................4 1.24 Eligible Participant means........................................................4 1.25 Eligible Retirement Plan..........................................................4 1.26 Eligible Rollover Distribution....................................................4 1.27 Employee means....................................................................5 1.28 Employment Date...................................................................5 1.29 Entry Date........................................................................5 1.30 ERISA means.......................................................................5 1.31 ESOP Account......................................................................5 1.32 ESOP Contributions................................................................5 1.33 Forfeiture........................................................................5 1.34 Highly Compensated Employee.......................................................5 1.35 Hour of Service...................................................................5 (a) General Rule......................................................................5 (b) Equivalencies.....................................................................6
(c) Uniformed Services................................................................6 (d) Changes by Administrative Committee...............................................6 (e) Computation Period................................................................7 1.36 Investment Committee..............................................................7 1.37 Investment Fund...................................................................7 1.38 Investment Manager................................................................7 1.39 Leave of Absence..................................................................7 1.40 Matching Account..................................................................7 1.41 Matching Contributions............................................................7 1.42 Maternity or Paternity Leave......................................................7 1.43 Maximum Deferral Amount...........................................................8 1.44 Named Fiduciary...................................................................8 1.45 Normal Retirement Age means age 65................................................8 1.46 Participant.......................................................................8 1.47 Participating Company.............................................................8 1.48 Plan..............................................................................8 1.49 Qualified Separation..............................................................8 1.50 Qualified Spousal Waiver..........................................................8 1.51 Restoration Contributions.........................................................8 1.52 Rollover Account..................................................................9 1.53 Rollover Contributions............................................................9 1.54 Spouse or Surviving Spouse........................................................9 1.55 Supplemental Account..............................................................9 1.56 Supplemental Contributions........................................................9 1.57 Transfer Account..................................................................9 1.58 Transfer Contributions............................................................9 1.59 Trust or Trust Agreement..........................................................9 1.60 Trustee...........................................................................9 1.61 Trust Fund.......................................................................10 1.62 Valuation Date...................................................................10 1.63 Year of Eligibility Service......................................................10 (a) Computation Period...............................................................10 (b) Predecessor Employer.............................................................10 1.64 Year of Vesting Service..........................................................10 (a) Pre-Break Service................................................................10 (b) Post-Break Service...............................................................10 (c) Predecessor Plan.................................................................10 (d) Predecessor Employer.............................................................11 Article II ELIGIBILITY.......................................................................12 2.1 Initial Eligibility Requirements.................................................12 (a) General Rule.....................................................................12 (b) New Participating Companies......................................................12 2.2 Treatment of Interruptions of Service............................................12 (a) Termination Before Satisfying Eligibility Requirements...........................12
(b) Termination Before Participation.................................................12 (c) Reparticipation Upon Reemployment................................................12 2.3 Change in Status.................................................................13 (a) Loss of Covered Employee Status..................................................13 (b) Change to Covered Employee Status................................................13 (c) Change by Participant............................................................13 Article III contributions....................................................................14 3.1 Before-Tax Contributions.........................................................14 (a) Before-Tax Contributions.........................................................14 (b) Deferral Elections...............................................................14 3.2 Matching Contributions...........................................................15 3.3 ESOP Contributions...............................................................15 3.4 Supplemental Contributions.......................................................16 3.5 Form of Contributions............................................................16 3.6 Timing of Contributions..........................................................16 (a) Before-Tax Contributions.........................................................16 (b) Matching, ESOP and Supplemental Contributions....................................16 3.7 Contingent Nature of Company Contributions.......................................16 3.8 Restoration Contributions........................................................16 (a) Restoration of Forfeitures.......................................................16 (b) Restoration Contribution.........................................................17 3.9 Contributions Following Military Service.........................................17 Article IV ROLLOVERS AND TRANSFERS BETWEEN PLANS.............................................18 4.1 Rollover Contributions...........................................................18 (a) Request by Covered Employee......................................................18 (b) Acceptance of Rollover...........................................................18 4.2 Transfer Contributions...........................................................18 (a) Direct Transfers Permitted.......................................................18 (b) Mergers and Spin-offs Permitted..................................................18 (c) Establishment of Transfer Accounts...............................................18 (d) Transfer Accounts................................................................19 4.3 Spin-offs to Other Plans.........................................................19 Article V PARTICIPANTS' ACCOUNTS; CREDITING AND ALLOCATIONS..................................20 5.1 Establishment of Participants' Accounts..........................................20 5.2 Allocation of Before-Tax, Matching, Rollover and Transfer Contributions..........20 5.3 Allocation of ESOP Contributions.................................................20 5.4 Allocation and Crediting of Supplemental Contributions...........................20 (a) General Provision................................................................20 (b) Per Capita Supplemental Contributions............................................21 (c) Proportional Supplemental Contributions..........................................21 (d) Bottoms-up Supplemental Contributions............................................21 (e) Matching Supplemental Contributions..............................................21 5.5 Allocation of Forfeitures........................................................21 5.6 Allocation and Crediting of Investment Experience................................22
(a) Determination of Earnings or Losses..............................................22 (b) Formula For Allocation...........................................................22 5.7 Notice to Participants of Account Balances.......................................23 5.8 Good Faith Valuation Binding.....................................................23 5.9 Errors and Omissions in Accounts.................................................23 Article VI CONTRIBUTION AND LIMITATIONS AND NONDISCRIMINATION REQUIREMENTS...................24 6.1 Deductibility Limitations........................................................24 6.2 Maximum Limitation on Elective Deferrals.........................................24 (a) Maximum Elective Deferrals Under Affiliate Plans.................................24 (b) Return of Excess Before-Tax Contributions........................................24 (c) Return of Excess Elective Deferrals Provided by Other Affiliates.................24 (d) Discretionary Return of Elective Deferrals.......................................25 6.3 Nondiscrimination Requirements for Before-Tax Contributions......................25 (a) ADP Test.........................................................................25 (b) Multiple Plans...................................................................25 (c) Adjustments to Actual Deferral Percentages.......................................25 (d) Coordination with Other Provisions...............................................26 6.4 Construction of Limitations and Requirements.....................................27 Article VII INVESTMENTS......................................................................28 7.1 Establishment of Trust Account...................................................28 7.2 Investment Funds.................................................................28 (a) Named Investment Funds...........................................................28 (b) Reinvestment of Cash Earnings....................................................28 (c) Limitation on ESOP Investment....................................................28 7.3 Participant Direction of Investments.............................................28 (a) Investment of Contributions......................................................28 (b) Investment of Existing Account Balances..........................................29 (c) Conditions Applicable to Elections...............................................29 (d) Restrictions on Investments......................................................29 7.4 Valuation........................................................................30 (a) General..........................................................................30 (b) Value of Company Stock...........................................................30 7.5 Voting and Tender Offer Rights with Respect to Investment Funds..................30 7.6 Fiduciary Responsibilities for Investment Directions.............................30 7.7 Appointment of Investment Manager; Authorization to Invest in Collective Trust...30 (a) Investment Manager...............................................................30 (b) Collective Trust.................................................................31 7.8 Purchase of Life Insurance.......................................................31 7.9 Voting and Tender Offer Rights With Respect to Company Stock.....................31 (a) Voting Rights....................................................................31 (b) Tender Offer Rights..............................................................31 (c) Confidentiality..................................................................32
(d) Dissemination of Pertinent Information...........................................32 Article VIII VESTING IN ACCOUNTS.............................................................33 8.1 General Vesting Rule.............................................................33 (a) Fully Vested Accounts............................................................33 (b) Matching Account.................................................................33 (c) ESOP Account.....................................................................33 8.2 Vesting Upon Attainment of Normal Retirement Age, Death or Disability............33 8.3 Timing of Forfeitures and Vesting after Restoration Contributions................34 (a) Reemployment and Vesting Before any Distribution.................................34 (b) Reemployment And Vesting in ESOP Account After Distribution......................34 8.4 Amendment to Vesting Schedule....................................................35 Article IX PAYMENT OF BENEFITS...............................................................36 9.1 Benefits Payable Upon Separation From Service for Reasons Other than Death.......36 (a) General Rule Concerning Benefits Payable.........................................36 (b) Timing of Distribution...........................................................36 (c) Restrictions on Distributions from Before-Tax and Supplemental Accounts..........37 (d) Delay Upon Reemployment or Termination of Disability.............................37 9.2 Death Benefits...................................................................38 9.3 Cash-Out Payment of Benefits.....................................................38 9.4 Manner of Distribution...........................................................38 9.5 Qualified Domestic Relations Orders..............................................39 9.6 Beneficiary Designation..........................................................39 (a) General..........................................................................39 (b) No Designation or Designee Dead or Missing. In the event that:..................40 9.7 Unclaimed Benefits...............................................................40 9.8 Claims...........................................................................40 (a) Procedure........................................................................40 (b) Review Procedure.................................................................41 (c) Satisfaction of Claims...........................................................41 9.9 Explanation of Rollover Distributions............................................41 Article X HARDSHIP WITHDRAWALS AND LOANS.....................................................42 10.1 Hardship Withdrawals.............................................................42 (a) Parameters of Hardship Withdrawals...............................................42 (b) Immediate and Heavy Financial Need...............................................42 (c) Necessary to Satisfy a Financial Need............................................42 (d) Form of Distribution.............................................................43 (e) Source of Funds..................................................................43 10.2 Loans to Participants............................................................43 (a) Grant of Authority...............................................................43 (b) Nondiscriminatory Policy.........................................................43 (c) Minimum Loan Amount..............................................................43 (d) Maximum Loan Amount..............................................................43 (e) Maximum Loan Term................................................................44 (f) Terms of Repayment...............................................................44
(g) Adequacy of Security.............................................................44 (h) Rate of Interest.................................................................45 (i) Source of Loan Amounts...........................................................45 (j) Crediting Loan Payments to Accounts..............................................45 (k) Remedies in the Event of Default.................................................45 Article XI ADMINISTRATION....................................................................47 11.1 Administrative Committee; Appointment and Term of Office.........................47 (a) Appointment......................................................................47 (b) Removal; Resignation.............................................................47 (c) Certification....................................................................47 11.2 Organization of Administrative Committee.........................................47 11.3 Powers and Responsibility........................................................47 11.4 Records of Administrative Committee..............................................48 (a) Notices and Directions...........................................................48 (b) Records..........................................................................48 11.5 Reporting and Disclosure.........................................................49 11.6 Construction of the Plan.........................................................49 11.7 Assistants and Advisors..........................................................49 (a) Engaging Advisors................................................................49 (b) Reliance on Advisors.............................................................49 11.8 Investment Committee.............................................................50 (a) Funding Policy...................................................................50 (b) Appointment......................................................................50 (c) Duties...........................................................................50 11.9 Direction of Trustee.............................................................50 11.10 Bonding.......................................................................51 11.11 Indemnification...............................................................51 Article XII ALLOCATION OF AUTHORITY AND RESPONSIBILITIES.....................................52 12.1 Controlling Company and Board....................................................52 (a) General Responsibilities.........................................................52 (b) Allocation of Authority..........................................................52 (c) Authority of Participating Companies.............................................52 12.2 Administrative Committee.........................................................52 12.3 Investment Committee.............................................................53 12.4 Trustee..........................................................................53 12.5 Limitations on Obligations of Fiduciaries........................................53 12.6 Delegation.......................................................................53 12.7 Multiple Fiduciary Roles.........................................................53 Article XIII AMENDMENT, TERMINATION AND ADOPTION.............................................54 13.1 Amendment........................................................................54 13.2 Termination......................................................................54 (a) Right to Terminate...............................................................54 (b) Vesting Upon Complete Termination................................................54 (d) Vesting Upon Partial Termination.................................................55
13.3 Adoption of the Plan by a Participating Company..................................55 (a) Procedures for Participation.....................................................55 (b) Single Plan......................................................................56 (c) Authority under Plan.............................................................56 (d) Contributions to Plan............................................................56 (e) Withdrawal from Plan.............................................................56 13.4 Merger, Consolidation and Transfer of Assets or Liabilities......................57 Article XIV MISCELLANEOUS....................................................................58 14.1 Nonalienation of Benefits and Spendthrift Clause.................................58 (a) General Nonalienation Requirements...............................................58 (b) Exception for Qualified Domestic Relations Orders................................58 (c) Exception for Loans from the Plan................................................58 14.2 Exclusive Benefit; Refund of Contributions.......................................59 (a) Permitted Refunds................................................................59 (b) Payment of Refund................................................................59 (c) Limitation on Refund.............................................................59 14.3 Plan Expenses....................................................................59 14.4 No Contract of Employment........................................................59 14.5 Legally Incompetent..............................................................60 14.6 Heirs, Assigns and Personal Representatives......................................60 14.7 Title to Assets, Benefits Supported Only By Trust Fund...........................60 14.8 Legal Action.....................................................................60 14.9 No Discrimination................................................................61 14.10 Headings......................................................................61 14.11 Construction, Controlling Law.................................................61 14.12 Severability..................................................................61 SCHEDULE A PARTICIPATING COMPANIES AND EFFECTIVE DATES......................................A-1 SCHEDULE B SERVICE WITH PREDECESSOR EMPLOYERS...............................................B-1
ARTICLE I DEFINITIONS For purposes of the Plan, the following terms, when used with an initial capital letter, have the meanings set forth below unless a different meaning plainly is required by the context. 1.1 Account means, with respect to a Participant or Beneficiary, the amount of money or other property in the Trust Fund, as is evidenced by the last balance posted in accordance with the terms of the Plan to the account record established for the Participant or Beneficiary. The Administrative Committee, as required by the terms of the Plan and otherwise as it deems necessary or desirable in its sole discretion, may establish and maintain separate subaccounts for each Participant and Beneficiary, provided allocations are made to such subaccounts in the manner described in Article V of the Plan. "Account" shall refer to the aggregate of all separate subaccounts or to individual, separate subaccounts, as may be appropriate in context. 1.2 Active Participant means, for any Plan Year (or any portion thereof), any Covered Employee who, pursuant to the terms of Article II, has been admitted to, and not removed from, active participation in the Plan since the last date his employment commenced or recommenced. 1.3 Administrative Committee means the committee that acts on behalf of the Controlling Company to administer the Plan as provided in Article XII. The Administrative Committee is the plan administrator, as that term is defined in ERISA Section 3(16)(A). 1.4 ADP or Actual Deferral Percentage means, with respect to a specified group of Participants for a Plan Year, the average of the ratios (calculated separately for each Participant in such group and rounded to the nearest 1/100th of a percent) of (i) the total of the amount of Before-Tax Contributions, and to the extent designated by the Administrative Committee, the Supplemental Contributions actually paid to the Trustee on behalf of the Participant for the Plan Year, to (ii) the Participant's Compensation for the Plan Year. If a Highly Compensated Employee participates in the Plan and one or more other Section 1165(e) plans of any Affiliate to which before-tax contributions are made (other than a plan for which aggregation with the Plan is not permitted), the before-tax contributions made with respect to the Highly Compensated Employee shall be aggregated for purposes of determining his ADP. The ADP shall be rounded to the nearest 1/100th of a percent and shall be calculated in a manner consistent with the terms of Code Section 1165(e)(3) and the regulations promulgated thereunder. If a Participant is eligible to participate in the Plan for all or a portion of a Plan Year by reason of satisfying the eligibility requirements of Article II but makes no Before-Tax Contributions and receives no allocation of Supplemental Contributions that are taken into account for purposes of calculating his ADP, the Participant's ADP for the Plan Year shall be zero. 1.5 ADP Tests means the nondiscrimination tests described in Section 6.3. 1.6 Affiliate means, as of any date, (i) a Participating Company, (ii) any corporation which is a member of a controlled group of corporations (as defined in ERISA Section 210(c)) and (iii) any company, person or organization that, on such date is a trade or business (whether or not incorporated) that controls, is controlled by or is under common control (as defined by ERISA Section 210(d)) with a Participating Company. 1.7 Before-Tax Account means the separate subaccount established and maintained on behalf of a Participant or Beneficiary to reflect his interest in the Trust Fund attributable to Before-Tax Contributions. 1.8 Before-Tax Contributions means the amounts paid by a Participating Company to the Trust Fund at the election of Participants pursuant to the terms of Section 3.1(a). 1.9 Beneficiary means the person(s) designated in accordance with Section 9.6 to receive any death benefits payable under the Plan upon the death of a Participant. 1.10 Board means the board of directors of the Controlling Company. A reference to the board of directors of any other Participating Company shall specify it as such. 1.11 Break in Service means any Plan Year during which an Employee fails to complete at least 1 Hour of Service; provided, a Break in Service shall not be deemed to have occurred during any period for which he is granted a Leave of Absence. For purposes of determining whether or not an Employee has incurred a Break in Service, an Employee absent from work due to a Maternity or Paternity Leave shall be credited with at least 1 Hour of Service in the year in which the Maternity or Paternity Leave begins, unless such Hour of Service is not required to prevent the Employee from incurring a Break in Service in such year, in which event such Hour of Service shall be credited to the Employee in the immediately following year. No Hour of Service shall be credited due to Maternity or Paternity Leave as described in this Section unless the Employee furnishes proof satisfactory to the Administrative Committee (A) that his absence from work was due to a Maternity or Paternity Leave and (B) of the number of days he was absent due to the Maternity or Paternity Leave. The Administrative Committee shall prescribe uniform and nondiscriminatory procedures by which to make the above determinations. In addition, solely for the purpose of avoiding a Break in Service, to the extent required under the Family and Medical Leave Act of 1993 and the regulations thereunder, an Employee shall be deemed to be performing services for an Affiliate during any period the Employee is granted leave under such Act for (i) the birth of a child, (ii) the placement with the Employee of a child for adoption or foster care, (iii) to care for the spouse or a child or parent of the Employee with a serious health condition, or (iv) for a serious health condition that makes the Employee unable to perform the functions of the Employee's job. 1.12 Code means the Puerto Rico Internal Revenue Code of 1994, as amended. 1.13 Company Contributions means Before-Tax, Matching, ESOP and Supplemental Contributions made by the Participating Companies pursuant to the terms of the Plan. 2 1.14 Company Stock means the $.05 par value per share common stock of The Home Depot, Inc., a Delaware corporation with its principal office in Atlanta, Georgia. 1.15 Company Stock Fund means a unitized fund invested primarily in Company Stock. 1.16 Compensation means, for any Plan Year, the total of the amounts described in subsections (a) and (b), minus the amounts described in subsections (c) and (d), as follows: (a) all of a Participant's wages, as defined in Code Section 1141(a) for purposes of income tax withholding at the source that are reportable for income tax purposes, but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of employment or the services performed (such as the exception for agricultural labor in Code Section 1141(a)(1)(A)); plus (b) all before-tax, salary deferral or reduction contributions made to the Plan and other Section 1165(e) plans of the Affiliates on behalf of a Participant for such Plan Year; minus (c) all amounts included in subsection (1) or (2) that consist of reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation and welfare benefits (even if includable in gross income); and minus (d) all amounts paid to the Participant during the Plan Year while he is not an Active Participant. 1.17 Contributions means, individually or collectively, the Before-Tax, Matching, ESOP, Supplemental, Restoration, Rollover and Transfer Contributions permitted under the Plan. 1.18 Controlling Company means Home Depot Puerto Rico, Inc., a corporation organized and existing under the laws of the Commonwealth of Puerto Rico, and its successors that adopt the Plan. 1.19 Covered Employee means an Employee other than: (a) an individual who is classified as an independent contractor or leased employee under an Affiliate's customary worker classification practices, regardless of whether such person is an Employee; (b) an Employee who is covered by a collective bargaining agreement between a Participating Company and a collective bargaining unit, unless the terms of the collective bargaining agreement require that the Employee be eligible to participate in the Plan; or (c) an Employee who is a nonresident alien who receives no earned income from an Affiliate that constitutes income from sources within Puerto Rico. 3 1.20 Deferral Election means an election by an Active Participant directing the Participating Company of which he is an Employee to withhold a percentage of his current Compensation from his paychecks and to contribute such withheld amounts to the Plan as Before-Tax Contributions, as provided in Section 3.1. 1.21 Disability or Disabled means that a Participant is wholly prevented from engaging in his regular duties for the Company or an Affiliate by reason of a medically determinable physical or mental impairment that can be expected to result in death or to be of long-continued and indefinite duration. The determination of Disability shall be made by the Administrative Committee or an entity or person appointed by the Administrative Committee; provided, until the Administrative Committee determines otherwise, such determination shall be made by an insurance carrier that offers long-term disability insurance to the public and that is selected by the Administrative Committee. In determining whether a Participant has suffered a Disability, the Administrative Committee or its designee may require such medical proof as it deems necessary, including the certificate of one or more licensed physicians selected by the Administrative Committee. The decision of the Administrative Committee as to Disability shall be final and binding. Notwithstanding anything herein to the contrary, a Participant shall be deemed to be Disabled upon a determination by the Social Security Administration, while the Participant is an Employee, that the Participant is eligible for Social Security disability benefits. 1.22 Effective Date means June 15, 1998, the date that this adoption of the Plan generally is effective; provided, any effective date specified herein for any provision, if different from the Effective Date, shall control. The effective date of participation in the Plan for each Participating Company is the date set forth with respect to the Participating Company in Schedule A hereto. 1.23 Elective Deferrals means, with respect to a Participant for any calendar year, the total amount of his Before-Tax Contributions. 1.24 Eligible Participant means, for any Plan Year, (i) any Active Participant who is in the employ of an Affiliate on the last day of such Plan Year, and (ii) any Participant who terminated employment during the Plan Year as a result of a Qualified Separation. 1.25 Eligible Retirement Plan means a plan that is a defined contribution plan, the terms of which permit the acceptance of rollover distributions and that is either (i) an individual retirement account described in Code Section 1169(a), (ii) an individual retirement annuity described in Code Section 1169(b), or (iii) a qualified trust described in Code Section 1165(a). In the case of a distribution to the Surviving Spouse, Eligible Retirement Plan means the accounts described in clauses (i) and (ii) hereof. 1.26 Eligible Rollover Distribution means any distribution to an employee of all or any portion of the balance to his credit in a qualified trust (including any distribution to a Participant of all or any portion of his Account). 4 1.27 Employee means any individual employed by a Participating Company (including officers, but excluding independent contractors and directors who are not officers or otherwise employees). 1.28 Employment Date means the date on which an Employee first completes an Hour of Service for an Affiliate. 1.29 Entry Date means the Effective Date and the first day each calendar quarter during which the Plan remains in effect. In addition, the Administrative Committee may prescribe and set forth on Schedule B a special Entry Date for any individuals who are employed by an acquired company [as described in Section 1.64(b)], and who otherwise have satisfied the requirements for eligibility. 1.30 ERISA means the Employee Retirement Income Security Act of 1974, as amended. 1.31 ESOP Account means the separate subaccount established and maintained on behalf of a Participant or Beneficiary to reflect his interest in the Trust Fund attributable to ESOP Contributions. 1.32 ESOP Contributions means the discretionary amounts contributed by each Participating Company to the Trust Fund for allocation to Participants' ESOP Accounts, as provided in Section 3.3. 1.33 Forfeiture means the amount that is removed from the Account of a former Employee as provided in Section 8.3. 1.34 Highly Compensated Employee means, for any Plan Year, an Employee who receives Compensation exceeding the Compensation of two-thirds of all Employees who are Active Participants for that Plan Year. 1.35 Hour of Service means the increments of time described in subsection (a) hereof, as modified by subsections (b), (c), (d) and (e) hereof: (a) General Rule. (1) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Affiliate during the applicable computation period; (2) Each hour for which an Employee is paid, or entitled to payment, by an Affiliate on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or Leave of Absence; provided: (A) Except as otherwise required by law, no more than 501 5 Hours of Service shall be credited under this subsection (2) to an Employee for any single continuous period during which he performs no duties as an employee of an Affiliate (whether or not such period occurs in a single computation period); (B) An hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which he performs no duties as an employee of an Affiliate shall not be credited as an Hour of Service if such payment is made or due under a plan maintained solely to comply with applicable workers' compensation, unemployment compensation or disability insurance laws; and (C) Hours of Service shall not be credited to an Employee for a payment which solely reimburses such Employee for medical or medically related expenses incurred by him. For purposes of this subsection (2), a payment shall be deemed to be made by or due from an Affiliate regardless of whether such payment is made by or due from an Affiliate directly, or indirectly through, among others, a trust fund or insurer, to which the Affiliate contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular employees or are on behalf of a group of employees in the aggregate; and (3) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Affiliate; provided, the same Hours of Service shall not be credited both under subsection (1) or subsection (2), as the case may be, and under this subsection (3); and, provided further, crediting of Hours of Service for back pay awarded or agreed to with respect to periods described in subsection (2) shall be subject to the limitations set forth in that subsection. (b) Equivalencies. Each Employee for whom an Affiliate does not keep records of actual Hours of Service shall be credited, in accordance with this Section and applicable regulations promulgated by the Department of Labor, with 45 Hours of Service for each week for which such Employee would be required to be credited with at least 1 Hour of Service. (c) Uniformed Services. To the extent required under the Uniformed Services Employment and Reemployment Rights Act of 1994, an Employee who leaves the services of an Affiliate to enter the uniformed forces and returns to service with an Affiliate shall be credited with Hours of Service in respect of such uniformed service. (d) Changes by Administrative Committee. The rate or manner used for crediting Hours of Service may be changed at the direction of the Administrative Committee from time to time so as to facilitate administration and to equitably reflect the purposes of the Plan; provided, no change shall be effective as to any Plan Year for which allocations have been made pursuant to Article V at the time such change is made; and, provided further, Hours of Service shall be credited and determined in compliance with Department of Labor Regulation 6 Sections 2530.200b-2(b) and (c), 29 CFR Part 2530, as may be amended from time to time, or such other regulations as may from time to time be applicable. (e) Computation Period. For purposes of this Section, a "computation period" means the 12-month period that forms the basis for determining an Employee's Years of Eligibility Service or Years of Vesting Service, whichever is applicable. 1.36 Investment Committee means the committee which shall act on behalf of the Controlling Company with respect to making and effecting investment decisions, all as provided in Article XI. Unless the Controlling Company specifies otherwise, the Administrative Committee shall serve as the Investment Committee. The Controlling Company may act in lieu of the Investment Committee as it deems appropriate or desirable. 1.37 Investment Fund means any of the investment funds established under Section 7.2. 1.38 Investment Manager means an "investment manager" within the meaning of ERISA Section 3(38). 1.39 Leave of Absence means an excused leave of absence granted to an Employee by an Affiliate in accordance with applicable federal or Puerto Rico law or the Affiliate's personnel policy. Among other things, a Leave of Absence shall be granted to an Employee: (a) who leaves the service of an Affiliate, voluntarily or involuntarily, to enter the Armed Forces of the United States; provided, (i) the Employee is legally entitled to reemployment under the veteran's reemployment rights provisions as codified at 38 USC Section 2021, et seq., its predecessors and successors, and (ii) the Employee applies for and reenters service with an Affiliate within the time, in the manner and under the conditions prescribed by law; and (b) under such other circumstances as the Administrative Committee shall determine are fair, reasonable and equitable, as applied uniformly among Employees under similar circumstances. 1.40 Matching Account means the separate subaccount established and maintained on behalf of a Participant or Beneficiary to reflect his interest in the Trust Fund attributable to Matching Contributions. 1.41 Matching Contributions means the amounts paid to by each Participating Company to the Trust Fund as a match to Participants' Before-Tax Contributions, as provided in Section 3.2. 1.42 Maternity or Paternity Leave means any period during which an Employee is absent from work as an employee of an Affiliate (i) because of the pregnancy of such Employee; (ii) because of the birth of a child of such Employee; (iii) because of the placement of a child with such Employee in connection with the adoption of such child by such Employee; or (iv) for 7 purposes of such Employee caring for a child immediately after the birth or placement of such child. 1.43 Maximum Deferral Amount means $8,000, as adjusted from time to time in accordance with Code Section 1165(e)(7). 1.44 Named Fiduciary means the Controlling Company, the Board, the Administrative Committee and the Investment Committee. 1.45 Normal Retirement Age means age 65. 1.46 Participant means any person who has been admitted to, and has not been removed from, participation in the Plan pursuant to Article II. "Participant" shall include Active Participants and former Employees who have an Account under the Plan. 1.47 Participating Company means any Affiliate that has adopted or hereafter may adopt the Plan for the benefit of its employees and which continues to participate in the Plan, as provided in Section 13.3. A list of the Participating Companies with the dates as of which their participation became effective is set forth on Schedule A hereto. 1.48 Plan means The Home Depot FutureBuilder for Puerto Rico as contained herein and all amendments thereto. The Plan is intended to be a stock bonus plan qualified under Code Sections 1165(a) and 1165(e). 1.49 Qualified Separation means a separation from service (i) on or after attaining Normal Retirement Age, (ii) on account of Disability, or (iii) on account of death. 1.50 Qualified Spousal Waiver means a written election executed by a Spouse, delivered to the Administrative Committee and witnessed by a notary public or a Plan representative, which consents to the payment of all or a specified portion of a Participant's death benefit to a Beneficiary other than such Spouse and which acknowledges that such Spouse has waived his right to be the Participant's Beneficiary under the Plan. A Qualified Spousal Waiver shall be valid only with respect to the Spouse who signs it and shall apply only to the alternative Beneficiary designated therein, unless the written election expressly permits other designations without further consent of the Spouse. A Qualified Spousal Waiver shall be irrevocable unless revoked by the Participant by way of (i) a written statement executed by the Participant and delivered to the Administrative Committee or (ii) a written revocation of the nonspouse Beneficiary designation to which such Spouse has consented; provided, any such revocation must be received by the Administrative Committee prior to the Participant's date of death. 1.51 Restoration Contributions means the amounts paid to the Trust Fund on behalf of a rehired individual pursuant to Section 3.8. 8 1.52 Rollover Account means the separate subaccount established and maintained on behalf of a Participant or Beneficiary to reflect his interest in the Trust Fund attributable to Rollover Contributions. 1.53 Rollover Contributions means the amounts contributed to the Trust Fund as "rollover" contributions under Code Section 1165(b)(2). An amount shall be treated as a Rollover Contribution only to the extent that its acceptance by the Trustee is permitted under the Code. 1.54 Spouse or Surviving Spouse means a person who is treated as married to a Participant under the laws of the place of residence of the Participant. The determination of a Participant's Spouse or Surviving Spouse shall be made as of the date of the Participant's death. In addition, a Participant's former spouse shall be treated as his Spouse or Surviving Spouse to the extent provided under a qualified domestic relations order as defined in ERISA Section 206(d)(3). 1.55 Supplemental Account means the separate subaccount established and maintained on behalf of a Participant or Beneficiary to reflect his interest in the Trust Fund attributable to Supplemental Contributions. 1.56 Supplemental Contributions means the amounts paid to the Trust Fund by each Participating Company pursuant to Section 3.4, to the extent used to help satisfy the ADP Test. 1.57 Transfer Account means one or more separate subaccounts established and maintained on behalf of a Participant or Beneficiary to reflect his interest in the Trust Fund attributable to Transfer Contributions; provided, to the extent that the Administrative Committee (in conjunction with the Plan's recordkeeper) deems appropriate, other subaccounts (for example, Before-Tax or Matching Accounts) may be used to reflect Participant's interests attributable to Transfer Contributions. "Transfer Account" shall refer to the aggregate of all separate subaccounts established for Transfer Contributions or to individual, separate subaccounts appropriately described, as may be appropriate in context. Transfer Accounts shall be reflected and described on a schedule hereto or in other Plan records. 1.58 Transfer Contributions means amounts which are received either (i) by a direct trustee-to-trustee transfer or (ii) as part of a spin-off, merger or other similar event by the Trustee from the trustee or custodian of another qualified retirement plan and held in the Trust Fund on behalf of a Participant or Beneficiary. Transfer Contributions shall retain the character that those contributions had under the other qualified retirement plan; for example, after-tax contributions under the prior plan shall continue to be treated as after-tax contributions when held in the Transfer Account. 1.59 Trust or Trust Agreement means the separate agreement between the Controlling Company and the Trustee governing the creation of the Trust Fund, and all amendments thereto. 1.60 Trustee means the party or parties so designated from time to time under the Trust Agreement. 9 1.61 Trust Fund means the total amount of cash and other property held by the Trustee (or any nominee thereof) at any time under the Trust Agreement. 1.62 Valuation Date shall mean the last day of each calendar quarter or such other date or dates as determined by the Administrative Committee. 1.63 Year of Eligibility Service means a 12-consecutive month period during which an Employee completes no less than 1,000 Hours of Service, subject to subsections (a) and (b) below: (a) Computation Period. For purposes of determining whether an Employee has completed a Year of Eligibility Service, the computation period initially shall be the 12-consecutive-month period beginning on the Employee's Employment Date and thereafter shall be each Plan Year, beginning with the Plan Year that includes the first anniversary of the Employee's Employment Date. (b) Predecessor Employer. Unless otherwise determined by the Administrative Committee, an Employee's periods of employment with any company or enterprise (i) acquired in whole or in part by, (ii) merged into, or (iii) all or a portion of the assets or business of which are acquired by, an Affiliate shall be taken into account in determining whether he has completed a Year of Eligibility Service. 1.64 Year of Vesting Service means each Plan Year beginning on or after January 1, 1988 during which an Employee completes at least 1,000 hours of Service, subject to the rules, additions and limitations in subsections (a), (b), (c), and (d) hereof: (a) Pre-Break Service. If a Participant incurs a Break in Service, the Participant shall not be credited with Years of Vesting Service completed prior to such Break in Service unless and until such Participant has completed a Year of Vesting Service following his reemployment. In addition, Years of Vesting Service completed prior to a period in which the Participant incurred 5 or more consecutive Breaks in Service shall be disregarded under the Plan if the Participant had no vested interest in his Account at the time the first such Break in Service commenced. (b) Post-Break Service. Years of Vesting Service completed after a period in which the Participant had at least 5 consecutive Breaks in Service shall be disregarded for the purpose of determining his vested interest in that portion of his Account which accrued before such Breaks in Service. (c) Predecessor Plan. To the extent required by ERISA Section 210(b) and not otherwise counted hereunder, if an Affiliate maintains a plan that is or was the qualified retirement plan of a predecessor employer, an Employee's periods of employment with such predecessor employer shall be taken into account in determining his Years of Vesting Service. 10 (d) Predecessor Employer. Unless otherwise determined by the Administrative Committee, an Employee's periods of employment with any company or enterprise (i) acquired in whole or in part by, (ii) merged into, or (iii) all or a portion of the assets or business of which are acquired by, an Affiliate shall be taken into account in determining whether he has completed a Year of Eligibility Service. 11 ARTICLE II ELIGIBILITY 2.1 Initial Eligibility Requirements. (a) General Rule. Except as provided in subsection (b) hereof, every Covered Employee shall become an Active Participant on the Entry Date coinciding with or next following the date on which he first has completed 1 Year of Eligibility Service, provided he is a Covered Employee on such Entry Date. If a Covered Employee fails to complete a Year of Eligibility Service during the initial 12-consecutive-month period beginning on his Employment Date but subsequently completes 1,000 Hours of Service during a Plan Year beginning after the Employee's Employment Date, he shall become an Active Participant as of the Entry Date coinciding with or immediately following the date on which he first has completed 1 Year of Eligibility Service. (b) New Participating Companies. For employees of companies that become Participating Companies after the Effective Date, each Covered Employee employed by a Participating Company on the date such Participating Company first becomes a Participating Company shall become an Active Participant as of such Participating Company's effective date under the Plan, if, as of the Participating Company's effective date, the Covered Employee has met the eligibility requirements under subsection (a). 