Prepared by MERRILL CORPORATION









 




 




 




 




 




 




EMPLOYMENT

AGREEMENT




 




BETWEEN




 




ROBERT L. NARDELLI




 




AND




 




THE HOME DEPOT, INC.




 




 




 




 




 




 




 






















 




EMPLOYMENT AGREEMENT


BETWEEN


ROBERT L. NARDELLI


AND


THE HOME DEPOT, INC.




 




Table of

Contents




 




 




	

  1.


  	

  Employment


  	

   


  
	

  2.


  	

  Period of Employment


  	

   


  
	

  3.


  	

  Duties During the Period of Employment


  	

   


  
	

   


  	

  3.1


  	

  Duties.


  	

   


  
	

   


  	

  3.2


  	

  Scope.


  	

   


  
	

  4.


  	

  Compensation and Other Payments


  	

   


  
	

   


  	

  4.1


  	

  Salary.


  	

   


  
	

   


  	

  4.2


  	

  Make Whole Payment.


  	

   


  
	

   


  	

  4.3


  	

  Annual Bonus.


  	

   


  
	

   


  	

  4.4


  	

  Annual Stock Option Grants.


  	

   


  
	

   


  	

  4.5


  	

  Deferred Stock Units.


  	

   


  
	

   


  	

  4.6


  	

  Payment of Professional Fees.


  	

   


  
	

  5.


  	

  Other Executive Benefits


  	

   


  
	

   


  	

  5.1


  	

  Deferred Compensation


  	

   


  
	

   


  	

  5.2


  	

  Regular Reimbursed Business Expenses


  	

   


  
	

   


  	

  5.3


  	

  Benefit Plans


  	

   


  
	

   


  	

  5.4


  	

  Relocation


  	

   


  
	

   


  	

  5.5


  	

  Perquisites


  	

   


  
	

  6.


  	

  Termination


  	

   


  
	

   


  	

  6.1


  	

  Death or Disability


  	

   


  
	

   


  	

  6.2


  	

  By the Company for Cause


  	

   


  
	

   


  	

  6.3


  	

  By Executive for Good Reason


  	

   


  
	

   


  	

  6.4


  	

  Other than for Cause or Good Reason


  	

   


  
	

   


  	

  6.5


  	

  Notice of Termination


  	

   


  
	

   


  	

  6.6


  	

  Date of Termination


  	

   


  
	

  7.


  	

  Obligations of the Company Upon Termination


  	

   


  
	

   


  	

  7.1


  	

  Termination by the Company for Cause or

  Resignation without Good Reason


  	

   


  
	

   


  	

  7.2


  	

  Resignation with Good Reason; Change in

  Control; Termination without Cause; Death; Disability


  	

   


  
	

   


  	

  7.3


  	

  Retirement after Age Sixty-Two


  	

   


  
	

   


  	

  7.4


  	

  COBRA Rights


  	

   


  
	

  8.


  	

  Change in Control


  	

   


  
	

  9.


  	

  Mitigation


  	

   


  
	

  10.


  	

  Indemnification


  	

   


  
	

  11.


  	

  Confidential Information


  	

   


  
	

  12.


  	

  Remedy for Violation of Section 11


  	

   


  
	

  13.


  	

  Withholding


  	

   


  
	

  14.


  	

  Arbitration


  	

   


  
	

  15.


  	

  Reimbursement of Legal Expenses


  	

   


  
	

  16.


  	

  Taxes


  	

   


  
	

  17.


  	

  Successors


  	

   


  
	

  18.


  	

  Representations


  	

   


  
	

  19.


  	

  Miscellaneous


  	

   


  





 






















 




EMPLOYMENT AGREEMENT




 




                THIS AGREEMENT (“Agreement”), by

and between The Home Depot, Inc., a Delaware corporation (“Company”), and

Robert L. Nardelli (“Executive”) is effective as of December 4, 2000

(the “Effective Date”).  In

consideration of the mutual covenants set forth herein, the Company and the

Executive hereby agree as follows:




 




                1.             Employment. The Company hereby agrees to employ the

Executive, and the Executive agrees to serve the Company, in the capacities

described herein during the Period of Employment (as defined in Section 2

of this Agreement), in accordance with the terms and conditions of this

Agreement.




 




                2.             Period of

Employment.  The term

“Period of Employment” shall mean the period which commences on the Effective

Date and, unless earlier terminated pursuant to Section 6, ends on

December 31, 2005; provided, however, that the Period of Employment shall

automatically be extended on a day by day basis effective on and after

January 1, 2003 (so that the remaining term shall always be three (3)

years) until such date as either the Company or the Executive shall have

terminated such automatic extension provision by giving written notice to the

other.




 




                3.             Duties

During the Period of Employment.




 




                                3.1           Duties.  During the Period of Employment, the

Executive shall be employed as the President and Chief Executive Officer of the

Company with overall charge and responsibility for the business and affairs of

the Company.  The Executive shall report

directly to the Company’s Board of Directors (the “Board”) and shall perform

such duties as the Executive shall reasonably be directed to perform by the

Board.  The Company shall cause the

Executive to be elected as follows: (i) to the Board, as of the Effective

Date, (ii) to the Executive Committee of the Board, as of the first

regularly scheduled Board meeting following the Effective Date, and

(iii) as sole Chairman of the Board, on or before December 31, 2001

or as of such date as Executive shall designate upon not less than

thirty (30) days’ notice to the Company as provided under

Section 19.2 of this Agreement.




 




                                3.2           Scope.  During the Period of Employment, and

excluding any periods of vacation and sick leave to which the Executive is

entitled, the Executive shall devote substantially all of his business time and

attention to the business and affairs of the Company.  It shall not be a violation of this Agreement for the Executive

to (i) serve on corporate, civic or charitable boards or committees,

(ii) deliver lectures, fulfill speaking engagements or teach occasional

courses or seminars at educational institutions, or (iii) manage personal

investments, so long as such activities under clauses (i), (ii) and (iii)

do not interfere, in any substantial respect, with the Executive’s

responsibilities hereunder.






















                4.             Compensation and Other

Payments.




 




                                4.1           Salary.  During the Period of Employment, the Company

shall pay the Executive an annualized base salary of not less than one million

five hundred thousand dollars ($1,500,000) per year (the “Base Salary”).  The Executive’s Base Salary shall be paid in

accordance with the Company’s executive payroll policy.  The Base Salary shall be reviewed by the

Compensation Committee of the Board of the Company (the “Committee”) as soon as

practicable after the end of each fiscal year during the Period of Employment,

beginning with the fiscal year ending on February 3, 2002.  Based upon such reviews, the Committee may

increase, but shall not decrease, the Base Salary.  Any increase in Base Salary shall not serve to limit or reduce

any other obligation to the Executive under this Agreement.




