<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BJ's Wholesale Club, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
[BJ'S LOGO APPEARS HERE]
ONE MERCER ROAD
NATICK, MASSACHUSETTS 01760
April 24, 1998
Dear Stockholder:
We invite you to attend our 1998 Annual Meeting of Stockholders on Thursday,
May 28, 1998, at 11:00 a.m. at BankBoston, 100 Federal Street, Boston,
Massachusetts. At this meeting, you are being asked to elect three directors.
We hope that you will join us on May 28th and would like to take this
opportunity to remind you that your vote is important.
Sincerely,
/s/ John J. Nugent /s/ Herbert J. Zarkin
John J. Nugent Herbert J. Zarkin
President and Chief Executive Officer Chairman of the Board
<PAGE>
BJ'S WHOLESALE CLUB, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
----------------
The Annual Meeting of Stockholders of BJ's Wholesale Club, Inc. will be held
at BankBoston, 100 Federal Street, Boston, Massachusetts, on Thursday, May 28,
1998 at 11:00 a.m. to:
. Elect three directors to serve until the 2001 Annual Meeting of
Stockholders; and
. Transact other business properly brought before the meeting.
Stockholders of record at the close of business on April 8, 1998 may vote at
the meeting. A list of stockholders entitled to vote at the meeting will be
open to examination by stockholders during normal business hours for the ten
days before the meeting at the offices of Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts.
By Order of the Board of Directors
SARAH M. GALLIVAN
Secretary
Natick, Massachusetts
April 24, 1998
PLEASE SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. IF YOU ARE
PRESENT AT THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE>
BJ'S WHOLESALE CLUB, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
PROXY STATEMENT
----------------
We sent you this proxy statement and the enclosed proxy card because the
Board of Directors of BJ's Wholesale Club, Inc. ("BJ's" or the "Company") is
soliciting your proxy to vote your shares at the Annual Meeting. Unless you
give different instructions, shares represented by properly executed proxies
will be voted for the election of the three nominees set forth below. You may
revoke your proxy before it is exercised by sending a written revocation to
the Secretary of BJ's at the address below, by a later dated proxy or by a
request at the meeting that the proxy be revoked.
Stockholders of record at the close of business on April 8, 1998 are
entitled to vote at the meeting. Each share of BJ's common stock, par value
$.01 ("Common Stock"), outstanding on the record date is entitled to one vote.
As of the close of business on April 8, 1998, there were outstanding and
entitled to vote 37,643,962 shares of Common Stock.
This Proxy Statement, the enclosed proxy card and the Annual Report of the
Company for the fiscal year ended January 31, 1998 were first mailed to
stockholders on or about April 24, 1998.
Fiscal year references apply to the Company's fiscal year which ends on the
last Saturday in January of the following year. For example, the fiscal year
ended January 31, 1998 is referred to as 1997 or fiscal 1997. The Company's
address is One Mercer Road, Natick, Massachusetts 01760.
VOTE REQUIRED
Under the Company's by-laws, so long as a quorum is present at the meeting,
the election of directors requires a plurality of votes cast at the meeting.
This means that the three nominees for director with the most votes will be
elected whether or not such nominees receive a majority of the votes cast.
Although proxies which withhold authority to vote for all of the nominees and
broker non-votes (i.e., shares held by brokers or nominees which are not voted
because instructions have not been received from the beneficial owners and the
broker or nominee does not have discretionary authority) are counted as
present for quorum purposes, these shares are not counted for, and have no
effect on the outcome of, the election of directors.
ELECTION OF DIRECTORS
The Board of Directors voted to fix the number of directors at eight. BJ's
Amended and Restated Certificate of Incorporation and by-laws provide for the
classification of the Board of Directors into three classes, as nearly equal
in number as possible, with the term of office of one class expiring each
year. Your proxy will be voted to re-elect the three nominees named below,
unless otherwise instructed, as directors for a term of three years expiring
at the 2001 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified. All of the nominees have indicated
their willingness to serve, if elected. If a nominee becomes unavailable, your
proxy will be voted either for another nominee proposed by the Board of
Directors or a lesser number of directors as proposed by the Board of
Directors. The nominees for re-election as directors and incumbent directors
are as follows:
<PAGE>
NOMINEES FOR RE-ELECTION AS DIRECTORS--TERMS EXPIRING 2001
S. JAMES COPPERSMITH, 65, has been a director of the Company since July
1997. He was a director of Waban Inc. ("Waban") from December 1993 to July
1997. He was President and General Manager of WCVB-TV, a Boston television
station, from 1990 to 1994. From 1982 to 1990 he was Vice President and
General Manager of WCVB-TV. Mr. Coppersmith is also a director of Kushner-
Locke Company, Metro Services Group, Inc., Sun America Asset Management
Corporation and Uno Restaurant Corporation and a member of the Board of
Governors of the Boston Stock Exchange. Mr. Coppersmith is a member of the
Executive Compensation Committee.
THOMAS J. SHIELDS, 51, has been a director of the Company since July 1997.
He was a director of Waban from June 1992 to July 1997. He is President of
Shields & Company, Inc., an investment banking firm. Mr. Shields is also a
director of Seaboard Corporation and Versar, Inc. Mr. Shields is Chairman of
the Audit Committee and a member of the Executive Compensation Committee, the
Executive Committee and the Finance Committee.
HERBERT J. ZARKIN, 59, has been a director of the Company since November
1996 and Chairman of the Board of Directors of the Company since July 1997. He
was a director, President and Chief Executive Officer of Waban from May 1993
to July 1997 and Executive Vice President of Waban from April 1989 to May
1993. He was President of Waban's BJ's Wholesale Club division (the "BJ's
Division") from May 1990 to May 1993. Mr. Zarkin is also Chairman of the Board
of Directors of HomeBase, Inc., formerly known as Waban, ("Homebase"). Mr.
Zarkin is Chairman of the Executive Committee and a member of the Finance
Committee.
INCUMBENT DIRECTORS--TERMS EXPIRING 2000
JOHN J. NUGENT, 51, has been a director of the Company since July 1996. He
was Executive Vice President of Waban and President of the BJ's Division from
September 1993 to July 1997. From 1991 until 1993 he was Senior Vice
President, Sales Operations of the BJ's Division. Mr. Nugent is a member of
the Executive Committee and the Finance Committee.
KERRY L. HAMILTON, 47, has been a director of the Company since July 1997.
She was a director of Waban from September 1994 to July 1997. Ms. Hamilton is
Vice President, Marketing for Marshalls, a division of The TJX Companies, Inc.
Prior to joining Marshalls in April 1996, Ms. Hamilton was Vice Chairman of
Pamet River Partners, a marketing consulting firm, for two years. Prior to
joining Pamet River Partners, Ms. Hamilton spent 17 years at Ingalls, Quinn &
Johnson in various capacities. Ms. Hamilton is a member of the Audit
Committee.
