<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE HOME DEPOT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(THE HOME DEPOT LOGO)
THE HOME DEPOT, INC.
To our Stockholders:
On behalf of the Board of Directors, it is our pleasure to invite you to
attend the Annual Meeting of Stockholders of The Home Depot, Inc.
As shown in the formal notice enclosed, the meeting will be held at the
Cobb Galleria Centre, 2 Galleria Parkway, Atlanta, Georgia 30339, on Wednesday,
May 28, 1997, at 10:00 a.m. local time. At the meeting, in addition to acting on
the matters described in the Proxy Statement, we will give a current report on
the activities of the Company. Stockholders will have an opportunity at that
time to comment on or to inquire about the affairs of the Company that may be of
interest to Stockholders generally. If you will need special assistance at the
meeting because of a disability, please contact Mr. Don Singletary, Vice
President-Employee Relations, Home Depot U.S.A., Inc., 2727 Paces Ferry Road,
Atlanta, Georgia 30339-4089. An interpreter for persons who are hearing impaired
will be provided.
The subjects proposed for action at the meeting are the election of four
directors, the approval of two compensation plans and the conduct of such other
business, including consideration of two stockholder proposals, as may properly
come before the meeting.
It is important that your shares be represented at this meeting in order
that the presence of a quorum may be assured. Whether or not you plan to attend
the meeting, you are urged to date, sign and mail the enclosed proxy card in the
envelope provided.
Thank you for your support.
Sincerely,
/s/ BERNARD MARCUS
Bernard Marcus
Chairman of the Board of Directors,
Chief Executive Officer and
Secretary
/s/ ARTHUR M. BLANK
Arthur M. Blank
President and Chief Operating Officer
<PAGE> 3
THE HOME DEPOT, INC.
2727 PACES FERRY ROAD
ATLANTA, GEORGIA 30339-4089
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1997
NOTICE is hereby given that the Annual Meeting of Stockholders of The Home
Depot, Inc., a Delaware corporation (the "Company" or "Home Depot"), will be
held in accordance with its By-laws at the Cobb Galleria Centre, 2 Galleria
Parkway, Atlanta, Georgia 30339, Wednesday, May 28, 1997, at 10:00 a.m. for the
following purposes:
(1) To elect four (4) directors for terms ending with the 2000 Annual
Meeting of Stockholders and until their successors are elected and
qualified;
(2) To approve the Company's 1997 Omnibus Stock Incentive Plan;
(3) To approve a Nonemployee Directors' Deferred Stock Compensation
Plan; and
(4) To conduct such other business, including consideration of two
stockholder proposals, as may properly come before the meeting.
The Common Stock of the Company should be represented as fully as possible
at the Annual Meeting. Therefore, it will be appreciated if you will date, sign
and return the enclosed proxy at your earliest convenience. You may, of course,
change or withdraw your proxy at any time prior to the voting at the meeting.
However, signing and returning the proxy in a timely manner will assure your
representation at the Annual Meeting.
The Board of Directors has fixed the close of business on April 1, 1997, as
the record date for the determination of holders of Common Stock of the Company
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
thereof. A list of Stockholders entitled to vote at the meeting will be
available for inspection by any Stockholder for any purpose germane to the
meeting during ordinary business hours from May 19 through May 28, 1997, at the
corporate offices of the Company.
By Order of the Board of Directors
/s/ BERNARD MARCUS
Bernard Marcus
Chairman of the Board of Directors,
Chief Executive Officer and
Secretary
Atlanta, Georgia
April 18, 1997
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN,
DATE AND RETURN YOUR PROXY.
<PAGE> 4
THE HOME DEPOT, INC.
2727 PACES FERRY ROAD
ATLANTA, GEORGIA 30339-4089
(770) 433-8211
PROXY STATEMENT
SOLICITATION OF PROXIES FOR ANNUAL MEETING
INTRODUCTION
The enclosed proxy is being solicited by the Board of Directors of Home
Depot for use at the 1997 Annual Meeting of Stockholders of the Company to be
held at 10:00 a.m. on Wednesday, May 28, 1997, at the Cobb Galleria Centre, 2
Galleria Parkway, Atlanta, Georgia 30339, or at any adjournments thereof (the
"Annual Meeting").
Certain directors, officers and employees of the Company may solicit
proxies by telephone, telegram, mail or personal contact. In addition, the
Company has retained D. F. King & Co., Inc., New York, New York, to assist in
the solicitation of proxies and will pay such firm a fee, estimated not to
exceed $10,000, plus reimbursement of expenses. Arrangements will be made with
brokers, nominees and fiduciaries to send proxies and proxy material at the
Company's expense to their principals. This Proxy Statement is first being
mailed on or about April 18, 1997, to Stockholders of record on April 1, 1997.
The shares held by each Stockholder who signs and returns the enclosed
proxy will be counted for purposes of determining the presence of a quorum at
the Annual Meeting unless such proxy shall be timely revoked. If the enclosed
form of proxy is executed and returned, it may, nevertheless, be revoked at any
time before it is voted by written notice to the Secretary of the Company or by
a Stockholder personally attending and voting his or her shares at the Annual
Meeting.
The total number of shares of stock of the Company outstanding and entitled
to vote at the Annual Meeting is 485,657,520 consisting of Common Stock, par
value $.05 per share (the "Common Stock"). Each share of Common Stock entitles
the holder to one vote with respect to all matters to come before the meeting,
and all of such shares vote as a single class. Only Stockholders of record at
the close of business on April 1, 1997, are entitled to notice of, and to vote
at, the Annual Meeting. A majority of the outstanding shares will constitute a
quorum at the meeting. Abstentions and broker non-votes are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulations, but not as an affirmative
vote, of the votes cast on proposals presented to Stockholders, whereas broker
non-votes are not counted for purposes of determining whether a proposal has
been approved. A plurality of the votes cast at the Annual Meeting is necessary
for the election of directors. The affirmative vote of the holders of a majority
of the votes cast at the Annual Meeting is necessary for approval of each of the
two compensation plans.
The Annual Report to Stockholders of the Company for the fiscal year ended
February 2, 1997 (sometimes referred to herein as "fiscal 1996"), including
financial statements (the "Annual Report"), is being mailed concurrently with
this Proxy Statement to all Stockholders of record as of April 1, 1997, except
for accounts where the Stockholder had filed a written request to eliminate
duplicate reports. In addition, the Company has provided brokers, dealers,
banks, voting trustees and their nominees, at Company expense, with additional
copies of the Annual Report so that such record holders could supply such
material to beneficial owners as of April 1, 1997. ADDITIONAL COPIES OF THE
ANNUAL REPORT AND THE ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
FEBRUARY 2, 1997, TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"FORM 10-K"), BUT WITHOUT EXHIBITS TO THE FORM 10-K, ARE OR WILL BE AVAILABLE
WITHOUT CHARGE, UPON REQUEST. SEE "AVAILABILITY OF FORM 10-K AND ANNUAL REPORT
TO STOCKHOLDERS."
Each properly executed proxy received in time for the Annual Meeting will
be voted as specified therein. If a Stockholder does not specify otherwise, the
shares represented by his or her proxy will be voted in accordance with the
recommendations by the Board of Directors as follows: FOR the election of Frank
Borman, Ronald M. Brill, Berry R. Cox and one new nominee, Ronald A. Matricaria,
to the Board of Directors of the Company; FOR
<PAGE> 5
the approval of The Home Depot, Inc. 1997 Omnibus Stock Incentive Plan; FOR the
approval of the Nonemployee Directors' Deferred Stock Compensation Plan; AGAINST
Stockholder Proposal No. 1; and AGAINST Stockholder Proposal No. 2.
COMMON STOCK OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows information as to "beneficial ownership" of the
Common Stock of the Company, as of February 2, 1997, by each person known by the
Company to be the "beneficial owner" of more than five percent of such Common
Stock, by each present director and nominee of the Company, by certain executive
officers, and by directors and all executive officers of the Company as a group
(21 persons). The determinations of "beneficial ownership" of the Company's
Common Stock are based upon responses to Company inquiries which cited Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "1934 Act").
Such Rule provides that shares shall be deemed to be beneficially owned where a
person has, either solely or in conjunction with others, the power to vote or to
direct the voting of shares and/or the power to dispose, or to direct the
disposition of shares; or where a person has the right to acquire any such power
within 60 days after the date such "beneficial ownership" is determined. Except
as disclosed in the notes to the table, each person has sole voting and
investment powers with respect to the whole number of shares shown as
beneficially owned by him or her.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OF
(AND ADDRESS IF "BENEFICIAL OWNERSHIP" EXCEEDS 5%) OWNED CLASS (1)
- -------------------------------------------------- ------------ ---------
<S> <C> <C>
Bernard Marcus(2)........................................... 14,734,388 3.07
Arthur M. Blank(3).......................................... 8,257,692 1.72
Kenneth G. Langone(4)....................................... 4,600,000 *
Milledge A. Hart, III(5).................................... 1,371,160 *
Berry R. Cox................................................ 1,100,000 *
Ronald M. Brill(6).......................................... 560,610 *
Larry M. Mercer(7).......................................... 324,012 *
Frank Borman(8)............................................. 195,837 *
W. Andrew McKenna(9)........................................ 91,382 *
Donald R. Keough(10)........................................ 13,333 *
M. Faye Wilson(11).......................................... 11,000 *
Johnnetta B. Cole(12)....................................... 1,575 *
John L. Clendenin........................................... 1,000 *
Ronald A. Matricaria........................................ 0 *
Directors and Executive Officers as a group(13)............. 31,261,989 6.51
FMR Corp.(14)............................................... 31,149,691 6.48
</TABLE>
- ---------------
* Less than 1%
(1) Based on 480,516,098 shares outstanding on February 2, 1997.
(2) Includes 5,777 shares credited to Mr. Marcus' account under the Company's
FutureBuilder Plan (a combined 401(k) and ESOP Plan referred to as
"FutureBuilder"). Mr. Marcus may be deemed to have shared voting and
investment powers over the following not included shares: 152,274 shares
held by Mr. Marcus' wife as trustee of a trust for his children and 86,745
shares held by charitable organizations of which Mr. Marcus serves as a
director. Mr. Marcus disclaims beneficial ownership of such shares.
(3) Includes 5,777 shares credited to Mr. Blank's account under the Company's
FutureBuilder Plan. Includes 430,000 shares held by two private charitable
trusts of which Mr. Blank has sole voting and investment powers. Does not
include 10,510 shares held by Mr. Blank's wife of which Mr. Blank may be
deemed to have shared voting and investment powers. Does not include
297,378 shares which are held by others as co-trustees for the children of
Mr. Blank. Mr. Blank disclaims beneficial ownership of such shares.
(4) Does not include 1,009 shares held by Mr. Langone's wife of which Mr.
Langone may be deemed to have shared voting and investment powers and
15,406 shares held by Invemed Associates, Inc., an investment company of
which Mr. Langone is President and Chairman. Mr. Langone disclaims
beneficial ownership of such shares.
2
<PAGE> 6
(5) Includes 100,118 shares held by a limited partnership whose general partner
is a corporation of which Mr. Hart and his wife are the sole stockholders.
(6) Includes 5,776 shares credited to Mr. Brill's account under the Company's
FutureBuilder Plan. Includes 21,627 shares held by a private charitable
trust of which Mr. Brill has shared voting and investment powers. Does not
include 51,158 shares which are held either by his wife individually or by
Mr. Brill and his wife as custodians for their children, and all of which
shares Mr. Brill may be deemed to have shared voting and investment powers.
Mr. Brill disclaims beneficial ownership of such shares. Includes 120,845
shares under stock options which are exercisable within 60 days from
February 2, 1997.
(7) Includes 5,402 shares credited to Mr. Mercer's account under the Company's
FutureBuilder Plan. Includes 108,345 shares under stock options which are
exercisable within 60 days from February 2, 1997.
(8) Includes 133,192 shares held by a trust of which Colonel Borman and his
wife have shared voting and investment powers. Includes 14,624 shares held
by a private foundation of which Colonel Borman has shared voting and
investment powers. Includes 47,400 shares held by a charitable trust of
which Colonel Borman has shared voting and investment powers.
(9) Includes 2,034 shares credited to Mr. McKenna's account under the Company's
FutureBuilder Plan. Includes 38,345 shares under stock options which are
exercisable within 60 days from February 2, 1997.
(10) Does not include 400 shares held by Mr. Keough's wife of which Mr. Keough
may be deemed to have shared voting and investment powers. Mr. Keough
disclaims beneficial ownership of such shares. Includes 6,667 shares under
stock options which are exercisable within 60 days from February 2, 1997.
(11) Includes 10,000 shares under stock options which are exercisable within 60
days from February 2, 1997.
(12) Includes 1,250 shares under stock options which are exercisable within 60
days from February 2, 1997.
(13) Includes 56,119 shares credited to accounts under the Company's
FutureBuilder Plan. Includes 647,273 shares under stock options which are
exercisable within 60 days from February 2, 1997, and does not include
certain shares held by their spouses individually and held by their spouses
as custodian for their children.
(14) A Schedule 13G has been filed on behalf of FMR Corp. ("FMR"), 82 Devonshire
Street, Boston, Massachusetts 02109, to report beneficial ownership as of
December 31, 1996, through Fidelity Management & Research Company, of
29,144,628 shares, through Fidelity Management Trust Company, of 1,974,463
shares, and through Fidelity International Limited, of 30,600 shares. FMR
reports sole power to vote or direct the vote of 1,462,416 shares, and sole
power to dispose or to direct the disposition of all 31,149,691 shares.
I. ELECTION OF DIRECTORS
AND INFORMATION REGARDING DIRECTORS
The Company's Certificate of Incorporation, as amended, provides that, "The
directors shall be divided into three classes, designated Class I, Class II and
Class III . . ." The terms of the present Class III directors shall expire at
the Annual Meeting of Stockholders in 1997.
The Board of Directors has nominated three incumbent Class III directors,
Frank Borman, Ronald M. Brill, and Berry R. Cox and one new nominee, Ronald A.
Matricaria, for terms expiring at the Annual Meeting of Stockholders in 2000.
The following information is provided concerning directors of Home Depot
and nominees for election as directors. Positions held by executive officers are
for the Company and/or its subsidiaries.
FRANK BORMAN, age 69, has been a director of the Company since 1983.