 




                                4.2           Make Whole Payment.  As of the

Effective Date, the Company shall grant the Executive:




 




                4.2.1        A stock option grant with respect to two million five hundred

thousand (2,500,000) shares of the Company’s stock, which shall vest and become

exercisable in equal five hundred thousand (500,000) share increments on the

Effective Date and each of the next four anniversaries of the Effective Date,

provided that each tranche shall vest only if the Executive is employed by the

Company on that tranche’s vesting date, except as provided in this

Agreement.  Each tranche will have a

10-year exercise period beginning at its vesting date.  The exercise price for this option shall be

forty dollars and seventy-five cents ($40.75) per share, which is the closing

price of the Company’s stock on the New York Stock Exchange (as reported in The Wall Street Journal) on the Effective

Date.




 




                4.2.2        A fully vested and exercisable 10-year stock option grant

under the Company’s 1997 Omnibus Stock Incentive Plan with respect to one

million (1,000,000) shares of Company stock, with an exercise price equal to

forty dollars and seventy-five cents ($40.75), which is the closing price of

the Company’s stock on the New York Stock Exchange (as reported in The Wall Street Journal) on the Effective

Date.




 




                4.2.3        A lump-sum cash payment of fifty

thousand four hundred dollars ($50,400).




 




                4.2.4        A ten million dollar ($10,000,000) loan at the interest rate

of five and eighty–seven hundredths percent (5.87%) per annum,

compounded annually, to be disbursed within three business days of the

Effective Date (the “Executive Loan”). 

This loan, and the Executive’s obligation to repay principal and the

associated accrued interest thereunder, (the term “Loan” covering both

principal and accrued interest) shall be forgiven as

follows:  (a) on each of the first five (5) anniversaries of

the Effective Date, two million dollars ($2,000,000) of principal and all

interest accrued to date shall be forgiven, provided that the Executive is

employed by the Company on any such anniversary, or (b) the entire

outstanding balance of principal and accrued interest shall be forgiven on the

date of a Change in Control of the Company (as defined in Section 7.2.12),

if the Executive is employed by the Company on such date, or (c) the entire

outstanding balance of principal and accrued interest shall be forgiven upon the

date of the termination of the Executive’s employment with the Company prior to

December 4, 2005 if such termination is by the Company without Cause

(as defined in subsection 6.2), by the Executive for Good Reason (as

defined in subsection 6.3) or by reason of the Executive’s death or

Disability (as defined in subsection 6.1).  In addition, if the Loan, or any part of the Loan, is forgiven

pursuant to the preceding sentence, the Company shall pay the Executive, on or

prior to such date as the Executive shall be required to pay federal, state or

local taxes with respect to the forgiveness of the Loan or any part of the

Loan, an additional payment (the “Gross-Up Payment”) in an amount sufficient to

fully reimburse the Executive with respect to all federal, state and local

taxes with respect to the forgiveness of the Loan or any part of the Loan and

with respect to receipt of the Gross-Up Payment.  If, prior to the fifth anniversary of the Effective Date, the

Executive’s employment with the Company is terminated by the Company for Cause

or by the Executive other than for Good Reason, then the remaining principal

balance (not including accrued interest) of the Executive Loan shall be repaid

by the Executive in annual two million dollar ($2,000,000)  installments, which shall be made on the

next anniversary or anniversaries, as the case may be, of the Effective Date.






















                                4.3           Annual Bonus.  Beginning

with the Company’s fiscal year ending on the last Sunday in January 2002,

as soon as practicable after the end of each fiscal year, the Committee shall

review the Executive’s performance under this Agreement as part of Executive’s

participation under the appropriate bonus plan of the Company as in effect from

time to time.  The Executive’s annual

bonus shall be at a target of no less than three million dollars ($3,000,000)

(the “Target Amount”) and a maximum of no less than four million dollars

($4,000,000) (the “Maximum Amount”). 

Nothing contained herein shall prevent the Committee from paying an

annual bonus in excess of the Maximum Amount. 

The Executive shall be paid his annual bonus no later than other senior

executives of the Company are paid their annual bonuses.  For each year during the Period of

Employment, and for any period during the Period of Employment which is less

than one year due to termination of the Executive’s employment for any reason

other than Cause, the Executive will receive an annual bonus of no less than

the full Target Amount.




 




                                4.4           Annual Stock

Option Grants.  The

Committee shall in 2002 and subsequent calendar years grant to the Executive

ten-year options with respect to shares of Company stock, with such grants to

be made at the same time during the calendar year as grants are generally made

to senior executives of the Company. 

Such annual grants shall be consistent with competitive pay practices

generally and appropriate relative to awards made to other senior executives of

the Company; provided, however, that each such annual grant shall be to

purchase no less than four hundred fifty thousand (450,000) shares of Company

Stock, with such number to be adjusted appropriately in the event of any change

in the outstanding shares of Company Stock by reason of a stock dividend or

split, recapitalization, merger, consolidation or other similar corporate

change or distribution of stock or property by the Company. These option grants

shall vest in four equal increments, with one tranche vesting on the second

anniversary of the grant date and one tranche vesting on each of the next three

anniversaries of the grant date (the “Vesting Scheme”); provided, however that

an annual option grant shall instead vest pursuant to normal Company practice

at the time of grant, so long as such then-current practice is no slower than

the Vesting Scheme.  Any annual option

grant may vest subject to a different vesting schedule, so long as such  vesting schedule is no slower than the

faster of the Vesting Scheme or the then-current normal Company practice at the

time of such stock option grant.






















                                4.5           Deferred Stock Units.  As of the

Effective Date, the Company shall grant the Executive an award of deferred

stock units corresponding to seven hundred fifty thousand (750,000) shares of

Company stock.  Such award shall vest in

equal one hundred fifty thousand (150,000) share increments on the Effective

Date and each of the first four anniversaries of the Effective Date; provided

that each tranche shall vest only if the Executive is employed by the Company

on that tranche’s vesting date, except as provided in this Agreement.  On the January 1 following the second

anniversary of each vesting date (as illustrated in the schedule on

Appendix A hereto) one share of stock for each unit shall be distributed

to the Executive, unless such distribution is further deferred by the Executive

by the second December 31 following the vesting date (as illustrated in

the schedule on Appendix A hereto). 