2.2 Treatment of Interruptions of Service. (a) Termination Before Satisfying Eligibility Requirements. If a Covered Employee terminates employment before satisfying the eligibility requirements set forth in Section 2.1 and then is reemployed by the Company, he shall become an Active Participant in accordance with the requirements of Section 2.1(a). (b) Termination Before Participation. If a Covered Employee satisfies the eligibility requirements set forth in Section 2.1, terminates employment with the Company before the Entry Date on which he otherwise would become an Active Participant, and then is reemployed by the Company prior to completing a Break in Service, he shall become an Active Participant as of the later of (i) the Entry Date on which he otherwise would have become an Active Participant if he had not terminated employment or (ii) the Entry Date coinciding with or immediately preceding the date he is reemployed as a Covered Employee. (c) Reparticipation Upon Reemployment. If an Active Participant terminates employment with the Company, his active participation in the Plan shall cease immediately, and he again shall become an Active Participant as of the day he again becomes a Covered Employee. However, regardless of whether he again becomes an Active Participant, he shall continue to be a Participant until he no longer has an Account under the Plan. 12 2.3 Change in Status. (a) Loss of Covered Employee Status. If a Covered Employee (i) satisfies the eligibility requirements set forth in Section 2.1, (ii) changes his employment status (but remains employed) so that he ceases to be a Covered Employee before the Entry Date on which he otherwise would become an Active Participant, and (iii) then again changes his employment status and becomes a Covered Employee, he shall become an Active Participant as of the later of the date he again becomes a Covered Employee or the Entry Date on which he otherwise would become an Active Participant. (b) Change to Covered Employee Status. If an Employee who first satisfies the eligibility requirements of Section 2.1 while he is not a Covered Employee subsequently changes his employment status so that he becomes a Covered Employee, he shall become an Active Participant as of the later of the date of his change in status or the Entry Date on which he otherwise would become an Active Participant. (c) Change by Participant. If an Active Participant changes his status of employment (but remains employed) so that he is no longer a Covered Employee, his active participation in the Plan shall cease immediately, and he shall again become an Active Participant in the Plan as of the day he again becomes a Covered Employee. However, regardless of whether he again becomes an Active Participant, he shall continue to be a Participant until he no longer has an Account under the Plan. 13 ARTICLE III CONTRIBUTIONS 3.1 Before-Tax Contributions. (a) Before-Tax Contributions. Each Participating Company shall contribute to the Plan, on behalf of each Active Participant employed by such Participating Company and for each regular payroll period and for each other payment of compensation for which such Active Participant has a Deferral Election in effect with such Participating Company, a Before-Tax Contribution in an amount equal to the amount by which such Active Participant's Compensation has been reduced for such period pursuant to his Deferral Election. The amount of the Before-Tax Contribution shall be determined in increments of 1 percent of such Active Participant's Compensation for each payroll period. An Active Participant may elect to reduce his Compensation for any period by a minimum of 1 percent and a maximum of 10 percent (or such lower minimum or higher maximum percentage and/or amount established by the Administrative Committee from time to time); provided, the maximum limitations in Article VI shall apply. (b) Deferral Elections. Each Active Participant who desires that his Participating Company make a Before-Tax Contribution on his behalf shall make a Deferral Election. Such Deferral Election shall provide for the reduction of his Compensation while he is an Active Participant employed by a Participating Company. A Deferral Election may be made on a form, through an interactive telephone system, or through such other format or process permitted by the Administrative Committee. The Administrative Committee may prescribe such nondiscriminatory terms and conditions governing the use of the Deferral Elections as it deems appropriate. Subject to any modifications, additions or exceptions which the Administrative Committee deems appropriate, the following terms shall apply to Deferral Elections: (1) Effective Date. An Active Participant may make an initial Deferral Election with a Participating Company, effective for the first paycheck payable on or after an Entry Date. (2) Term. Each Active Participant's Deferral Election with a Participating Company shall remain in effect in accordance with its original terms until the earlier of (A) the date the Active Participant ceases to be a Covered Employee of all Participating Companies, (B) the date the Active Participant revokes such Deferral Election pursuant to the terms of paragraph (b)(3) hereof, or (C) the date the Active Participant or the Administrative Committee modifies such Deferral Election pursuant to the terms of paragraph (b)(4) or (b)(5) hereof. If the final payment of Compensation to an Active Participant is not made through the Participating Company's regular payroll process, the Active Participant's Deferral Election shall not apply to such payment. If a Participant is transferred from the employment of a Participating Company to the employment of another Participating Company, his Deferral Election with the first Participating Company will remain in effect and will apply to his Compensation from the 14 second Participating Company until the earlier of (A), (B) or (C) of the preceding sentence. (3) Revocation. An Active Participant's Deferral Election shall terminate upon his ceasing to be a Covered Employee. In addition, an Active Participant may revoke his Deferral Election, and such revocation shall be effective as soon as practicable after the date on which it is received. An Active Participant who revokes a Deferral Election may make a new Deferral Election, effective as soon as practicable after the date of such election. (4) Modification by Participant. An Active Participant may modify his existing Deferral Election to increase or decrease the percentage of his Contribution by making a new Deferral Election. Such notification shall be effective as soon as practicable after the date of such election. (5) Modification by Administrative Committee. Notwithstanding anything herein to the contrary, the Administrative Committee may modify any Deferral Election of any Active Participant at any time by decreasing the percentage of any Before-Tax Contributions to any extent the Administrative Committee believes necessary to comply with the limitations described in Article VI. 3.2 Matching Contributions. For each Active Participant on whose behalf a Participating Company has made any Before-Tax Contributions, such Participating Company shall make, with respect to such payroll period or other payment of Compensation, a Matching Contribution to the Plan, equal to 50 percent of the amount of the total of such Before-Tax Contributions; provided, such Matching Contributions shall not exceed 2.5 percent of the Active Participant's Compensation paid by the Participating Company for such payroll period (that is, the 50 percent Matching Contribution shall not be applied to the amount of a Before-Tax Contribution that exceeds 5 percent of a Participant's Compensation for a payroll period), nor shall such amount exceed (or cause the Contributions to exceed) any of the maximum limitations described in Section 6.1. The Board, in its sole discretion, may change the 50 percent and 5 percent levels set forth hereinabove. 3.3 ESOP Contributions. The Controlling Company may, but shall not be required to, make an ESOP Contribution to the Plan with respect to each Plan Year. Subject to the limitations set forth in Section 6.1, the amount of any such ESOP Contribution shall be determined by the Board in its sole discretion. If the Controlling Company makes an ESOP Contribution to the Plan for a Plan Year, each other Participating Company shall contribute to the Plan for such Plan Year the same percentage of Compensation that the Participating Company pays to its Employees who are Eligible Participants for such Plan Year as the Controlling Company contributes with respect to its Employees who are Eligible Participants for such Plan Year. 15 3.4 Supplemental Contributions. To the extent and in such amounts as the Administrative Committee, in its sole discretion, deems desirable to help satisfy the ADP Test for any Plan Year and subject to the requirements and limitations set forth in Section 6.1 and Section 6.3, each Participating Company shall make a Supplemental Contribution for a Plan Year. 3.5 Form of Contributions. All Contributions shall be paid to the Trustee in the form of cash or shares of Company Stock, as determined by the Board. 3.6 Timing of Contributions. (a) Before-Tax Contributions. Each Participating Company that withholds Before-Tax Contributions from an Active Participant's paycheck pursuant to a Deferral Election shall pay such Before-Tax Contributions to the Trustee as of the earliest date (but not later than the 15th business day of the month following the month in which such amounts otherwise would have been payable to such Active Participant in cash or such earlier date as required by law) on which such Contributions can reasonably be segregated from the Participating Company's general assets. (b) Matching, ESOP and Supplemental Contributions. Each Participating Company shall pay its Matching, ESOP and Supplemental Contributions to the Trustee (i) on or before the date for filing its income tax return (including extensions thereof) for the tax year to which such Matching, ESOP and Supplemental Contributions relate, or (ii) on or before such other date as shall be within the time allowed to permit the Participating Company to properly deduct, for income tax purposes and for the tax year of the Participating Company in which the obligation to make such Contributions was incurred, the full amount of such Matching, ESOP and Supplemental Contributions; provided, in the event the amount of Supplemental Contributions cannot be calculated by the latest date described hereinabove, such Supplemental Contributions may be made at a later date which is on or before the last day of the Plan Year following the Plan Year to which such Supplemental Contributions relate. 3.7 Contingent Nature of Company Contributions. Notwithstanding Section 3.1 and subject to the terms of Section 14.2, each Company Contribution made to the Plan by a Participating Company is made expressly contingent upon the deductibility thereof for income tax purposes for the taxable year of the Participating Company with respect to which such Company Contribution is made. 3.8 Restoration Contributions. (a) Restoration of Forfeitures. If a Participant has forfeited his nonvested Account in accordance with Section 8.3, and such Participant subsequently is rehired as a Covered 16 Employee prior to the occurrence of 5 consecutive Breaks in Service, his Account shall be credited with all of the benefits (unadjusted for gains or losses) which were forfeited, as determined pursuant to Section 8.3. (b) Restoration Contribution. The assets necessary to fund the Account of the rehired individual shall be provided no later than as of the end of the Plan Year following the Plan Year in which the individual is rehired, and shall be provided in the discretion of the Administrative Committee from (i) income or gain to the Trust Fund, (ii) Forfeitures arising from the Accounts of Participants employed or formerly employed by the Participating Companies, or (iii) Contributions by the Participating Companies. 3.9 Contributions Following Military Service. To the extent and in the manner required by the Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA"), the Administrative Committee shall provide for Contributions to be made by and on behalf of persons entitled to reemployment following uniformed service. Matching Contributions shall be made with respect to such period of uniformed service only to the extent that the Participant makes Before-Tax Contributions with respect to such period in the manner prescribed by the Administrative Committee in accordance with USERRA. For purposes of determining the amount of Contributions that may be made by or on the behalf of a Participant with respect to a period of uniformed service, the Participant's Compensation for such period shall be based on (i) the Compensation the Participant would have received but for such period of uniformed service, or (ii) if such amount is not reasonably certain, the Participant's average rate of Compensation during the 12-month period immediately preceding such period of uniformed service (or, if shorter, the Participant's period of employment with all Affiliates immediately preceding such period of uniformed service). 17 ARTICLE IV ROLLOVERS AND TRANSFERS BETWEEN PLANS 4.1 Rollover Contributions. (a) Request by Covered Employee. An Active Participant may make a written request to the Administrative Committee (or its designee) that he be permitted to make a Rollover Contribution. Such written request shall contain a statement, satisfactory to the Administrative Committee, that the property constitutes a Rollover Contribution. (b) Acceptance of Rollover. Subject to the terms of the Plan and the Code, the Administrative Committee, in its sole discretion, shall determine whether (and if so, under what conditions) a Rollover Contribution shall be accepted at any time by the Trustee. For example, the Administrative Committee, in its sole discretion, may decide to allow Rollover Contributions from Participants and/or direct Rollover Contributions from another qualified retirement plan [as described in Code Section 1165(b)(2)]. If the Administrative Committee (or its designee) permits an Active Participant to make a Rollover Contribution, the amount of the Rollover Contribution shall be transferred to the Trustee and allocated as soon as practicable thereafter to a Rollover Account for the Active Participant. Unless the Administrative Committee permits otherwise, all Rollover Contributions shall be made in cash. 4.2 Transfer Contributions. (a) Direct Transfers Permitted. The Administrative Committee, in its sole discretion, shall permit direct trustee-to-trustee transfers of assets and liabilities to the Plan [which shall be distinguished from direct Rollover Contributions as described in Code Section 1165(b)(2)] as a Transfer Contribution on behalf of an Active Participant. However, in no event shall a Transfer Contribution be accepted on behalf of an Active Participant if such Transfer Contribution is from a retirement plan which, with respect to such Participant, is subject to the requirements of providing any alternative form of benefit not permitted under the Plan. (b) Mergers and Spin-offs Permitted. The Administrative Committee, in its sole discretion, shall permit other qualified retirement plans to transfer assets and liabilities to the Plan as part of a merger, spin-off or similar transaction. Any such transfer shall be made in accordance with the terms of the Code and subject to such rules and requirements as the Administrative Committee may deem appropriate. Without limitation, the Administrative Committee shall determine the schedule under which such Transfer Contributions shall vest. Notwithstanding anything herein to the contrary, in no event shall a Transfer Contribution be accepted if the transferring plan is subject to the requirements of providing any alternative form of benefit not permitted under the Plan. (c) Establishment of Transfer Accounts. As soon as practicable after the date the Trustee receives a Transfer Contribution, there shall be credited to one or more Transfer Accounts of each Participant the total amount received from the respective accounts of such Participant in the transferring qualified retirement plan. Any amounts so credited as a result of 18 any such merger or spin-off or other transfer shall be subject to all of the terms and conditions of the Plan from and after the date of such transfer. (d) Transfer Accounts. The rules and terms applicable to Transfer Contributions and resulting Transfer Accounts shall be reflected on a schedule hereto or in other Plan records. 4.3 Spin-offs to Other Plans. The Administrative Committee, in its sole discretion, may cause the Plan to transfer to another qualified retirement plan (as part of a spin-off or similar transaction) assets and liabilities maintained under the Plan. Any such transfer shall be made in accordance with the terms of the Code and subject to such rules and requirements as the Administrative Committee may deem appropriate. Upon the effectiveness of any such transfer, the Plan and Trust shall have no further responsibility or liability with respect to the transferred assets and liabilities. 19 ARTICLE V PARTICIPANTS' ACCOUNTS; CREDITING AND ALLOCATIONS 5.1 Establishment of Participants' Accounts. The Administrative Committee shall establish and maintain, on behalf of each Participant and Beneficiary, an Account which shall be divided into segregated subaccounts. The subaccounts shall include Before-Tax, Matching, ESOP, Supplemental, Rollover and Transfer Accounts and such other subaccounts as the Administrative Committee deems appropriate. Each Account shall be credited with Contributions allocated to such Account and generally shall be credited with income on investments derived from the assets of such Account. Notwithstanding anything herein to the contrary, while Contributions may be allocated to a Participant's Account as of a particular date (as specified in the Plan), such Contributions shall actually be added to a Participant's Account and shall be credited with investment experience only from the date such Contributions are received and credited to the Participant's Account by the Trustee. Each Account of a Participant or Beneficiary shall be maintained until the value thereof has been distributed to or on behalf of such Participant or Beneficiary. 5.2 Allocation of Before-Tax, Matching, Rollover and Transfer Contributions. As of, or as soon as administratively practicable after, each Valuation Date coinciding with or immediately following the date on which Before-Tax, Matching, Rollover and Transfer Contributions are received on behalf of an Active Participant, such Contributions shall be allocated and credited directly to the appropriate Before-Tax, Matching, Rollover and Transfer Accounts of such Active Participant. 5.3 Allocation of ESOP Contributions. As of the last day of each Plan Year for which the Company makes (or is deemed to have made) ESOP Contributions, each Eligible Participant shall have credited to his Account a portion of such ESOP Contributions. The amount of such ESOP Contributions shall be allocated among Eligible Participants' Accounts in the same proportion that the Compensation of each Eligible Participant for the Plan Year bears to the total Compensation of all Eligible Participants for the Plan Year. If a combination of cash and Company Stock is allocated, the allocation formula described in this subsection shall be applied separately to the cash and Company Stock. 5.4 Allocation and Crediting of Supplemental Contributions. (a) General Provision. As of the last day of each Plan Year for which the Participating Companies make (or are deemed to have made) Supplemental Contributions, each individual who is or was an Active Participant at any time during the Plan Year and who is not a Highly Compensated Employee shall have allocated and credited to his Supplemental Account a portion of the Supplemental Contributions made for such Plan Year by the Participating Companies. The Administrative Committee shall cause a portion of such Supplemental 20 Contributions to be allocated to the Supplemental Account of each such Active Participant in accordance with the terms of subsection (b), (c) (d) or (e) hereof, whichever is applicable. (b) Per Capita Supplemental Contributions. To the extent that the Administrative Committee designates all or any portion of the Supplemental Contributions for a Plan Year as "Per Capita Supplemental Contributions," such Contributions shall be allocated to the Supplemental Accounts of all Eligible Participants who are not Highly Compensated Employees on a per capita basis (that is, the same dollar amount shall be allocated to the Supplemental Account of each such Eligible Participant). (c) Proportional Supplemental Contributions. To the extent that the Administrative Committee designates all or any portion of the Supplemental Contributions for a Plan Year as "Proportional Supplemental Contributions," such Contributions shall be allocated to the Supplemental Account of each Eligible Participant who is not a Highly Compensated Employee in the same proportion that (i) the Compensation of such Eligible Participant for such Plan Year bears to (ii) the total Compensation of all such Eligible Participants for such Plan Year. (d) Bottoms-up Supplemental Contributions. To the extent that the Administrative Committee designates all or any portion of the Supplemental Contributions for a Plan Year as "Bottoms-up Supplemental Contributions," such Contributions shall be allocated to the Supplemental Account of some or all Active Participants who are not Highly Compensated Employees, (A) beginning with such of the Active Participant(s) who have the lowest Compensation, until such Active Participant(s) reach 25 percent of their Compensation for the Plan Year (determined without taking into account the exclusion from Compensation provided in Section 1.16(d)), or the amount of the Supplemental Contributions is fully allocated, and then (B) continuing with successive individuals or groups of such Active Participants in the same manner until the amount of the Bottoms-up Supplemental Contributions is fully allocated. (e) Matching Supplemental Contributions. To the extent that the Administrative Committee designates all or any portion of the Supplemental Contributions for a Plan Year as "Matching Supplemental Contributions," such Contributions shall be allocated to the Supplemental Account of each Eligible Participant who is not a Highly Compensated Employee in the same proportion that (i) such Eligible Participant's Plan Year Before-Tax Contributions that do not exceed the maximum amount of Before-Tax Contributions taken into account in determining Matching Contributions for such Plan Year bears to (ii) the total of all such Eligible Participants' Plan Year Before-Tax Contributions (calculated by taking into account for such Eligible Participants only the maximum amount of Before-Tax Contributions taken into account in determining Matching Contributions for such Plan Year). 5.5 Allocation of Forfeitures. To the extent Forfeitures for a Plan Year are not used to pay Restoration Contributions pursuant to Section 3.8(b), to replace abandoned Accounts as provided in Section 9.7 or to pay Plan expenses as provided in Section 14.3, the Administrative Committee, in its sole discretion, shall 21 deem such Forfeitures to be Matching, Supplemental or ESOP Contributions (which shall first be used to reduce the Participating Companies' obligation, if any, to make such Contributions pursuant to the terms of the Plan and then shall be added to, and combined with, any such other Contributions made for such Plan Year by the Participating Companies), and such Forfeitures shall be allocated pursuant to Section 5.2, Section 5.3 or Section 5.4, as applicable. 5.6 Allocation and Crediting of Investment Experience. As of each Valuation Date, the Trustee shall determine the fair market value of the Trust Fund which shall be the sum of the fair market values of the Investment Funds. The Administrative Committee shall determine the amount of the Accounts as follows: (a) Determination of Earnings or Losses. As of each Valuation Date, the investment earnings (or losses) of each Investment Fund shall be the amount by which the sum determined in (1) exceeds (or is less than) the sum determined in (2), where (1) and (2) are as follows: (1) The sum of (A) the fair market value of such Investment Fund as of such Valuation Date, plus (B) the amount of distributions and withdrawals and any transfers to other Investment Funds made since the immediately preceding Valuation Date from amounts invested in the Investment Fund; and (2) The sum of (A) the fair market value of the Investment Fund as of the immediately preceding Valuation Date, plus (B) Contributions deposited in and amounts transferred to such Investment Fund since the immediately preceding Valuation Date. (b) Formula For Allocation. To the extent directed by the Administrative Committee, investment earnings initially shall be used to pay Restoration Contributions pursuant to Section 3.8(b) or to replace abandoned Accounts as provided in Section 9.7. As of each Valuation Date and prior to the allocations described in Section 5.2, Section 5.3, Section 5.4 and Section 5.5, each Participant's and Beneficiary's Account shall be allocated and credited with a portion of such earnings or debited with a portion of such losses of each Investment Fund, as determined in accordance with subsection (a) hereof, in the proportion that (i)(A) the amount credited to such Account that was invested in such Investment Fund as of the immediately preceding Valuation Date, minus (B) one half of any distributions or withdrawals or transfers to other Investment Funds which were made from such Account since such preceding Valuation Date and on or before such current Valuation Date, plus (C) one half of any amounts transferred to such Investment Fund since the immediately preceding Valuation Date; bears to (ii)(A) the total amount invested in such Investment Fund by all Participants and Beneficiaries as of the immediately preceding Valuation Date, minus (B) one half of any distributions or withdrawals or transfers to other Investment Funds which were made since such preceding Valuation Date and on or before such current Valuation Date, plus (C) one half of any amounts transferred to such Investment Fund since the immediately preceding Valuation Date, provided that no allocation of investment earnings or 22 losses shall be made to an Account the full amount of which has been distributed since the preceding Valuation Date. 5.7 Notice to Participants of Account Balances. At least once for each Plan Year, the Administrative Committee shall cause a written statement of a Participant's or Beneficiary's Account balance to be distributed to the Participant or Beneficiary. 5.8 Good Faith Valuation Binding. In determining the value of the Trust Fund and the Accounts, the Trustee and the Administrative Committee shall exercise their best judgment, and all such determinations of value (in the absence of bad faith) shall be binding upon all Participants and Beneficiaries. 5.9 Errors and Omissions in Accounts. If an error or omission is discovered in the Account of a Participant or Beneficiary, the Administrative Committee shall cause appropriate, equitable adjustments to be made as of the Valuation Date coinciding with or immediately following the discovery of such error or omission. 23 ARTICLE VI CONTRIBUTION AND LIMITATIONS AND NONDISCRIMINATION REQUIREMENTS 6.1 Deductibility Limitations. In no event shall the total Company Contribution amount for any taxable year of a Participating Company exceed that amount which is properly deductible for income tax purposes under the Code. Generally, the maximum, tax-deductible Company Contribution amount for any taxable year of a Participating Company shall be equal to 15 percent of the total Compensation paid or accrued during such taxable year to all Participants employed by such Participating Company. For purposes of this Section, a Company Contribution may be deemed made by a Participating Company for a taxable year if it is paid to the Trustee on or before the date of filing the Participating Company's income tax return (including extensions thereof) for that year or on or before such other date as shall be within the time allowed to permit proper deduction by the Participating Company of the amount so contributed for income tax purposes for the year in which the obligation to make such Company Contribution was incurred. 6.2 Maximum Limitation on Elective Deferrals. (a) Maximum Elective Deferrals Under Affiliate Plans. The aggregate amount of a Participant's Elective Deferrals made for any calendar year under the Plan and any other plans, contracts or arrangements with any Affiliate shall not exceed the Maximum Deferral Amount. (b) Return of Excess Before-Tax Contributions. If the aggregate amount of a Participant's Before-Tax Contributions made for any calendar year by itself exceeds the Maximum Deferral Amount, the Participant shall be deemed to have notified the Administrative Committee of such excess, and the Administrative Committee shall cause the Trustee to distribute to such Participant, on or before April 15 of the next succeeding calendar year, the total of (i) the amount by which such Before-Tax Contributions exceed the Maximum Deferral Amount, plus (ii) any earnings allocable thereto (including, in the Administrative Committee's discretion, any gap income). In addition, Matching Contributions made on behalf of the Participant which are attributable to the distributed Before-Tax Contributions shall be forfeited. (c) Return of Excess Elective Deferrals Provided by Other Affiliates. If after the reduction described in subsection (b) hereof, a Participant's aggregate Elective Deferrals under plans, contracts and arrangements with Affiliates still exceed the Maximum Deferral Amount, then, the Participant shall be deemed to have notified the Administrative Committee of such excess, and, unless the Administrative Committee directs otherwise, such excess shall be reduced by distributing to the Participant Elective Deferrals that were made for the calendar year under such plans, contracts and/or arrangements with any Affiliates other than the Plan. However, if the Administrative Committee decides to make any such distributions from Before- 24 Tax Contributions made to the Plan, such distributions (including forfeiture of Matching Contributions) shall be made in a manner similar to that described in subsection (b) hereof. (d) Discretionary Return of Elective Deferrals. If after the reductions described in subsections (b) and (c) hereof, (i) a Participant's aggregate Elective Deferrals made for any calendar year under the Plan and any other plans, contracts or arrangements with Affiliates and any other employers still exceed the Maximum Deferral Amount, and (ii) such Participant submits to the Administrative Committee, on or before the March 1 following the end of such calendar year, a written request that the Administrative Committee distribute to such Participant all or a portion of his remaining Before-Tax Contributions made for such calendar year, and any earnings attributable thereto (including, in the Administrative Committee's discretion, any gap income), then the Administrative Committee may, but shall not be required to, cause the Trustee to distribute such amount to such Participant on or before the following April 15. However, if the Administrative Committee decides to make any such distributions from Before-Tax Contributions made to the Plan, such distributions (including forfeiture of Matching Contributions) shall be made in a manner similar to that described in subsection (b) hereof. 6.3 Nondiscrimination Requirements for Before-Tax Contributions. (a) ADP Test. For each Plan Year, the amount of the aggregate of all Before-Tax Contributions and, to the extent designated by the Administrative Committee pursuant to subsection (c) hereof, Supplemental Contributions shall satisfy at least one of the following ADP Tests: (1) The ADP for the Highly Compensated Employees who are Active Participants shall not exceed the product of (A) the ADP for the Active Participants who are not Highly Compensated Employees, multiplied by (B) 1.25; or (2) The ADP for the Highly Compensated Employees who are Active Participants shall not exceed the ADP for the Active Participants who are not Highly Compensated Employees by more than 2 percentage points, nor shall it exceed the product of (A) the ADP of the Active Participants who are not Highly Compensated Employees, multiplied by (B) 2. (b) Multiple Plans. If before-tax, matching and/or supplemental contributions are made to one or more other plans which, along with the Plan, are considered as a single plan for purposes of Code Section 1165(a)(3) or Section 1165(a)(4), such plans shall be treated as one plan for purposes of this Section, and the before-tax and applicable matching and supplemental contributions made to those other plans shall be combined with the Before-Tax and applicable Supplemental Contributions for purposes of performing the tests described in subsection (a) hereof. (c) Adjustments to Actual Deferral Percentages. In the event that the allocation of the Before-Tax and Supplemental Contributions for a Plan Year does not satisfy one of the ADP Tests, the Administrative Committee shall cause the Before-Tax and Supplemental 25 Contributions for such Plan Year to be adjusted in accordance with one or a combination of the following options: (1) The Administrative Committee may cause the Participating Companies to make, with respect to such Plan Year, Supplemental Contributions on behalf of, and allocable to, the Eligible Participants described in Section 5.4 with respect to such Plan Year, in the minimum amount necessary to satisfy one of the ADP Tests. Such Supplemental Contributions shall be allocated among such Eligible Participants pursuant to one of the methods described in Section 5.4. (2) By the last day of the Plan Year following the Plan Year in which the annual allocation failed both of the ADP Tests, the Administrative Committee may direct the Trustee to reduce the Before-Tax Contributions taken into account with respect to Highly Compensated Employees under such failed ADP Tests by an amount necessary to satisfy one of the ADP Tests. Any amount by which Before-Tax Contributions are so reduced, plus any earnings attributable thereto (including, in the Administrative Committee's discretion, any gap income), shall be distributed to the Highly Compensated Employees from whose Before-Tax Accounts such reductions shall have been made. Such reductions in Before-Tax Contributions shall be made in accordance with, and solely to the Accounts of those Highly Compensated Employees who are affected by, the following procedure: (A) First, the Before-Tax Contributions of the Highly Compensated Employee(s) with the highest ADP for such Plan Year shall be reduced by the lesser of (i) the entire amount necessary to satisfy one of the ADP Tests, or (ii) that part of the amount necessary to satisfy one of the ADP Tests as shall cause the ADP of each such Highly Compensated Employee to equal the ADP of each of the Highly Compensated Employees with the next highest ADP for such Plan Year. In addition, to the extent that a Highly Compensated Employee's Before-Tax Contributions are reduced pursuant to this Section, any Matching Contributions made on behalf of a Highly Compensated Employee which are attributable to the distributed Before-Tax Contributions shall be forfeited. (B) Substantially identical steps shall be followed for making further reductions in the Before-Tax Contributions of each of the Highly Compensated Employees with the next highest ADP for such Plan Year until one of the ADP Tests has been satisfied. (d) Coordination with Other Provisions. The amount of Before-Tax Contributions distributed under paragraph (c)(2) with respect to a Participant for a Plan Year shall be reduced by the amount of any excess Before-Tax Contributions previously distributed under Section 6.2 to the Participant for the taxable year ending with or within such Plan Year. Furthermore, the amount of excess Before-Tax Contributions distributed under Section 6.2 with respect 26 to a Participant for a taxable year shall be reduced by the amount of Before-Tax Contributions previously distributed to the Participant under paragraph (c)(2) for the Plan Year beginning with or within such taxable year. 6.4 Construction of Limitations and Requirements. The descriptions of the limitations and requirements set forth in this Article are intended to serve as statements of restrictions on the Plan. For example, if use of a more liberal definition of "Compensation" or a more liberal the minimum legal requirements necessary for the Plan to remain qualified under the applicable terms of the Code. The Participating Companies do not desire or intend, and the terms of this Article shall not be construed, to impose any more restrictions on the operation of the Plan than required by law. Therefore, the terms of this Article and any related terms and definitions in the Plan shall be interpreted and operated in a manner which imposes the least multiple use test is permissible at any time under the law, then the more liberal provisions may be applied as if such provisions were included in the Plan. 27 ARTICLE VII INVESTMENTS 7.1 Establishment of Trust Account. All Contributions are to be paid over to the Trustee to be held in the Trust Fund and invested in accordance with the terms of the Plan and the Trust. 7.2 Investment Funds. (a) Named Investment Funds. In accordance with instructions from the Administrative Committee and/or the Investment Committee and pursuant to the terms of the Plan and the Trust, the Trustee shall establish and maintain for the investment of assets of the Trust Fund, Investment Funds for the investment of Before-Tax, Matching, ESOP, Rollover and Transfer Contributions. Such Investment Funds shall include the Company Stock Fund. Other Investment Funds shall be established and modified from time to time without necessity of amendment to the Plan and which shall have investment objectives prescribed by the Investment Committee. Investment Funds also may be established and maintained for any limited purpose(s) the Investment Committee may properly direct (for example, for the investment of certain specified Accounts transferred from a prior plan). Similarly, at the proper direction of the Investment Committee, the Trustee may eliminate one or more of the then existing Investment Funds. (b) Reinvestment of Cash Earnings. Subject to the terms of Article V, any investment earnings received in the form of cash or other property with respect to any Investment Fund (in excess of the amounts necessary to make cash distributions or Restoration Contributions or to pay Plan or Trust expenses) shall be reinvested in such Investment Fund. (c) Limitation on ESOP Investment. Notwithstanding anything in the Plan to the contrary, and subject to the direction of the Investment Committee, ESOP Accounts shall be invested primarily in the Company Stock Fund. 7.3 Participant Direction of Investments. Except as described in subsection (a) hereof, each Participant or Beneficiary generally may direct the manner in which his Before-Tax, Matching, Rollover and Transfer Contributions and Accounts shall be invested in and among the Investment Funds described in Section 7.2; provided, such investment directions shall be made in accordance with the following terms: (a) Investment of Contributions. Except as otherwise provided in this Section, each Participant may elect the percentage or amount of his future Contributions (other than ESOP Contributions) that will be invested in each Inve Such Participant or Beneficiary may make such elections effective as of any Valuation Date following his Entry Date into the Plan. stment Fund. An initial election of a Participant shall be made as of the Entry Date coinciding with or immediately following the date the Participant commences or recommences participation 28 in the Plan and shall apply to all such specified Contributions credited to such Participant's Account after such Entry Date. Such Participant may make subsequent elections as of any Valuation Date, and such elections shall apply to all such Contributions credited to such Participant's Accounts after such date; for purposes hereof, Contributions and/or Forfeitures that are credited to a Participant's or Beneficiary's Account shall be subject to the investment election in effect on the date on which such amounts are actually received and credited, regardless of any prior date "as of" which such Contributions may have been allocated to his Account. Any election made pursuant to this subsection with respect to future Contributions shall remain effective until changed by the Participant. In the event a Participant never makes an investment election or makes an incomplete or insufficient election in some manner, the Trustee, based on proper directions from the Administrative Committee, shall direct the investment of the Participant's future Contributions. The Participant or Beneficiary may elect to direct the investment of his existing Matching Account among other Investment Funds in accordance with subsection (b) below. (b) Investment of Existing Account Balances. Except as otherwise provided in this Section, each Participant or Beneficiary may elect the percentage or amount of his existing Accounts that will be invested in each Investment Fund. Each such election shall remain in effect until changed by such Participant or Beneficiary. In the event a Participant fails to make an election for his existing Account pursuant to the terms of this subsection (b) which is separate from any election he made for his Contributions pursuant to the terms of subsection (a) hereof, or if a Participant's or Beneficiary's investment election is incomplete or insufficient in some manner, the Participant's or Beneficiary's existing Account will continue to be invested in the same manner provided under the terms of the most recent election affecting his Contributions. (c) Conditions Applicable to Elections. Investment elections described in subsections (a) and (b) hereof shall be made on a form provided by the Administrative Committee, through an interactive telephone system or in such other manner as the Administrative Committee may prescribe. Allocations of investments in the various Investment Funds shall be made in even multiples of 1 percent or in such amounts, as directed by the Participant or Beneficiary. The Administrative Committee shall have complete discretion to adopt and revise procedures to be followed in making such investment elections. Such procedures may include, but are not limited to, the process of the election, the permitted frequency of making elections, the deadline for making elections and the effective date of such elections; provided, elections must be permitted at least once every 3 months. Any procedures adopted by the Administrative Committee that are inconsistent with the deadlines or procedures specified in this Section shall supersede such provisions of this Section without the necessity of a Plan amendment. (d) Restrictions on Investments. To the extent any investment or reinvestment restrictions apply with respect to any Investment Funds (for example, restrictions on changes of investments between competing funds), those restrictions may limit a Participant's or Beneficiary's ability to direct investments hereunder. 29 7.4 Valuation. (a) General. As of each Valuation Date, the Trustee shall determine the fair market value of each of the Investment Funds after first deducting any expenses which have not been paid by the Participating Companies. All costs and expenses incurred in connection with Plan investments and, unless paid by the Participating Companies, all costs and expenses incurred in connection with the general administration of the Plan and the Trust shall be allocated between the Investment Funds in the proportion in which the amount invested in each Investment Fund bears to the amount invested in all Investment Funds as of the appropriate Valuation Date; provided, all costs and expenses directly identifiable to one Investment Fund shall be allocated to that Investment Fund. (b) Value of Company Stock. For all purposes under the Plan for which the value of Company Stock must be determined, the value of Company Stock shall be its fair market value. If the Company Stock is listed on an established stock exchange, the fair market value per share of Company Stock on any particular date shall be the closing price of the stock on such exchange on the last business day of such exchange which immediately precedes the date of valuation. If, for any reason, the fair market value per share of Company Stock cannot be ascertained or is unavailable for a particular date, the fair market value of such stock shall be determined as of the nearest preceding date on which such fair market value can be ascertained pursuant to the terms hereof. 7.5 Voting and Tender Offer Rights with Respect to Investment Funds. Except as provided in Section 7.9, only if, to the extent and in the manner, permitted by the Trust and/or any documents establishing or controlling any of the Investment Funds, shall Participants and Beneficiaries be given the opportunity to vote and tender their interests in each such Investment Funds. Otherwise, such interests shall be voted and/or tendered by the Investment Manager or other fiduciary that controls such Investment Fund, as may be provided in the controlling documents. 7.6 Fiduciary Responsibilities for Investment Directions. All responsibility with respect to the selection of Investment Funds for the investment of a Participant's or Beneficiary's Accounts shall be allocated to the Participant or Beneficiary who directs the investment. Neither the Administrative Committee, the Investment Committee, the Trustee, nor any Participating Company shall be accountable for any loss sustained by reason of any action taken, or investment made, pursuant to an investment direction. 7.7 Appointment of Investment Manager; Authorization to Invest in Collective Trust. (a) Investment Manager. The Investment Committee may appoint any one or more individuals or entities to serve as the Investment Manager or Managers of the entire Trust or of all or any designated portion of a particular Investment Fund or Investment Funds. The Investment Manager shall certify that it is qualified to act as an "investment manager" within the meaning of Section 3(38) of ERISA and shall acknowledge in writing its fiduciary status with respect to 30 the assets placed under its control. The appointment of the Investment Manager shall be effective upon the Trustee's receipt of a copy of an appropriate Investment Committee resolution (or such later effective date as may be contained therein), and the appointment shall continue in effect until receipt by the Trustee of a copy of an Investment Committee resolution removing or accepting the resignation of the Investment Manager (or such later effective date as may be specified therein). If an Investment Manager is appointed, the Investment Manager shall have the power to manage, acquire and dispose of any and all assets of the Trust Fund, as the case may be, which have been placed under its control, except to the extent that such power is reserved to the Trustee by the Controlling Company. If an Investment Manager is appointed, the Trustee shall be relieved of any and all liability for the acts or omissions of the Investment Manager, and the Trustee shall not be under any obligation to invest or otherwise manage any assets which are subject to the management of the Investment Manager. (b) Collective Trust. The Investment Committee may designate that all or any portion of the Trust Fund shall be invested in a collective trust fund, in accordance with the provisions of Revenue Ruling 81-100 or any successor ruling, which collective trust fund shall have been specifically identified in the Trust and adopted thereby as part of the Plan. The trustee of said collective trust shall be appointed as either a co-trustee or Investment Manager of the Plan, effective upon the Trustee's receipt of a copy of an appropriate Investment Committee resolution (or such later effective date as may be contained therein), and the investment in said collective trust shall continue in effect until receipt by the Trustee of a copy of an Investment Committee resolution terminating said investment (or such later effective date as may be contained therein). Said designation or direction shall be in addition to the powers to invest in commingled funds maintained by the Trustee provided for in the Trust. 7.8 Purchase of Life Insurance. Life insurance contracts shall not be purchased. 7.9 Voting and Tender Offer Rights With Respect to Company Stock. (a) Voting Rights. Each Participant or Beneficiary shall have the right to direct the Trustee as to the exercise of all voting rights with respect to the whole shares of Company Stock in his Account. The Trustee shall vote fractional shares, and allocated shares with respect to which voting directions are not received in the same proportion as the whole shares of Company Stock are voted by the voting Participants or Beneficiaries. (b) Tender Offer Rights. Each Participant or Beneficiary also shall have the responsibilities of a Named Fiduciary for purposes of directing, and shall have the right to direct, the Trustee as to whether, in accordance with the terms of any tender offer for shares of Company Stock, to tender the whole shares of Company Stock in his Account, and the Trustee shall follow such directions. To the extent possible, the Trustee shall combine fractional shares of Company Stock in the Accounts of Participants or Beneficiaries and shall tender such fractional shares of Company Stock in the same proportion as the whole shares of such Company Stock are tendered by the tendering Participants or Beneficiaries. Unless otherwise required by ERISA, the Trustee 31 shall not tender whole shares of Company Stock credited to a Participant's or Beneficiary's Account for which it has received no directions from such Participant or Beneficiary. (c) Confidentiality. The Administrative Committee shall establish procedures to protect the voting and tender offer rights of the Participants and Beneficiaries and to assure that the manner in which each Participant or Beneficiary exercises his voting or tender offer rights is confidential with respect to the Administrative Committee and the management of the Company. (d) Dissemination of Pertinent Information. The Administrative Committee shall deliver, or cause to be delivered, to each Participant or Beneficiary, all notices, financial statements, proxies and proxy soliciting materials, relating to the voting of Company Stock in his Account. In addition, the Administrative Committee shall deliver, or cause to be delivered, to each Participant and Beneficiary all materials relating to any tender offer, including the materials distributed by any tender offeror (that is, any bidder). The Administrative Committee shall notify each Participant or Beneficiary of each occasion for the exercise of voting or tender offer rights within a reasonable time before such rights are to be exercised, and such notification shall include all of the relevant information that the Controlling Company distributes to stockholders regarding the exercise of such rights. 32 ARTICLE VIII VESTING IN ACCOUNTS 8.1 General Vesting Rule. (a) Fully Vested Accounts. All Participants shall at all times be fully vested in their Before-Tax, Supplemental, Rollover and Transfer Accounts, except that Transfer Contributions made pursuant to Section 4.2(b) shall vest in accordance with that Section. (b) Matching Account. Except as provided in Section 8.2 and Section 8.3, the Matching Account of a Participant shall vest in accordance with the following vesting schedule, based on the total of the Participant's Years of Vesting Service:
Years of Vesting Service Vested Percentage of Completed by Participant Participant's Matching Account ------------------------ ------------------------------ Less than 3 Years None 3 Years or more 100%
(c) ESOP Account. Except as provided in Section 8.2 and Section 8.3, the ESOP Account of a Participant shall vest in accordance with the following vesting schedule, based on the total of the Participant's Years of Vesting Service:
Years of Service Vested Percentage of Completed by Participant Participant's ESOP Account ------------------------ -------------------------- Less than 3 Years None 3 Years, but less than 4 20% 4 Years, but less than 5 40% 5 Years, but less than 6 60% 6 Years, but less than 7 80% 7 Years or more 100%
8.2 Vesting Upon Attainment of Normal Retirement Age, Death or Disability. Notwithstanding Section 8.1, a Participant's Matching and ESOP Accounts shall become 100 percent vested and nonforfeitable upon the occurrence of any of the following events: (a) The Participant's attainment of Normal Retirement Age while still employed as an employee of any Affiliate; (b) The Participant's death while still employed as an employee of any Affiliate; or (c) The Participant's becoming Disabled while still employed as an employee of any Affiliate. 33 8.3 Timing of Forfeitures and Vesting after Restoration Contributions. If a Participant who is not yet 100 percent vested in his Matching and ESOP Accounts separates from service with all Affiliates, the nonvested amount in his Matching and ESOP Accounts shall be forfeited as soon as administratively practicable and shall become available for allocation as a Forfeiture (in accordance with the terms of Section 5.5) for the Plan Year during which such separation occurs; provided, if shares of Company Stock acquired with the proceeds of a Loan have been allocated to such a Participant's Account, such shares shall be forfeited last. If a Participant has no vested interest in his Account at the time he separates from service, he shall be deemed to have received a cash-out distribution at the time he separates from service, and the forfeiture provisions of this Section shall apply. If such a Participant resumes employment with an Affiliate after he has incurred 5 or more consecutive Breaks in Service, such nonvested amount shall not be restored. If such a Participant resumes employment with an Affiliate before he has incurred 5 consecutive Breaks in Service, the nonvested amount shall be restored as follows: (a) Reemployment and Vesting Before any Distribution. If by the date of reemployment such a Participant has not received any distributions of his vested interest in his Matching or ESOP Account, or if he has no vested interest in his Matching or ESOP Account, the nonvested amount of his Matching and ESOP Accounts shall be restored pursuant to the terms of Section 3.8 and shall be credited to his Matching and ESOP Accounts, respectively. The Participant's Matching and ESOP Accounts then shall be subject to all of the vesting rules in this Article VIII as if no Forfeitures had occurred. (b) Reemployment And Vesting in ESOP Account After Distribution. If by the date of reemployment such a Participant has received a distribution of his entire Matching Account and a portion but not all of his ESOP Account, then, notwithstanding the general rules set forth in Section 8.1, the nonvested amount of his ESOP Account shall be restored pursuant to the terms of Section 3.8. The vested interest of such Participant in such ESOP Account prior to the date such Participant (i) again separates from service with all Affiliates, (ii) incurs 5 consecutive Breaks in Service (such that the nonvested portion of his ESOP Account is forfeited), or (iii) becomes 100 percent vested pursuant to the terms of Section 8.1 or Section 8.2 hereof (whichever is earliest), shall be determined pursuant to the following formula: X = P (AB + [R x D]) - (R x D), where X is the vested interest at the relevant time (that is, the time at which the vested percentage in such Account cannot increase); P is the vested percentage at the relevant time; AB is the balance of his ESOP Account at the relevant time; D is the amount of the distribution; and R is the ratio of his Matching and ESOP Account balance at the relevant time to such Account's balance immediately after the distribution. 34 8.4 Amendment to Vesting Schedule. Notwithstanding anything herein to the contrary, in no event shall the terms of any amendment to the Plan reduce the vested percentage that any Participant has earned under the Plan. In the event that the Plan provides for Participants to vest in their Accounts at a rate which is faster than that provided under any amendment hereto (or in the event any other change is made that directly has an adverse effect on Participants' vested percentage), any Participant who has 3 or more years of vesting service may elect to have his vested percentage calculated under the schedule in the Plan before any such change, and the Administrative Committee shall give each such Participant notice of his rights to make such an election. The period during which the election may be made shall commence with the date the amendment is adopted or deemed to be made and shall end on the latest of: (1) 60 days after the amendment is adopted; (2) 60 days after the amendment becomes effective; or (3) 60 days after the Participant is issued written notice of the amendment by a Participating Company or Administrative Committee. 35 ARTICLE IX PAYMENT OF BENEFITS 9.1 Benefits Payable Upon Separation From Service for Reasons Other than Death. (a) General Rule Concerning Benefits Payable. In accordance with the terms of subsection (b) hereof and subject to the restrictions set forth in subsections (c) and (d) hereof, if a Participant separates from service with all Affiliates for any reason other than death, or if a Participant becomes Disabled but remains an employee of an Affiliate, he shall be entitled to receive a distribution of (i) the vested amount credited to his Account, determined as of the Valuation Date on which the distribution is processed, plus (ii) the vested amount of any Contributions made on his behalf since such Valuation Date. The "Valuation Date on which the distribution is processed" refers to the Valuation Date on which the value of a Participant's Account is determined for purposes of processing a distribution, even if actual payment is made at a later date. (b) Timing of Distribution. (1) Except as provided in subsections (b)(2), (b)(3), and (c) hereof, benefits payable to a Participant who has separated from service or become Disabled shall be distributed as soon as administratively practicable following the first Valuation Date following the later of (i) the date on which the Participant affirmatively elects to receive such payment, or (ii) the date on which the Participant's separation from service or Disability has been processed by the Controlling Company's payroll system and communicated to the Plan's third-party recordkeeper (that is, the Administrative Committee's designee for processing distributions). In order for such Participant's election to be valid, he must actually separate from service or he must become Disabled on or before the date his benefits are distributed, his election must be made within the 90-day period ending on such date, and the Administrative Committee (no later than 30 days and no earlier than 90 days before the distribution date, or within such other period as may be permissible) must have presented him with a notice informing him of his right to defer his distribution. The Administrative Committee shall establish terms and conditions governing elections made under this paragraph (b)(1). If any amounts are subsequently allocated to the ESOP Account of a Participant who incurs a Qualified Separation, such amounts shall be distributed as soon as administratively practicable following the date of such allocation. (2) Notwithstanding the foregoing, in the event that the value of the Participant's Account does not exceed (and at the time of any prior distribution did not exceed) $5,000, benefits shall be distributed to such Participant as soon as administratively practicable following the date on which the Participant separates from service or or becomes Disabled. If any amounts are subsequently allocated to the ESOP Account of a Participant who incurs a Qualified Separation, such amounts shall be distributed as soon as administratively practicable following the date of such allocation. 36 (3) Notwithstanding anything in the Plan to the contrary, once a Participant files a claim for benefits under the Plan, in no event shall payment of the Participant's benefit be made later than 60 days after the end of the Plan Year which includes the latest of (i) the date on which the Participant attained Normal Retirement Age, (ii) the date which is the 10th anniversary of the date he commenced participation in the Plan, or (iii) the date he actually separates from service with all Affiliates; provided, if the amount of the payment cannot be ascertained by the date as of which payments are scheduled to be made hereunder, payment shall be made no later than 60 days after the earliest date on which such payment can be ascertained under the Plan. (c) Restrictions on Distributions from Before-Tax and Supplemental Accounts. Notwithstanding anything in the Plan to the contrary, (i) amounts in a Participant's Before-Tax and Supplemental Accounts, and (ii) amounts in a Participant's Transfer Accounts credited with before-tax contributions, matching and company contributions used to satisfy the Code Section 1165(e) actual deferral percentage test shall not be distributable to such Participant earlier than the earliest of the following to occur: (1) The Participant's death, Disability or separation from service with all Affiliates; (2) The termination of the Plan without the establishment or maintenance of a successor defined contribution plan at the time the Plan is terminated or within the period ending 12 months after the final distribution of all assets in all Before Tax, Supplemental and Transfer Accounts described above in this subsection (c); provided, if fewer than 2 percent of the Employees who are or were eligible under the Plan at the time of its termination are or were eligible under another defined contribution plan at any time during the 24 month period beginning 12 months before the time of termination, such other plan shall not be a successor plan; (3) The date of disposition by the Participating Company employing such Participant of substantially all of its assets that were used by such Participating Company in a trade or business; provided, such Participant continues employment with the corporation acquiring such assets. (4) The date of disposition by the Participating Company employing such Participant of its interest in a subsidiary; provided, such Participant continues employment with such subsidiary; (5) The attainment by such Participant of age 59-1/2; or (6) The Participant's incurrence of an economic emergency as described in Section 10.1. (d) Delay Upon Reemployment or Termination of Disability. If a Participant becomes eligible to receive or begins receiving benefit payments in accordance with the terms of 37 this Article IX and subsequently is reemployed by an Affiliate (or ceases to be Disabled, as applicable) prior to the time his Account has been distributed, the distribution to such Participant shall be delayed until such Participant again becomes eligible to receive distributions from the Plan. 9.2 Death Benefits. If a Participant dies before payment of his benefits from the Plan is made, the Beneficiary or Beneficiaries designated by such Participant in his latest beneficiary designation form filed with the Administrative Committee in accordance with the terms of Section 9.6 shall be entitled to receive a distribution of (i) the vested amount credited to his Account, determined as of the Valuation Date coincident with or immediately preceding the date on which such distribution is to be made, plus (ii) the vested amount of any Contributions made on his behalf since such Valuation Date. For purposes of this subsection, the "date on which such distribution is to be made" refers to the date established for such purpose by administrative practice, even if actual payment and/or processing is made at a later date due to delays in the valuation, administrative or any other procedure. Benefits shall be distributed to such Beneficiary or Beneficiaries as soon as administratively feasible following the second month after the date of the Participant's death (or, if later, after timing restrictions and requirements under the Code are satisfied); provided, any amounts allocated to a Participant's ESOP Account after the date of his death shall be distributed as soon as administratively practicable following the date of such allocation. The Administrative Committee may direct the Trustee to distribute a Participant's Account to a Beneficiary without the written consent of such Beneficiary. 9.3 Cash-Out Payment of Benefits. Notwithstanding anything to the contrary in this Article IX, in the event that the vested portion of the Account of any Participant who separates from the service of all Affiliates is less than or equal to $5,000 and has never exceeded $5,000 at the time of any prior distribution, the full vested amount of such benefit automatically shall be paid to such Participant in one single-sum, cash-out distribution as soon as practicable following the end of the second month following the month in which the Participant separates from service, but in no event later than the end of the second Plan Year following the Plan Year in which such Participant's separation occurs. In the event a Participant has no vested interest in his Account at the time of his separation from service, he shall be deemed to have received a cash-out distribution at the time of his separation from service, and the forfeiture provisions of Section 8.3 shall apply. 9.4 Manner of Distribution. (a) Method. All benefits described in this Article IX shall be paid in the form of a single sum distribution. (b) Form of Payment. Subject to the election of a Participant or Beneficiary, any distribution to a Participant or Beneficiary shall be made in the form of cash, in whole shares of Company Stock, or in a combination of cash and Company Stock; provided, if the Participant or Beneficiary fails to make an election, his entire Account shall be paid in the form of cash. Any 38 portion of the Account which is represented by a fractional share of Company Stock shall be paid in cash. (c) Direct Rollover Distributions. If a Participant, his Spouse who is his Beneficiary, or an alternate payee under a qualified domestic relations order, elects to have an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan and specifies (in such form and at such time as the Administrative Committee may prescribe) the Eligible Retirement Plan to which such distribution is to be paid, such distribution shall be made in the form of a direct trustee-to-trustee transfer to the specified Eligible Retirement Plan; provided, such transfer shall be made only to the extent that the Eligible Rollover Distribution would be included in gross income if not so transferred [determined without regard to Code Section 1165(b)(2)]. 9.5 Qualified Domestic Relations Orders. In the event the Administrative Committee receives a domestic relations order which it determines to be a qualified domestic relations order [see Section 14.1(b)], the Plan shall pay such benefit to the prescribed alternate payee(s) at such time and in such form as shall be described in the qualified domestic relations order and permitted under Section 14.1(b). If the qualified domestic relations order requires immediate payment, the specified benefit shall be paid to the alternate payee as soon as practicable following the end of the month within which the Administrative Committee determines that the order is qualified or, if later, after timing restrictions and requirements under the Code are satisfied. To the extent consistent with the qualified domestic relations order, the amount of the payment to an alternate payee shall include earnings, interest and other investment proceeds through (but not after) the Valuation Date coinciding with or immediately preceding the date on which the Trustee processes the distribution. If a Participant's Account is partially paid or payable to an alternate payee, the Participant's remaining portion of his Account shall be reduced accordingly and shall be subject to the distribution provisions in this Article IX. 9.6 Beneficiary Designation. (a) General. In accordance with the terms of this Section, Participants shall designate and from time to time may redesignate their Beneficiary or Beneficiaries in such form and manner as the Administrative Committee may determine. A Participant shall be deemed to have named his Surviving Spouse, if any, as his sole Beneficiary unless his Spouse consents to the payment of all or a specified portion of the Participant's death benefit to a Beneficiary other than or in addition to the Surviving Spouse in a manner satisfying the requirements of a Qualified Spousal Waiver and such other procedures as the Administrative Committee may establish. Notwithstanding the foregoing, a married Participant may designate a nonspouse Beneficiary without a Qualified Spousal Waiver if the Participant establishes to the satisfaction of the Administrative Committee that a Qualified Spousal Waiver may not be obtained because his Spouse cannot be located or such other permissible circumstances exist as the Secretary of the Treasury may prescribe by regulation. 39 (b) No Designation or Designee Dead or Missing. In the event that: (1) a Participant dies without designating a Beneficiary; (2) the Beneficiary designated by a Participant is not surviving when a payment is to be made to such person under the Plan, and no contingent Beneficiary has been designated; or (3) the Beneficiary designated by a Participant cannot be located by the Administrative Committee within 1 year after the date benefits are to commence to such person; then, in any of such events, the Beneficiary of such Participant with respect to any benefits that remain payable under the Plan shall be the Participant's Surviving Spouse, if any, and if not, then the estate of the Participant.Unclaimed Benefits. 9.7 Unclaimed Benefits. In the event a Participant becomes entitled to benefits under the Plan other than death benefits and the Administrative Committee is unable to locate such Participant (after sending a letter, return receipt requested, to the Participant's last known address, and after such further diligent efforts as the Administrative Committee in its sole discretion deems appropriate) within 1 year from the date upon which he becomes so entitled, the Administrative Committee shall direct that such benefits be paid to the person(s) who have been designated as the Participant's Beneficiary or, if none, who have been designated as the Beneficiary by operation of the Plan under Section 9.6; and, provided further, if the distribution is payable upon termination of the Plan, the Administrative Committee shall not be required to wait until the end of such 1-year period. If neither the Participant, nor his Beneficiary can be located and neither of them claims such benefits by the end of the fifth Plan Year following the Plan Year in which such Participant becomes entitled to such benefits, then the full Account of the Participant shall be deemed abandoned and treated as a Forfeiture; provided, in the event such Participant or Beneficiary is located or makes a claim subsequent to the allocation of the abandoned Account, the amount of the abandoned Account (unadjusted for any investment gains or losses from the time of abandonment) shall be restored (from abandoned Accounts, Forfeitures, Trust earnings or Contributions made by the Participating Companies) to such Participant or Beneficiary, as appropriate; and, provided further, the Administrative Committee, in its sole discretion, may delay the deemed date of abandonment of any such Account for a period longer than the prescribed five Plan Years if it believes that it is in the best interest of the Plan to do so. 9.8 Claims. (a) Procedure. Claims for benefits under the Plan may be filed with the Administrative Committee on forms supplied by the Administrative Committee. The Administrative Committee shall furnish to the claimant written notice of the disposition of a claim within 90 days after the application therefor is filed; provided, if special circumstances require an extension of time for processing the claim, the Administrative Committee shall furnish 40 written notice of the extension to the claimant prior to the end of the initial 90-day period, and such extension shall not exceed one additional, consecutive 90-day period. In the event the claim is denied, the notice of the disposition of the claim shall provide the specific reasons for the denial, cites of the pertinent provisions of the Plan, and, where appropriate, an explanation as to how the claimant can perfect the claim and/or submit the claim for review. (b) Review Procedure. Any Participant or Beneficiary who has been denied a benefit, or his duly authorized representative, shall be entitled, upon request to the Administrative Committee, to appeal the denial of his claim. The claimant or his duly authorized representative may review pertinent documents related to the Plan and in the Administrative Committee's possession in order to prepare the appeal. The form containing the request for review, together with a written statement of the claimant's position, must be filed with the Administrative Committee no later than 60 days after receipt of the written notification of denial of a claim provided for in subsection (a) hereof. The Administrative Committee's decision shall be made within 60 days following the filing of the request for review and shall be communicated in writing to the claimant; provided, if special circumstances require an extension of time for processing the appeal, the Administrative Committee shall furnish written notice to the claimant prior to the end of the initial 60-day period, and such an extension shall not exceed one additional 60-day period. If unfavorable, the notice of decision shall explain the reason or reasons for denial and indicate the provisions of the Plan or other documents used to arrive at the decision. (c) Satisfaction of Claims. Any payment to a Participant or Beneficiary, or to his legal representative or heirs at law, all in accordance with the provisions of the Plan, shall to the extent thereof be in full satisfaction of all claims hereunder against the Trustee, the Administrative Committee and the Adopting Company, any of whom may require such Participant, Beneficiary, legal representative or heirs at law, as a condition to such payment, to execute a receipt and release therefor in such form as shall be determined by the Trustee, the Administrative Committee or the Adopting Company, as the case may be. If receipt and release shall be required but execution by such Participant, Beneficiary, legal representative or heirs at law shall not be accomplished so that the terms of Section 9.1(b) (dealing with the timing of distributions) may be fulfilled, such benefits may be distributed or paid into any appropriate court or to such other place as such court shall direct, for disposition in accordance with the order of such court, and such distribution shall be deemed to comply with the requirements of Section 9.1(b). 9.9 Explanation of Rollover Distributions. Within a reasonable period of time before making an Eligible Rollover Distribution from the Plan to a Participant or Beneficiary, the Administrative Committee shall provide such Participant or Beneficiary with a written explanation of (i) the provisions under which the distributee may have the distribution directly transferred to another Eligible Retirement Plan, (ii) the provisions which require the withholding of tax on the distribution if it is not directly transferred to another Eligible Retirement Plan, and (iii) the provisions under which the distribution will not be subject to tax if transferred to an Eligible Retirement Plan within 60 days after the date on which the distributee receives the distribution. 41 ARTICLE X HARDSHIP WITHDRAWALS AND LOANS 10.1 Hardship Withdrawals. (a) Parameters of Hardship Withdrawals. A Participant who is an employee of an affiliate may make, on account of hardship, a withdrawal from his Account in an amount up to, but not exceeding, the total of (i) 50 percent of the total of his vested Matching and ESOP Account balance, and (ii) 100% of his Rollover and Before-Tax Account balance (excluding earnings on Before-Tax Contributions). For purposes of this subsection, a withdrawal will be on account of "hardship" if it is necessary to satisfy an immediate and heavy financial need of the Participant. A withdrawal based on financial hardship cannot exceed the amount necessary to meet the immediate financial need created by the hardship and not reasonably available from other resources of the Participant. The Administrative Committee (or its designee) shall make its determination as to whether a Participant has suffered an immediate and heavy financial need and whether it is necessary to use a hardship withdrawal from the Plan to satisfy that need on the basis of all relevant facts and circumstances. The minimum amount of any Hardship Withdrawal shall be $1,000 or such lesser amount established from time to time in a nondiscriminatory manner by the Administrative Committee. (b) Immediate and Heavy Financial Need. For purposes of the Plan, an immediate and heavy financial need exists if the withdrawal is on account of (i) expenses for medical care described in Code Section 1023(aa)(2)(P) previously incurred by the Participant, his Spouse or dependents, or necessary to obtain such medical care for such persons, (ii) the purchase (excluding mortgage payments) of a principal residence for the Participant, (iii) the payment of tuition, room, board and related educational fees for the next 12 months of post-secondary education for the Participant, his Spouse or dependents, (iv) the need to prevent eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence, (v) the payment of funeral expenses for a member of the Participant's immediate family (that is, his parent, step-parent, father in-law or mother in-law, grandparent, brother or sister, half-brother or half-sister, step-brother or step-sister, spouse, child, step-child or grandchild), or (vi) any other event deemed an immediate and heavy financial need by the Secretary of the Puerto Rico Treasury Department. (c) Necessary to Satisfy a Financial Need. In determining whether the withdrawal is necessary to relieve the Participant's immediate and heavy financial need, the Administrative Committee shall rely upon the Participant's reasonable representation that the need cannot be relieved: (i) through reimbursement or compensation by insurance or otherwise; (ii) by reasonable liquidation of the Participant's assets to the extent that liquidation would not itself cause an immediate and heavy financial need; (iii) by cessation of Before-Tax Contributions to the Plan; or (iv) by other distributions or nontaxable (at the time of the loan) loans from plans maintained by one or more Participating Companies or by borrowing from commercial sources on reasonable commercial terms. In determining the amount of a 42 Participant's assets, the resources of his spouse and minor dependents are considered to be reasonably available to the Participant unless they are held for his child or children under an irrevocable trust or under the Uniform Gifts to Minors Act. The amount of an immediate and heavy financial need may include amounts necessary for the Participant to pay any taxes which are reasonably anticipated to result from the hardship withdrawal. (d) Form of Distribution. Subject to the election of a Participant, any hardship withdrawal may be paid entirely in cash or entirely in whole shares of Company Stock (with any portion of the withdrawal reprocessed by a fractional share being paid in cash). (e) Source of Funds. The amount of a Participant's hardship withdrawal shall be charged first against his Rollover Account, then against his Matching Account, then against his ESOP Account, and then against his Before-Tax Account. 10.2 Loans to Participants. (a) Grant of Authority. Loans to Participants, Beneficiaries and alternate payees, who are parties-in-interest as defined in ERISA Section 3(14) generally shall be allowed commencing as of such date as the Administrative Committee or its designee may determine; provided, if the Administrative Committee determines in its sole discretion that it is not administratively feasible or desirable to make such loans during any period of time, no loans shall be made during such period. Subject to the limitations set forth in this Section and to such uniform and nondiscriminatory rules as may from time to time be adopted by the Administrative Committee and set forth in a written policy statement which hereby is incorporated by reference, the Trustee, upon proper application by an eligible Participant, Beneficiary or alternate payee on forms approved by the Administrative Committee, may make a loan or loans to the borrower. (b) Nondiscriminatory Policy. Loans shall be available to all Participants, Beneficiaries and alternate payees who are parties-in-interest as defined in ERISA Section 3(14) on a reasonably equivalent basis, without regard to an individual's race, color, religion, age, sex or national origin. Loans shall not be made available to borrowers who are Highly Compensated Employees in an amount greater than the amount available to other borrowers; provided, this limitation shall be interpreted to mean that, subject to the other limitations in this Section, the same percentage of each borrower's vested Account balance may be loaned to each such borrower regardless of the actual amount of his vested Account balance. (c) Minimum Loan Amount. The minimum amount of any loan shall be $1,000 or such lesser amount established by the Administrative Committee in the written loan policy statement. (d) Maximum Loan Amount. Unless the Administrative Committee, in its sole discretion in the written loan policy statement, permits fewer or additional loans, no borrower may have more than two loans outstanding at any time not more than one of which may 43 be a residential purchase loan described in subsection (e)(2) below. In addition, no loan may be made to any borrower from the Plan if the amount of such loan exceeds the lesser of: (1) $50,000 minus the highest aggregate principal balance, outstanding during the year ending on the day before such loan is made, of all loans made to the borrower by the qualified retirement plans maintained by the Affiliates; or (2) 50 percent of the borrower's total Vested Account as of the date the loan is made, minus the amount of the borrowers Vested Account already used as security for an outstanding loan. (e) Maximum Loan Term. (1) Except as provided in paragraph (e)(2) hereof, the terms of any loan made to a borrower from the Plan shall require that the full amount of the loan be repaid within the 5-year period (or such other shorter maximum term as the Administrative Committee may establish in its written loan policy statement) commencing on the date the loan is made, and in no event shall the repayment period of the loan subsequently be extended beyond such 5-year period. The Trustee shall make a diligent effort to collect the full amount of the loan within this specified repayment period and shall inform the borrower that, in the event the loan is not fully repaid within the 5-year period, the borrower will be treated as having received a taxable distribution from the Plan. (2) The 5-year repayment rule set forth in paragraph (e)(1) hereof shall not apply to the extent that a loan to a borrower from the Plan is used to acquire any dwelling unit which is used, or within a reasonable time is to be used, as a principal residence of the borrower. Whether a dwelling unit is to be used within a reasonable time as a principal residence is to be determined by the Administrative Committee at the time the loan is made, and the Administrative Committee may require such written statements and other evidence from the borrower as it deems necessary to make this determination. Loans made with respect to principal residences pursuant to this subsection shall be repaid within a 5-year period (or such shorter maximum time as the Administrative Committee may establish in its written loan policy statement). (f) Terms of Repayment. All loans to borrowers made by the Trustee shall be subject to a definite repayment schedule which requires substantially level amortization over the term of the loan with payments to be made not less frequently than quarterly (and more frequently if required by the Administrative Committee's written loan policy statement). Unless the Administrative Committee provides for different methods in its written loan policy statement, payments shall be made by Participants who are employees of Affiliates on a payroll deduction basis, and payments from other borrowers shall be made by cash, check or other cash equivalent. (g) Adequacy of Security. All loans to borrowers made by the Trustee shall be secured by the pledge of a dollar amount of the borrower's Account balance (i) which is not 44 less than the principal amount of the loan plus an additional amount, if any, which the Administrative Committee, pursuant to its written loan policy statement, deems desirable to secure payment of interest accruing on the loan, and (ii) which in no event (when aggregated for all outstanding loans) is greater than 50 percent of the borrower's vested Account balance immediately after the origination of the loan. Notwithstanding anything herein to the contrary, the pledge of such security shall be made in such manner and amount as the Administrative Committee, pursuant to its written loan policy statement, may require for the loan to be considered adequately secured. A loan will be considered to be "adequately secured" if the security posted for such loan is in addition to and supporting a promise to pay, if it is pledged in a manner such that it may be sold, foreclosed upon, or otherwise disposed of upon default of repayment of the loan, and if the value and liquidity of that security is such that it may reasonably be anticipated that loss of principal or interest will not result from the loan. The adequacy of such security will be determined in light of the type and amount of security which would be required in the case of an otherwise identical transaction in a normal commercial setting between unrelated parties on arm's-length terms. (h) Rate of Interest. A loan from the Plan to a borrower must bear a reasonable rate of interest. A loan will be considered to bear "a reasonable rate of interest" if such loan provides the Plan with a return commensurate with interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances. In general, the Administrative Committee's decision as to the rate of interest for any Plan loan shall be based primarily on the rate of interest that one or more local banks or other lending institutions would charge on a similar loan, taking into account, among other things, the collateral pledged to secure the loan. (i) Source of Loan Amounts. If the assets of an Account are invested in more than one Investment Fund and/or type of Account, the loan proceeds shall be charged against each Investment Fund and/or type of Account in the manner prescribed in the written loan policy statement. (j) Crediting Loan Payments to Accounts. The loan shall be considered a directed investment of the borrower and any principal and interest paid on the loan shall be considered a part of his total Account. Each payment of principal and interest shall be credited to each Investment Fund and Account in the manner prescribed in the written loan policy statement. (k) Remedies in the Event of Default. If any loan payments are not paid as and when due, the Administrative Committee may declare the loan to be in default. The Administrative Committee may take such actions, as it deems appropriate in accordance with its written loan policy statement, to allow the borrower to cure such default or to otherwise collect such overdue payments or, as the case may be, the outstanding balance of the loan. Among other things, the Administrative Committee's actions may include causing all or any portion of the borrower's Account which has been pledged to secure the loan to be used to repay such loan; provided, although the Administrative Committee may treat any portion of the loan balance that remains outstanding after a default as taxable income to the borrower, no portion of such 45 outstanding loan balance may be treated as a reduction of a Participant's Account balance until such time as such reduction, if treated as a distribution, will not breach the special distribution restrictions of Code Section 1165(e)(2)(B). 46 ARTICLE XI ADMINISTRATION 11.1 Administrative Committee; Appointment and Term of Office. (a) Appointment. The Administrative Committee shall consist of not less than one member who shall be appointed by and serve at the pleasure of the Board. (b) Removal; Resignation. The Board shall have the right to remove any member of the Administrative Committee at any time. A member may resign at any time by written resignation to the Board. If a vacancy in the Administrative Committee should occur, a successor may be appointed by the Board. (c) Certification. A written certification shall be given to the Trustee by the Board of all members of the Administrative Committee together with a specimen signature of each member. For all purposes hereunder, the Trustee shall be conclusively entitled to rely upon such certification until the Trustee is otherwise notified in writing. 11.2 Organization of Administrative Committee. The Administrative Committee may elect a Chairman and a Secretary from among its members. In addition to those powers set forth elsewhere in the Plan, the Administrative Committee may appoint such agents, who need not be members of such Administrative Committee, as it may deem necessary for the effective performance of its duties and may delegate to such agents such powers and duties, whether ministerial or discretionary, as the Administrative Committee may deem expedient or appropriate. The compensation of such agents who are not full-time Employees of a Participating Company shall be fixed by the Administrative Committee and shall be paid by the Controlling Company (to be divided equitably among the Participating Companies) or from the Trust Fund as determined by the Administrative Committee. The Administrative Committee shall act by majority vote. Its members shall serve as such without compensation. 11.3 Powers and Responsibility. The Administrative Committee shall fulfill the duties of "administrator" as set forth in Section 3(16) of ERISA and shall have complete control of the administration of the Plan hereunder, with all powers necessary to enable it properly to carry out its duties as set forth in the Plan and the Trust Agreement. The Administrative Committee shall have the following duties and responsibilities: (a) to construe the Plan and to determine all questions that shall arise thereunder; (b) to have all powers elsewhere herein conferred upon it; 47 (c) to decide all questions relating to the eligibility of Employees to participate in the benefits of the Plan; (d) to determine the benefits of the Plan to which any Participant or Beneficiary may be entitled; (e) to maintain and retain records relating to P articipants and Beneficiaries; (f) to prepare and furnish to Participants all information required under Puerto Rico law or provisions of the Plan to be furnished to them; (g) to prepare and furnish to the Trustee sufficient employee data and the amount of Contributions received from all sources so that the Trustee may maintain separate accounts for Participants and Beneficiaries and make required payments of benefits; (h) to prepare and file or publish with the Secretary of Labor, the Secretary of the Treasury, their delegates and all other appropriate government officials all reports and other information required under law to be so filed or published; (i) to provide directions to the Trustee with respect to methods of benefit payment, and all other matters where called for in the Plan or requested by the Trustee; (j) to engage assistants and professional advisers; (k) to arrange for fiduciary bonding; (l) to provide procedures for determination of claims for benefits; and (m) to designate, from time to time, the Trustee. all as further set forth herein. 11.4 Records of Administrative Committee. (a) Notices and Directions. Any notice, direction, order, request, certification or instruction of the Administrative Committee to the Trustee shall be in writing and shall be signed by a member of the Administrative Committee. The Trustee and every other person shall be entitled to rely conclusively upon any and all such proper notices, directions, orders, requests, certifications and instructions received from the Administrative Committee and reasonably believed to be properly executed, and shall act and be fully protected in acting in accordance with any such directions that are proper. (b) Records. All acts and determinations of the Administrative Committee shall be duly recorded by its Secretary or under his supervision, and all such records (including records necessary to demonstrate compliance with the nondiscrimination requirements of the 48 Code), together with such other documents as may be necessary for the administration of the Plan, shall be preserved in the custody of such Secretary. 11.5 Reporting and Disclosure. The Administrative Committee shall keep all individual and group records relating to Participants and Beneficiaries and all other records necessary for the proper operation of the Plan. Such records shall be made available to the Participating Companies and to each Participant and Beneficiary for examination during normal business hours except that a Participant or Beneficiary shall examine only such records as pertain exclusively to the examining Participant or Beneficiary and the Plan and Trust Agreement. The Administrative Committee shall prepare and shall file as required by law or regulation all reports, forms, documents and other items required by ERISA, the Code and every other relevant statute, each as amended, and all regulations thereunder. This provision shall not be construed as imposing upon the Administrative Committee the responsibility or authority for the preparation, preservation, publication or filing of any document required to be prepared, preserved or filed by the Trustee or by any other Named Fiduciary to whom such responsibilities are delegated by law or by the Plan. 11.6 Construction of the Plan. The Administrative Committee shall take such steps as are considered necessary and appropriate to remedy any inequity that results from incorrect information received or communicated in good faith or as the consequence of an administrative error. The Administrative Committee, in its sole and full discretion, shall interpret the Plan and shall determine the questions arising in the administration, interpretation and application of the Plan. The Administrative Committee shall endeavor to act, whether by general rules or by particular decisions, so as not to discriminate in favor of or against any person and so as to treat all persons in similar circumstances uniformly. The Administrative Committee shall correct any defect, reconcile any inconsistency or supply any omission with respect to the Plan. 11.7 Assistants and Advisors. (a) Engaging Advisors. The Administrative Committee shall have the right to hire, at the expense of the Controlling Company (to be divided equitably among the Participating Companies), such professional assistants and consultants as it, in its sole discretion, deems necessary or advisable. To the extent that the costs for such assistants and advisors are not so paid by the Controlling Company, they shall be paid at the direction of the Administrative Committee from the Trust Fund as an expense of the Trust Fund. (b) Reliance on Advisors. The Administrative Committee and the Participating Companies shall be entitled to rely upon all certificates and reports made by an accountant, attorney or other professional adviser selected pursuant to this Section; the Administrative Committee, the Participating Companies, and the Trustee shall be fully protected in respect to any action taken or suffered by them in good faith in reliance upon the advice or 49 opinion of any such accountant, attorney or other professional adviser; and any action so taken or suffered shall be conclusive upon each of them and upon all other persons interested in the Plan. 11.8 Investment Committee. (a) Funding Policy. The Investment Committee is the Named Fiduciary to act on behalf of the Controlling Company to establish and carry out a funding policy consistent with the Plan objectives and with the requirements of any applicable law. Such policy shall be in writing and shall have due regard for the liquidity needs of the Trust. Such funding policy shall also state the general investment objectives of the Trust and the philosophy upon which maintenance of the Plan is based. (b) Appointment. The Board shall determine the membership of the Investment Committee, and the members shall serve at the pleasure of the Board or until their resignation. (c) Duties. The Investment Committee also shall carry out the Controlling Company's responsibility and authority: (1) To appoint one or more persons to serve as investment manager with respect to all or part of the Plan assets, including assets maintained under separate accounts of an insurance company; (2) To allocate the responsibility and authority being carried out by the Investment Committee among the members of the Committee; (3) To take any action appropriate to ensure that the Plan assets are invested for the exclusive purpose of providing benefits to Participants and their Beneficiaries in accordance with the Plan and defraying reasonable expenses of administering the Plan, subject to the requirements of any applicable law; and (4) To employ one or more persons to render advice with respect to any responsibility or authority being carried out by the Investment Committee. To the extent that the costs for such assistants and advisors are not paid by the Controlling Company, they shall be paid at the direction of the Investment Committee from the Trust Fund as an expense of the Trust Fund. 11.9 Direction of Trustee. The Investment Committee shall have the power to provide the Trustee with general investment policy guidelines and directions to assist the Trustee respecting investments made in compliance with, and pursuant to, the terms of the Plan. 50 11.10 Bonding. The Administrative Committee shall arrange for fiduciary bonding as is required by law, but no bonding in excess of the amount required by law shall be required by the Plan. 11.11 Indemnification. Each of the Administrative Committee and the Investment Committee and each member of those Committees shall be indemnified by the Participating Companies against judgment amounts, settlement amounts (other than amounts paid in settlement to which the Participating Companies do not consent) and expenses, reasonably incurred by the Committee or him in connection with any action to which the Committee or he may be a party (by reason of his service as a member of a Committee) except in relation to matters as to which the Committee or he shall be adjudged in such action to be personally guilty of gross negligence or willful misconduct in the performance of its or his duties. The foregoing right to indemnification shall be in addition to such other rights as such Committee or each Committee member may enjoy as a matter of law or by reason of insurance coverage of any kind. Rights granted hereunder shall be in addition to and not in lieu of any rights to indemnification to which such Committee or each Committee member may be entitled pursuant to the by-laws of the Controlling Company. Service on the Administrative or Investment Committee shall be deemed in partial fulfillment of a Committee member's function as an Employee, officer and/or director of the Controlling Company or any Participating Company, if he serves in such other capacity as well. 51 ARTICLE XII ALLOCATION OF AUTHORITY AND RESPONSIBILITIES 12.1 Controlling Company and Board. (a) General Responsibilities. The Controlling Company, as Plan sponsor, and the Board each shall serve as a Named Fiduciary having the following (and only the following) authority and responsibilities: (1) To appoint the Administrative Committee, the Investment Committee and the Trustee, and to monitor each of their performances; (2) To communicate such information to the Administrative Committee, the Investment Committee and the Trustee as each needs for the proper performance of its duties; and (3) To provide channels and mechanisms through which the Administrative Committee can communicate with Participants and Beneficiaries. In addition, the Controlling Company shall perform such duties as are imposed by law or by regulation and shall serve as Plan Administrator in the absence of an appointed Administrative Committee. (b) Allocation of Authority. In the event any of the areas of authority and responsibilities of the Controlling Company and the Board overlap with that of any other Plan fiduciary, the Controlling Company and the Board shall coordinate with such other fiduciaries the execution of such authority and responsibilities; provided, the decision of the Controlling Company and the Board with respect to such authority and responsibilities ultimately shall be controlling. (c) Authority of Participating Companies. Notwithstanding anything herein to the contrary, and in addition to the authority and responsibilities specifically given to the Participating Companies in the Plan, the Controlling Company, in its sole discretion, may grant the Participating Companies such authority and charge them with such responsibilities as the Controlling Company deems appropriate. 