Colonel Borman (U.S. Air Force, ret.) retired as the Chairman of the Board and
Chief Executive Officer of Eastern Air Lines, Inc. in 1986. Since 1986, Colonel
Borman has served on the Board of Directors of Continental Holdings, Inc., and
since 1988, as Chairman of the Board, President and Chief Executive Officer of
Patlex Corporation. Since the merger in 1996 between Patlex Corporation and DBT
Online, Inc., Colonel Borman has been President and Chief Executive Officer of
Patlex Corporation and Chairman of the Board of DBT Online, Inc. Colonel Borman
also serves as a director of Outboard Marine Corporation, Thermo Instrument
Systems, American Superconductor Corporation and is also a member of the Board
of Trustees of the National Geographic Society.
3
<PAGE> 7
RONALD M. BRILL, age 53, has been Executive Vice President and Chief
Administrative Officer ("CAO") of the Company since August 1995. Mr. Brill
joined Home Depot as its Controller in 1978, was elected Treasurer in 1980, Vice
President-Finance in 1981, Senior Vice President and Chief Financial Officer
("CFO") in 1984, Executive Vice President and CFO in 1993, and elected as a
director in 1987. Mr. Brill serves on the Board of Trustees of the Atlanta
Jewish Federation, the Atlanta Jewish Community Center and Woodruff Arts Center,
the Board of Directors of the Atlanta High Museum of Art and Pilchuck Glass
School and the Governing Board of Woodward Academy.
BERRY R. COX, age 43, has been a director of the Company since 1978. For
the past 20 years, Mr. Cox has been a private investor. Mr. Cox is Chairman of
the Board of Berry R. Cox, Inc., a private investment management company which
oversees interests in oil and gas, real estate and equities.
RONALD A. MATRICARIA, age 54, has been President and Chief Executive
Officer of St. Jude Medical, Inc. since April 1993, and its Chairman of the
Board since January 30, 1995. Prior to joining St. Jude, Mr. Matricaria was with
Eli Lilly and Company, Inc., for 23 years, last serving as Executive Vice
President of its Pharmaceutical Division and President of its North American
operations. He had served as President of Eli Lilly International Corporation
from July 1, 1991 to the end of 1992. Mr. Matricaria serves on the Board of
Directors of Centocor, Inc. and the Health Industry Manufacturers Association.
If any nominee becomes unwilling or unable to serve, which is not expected,
the proxies are intended to be voted for a substitute person to be designated by
the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE PROPOSAL TO ELECT FRANK BORMAN, RONALD M. BRILL, BERRY R.
COX AND RONALD A. MATRICARIA AS CLASS III DIRECTORS OF THE COMPANY TO HOLD
OFFICE UNTIL THE 2000 ANNUAL MEETING OF STOCKHOLDERS AND UNTIL THEIR SUCCESSORS
ARE ELECTED AND QUALIFIED.
The following Class I directors were elected at the Annual Meeting of
Stockholders in 1996 and their present terms expire with the Annual Meeting of
Stockholders in 1999:
BERNARD MARCUS, age 67, is one of the co-founders of Home Depot and has
been its Chairman of the Board of Directors and Chief Executive Officer ("CEO")
since its inception in 1978. He serves on the Board of Directors of Wachovia
Bank of Georgia, N.A., National Service Industries, Inc. and the New York Stock
Exchange, Inc. Mr. Marcus also serves on the Board of the National Foundation
for the Centers for Disease Control and Prevention and is Chairman of the Board
of The Marcus Center, Inc., which provides support services for persons with
developmental disabilities and their families. In addition, he is a member of
the Advisory Board and Board of Directors of the Shepherd Center in Atlanta,
Georgia and Vice President and member of the Board of The City of Hope, a
charitable organization in Duarte, California.
DONALD R. KEOUGH, age 70, was President, Chief Operating Officer and a
director of The Coca-Cola Company until his retirement in 1993. Mr. Keough has
been a director of Home Depot since 1993. Mr. Keough is also Chairman of the
Board of Excalibur Technologies Corporation and Allen & Company Incorporated, a
privately-held investment banking firm, and serves on the boards of H. J. Heinz
Company, The Washington Post Company and McDonald's Corporation. Mr. Keough is a
past Chairman of the Board of Trustees of the University of Notre Dame and is a
trustee of several other educational institutions. Mr. Keough also serves on the
boards of a number of national charitable and civic organizations.
KENNETH G. LANGONE, age 61, is one of the co-founders of Home Depot and has
been a director of the Company since 1978. Mr. Langone is Chairman of the Board,
Chief Executive Officer, President and Managing Director of Invemed Associates,
Inc., a New York Stock Exchange member firm engaged in investment banking and
brokerage. Mr. Langone serves on the Board of Directors of Unifi, Inc., DBT
Online, Inc., St. Jude Medical, Inc. and United States Satellite Broadcasting
Company, Inc. Mr. Langone also serves on the boards of a number of charitable
and educational organizations.
JOHN L. CLENDENIN, age 62, was President and Chief Executive Officer of
BellSouth Corporation for at least five years until his retirement in 1996, and
remains its Chairman of the Board. Mr. Clendenin has been a director of Home
Depot since 1996. Mr. Clendenin serves on the Board of Directors of Coca-Cola
Enterprises, Inc., Equifax, Inc., Providian Corporation, Springs Industries,
Inc., The Kroger Company, RJR Nabisco Holdings
4
<PAGE> 8
Corp., Wachovia Corporation and the New York Stock Exchange, Inc. Mr. Clendenin
is Chairman of the Committee for Economic Development and the National Junior
Achievement Board and a member of the Board of Governors of the American Red
Cross.
The following Class II directors were elected at the Annual Meeting of
Stockholders in 1995 and their present terms expire with the Annual Meeting of
Stockholders in 1998:
ARTHUR M. BLANK, age 54, has been President, Chief Operating Officer
("COO") and a director of Home Depot since its inception in 1978, and is,
together with Mr. Bernard Marcus and Mr. Kenneth G. Langone, a co-founder of the
Company. Mr. Blank serves as a member of the Board of Trustees of North Carolina
Outward Bound School, a non-profit corporation; serves on the Board of Trustees
of Emory University; serves on the Board of Councilors of the Carter Center of
Emory University and the Board of Directors of Cox Enterprises, Inc. and Post
Properties, Inc.
MILLEDGE A. HART, III, age 63, has been a director of the Company since
1978. Mr. Hart is Chairman of the Board of Hart Group, Inc., a private
management services company. Mr. Hart is also Chairman of the Board of Rmax,
Inc., an insulation manufacturing company, and Axon, Inc., a
residential/commercial service company.
M. FAYE WILSON, age 59, has been a director of the Company since 1992. Ms.
Wilson was Managing Director of Mergers and Acquisitions for Security Pacific
Hoare Govett in London from 1987 until she returned to California in 1991 as
Executive Vice President for Security Pacific Financial Services Systems, Inc.
Since the merger in 1992 between BankAmerica Corporation and Security Pacific
Corporation, Ms. Wilson has been Executive Vice President of Bank of America
NT&SA. Since November 1993, Ms. Wilson has also served as Chairman of the Board
and President of Security Pacific Financial Services, Inc.
JOHNNETTA B. COLE, age 60, has been a director of the Company since 1995.
Since 1987, Dr. Cole has served as President of Spelman College in Atlanta,
Georgia, a post-secondary educational institution. Dr. Cole also serves as a
member of the Board of Directors of Coca-Cola Enterprises, Inc., Management
Training Corporation, NationsBank of Georgia and Merck & Co., Inc. Dr. Cole also
serves on the boards of a number of charitable, civic and educational
organizations.
Each director who is not an employee of the Company is paid for service on
the Board of Directors a retainer at the rate of $30,000 per annum and an
additional $1,000 for each meeting of the Board of Directors attended other than
telephonic meetings. Home Depot also reimburses each director for reasonable
expenses in attending meetings of the Board of Directors. Directors who are also
employees of the Company are not separately compensated for their services as
directors.
Home Depot's Board of Directors has the following committees:
(a) The Executive Committee is comprised of Messrs. Marcus, Blank and
Langone. This Committee exercises the authority of the Board of Directors
in accordance with the By-laws of the Company between meetings of the
Board. The Executive Committee held meetings from time to time during
fiscal 1996.
(b) The Audit Committee is comprised of Messrs. Borman, Cox, Hart,
Keough and Ms. Wilson. This Committee was established to oversee the
auditing procedures of the Company, to receive and accept the reports of
the Company's independent certified public accountants, to oversee the
Company's internal systems of accounting and management controls, and to
make recommendations to the full Board of Directors as to the selection and
appointment of auditors for the Company. The Audit Committee held four
meetings during fiscal 1996.
(c) The Stock Option Committee is comprised of Messrs. Marcus, Blank
and Langone. This Committee considers and makes grants of stock options
pursuant to the Company's 1991 Omnibus Stock Option Plan and Employee Stock
Purchase Plan and administers such plans. During fiscal 1996, the Stock
Option Committee held five meetings.
(d) The Compensation Committee is comprised of Messrs. Borman,
Clendenin, Cox and Keough. This Committee reviews and recommends to the
Board of Directors the appropriate compensation of directors and executive
officers of the Company. The Compensation Committee held four meetings
during fiscal 1996.
(e) The Directors' Nominating Committee is comprised of Messrs.
Marcus, Hart, Langone and Dr. Cole. This Committee is charged with making
recommendations to the full Board for the selection of
5
<PAGE> 9
director nominees. There is no formal procedure for the submission of
Stockholder recommendations. The Nominating Committee held one meeting
during fiscal 1996.
During fiscal 1996, the Board of Directors of the Company held six
meetings. All directors attended at least 75 percent of the meetings of the
Board and of the Committees of the Board of which they were members during that
period.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The following persons served as members of the Compensation Committee of
the Board of Directors during the fiscal year ended February 2, 1997: Frank
Borman, John L. Clendenin, Berry R. Cox and Donald R. Keough. None of the
members of the Compensation Committee were employed by the Company.
INSIDER TRANSACTIONS
Mr. Kenneth G. Langone, a director of the Company, is Chairman of the Board
and President of Invemed Associates, Inc. ("Invemed"), which provides investment
banking consulting services to the Company under a written contract which is
cancelable by either party upon 60 days written notice. The contract provides
for the Company to pay Invemed an annual consulting fee of $100,000. The Company
contemplates utilizing the services of and paying a similar amount to Invemed in
fiscal 1997. In addition, on October 2, 1996, Invemed acted as co-managing
underwriter of a public offering of $1,104,000,000 principal amount of the
Company's 3 1/4% Convertible Subordinated Notes, and received underwriting fees
of $5,520,000 from such public offering.
Ms. M. Faye Wilson, a director of the Company, is an Executive Officer of
Bank of America NT&SA ("Bank of America"). Bank of America provides a variety of
banking services to the Company, including deposit and cash management services,
letters of credit and capital market products. In addition, BankAmerica, the
parent company of Bank of America, provided a total of $118.5 million of loan
commitments to Home Depot as a participating bank under various credit
agreements.
Mr. Milledge A. Hart, III, a director of the Company, is Chairman of the
Board and a substantial stockholder of Axon, Inc., a company which provides
installed sales services, and Rmax, Inc., a company which sells isocyanurate
foam insulation. Axon, Inc. and Rmax, Inc. were vendors to the Company in fiscal
1996 for which Axon, Inc. and Rmax, Inc. received payments in the amount of
$328,000 and $1,131,000, respectively. The Company contemplates making purchases
from Axon, Inc. and Rmax, Inc. in fiscal 1997.
In the opinion of management, all monies paid to Invemed, Bank of America,
Axon, Inc. and Rmax, Inc. are fair and reasonable and as favorable to the
Company as those which could have been obtained from unrelated third parties.
During fiscal 1996, the Company provided an interest free bridge loan in
the amount of $200,000 to Mr. Lynn Martineau, President-Western Division, to
assist him in relocation. The loan is to be repaid on or before July 14, 1997.
II. APPROVAL OF THE HOME DEPOT, INC. 1997
OMNIBUS STOCK INCENTIVE PLAN
The Board of Directors adopted The Home Depot, Inc. 1997 Omnibus Stock
Incentive Plan (the "Omnibus Plan") on February 27, 1997, subject to approval by
the Stockholders of the Company. The Omnibus Plan is intended to allow the
Company to attract and retain employees and directors of the Company and its
subsidiaries and to provide such persons with incentives and rewards for
superior performance.
The Omnibus Plan is an amendment and restatement of the Company's 1991
Omnibus Stock Option Plan (the "1991 Plan"). The Omnibus Plan allows the
committee appointed by the Board to administer the Plan (the "Committee") broad
flexibility in designing stock-based incentives. The Committee may select from
among six categories of incentive awards: stock options, stock appreciation
rights, restricted shares, deferred shares, performance shares and performance
units.
The number of shares of the Company's Common Stock ("Shares") that may be
(i) issued or transferred upon the exercise of stock options or stock
appreciation rights, (ii) awarded as restricted shares and released from
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substantial risk of forfeiture, or (iii) issued or transferred in payment of
deferred shares, performance shares or performance units, shall not in the
aggregate exceed (y) the number of Shares remaining available under the 1991
Plan (32,406,608 Shares, as of April 10, 1997), plus (z) one-half percent
( 1/2%) of the total number of issued Shares (including Treasury Shares) as of
the first day of each fiscal year of the Company that the Omnibus Plan is in
effect. The number of Shares available for issuance in any one fiscal year shall
be increased by any Shares available in prior fiscal years but not issued in
such fiscal years. In no event will the number of Shares issued upon the
exercise of incentive stock options exceed 50,000,000 Shares or the number of
restricted shares released from a substantial risk of forfeiture exceed
5,000,000 Shares. The number of performance units granted under the Omnibus Plan
may not in the aggregate exceed 5,000,000. No participant may receive awards
during any one calendar year representing more than 1,000,000 Shares or more
than 5,000,000 performance units. These limits are subject to adjustments as
provided in the Omnibus Plan for stock splits, stock dividends,
recapitalizations and other similar transactions or events. Shares issued under
the Omnibus Plan may be Shares of original issuance, Shares held in Treasury or
Shares that have been reacquired by the Company.
