<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended October 30, 1999
Commission file number 001-13143
BJ'S WHOLESALE CLUB, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 04-3360747
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Mercer Road
Natick, Massachusetts 01760
(Address of principal executive offices) (Zip Code)
(508) 651-7400
(Registrant's telephone number, including area code)
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. Yes X No .
----- ------
The number of shares of the Registrant's common stock outstanding as of November
27, 1999: 73,512,296.
<PAGE>
PART I. FINANCIAL INFORMATION
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------------------
October 30, October 31,
1999 1998
------------ --------------
(Dollars in Thousands except Per Share Amounts)
<S> <C> <C>
Net sales $ 990,638 $ 828,477
Membership fees and other 23,336 19,335
----------- ------------
Total revenues 1,013,974 847,812
----------- ------------
Cost of sales, including buying and occupancy costs 900,383 756,553
Selling, general and administrative expenses 73,755 65,311
Preopening expenses 2,504 2,531
----------- ------------
Operating income 37,332 23,417
Interest (income) expense, net (841) (236)
----------- ------------
Income before income taxes 38,173 23,653
Provision for income taxes 14,839 9,225
----------- ------------
Net income $ 23,334 $ 14,428
=========== ============
Net income per common share:
Basic $ 0.32 $ 0.19
=========== ============
Diluted $ 0.31 $ 0.19
=========== ============
Number of common shares for earnings per share computations:
Basic 73,582,931 74,794,712
Diluted 75,290,420 75,962,876
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
-----------------------------------------
October 30, October 31,
1999 1998
---------------- ----------------
(Dollars in Thousands except Per Share Amounts)
<S> <C> <C>
Net sales $ 2,864,438 $ 2,442,828
Membership fees and other 66,176 54,902
------------ -----------
Total revenues 2,930,614 2,497,730
------------ -----------
Cost of sales, including buying and occupancy costs 2,609,993 2,231,811
Selling, general and administrative expenses 211,841 187,402
Preopening expenses 7,159 5,094
Pension termination costs - 1,521
------------ -----------
Operating income 101,621 71,902
Interest (income) expense, net (1,949) (456)
------------ -----------
Income before income taxes and cumulative effect of
accounting principle changes 103,570 72,358
Provision for income taxes 40,082 28,220
------------ -----------
Income before cumulative effect of accounting principle changes 63,488 44,138
Cumulative effect of accounting principle changes - (19,326)
------------ -----------
Net income $ 63,488 $ 24,812
============ ===========
Net income per common share:
Basic earnings per share:
Income before cumulative effect of accounting principle changes $ 0.86 $ 0.59
Cumulative effect of accounting principle changes - (0.26)
------------ -----------
Net income $ 0.86 $ 0.33
============ ===========
Diluted earnings per share:
Income before cumulative effect of accounting principle changes $ 0.84 $ 0.58
Cumulative effect of accounting principle changes - (0.26)
------------ -----------
Net income $ 0.84 $ 0.32
============ ===========
Number of common shares for earnings per share computations:
Basic 73,702,223 75,107,576
Diluted 75,400,176 76,376,870
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
October 30, January 30, October 31,
1999 1999 1998
----------- ----------- ----------
(Dollars in Thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,635 $ 12,150 $ 7,675
Marketable securities 1,582 100 98
Accounts receivable 45,922 51,134 41,582
Merchandise inventories 503,793 372,740 430,373
Current deferred income taxes 8,596 7,859 7,492
Prepaid expenses 11,404 12,607 10,126
----------- ----------- ----------
Total current assets 578,932 456,590 497,346
----------- ----------- ----------
Property at cost:
Land and buildings 336,939 322,712 307,569
Leasehold costs and improvements 49,544 45,861 43,745
Furniture, fixtures and equipment 260,650 236,231 221,657
----------- ----------- ----------
647,133 604,804 572,971
Less accumulated depreciation and amortization 191,665 168,957 160,858
----------- ----------- ----------
455,468 435,847 412,113
----------- ----------- ----------
Property under capital leases 6,219 6,219 6,219
Less accumulated amortization 2,074 1,949 1,908
----------- ----------- ----------
4,145 4,270 4,311
----------- ----------- ----------
Other assets 11,834 10,923 10,603
----------- ----------- ----------
Total assets $ 1,050,379 $ 907,630 $ 924,373
=========== =========== ==========
LIABILITIES
Current liabilities:
Accounts payable $ 345,166 $ 213,702 265,373
Accrued expenses and other current liabilities 117,717 121,951 100,998
Accrued federal and state income taxes 8,574 11,757 (4,279)
Obligations under capital leases due within one year 215 201 197
----------- ----------- ----------
Total current liabilities 471,672 347,611 362,289
----------- ----------- ----------
Long-term debt - 30,000 64,500
Obligations under capital leases, less portion
due within one year 2,103 2,249 2,297
Other noncurrent liabilities 36,907 34,928 38,409
Deferred income taxes 7,495 7,800 5,547
STOCKHOLDERS' EQUITY
Common stock, par value $.01, authorized 180,000,000
shares, issued 74,184,588, 73,805,000
and 37,706,138 shares 742 738 377
Additional paid-in capital 81,856 78,376 108,338
Retained earnings 469,416 405,928 368,286
Treasury stock, at cost, 706,828, 0 and 710,384 shares (19,812) - (25,670)
----------- ----------- ----------
Total stockholders' equity 532,202 485,042 451,331
----------- ----------- ----------
Total liabilities and stockholders' equity $ 1,050,379 $ 907,630 $ 924,373
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
---------------------------------
October 30, October 31,
1999 1998
------------ ------------
(Dollars in Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 63,488 $ 24,812
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of accounting principle changes - 19,326
Depreciation and amortization of property 34,348 30,310
Loss on property disposals 696 174
Other noncash items (net) 59 131
Deferred income taxes (1,042) 56
Increase (decrease) in cash
due to changes in:
Accounts receivable 5,212 (3,260)
Merchandise inventories (131,053) (98,099)
Prepaid expenses 1,203 2,484
Other assets (955) 307
Accounts payable 131,464 64,987
Accrued expenses 5,366 3,883
Accrued income taxes (3,183) 1,068
Other noncurrent liabilities 1,979 2,013
---------- -----------
Net cash provided by operating activities 107,582 48,192
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (1,582) (95)
Maturity of marketable securities 100 -
Property additions (64,171) (55,390)
Proceeds from property disposals 31 214
---------- -----------
Net cash used in investing activities (65,622) (55,271)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations (132) (121)
Borrowing (repayment) of long-term debt (30,000) 22,000
Purchase of treasury stock (26,645) (26,173)
Proceeds from sale and issuance of common stock 10,302 5,147
Contribution to capital by Waban Inc. - 1,188
---------- -----------
Net cash provided by (used in) financing activities (46,475) 2,041
---------- -----------
Net decrease in cash and cash equivalents (4,515) (5,038)
Cash and cash equivalents at beginning of year 12,150 12,713
---------- -----------
Cash and cash equivalents at end of period $ 7,635 $ 7,675
========== ===========
Supplemental cash flow information:
Interest paid $ 194 $ 196
Income taxes paid 44,307 27,096
Noncash financing and investing activities:
Treasury stock issued for compensation plans 6,833 -
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in Thousands except Per Share Amounts)
------------------------------------------------------------------------------------
Common Additional Total
Stock Paid-in Retained Treasury Stockholders'
Par Value $.01 Capital Earnings Stock Equity
---------------- ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 31, 1998 $ 375 $ 102,408 $ 343,474 $ - $ 446,257
Net income - - 24,812 - 24,812
Sale and issuance of common stock 2 4,742 - 503 5,247
Purchase of treasury stock - - - (26,173) (26,173)
Contribution to capital by Waban Inc. - 1,188 - - 1,188
---------------- ------------- ------------ -------------- -------------
Balance, October 31, 1998 $ 377 $ 108,338 $ 368,286 $ (25,670) $ 451,331
================ ============= ============ ============== =============
Balance, January 30, 1999 $ 738 $ 78,376 $ 405,928 $ - $ 485,042
Net income - - 63,488 - 63,488
Sale and issuance of common stock 4 3,480 - 6,833 10,317
Purchase of treasury stock - - - (26,645) (26,645)
---------------- ------------- ------------ -------------- -------------
Balance, October 30, 1999 $ 742 $ 81,856 $ 469,416 $ (19,812) $ 532,202
================ ============= ============ ============== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the quarter and nine months ended October 30, 1999 are not
necessarily indicative of the results for the full fiscal year or any future
period because, among other things, the Company's business, in common with the
business of retailers generally, is subject to seasonal influences. The
Company's sales and operating income have historically been strongest in the
fourth quarter holiday season and lowest in the first quarter of each fiscal
year.
2. The interim financial statements are unaudited and reflect all normal
recurring adjustments considered necessary by the Company for a fair
presentation of its financial statements in accordance with generally accepted
accounting principles.
3. These interim financial statements should be read in conjunction with the
consolidated financial statements and related notes in the Company's Annual
Report on Form 10-K for the fiscal year ended January 30, 1999.
4. The Company completed a two-for-one stock split on March 2, 1999 in the form
of a 100% stock dividend paid to stockholders of record as of February 16, 1999.
All historical earnings per share amounts have been restated to reflect the two-
for-one split.
5. During the quarter ended May 2, 1998, the Company recorded a pre-tax charge
of $1.5 million in connection with the termination of the Waban Inc. Retirement
Plan, in which certain of the Company's employees participated. On a post-tax
basis, this charge amounted to $.9 million, or $.01 per diluted share.
6. During the fiscal year ended January 30, 1999, the Company adopted changes
in methods of accounting for membership fee revenues and preopening expenses.
The Company recorded a noncash post-tax charge of $19.3 million, or $.26 per
diluted share, as of the beginning of the fiscal year to reflect the cumulative
effect of these accounting principle changes.
<PAGE>
7. The following details the calculation of earnings per share ("EPS") for the
periods presented below (amounts in thousands except per share amounts):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -----------------------
Oct. 30, Oct. 31, Oct. 30, Oct. 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income before cumulative effect of
accounting principle changes $23,334 $14,428 $63,488 $44,138
======= ======= ======= =======
Weighted-average number of common
shares outstanding, used for basic
computation 73,583 74,795 73,702 75,108
Plus: Incremental shares from assumed
conversion of stock options 1,707 1,168 1,698 1,269
------- ------- ------- ------
Weighted-average number of common
and dilutive potential common shares
outstanding 75,290 75,963 75,400 76,377
======= ======= ======= ======
Basic income per share before
cumulative effect of accounting
principle changes $ 0.32 $ 0.19 $ 0.86 $ 0.59
======= ======= ======= =======
Diluted income per share before
cumulative effect of accounting
principle changes $ 0.31 $ 0.19 $ 0.84 $ 0.58
======= ======= ======= =======
</TABLE>
Options to purchase a total of 595,300 shares at a weighted-average exercise
price of $29.73 were outstanding at October 30, 1999, but were not included
in the computation of diluted EPS for the nine-month period then ended
because the options' exercise price was greater than the average market
price of the common shares during that period. All outstanding options were
included in the computation of diluted EPS for the third quarter ended
October 30, 1999.
8. The Company operated 103 clubs on October 30, 1999 versus 90 clubs on
October 31, 1998.
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Thirteen Weeks (Third Quarter) and Thirty-Nine Weeks Ended October 30, 1999
versus Thirteen and Thirty-Nine Weeks Ended October 30, 1998.
Results of Operations
- ---------------------
Net sales for the third quarter ended October 30, 1999 rose 19.6% to $991
million from $828 million reported in last year's third quarter. Net sales for
the first nine months of the year totaled $2.9 billion, 17.3% higher than last
year's comparable period. These increases were due to the opening of new stores
and to comparable store sales increases of 7.8% in the third quarter and 6.7%
year-to-date.
Total revenues in the third quarter included membership fees of $20.3 million
versus $16.7 million in last year's third quarter, an increase of 21.8%. Year-
to-date membership fees were $58.3 million versus $48.0 million last year, an
increase of 21.7%. Membership fee revenues are recognized over the life of the
membership, which is typically twelve months. Consequently, this year's results
benefited from an increase in the membership fee for "Inner Circle" members from
$30 to $35, effective February 1, 1998 and, to a lesser extent, an increase in
the membership fee for business members from $30 to $35, effective February 1,
1999.
Cost of sales (including buying and occupancy costs) was 90.9% of net sales in
this year's third quarter compared with 91.3% in last year's third quarter. For
the first nine months, the cost of sales percentage was 91.1% this year versus
91.4% last year. These improvements were due both to a favorable merchandise
mix, which benefited gross margin, and to leveraging fixed buying and occupancy
costs against strong comparable store sales, particularly in the third quarter.
Selling, general and administrative ("SG&A") expenses were 7.4% of net sales in
the third quarter versus 7.9% in last year's comparable period. Year-to-date
SG&A expenses were 7.4% of net sales this year versus 7.7% last year. These
decreases were attributable mainly to leveraging fixed expenses against both
increased comparable store sales and a growing number of clubs and to cost
savings resulting from a new medical benefit program for employees that became
effective on January 1, 1999.
Preopening expenses were $2.5 million in both this year's and last year's third
quarters. Year-to-date preopening expenses totaled $7.2 million this year versus
$5.1 million last year. The Company opened seven new clubs in the first nine
months of this year, three of them in the third quarter. Last year the Company
opened six new clubs in the first nine months, two of them in the third quarter.