The Executive shall receive a dividend equivalent cash payment on all

vested deferred stock units when dividends are paid to shareholders. Unless

otherwise agreed to by the Executive and the Company, the Company shall, within

ten (10) days after termination of the Executive’s employment for any

reason, deliver to the Executive one share of Company stock for each vested

deferred stock unit for which stock has not yet been distributed to the

Executive.




 




                                4.6           Payment of Professional

Fees.  The Company shall pay on the 

Executive’s behalf all statements rendered to the Executive by the

Executive’s attorneys, accountants and other advisors for reasonable fees and

expenses in connection with the negotiation and preparation of this Agreement.

The Company shall pay the Executive, on or prior to such date as the Executive

shall be required to pay federal, state or local taxes with respect to the

Company’s payment of such professional fees, an additional payment (the

“Gross-Up Payment”) in an amount sufficient to fully reimburse the Executive

with respect to all federal, state and local taxes with respect to the

Company’s payment of such professional fees and with respect to receipt of the

Gross-Up Payment.




 




                5.             Other

Executive Benefits.




 




                                5.1           Deferred

Compensation.




 




                5.1.1        Upon termination of the Executive’s

employment, the Executive shall be entitled to a cash benefit  (the “Deferred Compensation”) in the form of

a single life annuity for the life of Executive, commencing on the later of his

62nd birthday or termination of employment, in an annual amount equal to 50% of

the Executive’s Final Earnings.  Final

Earnings shall equal the sum of the Executive’s (i) then-current Base

Salary as of the date of termination and (ii) most recent annual bonus (or

then-current Target Amount, if greater) as of the date of termination;

provided, however, that Final Earnings shall not be less than four million five

hundred thousand dollars ($4,500,000) (the sum of the original Base Salary and

original Target Amount under this Agreement). 

The Deferred Compensation shall be subject to offset for all

employer-funded qualified and non-qualified defined benefit pension benefits paid

or payable to the Executive from the Company or the Executive’s prior

employers.  In the event any amount

taken into account as an offset is not paid (other than as a result of the

death of the Executive, or of any action by Executive), and a final determination

is made that such amount will not be paid to Executive, then the Executive

shall be entitled to receive an additional amount from the Company equivalent

to such unpaid amount.  The Executive

and the Company shall cooperate with each other in connection with any

proceeding or claim against a prior employer relating to the payment of such an

amount to Executive, and all expenses incurred by the Executive in connection

therewith shall be paid by the Company promptly upon notice from Executive.




 




                5.1.2        In the event the Executive’s employment

is terminated either (i) by the Company for Cause or (ii) by the

Executive without Good Reason, and such termination occurs prior to the

Executive’s 62nd birthday, the Deferred Compensation amount at age 62 shall be

reduced by 3% for each full year during the period between such termination and

the Executive’s 62nd birthday.




 




                5.1.3        In the event the Executive’s employment

is terminated either (i) by the Company for Cause or (ii) by the

Executive without Good Reason, and such termination occurs prior to the fifth

anniversary of the Effective Date, the Deferred Compensation amount at age 62

(after any applicable reduction under subsection 5.1.2) shall be reduced

by 20% for each full year during the period between such termination and the

fifth anniversary of the Effective Date.




 




                5.1.4        Termination of the Executive’s

employment for any reason other than (i) by the Company for Cause or

(ii) by the Executive without Good Reason shall not cause a reduction in

the Deferred Compensation under subsection 5.1.2 or 5.1.3.  In the event of the Executive’s death prior

to commencement of the payment of the Deferred Compensation, the Executive’s

surviving spouse (or, if there is no surviving spouse, Executive’s estate),

shall be entitled to receive a lump sum 

payment equal to the lump sum payment to which Executive would have been

entitled if his Deferred Compensation was payable (without reduction under

subsection 5.1.2 or 5.1.3) as of the date immediately preceding his death and

he had elected to receive such amount in a lump sum on that date.




 




                5.1.5        In the event the Executive commences

receipt of (or in the event of his death, was deemed to have elected to

receive) his Deferred Compensation prior to age 62, the Deferred Compensation

amount (after any applicable reduction(s) under subsections 5.1.2 and/or

5.1.3) shall be subject to a discount of 4% for each full year between the date

the Executive receives or begins to receive (or is deemed to have received) the

Deferred Compensation and the date of the Executive’s 62nd birthday.  In the event of a Change in Control of the

Company, this subsection shall be revised by substituting “age 55” for “age 62”

in the immediately preceding sentence.






















                5.1.6        With the consent of the Company, or by

written election delivered to the Company by the Executive at least twelve

(12) months prior to the termination of the Executive’s employment with

the Company, the Executive may elect, in lieu of a single life annuity, to

receive the Deferred Compensation in a lump sum or deferred lump sum or

installment payments, or a life and term certain or joint and survivor annuity,

or such other optional form as Executive may elect.  The amount of such lump sum benefit shall be the actuarially

equivalent present value of the Deferred Compensation that would otherwise have

been payable, commencing immediately as of the date such lump sum payment is

made.  Any optional form of payment

shall have an actuarially equivalent present value equal to the amount of such

lump sum.  For purposes of this

Agreement, any actuarially equivalent present value shall not be less than the

present value determined on the basis of the applicable mortality table and

applicable interest rate prescribed in Internal Revenue Code Section 417(e)(3)(A)(ii),

in each case as would be applicable to a distribution made during the second

calendar month immediately preceding the calendar month in which such lump sum

distribution is made or optional form of payment is commenced.




 




                                5.2           Regular Reimbursed Business

Expenses.  The Company shall promptly reimburse the

Executive for all expenses and disbursements reasonably incurred by the

Executive in the performance of his duties hereunder during the Period of

Employment.




 




                                5.3           Benefit Plans.  The

Executive and his eligible family members shall be entitled to participate

immediately (except for the Company’s 401(k) plan, in which the Executive shall

be entitled to participate after satisfying the one-year waiting period), on

terms no less favorable to the Executive than the terms offered to other senior

executives of the Company who perform or have performed in the same capacity as

the Executive, in any group and/or executive life, hospitalization or

disability insurance plan, health program, vacation policy, pension, profit

sharing, ESOP, 401(k) and similar benefit plans (qualified, non-qualified and

supplemental) or other fringe benefits (it being understood that items such as

stock options are not fringe benefits) of the Company (collectively referred to

as the “Benefits”); provided, however, that such Benefits shall be no less, in

both scope of coverage and value of coverage, than the benefits provided to the

Executive by the Executive’s immediately preceding employer.  The benefit adjustments necessary to meet

the requirements of this paragraph are described in the letter from the Company

to the Executive of even date herewith. 

