<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
/X/Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
or
/ /Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended Commission file number
January 25, 1997 1-4908
The TJX Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-2207613
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
770 Cochituate Road
Framingham, Massachusetts 01701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508)390-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $1.00 New York Stock Exchange
Series E Cumulative Convertible
Preferred Stock, par value $1.00 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant on March 31, 1997 was $3,403,391,026.
There were 79,683,329 shares of the Registrant's Common Stock, $1 par
value, outstanding as of March 31, 1997.
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PAGE 2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended
January 25, 1997 (certain parts as indicated herein) (Parts I and II).
Portions of the Proxy Statement for the Annual Meeting of Stockholders
to be held on June 3, 1997 (Part III).
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PAGE 3
ITEM 1. Business
The TJX Companies, Inc., (together with its wholly-owned subsidiaries,
hereinafter referred to as the "Company"), is the largest off-price apparel
retailer in North America. The Company operates 578 T.J. Maxx stores, 454
Marshalls stores, and Winners Apparel Ltd., a Canadian off-price family apparel
chain with 65 stores. TJX also operates HomeGoods, a U.S. off-price home fashion
chain with 21 stores, and T.K. Maxx, an off-price family apparel concept in the
United Kingdom, which has 18 stores.
The Company acquired Marshalls, an off-price family apparel chain, from
Melville Corporation on November 17, 1995 having paid $424.3 million in cash,
plus $175 million in TJX convertible preferred stock. The total purchase price
of Marshalls, including acquisition costs, was $606 million. The results of
Marshalls are included in the Company's consolidated results from the date of
acquisition.
The Company strives to provide value to its customers by delivering
brand names, fashion, quality and price. During the fiscal year ended January
25, 1997 ("fiscal 1997"), the Company's stores derived 34.0% of its sales from
the Northeast, 18.3% from the Midwest, 28.7% from the South, 1.1% from the
Central States, 14.1% from the West and 3.8% from Canada.
As a result of the Marshalls acquisition, the Company has started to
realize improved operating efficiencies for the combined T.J. Maxx/Marshalls
entity through the integration of many administrative and operational functions
as well as through increased purchasing leverage allowing the Company to provide
increased values to its customers. In addition, the Company has been able to
decrease the amount of excess retail square footage by the closure of 30 T.J.
Maxx stores and 63 Marshalls stores from the date of acquisition through the end
of fiscal 1997. The Company expects to close another 50 Marshalls stores during
fiscal 1998. The Company has retained the independent identities of the T.J.
Maxx and Marshalls stores, including certain elements of merchandising, product
assortment and store appearance.
The majority of the Company's sales volume is done through the
Company's T.J. Maxx and Marshalls stores. T.J. Maxx operates 578 stores in 47
states, with an average store size of 29,000 gross square feet, while Marshalls
operates 454 stores in 37 states and Puerto Rico, with an average store size of
32,000 gross square feet. T.J. Maxx and Marshalls sell a broad range of brand
name family apparel, accessories, shoes, domestics, giftware and jewelry at
prices generally 20% to 60% below department and specialty store regular prices.
Winners Apparel Ltd. is an off-price family apparel retailer, which operates 65
stores in Canada. HomeGoods, an off-price business the Company began testing in
fiscal 1993, sells domestics, giftware and other home fashions and operates a
total of 21 stores. T.K. Maxx, the Company's newest venture, operates 18
off-price family apparel stores in the United Kingdom. Unless otherwise
indicated, all figures herein relating to numbers of stores are as of January
25, 1997.
In common with the business of apparel retailers generally, the
Company's business is subject to seasonal influences, with higher levels of
sales and income generally realized in the second half of the year.
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In December 1996, the Company sold its Chadwick's of Boston catalog
division and in September 1995, the Company sold its Hit or Miss chain of
off-price women's specialty apparel stores. The Company will continue to
evaluate its existing operations and that of other retailers and review
opportunities that would strengthen its position in the apparel retail industry.
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Set forth in the following table are the locations of stores operated
by the Company's United States operations as of January 25, 1997:
<TABLE>
<CAPTION>
T.J. Maxx Marshalls HomeGoods
--------- --------- ---------
<S> <C> <C> <C>
Alabama .................................. 9 2 --
Arizona .................................. 8 3 --
Arkansas ................................. 3 -- --
California ............................... 48 67 --
Colorado ................................. 8 3 --
Connecticut .............................. 24 19 2
Delaware ................................. 2 2 --
District of Columbia ..................... 1 -- --
Florida .................................. 40 40 --
Georgia .................................. 20 18 --
Idaho .................................... 1 -- --
Illinois ................................. 33 29 3
Indiana .................................. 7 4 --
Iowa ..................................... 4 1 --
Kansas ................................... 4 1 --
Kentucky ................................. 6 1 1
Louisiana ................................ 4 5 --
Maine .................................... 5 1 --
Maryland ................................. 9 13 --
Massachusetts ............................ 39 36 6
Michigan ................................. 25 7 --
Minnesota ................................ 12 10 --
Mississippi .............................. 2 -- --
Missouri ................................. 7 8 --
Montana .................................. 1 -- --
Nebraska ................................. 2 1 --
Nevada ................................... 3 3 --
New Hampshire ............................ 9 6 2
New Jersey ............................... 16 26 --
New Mexico ............................... 2 -- --
New York ................................. 35 33 --
North Carolina ........................... 18 10 --
North Dakota ............................. 3 -- --
Ohio ..................................... 31 8 3
Oklahoma ................................. 3 1 --
Oregon ................................... 4 2 --
Pennsylvania ............................. 30 16 --
Puerto Rico .............................. -- 12 --
Rhode Island ............................. 5 3 --
South Carolina ........................... 9 4 --
South Dakota ............................. 1 -- --
Tennessee ................................ 13 6 --
Texas .................................... 26 29 --
Utah ..................................... 4 -- --
Vermont .................................. 2 -- --
Virginia ................................. 22 18 --
Washington ............................... 7 5 --
West Virginia ............................ 1 -- --
Wisconsin ................................ 10 1 4
--- --- --
Total Stores 578 454 21
=== === ==
</TABLE>
Winners Apparel Ltd. operates 65 stores in Canada: 9 in Alberta, 3 in Manitoba,
35 in Ontario, 11 in Quebec, 2 in Nova Scotia, 1 in Saskatchewan, 2 in British
Columbia and 2 in New Brunswick.
T.K. Maxx operates 18 stores in the United Kingdom.
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T.J. MAXX AND MARSHALLS
T.J. Maxx Stores
T.J. Maxx, the largest off-price family apparel chain in the United
States, was founded by the Company in 1976 and operates 578 stores in 47 states.
T.J. Maxx sells brand name family apparel, accessories, giftware,
domestics, women's shoes and fine jewelry at prices generally 20% to 60% below
department and specialty store regular prices. T.J. Maxx's target customers are
women between the ages of 25 to 50, who typically have families with middle and
upper-middle incomes and who generally fit the profile of a department store
shopper.
T.J. Maxx stores are generally located in suburban community shopping
centers and average approximately 29,000 gross square feet in size. In recent
years, T.J. Maxx has enlarged a number of stores to a larger format,
approximately 30,000-40,000 square feet in size, and plans to continue its
program of enlarging other successful stores. This larger format allows T.J.
Maxx to expand all of its departments, with particular emphasis on its giftware
and housewares departments and other non-apparel categories. During fiscal 1997,
21 stores were opened, including 13 of the new larger prototype, and 30 were
closed, including 4 of the larger prototype. In addition, 21 existing stores
were expanded to the larger format, bringing the total of T.J. Maxx stores in
the larger format to 247. In fiscal 1998, approximately 25 new stores are
planned, of which approximately 10 are expected to be larger stores, along with
the planned expansion of about 20 existing locations.
Marshalls Stores
Marshalls, the second largest off-price family apparel retailer in the
United States, operates 454 stores in 37 states and Puerto Rico. Marshalls
target customers fit a profile similar to those of T.J. Maxx. Marshalls
merchandise is also similar to that carried by T.J. Maxx, except that Marshalls
offers its customers a full-line shoe department, a larger men's department and
costume, rather than fine, jewelry. Marshalls stores average approximately
32,000 gross square feet. During fiscal 1997, 11 Marshalls stores were opened
and 53 were closed and in fiscal 1998, approximately 15 new stores are planned
along with approximately 50 closings.
The operations and strategies of T.J. Maxx and Marshalls have been very
similar historically. Prior to the acquisition of Marshalls by TJX, Marshalls
had deviated from some of its key strategies, such as everyday low prices, in
favor of other marketing ideas, including frequent promotional pricing. The
Company believes that restoring Marshalls historical strategies and effecting
other improvements, were significant factors in increasing Marshalls level of
profitability and performance in fiscal 1997.
Buying and Distribution
During fiscal 1997, the Company combined a number of administrative
functions of the T.J. Maxx and Marshalls operations with one of the most
significant being the buying and merchandising function. The ability to
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purchase merchandise at favorable prices and operate with a low cost structure
is essential to T.J. Maxx's and Marshalls off-price mission which emphasizes
providing quality brand-name merchandise at great values to its customers. These
chains use opportunistic buying strategies to purchase large quantities of
merchandise at significant discounts from initial wholesale prices. Those
strategies include special situation purchases, closeouts of current season
fashions and out-of-season purchases of basic seasonal items for warehousing
until the appropriate selling season. These buying strategies rely heavily on
inventory controls that permit a virtually continuous "open-to-buy" position. In
addition, highly automated storage and distribution systems track, allocate and
deliver an average of 10,000 items per week to each store. T.J. Maxx's
computerized warehouse storage, handling and shipping systems permit a
continuous evaluation and replenishment of store inventory requirements and the
breakdown of manufacturers' bulk shipments into computer-determined individual
store allotments by style, size and quantity. Pricing and markdown decisions and
store inventory replenishment requirements are determined centrally, using
satellite-transmitted information provided by point-of-sale computer terminals;
this ensures that substantially all merchandise is sold within targeted selling
periods. During fiscal 1997, the Company developed a plan for the realignment of
the Marshalls and T.J. Maxx distribution facilities which is expected to be
implemented over the next several years. Each T.J. Maxx store is currently
serviced by one of the chain's four distribution centers in Worcester,
Massachusetts; Evansville, Indiana; Las Vegas, Nevada; and Charlotte, North
Carolina. Each Marshalls store is currently serviced by one of four main
distribution centers located in Woburn, Massachusetts; Decatur, Georgia;
Bridgewater, Virginia; and Chatsworth, California. Other administrative
functions that have been consolidated include finance, real estate, human
resources and systems.
WINNERS APPAREL LTD.
The Company acquired the Winners chain in 1990. The Winners acquisition
has provided the Company with the opportunity to introduce the concept of
off-price apparel retailing to the Canadian market. Since the acquisition,
Winners has increased its number of stores from 5 to 65.
Winners' apparel merchandising concept is substantially similar to that
of T.J. Maxx. Winners' stores average 25,000 square feet, and emphasize
off-price designer and brand name misses sportswear, dresses, women's shoes,
lingerie, accessories and giftware, as well as menswear and clothing for
children, including infants and toddlers. In fiscal 1997, Winners opened 13
stores in new and existing Canadian markets and expects to open a similar amount
of stores in fiscal 1998.
HOMEGOODS
HomeGoods is a chain of off-price home fashion stores started by the
Company in 1992 and designed to expand the Company's off-price presence in the
home fashions market. The Company is continuing efforts to develop this business
and during fiscal 1997 tested a new advertising campaign and a new signage
package. The HomeGoods stores offer a broad and deep range of home fashion
products, including giftware, domestics, rugs, bath accessories, lamps and
seasonal merchandise in a no-frills, multi-department format.
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HomeGoods' stores currently average approximately 37,000 square feet.
HomeGoods has been moving to a smaller 35,000 square foot prototype for new
openings and downsizing existing locations. HomeGoods opened 1 store and closed
2 stores in fiscal 1997 and now operates a total of 21 stores. HomeGoods and
T.J. Maxx have experimented with a new format that combines T.J. Maxx and
HomeGoods in one store and currently operates 3 such locations.
T.K. MAXX
During fiscal 1995, the Company began testing the off-price family
apparel concept in Europe by opening its first 5 T.K. Maxx stores in the United
Kingdom. T.K. Maxx utilizes the same off-price strategy employed by T.J. Maxx,
Marshalls and Winners. At the end of fiscal 1997, the Company had a total of 18
stores and has plans to open approximately 15 stores in fiscal 1998. Most of
these openings will be in the United Kingdom with several openings anticipated
in other European countries.
EMPLOYEES
At January 25, 1997, the Company had approximately 56,000 employees,
many of whom work less than 40 hours per week. In addition, temporary employees
are hired during the peak back-to-school and holiday seasons. The Company has
collective bargaining agreements with the Union of Needletrades and Textile
Employees ("UNITE"), formerly the International Ladies' Garment Workers' Union,
covering approximately 3,200 employees in its distribution facilities in
Worcester and Mansfield, Massachusetts; Evansville, Indiana; Las Vegas, Nevada;
Charlotte, North Carolina; and Decatur, Georgia. A new three year agreement,
effective January 1, 1997, was ratified by the union workers in Charlotte.
Negotiations are currently being conducted with UNITE for an agreement covering
Decatur, Georgia union workers, and negotiations for union workers at the
Worcester, Mansfield and Las Vegas facilities will be scheduled prior to the
December 31, 1997, expiration of current contracts. The Company considers its
labor/management relations and overall employee relations to be good.
COMPETITION
The retail apparel business is highly competitive. The Company
generally competes for customers with a variety of conventional and discount
retail stores, including national, regional and local independent department and
specialty stores, as well as with catalog operations, factory outlet stores and
other off-price stores. In recent years, the Company has encountered increased
competition from department stores which have become more focused on promotions
to increase sales. Competitive factors important to the Company's customers
include fashion, value, merchandise selection, brand name recognition and, to a
lesser degree, store location. In addition, because the Company purchases much
of its inventory opportunistically, the Company competes for merchandise with
other national and regional off-price apparel and other discount outlets. Also,
many of the Company's competitors handle identical or similar lines of
merchandise and have comparable locations, and some have greater financial
resources than the Company. The Company believes that the Marshalls acquisition
has enhanced its competitiveness.
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CREDIT
The Company's stores operate primarily on a cash-and-carry basis. Each
chain accepts credit sales through programs offered by banks and others.
BUYING AND DISTRIBUTION
The T.J. Maxx and Marshalls chains are serviced by a single centralized
buying organization while each of the other chains has its own centralized
buying organization. All of the Company's chains are serviced through their own
distribution network. Each T.J. Maxx store is serviced by one of the chain's
four distribution centers in Worcester, Massachusetts, Evansville, Indiana, Las
Vegas, Nevada and Charlotte, North Carolina. Shipments are made twice a week by
contract carrier to each store. Each Marshalls store is serviced by one of the
chain's four main distribution centers in Woburn, Massachusetts; Decatur,
Georgia; Chatsworth, California; and Bridgewater, Virginia. Winners Apparel Ltd.
stores are serviced from a distribution center in Brampton, Ontario, HomeGoods
stores are serviced from a distribution center in Mansfield, Massachusetts, and
T.K. Maxx stores are serviced from a distribution center in Milton Keynes,
England.
ITEM 2. Properties
All of the Company's chains lease virtually all of their store
locations. Leases are generally for 10 years with options to extend for one or
more 5 year periods. The Company has the right to terminate certain leases
before the expiration date under certain circumstances and for a specified
payment.
The approximate average size of a T.J. Maxx store is 29,000 square
feet, Marshalls stores average approximately 32,000 square feet, Winners stores
are approximately 25,000 square feet on average, HomeGoods stores currently
average approximately 37,000 square feet and T.K. Maxx stores average
approximately 27,000 square feet. The Company owns four T.J. Maxx distribution
facilities - a 526,000 square foot facility in Worcester, Massachusetts; a
983,000 square foot facility in Evansville, Indiana; a 400,000 square foot
facility in Las Vegas, Nevada; and a 600,000 square foot facility in Charlotte,
North Carolina. The Company owns one of the Marshalls distribution facilities, a
856,000 square foot facility in Decatur, Georgia. In addition, Marshalls leases
its other three main distribution facilities - a 837,000 square foot facility in
Woburn, Massachusetts; a 183,000 square foot facility in Chatsworth, California;
and a 700,000 square foot facility in Bridgewater, Virginia. Winners leases a
391,000 square foot distribution center in Brampton, Ontario and 56,000 square
feet of office space in Mississaugau, Ontario. HomeGoods leases a 205,000 square
foot distribution center in Mansfield, Massachusetts. T.K. Maxx in the United
Kingdom has leased a 108,000 square foot office and distribution facility in
Milton Keynes, England and a 16,500 square foot office space in Watford,
England. The Company's, T.J. Maxx's, Marshalls' and HomeGoods' executive and
administrative offices are located in a 517,000 square foot office facility,
which the Company leases in Framingham, Massachusetts along with an additional
100,000 square feet of office space in the Framingham area.
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The table below indicates the approximate gross square footage of
stores and distribution centers, by division, in operation as of January 25,
1997.
<TABLE>
<CAPTION>
(In Thousands)
Distribution Centers
------------------------
Stores Leased Owned
------ ------ -----
<S> <C> <C> <C>
T.J. Maxx 16,606 -- 2,466
Marshalls 14,383 1,737 801
Winners 1,638 391 --
HomeGoods 773 205 --
T.K. Maxx 494 100 --
------ ----- -----
Total 33,894 2,433 3,267
====== ===== =====
</TABLE>
ITEM 3. Legal Proceedings
There is no litigation pending against the Company or any of its
subsidiaries which the Company believes is material.
ITEM 4. Submission of Matters to a Vote of Security Holders
There was no matter submitted to a vote of the Company's security
holders during the fourth quarter of fiscal 1997.
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ITEM 4A. Executive Officers of the Registrant
The following persons are the executive officers of the Company as of
the date hereof:
<TABLE>
<CAPTION>
Office and Employment
Name Age During Last Five Years
- ---- --- ----------------------
<S> <C> <C>
Bernard Cammarata 57 President, Chief Executive Officer and
Director since 1989, Chairman of the
Company's T.J. Maxx Division from 1986 to
1995 and of the Company's T.J. Maxx and
Marshalls Division ("The Marmaxx Group")
since 1995. Executive Vice President of the
Company from 1986 to 1989. President, Chief
Executive Officer and Director of the
Company's former TJX subsidiary from 1987 to
1989; President of T.J. Maxx, 1976 to 1986.
Donald G. Campbell 45 Executive Vice President - Finance since 1996
and Chief Financial Officer of the Company
since 1989. Senior Vice President - Finance,
from 1989 to 1996. Senior Financial Executive
of the Company, 1988 to 1989; Senior Vice
President - Finance and Administration Zayre
Stores Division 1987-1988; Vice President and
Corporate Controller of the Company prior to
1987.
Richard Lesser 62 Executive Vice President of the Company since
1991 and Chief Operating Officer of the
Company since 1994 and President of The
Marmaxx Group since 1995. Senior Vice
President of the Company 1989-1991 and
President of the T.J. Maxx Division from 1986
to 1994. Senior Executive Vice President -
Merchandising and Distribution 1986.
Executive Vice President - General
Merchandise Manager 1984 to 1986; Senior Vice
President - General Merchandise Manager 1981
to 1984.
</TABLE>
The foregoing were elected to their current Company offices by the
Board of Directors in June 1996. All officers hold office until the next annual
meeting of the Board in June 1997 and until their successors are elected and
qualified.
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PART II
ITEM 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
The information required by this Item is incorporated herein by
reference from page 34 of the Annual Report, under the caption "Price Range of
Common Stock," and from inside the back cover of the Annual Report, under the
caption "Shareholder Information."
ITEM 6. Selected Financial Data
The information required by this Item is incorporated herein by
reference from page 34 of the Annual Report, under the caption "Selected
Financial Data."
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this Item is incorporated herein by
reference from pages 35 through 37 of the Annual Report, under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
ITEM 8. Financial Statements and Supplementary Data
The information required by this Item and not filed with this report as
Financial Statement Schedules is incorporated herein by reference from
pages 16 through 32 of the Annual Report, under the captions; "Consolidated
Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements
of Cash Flows," "Consolidated Statements of Shareholders' Equity," "Selected
Information by Major Business Segment" and "Notes to Consolidated Financial
Statements."
ITEM 9. Disagreements on Accounting and Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The Company will file with the Securities and Exchange Commission a
definitive Proxy Statement no later than 120 days after the close of its fiscal
year ended January 25, 1997 (the "Proxy Statement"). The information required by
this Item and not given in Item 4A, Executive Officers of the Registrant, is
incorporated by reference to the Proxy Statement. However, information under the
captions "Executive Compensation Committee Report" and "Performance Graph" in
the Proxy Statement is not so incorporated.
ITEM 11. Executive Compensation
The information required by this Item is incorporated by reference to
the Proxy Statement.
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ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to
the Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to
the Proxy Statement.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statement Schedules
The Financial Statements and Financial Statement Schedules filed as
part of this report are listed and indexed at Page F-1.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated as of October 18,
1996 regarding the Asset Purchase Agreement dated as of October 18, 1996 entered
into by the Company and Brylane, L.P. (Brylane) regarding the sale of the
Chadwick's division by the Company to Brylane. This Form 8-K also included the
Company's statement of cautionary factors relating to forward-looking
information.
The Company filed a Current Report on Form 8-K dated as of December 7,
1996 relating to the consummation of the sale of Chadwick's by the Company to
Brylane.
(c) Exhibits
Listed below are all Exhibits filed as part of this report. Certain
Exhibits are incorporated by reference to documents previously filed by the
Registrant with the Securities and Exchange Commission pursuant to Rule 12b-32
under the Securities Exchange Act of 1934, as amended.
Exhibit
No. Description of Exhibit
- ------- ----------------------
3(i).1 Second Restated Certificate of Incorporation filed June 5, 1985 is
incorporated herein by reference to Exhibit (3i)(a) to the Form 10-K
filed for the fiscal year ended January 28, 1995.
3(i).2 Certificate of Amendment of Second Restated Certificate of
Incorporation filed June 3, 1986 is incorporated herein by reference
to Exhibit (3i)(b) to the Form 10-K filed for the fiscal year ended
January 28, 1995.
3(i).3 Certificate of Amendment of Second Restated Certificate of
Incorporation filed June 2, 1987 is incorporated herein by reference
to Exhibit (3i)(c) to the Form 10-K filed for the fiscal year ended
January 28, 1995.
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PAGE 14
3(i).4 Certificate of Amendment of Second Restated Certificate of
Incorporation filed June 20, 1989 is incorporated herein by reference
to Exhibit (3i)(d) to the Form 10-K filed for the fiscal year ended
January 28, 1995.
3(i).5 Certificate of Designations, Preferences and Rights of Series E
Cumulative Convertible Preferred Stock is incorporated herein by
reference to Exhibit 10.2 of the Form 8-K dated November 17, 1995.
3(ii).1 The by-laws of the Company, as amended, are incorporated herein by
reference to Exhibit (3ii)(a) to the Form 10-K filed for the fiscal
year ended January 28, 1995.
4.1 Credit Agreement dated as of November 17, 1995 among The First
National Bank of Chicago, Bank of America Illinois, The Bank of New
York, and Pearl Street L.P., as co-arrangers, the other financial
institution parties thereto, and the Company is incorporated by
reference to the Current Report on Form 8-K dated November 17, 1995.
Each other instrument relates to securities the total amount of which
does not exceed 10% of the total assets of the Company and its subsidiaries
on a consolidated basis. The Company agrees to furnish to the Securities
and Exchange Commission copies of each such instrument not otherwise filed
herewith or incorporated herein by reference.
10.2 The Employment Agreement dated as of January 26, 1997 with Bernard
Cammarata is filed herewith. *
10.3 The Amended and Restated Employment Agreement dated as of February 1,
1995 with Richard Lesser is incorporated herein by reference to
Exhibit (10)(e) to the Form 10-K for the fiscal year ended January
28, 1995. The Amendment dated as of April 7, 1997 to the Amended and
Restated Employment Agreement dated as of February 1, 1995 with
Richard Lesser is filed herewith. *
10.4 The Amended and Restated Employment Agreement dated as of February 1,
1995 with Donald G. Campbell is incorporated herein by reference to
Exhibit (10)(f) to the Form 10-K filed for the fiscal year ended
January 28, 1995. The Amendment dated as of April 7, 1997 to the
Amended and Restated Employment Agreement dated as of February 1,
1995 with Donald G. Campbell is filed herewith. *
10.5 The Management Incentive Plan, as amended, is incorporated herein by
reference to Exhibit 10(g) to the Form 10-K filed for the fiscal year
ended January 29, 1994. *
10.6 The 1982 Long Range Management Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10(h) to the Form 10-K
filed for the fiscal year ended January 29, 1994. *
10.7 The 1986 Stock Incentive Plan as amended through April 9, 1997 is
filed herewith. *
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PAGE 15
10.8 The TJX Companies, Inc. Long Range Performance Incentive Plan, as
amended, is incorporated herein by reference to Exhibit 10(j) to the
Form 10-K filed for the fiscal year ended January 29, 1994. *
10.9 The General Deferred Compensation Plan, as amended, is incorporated
herein by reference to Exhibit 10(n) to the Form 10-K filed for the
fiscal year ended January 27, 1990. *
10.10 The Supplemental Executive Retirement Plan, as amended, is
incorporated herein by reference to Exhibit 10(l) to the Form 10-K
filed for the fiscal year ended January 25, 1992. *
10.11 The 1993 Stock Option Plan for Non-Employee Directors is incorporated
herein by reference to Exhibit 10.1 to the Form 10-Q filed for the
quarter ended May 1, 1993. *
10.12 The Retirement Plan for Directors, as amended, is incorporated herein
by reference to Exhibit 10.2 to the Form 10-Q filed for the quarter
ended May 1, 1993. *
10.13 The form of Indemnification Agreement between the Company and each of
its officers and directors is incorporated herein by reference to
Exhibit 10(r) to the Form 10-K filed for the fiscal year ended
January 27, 1990. *
10.14 The Trust Agreement dated as of April 8, 1988 between the Company and
State Street Bank and Trust Company is incorporated herein by
reference to Exhibit 10(y) to the Form 10-K filed for the fiscal year
ended January 30, 1988. *
10.15 The Trust Agreement dated as of April 8, 1988 between the Company and
Shawmut Bank of Boston, N.A. is incorporated herein by reference to
Exhibit 10(z) to the Form 10-K filed for the fiscal year ended
January 30, 1988. *
10.16 Stock Purchase Agreement dated as of October 14, 1995 between the
Company and Melville Corporation is incorporated herein by reference
to the Current Report on Form 8-K dated October 14, 1995.
10.17 Amendment Number One dated as of November 17, 1995 to the Stock
Purchase Agreement dated as of October 14, 1995 between the Company
and Melville Corporation is incorporated herein by reference to the
Current Report on Form 8-K dated November 17, 1995.
10.18 Transitional Services Agreement dated as of November 17, 1995 between
the Company and Melville Corporation is incorporated herein by
reference to the Current Report on Form 8-K dated November 17, 1995.
10.19 Amendment Number Two dated as of February 1, 1996 to Stock Purchase
Agreement and Transitional Services Agreement between the Company and
Melville Corporation is incorporated herein by reference to the Form
10-K filed for the fiscal year ended January 27, 1996.