INCUMBENT DIRECTORS--TERMS EXPIRING 1999
ALLYN L. LEVY, 70, has been a director of the Company since July 1997. He
was a director of Waban from October 1993 to July 1997. He has been a private
investor since 1988. From 1974 until 1986, he was founder, Chairman of the
Board and Chief Executive Officer of Patriot Bank Corporation, a commercial
bank holding company. Mr. Levy is also a director of CV Reit, Inc. Mr. Levy is
a member of the Audit Committee.
LORNE R. WAXLAX, 64, has been a director of the Company since July 1997. He
was a director of Waban from January 1990 to July 1997 and Chairman of the
Board of Directors of Waban from June 1996 to July 1997. He was an Executive
Vice President of The Gillette Company from 1985 to 1993. Mr. Waxlax is also a
director of HomeBase, Quaker State Corporation, The Iams Company, Hon
Industries, Inc. and Clean Harbors, Inc. Mr. Waxlax is Chairman of the
Executive Compensation Committee and a member of the Executive Committee.
EDWARD J. WEISBERGER, 56, has been a director of the Company since November
1996 and Senior Vice President of the Company since July 1997. He was Senior
Vice President and Chief Financial Officer of Waban from September 1994 to
July 1997. From April 1989 until September 1994 he was Vice President-Finance
of Waban. Mr. Weisberger is also a director of HomeBase. Mr. Weisberger is
Chairman of the Finance Committee.
2
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Audit Committee, which held one meeting during 1997, reviews with
management, the internal audit group and the independent accountants the
Company's financial statements, the accounting principles applied in their
preparation, the scope of the audit, any comments made by the independent
accountants upon the financial condition of the Company and its accounting
controls and procedures, and such other matters as the Committee deems
appropriate. The Audit Committee also reviews with management such matters
relating to compliance with corporate policies as the Committee deems
appropriate.
The Executive Compensation Committee, which held two meetings during 1997,
reviews salary policies and compensation of officers and other members of
management and approves compensation plans and compensation of certain
officers and other members of management. The Committee administers certain of
the Company's incentive plans, including its stock incentive plan.
The Board of Directors also has an Executive Committee, which has authority
to act for the Board on most matters during the intervals between meetings of
the Board, and is responsible for considering the qualifications of, and
recommending to the Board of Directors, nominees to fill Board vacancies. This
committee will consider nominees recommended by stockholders if such
recommendations are in writing and timely filed with the Secretary of the
Company in accordance with the Company's by-laws. This Committee did not meet
during 1997.
In addition, the Board of Directors has a Finance Committee, which did not
meet during 1997. This Committee reviews with management and advises the Board
with respect to the Company's finances, including exploring methods of meeting
the Company's financing requirements and planning the Company's capital
structure.
During 1997 the Board of Directors held three meetings and took action by
written consent once. In addition, prior to the spin-off of BJ's from Waban in
July 1997 (the "Distribution"), the Company's Board of Directors acted by
written consent on several occasions. Each director attended all of the
meetings of the Board and Committees of which he or she is a member.
COMPENSATION OF DIRECTORS
Directors other than Messrs. Nugent, Weisberger and Zarkin are paid an
annual retainer of $30,000 and fees of $1,250 for each Board meeting attended,
$750 for each Committee meeting attended and $750 for certain telephone
meetings. In addition, the Chairman of the Audit Committee and the Chairman of
the Executive Compensation Committee are each paid $2,500 per annum for their
services as such. All directors are reimbursed for their expenses related to
attendance at meetings. Directors may participate in the Company's General
Deferred Compensation Plan.
Under the 1997 Director Stock Option Plan (the "Director Plan"), on the date
of each annual meeting, each continuing non-employee director is granted an
option to acquire 1,500 shares of Common Stock, and each non-employee director
newly elected or elected subsequent to the then most recent annual meeting is
granted an option to purchase 3,000 shares of Common Stock. The option
exercise price for each of these options is the fair market value of a share
of Common Stock on the date of grant. Each option will expire ten years after
the date of grant and will become exercisable in three equal annual
installments beginning on the first day of the month which includes the first
anniversary of the date of grant. If the director dies or otherwise ceases to
be a director prior to the date the option becomes exercisable, the option
will immediately expire. Any vested options will remain exercisable for a
period of one year following cessation of service as a director of the
Company. All unexercised options will become exercisable in full beginning 20
days prior to the consummation of a merger or consolidation, acquisition,
reorganization or liquidation and, to the extent not exercised, shall
terminate immediately after the consummation of such merger, consolidation,
acquisition, reorganization or liquidation. Except as the Board may otherwise
determine, options granted under the Director Plan are not transferable.
In connection with the Distribution, non-employee directors who had Waban
stock options were granted replacement stock options under the Director Plan
which preserved the same inherent value, vesting terms and expiration dates as
the Waban options they replaced.
3
<PAGE>
The Company has an employment agreement with Mr. Weisberger under which he
receives an annual base salary of $150,000 and participates in specified
incentive and other benefit plans. Mr. Weisberger must generally devote
approximately one-half of his working time and attention to the performance of
his duties and responsibilities under his employment agreement. If employment
is terminated by the Company other than for cause, Mr. Weisberger is entitled
to payment of certain cash compensation amounts and to certain benefits and
continuation of base salary for 12 months after termination (but not beyond
July 29, 2000) at the rate in effect upon termination. The continuing base
salary payments are subject to reduction after three months for compensation
earned by Mr. Weisberger from other employment (other than employment at
HomeBase), and the continuing benefits are subject to reduction at any time
for comparable benefits received by Mr. Weisberger from other employment. In
the event of a change of control followed by termination of employment as
described below under "Change of Control Severance Benefits," Mr. Weisberger
would be entitled to the termination benefits described thereunder, to the
extent such benefits would exceed the benefits otherwise described above.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 1, 1998 (unless otherwise indicated)
by (i) each person known to the Company to beneficially own more than 5% of
the outstanding shares of Common Stock, (ii) each director of the Company,
(iii) each executive officer of the Company named in the Summary Compensation
Table set forth on page 10, and (iv) all the Company's current directors and
executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OUTSTANDING
NAME SHARES(1) COMMON STOCK(1)
---- --------- ---------------
<S> <C> <C>
The Prudential Insurance Company of America. 4,053,640(2) 10.8%
751 Broad Street
Newark, New Jersey 07102
Boston Partners Asset Management, L.P. ..... 2,754,511(3) 7.3%
One Financial Center
Boston, MA 02111
Wellington Management Company, LLP. ........ 2,704,200(4) 7.2%
75 State Street
Boston, MA 02109
Franklin Resources, Inc. ................... 2,146,700(5) 5.7%
777 Mariners Island Blvd.
P. O. Box 7777
San Mateo, CA 94404
S. James Coppersmith........................ 5,027 *
Kerry L. Hamilton........................... 3,227 *
Allyn L. Levy............................... 8,027 *
Thomas J. Shields........................... 3,527 *
Lorne R. Waxlax............................. 9,500 *
Edward J. Weisberger........................ 127,887 *
Herbert J. Zarkin........................... 477,322 1.3%
John J. Nugent.............................. 213,068 *
Frank D. Forward............................ 39,496 *
Laura J. Sen................................ 35,512 *
Michael T. Wedge............................ 38,276 *
All current directors and executive officers
as a group
(12 persons)............................... 989,524 2.6%
</TABLE>
- - --------
*Less than 1%.