Some preopening expenses for two clubs which opened in February 1998 were
incurred in the prior fiscal year.
During the quarter ended May 2, 1998, the Company recorded a pre-tax charge of
$1.5 million in connection with the termination of the Waban Inc. Retirement
Plan, in which certain of the Company's employees participated. On a post-tax
basis, this charge amounted to $.9 million, or $.01 per diluted share.
<PAGE>
Operating income in the third quarter rose to $37.3 million, an increase of
59.4% over last year's third quarter operating income of $23.4 million. Year-to-
date operating income this year was $101.6 million, 38.4% higher than last
year's $73.4 million before pension termination costs.
The components of net interest (income) expense were as follows (in thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -----------------------
Oct. 30, Oct. 31, Oct. 30, Oct. 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest expense on debt $ 70 $ 151 $ 242 $ 600
Capitalized interest (21) (218) (200) (537)
Interest income (952) (236) (2,178) (719)
----- ----- ------ -----
Interest on debt (net) (903) (303) (2,136) (656)
Interest on capital leases 62 67 187 200
----- ----- ------ -----
Interest (income) expense, net $(841) $(236) $(1,949) $(456)
===== ===== ======= =====
</TABLE>
This year's increase in net interest income was due primarily to higher levels
of investments and lower borrowing levels.
The Company's year-to-date provision for income taxes was 38.7% of pre-tax
income this year versus 39.0% in last year's comparable period. This year's tax
rate is lower than last year due to a reduction in the effective state income
tax rate expected for the full year.
Third quarter net income was $23.3 million, or $.31 per diluted share, compared
with $14.4 million, or $.19 per diluted share, in last year's third quarter. Net
income in this year's first nine months was $63.5 million, or $.84 per diluted
share, versus income before the cumulative effect of accounting principle
changes of $44.1 million, or $.58 per diluted share, in last year's comparable
period.
The Company adopted changes in methods of accounting for membership fee revenues
and preopening expenses as of the beginning of last year. Including a noncash
post-tax charge of $19.3 million, or $.26 per diluted share, to reflect the
cumulative effect of these changes, the Company posted net income of $24.8
million, or $.32 per diluted share, in the first nine months of 1998.
Over the remainder of the year, the Company expects to continue to benefit from
the increases in the cost of membership fees, although the effect of last year's
increase in the Inner Circle membership fee will diminish because membership fee
income is recognized over the life of the membership, which is typically twelve
months. The Company also expects to continue to benefit from the changes in the
Company's medical benefit program for employees in the fourth quarter; compared
to the first three quarters, the impact of these changes is expected to be
somewhat less in the fourth fiscal quarter, as they became effective on January
1, 1999. Preopening expenses may vary from quarter to quarter depending on the
timing and number of club openings.
Year 2000 Compliance
- --------------------
The Company has worked for several years to prepare its financial, merchandising
and other information technology ("IT") systems for the Year 2000. The Company
believes that its Year 2000 assessment, remediation and testing efforts with
regard to IT systems is substantially
<PAGE>
complete. All of the Company's major IT systems have been assessed for Year 2000
compliance and the Company believes that currently known Year 2000 issues have
been remedied. Based on these efforts, the Company does not believe that Year
2000 issues related to IT systems will have a material adverse effect on the
Company's results of operations, financial position or cash flows. The Company
intends to retest systems which are modified or upgraded before January 1, 2000
for Year 2000 compliance, regardless of whether the modification is related to
the Year 2000 issue, and has instituted a moratorium on all new systems
applications for its fourth quarter of 1999. Since August 1998, the Company
successfully conducted four disaster recovery tests simulating dates beyond Year
2000. All of the Company's Year 2000 testing has been performed in tandem with
the Company's third-party data processing center.
The Company has also been reviewing its major non-IT systems for Year 2000
issues, including refrigeration, security and utilities systems. BJ's estimates
that its Year 2000 assessment, remediation and testing efforts with regard to
non-IT systems are substantially complete. Based on these efforts, the Company
does not believe that Year 2000 issues related to non-IT systems will have a
material adverse effect on the Company's results of operations, financial
position or cash flows.
BJ's is working with key vendors and other third parties with whom it does
business in an effort to minimize the potential adverse impact on the Company if
they fail to address the Year 2000 issue successfully. The Company has a
committee, with representatives from various departments in the Company, which
is examining the Year 2000 readiness of the Company's business partners. The
Company sent a questionnaire regarding Year 2000 issues to more than 900 of its
business partners, including its 200 highest volume merchandise vendors, all
active freight vendors, 100 of its highest volume non-merchandise vendors and a
random sample of other vendors. A review of these responses did not indicate
any Year 2000 issues that are expected to materially impact the Company. The
Company may seek alternate sources to replace vendors who are not expected to be
Year 2000 compliant. The Year 2000 committee has also been evaluating the Year
2000 readiness of key third parties or vendors who share data with the Company,
including banks and mail houses. Although some of the Company's agreements with
manufacturers and its merchandise vendors contain provisions requiring them to
indemnify the Company under some circumstances, there can be no assurance that
such indemnification arrangements would cover all of the Company's liabilities
and costs, if any, in connection with claims related to the Year 2000 issue.
BJ's estimates that its total historical and anticipated costs of Year 2000
assessment, remediation and testing will total approximately $1.6 million,
including estimated internal payroll costs. Substantially all of this total has
been incurred as of October 30, 1999.
The Company believes that its most likely worst case Year 2000 scenario would
probably result from a large number of key third parties with whom the Company
does business not being Year 2000 compliant. Among the factors that would tend
to mitigate the consequences of this scenario are that the Company sells a broad
assortment of products and is not dependent on any particular class of
merchandise; the Company is not dependent on a small number of vendors; the
Company purchases most of its inventory from well-established, brand name
vendors; and there are expected to be alternate sources to replace merchandise
vendors who encounter Year 2000 problems. However, there can be no assurance
that the third parties with whom the Company does business will be successful in
addressing the Year 2000 issue or that their failure to successfully address the
issue will not have an adverse effect on the Company's financial condition and
results of operations. Based on its current assessment of Year 2000 readiness,
the Company does not plan to develop a formal contingency plan to address this
or other scenarios.
<PAGE>
However, the Company has prepared a guide for all of its locations to address
potential issues which might arise at the time of the millennium change and
plans to have information systems personnel on duty around the clock at that
time to help deal with those issues.
The foregoing discussion of the Company's Year 2000 readiness contains forward-
looking statements, including estimates of the costs of the Company's Year 2000
implementation efforts and the status of those efforts. Such statements are
based upon management's current estimates, using numerous assumptions regarding
future events, including the continued availability of certain resources, third
party remediation plans, and other factors. There can be no assurance that
these forward-looking statements will prove to be accurate, and actual results
could differ materially from those currently anticipated. Factors that could
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in Year 2000 issues, the ability to
assess, remedy and test all relevant computer code and embedded technology, the
ability of third parties with whom the Company has business relationships
(including its third-party data processing center) to successfully address their
Year 2000 issues and similar uncertainties.
The foregoing information is intended to qualify as "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act to the maximum amount permitted by such Act.
Seasonality
- -----------
The Company's business, in common with the business of retailers generally, is
subject to seasonal influences. The Company's sales and operating income have
historically been strongest in the fourth quarter holiday season and lowest in
the first quarter of each fiscal year.
Recent Accounting Standards
- ---------------------------
In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," was issued. The adoption of
this statement, which currently becomes effective in 2001, is not expected to
have a material impact on the Company's results of operations, financial
position or cash flows or to produce any major changes in current disclosures.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities was $107.6 million in the first nine
months of 1999 versus $48.2 million in last year's comparable period. The
increase over last year in cash provided by operating activities was
attributable mainly to the change in merchandise inventories, net of accounts
payable, and the increase in income before the cumulative effect of accounting
changes.
Cash expended for property additions was $64.2 million in the first nine months
of 1999 versus $55.4 million in the comparable period in 1998. The Company has
opened seven new clubs year-to-date this year versus six new clubs in the same
period last year. The Company's capital expenditures are expected to total
approximately $90 million in 1999, based on plans to open approximately eleven
new clubs (including the new clubs already opened this year). The timing of
actual club openings and the amount of related expenditures could vary from
these estimates due, among other things, to the complexity of the real estate
development process.
<PAGE>
In August 1999, the Company completed its repurchase of $50 million of the
Company's common stock, which had been authorized by the Board of Directors in
August 1998. On September 16, 1999, the Board authorized the repurchase of an
additional $50 million of the Company's common stock. During the first nine
months of 1999, the Company repurchased 965,100 shares of common stock for $26.6
million, or an average price of $27.61 per share. As of October 30, 1999, the
Company's remaining repurchase authorization was $42.4 million.
The Company has a $200 million unsecured credit agreement with a group of banks
which expires July 9, 2002. The agreement includes a $50 million sub-facility
for letters of credit, of which $3.4 million was outstanding at October 30,
1999. The Company is required to pay an annual facility fee which is currently
0.10% of the total commitment. Interest on borrowings is payable at the
Company's option either at (a) the Eurodollar rate plus a margin which is
currently 0.25%, (b) the agent bank's prime rate or (c) a rate determined by
competitive bidding. The facility fee and Eurodollar margin are both subject to
change based upon the Company's fixed charge coverage ratio. The agreement
contains covenants which, among other things, include minimum net worth and
fixed charge coverage requirements and a maximum funded debt-to-capital
limitation and prohibit the payment of cash dividends on the Company's common
stock. In September 1999, the agreement was amended to generally limit the
cumulative repurchase of the Company's common stock to $50 million plus 50% of
Net Income (as defined by the agreement) after January 30, 1998.
The Company also maintains a separate $38 million facility for letters of
credit, primarily to support the purchase of inventories, of which $2.7 million
was outstanding at October 30, 1999, and an additional $20 million uncommitted
credit line for short-term borrowings.
Increases in merchandise inventories and accounts payable since the end of the
previous fiscal year were due mainly to normal seasonal requirements and new
stores. Increases in inventories and accounts payable compared to the end of
last year's third quarter were due primarily to new stores.
Cash and cash equivalents totalled $7.6 million as of October 30, 1999, and
there were no borrowings outstanding on that date. The Company expects that its
current resources, together with anticipated cash flow from operations, will be
sufficient to finance its operations through the fiscal year ending February 3,
2001. However, the Company may from time to time seek to obtain additional
financing.
Factors Which Could Affect Future Operating Results
- ---------------------------------------------------
This report contains a number of "forward-looking statements," including
statements regarding the expected impact of changes in membership fees and the
Company's medical benefit program for employees, the expected effective income
tax rate for 1999, planned capital expenditures, planned store openings, Year
2000 compliance and other information with respect to the Company's plans and
strategies. Any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans,"
"estimates," "expects" and similar expressions are intended to identify forward-
looking statements. There are a number of important factors that could cause
actual events or the Company's actual results to differ materially from those
indicated by such forward-looking statements, including, without limitation:
economic and weather conditions; state and local regulation in the Company's
markets; competitive conditions; contingent liabilities under the Company's
indemnification agreement with The TJX Companies,
<PAGE>
Inc.; and events which might cause the Company's spin-off from Waban (now known
as HomeBase, Inc.) not to qualify for tax-free treatment. Each of these factors
is discussed in more detail in the Company's Annual Report on Form 10-K for the
fiscal year ended January 30, 1999.
Other factors which could affect future operating results of the Company
include, without limitation, the successful implementation of the Company's Year
2000 remediation plans, the success of the Company's key vendors and other third
parties in achieving Year 2000 compliance and new club opening plans discussed
above.
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company believes that its potential exposure to market risk as of October
30, 1999 is not material because of the short contractual maturities of its
cash, cash equivalents, marketable securities and bank debt. The Company has
not used derivative financial instruments.
<PAGE>
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10.7 BJ's Wholesale Club, Inc. 1997 Director Stock Option
Plan (as amended through May 27, 1999)*
10.13a Amended and Restated Change of Control Severance
Agreement between the Company and John J. Nugent*
10.19 Amended and Restated Form of Change of Control Severance
Agreement between the Company and officers of the
Company*
10.22b Second Amendment dated as of September 21, 1999 to Credit
Agreement dated July 9, 1997
27.0 Financial Data Schedule
* Management contract or other compensatory plan or
arrangement.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K with the
Securities and Exchange Commission during the quarter ended
October 30, 1999.
<PAGE>
SIGNATURES
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.
BJ'S WHOLESALE CLUB, INC.
-------------------------
(Registrant)
Date: December 10, 1999 /s/ JOHN J. NUGENT
-------------------------- ----------------------------------
John J. Nugent
President and Chief Executive Officer
(Principal Executive Officer)
Date: December 10, 1999 /s/ FRANK D. FORWARD
-------------------------- ----------------------------------
Frank D. Forward
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
EXHIBIT 10.7
As amended through May 27, 1999
BJ'S WHOLESALE CLUB, INC.
1997 DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1997 Director Stock Option Plan (the "Plan") of BJ's
Wholesale Club, Inc. (the "Company") is to encourage ownership in the Company by
non-employee directors of the Company whose continued services are considered
essential to the Company's future progress and to provide them with a further
incentive to remain as directors of the Company.