Employees of the Company and its subsidiaries and members of the Board who
are not employees ("Nonemployee Directors") may be selected by the Committee to
receive benefits under the Omnibus Plan. Subject to the terms of the Omnibus
Plan, the Committee has the discretion to determine the terms of each award
granted under the Omnibus Plan and to interpret the Omnibus Plan and all related
documents and agreements.
The Committee may grant stock options that entitle the optionee to purchase
Shares at a price equal to or greater than fair market value on the date of
grant. Stock options granted under the Omnibus Plan may be options that are
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
"nonqualified stock options" that are not intended to so qualify, provided that
Nonemployee Directors may not be awarded incentive stock options.
The option may specify that the option price is payable (i) in cash, (ii)
by the transfer to the Company of unrestricted Shares, (iii) with any other
legal consideration the Committee may deem appropriate or (iv) by any
combination of the foregoing methods of payment. Any grant of a stock option may
provide for deferred payment of the option price from the proceeds of sale
through a broker of some or all of the Shares to which the option relates. To
the extent determined by the Committee, payment of the option price of any
nonqualified stock option may also be made in whole or in part in the form of
restricted shares or other Shares that are subject to risk of forfeiture or
restriction on transfer. In such event, unless otherwise determined by the
Committee, the Shares received by the optionee upon the exercise of the
nonqualified stock option will be subject to the same risks of forfeiture or
restrictions on transfer as applied to the consideration surrendered by the
optionee, provided that such risks of forfeiture and restriction on transfer
shall apply only to the same number of Shares received by the optionee as
applied to the forfeitable or restricted Shares surrendered by the optionee.
No stock option may be exercised more than ten years from the date of
grant. Each grant may specify a period of continuous employment with the Company
or any subsidiary (or in the case of a Nonemployee Director, service on the
Board) that is necessary before the stock option or any portion thereof will
become exercisable and may provide for the earlier exercise of the option in the
event of a change in control of the Company or similar event.
The Committee may grant "tandem" stock appreciation rights in connection
with an option granted under the Omnibus Plan or "freestanding" stock
appreciation rights unrelated to any option. Tandem stock appreciation rights
entitle the holder to receive an amount equal to a percentage (not exceeding 100
percent) of the "spread" between the option price under the related option and
the fair market value of the Shares subject to the option. Freestanding stock
appreciation rights entitle the holder to receive a payment equal to the
increase in the value of the Shares over a specified "base price" determined by
the Committee at the time of grant. Any grant of stock appreciation rights may
be paid in cash, Shares or any combination thereof, or grant to the participant
or reserve to the Committee the right to elect among those alternatives.
An award of restricted shares involves the immediate transfer by the
Company to a participant of ownership of a specific number of Shares in
consideration of the performance of services. The participant is entitled
immediately to voting, dividend and other ownership rights in such Shares,
although the Committee may provide for the sequestration of dividends during the
restriction period. The transfer may be made without additional consideration
from the participant. The Committee may specify performance objectives (as
discussed below)
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which, if achieved, will result in termination or early termination of the
restrictions applicable to such Shares. The Committee may also specify in
respect of the specified performance objectives, a minimum acceptable level of
achievement of the performance objectives and a formula for determining the
number of restricted shares on which restrictions will terminate if performance
is at or above the minimum level, but below full achievement of the specified
performance objectives. Restricted shares must be subject to a "substantial risk
of forfeiture" within the meaning of Section 83 of the Code. To enforce these
forfeiture provisions, the transferability of restricted shares will be
prohibited or restricted in a manner and to the extent prescribed by the
Committee for the period during which the forfeiture provisions are to continue.
The Committee may provide for a shorter period during which the forfeiture
provisions are to apply in the event of a change in control of the Company or
similar event.
An award of deferred shares granted under the Omnibus Plan represents the
right to receive a specific number of Shares at the end of a specified deferral
period. Any grant of deferred shares may be further conditioned upon the
attainment of performance objectives (as described below). The grant may provide
for the early termination of the deferral period in the event of a change in
control of the Company or similar event. During the deferral period, the
participant is not entitled to vote or receive dividends on the Shares subject
to the award, but the Committee may provide for the payment of dividend
equivalents on a current or deferred basis. The grant of deferred shares may be
made without any consideration from the participant other than the performance
of future services.
A performance share is the equivalent of one Share, and a performance unit
is the equivalent of one dollar ($1.00). Each grant will specify one or more
performance objectives to meet within a specified period (the "performance
period"). The specified performance period may be subject to earlier termination
in the event of a change in control of the Company or a similar event. If by the
end of the performance period the participant has achieved the specified
performance objectives, the participant will be deemed to have fully earned the
performance shares or performance units. If the participant has not achieved the
performance objectives but has attained or exceeded the predetermined minimum
level of acceptable achievement, the participant may be deemed to have partly
earned the performance shares or performance units in accordance with a
predetermined formula. To the extent earned, the performance shares or
performance units will be paid to the participant at the time and in the manner
determined by the Committee in cash, Shares or any combination thereof.
The Omnibus Plan provides for the Committee to establish "performance
objectives" for purposes of performance shares or performance units. When so
determined by the Committee, awards of deferred shares and restricted stock may
also specify performance objectives. Performance objectives may be described in
terms of either Company-wide objectives or objectives that are related to the
performance of the individual participant or subsidiary, division, department or
function within the Company or a subsidiary. Any performance objectives intended
by the Committee to qualify as "performance-based compensation" under Section
162(m) of the Code shall be limited to specified levels of or growth in (i)
return on equity, (ii) earnings per share, (iii) total earnings, (iv) earnings
growth, (v) return on capital, (vi) return on assets, (vii) economic value
added, (viii) earnings before interest and taxes, (ix) sales growth, (x) gross
margin return on investment, and/or (xi) increases in the fair market value of
the Shares. Except in the case of such an award intended to qualify under
Section 162(m) of the Code, if the Committee determines that a change in the
business, operations, corporate structure or capital structure of the Company,
or the manner in which it conducts its business, or other events or
circumstances render the performance objectives unsuitable, the Committee may
modify such performance objectives, in whole or in part, as the Committee deems
appropriate and equitable.
Except as provided below, no award under the Omnibus Plan may be
transferred by a participant other than by will or the laws of descent and
distribution, and stock options and stock appreciation rights may be exercised
during the participant's lifetime only by the participant or, in the event of
the participant's legal incapacity, the guardian or legal representative acting
on behalf of the participant. The Committee may expressly provide in a
nonqualified stock option agreement (or amendment thereto) that the participant
may transfer the option to a spouse or lineal descendant, a trust for the
exclusive benefit of such family members, a partnership or other entity in which
all the beneficial owners are such family members, or any other entity
affiliated with the participant that the Committee may approve.
The Omnibus Plan may be amended from time to time by the Board of
Directors, but without further approval by the Stockholders of the Company no
such amendment may increase the aggregate number of Shares
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<PAGE> 12
that may be issued or transferred, increase the aggregate number of performance
units that may be granted, or increase the number of Shares or performance units
that may be granted to any participant in any one-year period.
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the Omnibus Plan. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
In general, an optionee will not recognize income at the time a
nonqualified stock option is granted. At the time of exercise, the optionee will
recognize ordinary income in an amount equal to the difference between the
option price paid for the Shares and the fair market value of the Shares on the
date of exercise. At the time of sale of Shares acquired pursuant to the
exercise of a nonqualified stock option, any appreciation (or depreciation) in
the value of the Shares after the date of exercise generally will be treated as
capital gain (or loss).
An optionee generally will not recognize income upon the grant or exercise
of an incentive stock option. If Shares issued to an optionee upon the exercise
of an incentive stock option are not disposed of in a disqualifying disposition
within two years after the date of grant or within one year after the transfer
of the Shares to the optionee, then upon the sale of the Shares any amount
realized in excess of the option price generally will be taxed to the optionee
as long-term capital gain and any loss sustained will be a long-term capital
loss. If Shares acquired upon the exercise of an incentive stock option are
disposed of prior to the expiration of either holding period described above,
the optionee generally will recognize ordinary income in the year of disposition
in an amount equal to any excess of the fair market value of the Shares at the
time of exercise (or, if less, the amount realized on the disposition of the
Shares) over the option price paid for the Shares. Any further gain (or loss)
realized by the optionee generally will be taxed as short-term or long-term
capital gain (or loss) depending on the holding period.
Subject to certain exceptions for death or disability, if an optionee
exercises an incentive stock option more than three months after termination of
employment, the exercise of the option will be taxed as the exercise of a
nonqualified stock option. In addition, if an optionee is subject to federal
"alternative minimum tax," the exercise of an incentive stock option will be
treated essentially the same as a nonqualified stock option for purposes of the
alternative minimum tax.
A recipient of restricted shares generally will be subject to tax at
ordinary income rates on the fair market value of the restricted shares (reduced
by any amount paid by the recipient) at such time as the Shares are no longer
subject to a risk of forfeiture or restrictions on transfer for purposes of
Section 83 of the Code. However, a recipient who so elects under Section 83(b)
of the Code within 30 days of the date of transfer of the restricted shares will
recognize ordinary income on the date of transfer of the Shares equal to the
excess of the fair market value of the restricted shares (determined without
regard to the risk of forfeiture or restrictions on transfer) over any purchase
price paid for the Shares. If a Section 83(b) election has not been made, any
dividends received with respect to restricted shares that are subject at that
time to a risk of forfeiture or restrictions on transfer generally will be
treated as compensation that is taxable as ordinary income to the recipient.
A recipient of deferred shares generally will not recognize income until
Shares are transferred to the recipient at the end of the deferral period and
are no longer subject to a substantial risk of forfeiture or restrictions on
transfer for purposes of Section 83 of the Code. At that time, the participant
will recognize ordinary income equal to the fair market value of the Shares,
reduced by any amount paid by the recipient.
A participant generally will not recognize income upon the grant of
performance shares or performance units. Upon payment in respect of performance
shares or performance units, the participant generally will recognize as
ordinary income an amount equal to the amount of cash received and the fair
market value of any unrestricted Shares received.
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
participant performs services will be entitled to a corresponding deduction,
provided that, among other things, the income meets the test of reasonableness,
is an ordinary and necessary business expense, is not an "excess parachute
payment" within the meaning of Section 280G of the Code and is not disallowed by
the $1 million limitation on certain executive compensation under Section 162(m)
of the Code.
Because the selection of participants is discretionary, it is not possible
to determine the number of persons who will receive awards under the Omnibus
Plan during its term.
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The Board of Directors believes that this Omnibus Plan is a valuable
benefit offered to its employees. The Board of Directors has approved the
Omnibus Plan and has recommended that it be submitted to the Stockholders at the
Annual Meeting for their approval. The Board of Directors believes that the
approval of the Omnibus Plan is in the Company's and Stockholders' best
interests. The full text of the Omnibus Plan is set forth as Appendix A to this
Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE HOME
DEPOT, INC. 1997 OMNIBUS STOCK INCENTIVE PLAN. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
III. APPROVAL OF THE HOME DEPOT, INC. NONEMPLOYEE DIRECTORS' DEFERRED STOCK
COMPENSATION PLAN
On February 27, 1997, the Company's Board of Directors approved and
adopted, subject to Stockholders' approval, The Home Depot, Inc. Nonemployee
Directors' Deferred Stock Compensation Plan (the "Directors' Plan"). The
Directors' Plan allows Nonemployee Directors to defer receipt of cash
compensation and to receive such deferred compensation in the form of shares of
Common Stock of the Company.
To participate in the Directors' Plan, a Nonemployee Director must file a
written deferral election form with the Company's Corporate Secretary or a
designee. The deferral election may apply to all or any part of the Director's
annual retainer. In addition, Nonemployee Directors may elect to defer all (but
not a lesser percentage) of each payment of meeting fees.
Before the 1997 Annual Meeting, all current Nonemployee Directors, and any
Nonemployee Director first elected on that date, may make an election to defer
fees payable on and after the 1997 Annual Meeting date. Nonemployee Directors
who are appointed or elected in the future may elect to defer fees by making an
election before the date the first fees are payable to them. If a Nonemployee
Director does not elect to participate in the Directors' Plan when first
eligible, he or she may elect to begin participating by filing an election
before the first day of any subsequent calendar year. The election will apply to
all fees paid on or after the first day of that calendar year.
Once a Nonemployee Director has made a deferral election, that deferral
election will remain in effect for all future fees paid while he or she is a
Nonemployee Director, unless the Director revokes or modifies the election by
submitting a new form before the first day of any subsequent calendar year. The
change will be effective for fees paid on or after the first day of that
calendar year.
A "stock unit account" will be established for each Nonemployee Director
who elects to participate in the Directors' Plan. When a Nonemployee Director
elects to defer fees under the Directors' Plan, his or her stock unit account
will be credited with the number of whole and fractional shares obtained by
dividing (i) the amount of fees deferred, by (ii) the fair market value of a
share of Common Stock on the date the fees otherwise would have been paid in
cash. When dividends are paid on the Common Stock, the stock unit accounts will
be credited with additional stock units just as if dividends on actual shares of
Common Stock were reinvested. Stock unit accounts will also be adjusted to
reflect any stock split, reorganization or similar occurrence. Each stock unit
in a participant's account will entitle him or her to receive one share of
Common Stock. Fractional stock units will be paid in cash.
When a participant makes a deferral election, he or she must elect to
receive payments either in a lump sum or in up to five equal annual
installments. This election may be changed, but a revised election form must be
submitted at least five months before the participant leaves the service of the
Board.
Distributions will be made or begin on, or as soon as administratively
feasible after, the first day of the second month following the month in which
the Nonemployee Director leaves the service of the Board, unless a Nonemployee
Director elects to defer payment until January 1 of the following year. An
election to defer payment until the following year must be made at least five
months before the Nonemployee Director leaves the service of the Board.
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Participants may designate a beneficiary or beneficiaries under the
Directors' Plan. If a participant dies before all amounts have been paid to him
or her, the remaining balance will be paid to his or her beneficiary or
beneficiaries in a single lump sum.
The Directors' Plan is an unfunded arrangement, which means that
participants will at all times be general, unsecured creditors of the Company.
The stock unit accounts established under the Directors' Plan are merely
bookkeeping accounts and do not give participants secured interests in any
assets.
The Directors' Plan is administered by the Board or a committee appointed
by the Board. This committee has full authority to make all determinations under
the Directors' Plan, subject to the express provisions of the Directors' Plan.