(1) Includes, for the persons indicated, the following shares of Common Stock
that may be acquired upon exercise of outstanding stock options which were
exercisable on March 1, 1998 or within 60 days thereafter: Mr.
Coppersmith, 3,027 shares; Ms. Hamilton, 3,027 shares; Mr. Levy, 3,027
shares; Mr. Shields, 3,027 shares; Mr. Waxlax, 2,500 shares; Mr.
Weisberger, 112,170 shares; Mr. Zarkin, 414,650 shares; Mr. Nugent,
202,268 shares; Ms. Sen, 28,464 shares; Mr. Wedge, 37,244 shares; Mr.
Forward, 29,672 shares; all directors and executive officers as a group,
862,693 shares.
4
<PAGE>
(2) Information is as of December 31, 1997 and is based on a Schedule 13G
filed with the Securities and Exchange Commission ("SEC") by The
Prudential Insurance Company of America ("Prudential"). Prudential
reported that it has sole voting and dispositive power with respect to
815,200 shares and shared voting and dispositive power with respect to
3,238,440 shares.
(3) Information is as of December 31, 1997 and is based on a Schedule 13G
filed with the SEC by Boston Partners Asset Management, L.P. ("Boston
Partners"). Boston Partners reported that it has shared voting and
dispositive power with respect to all 2,754,511 shares.
(4) Information is as of December 31, 1997 and is based on a Schedule 13G
filed with the SEC by Wellington Management Company, LLP. ("Wellington").
Wellington reported that it has shared voting power with respect to 400
shares and has shared dispositive power with respect to 2,704,200 shares.
Separately, a Schedule 13G was filed with the SEC by Vanguard/Windsor
Funds, Inc.--Windsor Fund ("Vanguard"), a client of Wellington. Vanguard
reported that it has sole voting power and shared dispositive power with
respect to 2,703,800 shares.
(5) Information is as of December 31, 1997 and is based on a Schedule 13G
filed with the SEC by Franklin Resources, Inc. ("Franklin Resources").
Franklin Resources reported that Franklin Mutual Advisors, Inc., a
subsidiary of Franklin Resources, has sole voting and dispositive power
with respect to 1,986,700 shares and Templeton Investment Counsel, Inc., a
subsidiary of Franklin Resources, has sole voting and dispositive power
with respect to 160,000 shares.
RELATIONSHIP WITH HOMEBASE; CONFLICTS OF INTEREST
In connection with the Distribution, BJ's and HomeBase entered into a series
of agreements, as described below. Although the following summaries of these
agreements set forth an accurate description of their material terms and
provisions, such summaries are qualified in their entirety by reference to the
detailed provisions of the agreements, each of which has previously been filed
with the SEC.
DISTRIBUTION AGREEMENT
BJ's and HomeBase entered into a Separation and Distribution Agreement (the
"Distribution Agreement"), which provided for, among other things, (i) the
principal corporate transactions required to effect the Distribution, (ii) the
division between BJ's and HomeBase of certain assets and liabilities, and
(iii) the execution and delivery of the Services Agreement, the Employee
Benefits Agreement and the Tax Sharing Agreement, each of which, as described
below, governs certain aspects of the relationship between BJ's and HomeBase.
The Distribution Agreement provided for, among other things, (i) the
transfer by HomeBase to BJ's, prior to the Distribution, of all of the assets
of the BJ's Division, including the stock of subsidiaries which held assets of
the BJ's Division, and the assets associated with the corporate headquarters
in Massachusetts, (ii) BJ's assumption of the leases and other liabilities of
the BJ's Division and 75% of the amount of all bank indebtedness of Waban
existing as of the date of the Distribution, and (iii) the issuance by BJ's to
HomeBase of the common stock of BJ's distributed in the Distribution.
Under the Distribution Agreement, except as provided in the Employee
Benefits Agreement or the Tax Sharing Agreement, BJ's agreed to indemnify
HomeBase for liabilities relating to BJ's business. Similarly, HomeBase agreed
to indemnify BJ's for liabilities pertaining to HomeBase's business. The
Distribution Agreement also requires BJ's and HomeBase to indemnify each other
for losses incurred due to a failure to perform their respective obligations
under the Distribution Agreement or any other agreement entered into in
connection with the Distribution. In addition, the Distribution Agreement
provides that HomeBase will provide liability insurance for a period of six
years following the Distribution to each individual who served as a director
or officer of Waban prior to the Distribution. BJ's also agreed to indemnify,
defend and hold harmless each such individual from any losses and liabilities
incurred in connection with the approval of the Distribution Agreement.
5
<PAGE>
The Distribution Agreement also contains provisions regarding the settlement
of intercompany accounts, certain matters relating to lease liabilities
described below, access, retention and sharing of information and records,
procedures relating to indemnification claims, the transfer of insurance
coverage and confidentiality.
LEASES
Pursuant to the Distribution Agreement, effective upon the Distribution,
BJ's assumed all liabilities to third-party lessors with respect to leases
entered into by Waban, with respect to the BJ's Division. While HomeBase will
continue to be liable, by law, with respect to such lease liabilities, BJ's
has agreed to indemnify HomeBase for such liabilities.
In connection with the spin-off of Waban Inc. by The TJX Companies, Inc.
("TJX") in 1989, Waban and TJX entered into an agreement (the "1989
Agreement") pursuant to which Waban agreed to indemnify TJX against any
liabilities that TJX might incur with respect to 44 current HomeBase real
estate leases as to which TJX was either a lessee or guarantor. In connection
with the Distribution, BJ's agreed that through January 31, 2003 it will
indemnify TJX with respect to any liabilities (as defined in the 1989
Agreement) that TJX may incur with respect to HomeBase leases and thereafter
it will indemnify TJX for 50% of such liabilities. In addition, HomeBase
agreed that it will not renew any lease identified in the 1989 Agreement as to
which TJX is a lessee or guarantor unless TJX is removed as lessee or
guarantor.
The Distribution Agreement contains restrictions on the renewal of HomeBase
leases similar to those agreed to by HomeBase and TJX. In addition, BJ's may
not renew any of its real estate leases (other than ground leases) for which
HomeBase may be liable during any period during which BJ's does not meet
certain minimal standards of creditworthiness.
