Exhibit 10.1

 

SEPARATION AGREEMENT & RELEASE

 

This is an Agreement between The Home Depot, Inc., its subsidiaries and
affiliates (hereinafter “Home Depot” or the “Company”) and John H. Costello (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 is intended to supersede and replace the
termination provisions set forth in any of his employment letters, including but
not limited to dated September 26, 2002 and July 25, 2003; 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.
Executive will be placed on a paid Leave of Absence (“LOA”) commencing on
September 1, 2005 and extending through August 31, 2007.  Executive will be
placed on an unpaid LOA, without pay or benefits, from September 1, 2007 though
August 31, 2008. Executive’s last day of employment will be August 31, 2008
(“Termination Date”), or as otherwise provided in Paragraph 9 (Breach by
Executive) below.  Executive shall not accrue any vacation days, pay or credit
subsequent to September 1, 2005.

 

2.                                       Annual Salary.  Executive will receive
no salary from September 1, 2005 to March 1, 2006.  On March 2, 2006, Employee
will receive a lump sum payment of $362,500, less withholdings and deductions. 
From March 2, 2006 to September 1, 2007, Executive will be paid salary at the
rate of $725,000 per year, payable in substantially equal installments each
regular payroll period. 

 

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3.                                       Bonus Payments.  Executive will be
eligible to receive the pro rata portion through September 1, 2005 of his
Management Incentive Plan bonus for Fiscal Year 2005, if earned under the terms
of the plan, payable at the same time other officers receive their bonuses for
such year.  Executive will not be eligible for bonus payments of any other kind
except as expressly provided in this Paragraph 3, including any Management
Incentive Plan payments relating to Fiscal Year 2006 or beyond.  Executive will
be eligible to receive the pro rata portion through September 1, 2005 of his
Long Term Incentive Plan (“LTIP”) bonus for the FY03-FY05 performance period, if
earned under the terms of the plan, payable at the same time other officers
receive their LTIP bonus for such year.  Executive shall not be eligible to
participate in any LTIP program during the LOA period and his employment with
the Company, for purposes of the LTIP program, shall be deemed to have
terminated on September 1, 2005, and before the end of the performance period,
and no payment shall be made to him for any LTIP program in which he is
currently participating other than the FY03-FY05 LTIP as provided by this
Paragraph 3.  Executive is not required to pay the Company the $200,000 signing
bonus that he received pursuant to his September 26, 2002 employment letter.

 

4.                                       Benefits.  Executive will be eligible
to continue to participate in the Company’s health and welfare benefit plans,
including the Supplemental Executive Choice Program, during the paid LOA,
pursuant to the terms of such plans and applicable law.  Executive may continue
to use the Company provided automobile in his possession through the earlier of:
(i) September 1, 2007; (ii)  ten (10) days prior to the expiration of the lease
for such automobile; or (iii) any earlier breach or lapse of this Agreement, at
which time Executive agrees to return the automobile to the Company’s Atlanta
Store Support Center.  The Company will pay no premiums after August 19, 2005
for coverage under Executive’s $10 million individual executive life insurance
policy.  Executive shall not be entitled to any other benefits except as
expressly provided for in this Agreement.

 

5.                                       Stock Options/Restricted Stock.

 

(a)          All of Executive’s outstanding, non-vested stock options and
restricted stock will vest in accordance with the terms of the original grant
through the Termination Date and through expiration of any award that provides
for continued vesting upon retirement at age 60 and 5 years of continuous
service (“Retirement Vesting”). All of Executive’s vested stock options without
a Retirement Vesting provision must be exercised within 90 days of the
Termination Date. Options with a Retirement Vesting provision may be exercised
anytime before the option expires in accordance with the terms of the original
grant.  All non-vested stock options and restricted stock that do not provide
for Retirement Vesting will be forfeited on the Termination Date.  All of
Executive’s stock options provide for Retirement Vesting; none of Executive’s
restricted stock awards provide for Retirement Vesting except for his March 23,
2005 restricted stock award.

 

(b)         All of Executive’s outstanding options and restricted stock awarded
to him on November 21, 2002 in connection with his initial hire shall be 100%
fully vested effective September 1, 2005.

 

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(c)          The Company shall have the right to require the Executive to pay to
the Company immediately upon exercise of any vested options or upon the vesting
of any restricted shares any federal, state, and local income and employment tax
withholding obligations related to the exercise of said stock options or vesting
of said restricted shares; or, in the alternative, the Company shall have the
right to withhold a sufficient number of shares necessary to satisfy said
withholding obligations.

 

(d)         Executive shall not be eligible to receive any other equity-based
awards after September 1, 2005.