The Board may amend or terminate the Directors' Plan at any time, but no such
action taken without a participant's consent may materially impair the
participant's existing account balance under the Directors' Plan.
All current Directors who are not employees of the Company or a subsidiary
are eligible to participate in the Directors' Plan. It is not possible to
determine the benefits or amounts that will be received by any such Director who
participates in the Directors' Plan.
The Board of Directors believes that this Directors' Plan will advance the
interests of the Company and its Stockholders by providing a means to attract
and retain qualified persons to serve as Nonemployee Directors and to promote
ownership by Nonemployee Directors of a greater proprietary interest in the
Company, thereby aligning such Directors' interests more closely with the
interests of Stockholders of the Company. The Board of Directors has approved
the Directors' Plan and has recommended that it be submitted to the Stockholders
at the Annual Meeting for their approval. The Board of Directors believes that
the approval of the Directors' Plan is in the Company's and Stockholders' best
interests. The full text of the Plan is set forth as Appendix B to this Proxy
Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THIS
PROPOSAL TO ESTABLISH THE HOME DEPOT, INC. NONEMPLOYEE DIRECTORS' DEFERRED STOCK
COMPENSATION PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED
UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
IV. STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSAL NO. 1
The National Electrical Benefit Fund of Washington, D.C., owner of 188,950
shares of Common Stock has given notice that it intends to present for action at
the annual meeting the following resolution:
"BE IT RESOLVED: That the shareholders of Home Depot, Inc. ("Company")
hereby request that the Company's Board of Directors take the steps
necessary to amend the Company's bylaws, effective after the 1997 Annual
Meeting, to provide that the Board of Directors shall consist of a majority
of independent directors. For these purposes, the definition of independent
director shall mean a director who:
- has not been employed by the Company or an affiliate in an executive
capacity within the last five years;
- was not, and is not a member of a corporation or firm that is one of the
Company's paid advisers or consultants;
- is not employed by a significant customer, supplier or provider of
professional services;
- has no personal services contract with the Company;
- is not employed by a foundation or university that receives significant
grants or endowments from the Company;
- is not a relative of the management of the Company;
- is not a shareholder who has signed shareholder agreements legally
binding him to vote with management; and
- is not the chairman of a company on which Home Depot's Chairman or Chief
Executive Officer is also a board member."
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The following statement was submitted in support of such resolution:
"The purpose of this proposal is to incorporate within the Board of
Directors a basic standard of independence that we believe will permit
clear and objective decision-making in the best long-term interests of
shareholders. A Board of Directors must formulate corporate policies and
monitor the activities of management in implementing those policies. Given
those functions, we believe that it is in the best interest of all
stockholders if at least a majority of our representatives be independent.
The benefits of such independence we think, are well accepted. The New
York Stock Exchange, for instance, requires each of its listed companies to
have at least two members of the Board of Directors and all members of the
audit committee who meet New York Stock Exchange standards of independence.
We also note studies which reflect that a majority of directors of
publicly-held companies are not employees of the companies on whose boards
they serve. This trend is supported by The Business Roundtable in its
publication Corporate Governance and American Competitiveness, prepared by
a committee of the Roundtable, which states, in part, that:
Board of Directors of large publicly-held public corporations
should be composed predominately of independent directors who do not
hold management responsibilities within the corporation. . . In order to
underscore their independence, non-management directors should not be
dependent financially on whose boards they serve.
WE URGE YOU TO VOTE FOR THIS PROPOSAL"
THE BOARD OF DIRECTORS FAVORS A VOTE "AGAINST" THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
It is the Company's view that, since its inception, The Home Depot's Board
of Directors has functioned extraordinarily well. Company policy has been served
well in the past and continues to be served by combining the talents and diverse
backgrounds of independent directors with that of our most senior officers
serving on the Board.
No longer in its infancy, The Home Depot has taken a prominent place in the
United States. For the fourth consecutive year, the Company was named by Fortune
Magazine as America's most admired retailer. The Company would not be one of
America's most successful and admired companies if it were not for the
combination of talents, knowledge and perspective held by the persons serving on
the Board of Directors. It is without question that the senior officers serving
on the Board bring direct knowledge of Company operations and strategies in this
very competitive home improvement industry. Without the presence of senior
officers serving on the Board, the Directors would be without direct access to
on-the-spot information about the Company's operations and strategies. In
addition, certain outside directors have business relationships with the
Company. The Company discloses these relationships. The Company cannot determine
how these relationships would be defined under the proponent's criteria. The
Company believes the Board's ability to fulfill its fiduciary obligations to
represent and safeguard the best interests of the Stockholders as a whole would
be impaired if the composition of the Board consisted primarily of independent
directors as defined by this Proposal.
The current Board is comprised of eleven members, six of whom may not meet
the proponent's definition of independent director. The Board, therefore, might
not currently meet the burden of this rule. The Company should have flexibility
in the composition of its Board and not be mandated by a rigid arbitrary rule
that has no bearing to the qualifications of the individual member.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE ADOPTION OF THIS
STOCKHOLDER PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
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STOCKHOLDER PROPOSAL NO. 2
The Teamsters Affiliates Pension Plan of the International Brotherhood of
Teamsters of Washington, D.C., owner of 38,566 shares of Common Stock has given
notice that it intends to present for action at the Annual Meeting of
Stockholders the following resolution:
"RESOLVED, that the shareholders urge the Board of Directors of The
Home Depot, Inc. to amend the bylaws to require that an independent
director who was not formerly the chief executive of the company serve as
chair of the board.
SUPPORTING STATEMENT: With the announcement on December 11, 1996 that
True Value Hardware Stores will merge with ServiStar Coast to Coast Corp.,
creating the largest independent chain of hardware dealers nationwide,
management must be poised to react effectively and efficiently to possible
market encroachment. Any management response to this assault upon our
company's market share must be diligently implemented, free from director
or executive bias.
In a recent Wall Street Journal article, a True Value official is
noted as saying that the announcement of the merger brought about a decline
in Home Depot's stock price. Even more interesting is the fact that the
price of the stock currently around $51.25, is just now returning to 1993
levels and is no longer the growth stock it was in the past.
According to a March [sic] Fortune magazine article "Wall Street
predicts the [HOME DEPOT] profits will increase at least 20% during the
next few years, but then expects a slowdown," citing that, "Home Depot
isn't such a nimble category killer anymore. . . 'The competition got
better. They have their copy machines on clearer focus, running at higher
speeds,"' stated President and COO Arthur M. Blank. The article also notes
that Home Depot could be running out of room to grow -- that market
saturation may become a problem.
The simple way to provide checks and balances for our company is to
name an independent board chairman. Maintaining one chair and CEO allows
old, inefficient ideas to remain unchallenged, inhibiting stock price and
growth of the company. The board's ability to critically scrutinize
management plans is diluted when the board chair is also the chief
architect of any management plan. By requiring that the chair be an
independent director, the board would be able to bring to bear more
critical review of basic management plans. Such a chair should come from
outside the corporation.
With increased competition from smaller, independent hardware stores,
and possible problematic plans for expansion -- 400 more Home Depot stores
over the next four years -- management needs a new outlook for the future,
one which can be optimally realized with an independent chair."
THE BOARD OF DIRECTORS FAVORS A VOTE "AGAINST" THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
Combining the positions of Chairman of the Board and CEO facilitates the
ability of the Board to operate effectively and efficiently. A principal role of
the Chairman is to propose the general agenda for Board meetings from among the
many operational, administrative and strategic issues facing the Company on a
day-to-day basis. The agenda provides a framework for discussion without
limiting consideration of other matters by the Board. The Company and its
Stockholders benefit by permitting the Board to interact directly and
consistently with the CEO, who is the person among them most knowledgeable about
the Company and about management's vision for the Company's future.
The Board believes its independence is not compromised by having a single
person serve as Chairman and CEO. The functions of the Board are carried out at
the full Board and Board committee levels. Each of the Directors is a full and
equal participant in the major strategic and policy decisions of the Company.
The insight, advice, and counsel that each Nonemployee Director makes available
to the Company is not likely to differ in any respect should one of those
Directors be the Chairman.
The responsibilities of the Compensation Committee of the Board, which is
composed of all Nonemployee Directors, makes a non-executive chairperson
unnecessary. The Compensation Committee reviews and evaluates the performance of
all executive officers, including the Chairman and CEO. The Compensation
Committee makes recommendations as to the compensation for all elected officers.
The Chairman and CEO is not a member of this committee. This assures objectivity
of the Board when it reviews performance and compensation matters. The
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Audit Committee assists the Board in fulfilling its responsibilities for the
Company's accounting and financial reporting practices and provides a channel of
communication between the Board and the Company's independent auditors. The
Chairman and CEO is not a member of this committee. A more detailed discussion
about these committees can be found earlier in this Proxy Statement.
The Board believes that no meaningful additional measure of independence
would be provided by a non-executive Chairman. In fact, in the Board's view, the
separation of offices would undermine the effectiveness of the CEO and could
conceivably create confusion, both within and outside the Company, regarding the
corporate direction. The separateness of management authority that the proponent
seeks is already accomplished by the fact the CEO is a different person than the
President. The Board believes that the interests of the Company and its
Stockholders are best served at this time by the experience, consistent
direction and ability for decisive action afforded by a single full-time person
serving as CEO, subject to oversight by the Company's Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE ADOPTION OF THIS
STOCKHOLDER PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE.
EXECUTIVE OFFICERS AND THEIR COMPENSATION
The following table sets forth all cash compensation paid by the Company
and its subsidiaries (for the purposes of this section collectively referred to
as the "Company") to the CEO and the four most highly compensated executive
officers for services rendered in all capacities during the Company's last three
fiscal years:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION OPTIONS(1) COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ------ ------- --------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Bernard Marcus................ 1996 600,000 2,000,000 2,864 -- 169,580
Chairman of the Board, CEO 1995 600,000 2,000,000 1,597 -- 165,829
and Secretary 1994 600,000 2,000,000 4,895 -- 165,829
Arthur M. Blank............... 1996 600,000 2,000,000 2,656 -- 42,576
President and COO 1995 600,000 2,000,000 1,539 -- 38,825
1994 600,000 2,000,000 2,915 -- 38,825
Ronald M. Brill............... 1996 494,807 232,150 5,625 52,300 26,865
Executive Vice President, 1995 457,885 153,200 5,631 15,250 28,191
CAO 1994 435,385 170,000 5,718 27,500 32,818
and Assistant Secretary
W. Andrew McKenna............. 1996 414,808 189,798 2,580 12,300 22,604
President-Midwest Division 1995 383,654 84,300 1,814 12,250 24,519
1994 355,385 180,000 4,567 32,500 30,400
Larry M. Mercer............... 1996 361,346 171,791 2,028 52,300 21,050
Executive Vice President 1995 313,654 100,000 1,286 12,250 22,001
1994 286,154 135,000 7,807 2,500 22,756
</TABLE>
- ---------------
(1) Messrs. Marcus and Blank do not participate in any of the Company's stock
option plans.
(2) The Company has had in effect various plans and arrangements which may not
be available generally to all its salaried employees and which provide for
cash or non-cash compensation for one or more of its executive officers.
Certain plans and arrangements are described in the remainder of this
section.
The Company's Employee Stock Ownership Plan and Trust (the "ESOP"), adopted
during fiscal 1988, is a defined contribution and employee stock ownership plan
qualified under the Code, and is available to all employees pursuant to the
ESOP's Eligibility to Participate provisions. The ESOP is funded solely by
contributions from the Company and generally invests only in Common Stock of the
Company. Contributions are allocated to each participant's account on the basis
of his or her individual compensation as defined in the ESOP. Participants'
accounts are fully vested once seven years of service (as defined in the ESOP)
are completed or employment is terminated by reason of death, disability or
retirement.
14
<PAGE> 18
In fiscal 1996, the ESOP was amended to allow eligible participants to make
Code Section 401(k) contributions to The Home Depot FutureBuilder, a combined
401(k) and Stock Ownership Plan ("FutureBuilder"). FutureBuilder is a defined
contribution plan subject to the applicable provisions of the Code and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Through
FutureBuilder, eligible participants (as defined in FutureBuilder) may make
before-tax contributions in increments from 1 percent to 15 percent of their
total compensation (subject to lower contribution limits imposed by the Code for
certain participants). When before-tax contributions are made, the Company
matches 50 percent ($.50 for each $1.00) of the first five percent of the
participant's compensation contributed to FutureBuilder (the "Matching
Contribution"). In addition to the Matching Contribution, the Company will
continue to make ESOP contributions to participants' accounts.
The Company's contribution to FutureBuilder for the fiscal year ended
February 2, 1997, was $26,000,000. Allocations of Common Stock under the ESOP
for the last fiscal year were valued at $4,721 for each of Messrs. Marcus,
Blank, Brill, McKenna and Mercer. The Matching Contributions under the 401(k)
portion of FutureBuilder for the last fiscal year were valued at $3,750 for each
of Messrs. Marcus, Blank, Brill, McKenna and Mercer.
The Company adopted an ESOP Restoration Plan in fiscal 1994. The primary
purpose of the Plan is to provide certain employees deferred compensation that
they would have received under the ESOP if not for the maximum compensation
limits under the Code. The ESOP Restoration Plan is an unfunded arrangement
under which separate bookkeeping accounts are maintained for each participant.
Participants' accounts are credited with "stock units" which have a value equal
to the market value of the Company's Common Stock as of the date of such
crediting. All material terms of the Plan including vesting and distribution are
the same as the ESOP. Allocations for the last fiscal year were $25,280 for each
of Messrs. Marcus and Blank, $15,576 for Mr. Brill, $10,890 for Mr. McKenna and
$9,625 for Mr. Mercer.
The Company, in fiscal 1996, enabled Messrs. Marcus, Blank, Brill, McKenna
and Mercer to obtain life insurance in the amounts of $8,000,000, $800,000,
$250,000, $250,000 and $256,900, respectively, pursuant to a "split dollar" plan
under which the Company pays the gross annual premium of $135,829, $8,825,
$2,818, $3,243 and $2,954, respectively.
STOCK OPTIONS
At the Annual Meeting of Stockholders in 1991, the Stockholders approved
the 1991 Omnibus Stock Option Plan (the "1991 Plan") providing for stock options
to key employees and newly elected Nonemployee Directors. The 1991 Plan became
effective June 1, 1991 and continues for a ten-year term, except that any stock
options granted under the 1991 Plan will continue to be effective pursuant to
the terms of each grant beyond the expiration of the 1991 Plan. If approved by
the Stockholders, the 1991 Plan will be replaced by the Omnibus Plan.