SERVICES AGREEMENT
BJ's and HomeBase entered into a Services Agreement (the "Services
Agreement") pursuant to which BJ's provides for a fee certain tax
administration services with respect to HomeBase's tax year ended January 31,
1998. In addition, to the extent requested by HomeBase, BJ's agreed to provide
risk management, legal, investor relations and treasury services to HomeBase
for a period of up to twelve months following the Distribution. The Services
Agreement provides that BJ's will provide such requested services on an hourly
billing basis at 2.5 times the providing employee's hourly rate. BJ's and
HomeBase believe that such rates are as favorable as could have been obtained
from disinterested third parties. If a dispute arises between the parties
under the Services Agreement that cannot be resolved, it will be submitted to
arbitration.
EMPLOYEE BENEFITS AGREEMENT
BJ's and HomeBase entered into an Employee Benefits Agreement (the "Employee
Benefits Agreement") which contains a number of provisions pertaining to
employee benefit plan matters. Pursuant to the Employee Benefits Agreement,
BJ's set up employee benefit plans substantially similar to the employee
benefit plans maintained by Waban and assumed or retained under the applicable
BJ's plan with respect to each BJ's employee or former employee of the BJ's
Division all liabilities under the corresponding Waban plan accrued for the
period ended July 26, 1997 (or the date of the former employee's termination
of employment). In addition, the Employee Benefits Agreement provides that the
Waban Inc. Retirement Plan (the "Waban Retirement Plan") will be terminated
and, in connection with such termination, BJ's will pay to HomeBase 75% of any
amount contributed or to be contributed by HomeBase to the Waban Retirement
Plan in order for the Waban Retirement Plan to pay all accrued benefits.
The Employee Benefits Agreement provides for appropriate asset transfers
(and corresponding credit for service with Waban prior to the Distribution)
from Waban's 401(k) Savings Plans and Executive Retirement Plan in respect of
persons who became BJ's employees. In addition, the Employee Benefits
Agreement contains provisions for the issuance of replacement stock options
and restricted stock by BJ's to persons who became BJ's employees on the date
of the Distribution, subject to such persons' surrender of their corresponding
Waban awards.
6
<PAGE>
TAX SHARING AGREEMENT
BJ's and HomeBase entered into a Tax Sharing Agreement (the "Tax Sharing
Agreement") providing for the allocation between the parties of federal,
state, local and foreign tax liabilities, and the entitlement to tax refunds,
for periods ending on or prior to the date of the Distribution, and various
related matters. Each party has agreed to indemnify the other in specified
circumstances if certain events cause the Distribution or related transactions
to become taxable.
PROCEDURES FOR ADDRESSING CONFLICTS
As a result of the Distribution, BJ's and HomeBase have significant
contractual and other ongoing relationships that may present certain conflict
situations for Mr. Zarkin, who serves as Chairman of the Board of Directors of
both companies, and for Messrs. Waxlax and Weisberger, who serve as directors
of both companies. Each of these persons also owns (or has options or other
rights to acquire) a significant number of shares of common stock in both
companies. BJ's has adopted procedures to be followed by its Board of
Directors to limit the involvement of such persons in conflict situations
whereby all transactions being considered by BJ's which relate to HomeBase
must (i) be approved by a majority of the Board of Directors and by a majority
of the disinterested members of the Board of Directors and (ii) be on terms no
less favorable to BJ's than could be obtained from unaffiliated third parties.
TAX-FREE SPIN-OFF
Prior to the Distribution, Waban received a letter ruling from the Internal
Revenue Service ("IRS") to the effect that, for Federal income tax purposes,
the Distribution would qualify as a spin-off under Section 355 of the IRS Code
and would be tax free to Waban and the holders of its common stock at the time
of the Distribution. Certain future events not within the control of BJ's,
including, for example, an IRS challenge to the Distribution in the event that
BJ's or HomeBase is acquired before the end of fiscal 1999, could cause the
Distribution not to qualify for tax-free treatment.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT
The following report has been submitted to the Board of Directors by its
Executive Compensation Committee, in compliance with requirements of the SEC:
As members of the Executive Compensation Committee (the "ECC"), it is our
responsibility to review the Company's compensation policies and programs,
approve, or, with respect to the Chief Executive Officer, recommend to the
Board of Directors for approval, incentive plan awards and all elements of
compensation for the Company's executive officers, and administer the
Company's stock incentive plans. All of the members of the ECC are
independent, non-employee directors.
EXECUTIVE COMPENSATION PRINCIPLES
The Company's executive compensation program is designed to provide
competitive levels of compensation that:
. Integrate compensation with the achievement of the Company's annual and
long-term performance goals and business strategies
. Link management's long-term interests with stockholders' interests
through stock-based awards
. Recognize management initiatives and achievements
. Reward outstanding corporate performance
. Attract and retain key executives critical to the long-term success of
the Company
7
<PAGE>
With respect to Section 162(m) of the Internal Revenue Code of 1986, as
amended, which limits the ability of publicly held corporations to deduct non-
performance-based compensation for certain executive officers, the ECC
believes that the Company's compensation plans should be structured to satisfy
the requirements for tax deductibility, unless doing so is determined by the
ECC to be not in the best interests of the Company.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The total compensation program for all executive officers, including
executive officers named in the Summary Compensation Table, consists of both
cash and equity-based compensation and takes into account applicable
provisions of employment agreements of such officers. Through stock options
and stock grants available under the Company's stock incentive plan, the ECC
seeks to align executive officers' long-range interests with those of
stockholders by providing executive officers with the opportunity to
participate in the growth of the Company's stock value.
The ECC is advised by Frederic W. Cook & Co., Inc. ("Cook"), compensation
consultants, concerning salary competitiveness and the design of the Company's
compensation programs. Cook provides services to the Company, which are billed
at hourly rates, on an "as requested" basis. The Company does not have a
retainer or other contract with Cook. The Company has had consultations with
Cook in the past year.
BASE SALARY. Base salaries for the Company's executive officers, including
Mr. Nugent, are set within ranges that are determined based upon a review of
publicly available information concerning compensation paid to executives with
similar responsibilities at certain peer companies. The ECC utilizes Cook to
assist in the compilation and interpretation of this information. The
companies selected for these purposes are retailing companies, including major
competitors of the Company. While some of these peer companies are included in
the Dow Jones Industry Group Index OTS--Other Specialty Retailers which
appears in the Performance Graph on page 15, these peer companies are not all
the same as the companies comprising that index. While the ECC's overall
objective is to set base salaries at approximately the midpoint of competitive
ranges, an individual executive's placement within a range and salary
adjustments are based upon the ECC's subjective evaluation of the executive's
performance and value to the Company.