<PAGE> 16
PAGE 16
10.20 Standstill and Registration Rights Agreement dated as of November 17,
1995 between the Company and Melville Corporation is incorporated
herein by reference to the Form 10-K filed for the fiscal year ended
January 27, 1996.
10.21 Asset Purchase Agreement dated as of October 18, 1996 between the
Company and Brylane, L.P. is incorporated herein by reference to the
Current Report on Form 8-K dated October 18, 1996.
10.22 The Distribution Agreement dated as of May 1, 1989 between the
Company and Waban Inc. is incorporated herein by reference to Exhibit
3 to the Company's Current Report on Form 8-K dated June 21, 1989.
The First Amendment to Distribution Agreement dated as of April 18,
1997 between the Company and Waban Inc. is filed herewith.
10.23 The Indemnification Agreement dated as of April 18, 1997 by and
between the Company and BJ's Wholesale Club, Inc. is filed herewith.
11 Statement re computation of per share earnings.
This statement is filed herewith.
13 Annual Report to security holders.
Portions of the Annual Report to Stockholders for the fiscal year
ended January 25, 1997 are filed herewith.
21 Subsidiaries.
A list of the Registrant's subsidiaries is filed herewith.
23 Consents of experts and counsel.
The Consent of Coopers & Lybrand L.L.P. is contained on Page F-3 of
the Financial Statements filed herewith.
24 Power of Attorney.
The Power of Attorney given by the Directors and certain Executive
Officers of the Company is filed herewith.
* Management contract or compensatory plan or arrangement.
<PAGE> 17
PAGE 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE TJX COMPANIES, INC.
Dated: April 25, 1997
/s/ Donald G. Campbell
----------------------------------
Donald G. Campbell
Executive Vice President - Finance
<PAGE> 18
PAGE 18
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ BERNARD CAMMARATA /s/ DONALD G. CAMPBELL
- ---------------------------------- ----------------------------------
Bernard Cammarata, President Donald G. Campbell, Executive
and Principal Executive Officer Vice President - Finance,
and Director Principal Financial and
Accounting Officer
PHYLLIS B. DAVIS* JOHN F. O'BRIEN*
- ---------------------------------- ----------------------------------
Phyllis B. Davis, Director John F. O'Brien, Director
DENNIS F. HIGHTOWER* ROBERT F. SHAPIRO*
- ---------------------------------- ----------------------------------
Dennis F. Hightower Robert F. Shapiro, Director
RICHARD LESSER* WILLOW B. SHIRE*
- ---------------------------------- ----------------------------------
Richard Lesser, Director Willow B. Shire, Director
ARTHUR F. LOEWY* FLETCHER H. WILEY*
- ---------------------------------- ----------------------------------
Arthur F. Loewy, Director Fletcher H. Wiley, Director
JOHN M. NELSON*
- ----------------------------------
John M. Nelson, Director
* By /s/ DONALD G. CAMPBELL
----------------------------------
Donald G. Campbell
Dated: April 25, 1997 as attorney-in-fact
<PAGE> 19
PAGE 19
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
THE TJX COMPANIES, INC.
FORM 10-K
ANNUAL REPORT
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULES
For the Fiscal Years Ended
January 25, 1997, January 27, 1996
and January 28, 1995
<PAGE> 20
THE TJX COMPANIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
For Fiscal Years Ended January 25, 1997, January 27, 1996 and
January 28, 1995
Report of Independent Accountants F-2
Consent of Independent Accountants F-3
Selected Quarterly Financial Data (Unaudited) 38*
Consolidated Financial Statements:
Consolidated Statements of Income for the fiscal
years ended January 25, 1997, January 27, 1996 and
January 28, 1995 16*
Consolidated Balance Sheets as of January 25, 1997
and January 27, 1996 17*
Consolidated Statements of Cash Flows for the fiscal
years ended January 25, 1997, January 27, 1996 and
January 28, 1995 18*
Consolidated Statements of Shareholders' Equity for
the fiscal years ended January 25, 1997, January 27,
1996 and January 28, 1995 19*
Notes to Consolidated Financial Statements 21-32*
Schedules
(II) Valuation and Qualifying Accounts F-4
* Refers to page numbers in the Company's Annual Report to Stockholders
for the fiscal year ended January 25, 1997, certain portions of which
pages are incorporated by reference in Part II, Item 8 of this report
as indicated.
F-1
<PAGE> 21
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of The TJX
Companies, Inc. has been incorporated by reference in this Form 10-K from page
33 of the 1996 Annual Report to Shareholders of The TJX Companies, Inc. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedules listed in the index on page F-1 of
this Form 10-K.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Boston, Massachusetts
February 25, 1997 Coopers & Lybrand L.L.P.
F-2
<PAGE> 22
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements of The TJX Companies, Inc. on Form S-3 (File Nos. 333-5501 and
33-60059) and on Forms S-8 (File Nos.33-23613, 33-49747 and 33-12220) of our
report dated February 25, 1997 on our audits of the consolidated financial
statements of The TJX Companies, Inc. as of January 25, 1997 and January 27,
1996 and for the years ended January 25, 1997, January 27, 1996 and January 28,
1995 which report is incorporated by reference in this Annual Report on Form
10-K.
Boston, Massachusetts
April 22, 1997 Coopers & Lybrand L.L.P.
F-3
<PAGE> 23
THE TJX COMPANIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
(1) (2)
Balance at Charged to Charges to Balance at
Description Beginning of Period Costs and Expenses Other Accounts Deductions End of Period
- ----------- ------------------- ------------------ -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Reserves for Discontinued Operations:
Fiscal year ended January 25, 1997 25,253,000 10,709,000(A) -- 12,312,000(D) 23,650,000
Fiscal year ended January 27, 1996 13,085,000 23,025,000(A) -- 10,857,000(D) 25,253,000
Fiscal year ended January 28, 1995 17,618,000 -- -- 4,533,000(D) 13,085,000
Store Closing and Restructuring Reserves:
Fiscal year ended January 25, 1997 251,566,000 3,071,000(B) -- 158,770,000(E) 95,867,000
Fiscal year ended January 27, 1996 -- 38,800,000(B) 244,095,000(C) 31,329,000(E) 251,566,000
</TABLE>
(A) Additions are primarily for the estimated costs associated with the sale of
Chadwick's in the fiscal year ended January 25, 1997. Additions for the
fiscal year ended January 27, 1996 are primarily for estimated costs
associated with the sale of the Hit or Miss Division including costs to
close 69 stores and to settle or otherwise dispose of related leases.
(B) Additions for fiscal 1997 are for certain restructuring costs of HomeGoods.
Additions for fiscal 1996, include $35 million for estimated cost of closing
approximately 30 T.J. Maxx stores in connection with the acquisition of
Marshalls and $3.8 million for certain restructuring costs of HomeGoods
operation.
(C) Represents the initial reserve established in the allocation of the purchase
price of Marshalls relating primarily to the anticipated closing of
approximately 170 Marshalls stores. The reserve also includes a reserve for
markdowns on inventory acquired, legal and professional fees and the cost
associated with the closing of other non-store facilities.
(D) Deductions relate primarily to ongoing lease obligations, net of sublease
income, as well as settlement costs on certain leases.
(E) Deductions for fiscal 1997 include reserve adjustments of $8 million for
reduced costs associated with the T.J. Maxx store closings and a reduction
of $85.9 million to the Marshalls store closing reserve due to fewer planned
closings and the reduced cost of those closings. Expenditures and charges
against the reserve totalled $64.9 million which included $21.3 million for
lease disposal and settlement costs with the balance primarily for inventory
markdowns, severance and the net book value of property writeoffs.
Deductions for fiscal 1996 are primarily for inventory markdowns and for
HomeGoods restructuring costs including one store closing and downsizing
expenditures.
F-4
<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
DATED AS OF JANUARY 26, 1997
BETWEEN BERNARD CAMMARATA AND THE TJX COMPANIES, INC.
<PAGE> 2
INDEX PAGE
1. EFFECTIVE DATE; TERM OF AGREEMENT..........................................1
2. SCOPE OF EMPLOYMENT........................................................1
3. COMPENSATION AND BENEFITS..................................................2
4. TERMINATION OF EMPLOYMENT; IN GENERAL......................................7
5. BENEFITS UPON NON-VOLUNTARY TERMINATION OF EMPLOYMENT OR
UPON EXPIRATION OF THE AGREEMENT......................................7
6. OTHER TERMINATION; VIOLATION OF CERTAIN AGREEMENTS........................10
7. BENEFITS UPON CHANGE IN CONTROL...........................................11
8. AGREEMENT NOT TO SOLICIT OR COMPETE.......................................11
9. SPECIAL DEFERRAL ACCOUNT; TRUST...........................................12
10. ASSIGNMENT................................................................15
11. NOTICES...................................................................16
12. CERTAIN EXPENSES..........................................................16
13. WITHHOLDING...............................................................16
14. GOVERNING LAW.............................................................16
15. ARBITRATION...............................................................16
16. ENTIRE AGREEMENT..........................................................17
EXHIBIT A
Terms of 75,000 Share Deferred Stock Award Under Section 3(c)(i)....A-1
-i-
<PAGE> 3
EXHIBIT B
Terms of 150,000 Share Deferred Stock Award Under Section 3(c)(ii)..B-1
EXHIBIT C
Certain Definitions.................................................C-1
EXHIBIT D
Definition of "Change of Control"...................................D-1
EXHIBIT E
Change of Control Benefits..........................................E-1
-ii-
<PAGE> 4
BERNARD CAMMARATA
EMPLOYMENT AGREEMENT
AGREEMENT dated as of January 26, 1997 between BERNARD CAMMARATA of One
Thornton Lane, Concord, Massachusetts 01742 ("Executive") and The TJX Companies,
Inc., a Delaware corporation whose principal office is in Framingham,
Massachusetts 01701.
RECITALS
Executive has been employed by The TJX Companies, Inc. (the "Company")
as its President and Chief Executive Officer, most recently pursuant to an
employment agreement dated as of January 30, 1994 (the "Prior Agreement"). The
Company and Executive intend that Executive should continue to serve the Company
on the terms set forth below and, to that end, deem it desirable and appropriate
to enter into this Agreement.
AGREEMENT
The parties hereto, in consideration of the mutual agreements
hereinafter contained, agree as follows:
1. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall become
effective as of January 26, 1997 (the "Effective Date") and, as of that date,
shall supersede the Prior Agreement. Executive's employment shall continue on
the terms provided herein until January 26, 2002, subject to earlier termination
as provided herein (such period of employment hereinafter called the "Employment
Period").
2. SCOPE OF EMPLOYMENT.
(a) Nature of Services. Executive shall diligently perform the duties
and assume the responsibilities of President and Chief Executive Officer of the
Company and such additional executive duties and responsibilities as shall from
time to time be assigned to him by the Board.
(b) Extent of Services. Except for illnesses and vacation periods,
Executive shall devote substantially all his working time and attention and his
best efforts to the performance
<PAGE> 5
of his duties and responsibilities under this Agreement. However, Executive may
(i) make any passive investments where he is not obligated or required to, and
shall not in fact, devote any managerial efforts, (ii) participate in charitable
or community activities or in trade or professional organizations, or (iii)
subject to Board approval (which approval shall not be unreasonably withheld or
withdrawn), hold directorships in public companies, except only that the Board
shall have the right to limit such services as a director or such participation
whenever the Board shall believe that the time spent on such activities
infringes in any material respect upon the time required by Executive for the
performance of his duties under this Agreement or is otherwise incompatible with
those duties. The parties hereto acknowledge that Executive's involvement as an
investor in and director of the Sterling Country Club constitutes a passive
investment that does not involve managerial effort within the meaning of (i)
above.
3. COMPENSATION AND BENEFITS.
(a) Base Salary. Executive shall be paid a base salary at the rate
hereinafter specified, such Base Salary to be paid in the same manner and at the
same times as the Company shall pay base salary to other executive employees.
The rate at which Executive's Base Salary shall be paid shall be $1,200,000 per
year or such other rate (not less than $1,200,000 per year) as the Board may
determine after Board review at the beginning of the Company's FYE 2000 and FYE
2002; provided, that so much of Executive's Base Salary for any fiscal year of
the Company as exceeds the Section 162(m) Current Salary Maximum shall be
credited to the Account described at Section 9 below and paid out in accordance
with Section 9(f) below.
(b) Existing Awards Under 1986 Stock Incentive Plan (Including LRPIP).
Reference is made to the following awards previously made to Executive under the
Company's 1986 Stock Incentive Plan (including any successor, the "1986 Plan"),
including awards under the Long Range Performance Incentive Plan:
(i) PARS: The award for 100,000 shares referenced in Section
3(d) of the employment agreement between Executive and the Company
dated as of June 1, 1989 (the "1989 Agreement"), and the award dated
September 17, 1990;
(ii) PBDS: The award for a maximum of 150,000 shares
referenced in Section 3(c) of the Prior Agreement;
(iii) Existing Options: Grant Nos. 86-40, 86-42, 86-46, and
86-48; and
(iv) LRPIP: Awards made prior to the date of this Agreement
under the terms of LRPIP.
-2-
<PAGE> 6
Each of the above-referenced awards shall continue for such period or periods
and in accordance with such terms as are set out in the grant and other
governing documents relating to such awards (including for this purpose the
Prior Agreement and the 1989 Agreement insofar as they relate to any such
awards), and shall not be affected by the terms of this Agreement except as
otherwise expressly provided herein; provided, that by executing this Agreement,
Executive waives any and all right to receive any shares under Section A.2(e) of
Schedule A of the Prior Agreement and acknowledges that all references hereunder
to his PBDS award under the Prior Agreement shall exclude amounts, if any,
determined under said Section A.2(e).
(c) Additional Awards under 1986 Plan. The Committee has determined to
grant to Executive the following additional awards under the 1986 Plan:
(i) Effective upon execution of this Agreement, Executive
shall be awarded a bonus of 75,000 shares of Deferred Stock on the
terms and conditions set forth in Exhibit A to this Agreement. This
Agreement, including Exhibit A, shall constitute the Award Agreement in
respect of such shares required by the 1986 Plan.
(ii) Also effective upon execution of this Agreement,
Executive shall be awarded an additional 150,000 shares of Deferred
Stock on the terms and conditions set forth in Exhibit B to this
Agreement. This Agreement, including Exhibit B, shall constitute the
Award Agreement in respect of such shares required by the 1986 Plan.
(iii) Also effective upon execution of this Agreement,
Executive shall be awarded two stock options under the 1986 Plan for an
aggregate of 350,000 shares of Stock: one option (the "First New
Option") to purchase 100,000 shares of Stock and the second (the
"Second New Option") to purchase 250,000 shares of Stock. The First and
Second New Options shall be identical in their terms except that the
First New Option shall vest (become exercisable) on a cumulative basis
at the rate of 33 1/3% per year beginning on June 4, 1997, subject to
acceleration in accordance with the 1986 Plan and this Agreement, and
the Second New Option shall vest (become exercisable) on a cumulative
basis at the rate of 33 1/3% per year beginning on the first
anniversary of the date of grant, subject to acceleration in accordance
with the 1986 Plan and this Agreement. The exercise price for each New
Option shall be the fair market value of the Stock on the date of
grant, and each New Option shall have a term of ten years, subject to
earlier termination in accordance with the 1986 Plan and this
Agreement. Executive shall also be eligible to receive normal annual
awards of non-statutory stock options (including any such awards made
in the Company's fiscal year ending in 1998), but only if at the time
of such award Executive is still serving as Chief Executive Officer
(such additional option awards, if any, together with the First New
Option and the Second New Option being hereinafter referred to as the
"New Options"). If prior
-3-
<PAGE> 7
to January 26, 2002 (A) Executive dies or becomes Disabled, or (B) a
Change of Control occurs while Executive is employed by the Company, or
(C) Executive voluntarily terminates the Employment Period for Valid
Reason, or (D) Executive's employment is terminated by the Company
other than for Cause, then all of Executive's previously granted stock
options (including but not limited to the New Options) ("Options") then
outstanding, to the extent not already vested, shall be immediately
vested. If Executive dies or becomes Disabled while employed by the
Company, all his Options shall remain exercisable for a period of three
years or, if less, the remainder of the original option term, and shall
then terminate. In the event Executive retires under the terms of the
1986 Plan, all his Options shall remain exercisable (to the extent they
were exercisable immediately prior to such retirement) for a period of
three years or, if less, the remainder of the original option term, and
then shall terminate. Upon any other termination of employment the
Options shall remain exercisable (to the extent they were exercisable
immediately prior to such termination, taking into account any
applicable accelerated vesting as described above) for a period equal
to the lesser of (i) three months, or (ii) the remainder of their
original term, and then shall terminate. However, if Executive is
terminated for Cause all the Options shall immediately terminate.
(d) LRPIP. During the Employment Period, Executive will be eligible to
participate in annual grants under LRPIP. To the extent provided in Section
162(m) of the Code, the terms of any such award shall be established by the
Committee. Subject to the foregoing, Executive shall be entitled with respect to
each award cycle (beginning with the FYE 1998 to FYE 2000 cycle) to earn up to
70% of his Base Salary as in effect at the beginning of the cycle if the target
established by the Committee is met and up to 105% of such Base Salary if such
target is exceeded, with the payment potential ranging from 0% to 105% of
Executive's Base Salary as established by the terms of the award. To the extent
the material terms of LRPIP are required to be approved by stockholders,
Executive's eligibility to receive awards under LRPIP for any cycle to which
such stockholder vote pertains shall be subject to such stockholder approval.
(e) MIP. During the Employment Period, Executive shall be eligible to
receive annual awards under the Company's Management Incentive Plan ("MIP"). To
the extent provided in Section 162(m) of the Code, the goals, scope and
conditions of any award shall be established annually by the Committee. Subject
to the foregoing, Executive shall be entitled to earn up to 60% of his Base
Salary if the target established by the Committee is met and up to 120% of his
Base Salary if such target is exceeded, with the payment potential ranging from
0% to 120% of Executive's Base Salary as established by the terms of the award.
To the extent the material terms of MIP are required to be approved by
stockholders, Executive's eligibility to receive annual awards under MIP for any
year to which such stockholder vote pertains shall be subject to such
stockholder approval.
-4-
<PAGE> 8
(f) Additional Bonus Awards. The following additional awards shall be
made and shall be credited to Executive's Account under Section 9:
(i) Subject to the provisions of this paragraph (f)(i),
Executive shall be entitled to a deferred award equal to (i) the
positive excess, if any, of the closing price of a share of Stock on
each vesting date of the First New Option described in paragraph
(c)(iii) above (each, a "vesting determination date"), taking into
account any accelerated vesting of such Option (or the closing price of
a share of Stock on the first day prior to the vesting determination
date on which the Stock is traded if the Stock is not traded on the
vesting determination date), over $34.875 (provided, that in no event
shall such positive excess exceed $7.875), multiplied by (B) the number
of shares of Stock as to which the First New Option vests on such
vesting determination date, subject in each case to appropriate
adjustment (as to dollar amounts and number of shares) for stock
splits, stock dividends and similar transactions occurring after June
4, 1996. The portion of the award described in this paragraph that is
determined on any vesting determination date shall be credited to
Executive's Account under Section 9 as of such date, regardless of
whether the First New Option is exercised or remains exercisable.
(ii) On the date in 1999 on which LRPIP awards, if any, for
the FYE 1997-1999 cycle are determined and paid, there shall be
credited to Executive's Account under Section 9, if Executive is then
still employed by the Company and its Subsidiaries, an amount equal to
the award, if any, to which Executive would have been entitled if he
had participated in the LRPIP FYE 1997-1999 cycle.
(g) SERP. Except as provided in Exhibit E ("Change of Control
Benefits") and this subsection (g), Executive is entitled to Category B benefits
determined and made payable in accordance with the generally applicable
provisions of the Company's Supplemental Executive Retirement Plan.
(i) Benefits vested to the extent accrued. Subject to the
provisions of Section 6 below, Executive has a fully vested right to
his accrued benefit under SERP based (except as provided in Exhibit E)
on his actual years of service. Executive shall continue to be fully
vested in any future accruals (if any) under SERP.
(ii) Death benefit. If Executive should die unmarried during
the Employment Period, the Company shall pay a lump sum death benefit
to his designated beneficiary, or if none to his estate. The lump sum
death benefit payable in accordance with this paragraph shall be paid
as soon as practicable following the date of Executive's death (the
"benefit determination date") and shall be in lieu of any other death
benefit then payable under SERP. The
-5-
<PAGE> 9
amount of such lump sum death benefit shall be determined by assuming
that Executive:
(A) was married to a spouse of the same age as
himself;
(B) retired on the benefit determination date and
deferred receipt of his SERP benefit until age 65;
(C) commenced receiving his SERP benefit at age 65 in
the form of a reduced joint and survivor annuity with a 50%
continuance to such spouse if she survived him; and
(D) died immediately after commencement of that
annuity.
The lump sum death benefit described in this subsection (g) shall be
the actuarial present value, determined as of the benefit determination
date, of the hypothetical survivor-spouse annuity determined in
accordance with the assumptions described in (A) through (D) above. For
purposes of making this actuarial present-value determination, the same
interest rate and mortality assumptions shall be applied as would apply
in determining a Category B SERP participant's retirement lump sum
benefit payable as of the benefit determination date.
For purposes of this subsection (g), Executive's designated
beneficiary shall be such person (including a trust) as Executive shall
have specified by a written notice delivered to the Company in
accordance with Section 11. Executive may change his beneficiary
designation at any time by a subsequent written notice delivered in the
same manner. If no beneficiary designation under this subsection (g) is
in effect at the time of Executive's death, the death benefit, if any,
payable under this subsection (g) shall be paid to Executive's estate.
(h) Qualified Plans. Executive shall be entitled during the Employment
Period to participate in the Company's tax-qualified retirement and
profit-sharing plans in accordance with the terms of those plans.
(i) Policies and Fringe Benefits. Executive shall be subject to Company
policies applicable to its executives generally and shall be entitled to receive
all such fringe benefits as the Company shall from time to time make available
to other executives generally (subject to the terms of any applicable fringe
benefit plan).
-6-
<PAGE> 10
4. TERMINATION OF EMPLOYMENT; IN GENERAL.
(a) The Company shall have the right to end Executive's employment at
any time and for any reason, with or without Cause.
(b) The Employment Period shall terminate when Executive becomes
Disabled. In addition, if by reason of Incapacity Executive is unable to perform
his duties for at least six continuous months, upon written notice by the
Company to Executive the Employment Period will be terminated for Incapacity.
(c) Whenever the Employment Period shall terminate, Executive shall
resign all offices or other positions he shall hold with the Company and any
affiliated corporations, including any position on the Board.
5. BENEFITS UPON NON-VOLUNTARY TERMINATION OF EMPLOYMENT OR UPON
EXPIRATION OF THE AGREEMENT.
(a) Certain Terminations Prior to January 26, 2002. If the Employment
Period shall have terminated prior to January 26, 2002 by reason of (i) death,
Disability or Incapacity of Executive, (ii) termination by the Company for any
reason other than Cause or (iii) termination by Executive in the event that
either (A) Executive shall be removed from or fail to be reelected to the
offices of Chief Executive Officer, a Director and a member of any Executive
Committee of the Board, or (B) Executive is relocated more than 40 miles from
the current corporate headquarters of the Company, in either case without his
prior written consent (a "Constructive Termination"), then all compensation and
benefits for Executive shall be as follows:
(i) For the longer of twelve (12) months after such
termination or until January 26, 2002 (the "termination period"), the
Company will pay to Executive or his legal representative continued
Base Salary at the rate in effect at termination of employment, subject
to the following:
(A) If Executive is eligible for long-term disability
compensation benefits under the Company's long-term disability
plan or any successor Company long-term disability plan, the
amount payable under this clause shall be paid at a rate equal
to the excess of (I) the rate of Base Salary in effect at
termination of employment, over (II) the long-term disability
compensation benefits for which Executive is eligible under
such plan.
(B) Payments pursuant to this clause (a)(i) shall be
paid for the first twelve months of the termination period
without reduction for compensation
-7-
<PAGE> 11
earned from other employment or self-employment, and shall
thereafter be reduced by such compensation received by
Executive from other employment or self-employment.
(ii) Until the expiration of the termination period as defined
at (a)(i) above and subject to such minimum coverage-continuation
requirements as may be required by law, the Company will provide
(except to the extent that Executive shall obtain the same from another
employer or from self-employment) such medical and hospital insurance,
long-term disability insurance and term life insurance for Executive
and his family, comparable to the insurance provided for executives
generally, as the Company shall determine, and upon the same terms and
conditions as the same shall be provided for other Company executives
generally; provided, however, that in no event shall such benefits or
the terms and conditions thereof be less favorable to Executive than
those afforded to him as of the date of termination.
(iii) The Company will pay to Executive or his legal
representative, without offset for compensation earned from other
employment or self-employment, (A) any amounts to which Executive is
entitled under MIP for the fiscal year of the Company ended immediately
prior to Executive's termination of employment, plus (B) any unpaid
amounts owing with respect to LRPIP cycles in which Executive
participated and which were completed prior to termination, plus (C) if
the LRPIP FYE 1997-1999 cycle has been completed, any bonus to which
Executive is entitled under Section 3(f)(ii), unless such bonus has
already been credited to Executive's Account under Section 9. These
amounts will be paid at the same time as other awards for such prior
year or cycle are paid.
(iv) The Company will pay to Executive or his legal
representative, without offset for compensation earned from other
employment or self-employment, an amount in the nature of severance
equal to the sum of (A) Executive's MIP Target Award, if any, for the
year of termination, multiplied by a fraction, the numerator of which
is three hundred and sixty-five (365) plus the number of days during
such year prior to termination, and the denominator of which is seven
hundred and thirty (730), plus (B) with respect to each LRPIP cycle in
which Executive participated and which had not ended prior to
termination of employment, 1/36 of an amount equal to Executive's LRPIP
Target Award for such cycle multiplied by the number of full months in
such cycle completed prior to termination of employment, plus (C) with
respect to the bonus described in Section 3(f)(ii) (if the LRPIP FYE
1997-1999 cycle has not yet been completed), an amount equal to $70,000
for each month in the FYE 1997-1999 LRPIP cycle ended prior to
termination of employment. The severance component described in clause
(a)(iv)(A) above will be paid not later than MIP awards for the year of
termination are paid. The severance component described in clause
(a)(iv)(B) above, to
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the extent measured by the LRPIP Target Award for any cycle, will be
paid not later than the date on which LRPIP awards for such cycle are
paid or would have been paid. The severance component described in
clause (a)(iv)(C) above will be paid not later than the date in 1999 on
which LRPIP awards for the FYE 1997-1999 cycle are paid or would have
been paid. In no event shall the severance described in this paragraph
be treated as paid under MIP or LRPIP.
(v) In addition, the Company (A) will pay to Executive or his
legal representative such vested amounts as shall have been deferred
for Executive's account (but not received) under the GDCP in accordance
with its terms plus such amounts, if any, as shall then remain credited
to Executive's Account under Section 9; and (B) shall deliver to
Executive or his legal representative any shares of Stock which
Executive shall have earned but deferred in respect of his PBDS award
referred to in Section 3(b)(ii).
(vi) Executive or his legal representative shall be entitled
to the benefits described in Sections 3(b)(i) (PARS), 3(b)(ii) (PBDS)
(other than those referenced under Section 6(a)(v) above), 3(b)(iii)
(Existing Options), Section 3(c)(iii) (New Options), 3(g) (SERP), and
3(h) (Qualified Plans).