2. ADMINISTRATION
The Board of Directors shall supervise and administer the Plan. Grants of
stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic in accordance with Section 5. However, all questions
of interpretation of the Plan or of any options issued under it shall be
determined by the Board of Directors and such determination shall be final and
binding upon all persons having an interest in the Plan. The Board of Directors
may, to the full extent permitted by or consistent with applicable laws or
regulations, delegate any or all of its powers under the Plan to a committee
appointed by the Board of Directors, and if a committee is so appointed, all
references to the Board of Directors in the Plan shall mean and relate to such
committee.
3. PARTICIPATION IN THE PLAN
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. STOCK SUBJECT TO THE PLAN
(a) The maximum number of shares which may be issued under the Plan shall
be 150,000 shares of the Company's Common Stock, par value $0.01 per share
("Common Stock"), subject to adjustment as provided in Section 8 of the Plan.
(b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares allocable to the
unexercised portion of such option shall again become available for grant
pursuant to the Plan.
(c) All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended to date and as it may be amended from time to time (the
"Code").
(d) Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
<PAGE>
5. TERMS, CONDITIONS AND FORM OF OPTIONS
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) Option Grant Dates and Number of Options.
----------------------------------------
(1) Annual Grants. Upon the date of each annual meeting of the
-------------
stockholders of the Company held after the Distribution Date (as defined in
Section 6(a)), the Company shall grant (i) to each eligible director elected as
a director for the first time at such meeting (other than persons who were
directors of Waban Inc. immediately prior to the Distribution Date) an option
for 5,000 shares of Common Stock and (ii) to each other eligible director
continuing in office after, or elected at, such meeting (including, without
limitation, any directors of Waban Inc. who became directors of the Company on
or prior to the Distribution Date) an option for 2,500 shares of Common Stock.
For purposes of this paragraph, and subject to the parenthetical in clause (i)
in the previous sentence, each eligible director initially elected (other than
at an annual meeting of stockholders or within six months after an annual
meeting of stockholders) shall be deemed to have been elected as a director for
the first time at the next annual meeting of stockholders following his or her
election as a director (provided such person is serving as a director on the
date of such annual meeting). The Company shall grant to each eligible director
first elected as a director within six months after an annual meeting of
stockholders an option for 5,000 shares of Common Stock, effective upon such
election.
(2) Replacement Options.
-------------------
(A) General. Following the Distribution Date, the Company will
-------
grant options under the Plan in replacement or adjustment of options previously
granted under the Waban Inc. 1995 Director Stock Option Plan (the "Waban Plan").
Except as provided below, the vesting schedule and other terms of such options
shall be substantially similar to those of the applicable Waban option. For
purposes of this section, the term "Stock Value Ratio" means the number
determined by dividing the Waban Common Stock Value by the BJI Common Stock
Value, where (i) the "Waban Common Stock Value" equals the average of the
closing prices of Waban Common Stock on the NYSE during the ten trading days
immediately preceding the Distribution Date and (ii) the "BJI Common Stock
Value" equals the average of the closing prices of BJI Common Stock on the NYSE
during the ten trading days immediately following the Distribution Date.
(B) For Eligible Directors of BJI Who Will Not Be Waban
---------------------------------------------------
Directors. The Company shall grant a replacement option to each eligible
- ---------
director who is no longer serving as a director of Waban immediately after the
Distribution Date, upon the cancellation, forfeiture or other expiration of each
unexercised option under the Waban Plan held by such eligible director. Each
such replacement option shall (i) be for the number of shares of Common Stock
determined by multiplying the number of shares of Waban Common Stock subject to
the
2
<PAGE>
applicable Waban option by the Stock Value Ratio (rounded down to the nearest
whole share) and (ii) have an exercise price determined by dividing the per
share exercise price of the applicable Waban option by the Stock Value Ratio
(rounded up to the next higher cent).
(C) For Eligible Directors of BJI Who Will Also Be Waban
----------------------------------------------------
Directors. The Company shall grant an adjustment option to each eligible
- ---------
director who is continuing to serve as a director of Waban immediately after the
Distribution Date. Such adjustment option shall (i) be for the same aggregate
number of shares of Common Stock as the unexercised portion of the applicable
Waban option and (ii) have an exercise price determined by dividing the per
share exercise price of the applicable Waban option by the Stock Value Ratio
(rounded up to the next higher cent).
(b) Option Exercise Price. Except as set forth in Section 5(a)(2) with
---------------------
respect to replacement options, the option exercise price per share for each
option granted under the Plan shall equal the closing sale price per share of
the Common Stock on the New York Stock Exchange on the date of grant (or if no
such price is reported on such date such price as reported on the nearest
preceding day) as reported in The Wall Street Journal (Eastern Edition). If the
Common Stock is instead listed on another nationally recognized securities
exchange on the date of grant, the option exercise price per share for each
option granted under the Plan shall equal the reported closing sale price per
share of the Common Stock by such exchange on the date of grant or if the Common
Stock is traded on the Nasdaq National Market or another automated quotation
system, the last reported sale price per share of the Company's Common Stock on
such system on the date of grant (or if no such price is reported on such date,
such price as reported on the nearest preceding day) as reported in The Wall
Street Journal (Eastern Edition). If the Common Stock is not listed on an
exchange or reported in an automated quotation system, the fair market value per
share on the date of grant shall be determined by the Board of Directors.
(c) Transferability of Options. Except as the Board may otherwise
--------------------------
determine or provide in an option granted under the Plan, options shall not be
sold, assigned, transferred, pledged or otherwise encumbered by the person to
whom they are granted, either voluntarily or by operation of law, except by will
or the laws of descent and distribution, and, during the life of the
Participant, shall be exercisable only by the Participant. References to a
Participant, to the extent relevant in the context, shall include references to
authorized transferees.
(d) Exercise Period. Except as set forth in Section 5(a)(2) with respect
---------------
to replacement options, each option shall become exercisable on a cumulative
basis as to one-third of the shares subject to the option on each of the first
day of the month of the first three anniversaries of the date of grant of such
option. In the event an optionee ceases to serve as a director, each such
option may be exercised by the optionee (or, in the event of the optionee's
death, by the optionee's administrator, executor or heirs), at any time within
12 months after the optionee ceases to serve as a director, to the extent such
option was exercisable at the time of such cessation of service.
Notwithstanding the foregoing, no option shall be exercisable after the
expiration of ten years from the date of grant.
3
<PAGE>
(e) Exercise Procedure. Options may be exercised only by written notice to
------------------
the Company at its principal office accompanied by (i) payment in cash or by
certified or bank check of the full consideration for the shares as to which
they are exercised, (ii) delivery of outstanding shares of the Company's Common
Stock (which, in the case of shares acquired from the Company, have been
outstanding for at least six months) having a fair market value on the last
business day preceding the date of exercise equal to the option exercise price,
or (iii) an irrevocable undertaking by a broker (who is a member of the New York
Stock Exchange) to deliver promptly to the Company sufficient funds to pay the
exercise price or delivery of irrevocable instructions to a broker (who is a
member of the New York Stock Exchange) to deliver promptly to the Company cash
or a check sufficient to pay the exercise price.
6. EFFECTIVE DATE AND TERMINATION
(a) The effective date of the Plan is the date on which Waban Inc.
distributes to its stockholders, on a pro-rata basis, all of the then
outstanding shares of common stock of the Company (the "Distribution Date").
(b) Unless sooner terminated in accordance with its terms, the Plan shall
terminate on the day following the date of the Company's annual meeting of
stockholders for the year 2002. Options outstanding on such date shall continue
to have force and effect in accordance with the provisions of the instruments
evidencing such options.
7. LIMITATION OF RIGHTS
(a) No Right to Continue as a Director. Neither the Plan, nor the granting
----------------------------------
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no rights
-----------------------------------
as a stockholder with respect to the shares covered by such optionee's options
until the date of the issuance to such optionee of a stock certificate therefor,
and no adjustment will be made for dividends or other rights (except as provided
in Section 8) for which the record date is prior to the date such certificate is
issued.
(c) Compliance with Securities Laws. Each option shall be subject to the
-------------------------------
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or the disclosure of non-
public information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein shall be deemed to
4
<PAGE>
require the Company to apply for or to obtain such listing, registration or
qualification, or to satisfy such condition.
8. CHANGES IN COMMON STOCK
(a) Subject to paragraph (b) below, if the outstanding shares of Common
Stock are increased, decreased or exchanged for a different number or kind of
shares or other securities, or if additional shares or new or different shares
or other securities are distributed with respect to such shares of Common Stock
or other securities, through merger, consolidation, sale of all or substantially
all of the assets of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution with respect to such shares of Common Stock, or other securities,
an appropriate and proportionate adjustment will be made in (i) the maximum
number and kind of shares reserved for issuance under the Plan, (ii) the number
and kind of shares or other securities subject to then outstanding options under
the Plan, and (iii) the price for each share subject to any then outstanding
options under the Plan, without changing the aggregate purchase price as to
which such options remain exercisable. No fractional shares will be issued
under the Plan on account of any such adjustments.
(b) In the event that the Company is merged or consolidated into or with
another corporation (in which consolidation or merger the stockholders of the
Company receive distributions of cash or securities of another issuer as a
result thereof), or in the event that all or substantially all of the assets of
the Company are acquired by any other person or entity, or in the event of a
reorganization or liquidation of the Company, all unexercised options will
become exercisable in full beginning 20 days prior to the consummation of such
merger, consolidation, acquisition, reorganization or liquidation and, to the
extent not exercised, shall terminate effective immediately after the
consummation of such merger, consolidation, acquisition, reorganization or
liquidation.
9. AMENDMENT OF THE PLAN
The Board of Directors may suspend or discontinue the Plan or amend it in
any respect whatsoever; provided, however, that without approval of the
stockholders of the Company no revision or amendment shall change the number of
shares subject to the Plan (except as provided in Section 8).
10. NOTICE
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
11. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the internal laws of the Commonwealth of Massachusetts
(without regard to any applicable conflicts of law).
5
<PAGE>
Exhibit 10.13a
John J. Nugent
--------------
CHANGE OF CONTROL SEVERANCE AGREEMENT
-------------------------------------
THIS AGREEMENT between BJ's Wholesale Club, Inc., a Delaware corporation
(the "Company",), and John J. Nugent ("Executive"), dated as of February 4,
1999.
Executive is a key executive of the Company or a Subsidiary and an integral
part of its management.
The Company recognizes that the possibility of a Change of Control or
Potential Change of Control of the Company may result in the departure or
distraction of management to the detriment of the Company and its shareholders
and wishes to modify and restate the agreement previously applicable under such
circumstances.
The Company wishes to assure Executive of fair severance should Executive's
employment terminate in specified circumstances following a Change of Control or
Potential Change of Control of the Company and to assure Executive of certain
other benefits upon such event.
In consideration of Executive's continued employment with the Company or a
Subsidiary and other good and valuable consideration, the parties agree as
follows:
1. Benefits Upon Change of Control.
-------------------------------
1.1 In General. Within 30 days following the earlier of a Change of
----------
Control or Potential Change of Control (such earlier event to be a "Control
Event") as long as this Agreement had not been terminated under Section 8.6 at
the time of the Control Event, then whether or not Executive's employment has
been terminated following the Control Event, the Company shall pay to Executive
the following in a lump sum:
(a) an amount equal to the product of (i) the "Target Bonus" under the
Company's Management Incentive Plan or any other annual incentive plan
which is applicable to Executive for the fiscal year in which the Control
Event occurs (or if the Target Bonus is reduced within 180 days before the
commencement of a Standstill Period, the "Target Bonus" applicable to
Executive for the fiscal year in which such reduction occurred) and (ii) a
fraction, the numerator of which is the number of days in such fiscal year
prior to the Control Event and the denominator of which is 365; and
<PAGE>
(b) if Executive is a participant in a performance-based long-range
incentive plan at the time of a Control Event, such amount as is required
to be paid to Executive upon a Control Event pursuant to the provisions of
such plan; provided, that if such incentive plan does not provide for an
automatic payment on the earlier of a Change of Control or a Potential
Change of Control, then any payment under such incentive plan shall be made
only as and when provided for in such incentive plan even though the
benefit under Section 1.1(a) above has been paid previously.
1.2 Benefits Following Qualified Termination of Employment. Executive
------------------------------------------------------
shall be entitled to the following benefits upon a Qualified Termination:
(a) Within 30 days following the Date of Termination, the Company
shall pay to Executive the following in a lump sum:
(i) an amount equal to three times Executive's Base Salary for
one year at the rate in effect immediately prior to the Date of
Termination or, if higher, the Control Event (or if Executive's Base
Salary was reduced within 180 days before the commencement of a
Standstill Period, the rate in effect immediately prior to such
reduction), plus the accrued and unpaid portion of Executive's Base
Salary through the Date of Termination. Any payments made to Executive
under any long term disability plan of the Company with respect to the
three years following termination of employment shall be offset
against such three times Base Salary payment. Executive shall promptly
make reimbursement payments to the Company to the extent any such
disability payments are received by Executive after the Base Salary
payment; and
(ii) an amount equal to three times Executive's automobile
allowance for one year at the rate in effect immediately prior to the
Date of Termination or, if higher, the Control Event (or if such
automobile allowance was reduced within 180 days before the
commencement of a Standstill Period, the rate in effect immediately
prior to such reduction unless such reduction was offset by an
increase in Base Salary during such 180-day period), plus any portion
of Executive's automobile allowance payable but unpaid through the
Date of Termination; and
(iii) an amount equal to three times the Target Bonus amount, as
defined and determined under Section 1.1(a) above without any
fractional adjustment.