12.2 Administrative Committee. The Administrative Committee shall have the authority and responsibilities imposed by Article XI. With respect to said authority and responsibilities, the Administrative Committee shall be a Named Fiduciary, and as such, shall have no authority or responsibilities other than as granted in the Plan or as imposed as a matter of law. 52 12.3 Investment Committee. The Investment Committee, if any is appointed, shall be a Named Fiduciary with respect to its authority and responsibilities, as imposed by Article XI. The Investment Committee shall have no authority or responsibilities other than those granted in the Plan and the Trust. 12.4 Trustee. The Trustee shall be a Named Fiduciary with respect to investment of Trust Fund assets and shall have the powers and duties set forth in the Trust Agreement. 12.5 Limitations on Obligations of Fiduciaries. No fiduciary shall have authority or responsibility to deal with matters other than as delegated to it under the Plan, under the Trust Agreement or by operation of law. A fiduciary shall not in any event be liable for breach of fiduciary responsibility or obligation by another fiduciary (including Named Fiduciaries) if the responsibility or authority for the act or omission deemed to be a breach was not within the scope of such fiduciary's authority or delegated responsibility. 12.6 Delegation. Named Fiduciaries shall have the power to delegate specific fiduciary responsibilities (other than Trustee responsibilities). Such delegations may be to officers or Employees of a Participating Company or to other persons, all of whom shall serve at the pleasure of the Named Fiduciary making such delegation and, if full-time Employees of a Participating Company, without compensation. Any such person may resign by delivering a written resignation to the delegating Named Fiduciary. Vacancies created by any reason may be filled by the appropriate Named Fiduciary or the assigned responsibilities may be reabsorbed or redelegated by the Named Fiduciary. 12.7 Multiple Fiduciary Roles. Any person may hold more than one position of fiduciary responsibility and shall be liable for each such responsibility separately. 53 ARTICLE XIII AMENDMENT, TERMINATION AND ADOPTION 13.1 Amendment. The provisions of the Plan may be amended at any time and from time to time by the Administrative Committee; provided: (a) No amendment shall increase the duties or liabilities of the Trustee without the consent of such party; (b) No amendment shall decrease the balance or vested percentage of an Account or eliminate an optional form of benefit; (c) No amendment shall be made which would divert any of the assets of the Trust Fund to any purpose other than the exclusive benefit of Participants and Beneficiaries, except that the Plan and Trust Agreement may be amended retroactively and to affect the Accounts of Participants and Beneficiaries if necessary to cause the Plan and Trust to be qualified and exempt from taxation under the Code; (d) No amendment shall be made which constitutes a restatement of the Plan that significantly changes the Plan design without approval of the Board; (e) No amendment shall affect any changes in the contribution formula without approval of the Board; and (f) Each amendment shall be approved by the Administrative Committee by resolution. 13.2 Termination. (a) Right to Terminate. The Controlling Company expects the Plan to be continued indefinitely, but it reserves the right to terminate the Plan or to completely discontinue Contributions to the Plan at any time by action of the Board. In either event, the Administrative Committee, Investment Committee, each Participating Company and the Trustee shall be promptly advised of such decision in writing. [For termination of the Plan by a Participating Company as to itself (rather than the termination of the entire Plan) refer to Section 13.3(e).] (b) Vesting Upon Complete Termination. If the Plan is terminated by the Controlling Company or Contributions to the Plan are completely discontinued, the Accounts of all Participants, Beneficiaries or other successors in interest as of such date shall become 100 percent vested and nonforfeitable. Upon termination of the Plan, the Administrative Committee, in its sole discretion, shall instruct the Trustee either (i) to continue to manage and administer the assets of the Trust for the benefit of the Participants and their Beneficiaries pursuant to the terms and provisions of the Trust Agreement, or (ii) if there is no successor plan permitted under the 54 terms of Section 9.1(c) or no benefits subject to the restrictions in said Section, to pay over to each Participant the value of his interest in a single sum and to thereupon dissolve the Trust. (c) Dissolution of Trust. In the event that the Administrative Committee decides to dissolve the Trust, as soon as practicable following the termination of the Plan or the Administrative Committee's decision, whichever is later, the assets under the Plan shall be converted to cash or other distributable assets, to the extent necessary to effect a complete distribution of the Trust assets as described hereinbelow. Following completion of the conversion, on a date selected by the Administrative Committee, each individual with an Account under the Plan on such date shall receive a distribution of the total amount then credited to his Account; provided, if the Participating Companies maintain any defined Contribution plan other than the Plan, and if the balance of a Participant's Account is greater than $5,000 and such Participant does not consent to a lump sum distribution, the Administrative Committee shall direct that the Participant's Account be distributed by the purchase and distribution of a nonparticipating annuity with distribution terms comparable to those in the applicable provisions in Article IX. The amount of cash and other property distributable to each such individual shall be determined as of the date of distribution (treating, for this purpose, such distribution date as the Valuation Date coinciding with or immediately preceding the date as of which the distributable amount is determined). In the case of a termination distribution as provided herein, the Administrative Committee may direct the Trustee to take any action provided in Article IX dealing with unclaimed benefits, except that it shall not be necessary to hold funds for any period of time stated in such Section. Within the expense limitations set forth in the Plan, the Administrative Committee may direct the Trustee to use assets of the Trust Fund to pay any due and accrued expenses and liabilities of the Trust and any expenses involved in termination of the Plan (other than expenses incurred for the benefit of the Participating Companies). (d) Vesting Upon Partial Termination. In the event of a partial termination of the Plan [as defined in ERISA Section 4043(c)(4)], the Accounts of those Participants and Beneficiaries affected shall become 100 percent vested and nonforfeitable and, unless transferred to another qualified plan, shall be distributed in a manner and at a time consistent with the terms of Article IX. 13.3 Adoption of the Plan by a Participating Company. (a) Procedures for Participation. As of the Effective Date, the Controlling Company and the other Affiliates listed on Schedule A hereto shall be Participating Companies in the Plan. Any other company may become a Participating Company and commence participation in the Plan subject to the provisions of this subsection. In order for a company to become a Participating Company, the Administrative Committee must designate such company as a Participating Company and specify the effective date of such designation. The name of any company which shall commence participation in the Plan, along with the effective date of its participation, shall be recorded on Schedule A hereto which shall be appropriately modified each time a Participating Company is added or deleted. To adopt the Plan as a Participating Company, the board of directors of the company must approve a resolution expressly adopting the Plan for 55 the benefit of its eligible employees and accepting designation as a Participating Company, subject to all of the provisions of this Plan and of the Trust. The resolution shall specify the date as of which the designation as a Participating Company shall be effective. A copy of the resolution (certified if requested) of the board of directors of the adopting Participating Company shall be provided to the Administrative Committee. Upon adoption of the Plan by a Participating Company as herein provided, the Employees of such company shall be eligible to participate in the Plan subject to the terms hereof and of the resolution of the Administrative Committee designating the adopting company as such. (b) Single Plan. The Plan, as adopted by all Participating Companies, shall be considered a single plan. All assets contributed to the Plan by the Participating Companies shall be held together in a single fund and shall be available to pay benefits to all Participants and Beneficiaries. Nothing contained herein shall be construed to prohibit the separate accounting of assets contributed by the Participating Companies for purposes of cost allocation, contributions, forfeitures and other purposes, pursuant to the terms of the Plan and as directed by the Administrative Committee. (c) Authority under Plan. As long as a Participating Company's designation as such remains in effect, such Participating Company shall be bound by, and subject to, all provisions of the Plan and the Trust. The exclusive authority to amend the Plan and the Trust shall be vested in the Administrative Committee, and no other Participating Company shall have any right to amend the Plan or the Trust. Any amendment to the Plan or the Trust adopted by the Administrative Committee shall be binding upon every Participating Company without further action by such Participating Company. (d) Contributions to Plan. A Participating Company shall be required to make Contributions to the Plan at such times and in such amounts as specified in Articles III and VI. The Contributions made (or to be made) to the Plan by the Participating Companies shall be allocated between and among such companies in whatever equitable manner or amounts as the Administrative Committee shall determine. (e) Withdrawal from Plan. The Administrative Committee may terminate the designation of a Participating Company, effective as of any date. A company's status as a Participating Company automatically shall cease as of the date it ceases to be an Affiliate with the Controlling Company. A Participating Company may withdraw from participation in the Plan, with the approval of the Administrative Committee, by action of its board of directors, provided such action is communicated in writing to the Administrative Committee. The withdrawal of a Participating Company shall be effective as of the last day of the Plan Year in which the notice of withdrawal is received by the Administrative Committee (unless the Controlling Company or Administrative Committee consents to a different effective date). Any such Participating Company which ceases to be a Participating Company shall be liable for all costs and liabilities (whether imposed under the terms of the Plan, the Code or ERISA) accrued through the effective date of its withdrawal or termination. The withdrawing or terminating Participating Company shall have no right to direct that assets of the Plan be transferred to a 56 successor plan for its employees unless such transfer is approved by the Controlling Company or Administrative Committee in its sole discretion. 13.4 Merger, Consolidation and Transfer of Assets or Liabilities. In the event of any merger or consolidation of the Plan with, or transfer of assets or liabilities of the Plan to, any other plan, each Participant and Beneficiary shall have a plan benefit in the surviving or transferee plan (determined as if such plan were then terminated immediately after such merger, consolidation or transfer of assets or liabilities) that is equal to or greater than the benefit he would have been entitled to receive under the Plan immediately before such merger, consolidation or transfer of assets or liabilities, if the Plan had terminated at that time. 57 ARTICLE XIV MISCELLANEOUS 14.1 Nonalienation of Benefits and Spendthrift Clause. (a) General Nonalienation Requirements. Except to the extent permitted by law and as provided in subsections (b) and (c) hereof, none of the Accounts, benefits, payments, proceeds or distributions under the Plan shall be subject to the claim of any creditor of a Participant or Beneficiary or to any legal process by any creditor of such Participant or of such Beneficiary; and neither such Participant nor any such Beneficiary shall have any right to alienate, commute, anticipate or assign any of the Accounts, benefits, payments, proceeds or distributions under the Plan except to the extent expressly provided herein. (b) Exception for Qualified Domestic Relations Orders. (1) The nonalienation requirements of subsection (a) hereof shall apply to the creation, assignment or recognition of a right to any benefit, payable with respect to a Participant pursuant to a domestic relations order, unless such order is (i) determined to be a qualified domestic relations order, as defined in ERISA Section 206(d)(3), entered on or after January 1, 1985, or (ii) any domestic relations order, as defined in ERISA Section 206(d)(3), entered before January 1, 1985, pursuant to which a transferor plan was paying benefits on January 1, 1985. The Administrative Committee shall establish reasonable written procedures to determine the qualified status of a domestic relations order. Further, to the extent provided under a qualified domestic relations order, a former spouse of a Participant shall be treated as the Spouse or Surviving Spouse for all purposes under the Plan. (2) The Administrative Committee shall establish reasonable procedures to administer distributions under qualified domestic relations orders which are submitted to it. The Administrative Committee, to the extent provided in a qualified domestic relations order, shall direct the Trustee to pay, in a single sum payment, the full amount of the benefit payable to any alternate payee under a qualified domestic relations order. Such cash-out payment shall be made as soon as practicable after the end of the month within which the Administrative Committee determines that a domestic relations order is a qualified domestic relations order, or if later, when the terms of the qualified domestic relations order permit such a distribution. (See also Section 9.5.) If the terms of a qualified domestic relations order do not permit an immediate cash-out payment, the benefits shall be paid to the alternate payee in accordance with the terms of such order and the applicable terms of the Plan. (c) Exception for Loans from the Plan. All loans made by the Trustee to any Participant or Beneficiary shall be secured by a pledge of the borrower's interest in the Plan. 58 14.2 Exclusive Benefit; Refund of Contributions. No part of the Trust Fund shall be used for or diverted to purposes other than the exclusive benefit of the Participants and their Beneficiaries, subject, however, to the payment of all costs of maintaining and administering the Plan and Trust. Notwithstanding the foregoing, Contributions to the Trust by a Participating Company may be refunded to the Participating Company under the following circumstances and subject to the following limitations: (a) Permitted Refunds. If and to the extent permitted by the Code and other applicable laws and regulations thereunder, upon the Participating Company's request, a Contribution which is (i) made by a mistake in fact, or (ii) conditioned upon the deductibility of the Contribution under Code Section 1023, shall be returned to the Participating Company making the Contribution within 1 year after the payment of the Contribution or the disallowance of the deduction (to the extent disallowed), whichever is applicable. (b) Payment of Refund. If any refund is paid to a Participating Company hereunder, such refund shall be made without interest or other investment gains, shall be reduced by any investment losses attributable to the refundable amount and shall be apportioned among the Accounts of the Participants as an investment loss, except to the extent that the amount of the refund can be attributed to one or more specific Participants (for example, as in the case of certain mistakes of fact), in which case the amount of the refund attributable to each such Participant's Account shall be debited directly against such Account. (c) Limitation on Refund. No refund shall be made to a Participating Company if such refund would cause the balance in a Participant's Account to be less than the balance would have been had the refunded contribution not been made. 14.3 Plan Expenses. As permitted under the Code and ERISA, expenses incurred with respect to administering the Plan and Trust shall be paid by the Trustee from the Trust Fund to the extent such costs are not paid by the Participating Companies or to the extent the Controlling Company requests that the Trustee reimburse it for its payment of such expenses. The Administrative Committee may provide for any expenses specifically attributable to transactions involving an Account to be charged against such Account; provided, such expenses may not reduce a Participant's Account to an amount less than the Account balance as of the date the Administrative Committee decides to charge such expenses against such Account. 14.4 No Contract of Employment. Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Participant, Employee or any person whomsoever the right to be retained in the service of any Affiliate, and all Participants and other Employees shall remain subject to 59 discharge to the same extent as if the Plan had never been adopted. 14.5 Legally Incompetent. The Administrative Committee may in its discretion direct that payment be made and the Trustee shall make payment on such direction, directly to an incompetent or disabled person, whether incompetent or disabled because of minority or mental or physical disability, or to the guardian of such person or to the person having legal custody of such person, without further liability with respect to or in the amount of such payment either on the part of any Participating Company, the Administrative Committee or the Trustee. 14.6 Heirs, Assigns and Personal Representatives. The Plan shall be binding upon the heirs, executors, administrators, successors and assigns of the parties, including each Participant and Beneficiary, present and future. 14.7 Title to Assets, Benefits Supported Only By Trust Fund. No Participant or Beneficiary shall have any right to, or interest in, any assets of the Trust Fund upon termination of his employment or otherwise, except as provided from time to time under the Plan, and then only to the extent of the benefits payable under the Plan to such Participant out of the assets of the Trust Fund. Any person having any claim under the Plan shall look solely to the assets of the Trust Fund for satisfaction. The foregoing sentence notwithstanding, each Participating Company shall indemnify and save any of its officers, members of its board of directors or agents, and each of them, harmless from any and all claims, loss, damages, expense and liability arising from their responsibilities in connection with the Plan and from acts, omissions and conduct in their official capacity, except to the extent that such effects and consequences shall result from their own willful misconduct or gross negligence. 14.8 Legal Action. In any action or proceeding involving the assets held with respect to the Plan or Trust Fund or the administration thereof, the Participating Companies, the Administrative Committee and the Trustee shall be the only necessary parties and no Participants, Employees, or former Employees of the Company, their Beneficiaries or any other person having or claiming to have an interest in the Plan shall be entitled to any notice of process; provided, that such notice as is required by the Puerto Rico Treasury Department and the United States Department of Labor to be given in connection with Plan amendments, termination, curtailment or other activity shall be given in the manner and form and at the time so required. Any final judgment which is not appealed or appealable that may be entered in any such action or proceeding shall be binding and conclusive on the parties hereto, the Administrative Committee and all persons having or claiming to have an interest in the Plan. 60 14.9 No Discrimination. The Controlling Company, through the Administrative Committee, shall administer the Plan in a uniform and consistent manner with respect to all Participants and Beneficiaries and shall not permit discrimination in favor of officers, stockholders, supervisory or highly compensated Employees. 14.10 Headings. The headings and subheadings in the Plan have been inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. 14.11 Construction, Controlling Law. In the construction of the Plan, the masculine shall include the feminine and the feminine the masculine, and the singular shall include the plural and the plural the singular, in all cases where such meanings would be appropriate. Unless otherwise specified, any reference to a section shall be interpreted as a reference to a section of the Plan. The Plan shall be construed in accordance with the laws of the Commonwealth of Puerto Rico and applicable laws of the United States. 14.12 Severability. If any provisions of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included. 61 IN WITNESS WHEREOF, the Controlling Company has caused the Plan to be executed by its duly authorized officer, as of the date first above written. HOME DEPOT PUERTO RICO, INC. By: /s/ L.A. Smith ------------------------------------- Title: Vice President and Secretary ---------------------------------- 62 THE HOME DEPOT FUTUREBUILDER SCHEDULE A PARTICIPATING COMPANIES AND EFFECTIVE DATES [see Plan Section 1.47 and Section 13.3] Name Effective Date The Home Depot, Inc. June 15, 1998 A-1 THE HOME DEPOT FUTUREBUILDER SCHEDULE B SERVICE WITH PREDECESSOR EMPLOYERS B-1 FIRST AMENDMENT TO THE HOME DEPOT FUTUREBUILDER FOR PUERTO RICO THIS FIRST AMENDMENT to The Home Depot FutureBuilder for Puerto Rico (the "Plan") is made this 30 day of MARCH, 2000, by Home Depot Puerto Rico, Inc. (the "Company"). WITNESSETH: WHEREAS, the Company maintains the Plan for the benefit of its eligible employees; and WHEREAS, the Company desires to amend the Plan as provided herein; NOW, THEREFORE, the Plan is amended as follows: 1. Section 1.43 is amended in its entirety effective June 15, 1998, to read as follows: 1.43 Maximum Deferral Amount means the lesser of (i) $8,000, as adjusted from time to time in accordance with Code ss.1165(e)(7), or (ii) 10 percent of a Participant's Compensation for the Plan Year. 2. A new Section 1.48A is added effective June 15, 1998, as follows: 1.48A Plan Year means the calendar year. 3. Section 3.2 is amended effective November 1, 1998, to read as follows: 3.2 Matching Contributions. For each Active Participant on whose behalf a Participating Company has made any Before-Tax Contributions, such Participating Company shall make, with respect to such payroll period or other payment of Compensation, a Matching Contribution to the Plan, equal to: (a) 150 percent of the amount of such Before-Tax Contributions to the extent such Before-Tax Contributions do not exceed 1 percent of a Participant's Compensation for a payroll period (that is, such Matching Contributions shall not exceed 1.5 percent of the Active Participant's Compensation for such payroll period); and (b) 50 percent of the amount of such Before-Tax Contributions to the extent such Before-Tax Contributions exceed 1 percent but do not exceed 5 percent of a Participant's Compensation for such payroll period; (that is, the aggregate Matching Contributions made under subsection (a) and this subsection (b) shall not exceed 3.5 percent of the Active Participant's Compensation for such payroll period). Moreover, the total amount of such Matching Contributions shall not exceed (or cause the Contributions to exceed) any of the maximum limitations described in ss.6.1. The Board, in its sole discretion, may change the contribution amounts set forth hereinabove. 4. Section 6.2(b) is amended effective June 15, 1998, to read as follows: Return of Excess Before-Tax Contributions. If the aggregate amount of a Participant's Before-Tax Contributions made for any calendar year by itself exceeds the Maximum Deferral Amount, the Participant shall be deemed to have notified the Administrative Committee of such excess, and the Administrative Committee shall cause the Trustee to distribute to such Participant the total of (i) the amount by which such Before-Tax Contributions exceed the Maximum Deferral Amount, plus (ii) any earnings allocable thereto (including, in the Administrative Committee's discretion, any gap income). In addition, Matching Contributions made on behalf of the Participant which are attributable to the distributed Before-Tax Contributions shall be forfeited. 5. The first two sentences of Section 7.3(a) are amended effective June 15, 1998, to read as follows: Investment of Contributions Except as otherwise provided in this Section, each Participant may elect the percentage or amount of his future Contributions (other than ESOP Contributions) that will be invested in each Investment Fund. An initial election of a Participant shall be made as of the Entry Date coinciding with or immediately following the date the Participant commences or recommences participation in the Plan and shall apply to all such specified Contributions credited to such Participant's Account after such Entry Date. 6. Section 9.7 is amended in its entirety to read as follows: 9.7 Unclaimed Benefits In the event a Participant or Beneficiary becomes entitled to a distribution from the Plan and the Administrative Committee is unable to locate the Participant or Beneficiary after such diligent efforts as the Administrative Committee in its sole discretion deems appropriate, then the full Account of the Participant or Beneficiary shall be deemed abandoned and treated as a Forfeiture; provided, in the event such Participant or Beneficiary is located or makes a claim subsequent to the 2 allocation of the abandoned Account, the amount of the abandoned Account (unadjusted for any investment gains or losses from the time of abandonment) shall be restored (from abandoned Accounts, Forfeitures, Trust earnings or Contributions made by the Participating Companies) to such Participant or Beneficiary. 7. Effective as of April 1, 1999, the heading to Article X is amended to read as follows: IN-SERVICE WITHDRAWALS AND LOANS 8. Effective as of January 1, 2000, Section 10.1(b) of the Plan is amended to read as follows: (b) Immediate and Heavy Financial Need. For purposes of the Plan, an immediate and heavy financial need exists if the withdrawal is on account of: (i) expenses for medical care described in Code ss. 1023(aa)(2)(P) previously incurred by the Participant, his Spouse or dependents, or necessary to obtain such medical care for such persons; (ii) the purchase (excluding mortgage payments) of a principal residence for the Participant; (iii) the payment of tuition, room, board and related educational fees for the next 12 months of post-secondary education for the Participant, his Spouse or dependents; (iv) the need to prevent eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; (v) the payment of funeral expenses for a member of the Participant's immediate family (that is, his parent, step-parent, father-in-law or mother-in-law, grandparent, brother or sister, half-brother or half-sister, step-brother or step-sister, Spouse, child, step-child or grandchild); (vi) the payment of federal income taxes with respect to the Participant's individual income tax returns for the two most recently ended tax years (including penalties and interest); (vii) the payment of uninsured costs for repairs to a Participant's principal residence for damages caused by a natural disaster or accident; (viii) the payment of legal fees and expenses incurred as a direct result of the adoption of a child by the Participant; or 3 (ix) any other event deemed an immediate and heavy financial need by the Secretary of the Puerto Rico Treasury Department. 9. Effective as of April 1, 1999, a new Section 10.3 is added to read as follows: 10.3 Age 65 Withdrawals (a) Conditions. Beginning with the Plan Year in which a Participant attains age 65, a Participant who is an Employee of an Affiliate may request a withdrawal of all or part of his Account. A Participant may request two such withdrawals in any 12-consecutive month period. (b) Source of Funds. The amount of such withdrawal shall be charged first against his Rollover Account, then against his Matching Account, then against his ESOP Account, and then against his Before-Tax Account, and shall be charged pro-rata against the Investment Funds in which such Accounts are invested. (c) Method. A withdrawal described in this Section 10.3 shall be paid in the form of a single sum distribution which shall, except as otherwise provided herein, be paid in cash. To the extent that a portion of a Participant's Account that is to be withdrawn is invested in Company Stock, such withdrawal shall be made in the form of Company Stock or cash, at the election of the Participant. IN WITNESS WHEREOF, this First Amendment has been executed by the duly authorized officer of the Company as of the date first written above. HOME DEPOT PUERTO RICO, INC. By: /s/ L.A. Smith ------------------------------------------ Title: Sr. Vice President and General Counsel --------------------------------------- 4 SECOND AMENDMENT TO THE HOME DEPOT FUTUREBUILDER FOR PUERTO RICO THIS AMENDMENT to The Home Depot FutureBuilder for Puerto Rico (the "Plan") is made this 29th day of May, 2002, by the Administrative Committee of the Plan. W I T N E S S E T H: WHEREAS, Home Depot Puerto Rico, Inc. maintains the Plan for the benefit of its eligible employees; and WHEREAS, Section 13.1 of the Plan provides that the Plan may be amended by the Administrative Committee, subject to certain limitations set forth in such Section; WHEREAS, the Administrative Committee desires to amend the Plan as provided herein (i) to provide for the daily valuation of accounts, and (ii) to allow each Participant to diversify the investment of all or a portion of his ESOP Account from the Company Stock Fund among the other Investment Funds; NOW, THEREFORE, the Plan is amended as follows: 1. Section 1.62 is amended, effective April 1, 2002, to read as follows: 1.62 Valuation Date shall mean each day the New York Stock Exchange is open for trading. The value of an Account or the Trust Fund on any other date shall be the value determined as of the immediately preceding date on which the New York Stock Exchange was open for trading. 2. Section 5.6 is amended, effective April 1, 2002, to read as follows: 5.6 Adjustments to Accounts As of each Valuation Date, the Trustee shall determine the fair market value of the Trust Fund which shall be the sum of the fair market values of the Investment Funds, as determined by the institutions maintaining the Investment Funds. Each Participant's or Beneficiary's Account shall be allocated and credited with a portion of such earnings or debited with a portion of such losses in each Investment Fund, in the proportion that the amount credited to such Account is invested in each Investment Fund. Each Account shall also be appropriately adjusted to reflect any contributions, distributions, withdrawals or transfers between Investment Funds and other disbursements from such Account. The provisions of this Section 5.6 shall apply to all investment earnings or losses other than dividends paid on Company Stock that are allocated pursuant to Section 5.7. 3. Section 7.2(c) is deleted in its entirety, effective June 1, 2002. 4. The introductory sentence to Section 7.3 is amended, effective June 1, 2002, to read as follows: Except as described in subsection (a) hereof, each Participant or Beneficiary generally may direct the manner in which his Contributions and Accounts shall be invested in and among the Investment Funds described in ss.7.2; provided, such investment directions shall be made in accordance with the following terms: 5. Sections 7.3(a)and (b) are amended, effective June 1, 2002, to read as follows: (a) Investment of Contributions. Except as otherwise provided in this Section, each Participant may elect, on a form provided by the Administrative Committee, through an interactive telephone or internet-based system, or in such other manner as the Administrative Committee may prescribe, the percentage of his future Contributions (other than ESOP or Matching Contributions) that will be invested in each Investment Fund. An initial election of a Participant shall be made as of the Entry Date on which the Participant commences or recommences participation in the Plan and shall apply to all such specified Contributions credited to such Participant's Account after such Entry Date. Such Participant may make subsequent elections as of any Valuation Date, and such elections shall apply to all such Contributions credited to such Participant's Accounts following such date; for purposes hereof, Contributions and/or Forfeitures that are credited to a Participant's or Beneficiary's Account shall be subject to the investment election in effect on the date on which such amounts are actually received and credited, regardless of any prior date "as of" which such Contributions may have been allocated to his Account. Any election made pursuant to this subsection with respect to future Contributions shall remain effective until changed by the Participant. In the event a Participant never makes an investment election or makes an incomplete or insufficient election in some manner, the Trustee, based on authorized directions from the Administrative Committee, shall direct the investment of the Participant's future Contributions. Notwithstanding anything in this subsection (a) to the contrary, all ESOP and Matching Contributions shall be initially invested in the Company Stock Fund; provided, the Participant or Beneficiary may elect to direct the investment of his existing ESOP and Matching Accounts among other Investment Funds in accordance with subsection (b) below. (b) Investment of Existing Account Balances. Except as otherwise provided in this Section, each Participant or Beneficiary may elect, on a form provided by the Administrative Committee, through an interactive telephone or internet-based system, or in such other manner as the Administrative Committee may prescribe, the percentage of his existing Accounts that will be invested in each Investment Fund. Such Participant or Beneficiary may make such elections effective as of any Valuation Date following his Entry Date into the Plan (or the crediting of his Rollover Contribution). Each such election shall remain in effect until changed by such Participant or Beneficiary. In the event a Participant or Beneficiary fails to make an election for his existing Account balance pursuant to the terms of this subsection which is separate from his election made for his Contributions pursuant to the terms of this subsection (a) hereof, or if a Participant's or Beneficiary's investment election form is incomplete or insufficient in some manner, the Participant's or Beneficiary's existing Account balance will continue to 2 be invested in the same manner provided under the terms of the most recent election affecting that portion of his Account. Notwithstanding anything in this subsection (b) to the contrary, a Participant's or Beneficiary's ESOP and Matching Account shall remain invested in the Company Stock Fund until the Participant or Beneficiary elects to change such investment; and, thereafter, that portion of the ESOP and Matching Accounts which has been invested in other Investment Funds shall be reinvested according to the Participant's or Beneficiary's subsequent investment elections along with all other Accounts. 6. Subsections (1) and (2) of Section 9.1(b) are amended, effective April 1, 2002, to read as follows: (b) Timing of Distribution. (1) Except as provided in subsections (b)(2), (b)(3), (b)(4), (d) and (e) hereof, benefits payable to a Participant under this Section shall be distributed as soon as administratively practicable following the last Business Day of the first full calendar month following the later of (i) the date on which the Participant affirmatively elects to receive such payment, or (ii) the date on which the Participant's separation from service or Disability has been processed by the Controlling Company's payroll system and communicated to the Plan's third-party recordkeeper (that is, the Administrative Committee's designee for processing distributions). The Administrative Committee shall establish terms and conditions governing elections made under this subsection (b)(1). Any amounts subsequently allocated to the ESOP Account of a Participant who incurs a Qualified Separation shall be distributed as soon as administratively practicable following the date of such allocation. (2) Notwithstanding the foregoing, in the event that (A) the value of the Participant's Account exceeds (or at the time of any prior distribution exceeded) $5,000 and (B) the distribution date described in subsection (b)(1) hereof occurs or is to occur prior to the Participant's attainment of Normal Retirement Age, benefits shall not be distributed to such Participant at the time set forth in subsection (b)(1) hereof without the Participant's written election (including an on-line election) in such form as provided by the Administrative Committee. In order for such Participant's election to be valid, his election must be filed with the Administrative Committee within the 90-day period ending on such date, and the Administrative Committee (no later than 30 days and no earlier than 90 days before such distribution date) must have presented him with a notice informing him of his right to defer his distribution; provided, the Participant may elect to waive the minimum 30-day notice period and to receive his distribution before the end of such period. If the Participant does not consent in writing to the distribution of his benefit at such time, his benefit shall be distributed as soon as practicable after the date he files a written election with the Administrative Committee requesting such payment. 3 7. Article XIV is amended, effective April 1, 2002, by adding a new Section 14.13 to the end thereof, as follows: 14.13 Recordkeeper Transition For purposes of effecting a change in the Plan's recordkeeper, and notwithstanding anything in the Plan to the contrary, the Administrative Committee may designate a period during which transactions under the Plan (including without limitation investment elections, changes, fund transfers, withdrawals, loans and distributions) shall be suspended. IN WITNESS WHEREOF, this Second Amendment has been executed by the duly authorized member of the Administrative Committee as of the date first written above. ADMINISTRATIVE COMMITTEE OF THE HOME DEPOT FUTUREBUILDER FOR PUERTO RICO By: /s/ ILEANA CONNALLY ---------------------------------------- Title: VP of Benefits ------------------------------------- 4 EX-10.36 9 g81844exv10w36.txt EX-10.36 NON-U.S. EMPLOYEE STOCK PURCHASE PLAN EXHIBIT 10.36 THE HOME DEPOT, INC. NON-U.S. EMPLOYEE STOCK PURCHASE PLAN 1. Purpose. The purpose of The Home Depot, Inc. Non-U.S. Employee Stock Purchase Plan (the "Plan") is to encourage and enable eligible employees of The Home Depot, Inc. (the "Company") and its Subsidiaries and Affiliates to acquire proprietary interests in the Company through the ownership of Common Stock of the Company. The Company believes that employees who participate in the Plan will have a closer identification with the Company by virtue of their ability as stockholders to participate in the Company's growth and earnings. 2. Definitions. The following words or terms have the following meanings: (a) "Plan" shall mean this The Home Depot, Inc. Non-U.S. Employee Stock Purchase Plan. (b) "Affiliate" or "Affiliates" shall mean any corporation or other business organization in which the Company owns, directly or indirectly, 50% or more of the voting stock or capital at the lime of the granting of an option under the Plan. (c) "Closing Market Price" shall mean the closing price of the Company's Common Stock on the New York Stock Exchange. (d) "Company" shall mean The Home Depot, Inc. (e) "Board of Directors" shall mean Board of Directors of the Company or the Executive Committee of such Board. (f) "Shares", "Stock" or "Common Stock" shall mean shares of the $.05 par value Common Stock of the Company. (g) "Committee" shall mean the committee of the Board of Directors of the Company appointed to administer the Plan or their designee(s). (h) "Subsidiary" or "Subsidiaries" shall mean any corporation, if the Company owns or controls directly or indirectly, more than a majority of the voting stock of such corporation. (i) "Eligible Employee" shall mean any Employee or class of Employees of the Company, its Subsidiaries and Affiliates regularly employed outside the United States of America and designated, in the sole and absolute discretion of the Committee, as an eligible participant in this Plan. Notwithstanding the foregoing, no Employee subject to the provisions of Section 16 of the Securities Exchange Act of 1934 or ss. 162(m) of the U.S. Internal Revenue Code of 1986, as amended ("Excluded Persons") shall be eligible to participate absent an express determination by the Committee that all actions, conditions or events ("Necessary Conditions"), which the Committee deems to be in the best interest of the Company shall have occurred prior to such participation being permitted. Necessary Conditions to participation by any Excluded Person may include, without limitation, amendment of the Plan and stockholder approval of the Plan. Provided further, that no employee subject to, or the beneficiary of, any collective bargaining agreement or other similar agreement shall be eligible to participate in the Plan unless such participation shall be expressly provided for in such agreement. (j) "Employee" shall mean any employee, director, general partner, officer, consultant, advisor or other person providing bona fide services to the fullest extent permitted under (i) the securities laws of the United States of America and consistent with the utilization of a Form S-8 Registration Statement or any successor form or provision, and (ii) such other laws, as applicable, of the country or jurisdiction in which a proposed participant is employed. To the fullest extent permitted under (i) the securities laws of the United States of America and consistent with the utilization of a Form S-8 Registration Statement or any successor form or provision, and (ii) such other laws, as applicable, of the country or jurisdiction in which a proposed participant is employed, the term Employee shall include former employees, as well as executors, administrators or beneficiaries of deceased employees, guardians, or members of a committee for incompetent employees or similar persons duly authorized by law to administer the estate or assets of former employees. (k) "Purchase Period" shall mean the number of calendar months during which installment payments for stock purchased under the Plan shall be made. (1) "Options" shall mean the right or rights granted to Eligible Employees to purchase the Company's Common Stock under an Offering made under the Plan and pursuant to such Eligible Employees' elections to purchase. (m) "Subscription Period" shall mean that period of time prescribed in any offer of Stock under the Plan beginning on the first day Eligible Employees may elect to purchase Shares and ending on the last day such elections to purchase are authorized to be received and accepted. (n) "Annual Pay" shall mean an amount, calculated in such currency as the Committee shall specify or, if no currency is specified, in the currency of the country in which the Eligible Employee is employed, equal to the sum of (i) the annual basic rate of pay of an Eligible Employee as determined from the payroll records of the Company, its Subsidiaries or Affiliates on the effective date of an offer of Stock made pursuant to the Plan, and (ii) the amount paid, calculated in such currency as the Committee shall specify or, if no currency is specified, in the currency of die country in which the Eligible Employee is employed on the effective date of an offer of Stock made pursuant to the Plan, to the Eligible Employee by the Company or a Subsidiary under any incentive compensation or bonus plan during the twelve-month period immediately preceding the effective date of an offer of Stock made pursuant to the Plan. 3. Shares Reserved for Plan. The Shares of the Company's Common Stock to be sold to Eligible Employees under the Plan may, at the election of the Company, be either treasury shares or shares originally issued for such purpose. The maximum number of Shares which shall be reserved and made available for sale under the Plan shall be 5,000,000. The Shares reserved may be issued and sold pursuant to one or more offerings under the Plan. With respect to each offering, the Board of Directors, or the Committee, will specify the number of Shares to be made available, the length of the Subscription Period, the length of the Purchase Period and such other terms and conditions not inconsistent with the Plan as may be necessary or appropriate. [In no event shall the Subscription Period and the Purchase Period together exceed 27 months for any offering.] In the event of a subdivision or combination of the Company's Shares, the maximum number of Shares which may thereafter be issued and sold under the Plan and the number of Shares under elections to purchase at the time of such subdivision or combination will be proportionately increased or decreased, the terms relating to the price at which Shares under the elections to purchase will be sold will be appropriately adjusted, and such other action will be taken as in the opinion of the Board of Directors is appropriate under the circumstances. In case of a reclassification or other change in the Company's Shares, the Board of Directors also will make appropriate adjustments. 4. Administration of the Plan. The Plan shall be administered by a Committee who shall be appointed by the Board of Directors; provided, however, that the Board or the Committee may delegate in writing the administration of the Plan or any part thereof to one or more officers of the Company, its Subsidiaries or Affiliates. The Committee or its designee(s) shall be vested with full authority to make, administer and interpret such equitable rules and regulations regarding the Plan or to make amendments 2 to the Plan itself as it may deem advisable; provided, however, that any amendment to increase the maximum number of Shares available for sale under the Plan, otherwise than as required to reflect a subdivision or a combination as provided in Section 3 hereof or to expand the persons eligible to participate in the Plan beyond the Employees of the Company, its Subsidiaries and Affiliates shall require the approval of the Board of Directors of the Company. Subject to the provisions requiring action by the Board of Directors of the Company, any determination, decision or action of the Committee in connection with the construction, interpretation, administration or application of the Plan shall be final, conclusive and binding upon all Eligible Employees and any and all persons claiming under or through an Eligible Employee. The Committee may act by a majority vote at a regular or special meeting of the Committee or by decision reduced to writing and signed by a majority of the members of the Committee without holding a formal meeting, vacancies in the membership of the Committee arising from death, resignation or other inability to serve shall be filled by the Board of Directors. 5. Participation in the Plan. Options to purchase the Company's Common Stock under the Plan shall be granted only to Eligible Employees; provided, however, that in addition to the Excluded Persons identified in Section 2(i), the Board of Directors may determine that any offering of Common Stock under the Plan will not be extended to directors, officers, or highly paid Employees of the Company, its Subsidiaries or Affiliates or to those Employees whose principal duties consist of supervising the work of other Employees, provided further, that in no event may an Employee be granted an Option under this Plan if such Employee, immediately after the Option is granted, owns Stock possessing five percent or more of the total combined voting power or value of all classes of capital stock of the Company or its Subsidiaries or Affiliates. For the purposes of determining stock ownership under this paragraph, Stock which the Employee may purchase under all outstanding Options shall be treated as Stock owned by the Employee. 6. Purchase Price. The purchase price for Shares purchased pursuant to the Plan (except as otherwise provided herein) shall be the lower of (a) 85 percent of the Market Price on the first day of the Purchase Period; or (b) 85 percent of the Market Price on the last day of the Purchase Period; or if no Shares were traded on such day, on the last day prior thereto on which Shares were traded. 