All of the Company's stock option plans are administered by the Stock
Option Committee of the Board of Directors. The Stock Option Committee
determines the number of shares granted and the option exercise price, but such
price may not be less than 100 percent of the fair market value of Common Stock
on the grant date.
15
<PAGE> 19
The following tables reflect certain information with respect to stock
options granted under the Company's stock option plans to and those exercised by
certain executive officers (excluding Messrs. Marcus [CEO] and Blank [COO] who
did not participate in the stock option plans) during fiscal 1996.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES OR BASE (10 YEARS)*
GRANTED IN FISCAL PRICE EXPIRATION ---------------------
NAME (#) YEAR (%) ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ronald M. Brill.................... 52,300 1.08 43.25 02/27/06 1,422,544 3,605,006
W. Andrew McKenna.................. 12,300 0.25 43.25 02/27/06 334,556 847,831
Larry M. Mercer.................... 52,300 1.08 43.25 02/27/06 1,422,544 3,605,006
</TABLE>
- ---------------
* These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on future performance
of the Common Stock and overall market conditions. There can be no assurance
that the amounts reflected in these columns will be achieved or if achieved,
will exist at the time of any option exercise.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)
SHARES VALUE ------------- -------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- -------------------
<S> <C> <C> <C> <C>
Ronald M. Brill......................... 4,837 153,373 87,861/112,522 1,555,002/1,192,101
W. Andrew McKenna....................... 0 0 29,111/53,272 435,002/534,226
Larry M. Mercer......................... 6,449 200,456 81,611/90,772 1,489,377/957,351
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committees of the Board of Directors have
furnished the following report on executive compensation:
Under the supervision of the Compensation and Stock Option Committees of
the Board of Directors, the Company has developed and implemented compensation
policies, plans and programs ("Compensation Policies") which seek to structure
executive compensation consistent with the Company's overall business strategy,
philosophy and objectives. The Compensation Policies are intended to embody a
"pay-for-performance" philosophy which rewards executives for long-term
strategic management and enhancement of stockholder value by providing ownership
incentives in the Company and a performance-oriented environment that measures
rewards against personal and Company goals. The Company believes this philosophy
attracts, retains and motivates key executives critical to the long-term success
of the Company.
This compensation philosophy is implemented through compensation packages
which include various cash components and non-cash components. Although no
formal analysis of industry compensation was conducted by the Compensation
Committee, base salaries are generally set near retail industry averages so that
the Company relies to a large degree on annual and longer term "incentive"
compensation to provide significant upside potential such that high performance
could bring total compensation above the retail industry averages.
Beginning in 1994, the Omnibus Budget Reconciliation Act of 1993 ("OBRA")
limits the deductibility of executive compensation paid by publicly held
corporations to $1 million per employee subject to various exceptions, including
compensation based on performance goals.
16
<PAGE> 20
The deductibility limitation generally does not apply to compensation based
on performance goals where (1) the performance goals are established by a
compensation committee which is comprised solely of two or more outside
directors; (2) the material terms are disclosed to stockholders and approved by
majority vote of the stockholders eligible to vote thereon before the
compensation is paid and (3) before the compensation is paid, the compensation
committee certifies that the performance goals and other material terms have
been satisfied. Pursuant to OBRA and Internal Revenue Service ("IRS")
regulations adopted thereunder, a director will not be an outside director if
such person, among other things, receives compensation for personal services in
any capacity other than as a director. The Company is seeking stockholder
approval for related amendments as well as other changes to its stock option
plan for potential compensation in excess of $1 million to satisfy Code Section
162(m).
The Compensation Committee has established a Senior Officers' Bonus Pool
("SOBP") for its CEO and COO. The SOBP is intended to be, and the Compensation
Committee believes that the SOBP qualifies as, performance-based compensation
and, accordingly, that all sums paid thereunder should be deductible for tax
purposes by the Company. The Stockholders approved the SOBP at the 1994 Annual
Meeting of Stockholders and thereafter amended it at the 1995 Annual Meeting of
Stockholders, in order to comply with a "safe harbor" under regulations adopted
under OBRA. The SOBP was further amended at the 1996 Annual Meeting of
Stockholders to set automatically each year's Earnings Threshold at the prior
year's net earnings and to set the maximum payout awardable under the SOBP at
$4,000,000 for each of the next five fiscal years, commencing in fiscal 1996.
The SOBP allows the CEO and the COO collectively to earn a bonus equal to ten
percent of the Company's earnings in excess of the threshold amount (the
"Earnings Threshold"). The Earnings Threshold for fiscal 1997 is equal to
$937,739,000, which is approximately equal to the Company's net earnings for
fiscal 1996. Monies payable from the SOBP are to be shared by the CEO and COO at
the ratio of fifty percent each. Accordingly, under the terms and conditions of
the SOBP, the performance goals for fiscal 1996 were met and certified by the
Compensation Committee, and the CEO and COO each received their respective
bonus.
The Compensation Committee bases its belief that the SOBP is
performance-based on, among other things, the fact that the amount of the
Company's earnings in any year are not capable of being ascertained with
certainty at the start of such year, statements in the IRS regulations that
performance goals need not be based upon an increase or positive result under a
company's business criterion and may include maintaining the status quo or
limiting economic losses and the Compensation Committee's belief that
achievement of an earnings threshold which is at least equal to the level of the
prior year's earnings is subject to substantial uncertainty, even in light of
the Company's historical earnings growth. Nevertheless, neither the Company nor
the Compensation Committee can give any assurance that the IRS will agree that
the SOBP is performance-based. In the event that the SOBP was deemed by the IRS
not to be performance-based, the Company would have the option to contest such
determination, forego the deduction for sums in excess of the deductible limit,
modify the SOBP for future years or any combination of the foregoing.
Payments under the SOBP to the CEO and COO comprise approximately 77
percent of each of their total cash compensation in fiscal 1996. From fiscal
1988 until fiscal 1992, the CEO and COO declined to accept recommendations from
the Compensation Committee for increases to the maximum amount in the SOBP. In
the 1992 fiscal year, the Compensation Committee increased the maximum amount in
the SOBP for the CEO and COO from $2 million to $4 million. The increase in the
maximum amount awardable under the SOBP from prior years was based upon the
Compensation Committee's assessment of the CEO's and COO's contributions to the
Company as reflected in the multiple measures of the Company's financial
performance since the last increase in the maximum compensation awardable under
the SOBP including, without limitation, increases in net earnings, net sales,
net earnings per share, total assets and stockholder's equity. The Compensation
Committee also considered the Company's market share, geographic expansion and
market penetration and marketing innovations. The Compensation Committee did not
assign formal weights to particular measures and the relative weighing of the
importance of such measures was based on the subjective perception of the
individual members of the Compensation Committee. The Compensation Committee was
also cognizant of the total compensation levels of certain other executives of
similar position in the retail industry and other companies similar in size.
In setting annual salaries, the Compensation Committee reviews with the CEO
an annual salary plan recommended by the CEO and COO for the Company's executive
officers. The annual salary plan is based on numerous subjective factors which
include performance merit increases and responsibility levels. The annual
17
<PAGE> 21
salary plans for both the CEO and COO are established by the Compensation
Committee based on available compensation data, including compensation data for
the retail industry and other companies similar in size, the Compensation
Committee's assessment of such officers' past performance and the Compensation
Committee's expectation of their future contributions in leading the Company.
The Compensation Committee does not purport to scientifically or statistically
sample compensation data for other companies. Accordingly, compensation data for
other companies may, but need not, include companies in the retail industry or
the S&P 500, usually is historical in nature, and may be limited to that
available from public sources. To the extent that comparative data is utilized,
the Compensation Committee believes a subjective comparison is required to
account for the numerous variables between Home Depot and other companies and
notes that compensation levels and operating performance of other companies can
be influenced by a variety of factors both within and without the control of
such other companies. While type of business and broad market indexes may be
appropriate measures of historical company performance, the Compensation
Committee currently believes neither grouping should be accorded any special
ranking in its compensation deliberations.
All executive officers (other than the CEO and COO) participate in the
Company's Corporate Management Bonus Plan ("CMBP"), under which they are
eligible to earn a bonus up to 50 percent of their annual base salary depending
on personal performance and the Company's performance relative to criteria such
as gross margin return on investment, return on assets and sales target levels.
Fifty percent of such bonus may be awarded based solely on subjective
evaluations and the remaining 50 percent is based on performance with respect to
the objective criteria enumerated below. During the 1996 fiscal year, based upon
these objective and subjective performance assessments all of the executive
officers other than the CEO and COO were awarded bonuses as reflected in the
Summary Compensation Table contained elsewhere in the Proxy Statement.
The exact objective criteria employed depend on the officer's
responsibilities and such performance criteria may be computed by various
methods depending on the Compensation Committee's assessment of the best match
between job duties and performance criteria. Gross Margin Return On Investment
("GMROI") is calculated by dividing gross margin by net sales and multiplying
the resulting number by net sales divided by average inventory at cost. Return
On Assets is calculated in the same manner as GMROI except net income before
taxes and interest replaces gross margin and total assets, which is composed of
average retail inventory and changes in fixed assets, replaces inventory. In
calculating Return On Assets, for officers with non-merchandising positions,
total assets are defined as average total assets based on the Company's balance
sheet. Minimum bonuses are payable if 95 percent of planned results are achieved
and maximum bonuses are paid upon the achievement of 115 percent of planned
results. Bonus payments, as a percentage of salary, increase on a linear basis
for the achievement of results between 95 percent and 115 percent of planned
results although the slope of line (i.e., relative percentage) varies depending
on the placement within the range and the nature of the officer's duties.
Minimum bonuses based on the application of the foregoing formulas generally are
payable in an amount equal to, but not less than, one percent of salary assuming
95 percent of planned results are achieved.
The Compensation Committee believes that disclosure of actual targets under
the CMBP could adversely affect the Company since, among other things, such
projections are not publicly disclosed and could place the Company at a
competitive disadvantage with respect to hiring and retaining key employees and
could potentially expose the Company to claims by third parties based on such
projections, especially since such projections are not intended as a predictor
of future performance on which the public should rely. The CMBP is subject to
adjustment based on, among other things, adjustments to scheduled store opening
dates and other non-anticipated events, and the Company may adjust the CMBP,
including targets and utilized criteria, at such time or times as the Company,
in its sole discretion, determines that the original projections or the bases
therefor were materially incorrect.
A large portion of the executive officers' total compensation is tied to
stock performance, thus more closely aligning their interests with the long-term
interests of Stockholders. This is accomplished through several stock plans. The
Company's 1991 Plan and its Employee Stock Purchase Plan are administered by the
Stock Option Committee of the Board of Directors which coordinates its
activities with those of the Compensation Committee. Annually, at the discretion
of the Stock Option Committee, stock options are granted to all executive
officers and key employees, excluding both the CEO and COO, to purchase stock at
the then current market price. The stock option grant size is determined by the
Stock Option Committee and based on the individual's position within the Company
and a stock option rating based on job performance rating, future potential and
cultural fit. Individual
18
<PAGE> 22
ratings are based on reviews compiled by one or more of the officers to whom an
officer reports and such officer's perceived relative performance and abilities
when compared with other employees of the Company. Stock option grants made
since fiscal 1991 are exercisable at a rate of 25 percent per year commencing on
the first or second year after the date of grant (depending on the type of stock
option granted) with a total stock option term of ten years. The Company's stock
options historically have been financially rewarding when the Company's stock
price has shown dramatic increases. To the extent that the public market does
not, in the Compensation Committee's view, fairly value the Company, the
Compensation Committee may consider decreasing the portion of compensation tied
to stock performance. The executive officers, excluding the CEO and COO, may
also purchase stock at a discount through the Employee Stock Purchase Plan. The
Company's CEO and COO have chosen not to participate in the Company's 1991 Plan
and Employee Stock Purchase Plan due to their already large stock ownership as
shown elsewhere in the Proxy Statement. Of course, they have benefited along
with other Stockholders in the historical increases in the market value of the
Company's Common Stock. All executive officers including the CEO and COO
participate in the ESOP portion of the Company's FutureBuilder Plan and the ESOP
Restoration Plan (the "ESOP Plans") whereby their vested interests increase in
value, without any outlay of funds by the employees, through seniority,
increases in the market value of the Company's Common Stock and discretionary
annual contributions to the ESOP Plans by the Company. Such discretionary
contributions to the ESOP Plans are determined by the Board of Directors based
on the Company's performance and are typically distributed to the Plan
participants, including participating executive officers, based on a percentage
of the participants' base salary.
The Omnibus Plan, as presented for approval by the Stockholders herein,
allows further flexibility in offering other non-cash compensation incentives.
The tables included in the Proxy Statement and accompanying narrative
footnotes, reflect the decisions covered by the above discussion. The foregoing
report has been furnished by the members of the following committees:
<TABLE>
<S> <C>
Compensation Committee: Stock Option Committee:
Frank Borman Bernard Marcus
John L. Clendenin Arthur M. Blank
Berry R. Cox Kenneth G. Langone
Donald R. Keough
</TABLE>
19
<PAGE> 23
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN ON $100 INVESTMENT
AMONG HOME DEPOT, S&P 500 INDEX AND S&P SPECIALTY RETAIL GROUP
ASSUMING REINVESTMENT OF DIVIDENDS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P RETAIL
(FISCAL YEAR COVERED) HOME DEPOT COMPOSITE S&P 500 INDEX
<S> <C> <C> <C>
2/2/92 100.00 100.00 100.00
1/31/93 162.53 119.11 111.51
1/30/94 127.18 112.29 124.74
1/29/95 152.97 105.80 125.42
1/28/96 151.17 114.01 173.79
2/2/97 163.39 132.96 219.48
</TABLE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP were the auditors of the Company during fiscal 1996.
Although the Board of Directors has not yet selected auditors for the present
fiscal year, it is expected that KPMG Peat Marwick LLP will be chosen. A
representative of that firm will be present at the Annual Meeting with an
opportunity to make a statement and will be available to respond to appropriate
questions.