ANNUAL INCENTIVE PROGRAM. Under the Company's Management Incentive Plan
("MIP"), executive officers and other members of management are eligible to
receive incentive cash awards based upon the level of achievement of pre-
established performance goals. At the beginning of the year, the ECC
establishes the MIP performance goals and corresponding target awards, based
on one or more of the following objective performance criteria: operating
income, pre-tax income, net income, gross profit dollars, costs, any of the
preceding measures as a percent of sales, earnings per share, sales, return on
equity, and return on invesment. Such goals, criteria and target awards may
vary among participants. The ECC reviews the payout calculations after the
year's financial results have been audited. Target awards for executive
officers range from 20% to 50% of salary, but if targets are not met, there
would be either no MIP award or a reduced award based on a percentage of the
target realized. If results exceed goal(s), an executive officer could earn an
additional award, depending upon the extent to which goals are exceeded. No
executive officer may receive a MIP award in excess of $1,000,000 in any
calendar year or, if less, 100% of base salary earned for the applicable
performance period. For 1997, MIP awards for the Company's executive officers,
including Mr. Nugent, were based on the Company's pre-tax income. Pre-tax
income of the Company exceeded its MIP goal, resulting in payouts to Mr.
Nugent and to the Company's other executive officers equal to 133.9% of
targeted award. For 1998, MIP award goals for the Company's executive
officers, including Mr. Nugent, are based on the Company's net income.
LONG-TERM INCENTIVE PROGRAM. The Company's Growth Incentive Plan ("BJGIP")
is intended to provide high-level executives of the Company, as selected by
the ECC, with cash awards, based upon the growth and performance of the
Company. All the executive officers, including Mr. Nugent, participate in the
BJGIP, as well as 23 non-executive officer employees of the Company. Awards
are earned based on one or more of the following objective measures of
performance or growth, as selected by the ECC at the beginning of the award
period: operating income, pre-tax income, net income, costs, any of the
preceding measures as a percent of sales,
8
<PAGE>
earnings per share, sales, return on equity, and return on investment. All
relevant factors upon which the cash award is based (e.g., performance
measurement, length of award period, relation between performance and cash
award) are determined at the beginning of the award period by the ECC. Awards
issued to the Company's executive officers, except Mr. Zarkin but including
Mr. Nugent, in 1994 and 1996 (at which time the BJ's business was operated as
a division of Waban) were based on cumulative pre-tax income for the Company
for the three-year periods ending January 25, 1997 and January 30, 1999,
respectively. The award issued to Mr. Zarkin in 1994 was based on cumulative
net income for Waban for the three-year period ended January 25, 1997. The
award issued to Mr. Zarkin in 1996 was replaced with an award under the BJGIP
which is based on cumulative pre-tax income for the Company for the three-year
period ending January 30, 1999. Awards issued under the BJGIP in 1994 were
paid in cash, 50% each in April 1997 and April 1998. All awards issued under
the BJGIP in 1996 are payable in cash, 50% in April 1999, contingent on
employment continuing through January 30, 1999, and 50% in April 2000,
contingent on employment continuing through March 31, 2000. There is no target
amount for each award. However, there is a threshold amount based on the
Company's growth, and the value of each award increases as achievement of the
performance measurement increases. No individual award payment can exceed
$2,000,000 in any calendar year.
The Company has made it a practice to provide incentives to its executive
officers and other senior executives to achieve long-range goals that are
typically expressed as either a compounded rate of earnings growth or three-
year cumulative earnings. In determining the level of long-term incentive
awards, the ECC takes into account a survey of the same peer companies
referred to above, but does not target a specific percentile.
STOCK-BASED INCENTIVES. Stock options are awarded to the Company's key
employees, including Mr. Nugent and other executive officers, by the ECC,
based on its subjective assessment of such factors as the compensation level
and responsibility of the particular employee, the employee's contribution
towards Company performance, and a survey of competitive compensation data of
the same group of peer companies referred to previously in this report. The
ECC generally targets awards to the median of such survey. The options are
designed to reward recipients to the extent the Company's stock value is
enhanced. Because of the vesting provisions of such grants, the options also
provide an incentive for the employee to remain with the Company. Since the
ECC does not grant options on a cumulative basis, the size of previous grants
is not a factor in making current grants.
CHIEF EXECUTIVE OFFICER COMPENSATION
Pursuant to the terms of Mr. Nugent's employment contract, his salary is
reviewed annually by the ECC. His salary was set at $520,000 in July 1997,
equal to approximately the 30th percentile of the compensation range of the
survey of peer companies referred to previously in this report. The number of
options granted to Mr. Nugent in 1997 was subjectively determined based on Mr.
Nugent's success in providing leadership to the Company and after a review of
competitive compensation data of the same group of peer companies referred to
previously in this report without targeting a specific percentile range. Stock
option grants encourage long-term performance and promote management retention
while further aligning shareholders' and management's common interest in
enhancing the value of the Company's Common Stock.
Mr. Nugent's current MIP award provides a target opportunity equal to 50% of
base salary if performance goals are met; the actual payout can vary between
0% and 100% of base salary as of the beginning of the performance period. The
MIP payout to Mr. Nugent for 1997 was equal to 63% of his 1997 salary.
Executive Compensation Committee
Lorne R. Waxlax, Chairman
S. James Coppersmith
Thomas J. Shields
9
<PAGE>
COMPENSATION OF EXECUTIVES
The following table sets forth certain information concerning the annual and
long-term compensation paid for fiscal 1997, 1996 and 1995 to (i) the
Company's Chief Executive Officer and (ii) the Company's four other most
highly compensated executive officers during 1997 who were serving as
executive officers of the Company on January 31, 1998 (collectively, the
"Named Executive Officers"). All amounts paid prior to the Company's spin-off
from Waban in July 1997 were paid by Waban.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- ---------------------------------
AWARDS PAYOUTS
--------------------- -------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPEN- STOCK OPTIONS LTIP COMPEN-
PRINCIPAL POSITION YEAR (1) SALARY BONUS SATION (2) AWARDS (3) (4) PAYOUTS (5) SATION (6)
------------------ -------- -------- -------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John J. Nugent.......... 1997 $488,462 $308,486 $20,663 -- 100,000 $303,278 $29,173
President and Chief 1996 382,693 253,450 16,189 -- 24,224 303,278 23,635
Executive Officer 1995 350,000 134,967 14,806 -- 60,560 -- 22,000
Herbert J. Zarkin (7)... 1997 505,769 230,141 14,541 -- 40,000 180,320 21,259
Chairman of the Board 1996 605,962 199,361 25,633 -- 250,000 360,640 34,792
1995 570,000 171,285 24,112 -- 100,000 -- 33,000
Laura J. Sen............ 1997 226,808 75,923 9,594 -- 25,000 141,530 16,090
Executive Vice
President, 1996 203,500 84,234 8,608 -- 6,056 141,530 14,675
Merchandising 1995 190,500 61,217 8,059 -- -- -- 14,025
Michael T. Wedge........ 1997 223,174 74,708 9,441 -- 25,000 141,530 15,909
Executive Vice
President, 1996 193,174 79,959 8,172 -- 6,056 141,530 14,159
Club Operations 1995 178,769 57,447 7,562 -- -- -- 13,439
Frank D. Forward........ 1997 176,193 58,980 7,453 -- 25,000 101,092 13,610
Executive Vice
President, 1996 155,885 64,524 5,723 -- 6,056 101,092 12,225
Chief Financial Officer 1995 144,808 46,534 5,316 -- -- -- 11,740
</TABLE>
- - --------
(1) Refers to fiscal year ended in January of the following year. 1997 was a
53-week fiscal year. 1996 and 1995 were 52-week years.