(vii) If termination occurs by reason of Incapacity or
Disability, Executive shall be entitled to such compensation, if any,
as is payable pursuant to the Company's long-term disability plan or
any successor Company disability plan. If for any period Executive
receives long-term disability compensation payments under a long-term
disability plan of the Company as well as payments under (a)(i) above,
and if the sum of such payments (the "combined salary/disability
benefit") exceeds the payment for such period to which Executive is
entitled under (a)(i) above (determined without regard to paragraph (A)
thereof), he shall promptly pay such excess in reimbursement to the
Company; provided, that in no event shall application of this sentence
result in reduction of Executive's combined salary/disability benefit
below the level of long-term disability compensation payments to which
Executive is entitled under the long-term disability plan or plans of
the Company.
(b) Terminations after January 25, 2002. Unless earlier terminated or
except as otherwise mutually agreed by Executive and the Company, Executive's
employment with the Company shall terminate on January 26, 2002. Unless the
Company in connection with such termination shall offer to Executive continued
service in a position acceptable to Executive and upon mutually and reasonably
agreeable terms, Executive shall be entitled upon such termination to receive,
for the period beginning on such termination and ending on the date of the
annual meeting of stockholders occurring in 2003, continuation of Base Salary at
the rate in effect at termination of employment plus medical, dental,
life-insurance and disability
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coverage (but not including continued participation in the Company's retirement
or 401(k) plan(s) or continued participation in SERP or any other fringe
benefit, other than a Company provided automobile or automobile allowance)
comparable to the benefits of such type to which he was entitled at time of
termination; provided, that to the extent it is impossible or impracticable to
provide any such benefits to Executive under the Company's then existing
employee benefit plans or arrangements, the Company shall arrange for
alternative comparable coverage or, if such alternative coverage is not
available, shall pay to Executive the cost of such coverage, all as reasonably
determined by the Committee. If the Company in connection with such termination
offers to Executive continued service in a position acceptable to Executive and
upon mutually and reasonably agreeable terms, and Executive declines such
service, he shall be treated for all purposes of this Agreement as having
terminated his employment voluntarily (other than for Valid Reason) on January
26, 2002 and he shall be entitled only to those benefits to which he would be
entitled under Section 6(a) ("Voluntary termination of employment"). For
purposes of the two preceding sentences, "service in a position acceptable to
Executive" shall mean service as Chief Executive Officer of the Company or
service as Chairman of the Board, or service in such other position, if any, as
may be acceptable to Executive.
6. OTHER TERMINATION; VIOLATION OF CERTAIN AGREEMENTS.
(a) Voluntary termination of employment. If Executive
terminates his employment voluntarily, Executive or his legal
representative shall be entitled to: (i) such vested amounts as shall
have been deferred for Executive's account (but not received) under the
GDCP in accordance with its terms and such amounts, if any, as shall
then remain credited to Executive's Account under Section 9; (ii) any
shares of Stock which Executive shall have earned but deferred in
respect of his PBDS award referred to in Section 3(b)(ii); and (iii)
the benefits described in Sections 3(b)(i) (PARS), 3(b)(ii) (PBDS)
(other than those referenced under Section 6(a)(ii) above), 3(b)(iii)
(Existing Options), Section 3(c)(iii) (New Options), 3(g) (SERP), and
3(h) (Qualified Plans). No other benefits shall be paid under this
Agreement upon a voluntary termination of employment.
(b) Termination for Cause; violation of certain agreements. If
the Company should end Executive's employment for Cause, or,
notwithstanding Section 5 and Section 6(a) above, if Executive should
violate the protected persons or noncompetition provisions of Section
8, all compensation and benefits otherwise payable pursuant to this
Agreement shall cease, other than (w) such amounts as Executive shall
have deferred (but not received) under the GDCP in accordance with its
terms and such amounts as are credited to Executive's Account under
Section 9, (x) any shares which Executive has earned but deferred in
respect of his PBDS award referred to in Section 3(b)(ii); (y) any
benefits to which Executive may be entitled under SERP (provided,
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that if Executive should end his employment voluntarily, such benefits
shall be payable only if Executive does not violate the provisions of
Section 8), and (z) benefits, if any, to which Executive may be
entitled under Sections 3(b)(i) (PARS), 3(b)(ii) (PBDS) (other than
those referenced under (x) above), 3(b)(iii) (Existing Options),
3(c)(iii) (New Stock Options), and 3(h) (Qualified Plans). The Company
does not waive any rights it may have for damages or for injunctive
relief.
7. BENEFITS UPON CHANGE IN CONTROL. Notwithstanding any other provision
of this Agreement, in the event of a Change of Control, the determination and
payment of any benefits payable thereafter with respect to Executive shall be
governed exclusively by the provisions of Exhibit E.
8. AGREEMENT NOT TO SOLICIT OR COMPETE.
(a) Upon the termination of employment at any time, then for a period
of two years after the termination of the Employment Period, Executive shall not
under any circumstances employ, solicit the employment of, or accept unsolicited
the services of, any "protected person" or recommend the employment of any
"protected person" to any other business organization. A "protected person"
shall be a person known by Executive to be employed by the Company or its
Subsidiaries or to have been employed by Company or its Subsidiaries within six
months prior to the commencement of conversations with such person with respect
to employment.
As to (i) each "protected person" to whom the foregoing applies, (ii)
each subcategory of "protected person" as defined above, (iii) each limitation
on (A) employment, (B) solicitation and (C) unsolicited acceptance of services,
of each "protected person" and (iv) each month of the period during which the
provisions of this subsection (a) apply to each of the foregoing, the provisions
set forth in this subsection (a) are deemed to be separate and independent
agreements and in the events of unenforceability of any such agreement, such
unenforceable agreement shall be deemed automatically deleted from the
provisions hereof and such deletion shall not affect the enforceability of any
other provision of this subsection (a) or any other term of this Agreement.
(b) During the course of his employment, Executive will have learned
many trade secrets of the Company and will have access to confidential
information and business plans for the Company. Therefore, upon automatic
termination of the Employment Period on January 26, 2002, or if Executive should
end his employment voluntarily at any time, including by reason of retirement or
disability but not including a voluntary termination for Valid Reason, or if the
Company should end Executive's employment at any time for Cause, then for a
period of two years thereafter, Executive will not engage, either as a
principal, employee, partner, consultant or investor (other than a less-than-1%
stock interest in a
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<PAGE> 15
corporation), in a business which is a competitor of the Company. A business
shall be deemed a competitor of the Company if and only if it shall then be so
regarded by retailers generally or if it shall operate a promotional off-price
family apparel store within 10 miles of any "then existing T.J. Maxx or
Marshalls store." The term "then existing" in the previous sentence shall refer
to any such store that is, at the time of termination of the Employment Period,
operated by the Company or any wholly-owned subsidiary of the Company or under
lease for operation as aforesaid. Nothing herein shall restrict the right of
Executive to engage in a business that operates a conventional or full mark-up
department store. Executive agrees that if, at any time, pursuant to action of
any court, administrative or governmental body or other arbitral tribunal, the
operation of any part of this paragraph shall be determined to be unlawful or
otherwise unenforceable, then the coverage of this paragraph shall be deemed to
be restricted as to duration, geographical scope or otherwise, to the extent,
and only to the extent, necessary to make this paragraph lawful and enforceable
in the particular jurisdiction in which such determination is made.
(c) If the Employment Period terminates, Executive agrees (i) to notify
the Company immediately upon his securing employment or becoming self-employed
during any period when Executive's compensation from the Company shall be
subject to reduction or his benefits provided by the Company shall be subject to
termination as provided in Section 6 and (ii) to furnish to the Company written
evidence of his compensation earned from any such employment or self-employment
as the Company shall from time to time request. In addition, upon termination of
the Employment Period for any reason other than the death of Executive,
Executive shall immediately return all written trade secrets, confidential
information and business plans of the Company and shall execute a certificate
certifying that he has returned all such items in his possession or under his
control.
9. SPECIAL DEFERRAL ACCOUNT; TRUST.
(a) The Company shall maintain on its books a special
memorandum Account reflecting the following deferred compensation
obligations of the Company to Executive: (i) an opening balance of
$55,000, which shall be credited to the Account as of the date of
execution of this Agreement; (ii) the Deferred Stock award described in
Exhibit A, which shall be credited to the Account as of the date of
execution of this Agreement; (iii) the Deferred Stock award described
in Exhibit B, which shall be credited to the Account as of the date of
this Agreement; (iv) any Base Salary deferred under Section 3(a), which
shall be credited to the Account as of the date such deferred Base
Salary would have been paid had it not been deferred; (v) the amounts,
if any, described in Section 3(f)(i) above, which shall be credited to
the Account as of the date(s) such amounts, if any, are earned under
Section 3(f)(i); (v) the amount, if any, described in Section 3(f)(ii)
above, which shall be credited to the Account as of the date
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<PAGE> 16
awards (if any) for the LRPIP FYE 1997-1999 cycle are paid; and (vi)
notional investment experience with respect to such deferrals, as
hereinafter described.
(b) The Company's obligations with respect to the Account
represent an unsecured and unfunded promise by the Company to pay or
deliver cash or property in the future, and Executive's rights to
amounts credited to the Account shall be those of an unsecured general
creditor of the Company.
(c) Amounts credited to the Account shall be adjusted for
notional investment experience determined under this paragraph. For
purposes of determining the amount of the Company's unfunded obligation
to Executive hereunder, all amounts initially credited to the Account
under (a)(ii) or (a)(iii) above shall be deemed invested in Stock and
all other amounts initially credited to the Account, except as the same
may be notionally invested or reinvested as described below, shall bear
interest at the rate specified in the GDCP until such time as the
Company shall have established a brokerage account (either directly or
under the trust described in (e) below) to make "hedging investments"
(as that term is defined in (d) below) and thereafter at the rate of
return earned on uninvested cash in such brokerage account. Executive
shall have the right, at any time and from time to time from and after
the date any amount is credited to the Account, to specify by advance
written notice to the Treasurer's Office of the Company the Authorized
Investment(s) in which such amount shall be notionally invested;
provided, that except as the Committee may otherwise authorize, no such
specification with respect to the Account shall result in any one
notional transaction that involves an amount less than $50,000; and
further provided, that any such specification involving a notional sale
of Stock shall be effective under this paragraph only (i) to the extent
the Company could sell an equivalent number of shares of Stock pursuant
to an effective Registration Statement under the Securities Act of 1933
(it being the agreement of the parties hereto that the Company shall
cause a Registration Statement to be filed with the Securities and
Exchange Commission as soon as practicable following execution of this
Agreement) and in compliance with all applicable federal and state
securities laws, and (ii) at such times as an executive officer of the
Company would be free under applicable securities laws and Company
practices applicable to executive officers generally to sell an
equivalent number of shares of Stock. Any notional sale or purchase
hereunder shall be effective on such date as Executive may specify (but
not earlier than the first business day following the business day on
which Executive provides to the Treasurer's Office written notice of
such transaction) and shall be treated as having been effected, in the
case of a security listed on an exchange or Nasdaq, at the closing
price of such security on such effective date as reasonably determined
by the Company based on reported third-party sources (such as, but not
limited to, quotations in The Wall Street Journal); provided, that if
Executive specifies a notional transaction subject to a minimum sale
price, maximum
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<PAGE> 17
purchase price or similar limitation, such limitation shall be taken
into account to the extent practicable in the Company's reasonable
determination as to whether, when and at what price the notional
transaction specification is to be given effect; and further provided,
that in the case of any transaction as to which the Company makes (or
causes to be made) a "hedging transaction" as that term is defined in
paragraph (d) below, the provisions of paragraph (d) below shall apply
in determining the amount, price and other terms of notional
transactions. Subject to paragraph (d) below, the Account shall be
adjusted for income, gain, loss and expenses associated with the
Authorized Investments specified by Executive in the same manner as if
the Account had actually been invested in such Investments. In the case
of any portion of the Account notionally invested in Stock, any deemed
cash dividends shall be treated as having been notionally reinvested in
Authorized Investments other than Stock, and any deemed distributions
of property other than Stock shall continue to be treated as notionally
invested in such property until Executive shall specify another
notional investment.
(d) Notional investment experience under (c) above shall be
determined net of brokerage commissions, loads and other transaction
costs as provided in this paragraph. The Company in its discretion may
cause assets of the Company (including assets held in the trust
described at (e) below) to be invested in Authorized Investments
matching those specified by Executive as the measure of notional
investment experience under the Account (a "hedging investment"). If
the Company chooses to make any such hedging investments for its own
account, and so notifies Executive in writing, the notional investment
experience under the Account related to any investment specification by
Executive that is so hedged shall be determined after taking into
account the Company's actual investment-related expenses (other than
expenses associated with the preparation and filing of the registration
statement or other compliance measures referred to at (c) above) and
any actual loads or surrender charges with respect to such investment.
If the Company notifies Executive in writing that it intends to hedge a
notional investment, Executive's notional investment specifications
shall take effect only at such time or times and to such extent as the
Company's hedging investments are made. If the Company does not choose
to hedge any notional investment specification made by Executive or
does so without notifying Executive in writing (an "unhedged notional
transaction"), the notional investment experience under the Account
related to any such unhedged notional transaction shall be determined
after taking into account deemed brokerage commissions equal to the
Fidelity discount brokerage commission rates then in effect and such
loads or surrender charges, if any, as would have been borne with
respect to comparable investments, as reasonably determined by the
Committee.
(e) As soon as practicable following execution of this
Agreement, the Company shall cause a trust (of the type commonly
referred to as a "rabbi trust") (the "Trust") to
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<PAGE> 18
be established. As of each date that a credit described in (a)(i)
through (a)(v) above is credited to the Account, the Company shall
cause to be contributed to the Trust an amount equal to such credit. In
the case of the credits described in (a)(ii) and (a)(iii) above, such
contributions shall be made in shares of Stock; otherwise, all such
contributions shall be made in cash. The Trust shall be irrevocable,
subject only to the rights of the Company's general creditors to reach
Trust assets in the event of the Company's insolvency or bankruptcy (as
determined in a manner consistent with continued treatment of the Trust
as a "grantor trust" under I.R.S. Revenue Procedure 92-64 and other
applicable I.R.S. guidance) and subject to the remaining provisions of
this paragraph. To the extent of any payment to Executive in respect of
the Company's obligations under the Account, the Company may either
make such payment directly and cause itself to be reimbursed for such
payment out of the Trust, or may cause the trustee of the Trust to make
the payment directly out of the Trust. Any payment from the Trust to
Executive shall be treated to the extent of such payment as a discharge
of the Company's obligations hereunder. If, after full payment of all
amounts owing hereunder to Executive in respect of the Account, there
remain any assets in the Trust, the Company shall have the right to
recover such assets from the Trust and to terminate the Trust. Prior to
termination of the Trust, not less frequently than once each calendar
quarter the value of the assets held in the Trust shall be determined
and compared to the balance then standing to the Account. If the
balance in the Trust as of any such measurement date is more than the
balance standing to the Account as of such date, the excess over such
Account balance shall be paid to the Company at its request. If the
balance in the Trust as of any measurement date is less than the
balance standing to the Account as of such date, the Company shall
promptly contribute to the Trust funds sufficient to cause the Trust
balance to equal the Account balance as so determined.
(f) Distribution to Executive of amounts credited to the
Account described at (a) above shall be made as soon as practicable
following termination of Executive's status as an employee for any
reason; provided, that if the Committee determines that because of a
change in law or circumstances the deduction associated with an earlier
distribution would not be limited by Section 162(m) of the Internal
Revenue Code and the regulations thereunder, the Committee shall cause
such distribution to be made at or as soon as practicable after the
first date on which such limitation on deductions would not apply.
10. ASSIGNMENT. The rights and obligations of the Company shall enure
to the benefit of and shall be binding upon the successors and assigns of the
Company. The rights and obligations of Executive are not assignable except only
that payments payable to him after his death shall be made by devise or descent.
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<PAGE> 19
11. NOTICES. All notices and other communications required hereunder
shall be in writing and shall be given by mailing the same by certified or
registered mail, return receipt requested, postage prepaid. If sent to the
Company the same shall be mailed to the Company at 770 Cochituate Road,
Framingham, Massachusetts 01701, Attention: Chairman of the Executive
Compensation Committee, or other such address as the Company may hereafter
designate by notice to Executive; and if sent to the Executive, the same shall
be mailed to Executive at One Thornton Lane, Concord, Massachusetts 01742 or at
such other address as Executive may hereafter designate by notice to the
Company.
12. CERTAIN EXPENSES. The Company shall bear the reasonable fees and
costs of Executive's legal and financial advisors (not to exceed $35,000 in the
aggregate) incurred in negotiating this Agreement.
13. 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.
14. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by the laws of the Commonwealth of
Massachusetts.
15. ARBITRATION. In the event that there is any claim or dispute
arising out of or relating to this Agreement, or the breach thereof, and the
parties hereto shall not have resolved such claim or dispute within 60 days
after written notice from one party to the other setting forth the nature of
such claim or dispute, then such claim or dispute shall be settled exclusively
by binding arbitration in Boston, Massachusetts in accordance with the
Commercial Arbitration Rules of the American Arbitration Association by an
arbitrator mutually agreed upon by the parties hereto or, in the absence of such
agreement, by an arbitrator selected according to such Rules. Notwithstanding
the foregoing, if either the Company or Executive shall request, such
arbitration shall be conducted by a panel of three arbitrators, one selected by
the Company, one selected by Executive and the third selected by agreement of
the first two, or, in the absence of such agreement, in accordance with such
Rules. Judgment upon the award rendered by such arbitrator(s) shall be entered
in any Court having jurisdiction thereof upon the application of either party.
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16. ENTIRE AGREEMENT. This Agreement, including Exhibits, represents
the entire agreement between the parties relating to the terms of Executive's
employment by the Company and supersedes all prior written or oral agreements
between them.
/s/ Bernard Cammarata
------------------------------
Executive
THE TJX COMPANIES, INC.
By /s/ Robert Shapiro
--------------------------------------------------
Chairman of the Executive Compensation Committee
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EXHIBIT A
Terms of 75,000 Share Deferred Stock Award Under Section 3(c)(i)
The following terms shall govern the award of Deferred Stock under the
1986 Plan described at Section 3(c)(i) of the Agreement (the "Section 3(c)(i)
Award"):
A.1. Number of Shares. The number of shares of Stock subject to the
Section 3(c)(i) Award shall be 75,000. An amount representing such shares shall
be credited to the Account described at Section 9 of the Agreement as of the
date of execution of the Agreement, and shall thereafter be notionally invested
or reinvested, and otherwise adjusted, pursuant to Section 9.
A.2. Transfer of Shares. To the extent that, as of the date of
distribution of the Account described at Section 9 of the Agreement, that
portion of the Account attributable to the Section 3(c)(i) Award remains
notionally invested in Stock, there shall be transferred to Executive in
satisfaction of the Company's obligation with respect to that portion of the
Account shares of Stock equal in number to the number of such notionally
invested shares; provided, that if the total number of shares to be distributed
pursuant to this A.2. plus the total number of shares (if any) to be distributed
pursuant to Section B.2. of Exhibit B includes a fractional share, the total
such number shall be rounded down to the nearest whole number and the fractional
share amount shall be distributed in cash.
A.3. Voting. Executive shall be entitled to vote only those shares of
Stock subject to the Section 3(c)(i) Award that have actually been transferred
to him.
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EXHIBIT B
Terms of 150,000 Share Deferred Stock Award Under Section 3(c)(ii)
The following terms shall govern the award of Deferred Stock under the
1986 Plan described at Section 3(c)(ii) of the Agreement (the "Section 3(c)(ii)
Award"):
B.1. Number of Shares. The number of shares of Stock subject to the
Section 3(c)(ii) Award shall be 150,000. An amount representing such shares
shall be credited to the Account described at Section 9 of the Agreement as of
the date of execution of the Agreement, and shall thereafter be notionally
invested or reinvested, and otherwise adjusted, pursuant to Section 9.
B.2. Transfer of Shares. To the extent that, as of the date of
distribution of the Account described at Section 9 of the Agreement, that
portion of the Account attributable to the Section 3(c)(ii) Award remains
notionally invested in Stock, there shall be transferred to Executive in
satisfaction of the Company's obligation with respect to that portion of the
Account shares of Stock equal in number to the number of such notionally
invested shares; provided, that if the total number of shares to be distributed
pursuant to this B.2. plus the total number of shares (if any) to be distributed
pursuant to Section A.2. of Exhibit A includes a fractional share, the total
such number shall be rounded down to the nearest whole number and the fractional
share amount shall be distributed in cash.
B.3. Voting. Executive shall be entitled to vote only those shares of
Stock subject to the Section 3(c)(ii) Award that have actually been transferred
to him.
B.4. Noncompetition, etc. In consideration of the Section 3(c)(ii)
Award, Executive agrees that upon automatic termination of the Employment Period
on January 26, 2002, or if Executive should end his employment voluntarily at
any time, including by reason of retirement or disability but not including a
voluntary termination for Valid Reason, or if the Company should end Executive's
employment at any time for Cause, then for a period of five years thereafter
(instead of the two years specified in Section 8 of the Agreement) Executive
shall be bound by the terms and conditions of Section 8 of the Agreement. The
Company does not waive any rights it may have for damages or for injunctive
relief in respect of the noncompetition agreement described in this Section.
B - 1
<PAGE> 23
EXHIBIT C
Certain Definitions
In this Agreement, the following terms shall have the following meanings:
(a) "Account" shall mean the deferred compensation memorandum
account described at Section 9 of the Agreement.
(b) "Authorized Investment" means cash, shares in investment
companies registered under the Investment Company Act of 1940,
investments permitted as an investment for current contributions under
the Company's 401(k) plan or plans, bank obligations, commercial paper
rated A-1, A-2 or A-3 or their equivalent, direct or guaranteed federal
or state governmental obligations, and freely tradeable shares of
common stock in companies listed on the New York Stock Exchange, the
American Stock Exchange, or Nasdaq; provided, that Stock shall be
considered an Authorized Investment only with respect to amounts
initially credited to the Account under Section 9(a)(ii) or Section
9(a)(iii) and, with respect to any such amount, only until such time,
as any, as Executive specifies that such amount be notionally
reinvested in another Authorized Investment. An investment shall not
constitute an Authorized Investment if it (i) represents five percent
(5%) or more of the outstanding shares of any class of stock of the
issuer, or (ii) if made by the Company or by Executive, would be
illegal or require registration, consent or reporting with, from or to
any governmental agency or other person, or (iii) would be subject to
any restriction on transfer.
(c) "Base Salary" means, for any period, the amount described
in Section 3(a).
(d) "Board" means the Board of Directors of the Company.
(e) "Committee" means the Executive Compensation Committee of
the Board.
(f) "Cause" means dishonesty by Executive in the performance
of his duties, conviction of a felony (other than a conviction arising
solely under a statutory provision imposing criminal liability upon
Executive on a per se basis due to the Company offices held by
Executive, so long as any act or omission of Executive with respect to
such matter was not taken or omitted in contravention of any applicable
policy or directive of the Board), gross neglect of duties (other than
as a result of Disability or death), or conflict of interest which
conflict shall continue for 30 days after the Company gives written
notice to Executive requesting the cessation of such conflict.
C - 1
<PAGE> 24
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 his counsel was given an opportunity to be heard, finding that the
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
his Base Salary from the date that notice of termination is given until
the earliest to occur of (A) termination of Executive for Cause (in
which case Executive shall not be entitled to his 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 his previously unpaid Base Salary for such
period), or (C) 90 days after notice of termination is given (in which
case Executive shall then be reinstated and paid any of his previously
unpaid Base Salary for such period). If Base Salary is withheld and
then paid pursuant to clauses (B) and (C) of the preceding sentence,
the amount thereof shall be accompanied by simple interest, calculated
on a daily basis, at a rate per annum equal to the prime or base
lending rate, as in effect at the time, of the Company's principal
commercial bank.
(g) "Change of Control" has the meaning given it in Exhibit D.
(h) "Change of Control Termination" means 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 his employment (A)
within 120 days after the occurrence without Executive's express
written consent of any one 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
pertinent situation described therein 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 of the event described in clause (VII), provided that Executive
gives notice to the Company at least 30 days in advance of his intent
to terminate his employment in respect of such event; or (C) under the
circumstances described in clause (VIII) below, provided that Executive
gives notice to the Company at least 30 days in advance:
C - 2
<PAGE> 25
(I) the assignment to him of any duties inconsistent with his
positions, duties, responsibilities, reporting
requirements, and status with the Company immediately
prior to the Change of Control, or any removal of
Executive from or any failure to reelect him to such
positions, except in connection with the termination of
Executive's employment by the Company for Cause or by
Executive other than for good reason, or any other action
by the Company 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 promptly after receipt of notice
thereof given by Executive; or
(II) if 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 Change of Control or if Executive's total
cash compensation opportunities, including salary 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 Change of Control; or
(III) the failure of the Company 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 Change of
Control unless the Company provides Executive with a plan
or plans that provide substantially similar benefits, or
the taking of any action by the Company that would
adversely affect Executive's benefits under any of such
plans or deprive Executive of any material fringe benefit
enjoyed by Executive immediately prior to the Change of
Control; or
(IV) any purported termination of Executive's employment by the
Company for Cause during a Standstill Period which is not
effected in compliance with paragraph (d) above; or
(V) any relocation of Executive of more than 40 miles from the
place where Executive was located at the time of the
Change of Control; 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
C - 3
<PAGE> 26
of the Company determined in accordance with generally
accepted accounting principles consistently applied) or
earning power of the Company (on an individual basis) or
the Company and its Subsidiaries (on a consolidated basis)
to any other Person or Persons (as those terms are defined
in Exhibit D); or
(VIII) The voluntary termination by Executive of his employment
at any time within one year after the Change of Control.
Notwithstanding the foregoing, the Board may expressly
waive the application of this clause (VIII) if it waives
the applicability of substantially similar provisions with
respect to all persons with whom the Company has a written
severance agreement (or may condition its application on
any additional requirements or employee agreements which
the Board shall in its discretion deem appropriate in the
circumstances). The determination of whether to waive or
impose conditions on the application of this clause (VIII)
shall be within the complete discretion of the Board but
shall be made prior to the Change of Control.
(i) "Date of Termination" means the date on which Executive's
employment terminates.
(j) "Disability" has 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.
(k) "GDCP" means the Company's General Deferred Compensation
Plan, or, if the General Deferred Compensation Plan is no longer
maintained by the Company, a nonqualified deferred compensation plan or
arrangement the terms of which are not less favorable to Executive than
the terms of the General Deferred Compensation Plan as in effect on the
Effective Date.
(l) "Incapacity" means a disability (other than Disability
within the meaning of (j) above) or other impairment of health that
renders Executive unable to perform his duties to the reasonable
satisfaction of the Committee.
(m) "Section 162(m) Current Salary Maximum" means, for any
fiscal year of the Company, $1,000,000 plus that portion of Executive's
Base Salary as is deferred by salary reduction into the Company's
401(k) plan or plans, minus the sum of taxable fringe benefits provided
to Executive for which the Company would be entitled to a deduction
(determined without regard to Section 162(m) of the Code).
C - 4
<PAGE> 27
(n) "Standstill Period" means the period commencing on the
date of a Change of Control and continuing until the close of business
on the earlier of January 26, 2002 or the last business day of the 24th
calendar month following such Change of Control.
(o) "Stock" means the common stock, $1.00 par value, of the
Company.
(p) "Subsidiary" means 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.