6. Method of Payment. Payment for Shares purchased pursuant to the Plan shall be made in installments through payroll deductions; provided, however, that the Committee may, from time to time, permit lump sum payments. Subject to any permitted lump sum payments, each Eligible Employee electing to purchase Shares will authorize the Company to withhold a designated amount from' his regular weekly, bi-weekly, semimonthly or monthly pay for each payroll period during the Purchase Period. All such payroll deductions made for an Eligible Employee shall be credited to his account under the Plan in the currency of the country where the Eligible Employee is employed and shall be maintained in such currency as the Committee in its sole and absolute discretion may elect, or if no election is made, in the currency of the country where the Eligible Employee is employed; provided, however, that the Committee in its sole and absolute discretion may, from time to time, with respect to, any Purchase Period permit for additional deposits based on estimates of such amount of local currency that is expected to be sufficient to fund the Purchase Price (such price having been as calculated on the basis of U.S. dollars on the day the Option is granted). At the end of the Purchase Period, each Eligible 3 Employee shall receive in cash the balance remaining in his account, if any, after the purchase of the number of Shares covered by his Option to purchase Shares, such balance will be paid in such currency as the Committee may, from time to time, specify or if no currency is specified in the currency of the country in which the Eligible Employee is employed, based on the currency conversion rate in effect at such time. 7. Employee's Election to Purchase - Grants of Options. In order to participate in the Plan, an Eligible Employee must sign an election to purchase Shares on a form provided by the Company stating the Eligible Employee's desire to purchase Shares under the Plan and showing the amount which the Eligible Employee elects to have withheld from his pay which shall be in such currency as the Committee in its sole and absolute discretion shall specify, or if no currency is specified, in the currency of the country where the Eligible Employee is employed, for such payroll period during the Purchase Period. The election to purchase Shares must be delivered on or before the last day of the Subscription Period to the person or office designated to receive and accept such elections. Subject to the limitations set forth in Section 9, each participating Eligible Employee shall be granted an Option to purchase a fixed maximum number of Shares determined by the following procedures: Step 1 - Determine the aggregate amount which will be withheld from the Eligible Employee's pay during the Purchase Period and calculate the equivalent amount in U.S. dollars based on the exchange rate in effect on the first day of the Purchase Period; Step 2 - Determine the figure which represents the lower of (a) 85 percent of the Market Price on the first day of the Purchase Period; or (b) 85 percent of the Market Price on the last day of the Purchase Period; or if no Shares were traded on such day, on the last day prior thereto on which Shares were traded. Step 3 - Divide the figure determined in Step 1 by the figure determined in Step 2. This final figure shall be the fixed maximum number of Shares for which the Eligible Employee may be granted an Option to purchase. The date on which the Option is granted to each participating Eligible Employee shall be the first day of the Purchase Period. No certificate or other form of notice that an Option has been granted need be given to any participating Eligible Employee and such records as are, from time to time, maintained by the Company, in its sole and absolute discretion, shall be conclusive evidence of an Eligible Employee's participation in the Plan and the terms of such participation. In the event the total maximum number of Shares resulting from all elections to purchase under any offering of Shares under the Plan exceeds the number of Shares offered, the Company reserves the right to reduce the maximum number of Shares which Eligible Employees may purchase pursuant to their elections to purchase, to allot the Shares available in such manner as it shall determine, but generally prorata to subscriptions received, and to grant Options to purchase only for such reduced number of Shares. All Shares included in any offering under the Plan in excess of the total number of Shares which; all Eligible Employees elect to purchase and all Shares with respect to which elections to purchase are canceled as provided in Section 12 shall continue to be reserved for the Plan and shall be available for inclusion in any subsequent offering under the Plan. 4 8. Limitations of Number of Shares Which May be Purchased. Subject to any variation which may from time to time be approved in writing by the Committee with the approval of the Board of Directors, the following limitations shall apply with respect to the number of Shares which may be purchased by each Eligible Employee who elects to participate in an offering under the Plan: (a) No Eligible Employee may purchase Shares during any one offering pursuant to the Plan for an aggregate purchase price (which shall be computed on an annual basis in the event the Purchase Period is more or less than 12 months) in excess of 20% of his Annual Pay calculated in such currency as the Committee shall specify or if no currency is specified, in the currency of the country in which the Eligible Employee is employed as defined in Section 2(j); and (b) No Eligible Employee shall be granted an Option to purchase Shares under the Plan if such Eligible Employee immediately after such Option is granted, owns stock or holds Options to purchase stock possessing five percent or more of the total combined voting power or value of the capital stock of the Company or of any Subsidiary. Notwithstanding the limitations imposed by Section 9(a) of this Plan, no Eligible Employee may be granted an Option to purchase Shares which permits his right to purchase Stock of any of its Subsidiaries and Affiliates under the Plan and all other stock purchase plans to accrue at a rate which exceeds in any one calendar year U.S.$25,000 of the fair market value of such Stock (determined on the date the Option to purchase is granted). An Eligible Employee may elect to purchase less than the number of Shares which he is entitled to elect to purchase. 9. Rights as Stockholder. An Eligible Employee will become a stockholder of the Company with respect to Shares for which payment has been completed only upon the issuance of a certificate representing the purchased Shares to the Eligible Employee or his agent. An Eligible Employee will have no rights as a stockholder with respect to Shares under an election to purchase Shares until he has become a stockholder as provided above. A certificate for the Shares purchased will be issued as soon as practicable after the last day of the Purchase Period. 10. Rights to Purchase Shares Not Transferable. An Eligible Employee's rights under his election to purchase Shares may not be sold, pledged, assigned or transferred in any manner otherwise than by will or the laws of descent and distribution. 11. Cancellation of Election to Purchase. An Eligible Employee who has elected to purchase Shares may cancel his election in its entirety or may partially cancel his election by reducing the amount which he has authorized the Company to withhold from his pay for each payroll period during the Purchase Period. Any such full or partial cancellation shall be effective upon the delivery by the Eligible Employee of written notice of cancellation to the office or person designated to receive elections. Such notice of cancellation must be so delivered before the close of business on the last business day of the Purchase Period. If an Eligible Employee partially cancels his original election by reducing the amount authorized to be withheld from his pay, he shall continue to make installment payments at the reduced rate for the remainder of the Purchase Period. An Eligible Employee shall be entitled to only one partial cancellation during a Purchase Period; provided, however, that the Committee may, in its sole and absolute discretion, from time to time, authorize additional partial cancellations. 5 An Eligible Employee's rights upon the full or partial cancellation of his election to purchase Shares shall be limited to the following: (a) He may receive in cash, as soon as practicable after delivery of the notice of cancellation, the amount then credited to his account, except, in the case of a partial cancellation, he must retain in his account the cumulative installment payments made during the Purchase Period through the date of cancellation, or (b) He may have the amount credited to his account at the time of the cancellation becomes effective applied to the purchase of the number of Shares such amount will then purchase at the end of the Purchase Period. 12. Adjustments in Withholding Amounts. The Committee, in its sole and absolute discretion, may allow an Eligible Employee or class of Eligible Employees to increase the amount of withholding or to make a prepayment of the Purchase Price to prevent any reduction in the number of Shares which such Eligible Employee's payroll deductions would be insufficient to purchase due to changes in currency exchange rates. 13. Leave of Absence or Layoff. An Eligible Employee purchasing Stock under the Plan who is granted a leave of absence (including a military leave) or is laid off during the Purchase Period may at that time (on a form provided by the Company) elect one of the following: (a) He may suspend payments during the leave of absence, or, in the case of a layoff, he may suspend payments for not more than 90 days, but not in either case beyond the last month of the Purchase Period, or (b) He may make his installment payments in cash but not, in case of leave of absence, for longer than his leave nor more than 90 days in case of a layoff. If Option (a) is elected, the Eligible Employee at the end of the suspension period must make up the deficiency in his account either by immediate lump sum payment or with increased installment payments so that, assuming the maximum purchase price per share, payment for the maximum number of Shares covered by his Option will be completed in the last month of the Purchase Period. If the Eligible Employee elects to make increased installment payments, he may, nevertheless, at any time make up his remaining deficiency by a lump sum payment. If an Eligible Employee does not return to active service upon the expiration of his leave of absence or within 90 days from the date of his layoff, his election to purchase shall be deemed to have been canceled at the time of the leave of absence or layoff. In no event shall an Eligible Employee be permitted to complete payment for any Shares after 27 months from the date of the commencement of the Subscription Period. 14. Effect of Failure to Make Payments When Due. If in any payroll period, for any reason not set forth in Section 13, an Eligible Employee who has filed an election to purchase Shares under the Plan has no pay or his pay is insufficient (after other authorized deductions) to permit deduction of his installment payment, such payment may be made in cash at the time. If not so made, the Eligible Employee, when his pay is again sufficient to permit the resumption of installment payments, must pay in cash the amount of the deficiency in his account or arrange for uniformly increased installment payments so that, assuming the maximum purchase price per share, payment for the maximum number 6 of Shares covered by his Option will be completed in the last month of the Purchase Period. If the Eligible Employee elects to make increased installment payments, he may, nevertheless, at any time make up the remaining deficiency by a lump sum payment. Subject to the above and other provisions of the Plan permitting postponement, the Company may treat the failure by an Eligible Employee to make any payment as a cancellation of his election to purchase Shares. Such cancellation will be affected by mailing notice to him at his last known business or home address. Upon such mailing, his only right will be to receive in cash the amount credited to his account. 15. Retirement. If an Eligible Employee officially retires and has an election to purchase Shares in effect at the time of his retirement, he may, within three months after the date of his retirement (but in no event later than the end of the Purchase Period), by delivering written notice to the office or person designated to receive elections, elect to: (a) Complete the remaining installment payments in cash, (b) Make a lump sum payment in the amount of any deficiency for the remaining portion of the Purchase Price, or (c) Cancel his election to purchase Shares in accordance with the provisions of Section 12. If no such notice is given within such period, the election will be deemed canceled as of the date of retirement and the only right of the Eligible Employee will be to receive in cash the amount credited to his account. 16. Death. If an Eligible Employee, including a retired Eligible Employee, dies and has an election to purchase Shares in effect at the time of his death, the legal representative of the deceased Eligible Employee may, within three months from the date of death (but in no event later than the end of the Purchase Period), by delivering written notice and adequate proof in the form designated by the Company, to the office or person designated to receive elections, elect to: (a) Complete the remaining installment payments in cash, (b) Make a lump sum payment in the amount of any deficiency for the remaining portion of the Purchase Period, or (c) Cancel the election to purchase Shares in accordance with the provisions of Section 12. If no such notice is given within such period, the election will be deemed, canceled as of the date of death, and the only right of such legal representative will be to receive in cash the amount credited to the deceased Eligible Employee's account. 17. Effect of Currency Exchange Changes. If at the end of any Purchase Period, an Eligible Employee's payroll deductions are insufficient to permit him to purchase the number of Shares which he is eligible to purchase pursuant to Section 8, he may cancel, in part or whole, the election to purchase Shares in accordance with the provisions of Section 12. Each Eligible Employee by participating in the Plan acknowledges that any change in such Employee's relative rights and benefits arising out of changes in the currency exchange rate, or other 7 currency exchange limitations and controls shall be at the risk of the Eligible Employee, and the Company shall not be considered a trustee or fiduciary with respect to any payroll deduction or other payment amounts under this Plan. 18. Termination of Employment Other Than for Retirement or Death. If an Eligible Employee's employment is terminated for any reason other than retirement or death prior to the end of the Purchase Period, his election to purchase shall thereupon be deemed cancelled as of the date on which his employment ended. In such an event, no further payments under such election will be permitted, and the Eligible Employee's only right will be to receive in cash the amount credited to his account based on the value of such account in the currency in which such account is then denominated which shall be paid in such currency of the country in which the employee is employed. 19. Application of Funds. All funds received by the Company in payment for Shares purchased under the Plan and held by the Company at any time may be used for any valid corporate purpose. 20. Termination and Amendment of the Plan. The Board or the Committee may terminate the Plan, in whole or in part, may suspend the Plan, in whole or in part, from time to time and may amend the Plan from time to time, including the adoption of amendments deemed necessary or desirable to qualify the Options under the laws of various countries (including tax laws) and under rules and regulations promulgated by the Securities and Exchange Commission. The Committee also may adopt such modifications, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of countries other than the United States in which the Company or its Subsidiaries or Affiliates may operate to assure the viability of the benefits of grants made to Employees in such countries and to meet the purposes of the Plan. 21. Governmental Approvals or Consents. The Plan and any offerings and sales to Eligible Employees under it are subject to any governmental approvals or consent that may be or become applicable in connection therewith. Each Option shall be subject to the requirement that if at any time the Committee shall determine that the registration, listing or qualification of the Shares covered thereby upon any securities exchange or under any foreign, federal, state or local law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Option or the purchase of Shares thereunder, no such Option may be exercised unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Committee. Any person exercising an Option shall make such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing or any other applicable legal requirements. 22. Choice of Law. This Plan has been adopted in the United States of America and in the State of Georgia, and the Plan and all determinations made and actions taken pursuant thereto shall be governed by the laws of the United States of America and the internal laws of the State of Georgia and construed in accordance therewith. 23. No Vested Rights and No Right to Employment. No Eligible Employee or other person shall have any claim or right to be granted an Option under the Plan. Having received an Option under the Plan shall not give an Eligible Employee any right to receive any other grant under the Plan. An Eligible Employee shall have no rights or interest in any Option except as expressly set forth herein. Neither the Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of the Company or any Subsidiary or Affiliate. Participation in the Plan also shall not be a condition of employment. As a condition to participation in the Plan and the issuance of 8 any Shares to be issued to an Eligible Employee participating in the Plan, such Eligible Employee shall furnish the Company with an acknowledgement that the Employee has no "acquired rights" or "vested rights" in the Plan or any benefit grantable thereunder. Such statement shall be in such form or forms as the Committee may, from time to time, establish. 24. Plan Unfunded. The Plan shall be unfunded. Except for reserving a sufficient number of authorized Shares to the extent required by law to meet the requirements of the Plan, the Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the delivery of the Company's Capital Stock upon exercise of any Option granted under the Plan. 25. Resolution of Disputes. All disputes and claims by an Eligible Employee relating to any provision of this Plan or any benefit granted hereunder or relating to or arising out of the parties' relationship or termination thereof (including, without limitation, any claim by an Eligible Employee that any provision of this Plan is illegal or otherwise unenforceable or voidable under any law, ordinance, or ruling or that any benefit is due to such Eligible Employee under the Plan) shall be settled by arbitration at such location as the Company shall select with the consent of the Eligible Employee or, if such consent shall not be given, at the Office of the American Arbitration Association in Atlanta, Georgia. Such arbitration shall be conducted in accordance with such rules as the Company shall select with the consent of the Eligible Employee or, if such consent shall not be given, in accordance with the United States Arbitration Act (9 U.S.C. Section 1 et seq.) and the Rules of the American Arbitration Association, provided, however, that, in all cases, (i) the arbitrators named shall be admitted to practice law in the jurisdiction where the arbitration is held or in the United States of America or a state thereof; (ii) such arbitrators shall decide the dispute solely on the basis of the terms of the Plan and the applicable law; (iii) the number of potential arbitrators to which the parties may object shall be limited to thirty; (iv) the arbitrators shall set forth the basis for their decision in writing; and (v) such arbitrators shall not have any power to award any punitive damages against the Company, its Subsidiaries or Affiliates or to award any relief to any Eligible Employee against the Company, its Subsidiaries or Affiliates in excess of the amount of any benefit allegedly owing under the Plan, if any. All awards of the arbitration shall be binding and non-appealable except as otherwise provided in the United States Arbitration Act and this Section. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of such award and an order of enforcement as the case may be. The parties hereby agree the rendering of an award by the arbitrator or arbitrators shall be a condition precedent to the initiation of any legal proceeding with respect to any dispute arising in connection with this Plan. Each party shall, in all instances, bear the cost of its own legal fees. The cost of the arbitrators shall be borne equally by the parties to the arbitration, except that for purposes of this sentence only, the Company, its Subsidiaries and Affiliates shall be considered one party. As of 6/1/95 9 EX-10.37 10 g81844exv10w37.txt EX-10.37 NON-EMPLOYEE DIRECTOR'S STOCK PLAN EXHIBIT 10.37 THE HOME DEPOT, INC. NONEMPLOYEE DIRECTORS' DEFERRED STOCK COMPENSATION PLAN ARTICLE I INTRODUCTION I.1 ESTABLISHMENT. The Home Depot, Inc. (the "Company") hereby establishes The Home Depot, Inc. Nonemployee Directors' Deferred Stock Compensation Plan (the "Plan") for those directors of the Company who are not employees of the Company. The Plan allows Nonemployee Directors to defer the receipt of cash compensation and to receive such deferred compensation in the form of Shares of Common Stock of the Company. I.2 PURPOSE. The Plan is intended to advance the interests of the Company and its Stockholders by providing a means to attract and retain qualified persons to serve as Nonemployee Directors and to promote ownership by Nonemployee Directors of a greater proprietary interest in the Company, thereby aligning such Directors' interests more closely with the interests of Stockholders of the Company. I.3 EFFECTIVE DATE. The Plan shall become effective upon approval by the Stockholders of the Company at the Company's 1997 Annual Meeting of Stockholders. ARTICLE II DEFINITIONS II.1 "ANNUAL MEETING" means the Annual Meeting of Stockholders of the Company. II.2 "ANNUAL MEETING DATE" means the date of the Annual Meeting. II.3 "BOARD" means the Board of Directors of the Company. II.4 "COMMITTEE" means the Board or a committee appointed to administer the Plan under Article IV. II.5 "COMPANY" means The Home Depot, Inc., a Delaware corporation, or any successor thereto. II.6 "DEFERRAL DATE" means the date Fees would otherwise have been paid to the Participant. II.7 "DEFERRAL ELECTION" means a written election to defer Fees under the Plan. II.8 "DIRECTOR" means any individual who is a member of the Board. II.9 "EFFECTIVE DATE" means May 28, 1997, the date of the Company's 1997 Annual Meeting. II.10 "FAIR MARKET VALUE" means 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. II.11 "FEES" means all or part of any retainer or meeting fees payable in cash to a Nonemployee Director in his or her capacity as a Director. Fees shall not include any expenses paid directly or through reimbursement. II.12 "NONEMPLOYEE DIRECTOR" means a Director who is not, as of an Annual Meeting Date, an employee of the Company or any of its subsidiaries or affiliates. For purposes of the Plan, an employee is an individual whose wages are subject to the withholding of federal income tax under Section 3401 of the Internal Revenue Code of 1986, as amended. II.13 "PARTICIPANT" means a Nonemployee Director who defers Fees under Article VI of the Plan. II.14 "SECRETARY" means the Secretary or any Assistant Secretary of the Company. II.15 "SHARES" means shares of the Common Stock of the Company, par value $.05 per share. B-1 35 II.16 "STOCK UNITS" means the credits to a Participant's Stock Unit Account under Article VI of the Plan, each of which represents the right to receive one Share upon settlement of the Stock Unit Account. II.17 "STOCK UNIT ACCOUNT" means the bookkeeping account established by the Company pursuant to Section 6.5. II.18 "TERMINATION OF SERVICE" means termination of service as a Director for any reason. ARTICLE III SHARES AVAILABLE UNDER THE PLAN Subject to adjustment as provided in Article X, the maximum number of Shares that may be distributed in settlement of Stock Unit Accounts under the Plan shall be 500,000. Such Shares may include authorized but unissued Shares, Treasury Shares or Shares that have been reacquired by the Company. ARTICLE IV ADMINISTRATION The Plan shall be administered by the Board or such other committee as may be designated by the Board. The Committee shall have the authority to make all determinations it deems necessary or advisable for administering the Plan, subject to the express provisions of the Plan. Notwithstanding the foregoing, no Director who is a Participant under the Plan shall participate in any determination relating solely or primarily to his or her own Shares, Stock Units or Stock Unit Account. ARTICLE V ELIGIBILITY Each person who is a Nonemployee Director on a Deferral Date shall be eligible to defer Fees payable on such date in accordance with Article VI of the Plan. If any Nonemployee Director subsequently becomes an employee of the Company or any of its subsidiaries, but does not incur a Termination of Service, such Director shall continue as a Participant with respect to Fees previously deferred, but shall cease eligibility with respect to all future Fees, if any, earned while an employee. ARTICLE VI DEFERRAL ELECTIONS IN LIEU OF CASH PAYMENTS VI.1 GENERAL RULE. Each Nonemployee Director may, in lieu of receipt of Fees, defer any or all of such Fees in accordance with this Article VI, provided that such Nonemployee Director is eligible under Article V of the Plan to defer such Fees at the date any such Fees are otherwise payable. VI.2 TIMING OF ELECTION. Each Nonemployee Director who is serving on the Board on the Effective Date may make a Deferral Election at any time prior to the Effective Date. Any person who is not then serving as a Nonemployee Director may make a Deferral Election before the first date on which he or she is entitled to receive Fees. A Nonemployee Director who does not make a Deferral Election when first eligible to do so may make a Deferral Election at any time before the first day of any subsequent calendar year. VI.3 EFFECT AND DURATION OF ELECTION. A Deferral Election shall apply to Fees payable after the date such election is made and shall be deemed to be continuing and applicable to all Fees payable in subsequent calendar years, unless the Participant revokes or modifies such election by filing a new election form before the first day of any subsequent calendar year, effective for all Fees payable on and after the first day of such calendar year. B-2 36 VI.4 FORM OF ELECTION. A Deferral Election shall be made in a manner satisfactory to the Committee. Generally, a Deferral Election shall be made by completing and filing the specified election form with the Secretary or his or her designee within the period described in Section 6.2 or Section 6.3. VI.5 ESTABLISHMENT OF STOCK UNIT ACCOUNT. The Company shall establish a Stock Unit Account for each Participant. All Fees deferred pursuant to this Article VI shall be credited to the Participant's Stock Unit Account as of the Deferral Date and converted to Stock Units. The number of Stock Units credited to a Participant's Stock Unit Account as of a Deferral Date shall equal the amount of the deferred Fees divided by the Fair Market Value of a Share on such Deferral Date, with fractional units calculated to three decimal places. Fractional Stock Units shall be credited cumulatively, but any fractional Stock Unit in a Participant's Stock Unit Account at the time of a distribution under Article VII shall be converted into cash equal to the Fair Market Value of a corresponding fractional Share on the date of distribution. VI.6 CREDITING OF DIVIDEND EQUIVALENTS. As of each dividend payment date with respect to Shares, each Participant shall have credited to his or her Stock Unit Account a dollar amount equal to the amount of cash dividends that would have been paid on the number of Shares equal to the number of Stock Units credited to the Participant's Stock Unit Account as of the close of business on the record date for such dividend. Such dollar amount shall then be converted into a number of Stock Units equal to the number of whole and fractional Shares that could have been purchased with such dollar amount at Fair Market Value on the dividend payment date. ARTICLE VII SETTLEMENT OF STOCK UNITS VII.1 TIMING OF PAYMENT. A Participant shall receive or begin receiving a distribution of his or her Stock Unit Account in the manner described in Section 7.2 either (i) on or as soon as administratively feasible after the first day of the second calendar month immediately following the month in which the Participant incurs a Termination of Service, or (ii) if the Participant has made an election to defer payment in accordance with this Section, on or as soon as administratively feasible after January 1 of the year immediately following the date on which the Participant incurs a Termination of Service. A Participant must deliver an election to defer the distribution or commencement of distribution to the Secretary or his or her designee at least 5 months before the date on which the Participant incurs a Termination of Service. VII.2 PAYMENT OPTIONS. A Deferral Election filed under Article VI shall specify whether the Participant's Stock Unit Account is to be settled by delivering to the Participant the number of Shares equal to the number of whole Stock Units then credited to the Participant's Stock Unit Account, in either (i) a lump sum, or (ii) substantially equal annual installments over a period not to exceed 5 years. Any fractional Stock Unit credited to a Participant's Stock Unit Account at the time of a distribution shall be paid in cash at the time of such distribution. A Participant may change the manner in which his or her Stock Unit Account is distributed by delivering a new election form to the Secretary or his or her designee at least 5 months before the date on which the Participant incurs a Termination of Service. VII.3 PAYMENT UPON DEATH OF A PARTICIPANT. If a Participant dies before the entire balance of his or her Stock Unit Account has been distributed, the balance of the Participant's Stock Unit Account shall be paid, in a lump sum as soon as administratively feasible after the Participant's death, to the beneficiary designated by the Participant under Article IX. VII.4 CONTINUATION OF DIVIDEND EQUIVALENTS. If payment of Stock Units is deferred pursuant to Section 7.2, the Participant's Stock Unit Account shall continue to be credited with dividend equivalents as provided in Section 6.6 until the entire balance of the Participant's Stock Unit Account has been distributed. B-3 37 ARTICLE VIII UNFUNDED STATUS VIII.1 GENERAL. The interest of each Participant in any Fees deferred under the Plan (and any Stock Units or Stock Unit Account relating thereto) shall be that of a general creditor of the Company. Stock Unit Accounts, and Stock Units credited thereto, shall at all times be maintained by the Company as bookkeeping entries evidencing unfunded and unsecured general obligations of the Company. Except as provided in Section 8.2, no money or other assets shall be set aside for any Participant. VIII.2 TRUST. To the extent determined by the Board, the Company may transfer funds necessary to fund all or part of the payments under the Plan to a trust; provided, the assets held in such trust shall remain at all times subject to the claims of the general creditors of the Company. No Participant or beneficiary shall have any interest in the assets held in such trust or in the general assets of the Company other than as a general, unsecured creditor. Accordingly, the Company shall not grant a security interest in the assets held by the trust in favor of any Participant, beneficiary or creditor. ARTICLE IX DESIGNATION OF BENEFICIARY Each Participant may designate, on a form provided by the Committee, one or more beneficiaries to receive payment of the Participant's Stock Unit Account in the event of such Participant's death. The Company may rely upon the beneficiary designation last filed with the Committee, provided that such form was executed by the Participant or his or her legal representative and filed with the Committee prior to the Participant's death. If a Participant has not designated a beneficiary, or if the designated beneficiary is not surviving when a payment is to be made to such person under the Plan, the beneficiary with respect to such payment shall be the Participant's surviving spouse, or if there is no surviving spouse, the Participant's estate. ARTICLE X ADJUSTMENT PROVISIONS In the event any recapitalization, reorganization, merger, consolidation, spin-off, combination, repurchase, exchange of Shares or other securities of the Company, stock split or reverse split, or similar corporate transaction or event affects Shares such that an adjustment is determined by the Board or Committee to be appropriate to prevent dilution or enlargement of Participants' rights under the Plan, then the Board or Committee shall, in a manner that is proportionate to the change to the Shares and is otherwise equitable, adjust the number or kind of Shares to be delivered upon settlement of Stock Unit Accounts under Article VII. ARTICLE XI GENERAL PROVISIONS XI.1 NO STOCKHOLDER RIGHTS CONFERRED. Nothing contained in the Plan will confer upon any Participant or beneficiary any rights of a Stockholder of the Company, unless and until Shares are in fact issued or transferred to such Participant or beneficiary in accordance with Article VII. XI.2 CHANGES TO THE PLAN. The Board may amend, alter, suspend, discontinue, extend, or terminate the Plan without the consent of Stockholders or Participants; provided, no action taken without the consent of an affected Participant may materially impair the rights of such Participant with respect to any Stock Units credited to his or her Stock Unit Account at the time of such change or termination. XI.3 COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company will not be obligated to issue or deliver Shares in connection with the Plan in a transaction subject to the registration requirements of the Securities Act of 1933, as amended, or any other federal or state securities law, any requirement under any listing agreement between the Company and any national securities exchange or automated quotation system or any other laws, B-4 38 regulations, or contractual obligations of the Company, until the Company is satisfied that such laws, regulations and other obligations of the Company have been complied with in full. Certificates representing Shares delivered under the Plan will be subject to such restrictions as may be applicable under such laws, regulations and other obligations of the Company. XI.4 LIMITATIONS ON TRANSFERABILITY. Stock Units and any other right under the Plan will not be transferable by descent and distribution (or to a designated beneficiary in the event of a Participant's death). Stock Units and other rights under the Plan may not be pledged, mortgaged, hypothecated or otherwise encumbered, and shall not be subject to the claims of creditors of any Participant. XI.5 GOVERNING LAW. The validity, construction and effect of the Plan and any agreement 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. XI.6 PLAN TERMINATION. Unless earlier terminated by action of the Board, the Plan will remain in effect until such time as no Shares remain available for delivery under the Plan and the Company has no further rights or obligations under the Plan. EX-10.38 11 g81844exv10w38.txt EX-10.38 DEFERRED COMPENSATION PLAN FOR OFFICERS EXHIBIT 10.38 HOME DEPOT U.S.A., INC. DEFERRED COMPENSATION PLAN FOR OFFICERS (As Amended and Restated Effective January 1, 2003) HOME DEPOT U.S.A., INC. DEFERRED COMPENSATION PLAN FOR OFFICERS (As Amended and Restated Effective January 1, 2003) TABLE OF CONTENTS
PAGE ---- SECTION 1. ESTABLISHMENT AND PURPOSE OF PLAN............................................ 1 1.1. ESTABLISHMENT AND RESTATEMENT OF PLAN........................................ 1 1.2. PURPOSE OF PLAN.............................................................. 1 SECTION 2. DEFINITIONS.................................................................. 1 2.1. ACCOUNT...................................................................... 1 2.2. BASE COMPENSATION............................................................ 1 2.3. BONUS COMPENSATION........................................................... 1 2.4. BOARD........................................................................ 1 2.5. CHANGE IN CONTROL............................................................ 1 2.6. CODE......................................................................... 2 2.7. COMMITTEE.................................................................... 2 2.8. COMPANY...................................................................... 2 2.9. DEDUCTIBLE................................................................... 2 2.10. DISTRIBUTION DATE............................................................ 2 2.11. DISABILITY OR DISABLED....................................................... 2 2.12. EFFECTIVE DATE............................................................... 3 2.13. ELIGIBLE OFFICER............................................................. 3 2.14. EMPLOYMENT TERMINATION....................................................... 3 2.15. ENROLLMENT PERIOD............................................................ 3 2.16. EXCHANGE ACT................................................................. 3 2.17. HARDSHIP..................................................................... 3 2.18. NONDEDUCTIBLE................................................................ 3 2.19. NONDEDUCTIBLE COMPENSATION................................................... 3 2.20. PARENT COMPANY............................................................... 3 2.21. PARTICIPANT.................................................................. 4 2.22. PARTICIPATING COMPANY........................................................ 4 2.23. PLAN......................................................................... 4
2.24. PLAN YEAR.................................................................... 4 2.25. RELATED COMPANY.............................................................. 4 2.26. RETIREMENT DATE.............................................................. 4 SECTION 3. PARTICIPATION, CONTRIBUTIONS AND DEFERRALS................................... 4 3.1. ELIGIBILITY.................................................................. 4 3.2. COMMENCEMENT OF PARTICIPATION................................................ 4 3.3. PARTICIPANT DEFERRAL ELECTIONS............................................... 4 3.4. CONTINUANCE OF DEFERRAL ELECTION DURING SEVERANCE PERIOD..................... 5 3.5. REVOCATION/MODIFICATION OF DEFERRAL ELECTIONS................................ 5 3.6. COMPANY DISCRETIONARY CONTRIBUTIONS.......................................... 5 SECTION 4. VESTING AND ADMINISTRATION OF ACCOUNTS....................................... 5 4.1. VESTING OF DEFERRALS......................................................... 5 4.2. CREDITS/DEBTS TO ACCOUNT..................................................... 6 4.3. ACCOUNT EARNINGS............................................................. 6 4.4. OWNERSHIP AND INVESTMENT OF ACCOUNTS......................................... 6 4.5. ESTABLISHMENT OF RABBI TRUST................................................. 6 SECTION 5. DISPOSITION OF PARTICIPANT ACCOUNTS.......................................... 6 5.1. PLAN DISTRIBUTION ELECTIONS.................................................. 6 5.2. DISTRIBUTION DATE............................................................ 7 5.3. FORM OF DISTRIBUTION......................................................... 7 5.4. HARDSHIP DISTRIBUTIONS....................................................... 7 5.5. IN-SERVICE DISTRIBUTIONS..................................................... 8 5.6. DISABILITY DISTRIBUTIONS..................................................... 8 5.7. DEATH DISTRIBUTIONS.......................................................... 8 5.8. DISPOSITION OF ACCOUNT ON PLAN TERMINATION................................... 9 5.9. ACCOUNTING METHOD FOR DISTRIBUTIONS.......................................... 9 5.10. DISTRIBUTIONS CAUSING LOSS OF COMPENSATION DEDUCTION......................... 9 5.11. TAX WITHHOLDING.............................................................. 9 5.12. PRESUMED COMPETENCY.......................................................... 9 5.13. FORFEITURE OF UNCLAIMED BENEFITS............................................. 10 SECTION 6. COMMITTEE ADMINISTRATION..................................................... 10 6.1. PLAN COMMITTEE............................................................... 10
6.2. COMMITTEE ACTION.............................................................10 6.3. PLAN RULES AND REGULATIONS...................................................10 6.4. DETERMINATIONS BY COMMITTEE..................................................10 6.5. PLAN RECORDS.................................................................11 SECTION 7. CLAIM AND REVIEW PROCEDURES..................................................11 7.1. CLAIMS PROCEDURE.............................................................11 7.2. REVIEW PROCEDURE.............................................................11 7.2(a). GENERAL PROCEDURES...........................................................11 7.2(b). DISABILITY CLAIMS............................................................12 7.2(c). PERIOD FOR REVIEW DECISION...................................................12 7.2(d). DECISIONS BY COMMITTEE.......................................................12 7.2(e). REVIEW DECISION..............................................................13 7.3. PROCEDURES APPLYING TO BOTH CLAIMS AND REVIEW PROCEDURES.....................13 7.3(a). METHOD OF NOTIFICATION.......................................................13 7.3(b). WHEN CLAIM OR APPEAL DEEMED FILED............................................13 7.3(c). TOLLING OF PERIOD FOR MAKING DECISION........................................13 7.3(d). RELEVANT DOCUMENTS...........................................................13 7.3(e). DISABILITY CLAIMS............................................................13 SECTION 8. PARTICIPATION BY RELATED COMPANIES...........................................14 8.1. ADOPTION OF PLAN BY RELATED COMPANY..........................................14 8.2. WITHDRAWAL FROM PLAN BY RELATED COMPANY......................................14 8.3. OBLIGATION OF PARTICIPATING EMPLOYERS........................................14 SECTION 9. MISCELLANEOUS PROVISIONS.....................................................14 9.1. AMENDMENT OR TERMINATION.....................................................14 9.2. PARTICIPANT'S RIGHTS UNSECURED...............................................14 9.3. NONTRANSFERABILITY/NONALIENABILITY...........................................15 9.4. PARTICIPANT OBLIGATION TO FURNISH INFORMATION................................15 9.5. NO RIGHT OF EMPLOYMENT.......................................................15 9.6. PLAN EXPENSES................................................................15 9.7. OFFSETS......................................................................15 9.8. SEVERABILITY.................................................................15 9.9. ENFORCEABILITY...............................................................15 9.10. LIMITATION OF ACTIONS........................................................15 9.11. GOVERNING LAW................................................................16