STOCKHOLDER PROPOSALS
Stockholders who desire to submit to the Company proposals for inclusion in
the Company's proxy materials for the 1998 Annual Meeting of Stockholders of The
Home Depot, Inc. must submit such proposals to the Secretary of the Company by
December 17, 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the Securities and
Exchange Commission and the New York Stock Exchange reports of ownership and
changes in ownership of Common Stock and other equity securities of the Company.
Directors, executive officers and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
20
<PAGE> 24
Based solely on review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that during fiscal 1996, all filing requirements applicable to
its directors, executive officers and greater than ten percent beneficial owners
were complied with except that Colonel Frank Borman, Director, and Mr. Bruce
Berg, President -- Southeast Division, each failed to timely file a Form 4 on a
single transaction.
OTHER MATTERS
Management does not intend to present to the Annual Meeting any business
other than the items stated in the "Notice of Annual Meeting of Stockholders"
and knows of no other business to be presented for action at the meeting. If,
however, any other business should properly come before the meeting or any
adjournments thereof, it is intended that all management proxies will be voted
with respect thereto in accordance with the best judgment of the persons named
in the proxies.
AVAILABILITY OF FORM 10-K
AND ANNUAL REPORT TO STOCKHOLDERS
Copies of Home Depot's Annual Report to Stockholders for the fiscal year
ended February 2, 1997, which includes certain financial information about the
Company, are currently being mailed together with this Proxy Statement to
Stockholders. Additional copies of such Annual Report, along with copies of Home
Depot's Annual Report on Form 10-K for the fiscal year ended February 2, 1997,
as filed with the Securities and Exchange Commission (exclusive of documents
incorporated by reference), are available without charge to Stockholders upon
written request to Investor Relations, The Home Depot, Inc., 2455 Paces Ferry
Rd., Atlanta, Georgia 30339-4024.
21
<PAGE> 25
APPENDIX A
THE HOME DEPOT, INC.
1997 OMNIBUS STOCK INCENTIVE PLAN
1. HISTORY AND PURPOSE. The Home Depot, Inc. Omnibus Stock Incentive Plan
(this "Plan") is an amendment and restatement of The Home Depot, Inc. 1991
Omnibus Stock Option Plan. The purpose of this Plan is to attract and retain
employees and directors for The Home Depot, Inc. and its subsidiaries and to
provide such persons with incentives and rewards for superior performance.
2. DEFINITIONS. As used in this Plan, the following terms shall be defined
as set forth below:
"AWARD" means any Option, Stock Appreciation Right, Restricted Shares,
Deferred Shares, Performance Shares or Performance Unit.
"BASE PRICE" means the price to be used as the basis for determining
the Spread upon the exercise of a Freestanding Stock Appreciation Right.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITTEE" means the committee described in Section 4 of this Plan.
"COMPANY" means The Home Depot, Inc., a Delaware corporation, or any
successor corporation.
"DEFERRAL PERIOD" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 8 of this Plan.
"DEFERRED SHARES" means an Award pursuant to Section 8 of this Plan of
the right to receive Shares at the end of a specified Deferral Period.
"EMPLOYEE" means any person, including an officer, employed by the
Company or a Subsidiary.
"FAIR MARKET VALUE" means the fair market value of the Shares as
determined by the Committee from time to time. Unless otherwise determined
by the Committee, the fair market value shall be the closing price for the
Shares reported on a consolidated basis on the New York Stock Exchange on
the relevant date or, if there were no sales on such date, the closing
price on the nearest preceding date on which sales occurred.
"FREESTANDING STOCK APPRECIATION RIGHT" means a Stock Appreciation
Right granted pursuant to Section 6 of this Plan that is not granted in
tandem with an Option or similar right.
"GRANT DATE" means the date specified by the Committee on which a
grant of an Award shall become effective, which shall not be earlier than
the date on which the Committee takes action with respect thereto.
"INCENTIVE STOCK OPTIONS" means any Option that is intended to qualify
as an "incentive stock option" under Section 422 of the Code or any
successor provision.
"NONEMPLOYEE DIRECTOR" means a member of the Board who is not an
Employee.
"NONQUALIFIED STOCK OPTION" means an Option that is not intended to
qualify as an Incentive Stock Option.
"OPTION" means any option to purchase Shares granted under Section 5
of this Plan.
"OPTIONEE" means the person so designated in an agreement evidencing
an outstanding Option.
"OPTION PRICE" means the purchase price payable upon the exercise of
an Option.
"PARTICIPANT" means an Employee or Nonemployee Director who is
selected by the Committee to receive benefits under this Plan, provided
that Nonemployee Directors shall not be eligible to receive grants of
Incentive Stock Options.
A-1
<PAGE> 26
"PERFORMANCE OBJECTIVES" means the performance objectives established
pursuant to this Plan for Participants who have received grants of
Performance Shares or Performance Units or, when so determined by the
Committee, Deferred Shares or Restricted Shares. Performance Objectives may
be described in terms of Company-wide objectives or objectives that are
related to the performance of the individual Participant or the Subsidiary,
division, department or function within the Company or Subsidiary in which
the Participant is employed. Any Performance Objectives applicable to
Awards to the extent that such an Award is intended to qualify as
"performance-based compensation" under Section 162(m) of the Code shall be
limited to specified levels of or increases in the Company's or
Subsidiary's return on equity, earnings per share, total earnings, earnings
growth, return on capital, return on assets, economic value added, earnings
before interest and taxes, sales growth, gross margin return on investment
or increase in the Fair Market Value of the Shares. Except in the case of
such an Award intended to qualify under Section 162(m) of the Code, if the
Committee determines that a change in the business, operations, corporate
structure or capital structure of the Company, or the manner in which it
conducts its business, or other events or circumstances render the
Performance Objectives unsuitable, the Committee may modify such
Performance Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Committee deems appropriate and
equitable.
"PERFORMANCE PERIOD" means a period of time established under Section
9 of this Plan within which the Performance Objectives relating to a
Performance Share, Performance Unit, Deferred Shares or Restricted Shares
are to be achieved.
"PERFORMANCE SHARE" means a bookkeeping entry that records the
equivalent of one Share awarded pursuant to Section 9 of this Plan.
"PERFORMANCE UNIT" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 9 of this Plan.
"PREDECESSOR PLAN" means The Home Depot, Inc. 1991 Omnibus Stock
Option Plan.
"RESTRICTED SHARES" mean Shares granted under Section 7 of this Plan
subject to a substantial risk of forfeiture.
"SHARES" means shares of the Common Stock of the Company, $.05 par
value, or any security into which Shares may be converted by reason of any
transaction or event of the type referred to in Section 11 of this Plan.
"SPREAD" means, in the case of a Freestanding Stock Appreciation
Right, the amount by which the Fair Market Value on the date when any such
right is exercised exceeds the Base Price specified in such right or, in
the case of a Tandem Stock Appreciation Right, the amount by which the Fair
Market Value on the date when any such right is exercised exceeds the
Option Price specified in the related Option.
"STOCK APPRECIATION RIGHT" means a right granted under Section 6 of
this Plan, including a Freestanding Stock Appreciation Right or a Tandem
Stock Appreciation Right.
"SUBSIDIARY" means a corporation or other entity (i) more than 50
percent of whose outstanding shares or securities (representing the right
to vote for the election of directors or other managing authority) are, or
(ii) which does not have outstanding shares or securities (as may be the
case in a partnership, joint venture or unincorporated association), but
more than 50 percent of whose ownership interest (representing the right
generally to make decisions for such other entity) is, now or hereafter
owned or controlled directly or indirectly by the Company, provided that
for purposes of determining whether any person may be a Participant for
purposes of any grant of Incentive Stock Options, "Subsidiary" means any
corporation in which the Company owns or controls directly or indirectly
more than 50 percent of the total combined voting power represented by all
classes of stock issued by such corporation at the time of such grant.
"TANDEM STOCK APPRECIATION RIGHT" means a Stock Appreciation Right
granted pursuant to Section 6 of this Plan that is granted in tandem with
an Option or any similar right granted under any other plan of the Company.
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3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as provided
in Section 11 of this Plan, the number of Shares that may be (i) issued or
transferred upon the exercise of Options or Stock Appreciation Rights, (ii)
awarded as Restricted Shares and released from substantial risk of forfeiture,
or (iii) issued or transferred in payment of Deferred Shares or Performance
Shares, on or after the effective date specified in Section 17 shall not in the
aggregate exceed (y) the number of Shares then remaining available under the
Predecessor Plan, plus (z) one-half percent ( 1/2%) of the total number of
issued Shares (including Treasury Shares) as of the first day of each fiscal
year of the Company that the Plan is in effect. The number of Shares available
for issuance in any one fiscal year shall be increased by any Shares available
in prior fiscal years but not issued in such fiscal years. In no event, however,
shall the number of Shares issued upon the exercise of Incentive Stock Options
exceed 50,000,000 Shares or the number of Restricted Shares released from
substantial risk of forfeiture exceed 5,000,000 Shares, subject to adjustment as
provided in Section 11. Such Shares may be Shares of original issuance, Shares
held in Treasury, or Shares that have been reacquired by the Company.
(b) Upon payment of the Option Price upon exercise of a Nonqualified Stock
Option by the transfer to the Company of Shares or upon satisfaction of tax
withholding obligations under the Plan by the transfer or relinquishment of
Shares, there shall be deemed to have been issued or transferred only the number
of Shares actually issued or transferred by the Company, less the number of
Shares so transferred or relinquished. Upon the payment in cash of a benefit
provided by any Award under the Plan, any Shares that were subject to such Award
shall again be available for issuance or transfer under the Plan.
(c) No Participant may receive Awards representing more than 1,000,000
Shares in any one calendar year. In addition, the maximum number of Performance
Units that may be granted to a Participant in any one calendar year is
5,000,000.
4. ADMINISTRATION OF THE PLAN. This Plan shall be administered by one or
more committees appointed by the Board. The interpretation and construction by
the Committee of any provision of this Plan or of any agreement or document
evidencing the grant of any Award and any determination by the Committee
pursuant to any provision of this Plan or any such agreement, notification or
document, shall be final and conclusive. No member of the Committee shall be
liable to any person for any such action taken or determination made in good
faith.
5. OPTIONS. The Committee may from time to time authorize grants to
Participants of options to purchase Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each grant shall specify the number of Shares to which it
pertains.
(b) Each grant shall specify an Option Price per Share, which shall be
equal to or greater than the Fair Market Value on the Grant Date.
(c) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check
or other cash equivalent acceptable to the Company, (ii) nonforfeitable,
unrestricted Shares owned by the Optionee which have a value at the time of
exercise that is equal to the Option Price, (iii) any other legal
consideration that the Committee may deem appropriate, including without
limitation any form of consideration authorized under Section 5(d) below,
on such basis as the Committee may determine in accordance with this Plan,
or (iv) any combination of the foregoing.
(d) On or after the Grant Date of any Option other than an Incentive
Stock Option, the Committee may determine that payment of the Option Price
may also be made in whole or in part in the form of Restricted Shares or
other Shares that are subject to risk of forfeiture or restrictions on
transfer. Unless otherwise determined by the Committee, whenever any Option
Price is paid in whole or in part by means of any of the forms of
consideration specified in this Section 5(d), the Shares received by the
Optionee upon the exercise of the Options shall be subject to the same
risks of forfeiture or restrictions on transfer as those that applied to
the consideration surrendered by the Optionee, provided that such risks of
forfeiture and restrictions on transfer shall apply only to the same number
of Shares received by the Optionee as applied to the forfeitable or
restricted Shares surrendered by the Optionee.
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(e) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a bank or broker on the date of exercise
of some or all of the Shares to which the exercise relates.
(f) On or after the Grant Date of any Option, the Committee may
provide for the automatic grant to the Optionee of a "reload" Option in the
event the Optionee surrenders Shares in satisfaction of the Option Price
upon the exercise of an Option as authorized under Sections 5(c) and (d)
above. Each reload Option shall pertain to a number of Shares equal to the
number of Shares utilized by the Optionee to exercise the original Option.
Each reload Option shall have an exercise price equal to Fair Market Value
on the date it is granted and shall expire on the stated exercise date of
the original Option.
(g) Each Option grant may specify a period of continuous employment of
the Optionee by the Company or any Subsidiary (or, in the case of a
Nonemployee Director, service on the Board) that is necessary before the
Options or installments thereof shall become exercisable, and any grant may
provide for the earlier exercise of such rights in the event of a change in
control of the Company or other similar transaction or event.
(h) Options granted under this Plan may be Incentive Stock Options,
Nonqualified Stock Options or a combination of the foregoing, provided that
only Nonqualified Stock Options may be granted to Nonemployee Directors.
Each grant shall specify whether (or the extent to which) the Option is an
Incentive Stock Option or a Nonqualified Stock Option. Notwithstanding any
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Options designated as Incentive Stock Options
are exercisable for the first time by an Optionee during any calendar year
(under all plans of the Company) exceeds $100,000, such Options shall be
treated as Nonqualified Stock Options.
(i) No Option granted under this Plan may be exercised more than ten
years from the Grant Date.
(j) Each grant shall be evidenced by an agreement delivered to and
accepted by the Optionee and containing such terms and provisions as the
Committee may determine consistent with this Plan.
6. STOCK APPRECIATION RIGHTS. The Committee may also authorize grants to
Participants of Stock Appreciation Rights. A Stock Appreciation Right is the
right of the Participant to receive from the Company an amount, which shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100 percent) of the Spread at the time of the exercise of such right.
Any grant of Stock Appreciation Rights under this Plan shall be upon such terms
and conditions as the Committee may determine in accordance with the following
provisions:
(a) Any grant may specify that the amount payable upon the exercise of
a Stock Appreciation Right may be paid by the Company in cash, Shares or
any combination thereof and may (i) either grant to the Participant or
reserve to the Committee the right to elect among those alternatives or
(ii) preclude the right of the Participant to receive and the Company to
issue Shares or other equity securities in lieu of cash.
(b) Any grant may specify that the amount payable upon the exercise of
a Stock Appreciation Right shall not exceed a maximum specified by the
Committee on the Grant Date.
(c) Any grant may specify (i) a waiting period or periods before Stock
Appreciation Rights shall become exercisable and (ii) permissible dates or
periods on or during which Stock Appreciation Rights shall be exercisable.
(d) Any grant may specify that a Stock Appreciation Right may be
exercised only in the event of a change in control of the Company or other
similar transaction or event.
