Exhibit

10.3




 




September 26, 2002




 




John Costello




860 Gloucester Crossing




Lake Forest, IL 60045




 




 




Dear John,




 




This will confirm The Home Depot, Inc.’s offer and your acceptance of

employment effective November 4, 2002 in the position of Executive Vice President

and Chief Marketing Officer, reporting directly to me.  You have agreed to tender your resignation

to your current employer by October 15, 2002 and continue your employment with

your current employer until November 1, 2002. 

Your initial base annual salary will be $550,000, payable in equal

bi-weekly installments.  Your first

salary review will be held in April of 2003, with salary reviews held annually

thereafter.




 




In addition to your base salary, you will participate in the Senior

Officer Management Incentive Program, which provides an annual incentive target

of up to 100% of your base salary, based upon achieving established goals.  We will guarantee a payment of $450,000 for

fiscal year 2002, payable in 2003 (offset by any Yahoo! award received for fiscal

year 2002). To be eligible for payment of any incentive, you must be employed

on the day on which the incentive is paid.




 




In addition to the compensation outlined above, we will give you a

$200,000 signing bonus.  This will be

payable to you within 30 days of your first day of employment.  In the event you have an obligation to your

current employer to repay signing bonuses and/or relocation expenses, you will

be reimbursed for up to $400,000 within 30 days following written verification

of such repayments.  In the event that

you voluntarily terminate your service with The Home Depot, Inc. within your

first three years of employment, you will, at the Company’s discretion, be

required to repay the signing bonus and reimbursements outlined in this paragraph.




 




Commencing in fiscal year 2003 you will be eligible to participate in

the Long-Term Incentive Plan (LTIP), which provides an incentive target of 75%

of your base salary.  This plan’s payout

is based on a three-year performance period and a new three-year performance

period begins every year.  Upon hire you

will receive the plan documents explaining this plan.




 




At the next meeting of The Home Depot, Inc. Compensation Committee

following the commencement of your employment, you will receive a grant of 250,000

non-qualified stock options exercisable in accordance with the 1997 Omnibus

Stock Option Plan, a copy of which is enclosed for your information.  Twenty-five percent of the stock options

will become exercisable on the second, third, fourth, and fifth anniversaries

of the grant date.  Expiration of all

stock options will be the earlier of ten years from the grant date or

termination of employment.  While there

can be no guarantee of future stock option grants, the issuance of stock

options is a continuing pattern in our company. You will be reviewed in April

of 2003 for additional stock option grants beyond what is being offered in this

letter.




 





























 




Also, at the next meeting of The Home Depot, Inc. Compensation

Committee following the commencement of your employment, you will receive a

grant of 70,000 shares of restricted stock in accordance with the 1997 Omnibus

Stock Option Plan.  The restrictions on

twenty-five percent of the shares will lapse on the third anniversary of the

grant date, twenty-five percent will lapse on the sixth anniversary of the

grant date, and the remaining fifty percent will lapse at age 62.




 




In addition to the above stock option grant, you will be eligible to

participate in The Home Depot Employee Stock Purchase Plan.  The plan affords you the opportunity to

purchase Home Depot stock at a 15% discount through payroll deductions.  See the enclosed brochure for a detailed

explanation of the plan.




 




You will also be eligible to participate in The Home Depot Nonqualified

Deferred Compensation Program.  This

plan affords you the opportunity to defer up to fifty percent of your base

salary and one hundred percent of your annual management incentive payment into

the plan.  Upon hire you will receive

the plan document explaining this plan.




 




The Home Depot offers an extensive benefits program for our associates

and their dependents.  The insurance

coverages begin on your employment date with the Company.  After one year of service, you are also

eligible to participate in The Home Depot FutureBuilder, a 401(k) and Stock

Ownership Plan.  For full details on our

various benefits, please review the enclosed benefits summary.




 




In addition to the standard benefits package for salaried associates,

as an officer of the Company, you will receive an additional $250,000 Death

Benefit Only insurance policy.  You are

also able to participate in the Supplemental Executive Choice Program.  Under this program you will receive an annual

supplemental benefit allowance of $25,000. 