 

6.                                       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 (including but not limited to any and all of Executive’s employment
letters, including but not limited to those dated September 26, 2002 and
July 25, 2003), 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)         This Agreement is also a release of any and all rights under any and
all of Executive’s employment letters, including but not limited to those dated
September 26, 2002 and July 25, 2003.

 

(c) 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 that 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.

 

(d)         The Executive further agrees never to sue the Company or its past
and present directors, officers, employees, parents, subsidiaries, affiliates,
related entities, and agents or cause the Company or its past and present
directors, officers, employees, parents, subsidiaries, affiliates, related
entities and agents to be sued regarding any matter within the scope of the
above release. If the Executive violates this paragraph, the Company may recover
all damages as allowed by law, including all costs and expenses, including
reasonable attorneys’ fees, incurred in defending against the suit.

 

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7.                                       Confidential Information.  The
Executive acknowledges that through his employment with the Company that 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 have
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 Executive Vice President, Human Resources of the Company, and
further agrees to return all documents, disks, or any other item or source
containing Confidential Information, or any other property of the Company, to
the Company on or before September 1, 2005.  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.

 

8.                                       Non-Competition and Non-Solicitation.

 

(a)          The Executive agrees that he will not, prior to August 31, 2008,
enter into or maintain an employment or contractual relationship, either
directly or indirectly, to provide merchandising, marketing, executive,
operational 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, in the United States, Canada,
Puerto Rico, Mexico, China, or any other location in which the Company,
currently conduct business or may conduct business prior to August 31, 2008,
without the prior written consent of the Executive Vice President, Human
Resources 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);
Sears Holding Corp. (including, but not limited to, Orchard Supply and Hardware
Company); K-Mart; Wal-Mart; Rona Inc.; Castorama/B&Q; Ace Hardware; True Value
Company; and Menard, Inc.

 

(b)         In the event the Executive wishes to enter into any relationship or
employment prior to August 31, 2008 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 prior to August 31, 2008, he will not
directly or indirectly solicit any person who is an employee of the Company to
terminate his or her

 

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relationship with the Company without prior written approval from the Executive
Vice President, Human Resources of the Company.

 

9.                                       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 breach by Executive of
this Agreement will result in the immediate cancellation of all Executive’s
stock options and restricted stock and 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 restricted stock or stock options exercised
after September 1, 2005.

 

10.                                 Executive Availability.

 

(a)          During the 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.

 

11.                                 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.

 

12.                                 Insider Trading. The Executive acknowledges
that prior to the Termination Date, he remains subject to the restrictions of
the Company’s Securities Laws Policy applicable to Directors, Officers, and
Designated Associates, which permits trading only during designated window
periods.  Executive agrees to obtain pre-clearance from the Company’s General
Counsel for any trades in Company securities through February 19, 2006. 
Executive acknowledges that through his employment with the Company that 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 the advice of legal

 

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counsel prior to conducting any transactions in Company securities if the
Executive believes he may possess such information.

 

13.                                 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 for any job
or position in the future.

 

14.                                 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.

 

15.                                 Right to Revoke this Agreement. The
Executive may revoke this Agreement in writing within seven (7) days of signing
it by delivering notice of such revocation to the Company’s Executive Vice
President, Human Resources. 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.

 

16.                                 Effective Date. The Effective Date shall be
the day after the end of the revocation period described in Paragraph 15.

 

17.                                 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
Executive Vice President, Human Resources of 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.

 

18.                                 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 result of such
action.  This paragraph is not applicable to claims of violation of Paragraphs
7, 8, 11 or 17 (Confidential Information; Non-Competition and Non-Solicitation;
Non-Disparagement; Confidentiality) of this Agreement.

 

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19.                                 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 and its affiliates 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.

 

20.                                 Death of Executive.    In the event of the
Executive’s death prior to September 1, 2007, this agreement shall remain in
full force and effect, and the Executive’s estate, as determined by law, shall
be entitled receive all compensation, benefits, entitlements and to exercise all
stock options and/or grants as provided under this agreement.

 

21.                                 Entire Agreement. This Agreement constitutes
the entire understanding between the parties.  This Agreement supersedes all
previous agreements between the Company and its affiliates and the Executive,
including but not limited to Executive’s employment letters dated September 26,
2002 and July 25, 2003. All previous agreements shall be void and
unenforceable.  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 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.

 

THE HOME DEPOT, INC.

 

 

By:

/s/ DENNIS M. DONOVAN

 

09/08/2005

 

Dennis M. Donovan

 

Date

 

 

 

 

 

 

 

 

 

/s/ JOHN H. COSTELLO

 

09/08/2005

 

John H. Costello

 

Date

 

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