(e) On or after the Grant Date of any Stock Appreciation Rights, the
Committee may provide for the payment to the Participant of dividend
equivalents thereon in cash or Shares on a current, deferred or contingent
basis.
(f) Each grant shall be evidenced by an agreement delivered to and
accepted by the Optionee, which shall describe the subject Stock
Appreciation Rights, identify any related Options, state that the Stock
Appreciation Rights are subject to all of the terms and conditions of this
Plan and contain such other terms and provisions as the Committee may
determine consistent with this Plan.
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(g) Each grant of a Tandem Stock Appreciation Right shall provide that
such Tandem Stock Appreciation Right may be exercised only (i) at a time
when the related Option (or any similar right granted under any other plan
of the Company) is also exercisable and the Spread is positive; and (ii) by
surrender of the related Option (or such other right) for cancellation.
(h) Regarding Freestanding Stock Appreciation Rights only:
(i) Each grant shall specify in respect of each Freestanding Stock
Appreciation Right a Base Price per Share, which shall be equal to or
greater than the Fair Market Value on the Grant Date;
(ii) Successive grants may be made to the same Participant
regardless of whether any Freestanding Stock Appreciation Rights
previously granted to such Participant remain unexercised;
(iii) Each grant shall specify the period or periods of continuous
employment of the Participant by the Company or any Subsidiary that are
necessary before the Freestanding Stock Appreciation Rights or
installments thereof shall become exercisable, and any grant may provide
for the earlier exercise of such rights in the event of a change in
control of the Company or other similar transaction or event; and
(iv) No Freestanding Stock Appreciation Right granted under this
Plan may be exercised more than ten years from the Grant Date.
7. RESTRICTED SHARES. The Committee may also authorize grants to
Participants of Restricted Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each grant shall constitute an immediate transfer of the ownership
of Shares to the Participant in consideration of the performance of
services, subject to the substantial risk of forfeiture and restrictions on
transfer hereinafter referred to.
(b) Each grant may be made without additional consideration from the
Participant or in consideration of a payment by the Participant that is
less than the Fair Market Value on the Grant Date.
(c) Each grant shall provide that the Restricted Shares covered
thereby shall be subject to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code for a period to be determined by the
Committee on the Grant Date, and any grant or sale may provide for the
earlier termination of such risk of forfeiture in the event of a change in
control of the Company or other similar transaction or event.
(d) Unless otherwise determined by the Committee, an award of
Restricted Shares shall entitle the Participant to dividend, voting and
other ownership rights during the period for which such substantial risk of
forfeiture is to continue.
(e) Each grant shall provide that, during the period for which such
substantial risk of forfeiture is to continue, the transferability of the
Restricted Shares shall be prohibited or restricted in the manner and to
the extent prescribed by the Committee on the Grant Date. Such restrictions
may include, without limitation, rights of repurchase or first refusal in
the Company or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee.
(f) Any grant or the vesting thereof may be further conditioned upon
the attainment of Performance Objectives established by the Committee in
accordance with the applicable provisions of Section 9 of this Plan
regarding Performance Shares and Performance Units.
(g) Any grant may require that any or all dividends or other
distributions paid on the Restricted Shares during the period of such
restrictions be automatically sequestered and reinvested on an immediate or
deferred basis in additional Shares, which may be subject to the same
restrictions as the underlying Award or such other restrictions as the
Committee may determine.
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(h) Each grant shall be evidenced by an agreement delivered to and
accepted by the Participant and containing such terms and provisions as the
Committee may determine consistent with this Plan. Unless otherwise
directed by the Committee, all certificates representing Restricted Shares,
together with a stock power that shall be endorsed in blank by the
Participant with respect to such Shares, shall be held in custody by the
Company until all restrictions thereon lapse.
8. DEFERRED SHARES. The Committee may authorize grants of Deferred Shares
to Participants upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall constitute the agreement by the Company to issue
or transfer Shares to the Participant in the future in consideration of the
performance of services, subject to the fulfillment during the Deferral
Period of such conditions as the Committee may specify.
(b) Each grant may be made without additional consideration from the
Participant or in consideration of a payment by the Participant that is
less than the Fair Market Value on the Grant Date.
(c) Each grant shall provide that the Deferred Shares covered thereby
shall be subject to a Deferral Period, which shall be fixed by the
Committee on the Grant Date, and any grant or sale may provide for the
earlier termination of such period in the event of a change in control of
the Company or other similar transaction or event.
(d) During the Deferral Period, the Participant shall not have any
right to transfer any rights under the subject Award, shall not have any
rights of ownership in the Deferred Shares and shall not have any right to
vote such shares, but the Committee may on or after the Grant Date
authorize the payment of dividend equivalents on such shares in cash or
additional Shares on a current, deferred or contingent basis.
(e) Any grant or the vesting thereof may be further conditioned upon
the attainment of Performance Objectives established by the Committee in
accordance with the applicable provisions of Section 9 of this Plan
regarding Performance Shares and Performance Units.
(f) Each grant shall be evidenced by an agreement delivered to and
accepted by the Participant and containing such terms and provisions as the
Committee may determine consistent with this Plan.
9. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Committee may also
authorize grants of Performance Shares and Performance Units, which shall become
payable to the Participant upon the achievement of specified Performance
Objectives, upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which may be subject to adjustment
to reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Performance Share or
Performance Unit shall commence on the Grant Date and may be subject to
earlier termination in the event of a change in control of the Company or
other similar transaction or event.
(c) Each grant shall specify the Performance Objectives that are to be
achieved by the Participant.
(d) Each grant may specify in respect of the specified Performance
Objectives a minimum acceptable level of achievement below which no payment
will be made and may set forth a formula for determining the amount of any
payment to be made if performance is at or above such minimum acceptable
level but falls short of the maximum achievement of the specified
Performance Objectives.
(e) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that shall have been earned, and
any grant may specify that any such amount may be paid by the Company in
cash, Shares or any combination thereof and may either grant to the
Participant or reserve to the Committee the right to elect among those
alternatives.
(f) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the
Committee on the Grant Date. Any grant of Performance Units may
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specify that the amount payable, or the number of Shares issued, with
respect thereto may not exceed maximums specified by the Committee on the
Grant Date.
(g) Any grant of Performance Shares may provide for the payment to the
Participant of dividend equivalents thereon in cash or additional Shares on
a current, deferred or contingent basis.
(h) If provided in the terms of the grant, the Committee may adjust
Performance Objectives and the related minimum acceptable level of
achievement if, in the sole judgment of the Committee, events or
transactions have occurred after the Grant Date that are unrelated to the
performance of the Participant and result in distortion of the Performance
Objectives or the related minimum acceptable level of achievement.
(i) Each grant shall be evidenced by an agreement delivered to and
accepted by the Participant, which shall state that the Performance Shares
or Performance Units are subject to all of the terms and conditions of this
Plan and such other terms and provisions as the Committee may determine
consistent with this Plan.
10. TRANSFERABILITY. (a) Except as provided in Section 10(b), no Award
granted under this Plan shall be transferable by a Participant other than by
will or the laws of descent and distribution, and Options and Stock Appreciation
Rights shall be exercisable during a Participant's lifetime only by the
Participant or, in the event of the Participant's legal incapacity, by his
guardian or legal representative acting in a fiduciary capacity on behalf of the
Participant under state law. Any attempt to transfer an Award in violation of
this Plan shall render such Award null and void.
(b) The Committee may expressly provide in an Award agreement (or an
amendment to an Award agreement) that a Participant may transfer such Award
(other than an Incentive Stock Option), in whole or in part, to a spouse or
lineal descendant (a "Family Member"), a trust for the exclusive benefit of
Family Members, a partnership or other entity in which all the beneficial owners
are Family Members, or any other entity affiliated with the Participant that may
be approved by the Committee. Subsequent transfers of Awards shall be prohibited
except in accordance with this Section 10(b). All terms and conditions of the
Award, including provisions relating to the termination of the Participant's
employment or service with the Company or a Subsidiary, shall continue to apply
following a transfer made in accordance with this Section 10(b).
(c) Any Award made under this Plan may provide that all or any part of the
Shares that are (i) to be issued or transferred by the Company upon the exercise
of Options or Stock Appreciation Rights, upon the termination of the Deferral
Period applicable to Deferred Shares or upon payment under any grant of
Performance Shares or Performance Units, or (ii) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 7 of this Plan, shall be subject to further restrictions upon transfer.
11. ADJUSTMENTS. The Committee may make or provide for such adjustments in
the (a) number of Shares covered by outstanding Options, Stock Appreciation
Rights, Deferred Shares, Restricted Shares and Performance Shares granted
hereunder, (b) prices per share applicable to such Options and Stock
Appreciation Rights, and (c) kind of Shares covered thereby, as the Committee in
its sole discretion may in good faith determine to be equitably required in
order to prevent dilution or enlargement of the rights of Participants that
otherwise would result from (x) any stock dividend, stock split, combination or
exchange of Shares, recapitalization or other change in the capital structure of
the Company, (y) any merger, consolidation, spin-off, spin-out, split-off,
split-up, reorganization, partial or complete liquidation or other distribution
of assets (other than a normal cash dividend), issuance of rights or warrants to
purchase securities or (z) any other corporate transaction or event having an
effect similar to any of the foregoing. Moreover, in the event of any such
transaction or event, the Committee may provide in substitution for any or all
outstanding Awards under this Plan such alternative consideration as it may in
good faith determine to be equitable under the circumstances and may require in
connection therewith the surrender of all Awards so replaced. The Committee may
also make or provide for such adjustments in the number of Shares specified in
Section 3 of this Plan as the Committee in its sole discretion may in good faith
determine to be appropriate in order to reflect any transaction or event
described in this Section 11.
12. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional Shares pursuant to this Plan. The Committee may provide for the
elimination of fractions or for the settlement thereof in cash.
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13. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of all such taxes required to be withheld. At the
discretion of the Committee, such arrangements may include relinquishment of a
portion of such benefit.
14. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND APPROVED LEAVES OF
ABSENCE. Notwithstanding any other provision of this Plan to the contrary, in
the event of termination of employment by reason of death, disability, normal
retirement, early retirement with the consent of the Company or leave of absence
approved by the Company, or in the event of hardship or other special
circumstances, of a Participant who holds an Option or Stock Appreciation Right
that is not immediately and fully exercisable, any Restricted Shares as to which
the substantial risk of forfeiture or the prohibition or restriction on transfer
has not lapsed, any Deferred Shares as to which the Deferral Period is not
complete, any Performance Shares or Performance Units that have not been fully
earned, or any Shares that are subject to any transfer restriction pursuant to
Section 10(c) of this Plan, the Committee may in its sole discretion take any
action that it deems to be equitable under the circumstances or in the best
interests of the Company, including, without limitation, waiving or modifying
any limitation or requirement with respect to any Award under this Plan.
15. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
combination of grants under this Plan, the Committee may provide for such
special terms for Awards to Participants who are foreign nationals, or who are
employed by the Company or any Subsidiary outside of the United States of
America, as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to, or amendments, restatements or alternative versions
of, this Plan as it may consider necessary or appropriate for such purposes
without thereby affecting the terms of this Plan as in effect for any other
purpose, provided that no such supplements, amendments, restatements or
alternative versions shall include any provisions that are inconsistent with the
terms of this Plan, as then in effect, unless this Plan could have been amended
to eliminate such inconsistency without further approval by the Stockholders of
the Company.
16. AMENDMENTS AND OTHER MATTERS. (a) This Plan may be amended from time
to time by the Board, but no such amendment shall increase any of the
limitations specified in Section 3 of this Plan, other than to reflect an
adjustment made in accordance with Section 11, without the further approval of
the Stockholders of the Company.
(b) With the concurrence of the affected Optionee, the Committee may cancel
any agreement evidencing Options or any other Award granted under this Plan. In
the event of such cancellation, the Committee may authorize the granting of new
Options or other Awards hereunder, which may or may not cover the same number of
Shares that had been the subject of the prior Award, in such manner, at such
Option Price and subject to such other terms, conditions and discretions as
would have been applicable under this Plan had the canceled Options or other
Award not been granted.
(c) This Plan shall not confer upon any Participant any right with respect
to continuance of employment or other service with the Company or any Subsidiary
and shall not interfere in any way with any right that the Company or any
Subsidiary would otherwise have to terminate any Participant's employment or
other service at any time.
(d) To the extent that any provision of this Plan would prevent any Option
that was intended to qualify under particular provisions of the Code from so
qualifying, such provision of this Plan shall be null and void with respect to
such Option, provided that such provision shall remain in effect with respect to
other Options, and there shall be no further effect on any provision of this
Plan.
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17. EFFECTIVE DATE AND STOCKHOLDER APPROVAL. This Plan, as an amendment
and restatement of the Predecessor Plan, shall become effective upon its
approval by the Board, subject to approval by the Stockholders of the Company at
the next Annual Meeting of Stockholders. The Committee may grant Awards subject
to the condition that this Plan shall have been approved by the Stockholders of
the Company.
18. TERMINATION. This Plan shall terminate on February 27, 2007, and no
Award shall be granted after that date.
19. GOVERNING LAW. The validity, construction and effect of this Plan and
any Award hereunder will be determined in accordance with (i) the Delaware
General Corporation Law, and (ii) to the extent applicable, other laws
(including those governing contracts) of the State of Georgia.
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APPENDIX B
THE HOME DEPOT, INC.
NONEMPLOYEE DIRECTORS' DEFERRED
STOCK COMPENSATION PLAN
ARTICLE I
INTRODUCTION
I.1 Establishment. The Home Depot, Inc. (the "Company") hereby establishes
The Home Depot, Inc. Nonemployee Directors' Deferred Stock Compensation Plan
(the "Plan") for those directors of the Company who are not employees of the
Company. The Plan allows Nonemployee Directors to defer the receipt of cash
compensation and to receive such deferred compensation in the form of Shares of
Common Stock of the Company.
I.2 Purpose. The Plan is intended to advance the interests of the Company
and its Stockholders by providing a means to attract and retain qualified
persons to serve as Nonemployee Directors and to promote ownership by
Nonemployee Directors of a greater proprietary interest in the Company, thereby
aligning such Directors' interests more closely with the interests of
Stockholders of the Company.
I.3 Effective Date. The Plan shall become effective upon approval by the
Stockholders of the Company at the Company's 1997 Annual Meeting of
Stockholders.
