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.  


 





















 


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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