LOWES COMPANIES INC (Form: 10-Q, Received: 09/03/2008 17:18:03)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 2008

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______

Commission file number

1-7898

LOWE'S COMPANIES, INC.

(Exact name of registrant as specified in its charter)

NORTH CAROLINA	56-0578072
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1000 Lowe's Blvd., Mooresville, NC	28117
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code	(704) 758-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

CLASS		OUTSTANDING AT AUGUST 29, 2008
Common Stock, $.50 par value		1,465,680,775

LOWE’S COMPANIES, INC. - INDEX -

PART I - Financial Information			Page No.

	Item 1.	Financial Statements

		Consolidated Balance Sheets – August 1, 2008 (Unaudited), August 3, 2007 (Unaudited) and February 1, 2008	3

		Consolidated Statements of Current and Retained Earnings (Unaudited) – Three and six months ended August 1, 2008 and August 3, 2007	4

		Consolidated Statements of Cash Flows (Unaudited) - Six months ended August 1, 2008 and August 3, 2007	5

		Notes to Consolidated Financial Statements (Unaudited)	6 - 10

		Report of Independent Registered Public Accounting Firm	11

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12 - 19

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19

	Item 4.	Controls and Procedures	19

PART II - Other Information

	Item 1A.	Risk Factors	20

	Item 4.	Submission of Matters to a Vote of Security Holders	20

	Item 6.	Exhibits	21

	Signature		22

	Exhibit Index		23

Part I - FINANCIAL INFORMATION
Item 1. Financial Statements

Lowe's Companies, Inc.
Consolidated Balance Sheets
In Millions, Except Par Value Data

			(Unaudited)		(Unaudited)
		August 1, 2008		August 3, 2007		February 1, 2008
Assets

Current assets:
Cash and cash equivalents		$	477	$	337	$	281
Short-term investments (includes $39 million of trading securities at August 1, 2008)			377		325		249
Merchandise inventory - net			7,939		7,799		7,611
Deferred income taxes - net			275		209		247
Other current assets			236		181		298

Total current assets			9,304		8,851		8,686

Property, less accumulated depreciation			22,066		19,825		21,361
Long-term investments			798		627		509
Other assets			381		341		313

Total assets		$	32,549	$	29,644	$	30,869

Liabilities and shareholders' equity

Current liabilities:
Short-term borrowings		$	189	$	555	$	1,064
Current maturities of long-term debt			31		85		40
Accounts payable			4,786		4,167		3,713
Accrued compensation and employee benefits			492		414		467
Self-insurance liabilities			736		726		671
Deferred revenue			816		819		717
Other current liabilities			1,478		1,274		1,079

Total current liabilities			8,528		8,040		7,751

Long-term debt, excluding current maturities			5,050		4,301		5,576
Deferred income taxes - net			641		628		670
Other liabilities			824		706		774

Total liabilities			15,043		13,675		14,771

Shareholders' equity:
Preferred stock - $5 par value, none issued			-		-		-
Common stock - $.50 par value;
Shares issued and outstanding
August 1, 2008	1,464
August 3, 2007	1,485
February 1, 2008	1,458		732		742		729
Capital in excess of par value			118		11		16
Retained earnings			16,648		15,210		15,345
Accumulated other comprehensive income			8		6		8

Total shareholders' equity			17,506		15,969		16,098

Total liabilities and shareholders' equity		$	32,549	$	29,644	$	30,869


See accompanying notes to the consolidated financial statements (unaudited).

Lowe's Companies, Inc.
Consoli dated Statements of Current and Retained Earnings (Unaudited)
In Millions, Except Per Share Data

		Three Months Ended						Six Months Ended
		August 1, 2008			August 3, 2007			August 1, 2008			August 3, 2007
Current Earnings		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent
Net sales	$	14,509	100.00	$	14,167	100.00	$	26,519	100.00	$	26,338	100.00

Cost of sales		9,527	65.66		9,284	65.53		17,371	65.50		17,195	65.29

Gross margin		4,982	34.34		4,883	34.47		9,148	34.50		9,143	34.71

Expenses:

Selling, general and administrative		3,014	20.78		2,839	20.04		5,738	21.65		5,524	20.97

Store opening costs		21	0.14		26	0.18		38	0.14		38	0.14

Depreciation		381	2.63		332	2.35		757	2.85		656	2.49

Interest - net		69	0.47		50	0.35		145	0.55		97	0.37

Total expenses		3,485	24.02		3,247	22.92		6,678	25.19		6,315	23.97

Pre-tax earnings		1,497	10.32		1,636	11.55		2,470	9.31		2,828	10.74

Income tax provision		559	3.86		617	4.36		925	3.49		1,070	4.07

Net earnings	$	938	6.46	$	1,019	7.19	$	1,545	5.82	$	1,758	6.67


Weighted average shares outstanding - basic		1,455			1,490			1,454			1,500

Basic earnings per share	$	0.64		$	0.68		$	1.06		$	1.17

Weighted average shares outstanding - diluted		1,473			1,518			1,477			1,530

Diluted earnings per share	$	0.64		$	0.67		$	1.05		$	1.15

Cash dividends per share	$	0.085		$	0.080		$	0.165		$	0.130


Retained Earnings
Balance at beginning of period	$	15,835		$	14,968		$	15,345		$	14,860
Cumulative effect adjustment 1		-			-			-			(8)
Net earnings		938			1,019			1,545			1,758
Cash dividends		(125)			(119)			(242)			(194)
Share repurchases		-			(658)			-			(1,206)
Balance at end of period	$	16,648		$	15,210		$	16,648		$	15,210


1 The Company adopted FIN 48, "Accounting for Uncertainty in Income Taxes", effective February 3, 2007.

See accompanying notes to the consolidated financial statements (unaudited).

Lowe's Companies, Inc.
Consolidated Statements of Cash Flows (Unaudited)
In Millions

		Six Months Ended
	August 1, 2008		August 3, 2007
Cash flows from operating activities:
Net earnings	$	1,545	$	1,758
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		816		701
Deferred income taxes		(57)		3
Loss on property and other assets		30		17
Loss on redemption of long-term debt		8		-
Share-based payment expense		54		45
Changes in operating assets and liabilities:
Merchandise inventory - net		(328)		(655)
Other operating assets		52		56
Accounts payable		1,073		643
Other operating liabilities		675		510
Net cash provided by operating activities		3,868		3,078

Cash flows from investing activities:
Purchases of short-term investments		(95)		(368)
Proceeds from sale/maturity of short-term investments		171		524
Purchases of long-term investments		(1,066)		(1,102)
Proceeds from sale/maturity of long-term investments		565		589
Increase in other long-term assets		(37)		(23)
Property acquired		(1,620)		(1,698)
Proceeds from sale of property and other long-term assets		20		26
Net cash used in investing activities		(2,062)		(2,052)

Cash flows from financing activities:
Net (decrease) increase in short-term borrowings		(873)		532
Proceeds from issuance of long-term debt		11		4
Repayment of long-term debt		(555)		(31)
Proceeds from issuance of common stock under employee stock purchase plan		39		40
Proceeds from issuance of common stock from stock options exercised		11		43
Cash dividend payments		(242)		(194)
Repurchase of common stock		(2)		(1,450)
Excess tax benefits of share-based payments		1		3
Net cash used in financing activities		(1,610)		(1,053)

Net increase (decrease) in cash and cash equivalents		196		(27)
Cash and cash equivalents, beginning of period		281		364
Cash and cash equivalents, end of period	$	477	$	337


See accompanying notes to the consolidated financial statements (unaudited).

Lowe's Companies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1: Basis of Presentation - The accompanying consolidated financial statements (unaudited) and notes to consolidated financial statements (unaudited) are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements (unaudited), in the opinion of management, contain all adjustments necessary to present fairly the financial position as of August 1, 2008 and August 3, 2007, and the results of operations for the three and six months ended August 1, 2008 and August 3, 2007, and cash flows for the six months ended August 1, 2008 and August 3, 2007.

These interim consolidated financial statements (unaudited) should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Lowe's Companies, Inc. (the Company) Annual Report on Form 10-K for the fiscal year ended February 1, 2008 (the Annual Report). The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year.

Certain prior period amounts have been reclassified to conform to current classifications. The previous accrued salaries and wages caption was replaced with a new caption, accrued compensation and employee benefits, on the consolidated balance sheets. As part of this, certain prior period amounts were reclassified from other current liabilities into accrued compensation and employee benefits.

Note 2: Fair Value Measurements - Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements,” provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. FASB Staff Position (FSP) FAS 157-2, “Effective Date of FASB Statement No. 157” delayed the effective date for one year for all nonrecurring fair value measurements of nonfinancial assets and liabilities. As a result, the Company’s adoption of SFAS No. 157, effective February 2, 2008, is currently limited to financial assets and liabilities measured at fair value and other nonfinancial assets and liabilities measured at fair value on a recurring basis. The Company elected a partial deferral under the provisions of FSP FAS 157-2 related to the measurement of fair value used when evaluating long-lived assets for impairment and liabilities for exit or disposal activities.

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows:

•

Level 1 – inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities

•

Level 2 – inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly

•

Level 3 – inputs to the valuation techniques that are unobservable for the assets or liabilities

The effect of partially adopting this standard did not result in changes to the valuation techniques the Company had previously used to measure the fair value of its financial assets and liabilities. Therefore, the primary impact to the Company upon partial adoption of SFAS No. 157 was expanded fair value measurement disclosure.

The Company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” effective February 2, 2008. SFAS No. 159 provides entities with an option to measure many financial instruments and certain other items at fair value, including available-for-sale securities previously accounted for under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Under SFAS No. 159, unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings at each reporting period. Certain pre-existing financial

instruments included in long-term investments in the consolidated balance sheet, for which the fair value option has been elected upon the adoption of SFAS No. 159, will now be reported as trading securities under SFAS No. 115. Unrealized gains and losses on those trading securities were insignificant for the three and six months ended August 1, 2008. Cash flows from purchases, sales and maturities of trading securities continue to be included in cash flows from investing activities on the consolidated statements of cash flows because the nature and purpose for which the securities were acquired has not changed as a result of the SFAS No. 159 election. The adoption of SFAS No. 159 did not have a material impact on the Company’s consolidated financial statements.

The following table presents the Company’s financial assets measured at fair value on a recurring basis as of August 1, 2008, classified by SFAS No. 157 fair value hierarchy:

				Fair Value Measurements at Reporting Date Using

				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In millions)		August 1, 2008		(Level 1)		(Level 2)		(Level 3)
Short-term investments
Available-for-sale securities	$	338	$	109	$	229	$	-
Trading securities		39		39		-		-
Long-term investments
Available-for-sale securities		798		-		798		-
Total investments	$	1,175	$	148	$	1,027	$	-

When available, quoted prices are used to determine fair value. When quoted prices in active markets are available, investments are classified within Level 1 of the fair value hierarchy. The Company’s Level 1 investments primarily consist of investments in money market and mutual funds. When quoted prices in active markets are not available, fair values are determined using pricing models and the inputs to those pricing models are based on observable market inputs in active markets. The inputs to the pricing models are typically benchmark yields, reported trades, broker-dealer quotes, issuer spreads and benchmark securities, among others. The Company’s Level 2 investments primarily consist of investments in municipal obligations.

Note 3: Restricted Investment Balances - Short-term and long-term investments include restricted balances pledged as collateral for letters of credit for the Company’s extended warranty program and for a portion of the Company’s casualty insurance and installed sales program liabilities. Restricted balances included in short-term investments were $194 million at August 1, 2008, $178 million at August 3, 2007, and $167 million at February 1, 2008. Restricted balances included in long-term investments were $152 million at August 1, 2008, $102 million at August 3, 2007, and $172 million at February 1, 2008.

Note 4: Property - Property is shown net of accumulated depreciation o f $8.2 billion a t August 1, 2008, $6.8 billion at August 3, 2007, and $7.5 billion at February 1, 2008.