This amount will be grossed up for income tax purposes.  You can use this annual allowance to

purchase additional disability or life insurance benefits, personal excess

liability insurance, or you can use it to reimburse yourself for financial services

or health care expenses not covered under our standard health plans.  Additionally, you will be eligible to

participate in the leased car program. 

Upon hire you will receive your personalized Supplemental Executive

Choice Program package for enrollment in this plan.




 




Our standard vacation policy will be waived and you will be entitled to

four weeks of vacation during each anniversary year of employment with Home

Depot.  Should you leave the employment

of the Company at any time you will be paid for unused vacation strictly in

accordance with Home Depot’s standard vacation policy.




 




The Home Depot offers a comprehensive

relocation package.  Relocation benefits

include:  (a) one home-finding trip (not

to exceed five days) for two (yourself and your spouse/domestic partner) to the

new location;  (b) packing and hauling

of typical household belongings and the shipment of one automobile (if two are

owned) for moves between 500-1,500 miles and both automobiles if the move is

over 1,500 miles; (c) reimbursement for eligible travel expenses to your new

location;  (d) a relocation allowance of  $

25,000 to assist with miscellaneous expenses (appropriate taxes will be

withheld); and (e) to assist with the sale of your current home, following

ninety days of marketing assistance through The Home Depot Relocation

Department, the Company will extend an Appraised Value Offer (guaranteed

buy-out) utilizing a third party home purchase provider (see enclosed

Relocation brochure for details).   You

will also be reimbursed for the loss-on-sale of your principal residence based

on the difference in the contract purchase price and the contract sale

price.  Appropriate taxes will be

withheld from the loss-on-sale.  If you

sell your current home, you are entitled to the reimbursement of 2% of closing

costs on the purchase of a new home excluding loan origination and discount

point(s) and a home inspection up to $400.




 




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The Relocation Department has a network of quality brokers in place

across the United States to assist you at your destination whether you plan to

rent or purchase.  It is our

understanding that your Illinois home is currently listed.  The Relocation department will work with

your current agent in order to facilitate the sale of your residence.  You may call Mike Lequier of Relocation at

(770) 384-3506.




 




You agree that you shall not, without the prior express written consent

of an officer of the Company, engage in or have any financial or other

interests in, or render any service in any capacity to any competitor or

supplier of the Company during the course of your employment with the

Company.  Notwithstanding the foregoing,

you shall not be restricted from owning securities of corporations listed on a

national securities exchange or regularly traded by national securities

dealers, provided that such investment does not exceed 1% of the market value

of the outstanding securities of such corporation.  The provisions of this paragraph shall apply to you and your

immediate family.




 




You have stated that you have not agreed to and are not subject to any

covenant not to compete with any prior employer.  You understand that it is not the intention of Home Depot to

receive or obtain any trade secrets of others. Accordingly you agree that you

will not disclose or use during the period of your employment with Home Depot

any proprietary information or confidential information which you may have

acquired because of employment with an employer other than Home Depot.  Further, you agree that you will not bring

Home Depot any documents in any form containing proprietary or confidential

information from a prior employer.   In

the event your employment with Home Depot is terminated for any reason, you

agree not to disclose any Home Depot proprietary or confidential information to

any future employer or third party or to take copies in any form of any

documents containing such information.




 




By accepting this offer you acknowledge that you will be exposed to

Company materials which are proprietary and confidential in nature and/or which

constitute trade secrets, and, further, that you will receive training in the

Company’s various merchandising, operations, financial, and/or other business

processes.  You further acknowledge that

such proprietary and confidential information, including trade secrets and

human resources and other business processes, are utilized by the Company

throughout the entire United States and in other locations in which it conducts

business.  Consequently, you agree that

you will not, for a period of thirty-six months subsequent to your termination

from Home Depot, regardless of the reason for the termination, enter into or

maintain an employment or contractual relationship, either directly or

indirectly, with any company or entity in the home improvement industry engaged

in any way in a business that competes with Home Depot, its parents,

subsidiaries, affiliates or related entities (collectively referred to as the

“Company”), in the United States, Canada, Puerto Rico, Mexico, or any other

location in which the Company 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); Menard Inc.; and Wal-Mart.