(q) "Valid Reason" means the voluntary termination by
Executive of his employment (A) within 120 days after the occurrence
without Executive's express written consent of any one of the events
described in clauses (I), (II), (III), (IV), or (V) below, provided
that Executive gives notice to the Company at least 30 days in advance
requesting that the pertinent situation described therein be remedied,
and the situation remains unremedied upon expiration of such 30-day
period; or (B) within 120 days after the occurrence without Executive's
express written consent of the event described in clause (VI) below:
(I) the assignment to him of any duties inconsistent with
his positions, duties, responsibilities, reporting
requirements, and status with the Company immediately
prior to such assignment, or a substantive change in
Executive's titles or offices as in effect
immediately prior to such assignment, or any removal
of Executive from or any failure to reelect him to
such positions, except in connection with the
termination of Executive's employment by the Company
for Cause or by Executive other than for Valid
Reason, or any other action by the Company 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 promptly after receipt of
notice thereof given by Executive; or
(II) the failure of the Company 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 such failure unless the Company provides Executive
with a plan or plans that provide substantially
similar benefits, or the taking of any action by the
Company that would adversely affect Executive's
benefits under any of such plans or deprive Executive
of any material fringe benefit enjoyed by Executive
immediately prior to such action, unless the
elimination or reduction of any such benefit,
perquisite or plan affects all other
C - 5
<PAGE> 28
executives in the same organizational level (it being
the Company's burden to establish this fact); or
(III) any purported termination of Executive's employment
by the Company for Cause which is not effected in
compliance with paragraph (d) above; or
(IV) any relocation of Executive of more than 40 miles
from the place where Executive was located at the
time of such relocation; or
(V) any other breach by the Company of any provision of
this Agreement; or
(VI) 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 an individual basis) or the Company and its
Subsidiaries (on a consolidated basis) to any other
Person or Persons (as those terms are defined in
Exhibit D).
C - 6
<PAGE> 29
EXHIBIT D
Definition of "Change of Control"
"Change of Control" shall mean the occurrence of any one of the
following events:
(a) there occurs a change of control of the Company of a
nature that would be required to be reported in response to Item 1(a)
of the Current Report on Form 8-K pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") or in any
other filing under the Exchange Act; provided, however, that no
transaction shall be deemed to be a Change of Control (i) if the person
or each member of a group of persons acquiring control is excluded from
the definition of the term "Person" hereunder or (ii) unless the
Committee shall otherwise determine prior to such occurrence, if
Executive or an Executive Related Party is the Person or a member of a
group constituting the Person acquiring control; or
(b) any Person other than the Company, any wholly-owned
subsidiary of the Company, or any employee benefit plan of the Company
or such a subsidiary becomes the owner of 20% or more of the Company's
Common Stock and thereafter individuals who were not directors of the
Company prior to the date such Person became a 20% owner are elected as
directors pursuant to an arrangement or understanding with, or upon the
request of or nomination by, such Person and constitute at least 1/4 of
the Company's Board of Directors; provided, however, that unless the
Committee shall otherwise determine prior to the acquisition of such
20% ownership, such acquisition of ownership shall not constitute a
Change of Control if Executive or an Executive Related Party is the
Person or a member of a group constituting the Person acquiring such
ownership; or
(c) there occurs any solicitation or series of solicitations
of proxies by or on behalf of any Person other than the Company's Board
of Directors and thereafter individuals who were not directors of the
Company prior to the commencement of such solicitation or series of
solicitations are elected as directors pursuant to an arrangement or
understanding with, or upon the request of or nomination by, such
Person and constitute at least 1/4 of the Company's Board of Directors;
or
(d) the Company executes an agreement of acquisition, merger
or consolidation which contemplates that (i) after the effective date
provided for in the agreement, all or substantially all of the business
and/or assets of the Company shall be owned, leased or otherwise
controlled by another Person and (ii) individuals who are directors of
the Company when such agreement is executed shall not constitute a
majority of the board of directors of the survivor or successor entity
immediately after the effective date
D - 1
<PAGE> 30
provided for in such agreement; provided, however, that unless
otherwise determined by the Committee, no transaction shall constitute
a Change of Control if, immediately after such transaction, Executive
or any Executive Related Party shall own equity securities of any
surviving corporation ("Surviving Entity") having a fair value as a
percentage of the fair value of the equity securities of such Surviving
Entity greater than 125% of the fair value of the equity securities of
the Company owned by Executive and any Executive Related Party
immediately prior to such transaction, expressed as a percentage of the
fair value of all equity securities of the Company immediately prior to
such transaction (for purposes of this paragraph ownership of equity
securities shall be determined in the same manner as ownership of
Common Stock); and provided, further, that, for purposes of this
paragraph (d), if such agreement requires as a condition precedent
approval by the Company's shareholders of the agreement or transaction,
a Change of Control shall not be deemed to have taken place unless and
until such approval is secured (but upon any such approval, a Change of
Control shall be deemed to have occurred on the date of execution of
such agreement).
In addition, for purposes of this Exhibit D the following terms have the
meanings set forth below:
"Common Stock" shall mean the then outstanding Common Stock of the
Company plus, for purposes of determining the stock ownership of any Person, the
number of unissued shares of Common Stock which such Person has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term Common Stock shall
not include shares of Preferred Stock or convertible debt or options or warrants
to acquire shares of Common Stock (including any shares of Common Stock issued
or issuable upon the conversion or exercise thereof) to the extent that the
Board of Directors of the Company shall expressly so determine in any future
transaction or transactions.
A Person shall be deemed to be the "owner" of any Common Stock:
(i) of which such Person would be the "beneficial owner," as
such term is defined in Rule 13d-3 promulgated by the Securities and
Exchange Commission (the "Commission") under the Exchange Act, as in
effect on March 1, 1989; or
(ii) of which such Person would be the "beneficial owner" for
purposes of Section 16 of the Exchange Act and the rules of the
Commission promulgated thereunder, as in effect on March 1, 1989; or
D - 2
<PAGE> 31
(iii) which such Person or any of its affiliates or associates
(as such terms are defined in Rule 12b-2 promulgated by the Commission
under the Exchange Act, as in effect on March 1, 1989), has the right
to acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options or otherwise.
"Person" shall have the meaning used in Section 13(d) of the Exchange
Act, as in effect on March 1, 1989.
An "Executive Related Party" shall mean any affiliate or associate of
Executive other than the Company or a majority-owned subsidiary of the Company.
The terms "affiliate" and "associate" shall have the meanings ascribed thereto
in Rule 12b-2 under the Exchange Act (the term "registrant" in the definition of
"associate" meaning, in this case, the Company).
D - 3
<PAGE> 32
EXHIBIT E
Change of Control Benefits
E.1. Benefits Upon a Change of Control Termination.
(a) The Company shall pay the following to Executive in a lump sum
within 30 days following a Change of Control Termination:
(i) an amount equal to (A) two times his Base Salary for one
year at the rate in effect immediately prior to the Date of Termination
or the Change of Control, whichever is higher, plus (B) the accrued and
unpaid portion of his Base Salary through the Date of Termination,
subject to the following. If Executive is eligible for long term
disability compensation benefits under the Company's long-term
disability plan or any successor Company long-term disability plan, the
amount payable under (A) shall be reduced by the annual long-term
disability compensation benefit for which Executive is eligible under
such plan for the two-year period over which the amount payable under
(A) is measured. If for any period Executive receives long-term
disability compensation payments under a long-term disability plan of
the Company as well as payments under the first sentence of this clause
(i), and if the sum of such payments (the "combined Change of
Control/disability benefit") exceeds the payment for such period to
which Executive is entitled under the first sentence of this clause (i)
(determined without regard to the second sentence of this clause (i)),
he shall promptly pay such excess in reimbursement to the Company;
provided, that in no event shall application of this sentence result in
reduction of Executive's combined Change of Control/disability benefit
below the level of long-term disability compensation payments to which
Executive is entitled under the long-term disability plan or plans of
the Company.
(ii) in lieu of any other benefits under SERP, an amount equal
to the present value of the payments that Executive would have been
entitled to receive under SERP as a Category B participant, applying
the following rules and assumptions:
(A) Executive's Primary Social Security Benefit (as
that term is defined in SERP) shall mean the annual primary
insurance amount to which the Executive is entitled or would,
upon application therefor, become entitled at age 65 under the
provisions of the Federal Social Security Act as in effect on
the Date of Termination assuming that Executive received
annual income at the rate of his Base Salary from the Date of
Termination until his 65th birthdate which would be treated as
wages for purposes of the Social Security Act;
E - 1
<PAGE> 33
(B) the monthly benefit under SERP determined using
the foregoing criteria shall be multiplied by 12 to determine
an annual benefit; and
(C) the present value of such annual benefit shall be
determined by multiplying the result in (B) by the appropriate
actuarial factor, using the most recently published interest
and mortality rates published by the Pension Benefit Guaranty
Corporation which are effective for plan terminations
occurring on the Date of Termination, using Executive's age to
the nearest year determined as of that date. If, as of the
Date of Termination, the Executive has previously satisfied
the eligibility requirements for Early Retirement under The
TJX Companies, Inc. Retirement Plan, then the appropriate
factor shall be that based on the most recently published
"PBGC Actuarial Value of $1.00 Per Year Deferred to Age 60 and
Payable for Life Thereafter -- Healthy Lives," except that if
the Executive's age to the nearest year is more than 60, then
such higher age shall be substituted for 60. If, as of the
Date of Termination, the Executive has not satisfied the
eligibility requirements for Early Retirement under The TJX
Companies, Inc. Retirement Plan, then the appropriate factor
shall be based on the most recently published "PBGC Actuarial
Value of $1.00 Per Year Deferred To Age 65 And Payable For
Life Thereafter -- Healthy Lives."
(D) the benefit determined under (E) above shall be
reduced by the value of any portion of Executive's SERP
benefit already paid or provided to him in cash or through the
transfer of an annuity contract.
(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 his family all life insurance, medical insurance and disability
plans and programs in which Executive was entitled to participate immediately
prior to the Change of Control, provided that Executive's continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that Executive is ineligible to participate in such
plans or programs, the Company shall arrange upon comparable terms to provide
Executive with benefits substantially similar to those which he is entitled to
receive under such plans and programs. Notwithstanding the foregoing, the
Company's obligations hereunder with respect to life, medical or disability
coverage or benefits shall be deemed satisfied to the extent (but only to the
extent) of any such coverage or benefits provided by another employer.
(c) For a period of two years after the Date of Termination, the
Company shall make available to Executive the use of any automobile that was
made available to Executive prior to the Date of Termination, including ordinary
replacement thereof in accordance with the Company's automobile policy in effect
immediately prior to the Change of Control (or, in lieu
E - 2
<PAGE> 34
of making such automobile available, the Company may at its option pay to
Executive the present value of its cost of providing such automobile).
E.2. Incentive Benefits Upon a Change of Control. Within 30 days
following a Change of Control, whether or not Executive's employment has
terminated or been terminated, the Company shall pay to the Executive, in a lump
sum, the sum of (i) and (ii), where:
(i) is the sum of (A) the "Target Award" 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 Change of
Control occurs, plus (B) an amount equal to such Target Award prorated
for the period of active employment during such fiscal year through the
Change of Control; and
(ii) the sum of (A) for Performance Cycles not completed prior
to the Change of Control, an amount with respect to each such cycle
equal to the maximum Award under LRPIP specified for Executive for such
cycle, plus (B) if the Change of Control occurs prior to the close of
the fiscal year ended in 1999, $1,260,000 in lieu of any award under
Section 3(f)(ii) of the Agreement, plus (C) any unpaid amounts owing
with respect to cycles completed prior to the Change of Control (and,
if the Change of Control occurs after the close of the fiscal year
ended in 1999, any unpaid amount owing with respect to the award
described in Section 3(f)(ii) of the Agreement).
E.3. Payments under Section E.1. and Section E.2. of this Exhibit shall
be made without regard to whether the deductibility of such payments (or any
other payments to or for the benefit of Executive) would be limited or precluded
by Internal Revenue Code Section 280G and without regard to whether such
payments (or any other payments) would subject Executive to the federal excise
tax levied on certain "excess parachute payments" under Internal Revenue Code
Section 4999; provided, that if the total of all payments to or for the benefit
of Executive, after reduction for all federal taxes (including the tax described
in Internal Revenue Code Section 4999, if applicable) with respect to such
payments ("Executive's total after-tax payments"), would be increased by the
limitation or elimination of any payment under Section E.1. or Section E.2.,
amounts payable under Section E.1. and Section E.2. shall be reduced to the
extent, and only to the extent, necessary to maximize Executive's total
after-tax payments. The determination as to whether and to what extent payments
under Section E.1. or Section E.2. are required to be reduced in accordance with
the preceding sentence shall be made at the Company's expense by Coopers &
Lybrand or by such other certified public accounting firm as the Committee may
designate prior to a Change of Control. In the event of any underpayment or
overpayment under Section E.1. or Section E.2., as determined by Coopers &
Lybrand (or such other firm as may have been designated in accordance with the
preceding sentence), the amount of such underpayment or overpayment
E - 3
<PAGE> 35
shall forthwith be paid to Executive or refunded to the Company, as the case may
be, with interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Internal Revenue Code.
E.4. Other Benefits. In addition to the amounts described in Sections
E.1. and E.2., Executive shall be entitled to his benefits, if any, under
Sections 3(b)(i) (PARS), 3(b)(ii) (PBDS), 3(b)(iii) (Existing Options), 3(c)
(Additional Awards), 3(f) (Additional Bonus Awards), and 3(h) (Qualified Plans).
5. Noncompetition; No Mitigation of Damages; etc.
(a) Noncompetition. Upon a Change of Control, any agreement by
Executive not to engage in competition with the Company subsequent to
the termination of his employment, whether contained in an employment
contract or other agreement, shall no longer be effective.
(b) No Duty to Mitigate Damages. Executive's benefits under
this Exhibit E shall be considered severance pay in consideration of
his past service and his continued service from the date of this
Agreement, and his entitlement thereto shall neither be governed by any
duty to mitigate his damages by seeking further employment nor offset
by any compensation which he may receive from future employment.
(c) 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 his
employment during a Standstill Period is for Cause or other than for
good reason (as defined in the definition of Change of Control
Termination) or obtaining any right or benefit to which Executive is
entitled under this Agreement following a Change of Control. 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 the First
National Bank of Boston, until paid in full.
(e) Notice of Termination. During a Standstill Period,
executive's employment may be terminated by the Company only upon 30
days' written notice to Executive.
E - 4
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT AMENDMENT
This Amendment dated as of April 7, 1997 amends the Amended and
Restated Employment Agreement dated as of February 1, 1995 (the "Agreement")
between RICHARD LESSER ("Executive") and The TJX Companies, Inc., a Delaware
corporation, whose principal office is in Framingham, Massachusetts 01701.
The parties hereto, in consideration of the mutual agreements contained
in the Agreement, agree that, effective April 7, 1997, the Agreement is amended
by deleting Section 3(c) thereof and substituting the following new Section 3(c)
therefor:
"(c) MIP. During the Employment Period, Executive shall be eligible to
receive annual awards under MIP. To the extent provided in Section 162(m) of the
Code, the goals, scope and conditions of any award shall be established annually
by the Committee. Subject to the foregoing, (i) for fiscal 1996 Executive shall
be entitled to earn up to 45% of his Base Salary if the target established by
the Committee is met and up to 90% of his Base Salary if such target is
exceeded, with the payment potential ranging from 0% to 90% of Executive's Base
Salary as established by the terms of the award, and (ii) commencing with fiscal
1997 Executive shall be entitled to earn up to 50% of his Base Salary if the
target established by the Committee is met and up to 100% of his Base Salary if
such target is exceeded, with the payment potential ranging from 0% to 100% of
Executive's Base Salary as established by the terms of the award."
/s/ Richard Lesser
------------------------------
Executive - Richard Lesser
THE TJX COMPANIES, INC.
By: /s/ Bernard Cammarata
------------------------------
Bernard Cammarata
President and
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT AMENDMENT
This Amendment dated as of April 7, 1997 amends the Amended and
Restated Employment Agreement dated as of February 1, 1995 (the "Agreement")
between DONALD G. CAMPBELL ("Executive") and The TJX Companies, Inc., a Delaware
corporation, whose principal office is in Framingham, Massachusetts 01701.
The parties hereto, in consideration of the mutual agreements contained
in the Agreement, agree that, effective April 7, 1997, the Agreement is amended
by deleting Section 3(c) thereof and substituting the following new Section 3(c)
therefore:
"(c) MIP. During the Employment Period, Executive shall be eligible to
receive annual awards under MIP. To the extent provided in Section 162(m) of the
Code, the goals, scope and conditions of any award shall be established annually
by the Committee. Subject to the foregoing, (i) for fiscal 1996 Executive shall
be entitled to earn up to 35% of his Base Salary if the target established by
the Committee is met and up to 70% of his Base Salary if such target is
exceeded, with the payment potential ranging from 0% to 70% of Executive's Base
Salary as established by the terms of the award, and (ii) commencing with fiscal
1997 Executive shall be entitled to earn up to 42.5% of his Base Salary if the
target established by the Committee is met and up to 85% of his Base Salary if
such target is exceeded, with the payment potential ranging from 0% to 85% of
Executive's Base Salary as established by the terms of the award."
/s/ Donald G. Campbell
-----------------------------------
Executive - Donald G. Campbell
THE TJX COMPANIES, INC.
By: /s/ Bernard Cammarata
-----------------------------------
Bernard Cammarata
President and
Chief Executive Officer
<PAGE> 1
Exhibit 10.7
(As amended through April 9, 1997)
THE TJX COMPANIES, INC.
1986 STOCK INCENTIVE PLAN
<PAGE> 2
INDEX
Page
SECTION 1. GENERAL PURPOSE OF THE PLAN........................................1
SECTION 2. PLAN ADMINISTRATION................................................1
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS;
SUBSTITUTION.................................................2
SECTION 4. ELIGIBILITY........................................................3
SECTION 5. LIMITATIONS ON TERM AND DATES OF AWARDS............................3
SECTION 6. STOCK OPTIONS......................................................4
SECTION 7. STOCK APPRECIATION RIGHTS; DISCRETIONARY
PAYMENTS.....................................................6
SECTION 8. RESTRICTED STOCK; UNRESTRICTED STOCK...............................8
SECTION 9. DEFERRED STOCK AWARDS.............................................10
SECTION 10. PERFORMANCE AWARDS................................................11
SECTION 11. OTHER STOCK-BASED AWARDS..........................................13
SECTION 12. TRANSFER, LEAVE OF ABSENCE........................................14
SECTION 13. AMENDMENTS AND TERMINATION........................................14
SECTION 14. STATUS OF PLAN....................................................14
SECTION 15. CHANGE OF CONTROL PROVISIONS......................................15
SECTION 16. GENERAL PROVISIONS................................................15
SECTION 17. DEFINITIONS......................................................16
DEFINITION OF "CHANGE OF CONTROL".............................................19
<PAGE> 3
THE TJX COMPANIES, INC.
1986 STOCK INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN.
The name of the plan is The TJX Companies, Inc. 1986 Stock Incentive
Plan (the "Plan"). The purpose of the Plan is to secure for The TJX Companies,
Inc. (the "Company") and its stockholders the benefit of the incentives inherent
in Common Stock ownership and the receipt of incentive awards by selected key
employees of the Company and its Subsidiaries who contribute to and will be
responsible for its continued long term growth. The Plan is intended to
stimulate the efforts of such key employees by providing an opportunity for
capital appreciation and giving suitable recognition for services which
contribute materially to the success of the Company.
SECTION 2. PLAN ADMINISTRATION.
The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board.
The Committee shall have the power and authority to grant Awards
consistent with the terms of the Plan, including the power and authority:
(i) to select the officers and other key employees of the Company
and its Subsidiaries to whom Awards may from time to time be
granted;
(ii) to determine the time or times of grant, and the extent, if
any, of Incentive Stock Options, Non-Qualified Stock Options,
Stock Appreciation Rights, Restricted Stock, Unrestricted
Stock, Deferred Stock, Performance Awards and any Other
Stock-based Awards, or any combination of the foregoing,
granted to any one or more participants;
(iii) to determine the number of shares to be covered by any Award;
(iv) to determine the terms and conditions, including restrictions,
not inconsistent with the terms of the Plan, of any Award,
which terms and conditions may differ among individual Awards
and participants;
(v) to determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to
an Award shall be deferred either automatically or at the
election of the participant and whether and to what extent the
Company shall pay or credit amounts equal to interest (at
<PAGE> 4
rates determined by the Committee) or dividends or deemed
dividends on such deferrals; and
(vi) to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts
and proceedings as it shall deem advisable; to interpret the
terms and provisions of the Plan and any Award (including
related Award Agreements); to make all determinations it deems
advisable for the administration of the Plan; to decide all
disputes arising in connection with the Plan; and to otherwise
supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS;
SUBSTITUTION.
(a) Shares Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 6,000,000, including shares
issued in lieu of or upon reinvestment of dividends arising from Awards. For
purposes of this limitation, Awards and Stock which are forfeited, reacquired by
the Company or satisfied without the issuance of Stock shall not be counted and
such limitation shall apply only to shares which have become free of any
restrictions under the Plan, except that shares of Restricted Stock reacquired
by the Company, and shares withheld by the Company to satisfy tax withholding
requirements shall be counted to the extent required under Rule 16b-3 under the
Act or any successor rule. Subject to such overall limitation, shares may be
issued up to such maximum pursuant to any type or types of Award, including
Incentive Stock Options. Shares issued under the Plan may be authorized but
unissued shares or shares reacquired by the Company.
No Stock Option or Stock Options shall be awarded in any calendar year
to any one "covered associate" (as that term is defined in Section 162(m) of the
Code, as amended by the Revenue Reconciliation Act of 1993) covering shares, in
the aggregate for such year, in excess of the applicable limit. For purposes of
the preceding sentence, the term "applicable limit" shall mean (a) for any
calendar year ending on or prior to December 31, 1993, 300,000 shares, and (b)
for any calendar year beginning on or after January 1, 1994, the number of
shares available generally for awards under the Plan, determined under the first
paragraph of this Section 3(a) as of the close of the immediately preceding
year, or such smaller number of shares as the Committee may determine consistent
with Section 162(m) of the Code.
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(b) Stock Dividends, Mergers, etc. In the event of a stock dividend,
stock split or similar change in capitalization, or extraordinary dividend or
distribution or restructuring transaction affecting the Stock, the Committee
shall make appropriate adjustments in the number and kind of shares of stock or
securities on which Awards may thereafter be granted and shall make such
adjustments in the number and kind of shares remaining subject to outstanding
Awards, and the option or purchase price in respect of such shares as it may
deem appropriate with a view toward preserving the value of outstanding awards.
In the event of any merger, consolidation, dissolution or liquidation of the
Company, the Committee in its sole discretion may, as to any outstanding Awards,
make such substitution or adjustment in the aggregate number of shares reserved
for issuance under the Plan and in the number and purchase price (if any) of
shares subject to such Awards as it may determine, or accelerate, amend or
terminate such Awards upon such terms and conditions as it shall provide (which,
in the case of the termination of the vested portion of any Award, shall require
payment or other consideration which the Committee deems equitable in the
circumstances), subject, however, to the provisions of Section 15.
(c) Substitute Awards. The Company may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances. The shares which may be delivered
under such substitute Awards shall be in addition to the maximum number of
shares provided for in Section 3(a).
SECTION 4. ELIGIBILITY.
Participants in the Plan will be such full or part time officers and
other key employees of the Company and its Subsidiaries (excluding any director
who is not a full time employee) who are responsible for or contribute to the
management, growth or profitability of the Company and its Subsidiaries and who
are selected from time to time by the Committee, in its sole discretion. Persons
who are not employees of the Company or a subsidiary (within the meaning of
Section 424 of the Code) shall not be eligible to receive grants of Incentive
Stock Options.
SECTION 5. LIMITATIONS ON TERM AND DATES OF AWARDS.
(a) Duration of Awards. Subject to Sections 16(a) and 16(c) below, no
restrictions or limitations on Awards shall extend beyond 10 years (or 10 years
and one
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day in the case of Non-Qualified Stock Options) from the grant date, except that
deferrals elected by participants of the receipt of Stock or other benefits
under the Plan may extend beyond such date.
(b) Latest Grant Date. No Award shall be granted after April 7, 2003,
but then outstanding Awards may extend beyond such date.
SECTION 6. STOCK OPTIONS.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. To the extent that any option does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted to the Committee under
the Plan be so exercised, so as to disqualify the Plan or, without the consent
of the optionee, any Incentive Stock Option under Section 422 of the Code.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant but
shall be not less than 100% of Fair Market Value on the date of grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted and no Non-Qualified Stock Option
shall be exercisable more than ten years and one day after the date the option
is granted.
(c) Exercisability. Stock Options shall be exercisable at such future
time or times, whether or not in installments, as shall be determined by the
Committee at or after the grant date. The Committee may at any time accelerate
the exercisability of all or any portion of any Stock Option.
(d) Intentionally omitted.
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(e) Method of Exercise. Stock Options may be exercised in whole or in
part, by giving written notice of exercise to the Company specifying the number
of shares to be purchased. Such notice shall be accompanied by payment in full
of the purchase price, either by certified or bank check or other instrument or
means acceptable to the Committee or by delivery of an unconditional and
irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price. As determined by the Committee, in
its discretion, at (or, in the case of Non-Qualified Stock Options, after)
grant, payment in full or in part of the exercise price or to pay withholding
taxes (as provided in Section 16(c)) may also be made in the form of shares of
Stock not then subject to restrictions under any Company plan. An optionee shall
have the rights of a shareholder only as to shares acquired upon the exercise of
a Stock Option and not as to unexercised Stock Options. Notwithstanding anything
to the contrary contained herein, this Plan does not permit the exercise of an
option in successive stages using as payment at each stage shares which have
been acquired under the option in preceding stages.
(f) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(g) Termination by Death. If an optionee's employment by the Company
and its Subsidiaries terminates by reason of death, the Stock Option may
thereafter be exercised, to the extent then exercisable (or on such accelerated
basis as the Committee shall at any time determine prior to death), by the legal
representative or legatee of the optionee, for a period of three years (or such
shorter period as the Committee shall specify at time of grant) from the date of
death or until the expiration of the stated term of the option, if earlier.
(h) Termination by Reason of Disability. Any Stock Option held by an
optionee whose employment by the Company and its Subsidiaries has terminated, or
who has been designated an inactive employee, by reason of Disability may
thereafter be exercised to the extent it was exercisable at the time of the
earlier of such termination or such designation (or on such accelerated basis as
the Committee shall at any time determine prior to such termination or
designation) for a period of three years (or such shorter period as the
Committee shall specify at time of grant) from the date of such termination of
employment or designation or until the expiration of the stated term of the
option, if earlier. Except as otherwise provided by the Committee at the time of
grant, the death of an optionee during the final year of such exercise period
shall extend such period for one year following death, subject to termination on
the expiration of the stated term of the option, if earlier. The Committee shall
have the authority to determine whether a
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participant has been terminated or designated an inactive employee by reason of
Disability.
(i) Termination by Reason of Normal Retirement. If an optionee's
employment by the Company and its Subsidiaries terminates by reason of Normal
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent that it was then exercisable (or on such accelerated basis as the
Committee shall at any time determine) for a period of three years (or such
shorter period as the Committee shall specify at time of grant) from the date of
Normal Retirement or until the expiration of the stated term of the option, if
earlier. Except as otherwise provided by the Committee at the time of grant, the
death of an optionee during the final year of such exercise period shall extend
such period for one year following death, subject to earlier termination on the
expiration of the stated term of the option, if earlier.