Note 5: Short-Term Borrowings - The Company has a Canadian dollar (C$) denominated credit agreement in the amount of C$200 million for the purpose of funding the build-out of retail stores and for working capital and other general corporate purposes in Canada. Borrowings made are unsecured and are priced at a fixed rate based upon market conditions at the time of funding in accordance with the terms of the credit agreement. The credit agreement contains certain restrictive covenants, which include maintenance of a debt leverage ratio as defined by the credit agreement. The Company was in compliance with those covenants at August 1, 2008. Three banking institutions are participating in the credit agreement. As of August 1, 2008, there was C$194 million or the equivalent of $189 million outstanding under the credit agreement. The weighted-average interest rate on the short-term borrowings was 3.26%.

Note 6: Long-Term Debt - On June 30, 2008, the Company redeemed for cash approximately $19 million principal amount, $14 million carrying amount, of its convertible notes issued in February 2001, which represented all remaining

notes outstanding of such issue, at a price equal to the sum of the issuance price plus accrued original issue discount of such notes as of the redemption date ($730.71 per note). During the first six months of 2008 and 2007, holders of an insignificant number of notes exercised their right to convert their notes into shares of the Company’s common stock at the rate of 32.896 shares per note.

On June 25, 2008, the Company completed a single open market repurchase of approximately $187 million principal amount, $164 million carrying amount, of its senior convertible notes issued in October 2001 at a price of $875.73 per note. The Company subsequently redeemed on June 30, 2008 for cash approximately $392 million principal amount, $343 million carrying amount, of its senior convertible notes issued in October 2001, which represented all remaining notes outstanding of such issue, at a price equal to the sum of the issuance price plus accrued original issue discount of such notes as of the redemption date ($875.73 per note). During the first six months of 2008 and 2007, holders of an insignificant number of notes exercised their right to convert their notes into shares of the Company’s common stock at the rate of 34.424 shares per note.

Upon redemption of these convertible notes, the Company recognized in selling, general and administrative expense (SG&A) a loss of approximately $8 million related to the unamortized debt issuance costs and underwriting discounts.

Note 7: Extended Warranties - Lowe’s sells separately-priced extended warranty contracts under a Lowe’s-branded program for which the Company is ultimately self-insured. The Company recognizes revenue from extended warranty sales on a straight-line basis over the respective contract term. Extended warranty contract terms primarily range from one to four years from the date of purchase or the end of the manufacturer’s warranty, as applicable. Extended warranty deferred revenue is included in other liabilities (non-current) in the accompanying consolidated balance sheets. Changes in deferred revenue for extended warranty contracts are summarized as follows:

	Three Months Ended						Six Months Ended
(In millions)	August 1, 2008			August 3, 2007			August 1, 2008			August 3, 2007
Extended warranty deferred revenue, beginning of period	$	430		$	343		$	407		$	315
Additions to deferred revenue		56			50			105			94
Deferred revenue recognized		(30	)		(20	)		(56	)		(36	)
Extended warranty deferred revenue, end of period	$	456		$	373		$	456		$	373

Incremental direct acquisition costs associated with the sale of extended warranties are also deferred and recognized as expense on a straight-line basis over the respective contract term. Unamortized deferred costs associated with extended warranty contracts were $109 million and $85 million at August 1, 2008 and August 3, 2007, respectively, and are included in other assets (non-current) in the accompanying consolidated balance sheets. All other costs, such as costs of services performed under the contract, general and administrative expenses and advertising expenses are expensed as incurred.

The liability for extended warranty claims incurred is included in self-insurance liabilities in the accompanying consolidated balance sheets. Changes in the liability for extended warranty claims are summarized as follows:

	Three Months Ended						Six Months Ended
(In millions)	August 1, 2008			August 3, 2007			August 1, 2008			August 3, 2007
Liability for extended warranty claims, beginning of period	$	12		$	9		$	14		$	10
Accrual for claims incurred		13			11			25			19
Claim payments		(8	)		(2	)		(22	)		(11	)
Liability for extended warranty claims, end of period	$	17		$	18		$	17		$	18

Note 8 : Shareholders’ Equity - No common shares were repurchased under the share repurchase program during the first six months of fiscal 2008. The Company repurchased 45.7 million common shares under the share repurchase

program during the first six months of fiscal 2007. The total cost of the share repurchases was $1.5 billion (of which $1.2 billion was recorded as a reduction in retained earnings, after capital in excess of par value was depleted). As of August 1, 2008, the Company had remaining authorization through 2009 under the share repurchase program of $2.2 billion.

Note 9: Comprehensive Income - Comprehensive income represents changes in shareholders’ equity from non-owner sources and is comprised of net earnings plus or minus unrealized gains or losses on available-for-sale securities and foreign currency translation adjustments . For the three months ended August 1, 2008, both comprehensive income and net earnings totaled $0.9 billion. For the three months ended August 3, 2007, both comprehensive income and net earnings totaled $1.0 billion. For the six months ended August 1, 2008, both comprehensive income and net earnings totaled $1.5 billion. For the six months ended August 3, 2007, both comprehensive income and net earnings totaled $1.8 billion.

Note 10: Earnings Per Share - Basic earnings per share excludes dilution and is computed by dividing the applicable net earnings by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is calculated based on the weighted-average shares of common stock as of the balance sheet date, as adjusted for the potential dilutive effect of share-based awards and convertible notes. The following table reconciles earnings per share for the three and six months ended August 1, 2008 and August 3, 2007.

	Three Months Ended				Six Months Ended
(In millions, except per share data)	August 1, 2008		August 3, 2007		August 1, 2008		August 3, 2007
Basic earnings per share:
Net earnings	$	938	$	1,019	$	1,545	$	1,758
Weighted-average shares outstanding		1,455		1,490		1,454		1,500
Basic earnings per share	$	0.64	$	0.68	$	1.06	$	1.17
Diluted earnings per share:
Net earnings	$	938	$	1,019	$	1,545	$	1,758
Net earnings adjustment for interest on convertible notes, net of tax		-		1		1		2
Net earnings, as adjusted	$	938	$	1,020	$	1,546	$	1,760
Weighted-average shares outstanding		1,455		1,490		1,454		1,500
Dilutive effect of share-based awards		5		7		6		9
Dilutive effect of convertible notes		13		21		17		21
Weighted-average shares, as adjusted		1,473		1,518		1,477		1,530
Diluted earnings per share	$	0.64	$	0.67	$	1.05	$	1.15

Stock options to purchase 22.1 million and 8.0 million shares of common stock were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive for the three months ended August 1, 2008 and August 3, 2007, respectively. Stock options to purchase 18.0 million and 8.0 million shares of common stock were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive for the six months ended August 1, 2008 and August 3, 2007, respectively.

Note 11: Supplemental Disclosure

Net interest expense is comprised of the following:

	Three Months Ended						Six Months Ended
(In millions)	August 1, 2008			August 3, 2007			August 1, 2008			August 3, 2007
Long-term debt	$	73		$	54		$	146		$	109
Short-term borrowings		2			1			7			1
Capitalized leases		7			8			16			16
Interest income		(12	)		(13	)		(21	)		(24	)
Interest capitalized		(7	)		(4	)		(15	)		(8	)
Other		6			4			12			3
Interest - net	$	69		$	50		$	145		$	97

Supplemental disclosures of cash flow information:

	Six Months Ended
(In millions)	August 1, 2008		August 3, 2007
Cash paid for interest, net of amount capitalized	$	161	$	121
Cash paid for income taxes	$	655	$	876
Non-cash investing and financing activities:
Non-cash property acquisitions	$	81	$	48

Note 12: Recent Accounting Pronouncements - In June 2008, the Financial Accounting Standards Board (FASB) issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities”. FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and affects entities that accrue cash dividends on share-based payment awards during the awards’ service period when the dividends do not need to be returned if the employees forfeit the awards. FSP EITF 03-6-1 states that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company does not expect the adoption of FSP EITF 03-6-1 to have a material impact on its consolidated financial statements.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Lowe’s Companies, Inc.

Mooresville, North Carolina

We have reviewed the accompanying consolidated balance sheets of Lowe’s Companies, Inc. and subsidiaries (the “Company”) as of August 1, 2008 and August 3, 2007, and the related consolidated statements of current and retained earnings for the fiscal three and six-month periods then ended, and of cash flows for the fiscal six-month periods ended August 1, 2008 and August 3, 2007. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of February 1, 2008, and the related consolidated statements of earnings, shareholders’ equity, and cash flows for the fiscal year then ended (not presented herein); and in our report dated April 1, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet of the Company as of February 1, 2008 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

Charlotte, North Carolina

September 3, 2008

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis summarizes the significant factors affecting our consolidated operating results, liquidity and capital resources during the three and six month periods ended August 1, 2008 and August 3, 2007. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that are included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2008 (the Annual Report), as well as the consolidated financial statements (unaudited) and notes to the consolidated financial statements (unaudited) contained in this report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following discussion and analysis of the financial condition and results of operations are based on the consolidated financial statements (unaudited) and notes to consolidated financial statements (unaudited) contained in this report that have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosures of contingent assets and liabilities. We base these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.

Our significant accounting polices are described in Note 1 to the consolidated financial statements presented in the Annual Report. Our critical accounting policies and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report. Our significant and critical accounting policies have not changed significantly since the filing of our Annual Report.

OPERATIONS

The following tables set forth the percentage relationship to net sales of each line item of the consolidated statements of earnings, as well as the percentage change in dollar amounts from the prior period. These tables should be read in conjunction with the following discussion and analysis and the consolidated financial statements (unaudited), including the related notes to the consolidated financial statements (unaudited).

	Three Months Ended				Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period	Percentage Increase / (Decrease) in Dollar Amounts from Prior Period
	August 1, 2008		August 3, 2007		2008 vs. 2007	2008 vs. 2007
Net sales	100.00	%	100.00	%	N/A	2.4	%
Gross margin	34.34		34.47		(13)	2.0
Expenses:
Selling, general and administrative	20.78		20.04		74	6.2
Store opening costs	0.14		0.18		(4)	(21.0)
Depreciation	2.63		2.35		28	14.7
Interest – net	0.47		0.35		12	37.1
Total expenses	24.02		22.92		110	7.3
Pre-tax earnings	10.32		11.55		(123)	(8.4)
Income tax provision	3.86		4.36		(50)	(9.2)
Net earnings	6.46	%	7.19	%	(73)	(8.0)	%

EBIT margin (1)	10.80	%	11.90	%	(110)	(7.1)	%

	Six Months Ended				Basis Point Increase / (Decrease) in Percentage of Net Sales from Prior Period	Percentage Increase / (Decrease) in Dollar Amounts from Prior Period
	August 1, 2008		August 3, 2007		2008 vs. 2007	2008 vs. 2007
Net sales	100.00	%	100.00	%	N/A	0.7	%
Gross margin	34.50		34.71		(21)	0.1
Expenses:
Selling, general and administrative	21.65		20.97		68	3.9
Store opening costs	0.14		0.14		-	0.6
Depreciation	2.85		2.49		36	15.4
Interest – net	0.55		0.37		18	48.8
Total expenses	25.19		23.97		122	5.8
Pre-tax earnings	9.31		10.74		(143)	(12.7)
Income tax provision	3.49		4.07		(58)	(13.5)
Net earnings	5.82	%	6.67	%	(85)	(12.1)	%

EBIT margin (1)	9.86	%	11.11	%	(125)	(10.6)	%

	Three Months Ended						Six Months Ended
Other metrics:	August 1, 2008			August 3, 2007			August 1, 2008			August 3, 2007
Comparable store sales changes (2)	(5.3)		%	(2.6)		%	(6.7)		%	(4.4)		%
Customer transactions (in millions)	217			207			398			385
Average ticket (3)	$	66.95		$	68.47		$	66.62		$	68.35
At end of period:
Number of stores	1,577			1,424
Sales floor square feet (in millions)	179			162
Average store size selling square feet (in thousands) (4)	113			113

(1) We define EBIT margin as earnings before interest and taxes as a percentage of sales (operating margin).

(2) We define a comparable store as a store that has been open longer than 13 months. A store that is identified for relocation is no longer considered comparable one month prior to its relocation. The relocated store must then remain open longer than 13 months to be considered comparable.