In the event that any health programs or insurance policies applicable

to the Benefits provided hereunder contain a preexisting conditions clause, the

Company shall reimburse the Executive for any COBRA  premiums on a tax grossed-up basis.  Anything contained herein to the contrary notwithstanding, the

Benefits described herein shall not duplicate benefits made available to the

Executive pursuant to any other provision of this Agreement.




 




                                5.4           Relocation.  The Company shall pay all costs of

relocation of the Executive and his family to the Atlanta metropolitan area in

accordance with the Company’s relocation policy supplemented as follows:




 




                5.4.1        The Company shall reimburse the

Executive for reasonable temporary living expenses (including reasonable travel

expenses between the Executive’s primary residence as of the Effective Date and

the Atlanta metropolitan area) for the Executive and his family in the Atlanta

metropolitan area for a period not to exceed one year from the Effective Date;




 




                5.4.2        The Company will make available to the

Executive the opportunity to sell his present primary residence at appraised

value through a relocation firm mutually acceptable to the Executive and the

Company; and




 




                5.4.3        All relocation payments and benefits

will be fully grossed-up for any applicable taxes.






















                                5.5           Perquisites.  The Company

shall provide the Executive such perquisites of employment as are commonly

provided to other senior executives of the Company.




 




                6.             Termination.




 




                                6.1           Death or

Disability.  This

Agreement and the Period of Employment shall terminate automatically upon the

Executive’s death.  If the Company

determines in good faith that the Disability of the Executive has occurred

(pursuant to the definition of “Disability” set forth below), it may give to

the Executive written notice of its intention to terminate the Executive’s

employment.  In such event, the Executive’s

employment with the Company shall terminate effective on the thirtieth day

after receipt by the Executive of such notice given at any time after a period

of one hundred twenty (120) consecutive days of Disability or a period of

one hundred eighty (180) days of Disability within any twelve (12)

consecutive months, and, in either case, while such Disability is continuing

(“Disability Effective Date”); provided that, within the thirty (30) days

after such receipt, the Executive shall not have returned to full-time

performance of the Executive’s duties. 

For purposes of this Agreement, “Disability” means the Executive’s

inability to substantially perform his duties hereunder, with reasonable

accommodation, as evidenced by a certificate signed either by a physician

mutually acceptable to the Company and the Executive or, if the Company and the

Executive cannot agree upon a physician, by a physician selected by agreement

of a physician designated by the Company and a physician designated by the

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.  Until the Disability Effective Date, the Executive shall be

entitled to all compensation provided for under Section 4 hereof.  It is understood that nothing in this

Section 6.1 shall serve to limit the Company’s obligations under

Section 7.2 hereof.




 




                                6.2           By the Company for Cause.  During the Period of Employment after the Effective Date, the

Company may terminate the Executive’s employment immediately for “Cause.”  For purposes of this Agreement, “Cause”

shall mean that (i) the Executive has been convicted of a felony involving

theft or moral turpitude, or (ii) engaged in conduct that constitutes

willful gross neglect or willful gross misconduct with respect to employment

duties which results in material economic harm to the Company; provided,

however, that for the purposes of determining whether conduct constitutes

willful gross misconduct, no act on Executive’s part shall be considered

“willful” unless it is done by the Executive in bad faith and without

reasonable belief that the Executive’s action was in the best interests of the

Company.  Notwithstanding the foregoing,

the Company  may not terminate the

Executive’s employment for Cause unless (i) a determination that Cause

exists is made and approved by a majority of the Company’s Board of Directors,

(ii) the Executive is given at least thirty (30) days written notice

of the Board meeting called to make such determination, and (iii) the

Executive and his legal counsel are given the opportunity to address such

meeting.






















                                6.3           By Executive for Good

Reason.  During the Period of Employment, the Executive’s employment

hereunder may be terminated by the Executive for Good Reason upon

fifteen (15) days’ written notice. 

For purposes of this Agreement, “Good Reason” shall mean, without the

Executive’s consent:




 




                6.3.1        Assignment to the Executive of any

duties inconsistent in any material respect with the Executive’s position

(including status, offices, titles and reporting relationships), authority,

duties or responsibilities as contemplated by Section 3 of this 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 the

Executive;




 




                6.3.2        Any failure by the Company to comply

with any of the provisions of Section 4 or 5 of this 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 the Executive;




 




                6.3.3        The 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 in Atlanta, Georgia as of

the Effective Date;




 




                6.3.4        Delivery by the Company of a notice

discontinuing the automatic extension provision of Section 2 of this

Agreement;




 




                6.3.5        Failure by the Company to elect the

Executive to the position of sole Chairman of the Board of Directors, in

compliance with the terms of Section 3.1; or




 




                6.3.6        Any purported termination by the Company

of the Executive’s employment otherwise than as expressly permitted by this

Agreement.




 




                                6.4           Other

than for Cause or Good Reason. 

The Executive or the Company may terminate this Agreement for any reason

other than for Good Reason or Cause, respectively, upon thirty (30) days

written notice to the Company or Executive, as the case may be.  If the Executive terminates the Agreement for

any reason, he shall have no liability to the Company or its subsidiaries or

affiliates as a result thereof.  If the

Company terminates the Agreement, or if the Agreement terminates because of the

death of the Executive, the obligations of the Company shall be as set forth in

Section 7 hereof.




 




                                6.5           Notice of

Termination.  Any

termination by the Company or by the Executive shall be communicated by a

Notice of Termination to the other party hereto given in accordance with

Section 19.2 of this Agreement. 

For purposes of this Agreement, a “Notice of Termination” means a

written notice which (i) indicates the specific termination provision in

this Agreement relied upon, (ii) sets forth in reasonable detail, if

necessary, the facts and circumstances claimed to provide a basis for

termination of the Executive’s employment under the provision so indicated, and

(iii) if the Date of Termination (as defined below) is other than the date

of receipt of such notice, specifies the termination date.  The failure by the Executive or Company to

set forth in the Notice of Termination any fact or circumstance which

contributes to a showing of the basis for termination shall not waive any right

of such party hereunder or preclude such party from asserting such fact or

circumstance in enforcing his or its rights hereunder.




 




                                6.6           Date of

Termination.  “Date of

Termination” means the date specified in the Notice of Termination; provided,

however, that if the Executive’s employment is terminated by reason of death or

Disability, the Date of Termination shall be the date of death of the Executive

or the Disability Effective Date, as the case may be.