 




In the event you wish to enter into any relationship or employment

prior to the end of the above referenced thirty-six  month period which may be covered by the above non-compete

provision, you agree 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 in its absolute

discretion.




 




You agree that prior to the end of the thirty-six month period stated

above that you 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.




 




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If you accept Home Depot’s offer of employment, and Home Depot notifies

you of its intention to terminate your employment involuntarily and without

cause subsequent to your written acceptance of this employment agreement, you

will be eligible to receive, in exchange for your execution of a general

release in a form acceptable to Home Depot’s legal counsel, twenty-four (24)

months base salary continuation and medical coverage during the period of

salary continuation.  In this

circumstance, all unvested stock options from the initial grant of 250,000

non-qualified stock options will vest immediately and all restrictions on the

initial grant of 70,000 shares of restricted stock shall lapse

immediately.  During the twenty-four

(24) months of salary continuation, outstanding options, other than the initial

grant referenced above, will continue to vest and restrictions on outstanding

restricted shares will continue to lapse. 

You will not receive any additional stock option or restricted stock

grants during the twenty-four (24) months salary continuation period.  You will have 90 days from the end of the

salary continuation period to exercise any options that are vested at that

time.




 




You will not be entitled to receive

these payments and benefits, or any other type of payment or benefit, if you

voluntarily resign from Home Depot, regardless of when or why you have resigned

from your employment.  You also are not

entitled to receive these payments or benefits, or any other type of payment or

benefit, if you terminated from Home Depot “for cause.”  For purposes of this letter, termination

“for cause” shall mean:




 




•                  Conviction of a

felony involving theft or moral turpitude




•                  Conduct that

constitutes willful gross neglect or willful gross misconduct with respect to

your employment duties which results in material economic harm to the Company




•                  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)




 




For purposes of determining whether conduct

constitutes willful gross misconduct or willful conduct or whether neglect

constitutes willful gross neglect, no act or omission on your part shall be

considered “willful” unless it is done in bad faith and without reasonable

belief that your action or inaction was in the best interests of the Company.




 




If you terminate your employment with Home Depot for

“good reason,” you will be entitled to the same benefits that you would be

entitled to if you were involuntarily terminated by the Company without cause,

subject to the same terms and conditions. 

“Good reason” shall mean, without your consent:




 




•                  Your assignment

or restructured role outside the Atlanta Metropolitan area




•                  Your assignment

or restructured role with a decrease in base salary




•                  Your assignment

to a position other than Executive Vice President (EVP), or a position that

does not report to the CEO




 




You must give at least 30 days

written notice if you wish to terminate your employment for good reason.




 




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This is a conditional offer of employment contingent on a background

check and drug test results.  As a

condition to your employment, you must take and pass a drug test and pass the

background check.  A positive test

result or failure to pass the background check will result in the denial of

your employment.  Drug testing must be

done within 48 hours from receipt of this letter.  Enclosed is information regarding your drug test.




 




This employment agreement does not obligate the Company to continue

your employment for any specified period of time, subject to the termination “without

cause” and “good reason” provisions outlined above.




 




We are pleased to welcome you to the Home Depot family.  I have enclosed a copy of this letter for

your records.  Please sign, date and

return the original to me.




 




Sincerely,




 




 




	

  /s/  Bob

  Nardelli


  	

   


  
	

  Bob Nardelli


  
	

  Chairman, President & CEO


  





 




 




Enclosures




 




pc:           Dennis Donovan




                Carol Tome




                Tim Crow




 




 




I accept this offer of employment.




 




	

   


  	

  /s/  John Costello


  	

   


  	

  9/29/02


  	

   


  
	

   


  	

  John Costello


  	

   


  	

  Date


  	

   


  





 




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