(3) We define average ticket as net sales divided by number of customer transactions.

(4) We define average store size selling square feet as sales floor square feet divided by the number of stores open at the end of the period.

Our employees focused on taking care of customers and capitalizing on opportunity in order to deliver better than anticipated results for the quarter in a difficult economic environment.

Contributing to our better than expected results was relative strength in many of our seasonal and outdoor products and continued stability in repair and maintenance products. Also aiding sales in the quarter was the positive impact of the fiscal stimulus tax rebates. However, the sales environment remains challenging and we anticipate that it will continue to be so into 2009. Broad-based declines in home prices, rising mortgage delinquencies and foreclosures, increasing inventory of unsold homes, tight credit markets and rising mortgage rates, as well as rising unemployment all suggest continued pressure on home improvement consumers. Nearly 90% of our stores are located in markets experiencing housing price declines. Until we see improvement in our core categories and larger ticket items, we will continue to take a cautious and measured approach to managing our business.

We have a heightened focus on maximizing every customer interaction to drive sales while improving customer service. Project selling to the do-it-yourself customer has always been a priority for Lowe’s. We continue to look for ways to maximize all opportunities to sell complete projects. Earlier this year we rolled out a related item selling report to our stores. This tool helps us sharpen our focus on project selling and consistently offer customers all the supplies needed to successfully complete their projects. By selling the entire project, we have the opportunity to increase sales while providing the customer with a one-stop shopping experience. In addition, we continually assess customer service using our “Customer-Focused” program which measures each store’s performance relative to five key components of customer satisfaction including: selling skills, delivery, installed sales, checkout and phone answering. Our customer service scores for the second quarter of 2008 increased in all five categories compared to the second quarter of 2007.

As a result of our customer-focused efforts and product and service offerings, our solid market share gains continued this quarter. According to third-party estimates, we gained unit market share in 17 of our 20 product categories in the second calendar quarter versus the same period last year and gained 120 basis points of unit market share for the total store. We also saw improvement in our draw rate, or the number of times that we were in the consideration set of customers buying the products we sell, in 17 of our 20 product categories. We have plans in place to continue to capture profitable market share, as well as capitalize on the opportunities created by the changing competitive landscape in our industry.

Net Sales - The increase in sales for both the quarter and six months ended August 1, 2008 was driven by our store expansion program, which added 153 net new stores during the last four quarters. Although total customer transactions increased 4.7% compared to the second quarter of 2007, average ticket decreased 2.2% to $66.95. Comparable store sales declined 5.3% for the quarter and 6.7% for the first half of 2008. Comparable store customer transactions decreased 2.7% compared to the second quarter of 2007 and comparable store average ticket decreased 2.6%. Based on external estimates of spending within the home improvement channel and our own consumer surveys, we believe the fiscal stimulus tax rebates benefited comparable store sales for the quarter by 100 to 150 basis points.

Rough plumbing and nursery, two of our 20 product categories, generated comparable store sales increases for the second quarter. Our increase in comparable store sales in rough plumbing was driven by solid sales in air filtration products, pumps and tanks, water treatment and HVAC controls, as well as commodity price inflation in copper and resin products. Seasonable weather in the second quarter of 2008 helped drive nursery sales as consumers took on small projects to enhance the appearance of their outdoor space. Additionally, as homeowners repaired damage caused by last year’s drought and continued to do routine lawn maintenance, we experienced better than average comparable store sales in lawn & landscape products and outdoor power equipment. Other categories that performed above our average comparable store sales change for the second quarter included building materials, hardware, paint, flooring, appliances and home environment. In addition, walls & windows and seasonal living performed at approximately our average comparable store sales change.

Consumers remain cautious about taking on larger discretionary projects, as evidenced by a comparable store sales decline in big ticket products. We did achieve an increase in comparable store sales for Installed Sales, however, for the first time in several quarters. Installed Sales experienced total sales growth of 9.8% and a comparable store sales increase of 1.1%.

Although there was some weakness in Special Order Sales, we experienced total sales growth of 4.6% driven by special order window treatments and carpet. Comparable store Special Order Sales declined 3.3%, but performed above our average comparable store sales change. Commercial Business Customer sales outperformed our average for the quarter, which indicated that our targeted marketing programs and products resonated with the commercial customer. Although sales remained soft in lumber and commodities, we continued to focus on property management where the day-to-day repair business remained strong.

We continued to experience a wide range of comparable store sales performance from a geographic market perspective in the second quarter. Markets in the western U.S., Florida, the Gulf Coast and certain areas of the Northeast experienced double-digit declines in comparable store sales during the second quarter. These areas include some of the markets most pressured by the declining housing market and reduced our comparable store sales by approximately 300 basis points for the quarter. Contrasting those markets, we continued to see solid sales performance in our Texas and Oklahoma markets, along with solid results in the Ohio Valley and parts of the upper Midwest during the second quarter of 2008. These better performing markets had a positive impact on total company comparable store sales of approximately 225 basis points for the quarter.

Gross Margin - In the second quarter, we experienced a 13 basis point decline in gross margin as a percentage of sales from the second quarter of 2007. The decrease was primarily driven by our carpet installation promotion, which negatively impacted gross margin by approximately 20 basis points. In addition, vendor price increases in a number of product categories negatively impacted gross margin by approximately 10 basis points. Higher fuel costs and de-leverage in distribution fixed costs also negatively impacted gross margin by approximately 10 basis points. The de-leverage from these factors was partially offset by a positive impact of 13 basis points from lower inventory shrink and eight basis points from the mix of products sold.

The decrease in gross margin as a percentage of sales for the first six months of 2008 compared to 2007 was attributable to the same factors that contributed to the decrease in gross margin in the second quarter of 2008.

SG&A - SG&A de-leveraged 74 basis points in the second quarter of 2008 versus the prior year, driven by de-leverage of 32 basis points in store payroll. As sales per store declined, additional stores were hitting the minimum staffing hours threshold, which increased the proportion of fixed to total payroll. We also experienced de-leverage of approximately 20 basis points in fixed expenses, such as rent, property taxes and utilities, as a result of the weak sales environment. In addition, we experienced de-leverage of 18 basis points in bonus expense as we attained higher achievement of performance targets this year versus missing many of our performance targets in the first half of 2007. We also saw de-leverage related to our proprietary credit programs due to higher losses than in the prior year. Our expense de-leverage was partially offset by leverage in store service and advertising expense in the quarter.

The increase in SG&A as a percentage of sales for the first six months was similarly driven by de-leverage in store payroll and fixed expenses, such as rent, property taxes and utilities, as a result of softer sales, as well as de-leverage in bonus expense. Our expense de-leverage was partially offset by leverage in store service expense.

Store Opening Costs - Store opening costs, which include payroll and supply costs incurred prior to store opening as well as grand opening advertising costs, totaled $21 million and $26 million in the second quarters of 2008 and 2007, respectively. Because store opening costs are expensed as incurred, the timing of expense recognition fluctuates based on the timing of store openings. We opened 23 new stores in the second quarter of 2008, compared to the opening of 26 stores (24 new and two relocated) in the second quarter of 2007. Store opening costs for stores opened during the second quarter of 2008 and 2007 averaged approximately $0.7 million and $0.8 million per store, respectively.

Store opening costs of $38 million for each of the first six months of 2008 and 2007, were associated with the opening of 43 new stores in 2008, compared to 41 stores (39 new and two relocated) in 2007. Store opening costs for stores opened during each of the first six months of 2008 and 2007 averaged approximately $0.8 million per store.

Depreciation - The de-leverage in depreciation for the three and six month periods ended August 1, 2008 was driven by the addition of 153 net new stores over the past four quarters and negative comparable store sales. Property, less accumulated depreciation, totaled $22.1 billion at August 1, 2008, an increase of 11.3% from $19.8 billion at August 3,

2007. At August 1, 2008, we owned 87% of our stores, compared to 86% at August 3, 2007, which includes stores on leased land.

Interest - The de-leverage in interest expense for the three and six month periods ended August 1, 2008 was primarily due to additional expense as a result of the September 2007 $1.3 billion debt issuance.

Income Tax Provision - Our effective income tax rate was 37.4% and 37.5% for the three and six month periods ended August 1, 2008, respectively, and 37.7% and 37.8% for the three and six month periods ended August 3, 2007, respectively. Our effective income tax rate was 37.7% for fiscal 2007.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Our primary sources of liquidity are cash flows from operating activities and our $1.75 billion senior credit facility that expires in June 2012. Net cash provided by operating activities totaled $3.9 billion and $3.1 billion for the six month periods ended August 1, 2008 and August 3, 2007, respectively. The change in cash flows from operating activities was primarily the result of focused inventory management and continued efforts to improve payment terms.

The primary component of net cash used in investing activities continues to be opening new stores, investing in existing stores through resets and remerchandising, and investing in our distribution center and information technology infrastructure. Cash acquisitions of property were $1.6 billion and $1.7 billion for the six month periods ended August 1, 2008 and August 3, 2007 , respectively. At August 1, 2008 , we operated 1,577 stores in the United States and Canada with 179 million square feet of retail selling space, representing a 10.5% increase over the retail selling space at August 3, 2007.

Net cash used in financing activities was $1.6 billion and $1.1 billion for the six month periods ended August 1, 2008 and August 3, 2007 , respectively. The change in cash flows from financing activities was primarily driven by an $873 million net decrease in short-term borrowings as a result of the repayment of $1.0 billion in commercial paper during the first six months of 2008 as compared to a $532 million net increase in short-term borrowings during the first six months of 2007. The change was also attributable to the redemption in June 2008 of our convertible notes issued in February 2001 and our senior convertible notes issued in October 2001. These uses of cash were partially offset by a $1.4 billion decrease in share repurchases as compared to the first six months of 2007. T he ratio of debt to equity plus debt was 23.1%, 23.6% and 29.3% as of August 1, 2008, August 3, 2007, and February 1, 2008, respectively.

Sources of Liquidity

The senior credit facility supports our commercial paper and revolving credit programs. Borrowings made under the senior credit facility are unsecured and are priced at a fixed rate based upon market conditions at the time of funding in accordance with the terms of the senior credit facility. The senior credit facility contains certain restrictive covenants, which include maintenance of a debt leverage ratio as defined by the senior credit facility. We were in compliance with all covenants at August 1, 2008. Eighteen banking institutions are participating in the senior credit facility. As of August 1, 2008, there were no outstanding borrowings under the senior credit facility. In addition, we had no commercial paper outstanding as of August 1, 2008.

The Canadian dollar (C$) denominated credit agreement in the amount of C$200 million was established for the purpose of funding the build-out of retail stores and for working capital and other general corporate purposes in Canada. Borrowings made are unsecured and are priced at a fixed rate based upon market conditions at the time of funding in accordance with the terms of the credit agreement. The credit agreement contains certain restrictive covenants, which include maintenance of a debt leverage ratio as defined by the credit agreement. We were in compliance with all covenants at August 1, 2008. Three banking institutions are participating in the credit agreement. As of August 1, 2008, there was C$194 million or the equivalent of $189 million outstanding under the credit agreement. The weighted-average interest rate on the short-term borrowings was 3.26%.

We also have a C$ denominated credit facility in the amount of C$50 million that provides revolving credit support for our Canadian operations. This uncommitted facility provides us with the ability to make unsecured borrowings, which are priced at a fixed rate based upon market conditions at the time of funding in accordance with the terms of the credit facility. As of August 1, 2008, there were no borrowings outstanding under the credit facility.

Cash Requirements

Capital Expenditures

Our initial 2008 capital forecast was approximately $4.2 billion, inclusive of approximately $350 million of lease commitments, resulting in a planned net cash outflow of $3.8 billion in 2008. As of the end of the second quarter of 2008, we expect that net cash outflow will be approximately $3.6 billion. Approximately 80% of this expected commitment is for store expansion. Expansion plans for 2008 consist of approximately 120 new stores, increasing our total sales floor square footage by 7% to 8% for the year. All of the 2008 projects will be owned, including approximately 30% that will be ground-leased properties.