 




                7.             Obligations

of the Company Upon Termination.  The following provisions describe the obligations of the Company

to the Executive under this Agreement upon termination of his employment.  However, except as explicitly provided in

this Agreement, nothing in this Agreement shall limit or otherwise adversely

affect any rights which the Executive may have under applicable law, under any

other agreement with the Company, or under any compensation or benefit plan,

program, policy or practice of the Company.




 




                                7.1           Termination by the Company

for Cause or Resignation without Good Reason.  In the event this Agreement terminates by

reason of the termination of the Executive’s Employment by the Company for

Cause or by reason of the resignation of the Executive other than for Good

Reason, the Company shall pay to the Executive all Accrued Obligations (as

defined below) in a lump sum in cash within thirty (30) days after the

Date of Termination.  “Accrued

Obligations” shall mean, as of the Date of Termination, the sum of (A) the

Executive’s Base Salary through the Date of Termination to the extent not

theretofore paid, (B) except as otherwise previously requested by the

Executive, the amount of any bonus, incentive compensation, deferred

compensation (not including the amounts described in subsection 5.1 of

this Agreement, which will be governed by subsection 5.1) and other cash

compensation accrued by the Executive as of the Date of Termination to the

extent not theretofore paid and (C) any vacation pay, expense reimbursements

and other cash entitlements accrued by the Executive as of the Date of

Termination to the extent not theretofore paid.




 




                                7.2           Resignation with Good

Reason; Change in Control; Termination without Cause; Death; Disability.  If (i) the Company shall terminate the

Executive’s employment other than for Cause, (ii) the Executive shall

terminate his employment at any time for Good Reason or for any reason within

twelve (12) months after a Change in Control or (iii) the Executive’s

employment shall terminate due to death or Disability, the Executive shall

receive in addition to the Accrued Obligations, the following:




 




                7.2.1        Twenty million dollars ($20,000,000),

within thirty (30) days after the Date of Termination;




 




                7.2.2        Immediate full vesting in (i.e., full

exercisability for) any options previously granted and not yet vested as of the

Date of Termination, including but not limited to any such options granted

under subsection 4.2.1 or subsection 4.4;




 




                7.2.3        Continued exercisability, through the

end of their respective full original terms, for all vested options, whether

previously vested or vesting under this subsection 7.2;






















                7.2.4        Delivery of one share of Company stock

for each deferred stock unit vested to the Executive for which stock has not

yet been distributed to the Executive, as provided under subsection 4.5;




 




                7.2.5        Immediate vesting of any deferred stock

units described in subsection 4.5 which have not yet vested to the

Executive, and delivery of one share of Company stock for each deferred stock

unit subject to accelerated vesting pursuant to this subsection 7.2.5;




 




                7.2.6        For each year prior to 2006 for which

the annual option award required by subsection 4.4 has not yet been

granted, immediate grant of a ten-year stock option award having an exercise

price equal to the fair market value of a share of Company stock on the Date of

Termination and otherwise complying with the requirements of

subsection 4.4, with each such award being fully vested immediately upon

such grant and remaining exercisable for the full ten-year term;




 




                7.2.7        Immediate full vesting in all other

otherwise unvested shares of restricted stock of the Company, deferred stock

units or other equity-based awards (if any) previously awarded to the

Executive, with immediate termination of all restrictions on such awards;




 




                7.2.8        Immediate full vesting in the Deferred

Compensation described in Section 5.1 (i.e., no reductions pursuant to

subsection 5.1.2 or 5.1.3);




 




                7.2.9        Immediate full forgiveness of any

outstanding balance of principal and accrued interest on the Executive Loan,

and payment of the Gross-Up Payment, as provided under subsection 4.2.4;




 




                7.2.10      Receipt of any other compensation and

Benefits accrued or earned and vested (if applicable) by the Executive as of

the Date of Termination (but not duplicative of the Accrued Obligations); and




 




                7.2.11      For the remainder of the Period of

Employment (determined without regard to the termination thereof pursuant to

Section 6) or for three (3) years (whichever is longer), the Company shall

continue health, prescription drug, dental, disability and life insurance

benefits to the Executive and/or the Executive’s eligible family members at

least equal to those which would have been provided to them in accordance with

Section 5.3 of this Agreement if the Executive’s employment had not been

terminated.






















                7.2.12      For purposes of this Agreement, a “Change

in Control” shall be deemed to have occurred if:




 




                7.2.12.1   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, (i) the Company or any

subsidiary of the Company, or (ii) 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 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 percentage

resulting solely from an acquisition of securities by the Company; or




 




                7.2.12.2   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 of Directors of the Company 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 (such individuals and any such new director being referred to as the

“Incumbent Board”) cease for any reason to constitute at least a majority of

the Board; or




 




                7.2.12.3   Consummation of a reorganization, merger or

consolidation or sale 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, (i) 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 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




 




                7.2.12.4   Approval by the stockholders of the Company

of a complete liquidation or dissolution of the Company.




 




                7.2.13      Any other provision of this

Section 7.2 notwithstanding, termination of the Executive’s employment due

to involuntary retirement on or after the Executive reaching age seventy-two

(72) will not be a termination of employment covered by this Section 7.2.






















                                7.3           Retirement after Age

Sixty-Two.  If the Executive’s employment with the Company terminates due to

his retirement from the Company after he attains age sixty-two (62), all

equity-based awards made to the Executive shall become fully vested and, if

applicable, shall remain exercisable through the end of their original term.




 




                                7.4           COBRA Rights.  It is understood that the Executive’s rights

under this Section 7 are in lieu of all other rights which the Executive

may otherwise have had upon termination of employment under this Agreement;

provided, however, that no provision of this Agreement is intended to adversely

affect the Executive’s rights under the Consolidated Omnibus Budget

Reconciliation Act of 1985.




 




                8.             Change in Control.  In the

event of a Change in Control of the Company: 

(i) all prior grants to the Executive of stock options, restricted

stock, deferred stock units or other equity-based awards (including but not

limited to grants under subsections 4.2.1, 4.4 and 4.5) shall become fully

vested (and, if applicable, shall remain exercisable through the end of their

respective full original terms); and (ii) the Executive shall be entitled

to receive any other Change-in-Control protection applicable to other senior

executives of the Company, except to the extent that the application thereof

would reduce the Executive’s rights or benefits under this Agreement.