(j) Other Termination. Unless otherwise determined by the Committee, if
an optionee's employment by the Company and its Subsidiaries terminates for any
reason other than death, Disability, Normal Retirement, or for Cause, any Stock
Option held by such optionee may thereafter be exercised to the extent it was
exercisable on the date of termination of employment (or on such accelerated
basis as the Committee shall determine at or after grant) for a period of three
months (or such longer period up to three years as the Committee shall specify
at or after grant) from the date of termination of employment or until the
expiration of the stated term of the option, if earlier. If an optionee's
employment terminates for Cause, the unexercised portion of any Stock Option
then held by the optionee shall immediately terminate.
(k) Form of Settlement. Subject to Section 16(a) and Section 16(c)
below, shares of Stock issued upon exercise of a Stock Option shall be free of
all restrictions under the Plan, except as provided in the following sentence.
The Committee may provide at time of grant that the shares to be issued upon the
exercise of a Stock Option shall be in the form of Restricted Stock or Deferred
Stock, or may reserve the right to so provide after time of grant.
SECTION 7. STOCK APPRECIATION RIGHTS; DISCRETIONARY PAYMENTS.
(a) Nature of Stock Appreciation Right. A Stock Appreciation Right is
an Award entitling the recipient to receive an amount in cash or shares of Stock
(or in a form of payment permitted under paragraph (e) below) or a combination
thereof having a value equal to (or if the Committee shall so determine at time
of grant, less than) the excess of the Fair Market Value of a share of Stock on
the date of exercise over the Fair Market Value of a share of Stock on the date
of grant (or over the option exercise price, if the Stock Appreciation Right was
granted in tandem with a Stock Option) multiplied
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by the number of shares with respect to which the Stock Appreciation Right shall
have been exercised, with the Committee having the right to determine the form
of payment.
(b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation
Rights may be granted in tandem with, or independently of, any Stock Option
granted under the Plan. In the case of a Stock Appreciation Right granted in
tandem with a Non-Qualified Stock Option, such Right may be granted either at or
after the time of the grant of such option. In the case of a Stock Appreciation
Right granted in tandem with an Incentive Stock Option, such Right may be
granted only at the time of the grant of the option.
A Stock Appreciation Right or applicable portion thereof granted in
tandem with a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related Stock Option shall not be reduced until the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.
(c) Terms and Conditions of Stock Appreciation Rights. Stock
Appreciation Rights shall be subject to such terms and conditions as shall be
determined from time to time by the Committee, subject to the following:
(i) Stock Appreciation Rights granted in tandem with Stock Options
shall be exercisable only at such time or times and to the
extent that the related Stock Options shall be exercisable.
(ii) Upon the exercise of a Stock Appreciation Right, the
applicable portion of any related Stock Option shall be
surrendered.
(iii) Stock Appreciation Rights granted in tandem with a Stock
Option shall be transferable only with such Stock Option.
Other Stock Appreciation Rights shall not be transferable
otherwise than by will or the laws of descent and
distribution. All Stock Appreciation Rights shall be
exercisable during the participant's lifetime only by the
participant or the participant's legal representative.
(d) Discretionary Payments. Notwithstanding that a Stock Option at the
time of exercise shall not be accompanied by a related Stock Appreciation Right,
if the market price of the shares subject to such Stock Option exceeds the
exercise price of such Stock Option at the time of its exercise, the Committee
may, in its discretion, cancel such Stock Option, in which event the Company
shall pay to the person exercising such Stock Option an amount equal to the
difference between the Fair Market Value of the Stock to
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have been purchased pursuant to such exercise of such Stock Option (determined
on the date the Stock Option is cancelled) and the aggregate consideration to
have been paid by such person upon such exercise. Such payment shall be by
check, bank draft or in Stock (or in a form of payment permitted under paragraph
(e) below) having a Fair Market Value (determined on the date the payment is to
be made) equal to the amount of such payments or any combination thereof, as
determined by the Committee. The Committee may exercise its discretion under the
first sentence of this paragraph (d) only in the event of a written request of
the person exercising the option, which request shall not be binding on the
Committee.
(e) Settlement in the Form of Restricted Shares or Rights to Receive
Deferred Stock. Subject to Sections 16(a) and 16(c) below, shares of Stock
issued upon exercise of a Stock Appreciation Right or as a Discretionary Payment
shall be free of all restrictions under the Plan, except as provided in the
following sentence. The Committee may provide at the time of grant in the case
of a Stock Appreciation Right (and at the time of payment in the case of a
Discretionary Payment) that such shares shall be in the form of shares of
Restricted Stock or rights to acquire Deferred Stock, or in the case of a Stock
Appreciation Right may reserve the right to so provide at any time after the
time of grant. Any such shares and any shares subject to rights to acquire
Deferred Stock shall be valued at Fair Market Value on the date of exercise of
the Stock Appreciation Right or the date the Stock Option is cancelled in the
case of Discretionary Payments.
SECTION 8. RESTRICTED STOCK; UNRESTRICTED STOCK.
(a) Nature of Restricted Stock Award. A Restricted Stock Award is an
Award entitling the recipient to acquire shares of Stock for a purchase price
(which may be zero), subject to such conditions, including a Company right
during a specified period or periods to repurchase such shares at their original
purchase price (or to require forfeiture of such shares, if the purchase price
was zero) upon participant's termination of employment, as the Committee may
determine at the time of grant.
(b) Award Agreement. Unless the Committee shall otherwise determine, a
participant who is granted a Restricted Stock Award shall have no rights with
respect to such Award unless the participant shall have accepted the Award
within 60 days (or such shorter date as the Committee may specify) following the
award date by making payment to the Company by certified or bank check or other
instrument acceptable to the Committee in an amount equal to the specified
purchase price, if any, of the shares covered by the Award and by executing and
delivering to the Company a Restricted Stock Award Agreement in such form as the
Committee shall determine.
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(c) Rights as a Shareholder. Upon complying with paragraph (b) above, a
participant shall have all the rights of a shareholder with respect to the
Restricted Stock including voting and dividend rights, subject to
nontransferability restrictions and Company repurchase or forfeiture rights
described in this Section and subject to any other conditions contained in the
Award Agreement. Unless the Committee shall otherwise determine, certificates
evidencing shares of Restricted Stock shall remain in the possession of the
Company until such shares are free of any restrictions under the Plan.
(d) Restrictions. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment with the
Company and its subsidiaries for any reason such shares shall be resold to the
Company at their purchase price, or forfeited to the Company if the purchase
price was zero, except as set forth below.
(i) The Committee at the time of grant shall specify the date or
dates (which may depend upon or be related to the attainment
of performance goals and other conditions) on which the
nontransferability of the Restricted Stock and the obligation
to resell such shares to the Company shall lapse. However, no
grants of Restricted Stock made after September 8, 1993 shall
specify such a date which is less than three years from the
date of grant, except that (i) such a date may be one year or
greater in the case of Restricted Stock granted subject to the
attainment of performance goals, (ii) future shares of
Restricted Stock may be granted which specify full vesting in
no less than three years and partial vesting at a rate no
faster than equal annual installments each of one-third of
such shares, and (iii) shares of Restricted Stock may be
granted which specify any vesting date provided that on a
cumulative basis such shares granted after September 8, 1993,
when no longer subject to restrictions under the Plan, do not
exceed 200,000 shares. The Committee at any time may
accelerate such date or dates and otherwise waive or, subject
to Section 13, amend any conditions of the Award.
(ii) Except as may otherwise be provided in the Award Agreement, in
the event of termination of employment by the Company and its
Subsidiaries for any reason (including death), a participant
or the participant's legal representative shall offer to
resell to the Company, at the price paid therefor, all
Restricted Stock, and the Company shall have the right to
purchase the same at such price, or if the price was zero to
require forfeiture of the same, provided that except as
provided in the Award
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Agreement, the Company must exercise such right of repurchase
or forfeiture not later than the 60th day following such
termination of employment.
(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted
Stock Award Agreement may require or permit the immediate payment, waiver,
deferral or investment of dividends paid on the Restricted Stock.
(f) Unrestricted Stock. The Committee may, in its sole discretion,
grant or sell to any participant shares of Stock free of restrictions under the
Plan ("Unrestricted Stock"). Shares of Unrestricted Stock may be granted or sold
as described in the preceding sentence in respect of past services or other
valid consideration.
SECTION 9. DEFERRED STOCK AWARDS.
(a) Nature of Deferred Stock Award. A Deferred Stock Award is an award
entitling the recipient to acquire shares of Stock without payment in one or
more installments at a future date or dates, all as determined by the Committee.
The Committee may also condition such acquisition on the attainment of specified
performance goals.
(b) Award Agreement. Unless the Committee shall otherwise determine, a
participant who is granted a Deferred Stock Award shall have no rights with
respect to a such Award unless within 60 days of the grant of such Award or such
shorter period as the Committee may specify, the participant shall have accepted
the Award by executing and delivering to the Company a Deferred Stock Award
Agreement.
(c) Restrictions on Transfer. Deferred Stock Awards and all rights with
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered. Rights with respect to such Awards shall be exercisable
during the participant's lifetime only by the participant or the participant's
legal representative.
(d) Rights as a Shareholder. A participant receiving a Deferred Stock
Award will have rights of a shareholder only as to shares actually received by
the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate for shares of Deferred Stock only upon
satisfaction of all conditions therefor specified in the Deferred Stock Award
Agreement.
(e) Termination. Except as may otherwise be provided by the Committee
at any time prior to termination of employment, a participant's rights in all
Deferred Stock
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Awards shall automatically terminate upon the participant's termination of
employment by the Company and its Subsidiaries for any reason (including death).
(f) Acceleration, Waiver, etc. At any time prior to the participant's
termination of employment the Committee may in its discretion accelerate, waive,
or, subject to Section 13, amend any or all of the restrictions or conditions
imposed under any Deferred Stock Award.
(g) Payments in Respect of Deferred Stock. Without limiting the right
of the Committee to specify different terms, the Deferred Stock Award Agreement
may either make no provisions for, or may require or permit the immediate
payment, deferral or investment of amounts equal to, or less than, any cash
dividends which would have been payable on the Deferred Stock had such Stock
been outstanding, all as determined by the Committee in its sole discretion.
SECTION 10. PERFORMANCE AWARDS.
(a) Nature of Performance Awards. A Performance Award is an award
entitling the recipient to acquire cash or shares of Stock, or a combination of
cash and Stock, upon the attainment of specified performance goals. If the
grant, vesting, or exercisability of a Stock Option, SAR, Restricted Stock,
Deferred Stock or Other Stock-Based Award is conditioned upon attainment of a
specified performance goal or goals, it shall be treated as a Performance Award
for purposes of this Section and shall be subject to the provisions of this
Section in addition to the provisions of the Plan applicable to such form of
Award.
(b) Qualifying and Nonqualifying Performance Awards. Performance Awards
may include Awards intended to qualify for the performance-based compensation
exception under Section 162(m)(4)(C) of the Code ("Qualifying Awards") and
Awards not intended so to qualify ("Nonqualifying Awards").
(c) Terms of Performance Awards. The Committee in its sole discretion
shall determine whether and to whom Performance Awards are to be granted, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the Award. Performance Awards may be granted independently or in
connection with the granting of other Awards. In the case of a Qualifying Award
(other than a Stock Option or SAR), the following special rules shall apply: (i)
the Committee shall preestablish the performance goals and other material terms
of the Award not later than the latest date permitted under Section 162(m) of
the Code; (ii) the performance goal or goals fixed by the Committee in
connection with the Award shall be based exclusively on one or more Approved
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Performance Criteria; (iii) no payment (including, for this purpose, vesting or
exercisability where vesting or exercisability, rather than the grant of the
award, is linked to satisfaction of performance goals) shall be made unless the
preestablished performance goals have been satisfied and the Committee has
certified (pursuant to Section 162(m) of the Code) that they have been
satisfied; (iv) no payment shall be made in lieu or in substitution for the
Award if the preestablished performance goals are not satisfied (but this clause
shall not limit the ability of the Committee or the Company to provide other
remuneration to the affected Participant, whether or not under the Plan, so long
as the payment of such remuneration would not cause the Award to fail to be
treated as having been contingent on the preestablished performance goals) and
(v) in all other respects the Award shall be construed and administered
consistent with the intent that any compensation under the Award be treated as
performance-based compensation under Section 162(m)(4)(C) of the Code.
(d) Award Agreement. Unless the Committee shall otherwise determine, a
participant shall have no rights with respect to a Performance Award unless
within 60 days of the grant of such Award or such shorter period as the
Committee may specify, the participant shall have accepted the Award by
executing and delivering to the Company a Performance Award Agreement.
(e) Rights as a Shareholder. A participant receiving a Performance
Award will have rights of a shareholder only as to shares actually received by
the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Award (to the extent the Award provides for the
delivery of shares of Stock) only upon satisfaction of all conditions therefor
specified in the Performance Award Agreement.
(f) Termination. Except as may otherwise be provided by the Committee
(consistent with Section 162(m), in the case of a Qualifying Award) at any time
prior to termination of employment, a participant's rights in all Performance
Awards shall automatically terminate upon the participant's termination of
employment by the Company and its Subsidiaries for any reason (including death).
(g) Acceleration, Waiver, etc.. At any time prior to the participant's
termination of employment by the Company and its Subsidiaries, the Committee may
in its sole discretion (but subject to Section 162(m), in the case of a
Qualifying Award) accelerate, waive or, subject to Section 13, amend any or all
of the goals, restrictions or conditions imposed under any Performance Award.
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SECTION 11. OTHER STOCK-BASED AWARDS.
(a) Nature of Awards. The Committee may grant other Awards under which
Stock is or may in the future be acquired ("Other Stock-based Awards").
(b) Purchase Price; Form of Payment. The Committee may determine the
consideration, if any, payable upon the issuance or exercise of an Other
Stock-based Award. The Committee may permit payment by certified check or bank
check or other instrument acceptable to the Committee or by surrender of other
shares of Stock (excluding shares then subject to restrictions under the Plan).
(c) Forfeiture of Awards; Repurchase of Stock; Acceleration or Waiver
of Restrictions. The Committee may determine the conditions under which an Other
Stock-based Award shall be forfeited or, in the case of an Award involving a
payment by the recipient, the conditions under which the Company may or must
repurchase such Award or related Stock. At any time the Committee may in its
sole discretion accelerate, waive or, subject to Section 13, amend any or all of
the limitations or conditions imposed under any Other Stock-based Award.
(d) Award Agreements. Unless the Committee shall otherwise determine, a
participant shall have no rights with respect to any Other Stock-based Award
unless within 60 days after the grant of such Award (or such shorter period as
the Committee may specify) the participant shall have accepted the Award by
executing and delivering to the Company an Other Stock-based Award Agreement.
(e) Nontransferability. Other Stock-based Awards may not be sold,
assigned, transferred, pledged or encumbered except as may be provided in the
Other Stock-based Award Agreement. However, in no event shall any Other
Stock-based Award be transferred other than by will or by the laws of descent
and distribution or be exercisable during the participant's lifetime by other
than the participant or the participant's legal representative.
(f) Rights as a Shareholder. A recipient of any Other Stock-based Award
will have rights of a shareholder only at the time and to the extent, if any,
specified by the Committee in the Other Stock-based Award Agreement.
(g) Deemed Dividend Payments; Deferrals. Without limiting the right of
the Committee to specify different terms at or after grant, an Other Stock-based
Award Agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends or deemed dividends payable or deemed payable on Stock
subject to the Award.
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SECTION 12. TRANSFER, LEAVE OF ABSENCE.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary
or from the Company to a Subsidiary, or from one Subsidiary to
another;
(b) an approved leave of absence for military service or sickness,
or for any other purpose approved by the Company, if the
employee's right to reemployment is guaranteed either by a
statute or by contract or under the policy pursuant to which
the leave of absence was granted or if the Committee otherwise
so provides in writing.
For purposes of the Plan, the employees of a Subsidiary of the Company shall be
deemed to have terminated their employment on the date on which such Subsidiary
ceases to be a Subsidiary of the Company.
SECTION 13. AMENDMENTS AND TERMINATION.
The Board may at any time amend or discontinue the Plan and the
Committee may at any time amend or cancel any outstanding Award for the purpose
of satisfying changes in law or for any other lawful purpose, but no such action
shall adversely affect rights under any outstanding Award without the holder's
consent. However, no such amendment shall be effective if it would cause the
Plan to fail to satisfy the incentive stock option requirements of the Code or
the requirements of Rule 16b-3 or any successor rule under the Act as in effect
on the date of such amendment. Notwithstanding any provision of this Plan, the
Board or the Committee may at any time adopt any subplan or otherwise grant
Stock Options or other Awards under this Plan having terms consistent with
applicable foreign tax or other foreign regulatory requirements or laws;
provided, however, that no person subject to the restrictions of Section 16(b)
of the Act may be eligible for or be granted any such Stock Options or other
Awards if such eligibility or grant would cause the Plan to fail to satisfy the
requirements of Rule 16b-3 or any successor rule under the Act as in effect on
the applicable date.
SECTION 14. STATUS OF PLAN.
With respect to the portion of any Award which has not been exercised
and any payments in cash, stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company
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<PAGE> 17
unless the Committee shall otherwise expressly determine in connection with any
Award or Awards. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the Company's obligations to
deliver Stock or make payments with respect to awards hereunder, provided that
the existence of such trusts or other arrangements is consistent with the
provision of the foregoing sentence.
SECTION 15. CHANGE OF CONTROL PROVISIONS.
As used herein, a Change of Control and related definitions shall have
the meanings set forth in Exhibit A to this Plan.
Upon the occurrence of a Change of Control:
(i) Each Stock Option and Stock Appreciation Right shall
automatically become fully exercisable unless the Committee
shall otherwise expressly provide at the time of grant.
(ii) Restrictions and conditions on Restricted Stock, Deferred
Stock, Performance Units and Other Stock-based Awards shall
automatically be deemed waived only if and to the extent, if
any, specified (whether at or after time of grant) by the
Committee.
The Committee may at any time prior to or after a Change of Control accelerate
the exercisability of any Stock Options and Stock Appreciation Rights and may
waive restrictions, limitations and conditions on Restricted Stock, Deferred
Stock, Performance Units and Other Stock-based Awards to the extent it shall in
its sole discretion determine.
SECTION 16. GENERAL PROVISIONS.
(a) No Distribution; Compliance with Legal Requirements, etc. The
Committee may require each person acquiring shares pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring
the shares without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange requirements have
been satisfied. The Committee may require the placing of such stop-orders and
restrictive legends on certificates for Stock and Awards as it deems
appropriate.
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<PAGE> 18
(b) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board of Directors from adopting other
or additional compensation arrangements, subject to stockholder approval if such
approval is required; and such arrangements may be either generally applicable
or applicable only in specific cases. The adoption of the Plan does not confer
upon any employee any right to continued employment with the Company or a
Subsidiary, nor does it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.
(c) Tax Withholding, etc. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant. The Company may withhold or otherwise administer the Plan to comply
with tax obligations under any applicable foreign laws.
The Committee may provide, in respect of any transfer of Stock under an
Award, that if and to the extent withholding of any Federal, state or local tax
is required in respect of such transfer or vesting, the participant may elect,
at such time and in such manner as the Committee shall prescribe, to (i)
surrender to the Company Stock not then subject to restrictions under any
Company plan or (ii) have the Company hold back from the transfer or vesting
Stock having a value calculated to satisfy such withholding obligation.
(d) Deferral of Awards. Participants may elect to defer receipt of
Awards or vesting of Awards only in such cases and to the extent that the
Committee shall determine at or after the grant date.
SECTION 17. DEFINITIONS.
The following terms shall be defined as set forth below:
(a) "Act" means the Securities Exchange Act of 1934.
(b) "Award" or "Awards" except where referring to a particular
category of grant under the Plan shall include Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock Awards,
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<PAGE> 19
Unrestricted Stock Awards, Deferred Stock Awards, Performance
Awards and Other Stock-based Awards.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means a felony conviction of a participant or the
failure of a participant to contest prosecution for a felony,
or a participant's willful misconduct or dishonesty, any of
which is directly harmful to the business or reputation of the
Company or any Subsidiary.
(e) "Code" means the Internal Revenue Code of 1986, as amended,
and any successor Code, and related rules, regulations and
interpretations.
(f) "Committee" means the Committee referred to in Section 2. If
at any time no Committee shall be in office, the functions of
the Committee shall be exercised by the Board.
(g) "Deferred Stock Award" is defined in Section 9(a).
(h) "Disability" means disability as determined in accordance with
standards and procedures similar to those used under the
Company's long term disability program.
(i) "Fair Market Value" on any given date means the last sale
price regular way at which Stock is traded on such date as
reflected in the New York Stock Exchange Composite
Transactions Index or, where applicable, the value of a share
of Stock as determined by the Committee in accordance with the
applicable provisions of the Code.
(j) "Incentive Stock Option" means any Stock Option intended to be
and designated as an "incentive stock option" as defined in
the Code.
(k) "Non-Employee Director" shall have the meaning set forth in
Rule 16b-3(b)(3) promulgated under the Act, or any successor
definition under the Act.
(l) "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option.
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<PAGE> 20
(m) "Normal Retirement" means retirement from active employment
with the Company and its Subsidiaries on or after the normal
retirement date specified in The TJX Companies, Inc.
Retirement Plan.
(n) "Other Stock-based Award" is defined in Section 11(a).
(o) "Performance Award" is defined in Section 10(a).
(p) "Restricted Stock Award" is defined in Section 8(a).
(q) "Stock" means the Common Stock, $1.00 par value, of the
Company, subject to adjustments pursuant to Section 3.
(r) "Stock Appreciation Right" means a right described in Section
7(a) and granted, either independently of other Awards or in
tandem with the grant of a Stock Option.
(s) "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 6.
(t) "Subsidiary" means any corporation or other entity (other than
the Company) in an unbroken chain beginning with the Company
if each of the entities (other than the last entity in the
unbroken chain) owns stock or other interests possessing 50%
or more of the total combined voting power of all classes of
stock or other interest in one of the other corporations or
other entities in the chain.
(u) "Unrestricted Stock Award" is defined in Section 8(b).
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<PAGE> 21
EXHIBIT A
DEFINITION OF "CHANGE OF CONTROL"
"Change of Control" shall mean the occurrence of any one of the
following events:
(a) there occurs a change of control of the Company of a
nature that would be required to be reported in response to Item 1(a)
of the Current Report on Form 8-K pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") or in any
other filing under the Exchange Act; provided, however, that if the
Participant or a Participant Related Party is the Person or a member of
a group constituting the Person acquiring control, a transaction shall
not be deemed to be a Change of Control as to a Participant unless the
Committee shall otherwise determine prior to such occurrence; or
(b) any Person other than the Company, any wholly-owned
subsidiary of the Company, or any employee benefit plan of the Company
or such a subsidiary becomes the owner of 20% or more of the Company's
Common Stock and thereafter individuals who were not directors of the
Company prior to the date such Person became a 20% owner are elected as
directors pursuant to an arrangement or understanding with, or upon the
request of or nomination by, such Person and constitute at least 1/4 of
the Company's Board of Directors; provided, however, that unless the
Committee shall otherwise determine prior to the acquisition of such
20% ownership, such acquisition of ownership shall not constitute a
Change of Control as to a Participant if the Participant or a
Participant Related Party is the Person or a member of a group
constituting the Person acquiring such ownership; or
(c) there occurs any solicitation or series of solicitations
of proxies by or on behalf of any Person other than the Company's Board
of Directors and thereafter individuals who were not directors of the
Company prior to the commencement of such solicitation or series of
solicitations are elected as directors pursuant to an arrangement or
understanding with, or upon the request of or nomination by, such
Person and constitute at least 1/4 of the Company's Board of Directors;
or
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<PAGE> 22
(d) the Company executes an agreement of acquisition, merger
or consolidation which contemplates that (i) after the effective date
provided for in such agreement, all or substantially all of the
business and/or assets of the Company shall be owned, leased or
otherwise controlled by another Person and (ii) individuals who are
directors of the Company when such agreement is executed shall not
constitute a majority of the board of directors of the survivor or
successor entity immediately after the effective date provided for in
such agreement; provided, however, that unless otherwise determined by
the Committee, no transaction shall constitute a Change of Control as
to a Participant if, immediately after such transaction, the
Participant or any Participant Related Party shall own equity
securities of any surviving corporation ("Surviving Entity") having a
fair value as a percentage of the fair value of the equity securities
of such Surviving Entity greater than 125% of the fair value of the
equity securities of the Company owned by the Participant and any
Participant Related Party immediately prior to such transaction,
expressed as a percentage of the fair value of all equity securities of
the Company immediately prior to such transaction (for purposes of this
paragraph ownership of equity securities shall be determined in the
same manner as ownership of Common Stock); and provided, further, that,
for purposes of this paragraph (d), if such agreement requires as a
condition precedent approval by the Company's shareholders of the
agreement or transaction, a Change of Control shall not be deemed to
have taken place unless and until such approval is secured (but upon
any such approval, a Change of Control shall be deemed to have occurred
on the date of execution of such agreement).
In addition, for purposes of this Exhibit A the following terms have
the meanings set forth below:
"Common Stock" shall mean the then outstanding Common Stock of the
Company plus, for purposes of determining the stock ownership of any Person, the
number of unissued shares of Common Stock which such Person has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term Common Stock shall
not include shares of Preferred Stock or convertible debt or options or warrants
to acquire shares of Common Stock (including any shares of Common Stock issued
or issuable upon the conversion or exercise thereof) to the extent that the
Board of Directors of the Company shall expressly so determine in any future
transaction or transactions.
A Person shall be deemed to be the "owner" of any Common Stock:
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<PAGE> 23
(i) of which such Person would be the "beneficial owner," as
such term is defined in Rule 13d-3 promulgated by the Securities and
Exchange Commission (the "Commission") under the Exchange Act, as in
effect on March 1, 1989; or
(ii) of which such Person would be the "beneficial owner" for
purposes of Section 16 of the Exchange Act and the rules of the
Commission promulgated thereunder, as in effect on March 1, 1989; or
(iii) which such Person or any of its affiliates or associates
(as such terms are defined in Rule 12b-2 promulgated by the Commission
under the Exchange Act, as in effect on March 1, 1989) has the right to
acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options or otherwise.
"Person" shall have the meaning used in Section 13(d) of the Exchange
Act, as in effect on March 1, 1989.
A "Participant Related Party" shall mean, with respect to a
Participant, any affiliate or associate of the Participant other than the
Company or a Subsidiary of the Company. The terms "affiliate" and "associate"
shall have the meanings ascribed thereto in Rule 12b-2 under the Exchange Act
(the term "registrant" in the definition of "associate" meaning, in this case,
the Company).
"Participant" means a participant in the Plan.
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<PAGE> 1
EXHIBIT 10.22
FIRST AMENDMENT TO DISTRIBUTION AGREEMENT
First Amendment to Distribution Agreement dated as of April 18, 1997 by
and between The TJX Companies, Inc., a Delaware corporation (f/k/a Zayre
Corp.)("TJX"), and Waban Inc., a Delaware corporation ("Waban"). TJX and Waban
are referred to collectively herein as the "Parties."
WHEREAS, the Parties are signatories to a Distribution Agreement dated
as of May 1, 1989 (the "Distribution Agreement") pursuant to which, among other
things, Waban agreed to indemnify TJX for certain Waban Liabilities.