As of August 1, 2008, we owned and operated 13 regional distribution centers (RDCs). We plan to start operations at our next RDC in Pittston, Pennsylvania in the fourth quarter of 2008. As of August 1, 2008, we also operated 15 flatbed distribution centers (FDCs) for the handling of lumber, building materials and other long-length items. We owned 13 and leased two of these FDCs.

Debt and Capital

On June 30, 2008, we redeemed for cash approximately $19 million principal amount, $14 million carrying amount, of our convertible notes issued in February 2001, which represented all remaining notes outstanding of such issue, at a price equal to the sum of the issuance price plus accrued original issue discount of such notes as of the redemption date ($730.71 per note). From their issuance through the redemption, principal amounts of $986 million, or approximately 98%, of our February 2001 convertible notes had converted from debt to equity. Insignificant amounts were converted during the first six months of 2008 and 2007.

On June 25, 2008, we completed a single open market repurchase of approximately $187 million principal amount, $164 million carrying amount, of our senior convertible notes issued in October 2001 at a price of $875.73 per note. We subsequently redeemed on June 30, 2008 for cash approximately $392 million principal amount, $343 million carrying amount, of our senior convertible notes issued in October 2001, which represented all remaining notes outstanding of such issue, at a price equal to the sum of the issuance price plus accrued original issue discount of such notes as of the redemption date ($875.73 per note). From their issuance through the redemption, an insignificant amount of the senior convertible notes had converted from debt to equity.

Our debt ratings at August 1, 2008, were as follows:

Current Debt Ratings	S&P	Moody’s	Fitch
Commercial Paper	A1	P1	F1
Senior Debt	A+	A1	A+
Outlook	Stable	Stable	Negative

We believe that net cash provided by operating activities and financing activities will be adequate for our expansion plans and other operating requirements over the next 12 months. However, the availability of funds through the issuance of commercial paper and new debt could be adversely affected due to a debt rating downgrade or a deterioration of certain financial ratios. In addition, continuing volatility in the capital markets may affect our ability to access those markets for additional borrowings or increase costs associated with borrowing funds. There are no provisions in any agreements that would require early cash settlement of existing debt or leases as a result of a downgrade in our debt rating or a decrease in our stock price.

We are committed to maintaining strong commercial paper ratings through the management of debt-related ratios.

During the first six months of 2008, there were no share repurchases under the share repurchase program. As of August 1, 2008, we had remaining authorization through 2009 under the share repurchase program of $2.2 billion. Our current outlook does not assume any share repurchases for 2008.

OFF-BALANCE SHEET ARRANGEMENTS

Other than in connection with executing operating leases, we do not have any off-balance sheet financing that has, or is reasonably likely to have, a material, current or future effect on our financial condition, cash flows, results of operations, liquidity, capital expenditures or capital resources.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

On June 30, 2008, we redeemed all remaining notes outstanding of our convertible notes issued in February 2001 and our senior convertible notes issued in October 2001, as further described in Note 6 to the consolidated financial statements (unaudited) contained herein.

	Payments Due by Period
Contractual Obligations			Less than			1-3		4-5	After 5
(In millions)	Total		1 year		years		years		years
Long-term debt (principal and interest amounts, excluding discount)	$	9,400	$	295	$	1,061	$	1,040	$	7,004

There have been no other significant changes in our contractual obligations and commercial commitments other than in the ordinary course of business since the end of 2007. Refer to the Annual Report for additional information regarding our contractual obligations and commercial commitments.

COMPANY OUTLOOK

Third Quarter

As of August 18, 2008, the date of our second quarter 2008 earnings release, we expected to open approximately 38 new stores during the third quarter of 2008, which ends on October 31, 2008, reflecting square footage growth of approximately 10%. We expected total sales to increase 1% to 2% and comparable store sales to decline 5% to 7%. Earnings before interest and taxes as a percentage of sales (operating margin) was expected to decline approximately 290 basis points. In addition, store opening costs were expected to be approximately $34 million. Diluted earnings per share of $0.27 to $0.31 were expected for the third quarter. All comparisons are with the third quarter of fiscal 2007.

Fiscal 2008

As of August 18, 2008, the date of our second quarter 2008 earnings release, we expected to open approximately 120 new stores during fiscal 2008, which ends on January 30, 2009, reflecting total square footage growth of 7% to 8%. Total sales were expected to increase approximately 1% for the year. Comparable store sales were expected to decline 6% to 7%. Earnings before interest and taxes as a percentage of sales (operating margin) was expected to decline approximately 180 basis points. We expected store opening costs to be approximately $97 million. Diluted earnings per share of $1.48 to $1.56 were expected for fiscal 2008. All comparisons are with fiscal 2007.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). All statements other than those reciting historic fact are statements that could be “forward-looking statements” under the Act. Such forward-looking statements are found in, among other places, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Statements containing words such as “expects,” “plans,” “strategy,” “projects,” “believes,” “opportunity,” “anticipates,” “desires,” and similar expressions are intended to highlight or indicate “forward-looking statements.” Although we believe that the expectations, opinions, projections, and comments reflected in our forward-looking statements are reasonable, we can give no assurance that such statements will prove to be correct. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results expressed or implied by our forward-looking statements including, but not limited to, changes in general economic conditions, such as interest rate and currency fluctuations, higher fuel and other energy costs, slower growth in personal income and consumer spending, declining housing turnover, the availability of mortgage financing, inflation or deflation of commodity prices and other factors which can negatively affect our customers, as well as our ability to: (i) respond to adverse trends in the housing industry and the level of repairs, remodeling, and additions to existing homes, as well as general reduction in commercial building activity; (ii) secure, develop, and otherwise implement new technologies and processes designed to enhance our efficiency and competitiveness; (iii) attract, train, and retain highly-qualified associates; (iv) locate, secure, and successfully develop new sites for store development particularly in major metropolitan markets; (v) respond to fluctuations in the prices and availability of services, supplies, and products; (vi) respond to the growth and impact of competition; (vii) address legal and regulatory developments; and (viii) respond to unanticipated weather conditions that could adversely affect sales. For more information about these and other risks and uncertainties that we are exposed to, you should read the “Risk Factors” included in our Annual Report on Form 10-K to the United States Securities and Exchange Commission and the description of material changes, if any, in those “Risk Factors” included in our Quarterly Reports on Form 10-Q.

The forward-looking statements contained in this Form 10-Q are based upon data available as of the date of this report or other specified date and speak only as of such date. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, change in circumstances, future events, or otherwise.

Item 3. - Quantitative and Qualitative Disclosures about Market Risk

The Company's market risk has not changed materially from that disclosed in our Annual Report on Form 10-K for the fiscal year ended February 1, 2008.

Item 4. - Controls and Procedures

The Company's management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s “disclosure controls and procedures”, (as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the Exchange Act)). Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of August 1, 2008, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the SEC) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In addition, no change in the Company’s internal control over financial reporting occurred during the quarter ended August 1, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1A. - Risk Factors

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K.

Item 4. - Submission of Matters to a Vote of Security Holders

(a)	The annual meeting of shareholders was held on May 30, 2008.

(b)	Directors elected at the meeting were: Robert A. Ingram, Robert L. Johnson, and Richard K. Lochridge.

Incumbent Directors whose terms expire in subsequent years are: Peter C. Browning, Marshall O. Larsen, Stephen F. Page, O. Temple Sloan, Jr., David W. Bernauer, Leonard L. Berry, Dawn E. Hudson and Robert A. Niblock.

(c)	The matters voted upon at the meeting and the results of the voting were as follows:

(1)	Election of Directors:

	CLASS	TERM EXPIRING	FOR	WITHHELD
Robert A. Ingram	I	2011	1,289,312,322	62,452,627
Robert L. Johnson	I	2011	1,327,677,152	24,087,796
Richard K. Lochridge	I	2011	1,330,894,150	20,870,798

(2)	Ratification of Appointment of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm for the 2008 Fiscal Year:

FOR	AGAINST	ABSTAIN
1,331,701,110	8,007,141	12,056,695

(3) Approval of the Amendment to the Lowe’s Companies, Inc. Articles of Incorporation Eliminating Classified Structure of Board of Directors:

FOR	AGAINST	ABSTAIN
1,326,934,631	11,219,319	13,610,997

(4) Shareholder Proposal Entitled “Supermajority Vote Requirements”:

FOR	AGAINST	ABSTAIN	BROKER NON VOTE
818,873,282	338,655,736	14,569,559	179,666,371

(5) Shareholder Proposal Entitled “Executive Compensation Plan”:

FOR	AGAINST	ABSTAIN	BROKER NON VOTE
216,323,480	925,945,676	29,829,418	179,666,374

Item 6. - Exhibits

Exhibit 3.1 - Restated and Amended Charter

Exhibit 10.1 - Form of the Company’s Management Continuity Agreement for Tier I Senior Officers

Exhibit 10.2 - Form of the Company’s Management Continuity Agreement for Tier II Senior Officers

Exhibit 12.1 - Statement Re Computation of Ratio of Earnings to Fixed Charges

Exhibit 15.1 - Deloitte & Touche LLP Letter Re Unaudited Interim Financial Information

Exhibit 31.1 - Certification Pursuant to Rules 13a-14(a) and 15d-14(a) Under the Securities Exchange Act of 1934, as Amended

Exhibit 31.2 - Certification Pursuant to Rules 13a-14(a) and 15d-14(a) Under the Securities Exchange Act of 1934, as Amended

Exhibit 32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		LOWE'S COMPANIES, INC.

September 3, 2008 Date		/s/Matthew V. Hollifield Matthew V. Hollifield Senior Vice President and Chief Accounting Officer

EXHIBIT INDEX

Exhibit No.		Description

3.1		Restated and Amended Charter

10.1		Form of the Company’s Management Continuity Agreement for Tier I Senior Officers

10.2		Form of the Company’s Management Continuity Agreement for Tier II Senior Officers

12.1		Statement Re Computation of Ratio of Earnings to Fixed Charges

15.1		Deloitte & Touche LLP Letter Re Unaudited Interim Financial Information

31.1		Certification Pursuant to Rules 13a-14(a) and 15d-14(a) Under the Securities Exchange Act of 1934, as Amended

31.2		Certification Pursuant to Rules 13a-14(a) and 15d-14(a) Under the Securities Exchange Act of 1934, as Amended

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 3.1

RESTATED CHARTER

LOWE’S COMPANIES, INC.

1. Name . The name of the Corporation is Lowe's Companies, Inc.

2. Duration. The period of duration of the Corporation is perpetual.

3. Purpose. The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the North Carolina Business Corporation Act.

4. Authorized Stock . The Corporation shall have the authority to issue 5,000,000 shares of Preferred Stock of a par value of $5 per share and 5,600,000,000 shares of Common Stock of a par value of $.50 per share.

(a) Preferred Stock. Authority is expressly vested in the Board of Directors to divide the Preferred Stock into series and, within the following limitations, to fix and determine the relative rights and preferences as between series so established and to provide for the issuance thereof. Each series shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. All shares of Preferred Stock shall be identical except as to the following relative rights and preferences, as to which there may be variations between different series:

(1) The rate of dividend;

(2) The price at and the terms and conditions on which shares may be redeemed;

(3) The amount payable upon shares in event of involuntary liquidation;

(4) The amount payable upon shares in event of voluntary liquidation;

(5) Sinking fund provisions for the redemption or purchase of shares;

(6) The terms and conditions on which shares may be converted if the shares of any series are issued with the privilege of conversion; and

(7) The terms and conditions on which shares may be voted in the election of Directors or otherwise, either as a class or together with other voting securities.

Prior to the issuance of any shares of a series of Preferred Stock the Board of Directors shall establish such series by adopting a resolution setting forth the designation of the series and

the preferences, limitations and relative rights thereof to the extent that variations are permitted by the provisions hereof.

All series of Preferred Stock shall rank on a parity as to dividends and assets with all other series according to the respective dividend rates and amounts distributable upon any voluntary or involuntary liquidation of the Corporation fixed for each such series; but all shares of Preferred Stock shall be preferred over Common Stock as to both dividends and amounts distributable upon any voluntary or involuntary liquidation of the Corporation. All shares of any one series shall be identical.