(b) Until the third anniversary of the Date of Termination, the
Company shall maintain in full force and effect for the continued benefit
of Executive and Executive's family all life insurance and medical
insurance (other than long-term disability) plans and programs in which
Executive was entitled to participate immediately prior to the Control
Event (or if Executive's title was changed to a level below that of
Executive's Current Title within 180 days before the commencement of a
Standstill Period, all such plans and programs in which Executive was
entitled to participate immediately prior to such change,
-2-
<PAGE>
if the benefits thereunder are greater), provided that Executive's
continued participation is possible under the general terms and provisions
of such plans and programs. In the event that participation in such plans
or programs is not available to Executive for any reason, including
termination of the plan, the Company shall arrange upon comparable terms to
provide Executive with benefits substantially similar to those which
Executive is entitled to receive under such plans and programs.
Notwithstanding the foregoing, the Company's obligations hereunder with
respect to life insurance or medical insurance plans and programs shall be
deemed satisfied to the extent (but only to the extent) of any such
insurance coverage or benefits provided by another employer.
(c) If Qualified Termination occurs by reason of Disability, the
Company shall maintain in full force and effect for the continued benefit
of Executive, disability benefits and/or disability insurance at the same
level to which Executive was entitled immediately prior to the Qualified
Termination.
1.3 Coordination With Certain Tax Rules.
-----------------------------------
(a) Notwithstanding any other provision of this Agreement, in the
event that the Company undergoes a Change in Ownership or Control (as
defined below), the Company shall not be obligated to provide to Executive
a portion of any "Contingent Compensation Payments" that Executive would
otherwise be entitled to receive to the extent necessary to eliminate any
"excess parachute payments" (as defined in Section 280G(b)(1) of the
Internal Revenue Code of 1986, as amended (the "Code")) for Executive. For
purposes of this Section 1.3, the Contingent Compensation Payments so
eliminated shall be referred to as the "Eliminated Payments" and the
aggregate amount (determined in accordance with Proposed Treasury
Regulation Section 1.280G-1, Q/A-30 or any successor provision) of the
Contingent Compensation Payments so eliminated shall be referred to as the
"Eliminated Amount."
(b) For purposes of this Section 1.3, the following terms shall have
the following respective meanings:
(i) "Change in Ownership or Control" shall mean a change in the
ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company determined in
accordance with Section 280G(b)(2) of the Code.
(ii) "Contingent Compensation Payments" shall mean any payment
(or benefit) in the nature of compensation that is made or made
available (under this Agreement or otherwise) to a "disqualified
individual" (as defined in Section 280G(c) of the Code) and that is
contingent (within the meaning of Section 280G(b)(2)(A)(i) of the
Code) on a Change in Ownership or Control of the Company.
(c) Any payments or other benefits otherwise due to the Executive
following a Change in Ownership or Control that could be characterized (as
reasonably determined by
-3-
<PAGE>
the Company) as Contingent Compensation Payments shall not be made until
the determination, pursuant to this Section 1.3(c), of which Contingent
Compensation Payments shall be treated as Eliminated Payments. Within 30
days after each date on which the Executive first becomes entitled to
receive (whether or not then due) a Contingent Compensation Payment
relating to such Change in Ownership or Control, the Company shall
determine and notify Executive (with reasonable detail regarding the basis
for its determinations) (i) which of such payments and benefits constitute
Contingent Compensation Payments and (ii) the Eliminated Amount. Within 30
days after delivery of such notice to Executive, Executive shall notify the
Company which Contingent Compensation Payments, or portions thereof (the
aggregate amount of which, determined in accordance with Proposed Treasury
Regulation Section 1.280G-1, Q/A-30 or any successor provision, shall be
equal to the Eliminated Amount), shall be treated as Eliminated Payments.
In the event that Executive fails to notify the Company pursuant to the
preceding sentence on or before the required date, the Contingent
Compensation Payments (or portions thereof) that shall be treated as
Eliminated Payments shall be determined by the Company in its absolute
discretion.
(d) The provisions of this Section 1.3 are intended to apply to any
and all payments or benefits available to Executive under this Agreement or
any other agreement or plan of the Company under which Executive receives
Contingent Compensation Payments.
1.4 Definitions. The terms defined in Exhibits A and B hereto are used
-----------
herein as so defined.
2. Noncompetition; No Mitigation of Damages; Other Severance Payments;
-------------------------------------------------------------------
Withholding.
- -----------
2.1 Noncompetition. Upon a Qualified Termination, any agreement by
--------------
Executive not to engage in competition with the Company subsequent to the
termination of Executive's employment, whether contained in an employment
contract or other agreement, shall no longer be effective.
2.2 No Duty to Mitigate Damages. Executive's benefits under this Agreement
---------------------------
shall be considered severance pay in consideration of Executive's past service
and Executive's continued service from the date of this Agreement, and
Executive's entitlement thereto shall neither be governed by any duty to
mitigate Executive's damages by seeking further employment nor offset by any
compensation which Executive may receive from future employment.
2.3 Other Severance Payments. In the event that Executive has an
------------------------
employment contract or any other agreement with the Company (or a Subsidiary)
which entitles Executive to severance payments upon the termination of
Executive's employment with the Company, the amount of any such severance
payments shall be deducted from the payments to be made under this Agreement.
-4-
<PAGE>
2.4 Withholding. Anything to the contrary notwithstanding, all payments
-----------
required to be made by the Company hereunder to Executive shall be subject to
the withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation.
3. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or the breach thereof, shall be settled exclusively by
arbitration in Boston, Massachusetts in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
4. Legal Fees and Expenses. The Company shall pay all legal fees and
-----------------------
expenses, including, but not limited to, counsel fees, stenographer fees,
printing costs, etc. reasonably incurred by Executive in contesting or disputing
that the termination of Executive's employment during a Standstill Period is for
Cause or other than for good reason (as defined in paragraph (k) of Exhibit A)
or in obtaining any right or benefit to which Executive is entitled under this
Agreement. Any amount payable under this Agreement that is not paid when due
shall accrue interest at the prime rate as from time to time in effect at
BankBoston, N.A., or its successor, until paid in full.
5. Notice of Termination. During a Standstill Period, Executive's
---------------------
employment may be terminated by the Company (or a Subsidiary) only upon 30 days'
written notice to Executive.
6. Notices. All notices shall be in writing and shall be deemed given
-------
five days after mailing in the continental United States by registered or
certified mail, or upon personal receipt after delivery, telex, telecopy or
telegram, to the party entitled thereto at the address stated below or to such
changed address as the addressee may have given by a similar notice:
To the Company: BJ's Wholesale Club, Inc.
One Mercer Road
Natick, MA 01760
Attention: Chairman of the Board
To Executive: At Executive's home address, as last shown on
the records of the Company
7. Severability. In the event that any provision of this Agreement shall
------------
be determined to be invalid or unenforceable, such provision shall be
enforceable in any other jurisdiction in which valid and enforceable and in any
event the remaining provisions shall remain in full force and effect to the
fullest extent permitted by law.
-5-
<PAGE>
8. General Provisions.
------------------
8.1 Binding Agreement. This Agreement shall be binding upon and inure to
-----------------
the benefit of the parties and be enforceable by Executive's personal legal
representatives or successors. If Executive dies while any amounts would still
be payable to Executive hereunder, benefits would still be provided to
Executive's family hereunder or rights would still be exercisable by Executive
hereunder as if Executive had continued to live. Such amounts shall be paid to
Executive's estate, such benefits shall be provided to Executive's family and
such rights shall remain exercisable by Executive's estate in accordance with
the terms of this Agreement. This Agreement shall not otherwise be assignable by
Executive.
8.2 Successors. This Agreement shall inure to and be binding upon the
----------
Company's successors, including any successor to all or substantially all of the
Company's business and/or assets. The Company will require any successor to all
or substantially all of the business and/or assets of the Company by sale,
merger (where the Company is not the surviving corporation), lease or otherwise,
by agreement in form and substance satisfactory to Executive, to assume
expressly this Agreement. If the Company shall not obtain such agreement prior
to the effective date of any such succession, Executive shall have all rights
resulting from a Qualified Termination by Executive for good reason (as defined
in paragraph (k) of Exhibit A) under this Agreement. This Agreement shall not
otherwise be assignable by the Company.
8.3 Amendment or Modification; Waiver. This Agreement may not be amended
---------------------------------
unless agreed to in writing by Executive and the Company. No waiver by either
party of any breach of this Agreement shall be deemed a waiver of a subsequent
breach.
8.4 Titles. No provision of this Agreement is to be construed by reference
------
to the title of any section.
8.5 Continued Employment. This Agreement shall not give Executive any
--------------------
right of continued employment or any right to compensation or benefits from the
Company or any Subsidiary except the right specifically stated herein to certain
severance and other benefits, and shall not limit the Company's (or a
Subsidiary's) right to change the terms of or to terminate Executive's
employment, with or without Cause, at any time other than during a Standstill
Period, except as may be otherwise provided in a written employment agreement
between the Company (or a Subsidiary) and Executive.
8.6 Termination of Agreement Outside of Standstill Period. This Agreement
-----------------------------------------------------
shall be automatically terminated upon the first to occur of (i) the termination
of Executive's employment for any reason, whether voluntary or involuntary, at
any time other than during a Standstill Period or (ii) the 180th day after a
change in Executive's title to a level below that of Executive's Current Title
unless a Standstill Period was in effect on the date of such change or within
180 days thereafter or (iii) if Executive is employed by a Subsidiary of the
Company, the date on which the Subsidiary either ceases to be a Subsidiary of
the Company or sells or otherwise disposes of all or substantially all of its
assets, unless such event occurs during a Standstill
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<PAGE>
Period and Executive's employment shall have been terminated in a Qualified
Termination within 90 days of such event, or (iv) March 31, 2002; provided that
on March 31, 2000 and each March 31 thereafter, the termination date provided in
this clause (iv) shall be automatically extended for an additional year (the
"Date") (so that on March 31, 2000 the Date shall become March 31, 2003, and so
on) unless, not later than 90 days prior to any March 31, the Company shall have
given the Executive written notice that the term of this Agreement will not be
further extended.
8.7 Prior Agreement. This Agreement amends and restates and shall
---------------
supersede and replace any prior change of control severance agreement between
the Company or any of its subsidiaries, or any predecessor, and Executive.
8.8 Governing Law. The validity, interpretation, performance and
-------------
enforcement of this Agreement shall be governed by the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
BJ'S WHOLESALE CLUB, INC.
By /s/ Herbert J. Zarkin
------------------------------------
/s/ John J. Nugent
--------------------------------------
Executive: John J. Nugent
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<PAGE>
EXHIBIT A
---------
Definitions
-----------
The following terms as used in this Agreement shall have the following
meanings:
(a) "Base Salary" shall mean Executive's annual base salary, exclusive of
any bonus or other benefits Executive may receive.
(b) "Cause" shall mean (i) dishonesty, (ii) conviction of a felony, (iii)
gross neglect of duties (other than as a result of Incapacity, Disability or
death), or (iv) conflict of interest; provided that for purposes of clauses
(iii) or (iv) any such gross neglect or conflict shall continue for 30 days
after the Company gives written notice to Executive requesting the cessation of
such gross neglect or conflict, as the case may be.
In respect of any termination during a Standstill Period, Executive shall
not be deemed to have been terminated for Cause until the later to occur of (i)
the 30th day after notice of termination is given and (ii) the delivery to
Executive of a copy of a resolution duly adopted by the affirmative vote of not
less than a majority of the Company's directors at a meeting called and held for
that purpose (after reasonable notice to Executive), and at which Executive
together with Executive's counsel was given an opportunity to be heard, finding
that Executive was guilty of conduct described in the definition of "Cause"
above, and specifying the particulars thereof in detail; provided, however, that
-------- -------
the Company may suspend Executive and withhold payment of Executive's Base
Salary from the date that notice of termination is given until the earliest to
occur of (a) termination of Executive for Cause effected in accordance with the
foregoing procedures (in which case Executive shall not be entitled to
Executive's Base Salary for such period), (b) a determination by a majority of
the Company's directors that Executive was not guilty of the conduct described
in the definition of "Cause" above (in which case Executive shall be reinstated
and paid any of Executive's previously unpaid Base Salary for such period), or
(c) the 90th day after notice of termination is given (in which case Executive
shall be reinstated and paid any of Executive's previously unpaid Base Salary
for such period).
(c) "Change of Control" shall have the meaning set forth in Exhibit B.
(d) "Company" shall mean BJ's Wholesale Club, Inc. or any successor.
(e) "Current Title" shall mean Executive's title on the date 180 days prior
to the commencement of a Standstill Period.
(f) "Date of Termination" shall mean the date on which Executive's
employment is terminated.
(g) "Disability" shall have the meaning given it in the Company's long-term
disability plan. Executive's employment shall be deemed to be terminated for
Disability on the date on which Executive is entitled to receive long-term
disability compensation pursuant to such long-term disability plan.
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<PAGE>
(h) "Executive" shall mean the person named in the first paragraph of this
Agreement.
(i) "Incapacity" shall mean a disability (other than Disability within the
meaning of the definition in (g) above) or other impairment of health that
renders Executive unable to perform Executive's duties to the reasonable
satisfaction of the Board of Directors of the Company. If by reason of
Incapacity Executive is unable to perform Executive's duties for at least six
months in any 12-month period, upon written notice by the Company, the
employment of Executive shall be deemed to have terminated by reason of
Incapacity.