(2) Includes reimbursement for tax liabilities related to the Company's
contributions under the Company's Executive Retirement Plan ("BJERP") (see
"Retirement Benefits") and excludes perquisites having an aggregate value
less than the lesser of $50,000 or 10% of salary plus bonus.
(3) No Restricted Stock Awards were granted to the Named Executive Officers in
the last three years. Waban Inc. restricted shares held by the Named
Executive Officers as of the date of the Distribution (all of which were
granted before 1995) were replaced by restricted shares of the Company's
Common Stock which preserved the value inherent in the Waban shares they
replaced. The following table presents the aggregate restricted stock
holdings of the Named Executive Officers as of January 31, 1998 and the
value of such holdings based on the closing market price of the Company's
Common Stock on January 30, 1998 ($30.00).
10
<PAGE>
<TABLE>
<CAPTION>
RESTRICTED
STOCK HOLDINGS
AT 1/31/98
--------------
SHARES VALUE
------ -------
<S> <C> <C>
John J. Nugent............................................. 930 $27,900
Herbert J. Zarkin.......................................... 853 25,590
Laura J. Sen............................................... 558 16,740
Michael T. Wedge........................................... 372 11,160
Frank D. Forward........................................... 465 13,950
</TABLE>
In the event of a change of control (as defined), each Named Executive
Officer's restricted shares would become unrestricted. Holders of
restricted shares are entitled to the same dividends as those paid to
holders of unrestricted shares.
(4) Reflects the grant of options to purchase Common Stock. Stock options
awarded in 1997 to Mr. Zarkin, and in 1996 and 1995 to each Named
Executive Officer were granted with respect to Waban's common stock. The
number of shares shown for those years represents the number of shares of
Common Stock resulting from the replacement as of July 28, 1997 of
outstanding Waban options with options of the Company. These replacement
options preserved the value inherent in the Waban options they replaced as
of the of the Distribution date. Neither Waban nor the Company has ever
granted stock appreciation rights.
(5) Payouts in 1997 represent the remaining 50% of the award earned by the
Named Executive Officers, except Mr. Zarkin, for the three-year
performance period ended January 25, 1997. This award was originally
granted by Waban and was assumed by BJ's in connection with the
Distribution. See Note (7) below for information related to Mr. Zarkin's
payout.
(6) For 1997, represents the Company's contributions under the Waban and BJ's
401(k) Savings Plans and BJERP (see "Retirement Benefits") as presented
below:
<TABLE>
<CAPTION>
1997 COMPANY
CONTRIBUTIONS
---------------------
401(K)
SAVINGS PLANS BJERP
------------- -------
<S> <C> <C>
John J. Nugent...................................... $4,750 $24,423
Herbert J. Zarkin................................... 4,071 17,188
Laura J. Sen........................................ 4,750 11,340
Michael T. Wedge.................................... 4,750 11,159
Frank D. Forward.................................... 4,800 8,810
</TABLE>
(7) Prior to the Distribution, Mr. Zarkin was President and Chief Executive
Officer of Waban. After the Distribution, he became Chairman of the Board
of the Company and of HomeBase. Mr. Zarkin's salary for 1997 represents
his full salary paid by Waban as its President and Chief Executive
Officer through the date of the Distribution and his salary paid by the
Company as its Chairman thereafter. The annual bonus and Company
contribution under BJERP paid by the Company to Mr. Zarkin for 1997 were
based on 50% of his Waban salary through the date of the Distribution and
100% of his Company salary thereafter. Mr. Zarkin's LTIP payout for 1997
represented the remaining 50% of the Waban Growth Incentive Plan award
earned for the three-year performance period ended January 25, 1997; one-
half of the total was paid by the Company and is shown in the table
above; and the other half was paid by HomeBase.
11
<PAGE>
STOCK OPTION GRANTS
The following table sets forth the stock option grants made by the Company
to each of the Named Executive Officers during 1997:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1)
<TABLE>
<CAPTION>
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE OR FOR OPTION TERM(2)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ---------------------------
NAME GRANTED YEAR PER SHARE(3) DATE 0%(4) 5% 10%
- - ---- ---------- ---------- ------------ ---------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Nugent.......... 100,000 17.5% 30.125 9/18/07 0 $1,894,545 $4,801,149
Herbert J. Zarkin(5).... 40,000 7.0 21.990 9/19/06 0 528,600 1,327,200
Laura J. Sen............ 25,000 4.4 30.125 9/18/07 0 473,636 1,200,287
Michael T. Wedge........ 25,000 4.4 30.125 9/18/07 0 473,636 1,200,287
Frank D. Forward........ 25,000 4.4 30.125 9/18/07 0 473,636 1,200,287
</TABLE>
- - --------
(1) The table above excludes the grant of BJ's options which replaced Waban
options originally granted before 1997. All Named Executive Officers
(except Mr. Zarkin, whose replacement options are described in note (5)
below) received 1.2112 BJ's options in replacement of each unexercised
Waban option, with the exercise price of each BJ's replacement option
equal to .8256 times the exercise price of the Waban option it replaced.
These replacement options preserved the same inherent value, vesting terms
and expiration dates as the Waban options they replaced as of the date of
the Distribution. All replacement options are included in the "Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values"
table below.
(2) The dollar amounts in these columns are the result of calculations at 0%
and the arbitrary appreciation rates of 5% and 10% set by the SEC and are
not intended to forecast possible future appreciation, if any, of the
Company's stock price.
(3) All options granted in 1997 in the table above were granted with an
exercise price equal to the closing price of the Common Stock on the New
York Stock Exchange on the date of grant. Except for the options granted
to Mr. Zarkin (see Note (5) below), these options expire ten years from
the date of grant and vest in equal annual installments over four years.
All options vest upon a change of control (as defined).
(4) No gain to the optionees is possible without an appreciation in stock
price, which will benefit all shareholders commensurately. A zero percent
stock price appreciation will result in zero gain for the optionee.
(5) On January 27, 1997, Mr. Zarkin was granted 40,000 Waban stock options at
an exercise price of $26.625 per share, the closing price of Waban common
stock on the New York Stock Exchange on that date. As of the spin-off
date, all unexercised options held by Mr. Zarkin, including the 40,000
granted in 1997, were replaced by an equal number of BJ's options and
HomeBase options. The aggregate exercise prices of the BJ's and HomeBase
options equaled the exercise price of the replaced Waban options, with the
exercise price of the BJ's options equal to .8256 times the per share
exercise price of the applicable Waban options they replaced. The options
granted to Mr. Zarkin in 1997 expire on September 19, 2006 and vest in
three equal annual installments beginning September 19, 1997.