(b) Common Stock. The holders of Common Stock shall, to the exclusion of the holders of any other class of stock of the Corporation, have the sole and full power to vote for the election of Directors and for all other purposes without limitation except only (i) as otherwise provided in the resolutions establishing and designating a particular series of Preferred Stock and (ii) as otherwise expressly provided by the then existing statutes of the State of North Carolina. The holders of Common Stock shall have one vote for each share of Common Stock held by them.

Subject to the provisions of resolutions establishing and designating series of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive dividends if, when and as declared by the Board of Directors out of funds legally available therefor and to the net assets remaining after payment of all liabilities upon voluntary or involuntary liquidation of the Corporation.

(c) Stated Capital. The stated capital of the Corporation is $18,550,694 as of April 4, 1986, being the date that the Board of Directors adopted a resolution setting forth a Restated and Amended Charter for submission to the shareholders for approval.

5. Shareholders’ Preemptive Right. No holder of stock of the Corporation shall have any preemptive right to subscribe for or purchase any additional or increased stock of the Corporation of any class, whether now or hereafter authorized, including treasury stock, or obligations convertible into any class of stock, or stock of any class convertible into stock of any other class, or obligations, stock or other securities carrying warrants or rights to subscribe to stock of the Corporation of any class, whether now or hereafter authorized, but any and all shares of stock, bonds, debentures or other securities or obligations, whether or not convertible into stock or carrying warrants entitling the holders thereof to subscribe to stock, may be issued, sold or disposed of from time to time by authority of the Board of Directors to such persons, firms, corporations or employee stock ownership plans and for such consideration, as far as it may be permitted by law, as the Board of Directors shall from time to time determine.

6. Registered Office. The address of the registered office of the Corporation in the State of North Carolina is 225 Hillsborough Street, Wake County, Raleigh, North Carolina, 27603; and the name of its registered agent at such address is C T Corporation System.

7. Incorporators. The names and addresses of the original incorporators of the Corporation are as follows:

NAME ADDRESS

H. C. Buchan, Jr. North Wilkesboro, N.C.

Ruth Lowe Buchan North Wilkesboro, N.C.

Hal E. Church North Wilkesboro, N.C.

8. Board of Directors.

(a) Number, Election and Term of Directors. The Board of Directors of the Corporation shall consist of three or more individuals with the exact number to be fixed from time to time solely by resolution of the Board of Directors, acting by not less than a majority of the Directors then in office. Each Director who is serving as a Director immediately following the 2008 Annual Meeting of Shareholders, or is thereafter elected a Director, shall hold office until the expiration of the term for which he or she has been elected, and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification, or removal from office. At the 2009 Annual Meeting of Shareholders, the successors of the class of Directors whose terms expire at that meeting shall be elected for a two-year term expiring at the 2011 Annual Meeting of Shareholders. At the 2010 Annual Meeting of Shareholders, the successors of the class of Directors whose terms expire at that meeting shall be elected for a one-year term expiring at the 2011 Annual Meeting of Shareholders. At the 2011 Annual Meeting of Shareholders, and at each Annual Meeting of Shareholders thereafter, all Directors shall be elected for terms expiring at the next Annual Meeting of Shareholders. Continuing until after the Annual Meeting of Shareholders in 2010, whenever the Board of Directors changes the number of Directors of the Corporation, any newly-created Directorships or any decrease in the number of Directorships shall be so apportioned to or among the classes of Directors as to make all classes as nearly equal in number as possible.

(b) Standard for Election of Directors by Shareholders. Except as shall be otherwise permitted or authorized by these Articles of Incorporation, Directors are elected by the affirmative vote, at a meeting at which a quorum is present, of a majority of the Voting Shares voted at the meeting in person or by proxy (including those shares in respect of which votes are “withheld” pursuant to Rule 14a-4(b)(2) of the proxy solicitation rules and regulations promulgated under the Securities Exchange Act of 1934, as amended), unless the number of nominees exceeds the number of Directors to be elected, in which case, Directors are elected by a plurality of the votes cast by the Voting Shares entitled to vote in the election at a meeting at which a quorum is present. In the event that a Director nominee fails to receive a majority of the Voting Shares voted in an election where the number of nominees equals the number of Directors to be elected, the Board of Directors may decrease the number of Directors, fill any vacancy, or take other appropriate action.

(c) Newly-Created Directorships and Vacancies. Subject to the rights of the holders of Preferred Stock then outstanding, any vacancy occurring in the Board of Directors, including a vacancy resulting from an increase in the number of Directors, may be filled by the affirmative vote of the majority of the remaining Directors, though less than a quorum of the Board of Directors, and, continuing until after the 2010 Annual Meeting of Shareholders, the Directors so chosen shall hold office for a term expiring at the Annual Meeting of Shareholders

at which the term of the class to which they have been elected expires, subject to any requirement that they be elected by the shareholders at the Annual Meeting of Shareholders next following their election by the Board of Directors. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director.

(d) Elimination of Liability of Directors. To the full extent permitted by the North Carolina Business Corporation Act, a Director of the Corporation shall not be liable for monetary damages for breach of any duty as a Director of the Corporation, and the Corporation shall indemnify any Director from liability incurred as a Director of the Corporation.

9. (a) Vote Required for Certain Business Combinations.

(i) Higher Vote for Certain Business Combinations . In addition to any affirmative vote required by law or this Charter, and except as otherwise expressly provided in Section (b) of this Article:

(A) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Stockholder (as hereinafter defined) or (b) any other Corporation which immediately before such merger or consolidation is an Affiliate or Associate (as hereinafter defined) of an Interested Stockholder; or

(B) any statutory share exchange in which any Interested Stockholder or any Affiliate or Associate of an Interested Stockholder acquires the issued and outstanding shares of any class or Capital Stock of the Corporation or a Subsidiary; or

(C) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions during any 12 month period) to or with any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) in excess of 5% of the Corporation’s consolidated assets as of the date of the most recently available financial statements; or any guaranty by the Corporation or any Subsidiary (in one transaction or a series of transactions during any 12 month period) of indebtedness of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder in excess of 5% of the Corporation’s consolidated assets as of the date of the most recently available financial statements; or any transaction or series of transactions involving in excess of 5% of the Corporation’s consolidated assets as of the date of the most recently available financial statements to which the Corporation or any Subsidiary and any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder is a party; or

(D) the sale or other disposition by the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder (in one transaction or a series of transactions during any 12 month

period) of any securities of the Corporation or any Subsidiary having an aggregate Fair Market Value in excess of 5% of the aggregate Fair Market Value of all outstanding Voting Shares of the Corporation as of the date on which the Interested Stockholder became an Interested Stockholder (the “Determination Date”) except pursuant to a share dividend or the exercise of rights or warrants distributed or offered on a basis affording substantially proportionate treatment to all holders of the same class or series; or

(E) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or behalf of an Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or

(F) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly (in one transaction or a series of transactions during any 12 month period), of increasing by more than 5% the percentage of any class of securities of the Corporation or any Subsidiary directly or indirectly owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder;

shall require the affirmative vote of the holders of at least 70% of the outstanding Voting Shares. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise.

(ii) Definition of “Business Combination .” The term “Business Combination” as used in this Article shall mean any transaction which is referred to in any one or more of clauses (A) through (F) of paragraph (i) of this Section (a).

(b) When Higher Vote is Not Required for Certain Business Combination . The provisions of Section (a) of this Article shall not be applicable to any particular Business Combination, and such Business Combination shall require only such approval as is required by law and any other provision of these Articles of Incorporation, if consideration will be paid to the holders of each class or series of Voting Shares and all of the conditions specified in either of the following paragraphs (i) or (ii) are met.

(i) Approval by Disinterested Directors. The Business Combination shall have been approved by a majority of those persons who are Disinterested Directors (as hereinafter defined).

(ii) Price and Procedure Requirements.

(A) The aggregate amount of the cash and the Fair Market Value as of the Valuation Date of consideration other than cash to be received per share by holders of each class or series of Voting Shares in such Business Combination

shall be at least equal to the highest of the following (taking into account all stock dividends and stock splits):

(I) (If applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder for any shares of such class or series acquired by it (1) within the two year period (the “Preannouncement Period”) ending at 11:59 p.m., Eastern time, on the date of the first public announcement of the proposal of the Business Combination (the “Announcement Date”) or (2) in the transaction in which it became an Interested Stockholder, whichever is higher;

(II) the Fair Market Value per share of such class or series on the Determination Date or on the day after the Announcement Date, whichever is higher;

(III) (if applicable) the price per share equal to the Fair Market Value per share of such class or series determined pursuant to paragraph (ii)(A)(II) above, multiplied by the ratio of (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Stockholder for any shares of such class or series acquired by it within the Preannouncement Period, to (2) the Fair Market Value per share of such class or series on the first day during the Preannouncement Period upon which the Interested Stockholder acquired any shares of such class or series; and

(IV) (if applicable), the highest preferential amount, if any, per share to which the holders of such class or series are entitled in the event of any voluntary or involuntary dissolution of the Corporation.

(B) The consideration to be received by the holder of outstanding shares in such Business Combination shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of the same class or series. If the Interested Stockholder has paid for shares with varying forms of consideration, the form of consideration shall be either cash or the form used to acquire the largest number of shares of such class or series previously acquired by the Interested Stockholder.

(C) During such portion of the three year period preceding the Announcement Date that such Interested Stockholder has been an Interested Stockholder, except as approved by a majority of the Disinterested Directors: (a) there shall have been no failure to declare and pay at the regular date therefor any full periodic dividends (whether or not cumulative) on any outstanding shares of the Corporation; (b) there shall have been (1) no reduction in the annual rate of dividends paid on any class or series of Voting Shares, (except as necessary to reflect any subdivision of the class or series) and (2) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has

the effect of reducing the number of outstanding shares of the class or series; and (c) such Interested Stockholder shall have not become the beneficial owner of any additional Voting Shares except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder.

(D) During such portion of the three year period preceding the Announcement Date that such Interested Stockholder has been an Interested Stockholder, except as approved by a majority of the Disinterested Directors, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

(E) Except as otherwise approved by a majority of the Disinterested Directors, a proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to stockholders of the Corporation at least 20 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).

For the purposes of this Article:

(i) A “person” shall mean any individual, firm, corporation, partnership, joint venture, or other entity.

(ii) “Interested Stockholder” shall mean any person who or which is the beneficial owner, directly or indirectly, of 20% or more of the outstanding Voting Shares of the Corporation; provided, however, the term Interested Stockholder shall not include the Corporation, any Subsidiary, or any savings, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary, or any fiduciary with respect to any such plan when acting in such capacity.

For the purposes of determining whether a person is an Interested Stockholder, the number of shares of Voting Shares deemed to be outstanding shall include shares deemed owned through application of paragraph (iii) of this Section (c) but shall not include any other Voting Shares that may be issuable pursuant to any contract, arrangement or understanding, or upon exercise of conversion rights, exchange rights, warrants or options, or otherwise.

(iii) A person shall be a “beneficial owner” of any Voting Shares as to which such person and any of such person’s Affiliates or Associates, individually or in the aggregate, have

or share directly, or indirectly through any contract, arrangement, understanding, relationship, or otherwise:

(A) voting power, which includes the power to vote, or to direct the voting of the Voting Shares;

(B) investment power, which includes the power to dispose or to direct the disposition of the Voting Shares;

(C) economic benefit, which includes the right to receive or control the disposition of income or liquidation proceeds from the Voting Shares; or

(D) the right to acquire voting power, investment power or economic benefit (whether such right is exercisable immediately or only after the passage of time) pursuant to any contract, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise;

provided, that in no case shall a Director of the Corporation be deemed to be the beneficial owner of Voting Shares beneficially owned by another Director of the Corporation solely by reason of actions undertaken by such persons in their capacity as Directors of the Corporation.

(iv) “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with the person specified.