(j) "Potential Change of Control" shall mean:
(i) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control; or
(ii) the Board of Directors of the Company adopts a resolution that,
for purposes of this Agreement, a Potential Change of Control has occurred.
(k) "Qualified Termination" shall mean the termination of Executive's
employment during a Standstill Period (1) by the Company other than for Cause,
or (2) by Executive for good reason, or (3) by reason of death, Incapacity or
Disability.
For purposes of this definition, termination for "good reason" shall mean
the voluntary termination by Executive of Executive's employment (A) within 120
days after the occurrence without Executive's express written consent of any of
the events described in clauses (I), (II), (III), (IV), (V) or (VI) below,
provided that Executive gives notice to the Company at least 30 days in advance
requesting that the situation described in those clauses be remedied, and the
situation remains unremedied upon expiration of such 30-day period; (B) within
120 days after the occurrence without Executive's express written consent (which
must expressly refer to such consent as being given under this Agreement) of the
events described in clauses (VII) or (VIII) below, provided that Executive gives
notice to the Company at least 30 days in advance; or (C) upon occurrence of the
event described in clause (IX) below, provided that Executive gives notice to
the Company at least 30 days in advance:
(I) the assignment to Executive of any duties inconsistent with
Executive's positions, duties, responsibilities, reporting
requirements, and status with the Company (or a Subsidiary)
immediately prior to a Control Event, or a substantive change in
Executive's titles or offices as in effect immediately prior to a
Control Event, or any removal of Executive from or any failure to
reelect Executive to such positions, except in connection with the
termination of Executive's employment by the Company (or a
Subsidiary) for Cause or by Executive other than for good reason;
or any other action by the Company (or a Subsidiary) which results
in a diminishment in such position, authority, duties or
responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Company or the Subsidiary promptly
after receipt of notice thereof given by Executive; or
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<PAGE>
(II) Executive's rate of Base Salary for any fiscal year is less than
100 percent of the rate of Base Salary paid to Executive in the
completed fiscal year immediately preceding the Control Event, or
Executive's total cash compensation opportunities, including
salary, auto allowance, and incentives, for any fiscal year are
less than 100 percent of the total cash compensation opportunities
made available to Executive in the completed fiscal year
immediately preceding the Control Event, unless any such reduction
represents an overall reduction of no more than 5 percent of the
rate of Base Salary paid or cash compensation opportunities made
available, as the case may be, and affects all other executives in
the same organizational level (it being the Company's burden to
establish this fact); or
(III) the failure of the Company (or a Subsidiary) to continue in effect
any benefits or perquisites, or any pension, life insurance,
medical insurance or disability plan in which Executive was
participating immediately prior to the Control Event (the
"Benefits," individually, a "Benefit") unless the Company (or a
Subsidiary) provides Executive with substantially similar Benefits,
or the taking of any action by the Company (or a Subsidiary) that
would adversely affect Executive's participation in or materially
reduce any of Executive's Benefits or deprive Executive of any
material Benefit enjoyed by Executive immediately prior to the
Control Event, unless any elimination or reduction of any Benefit,
or any adverse effect on Executive's participation, has an
aggregate value equal to no more than 5 percent of the Benefits,
and affects all other executives in the same organizational level
(it being the Company's burden to establish this fact); or
(IV) any purported termination of Executive's employment by the Company
(or a Subsidiary) for Cause during a Standstill Period which is not
effected in compliance with paragraph (b) of this Exhibit; or
(V) any relocation of Executive of more than 40 miles from the place
where Executive was located at the time of the Control Event; or
(VI) any other breach by the Company of any provision of this Agreement;
or
(VII) the Company sells or otherwise disposes of, in one transaction or a
series of related transactions, assets or earning power aggregating
more than 30 percent of the assets (taken at asset value as stated
on the books of the Company determined in accordance with generally
accepted accounting principles consistently applied) or earning
power of the Company (on a non-consolidated basis) or the Company
and its Subsidiaries (on a consolidated basis) to any other Person
or Persons (as defined in Exhibit B); or
(VIII) if Executive is employed by a Subsidiary of the Company, such
Subsidiary either ceases to be a Subsidiary of the Company or sells
or otherwise disposes of, in one transaction or a series of related
transactions, assets or earning power aggregating more than 30
percent of the assets (taken at asset value as stated on the books
of the Subsidiary determined in accordance with generally accepted
accounting
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<PAGE>
principles consistently applied) or earning power of such
Subsidiary (on a non-consolidated basis) or such Subsidiary and its
subsidiaries (on a consolidated basis) to any other Person or
Persons (as defined in Exhibit B); or
(IX) the voluntary termination by Executive of Executive's employment at
any time during the period commencing eight months plus one day
after the Change of Control and ending 12 months after the Change
of Control, provided, that in the event of any such voluntary
--------
termination pursuant to this clause (IX), the Executive shall be
entitled to receive only one-third (1/3) of the lump sum amount
provided for in Section 1.2(a) of this Agreement and the benefits
provided for in Section 1.2(b) shall be provided for one year
rather than three years from the Date of Termination.
(l) "Standstill Period" shall be the period commencing on the date of a
Control Event and continuing until the close of business on the last business
day of the 24th calendar month following a Change of Control; provided, however,
if no Change of Control occurs within 12 months of a Potential Change of
Control, then the Standstill Period that began as a result of such Potential
Change of Control shall end on the close of business on the last business day of
the 12th calendar month following such Potential Change of Control.
(m) "Subsidiary" shall mean any corporation in which the Company owns,
directly or indirectly, 50 percent or more of the total combined voting power of
all classes of stock or with respect to determining the subsidiaries of a
Subsidiary in paragraph (k)(VIII), shall mean any corporation in which the
Subsidiary owns, directly or indirectly, 50 percent or more of the total
combined voting power of all classes of stock.
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<PAGE>
EXHIBIT B
---------
Definition of Change of Control
-------------------------------
A "Change of Control" shall mean:
(a) The acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
- -------- -------
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which satisfies the
criteria set forth in clauses (i), (ii) and (iii) of subsection (c) of this
definition; or
(b) Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
-------- -------
individual becoming a director subsequently to the date hereof whose election,
or nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board (except that this proviso shall not apply to any individual whose initial
assumption of office as a director occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board); or
(c) Consummation of a reorganization, merger or consolidation involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless, immediately
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, of the
corporation resulting from such Business Combination (which as used in Section
(c) of this definition shall include, without limitation, a corporation which as
a result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination, of the outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related
-12-
<PAGE>
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination, or the combined voting power of the
then-outstanding voting securities of such corporation and (iii) at least half
of the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
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<PAGE>
EXHIBIT 10.19
CHANGE OF CONTROL SEVERANCE AGREEMENT
-------------------------------------
THIS AGREEMENT between BJ's Wholesale Club, Inc., a Delaware corporation
(the "Company",), and ("Executive"), dated
as of February 4, 1999.
Executive is a key executive of the Company or a Subsidiary and an integral
part of its management.
The Company recognizes that the possibility of a Change of Control or
Potential Change of Control of the Company may result in the departure or
distraction of management to the detriment of the Company and its shareholders
and wishes to modify and restate the agreement previously applicable under such
circumstances.
The Company wishes to assure Executive of fair severance should Executive's
employment terminate in specified circumstances following a Change of Control or
Potential Change of Control of the Company and to assure Executive of certain
other benefits upon such event.
In consideration of Executive's continued employment with the Company or a
Subsidiary and other good and valuable consideration, the parties agree as
follows:
1. Benefits Upon Change of Control.
-------------------------------
1.1 In General. Within 30 days following the earlier of a Change of
----------
Control or Potential Change of Control (such earlier event to be a "Control
Event") as long as this Agreement had not been terminated under Section 8.6 at
the time of the Control Event, then whether or not Executive's employment has
been terminated following the Control Event, the Company shall pay to Executive
the following in a lump sum:
(a) an amount equal to the product of (i) the "Target Bonus" under
the Company's Management Incentive Plan or any other annual incentive plan
which is applicable to Executive for the fiscal year in which the Control
Event occurs (or if the Target Bonus is reduced within 180 days before the
commencement of a Standstill Period, the "Target Bonus" applicable to
Executive for the fiscal year in which such reduction occurred) and (ii) a
fraction, the numerator of which is the number of days in such fiscal year
prior to the Control Event and the denominator of which is 365; and
<PAGE>
(b) if Executive is a participant in a performance-based long-range
incentive plan at the time of a Control Event, such amount as is required
to be paid to Executive upon a Control Event pursuant to the provisions of
such plan; provided, that if such incentive plan does not provide for an
automatic payment on the earlier of a Change of Control or a Potential
Change of Control, then any payment under such incentive plan shall be made
only as and when provided for in such incentive plan even though the
benefit under Section 1.1(a) above has been paid previously.
1.2 Benefits Following Qualified Termination of Employment. Executive
------------------------------------------------------
shall be entitled to the following benefits upon a Qualified Termination:
(a) Within 30 days following the Date of Termination, the Company
shall pay to Executive the following in a lump sum:
(i) an amount equal to two times Executive's Base Salary for
one year at the rate in effect immediately prior to the Date of
Termination or, if higher, the Control Event (or if Executive's Base
Salary was reduced within 180 days before the commencement of a
Standstill Period, the rate in effect immediately prior to such
reduction), plus the accrued and unpaid portion of Executive's Base
Salary through the Date of Termination. Any payments made to Executive
under any long term disability plan of the Company with respect to the
two years following termination of employment shall be offset against
such two times Base Salary payment. Executive shall promptly make
reimbursement payments to the Company to the extent any such
disability payments are received by Executive after the Base Salary
payment; and
(ii) an amount equal to two times Executive's automobile
allowance for one year at the rate in effect immediately prior to the
Date of Termination or, if higher, the Control Event (or if such
automobile allowance was reduced within 180 days before the
commencement of a Standstill Period, the rate in effect immediately
prior to such reduction unless such reduction was offset by an
increase in Base Salary during such 180-day period), plus any portion
of Executive's automobile allowance payable but unpaid through the
Date of Termination; and
(iii) an amount equal to two times the Target Bonus amount, as
defined and determined under Section 1.1(a) above without any
fractional adjustment.
(b) Until the second anniversary of the Date of Termination, the
Company shall maintain in full force and effect for the continued benefit
of Executive and Executive's family all life insurance and medical
insurance (other than long-term disability) plans and programs in which
Executive was entitled to participate immediately prior to the Control
Event (or if Executive's title was changed to a level below that of
Executive's Current Title within 180 days before the commencement of a
Standstill Period, all such plans and programs in which Executive was
entitled to participate immediately prior to such change,
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<PAGE>
if the benefits thereunder are greater), provided that Executive's
continued participation is possible under the general terms and provisions
of such plans and programs. In the event that participation in such plans
or programs is not available to Executive for any reason, including
termination of the plan, the Company shall arrange upon comparable terms to
provide Executive with benefits substantially similar to those which
Executive is entitled to receive under such plans and programs.
Notwithstanding the foregoing, the Company's obligations hereunder with
respect to life insurance or medical insurance plans and programs shall be
deemed satisfied to the extent (but only to the extent) of any such
insurance coverage or benefits provided by another employer.
(c) If Qualified Termination occurs by reason of Disability, the
Company shall maintain in full force and effect for the continued benefit
of Executive, disability benefits and/or disability insurance at the same
level to which Executive was entitled immediately prior to the Qualified
Termination.
1.3 Coordination With Certain Tax Rules.
-----------------------------------
(a) Notwithstanding any other provision of this Agreement, in the
event that the Company undergoes a Change in Ownership or Control (as
defined below), the Company shall not be obligated to provide to Executive
a portion of any "Contingent Compensation Payments" that Executive would
otherwise be entitled to receive to the extent necessary to eliminate any
"excess parachute payments" (as defined in Section 280G(b)(1) of the
Internal Revenue Code of 1986, as amended (the "Code")) for Executive. For
purposes of this Section 1.3, the Contingent Compensation Payments so
eliminated shall be referred to as the "Eliminated Payments" and the
aggregate amount (determined in accordance with Proposed Treasury
Regulation Section 1.280G-1, Q/A-30 or any successor provision) of the
Contingent Compensation Payments so eliminated shall be referred to as the
"Eliminated Amount."
(b) For purposes of this Section 1.3, the following terms shall have
the following respective meanings:
(i) "Change in Ownership or Control" shall mean a change in the
ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company determined in
accordance with Section 280G(b)(2) of the Code.
(ii) "Contingent Compensation Payments" shall mean any payment
(or benefit) in the nature of compensation that is made or made
available (under this Agreement or otherwise) to a "disqualified
individual" (as defined in Section 280G(c) of the Code) and that is
contingent (within the meaning of Section 280G(b)(2)(A)(i) of the
Code) on a Change in Ownership or Control of the Company.
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<PAGE>
(c) Any payments or other benefits otherwise due to the Executive
following a Change in Ownership or Control that could be characterized (as
reasonably determined by the Company) as Contingent Compensation Payments
shall not be made until the determination, pursuant to this Section 1.3(c),
of which Contingent Compensation Payments shall be treated as Eliminated
Payments. Within 30 days after each date on which the Executive first
becomes entitled to receive (whether or not then due) a Contingent
Compensation Payment relating to such Change in Ownership or Control, the
Company shall determine and notify Executive (with reasonable detail
regarding the basis for its determinations) (i) which of such payments and
benefits constitute Contingent Compensation Payments and (ii) the
Eliminated Amount. Within 30 days after delivery of such notice to
Executive, Executive shall notify the Company which Contingent Compensation
Payments, or portions thereof (the aggregate amount of which, determined in
accordance with Proposed Treasury Regulation Section 1.280G-1, Q/A-30 or
any successor provision, shall be equal to the Eliminated Amount), shall be
treated as Eliminated Payments. In the event that Executive fails to notify
the Company pursuant to the preceding sentence on or before the required
date, the Contingent Compensation Payments (or portions thereof) that shall
be treated as Eliminated Payments shall be determined by the Company in its
absolute discretion.