WHEREAS, Waban has stated its intention of consummating a transaction
providing for (i) the transfer by Waban of the assets of its BJ's Wholesale Club
division to a newly-formed subsidiary, BJ's Wholesale Club, Inc. ("BJ's"), and
(ii) the subsequent transfer, through a special dividend (the "Distribution"),
of the stock of BJ's to the stockholders of Waban (the "Spinoff").
WHEREAS, the Parties desire to modify the Distribution Agreement to
reflect the change in circumstances caused by the consummation of the Spinoff.
Now, therefore, in consideration of the premises and the mutual
promises and covenants contained herein, the Parties agree as follows.
1. Definitions. Capitalized terms not defined herein shall have the
meanings ascribed to them in the Distribution Agreement. Any references to Waban
shall be construed to include HomeBase, Inc. on and after the date on which the
Distribution is made to the stockholders of Waban (the "Effective Date").
1.01 "BJ's" shall have the meaning set forth in the recitals hereof.
1.02 "BJ's Lease" shall mean any lease or sub-lease of property ever
used in connection with the Waban Businesses for which TJX or any Affiliate
thereof may be liable as a tenant, surety, sub-lessee or guarantor, other than
(i) a HomeBase Lease and (ii) the One Mercer Road, Natick, Massachusetts lease,
to the extent (and only to the extent) provided in the letter, dated April 18,
1997, from Mark G. Borden, counsel for Waban, to Luc A. Despins, counsel for
TJX.
1.03 "Distribution Agreement" shall have the meaning set forth in
the recitals hereof.
1.04 "HomeBase Lease" shall mean any of the leases or sub-leases of
property listed on the Schedule of Leases for
<PAGE> 2
which TJX or any Affiliate thereof may be liable as a tenant, sub-lessee, surety
or guarantor.
1.05 "Indemnification Agreement" shall have the meaning set forth in
section 4.02 hereof.
1.06 "Parties" shall have the meaning set forth in the recitals
hereof.
1.07 "Schedule of Leases" shall mean the schedule of leases
initialed by the parties, provided as of the date hereof and setting forth the
HomeBase Leases.
1.08 "Spinoff" shall have the meaning set forth in the recitals
hereof.
1.09 "TJX" shall have the meaning set forth in the recitals hereof.
1.10 "Waban" shall have the meaning set forth in the recitals
hereof.
2. Covenants Regarding Extension or Renewal of HomeBase Leases. Waban
hereby covenants that it shall not increase the amount of base rent scheduled to
come due under, extend the term of, or exercise any option to renew or extend
any HomeBase Lease without first securing from the Person holding the landlord's
interest and from any mortgagee with respect to the HomeBase Lease in question
(if the consent of such Person or mortgagee is required to release any Liability
of TJX and its Affiliates on such HomeBase Lease), a full and complete release
of Liability of TJX and its Affiliates on any such HomeBase Lease, in a form
reasonably satisfactory to TJX. Waban shall not transfer or assign any HomeBase
Lease unless the transferee or assignee shall execute and deliver an agreement
to be bound by terms equivalent to the terms of this section 2 (which would also
condition subsequent transfers or assignments upon an equivalent transfer
restriction) and Waban will be liable to TJX for any breach thereof.
3. Reporting Obligations and Access to Information. Waban shall provide
TJX with 30 days prior written notice of its intention to extend or renew,
transfer or assign any HomeBase Lease, and Waban shall provide TJX with any
document (including releases) executed in satisfaction of Waban's obligations
under section 2 hereof. Moreover, Waban shall afford TJX and its authorized
accountants, counsel and other designated representatives reasonable access
(including using reasonable efforts to give access to third parties possessing
Information) and duplicating rights during normal business hours to Information
within Waban's possession relating to the HomeBase Leases insofar as such access
is reasonably required by TJX.
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<PAGE> 3
4. Reaffirmation.
4.01 Each Party hereby acknowledges and represents to each other
that the Distribution Agreement is presently, and upon giving effect to this
First Amendment will be, valid and enforceable in accordance with its terms, not
subject to any defenses, counterclaims or right of set-off whatsoever.
4.02 Except as modified by this First Amendment, the Distribution
Agreement shall remain in full force and effect in accordance with its terms.
The fact that BJ's has entered into an Indemnification Agreement dated as of
April 18, 1997 (the "Indemnification Agreement") shall not be used as a defense
(other than as a defense of payment if and to the extent that BJ's has paid such
Liability to a TJX Indemnitee pursuant to the Indemnification Agreement) by
Waban to any claim of TJX against Waban.
5. No Third-Party Beneficiaries. This First Amendment shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and assigns.
6. Entire Agreement. This First Amendment (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings and agreements (other than the Distribution
Agreement and any other agreement between the parties that expressly so
provides), by or among the Parties, written or oral, to the extent they related
in any way to the subject matter hereof.
7. Succession and Assignment. This First Amendment shall be binding
upon and inure to the benefit of the Parties and their respective successors and
assigns.
8. Counterparts. This First Amendment is an agreement under seal and
may be executed in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
9. Headings. The section headings contained in this First Amendment are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this First Amendment.
10. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
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<PAGE> 4
If to TJX:
The TJX Companies, Inc.
770 Cochituate Road
Framingham, Massachusetts 01701
Telecopy No.: (508) 390-2457
Attention: General Counsel
Copy to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Telecopy No.: (212) 446-4900
Attention: Luc A. Despins, Esq.
If to Waban:
Waban Inc.
One Mercer Road
Natick, Massachusetts 01760
Telecopy No.: (508) 651-6251
Attention: Treasurer
Copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telecopy No.: (617) 526-5000
Attention: Mark G. Borden, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
11. Governing Law. This First Amendment shall be governed by and
construed in accordance with the domestic laws of the Commonwealth of
Massachusetts without giving effect to any choice or conflict of law provision
or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction)
that would cause the
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<PAGE> 5
application of the laws of any jurisdiction other than the Commonwealth of
Massachusetts.
12. Amendments and Waivers. No amendment of any provision of this First
Amendment shall be valid unless the same shall be in writing and signed by TJX
and Waban. No waiver by any Party of any default or breach of covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default or breach of covenant hereunder or affect in any way any
rights arising by virtue of any prior or subsequent such occurrence.
13. Severability. Any term or provision of this First Amendment that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
14. Expenses. Each Party will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection with this First
Amendment.
15. Construction. The Parties have participated jointly in the
negotiation and drafting of this First Amendment. In the event an ambiguity or
question of intent or interpretation arises, this First Amendment shall be
construed as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue of the authorship
of any of the provisions of this First Amendment.
16. Specific Performance. Each Party acknowledges and agrees that the
other Party would be damaged irreparably in the event any of the provisions of
this First Amendment are not performed in accordance with their specific terms
or otherwise are breached. Accordingly, each Party agrees that the other Party
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this First Amendment
and the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter, in addition to any other remedy to which they may be entitled, at law or
in equity.
17. Modifications to Indemnification Rights. Sections 7.4.2, 7.4.3, and
7.4.4 of the Distribution Agreement shall not apply to Third Party Claims
against TJX arising out of, or in any way relating to, HomeBase Leases.
18. Indemnification Agreement. Waban shall cause BJ's to execute the
Indemnification Agreement in the form attached hereto as Exhibit "A".
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<PAGE> 6
19. Spinoff. Waban hereby covenants that the Spinoff will only be
effected by the transfer of the assets of the BJ's Wholesale Club division to
BJ's, and not to any other person or entity.
20. Further Assurances. Each Party to this First Amendment shall
execute such documents and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and of the Distribution
Agreement.
21. Authority. The Parties hereto represent and warrant to each other
that the signatories to this First Amendment are authorized to execute this
First Amendment; that each has full power and authority to enter into this First
Amendment; that this First Amendment is duly executed and delivered, and
constitutes a valid, binding agreement in accordance with its terms.
22. Effective Date. This First Amendment, and all of the rights and
obligations of the Parties hereunder, shall become effective upon the Effective
Date, and if the Effective Date does not occur by December 31, 1997, this First
Amendment shall be null and void.
23. Waiver of Jury Trial. THE PARTIES HERETO EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS FIRST AMENDMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY A PARTY AGAINST THE OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE PARTIES HERETO EACH AGREE THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION 23 AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS FIRST AMENDMENT OR ANY PROVISION HEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS FIRST AMENDMENT.
*****
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<PAGE> 7
IN WITNESS WHEREOF, the Parties hereto have executed this First
Amendment as of the date first above written.
THE TJX COMPANIES, INC.
By: /s/ Donald Campbell
---------------------------------
Title: Executive Vice President
---------------------------------
WABAN INC.
By: /s/ Edward Weisberger
---------------------------------
Title: Senior Vice President and CFO
---------------------------------
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<PAGE> 1
EXHIBIT 10.23
EXHIBIT "A" TO
FIRST AMENDMENT TO
DISTRIBUTION AGREEMENT
INDEMNIFICATION AGREEMENT
Indemnification Agreement dated as of April 18, 1997 by and between The
TJX Companies, Inc., a Delaware corporation (f/k/a Zayre Corp.) ("TJX"), and
BJ's Wholesale Club, Inc., a Delaware corporation ("BJ's"). TJX and BJ's are
referred to collectively herein as the "Parties."
WHEREAS, Waban Inc. ("Waban") and TJX are signatories to a Distribution
Agreement, dated as of May 1, 1989 (as amended on April 18, 1997, the
"Distribution Agreement"), pursuant to which, among other things, Waban agreed
to indemnify TJX for certain Waban Liabilities (as defined in the Distribution
Agreement).
WHEREAS, Waban has stated its intention of consummating a transaction
providing for (i) the transfer by Waban of the assets of its BJ's Wholesale Club
division to BJ's, a newly-formed subsidiary of Waban, and (ii) the subsequent
transfer, through the declaration and distribution of a special dividend (the
"Distribution"), of the stock of BJ's to the stockholders of Waban (the
"Spinoff").
WHEREAS, the Parties desire to enter into this indemnification
agreement to provide for BJ's indemnification of TJX for certain Waban
Liabilities (as defined in the Distribution Agreement), effective upon the date
on which the Distribution is made to Waban's stockholders (the "Effective
Date").
Now, therefore, in consideration of the premises and the mutual
promises and covenants contained herein, the Parties agree as follows.
1. Definitions. Capitalized terms not defined herein shall have the
meanings ascribed to them in the Distribution Agreement.
Any references on or after the Effective Date to Waban shall be
construed to include HomeBase, Inc.
1.01 "Applicable Credits" shall have the meaning set forth in
section 7 hereof.
1.02 "BJ's" shall have the meaning set forth in the recitals hereof.
1.03 "BJ's Control Period" shall have the meaning set forth in
section 4 hereof.
<PAGE> 2
1.04 "BJ's Lease" shall mean any lease or sub-lease of property ever
used in connection with the Waban Businesses for which TJX or any Affiliate
thereof may be liable as a tenant, surety, sub-lessee or guarantor, other than
(i) a HomeBase Lease and (ii) the One Mercer Road, Natick, Massachusetts lease,
to the extent (and only to the extent) provided in the letter, dated April 18,
1997, from Mark G. Borden, counsel for Waban, to Luc A. Despins, counsel for
TJX.
1.05 "BJ's Lease Liability" shall mean (i) any Liability arising in
connection with a BJ's Lease or a BJ's Third Party Claim and (ii) any Liability
arising in connection with a HomeBase Lease or a HomeBase Third Party Claim,
other than a HomeBase Lease Liability.
1.06 "BJ's Lease Liability Payment" shall mean an amount paid by
BJ's (or by TJX, if BJ's breaches its obligation, pursuant to sections 3 and
5.01 hereof, to make all payments on account of such Liabilities) in
satisfaction of a BJ's Lease Liability.
1.07 "BJ's Third Party Claim" shall mean a Third Party Claim arising
out, or relating to, a BJ's Lease.
1.08 "Disabling Conduct" shall mean the conduct of a Person that
constitutes fraud, self-dealing, willful violation of the law, bad faith or
gross negligence.
1.09 "Distribution" shall have the meaning set forth in the recitals
hereof.
1.10 "Distribution Agreement" shall have the meaning set forth in
the recitals hereof.
1.11 "Effective Date" shall have the meaning set forth in the
recitals hereof.
1.12 "First Amendment" shall mean the First Amendment to the
Distribution Agreement, dated as of April 18, 1997.
1.13 "HomeBase Lease" shall mean any of the leases or sub-leases of
property listed on the Schedule of Leases for which TJX or any Affiliate thereof
may be liable as a tenant, sub-lessee, surety or guarantor.
1.14 "HomeBase Lease Liability" shall mean (i) any Liability arising
under any HomeBase Lease, during the current term (without any extension or
renewals after the date hereof) of such HomeBase Lease as set forth on the
Schedule of Leases, for any of the Specified Obligations in regard to such
HomeBase Lease and (ii)
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<PAGE> 3
any Liability arising by reason of any HomeBase Third Party Claim with respect
to any Liability described in clause (i) of this section 1.14.
1.15 "HomeBase Lease Liability Payment" shall mean any amount paid
by TJX or BJ's in satisfaction of any HomeBase Lease Liability.
1.16 "HomeBase Third Party Claim" shall mean a Third Party Claim
arising out of, or relating to, a HomeBase Lease.
1.17 "Liability" shall mean any and all debts, liabilities and
obligations, absolute or contingent, mature or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising (unless
otherwise specified in this Agreement), and all costs and expenses related
thereto, including, without limitation, (i) those debts, liabilities and
obligations arising under any law, rule, regulation, action, threatened action,
order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking, (ii) reasonable attorneys' and accountants' fees, (iii) fees paid
to real estate consultants and brokers, and (iv) amounts paid or incurred in
investigating, preparing or defending against Third Party Claims or settling or
mitigating such claims (including, without limitation, costs for repairs,
remodeling or any other modification to premises that are incurred in connection
with the letting of the premises).
1.18 "Net HomeBase Lease Liability Payments" shall have the meaning
set forth in section 7 hereof.
1.19 "Parties" shall have the meaning set forth in the recitals
hereof.
1.20 "Schedule of Leases" shall mean the schedule of leases
initialed by the parties, provided as of the date hereof and setting forth the
HomeBase Leases.
1.21 "Significant Subsidiary" shall have the meaning set forth in
section 6.01(d)(i) hereof.
1.22 "Specified Obligations" shall mean, in regard to any HomeBase
Lease, (i) the base rent in regard to such HomeBase Lease, provided, however,
that any such base rent in excess of the annual base rent set forth with respect
to such HomeBase Lease in the Schedule of Leases shall not constitute Specified
Obligations except to the extent, and then only to the extent, that the amount
of such excess results from the fact that the actual rate of adjustment in
minimum rent exceeds that reflected in the Schedule of Leases because the actual
rate of increase in the CPI (or similar inflation index) used to calculate such
increase under the
-3-
<PAGE> 4
current terms of such HomeBase Lease exceeds the 3% annual rate assumed in
developing the Schedule of Leases; and (ii) such amounts of common area
maintenance charges and property taxes and similar assessments as come due from
time to time under the terms of such HomeBase Lease as such terms are currently
in effect.
1.23 "Spinoff" shall have the meaning set forth in the recitals
hereof.
1.24 "Third Party Claim" shall mean the assertion by a Person (other
than Waban, TJX, BJ's or any of their Affiliates) of any claim or the
commencement by any such Person of any Action against any TJX Indemnitee.
1.25 "TJX" shall have the meaning set forth in the recitals hereof.
1.26 "TJX Control Period" shall have the meaning set forth in
section 5.04 hereof.
1.27 "TJX Indemnitees" shall mean TJX, its Affiliates and their
directors, officers, employees, representatives, attorneys, accountants, and
agents.
1.28 "Waban" shall have the meaning set forth in the recitals
hereof.
2. Indemnification for Breach of First Amendment. BJ's shall indemnify
and hold harmless the TJX Indemnitees for any and all Liability paid or
satisfied by the TJX Indemnitees arising out of the non-performance by Waban or
any assignee, for any reason (including bankruptcy), of the covenants contained
in section 2 of the First Amendment, as such covenants existed on the date
hereof, or any agreement entered into in accordance with said covenants.
3. Indemnification for BJ's Leases. BJ's shall indemnify and hold
harmless the TJX Indemnitees for one hundred percent (100%) of any BJ's Lease
Liability Payment.
4. Indemnification for HomeBase Leases. BJ's shall indemnify and hold
harmless the TJX Indemnitees for fifty percent (50%) of any Net HomeBase Lease
Liability Payment. Notwithstanding anything to the contrary contained in this
Agreement, BJ's shall indemnify and hold harmless the TJX Indemnitees for one
hundred percent (100%) of any HomeBase Lease Liability Payment that is made
either during or with respect to the period up to and including January 31, 2003
(the "BJ's Control Period"), net of an amount equal to the fair market value of
any benefit (such as by way of example, any rental income received by TJX or any
Affiliate thereof from a sublease with respect to the HomeBase Lease that is the
subject of the HomeBase Lease Liability Payment in question) that has inured
-4-
<PAGE> 5
to TJX or any Affiliate thereof during the BJ's Control Period (i) in regard to
the premises that are the subject of the HomeBase Lease as to which the HomeBase
Lease Liability Payment in question was made or (ii) by reason of any claim made
by TJX against any third party for reimbursement in whole or in part of the
HomeBase Lease Liability Payment in question.
5. Control of Third Party Claims and Payment Mechanism.
5.01 BJ's shall have control of the defense and settlement of all
BJ's Third Party Claims and shall be obligated to make all BJ's Lease Liability
Payments. TJX shall have the right, at its expense, to participate with BJ's in
the defense and settlement of such BJ's Third Party Claims.
5.02 During the BJ's Control Period, BJ's shall have the right to
control the defense and settlement of all HomeBase Third Party Claims, and shall
be obligated to make all HomeBase Lease Liability Payments with respect thereto.
During the BJ's Control Period, TJX shall have the right to participate, at its
expense, with BJ's in the defense and settlement of such HomeBase Third Party
Claims.
5.03 During the BJ's Control Period (unless TJX has exercised its
right to control under section 6 hereof), BJ's may defend against, and consent
to the entry of any judgment or enter into any settlement with respect to the
HomeBase Third Party Claims in any manner it may deem appropriate, and BJ's need
not obtain any consent from TJX in connection therewith, provided, however, that
any claim of TJX based on a Disabling Conduct on the part of BJ's in the
handling of the defense or settlement of such HomeBase Third Party Claims is
hereby expressly preserved.
5.04 From and after February 1, 2003 (the "TJX Control Period"), TJX
shall have the right to control the defense and settlement of all pending and
future HomeBase Third Party Claims. During the TJX Control Period, BJ's shall
have the right to participate, at its expense, with TJX on the defense and
settlement of such HomeBase Third Party Claims. During the TJX Control Period,
TJX shall provide BJ's with monthly statements (with reasonable supporting
documentation) of any HomeBase Lease Liability Payments and any Applicable
Credits during the month in question. Except for any HomeBase Lease Liability
Payment as to which TJX is one hundred percent (100%) indemnified pursuant to
(and subject to the potential netting called for by) the second sentence of
section 4 hereof (all of which such payments shall be 100% reimbursed by BJ's to
TJX after taking into account any netting called for by said sentence), BJ's
shall pay to TJX fifty percent (50%) of the Net HomeBase Lease Liability
Payments within fifteen (15) days of the receipt of such statement.
-5-
<PAGE> 6
5.05 During the TJX Control Period or, subject to section 6.03
hereof, after TJX has exercised its right to control pursuant to section 6.01
hereof, TJX may defend against, and consent to the entry of any judgment or
enter into any settlement with respect to any Third Party Claims as to which it
has control in any manner it may deem appropriate, and TJX need not obtain any
consent from BJ's in connection therewith, provided, however, that any claim of
BJ's based on a Disabling Conduct on the part of TJX in the handling of the
defense or settlement of such Third Party Claims is hereby expressly preserved.
5.06 TJX shall provide BJ's with written notice within ten (10)
business days after the receipt of a written BJ's Third Party Claim or HomeBase
Third Party Claim, provided that the failure of TJX to give such notice shall
not relieve BJ's of its obligations under this Agreement except to the extent
BJ's is materially prejudiced by such failure to give notice. Such notice shall
describe the Third Party Claim in reasonable detail. Thereafter, TJX shall
deliver to BJ's within five (5) business days after TJX's receipt thereof,
copies of all notices and documents (including court papers) received by TJX
relating to such Third Party Claim.
5.07 Both TJX and BJ's shall make available to the other any
personnel (to the extent that such tasks shall not unreasonably interfere with
the performance of such employee's responsibilities) and any books, records or
other documents within such Party's control or which it otherwise has the
ability to make available that are reasonably necessary or appropriate for the
defense, settlement or compromise, and shall otherwise cooperate in the defense,
settlement or compromise of any BJ's Third Party Claim or HomeBase Third Party
Claim, including pursuing any appeals of any judgments relating thereto.
5.08 During the BJ's Control Period, TJX shall assign, at BJ's
request, to the extent permitted to do so under the relevant lease or guaranty,
TJX's tenants' rights (if any) under the relevant lease or guaranty (including
such rights, if any, under TJX guaranties of HomeBase Leases) that would enable
BJ's, as sub-lessor, to enter into sub-leases with respect to the premises
covered by such HomeBase Leases.
6. Right of TJX To Control Third Party Claims Upon Occurrence of
Control Event
6.01 TJX shall have the right at any time following the occurrence
of a Control Event which is not cured within 30 days following written notice
thereof to BJ's by TJX to elect to control the defense and settlement of all
pending and future BJ's Third Party Claims or HomeBase Third Party Claims (or
both). Control Event shall mean the occurrence of any of the following events:
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<PAGE> 7
(a) BJ's shall have failed to perform in a material respect any
of its obligations hereunder;
(b) (i) BJ's shall have failed to maintain at the end of any
fiscal quarter an actual or implied senior debt rating of at least B-
by Standard & Poors or B3 by Moodys and (ii) at the end of such
quarter, BJ's shall have failed to maintain on a consolidated basis as
of the end of such fiscal quarter a Fixed Charge Coverage Ratio (as
such term is defined in the Agreement, dated as of April 4, 1995,
between Waban, The First National Bank of Boston, and the other lenders
party thereto, without regard to any subsequent amendments, and
interpreting such term as if BJ's were the borrower rather than Waban)
greater than 1.20 to 1.0; provided, however, that, in calculating the
Fixed Charge Coverage Ratio, extraordinary items and HomeBase Lease
Liability Payments shall be excluded;
(c) BJ's or any of its subsidiaries shall have defaulted in the
payment of any obligation for borrowed money exceeding $10 million in
principal amount which has been accelerated and is beyond any grace
period provided with respect thereto; or
(d) any of the following bankruptcy events shall have occurred:
(i) any decree or order for relief in respect of BJ's or
any Significant Subsidiary (as defined in SEC Regulation SX) or any
other three subsidiaries is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law (collectively, the
"Bankruptcy Law"), of any jurisdiction; or
(ii) BJ's or any Significant Subsidiary or any other three
subsidiaries petitions or applies to any tribunal for, or consents
to, the appointment of, or the taking of possession by, a trustee,
receiver, custodian, liquidator or similar official of BJ's or any
Significant Subsidiary or any other three subsidiaries, or of any
substantial part of the assets of BJ's or any Significant Subsidiary
or any other three subsidiaries, or commences a voluntary case under
the Bankruptcy Law of the United States or any similar proceedings
relating to BJ's or any Significant Subsidiary or any other three
subsidiaries under the Bankruptcy Law of any other jurisdiction; or
(iii) any petition or application referred to in clause (b)
above is filed, or any such proceedings are commenced, against BJ's,
any Significant Subsidiary or any other three subsidiaries and BJ's
or such
-7-
<PAGE> 8
Significant Subsidiary or such other three subsidiaries by any act
indicates its or their approval thereof or acquiescence therein, or
an order, judgment or decree is entered appointing any such trustee,
receiver, custodian, liquidator or similar official, or approving
the petition in any such proceedings, and such order, judgment or
decree remains unstayed and in effect for more than 60 days.
6.02 From and after the end of the fourth fiscal quarter beginning
from the date hereof, BJ's shall promptly report in writing to TJX any failure
at any time of BJ's to comply with any of the tests set forth in paragraphs (a)
through (d) of section 6.01 hereof. From and after the end of the fourth fiscal
quarter beginning from the date hereof, BJ's also shall furnish to TJX, within
45 days following the end of each fiscal quarter and within 90 days following
the end of each fiscal year, a certificate signed by the President or Chief
Financial Officer of BJ's certifying BJ's compliance (and, with respect to
paragraph (b) of section 6.01, specifying the applicable credit rating or
financial ratio for such fiscal quarter or fiscal year) as of the end of such
fiscal quarter or fiscal year with each of the tests set forth in paragraphs (a)
through (d) of section 6.01.
6.03 From and after the end of the fourth fiscal quarter beginning
from the date hereof, TJX shall promptly report in writing to BJ's any failure
at any time of TJX to comply with any of the tests set forth in paragraphs (a)
through (d) of section 6.01 hereof (as if such paragraphs applied to TJX). From
and after the end of the fourth fiscal quarter beginning from the date hereof,
TJX also shall furnish to BJ's, within 45 days following the end of each fiscal
quarter and within 90 days following the end of each fiscal year, a certificate
signed by the President or Chief Financial Officer of TJX certifying TJX's
compliance (and, with respect to paragraph (b) of section 6.01, specifying the
applicable credit rating or financial ratio for such fiscal quarter or fiscal
year) as of the end of such fiscal quarter or fiscal year with each of the tests
set forth in paragraphs (a) through (d) of section 6.01 (as if such paragraphs
applied to TJX).
6.04 After the exercise by TJX of its right to control the HomeBase
Third Party Claims pursuant to section 6.01 hereof, TJX shall provide BJ's
during the remainder of the BJ's Control Period with prior written notice of any
settlement agreement between TJX and the holder of a HomeBase Third Party Claim
pursuant to which more than three (3) months of Liability of a HomeBase Lease is
being extinguished. TJX shall not enter into any such settlement agreement
without the consent of BJ's; provided, however, that such consent shall not be
unreasonably withheld. BJ's shall be deemed to have consented to such settlement
agreement
-8-
<PAGE> 9
unless it notifies TJX in writing of its objection to such settlement agreement
within 10 days of receipt of such notice.
7. Calculation of Net HomeBase Lease Liability Payments. For purposes
of calculating the Net HomeBase Lease Liability Payments for which TJX is
entitled to partial reimbursement from BJ's pursuant to section 5.04 hereof, (a)
the "Applicable Credits" shall be an amount equal to the fair market value of
any benefit (such as by way of example, any rental income received by TJX or any
Affiliate thereof from a sublease with respect to a HomeBase Lease) that has
inured to TJX or any Affiliate thereof during the period covered by the monthly
statement in question (i) in regard to the premises that are the subject of the
HomeBase Leases that are covered by such monthly statement or (ii) by reason of
any claim made by TJX against any third party for reimbursement in whole or in
part of any HomeBase Lease Liability Payment; and (b) the "Net HomeBase Lease
Liability Payments" shall be the amount of the HomeBase Lease Liability Payments
during the month in question less the amount of any Applicable Credits during
such month.
8. No Set Off or Recoupment. The obligations of BJ's to indemnify the
TJX Indemnitees as provided for in this Agreement shall be absolute and not
subject to any set off or recoupment. Moreover, TJX shall have no obligation to
prosecute any claim or right of indemnification from Waban in order to be
entitled to indemnification from BJ's pursuant to the terms of this Agreement.