(v) “Associate” means as to any specified person:

(A) any entity (other than the Corporation and its Subsidiaries) of which such person is an Officer, Director or partner or is, directly or indirectly, the beneficial owner of 10% or more of the Voting Shares;

(B) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; or

(C) any relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is an Officer or Director of the Corporation or any of its Affiliates.

(vi) As to any Corporation, “Subsidiary” means any other Corporation of which it owns directly or indirectly a majority of the Voting Shares.

(vii) “Disinterested Director” means any member of the Board of Directors who:

(A) was elected to the Board of Directors of the Corporation at the 1986 Annual Meeting of Shareholders; or

(B) was recommended for election by a majority of the Disinterested Directors then on the Board, or was elected by the Board to fill a vacancy and received the affirmative vote of a majority of the Disinterested Directors then on the Board.

(viii) “ Fair Market Value ” means:

(A) in the case of stock the highest closing sale price during the 30 day period ending at 11:59 p.m., Eastern time, on the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30 day period ending at 11:59 p.m., Eastern time, on the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the Fair Market Value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors; and

(B) in the case of property other than cash or stock, the Fair Market Value of such property on the date in question as determined by a majority of the Disinterested Directors.

(ix) “Voting Shares” shall mean the outstanding shares of all classes or series of the Corporation’s stock entitled to vote generally in the election of Directors.

(x) “Control” shall mean the possession, directly or indirectly, through the ownership of voting securities, by contract, arrangement, understanding, relationship or otherwise, of the power to direct or cause the direction of the management and policies of the person. The beneficial ownership of 20% or more of the Corporation’s Voting Shares shall be deemed to constitute control.

(d) Certain Determinations .

Directors who are Disinterested Directors of the Corporation shall have the power and duty to determine for the purpose of this Article, on the basis of information known to them after reasonable inquiry, (i) whether a particular person is an Interested Stockholder, (ii) the number of Voting Shares beneficially owned by such person, (iii) whether any person is an Affiliate or Associate of such person, and (iv) whether the assets that are the subject of any Business Combination involving such person have an aggregate Fair Market Value in excess of 5% of the Corporation’s consolidated assets as of the date of the most recently available financial statement, or the securities to be issued or transferred by the Corporation or any Subsidiary in any Business Combination involving such person have an aggregate Fair Market Value in excess of 5% of the aggregate Fair Market Value of all outstanding Voting Shares of the Corporation as of the Determination Date.

(e) No Effect on Certain Obligations .

Nothing contained in this Article shall be construed to relieve any Interested Stockholder or any Director of the Corporation from any obligation imposed by law.

(f) Amendment or Repeal .

The provisions of this Article shall not be amended or repealed, nor shall any provision of these Articles of Incorporation be adopted that is inconsistent with this Article, unless such action shall have been approved by the affirmative vote or either:

(i) the holders of at least 70% of the outstanding Voting Shares; or

(ii) a majority of those Directors who are Disinterested Directors and the holders of the requisite number of shares specified under applicable North Carolina law for the amendment of the charter of a North Carolina corporation.

10. Series A Preferred Stock. The Corporation has designated 750,000 shares of the authorized but unissued shares of the Corporation’s Preferred Stock, par value $5.00 per share, as Participating Cumulative Preferred Stock, Series A (hereinafter referred to as “Series A Preferred Stock”). The terms of the Series A Preferred Stock, in the respect in which the shares of such series may vary from shares of any and all other series of Preferred Stock, are as follows:

(a) Dividends and Distributions.

(1) The holders of shares of Series A Preferred Stock in preference to the holders of Common Stock and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefor, dividends payable quarterly on the last business day of each April, July, October and January (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $120 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time after September 8, 1998 (the “Rights Declaration Date”), (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall

be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(2) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (1) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $120 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(3) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.

(b) Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:

(1) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(2) Except as otherwise provided herein, in the Restated and Amended Charter, or under applicable law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one voting group on all matters submitted to a vote of stockholders of the Corporation.

(3) (i) If at any time dividends on any shares of Series A Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (a “default period”) that shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of the outstanding shares of Series A Preferred Stock together with any other series of Preferred Stock then entitled to such a vote under the terms of the Restated and Amended Charter, voting as a separate voting group, shall be entitled to elect two members of the Board of Directors of the Corporation.

(ii) During any default period, such voting right of the holders of Series A Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Subsection (b)(3) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a separate voting group, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors, or if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Preferred Stock.

(iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the Chairman, President, a

Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (b)(3)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 10 days and not later than 60 days after such order or request. In the event such meeting is not called within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (b)(3)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders.

(iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a separate voting group, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (b)(3)(ii)) be filled by vote of a majority of the remaining Directors theretofore elected by the voting group which elected the Director whose office shall have become vacant. References in this paragraph (b)(3)(iv) to Directors elected by a particular voting group shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence.

(v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock, as a separate voting group, to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock, as a separate voting group, shall terminate, and (z) the number of Directors shall be such number as may be provided for in, or pursuant to, the Restated and Amended Charter or bylaws irrespective of any increase made pursuant to the provisions of paragraph (b)(3)(ii) (such number being subject, however, to change thereafter in any manner provided by law or in the Restated and Amended Charter or bylaws). Any vacancies in the Board of Directors affected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors, even though less than a quorum.

(4) Except as set forth herein or as otherwise provided in the Restated and Amended Charter, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

(1) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Subsection (a) are in arrears, thereafter

and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay or set apart for payment any dividends (other than dividends payable in shares of any class or classes of stock of the Corporation ranking junior to the Series A Preferred Stock) or make any other distributions on, any class of stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock and shall not redeem, purchase or otherwise acquire, directly or indirectly, whether voluntarily, for a sinking fund, or otherwise any shares of any class of stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that, notwithstanding the foregoing, the Corporation may at any time redeem, purchase or otherwise acquire shares of stock of any such junior class in exchange for, or out of the net cash proceeds from the concurrent sale of, other shares of stock of any such junior class;

(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock;

(iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(2) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (1) of Subsection (c), purchase or otherwise acquire such shares at such time and in such manner.

(d) Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.

(e) Liquidation, Dissolution or Winding Up.

(1) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $5.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “Series A Liquidation Preference”). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph 3 below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii) being hereinafter referred to as the “Adjustment Number”). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Preferred Stock and Common Stock, respectively, holders of Series A Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Series A Preferred Stock and Common Stock, on a per share basis, respectively.

(2) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, then such remaining assets shall be distributed ratably to the holders of all such shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.

(3) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction, the numerator of which is the number of shares of Common Stock

outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(f) Consolidation, Merger, Share Exchange, etc. In case the Corporation shall enter into any consolidation, merger, share exchange, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(g) Redemption. The outstanding shares of Series A Preferred Stock may be redeemed at the option of the Board of Directors as a whole, but not in part, at any time, or from time to time, at a cash price per share equal to (i) 100% of the product of the Adjustment Number times the Average Market Value (as such term is hereinafter defined) of the Common Stock, plus (ii) all dividends which on the redemption date have accrued on the shares to be redeemed and have not been paid or declared and a sum sufficient for the payment thereof set apart, without interest. The “Average Market Value” is the average of the closing sale prices of a share of the Common Stock during the 30-day period immediately preceding the date before the redemption date on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which such stock is listed, or, if such stock is not listed on any such exchange, the average of the closing bid quotations with respect to a share of Common Stock during such 30-day period on the National Association of Securities Dealers, Inc. Automated Quotation System or any system then in use, or if no such quotations are available, the fair market value of a share of the Common Stock as determined by the Board of Directors in good faith.

(h) Ranking. The Series A Preferred Stock shall rank on a parity with any and all other series of Preferred Stock as to the payment of dividends and the distribution of assets.

(i) Amendment. The Restated and Amended Charter shall not be further amended in any manner that would adversely affect the preferences, rights or powers of the Series A Preferred Stock without the affirmative vote of the holders of more than two-thirds of the outstanding shares of the Series A Preferred Stock, if any, voting separately as one voting group.

(j) Fractional Shares. Series A Preferred Stock may be issued in fractions of one one-thousandth of a share (and integral multiples thereof) which shall entitle the holder, in proportion to such holders’ fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock.

Exhibit 10.1

(Tier 1 Form of Agreement)

MANAGEMENT CONTINUITY AGREEMENT

THIS MANAGEMENT CONTINUITY AGREEMENT (this “ Agreement ”) is made and entered into as of the ____ day of __________________, ____, by and between LOWE’S COMPANIES, INC., a North Carolina corporation (the “ Company ”), and _________________ (“ Executive ”).

WHEREAS, the Company desires to enter into this Agreement to (i) assure that the Company will have the continued dedication of Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of the Company, (ii) diminish the inevitable distraction of Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control, (iii) encourage Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and (iv) provide Executive with compensation and benefits arrangements upon a Change in Control which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations,

NOW THEREFORE, in order to accomplish these objectives, the Company and Executive agree as follows:

1. Certain Definitions .

(a) The “ Effective Date ” shall mean the first date during the Change in Control Period (as defined in Section 1(b)) on which a Change in Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and if Executive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of such termination of employment.

(b) The “ Change in Control Period ” shall mean the period commencing on the date hereof and ending on the first anniversary of the date hereof; provided , however , that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as a “ Renewal Date ”), unless previously terminated, the Change in Control Period shall be automatically extended so as to terminate one year from the Renewal Date, unless at least 60 days prior to a Renewal Date the Company shall give notice to Executive that the Change in Control Period shall not be so extended.

2. Change in Control . For the purposes of this Agreement, a “Change in Control” shall mean:

(a) individuals who, at the Effective Date, constitute the Board (the “ Incumbent Directors ”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director after the Effective Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided , however , that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest (as described in Rule 14a-11 under the Exchange Act (“ Election Contest ”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“ Proxy Contest ”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director;

(b) any person becomes a “beneficial owner” (as defined in Rule 13d- 3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “ Company Voting Securities ”); provided , however , that the event described in this subparagraph (b) shall not be deemed to be a Change in Control of the Company by virtue of any of the following acquisitions: (i) an acquisition directly by or from the Company or any affiliated companies; (ii) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliated companies, (iii) an acquisition by an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subparagraph (c) below); or

(c) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s shareholders, whether for such transaction or the issuance of securities in the transaction (a “ Reorganization ”), or the sale or other disposition of all or substantially all of the Company’s assets to an entity that is not an affiliate of the Company (a “ Sale ”), unless immediately following such Reorganization or Sale: (i) more than 60% of the total voting power of (A) the corporation resulting from such Reorganization or the corporation which has acquired all or substantially all of the assets of the Company (in either case, the “ Surviving Corporation ”), or (B) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “ Parent Corporation ”), is represented by the Company Voting Securities that were outstanding immediately prior to such Reorganization or Sale (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Reorganization or Sale), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Reorganization or Sale, (ii) no person (other than (A)

the Company, (B) any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation, or (C) a person who immediately prior to the Reorganization or Sale was the beneficial owner of 25% or more of the outstanding Company Voting Securities) is the beneficial owner, directly or indirectly, of 25% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation), and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Reorganization or Sale were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization or Sale (any Reorganization or Sale which satisfies all of the criteria specified in (i), (ii) and (iii) above shall be deemed to be a “ Non-Qualifying Transaction ”).

3. Employment Period . The Company hereby agrees to continue Executive in its employ, and Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the “ Employment Period ”).

4. Terms of Employment .

(a) Position and Duties .

(i) During the Employment Period, (A) Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) Executive’s services shall be performed at the location where Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location.

(ii) During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to Executive hereunder, to use Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of Executive’s responsibilities to the Company.

(b) Compensation .

(i) Base Salary . During the Employment Period, Executive shall receive an annual base salary (“ Annual Base Salary ”), which shall be paid at a monthly rate, at least equal to 12 times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to Executive by the Company and its affiliated companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “ affiliated companies ” shall include any company controlled by, controlling or under common control with the Company.