 




                9.             Mitigation.  In no event shall the Executive be obligated

to seek other employment or take any other action by way of mitigation of the

amounts payable to the Executive under any of the provisions of this Agreement.  Any severance benefits payable to the

Executive shall not be subject to reduction for any compensation received from

other employment.




 




                10.           Indemnification.  The Company shall maintain, for the benefit

of the Executive, director and officer liability insurance in form at least as

comprehensive as, and in an amount that is at least equal to, that maintained

by the Company on the Effective Date. 

In addition, the Executive shall be indemnified by the Company against

liability as an officer and director of the Company and any subsidiary or

affiliate of the Company to the maximum extent permitted by applicable

law.  The Executive’s rights under this

Section 10 shall continue so long as he may be subject to such liability,

whether or not this Agreement may have terminated prior thereto.




 




                11.           Confidential Information.  The Executive shall hold in a fiduciary capacity for the benefit

of the Company all secret or confidential information, knowledge or data

relating to the Company, or any of its subsidiaries, affiliates and businesses,

which shall have been obtained by the Executive pursuant to his employment by

the Company or any of its subsidiaries and affiliates and which shall not have

become public knowledge (other than by acts by the Executive or his

representatives in violation of this Agreement).  After termination of the Executive’s employment with the Company,

the Executive shall not, without the prior written consent of the Company,

communicate or divulge any such information, knowledge or data to anyone other

than the Company and those designated by it. 

In no event shall an asserted violation of the provisions of this

Section 11 constitute a basis for deferring or withholding any amounts

otherwise payable to the Executive under this Agreement.






















                12.           Remedy for Violation of Section 11.  The Executive acknowledges that the Company

has no adequate remedy at law and will be irreparably harmed if the Executive

breaches or threatens to breach the provisions of Section 11 of this

Agreement, and, therefore, agrees that the Company shall be entitled to

injunctive relief to prevent any breach or threatened breach of such

Section and that the Company shall be entitled to specific performance of

the terms of such Section in addition to any other legal or equitable

remedy it may have.  Nothing in this

Agreement shall be construed as prohibiting the Company from pursuing any other

remedies at law or in equity that it may have or any other rights that it may

have under any other agreement.




 




                13.           Withholding.  Anything in this Agreement to the contrary

notwithstanding, all payments required to be made by the Company hereunder to

the Executive shall be subject to withholding, at the time payments are

actually made to the Executive and received by him, of such amounts relating to

taxes as the Company may reasonably determine it should withhold pursuant to

any applicable law or regulation.  In

lieu of withholding such amounts, in whole or in part, the Company may, in its

sole discretion, accept other provision for payment of taxes as required by law,

provided that it is satisfied that all requirements of law as to its

responsibilities to withhold such taxes have been satisfied.




 




                14.           Arbitration.  Any dispute or controversy between the

Company and the Executive, whether arising out of or relating to this

Agreement, the breach of this Agreement, or otherwise, shall be settled by

arbitration administered by the American Arbitration Association (“AAA”) in

accordance with its Commercial Arbitration Rules then in effect, and judgment

on the award rendered by the arbitrator may be entered in any court having

jurisdiction thereof.  Any arbitration

shall be held before a single arbitrator who shall be selected by the mutual

agreement of the Company and the Executive, unless the parties are unable to

agree to an arbitrator, in which case, the arbitrator will be selected under

the procedures of the AAA.  The

arbitrator shall have the authority to award any remedy or relief that a court

of competent jurisdiction could order or grant, including, without limitation,

the issuance of an injunction.  However,

either party may, without inconsistency with this arbitration provision, apply

to any court having jurisdiction over such dispute or controversy and seek

interim provisional, injunctive or other equitable relief until the arbitration

award is rendered or the controversy is otherwise resolved.  Except as necessary in court proceedings to

enforce this arbitration provision or an award rendered hereunder, or to obtain

interim relief, neither a party nor an arbitrator may disclose the existence,

content or results of any arbitration hereunder without the prior written

consent of the Company and the Executive. 

The Company and the Executive acknowledge that this Agreement evidences

a transaction involving interstate commerce. 

Notwithstanding any choice of law provision included in this Agreement,

the United States Federal Arbitration Act shall govern the interpretation and

enforcement of this arbitration provision. 

The arbitration proceeding shall be conducted in Atlanta, Georgia or

such other location to which the parties may agree.  The Company shall pay the costs of any arbitrator appointed

hereunder.






















                15.           Reimbursement of Legal

Expenses.  In the event that the Executive is

successful, whether in mediation, arbitration or litigation, in pursuing any

claim or dispute involving the Executive’s employment with the Company,

including any claim or dispute relating to (a) this Agreement,

(b) termination of the Executive’s employment with the Company or (c) the

failure or refusal of the Company to perform fully in accordance with the terms

hereof, the Company shall promptly reimburse the Executive for all costs and

expenses (including, without limitation, attorneys’ fees) relating solely, or

allocable, to such successful claim.  In

any other case, the Executive and the Company shall each bear all their own

respective costs and attorneys’ fees.




 




                16.           Taxes.  In the event that the aggregate of all

payments or benefits made or provided to, or that may be made or provided to,

the Executive under this Agreement and under all other plans, programs and

arrangements of the Company (the “Aggregate Payment”) is determined to

constitute a “parachute payment,” as such term is defined in

Section 280G(b)(2) of the Internal Revenue Code, the Company shall pay to

the Executive, prior to the time any excise tax imposed by Section 4999 of

the Internal Revenue Code (“Excise Tax”) is payable with respect to such

Aggregate Payment, an additional amount which, after the imposition of all income

and excise taxes thereon, is equal to the Excise Tax on the Aggregate

Payment.  The determination of whether

the Aggregate Payment constitutes a parachute payment and, if so, the amount to

be paid to the Executive and the time of payment pursuant to this Section 16

shall be made by an independent auditor (the “Auditor”) jointly selected by the

Company and the Executive and paid by the Company.  The Auditor shall be a nationally recognized United States public

accounting firm which has not, during the two (2) years preceding the date

of its selection, acted in any way on behalf of the Company or any affiliate

thereof.  If the Executive and the

Company cannot agree on the firm to serve as the Auditor, then the Executive

and the Company shall each select one accounting firm and those two firms shall

jointly select the accounting firm to serve as the Auditor.  Notwithstanding the foregoing, in the event

that the amount of the Executive’s Excise Tax liability is subsequently determined

to be greater than the Excise Tax liability with respect to which an initial

payment to the Executive under this Section 16 has been made, the Company

shall pay to the Executive an additional amount with respect to such additional

Excise Tax (and any interest and penalties thereon) at the time and in the

amount determined by the Auditor so as to make the Executive whole, on an

after-tax basis, with respect to such Excise Tax (and any interest and

penalties thereon) and such additional amount paid by the Company.  In the event the amount of the Executive’s

Excise Tax liability is subsequently determined to be less than the Excise Tax

liability with respect to which an initial payment to the Executive has been

made, the Executive shall, as soon as practical after the determination is

made, pay to the Company the amount of the overpayment by the Company, reduced

by the amount of any relevant taxes already paid by the Executive and not

refundable, all as determined by the Auditor. 

