Non-Qualified Stock Option and Deferred Stock Units Plan and Agreement - Home Depot Inc. and Robert L. Nardelli
THE HOME DEPOT, INC.
NON-QUALIFIED STOCK OPTION AND DEFERRED STOCK UNITS
PLAN AND AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AND DEFERRED STOCK UNITS PLAN AND
AGREEMENT evidences that, subject to the following terms and conditions, on
December 4, 2000 (the "Grant Date"), The Home Depot, Inc., a Delaware
Corporation, (the "Company") granted to Robert L. Nardelli (the "Executive") the
following: (i) a non-qualified stock option (the "Option"), for the purchase of
two million five hundred thousand (2,500,000) shares of the Company's Common
Stock, $.05 par value ("Common Stock"), at an option price of forty dollars and
seventy-five cents ($40.75) per share (the "Option Price"), and (ii) an award of
deferred stock units corresponding to seven hundred fifty thousand (750,000)
shares of Common Stock (each a "Deferred Stock Unit").
1. DEFINITIONS. As used herein, the following terms shall be
defined as set forth below:
(a) "CAUSE" shall mean that Executive has been convicted of a
felony involving theft or moral turpitude, or engaged in conduct that
constitutes willful gross neglect or willful gross misconduct with respect to
Executive's employment duties which results in material economic harm to the
Company; provided, however, that for purposes of determining whether conduct
constitutes willful gross misconduct, no act on Executive's part shall be
considered "willful" unless it is done by Executive in bad faith and without
reasonable belief that his action was in the best interests of the Company.
Notwithstanding the foregoing, the Company may not terminate Executive's
employment for Cause unless (1) a determination that Cause exists is made and
approved by a majority of the Company's Board of Directors (the "Board"), (2)
Executive is given at least thirty (30) days' written notice of the Board
meeting called to make such determination, and (3) Executive and his legal
counsel are given the opportunity to address such meeting.
(b) A "CHANGE IN CONTROL" shall be deemed to have occurred if:
(1) Any "person" (as defined in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), excluding for this purpose, (A)
the Company or any subsidiary of the Company, or (B)
any employee benefit plan of the Company or any
subsidiary of the Company, or any person or entity
organized, appointed or established by the Company
for or pursuant to the terms of any such plan which
acquires beneficial ownership of voting securities of
the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing more than twenty percent (20%) of the
combined voting power of the Company's then
outstanding securities; provided, however, that no
Change in Control will be deemed to have occurred as
a result of a change in ownership
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percentage resulting solely from an acquisition of
securities by the Company; or
(2) During any two (2) consecutive years (not including
any period beginning prior to December 3, 2000),
individuals who at the beginning of such two (2) year
period constitute the Board and any new director
(except for a director designated by a person who has
entered into an agreement with the Company to effect a
transaction described elsewhere in this definition of
Change in Control) whose election by the Board or
nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the
directors then still in office who either were
directors at the beginning of the period or whose
election or nomination for election was previously so
approved cease for any reason to constitute at least a
majority of the Board; or
(3) Consummation of a reorganization, merger or
consolidation or sale of the Company or other
disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each
case, unless, following such Business Combination, all
or substantially all of the individuals and entities
who were the beneficial owners of outstanding voting
securities of the Company immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than fifty percent (50%) of the
combined voting power of the then outstanding voting
securities entitled to vote generally in the election
of directors, as the case may be, of the company
resulting from such Business Combination (including,
without limitation, a company which as a result of
such transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
outstanding voting securities of the Company; or
(4) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(c) "COMMITTEE" means the Compensation Committee of the Board.
(d) "DISABILITY" means Executive's inability to substantially
perform his duties under that certain employment agreement entered into between
the Company and Executive effective as of December 4, 2000 (the "Employment
Agreement"), with reasonable accommodation, as evidenced by a certificate signed
either by a physician mutually acceptable to the Company and Executive or, if
the Company and Executive cannot agree upon a physician, by a physician selected
by agreement of a physician designated by the Company and a physician designated
by Executive; provided, however, that if such physicians cannot agree upon a
third physician within thirty (30) days, such third physician shall be
designated by the American Arbitration Association.