(ii) Annual Bonus . In addition to Annual Base Salary, Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus opportunity (the “ Annual Bonus ”) at least as favorable as that to which he would have been entitled under the annual bonus plan of the Company in effect for the last year prior to the Effective Date (annualized in the event that Executive was not employed by the Company for the whole of such fiscal year) (the “ Recent Annual Bonus ”). Each such Annual Bonus shall be paid in a single lump sum in cash at a time determined by the Company but in no event later than 2-½ months after the end of the fiscal year for which the Annual Bonus is awarded, unless Executive shall elect to defer the receipt of such Annual Bonus.

(iii) Incentive, Savings and Retirement Plans . During the Employment Period, Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies (“ Peer Executives ”).

(iv) Welfare Benefit Plans . During the Employment Period, Executive and/or Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under the welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription drug, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) (“ Welfare Plans ”) to the extent applicable generally to Peer Executives.

(v) Expenses . During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company and its affiliated companies to the extent applicable generally to Peer Executives.

(vi) Fringe Benefits . During the Employment Period, Executive shall be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company and its affiliated companies with respect to Peer Executives.

5. Separation from Service .

(a) Death, Retirement or Disability . Executive’s employment shall terminate automatically upon Executive’s death or Retirement (pursuant to the definition of Retirement set forth below) during the Employment Period. For purposes of this Agreement, “ Retirement ” shall mean Executive’s voluntary separation from service on or after the later of (i) 90 days after Executive has provided written notice to the Company’s corporate secretary of his decision to retire, or (ii) Executive’s attainment of age 60 (but shall not include Executive’s voluntary termination after he has been given notice that he may be terminated for Cause). If the Company determines in good faith that the Disability of Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice in accordance with Section 13(b) of this Agreement of its intention to terminate Executive’s employment. In such event, Executive shall separate from service with the Company effective on the 30 th day after receipt of such notice by Executive (the “ Disability Effective Date ”), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. For purposes of this Agreement, “ Disability ” shall mean mental or physical disability as determined by the Board in accordance with standards and procedures similar to those under the Company’s employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean any illness or other physical or mental condition of Executive that renders Executive incapable of performing his customary and usual duties for the Company, or any medically determinable illness or other physical or mental condition resulting from a bodily injury, disease or mental disorder which, in either case, has lasted or can reasonably be expected to last for at least 180 days out of a period of 365 consecutive days. The Board may require such medical or other evidence as it deems necessary to judge the nature and permanency of Executive’s condition.

(b) Cause . The Company may terminate Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “ Cause ” shall mean:

(i) the willful and continued failure of Executive to perform substantially Executive’s duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that Executive has not substantially performed Executive’s duties, or

(ii) the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

For purposes of the definition of Cause, no act or failure to act, on the part of Executive, shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the

Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. The cessation of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to Executive and Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.

(c) Good Reason . Executive’s employment may be terminated by Executive for Good Reason. For purposes of this Agreement, “ Good Reason ” shall mean:

(i) the assignment to Executive of any duties inconsistent in any material respect with Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive;

(ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive;

(iii) the failure by the Company (A) to continue in effect any compensation plan in which Executive participates as of the Effective Date that is material to Executive’s total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or (B) to continue Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Executive’s participation relative to Peer Executives;

(iv) the Company’s requiring Executive, without his consent, to be based at any office or location more than 35 miles from the office or location at which Executive was based on the date immediately prior to the Effective Date, or to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date;

(v) any purported termination by the Company of Executive’s employment otherwise than as expressly permitted by this Agreement; or

(vi) any failure by the Company to comply with and satisfy Section 12(c) of this Agreement.

Anything in this Agreement to the contrary notwithstanding, a termination by Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement.

(d) Notice of Termination . Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 13(b) of this Agreement. For purposes of this Agreement, a “ Notice of Termination ” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, and (iii) if the Date of Separation from Service (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). If a dispute exists concerning the provisions of this Agreement that apply to Executive’s termination of employment (other than a determination of “Cause” which shall be made as provided in Section 5(b)), the parties shall pursue the resolution of such dispute with reasonable diligence. Within 5 days of such a resolution, any party owing any payments pursuant to the provisions of this Agreement shall make all such payments together with interest accrued thereon at the rate provided in Section 1274(b)(2)(B) of the Code. The failure by either party to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of such party hereunder or preclude such party from asserting such fact or circumstance in enforcing such party’s rights hereunder.

(e) Date of Separation from Service . “ Date of Separation from Service ” means (i) if Executive’s employment is terminated for any reason other than death, Retirement or Disability, the date specified in the Notice of Termination, and (ii) if Executive’s employment is terminated by reason of death, Retirement or Disability, the Date of Separation from Service shall be the date of death or Retirement of Executive or the Disability Effective Date, as the case may be, provided in each such case, Executive’s termination of employment also constitutes a separation from service under Section 409A of the Code.

6. Obligations of the Company upon Separation from Service .

(a) Good Reason; Other Than for Cause, Death or Disability . If, during the Employment Period, the Company shall terminate Executive’s employment other than for Cause or Executive’s death or Disability or Executive shall separate from service for Good Reason, then in consideration for services rendered by Executive prior to the Date of Separation from Service:

(i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Separation from Service the aggregate of the following amounts:

(A) the sum of (1) Executive’s Annual Base Salary through the Date of Separation from Service to the extent not theretofore paid, and (2) any accrued vacation

pay to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the “ Accrued Obligations ”); and

(B) the amount equal to the present value of the continuation of Executive’s Base Salary for a period of 2.99 years after the Date of Separation from Service; such present value to be determined by applying a discount rate equal to 120 percent of the applicable federal rate provided in Section 1274(d) of the Code, compounded semi-annually (the “ Discount Rate ”); and

(C) the amount equal to the present value of 2.99 times the greater of (1) Executive’s annual bonus for the year prior to the year in which the Change in Control occurred (the “ Prior Year ”), or (2) Executive’s target annual bonus for the year in which the Change in Control occurred (the “ Current Year ”); such present value to be determined by applying the Discount Rate and assuming two equal annual payments on each of the first and second anniversaries of the Date of Separation from Service; and

(D) the amount equal to the present value of 2.99 times the annual cost to the Company and Executive of participation in the Welfare Plans described in Section 4(b)(iv) of this Agreement with respect to either the Prior Year or the Current Year, whichever year in which such annual cost was higher; such present value to be determined by applying the Discount Rate and assuming 36 monthly payments beginning on the Date of Separation from Service; and

(ii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the “ Other Benefits ”) at the time and in the manner provided in the documentation establishing or describing such Other Benefits.

(b) Death, Retirement or Disability . If Executive’s employment is terminated by reason of Executive’s death, Retirement or Disability during the Employment Period, this Agreement shall terminate without further obligations to Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Separation from Service. Other Benefits shall be paid at the time and in the manner provided in the documentation establishing or describing such Other Benefits. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include without limitation, and Executive’s estate and/or beneficiaries shall be entitled to receive, death, retirement or disability benefits then applicable to Executive.

Executive in a lump sum in cash within 30 days of the Date of Separation from Service. Other Benefits shall be paid at the time and in the manner provided in the documentation establishing or describing such Other Benefits.

(d) Special Rule for Specified Employees . Notwithstanding anything in this Agreement to the contrary, if Executive is a specified employee as of the Date of Separation from Service, then to the extent, and only to the extent, necessary to comply with Code Section 409A: (i) if any payment or distribution is payable hereunder in a lump sum, Executive’s right to receive payment or distribution will be delayed until the earlier of Executive’s death or the 7 th month following the Date of Separation from Service, and (ii) if any payment, distribution or benefit is payable or provided hereunder over time, the amount of such payment, distribution or benefit that would otherwise be payable or provided during the 6 month period immediately following the Date of Separation from Service will be accumulated, and Executive’s right to receive such accumulated payment, distribution or benefit will be delayed until the earlier of Executive’s death or the seventh month following the Date of Separation from Service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence. For purposes of this Agreement, Executive shall be a “ specified executive ” during the 12 month period beginning April 1 each year if the Executive met the requirements of Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the regulations thereunder and disregarding Section 416(i)(5) of the Code) at any time during the 12 month period ending on the December 31 immediately preceding the Date of Separation from Service.

7. Non-exclusivity of Rights . Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor, subject to Section 13(f), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Separation from Service shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.

8. Full Settlement; Cost of Enforcement . The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by Executive about the amount of any payment pursuant to this Agreement).

9. Certain Additional Payments by the Company .

(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a “ Payment ”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “ Excise Tax ”), then Executive shall be entitled to receive an additional payment (a “ Gross-Up Payment ”) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

(b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross- Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such other certified public accounting firm reasonably acceptable to the Company as may be designated by Executive (the “ Accounting Firm ”) which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company in a single lump sum in cash to Executive no later than the later of (i) the due date for the payment of the Excise Tax or (ii) 5 days after the receipt of the Accounting Firm’s delivery of the supporting calculations. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“ Underpayment ”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be paid by the Company to or for the benefit of Executive in a single lump sum in cash within 10 days of the Accounting Firm’s determination and disclosure to the Company of the Underpayment.

(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment (or an additional Gross-Up Payment). Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of

the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:

(i) give the Company any information reasonably requested by the Company relating to such claim,

(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

(iii) cooperate with the Company in good faith in order effectively to contest such claim, and

(iv) permit the Company to participate in any proceedings relating to such claim; provided , however , that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest (to the extent applicable to the Excise Tax and the Gross-Up Payment) and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 9(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company’s complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest

paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

10. Obligations of the Executive .

(a) Non-Competition . For the one (1) year period beginning on the Date of Separation from Service, the Executive shall not directly or indirectly engage in Competition (as defined below) with the Company; provided, that it shall not be a violation of this Section 10(a) for the Executive to become the registered or beneficial owner of up to 5% of any class of the capital stock of a competing corporation registered under the Securities Exchange Act of 1934, as amended, provided that the Executive does not actively participate in the business of such corporation until such time as this covenant expires. For purposes of this Agreement, “Competition” by the Executive shall mean the Executive’s engaging in, or otherwise directly or indirectly being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, agent, stockholder (other than as specifically provided for herein), member, owner or partner of, or permitting his name to be used in connection with the activities of any other business or organization that owns, operates, controls or maintains retail or warehouse hardware or home improvement stores in the United States, Puerto Rico, Canada or Mexico with total annual sales of at least $500 million. Such businesses or organizations include, but are not limited to, the following entities and each of their subsidiaries, affiliates, assigns, or successors in interest, in whole or in part: The Home Depot, Inc., Sears Holdings Corporation, Wal-Mart Stores, Inc. and Menard, Inc.

(b) Non-Interference . For the one (1) year period beginning on the Date of Separation from Service, the Executive shall not directly or indirectly (i) solicit or induce any officer, director, regional vice president, district manager, co-manager, store manager, regional human resource manager or regional loss prevention manager of the Company to terminate his or her employment with the Company or (ii) solicit, contact or attempt to influence any vendor or supplier of the Company to limit, curtail, cancel or terminate any business it transacts with the Company.

(c) Confidential Information . The Executive shall hold in a fiduciary capacity for the benefit of the Company all trade secrets, confidential information, and knowledge or data relating to the Company and its businesses, which were obtained by the Executive during the Executive’s employment by the Company. The Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such trade secrets, information, knowledge or data to anyone other than the Company and those designated by the Company.

11 . Enforcement . The Executive understands and agrees that any breach or threatened breach by the Executive of any of the provisions of Section 10 shall be considered a material breach of this Agreement, and in the event of such a breach or threatened breach, the

Company shall be entitled to pursue any and all of its remedies under law or in equity arising out of such breach. The Executive further agrees that in the event of his breach of any of the provisions of Section 10 , unless otherwise prohibited by law, ( i ) the Company shall be released from any obligation to make any payments or further payments to the Executive under Section 6 or Section 9 and no payments shall be due or payable to the Executive thereunder, and ( ii ) the Executive shall remit to the Company, upon demand by the Company, any payments previously paid by the Company to the Executive pursuant to Section 6 and Section 9 . The Executive further agrees that the remedies in the immediately preceding sentence will not preclude injunctive relief, and if the Company pursues either a temporary restraining order or temporary injunctive relief, then the Executive waives any requirement that the Company post a bond.