12
<PAGE>
AGGREGATED OPTION EXERCISES AND VALUATION
None of the Named Executive Officers exercised options during 1997 to
purchase shares of Common Stock of BJ's. The following table sets forth the
fiscal year-end value of unexercised options held by such officers:
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John J. Nugent.............. 180,467 149,659 $2,961,912 $ 656,761
Herbert J. Zarkin........... 403,400 236,600 6,195,784 2,668,866
Laura J. Sen................ 22,105 39,231 353,147 192,045
Michael T. Wedge............ 30,885 39,231 479,405 192,045
Frank D. Forward............ 25,130 35,598 370,252 136,321
</TABLE>
- - --------
(1) Based on the fair market value of the Common Stock on January 30, 1998
($30.00 per share), less the option exercise price.
RETIREMENT BENEFITS
Under the BJERP, employees in high-level management positions in the
Company, as selected by the ECC, including all executive officers, are
eligible to receive cash annual retirement contributions in an amount
determined by the ECC; provided that the smallest annual retirement
contribution shall equal, on an after-tax basis, at least three percent of the
participant's base salary. All amounts paid under the BJERP are to be used
exclusively to fund an investment vehicle, selected by the ECC, which is
appropriate to provide retirement income, such as an insurance policy.
The Company made retirement contributions after the end of 1997 equal to 5%
(net of taxes) of each participant's base salary during 1997. If the
participant terminates employment prior to the end of the fiscal year in which
the participant is credited with four years of service, the participant
forfeits the right to any benefit under the BJERP. As of January 31, 1998, all
executive officers were credited with at least four years of service.
The Waban Retirement Plan, in which all Named Executive Officers
participate, was frozen on July 4, 1992 and benefits under the Waban
Retirement Plan ceased to accrue after that date. All Named Executive Officers
are fully vested in their accrued benefits. The estimated annual benefits
payable under the Waban Retirement Plan upon normal retirement (age 65) on the
basis of a single life annuity are as follows: Mr. Nugent, $5,174; Mr. Zarkin,
$65,667; Ms. Sen, $6,200; Mr. Wedge, $2,982 and Mr. Forward, $8,077. Waban's
Board of Directors approved the termination of the Waban Retirement Plan
effective July 26, 1997. When the Plan termination is settled, the Named
Executive Officers may choose to have their benefits paid either as an annuity
or in a lump sum calculated to be actuarially equivalent to such annuity.
EMPLOYMENT AGREEMENTS
Under the Company's employment agreement with John J. Nugent, Mr. Nugent
receives an annual base salary of $520,000 and participates in specified
incentive and other benefit plans. The Company is entitled to terminate Mr.
Nugent's employment at any time with or without cause (as defined). If Mr.
Nugent's employment is terminated by the Company other than for cause, the
Company is required to pay certain cash compensation amounts and to continue
payment of Mr. Nugent's base salary and certain benefits for 12 months after
termination at the rate in effect upon termination. The continuing base salary
payments are subject to reduction after three months for compensation earned
by Mr. Nugent from other employment, and the continuing benefits are subject
to reduction at any time for comparable benefits received by Mr. Nugent from
other employment.
13
<PAGE>
Under the Company's employment agreement with Herbert J. Zarkin, Mr. Zarkin
receives an annual base salary of $350,000 and participates in specified
incentive and other benefit plans. The Company is entitled to terminate Mr.
Zarkin's employment at any time with or without cause (as defined). If his
employment terminates by reason of death, disability, incapacity or
termination by the Company other than for cause, or if Mr. Zarkin resigns as a
result of his being removed from his positions with the Company or as result
of being relocated more than 40 miles from the Company's current headquarters,
Mr. Zarkin is entitled to payment of certain cash compensation amounts and
continuation of base salary and certain benefits for a period of 12 months
after termination at the rate in effect upon termination. In addition, Mr.
Zarkin will be entitled to payment of any award earned under the Company's MIP
for the fiscal year ended immediately prior to the date of termination of Mr.
Zarkin's employment, and an amount equal to his MIP target award for the year
of termination (pro rated for the period of active employment during such
year). Any stock options or other stock-based awards held by Mr. Zarkin on the
date of termination will continue to vest for three years unless they expire
earlier by their terms. The continuing base salary payments are subject to
reduction after three months for compensation earned by Mr. Zarkin from other
employment (other than employment at HomeBase), and the continuing benefits
are subject to reduction at any time for comparable benefits received by Mr.
Zarkin from other employment.
The Company has an employment agreement with each of Ms. Sen and Messrs.
Wedge and Forward under which they receive annual base salaries of $260,000,
$260,000 and $230,000, respectively, and participate in specified incentive
and other benefit plans. If employment is terminated by the Company other than
for cause, each such executive is entitled to payment of certain cash
compensation amounts and to certain benefits and continuation of base salary
for 12 months after termination at the rate in effect upon termination. The
continuing base salary payments are subject to reduction after three months
for compensation earned by the executive from other employment, and the
continuing benefits are subject to reduction at any time for comparable
benefits received by the executive from other employment.
In the event of a change of control followed by termination of employment as
described below under "Change of Control Severance Benefits," each of the
Company's executive officers would be entitled to the termination benefits
described thereunder, to the extent such benefits would exceed the benefits
otherwise described above.
CHANGE OF CONTROL SEVERANCE BENEFITS
The Company provides change of control severance benefits to its executive
officers and Mr. Weisberger under individual agreements. Under the agreements,
in general, upon a change of control (as defined) of the Company, the
executive would be entitled to accelerated lump-sum payments of the MIP target
award for the year in which the change of control occurs. If, during the 24-
month period following a change of control, the Company were to terminate the
executive's employment other than for cause (as defined) or the executive were
to terminate employment for reasons specified in the agreement, or if
employment were to terminate by reason of death, disability or incapacity, the
executive would be entitled to receive an amount equal to two times the
executive's annual base salary. For up to two years following termination, the
Company would also be obligated to provide specified benefits, including
continued medical and life insurance benefits. The foregoing benefits would be
payable whether or not they gave rise to a federal excise tax on so-called
"excess parachute payments" or were non-deductible, except to the extent a
reduction in amounts paid would increase the executive's after-tax benefits.