The Executive and the Company shall cooperate with each other in

connection with any proceeding or claim relating to the existence or amount of

liability for Excise Tax, and all expenses incurred by the Executive in

connection therewith shall be paid by the Company promptly upon notice of

demand from the Executive.




 




                17.           Successors.




 




                                17.1         This

Agreement is personal to the Executive and without the prior written consent of

the Company shall not be assignable by the Executive otherwise than by will or

the laws of descent and distribution. 

This Agreement shall inure to the benefit of and be enforceable by the

Executive’s heirs and legal representatives.






















                                17.2         This Agreement shall inure to the

benefit of and be binding upon the Company and its successors and assigns.




 




                                17.3         The

Company shall require any successor (whether direct or indirect, by purchase,

merger, reorganization, consolidation, acquisition of property or stock,

liquidation, or otherwise) to all or a substantial portion of its assets, by

agreement in form and substance reasonably satisfactory to the Executive,

expressly to assume and agree to perform this Agreement in the same manner and

to the same extent that the Company would be required to perform this Agreement

if no such succession had taken place. 

Regardless of whether such an agreement is executed, this Agreement

shall be binding upon any successor of the Company in accordance with the

operation of law, and such successor shall be deemed the “Company” for purposes

of this Agreement.




 




                                17.4         As

used in this Agreement, the term “Company” shall include any successor to the

Company’s business and/or assets as aforesaid which assumes and agrees to

perform this Agreement by operation of law, or otherwise.




 




                18.           Representations.




 




                                18.1         The

Company represents and warrants that (i) the execution of this Agreement

has been duly authorized by the Company, including action of the Board and

Committee, (ii) the execution, delivery and performance of this Agreement

by the Company does not and will not violate any law, regulation, order,

judgment or decree or any agreement, plan or corporate governance document of

the Company and (iii) upon the execution and delivery of this Agreement by

the Executive, this Agreement shall be the valid and binding obligation of the

Company, enforceable in accordance with its terms, except to the extent

enforceability may be limited by applicable bankruptcy, insolvency or similar

laws affecting the enforcement of creditors’ rights generally and by the effect

of general principles of equity (regardless of whether enforceability is considered

in a proceeding in equity or at law).




 




                                18.2         The

Executive represents and warrants to the Company that (i) the execution,

delivery and performance of this Agreement by the Executive does not and will

not violate any law, regulation, order, judgment or decree or any agreement to

which the Executive is a party or by which he is bound, (ii) although the

Executive is bound by certain noncompetition, nonsolicitation and

confidentiality covenants in an agreement with his immediately preceding

employer, the Executive is not a party to or bound by any employment agreement,

noncompetition agreement or confidentiality agreement with any person or entity

that would interfere materially with this Agreement or his performance of

services hereunder, and (iii) upon the execution and delivery of this

Agreement by the Company, this Agreement shall be the valid and binding

obligation of the Executive, enforceable in accordance with its terms, except

to the extent enforceability may be limited by applicable bankruptcy, insolvency

or similar laws affecting the enforcement of creditors’ rights generally and by

the effect of general principles of equity (regardless of whether

enforceability is considered in a proceeding in equity or at law).






















                19.           Miscellaneous.




 




                                19.1         This

Agreement shall be governed by and construed in accordance with the laws of the

State of Georgia, without reference to principles of conflicts of laws.  The captions of this Agreement are not part

of the provisions hereof and shall have no force or effect.  This Agreement may not be amended or

modified otherwise than by a written agreement executed by the parties hereto

or their respective successors and legal representatives.




 




                                19.2         All

notices and other communications hereunder shall be in writing and shall be

given by hand delivery to the other party, by overnight courier, or by

registered or certified mail, return receipt requested, postage prepaid,

addressed as follows:




 




If to the Executive:




 




Robert L. Nardelli


1 Cobble Court


Loudonville, NY  12211




 




with a copy to:




 




Robert J. Stucker, Esq.


Vedder, Price, Kaufman & Kammholz


222 N. LaSalle Street


26th Floor


Chicago, IL  60601




 




If to the Company:




 




The Home Depot, Inc.


2455 Paces Ferry Road


Atlanta, GA  30339


Attn:  General Counsel




 




or

to such other address as either of the parties shall have furnished to the

other in writing in accordance herewith. 

Notice and communications shall be effective when actually received by

the addressee.




 




                                19.3         None

of the provisions of this Agreement shall be deemed to impose a penalty.




 




                                19.4         The

invalidity or unenforceability of any provision of this Agreement shall not

affect the validity or enforceability of any other provision of this Agreement.




 




                                19.5         Any

party’s failure to insist upon strict compliance with any provision hereof

shall not be deemed to be a waiver of such provision or any other provision

hereof.






















                                19.6         This Agreement supersedes any prior

employment agreement or understandings, written or oral between the Company and

the Executive and contains the entire understanding of the Company and the

Executive with respect to the subject matter hereof.




 




                                19.7         This

Agreement may be executed simultaneously in two or more counterparts, each of

which shall be deemed an original, but all of which together shall constitute

one and the same instrument.




 




                IN WITNESS WHEREOF, the parties

have executed this Agreement as of the dates written below.




 




	

   


  	

  THE

  HOME DEPOT, INC.


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  By:


  	

  /s/  Bernard Marcus


  
	

   


  	

   


  	

  Bernard

  Marcus


  
	

   


  	

   


  	

  Co-Chairman

  of the Board


  
	

   


  	

   


  	

   


  
	

   


  	

  Date:


  	

    8/27/01


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  By:


  	

  /s/  John. L. Clendenin


  
	

   


  	

   


  	

  John

  L. Clendenin


  
	

   


  	

   


  	

  Chairman

  of the Compensation Committee of the Board


  
	

   


  	

   


  	

   


  
	

   


  	

  Date:


  	

    8/17/01


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  ROBERT

  L. NARDELLI


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  /s/  Robert L. Nardelli


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  Date:


  	

    8/14/01


  























 




APPENDIX A 




 




 




SCHEDULE FOR DEFERRED STOCK UNITS




 








	

   


  	

   


  	

  Vesting Date


  	

   


  	

  Deferral Election Date


  	

   


  	

  Distribution Date


  
	

  1.