12. Successors .

(a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “ Company ” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

13. Miscellaneous .

(a) This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Executive:

At the Executive’s address of record on file with the Company

If to the Company:

Lowe’s Companies, Inc.

1000 Lowes Boulevard

Mooresville, North Carolina 28117

Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(e) Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder, including, without limitation, the right of Executive to terminate employment for Good Reason pursuant to Section 5(c) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

(f) Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between Executive and the Company, the employment of Executive by the Company is “at will” and, subject to Section 1(a) hereof, prior to the Effective Date, Executive’s employment and/or this Agreement may be terminated by either Executive or the Company at any time prior to the Effective Date, in which case Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.

IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

EXECUTIVE

_________________________________

LOWE’S COMPANIES, INC.

By: ________________________________

Name: ______________________________

Title: ______________________________

Exhibit 10.2

(Tier 2 Form of Agreement)

MANAGEMENT CONTINUITY AGREEMENT

NOW THEREFORE, in order to accomplish these objectives, the Company and Executive agree as follows:

1. Certain Definitions .

2. Change in Control . For the purposes of this Agreement, a “ Change in Control ” shall mean:

4. Terms of Employment .

(a) Position and Duties .

(b) Compensation .

5. Separation from Service .

(a) Death, Retirement or Disability . Executive’s employment shall terminate automatically upon Executive’s death or Retirement (pursuant to the definition of Retirement set forth below) during the Employment Period. For purposes of this Agreement, “ Retirement ” shall mean Executive’s voluntary separation from service on or after the later of (i) 90 days after Executive has provided written notice to the Company’s corporate secretary of his decision to retire, or (ii) Executive’s attainment of age 60 (but shall not include Executive’s voluntary termination after he has been given notice that he may be terminated for Cause). If the Company determines in good faith that the Disability of Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate Executive’s employment. In such event, Executive shall separate from service with the Company effective on the 30 th day after receipt of such notice by Executive (the “ Disability Effective Date ”), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. For purposes of this Agreement, “ Disability ” shall mean mental or physical disability as determined by the Board in accordance with standards and procedures similar to those under the Company’s employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean any illness or other physical or mental condition of Executive that renders Executive incapable of performing his customary and usual duties for the Company, or any medically determinable illness or other physical or mental condition resulting from a bodily injury, disease or mental disorder which, in either case, has lasted or can reasonably be expected to last for at least 180 days out of a period of 365 consecutive days. The Board may require such medical or other evidence as it deems necessary to judge the nature and permanency of Executive’s condition.

(b) Cause . The Company may terminate Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “ Cause ” shall mean:

(ii) the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

(c) Good Reason . Executive’s employment may be terminated by Executive for Good Reason. For purposes of this Agreement, “ Good Reason ” shall mean:

(v) any purported termination by the Company of Executive’s employment otherwise than as expressly permitted by this Agreement; or

(vi) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.

(d) Notice of Termination . Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a “ Notice of Termination ” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, and (iii) if the Date of Separation from Service (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). If a dispute exists concerning the provisions of this Agreement that apply to Executive’s termination of employment (other than a determination of “Cause” which shall be made as provided in Section 5(b)), the parties shall pursue the resolution of such dispute with reasonable diligence. Within 5 days of such a resolution, any party owing any payments pursuant to the provisions of this Agreement shall make all such payments together with interest accrued thereon at the rate provided in Section 1274(b)(2)(B) of the Code. The failure by either party to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of such party hereunder or preclude such party from asserting such fact or circumstance in enforcing such party’s rights hereunder.

6. Obligations of the Company upon Separation from Service .

(i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Separation from Service the aggregate of the following amounts:

(A) the sum of (1) Executive’s Annual Base Salary through the Date of Separation from Service to the extent not theretofore paid, and (2) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the “ Accrued Obligations ”); and

(B) the amount equal to the present value of the continuation of Executive’s Base Salary for a period of two (2) years after the Date of Separation from Service; such present value to be determined by applying a discount rate equal to 120 percent of the

applicable federal rate provided in Section 1274(d) of the Code, compounded semi-annually (the “ Discount Rate ”); and

(C) the amount equal to the present value of two (2) times the greater of (1) Executive’s annual bonus for the year prior to the year in which the Change in Control occurred (the “ Prior Year ”), or (2) Executive’s target annual bonus for the year in which the Change in Control occurred (the “ Current Year ”); such present value to be determined by applying the Discount Rate and assuming two equal annual payments on each of the first and second anniversaries of the Date of Separation from Service; and

(D) the amount equal to the present value of two (2) times the annual cost to the Company and Executive of participation in the Welfare Plans described in Section 4(b)(iv) of this Agreement with respect to either the Prior Year or the Current Year, whichever year in which such annual cost was higher; such present value to be determined by applying the Discount Rate and assuming 24 monthly payments beginning on the Date of Separation from Service; and

(c) Cause; Other than for Good Reason . If Executive’s employment shall be terminated for Cause, or if Executive voluntarily separates from service during the Employment Period, excluding a separation from service for Good Reason, this Agreement shall terminate without further obligations to Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to Executive in a lump sum in cash within 30 days of the Date of Separation from Service. Other Benefits shall be paid at the time and in the manner provided in the documentation establishing or describing such Other Benefits.

(d) Special Rule for Specified Employees . Notwithstanding anything in this Agreement to the contrary, if Executive is a specified employee as of the Date of Separation

from Service, then to the extent, and only to the extent, necessary to comply with Code Section 409A: (i) if any payment or distribution is payable hereunder in a lump sum, Executive’s right to receive payment or distribution will be delayed until the earlier of Executive’s death or the 7 th month following the Date of Separation from Service, and (ii) if any payment, distribution or benefit is payable or provided hereunder over time, the amount of such payment, distribution or benefit that would otherwise be payable or provided during the 6 month period immediately following the Date of Separation from Service will be accumulated, and Executive’s right to receive such accumulated payment, distribution or benefit will be delayed until the earlier of Executive’s death or the seventh month following the Date of Separation from Service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence. For purposes of this Agreement, Executive shall be a “ specified executive ” during the 12 month period beginning April 1 each year if the Executive met the requirements of Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the regulations thereunder and disregarding Section 416(i)(5) of the Code) at any time during the 12 month period ending on the December 31 immediately preceding the Date of Separation from Service.

7. Non-exclusivity of Rights . Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Separation from Service shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.

9. Obligations of the Executive .

capital stock of a competing corporation registered under the Securities Exchange Act of 1934, as amended, provided that the Executive does not actively participate in the business of such corporation until such time as this covenant expires. For purposes of this Agreement, “Competition” by the Executive shall mean the Executive’s engaging in, or otherwise directly or indirectly being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, agent, stockholder (other than as specifically provided for herein), member, owner or partner of, or permitting his name to be used in connection with the activities of any other business or organization that owns, operates, controls or maintains retail or warehouse hardware or home improvement stores in the United States, Puerto Rico, Canada or Mexico with total annual sales of at least $500 million. Such businesses or organizations include, but are not limited to, the following entities and each of their subsidiaries, affiliates, assigns, or successors in interest, in whole or in part: The Home Depot, Inc., Sears Holdings Corporation, Wal-Mart Stores, Inc. and Menard, Inc.

10 . Enforcement . The Executive understands and agrees that any breach or threatened breach by the Executive of any of the provisions of Section 9 shall be considered a material breach of this Agreement, and in the event of such a breach or threatened breach, the Company shall be entitled to pursue any and all of its remedies under law or in equity arising out of such breach. The Executive further agrees that in the event of his breach of any of the provisions of Section 9, unless otherwise prohibited by law, ( i ) the Company shall be released from any obligation to make any payments or further payments to the Executive under Section 6 and no payments shall be due or payable to the Executive thereunder, and ( ii ) the Executive shall remit to the Company, upon demand by the Company, any payments previously paid by the Company to the Executive pursuant to Section 6. The Executive further agrees that the remedies in the immediately preceding sentence will not preclude injunctive relief, and if the Company pursues either a temporary restraining order or temporary injunctive relief, then the Executive waives any requirement that the Company post a bond.

11. Successors .

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

12. Miscellaneous .

If to Executive:

At the Executive’s address of record on file with the Company

If to the Company:

Lowe’s Companies, Inc.

1000 Lowes Boulevard

Mooresville, North Carolina 28117

Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

EXECUTIVE

_______________________________

LOWE’S COMPANIES, INC.

By: _____________________________

Name: ___________________________

Title: ___________________________

Exhibit 12.1

Lowe’s Companies, Inc.

Statement Re Computation of Ratio of Earnings to Fixed Charges

In Millions, Except Ratio Data

	Fiscal Years Ended On										Six Months Ended
	January 30,		January 28,		February 3,		February 2,		February 1,		August 3,		August 1,
	2004		2005		2006		2007		2008		2007		2008
Earnings:
Earnings Before Income Taxes	$	2,908	$	3,520	$	4,496	$	4,998	$	4,511	$	2,828	$	2,470
Add: Fixed Charges		303		310		340		344		424		192		245
Less: Capitalized Interest		(26)		(28)		(28)		(32)		(65)		(8)		(15)
Adjusted Earnings	$	3,185	$	3,802	$	4,808	$	5,310	$	4,870	$	3,012	$	2,700

Fixed Charges:
Interest Expense (1)	$	224	$	220	$	231	$	238	$	301	$	133	$	178
Rental Expense (2)		79		90		109		106		123		59		67
Total Fixed Charges	$	303	$	310	$	340	$	344	$	424	$	192	$	245


Ratio of Earnings to Fixed Charges		10.5		12.3		14.1		15.4		11.5		15.7		11.0

(1) Interest accrued on uncertain tax positions is excluded from Interest Expense in the computation of Fixed Charges.

(2) The portion of rental expense that is representative of the interest factor in these rentals.

Exhibit 15.1

September 3, 2008

Lowe’s Companies, Inc.

Mooresville, North Carolina

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited consolidated interim financial information of Lowe’s Companies, Inc. and subsidiaries for the fiscal periods ended August 1, 2008 and August 3, 2007, as indicated in our report dated September 3, 2008 ; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended August 1, 2008, is incorporated by reference in the following Registration Statements:

• Registration Statement No. 33-54497 on Form S-8,

• Registration Statement No. 33-54499 on Form S-8,

• Registration Statement No. 333-34631 on Form S-8,

• Registration Statement No. 333-75793 on Form S-8,

• Registration Statement No. 333-89471 on Form S-8,

• Registration Statement No. 333-36096 on Form S-8,

• Registration Statement No. 333-73408 on Form S-8,

• Registration Statement No. 333-97811 on Form S-8,

• Registration Statement No. 333-33230 on Form S-3/A,

• Registration Statement No. 333-114435 on Form S-8,

• Registration Statement No. 333-137750 on Form S-3ASR,

• Registration Statement No. 333-138031 on Form S-8, and

• Registration Statement No. 333-143266 on Form S-8.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statements prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ DELOITTE & TOUCHE LLP

Charlotte, North Carolina

Exhibit 31.1

CERTIFICATION

I, Robert A. Niblock, certify that:

(1) I have reviewed this Quarterly Report on Form 10-Q for the quarter ended August 1, 2008 of Lowe's Companies, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

September 3, 2008		/s/ Robert A. Niblock
Date		Robert A. Niblock Chairman of the Board and Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Robert F. Hull, Jr., certify that:

(1) I have reviewed this Quarterly Report on Form 10-Q for the quarter ended August 1, 2008 of Lowe's Companies, Inc.;

(a)

(b)

(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

September 3, 2008		/s/ Robert F. Hull, Jr.
Date		Robert F. Hull, Jr., Executive Vice President and Chief Financial Officer

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Lowe's Companies, Inc. (the "Company") for the period ended August 1, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert A. Niblock, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert A. Niblock

Name: Robert A. Niblock

Title: Chairman of the Board and Chief Executive Officer

Date: September 3, 2008

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Lowe's Companies, Inc. (the "Company") for the period ended August 1, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert F. Hull, Jr., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert F. Hull, Jr .

Name: Robert F. Hull, Jr.

Title: Executive Vice President and Chief Financial Officer

Date: September 3, 2008