9. No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and assigns.
10. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings and agreements (unless such agreements expressly so
provide), by or among the Parties, written or oral, to the extent they relate in
any way to the subject matter hereof.
11. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and assigns.
12. Counterparts. This Agreement is an agreement under seal and may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument.
13. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
-9-
<PAGE> 10
14. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to TJX:
The TJX Companies, Inc.
770 Cochituate Road
Framingham, Massachusetts 01701
Telecopy No.: (508) 390-2457
Attention: General Counsel
Copy to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Telecopy No.: (212) 446-4900
Attention: Luc A. Despins, Esq.
If to BJ's:
BJ's Wholesale Club, Inc.
One Mercer Road
Natick, Massachusetts 01760
Telecopy No.: (508) 651-6251
Attention: Treasurer
Copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telecopy No.: (617) 526-5000
Attention: Mark G. Borden, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
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<PAGE> 11
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the Commonwealth of Massachusetts without
giving effect to any choice or conflict of law provision or rule (whether of the
Commonwealth of Massachusetts or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Massachusetts.
16. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default or breach of covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default or breach of covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
17. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
18. Expenses. Each Party will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement.
19. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.
20. Specific Performance. Each Party acknowledges and agrees that the
other Party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each Party agrees that the other Party
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any State thereof having jurisdiction over the Parties and the matter,
in addition to any other remedy to which they may be entitled, at law or in
equity.
21. Further Assurances. Each Party to this Agreement shall execute such
documents and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof.
-11-
<PAGE> 12
22. Authority. The Parties hereto represent and warrant to each other
that the signatories to this Agreement are authorized to execute this Agreement;
that each has full power and authority to enter into this Agreement; that this
Agreement is duly executed and delivered, and constitutes a valid, binding
agreement in accordance with its terms.
23. Effective Date. This Agreement, and all of the rights and
obligations of the parties hereunder, shall become effective upon the Effective
Date, and if the Effective Date does not occur by December 31, 1997, this
Agreement shall be null and void.
24. Waiver of Jury Trial. THE PARTIES HERETO EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY A
PARTY AGAINST THE OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE PARTIES HERETO EACH AGREE THAT ANY SUCH CLAIM OR CAUSE
OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION 24 AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT.
25. TJX Representation. TJX hereby represents that it has no Knowledge
of the existence of a lease or sub-lease of property that is (i) currently used
by the HomeBase division for which TJX or any Affiliate thereof may be liable as
a tenant, sub-lessee, surety or guarantor and (ii) not listed on the Schedule of
Leases. For the purposes of this Agreement, "Knowledge" shall mean the actual
present knowledge of Donald G. Campbell, without investigation; provided,
however, that the fact that Mr. Campbell may have executed a guaranty with
respect to such lease shall not be deemed to be actual knowledge of Mr. Campbell
unless such guaranty was executed by Mr. Campbell on or after January 18, 1997.
26. Subrogation. In the event of any payment by BJ's to a TJX
Indemnitee in connection with any Third Party Claim, BJ's shall be subrogated to
and shall stand in the place of such TJX Indemnitee as to any events or
circumstances for which such TJX Indemnitee may have any right or claim relating
to such Third Party Claim against any claimant or plaintiff asserting such Third
Party Claim or as against any other Person; provided, however, that BJ's shall
have no such right of subrogation in regard to any HomeBase Lease Liability or
any BJ's Lease Liability if the TJX Indemnitees have not been fully discharged
and exonerated from any and all Liability in respect of the HomeBase Lease or
BJ's Lease in
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<PAGE> 13
question. If BJ's is entitled to subrogation under this section 26, the TJX
Indemnitees shall cooperate with BJ's in a reasonable manner, at the cost and
expense of BJ's, in prosecuting any subrogated right or claim.
*****
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<PAGE> 14
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
THE TJX COMPANIES, INC.
By: /s/ Donald Campbell
---------------------------------
Title: Executive Vice President
---------------------------------
BJ'S WHOLESALE CLUB, INC.
By: /s/ Edward Weisberger
---------------------------------
Title: Senior Vice President
---------------------------------
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<PAGE> 1
EXHIBIT 11
THE TJX COMPANIES, INC.
DETAILED COMPUTATIONS OF NET INCOME PER COMMON SHARE
PRIMARY AND FULLY DILUTED
($000's)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------------
January 25, January 27, January 28, January 29, January 30,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
The computation of net income
available and adjusted shares
outstanding follows:
Net income $ 363,123 $ 26,261 $ 82,619 $ 124,379 $ 102,846
Add (where dilutive):
Tax effected interest and
amortization of debt expense
on convertible debt -- -- -- -- 3,069
Less:
Preferred stock dividends -- (9,314) (7,156) (7,156) (3,939)
----------- ------------ ------------ ------------ ------------
Net income used for primary and
fully diluted earnings per share
computation $ 363,123 $ 16,947 $ 75,463 $ 117,223 $ 101,976
=========== ============ ============ ============ ============
Weighted average number of common
shares outstanding 76,090,958 72,480,593 73,150,681 73,458,973 70,234,156
Add:
Actual and assumed exercise of
options that are common stock
equivalents, net of treasury
shares deemed to have been
repurchased 798,140 253,521 316,322 733,385 659,896
Assumed exercise of convertible
preferred stock for the
period outstanding 13,735,911 399,235 -- -- --
Assumed exercise of convertible
subordinated debentures for the
period outstanding -- -- -- -- 2,979,224
----------- ------------ ------------ ------------ ------------
Weighted average number of common and
common equivalent shares outstanding,
used for primary and fully diluted
earnings per share calculation 90,625,009 73,133,349 73,467,003 74,192,358 73,873,276
=========== ============ ============ ============ ============
</TABLE>
<PAGE> 1
EXHIBIT 13
CONSOLIDATED STATEMENTS OF INCOME The TJX Companies, Inc.
<TABLE>
<CAPTION>
January 25, January 27, January 28,
Fiscal Year Ended 1997 1996 1995
------------------------------------------------------
Dollars in Thousands Except Per Share Amounts
<S> <C> <C> <C>
Net sales $ 6,689,410 $ 3,975,115 $ 3,055,573
------------ ------------ ------------
Cost of sales, including buying and
occupancy costs 5,198,783 3,143,257 2,370,715
Selling, general and administrative
expenses 1,087,137 669,876 517,449
Store closing costs -- 35,000 --
Interest expense, net 37,350 38,186 22,171
------------ ------------ ------------
Income from continuing operations before
income taxes and extraordinary item 366,140 88,796 145,238
Provision for income taxes 152,314 37,207 60,758
------------ ------------ ------------
Income from continuing operations before
extraordinary item 213,826 51,589 84,480
Discontinued operations:
Income (loss) from discontinued
operations, net of income taxes 29,361 9,710 (1,861)
Gain (loss) on disposal of discontinued
operations, net of income taxes 125,556 (31,700) --
------------ ------------ ------------
Income before extraordinary item 368,743 29,599 82,619
Extraordinary (charge), net of
income taxes (5,620) (3,338) --
------------ ------------ ------------
Net income 363,123 26,261 82,619
Preferred stock dividends 13,741 9,407 7,156
------------ ------------ ------------
Net income available to common
shareholders $ 349,382 $ 16,854 $ 75,463
============ ============ ============
Number of common shares for primary
and fully diluted earnings per
share computations 90,625,009 73,133,349 73,467,003
Primary and fully diluted earnings
per common share:
Income from continuing operations $ 2.36 $ .58 $ 1.05
Income before extraordinary item $ 4.07 $ .28 $ 1.03
Net income $ 4.01 $ .23 $ 1.03
Cash dividends per common share $ .28 $ .49 $ .56
</TABLE>
The accompanying notes are an integral part of the financial statements
1
<PAGE> 2
CONSOLIDATED BALANCE SHEETS The TJX Companies, Inc.
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
- ------------------------------------------------------------------------------------------
ASSETS In Thousands
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 474,732 $ 209,226
Accounts receivable 57,275 55,144
Merchandise inventories 1,059,505 1,258,488
Prepaid expenses 16,379 16,406
Net current assets of discontinued operations 54,451 76,287
---------- ----------
Total current assets 1,662,342 1,615,551
---------- ----------
Property at cost:
Land and buildings 103,067 110,446
Leasehold costs and improvements 428,836 423,842
Furniture, fixtures and equipment 527,710 539,504
---------- ----------
1,059,613 1,073,792
Less accumulated depreciation and amortization 419,129 340,599
---------- ----------
640,484 733,193
Other assets 42,259 37,325
Goodwill and tradename, net of amortization 216,127 236,043
Net noncurrent assets of discontinued operations -- 52,299
---------- ----------
Total Assets $2,561,212 $2,674,411
========== ==========
LIABILITIES
Current liabilities:
Current installments of long-term debt $ 27,140 $ 78,670
Accounts payable 533,945 436,634
Accrued expenses and other current liabilities 621,211 691,096
---------- ----------
Total current liabilities 1,182,296 1,206,400
---------- ----------
Long-term debt, exclusive of current installments 244,410 690,713
Deferred income taxes 7,320 12,664
SHAREHOLDERS' EQUITY
Preferred stock at face value, authorized
5,000,000 shares, par value $1, issued and
outstanding cumulative convertible stock of:
250,000 shares of 8% Series A -- 25,000
1,650,000 shares of 6.25% Series C -- 82,500
250,000 shares of 1.81% Series D -- 25,000
1,500,000 shares of 7% Series E 150,000 150,000
Common stock, authorized 150,000,000 shares,
par value $1, issued and outstanding
79,576,438 and 72,485,776 shares 79,576 72,486
Additional paid-in capital 429,017 269,159
Retained earnings 468,593 140,489
---------- ----------
Total shareholders' equity 1,127,186 764,634
---------- ----------
Total Liabilities and Shareholders' Equity $2,561,212 $2,674,411
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 3
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY The TJX Companies, Inc.
<TABLE>
<CAPTION>
Preferred Common Additional
Stock, Stock, Par Paid-in Retained
Face Value Value $1 Capital Earnings Total
- -----------------------------------------------------------------------------------------------------------------------
In Thousands
<S> <C> <C> <C> <C> <C>
Balance, January 29, 1994 $ 107,500 $ 73,431 $ 284,744 $ 125,225 $ 590,900
Net income -- -- -- 82,619 82,619
Cash dividends:
Preferred stock -- -- -- (7,156) (7,156)
Common stock -- -- -- (41,574) (41,574)
Issuance of common stock
under stock incentive
plans and related tax
benefits -- 29 807 -- 836
Common stock repurchased -- (1,059) (18,202) -- (19,261)
Other -- -- 588 -- 588
--------- -------- --------- --------- -----------
Balance, January 28, 1995 107,500 72,401 267,937 159,114 606,952
Net income -- -- -- 26,261 26,261
Cash dividends:
Preferred stock -- -- -- (9,407) (9,407)
Common stock -- -- -- (35,479) (35,479)
Issuance of cumulative
convertible preferred
stock
Series D 25,000 -- -- -- 25,000
Series E 150,000 -- -- -- 150,000
Issuance of common
stock under stock
incentive plans
and related tax
benefits -- 85 754 -- 839
Other -- -- 468 -- 468
--------- -------- --------- --------- -----------
Balance, January 27, 1996 282,500 72,486 269,159 140,489 764,634
Net income -- -- -- 363,123 363,123
Cash dividends:
Preferred stock -- -- -- (13,741) (13,741)
Common stock -- -- -- (21,278) (21,278)
Conversion of cumulative
preferred stock into
common stock
Series A (25,000) 1,190 23,810 -- --
Series C (82,500) 3,178 79,322 -- --
Series D (25,000) 1,350 23,650 -- --
Issuance of common
stock under stock
incentive plans
and related tax
benefits -- 1,372 32,786 -- 34,158
Other -- -- 290 -- 290
--------- -------- --------- --------- -----------
Balance, January 25, 1997 $ 150,000 $ 79,576 $ 429,017 $ 468,593 $ 1,127,186
========= ======== ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF CASH FLOWS The TJX Companies, Inc.
<TABLE>
<CAPTION>
January 25, January 27, January 28,
Fiscal Year Ended 1997 1996 1995
- -------------------------------------------------------------------------------------------------
In Thousands
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 363,123 $ 26,261 $ 82,619
Adjustments to reconcile net income
to net cash provided by operating
activities:
(Income) loss from discontinued
operations (29,361) (9,710) 1,861
(Income) loss on disposal of
discontinued operations (125,556) 31,700 --
Extraordinary charge 5,620 3,338 --
Depreciation and amortization 126,830 79,232 60,582
Property disposals and asset
write-downs 25,399 3,489 5,157
Other, net (732) (382) 912
Changes in assets and liabilities,
net of effect of acquisition and
dispositions:
(Increase) in accounts receivable (2,131) (233) (8,302)
(Increase) decrease in
merchandise inventories 198,983 211,168 (163,898)
(Increase) decrease in prepaid
expenses 27 6,872 (1,760)
Increase (decrease) in
accounts payable 95,677 (147,013) 93,693
Increase in accrued expenses
and other current liabilities 11,928 63,975 13,384
(Decrease) in deferred income taxes (5,344) (14,143) (440)
--------- --------- ---------
Net cash provided by operating activities 664,463 254,554 83,808
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (119,153) (105,864) (109,436)
Acquisition of Marshalls, net of cash
acquired (49,327) (378,733) --
Proceeds from sale of discontinued
operations 222,800 3,000 --
--------- --------- ---------
Net cash provided by (used in)
investing activities 54,320 (481,597) (109,436)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) short-
term debt -- (20,000) 20,000
Proceeds from borrowings of
long-term debt -- 574,861 20,500
Principal payments on long-term debt (46,506) (31,271) (6,025)
Prepayment of long-term debt (455,560) -- --
Payment of debt issue expenses -- (14,776) --
Proceeds from sale and issuance
of common stock, net 34,395 1,040 741
Common stock repurchased -- -- (19,261)
Cash dividends paid (35,019) (44,886) (48,730)
--------- --------- ---------
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Net cash provided by (used in)
financing activities (502,690) 464,968 (32,775)
--------- --------- --------
Net cash provided by (used in)
continuing operations 216,093 237,925 (58,403)
Net cash provided by (used in)
discontinued operations 49,413 (70,268) 41,870
--------- --------- --------
Net increase (decrease) in cash and
cash equivalents 265,506 167,657 (16,533)
Cash and cash equivalents at
beginning of year 209,226 41,569 58,102
--------- --------- --------
Cash and cash equivalents at end of year $ 474,732 $ 209,226 $ 41,569
========= ========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
SELECTED INFORMATION BY MAJOR BUSINESS SEGMENT The TJX Companies, Inc.
The following selected information by major business segment reflects the
results of Marshalls in the off-price family apparel segment for the periods
following its acquisition on November 17, 1995. Prior year data has been
restated to reflect Chadwick's of Boston and Hit or Miss as discontinued
operations.
<TABLE>
<CAPTION>
January 25, January 27, January 28,
Fiscal Year Ended 1997 1996 1995
- ----------------------------------------------------------------------------------------------------
In Thousands
<S> <C> <C> <C>
Net sales:
Off-price family apparel stores $ 6,602,391 $ 3,896,710 $3,055,573
Off-price home fashion stores 87,019 78,405 --
----------- ----------- ----------
$ 6,689,410 $ 3,975,115 $3,055,573
=========== =========== ==========
Operating income (loss):
Off-price family apparel stores (1) $ 463,419 $ 187,974 $ 208,648
Off-price home fashion stores (2) (14,018) (13,375) --
----------- ----------- ----------
449,401 174,599 208,648
General corporate expense (3) 43,297 45,003 38,625
Goodwill amortization 2,614 2,614 2,614
Interest expense, net 37,350 38,186 22,171
----------- ----------- ----------
Income from continuing operations
before income taxes and extra-
ordinary item $ 366,140 $ 88,796 $ 145,238
=========== =========== ==========
Identifiable assets:
Off-price family apparel stores $ 1,801,779 $ 2,116,127 $1,154,258
Off-price home fashion stores 36,493 46,861 --
Corporate, primarily cash and goodwill 668,489 382,137 219,706
----------- ----------- ----------
$ 2,506,761 $ 2,545,125 $1,373,964
=========== =========== ==========
Capital expenditures:
Off-price family apparel stores $ 104,955 $ 87,037 $ 91,801
Off-price home fashion stores 731 7,932 --
Corporate 13,467 10,895 17,635
----------- ----------- ----------
$ 119,153 $ 105,864 $ 109,436
=========== =========== ==========
Depreciation and amortization:
Off-price family apparel stores $ 113,479 $ 69,596 $ 53,601
Off-price home fashion stores 2,104 1,777 --
Corporate, including goodwill 11,247 7,859 6,981
----------- ----------- ----------
$ 126,830 $ 79,232 $ 60,582
=========== =========== ==========
</TABLE>
- ----------
(1) The period ended January 27, 1996 includes a charge of $35 million
relating to the closing of approximately 30 T.J. Maxx stores.
(2) The periods ended January 25, 1997 and January 27, 1996 include a
charge of $3.1 million and $3.8 million, respectively, for certain
store closings and other restructuring costs relating to HomeGoods.
(3) General corporate expense for the fiscal years ended January 25, 1997,
January 27, 1996 and January 28, 1995 include the net operating results
of T.K. Maxx. General corporate expense for the fiscal year ended
January 27, 1996 includes the net operating results of the Cosmopolitan
catalog, which ceased catalog operations in the fourth quarter of
fiscal
<PAGE> 7
1996, and for the fiscal year ended January 28, 1995 general corporate
expense includes the net operating results of HomeGoods.
5
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The TJX Companies, Inc.
SUMMARY OF ACCOUNTING POLICIES
FISCAL YEAR: The Company's fiscal year ends on the last Saturday in January.
BASIS OF PRESENTATION: The consolidated financial statements of The TJX
Companies, Inc. include the financial statements of all the Company's
wholly-owned subsidiaries, including its foreign subsidiaries. The financial
statements for the applicable periods present the Company's former Chadwick's
and Hit or Miss divisions as discontinued operations. The notes pertain to
continuing operations except where otherwise noted.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS: The Company generally considers highly liquid investments with
an initial maturity of three months or less to be cash equivalents. The
Company's investments are primarily high grade commercial paper or time deposits
with major banks. The fair value of cash equivalents approximates carrying
value.
MERCHANDISE INVENTORIES: Inventories are stated at the lower of cost or
market. The Company uses the retail method for valuing inventories on the
first-in first-out basis.
DEPRECIATION AND AMORTIZATION: For financial reporting purposes, the Company
provides for depreciation and amortization of property principally by the use of
the straight-line method over the estimated useful lives of the assets.
Buildings are depreciated over 33 years, leasehold costs and improvements are
generally amortized over the lease term or their estimated useful life,
whichever is shorter, and furniture, fixtures and equipment are depreciated over
3 to 10 years. Maintenance and repairs are charged to expense as incurred. Upon
retirement or sale, the cost of disposed assets and the related depreciation are
eliminated and any gain or loss is included in net income. Debt discount and
related issue expenses are amortized over the lives of the related debt issues.
Pre-opening costs are charged to operations within the fiscal year that a new
store or facility opens.
GOODWILL AND TRADENAME: Goodwill is primarily the excess of the purchase price
incurred over the carrying value of the minority interest in the Company's
former 83%-owned subsidiary. The minority interest was acquired pursuant to the
Company's fiscal 1990 restructuring. In addition, goodwill includes the excess
of cost over the estimated fair market value of the net assets of Winners
Apparel Ltd., acquired by the Company effective May 31, 1990. Goodwill totalled
$84.7 million, net of amortization, as of January
6
<PAGE> 9
25, 1997 and is being amortized over 40 years. Annual amortization of goodwill
was $2.6 million in fiscal years 1997, 1996 and 1995. Cumulative amortization as
of January 25, 1997 and January 27, 1996 was $19.9 million and $17.3 million,
respectively.
Tradename is the value assigned to the name "Marshalls" as a result of the
Company's acquisition of the Marshalls chain on November 17, 1995. The final
allocation of the purchase price of Marshalls, pursuant to the purchase
accounting method, resulted in $135.8 million being allocated to the tradename.
The value of the tradename was determined by the discounted present value of
assumed after-tax royalty payments, offset by a reduction for its pro-rata share
of the total negative goodwill acquired (see Note A). The tradename is deemed to
have an indefinite life and accordingly is being amortized over 40 years.
Amortization expense was $3.7 million and $.7 million for fiscal years 1997 and
1996, respectively. Cumulative amortization as of January 25, 1997 and January
27, 1996 was $4.4 million and $.7 million, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS: During fiscal 1997, the Company adopted the
Financial Accounting Standards Board (FASB) Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." The Company periodically reviews the value of its property and intangible
assets in relation to the current and expected operating results of the related
business segments in order to assess whether there has been a permanent
impairment of their carrying values.
As a result of the acquisition of Marshalls, and the development of a plan for
the realignment of the distribution center facilities at T.J. Maxx and
Marshalls, certain distribution center assets have been written down to their
net estimated realizable value in anticipation of their sale or disposal. The
plan is expected to be implemented over the next several years. The amounts
impacting Marshalls have been reflected in the final allocation of purchase
price (see Note A) and those related to T.J. Maxx have been reflected as a $12.2
million impairment charge which has been recorded in selling, general and
administrative expenses for fiscal 1997.
ADVERTISING COSTS: The Company expenses advertising costs as incurred.
EARNINGS PER COMMON SHARE: Primary and fully diluted earnings per common share
is based upon the weighted average number of common and common equivalent shares
and other dilutive securities outstanding in each year. In computing earnings
per common share, income is adjusted for preferred dividends paid unless the
assumed conversion of the outstanding convertible preferred stock is more
dilutive. Income for earnings per share calculations has been adjusted for
preferred stock dividends of $9.3 million in fiscal 1996 and $7.2 million in
fiscal 1995.
FOREIGN CURRENCY TRANSLATION: The Company's foreign assets and liabilities are
translated at the year-end exchange rate and the income statement items are
translated at the average exchange rates prevailing during the year. A portion
of the Company's net investment in foreign operations is hedged with foreign
currency swap agreements. The translation adjustment associated with the foreign
operations and the currency swap agreements are included in
7
<PAGE> 10
shareholders' equity as a component of additional paid-in-capital. Cumulative
foreign currency translation adjustments included in shareholders' equity,
amounted to losses of $1.0 million as of January 25, 1997 and $1.7 million as of
January 27, 1996.
NEW ACCOUNTING STANDARD: During 1996, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 128 "Earnings per
Share." This statement specifies the computation, presentation and disclosures
for basic and dilutive earnings per share. The Company will implement the
standard in its fiscal year ended January 31, 1998. Using the new method for
computing earnings per share, basic earnings per share and dilutive earnings per
share would be as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended January
----------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income from continuing operations:
Basic $2.66 $ .58 $1.06
Dilutive 2.44 .58 1.05
Net income
Basic $4.64 $ .23 $1.03
Dilutive 4.14 .23 1.03
</TABLE>
OTHER: Certain amounts in prior years' financial statements have been
reclassified for comparative purposes.
A. DISPOSITIONS AND ACQUISITIONS
SALE OF CHADWICK'S OF BOSTON: Effective December 7, 1996, the Company sold its
Chadwick's of Boston catalog division to Brylane, L.P. Total proceeds from the
sale are estimated at $300 million and include cash, a 10-year $20 million
Convertible Subordinated Note at 6% interest and Chadwick's consumer credit card
receivables. The estimated cash proceeds received at closing will be adjusted to
reflect the actual closing balance sheet of Chadwick's as of December 7, 1996.
The Company assumes approximately $30 million will be paid to Brylane L.P.
during the first quarter of fiscal 1998 and has reflected this estimated payable
in accrued expenses and in the calculation of the gain on the sale of
Chadwick's. The net current assets of discontinued operations of $54.5 million
as of January 25, 1997 reflect the remaining consumer credit card receivables to
be collected in the first quarter of fiscal 1998. Pursuant to the agreement, the
Company agreed to purchase certain amounts of excess inventory from Chadwick's
through fiscal 2000.
The Chadwick's of Boston catalog division had net sales of $464.8 million and
recorded income from operations of $29.4 million, net of income taxes of $20.9
million, for the fiscal year ended January 25, 1997, which represents the
results through December 7, 1996, effective date of the transaction. The results
of Chadwick's for all periods prior to December 7, 1996 have been reclassified
to discontinued operations. The sale of the division resulted in a gain on
disposal of $125.6 million (net of income taxes of $15.2 million), or $1.39 per
common share. This gain includes utilization of $125.8 million of a capital loss
carryforward, providing tax benefits of $44 million (see Note G). Interest
expense was allocated to discontinued operations based on their respective
proportion of assets to total assets.
8
<PAGE> 11
Net sales for Chadwick's for fiscal 1996 and 1995 were $472.4 million and $433.6
million, respectively. Income from operations for Chadwick's was $12.0 million,
net income taxes of $8.1 million, for fiscal 1996 and $2.1 million, net of
income taxes of $.8 million, for fiscal 1995.
SALE OF HIT OR MISS DIVISION: Effective September 30, 1995, the Company sold its
Hit or Miss division to members of Hit or Miss management and outside investors.
The Company received $3 million in cash and a 7-year, $10 million note with
interest at 10%. Prior to October 2, 1997, interest may be paid-in-kind at the
election of Hit or Miss.
The Hit or Miss division had net sales of $165.4 million and recorded an
operating loss of $2.3 million, net of income tax benefits of $1.4 million, for
the fiscal year end January 27, 1996, which represents results through July 29,
1995, the measurement date of the transaction. Hit or Miss' operating results
for all prior periods have been reclassified to discontinued operations. The
sale of the division resulted in a loss on disposal of $31.7 million (net of
income tax benefits of $19.8 million) and includes the operating results from
July 30, 1995 through the closing date, as well as the cost to the Company of
closing 69 Hit or Miss stores. Interest expense was allocated to discontinued
operations based on their respective proportion of assets to total assets.
For fiscal 1995, Hit or Miss had net sales of $353.7 million and an operating
loss of $4 million, net of income tax benefits of $2.4 million.
ACQUISITION OF MARSHALLS: On November 17, 1995, the Company acquired the
Marshalls family apparel chain from Melville Corporation. The Company paid
$424.3 million in cash and $175 million in junior convertible preferred stock.
The total purchase price of Marshalls, including acquisition costs, was $606
million.
The acquisition has been accounted for using the purchase method of accounting
and accordingly, the purchase price has been allocated to the assets purchased
and the liabilities assumed based upon their fair values at the date of
acquisition. The allocation of purchase price has been revised from last year's
estimate with the fair value of the net assets acquired exceeding the purchase
price and resulting in negative goodwill of $86.4 million. The negative goodwill
was allocated to the long-term assets acquired. The final allocation of purchase
price is summarized below:
<TABLE>
<CAPTION>
In Thousands
<S> <C>
Current assets $ 718,627
Property, plant and equipment 237,145
Tradename 135,815
Current liabilities (485,587)
---------
$ 606,000
=========
</TABLE>
The most significant change affecting the fair value of the assets acquired and
liabilities assumed in the final allocation of purchase price, was reduction of
$86 million in the reserve for store closings due to fewer planned store
closings as well as the reduced cost of those closings. The fair value of
property, prior to the allocation of negative goodwill, was decreased primarily
for a write-down of certain distribution center assets. The fair value of
tradename, prior to the allocation of goodwill, was
9
<PAGE> 12
increased due to fewer planned store closings. The net impact of these changes
resulted in an additional $75.6 million of negative goodwill which was allocated
to long-term assets and further reduced the property and tradename values.