(d) The provisions of this Section 1.3 are intended to apply to any
and all payments or benefits available to Executive under this Agreement or
any other agreement or plan of the Company under which Executive receives
Contingent Compensation Payments.
1.4 Definitions. The terms defined in Exhibits A and B hereto are used
-----------
herein as so defined.
2. Noncompetition; No Mitigation of Damages; Other Severance Payments;
-------------------------------------------------------------------
Withholding.
- -----------
2.1 Noncompetition. Upon a Qualified Termination, any agreement by
--------------
Executive not to engage in competition with the Company subsequent to the
termination of Executive's employment, whether contained in an employment
contract or other agreement, shall no longer be effective.
2.2 No Duty to Mitigate Damages. Executive's benefits under this
---------------------------
Agreement shall be considered severance pay in consideration of Executive's
past service and Executive's continued service from the date of this Agreement,
and Executive's entitlement thereto shall neither be governed by any duty to
mitigate Executive's damages by seeking further employment nor offset by any
compensation which Executive may receive from future employment.
2.3 Other Severance Payments. In the event that Executive has an
------------------------
employment contract or any other agreement with the Company (or a Subsidiary)
which entitles Executive to severance payments upon the termination of
Executive's employment with the Company, the amount of any such severance
payments shall be deducted from the payments to be made under this Agreement.
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<PAGE>
2.4 Withholding. Anything to the contrary notwithstanding, all payments
-----------
required to be made by the Company hereunder to Executive shall be subject to
the withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation.
3. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or the breach thereof, shall be settled exclusively by
arbitration in Boston, Massachusetts in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
4. Legal Fees and Expenses. The Company shall pay all legal fees and
-----------------------
expenses, including, but not limited to, counsel fees, stenographer fees,
printing costs, etc. reasonably incurred by Executive in contesting or disputing
that the termination of Executive's employment during a Standstill Period is for
Cause or other than for good reason (as defined in paragraph (k) of Exhibit A)
or in obtaining any right or benefit to which Executive is entitled under this
Agreement. Any amount payable under this Agreement that is not paid when due
shall accrue interest at the prime rate as from time to time in effect at
BankBoston, N.A., or its successor, until paid in full.
5. Notice of Termination. During a Standstill Period, Executive's
---------------------
employment may be terminated by the Company (or a Subsidiary) only upon 30
days' written notice to Executive.
6. Notices. All notices shall be in writing and shall be deemed given
-------
five days after mailing in the continental United States by registered or
certified mail, or upon personal receipt after delivery, telex, telecopy or
telegram, to the party entitled thereto at the address stated below or to such
changed address as the addressee may have given by a similar notice:
To the Company: BJ's Wholesale Club, Inc.
One Mercer Road
Natick, MA 01760
Attention: President
To Executive: At Executive's home address, as last shown
on the records of the Company.
7. Severability. In the event that any provision of this Agreement shall
------------
be determined to be invalid or unenforceable, such provision shall be
enforceable in any other jurisdiction in which valid and enforceable and in any
event the remaining provisions shall remain in full force and effect to the
fullest extent permitted by law.
8. General Provisions.
------------------
8.1 Binding Agreement. This Agreement shall be binding upon and inure to
-----------------
the benefit of the parties and be enforceable by Executive's personal legal
representatives or
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<PAGE>
successors. If Executive dies while any amounts would still be payable to
Executive hereunder, benefits would still be provided to Executive's family
hereunder or rights would still be exercisable by Executive hereunder as if
Executive had continued to live. Such amounts shall be paid to Executive's
estate, such benefits shall be provided to Executive's family and such rights
shall remain exercisable by Executive's estate in accordance with the terms of
this Agreement. This Agreement shall not otherwise be assignable by Executive.
8.2 Successors. This Agreement shall inure to and be binding upon the
----------
Company's successors, including any successor to all or substantially all of the
Company's business and/or assets. The Company will require any successor to all
or substantially all of the business and/or assets of the Company by sale,
merger (where the Company is not the surviving corporation), lease or otherwise,
by agreement in form and substance satisfactory to Executive, to assume
expressly this Agreement. If the Company shall not obtain such agreement prior
to the effective date of any such succession, Executive shall have all rights
resulting from a Qualified Termination by Executive for good reason (as defined
in paragraph (k) of Exhibit A) under this Agreement. This Agreement shall not
otherwise be assignable by the Company.
8.3 Amendment or Modification; Waiver. This Agreement may not be amended
---------------------------------
unless agreed to in writing by Executive and the Company. No waiver by either
party of any breach of this Agreement shall be deemed a waiver of a subsequent
breach.
8.4 Titles. No provision of this Agreement is to be construed by
------
reference to the title of any section.
8.5 Continued Employment. This Agreement shall not give Executive any
--------------------
right of continued employment or any right to compensation or benefits from the
Company or any Subsidiary except the right specifically stated herein to certain
severance and other benefits, and shall not limit the Company's (or a
Subsidiary's) right to change the terms of or to terminate Executive's
employment, with or without Cause, at any time other than during a Standstill
Period, except as may be otherwise provided in a written employment agreement
between the Company (or a Subsidiary) and Executive.
8.6 Termination of Agreement Outside of Standstill Period. This Agreement
-----------------------------------------------------
shall be automatically terminated upon the first to occur of (i) the termination
of Executive's employment for any reason, whether voluntary or involuntary, at
any time other than during a Standstill Period or (ii) the 180/th/ day after a
change in Executive's title to a level below that of Executive's Current Title
unless a Standstill Period was in effect on the date of such change or within
180 days thereafter or (iii) if Executive is employed by a Subsidiary of the
Company, the date on which the Subsidiary either ceases to be a Subsidiary of
the Company or sells or otherwise disposes of all or substantially all of its
assets, unless such event occurs during a Standstill Period and Executive's
employment shall have been terminated in a Qualified Termination within 90 days
of such event, or (iv) March 31, 2002; provided that on March 31, 2000 and each
March 31 thereafter, the termination date provided in this clause (iv) shall be
automatically extended for an additional year (the "Date") (so that on March 31,
2000 the Date shall become
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<PAGE>
March 31, 2003, and so on) unless, not later than 90 days prior to any March 31,
the Company shall have given the Executive written notice that the term of this
Agreement will not be further extended.
8.7 Prior Agreement. This Agreement amends and restates and shall
---------------
supersede and replace any prior change of control severance agreement between
the Company or any of its subsidiaries, or any predecessor, and Executive.
8.8 Governing Law. The validity, interpretation, performance and
-------------
enforcement of this Agreement shall be governed by the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
BJ'S WHOLESALE CLUB, INC.
By___________________________________
_____________________________________
Executive:
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<PAGE>
EXHIBIT A
---------
Definitions
-----------
The following terms as used in this Agreement shall have the following
meanings:
(a) "Base Salary" shall mean Executive's annual base salary, exclusive of
any bonus or other benefits Executive may receive.
(b) "Cause" shall mean (i) dishonesty, (ii) conviction of a felony, (iii)
gross neglect of duties (other than as a result of Incapacity, Disability or
death), or (iv) conflict of interest; provided that for purposes of clauses
(iii) or (iv) any such gross neglect or conflict shall continue for 30 days
after the Company gives written notice to Executive requesting the cessation of
such gross neglect or conflict, as the case may be.
In respect of any termination during a Standstill Period, Executive shall
not be deemed to have been terminated for Cause until the later to occur of (i)
the 30/th/ day after notice of termination is given and (ii) the delivery to
Executive of a copy of a resolution duly adopted by the affirmative vote of not
less than a majority of the Company's directors at a meeting called and held for
that purpose (after reasonable notice to Executive), and at which Executive
together with Executive's counsel was given an opportunity to be heard, finding
that Executive was guilty of conduct described in the definition of "Cause"
above, and specifying the particulars thereof in detail; provided, however, that
-------- -------
the Company may suspend Executive and withhold payment of Executive's Base
Salary from the date that notice of termination is given until the earliest to
occur of (a) termination of Executive for Cause effected in accordance with the
foregoing procedures (in which case Executive shall not be entitled to
Executive's Base Salary for such period), (b) a determination by a majority of
the Company's directors that Executive was not guilty of the conduct described
in the definition of "Cause" above (in which case Executive shall be reinstated
and paid any of Executive's previously unpaid Base Salary for such period), or
(c) the 90/th/ day after notice of termination is given (in which case Executive
shall be reinstated and paid any of Executive's previously unpaid Base Salary
for such period).
(c) "Change of Control" shall have the meaning set forth in Exhibit B.
(d) "Company" shall mean BJ's Wholesale Club, Inc. or any successor.
(e) "Current Title" shall mean Executive's title on the date 180 days
prior to the commencement of a Standstill Period.
(f) "Date of Termination" shall mean the date on which Executive's
employment is terminated.
(g) "Disability" shall have the meaning given it in the Company's long-
term disability plan. Executive's employment shall be deemed to be terminated
for Disability on the date on which Executive is entitled to receive long-term
disability compensation pursuant to such long-term disability plan.
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<PAGE>
(h) "Executive" shall mean the person named in the first paragraph of this
Agreement.
(i) "Incapacity" shall mean a disability (other than Disability within the
meaning of the definition in (g) above) or other impairment of health that
renders Executive unable to perform Executive's duties to the reasonable
satisfaction of the Board of Directors of the Company. If by reason of
Incapacity Executive is unable to perform Executive's duties for at least six
months in any 12-month period, upon written notice by the Company, the
employment of Executive shall be deemed to have terminated by reason of
Incapacity.
(j) "Potential Change of Control" shall mean:
(i) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control; or
(ii) the Board of Directors of the Company adopts a resolution that,
for purposes of this Agreement, a Potential Change of Control has occurred.
(k) "Qualified Termination" shall mean the termination of Executive's
employment during a Standstill Period (1) by the Company other than for Cause,
or (2) by Executive for good reason, or (3) by reason of death, Incapacity or
Disability.
For purposes of this definition, termination for "good reason" shall mean
the voluntary termination by Executive of Executive's employment (A) within 120
days after the occurrence without Executive's express written consent of any of
the events described in clauses (I), (II), (III), (IV), (V) or (VI) below,
provided that Executive gives notice to the Company at least 30 days in advance
requesting that the situation described in those clauses be remedied, and the
situation remains unremedied upon expiration of such 30-day period; (B) within
120 days after the occurrence without Executive's express written consent (which
must expressly refer to such consent as being given under this Agreement) of the
events described in clauses (VII) or (VIII) below, provided that Executive gives
notice to the Company at least 30 days in advance; or (C) upon occurrence of the
event described in clause (IX) below, provided that Executive gives notice to
the Company at least 30 days in advance:
(I) the assignment to Executive of any duties inconsistent with
Executive's positions, duties, responsibilities, reporting
requirements, and status with the Company (or a Subsidiary)
immediately prior to a Control Event, or a substantive change in
Executive's titles or offices as in effect immediately prior to a
Control Event, or any removal of Executive from or any failure to
reelect Executive to such positions, except in connection with the
termination of Executive's employment by the Company (or a Subsidiary)
for Cause or by Executive other than for good reason; or any other
action by the Company (or a Subsidiary) which results in a
diminishment in such position, authority, duties or responsibilities,
other than an insubstantial and inadvertent action which is remedied
by the Company or the Subsidiary promptly after receipt of notice
thereof given by Executive; or
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<PAGE>
(II) Executive's rate of Base Salary for any fiscal year is less than
100 percent of the rate of Base Salary paid to Executive in the
completed fiscal year immediately preceding the Control Event, or
Executive's total cash compensation opportunities, including
salary, auto allowance, and incentives, for any fiscal year are
less than 100 percent of the total cash compensation opportunities
made available to Executive in the completed fiscal year
immediately preceding the Control Event, unless any such reduction
represents an overall reduction of no more than 5 percent of the
rate of Base Salary paid or cash compensation opportunities made
available, as the case may be, and affects all other executives in
the same organizational level (it being the Company's burden to
establish this fact); or
(III) the failure of the Company (or a Subsidiary) to continue in effect
any benefits or perquisites, or any pension, life insurance,
medical insurance or disability plan in which Executive was
participating immediately prior to the Control Event (the
"Benefits," individually, a "Benefit") unless the Company (or a
Subsidiary) provides Executive with substantially similar Benefits,
or the taking of any action by the Company (or a Subsidiary) that
would adversely affect Executive's participation in or materially
reduce any of Executive's Benefits or deprive Executive of any
material Benefit enjoyed by Executive immediately prior to the
Control Event, unless any elimination or reduction of any Benefit,
or any adverse effect on Executive's participation has an aggregate
value equal to no more than 5 percent of the Benefits, and affects
all other executives in the same organizational level (it being the
Company's burden to establish this fact); or
(IV) any purported termination of Executive's employment by the Company
(or a Subsidiary) for Cause during a Standstill Period which is not
effected in compliance with paragraph (b) of this Exhibit; or
(V) any relocation of Executive of more than 40 miles from the place
where Executive was located at the time of the Control Event; or
(VI) any other breach by the Company of any provision of this Agreement;
or
(VII) the Company sells or otherwise disposes of, in one transaction or a
series of related transactions, assets or earning power aggregating
more than 30 percent of the assets (taken at asset value as stated
on the books of the Company determined in accordance with generally
accepted accounting principles consistently applied) or earning
power of the Company (on a non-consolidated basis) or the Company
and its Subsidiaries (on a consolidated basis) to any other Person
or Persons (as defined in Exhibit B); or
(VIII) if Executive is employed by a Subsidiary of the Company, such
Subsidiary either ceases to be a Subsidiary of the Company or sells
or otherwise disposes of, in one transaction or a series of related
transactions, assets or earning power aggregating more than 30
percent of the assets (taken at asset value as stated on the books
of the Subsidiary determined in accordance with generally accepted
accounting
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<PAGE>
principles consistently applied) or earning power of such
Subsidiary (on a non-consolidated basis) or such Subsidiary and its
subsidiaries (on a consolidated basis) to any other Person or
Persons (as defined in Exhibit B); or
(IX) the voluntary termination by Executive of Executive's employment at
any time during the period commencing eight months plus one day
after the Change of Control and ending 12 months after the Change
of Control, provided, that in the event of any such voluntary
--------
termination pursuant to this clause (IX), the Executive shall be
entitled to receive only one-half (1/2) of the lump sum amount
provided for in Section 1.2(a) of this Agreement and the benefits
provided for in Section 1.2(b) shall be provided for one year
rather than two years from the Date of Termination.