HOME DEPOT U.S.A., INC. DEFERRED COMPENSATION PLAN FOR OFFICERS (As Amended and Restated Effective January 1, 2003) SECTION 1. ESTABLISHMENT AND PURPOSE OF PLAN 1.1. Establishment of Plan. The Compensation Committee of the Board of Directors of The Home Depot, Inc. adopted the Home Depot U.S.A., Inc. Deferred Compensation Plan For Officers effective March 1, 2002. The Plan is amended and restated, as set forth herein, effective January 1, 2003 except as otherwise expressly provided herein. 1.2. Purpose of Plan. The purpose of the Plan is to provide Eligible Officers an opportunity to defer to a future date the receipt of base and bonus compensation for services performed for the Participating Company. The Plan is intended to constitute, and shall be administered to qualify as, a "top hat" plan exempt from the requirements of the Employee Retirement Income Security Act of 1974, as amended, pursuant to Labor Reg. ss.2520.104-23 and shall be maintained strictly for a select group of management or highly compensated employees as contemplated by said regulation. SECTION 2. DEFINITIONS 2.1. "Account" means the Participant's bookkeeping account established on the Company's records showing the amount of the Participant's Base Compensation and Bonus Compensation deferred pursuant to the Participant's election and any notional earnings accrued thereon. 2.2 "Base Compensation" means the Participant's base rate of compensation (including regular compensation, holiday, vacation, personal, sick and severance pay) payable for services performed for the Participating Company for the Plan Year, as adjusted to reflect increases and decreases to the base rate during the Plan Year. 2.3 "Bonus Compensation" means the Participant's bonus or incentive compensation payable for services performed for the Participating Company for the Plan Year, including any signing bonus and any incentive compensation payable to the Participant pursuant to the Home Depot U.S.A., Inc. Long-Term Performance Incentive Plan or the Home Depot U.S.A. Management Incentive Plan. 2.4 "Board" means the Company's Board of Directors. 2.5 "Change in Control" means a change in control of the Parent Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act as in effect at the time of such change in control, provided that such a change in control shall be deemed to have occurred at such time as (1) any "person" (as that term is used in Sections 13(d) and 14(d) (2) of the Exchange Act), is or becomes the "beneficial owner," directly or indirectly, of securities representing twenty percent (20%) or more of the -1- combined voting power for election of directors of the then outstanding securities of the Parent Company or any successor of the Parent Company; (2) during any period of two (2) consecutive years or less, individuals who at the beginning of such period constituted the board of directors of the Parent Company cease, for any reason, to constitute at least a majority of the board, unless the election or nomination for election of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; (3) the stockholders of the Parent Company approve any merger or consolidation as a result of which the common stock of the Parent Company shall be changed, converted or exchanged (other than a merger with a wholly-owned subsidiary of the Parent Company) or any liquidation of the Parent Company or any sale or other disposition of fifty percent (50%) or more of the assets or earning power of the Parent Company; or (4) the stockholders of the Parent Company approve any merger or consolidation to which the Parent Company is a party as a result of which the persons who were stockholders of the Parent Company immediately before the effective date of the merger or consolidation shall have beneficial ownership of less than fifty-five percent (55%) of the combined voting power for election of directors of the surviving corporation following the effective date of such merger or consolidation. 2.6. "Code" means the Internal Revenue Code of 1986, as amended. 2.7. "Committee" means the Compensation Committee of the Board of Directors of The Home Depot, Inc. 2.8. "Company" means Home Depot U.S.A., Inc., a Delaware corporation, with corporate offices at 2455 Paces Ferry Road, N.W., Atlanta, Georgia 30339-4024. 2.9 "Deductible" means a distribution of Base Compensation or Bonus Compensation and earnings thereon for which the Participating Company is entitled to a compensation tax deduction. 2.10. "Distribution Date" means the earliest of the following events: (1) a year elected by the Participant that is after the Plan Year for which the deferrals are made; or (2) the Participant's Employment Termination for any reason (including death and Disability) before the Participant's Retirement Date; or (3) the Participant's Retirement Date or, if elected by the Participant, the Participant's Retirement Date plus one (1) year; or (4) if elected by the Participant, the date of a Change in Control. 2.11. "Disability" or "Disabled" means a physical or mental condition of the Participant which results in the Participant receiving benefits under the Participating Company's long term disability insurance plan, or in the event that the Participant is not participating in the Participating Company's long term disability insurance plan, means a physical or mental condition which in the judgment of the Committee, based on medical reports and other evidence satisfactory to the Committee, prevents the Participant from satisfactorily performing Participant's usual duties for the Participating Company or duties of such other job or position which the Participating Company makes available to the Participant and for which the Participant is qualified by reason of training, education or experience. 2.12. "Effective Date" means January 1, 2003. -2- 2.13. "Eligible Officer" means an employee officer of the Participating Company who: (1) has completed at least thirty (30) days of employment with the Participating Company in an eligible position as defined in Section 2.13(2); and (2) who is an executive officer of the Participating Company (Chief Executive Officer, Executive Vice President, Senior Vice President or Division President) or who is a Vice President of a Participating Company; and (3) is part of a select group of management or highly compensated employees of the Participating Company within the meaning of Labor Reg. ss.2520.104-23. 2.14. "Employment Termination" means the date that the Participant ceases to perform services for the Participating Company and is no longer on the Participating Company's active payroll; provided, however, that a Participant shall not be treated as having terminated employment with the Participating Company for purposes of Section 5 if, concurrently with or immediately after such termination, the Participant is employed by a subsidiary or affiliate of the Participating Company. 2.15. "Enrollment Period" means the period established by the Committee before the beginning of each Plan Year, and the thirty (30) day period after first becoming eligible to participate in the Plan, during which Participant deferral and distribution elections must be made. 2.16 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.17. "Hardship" means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or the Participant's dependent (as defined in Code Section 152(a)) loss of the Participant's property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control. The need to send a Participant's child to college or the desire to purchase a home are not considered unforeseeable emergencies that qualify as a "hardship." After the Participant's death, the phrase "Participant's beneficiary" shall be substituted for the word "Participant" in the first sentence of this Section 2.17. 2.18 "Nondeductible" means a distribution of Base Compensation or Bonus Compensation and earnings thereon for which the Participating Company would not be entitled to a compensation tax deduction. 2.19 "Nondeductible Compensation" means Base Compensation or Bonus Compensation that in the year deferred is nondeductible by the Company and its affiliated companies pursuant to Code Section 162(m). 2.20 "Parent Company" means The Home Depot, Inc., a Delaware corporation, with corporate offices at 2455 Paces Ferry Road, N.W., Atlanta, Georgia 30339-4024. 2.21 "Participant" means an Eligible Officer who has made a deferral election under the Plan and any former Eligible Officer who has an amount credited to an Account for his or her benefit under the Plan. 2.22 "Participating Company" means the Company, Home Depot Services LLC (effective upon organization) and any other Related Company that the Committee authorizes by appropriate -3- resolution to participate in the Plan as to its Eligible Officers. 2.23 "Plan" means the Home Depot U.S.A., Inc. Deferred Compensation Plan for Officers as described herein and as amended from time to time. 2.24 "Plan Year" means the calendar year. 2.25 "Related Company" means any trade or business, whether or not incorporated, which is a member of a controlled group of corporations within the meaning of Code Section 414(b) that includes the Company, or is under common control with the Company within the meaning of Code Section 414(c), or is part of an affiliated service group within the meaning of Code Section 414(m) that includes the Company. 2.26 "Retirement Date" means the date of the Participant's Employment Termination on or after the Participant's attainment of age sixty (60). SECTION 3. PARTICIPATION AND DEFERRALS 3.1. Eligibility. Eligible Officers may participate in the Plan as provided in Section 3.2. The Committee shall communicate a summary of the terms and conditions of the Plan to Eligible Officers, in writing, as soon as administratively practicable after they become eligible. 3.2. Commencement of Participation. Deferral elections are effective, and an Eligible Officer shall commence participation in the Plan, on the first day of the Plan Year following the date the Eligible Officer files his or her deferral election with the Committee in accordance with Section 3.3. Notwithstanding the foregoing, an Eligible Officer who first becomes eligible during the Plan Year shall commence participation in the Plan on the first available payroll period after the Eligible Officer timely files his or her deferral election with the Committee in accordance with Section 3.3, provided, however, that such newly Eligible Officer shall be eligible to defer Bonus Compensation for such Plan Year only to the extent it is earned and payable after the effective date of such officer's deferral election. 3.3. Deferral Elections. An Eligible Officer may elect during the Enrollment Period, in writing on forms approved by the Committee, to defer the receipt of a designated percentage of Base Compensation per payroll period that is earned and payable after the effective date of such election and a designated percentage of Bonus Compensation per payroll period that is payable after the effective date of such election and have such amount credited to the Participant's Account pursuant to the terms of the Plan. Deferral elections are effective at the time provided in Section 3.2. The Participant shall make a separate deferral election for Base and Bonus Compensation deferrals for each Plan Year. The minimum deferral each for Base Compensation and Bonus Compensation for any payroll period is One Thousand Dollars ($1,000.00) divided by the number of the Participant's remaining payroll periods for the Plan Year over which the deferral will be made. The maximum deferral is Fifty Percent (50%) of Base Compensation and One Hundred Percent (100%) of Bonus Compensation per payroll period. In no event may a Participant defer Base Compensation or Bonus Compensation for any payroll period to the extent the Participant has no Base or Bonus Compensation for such -4- payroll period or to the extent the Participant's Base or Bonus Compensation is insufficient after other payroll deductions are made, in which case the Participant's Base and Bonus Compensation deferral shall be accordingly adjusted by the Committee for such payroll period. Notwithstanding the foregoing, deferrals under this Plan are made before any elective deferrals into the Participating Company's qualified retirement plans. Deferrals shall be deemed to be made first from Base or Bonus Compensation that is deductible to the Company and its affiliates before nondeductible Base or Bonus Compensation. 3.4 Continuance of Deferral Election During Severance Period. Deferral elections shall continue during any period that the Participant remains on the Participating Company's active payroll through salary continuation, severance or other similar payments made to the Participant through the Participating Company's payroll system. 3.5. Revocation/Modification of Deferral Elections. Deferral elections made for a Plan Year are irrevocable and may not be revoked or modified by the Participant. Deferral elections shall be automatically revoked on the effective date of Plan termination and on the date the Participant becomes ineligible to participate in the Plan. 3.6 Discretionary Contributions. The Participating Company may make a discretionary contribution, such as a signing bonus, to the Plan to be credited to the Account of a designated Participant, to vest and to be distributed to the Participant at such times and in such manner as determined by the Company. The Committee shall communicate, in writing, to the Participant any special vesting and distribution provisions that apply to a discretionary contribution. SECTION 4. VESTING AND ADMINISTRATION OF ACCOUNTS 4.1. Vesting. Base Compensation and Bonus Compensation credited to a Participant's Account, and notional earnings thereon, shall be one hundred percent (100%) vested and non-forfeitable at all times; provided, however, that the Company may provide for a discretionary contribution made pursuant to Section 3.6 to vest over such period and in such installments as determined by the Company. 4.2. Credits/Debts to Account. Base Compensation and Bonus Compensation deferred under this Plan pursuant to the Participant's election in accordance with Section 3.3 shall be credited to the Participant's Account as soon as administratively practical after the date the deferrals would otherwise have been payable to the Participant in accordance with the Participating Company's normal payroll practices. 4.3. Account Earnings. As of the last day of each Plan Year, amounts credited to a Participant's Account shall be credited with notional earnings for the Plan Year equal to the yield on ten (10) year Treasury notes on the first business day of the Plan Year (the rate published for that day in the Wall Street Journal issued the following day) plus two and one-half percent (2.5%); provided, however, that the rate for the short 2002 Plan Year shall be 7.55%. Crediting of notional earnings shall be prorated for partial years of participation based on the number of days of participation during such Plan Year. Any change by the Committee in the method of -5- crediting earnings shall be communicated to Participants in writing during the Enrollment Period for the Plan Year such change is to become effective and such change shall apply only to amounts credited to Participant Accounts on and after the first day of such Plan Year. 4.4. Ownership and Investment of Accounts. Amounts credited to a Participant's Account may be kept in any investment vehicles or assets as may be selected by the Committee in its discretion. The Participating Company shall be the owner of all amounts credited to Participant Accounts until paid to the Participant pursuant to Section 5. 4.5. Establishment of Rabbi Trust. The Committee shall establish and fully fund an irrevocable grantor trust to provide itself a source of funds to satisfy its liability to Participants and their beneficiaries under the Plan. The Participating Company shall make cash contributions to the trust as soon as administratively practical after payroll deductions are made and as soon as administratively practical after the end of the Plan Year for notional earnings credited to Participant Accounts for the Plan Year. The Participating Company shall be the sole owner of the assets of the trust and trust assets shall be subject to the claims of the Participating Company's general creditors. The sole interest of the Participant and the Participant's beneficiaries to the assets of the trust shall be as a general creditor of the Participating Company. SECTION 5. DISPOSITION OF PARTICIPANT ACCOUNTS 5.1. Distribution Elections. Except as otherwise expressly provided herein, amounts credited to a Participant's Account for each Plan Year shall be paid to the Participant in accordance with the Participant's distribution election. The Participant shall make a separate distribution election for: (1) deferrals made each Plan Year and notional earnings thereon; and (2) for Disability distributions pursuant to Section 5.6; and (3) death distributions pursuant to Section 5.7. Distribution elections shall be in writing on forms approved by the Committee and shall specify a Distribution Date in accordance with Section 5.2, shall specify the form of distribution in accordance with Section 5.3, and shall be filed with the Committee during the Enrollment Period. A Participant may make a one (1) time change to his or her distribution election to elect a later Distribution Date in accordance with Section 5.2 and may make a one (1) time change to his or her distribution election to change the form of the distribution in accordance with Section 5.3; provided, however, that only the most recent election that is at least twelve (12) months from the Participant's elected Distribution Date shall control (or the Participant's first distribution election if Participant has less than twelve (12) months of Plan participation); any distribution election that is changed within twelve (12) months of the Distribution Date shall be ignored. -6- 5.2. Distribution Date. Distribution shall commence to the Participant, in the manner elected by the Participant in accordance with Section 5.3, during the month of December of the year of the Distribution Date for in-service distributions (other than pursuant to Section 5.5) and as soon as administratively practical after the next January 1 following the Distribution Date for all other distributions. Notwithstanding the foregoing, Disability, Hardship, Change in Control and in-service distributions pursuant to Section 5.5 shall be made as soon as administratively practical following the approval by the Committee of the Disability, Hardship distribution or the occurrence of a Change in Control or a request for an in-service distribution pursuant to Section 5.5. 5.3. Form of Distribution. Vested amounts credited to a Participant's Account shall, at the Participant's election, be payable to the Participant in a single sum cash payment or in substantially equal annual cash installments over not more than ten (10) years. Annual installment payments shall be calculated by dividing the Account balance by the remaining annual installments to be made. Notwithstanding the Participant's distribution election, payment shall be made to the Participant in a single sum cash distribution in accordance with Section 5.2 if: (1) the vested amount credited to the Participant's Account as of the Participant's Distribution Date is Twenty-Five Thousand Dollars ($25,000.00) or less; or (2) the Participant's employment with the Participating Company terminates for any reason other than death or Disability before the Participant's Retirement Date; or (3) the Participant has elected a distribution in connection with a Change in Control. In the event the Participant's employment with the Participating Company terminates for any reason other than death or Disability before the Participant's Retirement Date and the Participant is receiving distributions under the Plan, such distributions shall be accelerated and paid to the Participant in a single sum cash distribution. 5.4. Hardship Distributions. In the event of a request by the Participant, or by the Participant's beneficiary after the Participant's death, for distribution due to Hardship, and a finding by the Committee that a Hardship exists, deferrals pursuant to Section 3.3 shall cease for a period of twelve (12) months from the date of a Hardship distribution pursuant to this section and vested amounts credited to the Participant's Account shall be paid to the Participant in a single sum cash payment as soon as administratively practicable after the date of the Hardship. Notwithstanding the foregoing: (1) payment shall be limited to the amount reasonably necessary to satisfy the Hardship, and (2) payment shall not be made to the extent that the Hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause several financial hardship, or by cessation of deferrals under this Plan. Any decision of the Committee with respect to the application of the provisions of this section shall have a presumption of correctness, and the burden shall be on Participant to rebut such presumption by a preponderance of the evidence. The Participant shall be provided with a reasonable opportunity to present any and all evidence on his or her behalf. 5.5. In-Service Distributions With Penalty. A Participant may request, on forms approved by the Committee, a minimum distribution of One Thousand Dollar ($1,000.00) and a maximum distribution of one hundred percent (100%) of the Participant's vested total Account balance at any time for any reason, provided that the Participant shall forfeit to the Participating Company Ten Percent (10%) of the amount of the requested distribution. Said distribution -7- shall be paid to the Participant in a single sum distribution as soon as administratively practical after receipt by the Committee of the Participant's signed and completed distribution request form. All deferrals pursuant to Section 3.3 shall cease for a period of twelve (12) months from the date of a distribution pursuant to this Section 5.5. 5.6. Disability Distributions. If a Participant becomes Disabled before the Participant's Retirement Date, vested amounts credited to the Participant's Account shall be distributed to the Participant, in accordance with the Participant's Disability distribution election in accordance with Sections 5.2 and 5.3. Any decision of the Committee with respect to the application of the provisions of this section shall have a presumption of correctness, and the burden shall be on Participant to rebut such presumption by a preponderance of the evidence. The Participant shall be provided with a reasonable opportunity to present any and all evidence on his or her behalf. 5.7. Death Distributions. If a Participant dies before distribution of all the amounts credited to the Participant's Account, any vested amounts remaining in the Participant's Account shall be distributed to the deceased Participant's designated beneficiary or beneficiaries in the form specified by the Participant in accordance with Sections 5.2 and 5.3. If distributions have already commenced before the Participant's death, the Participant's designated beneficiary will continue to receive payments according to the same schedule as had been made to the Participant before his or her death. All beneficiary designations shall be in writing on forms approved by the Committee and shall be filed with the Committee. A Participant may, at any time, revoke or change any beneficiary designation by filing a new written designation with the Committee. If there is no effective beneficiary designation filed with the Committee at the time of the Participant's death, distribution of amounts otherwise payable to the deceased Participant under the Plan shall be paid in a single sum cash distribution to the personal representative of the Participant's estate as a part of the Participant's estate in accordance with Section 5.2. If a beneficiary designated by the Participant to receive the Participant's benefits shall survive the Participant but die before receiving all distributions hereunder, the balance thereof shall be paid in a single sum cash distribution to such deceased beneficiary's estate in a single sum distribution as soon as administratively practical after your beneficiary's death. The Committee, upon making a reasonable effort to ascertain the identity of the proper beneficiary or beneficiaries to receive any amounts payable pursuant to these provisions shall be entitled to rely on information reasonably available to it, and upon making any payments provided herein to any beneficiary believed in good faith by the Committee to be entitled thereto, shall have no further liability to any person for such payments. 5.8. Disposition of Account on Plan Termination. Upon termination of the Plan, distribution of vested Accounts shall be made, at the time and in the form elected by the Participant, according to the distribution election on file with the Committee at the time of such termination. 5.9. Accounting Method For Distributions. Distributions shall be made first, in descending order, from the portion of the Participant's Account earning the highest rate of notional earnings. For portions of Participant's Account earning the same rate of notional earnings, distribution shall made first from the oldest such Account in chronological order (first in-first out method). Debits and offsets shall be made first, in descending order, from the Nondeductible portion of the Participant's Account earning the -8- highest rate of notional earnings and then, in descending order, from the Deductible portion of the Participant's Account earnings the highest rate of notional earnings. 5.10. Distributions Causing Loss of Compensation Deduction. Notwithstanding the Participant's distribution election, no distribution shall be made to the extent the distribution would cause the Participant to have compensation from the Company and its affiliated companies for any year in excess of $1 million and that is nondeductible by the Company and its affiliated companies pursuant to Code Section 162(m). Any distribution not made because of this limitation shall be distributed in the first subsequent year in which the distribution would not cause the loss of the Company's or its affiliated companies' compensation tax deduction. This section shall not apply to: (1) Nondeductible Compensation; (2) death distributions pursuant to Section 5.7; (2) Disability distributions pursuant to Section 5.6; (3) In-Service distributions pursuant to Section 5.5; (4) Hardship Distributions pursuant to Section 5.4; (5) Change in Control distributions; and (6) distributions made with respect to compensation deferred for the 2002 Plan Year, including earnings thereon. 5.11. Tax Withholding. The Committee shall deduct from distributions under the Plan any federal, state or local tax withholding or other taxes or charges that the Participating Company is required to deduct under applicable law. The Participating Company shall be entitled to deduct from other compensation payable to the Participant, any employment or other tax required to be withheld as amounts are deferred under the Plan and the Participating Company may adjust the Participant's deferral election to cover required tax withholdings. 5.12. Presumed Competency. Every person receiving or claiming payments under the Plan shall be conclusively presumed to be mentally competent until the date on which the Committee receives a written notice in a form and manner acceptable to the Committee that such person is incompetent and that a guardian, conservator or other person legally vested with the interest of his or her estate has been appointed. In the event a guardian or conservator of the estate or any person receiving or claiming payments under the Plan shall be appointed by a court of competent jurisdiction, payments under the Plan may be made to such guardian or conservator provided that the proper proof of appointment and continuing qualification is furnished in a form and manner acceptable to the Committee. Any such payments so made shall be a complete discharge of any liability or obligation of Participating Company or the Committee regarding such payments. 5.13. Forfeiture of Unclaimed Benefits. Each Participant shall keep the Committee informed of his or her current address and the current address of his or her beneficiary. The Committee shall not be obligated to search for the whereabouts of any person. If the Committee is unable to locate any person to whom a payment is due under the Plan or a distribution payment check is not presented for payment, such payment shall be irrevocably forfeited two (2) years after the date on which the payment was first due. Forfeited payments shall be returned to the source of the payment (e.g., if benefits are funded through contributions by the Participating Company from its general assets, the forfeited payment shall be returned to the Participating Company; if the forfeited benefit payment is made from trust funds, the forfeited payment shall revert to the trust from which the payment was made). -9- SECTION 6. COMMITTEE ADMINISTRATION 6.1. Plan Committee. The Plan shall be administered by the Committee. A Participant who is also a member of the Committee shall not participate in any decision involving an election made by him or her or relating in any way to his or her individual rights, duties and obligations as a Participant under the Plan (other than decisions that affect all Participants). The Committee may appoint an administrative committee or one or more employees or agents to assist it in administration of the Plan and may delegate its duties under the Plan to such committee, employees or agents. Any references in the Plan to the Committee shall be to the administrative committee or such other designated agent to the extent the Committee has delegated its duties under the Plan to an administrative committee or other agent. 6.2. Committee Action. A majority of the Committee shall constitute a quorum for the transaction of business. All actions taken by the Committee at a meeting shall be by the vote of a majority of those present at such meeting but any action may be taken by the Committee without a meeting upon written consent signed by all of the members of the Committee. 6.3. Plan Rules and Regulations. The Committee may from time to time establish rules and regulations for the administration of the Plan and adopt standard forms for such matters as elections, beneficiary designations and applications for benefits, provided such rules and forms are not inconsistent with the provisions of the Plan. 6.4. Determinations by Committee. All determinations of the Committee, including, but not limited to, all questions of construction and interpretation, shall be final, binding and conclusive on all parties and the Committee shall have complete discretion in making such determinations. 6.5. Plan Records. The Committee shall be responsible for maintaining books and records for the Plan. SECTION 7. CLAIM AND REVIEW PROCEDURES 7.1. Claims Procedure: Any person who believes he or she is being denied rights or benefits under the Plan may file a written claim with the Committee, containing the claimant's name, mailing address, telephone number and a detailed description of the claim or dispute. The Committee shall notify the claimant of its decision if a claim is denied in whole or part. The notification will be given within 90 days (45 days for disability benefit claims) after the claim is filed, or within 180 days (75 days for disability claims) if special circumstances require an extension of time for processing the claim (in the case of disability claims due to matters beyond the Plan's control) and written notice of the extension, the circumstances and the date the Plan expects to make its decision is given to the claimant within the initial 90 day period (45 day period for disability claims). The notification shall be written in a manner calculated to be understood by the claimant and shall contain: (1) specific reasons for the denial, -10- (2) specific reference to Plan provisions on which the decision is based, (3) a description of any necessary additional material or information and an explanation of why it is necessary, and (4) information as to the steps to be taken and time limits for submitting a request for review, including a statement of the claimant's right to bring a civil action under ERISA Section 502(a) after an adverse benefit determination on review. The processing of a disability benefit claim may be extended an additional 30 days beyond the first 30 day extension if written notice of the extension, the circumstances and the date the Plan expects to make its decision is given to the claimant before the expiration of the first 30 day extension. In the case of any extension of time for processing a disability benefit claim, the notice of extension shall explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim and the additional information needed to resolve those issues and the claimant shall be afforded at least 45 days within which to provide the specified information. If notification is not given by the Committee within the periods set forth above, the claim will be considered denied as of the last day of such period and the claimant may request review of the claim. 7.2. Review Procedure: (a) General Procedures. Within 60 days (180 days for disability benefit claims) of receipt by the claimant of the written notice of denial of the claim, or within 60 days (180 days for disability benefit claims) after the claim is deemed denied, the claimant may file an appeal of an adverse benefit determination with the Committee for a full and fair review of the denied claim. The claimant may submit written comments, documents, records and other information relating to the claim. Upon request, the claimant shall be provided, free of charge, reasonable access to and copies of all documents, records and other information relevant to the claim. The review decision shall take into account all comments, documents, records and other information submitted by the claimant relating to the claim without regard to whether such information was submitted or considered in the initial benefit determination. In the event of an adverse benefit determination on review, the Committee shall provide access to, and copies of, relevant documents, records and other information. (b) Disability Claims. The following special rules apply to review decisions on disability benefit claims: (1) the review shall not afford deference to the initial adverse benefit determination and shall be conducted by an appropriate named Plan fiduciary who is neither the individual who made the adverse benefit determination that is the subject of the appeal nor the subordinate of such individual; and (2) in deciding an appeal of any adverse benefit determination that is based in whole or in part on a medical judgment, the appropriate named fiduciary shall consult with a healthcare professional who has appropriate training and experience in the field of medicine involved in the medical judgment and who is neither an individual who was consulted in connection with the adverse benefit determination that is the subject of the appeal nor the subordinate of any such individual; and (3) the review decision shall identify the medical or vocational experts whose advice was obtained on the Plan's behalf in connection with a claimant's adverse benefit determination, without regarding to whether the advice was relied upon in making the benefit determination. -11- (c) Period For Review Decision. The Committee shall make its review decision within 60 days (45 days for disability benefit claims) after the receipt of the claimant's request for review, unless special circumstances require an extension of time, in which case the 60 day period (45 day period for disability benefit claims) may be extended to 120 days (90 for disability benefit claims). The Committee shall notify the claimant in writing of any extension before the end of the initial 60-day period (45 day period for disability benefit claims), explaining the circumstances requiring the extension and the date the Plan expects to make the determination on review. (d) Decisions By Committee. Benefit determinations by the Committee, if the Committee holds regularly scheduled meetings at least quarterly, shall be made no later than the date of the meeting after the Plan's receipt of a request for review. If the request for review is filed within 30 days preceding the date of such meeting, the benefit determination may be made by no later than the date of the second meeting after the Plan's receipt of the request for review. If special circumstances require a further extension of time for processing, a benefit determination shall be made not later than the third meeting of the Committee after the Plan's receipt of the request for review. The Committee shall provide the claimant with written notice of any extension, describing the special circumstances and the date as of which the benefit determination will be made, before the commencement of the extension. The Committee shall notify the claimant of the benefit determination not later than 5 days after the benefit determination is made. (e) Review Decision. An adverse benefit determination on review shall set forth, in a manner calculated to be understood by the claimant: (1) the specific reason or reasons for the adverse determination; (2) reference to the specific plan provisions on which the benefit determination is based; (3) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits; and (4) a statement describing the claimant's right to bring an action under ERISA Section 502(a). 7.3. Procedures Applying To Both Claims and Review Procedures: (a) Method of Notification. Notice of the Committee's adverse benefit determination may be by written or electronic notification. Any electronic notification shall comply with the standards imposed by 29 CFR 2520.104b-1(c)(1)(i), (iii) and (iv). (b) When Claim or Appeal Deemed Filed. A claim or appeal shall be considered filed when received by the Committee regardless of whether all the information necessary to make a benefit determination accompanies the filing. (c) Tolling of Period for Making Decision. If a time period is extended because of the claimant's failure to submit information necessary to decide a claim, the period for making the benefit determination shall be tolled from the date notification of the extension is sent to the claimant until the date the claimant responds to the request for additional information. -12- (d) Relevant Documents. A document, record or other information shall be considered relevant to a claim if it: (1) was relied upon in making the benefit determination, (2) was submitted, considered or generated in making the benefit determination, regardless of whether it was relied upon in making the benefit determination, or (3) demonstrates compliance with the administrative processes and safeguards required in making the benefit determination. (e) Disability Claims. If an internal rule, guideline, protocol, or other similar criterion is relied upon in making an adverse claim or review determination, either the specific rule, guideline, protocol, or other similar criterion, or a statement that such a rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination shall be stated in the claim and review decisions and that a copy of such rule, guideline, protocol, or other criterion will be provided free of charge to the claimant upon request. SECTION 8. PARTICIPATION BY RELATED COMPANIES 8.1 Adoption of Plan by Related Company. The Committee may designate a Related Company to become a Participating Company in the Plan as to its Eligible Officers. Any Related Company so designated may adopt the Plan and become a Participating Company by resolution of its Board of Directors, as of the effective date provided in such resolution. Participating Companies shall be subject to the terms and provisions of the Plan. By adopting the Plan, the Related Company designates the Company to administer the Plan and to amend or terminate the Plan pursuant to Article 9. 8.2 Withdrawal From Plan by Related Company. A Participating Company that wishes to withdraw from the Plan shall deliver to the Company a resolution of its Board of Directors which authorizes its withdrawal as a Participating Company. The Board may at any time, in its sole discretion, determine that a Participating Company shall no longer participate in the Plan and may direct that the Participating Company withdraw from the Plan. 8.3 Obligation of Participating Company. Each Related Company adopting the Plan agrees to make all payments required to be made under the Plan or provided to or on behalf of the Participants employed by such Participating Company, and agrees that the liability for making such payments and providing such benefits shall be the sole and exclusive obligation of such Participating Company. Each Related Company by adopting this Plan agrees to pay all fees and reimburse all expenses to the Company as required by the Company and as agreed to by the parties in connection with the administration of this Plan. SECTION 9. MISCELLANEOUS PROVISIONS 9.1. Amendment or Termination. The Company reserves the right to amend, modify, terminate or discontinue the Plan at any time by appropriate action taken by -13- the Committee, provided, however, that no such action shall reduce the amounts then credited to any Account of any Participant except for reductions necessitated by the claims of the Participating Company's general creditors as contemplated by Section 9.2, Plan expenses contemplated by Section 9.6 and offsets contemplated by Section 9.7. 9.2. Participant's Rights Unsecured. The Participating Company shall remain the owner of amounts deferred under the Plan. The Participant and the Participant's beneficiary have only the Participating Company's unsecured promise to pay. The rights accruing to the Participant and the Participant's beneficiary are those of an unsecured general creditor of the Participating Company. Any contract, policy or other asset which the Participating Company may utilize to assure itself of the funds to make payment shall not serve in any way as security to the Participant or beneficiary for the Participating Company's obligations under the Plan. Accounts established under the Plan are for bookkeeping purposes only and shall not be considered to create a fund for the Participant or beneficiary. 9.3. Nontransferability/Nonalienability. No right of any Participant or beneficiary to receive any Plan payment shall be subject to alienation, transfer, sale, assignment, pledge, attachment, garnishment or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such payments whether presently or thereafter payable shall be void. 9.4. Participant Obligation to Furnish Information. Each person entitled to receive a Plan payment, whether a Participant, a duly designated beneficiary, a guardian or otherwise, shall provide the Committee with such information as it may from time to time deem necessary or in its best interest in administering the Plan. Any such person shall also furnish the Committee with such documents, evidence, data or other information as the Committee may from time to time deem necessary or advisable. 9.5. No Right of Employment. The Plan shall not be deemed to constitute a contract of employment between a Participant and the Participating Company, nor shall any Plan provision restrict the right of the Participating Company to discharge a Participant, or restrict the right of a Participant to terminate his or her employment. 9.6. Plan Expenses. Unless paid by the Participating Company, expenses of administering the Plan shall be paid by the Participants, except as otherwise provided herein, and shall be debited among Participant Accounts in proportion to the Participant's Account balance to total Account balances. -14- 9.7. Offsets. As a condition to eligibility to participate in the Plan, each Participant consents to the deduction from amounts otherwise payable under the Plan to the Participant and the Participant beneficiaries all amounts owed by the Participant to the Participating Company and the Participating Company and its affiliates to the maximum extent permitted by applicable law. 9.8 Severability. The invalidity or unenforceability of any provision in this Plan shall not in any way affect the validity or enforceability of any other provision and the Plan shall be construed in all respects as if such invalid or unenforceable provision had never been in the Plan. 9.9 Enforceability. The Plan shall be binding upon, inure to the benefit of and be enforceable by the Participating Company and Participants and their respective legal representatives, successors and assigns. 9.10. Limitation of Actions. No lawsuit with respect to any benefit payable or other matter arising out or relating to the Plan may be brought before exhaustion of the claim and review procedures set forth in Section 7 and any lawsuit must be filed no later than one (1) year after a claim is denied or be forever barred. 9.11. Governing Law. The Plan shall be construed, administered and governed in all respects under and by the applicable laws of the State of Georgia. By participating in the Plan, the Participant irrevocably consents to the exclusive jurisdiction of the courts of the State of Georgia and of any federal court located in Northern District of Georgia in connection with any action or proceeding arising out of or relating to the Plan, any document or instrument delivered pursuant to or in connection with the Plan. -15- EX-10.39 12 g81844exv10w39.txt EX-10.39 EXECUTIVE LIFE INSURANCE EXHIBIT 10.39 EXECUTIVE LIFE INSURANCE ABOUT THE PLAN As a Home Depot Executive, you are automatically eligible to enroll in the Executive Life Insurance, Death Benefit Only Plan. This Plan adds to your Total Value Package because the Company insures your life for $250,000 and pays all of the premiums for you. Additionally, the Plan has no imputed income for you to report. To enroll in this benefit, you will need to complete several forms: - - Pacific Life application - - Consent to Insure - - Employment Death Benefit Agreement - - Beneficiary Designation form These are in the pocket at the back of this binder. Please answer all of the questions, provide information and sign where indicated. EXECUTIVE LIFE ENROLLMENT CHECKLIST For your convenience, we have prepared the following enrollment checklist. Please follow these steps before returning your EXECUTIVE BENEFITS ELECTION WORKSHEET. ON THE APPLICATION PLEASE ANSWER: Question 3: State of birth Question 25: Activity at work Question 27: Smoking status PLEASE SIGN AND DATE ALL FORMS. PLEASE RETURN ALL ORIGINAL FORMS to the Executive Benefits Representative, Benefits Department, C-9, Atlanta SSC within two weeks of receiving this enrollment binder. If you have questions about how the program works, or about any of the options, please call the Executive Benefits Representative at the Store Support Center in Atlanta. EX-10.40 13 g81844exv10w40.txt EX-10.40 EXECUTIVE PHYSICAL PROGRAM EXHIBIT 10.40 EXECUTIVE PHYSICAL PROGRAM ABOUT THE PLAN The Emory Clinic in Atlanta is the designated provider for The Home Depot officers. The Executive Health program is designed to monitor and maintain optimum health for The Home Deport officers. Comprehensive, annual medical protocols have been tailored to match the total potential health risks of our dynamic Home Depot officer team. In addition to an examination and thorough review of personal and family histories, age-related preventive testing is recommended. Please see the attached list of required age-related tests. Emory offers the latest technology. The Ultrafast CT Scan is a proven, non-invasive test which is many times more effective in detecting the presence of coronary plaque, even in people who are healthy and have no symptoms of heart disease. Our goal is to provide you with the tools to achieve optimal health. HOW THE PROGRAM WORKS You will receive notification that your physical is due on your birth date. If you are a new officer and have had your physical within six months of your birth date, Emory will ask you to wait until next year to have your next physical, unless there is a medical concern. ATLANTA-BASED OFFICERS The Emory Clinic will send a reminder letter at which time you can call or fax The Emory Clinic to make your appointment (404-778-3886). You will be sent instructions regarding lab work and a questionnaire to be completed prior to the scheduled physical. This service is an officer benefit, and no payment is required. OFFICERS BASED OUTSIDE OF ATLANTA You may select one of the following options: 1. THE EMORY CLINIC IN ATLANTA If you are planning to visit the Atlanta area, we encourage you to take advantage of the world-renowned Emory physicians, medical facilities, and technology at the Emory Clinic. Contact the Executive Health Program at (404-778-3886) prior to your arrival to arrange an appointment. 2. THE EXECUTIVE REGISTRY NETWORK If you are unable to come to Atlanta, please make your appointment with a Registry Network Hospital. Emory provides referrals to member hospitals throughout the United States, Canada and South America. Contact Building Better Health (BBH) at (770-384-4030) to arrange an appointment. Officers can elect to see a physician of their choice; however, we cannot guarantee the quality of care if you choose to do so. Please notify BBH after your physical has been scheduled so we can contact the hospital to review the tests for protocol and billing procedures. PAYMENT FOR EXECUTIVE PHYSICAL This service is an officer benefit with a cap of $1,250 for a basic and $3,750 for a comprehensive physical. All invoices are to be sent to the Manager of BBH for payment. Do not send invoices to your medical insurance for payment. BUILDING BETTER HEALTH (BBH) BBH provides comprehensive nutrition and fitness consultations as a part of your annual Executive Physical Program. These complimentary services are offered in the Atlanta SSC Wellness Center. EXECUTIVE NUTRITION PROGRAM Our BBH registered, licensed dietitian will provide you with a nutrition assessment and counseling for health promotion or treatment of nutrition-related diseases. HOW THE PROGRAM WORKS Contact BBH to schedule an appointment. At that time you will be provided with a food log for you to complete and bring with you to your appointment. You may invite anyone who regularly prepares your food or joins you in daily eating to attend your nutrition appointment. Your visit will last approximately one hour. During that time you and the registered dietitian will do the following: - - Assess your dietary practices and health history - - Develop a personalized nutrition program - - Review specific instructions and materials on appropriate food choices - - Establish good eating behavior - - Schedule a follow-up appointment to monitor progress EXECUTIVE FITNESS EVALUATION & EXERCISE PRESCRIPTION A BBH certified fitness trainer will provide you with a fitness evaluation to maximize the results of your efforts. The evaluation consists of checking blood pressure, body fat, muscular strength, muscular endurance, flexibility and aerobic capacity. The protocol utilized follows the American College Sports Medicine Guidelines. After the evaluation, you will receive a personalized exercise program for your current level of fitness, exercise interests and personal goals. Your program will be re-evaluated every six months to ensure proper progress. BBH provides you with one-on-one weight lifting workshops to orient you on the equipment at the SSC Wellness Center. The workshop teaches you proper strength training techniques for optimal safety and progress. APPOINTMENT SCHEDULING You or your assistant can call the BBH staff, (see the Resource List behind the Updates Tab for contact information), to make an appointment for the nutrition consultations, fitness evaluations, and exercise prescriptions. These services are offered at the Atlanta SSC Wellness facility. The Building Better Health staff is always on hand to answer any questions regarding your health and wellness. EX-10.42 14 g81844exv10w42.txt EX-10.42 LONG-TERM INCENTIVE PLAN EXHIBIT 10.42 LONG-TERM INCENTIVE PLAN (LTIP) WHAT IS THE LTIP? As a Key Senior Executive, we are pleased to announce that you are eligible for our new Long-Term Incentive Plan (LTIP), which takes effect in FY 2002. The objectives of the plan are: - - Focus business leaders on the attainment of long-term (three-year) company-wide strategic goals, - - Link executive compensation to the creation of shareholder value, and - - Attract, motivate, and retain high-level executive talent. You should know that you are in this plan because you are a member of the strategic leadership group that has the power to influence the long-term performance of the Company. PERFORMANCE MEASURE - - The performance measure for The Home Depot LTIP is Total Shareholder Return (TSR) measured against our peer group during the performance period. Change in Stock price over the Performance Period + Dividends Paid TSR = ------------------------------------ Beginning Stock Price - - The peer group consists of companies included in the S&P Retail Composite Index, which is used in our Proxy for the stock performance graph. Currently, that group has 35 companies. PERFORMANCE PERIOD Each Performance period is a three-year cycle with a new three-year performance period beginning every year. The periods overlap as follows:
2002 2003 2004 2005 2006 2007 - --------------------------------------------------------------------------------------------------------------- First Award Performance Period Payout - --------------------------------------------------------------------------------------------------------------- Second Award Performance Period Payout - --------------------------------------------------------------------------------------------------------------- Third Award Performance Period Payout - ---------------------------------------------------------------------------------------------------------------
The payout for the first performance period is 2005 with the opportunity for annual payouts thereafter, assuming appropriate levels of performance. TARGET AWARD - - 100% of base salary for your position. - - Target awards are established at the start of each performance period. AWARD VEHICLE AND PAYMENT FORM - - Target award established at the start of each performance period will be one-half cash and one-half performance shares. - - At the end of the performance period, any earned cash portion will be paid in cash and the earned performance share portion will be paid in shares of restricted stock. - - The restricted stock vests at the third anniversary of the grant or payout date. - - During the vesting period, participants will be entitled to receive dividends on the restricted shares. PAYOUT CALCULATION At the end of each three-year performance period, The Home Depot's TSR will be ranked among the retail companies in our peer group by listing the companies from highest TSR to lowest TSR. The chart below shows the percentage of LTIP target payout if The Home Depot's TSR rates in the 50th, 70th, 90th, and 100th percentile in its peer group. WHAT HAPPENS WHEN YOU END EMPLOYMENT - - If your employment ends because of death, disability, or retirement and you have participated for at least two years in a performance period, you will still receive pro rata awards for actual results at the end of the performance period. - - At retirement, all unvested restricted shares will vest. (Retirement is defined as age 60 or older with at least five years of service.) TAXES The portion of your target payout that is cash will be taxed when it is paid. Restricted stock grants are taxable in the year that they vest. However, dividends received as a result of restricted stock are taxable in the year they are earned. EX-13 15 g81844exv13.txt EX-13 ANNUAL REPORT . . . 2002 FINANCIAL REVIEW [HOME DEPOT LOGO] Management's Discussion and Analysis of Results of Operations and Financial Condition 22 Consolidated Statements of Earnings 28 Consolidated Balance Sheets 29 Consolidated Statements of Stockholders' Equity and Comprehensive Income 30 Consolidated Statements of Cash Flows 31 Notes to Consolidated Financial Statements 32 Management's Responsibility for Financial Statements 41 Independent Auditors' Report 41 10-Year Summary of Financial and Operating Results 42 Corporate and Stockholder Information 44 Board of Directors and Executive Officers 45
THE HOME DEPOT, INC. 2002 ANNUAL REPORT 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION THE HOME DEPOT, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED STATEMENTS OF EARNINGS DATA The data below reflect selected sales data, the percentage relationship between sales and major categories in the Consolidated Statements of Earnings and the percentage change in the dollar amounts of each of the items.