The Company would also be obligated to pay all legal fees and expenses
reasonably incurred by the executive in seeking enforcement of contractual
rights following a change of control. In addition, upon involuntary
termination within 24 months following a change of control, any agreement by
the executive not to compete with the Company following termination of the
executive's employment would cease to be effective.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
directors and executive officers indemnifying them against expenses,
settlements, judgments and fines incurred in connection with any threatened,
pending or completed action, suit, arbitration or proceeding, where the
individual's involvement is
14
<PAGE>
by reason of the fact that he or she is or was a director or officer of the
Company or served at the Company's request as a director of another
organization (except that indemnification is not provided against judgments
and fines in a derivative suit unless permitted by Delaware law). An
individual may not be indemnified if he or she is found not to have acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Company, except to the extent Delaware
law permits broader contractual indemnification. The indemnification
agreements provide procedures, presumptions and remedies designed to
substantially strengthen the indemnity rights beyond those provided by the
Company's Amended and Restated Certificate of Incorporation and by Delaware
law.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the Common
Stock, with the cumulative total return of companies on the Standard and
Poor's 500 Stock Index and the Dow Jones Industry Group Index OTS--Other
Specialty Retailers from July 29, 1997 (the first day on which the Company's
stock was publicly traded following the Distribution) to January 30, 1998. The
Dow Jones Industry Group Index OTS--Other Specialty Retailers is comprised
currently of 263 specialty retail companies, including the Company and all
other publicly-traded membership warehouse clubs (other than those operated as
divisions of other companies). This index does not include department stores,
discount stores, drug stores or supermarkets. The graph assumes that the value
of the investment at July 29, 1997 was $100 and that all dividends were
reinvested. The values of investments in the companies in the Standard &
Poor's 500 Stock Index and the Dow Jones Industry Group Index OTS--Other
Specialty Retailers were measured as of the date nearest the end of the
indicated period for which index data is readily available.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
7/29/97 8/29/97 9/30/97 10/31/97 11/28/97 12/31/97 1/30/98
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BJ's Wholesale Club, Inc. $100 $98.30 $99.35 $98.30 $99.15 $106.81 $102.11
- - -----------------------------------------------------------------------------------------------------------------
Dow Jones Industry Group $100 $99.13 $106.34 $104.28 $106.22 $106.32 $107.23
Index OTS-Other Specialty
Retailers
- - -----------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 $100 $94.40 $99.57 $96.24 $100.70 $102.43 $103.56
Stock Index
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file with the SEC and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater-than-
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
directors, officers and greater-than-ten-percent beneficial owners with
respect to fiscal 1997 were met.
INDEPENDENT AUDITORS
The directors have appointed Coopers & Lybrand, L.L.P. as independent
auditors to examine the financial statements of the Company for the fiscal
year ending January 30, 1999. The Company expects that representatives of
Coopers & Lybrand L.L.P. will be present at the meeting, will have the
opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next annual
meeting of stockholders must be received by the Company no later than 5 p.m.
EST on December 25, 1998 in order to be considered for inclusion in the
Company's proxy materials for that meeting. Proposals must be in writing and
sent via registered or certified mail addressed to Sarah M. Gallivan,
Secretary, BJ's Wholesale Club, Inc., One Mercer Road, Natick, Massachusetts
01760. In addition, the Company's by-laws specify requirements relating to the
timing and content of the notice which stockholders must provide to the
Secretary of the Company for any matter, including a stockholder nomination
for director, to be properly presented at a stockholder meeting.
OTHER MATTERS
The Board of Directors has no knowledge of any other matter which may come
before the meeting and does not intend to present any such other matter.
However, if any such other matters shall properly come before the meeting or
any adjournment thereof, the persons named as proxies will have discretionary
authority to vote the shares represented by the accompanying proxy in
accordance with their own judgment.
Neither the Executive Compensation Committee Report appearing above on pages
7 through 9 nor the Performance Graph appearing above on page 15 shall be
deemed incorporated by reference by any general statement incorporating this
proxy statement into any filing under the Securities Act of 1933 or under the
Exchange Act, except to the extent that the Company specifically incorporates
such information by reference, and shall not otherwise be deemed filed under
such Acts.
The cost of solicitation of proxies will be borne by the Company. The
Company has retained Shareholder Communications Corporation to assist in
soliciting proxies by mail, telephone and personal interview for a fee of
$4,000 plus expenses. Officers and employees of the Company may, without
additional remuneration, also assist in soliciting proxies in the same manner.
By Order of the Board of Directors
SARAH M. GALLIVAN
Secretary
16
<PAGE>
[RECYCLED LOGO APPEARS HERE]
and [SOY INK LOGO APPEARS HERE]
<PAGE>
APPENDIX A
----------
BJ'S WHOLESALE CLUB, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P FOR THE ANNUAL MEETING OF STOCKHOLDERS, MAY 28, 1998
R The undersigned hereby appoints Kerry L. Hamilton, Frank D. Forward
and Sarah M. Gallivan, and each of them, as proxies, with full
O power of substitution, to represent and to vote, as designated herein,
all shares of Common Stock of BJ's Wholesale Club, Inc., at the
X Annual Meeting of Stockholders of BJ's Wholesale Club, Inc. to be
held at BankBoston, 100 Federal Street, Boston, Massachusetts, on
Y Thursday, May 28, 1998 at 11:00 a.m., and at all adjournments
thereof, which the undersigned could vote, if present, in such
manner as they may determine on any matters which may properly
come before the meeting and to vote on the following as specified
below:
THE BOARD OF DIRECTORS RECOMMENDS (Change of Address)
A VOTE FOR THE FOLLOWING:
ELECTION OF DIRECTORS for a term ---------------------------------
to expire in 2001.
---------------------------------
Nominees:
S. James Coppersmith, Thomas J. ---------------------------------
Shields and Herbert J. Zarkin
---------------------------------
You are encouraged to specify
your choices by marking the ap- (If you have written in the above
propriate boxes on the reverse space, please mark the correspon-
side but you need not mark any ing box on the reverse side of
boxes if you wish to vote in this card)
accordance with the Board of
Directors' recommendation.
Please sign and return this
card.
THIS PROXY, WHEN PROPERLY EXECUTED ON THE REVERSE SIDE OF THIS CARD, WILL
BE VOTED IN THE MANNER DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL NOMINEES. THE PROXIES, IN THEIR
DISCRETION, ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
SEE REVERSE
SIDE
- - --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
Election of FOR WITHHELD Change of Address on Reverse Side [_]
Directors
(see reverse) [_] [_] Will Attend Annual Meeting [_]
For, except vote withheld from the Discontinue Mailing
following nominee(s): Publications to this Account [_]
The signer hereby revokes all proxies
- - ---------------------------------- heretofore given by the signer to vote
at said meeting or any adjournment
thereof.
SIGNATURE(S)
------------------------------ ------------------------------
DATE
--------------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. Only authorized officers should sign for corporations.
PLEASE SIGN AND DATE HERE AND RETURN PROMPTLY.
- - -------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
As part of BJ's Wholesale Club's ongoing efforts to reduce expenses,
we are asking stockholders to authorize us to send only one copy of
stockholder publications to their household. If you are receiving
multiple copies of stockholder reports at your address and wish to
eliminate them for the account shown on the attached Proxy Card,
please mark the box provided on the card. You will continue to
receive your proxy mailings for shares held in this account.
We urge you to vote your shares. Thank you very much for your
cooperation and continued loyalty as BJ's Wholesale Club, Inc.
stockholder.
IMPORTANT: PLEASE VOTE, DATE AND SIGN YOUR
PROXY AND RETURN IT IN THE ENVELOPE PROVIDED