ARTICLE II
DEFINITIONS
II.1 "Annual Meeting" means the Annual Meeting of Stockholders of the
Company.
II.2 "Annual Meeting Date" means the date of the Annual Meeting.
II.3 "Board" means the Board of Directors of the Company.
II.4 "Committee" means the Board or a committee appointed to administer the
Plan under Article IV.
II.5 "Company" means The Home Depot, Inc., a Delaware corporation, or any
successor thereto.
II.6 "Deferral Date" means the date Fees would otherwise have been paid to
the Participant.
II.7 "Deferral Election" means a written election to defer Fees under the
Plan.
II.8 "Director" means any individual who is a member of the Board.
II.9 "Effective Date" means May 28, 1997, the date of the Company's 1997
Annual Meeting.
II.10 "Fair Market Value" means the closing price for the Shares reported
on a consolidated basis on the New York Stock Exchange on the relevant date or,
if there were no sales on such date, the closing price on the nearest preceding
date on which sales occurred.
II.11 "Fees" means all or part of any retainer or meeting fees payable in
cash to a Nonemployee Director in his or her capacity as a Director. Fees shall
not include any expenses paid directly or through reimbursement.
II.12 "Nonemployee Director" means a Director who is not, as of an Annual
Meeting Date, an employee of the Company or any of its subsidiaries or
affiliates. For purposes of the Plan, an employee is an individual whose wages
are subject to the withholding of federal income tax under Section 3401 of the
Internal Revenue Code of 1986, as amended.
II.13 "Participant" means a Nonemployee Director who defers Fees under
Article VI of the Plan.
II.14 "Secretary" means the Secretary or any Assistant Secretary of the
Company.
II.15 "Shares" means shares of the Common Stock of the Company, par value
$.05 per share.
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II.16 "Stock Units" means the credits to a Participant's Stock Unit Account
under Article VI of the Plan, each of which represents the right to receive one
Share upon settlement of the Stock Unit Account.
II.17 "Stock Unit Account" means the bookkeeping account established by the
Company pursuant to Section 6.5.
II.18 "Termination of Service" means termination of service as a Director
for any reason.
ARTICLE III
SHARES AVAILABLE UNDER THE PLAN
Subject to adjustment as provided in Article X, the maximum number of
Shares that may be distributed in settlement of Stock Unit Accounts under the
Plan shall be 500,000. Such Shares may include authorized but unissued Shares,
Treasury Shares or Shares that have been reacquired by the Company.
ARTICLE IV
ADMINISTRATION
The Plan shall be administered by the Board or such other committee as may
be designated by the Board. The Committee shall have the authority to make all
determinations it deems necessary or advisable for administering the Plan,
subject to the express provisions of the Plan. Notwithstanding the foregoing, no
Director who is a Participant under the Plan shall participate in any
determination relating solely or primarily to his or her own Shares, Stock Units
or Stock Unit Account.
ARTICLE V
ELIGIBILITY
Each person who is a Nonemployee Director on a Deferral Date shall be
eligible to defer Fees payable on such date in accordance with Article VI of the
Plan. If any Nonemployee Director subsequently becomes an employee of the
Company or any of its subsidiaries, but does not incur a Termination of Service,
such Director shall continue as a Participant with respect to Fees previously
deferred, but shall cease eligibility with respect to all future Fees, if any,
earned while an employee.
ARTICLE VI
DEFERRAL ELECTIONS IN LIEU OF CASH PAYMENTS
VI.1 General Rule. Each Nonemployee Director may, in lieu of receipt of
Fees, defer any or all of such Fees in accordance with this Article VI, provided
that such Nonemployee Director is eligible under Article V of the Plan to defer
such Fees at the date any such Fees are otherwise payable.
VI.2 Timing of Election. Each Nonemployee Director who is serving on the
Board on the Effective Date may make a Deferral Election at any time prior to
the Effective Date. Any person who is not then serving as a Nonemployee Director
may make a Deferral Election before the first date on which he or she is
entitled to receive Fees. A Nonemployee Director who does not make a Deferral
Election when first eligible to do so may make a Deferral Election at any time
before the first day of any subsequent calendar year.
VI.3 Effect and Duration of Election. A Deferral Election shall apply to
Fees payable after the date such election is made and shall be deemed to be
continuing and applicable to all Fees payable in subsequent calendar years,
unless the Participant revokes or modifies such election by filing a new
election form before the first day of any subsequent calendar year, effective
for all Fees payable on and after the first day of such calendar year.
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VI.4 Form of Election. A Deferral Election shall be made in a manner
satisfactory to the Committee. Generally, a Deferral Election shall be made by
completing and filing the specified election form with the Secretary or his or
her designee within the period described in Section 6.2 or Section 6.3.
VI.5 Establishment of Stock Unit Account. The Company shall establish a
Stock Unit Account for each Participant. All Fees deferred pursuant to this
Article VI shall be credited to the Participant's Stock Unit Account as of the
Deferral Date and converted to Stock Units. The number of Stock Units credited
to a Participant's Stock Unit Account as of a Deferral Date shall equal the
amount of the deferred Fees divided by the Fair Market Value of a Share on such
Deferral Date, with fractional units calculated to three decimal places.
Fractional Stock Units shall be credited cumulatively, but any fractional Stock
Unit in a Participant's Stock Unit Account at the time of a distribution under
Article VII shall be converted into cash equal to the Fair Market Value of a
corresponding fractional Share on the date of distribution.
VI.6 Crediting of Dividend Equivalents. As of each dividend payment date
with respect to Shares, each Participant shall have credited to his or her Stock
Unit Account a dollar amount equal to the amount of cash dividends that would
have been paid on the number of Shares equal to the number of Stock Units
credited to the Participant's Stock Unit Account as of the close of business on
the record date for such dividend. Such dollar amount shall then be converted
into a number of Stock Units equal to the number of whole and fractional Shares
that could have been purchased with such dollar amount at Fair Market Value on
the dividend payment date.
ARTICLE VII
SETTLEMENT OF STOCK UNITS
VII.1 Timing of Payment. A Participant shall receive or begin receiving a
distribution of his or her Stock Unit Account in the manner described in Section
7.2 either (i) on or as soon as administratively feasible after the first day of
the second calendar month immediately following the month in which the
Participant incurs a Termination of Service, or (ii) if the Participant has made
an election to defer payment in accordance with this Section, on or as soon as
administratively feasible after January 1 of the year immediately following the
date on which the Participant incurs a Termination of Service. A Participant
must deliver an election to defer the distribution or commencement of
distribution to the Secretary or his or her designee at least 5 months before
the date on which the Participant incurs a Termination of Service.
VII.2 Payment Options. A Deferral Election filed under Article VI shall
specify whether the Participant's Stock Unit Account is to be settled by
delivering to the Participant the number of Shares equal to the number of whole
Stock Units then credited to the Participant's Stock Unit Account, in either (i)
a lump sum, or (ii) substantially equal annual installments over a period not to
exceed 5 years. Any fractional Stock Unit credited to a Participant's Stock Unit
Account at the time of a distribution shall be paid in cash at the time of such
distribution. A Participant may change the manner in which his or her Stock Unit
Account is distributed by delivering a new election form to the Secretary or his
or her designee at least 5 months before the date on which the Participant
incurs a Termination of Service.
VII.3 Payment Upon Death of a Participant. If a Participant dies before
the entire balance of his or her Stock Unit Account has been distributed, the
balance of the Participant's Stock Unit Account shall be paid, in a lump sum as
soon as administratively feasible after the Participant's death, to the
beneficiary designated by the Participant under Article IX.
VII.4 Continuation of Dividend Equivalents. If payment of Stock Units is
deferred pursuant to Section 7.2, the Participant's Stock Unit Account shall
continue to be credited with dividend equivalents as provided in Section 6.6
until the entire balance of the Participant's Stock Unit Account has been
distributed.
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ARTICLE VIII
UNFUNDED STATUS
VIII.1 General. The interest of each Participant in any Fees deferred
under the Plan (and any Stock Units or Stock Unit Account relating thereto)
shall be that of a general creditor of the Company. Stock Unit Accounts, and
Stock Units credited thereto, shall at all times be maintained by the Company as
bookkeeping entries evidencing unfunded and unsecured general obligations of the
Company. Except as provided in Section 8.2, no money or other assets shall be
set aside for any Participant.
VIII.2 Trust. To the extent determined by the Board, the Company may
transfer funds necessary to fund all or part of the payments under the Plan to a
trust; provided, the assets held in such trust shall remain at all times subject
to the claims of the general creditors of the Company. No Participant or
beneficiary shall have any interest in the assets held in such trust or in the
general assets of the Company other than as a general, unsecured creditor.
Accordingly, the Company shall not grant a security interest in the assets held
by the trust in favor of any Participant, beneficiary or creditor.
ARTICLE IX
DESIGNATION OF BENEFICIARY
Each Participant may designate, on a form provided by the Committee, one or
more beneficiaries to receive payment of the Participant's Stock Unit Account in
the event of such Participant's death. The Company may rely upon the beneficiary
designation last filed with the Committee, provided that such form was executed
by the Participant or his or her legal representative and filed with the
Committee prior to the Participant's death. If a Participant has not designated
a beneficiary, or if the designated beneficiary is not surviving when a payment
is to be made to such person under the Plan, the beneficiary with respect to
such payment shall be the Participant's surviving spouse, or if there is no
surviving spouse, the Participant's estate.
ARTICLE X
ADJUSTMENT PROVISIONS
In the event any recapitalization, reorganization, merger, consolidation,
spin-off, combination, repurchase, exchange of Shares or other securities of the
Company, stock split or reverse split, or similar corporate transaction or event
affects Shares such that an adjustment is determined by the Board or Committee
to be appropriate to prevent dilution or enlargement of Participants' rights
under the Plan, then the Board or Committee shall, in a manner that is
proportionate to the change to the Shares and is otherwise equitable, adjust the
number or kind of Shares to be delivered upon settlement of Stock Unit Accounts
under Article VII.
ARTICLE XI
GENERAL PROVISIONS
XI.1 No Stockholder Rights Conferred. Nothing contained in the Plan will
confer upon any Participant or beneficiary any rights of a Stockholder of the
Company, unless and until Shares are in fact issued or transferred to such
Participant or beneficiary in accordance with Article VII.
XI.2 Changes to The Plan. The Board may amend, alter, suspend,
discontinue, extend, or terminate the Plan without the consent of Stockholders
or Participants; provided, no action taken without the consent of an affected
Participant may materially impair the rights of such Participant with respect to
any Stock Units credited to his or her Stock Unit Account at the time of such
change or termination.
XI.3 Compliance With Laws And Obligations. The Company will not be
obligated to issue or deliver Shares in connection with the Plan in a
transaction subject to the registration requirements of the Securities Act of
1933, as amended, or any other federal or state securities law, any requirement
under any listing agreement between the Company and any national securities
exchange or automated quotation system or any other laws,
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regulations, or contractual obligations of the Company, until the Company is
satisfied that such laws, regulations and other obligations of the Company have
been complied with in full. Certificates representing Shares delivered under the
Plan will be subject to such restrictions as may be applicable under such laws,
regulations and other obligations of the Company.
XI.4 Limitations on Transferability. Stock Units and any other right under
the Plan will not be transferable by descent and distribution (or to a
designated beneficiary in the event of a Participant's death). Stock Units and
other rights under the Plan may not be pledged, mortgaged, hypothecated or
otherwise encumbered, and shall not be subject to the claims of creditors of any
Participant.
XI.5 Governing Law. The validity, construction and effect of the Plan and
any agreement hereunder will be determined in accordance with (i) the Delaware
General Corporation Law, and (ii) to the extent applicable, other laws
(including those governing contracts) of the State of Georgia.
XI.6 Plan Termination. Unless earlier terminated by action of the Board,
the Plan will remain in effect until such time as no Shares remain available for
delivery under the Plan and the Company has no further rights or obligations
under the Plan.
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APPENDIX C
PROXY THE HOME DEPOT, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON MAY 28, 1997.
The undersigned stockholder hereby appoints BERNARD MARCUS, ARTHUR M.
BLANK and RONALD M. BRILL, and each of them, attorneys and proxies for the
undersigned with full power of substitution, to act and vote, with the powers
the undersigned would possess if personally present, at the Annual Meeting of
Stockholders of The Home Depot, Inc. to be held at the Cobb Galleria Centre,
Atlanta, Georgia, on Wednesday, May 28, 1997, at 10:00 a.m., and any
adjournments thereof, as directed below with respect to the matters set forth
below and with discretionary authority on all other matters that come before
the meeting, all as more fully described in the Proxy Statement received by the
undersigned stockholder. If no direction is made, the proxy will be voted
"FOR" the approval of item number 1, the election of FRANK BORMAN, RONALD M.
BRILL, BERRY R. COX and RONALD A. MATRICARIA, "FOR" the approval of item number
2, "FOR" the approval of item number 3, "AGAINST" item number 4, "AGAINST" item
number 5, and in accordance with the recommendations of the Board of Directors.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE.
SEE REVERSE SIDE
<PAGE> 40
X Please mark
- ----- votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. Election of Directors
NOMINEES: Frank Borman, Ronald M. Brill, Berry R. Cox and Ronald A. Matricaria.
FOR WITHHELD
___ ____
----------------------------
For all nominees
except as noted above
2. Approval of The Home Depot, Inc. 1997 Omnibus
Stock Incentive Plan.
FOR AGAINST ABSTAIN
___ ____ ____
3. Approval of the Home Depot, Inc. Nonemployee Directors'
Deferred Stock Compensation Plan.
FOR AGAINST ABSTAIN
___ ____ ____
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 4 AND 5.
4. Approval of Stockholder Proposal
to amend Bylaws to require a majority
of independent directors.
FOR AGAINST ABSTAIN
___ ____ ____
5. Approval of Stockholder Proposal
to amend Bylaws to require that an independent
director who was not formerly the chief executive
serve as chair of the board.
FOR AGAINST ABSTAIN
___ ____ ____
MARK HERE
FOR ADDRESS CHANGE
AND NOTE AT LEFT
PLEASE MARK, SIGN AND DATE HEREON AND
RETURN PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
Please sign exactly as name appears at left.
When shares are held by joint tenants, both should
sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name
by President or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.
Signature: Date:
------------------ -------------
Signature: Date:
------------------ -------------