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(e) "GOOD REASON" shall mean, without Executive's consent, (1) the
assignment to Executive of any duties inconsistent in any material respect with
Executive's position (including status, offices, titles and reporting
relationships), authority, duties or responsibilities as contemplated by Section
3 of the Employment Agreement, or any other action by the Company which results
in a significant diminution in such position, authority, duties or
responsibilities, excluding any isolated and inadvertent action not taken in bad
faith and which is remedied by the Company within ten (10) days after receipt of
notice thereof given by Executive; (2) any failure by the Company to comply with
any of the provisions of Sections 4 or 5 of the Employment Agreement other than
an isolated and inadvertent failure not committed in bad faith and which is
remedied by the Company within ten (10) days after receipt of notice thereof
given by Executive; (3) Executive being required to relocate to a principal
place of employment more than twenty-five (25) miles from his principal place of
employment with the Company as of December 4, 2000; (4) delivery by the Company
of a notice discontinuing the automatic extension provision of Section 2 of the
Employment Agreement; (5) failure by the Company to elect Executive to the
position of sole Chairman of the Board in compliance with the terms of Section
3.1 of the Employment Agreement; or (6) any purported termination by the Company
of Executive's employment otherwise than as expressly permitted by the
Employment Agreement.
2. STOCK OPTION.
(a) INITIAL EXERCISE. Twenty percent (20%) of the total number of
shares of Common Stock subject to the Option shall be exercisable immediately on
or after the Grant Date, and an additional twenty percent (20%) of the total
number of shares of Common Stock subject to the Option shall become exercisable
on or after the first, second, third and fourth anniversaries of the Grant Date
if Executive remains an employee of the Company through such dates, subject to
subparagraph (c) below. In addition, the Option shall be fully exercisable
immediately upon the occurrence of a Change in Control while Executive is
employed by the Company.
(b) EXPIRATION. The Option shall expire with respect to any share
of Common Stock on the tenth anniversary of the date that the Option first
becomes exercisable with respect to such share, unless the Option expires
earlier in accordance with subparagraph (c) below upon a termination of
employment by the Company for Cause or by Executive without Good Reason.
(c) TERMINATION OF EMPLOYMENT. If (1) the Company terminates
Executive's employment other than for Cause, (2) Executive, upon fifteen (15)
days' prior written notice, terminates his employment for Good Reason, or (3)
Executive's employment terminates due to death or Disability, the Option shall
immediately become fully exercisable as of the date of termination. In the event
of discharge by the Company for Cause or termination by Executive without Good
Reason, the Option shall immediately lapse and become null and void on and as of
the date of termination with respect to all shares of Common Stock subject to
the Option (whether or not then exercisable), unless a Change in Control has
occurred prior to such date of termination, in which case the Option shall
remain exercisable in accordance with subparagraph (b) above without regard to
Executive's termination.
(d) METHOD OF EXERCISE. Exercisable shares under the Option may be
exercised in whole or in part, with respect to whole shares of Common Stock,
from time to time until the tenth anniversary of the date that the Option first
becomes exercisable with respect to such
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shares. Exercise shall be by notice of exercise to the Stock Administration
Department of the Company, specifying the number of shares to be purchased, the
Option Price of each share and the aggregate Option Price for all shares being
purchased under said notice. The notice shall be accompanied by payment of the
aggregate Option Price for the number of shares purchased and any applicable
withholding taxes. Such exercise (subject to Paragraph 5 below) shall be
effective upon the actual receipt of such payment and notice to the Company. The
aggregate Option Price for all shares purchased pursuant to an exercise of the
Option shall be paid by check payable to the order of the Company, shares of
Common Stock of the Company held by Executive for at least six (6) months, the
fair market value of which at the time of such exercise is equal to the
aggregate Option Price (or portion thereof to be paid with previously owned
Common Stock), or a combination of both. Payment of the Option Price in shares
of Common Stock shall be made by delivering properly endorsed stock certificates
to the Company or otherwise causing such Common Stock to be transferred to the
account of the Company, or constructively exchanging such shares by a procedure
established by the Committee so that Executive receives the excess of shares
exercised under the Option over the shares owned by Executive and shares
retained by the Company to satisfy withholding requirements. In addition, the
aggregate Option Price for all shares purchased pursuant to an exercise of the
Option may be paid from the proceeds of sale through a bank or broker on the
date of exercise of some or all of the shares to which the exercise relates.
There shall be furnished with each notice of the exercise of any portion of the
Option such documents as the Company in its discretion may deem necessary to
assure compliance with applicable rules and regulations of any stock exchange or
governmental authority. No rights or privileges of a stockholder of the Company
in respect to such shares issuable upon the exercise of any part of the Option
shall accrue to Executive unless and until certificates representing such shares
have been registered in Executive's name.