(l) "Standstill Period" shall be the period commencing on the date of a
Control Event and continuing until the close of business on the last business
day of the 24/th/ calendar month following a Change of Control; provided,
however, if no Change of Control occurs within 12 months of a Potential Change
of Control, then the Standstill Period that began as a result of such Potential
Change of Control shall end on the close of business on the last business day of
the 12/th/ calendar month following such Potential Change of Control.
(m) "Subsidiary" shall mean any corporation in which the Company owns,
directly or indirectly, 50 percent or more of the total combined voting power of
all classes of stock or with respect to determining the subsidiaries of a
Subsidiary in paragraph (k)(VIII), shall mean any corporation in which the
Subsidiary owns, directly or indirectly, 50 percent or more of the total
combined voting power of all classes of stock.
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<PAGE>
EXHIBIT B
---------
Definition of Change of Control
-------------------------------
A "Change of Control" shall mean:
(a) The acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
- -------- -------
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which satisfies the
criteria set forth in clauses (i), (ii) and (iii) of subsection (c) of this
definition; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequently
-------- -------
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (except that this proviso shall
not apply to any individual whose initial assumption of office as a director
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board); or
(c) Consummation of a reorganization, merger or consolidation involving
the Company or a sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
immediately following such Business Combination, (i) all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, of the
corporation resulting from such Business Combination (which as used in Section
(c) of this definition shall include, without limitation, a corporation which as
a result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination, of the outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially
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<PAGE>
owns, directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then-outstanding voting
securities of such corporation and (iii) at least half of the members of the
board of directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
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<PAGE>
EXHIBIT 10.22B
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as of
September 21, 1999 by and among BJ'S WHOLESALE CLUB, INC., BANK ONE, NA
formerly known as THE FIRST NATIONAL BANK OF CHICAGO, BANKBOSTON, N.A., FLEET
NATIONAL BANK, FIRST UNION NATIONAL BANK, PNC BANK, NATIONAL ASSOCIATION AND
GENERAL ELECTRIC CREDIT CORPORATION.
RECITALS
--------
WHEREAS, the parties hereto are parties to that certain Credit
Agreement dated as of July 9, 1997 (as from time to time amended, restated,
supplemented or otherwise modified, the "Credit Agreement"; capitalized terms
used but not otherwise defined herein having the definitions provided therefor
in the Credit Agreement); and
WHEREAS, the Credit Agreement has been amended by that certain First
Amendment to Credit Agreement dated as of December 19, 1997 (the "First
Amendment"); and
WHEREAS, the parties hereto desire to further amend the Credit
Agreement on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Amendment to Credit Agreement. Subject to the terms and conditions set
-----------------------------
forth in Section 2 of this Amendment, upon the Effective Time (as hereinafter
---------
defined), the Credit Agreement is hereby amended as follows:
(i) Article I of the Credit Agreement is hereby amended by adding the
definition "Business Trust" subsequent to the definition of "Business Day" in
such Article, which new definition shall read as follows:
"Business Trust" means a to be formed business investment
trust organized under the laws of one of the states of the United
States of America with constitutive documents containing terms
and conditions reasonably acceptable to the Agent and which is a
Wholly Owned Subsidiary of the Borrower.
(ii) Article I of the Credit Agreement is hereby amended by deleting the
definition of "Loan Documents" in such Article and inserting the following in
its stead:
"Loan Documents" means this Agreement, the Notes, the
Facility Letters of Credit and any guarantees executed by
any Subsidiaries
<PAGE>
of the Borrower in favor of the Agent for the benefit of the
Lenders.
(iii) Article I of the Credit Agreement is hereby amended by amending the
definition of "Permitted Investments" in such Article by deleting the number
"$25,000,000" in clauses (vii), (viiii), (ix) and (x) thereof and inserting the
number "$50,000,000" in its stead.
(iv) Article I of the Credit Agreement is hereby amended by amending the
definition of "Permitted Investments" in such Article by deleting the word "and"
at the end of clause (ix) thereof, deleting the period (".") at the end of
clause (x) thereof and inserting a semi-colon (";") therein and by inserting a
new clause (xi) at the end of such definition which shall read as follows:
and (xi) money market mutual funds with an average
maturity of not more than 270 days which invest primarily in
corporate or governmental debt securities and which debt
securities have a rating equal to or better than the
applicable rating for such securities set forth in clauses
(ii), (vi), (ix) or (x) above.
(v) Article I of the Credit Agreement is hereby amended by amending the
definition of "Real Estate Subsidiary" in such Article by adding the words "or
any Wholly Owned Subsidiary" after the word "Borrower" in clauses (A) and (C)
thereof.
(vi) Article I of the Credit Agreement is hereby amended by adding the
definition "Trademark Subsidiary Promissory Note" subsequent to the definition
of "Trademark Subsidiaries" in such Article which new definition shall read as
follows:
"Trademark Subsidiary Promissory Note" means that certain
subordinated Promissory Note in the form of Attachment A
hereto issued by the Borrower in favor of the Business Trust
(as assignee of BJ's Northeast Operating Company) in the
aggregate principal amount not to exceed $650,000,000 and
dated not later than September 30, 1999.
(vii) Section 6.10 of the Credit Agreement is hereby amended by deleting
such Section in its entirety and inserting the following in its stead:
6.10 Dividends. The Borrower will not, nor will it
---------
permit any Subsidiary to, declare or pay any dividends
on its capital stock (other than dividends payable in
its own capital stock) or redeem, repurchase or
otherwise acquire or retire any of its capital stock at
any time outstanding, except that (i) any Subsidiary
may declare and pay dividends to the Borrower or to a
Wholly-Owned Subsidiary and (ii) the Borrower may (a)
repurchase for cash shares of common stock issued under
the Borrower's 1997 Replacement Stock Incentive Plan,
1997 Stock Incentive Plan or the 1997 Director Stock
Option Plan, as from time to time in
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<PAGE>
effect, provided that the aggregate amount of repurchases
permitted by this clause (a) shall not exceed $2,000,000 in
the aggregate during the term of this Agreement and (b) so
long as prior to and after giving effect thereto no Default
or Unmatured Default shall exist, repurchase shares of its
common stock in a so-called open market purchase program or
similar transaction; provided that the aggregate amount of
repurchases permitted by this clause (b) shall not exceed
(A) Fifty Million Dollars ($50,000,000) in the aggregate
during the term of this Agreement, plus (B) an amount equal
to fifty percent (50%) of Net Income, on an aggregate basis,
for the period commencing January 30, 1998 and ending on the
last day of the fiscal quarter immediately prior to the
proposed repurchase less (C) an amount equal to the
aggregate amount of money previously expended by Borrower or
any of its Affiliates to repurchase, acquire or redeem
shares of its capital stock pursuant to clause (a) of this
Section 6.10.
(viii) Section 6.11 of the Credit Agreement is hereby amended by deleting
the reference to "$75,000,000" in the third sentence of clause (vii) thereof and
inserting "$50,000,000" in its stead.
(ix) Section 6.11 of the Credit Agreement is hereby amended by deleting
clause (x) thereof and insert the following in its stead:
(x) Indebtedness owed by the Borrower to any Wholly
Owned Subsidiary (i) existing on July 31, 1999 in an
aggregate amount not greater than $200,000,000 or (ii)
incurred subsequent to July 31, 1999 and subordinated to the
Obligations upon terms and conditions reasonably
satisfactory to Agent in its reasonable discretion.
(x) Section 6.11 of the Credit Agreement is hereby amended by renumbering
the current clause (xii) as clause (xiv) thereof and inserting a new clause
(xii) and a new clause (xiii) which shall read as follows:
(xii) Indebtedness, at any time outstanding, of the
Borrower or any Real Estate Subsidiary owed to any Real
Estate Subsidiary which indebtedness was incurred in
connection with the financing of real property of the
Borrower or such Real Estate Subsidiary in an amount not to
exceed $75,000,000 in the aggregate and which, if incurred
after July 31, 1999, is subordinated to the Obligations upon
terms and conditions satisfactory to the Agent in its
reasonable discretion.
(xiii) Indebtedness owed by any Wholly Owned
Subsidiary(s) to the Borrower or any other Wholly Owned
Subsidiary(s) in an aggregate amount not in excess of
$50,000,000.
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<PAGE>
(xi) Section 6.15(a)(i) of the Credit Agreement is hereby amended by (A)
deleting the words "made prior to the Effective Date and" in such clause where
it appears and (B) substituting a new Schedule "2" thereto in the form attached
hereto as Attachment A hereto.
(xii) Section 6.15(a) of the Credit Agreement is hereby amended by deleting
clause (ix) thereof and inserting the following in its stead:
(ix) Investments made by the Borrower, any Real Estate
Subsidiary or any Trademark Subsidiary in any Real Estate
Subsidiary, so long as, for any such Real Estate Subsidiary
receiving Investments, the sum of such Investments plus any
other Indebtedness of such Real Estate Subsidiary does not
exceed 105% of the acquisition cost of the real estate owned
by such Real Estate Subsidiary.
(xiii) Section 6.15(a) of the Credit Agreement is hereby amended by
renumbering the current clause (xiv) as clause (xv) thereof and inserting new
clause (xiv) which shall read as follows:
(xiv) (A) Creation of the Business Trust and
Investments in the Business Trust consisting of (1) the
Trademark Subsidiary Promissory Note, (2) the assets used in
the ownership and/or operation of the Borrower's business in
Maine and New Hampshire, (3) the stock of Natick Realty,
Inc. and (4) Indebtedness of the Borrower or its
Subsidiaries owed to the Borrower or its Subsidiaries in an
aggregate amount not greater than that permitted pursuant to
Section 6.11(a)(xiii) hereof and (B) Investments in one
Wholly Owned Subsidiary of the Borrower consisting solely of
(1) intellectual property with an aggregate book value of
not greater than $650,000,000, (2) cash in an amount not
greater than $10,000,000 and (3) Indebtedness of the
Borrower or its Subsidiaries owed to the Borrower or its
Subsidiaries in an aggregate amount not greater than that
permitted pursuant to Section 6.11(a)(xiii) hereof.
(xiv) Section 6.18 of the Credit Agreement is hereby amended by inserting
the following words after the word "Documents" at the end of such Section:
or make any amendment, waiver, cancellation, termination or
modification to the Trademark Subsidiary Promissory Note
except with the consent of the Agent which consent shall not
be unreasonably withheld. The parties agree that the Agent
shall consent to amendments to the Trademark Subsidiary
Promissory Note, on one or more occasions, to provide for
inclusion in the
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<PAGE>
definition of "Senior Debt" in the Trademark Subsidiary
Promissory Note other indebtedness which the Borrower is
allowed to incur under Section 6.11 hereof and which the
Borrower elects to designate as "Senior Debt" solely for
purposes of the Trademark Subsidiary Promissory Note and to
make conforming changes in the Trademark Subsidiary
Promissory Note as is reasonably necessary to implement the
inclusion of other obligations of the Borrower in the
definition of "Senior Debt". The form of any such amendment
shall be reasonably satisfactory to the Agent.
(xv) Section 6.21 of the Credit Agreement is hereby amended by deleting
such Section in its entirety and inserting the following in its stead:
6.21. Subsidiary Guaranties. (a) If the Subsidiaries
(other than the Real Estate Subsidiaries, Trademark
Subsidiary and the Business Trust) have assets which in the
aggregate have a book value equal to or greater than twenty-
five percent (25%) of an amount equal to (i) the book value
of the Borrower's total consolidated assets and less (ii)
the book value of real estate owned by the Real Estate
Subsidiaries, each determined on a consolidated basis as at
the end of any fiscal quarter, the Borrower shall cause all
Subsidiaries other than the Real Estate Subsidiaries to
deliver to the Agent, on behalf of the Lenders, within 30
days after the end of any such fiscal quarter (i) an
executed guaranty in substantially the form attached hereto
as Exhibit "I" or a joinder agreement in substantially the
form attached to such guaranty and (ii) an opinion of
counsel to such Subsidiaries that such guaranty has been
duly executed and delivered and is a legal, valid and
binding obligation of such Subsidiaries enforceable in
accordance with its terms (subject to customary exceptions).