Percentage Increase Fiscal (Decrease) In Year(1) Dollar Amounts - -------------------------------------------------------------------------------------------------------------------------- 2002 2001 2002 2001 2000 vs. 2001 vs. 2000 - -------------------------------------------------------------------------------------------------------------------------- NET SALES 100.0% 100.0% 100.0% 8.8% 17.1% GROSS PROFIT 31.1 30.2 29.9 12.1 18.0 Operating Expenses: Selling and Store Operating 19.2 19.0 18.6 10.0 19.4 Pre-Opening 0.2 0.2 0.3 (17.9) (17.6) General and Administrative 1.7 1.7 1.8 7.2 12.0 - -------------------------------------------------------------------------------------------------------------------------- Total Operating Expenses 21.1 20.9 20.7 9.5 18.2 - -------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 10.0 9.3 9.2 18.2 17.7 Interest Income (Expense): Interest and Investment Income 0.1 0.1 0.1 49.1 12.8 Interest Expense (0.0) (0.1) (0.1) 32.1 33.3 - -------------------------------------------------------------------------------------------------------------------------- Interest, net 0.1 -- -- 68.0 (3.8) - -------------------------------------------------------------------------------------------------------------------------- EARNINGS BEFORE PROVISION FOR INCOME TAXES 10.1 9.3 9.2 18.5 17.5 Provision for Income Taxes 3.8 3.6 3.6 15.4 16.9 - -------------------------------------------------------------------------------------------------------------------------- NET EARNINGS 6.3% 5.7% 5.6% 20.4% 17.9% - -------------------------------------------------------------------------------------------------------------------------- SELECTED SALES DATA(2) Number of Transactions (000s) 1,160,994 1,090,975 936,519 6.4% 16.5% Average Sale per Transaction $ 49.43 $ 48.64 $ 48.65 1.6 -- Weighted Average Weekly Sales per Operating Store $ 772,000 $ 812,000 $864,000 (4.9) (6.0) Weighted Average Sales per Square Foot(3) $ 370.21 $ 387.93 $ 414.68 (4.6) (6.5) - --------------------------------------------------------------------------------------------------------------------------
(1) Fiscal years 2002, 2001 and 2000 refer to the fiscal years ended February 2, 2003, February 3, 2002 and January 28, 2001, respectively. Fiscal years 2002 and 2000 include 52 weeks, while fiscal year 2001 includes 53 weeks. (2) Includes all retail locations in excess of 50,000 square feet and, therefore, excludes Apex Supply Company, Georgia Lighting, Maintenance Warehouse, Your "other" Warehouse, Designplace Direct (formerly National Blinds and Wallpaper) and HD Builder Solutions Group locations. (3) Adjusted to reflect the first 52 weeks of the 53-week fiscal year in 2001. FORWARD-LOOKING STATEMENTS Certain statements made herein regarding implementation of store initiatives, store openings, capital expenditures and the effect of adopting certain accounting standards constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations. These risks and uncertainties include, but are not limited to, fluctuations in and the overall condition of the U.S. economy, stability of costs and availability of sourcing channels, conditions affecting new store development, our ability to implement new technologies and processes, our ability to attract, train and retain highly-qualified associates, unanticipated weather conditions, the impact of competition and the effects of regulatory and litigation matters. You should not place undue reliance on such forward-looking statements as such statements speak only as of the date on which they are made. Additional information concerning these and other risks and uncertainties is contained in our periodic filings with the Securities and Exchange Commission. RESULTS OF OPERATIONS For an understanding of the significant factors that influenced our performance during the past three fiscal years, the following discussion should be read in conjunction with the consolidated financial statements and the notes to consolidated financial statements presented in this annual report. 22 THE HOME DEPOT, INC. 2002 ANNUAL REPORT FISCAL YEAR ENDED FEBRUARY 2, 2003 ("FISCAL 2002") COMPARED TO FISCAL YEAR ENDED FEBRUARY 3, 2002 ("FISCAL 2001") Fiscal 2002 included 52 weeks as compared to 53 weeks in fiscal 2001. Net sales for fiscal 2002 increased 8.8% to $58.2 billion from $53.6 billion in fiscal 2001. This increase was attributable to the 203 new stores opened during fiscal 2002 and full year sales from the 204 new stores opened during fiscal 2001. The increase was partially offset by the net sales attributable to the additional week in fiscal 2001 of $880 million. Comparable store-for-store sales were flat in fiscal 2002, reflecting a number of internal and external factors. In the spring and early summer, we experienced some inventory out-of-stock positions as we transitioned through our new in-store Service Performance Improvement ("SPI") initiative, in which our stores handle and receive inventory at night. In addition, comparable store-for-store sales were negatively impacted by the level of merchandise resets implemented throughout the year, which disrupted in-store service and had a negative impact on our customers' experience in our stores. Kitchen and bath, plumbing and paint categories experienced strong comparable store-for-store sales growth for the year, which offset price deflation and the resulting comparable store-for-store sales decline in commodity categories such as lumber. In order to meet our customer service objectives, we strategically open stores near market areas served by existing strong performing stores ("cannibalize") to enhance service levels, gain incremental sales and increase market penetration. As of the end of fiscal 2002, certain new stores cannibalized 21% of our existing stores and we estimate that store cannibalization reduced total comparable store-for-store sales by approximately 4%, or about the same percentage as in the prior year. As we heavily cannibalized our most productive divisions, the weighted average weekly sales per store decreased during fiscal 2002 to $772,000 from $812,000 in the prior year. Additionally, we believe that our sales performance has been, and could continue to be, negatively impacted by the level of competition that we encounter in various markets. However, due to the highly-fragmented U.S. home improvement industry, in which we estimate our market share is approximately 10%, measuring the impact on our sales by our competitors is extremely difficult. During fiscal 2002, we continued the implementation or expansion of a number of in-store initiatives. We believe these initiatives will increase customer loyalty and operating efficiencies as they are fully implemented in the stores. The professional business customer ("Pro") initiative adds programs to our stores to enhance service levels to the Pro customer base. As of the end of fiscal 2002, the Pro initiative was in 1,135 stores or 74% of total stores, compared to 535 stores or 40% of total stores as of the end of fiscal 2001. This initiative is still in its early stages as approximately half of our stores implemented the Pro initiative in fiscal 2002. We expect to add the Pro initiative to an additional 204 stores by the end of fiscal 2003. As the Pro initiative matures within the stores in which it has been implemented, we expect to generate improvements in operating performance. We continued to implement the Appliance initiative which was started in the third quarter of fiscal 2001. The Appliance initiative offers customers an assortment of in-stock name brand appliances, including General Electric(R) and Maytag(R), and offers the ability to special order over 2,300 additional related products through computer kiosks located in the stores. In the stores which have implemented the Appliance initiative, we have enhanced the offering of appliances through 1,500 to 2,000 square feet of dedicated appliance selling space. Comparable store-for-store sales in the appliance category increased by approximately 23% in fiscal 2002. The Appliance initiative was in 743 or 48% of our stores as of the end of fiscal 2002, compared to 73 or 5% of our stores as of the end of fiscal 2001. We expect to add the Appliance initiative to an additional 671 stores by the end of fiscal 2003. We also continued to implement our Designplace initiative. This initiative offers an enhanced shopping experience to our design and decor customers by providing personalized service from specially-trained associates and an enhanced merchandise selection in an attractive setting. Although the Designplace initiative is in its early stages, stores generally show a positive sales trend after implementation. The Designplace initiative was in 873 or 57% of our stores as of the end of fiscal 2002, compared to 205 or 15% of our stores as of the end of fiscal 2001. We expect to add the Designplace initiative to an additional 556 stores by the end of fiscal 2003. In addition, we continued to drive our services programs, which focus primarily on providing products and services to our do-it-for-me customers. These programs are offered through Home Depot and EXPO Design Center stores. We also arrange for the provision of flooring installation services to homebuilders through HD Builder Solutions Group, Inc. Net service revenues for fiscal 2002 increased 25% to $2.0 billion from $1.6 billion for fiscal 2001. Gross profit as a percent of sales was 31.1% for fiscal 2002 compared to 30.2% for fiscal 2001. The rate increase was attributable to a reduction in the cost of merchandise sold which resulted from centralized purchasing, as we continued rationalizing vendor and sku assortments. Enhanced inventory control, resulting in lower shrink levels, and an increase in direct import penetration to 8% in fiscal 2002 from 6% in fiscal 2001 also positively impacted the gross profit rate. Operating expenses as a percent of sales were 21.1% for fiscal 2002 compared to 20.9% for fiscal 2001. Included in operating expenses are selling and store operating expenses which, as a percent of sales, increased to 19.2% in fiscal 2002 from 19.0% in fiscal 2001. The increase in selling and store THE HOME DEPOT, INC. 2002 ANNUAL REPORT 23 operating expenses was primarily attributable to higher costs associated with merchandise resets and store renovations as we invested in new signage, fixtures and general maintenance of our stores, a continued investment in store leadership positions in our stores and rising workers' compensation expense due in part to medical cost inflation. These increases were partially offset by a decrease in store payroll expense which resulted from improvement in labor productivity and effective wage rate management. Pre-opening expenses as a percent of sales were 0.2% for both fiscal 2002 and fiscal 2001. We opened 203 new stores in fiscal 2002 as compared to 204 new stores in fiscal 2001. General and administrative expenses as a percent of sales were 1.7% for both fiscal 2002 and fiscal 2001. Interest and investment income as a percent of sales was 0.1% for both fiscal 2002 and 2001. Interest expense as a percent of sales was 0.0% for fiscal 2002 and 0.1% for fiscal 2001. Our combined federal and state effective income tax rate decreased to 37.6% for fiscal 2002 from 38.6% for fiscal 2001. The decrease in fiscal 2002 was attributable to higher tax credits and a lower effective state income tax rate compared to fiscal 2001. FISCAL 2001 COMPARED TO FISCAL YEAR ENDED JANUARY 28, 2001 ("FISCAL 2000") Fiscal 2001 included 53 weeks as compared to 52 weeks in fiscal 2000. Net sales for fiscal 2001 increased 17.1% to $53.6 billion from $45.7 billion in fiscal 2000. This increase was attributable to, among other things, the 204 new stores opened during fiscal 2001 and full year sales from the 204 new stores opened during fiscal 2000. Approximately $880 million of the increase in sales was attributable to the additional week in fiscal 2001. Comparable store-for-store sales were flat in fiscal 2001 due to the weak economic environment resulting from certain factors including, but not limited to, low consumer confidence and high unemployment. Gross profit as a percent of sales was 30.2% for fiscal 2001 compared to 29.9% for fiscal 2000. The rate increase was primarily attributable to a lower cost of merchandise resulting from product line reviews, purchasing synergies created by our newly centralized merchandising structure and an increase in the number of tool rental centers from 342 at the end of fiscal 2000 to 466 at the end of fiscal 2001. Operating expenses as a percent of sales were 20.9% for fiscal 2001 compared to 20.7% for fiscal 2000. Included in operating expenses are selling and store operating expenses which, as a percent of sales, increased to 19.0% in fiscal 2001 from 18.6% in fiscal 2000. The increase was primarily attributable to growth in store occupancy costs resulting from higher depreciation and property taxes due to our investment in new stores, combined with increased energy costs. Also, credit card transaction fees were higher than the prior year due to increased penetration of total credit sales. These increases were partially offset by a decrease in store payroll expense due to an improvement in labor productivity which resulted from initiatives inside the store and new systems enhancements. Store initiatives included our SPI initiative which was introduced to every Home Depot store in fiscal 2001. Under SPI our stores receive and handle inventory at night, allowing our associates to spend more time with customers during peak selling hours. In addition, our Pro program was in 535 of our Home Depot stores at the end of fiscal 2001, providing dedicated store resources to serve the specific needs of professional customers. Pre-opening expenses as a percent of sales were 0.2% for fiscal 2001 and 0.3% for fiscal 2000. We opened 204 new stores in both fiscal 2001 and 2000. The decrease was primarily due to shorter pre-opening periods as we re-engineered our store opening process. General and administrative expenses as a percent of sales were 1.7% for fiscal 2001 compared to 1.8% for fiscal 2000. This decrease was primarily due to cost savings associated with the reorganization of certain components of our organizational structure, such as the centralization of our merchandising organization and our focus on expense control in areas such as travel. Interest and investment income as a percent of sales was 0.1% for both fiscal 2001 and 2000. Interest expense as a percent of sales was 0.1% for both fiscal 2001 and 2000. Our combined federal and state effective income tax rate decreased to 38.6% for fiscal 2001 from 38.8% for fiscal 2000. The decrease in fiscal 2001 was attributable to higher tax credits and a lower effective state income tax rate compared to fiscal 2000. LIQUIDITY AND CAPITAL RESOURCES Cash flow generated from operations provides us with a significant source of liquidity. For fiscal 2002, cash provided by operations decreased to $4.8 billion from $6.0 billion in fiscal 2001. The decrease was primarily due to a 7.9% increase in average inventory per store resulting from our focus on improving our in-stock position in fiscal 2002. During fiscal 2002, we experienced a significant growth in days payable outstanding to 42 days at the end of fiscal 2002 from 34 days at the end of fiscal 2001. The growth in days payable is the result of our efforts to move our payment terms to industry averages. We have realized the majority of the benefit from our renegotiated payment terms. 24 THE HOME DEPOT, INC. 2002 ANNUAL REPORT Cash used in investing activities decreased to $2.9 billion in fiscal 2002 from $3.5 billion in fiscal 2001. Capital expenditures decreased to $2.7 billion in fiscal 2002 from $3.4 billion in fiscal 2001. This decrease was due primarily to a shift in the timing of spending for future store openings. We opened 203 new stores in fiscal 2002 compared to 204 new stores in fiscal 2001. We own 195 and 188 of the stores opened in fiscal 2002 and fiscal 2001, respectively, and lease the remainder. We plan to open 206 stores in fiscal 2003, including 6 Home Depot Landscape Supply stores, and expect total capital expenditures to be approximately $4.0 billion, which includes a higher level of investment in store remodeling, technology and other initiatives as compared to fiscal 2002. Cash used in financing activities in fiscal 2002 was $2.2 billion compared with $173 million in fiscal 2001. This change is primarily due to the repurchase of approximately 68.6 million shares of our common stock for $2 billion, pursuant to the Share Repurchase Program approved by our Board of Directors in July 2002. We have a commercial paper program that allows borrowings for up to a maximum of $1 billion. As of February 2, 2003, there were no borrowings outstanding under the program. In connection with the program, we have a back-up credit facility with a consortium of banks for up to $800 million. The credit facility, which expires in September 2004, contains various restrictive covenants, none of which are expected to impact our liquidity or capital resources. We use capital and operating leases, as well as three off-balance sheet leases created under structured financing arrangements, to finance about 22% of our real estate. The net present value of capital lease obligations is reflected in our Consolidated Balance Sheets in Long-Term Debt. The three off-balance sheet leases were created to purchase land and fund the construction of certain stores, office buildings and distribution centers. Two of these lease agreements involve a special purpose entity ("SPE") which meets the criteria for non-consolidation established by generally accepted accounting principles and is not owned by or affiliated with our Company, management or officers. Operating and off-balance sheet leases are not reflected in our Consolidated Balance Sheets in accordance with generally accepted accounting principles. As of the end of fiscal 2002, our long-term debt-to-equity ratio was 6.7%. If the estimated net present value of future payments under the operating and off-balance sheet leases were capitalized, our long-term debt-to-equity ratio would increase to 28.5%. The following table summarizes our significant contractual obligations and commercial commitments as of February 2, 2003 (amounts in millions):
Payments Due By Fiscal Year ----------------------------------------------------------------- Contractual Obligations(1) Total 2003 2004-2005 2006-2007 Thereafter ------ ---- --------- --------- ---------- Long-Term Debt $1,051 $ 2 $502 $502 $ 45 Capital Lease Obligations 834 44 89 93 608 Operating Leases 7,308 541 988 864 4,915
Amount of Commitment Expiration Per Fiscal Year ----------------------------------------------------------------- Commercial Commitments(2) Total 2003 2004-2005 2006-2007 Thereafter ------ ---- --------- --------- ---------- Letters of Credit $ 930 $921 $ 9 $ -- $ -- Guarantees 799 -- 72 504 223
(1) Contractual obligations include long-term debt comprised primarily of $1 billion of Senior Notes further discussed in "Quantitative and Qualitative Disclosures about Market Risk" and future minimum lease payments under capital and operating leases, which include off-balance sheet leases, used in the normal course of business. (2) Commercial commitments include letters of credit for certain business transactions and guarantees provided under the off-balance sheet leases. We issue letters of credit for insurance programs, import purchases and construction contracts. Under the three off-balance sheet leases for certain stores, office buildings and distribution centers, we have provided residual value guarantees. The estimated maximum amount of the residual value guarantees at the end of the leases is $799 million. The leases expire at various dates during fiscal 2005 through 2008 with two of the leases having an option to renew through 2025. Events or circumstances that would require us to perform under the guarantees include 1) our default on the leases with the assets being sold for less than the initial book value, or 2) we decide not to purchase the assets at the end of the leases and the sale of the assets results in proceeds less than the initial book value of the assets. Our guarantees are limited to 82% of the initial book value of the assets. The expiration dates of the residual value guarantees as disclosed in the table above are based on the expiration of the leases; however, the expiration dates will change if the leases are renewed. THE HOME DEPOT, INC. 2002 ANNUAL REPORT 25 As of February 2, 2003, we had approximately $2.3 billion in cash and short-term investments. We believe that our current cash position, cash flow generated from operations, funds available from the $1 billion commercial paper program and the ability to obtain alternate sources of financing should be sufficient to enable us to complete our capital expenditure programs through the next several fiscal years. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure to market risk results primarily from fluctuations in interest rates. Although we have international operating entities, our exposure to foreign currency rate fluctuations is not significant to our financial condition and results of operations. Our objective for holding derivative instruments is primarily to decrease the volatility of earnings and cash flow associated with fluctuations in interest rates. We have financial instruments that are sensitive to changes in interest rates. These instruments include primarily fixed rate debt. As of February 2, 2003, we had $500 million of 5 3/8% Senior Notes and $500 million of 6 1/2% Senior Notes outstanding. The market values of the publicly traded 5 3/8% and 6 1/2% Senior Notes as of February 2, 2003, were approximately $538 million and $537 million, respectively. We have an interest rate swap agreement, with the notional amount of $300 million, that swaps fixed rate interest on $300 million of our $500 million 5 3/8% Senior Notes for a variable interest rate equal to LIBOR plus 30 basis points and expires on April 1, 2006. IMPACT OF INFLATION AND CHANGING PRICES Although we cannot accurately determine the precise effect of inflation on operations, we do not believe inflation has had a material effect on sales or results of operations. CRITICAL ACCOUNTING POLICIES Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements. The following discussion addresses our most critical accounting policies, which are those that are both important to the portrayal of our financial condition and results of operations and that require significant judgment or use of complex estimates. REVENUE RECOGNITION We recognize revenue, net of estimated returns, at the time the customer takes possession of the merchandise or receives services. We estimate the liability for sales returns based on our historical return levels. The methodology used is consistent with other retailers. We believe that our estimate for sales returns is an accurate reflection of future returns. When we receive payment from customers before the customer has taken possession of the merchandise or the service has been performed, the amount received is recorded in Deferred Revenue in the accompanying Consolidated Balance Sheets. INVENTORY Our inventory is stated at the lower of cost (first-in, first-out) or market, with approximately 93% valued under the retail method and the remainder under the cost method. Retailers with many different types of merchandise at low unit cost with a large number of transactions frequently use the retail method. Under the retail method, inventory is stated at cost which is determined by applying a cost-to-retail ratio to the ending retail value of inventory. As our inventory retail value is adjusted regularly to reflect market conditions, our inventory methodology approximates the lower of cost or market. Accordingly, there were no significant valuation reserves related to our inventory as of February 2, 2003 and February, 2002. In addition, we reduce our ending inventory value for estimated losses related to shrink. This estimate is determined based upon analysis of historical shrink losses and recent shrink trends. SELF INSURANCE We are self-insured for certain losses related to general liability, product liability, workers' compensation and medical claims. Our liability represents an estimate of the ultimate cost of claims incurred as of the balance sheet date. The estimated liability is not discounted and is established based upon analysis of historical data and actuarial estimates, and is reviewed by management and third party actuaries on a quarterly basis to ensure that the liability is appropriate. While we believe these estimates are reasonable based on the information currently available, if actual trends, including the severity or frequency of claims, medical cost inflation, or fluctuations in premiums, differ from our estimates, our results of operations could be impacted. CHANGE IN ACCOUNTING FOR STOCK-BASED COMPENSATION During fiscal 2002 and all fiscal years prior, we elected to account for our stock-based compensation plans under Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees," which requires the recording of compensation expense for some, but not all, stock-based compensation, rather than the alternative accounting permitted by Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." In December 2002, SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure," was issued, which provides three alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based compensation in accordance with SFAS No. 123. 26 THE HOME DEPOT, INC. 2002 ANNUAL REPORT Effective February 3, 2003, we adopted the fair value method of recording compensation expense related to all stock options granted after February 2, 2003, in accordance with SFAS Nos. 123 and 148. Accordingly, the fair value of stock options as determined on the date of grant using the Black-Scholes option-pricing model will be expensed over the vesting period of the related stock options. The estimated negative impact on diluted earnings per share is approximately $.02 for fiscal 2003. The actual impact may differ from this estimate as the estimate is based upon a number of factors including, but not limited to, the number of stock options granted and the fair value of the stock options on the date of grant. RECENT ACCOUNTING PRONOUNCEMENTS In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of Variable Interest Entities." Interpretation No. 46 requires consolidation of a variable interest entity if a company's variable interest absorbs a majority of the entity's losses or receives a majority of the entity's expected residual returns, or both. We do not have a variable interest in the SPE created as part of our off-balance sheet structured financing arrangements and, therefore, we are not required to consolidate the SPE. We do not expect Interpretation No. 46 to have any impact on our consolidated financial statements. In January 2003, the Emerging Issues Task Force issued EITF 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor," which states that cash consideration received from a vendor is presumed to be a reduction of the prices of the vendor's products or services and should, therefore, be characterized as a reduction of Cost of Merchandise Sold when recognized in our Consolidated Statements of Earnings. That presumption is overcome when the consideration is either a reimbursement of specific, incremental, identifiable costs incurred to sell the vendor's products, or a payment for assets or services delivered to the vendor. EITF 02-16 is effective for arrangements entered into after December 31, 2002. We are currently assessing the impact of the adoption of EITF 02-16 and do not expect the adoption to materially impact net earnings in fiscal 2003. We do, however, expect that certain payments received from our vendors that are currently reflected as a reduction in advertising expense, which is classified as Selling and Store Operating Expense, will be reclassified as a reduction of Cost of Merchandise Sold. In December 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," which provides for additional disclosures to be made by a guarantor in its interim and annual financial statements about its obligations and requires, under certain circumstances, a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. We have adopted the disclosure requirements for the fiscal year ended February 2, 2003. We do not expect the recognition and measurement provisions of Interpretation No. 45 for guarantees issued or modified after December 31, 2002, to have a material impact on our consolidated financial statements. THE HOME DEPOT, INC. 2002 ANNUAL REPORT 27 CONSOLIDATED STATEMENTS OF EARNINGS THE HOME DEPOT, INC. AND SUBSIDIARIES
Fiscal Year Ended(1) ------------------------------------------------- February 2, February 3, January 28, amounts in millions, except per share data 2003 2002 2001 - ---------------------------------------------------------------------------------------------------- NET SALES $ 58,247 $ 53,553 $ 45,738 Cost of Merchandise Sold 40,139 37,406 32,057 - ---------------------------------------------------------------------------------------------------- GROSS PROFIT 18,108 16,147 13,681 Operating Expenses: Selling and Store Operating 11,180 10,163 8,513 Pre-Opening 96 117 142 General and Administrative 1,002 935 835 - ---------------------------------------------------------------------------------------------------- Total Operating Expenses 12,278 11,215 9,490 - ---------------------------------------------------------------------------------------------------- OPERATING INCOME 5,830 4,932 4,191 Interest Income (Expense): Interest and Investment Income 79 53 47 Interest Expense (37) (28) (21) - ---------------------------------------------------------------------------------------------------- Interest, net 42 25 26 - ---------------------------------------------------------------------------------------------------- EARNINGS BEFORE PROVISION FOR INCOME TAXES 5,872 4,957 4,217 Provision for Income Taxes 2,208 1,913 1,636 - ---------------------------------------------------------------------------------------------------- NET EARNINGS $ 3,664 $ 3,044 $ 2,581 - ---------------------------------------------------------------------------------------------------- Weighted Average Common Shares 2,336 2,335 2,315 BASIC EARNINGS PER SHARE $ 1.57 $ 1.30 $ 1.11 - ---------------------------------------------------------------------------------------------------- Diluted Weighted Average Common Shares 2,344 2,353 2,352 DILUTED EARNINGS PER SHARE $ 1.56 $ 1.29 $ 1.10 - ----------------------------------------------------------------------------------------------------
(1) Fiscal years ended February 2, 2003 and January 28, 2001 include 52 weeks. Fiscal year ended February 3, 2002 includes 53 weeks. See accompanying notes to consolidated financial statements. 28 THE HOME DEPOT, INC. 2002 ANNUAL REPORT CONSOLIDATED BALANCE SHEETS THE HOME DEPOT, INC. AND SUBSIDIARIES
February 2, February 3, amounts in millions, except per share data 2003 2002 - ------------------------------------------------------------------------------------------------ ASSETS Current Assets: Cash and Cash Equivalents $ 2,188 $ 2,477 Short-Term Investments, including current maturities of long-term investments 65 69 Receivables, net 1,072 920 Merchandise Inventories 8,338 6,725 Other Current Assets 254 170 - ------------------------------------------------------------------------------------------------ Total Current Assets 11,917 10,361 - ------------------------------------------------------------------------------------------------ Property and Equipment, at cost: Land 5,560 4,972 Buildings 9,197 7,698 Furniture, Fixtures and Equipment 4,074 3,403 Leasehold Improvements 872 750 Construction in Progress 724 1,049 Capital Leases 306 257 - ------------------------------------------------------------------------------------------------ 20,733 18,129 Less Accumulated Depreciation and Amortization 3,565 2,754 - ------------------------------------------------------------------------------------------------ Net Property and Equipment 17,168 15,375 - ------------------------------------------------------------------------------------------------ Notes Receivable 107 83 Cost in Excess of the Fair Value of Net Assets Acquired, net of accumulated amortization of $50 at February 2, 2003 and $49 at February 3, 2002 575 419 Other Assets 244 156 - ------------------------------------------------------------------------------------------------ $ 30,011 $ 26,394 - ------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 4,560 $ 3,436 Accrued Salaries and Related Expenses 809 717 Sales Taxes Payable 307 348 Deferred Revenue 998 851 Income Taxes Payable 227 211 Other Accrued Expenses 1,134 938 - ------------------------------------------------------------------------------------------------ Total Current Liabilities 8,035 6,501 - ------------------------------------------------------------------------------------------------ Long-Term Debt, excluding current installments 1,321 1,250 Other Long-Term Liabilities 491 372 Deferred Income Taxes 362 189 STOCKHOLDERS' EQUITY Common Stock, par value $0.05; authorized: 10,000 shares, issued and outstanding 2,362 shares at February 2, 2003 and 2,346 shares at February 3, 2002 118 117 Paid-in Capital 5,858 5,412 Retained Earnings 15,971 12,799 Accumulated Other Comprehensive Loss (82) (220) Unearned Compensation (63) (26) Treasury Stock, at cost, 69 shares at February 2, 2003 (2,000) -- - ------------------------------------------------------------------------------------------------ Total Stockholders' Equity 19,802 18,082 - ------------------------------------------------------------------------------------------------ $ 30,011 $ 26,394 - ------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. THE HOME DEPOT, INC. 2002 ANNUAL REPORT 29 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME THE HOME DEPOT, INC. AND SUBSIDIARIES
Accumulated Other Common Stock Paid-In Retained Comprehensive amounts in millions, except per share data Shares Amount Capital Earnings Income (Loss) - ------------------------------------------ ------ ------ ------- -------- ------------- BALANCE, JANUARY 30, 2000 2,304 $115 $4,319 $ 7,941 $ (27) ===== ===== ====== ======== ===== Net Earnings -- -- -- 2,581 -- Shares Issued Under Employee Stock Purchase and Option Plans 20 1 348 -- -- Tax Effect of Sale of Option Shares by Employees -- -- 137 -- -- Translation Adjustments -- -- -- -- (40) Stock Compensation Expense -- -- 6 -- -- Cash Dividends ($0.16 per share) -- -- -- (371) -- Comprehensive Income ----- ----- ------ -------- ----- BALANCE, JANUARY 28, 2001 2,324 $116 $4,810 $ 10,151 $ (67) ===== ===== ====== ======== ===== Net Earnings -- -- -- 3,044 -- Shares Issued Under Employee Stock Purchase and Option Plans 22 1 448 -- -- Tax Effect of Sale of Option Shares by Employees -- -- 138 -- -- Translation Adjustments -- -- -- -- (124) Unrealized Loss on Derivative -- -- -- -- (29) Stock Compensation Expense -- -- 16 -- -- Cash Dividends ($0.17 per share) -- -- -- (396) -- Comprehensive Income ----- ----- ------ -------- ----- BALANCE, FEBRUARY 3, 2002 2,346 $117 $5,412 $ 12,799 $(220) ===== ===== ====== ======== ===== Net Earnings -- -- -- 3,664 -- Shares Issued Under Employee Stock Purchase and Option Plans 16 1 366 -- -- Tax Effect of Sale of Option Shares by Employees -- -- 68 -- -- Translation Adjustments -- -- -- -- 109 Realized Loss on Derivative -- -- -- -- 29 Stock Compensation Expense -- -- 12 -- -- Repurchase of Common Stock -- -- -- -- -- Cash Dividends ($0.21 per share) -- -- -- (492) -- Comprehensive Income ----- ----- ------ -------- ----- BALANCE, FEBRUARY 2, 2003 2,362 $118 $5,858 $ 15,971 $ (82) ===== ===== ====== ======== ===== Total Treasury Stock Unearned Stockholders' Comprehensive Shares Amount Compensation Equity Income(1) ------- ------- ------------ ------------- ------------- BALANCE, JANUARY 30, 2000 -- $ -- $ (7) $ 12,341 ===== ======= ===== ======== Net Earnings -- -- -- 2,581 $ 2,581 Shares Issued Under Employee Stock Purchase and Option Plans -- -- 1 350 Tax Effect of Sale of Option Shares by Employees -- -- -- 137 Translation Adjustments -- -- -- (40) (40) Stock Compensation Expense -- -- -- 6 Cash Dividends ($0.16 per share) -- -- -- (371) ------- Comprehensive Income $ 2,541 ------ ------- ---- -------- ------- BALANCE, JANUARY 28, 2001 -- $ -- $ (6) $ 15,004 ====== ======= ==== ======== Net Earnings -- -- -- 3,044 $ 3,044 Shares Issued Under Employee Stock Purchase and Option Plans -- -- (20) 429 Tax Effect of Sale of Option Shares by Employees -- -- -- 138 Translation Adjustments -- -- -- (124) (124) Unrealized Loss on Derivative -- -- -- (29) (18) Stock Compensation Expense -- -- -- 16 Cash Dividends ($0.17 per share) -- -- -- (396) ------- Comprehensive Income $ 2,902 ------ ------- ---- -------- ------- BALANCE, FEBRUARY 3, 2002 -- $ -- $(26) $ 18,082 ====== ======= ==== ======== Net Earnings -- -- -- 3,664 $ 3,664 Shares Issued Under Employee Stock Purchase and Option Plans -- -- (37) 330 Tax Effect of Sale of Option Shares by Employees -- -- -- 68 Translation Adjustments -- -- -- 109 109 Realized Loss on Derivative -- -- -- 29 18 Stock Compensation Expense -- -- -- 12 Repurchase of Common Stock (69) (2,000) -- (2,000) Cash Dividends ($0.21 per share) -- -- -- (492) Comprehensive Income $ 3,791 ------ ------- ---- -------- ------- BALANCE, FEBRUARY 2, 2003 (69) $(2,000) $(63) $ 19,802 ====== ======= ==== ========
(1) Components of comprehensive income are reported net of related income taxes. See accompanying notes to consolidated financial statements. 30 THE HOME DEPOT, INC. 2002 ANNUAL REPORT CONSOLIDATED STATEMENTS OF CASH FLOWS THE HOME DEPOT, INC. AND SUBSIDIARIES
Fiscal Year Ended(1) ---------------------------------------------- February 2, February 3, January 28, amounts in millions 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATIONS: Net Earnings $ 3,664 $ 3,044 $ 2,581 Reconciliation of Net Earnings to Net Cash Provided by Operations: Depreciation and Amortization 903 764 601 Increase in Receivables, net (38) (119) (246) Increase in Merchandise Inventories (1,592) (166) (1,075) Increase in Accounts Payable and Accrued Liabilities 1,394 1,878 268 Increase in Deferred Revenue 147 200 486 Increase in Income Taxes Payable 83 272 151 Increase (Decrease) in Deferred Income Taxes 173 (6) 108 Other 68 96 (78) - ------------------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operations 4,802 5,963 2,796 - ------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures, net of $49, $5 and $16 of non-cash capital expenditures in fiscal 2002, 2001 and 2000, respectively (2,749) (3,393) (3,558) Payments for Businesses Acquired, net (235) (190) (26) Proceeds from Sales of Businesses, net 22 64 -- Proceeds from Sales of Property and Equipment 105 126 95 Purchases of Investments (583) (85) (39) Proceeds from Maturities of Investments 506 25 30 Other -- (13) (32) - ------------------------------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (2,934) (3,466) (3,530) - ------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: (Repayments) Issuances of Commercial Paper Obligations, net -- (754) 754 Proceeds from Long-Term Debt 1 532 32 Repayments of Long-Term Debt -- -- (29) Repurchase of Common Stock (2,000) -- -- Proceeds from Sale of Common Stock, net 326 445 351 Cash Dividends Paid to Stockholders (492) (396) (371) - ------------------------------------------------------------------------------------------------------------------------- Net Cash (Used in) Provided by Financing Activities (2,165) (173) 737 - ------------------------------------------------------------------------------------------------------------------------- Effect of Exchange Rate Changes on Cash and Cash Equivalents 8 (14) (4) - ------------------------------------------------------------------------------------------------------------------------- (Decrease) Increase in Cash and Cash Equivalents (289) 2,310 (1) Cash and Cash Equivalents at Beginning of Year 2,477 167 168 - ------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 2,188 $ 2,477 $ 167 ========================================================================================================================= SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR: Interest, net of interest capitalized $ 50 $ 18 $ 16 Income Taxes $ 1,951 $ 1,685 $ 1,386 =========================================================================================================================
(1) Fiscal years ended February 2, 2003, and January 28, 2001, include 52 weeks. Fiscal year ended February 3, 2002, includes 53 weeks. See accompanying notes to consolidated financial statements. THE HOME DEPOT, INC. 2002 ANNUAL REPORT 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THE HOME DEPOT, INC. AND SUBSIDIARIES 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS, CONSOLIDATION AND PRESENTATION The Home Depot, Inc. and subsidiaries (the "Company") operate Home Depot stores, which are full-service, warehouse-style stores averaging approximately 108,000 square feet in size. The stores stock approximately 40,000 to 50,000 different kinds of building materials, home improvement supplies and lawn and garden products that are sold primarily to do-it-yourselfers, but also to home improvement contractors, tradespeople and building maintenance professionals. In addition, the Company operates EXPO Design Center stores, which offer products and services primarily related to design and renovation projects, Home Depot Landscape Supply stores which service landscape professionals and garden enthusiasts with lawn, landscape and garden products and Home Depot Supply stores serving primarily professional customers. The Company also operates one Home Depot Floor Store, a test store that offers only flooring products and installation services. At the end of fiscal 2002, the Company was operating 1,532 stores in total, which included 1,370 Home Depot stores, 52 EXPO Design Center stores, 5 Home Depot Supply stores, 3 Home Depot Landscape Supply stores and 1 Home Depot Floor Store in the United States ("U.S."); 89 Home Depot stores in Canada and 12 Home Depot stores in Mexico. Included in the Company's Consolidated Balance Sheet at February 2, 2003, were $1.2 billion of net assets of the Canada and Mexico operations. The consolidated results include several wholly-owned subsidiaries. The Company offers facilities maintenance and repair products as well as wallpaper and custom window treatments via direct shipment through its subsidiaries, Maintenance Warehouse America Corp. and National Blinds and Wallpaper, Inc. (doing business as Designplace Direct). Georgia Lighting, Inc. is a specialty lighting designer, distributor and retailer to both commercial and retail customers. The Company offers plumbing, HVAC and other professional plumbing products through wholesale plumbing distributors Apex Supply Company, Inc. and Home Depot Your "other" Warehouse, LLC. The Company also arranges for the provision of flooring installation services to homebuilders through HD Builder Solutions Group, Inc. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. FISCAL YEAR The Company's fiscal year is a 52 or 53-week period ending on the Sunday nearest to January 31. Fiscal years 2002 and 2000, which ended February 2, 2003, and January 28, 2001, respectively, include 52 weeks. Fiscal year 2001, which ended February 3, 2002, includes 53 weeks. CASH EQUIVALENTS The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The Company's cash and cash equivalents are carried at fair market value and consist primarily of high-grade commercial paper, money market funds, U.S. government agency securities and tax-exempt notes and bonds. ACCOUNTS RECEIVABLE The Company has an agreement with a third-party service provider who manages the Company's private label credit card program and directly extends credit to customers. The Company's valuation reserve related to accounts receivable was not material as of February 2, 2003 and February 3, 2002. MERCHANDISE INVENTORIES The majority of the Company's inventory is stated at the lower of cost (first-in, first-out) or market, as determined by the retail inventory method. Certain subsidiaries and distribution centers record inventories at lower of cost (first-in, first-out) or market, as determined by the cost method. These inventories represent approximately 7% of total inventory. INVESTMENTS The Company's investments, consisting primarily of high-grade debt securities, are recorded at fair value and are classified as available-for-sale. INCOME TAXES The Company provides for federal, state and foreign income taxes currently payable, as well as for those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Federal, state and foreign incentive tax credits are recorded as a reduction of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date. 32 THE HOME DEPOT, INC. 2002 ANNUAL REPORT The Company and its eligible subsidiaries file a consolidated U.S. federal income tax return. Non-U.S. subsidiaries, which are consolidated for financial reporting purposes, are not eligible to be included in consolidated U.S. federal income tax returns. Separate provisions for income taxes have been determined for these entities. The Company intends to reinvest the unremitted earnings of its non-U.S. subsidiaries and postpone their remittance indefinitely. Accordingly, no provision for U.S. income taxes for non-U.S. subsidiaries was recorded in the accompanying Consolidated Statements of Earnings. DEPRECIATION AND AMORTIZATION The Company's buildings, furniture, fixtures and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Improvements to leased assets are amortized using the straight-line method over the life of the lease or the useful life of the improvement, whichever is shorter. The Company's property and equipment is depreciated using the following estimated useful lives:
Life - --------------------------------------------------- Buildings 10-45 years Furniture, fixtures and equipment 5-20 years Leasehold improvements 5-30 years Computer equipment and software 3-5 years
REVENUES The Company recognizes revenue, net of estimated returns, at the time the customer takes possession of merchandise or receives services. When the Company receives payment from customers before the customer has taken possession of the merchandise or the service has been performed, the amount received is recorded in Deferred Revenue in the accompanying Consolidated Balance Sheets. SERVICE REVENUES Total revenues include service revenues generated through a variety of installation and home maintenance programs in Home Depot and EXPO stores as well as through the Company's subsidiary, HD Builder Solutions Group, Inc. In these programs, the customer selects and purchases materials for a project and the Company provides or arranges professional installation. When the Company subcontracts the installation of a project and the subcontractor provides material as part of the installation, both the material and labor are included in service revenues. The Company recognizes this revenue when the service for the customer is completed. All payments received prior to the completion of services are recorded in Deferred Revenue in the accompanying Consolidated Balance Sheets. Net service revenues, including the impact of deferred revenue, were $2.0 billion, $1.6 billion and $1.3 billion for the fiscal years 2002, 2001 and 2000, respectively. SELF INSURANCE The Company is self-insured for certain losses related to general liability, product liability, workers' compensation and medical claims. The expected ultimate cost for claims incurred as of the balance sheet date is not discounted and is recognized as a liability. The expected ultimate cost of claims is estimated based upon analysis of historical data and actuarial estimates. ADVERTISING Television and radio advertising production costs along with media placement costs are expensed when the advertisement first appears. Included in Current Assets in the accompanying Consolidated Balance Sheets are $20 million and $15 million at the end of fiscal years 2002 and 2001, respectively, relating to prepayments of production costs for print and broadcast advertising. Gross advertising expense is classified as Selling and Store Operating Expenses and was $895 million, $817 million and $722 million, in fiscal years 2002, 2001 and 2000, respectively. Advertising allowances earned from vendors fully offset gross advertising expenses. In fiscal 2002, 2001 and 2000, advertising allowances exceeded gross advertising expense by $30 million, $31 million and $62 million, respectively. These excess amounts were recorded as a reduction in Cost of Merchandise Sold in the accompanying Consolidated Statements of Earnings. SHIPPING AND HANDLING COSTS The Company accounts for certain shipping and handling costs related to the shipment of product to customers from vendors as Cost of Merchandise Sold. However, cost of shipping and handling to customers by the Company is classified as Selling and Store Operating Expenses. The cost of shipping and handling, including internal costs and payments to third parties, classified as Selling and Store Operating Expenses was $341 million, $278 million and $226 million in fiscal years 2002, 2001 and 2000, respectively. COST IN EXCESS OF THE FAIR VALUE OF NET ASSETS ACQUIRED Goodwill represents the excess of purchase price over fair value of net assets acquired. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," the Company stopped amortizing goodwill effective February 4, 2002. Amortization expense was $8 million in both fiscal 2001 and fiscal 2000. The Company assesses the recoverability of goodwill at least annually by determining whether the fair value of each reporting entity supports its carrying value. The Company completed its assessment of goodwill for fiscal 2002 and recorded an impairment charge of $1.3 million. THE HOME DEPOT, INC. 2002 ANNUAL REPORT 33 IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. Impairment is recognized to the extent the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. When the Company commits to relocate or close a location, a charge is recorded to Selling and Store Operating Expenses to write down the related assets to the estimated net recoverable value. In August 2002, the Company adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." In accordance with SFAS No. 146, the Company recognizes Selling and Store Operating Expense for the net present value of future lease obligations, less estimated sublease income when the location closes. Prior to the adoption of SFAS No. 146, the Company recognized this Selling and Store Operating Expense when the Company committed to a plan to relocate or close a location. STOCK-BASED COMPENSATION During fiscal 2002 and all fiscal years prior, the Company elected to account for its stock-based compensation plans under Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees," which requires the recording of compensation expense for some, but not all, stock-based compensation rather than the alternative accounting permitted by SFAS No. 123, "Accounting for Stock-Based Compensation." The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based compensation (amounts in millions, except per share data):