3. DEFERRED STOCK UNITS.
(a) VESTING SCHEDULE; ISSUANCE OF SHARES. One hundred fifty
thousand (150,000) Deferred Stock Units shall become vested on the Grant Date
and each of the first four anniversaries of the Grant Date (the "Vesting
Dates"); provided that, except as provided in subparagraph (c) below, Executive
is employed by the Company on the applicable Vesting Date. The Company shall
issue one share of Common Stock to Executive for each vested Deferred Stock Unit
on January 1 of the third calendar year following the calendar year in which the
Deferred Stock Unit vests (as illustrated in the schedule on Appendix A hereto),
unless (1) Executive has elected to defer the issuance of such shares pursuant
to subparagraph (b) below, or (2) Executive's employment terminates prior to
such date (in which case shares shall be issued as provided under subparagraph
(c) below). Each Deferred Stock Unit shall be cancelled upon the issuance of a
share of Common Stock with respect thereto.
(b) DEFERRAL. Executive may elect in writing on or before December
31 of the calendar year following the calendar year in which the Deferred Stock
Units vest (the "Latest Deferral Date"), to defer the issuance of shares of
Common Stock with respect to all or a part of such vested Deferred Stock Units.
Any such election shall specify the date of issuance for the deferred shares and
shall be irrevocable after the Latest Deferral Date.
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(c) TERMINATION OF EMPLOYMENT; CHANGE IN CONTROL. If (1) the
Company terminates Executive's employment other than for Cause, (2) Executive,
upon fifteen (15) days' prior written notice, terminates his employment for Good
Reason, (3) Executive's employment terminates due to death or Disability, or (4)
a Change in Control occurs while Executive is employed by the Company, any
Deferred Stock Units that have not yet vested shall immediately vest. Unless
Executive has elected pursuant to subparagraph (b) above to defer issuance to a
later date, the Company shall issue to Executive, within ten (10) days after the
termination of Executive's employment for any reason, one share of Common Stock
for each outstanding vested Deferred Stock Unit, and each outstanding Deferred
Stock Unit shall be cancelled.
(d) LIMITATION OF RIGHTS; DIVIDEND EQUIVALENTS. Executive shall
not have any right to transfer any rights under the Deferred Stock Units except
as permitted by Paragraph 6 below, shall not have any rights of ownership in the
shares of Common Stock subject to the Deferred Stock Units prior to the issuance
of such shares, and shall not have any right to vote such shares. Executive,
however, shall receive a cash payment equal to the cash dividends paid on shares
underlying outstanding vested Deferred Stock Units when cash dividends are paid
to shareholders of the Company.
4. ADMINISTRATION. This Plan and Agreement shall be administered
by the Committee. The interpretation and construction by the Committee of any
provision herein and any determination by the Committee pursuant to any
provision of this Plan and Agreement shall be final and conclusive. No member of
the Committee shall be liable to any person for any such action taken or
determination made in good faith.
5. COMPLIANCE WITH LAWS. The Option shall not be exercised and no
related share certificates shall be delivered if in the sole discretion of the
Company: (a) such exercise or delivery would constitute a violation of any
provision of, or any regulation or order entered pursuant to, any law purporting
to regulate wages, salaries or compensation; or (b) any requisite approval,
consent, registration or other qualification of any stock exchange upon which
the securities of the Company may then be listed, the Securities and Exchange
Commission or other governmental authority having jurisdiction over the exercise
of the Option or the issuance of shares shall not have been secured.
6. TRANSFERABILITY. Except as otherwise provided in this
Paragraph 6, the Option and Deferred Stock Units granted pursuant to this Plan
and Agreement shall not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner, other than, in the case of the Option, by will or
under the laws of descent and distribution, whether by the operation of law or
otherwise. Additionally, Executive may transfer the Option and Deferred Stock
Units, in whole or in part, to a spouse or lineal descendant (a "Family
Member"), a trust for the exclusive benefit of Executive and/or Family Members,
a partnership or other entity in which all the beneficial owners are Executive
and/or Family Members, or any other entity affiliated with Executive that may be
approved by the Committee (a "Permitted Transferee"). Subsequent transfers of
the Option and Deferred Stock Units shall be prohibited except in accordance
with this Paragraph 6. All terms and conditions of the Option and Deferred Stock
Units, including provisions relating to the termination of Executive's
employment with the Company, shall continue to apply following a transfer made
in accordance with this Paragraph 6. The Option may be exercised, during
Executive's lifetime, only by Executive or, in the event of Executive's legal
incapacity, by
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Executive's guardian or legal representative acting in a fiduciary capacity on
behalf of Executive under state law, or a Permitted Transferee to whom Executive
has transferred the Option. Upon any attempt of a transfer of the Option and
Deferred Stock Units prohibited by this Paragraph 6, the Option and Deferred
Stock Units shall immediately become null and void.