If any Subsidiary (other than a Real Estate Subsidiary,
Trademark Subsidiary or the Business Trust) has assets which
in the aggregate have a book value equal to or greater than
fifteen percent (15%) of an amount equal to (i) the book
value of the Borrower's total consolidated assets and less
(ii) the book value of real estate owned by the Real Estate
Subsidiaries, each determined on a consolidated basis as at
the end of any fiscal quarter, the Borrower shall cause such
Subsidiary to deliver to the Agent, on behalf of the
Lenders, within 30 days after the end of any such fiscal
quarter (i) an executed guaranty substantially in the form
attached hereto as Exhibit I or a joinder agreement
substantially in the form attached to such guaranty and (ii)
an opinion of counsel to such Subsidiary that such guaranty
has been duly executed and delivered and is a legal, valid
and binding
-5-
<PAGE>
obligation of such Subsidiary enforceable in accordance with
its terms (subject to customary exceptions).
(b) The Business Trust shall, within thirty (30) days
of its formation (i) execute and deliver to the Agent, for
the benefit of the Lenders, a guarantee in the form of
Exhibit I hereto and such guarantee shall be valid and
binding upon the Business Trust and shall be in full force
and effect and (ii) deliver to the Agent for the benefit of
the Lenders an opinion of counsel to the Business Trust that
the guaranty has been duly executed and delivered and is the
legal, valid and binding obligation of the Business Trust
enforceable in accordance with its terms (subject to
customary exceptions).
2. Conditions. The effectiveness of the amendments stated in this Amendment
----------
is subject to on or prior to the Effective Time, that the following conditions
shall have been satisfied in a manner, and in form and substance, as the case
may be, reasonably acceptable to Required Lenders:
(i) Amendment. This Amendment shall have been duly executed by the
---------
Required Lenders and the Borrower and delivered to Agent.
(ii) No Default. No Default or Event of Default under the Credit
----------
Agreement, as amended hereby, shall have occurred and be continuing.
(iii) Warranties and Representations. The warranties and
------------------------------
representations of the Borrower contained in this Amendment, the Credit
Agreement, as amended hereby, and the other Loan Documents shall be true
and correct as of the date hereof, with the same effect as though made on
such date, except to the extent that such warranties and representations
expressly relate to an earlier date, in which case such warranties and
representations shall have been true and correct as of such earlier date.
(iv) Guaranty. Each Trademark Subsidiary and the Subsidiary (known as
--------
BJ's PA Distribution Center, Inc.) holding the equity interest in the
Business Trust shall have executed and delivered to the Agent for the
benefit of the Lenders a guaranty in the form of Exhibit I to the Credit
Agreement and such guaranty shall be valid and binding upon each such
Subsidiary and be in full force and effect.
(v) Opinion. The Borrower shall have delivered to the Agent for the
-------
benefit of the Lenders an opinion of counsel to the Trademark Subsidiaries
that the guaranties executed pursuant to clause (iv) of this section have
been duly executed and delivered and are the legal, valid and binding
obligation of each such Subsidiary enforceable in accordance with its terms
(subject to customary exceptions).
The date on which all of the above events have occurred is the "Effective Time".
If the Effective Time has not occurred by September 30, 1999, this Amendment
shall be of no force and effect.
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<PAGE>
3. Continuing Credits. Notwithstanding this Amendment, the Loans owing to
------------------
Lenders by Borrower under the Credit Agreement that remain outstanding as of the
date hereof shall constitute continuing Obligations of the Borrower under the
Credit Agreement and this Amendment shall not be deemed to evidence or result in
a novation, or repayment and reborrowing, of such Loans.
4. Waivers.
-------
The Requisite Lenders hereby waive compliance by the Borrower of the
restrictions set forth in (i) Sections 6.13, 6.15 and 6.17 solely to the extent
that each of the following shall have occurred no more frequently than once and
prior to April 30, 2000: (A) contribution of cash and intellectual property and
having a book value not in excess of $10,000,000 into a new Wholly Owned
Subsidiary known as Strathmore Partners LP, (B) issuance by Borrower of the
Trademark Subsidiary Promissory Note to BJ's Northeast Operating Company in
exchange for all of the equity interests owned by BJ's Northeast Operating
Company in such new Wholly Owned Subsidiary, (C) revaluation of the intellectual
property owned by such new Wholly Owned Subsidiary to an amount not in excess of
$650,000,000, (D) transfer of the equity interests of the Business Trust by BJ's
Northeast Operating Company to BJ's PA Distribution Center, Inc., (E) transfer
of the Trademark Subsidiary Promissory Note from BJ's Northeast Operating
Company to the Business Trust, (F) the merger of BJ's Northeast Operating
Company into BJ's PA Distribution Center, Inc., (G) the contribution by Borrower
of Natick Realty, Inc. and its Subsidiaries to BJ's PA Distribution Center, Inc.
and (H) the contribution by BJ's PA Distribution Center, Inc. of Natick Realty,
Inc. and its Subsidiaries to the Business Trust and (ii) Section 6.4 solely to
the extent of the contribution by BJ's Northeast Operating Company to the
capital of the Business Trust of the operations of its stores in Maine and New
Hampshire.
The waiver by the Requisite Lenders under the Credit Agreement as described
in the immediately preceding paragraph shall not operate as a waiver of (i) any
other right, power or remedy of the Lenders under the Credit Agreement, or (ii)
any other Event of Default under the Credit Agreement. This waiver is only
applicable and shall be only effective in this specific instance for the above
transactions which shall occur on the Effective Date and for the specific
purpose for which made or given.
5. Miscellaneous.
-------------
(a) Captions. Section captions used in this Amendment are for convenience
--------
only, and shall not affect the construction of this Amendment.
(b) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
-------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. Whenever possible each provision of
this Amendment shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Amendment shall be prohibited
by or invalid under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Amendment.
-7-
<PAGE>
(c) Counterparts. This Amendment may be executed in any number of
------------
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
(d) Successors and Assigns. This Amendment shall be binding upon, and
----------------------
shall inure to the sole benefit of the Borrower, Agent and Lenders, and their
respective successors and assigns.
(e) References. Any reference to the Credit Agreement contained in any
----------
notice, request, certificate, or other document executed concurrently with or
after the execution and delivery of this Amendment shall be deemed to include
this Amendment unless the context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything contained herein,
-----------------------
the terms of this Amendment are not intended to and do not serve to effect a
novation as to the Credit Agreement; instead, it is the express intention of the
parties hereto to reaffirm the Obligations created under the Credit Agreement
which is evidenced by the Notes. The Credit Agreement, as amended hereby, and
each of the other Loan Documents remain in full force and effect.
(g) Costs and Expenses. Borrower affirms and acknowledges that Section 9.7
------------------
of the Credit Agreement applies to this Amendment and the transactions and
agreements and documents contemplated hereunder.
6. Representations and Warranties. The Borrower represents and warrants to
------------------------------
Agent and Lenders that the execution, delivery and performance by the Borrower
of this Amendment are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action (including, without limitation, all
necessary shareholder approval) of the Borrower, do not require any governmental
approvals, consents or filings and do not and will not contravene or conflict
with any provision of law applicable to the Borrower, the certificate of
incorporation or bylaws of the Borrower or any order, judgment or decree of any
court or other agency of government or any contractual obligation binding upon
the Borrower, and this Amendment, the Credit Agreement, as amended hereby, and
each Loan Document is the legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms and that the
conditions set forth in Sections 2(ii) and (iii) hereof are true, correct and
complete as of the Effective Time. The Borrower represents and warrants to
Agent and Lenders that, except as contemplated hereby, no Subsidiaries of the
Borrower are required to execute Subsidiary Guaranties pursuant to Section 6.21
of the Credit Agreement, as amended hereby.
[signature pages follow]
-8-
<PAGE>
IN WITNESS WHEREOF, this Second Amendment to Credit Agreement has been duly
executed and delivered as of the day and year first above written.
BJ'S WHOLESALE CLUB, INC.
By: /s/ Arthur T. Silk, Jr.
---------------------------------------
Print Name: Arthur T. Silk, Jr.
-------------------------------
Title: Vice President and Treasurer
------------------------------------
BANK ONE, NA formerly known as THE
FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:_______________________________________
Print Name: John D. Runger
Title: Managing Director
BANKBOSTON, N.A.,
Individually and as Syndication Agent
By: ______________________________________
Print Name: ______________________________
Title: ___________________________________
FLEET NATIONAL BANK
Individually and as Documentation Agent
By:_______________________________________
Print Name: ______________________________
Title: ___________________________________
FIRST UNION NATIONAL BANK
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
-9-
<PAGE>
IN WITNESS WHEREOF, this Second Amendment to Credit Agreement has been duly
executed and delivered as of the day and year first above written.
BJ'S WHOLESALE CLUB, INC.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
BANK ONE, NA formerly known as THE
FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ Vincent R. Henchek
---------------------------------------
Print Name: VINCENT R. HENCHEK
-------------------------------
Title: VICE PRESIDENT
------------------------------------
BANKBOSTON, N.A.,
Individually and as Syndication Agent
By: ______________________________________
Print Name: ______________________________
Title: ___________________________________
FLEET NATIONAL BANK
Individually and as Documentation Agent
By:_______________________________________
Print Name: ______________________________
Title: ___________________________________
FIRST UNION NATIONAL BANK
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
-10-
<PAGE>
IN WITNESS WHEREOF, this Second Amendment to Credit Agreement has been duly
executed and delivered as of the day and year first above written.
BJ'S WHOLESALE CLUB, INC.
By:
--------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
BANK ONE, NA formerly known as THE
FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:
--------------------------------------
Print Name: John D. Runger
Title: Managing Director
BANKBOSTON, N.A.,
Individually and as Syndication Agent
By: /s/ Susan L. Pardus-Galland
--------------------------------------
Print Name: Susan L. Pardus-Galland
------------------------------
Title: Vice President
-----------------------------------
FLEET NATIONAL BANK
Individually and as Documentation Agent
By:
--------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
FIRST UNION NATIONAL BANK
By:
--------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
-11-
<PAGE>
IN WITNESS WHEREOF, this Second Amendment to Credit Agreement has been duly
executed and delivered as of the day and year first above written.
BJ'S WHOLESALE CLUB, INC.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
BANK ONE, NA formerly known as THE
FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
BANKBOSTON, N.A.,
Individually and as Syndication Agent
By: ______________________________________
Print Name: ______________________________
Title: ___________________________________
FLEET NATIONAL BANK
Individually and as Documentation Agent
By: /s/ Thomas J. Bullard
---------------------------------------
Print Name: THOMAS J. BULLARD
-------------------------------
Title: VICE PRESIDENT
------------------------------------
FIRST UNION NATIONAL BANK
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
-12-
<PAGE>
IN WITNESS WHEREOF, this Second Amendment to Credit Agreement has been duly
executed and delivered as of the day and year first above written.
BJ'S WHOLESALE CLUB, INC.
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
BANK ONE, NA formerly known as THE
FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:_______________________________________
Print Name: John D. Runger
Title: Managing Director
BANKBOSTON, N.A.,
Individually and as Syndication Agent
By: ______________________________________
Print Name: ______________________________
Title: ___________________________________
FLEET NATIONAL BANK
Individually and as Documentation Agent
By:_______________________________________
Print Name: ______________________________
Title: ___________________________________
FIRST UNION NATIONAL BANK
By: /s/ Martha M. Winters
---------------------------------------
Print Name: MARTHA M. WINTERS
-------------------------------
Title: AVP
------------------------------------
-13-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Donald V. Davis
---------------------------------------
Print Name: Donald V. Davis
-------------------------------
Title: Vice President
------------------------------------
GENERAL ELECTRIC CREDIT
CORPORATION
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
-14-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By:_______________________________________
Print Name:_______________________________
Title:____________________________________
GENERAL ELECTRIC CREDIT
CORPORATION
By: /s/ Robert M. Kadlick
---------------------------------------
Print Name: ROBERT M. KADLICK
-------------------------------
Title: DULY AUTHORIZED SIGNATORY
------------------------------------
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BJ'S
WHOLESALE CLUB, INC. CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE
SHEETS FILED WITH THE FORM 10-Q FOR THE QUARTER ENDED OCTOBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> OCT-30-1999
<CASH> 7,635
<SECURITIES> 1,582
<RECEIVABLES> 45,922
<ALLOWANCES> 0
<INVENTORY> 503,793
<CURRENT-ASSETS> 578,932
<PP&E> 653,352
<DEPRECIATION> 193,739
<TOTAL-ASSETS> 1,050,379
<CURRENT-LIABILITIES> 471,672
<BONDS> 2,103
0
0
<COMMON> 742
<OTHER-SE> 531,460
<TOTAL-LIABILITY-AND-EQUITY> 1,050,379
<SALES> 2,864,438
<TOTAL-REVENUES> 2,930,614
<CGS> 2,609,993
<TOTAL-COSTS> 2,609,993
<OTHER-EXPENSES> 219,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,949)
<INCOME-PRETAX> 103,570
<INCOME-TAX> 40,082
<INCOME-CONTINUING> 63,488
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,488
<EPS-BASIC> 0.86
<EPS-DILUTED> 0.84
</TABLE>