  	

   


  	

  December 4, 2000


  	

   


  	

  December 31, 2001


  	

   


  	

  January 1, 2003


  
	

  2.


  	

   


  	

  December 4, 2001


  	

   


  	

  December 31, 2002


  	

   


  	

  January 1, 2004


  
	

  3.


  	

   


  	

  December 4, 2002


  	

   


  	

  December 31, 2003


  	

   


  	

  January 1, 2005


  
	

  4.


  	

   


  	

  December 4, 2003


  	

   


  	

  December 31, 2004


  	

   


  	

  January 1, 2006


  
	

  5.


  	

   


  	

  December 4, 2004


  	

   


  	

  December 31, 2005


  	

   


  	

  January 1, 2007


  










 






















 




[Home Depot Letterhead]




 




 




 




 




 




 




January 19, 2001




 




Mr.

Robert L. Nardelli




1

Cobble Court




Loudonville,

New York  12211




 




Dear

Bob:




 




                This letter is delivered to you

as a supplement to your Employment Agreement (the “Agreement”) with The Home

Depot, Inc. (the “Company”) of even date herewith, as provided for in

Paragraph 5.3 of the Agreement.




 




                During your Period of Employment

with the Company and subject to the terms of the Agreement, the Company will

provide you with the following benefits, which shall satisfy the Company’s

obligation to provide you with benefits no less than, in both scope and value

of coverage, the benefits provided you by General Electric Company:




 




                1.  Life

Insurance.  The Company will assume from General

Electric Company, its obligations under the following three insurance policies:






 




(1)  GE Executive Life Policy

number 918490013U;




(2)  Executive Life Policy

number 955190365UE; and




(3)  Leadership Life Policy

number 945192518UE.  




 




Alternatively, at your option, the Company shall provide you with term

life insurance with a death benefit of $25 million, with a guaranteed

minimum term of fifteen (15) years. 






 




The Company will pay you, on or prior to such date as you are required

to pay federal, state or local taxes with respect to the provision of the life

insurance described in this item 1, an additional payment in an amount

sufficient to fully reimburse you with respect to all federal, state and local

taxes with respect to this life insurance and with respect to receipt of the

additional payment.  




 




                2.  Basic Life

Insurance.  In addition to the life insurance described

in paragraph 1, the Company will provide you with the life insurance benefits

generally provided to executives of the Company, subject the usual terms under

which such life insurance is normally offered from time to time.  




 




                3.  Health

Insurance.  The Company shall provide you and your

eligible family members with full health care insurance under its Cigna

Preferred Provider Access plan (or similar plan), in accordance with its terms

as in effect from time to time.  






















                4.  Prescription

Drug Program.  You and your family will be entitled to

participate in the Company’s prescription drug program, in accordance with its

terms as in effect from time to time.




 




                5.  Dental

Insurance.  You and your family will be able to

participate in the Company’s dental insurance program, in accordance with its

terms as in effect from time to time.




 




                6.  Salary

Continuation and Disability Insurance.  You will be

covered by the Company’s salary continuation and long-term disability insurance

programs, in accordance with their terms as in effect from time to time.  




 




                7.  Automobile.  The Company

shall provide you with the use of an automobile, to be selected by you, such

automobile to be similar in class to that of the current Mercedes Benz

S600.  It is anticipated that the

automobile will be leased by the Company for a period up to three years.  The Company will provide you with a new

leased or purchased vehicle every three years. 

In addition, the Company shall pay for all maintenance, repairs,

insurance and similar cost related to the automobile.  




 




The Company will pay you, on or prior to such date as you are required

to pay federal, state or local taxes with respect to the provision of the

automobile benefit described in this item 7, an additional payment in an amount

sufficient to fully reimburse you with respect to all federal, state and local

taxes with respect to this automobile benefit and with respect to receipt of

the additional payment.  




 




                8.  Aircraft.  The Company

will make available a private aircraft for use by you and your family.  The Company requires, where practicable,

that you travel by use of such aircraft, for security purposes.  Your family’s personal use of such aircraft

will require the inclusion in your taxable income, an amount equal to the

related benefit of such accommodations. 

Such inclusion shall be made as required under the Internal Revenue Code

and related regulations.  




 




The Company will pay you, on or prior to such date as you are required

to pay federal, state or local taxes with respect to the provision of the

aircraft benefit described in this item 8, an additional payment in an amount

sufficient to fully reimburse you with respect to all federal, state and local

taxes with respect to this aircraft benefit and with respect to receipt of the

additional payment.  




 




                9.  Professional

Services.  The Company shall, in addition to the benefits provided to you

under Paragraph 4.6 of the Agreement, reimburse you for financial planning

and tax consultation and services up to $150,000 per three-year

period.  




 




The Company will pay you, on or prior to such date as you are required

to pay federal, state or local taxes with respect to the provision of the

professional services benefit described in this item 9, an additional payment

in an amount sufficient to fully reimburse you with respect to all federal, state

and local taxes with respect to this professional services benefit and with

respect to receipt of the additional payment. 






 




                10.  Retirement

and 401(k) Plans.  You will be entitled to participate in the

Company’s retirement and 401(k) plans, in accordance with the terms of

such plans in effect from time to time. 
























                11.  Employee

Stock Purchase Plan.  You will be entitled to participate in the

Company’s voluntary stock contribution plan, in accordance with its terms as in

effect from time to time.




 




                12.  Cafeteria

Plan.  You will be entitled to participate in the Company’s Cafeteria

plan, in accordance with its terms as in effect from time to time.  




 




                13.  Vacation.  You will be

entitled to six weeks of paid vacation, to be taken at your discretion.




 




                14.  Other

Benefit Plans.  You and your family will be entitled to

participate in any and all of the Company’s other benefits plans applicable to

senior executives, in accordance with their respective terms as in effect from

time to time.  




 




	

   


  	

  Very

  truly yours,


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  By:


  	

  /s/

  Bernard Marcus


  
	

   


  	

   


  	

  Bernard

  Marcus


  
	

   


  	

   


  	

  Co-Chairman

  of the Board


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  By:


  	

  /s/

  John L. Clendenin


  
	

   


  	

   


  	

  John

  L. Clendenin


  
	

   


  	

   


  	

  Chairman

  of the Compensation Committee of the Board