7. ADJUSTMENTS. The number of shares covered by the Option and
the Deferred Stock Units, the price per share applicable to the Option and, if
applicable, the kind of shares covered by the Option and Deferred Stock Units
shall be adjusted to reflect any stock dividend, stock split, or combination of
shares of the Company's Common Stock. In addition, the Committee may make or
provide for such adjustment in the number of shares covered by the Option and
the Deferred Stock Units, the price per share applicable to the Option, and the
kind of shares covered the Option and the Deferred Stock Units, as the Committee
in its sole discretion may in good faith determine to be equitably required in
order to prevent dilution or enlargement of Executive's rights that otherwise
would result from (a) any exchange of shares of the Company's Common Stock,
recapitalization or other change in the capital structure of the Company, (b)
any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation or other distribution of assets
(other than a normal cash dividend), issuance of rights or warrants to purchase
securities, or (c) any other corporate transaction or event having an effect
similar to any of the foregoing. Moreover, in the event of any such transaction
or event, the Committee may provide in substitution for the Option and the
Deferred Stock Units such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require in connection
therewith the surrender of the Option and the Deferred Stock Units so replaced.
8. FRACTIONAL SHARES. The Company shall not be required to issue
any fractional shares pursuant to this Plan and Agreement, and the Committee may
round fractions down.
9. TAXES. To the extent that the Company is required to withhold
federal, state, local or foreign taxes in connection with any benefit realized
by Executive or any other person under this Plan and Agreement, it shall be a
condition to the realization of such benefit that Executive or such other person
make arrangements satisfactory to the Company for payment of all such taxes
required to be withheld, which arrangements may include Executive's delivery to
the Company of a check equal to the amount of such taxes. Upon the payment of
any dividend equivalents payable pursuant to Paragraph 3(d) above, Executive
agrees that the Company shall deduct therefrom such amounts as are necessary to
satisfy applicable withholding requirements.
10. NO IMPACT ON OTHER BENEFITS AND EMPLOYMENT. This Plan and
Agreement shall not confer upon Executive any right with respect to continuance
of employment or other service with the Company and shall not interfere in any
way with any right that the Company would otherwise have to terminate
Executive's employment at any time, subject to the terms of the Employment
Agreement. Nothing herein contained shall affect Executive's right to
participate in and receive benefits under and in accordance with the then
current provisions of any pension, insurance or other employment plan or program
of the Company or any of its subsidiaries nor constitute an obligation for
continued employment.
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11. CANCELLATION. With Executive's concurrence, the Committee may
cancel this Plan and Agreement. In the event of such cancellation, the Committee
may authorize the granting of a new option and deferred stock units, which may
or may not cover the same number of shares that had been the subject of the
Option and Deferred Stock Units, in such manner, at such option price and
subject to such other terms and conditions as then determined by the Committee.
12. GOVERNING LAW. The validity, construction and effect of this
Plan and Agreement and the Option will be determined in accordance with (a) the
Delaware General Corporation Law, and (b) to the extent applicable, other laws
(including those governing contracts) of the State of Georgia (without regard to
the choice of law provisions thereof).
13. MERGER CLAUSE. This Plan and Agreement supersedes any and all
understandings between the Company and Executive with respect to the Option and
the Deferred Stock Units, except in the case of an inconsistency with terms and
conditions expressly provided in the Employment Agreement, in which case such
Employment Agreement terms and conditions will govern, and, except as otherwise
provided herein, this Plan and Agreement may be amended only in writing signed
by the Company and Executive.
PLEASE INDICATE YOUR UNDERSTANDING AND ACCEPTANCE OF THE FOREGOING BY SIGNING
AND RETURNING A COPY OF THIS PLAN AND AGREEMENT.
THE HOME DEPOT, INC.
/s/ Bernard Marcus
------------------------------------
By: Bernard Marcus
Co-Chairman of the Board
I hereby acknowledge receipt of the Option and the Deferred Stock Units
granted on December 4, 2000, which have been granted to me under the foregoing
terms and conditions. I further agree to conform to all of the terms and
conditions of the Option and such Deferred Stock Units.
EXECUTIVE
/s/ Robert L. Nardelli
--------------------------------------
Robert L. Nardelli
Date:
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APPENDIX A
SCHEDULE FOR DEFERRED STOCK UNITS
NUMBER OF
DEFERRED DISTRIBUTION DATE
STOCK UNITS VESTING DATE LATEST DEFERRAL DATE IF NO DEFERRAL
1. 150,000 December 4, 2000 December 31, 2001 January 1, 2003
2. 150,000 December 4, 2001 December 31, 2002 January 1, 2004
3. 150,000 December 4, 2002 December 31, 2003 January 1, 2005
4. 150,000 December 4, 2003 December 31, 2004 January 1, 2006
5. 150,000 December 4, 2004 December 31, 2005 January 1, 2007
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