Fiscal Year Ended February 2, February 3, January 28, 2003 2002 2001 - ------------------------------------------------------------------ Net Earnings As reported $3,664 $3,044 $2,581 Pro forma $3,414 $2,800 $2,364 Basic Earnings per Share As reported $ 1.57 $ 1.30 $ 1.11 Pro forma $ 1.46 $ 1.20 $ 1.02 Diluted Earnings per Share As reported $ 1.56 $ 1.29 $ 1.10 Pro forma $ 1.46 $ 1.19 $ 1.01 - -----------------------------------------------------------------
In December 2002, SFAS No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure," was issued, which provides three alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based compensation in accordance with SFAS No. 123. Effective February 3, 2003, the Company adopted the fair value method of recording compensation expense related to all stock options granted after February 2, 2003, in accordance with SFAS Nos. 123 and 148. Accordingly, the fair value of stock options as determined on the date of grant using the Black-Scholes option-pricing model will be expensed over the vesting period of the related stock options. The estimated negative impact on diluted earnings per share is approximately $.02 for fiscal 2003. The actual impact may differ from this estimate as the estimate is based upon a number of factors including, but not limited to, the number of stock options granted and the fair value of the stock options on the date of grant. DERIVATIVES The Company measures derivatives at fair value and recognizes these assets or liabilities on the Consolidated Balance Sheets. Recognition of changes in the fair value of a derivative in the Consolidated Statements of Earnings or Consolidated Statements of Stockholders' Equity and Comprehensive Income depends on the intended use of the derivative and its designation. The Company designates derivatives based upon criteria established by SFAS Nos. 133 and 138, "Accounting for Derivative Instruments and Hedging Activities." The Company's primary objective for holding derivative instruments is to decrease the volatility of earnings and cash flow associated with fluctuations in interest rates. COMPREHENSIVE INCOME Comprehensive income includes net earnings adjusted for certain revenues, expenses, gains and losses that are excluded from net earnings under generally accepted accounting principles. Examples include foreign currency translation adjustments and unrealized gains and losses on certain hedge transactions. FOREIGN CURRENCY TRANSLATION The assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current rate of exchange on the last day of the reporting period. Revenues and expenses are translated at the average monthly exchange rates, and equity transactions are translated using the actual rate on the day of the transaction. USE OF ESTIMATES Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in preparing these financial statements in conformity with generally accepted accounting principles. Actual results could differ from these estimates. 34 THE HOME DEPOT, INC. 2002 ANNUAL REPORT RECLASSIFICATIONS Certain amounts in prior fiscal years have been reclassified to conform with the presentation adopted in the current fiscal year. 2 LONG-TERM DEBT The Company's long-term debt at the end of fiscal 2002 and fiscal 2001 consisted of the following (amounts in millions):
February 2, February 3, 2003 2002 - ----------------------------------------------------------------------- 6 1/2% Senior Notes; due September 15, 2004; interest payable semi-annually on March 15 and September 15 $ 500 $ 500 5 3/8% Senior Notes; due April 1, 2006; interest payable semi-annually on April 1 and October 1 500 500 Capital Lease Obligations; payable in varying installments through May 31, 2027 277 232 Other 51 23 - ----------------------------------------------------------------------- Total long-term debt 1,328 1,255 Less current installments 7 5 - ----------------------------------------------------------------------- Long-term debt, excluding current installments $1,321 $1,250 =======================================================================
The Company has a commercial paper program with maximum available borrowings for up to $1 billion. In connection with the program, the Company has a back-up credit facility with a consortium of banks for up to $800 million. The credit facility, which expires in September 2004, contains various restrictive covenants, none of which are expected to materially impact the Company's liquidity or capital resources. The Company had $500 million of 6 1/2% Senior Notes and $500 million of 5 3/8% Senior Notes outstanding as of February 2, 2003, collectively referred to as "Senior Notes." The Senior Notes may be redeemed by the Company at any time, in whole or in part, at a redemption price plus accrued interest up to the redemption date. The redemption price is equal to the greater of (1) 100% of the principal amount of the Senior Notes to be redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest to maturity. The Senior Notes are not subject to sinking fund requirements. Interest Expense in the accompanying Consolidated Statements of Earnings is net of interest capitalized of $59 million, $84 million and $73 million in fiscal years 2002, 2001 and 2000, respectively. Maturities of long-term debt are $7 million for fiscal 2003, $507 million for fiscal 2004, $8 million for fiscal 2005, $509 million for fiscal 2006 and $11 million for fiscal 2007. As of February 2, 2003, the market values of the publicly traded 6 1/2% and 5 3/8% Senior Notes were approximately $537 million and $538 million, respectively. The estimated fair value of all other long-term borrowings, excluding capital lease obligations, approximated the carrying value of $51 million. These fair values were estimated using a discounted cash flow analysis based on the Company's incremental borrowing rate for similar liabilities. 3 INCOME TAXES The provision for income taxes consisted of the following (in millions):
Fiscal Year Ended February 2, February 3, January 28, 2003 2002 2001 - ------------------------------------------------------------------------------- Current: Federal $ 1,679 $ 1,594 $1,267 State 239 265 216 Foreign 117 60 45 - ------------------------------------------------------------------------------- 2,035 1,919 1,528 =============================================================================== Deferred: Federal 174 (12) 98 State 1 (1) 9 Foreign (2) 7 1 173 (6) 108 - ------------------------------------------------------------------------------- Total $ 2,208 $ 1,913 $1,636 ===============================================================================
The Company's combined federal, state and foreign effective tax rates for fiscal years 2002, 2001 and 2000, net of offsets generated by federal, state and foreign tax incentive credits, were approximately 37.6%, 38.6% and 38.8%, respectively. THE HOME DEPOT, INC. 2002 ANNUAL REPORT 35 A reconciliation of income tax expense at the federal statutory rate of 35% to actual tax expense for the applicable fiscal years is as follows (in millions):
Fiscal Year Ended February 2, February 3, January 28, 2003 2002 2001 - --------------------------------------------------------------------------- Income taxes at federal statutory rate $ 2,055 $1,735 $1,476 State income taxes, net of federal income tax benefit 156 172 146 Foreign rate differences (1) 4 5 Other, net (2) 2 9 - --------------------------------------------------------------------------- Total $ 2,208 $1,913 $1,636 ===========================================================================
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of February 2, 2003, and February 3, 2002, were as follows (in millions):
February 2, February 3, 2003 2002 - ------------------------------------------------------------------------- Deferred Tax Assets: Accrued self-insurance liabilities $ 305 $ 220 Other accrued liabilities 92 138 Net loss on disposition of business 31 31 - ------------------------------------------------------------------------- Total gross deferred tax assets 428 389 Valuation allowance (31) (31) - ------------------------------------------------------------------------- Deferred tax assets, net of valuation allowance 397 358 - ------------------------------------------------------------------------- Deferred Tax Liabilities: Accelerated depreciation (571) (492) Accelerated inventory deduction (149) -- Other (39) (55) - ------------------------------------------------------------------------- Total gross deferred tax liabilities (759) (547) - ------------------------------------------------------------------------- Net deferred tax liability $(362) $(189) =========================================================================
A valuation allowance existed as of February 2, 2003, and February 3, 2002, due to the uncertainty of capital loss utilization. Management believes the existing net deductible temporary differences comprising the deferred tax assets will reverse during periods in which the Company generates net taxable income. 4 EMPLOYEE STOCK PLANS The 1997 Omnibus Stock Incentive Plan ("1997 Plan") provides that incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares, performance shares, performance units and deferred shares may be issued to selected associates, officers and directors of the Company. The maximum number of shares of the Company's common stock authorized for issuance under the 1997 Plan includes the number of shares carried over from prior plans and the number of shares authorized but unissued in the prior year, plus one-half percent of the total number of outstanding shares as of the first day of each fiscal year. As of February 2, 2003, there were 108 million shares available for future grants under the 1997 Plan. Under the 1997 Plan, as of February 2, 2003, the Company had granted incentive and non-qualified stock options for 167 million shares, net of cancellations (of which 86 million had been exercised). Incentive stock options and non-qualified options typically vest at the rate of 25% per year commencing on the first anniversary date of the grant and expire on the tenth anniversary date of the grant. Under the 1997 Plan, as of February 2, 2003, 2 million shares of restricted stock had been issued net of cancellations (the restrictions on 4,600 shares have lapsed). Generally, the restrictions on 25% of the restricted shares lapse upon the third and sixth year anniversaries of the date of issuance with the remaining 50% of the restricted shares lapsing upon the associate's attainment of age 62. The fair value of the restricted shares is expensed over the period during which the restrictions lapse. The Company recorded compensation expense related to restricted stock of $3 million in both fiscal 2002 and 2001 and $455,000 in fiscal 2000. As of February 2, 2003, there were 2.5 million non-qualified stock options and 1.4 million deferred stock units outstanding under non-qualified stock option and deferred stock unit plans that are not part of the 1997 Plan. The 2.5 million non-qualified stock options have an exercise price of $40.75 per share and were granted in fiscal 2000. During fiscal years 2002, 2001 and 2000, the Company granted 0, 629,000 and 750,000 deferred stock units, respectively, to several key officers vesting at various dates. Each deferred stock unit entitles the officer to one share of common stock to be received up to five years after the vesting date of the deferred stock unit, subject to certain deferral rights of the officer. The fair value of the deferred stock units on the grant dates was $27 million and $31 million for deferred units granted in fiscal 2001 and 2000, respectively. These amounts are being amortized over the vesting periods. 36 THE HOME DEPOT, INC. 2002 ANNUAL REPORT The Company recorded stock compensation expense related to deferred stock units of $12 million, $16 million and $6 million in fiscal 2002, 2001 and 2000, respectively. The per share weighted average fair value of stock options granted during fiscal years 2002, 2001 and 2000 was $17.34, $20.51 and $31.96, respectively. The fair value of these options was determined at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Fiscal Year Ended February 2, February 3, January 28, 2003 2002 2001 - -------------------------------------------------------------------------------- Risk-free interest rate 4.0% 5.1% 6.4% Assumed volatility 44.3% 48.1% 54.6% Assumed dividend yield 0.5% 0.4% 0.3% Assumed lives of options 5 years 6 years 7 years ================================================================================
The Company applies APB 25 in accounting for its stock-based compensation plans and, accordingly, no compensation expense has been recognized in the Company's financial statements for incentive or non-qualified stock options granted. If, under SFAS No. 123, the Company determined compensation expense based on the fair value at the grant date for its stock options, as computed and disclosed above, net earnings and earnings per share would have been reduced to the pro forma amounts below (in millions, except per share data):
Fiscal Year Ended February 2, February 3, January 28, 2003 2002 2001 - ------------------------------------------------------------------------------ Net earnings, as reported $ 3,664 $ 3,044 $ 2,581 Add: Stock-based compensation expense included in reported net earnings, net of related tax effects 10 13 4 Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects (260) (257) (221) - ------------------------------------------------------------------------------ Pro forma net earnings $ 3,414 $ 2,800 $ 2,364 ============================================================================== Earnings per share: Basic-- as reported $ 1.57 $ 1.30 $ 1.11 Basic-- pro forma $ 1.46 $ 1.20 $ 1.02 Diluted--as reported $ 1.56 $ 1.29 $ 1.10 Diluted--pro forma $ 1.46 $ 1.19 $ 1.01 ==============================================================================
The following table summarizes stock options outstanding at February 2, 2003, February 3, 2002 and January 28, 2001, and changes during the fiscal years ended on these dates (shares in thousands):
Weighted Number Average of Shares Option Price - -------------------------------------------------------------------------- Outstanding at January 30, 2000 68,419 $ 18.79 ========================================================================== Granted 14,869 49.78 Exercised (14,689) 13.15 Canceled (2,798) 30.51 - -------------------------------------------------------------------------- Outstanding at January 28, 2001 65,801 $ 26.46 ========================================================================== Granted 25,330 40.33 Exercised (16,614) 15.03 Canceled (5,069) 39.20 - -------------------------------------------------------------------------- Outstanding at February 3, 2002 69,448 $ 33.33 ========================================================================== Granted 31,656 40.86 Exercised (9,908) 18.27 Canceled (8,030) 42.74 - -------------------------------------------------------------------------- Outstanding at February 2, 2003 83,166 $ 37.09 ========================================================================== Exercisable 29,431 $ 29.48 ==========================================================================
The following table summarizes information regarding stock options outstanding at February 2, 2003 (shares in thousands):
Weighted Weighted Weighted Average Average Average Range of Options Remaining Outstanding Options Exercisable Exercise Prices Outstanding Life(Yrs) Option Price Exercisable Option Price ---------------------------------------------------------------------------------------------- $ 6.00 to 12.00 7,090 3.5 $10.24 7,090 $10.24 12.01 to 20.00 1,191 4.7 17.21 1,191 17.21 20.01 to 30.00 7,438 5.6 22.19 6,090 21.78 30.01 to 42.00 41,745 8.4 37.67 11,161 39.12 42.01 to 54.00 25,702 8.5 48.80 3,899 52.48 - ------------------------------------------------------------------------------------------------ 83,166 7.7 $37.09 29,431 $29.48 ================================================================================================
The Company maintains two employee stock purchase plans (U.S. and non-U.S. plans). The plan for U.S. associates is a tax-qualified plan under Section 423 of the Internal Revenue Code. The non-U.S. plan is not a Section 423 plan. The Company had 43 million shares available for issuance under the Employee Stock Purchase Plans ("ESPPs") at February 2, 2003. The ESPPs allow associates to purchase up to 152 million shares of common stock, of which 109 million shares have been purchased from inception of the plan, at a price equal to the lower of 85% of the stock's fair market value on the first day or the last day of the purchase period. These shares were included in the pro forma calculation of stock-based compensation expense. During fiscal 2002, 5.2 million shares were purchased under the ESPPs at an average price of $30.89 per share. At February 2, 2003, there were 2.3 million shares outstanding, net of cancellations, at an average price of $34.09 per share. THE HOME DEPOT, INC. 2002 ANNUAL REPORT 37 5 LEASES The Company leases certain retail locations, office space, warehouse and distribution space, equipment and vehicles. While the majority of the leases are operating leases, certain retail locations are leased under capital leases. As leases expire, it can be expected that, in the normal course of business, certain leases will be renewed or replaced. The Company has two off-balance sheet lease agreements under which the Company leases assets totaling $882 million comprised of an initial lease agreement of $600 million and a subsequent agreement of $282 million. These two leases were created under structured financing arrangements and involve a special purpose entity which meets the criteria for non-consolidation established by generally accepted accounting principles and is not owned by or affiliated with the Company, its management or officers. The Company financed a portion of its new stores opened in fiscal years 1997 through 2002, as well as a distribution center and office buildings, under these lease agreements. Under both agreements, the lessor purchases the properties, pays for the construction costs and subsequently leases the facilities to the Company. The lease term for the $600 million agreement expires in fiscal 2006 and has three two-year renewal options. The lease term for the $282 million agreement expires in 2008 with no renewal option. Both lease agreements provide for substantial residual value guarantees and include purchase options at original cost of each property. Events or circumstances that would require the Company to perform under the guarantees include 1) initial default on the leases with the assets sold for less than book value, or 2) the Company's decision not to purchase the assets at the end of the leases and the sale of the assets results in proceeds less than the initial book value of the assets. The Company's guarantees are limited to 82% of the initial book value of the assets. The Company also leases an import distribution facility, including its related equipment, under an off-balance sheet lease created as part of a structured financing arrangement totaling $85 million. The lease for the import distribution facility expires in fiscal 2005 and has four 5-year renewal options. The lease agreement provides for substantial residual value guarantees and includes purchase options at the higher of the cost or fair market value of the assets. The maximum amount of the residual value guarantees relative to the assets under the three off-balance sheet lease agreements described above is estimated to be $799 million. As the leased assets are placed into service, the Company estimates its liability under the residual value guarantees and records additional rent expense on a straight-line basis over the remaining lease terms. Total rent expense, net of minor sublease income for the fiscal years ended February 2, 2003, February 3, 2002 and January 28, 2001, was $533 million, $522 million and $479 million, respectively. Real estate taxes, insurance, maintenance and operating expenses applicable to the leased property are obligations of the Company under the lease agreements. Certain store leases provide for contingent rent payments based on percentages of sales in excess of specified minimums. Contingent rent expense for the fiscal years ended February 2, 2003, February 3, 2002 and January 28, 2001, was approximately $8 million, $10 million and $9 million, respectively. The approximate future minimum lease payments under capital and all other leases, including off-balance sheet leases, at February 2, 2003, were as follows (in millions):
Capital Operating Fiscal Year Leases Leases - ----------------------------------------------------------------------- 2003 $ 44 $ 541 2004 45 512 2005 44 476 2006 46 440 2007 47 424 Thereafter through 2033 608 4,915 - ----------------------------------------------------------------------- 834 $7,308 ====== Less imputed interest 557 - ----------------------------------------------------------------------- Net present value of capital lease obligations 277 Less current installments 5 - ----------------------------------------------------------------------- Long-term capital lease obligations, excluding current installments $ 272 =======================================================================
Short-term and long-term obligations for capital leases are included in the accompanying Consolidated Balance Sheets in Other Accrued Expenses and Long-Term Debt, respectively. The assets under capital leases recorded in Property and Equipment, net of amortization, totaled $235 million and $199 million at February 2, 2003 and February 3, 2002, respectively. 38 THE HOME DEPOT, INC. 2002 ANNUAL REPORT 6 EMPLOYEE BENEFIT PLANS The Company maintains three active defined contribution retirement plans (the "Plans"). All associates satisfying certain service requirements are eligible to participate in the Plans. The Company makes cash contributions each payroll period to purchase shares of the Company's common stock, up to specified percentages of associates' contributions as approved by the Board of Directors. The Company's contributions to the Plans were $99 million, $97 million and $84 million for fiscal years 2002, 2001 and 2000, respectively. At February 2, 2003, the Plans held a total of 33 million shares of the Company's common stock in trust for plan participants. The Company also maintains a restoration plan to provide certain associates deferred compensation that they would have received under the Plans as a matching contribution if not for the maximum compensation limits under the Internal Revenue Code. The Company funds the restoration plan through contributions made to a grantor trust, which are then used to purchase shares of the Company's common stock in the open market. Compensation expense related to this plan for fiscal years 2002, 2001 and 2000 was not material. 7 BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES The reconciliation of basic to diluted weighted average common shares for fiscal years 2002, 2001 and 2000 was as follows (amounts in millions):
Fiscal Year Ended February 2, February 3, January 28, 2003 2002 2001 - --------------------------------------------------------------------------- Weighted average common shares 2,336 2,335 2,315 Effect of potentially dilutive securities: Stock Plans 8 18 37 - --------------------------------------------------------------------------- Diluted weighted average common shares 2,344 2,353 2,352 ===========================================================================
Stock plans include shares granted under the Company's employee stock purchase plans and stock incentive plans, as well as shares issued for deferred compensation stock plans. Options to purchase 72.1 million, 11.2 million and 10.9 million shares of common stock at February 2, 2003, February 3, 2002 and January 28, 2001, respectively, were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive. 8 COMMITMENTS AND CONTINGENCIES At February 2, 2003, the Company was contingently liable for approximately $930 million under outstanding letters of credit issued for certain business transactions, including insurance programs, import inventory purchases and construction contracts. The Company's letters of credit are primarily performance-based and are not based on changes in variable components, a liability or an equity security of the other party. The Company is involved in litigation arising from the normal course of business. In management's opinion, this litigation is not expected to materially impact the Company's consolidated results of operations or financial condition. 9 ACQUISITIONS AND DISPOSITIONS In October 2002, the Company acquired substantially all of the assets of FloorWorks, Inc. and Arvada Hardwood Floor Company, and common stock of Floors, Inc., three flooring installation companies primarily servicing the new home builder industry. These acquisitions were accounted for under the purchase method of accounting. In June 2002, the Company acquired the assets of Madereria Del Norte, S.A. de C.V, a four-store chain of home improvement stores in Juarez, Mexico. The acquisition was accounted for under the purchase method of accounting. In fiscal 2001, the Company acquired Your "other" Warehouse and Soluciones Para Las Casas de Mexico, S. de R.L. de C.V. These acquisitions were accounted for under the purchase method of accounting. Pro forma results of operations for fiscal years 2002, 2001 and 2000 would not be materially different as a result of the acquisitions discussed above and therefore are not presented. In February 2002, the Company sold all of the assets of The Home Depot Argentina S.R.L. In connection with the sale, the Company received proceeds comprised of cash and notes. An impairment charge of $45 million was recorded in Selling and Store Operating Expenses in the accompanying Consolidated Statements of Earnings in fiscal 2001 to write down the net assets of The Home Depot Argentina S.R.L. to fair value. In October 2001, the Company sold all of the assets of The Home Depot Chile S.A., resulting in a gain of $31 million included in Selling and Store Operating Expenses in the accompanying Consolidated Statements of Earnings. THE HOME DEPOT, INC. 2002 ANNUAL REPORT 39 10 QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the quarterly consolidated results of operations for the fiscal years ended February 2, 2003 and February 3, 2002 (dollars in millions, except per share data):
Increase (Decrease) Basic Diluted In Comparable Gross Net Earnings Earnings Net Sales Store Sales Profit Earnings Per Share Per Share - -------------------------------------------------------------------------------------------------------------------------------- Fiscal year ended February 2, 2003:(1) First quarter $ 14,282 5 % $ 4,360 $ 856 $ 0.36 $ 0.36 Second quarter 16,277 1 % 4,946 1,182 0.50 0.50 Third quarter 14,475 (2)% 4,580 940 0.40 0.40 Fourth quarter 13,213 (6)% 4,222 686 0.30 0.30 - -------------------------------------------------------------------------------------------------------------------------------- Fiscal year $ 58,247 0 % $ 18,108 $ 3,664 $ 1.57 $ 1.56 - -------------------------------------------------------------------------------------------------------------------------------- Fiscal year ended February 3, 2002:(1) First quarter $ 12,200 (3)% $ 3,655 $ 632 $ 0.27 $ 0.27 Second quarter 14,576 1 % 4,326 924 0.40 0.39 Third quarter 13,289 0 % 4,010 778 0.33 0.33 Fourth quarter 13,488 5 % 4,156 710 0.30 0.30 - -------------------------------------------------------------------------------------------------------------------------------- Fiscal year $ 53,553 0 % $ 16,147 $ 3,044 $ 1.30 $ 1.29
(1) Fiscal year ended February 2, 2003 includes 52 weeks and fiscal year ended February 3, 2002 includes 53 weeks. Note: The quarterly data may not sum to fiscal year totals due to rounding. 40 THE HOME DEPOT, INC. 2002 ANNUAL REPORT MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The financial statements presented in this Annual Report have been prepared with integrity and objectivity and are the responsibility of the management of The Home Depot, Inc. These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and properly reflect certain estimates and judgments based upon the best available information. The Company maintains a system of internal accounting controls, which is supported by an internal audit program and is designed to provide reasonable assurance, at an appropriate cost, that the Company's assets are safeguarded and transactions are properly recorded. This system is continually reviewed and modified in response to changing business conditions and operations and as a result of recommendations by the external and internal auditors. In addition, the Company has distributed to associates its policies for conducting business affairs in a lawful and ethical manner. The financial statements of the Company have been audited by KPMG LLP, independent auditors. Their accompanying report is based upon an audit conducted in accordance with auditing standards generally accepted in the United States of America, including the related review of internal accounting controls and financial reporting matters. The Audit Committee of the Board of Directors, consisting solely of outside directors, meets five times a year with the independent auditors, the internal auditors and representatives of management to discuss auditing and financial reporting matters. In addition, a telephonic meeting is held prior to each quarterly earnings release. The Audit Committee retains the independent auditors and regularly reviews the internal accounting controls, the activities of the outside auditors and internal auditors and the financial condition of the Company. Both the Company's independent auditors and the internal auditors have free access to the Audit Committee. /s/ CAROL B. TOME Carol B. Tome Executive Vice President and Chief Financial Officer INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders The Home Depot, Inc.: We have audited the accompanying consolidated balance sheets of The Home Depot, Inc. and subsidiaries as of February 2, 2003 and February 3, 2002 and the related consolidated statements of earnings, stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended February 2, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Home Depot, Inc. and subsidiaries as of February 2, 2003 and February 3, 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended February 2, 2003, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Atlanta, Georgia February 24, 2003 THE HOME DEPOT, INC. 2002 ANNUAL REPORT 41 10-YEAR SUMMARY OF FINANCIAL AND OPERATING RESULTS THE HOME DEPOT, INC. AND SUBSIDIARIES
5-Year 10-Year Compound Annual Compound Annual amounts in millions, except where noted Growth Rate Growth Rate 2002 2001(1) - --------------------------------------------------------------------------------------------------------------------------------- STATEMENT OF EARNINGS DATA Net sales 19.2% 23.3% $ 58,247 $ 53,553 Net sales increase(%) -- -- 8.8 17.1 Earnings before provision for income taxes 25.3 26.1 5,872 4,957 Net earnings 25.9 26.0 3,664 3,044 Net earnings increase(%) -- -- 20.4 17.9 Diluted earnings per share($)(2) 24.6 24.1 1.56 1.29 Diluted earnings per share increase(%) -- -- 20.9 17.3 Diluted weighted average number of common shares 0.5 1.1 2,344 2,353 Gross margin - % of sales -- -- 31.1 30.2 Selling and store operating expense - % of sales -- -- 19.2 19.0 Pre-opening expense - % of sales -- -- 0.2 0.2 General and administrative expense - % of sales -- -- 1.7 1.7 Net interest income (expense) - % of sales -- -- 0.1 -- Earnings before provision for income taxes - % of sales -- -- 10.1 9.3 Net earnings - % of sales -- -- 6.3 5.7 ================================================================================================================================= BALANCE SHEET DATA AND FINANCIAL RATIOS Total assets 21.7% 22.5% $ 30,011 $ 26,394 Working capital 14.1 17.0 3,882 3,860 Merchandise inventories 18.3 24.4 8,338 6,725 Net property and equipment 21.4 26.7 17,168 15,375 Long-term debt 0.3 4.6 1,321 1,250 Stockholders' equity 22.8 24.0 19,802 18,082 Book value per share ($) 21.0 22.0 8.38 7.71 Long-term debt-to-equity (%) -- -- 6.7 6.9 Current ratio -- -- 1.48:1 1.59:1 Inventory turnover -- -- 5.3x 5.4x Return on invested capital (%) -- -- 18.8 18.3 ================================================================================================================================= STATEMENT OF CASH FLOWS DATA Depreciation and amortization 26.1% 29.1% $ 903 $ 764 Capital expenditures(3) 13.4 20.2 2,749 3,398 Cash dividends per share ($) 28.5 26.5 0.21 0.17 ================================================================================================================================= STORE DATA (4) Number of stores 19.7% 21.8% 1,532 1,333 Square footage at fiscal year-end 20.3 23.0 166 146 Increase in square footage (%) -- -- 14.1 18.5 Average square footage per store (in thousands) 0.4 1.0 108 109 ================================================================================================================================= STORE SALES AND OTHER DATA Comparable store sales increase (%)(5) -- -- -- -- Weighted average weekly sales per operating store (in thousands)(4) (1.4)% 0.6% $ 772 $ 812 Weighted average sales per square foot ($)(4,5) (1.8) (0.4) 370 388 Number of customer transactions(4) 16.1 19.9 1,161 1,091 Average sale per transaction ($)(4) 2.5 2.7 49.43 48.64 Number of associates at fiscal year-end 17.7 21.9 280,900 256,300 - ---------------------------------------------------------------------------------------------------------------------------------
(1) Fiscal years 2001 and 1996 include 53 weeks; all other fiscal years reported include 52 weeks. (2) Diluted earnings per share for fiscal 1997, excluding a $104 million non-recurring charge, were $0.55. (3) Excludes payments for businesses acquired (net, in millions) for fiscal years 2002 ($235), 2001 ($190), 2000 ($26), 1999 ($101), 1998 ($6) and 1997 ($61). 42 THE HOME DEPOT, INC. 2002 ANNUAL REPORT
2000 1999 1998 1997 1996(1) 1995 1994 1993 =================================================================================================================================== STATEMENT OF EARNINGS DATA Net sales $ 45,738 $ 38,434 $ 30,219 $ 24,156 $ 19,535 $ 15,470 $ 12,477 $ 9,239 Net sales increase(%) 19.0 27.2 25.1 23.7 26.3 24.0 35.0 29.2 Earnings before provision for income taxes 4,217 3,804 2,654 1,898 1,535 1,195 980 737 Net earnings 2,581 2,320 1,614 1,160 938 732 605 457 Net earnings increase(%) 11.3 43.7 31.9 23.7 28.2 21.0 32.2 26.1 Diluted earnings per share($)(2) 1.10 1.00 0.71 0.52 0.43 0.34 0.29 0.22 Diluted earnings per share increase(%) 10.0 40.8 29.1 20.9 26.5 17.2 31.8 22.2 Diluted weighted average number of common shares 2,352 2,342 2,320 2,287 2,195 2,151 2,142 2,132 Gross margin - % of sales 29.9 29.7 28.5 28.1 27.8 27.7 27.9 27.7 Selling and store operating expense - % of sales 18.6 17.8 17.7 17.8 18.0 18.0 17.8 17.6 Pre-opening expense - % of sales 0.3 0.3 0.3 0.3 0.3 0.4 0.4 0.4 General and administrative expense - % of sales 1.8 1.7 1.7 1.7 1.7 1.7 1.8 2.0 Net interest income (expense) - % of sales -- -- -- -- 0.1 0.1 (0.1) 0.3 Earnings before provision for income taxes - - % of sales 9.2 9.9 8.8 7.9 7.9 7.7 7.8 8.0 Net earnings - % of sales 5.6 6.0 5.3 4.8 4.8 4.7 4.8 5.0 =================================================================================================================================== BALANCE SHEET DATA AND FINANCIAL RATIOS Total assets $ 21,385 $ 17,081 $ 13,465 $ 11,229 $ 9,342 $ 7,354 $ 5,778 $ 4,701 Working capital 3,392 2,734 2,076 2,004 1,867 1,255 919 994 Merchandise inventories 6,556 5,489 4,293 3,602 2,708 2,180 1,749 1,293 Net property and equipment 13,068 10,227 8,160 6,509 5,437 4,461 3,397 2,371 Long-term debt 1,545 750 1,566 1,303 1,247 720 983 874 Stockholders' equity 15,004 12,341 8,740 7,098 5,955 4,988 3,442 2,814 Book value per share ($) 6.46 5.36 3.95 3.23 2.75 2.32 1.69 1.39 Long-term debt-to-equity (%) 10.3 6.1 17.9 18.4 20.9 14.4 28.6 31.1 Current ratio 1.77:1 1.75:1 1.73:1 1.82:1 2.01:1 1.89:1 1.76:1 2.02:1 Inventory turnover 5.1x 5.4x 5.4x 5.4x 5.6x 5.5x 5.7x 5.9x Return on invested capital (%) 19.6 22.5 19.3 16.1 16.3 16.3 16.5 13.9 =================================================================================================================================== STATEMENT OF CASH FLOWS DATA Depreciation and amortization $ 601 $ 463 $ 373 $ 283 $ 232 $ 181 $ 130 $ 90 Capital expenditures(3) 3,574 2,618 2,094 1,464 1,248 1,308 1,220 900 Cash dividends per share ($) 0.16 0.11 0.08 0.06 0.05 0.04 0.03 0.02 =================================================================================================================================== STORE DATA(4) Number of stores 1,134 930 761 624 512 423 340 264 Square footage at fiscal year-end 123 100 81 66 54 44 35 26 Increase in square footage (%) 22.6 23.5 22.8 23.1 21.6 26.3 33.2 26.3 Average square footage per store (in thousands) 108 108 107 106 105 105 103 100 =================================================================================================================================== STORE SALES AND OTHER DATA Comparable store sales increase (%)(5) 4 10 7 7 7 3 8 7 Weighted average weekly sales per operating store (in thousands)(4) $ 864 $ 876 $ 844 $ 829 $ 803 $ 787 $ 802 $ 764 Weighted average sales per square foot ($)(4,5) 415 423 410 406 398 390 404 398 Number of customer transactions(4) 937 797 665 550 464 370 302 236 Average sale per transaction ($)(4) 48.65 47.87 45.05 43.63 42.09 41.78 41.29 39.13 Number of associates at fiscal year-end 227,300 201,400 156,700 124,400 98,100 80,800 67,300 50,600 - -----------------------------------------------------------------------------------------------------------------------------------
(4) Includes all retail locations in excess of 50,000 square feet and therefore excludes Apex Supply Company, Georgia Lighting, Maintenance Warehouse, Your "other" Warehouse, Designplace Direct (formerly National Blinds and Wallpaper) and HD Builder Solutions Group locations. (5) Adjusted to reflect the first 52 weeks of the 53-week fiscal years in 2001 and 1996. THE HOME DEPOT, INC. 2002 ANNUAL REPORT 43 CORPORATE AND STOCKHOLDER INFORMATION THE HOME DEPOT, INC. AND SUBSIDIARIES STORE SUPPORT CENTER The Home Depot, Inc. 2455 Paces Ferry Road, NW Atlanta, GA 30339-4024 Telephone: (770) 433-8211 THE HOME DEPOT WEB SITE www.homedepot.com TRANSFER AGENT AND REGISTRAR EquiServe Trust Company, N.A. P.O. Box 43016 Providence, RI 02940-3010 Telephone: (800) 577-0177 Internet address: www.equiserve.com INDEPENDENT AUDITORS KPMG LLP Suite 2000 303 Peachtree Street, NE Atlanta, GA 30308 STOCK EXCHANGE LISTING New York Stock Exchange Trading symbol - HD ANNUAL MEETING The Annual Meeting of Stockholders will be held at 10:00 a.m., Central Time, on May 30, 2003, at The Field Museum of Natural History, James Simpson Theatre, 1400 South Lake Shore Drive, Chicago, IL 60605. NUMBER OF STOCKHOLDERS As of March 24, 2003, there were approximately 207,516 stockholders of record and approximately 2,273,112 individual stockholders holding stock under nominee security position listings. DIVIDENDS DECLARED PER COMMON SHARE
First Second Third Fourth Quarter Quarter Quarter Quarter - ------------------------------------------------------------------- Fiscal 2002 $0.05 $0.05 $0.06 $0.06 Fiscal 2001 $0.04 $0.04 $0.05 $0.05 ===================================================================
DIRECT STOCK PURCHASE/DIVIDEND REINVESTMENT PLAN New investors may make an initial investment, and stockholders of record may acquire additional shares of The Home Depot, Inc.'s common stock through the Company's direct stock purchase and dividend reinvestment plan. Subject to certain requirements, initial cash investments, cash dividends and/or additional optional cash purchases may be invested through this plan. To obtain enrollment materials, including the prospectus, access The Home Depot web site, or call 1-877-HD-SHARE. For all other communications regarding these services, contact the Transfer Agent and Registrar. FINANCIAL AND OTHER COMPANY INFORMATION To request a copy of the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2003 (without exhibits), to be mailed to you at no cost, please contact: The Home Depot, Inc. Investor Relations 2455 Paces Ferry Road, NW Atlanta, GA 30339-4024 Telephone: (770) 384-4388 In addition, financial reports, recent filings with the Securities and Exchange Commission (including Form 10-K), store locations, news releases and other Company information are available on The Home Depot web site. QUARTERLY STOCK PRICE RANGE
First Second Third Fourth Quarter Quarter Quarter Quarter - ---------------------------------------------------------- Fiscal 2002 High $52.28 $49.25 $34.82 $29.18 Low $45.17 $27.15 $23.13 $20.10 Fiscal 2001 High $49.00 $53.73 $50.90 $52.04 Low $38.11 $44.60 $30.30 $37.15 - ----------------------------------------------------------
ABOUT THIS REPORT: Consistent with The Home Depot's commitment to the environment, portions of this report are printed on paper that is certified in accordance with the Principles and Criteria of the Forest Stewardship Council (FSC). This certification ensures that the fiber from which the paper is manufactured comes partially from certified forests that are managed in a way that is socially beneficial, environmentally responsible and economically viable. The paper used in the cover consists of at least 24.1% FSC fiber and at least 21.6% post consumer fiber while the financial section of this report consists of at least 32% FSC fiber and at least 11.7% post consumer fiber. Design: Corporate Reports Inc./Atlanta, GA Principal Photography: Mike Hemberger Other Photography: Phillip Vullo Printer: Wallace/Hillside Printing 44 THE HOME DEPOT, INC. 2002 ANNUAL REPORT HOME DEPOT BOARD OF DIRECTORS AND LEADERSHIP TEAM [PHOTO]
DIRECTORS Gregory D. Brenneman 1,2 William S. Davila 1,2 Bonnie G. Hill 1,4* Board of Directors Chairman and President Emeritus President Committee Membership: Chief Executive Officer The Vons Companies, Inc. B. Hill Enterprises, LLC 1 Audit TurnWorks, Inc. 2 Compensation Claudio X. Gonzalez 1,2* Kenneth G. Langone 3,4,5* 3 Executive Richard H. Brown 4,5 Chairman and Lead Director; Chairman of the 4 Human Resources Former Chairman and Chief Executive Officer Board, Chief Executive Officer, 5 Nominating and Corporate Chief Executive Officer Kimberly-Clark de Mexico, and President Governance Electronic Data Systems S.A. de C.V. Invemed Associates, Inc. 6 IT Advisory Council Corporation * Chair Richard A. Grasso, 2,5,6 Robert L. Nardelli 3* John L. Clendenin 1*,3,5 Chairman and Chairman, President, and Retired Chairman, President, Chief Executive Officer Chief Executive Officer and Chief Executive Officer New York Stock Exchange The Home Depot, Inc. BellSouth Corporation Milledge A. Hart, III 3,4,5,6* Roger S. Penske 4,5,6 Berry R. Cox 2,3,6 Chairman of the Board Chairman of the Board Chairman Hart Group, Inc. Penske Corporation Berry R. Cox, Inc. LEADERSHIP TEAM Robert L. Nardelli Dennis M. Donovan Wayne Gibson James A. Stoddart Chairman, President, and Executive Vice President, Senior Vice President, Division President, HD Supply Chief Executive Officer Human Resources Global Logistics Thomas V. Taylor, Jr. Francis S. Blake Jerry W. Edwards Bruce A. Merino Division President, Eastern Executive Vice President, Executive Vice President, Division President, Western Business Development Merchandising Annette M. Verschuren and Corporate Operations William E. Patterson Division President, Canada Frank L. Fernandez Division President, Central John H. Costello Executive Vice President, Robert J. Wittman Executive Vice President, Secretary, and General Counsel Eric V. Peterson Division President, Chief Marketing Officer Division President, Northwest EXPO Design Center Carol B. Tome Robert P. DeRodes Executive Vice President, Troy A. Rice Executive Vice President, Chief Financial Officer Senior Vice President, Chief Information Officer Operations
The Home Depot, Inc. and Subsidiaries at March 24, 2003 EX-21 16 g81844exv21.txt EX-21 LIST OF SUBSIDIARIES . . . EXHIBIT 21 LIST OF SUBSIDIARIES OF THE REGISTRANT
STATE OR JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION D/B/A Home Depot U.S.A., Inc. Delaware The Home Depot EXPO Design Center Home Depot At-Home Services Home Depot Landscape Supply The Home Depot Supply The Home Depot Floor Store HD Development of Maryland, Inc. Maryland (Not Applicable)
Certain subsidiaries were omitted pursuant to Item 601(21)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as amended. EX-23 17 g81844exv23.txt EX-23 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 The Board of Directors The Home Depot, Inc.: We consent to incorporation by reference in the registration statements (Nos. 333-72016, 333-62318, 333-62316, 333-56724, 333-56722, 333-91943, 333-38946, 333-85759, 333-61733, 333-56207, 33-46476, 33-22531, 33-22299, 033-58807, 333-16695, 333-01385) on Form S-8 and (Nos. 333-81485, 333-03497) on Form S-3 of The Home Depot, Inc. of our report dated February 24, 2003, relating to the consolidated balance sheets of The Home Depot, Inc. and subsidiaries as of February 2, 2003 and February 3, 2002, and the related consolidated statements of earnings, stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended February 2, 2003, which report is incorporated by reference in the February 2, 2003 Annual Report on Form 10-K of The Home Depot, Inc. /s/ KPMG LLP Atlanta, Georgia April 18, 2003 EX-99.1 18 g81844exv99w1.txt EX-99.1 CERTIFICATION OF THE CEO EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002* In connection with the Annual Report on Form 10-K ("Form 10-K") of The Home Depot, Inc. (the "Company") for the period ended February 2, 2003 as filed with the Securities and Exchange Commission on the date hereof, I, Robert L. Nardelli, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Form 10-K fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert L. Nardelli - ----------------------- Robert L. Nardelli Chief Executive Officer April 14, 2003 * A signed original of this written statement required by Section 906 has been provided to The Home Depot, Inc. and will be retained by The Home Depot, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.2 19 g81844exv99w2.txt EX-99.2 CERTIFICATION OF THE CFO EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002* In connection with the Annual Report on Form 10-K ("Form 10-K") of The Home Depot, Inc. (the "Company") for the period ended February 2, 2003 as filed with the Securities and Exchange Commission on the date hereof, I, Carol B. Tome, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Form 10-K fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Carol B. Tome - ----------------------- Carol B. Tome Chief Financial Officer April 4, 2003 * A signed original of this written statement required by Section 906 has been provided to The Home Depot, Inc. and will be retained by The Home Depot, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----