The operating results of Marshalls have been included in the consolidated
results of the Company from the date of acquisition on November 17, 1995.
Unaudited pro forma consolidated financial results, for the two fiscal years
ending January 1996 and 1995, are presented below as if the acquisition had
taken place at the beginning of the periods presented and have been restated to
reflect the final purchase price allocation described above:
<TABLE>
<CAPTION>
Fiscal Year Ended January 1996 1995
- ------------------------------------------------------------------------
Dollars In Thousands Except Per Share Amounts
<S> <C> <C>
Net sales $ 6,085,509 $ 5,835,504
Income from continuing operations $ 20,838 $ 156,187
Average shares outstanding for per
common share calculations 74,758,406 89,579,093
Income from continuing operations
per common share $ .04 $ 1.74
</TABLE>
The foregoing unaudited pro forma consolidated financial results give effect to,
among other pro forma adjustments, the following:
(i) Interest expense and amortization of the related debt expenses
on debt incurred to finance the acquisition.
(ii) Depreciation and amortization adjustments related to fair
market value of assets acquired.
(iii) Amortization of tradename acquired over 40 years.
(iv) Adjustments to income tax expense related to the above.
(v) Impact of preferred stock issued on earnings per common share
calculations.
The foregoing unaudited pro forma consolidated financial information is provided
for illustrative purposes only and does not purport to be indicative of results
that actually would have been achieved had the acquisition taken place on the
first day of the period presented or of future results.
10
<PAGE> 13
B. LONG-TERM DEBT AND CREDIT LINES
At January 25, 1997 and January 27, 1996, long-term debt, exclusive of current
installments, consisted of the following (information as to interest rates and
maturity dates as of January 25, 1997 only):
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
- ---------------------------------------------------------------------------------
In Thousands
<S> <C> <C>
Real estate mortgages, interest at 10.48%
maturing November 1, 1998 $ 22,391 $ 27,241
-------- --------
Equipment notes, interest at 11% to 11.25%
maturing December 12, 2000 to
December 30, 2001 2,135 3,272
-------- --------
General corporate debt:
Sinking fund debentures -- 99,830
Medium term notes, interest at 5.87% to
7.97%, maturing October 21, 2003 to
September 20, 2004 20,000 35,500
6 5/8% unsecured notes, maturing June 15, 2000 100,000 100,000
7% unsecured notes, maturing June 15, 2005
(effective interest rate of 7.02%
after reduction of the unamortized debt
discount of $116,000 and $130,000) 99,884 99,870
Term loan -- 325,000
-------- --------
Total general corporate debt 219,884 660,200
-------- --------
Long-term debt, exclusive of current installments $244,410 $690,713
======== ========
</TABLE>
The aggregate maturities of long-term debt, exclusive of current installments,
outstanding at January 25, 1997 are as follows:
<TABLE>
<CAPTION>
Real Estate General
Mortgages and Corporate
Fiscal Year Equipment Notes Debt Total
- --------------------------------------------------------------------
In Thousands
<S> <C> <C> <C>
1999 $23,399 $ -- $ 23,399
2000 697 -- 697
2001 430 100,000 100,430
2002 -- -- --
Later years -- 119,884 119,884
------- -------- --------
Aggregate maturities
of long-term debt $24,526 $219,884 $244,410
======= ======== ========
</TABLE>
Real estate mortgages are collateralized by land and buildings. While the parent
company is not directly obligated with respect to the real estate
11
<PAGE> 14
mortgages, it or a wholly-owned subsidiary has either guaranteed the debt or has
guaranteed a lease, if applicable, which has been assigned as collateral for
such debt.
On September 16, 1996, pursuant to a call for redemption, the Company prepaid
$88.8 million of its 9 1/2% sinking fund debentures. The Company recorded an
after-tax extraordinary charge of $2.9 million, or $.03 per common share,
related to the early retirement of this debt.
In June 1995, the Company filed a shelf registration statement with the
Securities and Exchange Commission which provided for the issuance of up to $250
million of long-term debt. This shelf registration statement was replaced by a
new shelf registration statement filed in fiscal 1997 (see Note F). In June
1995, the Company issued $200 million of long-term notes under the registration
statement; $100 million of 6 5/8% Notes due June 15, 2000 and $100 million of 7%
Notes due June 15, 2005. The proceeds were used in part to repay short-term
borrowings and for general corporate purposes including the repayment of
scheduled maturities of other outstanding long-term debt and for new store and
other capital expenditures.
On November 17, 1995, the Company entered into an unsecured $875 million bank
credit agreement under which the Company borrowed $375 million on a term loan
basis to fund the cash portion of the Marshalls purchase price and may borrow up
to an additional $500 million on a revolving loan basis to fund the working
capital needs of the Company. Interest is payable on borrowings at rates equal
to or less than prime. The revolving loan facility expires on November 17, 1998.
The Company cancelled its former committed U.S. short-term credit lines,
effective November 17, 1995. The new agreement has certain financial covenants
which include a minimum net worth requirement, and certain leverage and fixed
charge covenants. During the fourth quarter of the fiscal year ended January 25,
1997, the Company prepaid the outstanding balance of the $375 million term loan
and recorded an after-tax extraordinary charge of $2.7 million, or $.03 per
common share, for the early retirement of this debt.
In connection with the $875 million bank credit agreement, the Company prepaid
its $45 million real estate mortgage on the Chadwick's fulfillment center and
incurred an extraordinary after-tax charge of $3.3 million in fiscal 1996, on
the early retirement of this debt.
Under a former shelf registration statement which provided for the issuance of
up to $75 million of Medium Term Notes, the Company issued an aggregate of $57.5
million Series A Notes during fiscal 1995 and fiscal 1994 under five separate
pricing supplements. The borrowings under this program were used to support the
Company's international and domestic new business development and capital
expenditures. The interest rate and maturity information of the outstanding
Series A notes are as follows:
12
<PAGE> 15
<TABLE>
<CAPTION>
Interest Maturity
Series A Notes: Issue Date Principal Rate Date
- ------------------------------------------------------------------------
In Thousands
<S> <C> <C> <C> <C>
Supplement No. 1 10/21/93 $15,000 5.87% 10/21/03
Supplement No. 4 09/19/94 15,500 6.97 09/19/97
Supplement No. 5 09/19/94 5,000 7.97 09/20/04
</TABLE>
The Company has the ability to borrow up to $500 million on a revolving loan
basis under its bank agreement. As of January 25, 1997, the entire $500 million
was available for use. Interest is payable on borrowings at rates equal to or
less than prime. Actual short-term borrowings during the fiscal year ended
January 25, 1997 were at rates below prime. The revolving loan capability is
used as backup to the Company's commercial paper program. The weighted average
interest rate on the Company's short-term borrowings was 5.81%, 6.25% and 4.98%
in fiscal 1997, 1996 and 1995, respectively. The Company does not have any
compensating balance requirements under these arrangements. The Company also has
C$20 million of committed lines for its Canadian operation, all of which were
available as of January 25, 1997.
C. FINANCIAL INSTRUMENTS
The Company periodically enters into forward foreign exchange contracts to hedge
firm U.S. dollar merchandise purchase commitments made by its Canadian
subsidiary. As of January 25, 1997, the Company had $12.1 million of such
contracts outstanding. The contracts cover commitments for the first quarter of
fiscal 1998 and any gain or loss on the contract will ultimately be reflected in
the cost of the merchandise. Deferred gains and losses on the contracts as of
January 25, 1997 were immaterial.
The Company also has entered into foreign currency swap agreements in both
Canadian dollars and British pounds sterling. The Canadian swap agreements will
require the Company to pay C$26.7 million in exchange for $20 million in U.S.
currency between October 2003 and September 2004. The British pounds sterling
swap agreements will require the Company to repay (pound)34.9 million between
September 1997 and January 2000 in exchange for $55.3 million in U.S. currency.
The swap agreements are accounted for as a hedge against the Company's
investment in foreign subsidiaries; thus foreign exchange gains and losses on
the agreements are recognized in shareholders' equity, offsetting translation
adjustments associated with the Company's investment in foreign operations. The
gains (losses) on the swap agreements as of January 25, 1997 are immaterial. The
swap agreements contain rights of offset which minimize the Company's exposure
to credit loss in the event of nonperformance by one of the counterparties. The
interest rate payable on the foreign currency is slightly higher than the
interest received on the currency exchanged, resulting in deferred interest
costs, which are being amortized to interest expense over the related terms of
the swap agreements. The unamortized balance of deferred interest costs as of
January 25, 1997 and January 27, 1996 amounted to $4.1 million and $3.4 million,
respectively.
The counterparties to the exchange contracts and swap agreements are major
international financial institutions. The Company periodically monitors
13
<PAGE> 16
its position and the credit ratings of the counterparties and does not
anticipate losses resulting from the nonperformance of these institutions.
Pursuant to SFAS No. 107 "Disclosures About Fair Value of Financial
Instruments," the Company has estimated the fair value of its long-term debt,
including current installments. The fair value of the Company's long-term debt
was estimated by using the quoted market price, if available, or by using
discounted cash flow analysis based upon the Company's current incremental
borrowing rates for similar types of borrowing arrangements. The fair value of
long-term debt, including current installments at January 25, 1997 is estimated
to be $269.8 million versus a carrying value of $271.7 million. These estimates
do not necessarily reflect certain provisions or restrictions in the various
debt agreements which might affect the Company's ability to settle these
obligations.
D. COMMITMENTS
The Company is committed under long-term leases related to its continuing
operations for the rental of real estate, and fixtures and equipment. T.J. Maxx
leases are generally for a 10 year initial term with options to extend for one
or more 5 year periods. Marshalls leases, acquired in fiscal 1996, have
remaining terms ranging up to 25 years. In addition, the Company is generally
required to pay insurance, real estate taxes and other operating expenses and in
some cases rentals based on a percentage of sales.
The following schedule of future minimum lease payments for continuing
operations as of January 25, 1997 includes the lease commitments for Marshalls
stores that the Company anticipates closing and for which reserves have been
established as discussed in Note I.
<TABLE>
<CAPTION>
Operating
Fiscal Years Leases
- -----------------------------------------------------------------------------
In Thousands
<S> <C>
1998 $ 276,384
1999 262,232
2000 239,213
2001 209,417
2002 178,453
Later years 809,706
----------
Total minimum lease payments $1,975,405
==========
</TABLE>
The rental expense under operating leases for continuing operations amounted to
$293.5 million, $162.5 million and $117.4 million for fiscal years 1997, 1996
and 1995, respectively. The present value of the Company's operating lease
obligations approximates $1,335.9 million as of January 25, 1997, including
$168.4 million payable in fiscal 1998.
The Company had outstanding letters of credit in the amount of $36.1 million as
of January 25, 1997. The letters of credit are issued for the purchase of
inventory.
14
<PAGE> 17
E. STOCK COMPENSATION PLANS
The Company has a Stock Incentive Plan under which options and other stock
awards may be granted to certain officers and key employees. The Stock Incentive
Plan provides for the issuance of up to 6 million shares with 1.1 million shares
available for future grants as of January 25, 1997. The Company also has a
Directors Stock Option Plan under which stock options are granted to directors
who are not otherwise employed by the Company. This plan provides for the
issuance of up to 50,000 shares with 34,000 shares available for future grants
as of January 25, 1997.
Under its stock option plans, the Company has granted options for the purchase
of common stock, generally within ten years from the grant date at option prices
of 100% of market price on the grant date. Most options outstanding are
exercisable at various percentages starting one year after the grant, while
certain options are exercisable in their entirety three years after the grant
date. Options granted to directors become fully exercisable one year after the
date of grant.
A summary of the status of the Company's stock options and related Weighted
Average Exercise Prices ("WAEP") for fiscal years ended January 1997, 1996 and
1995 is presented below (shares in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended January 1997 1996 1995
- ------------------------- ------------------ ------------------- -------------------
Shares WAEP Shares WAEP Shares WAEP
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning
of year 2,812 $ 18.35 2,694 $ 19.94 2,183 $ 19.10
Granted 713 34.88 596 12.88 632 22.54
Exercised (1,362) 17.77 (82) 14.08 (51) 14.69
Canceled (115) 19.81 (396) 21.26 (70) 20.89
------ ----- -----
Outstanding end of year 2,048 24.40 2,812 18.35 2,694 19.94
====== ===== =====
Options exercisable
end of year 853 1,748 1,490
====== ===== =====
</TABLE>
The Company realizes an income tax benefit from the exercise or early
disposition of certain stock options. This benefit results in a decrease in
current income taxes payable and an increase in additional paid-in capital. Such
benefits amounted to $10.2 million for the fiscal year ended January 25, 1997.
Amounts for prior years were immaterial.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123 (SFAS No. 123) "Accounting for Stock-Based
Compensation," and continues to apply the provisions of APB Opinion No. 25
"Accounting for Stock Issued to Employees" in accounting for compensation
expense under its stock option plans. Accordingly no compensation expense has
been recognized for the stock options issued during fiscal years 1997 and 1996.
Had compensation expense been determined in accordance with SFAS No. 123, the
Company's income from continuing operations, net income and related earnings per
common share amounts for the fiscal year ended January 25, 1997, would have been
reduced to the unaudited pro forma amounts indicated below:
15
<PAGE> 18
<TABLE>
<CAPTION>
Unaudited
Dollars In Thousands Except Per Share Amounts As Reported Pro Forma
- --------------------------------------------------------------------------------
<S> <C> <C>
Income from continuing operations $213,826 $211,893
Primary and fully diluted earnings
per common share $2.36 $2.34
Net income $363,123 $361,190
Primary and fully diluted earnings
per common share $4.01 $3.99
</TABLE>
The pro forma impact of SFAS No. 123 for the fiscal year ended January 27, 1996
was immaterial.
For purposes of applying the provisions of SFAS No. 123 for the pro forma
calculations, the fair value of each option grant issued during fiscal 1997 and
1996 is estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions: dividend yield 1%; expected volatility of
38%; a risk free interest rate of 6.67% and expected holding periods of 6 years.
The weighted average fair value of options granted during fiscal 1997 and 1996
was $15.51 and $5.58, respectively.
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1995, and additional awards in future years are anticipated.
The following table summarizes information about stock options outstanding as of
January 25, 1997 (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------- ------------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Remaining Exercise Exercise
Prices Shares Contract Life Price Shares Price
- -------- ------ ------------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
$10.250 - $15.375 489 8.1 Years $12.71 136 $12.28
$15.376 - $24.375 615 6.4 Years 21.44 470 21.11
$24.376 - $34.875 944 8.6 Years 32.39 247 25.40
--------- ---------
Total 2,048 7.8 Years 24.40 853 20.94
========= =========
</TABLE>
The Company has also issued restricted stock and performance based stock awards
under the Stock Incentive Plan. Restricted stock awards are issued at par value,
or at no cost, and have restrictions which generally lapse over three to five
years from date of grant, with the exception of performance accelerated shares,
which have, restrictions that generally lapse equally over four to eight years,
with a provision for accelerated vesting depending upon the Company's earnings,
or other specified criteria. There have been 17,500, 10,000 and 150,000 shares
of other stock awards issued for the fiscal years ended January 1997, 1996 and
1995, respectively, and 3,500 and 2,267 shares forfeited for the fiscal years
ended January 1996 and January 1995, respectively. The weighted average market
value of these stock awards at grant date was $24.00, $12.88 and $26.50 for
fiscal 1997, 1996 and 1995, respectively.
16
<PAGE> 19
The market value in excess of cost is charged to income ratably over the period
during which these awards vest. Such pre-tax charges amounted to $2.5 million in
fiscal 1997, $0.4 million in fiscal 1996 and $0.6 million in fiscal 1995.
F. CAPITAL STOCK
On August 16, 1994, the Company authorized the repurchase of up to $100 million
of TJX common stock. During fiscal 1995, the Company repurchased 1.1 million of
its common shares, totalling $19.3 million, representing approximately 1.5% of
the Company's outstanding common shares. In connection with the Marshalls
acquisition, the Company terminated the share repurchase program.
In April 1992, the Company issued 250,000 shares of Series A cumulative
convertible preferred stock in a private offering. As of June 1996, pursuant to
a call for redemption, the Series A preferred stock was converted into 1,190,475
shares of common stock.
In August 1992, the Company issued 1,650,000 shares of Series C cumulative
convertible preferred stock in a public offering. As of September 1996, pursuant
to a call for redemption, the Series C preferred stock was converted into
3,177,844 shares of common stock.
On November 17, 1995, the Company issued its Series D and Series E convertible
preferred stock as part of the purchase price for Marshalls. The 250,000 shares
of Series D preferred stock, with a face value of $25 million, carried an annual
dividend rate of $1.81 per share and was automatically converted into 1,349,527
shares of common stock on November 17, 1996. The 1,500,000 shares of Series E
preferred stock, with a face value of $150 million, carries an annual dividend
rate of $7.00 per share, and is mandatorily converted into common shares on
November 17, 1998 unless converted earlier. The common shares issuable on
conversion will vary depending on the market price of common stock at the time
of conversion and ranges from a minimum of 8.1 million shares to a maximum of
9.7 million shares of common stock. Based on the Company's market price of its
common stock as of January 25, 1997, the minimum number of shares would be
issued. The Series E preferred stock has an aggregate liquidation preference of
$150 million. There is an aggregate of 9,716,599 common shares reserved for the
conversion of Series E preferred stock, the maximum number of shares that may be
issued. The Series E preferred stock is senior to all other capital stock of the
Company with respect to payment of dividends and upon liquidation. There are no
voting rights for preferred stock unless dividends are in arrears for a
specified number of periods.
Dividends on all of the preferred stock issued are paid quarterly on the first
business day of each calendar quarter and accrue from date of issuance through
conversion date. The Company accrues the dividends evenly throughout the year.
The Company recorded aggregate dividends on its preferred stock of $13.7 million
in fiscal 1997 and $9.4 million in fiscal 1996 and $7.2 million in fiscal 1995.
The preferred dividends reduce net income in computing net income available to
common shareholders.
During fiscal 1997, the Company replaced the June 1995 shelf registration
statement with another shelf registration statement which currently
17
<PAGE> 20
provides for the issuance of up to $600 million of debt, common stock or
preferred stock.
G. INCOME TAXES
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
Fiscal Year Ended January 1997 1996 1995
- --------------------------------------------------------------------------------
In Thousands
<S> <C> <C> <C>
Current:
Federal $ 116,848 $ 52,306 $ 51,347
State 27,160 12,604 8,261
Foreign 8,079 2,843 1,425
Deferred:
Federal 33 (25,593) (1,873)
State 462 (5,361) 61
Foreign (268) 408 1,537
--------- --------- ---------
Provision for income taxes $ 152,314 $ 37,207 $ 60,758
========= ========= =========
</TABLE>
The Company had a net deferred tax liability as follows:
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
- --------------------------------------------------------------------------------
In Thousands
<S> <C> <C>
Deferred tax assets:
Capital loss carryforward $ 4,500 $ 48,629
Foreign net operating loss carryforward 34,500 34,011
Reserves for discontinued operations 9,397 10,652
Reserve for closed stores and restructuring
costs 38,421 95,020
Insurance costs not currently deductible
for tax purposes 24,342 18,743
Pension, postretirement and employee benefits 23,267 17,535
Leases 6,478 3,827
Other 17,981 14,344
Valuation allowance (39,084) (82,727)
--------- ---------
Total deferred tax assets 119,802 160,034
--------- ---------
Deferred tax liabilities:
Property, plant and equipment 20,096 47,229
Safe harbor leases 44,603 48,818
Tradename 52,302 59,179
Other 10,121 17,472
--------- ---------
Total deferred tax liabilities 127,122 172,698
--------- ---------
Net deferred tax liability $ 7,320 $ 12,664
========= =========
</TABLE>
As a result of Chadwick's discontinued operations and sale of assets during
fiscal 1997, the net deferred tax liability decreased by $5.6 million.
18
<PAGE> 21
The capital loss carryforward tax asset, which expires in fiscal 1998, relates
to the surrendering of the Ames preferred stock upon consummation of the Ames
reorganization plan. During fiscal 1997, $125.8 million of the capital loss
carryforward was utilized to offset the capital gain recognized in the sale of
Chadwick's. Utilization of the remaining pre-tax capital loss of $13.0 million
is only available to the extent of future capital gains and thus this deferred
tax asset is fully reserved for in the valuation allowance. The change in the
valuation allowance during the year is primarily the result of the utilization
of the capital loss carryforward.
The Company does not provide for U.S. deferred income taxes on the undistributed
earnings of its foreign subsidiaries, as the earnings are considered to be
permanently reinvested. The undistributed earnings of its foreign subsidiaries
as of January 25, 1997 were immaterial.
The Company has a United Kingdom net operating loss carryforward of
approximately $36 million for tax and financial reporting purposes. The United
Kingdom operating loss does not expire under current United Kingdom tax law. The
Company also has a Puerto Rico net operating loss carryforward of approximately
$58 million for tax and financial reporting purposes which was acquired in the
Marshalls acquisition and expires in fiscal 1998 through fiscal 2003. Future
utilization of these operating loss carryforwards is dependent upon future
earnings of the Company's foreign subsidiaries. Future recognition of the net
operating loss in Puerto Rico will result in an adjustment to the allocation of
the purchase price for Marshalls.
The Company's worldwide effective tax rate was 42% for the fiscal years ended
January 25, 1997, January 27, 1996 and January 28, 1995. The difference between
the U.S. federal statutory income tax rate and the Company's worldwide effective
income tax rate is summarized as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended January 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory income tax rate 35% 35% 35%
Effective state income tax rate 5 5 5
Impact of foreign operations 1 3 3
All other 1 (1) (1)
---- ---- ----
Worldwide effective income tax rate 42% 42% 42%
==== ==== ====
</TABLE>
H. PENSION PLANS AND OTHER RETIREMENT BENEFITS
The Company has a non-contributory defined benefit retirement plan covering the
majority of full-time employees, excluding Marshalls' associates through the end
of fiscal 1997. Effective fiscal 1998, Marshalls' associates will be included in
the plan. Employees who have attained twenty-one years of age and have completed
one year of service are covered under the plan. Benefits are based on
compensation earned in each year of service. The Company also has an unfunded
supplemental retirement plan which covers certain key employees of the Company
and provides additional retirement benefits based on average compensation.
19
<PAGE> 22
Net periodic pension cost for all operations of the Company's plans includes the
following components:
<TABLE>
<CAPTION>
Fiscal Year Ended January 1997 1996 1995
- --------------------------------------------------------------------------------
In Thousands
<S> <C> <C> <C>
Service cost $ 4,699 $ 3,920 $ 4,554
Interest cost on projected benefit
obligation 7,266 6,915 6,526
Actual return on assets (16,981) (15,215) 4,545
Net amortization and deferrals 10,879 9,384 (11,600)
-------- -------- --------
Net periodic pension cost $ 5,863 $ 5,004 $ 4,025
======== ======== ========
</TABLE>
Net pension cost includes $0.4 million, $0.5 million and $0.5 million allocated
to discontinued operations in fiscal years 1997, 1996 and 1995, respectively.
The following table sets forth the funded status of the Company's pension plans
(including discontinued operations) and the amounts recognized in the Company's
statements of financial position:
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
- --------------------------------------------------------------------------------
In Thousands
<S> <C> <C>
Accumulated benefit obligation, including
vested benefits of $89,533 and $81,296 $ 93,383 $ 91,606
--------- ---------
Projected benefit obligation $ 100,465 $ 97,891
Plan assets at fair market value 89,704 71,792
--------- ---------
Projected benefit obligation in excess of
plan assets 10,761 26,099
Unrecognized net gain (loss) from past experience
different from that assumed and
effects of changes in assumptions 5,929 (7,563)
Prior service cost not yet recognized in net
periodic pension cost (950) (1,035)
Unrecognized net asset (obligation) as of
initial date of application of SFAS No. 87 (670) (745)
--------- ---------
Accrued pension cost included in accrued expenses $ 15,070 $ 16,756
========= =========
</TABLE>
The projected benefit obligation in excess of plan assets as of January 25,
1997, is primarily the Company's unfunded supplemental retirement plan.
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.50% and 7.00% for fiscal years
1997 and 1996, respectively. The rate of increase on future compensation levels
was 4.0% in each of the fiscal years 1997 and 1996, respectively, and the
expected long-term rate of return on assets was 9.0% in each of the fiscal years
1997 and 1996, respectively. The Company's funding policy is to contribute
annually an amount allowable for federal
20
<PAGE> 23
income tax purposes. Pension plan assets consist primarily of fixed income and
equity securities.
The Company's postretirement benefit plan is unfunded and provides limited
postretirement medical and life insurance benefits to associates who participate
in the Company's retirement plan and who retire at age 55 or older with 10 years
or more of service.
Net periodic postretirement benefit cost of the Company's plan includes the
following components:
<TABLE>
<CAPTION>
Fiscal Year Ended January 1997 1996 1995
- --------------------------------------------------------------------------------
In Thousands
<S> <C> <C> <C>
Service cost $ 671 $ 757 $ 952
Interest cost on accumulated
benefit obligation 1,081 1,046 963
Net amortization 55 -- 88
------ ------ ------
Net periodic postretirement
benefit cost $1,807 $1,803 $2,003
====== ====== ======
</TABLE>
Net periodic postretirement benefit costs include $0.1 million in fiscal year
1997, $0.3 million in fiscal year 1996 and $0.2 million in fiscal year 1995
allocated to discontinued operations.
The components of the accumulated postretirement benefit obligation (including
discontinued operations) and the amount recognized in the Company's statements
of financial position are as follows:
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
- --------------------------------------------------------------------------------
In Thousands
<S> <C> <C>
Accumulated postretirement obligation:
Retired associates $ 7,147 $ 6,731
Fully eligible active associates 4,653 5,140
Other active associates 3,501 3,867
-------- --------
Accumulated postretirement obligation 15,301 15,738
Unrecognized net gain (loss) due to change
in assumptions (1,375) (2,676)
-------- --------
Accrued postretirement benefits included in
accrued expenses $ 13,926 $ 13,062
======== ========
</TABLE>
Assumptions used in determining the actuarial present value of the accumulated
postretirement obligation include a discount rate of 7.50% and 7.00% in fiscal
years 1997 and 1996, respectively. Due to the nature of the plan, which limits
the annual benefit to $3,000, the medical inflation assumption, initially set at
5%, is gradually reduced to zero. A 1% increase in the medical inflation
assumption would increase the postretirement benefit obligation as of January
25, 1997 by approximately $0.5 million. Effective fiscal 1998, Marshalls'
associates are eligible for the Company's postretirement medical plan.
21
<PAGE> 24
The Company also sponsors an employee savings plan under Section 401(k) of the
Internal Revenue Code for all eligible employees, including Marshalls'
associates effective January 1, 1997. Employees may contribute up to 15% of
eligible pay. The Company matches employee contributions up to 5% of eligible
pay at rates ranging from 25% to 50% based upon Company performance. The Company
contributed for all 401(k) plans $6.4 million in fiscal 1997, $2.2 million in
fiscal 1996 and $2.0 million in fiscal 1995. Prior to January 1, 1997,
Marshalls' associates participated in a separate Section 401(k) savings plan.
I. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
The major components of accrued expenses and other current liabilities are as
follows:
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
- --------------------------------------------------------------------------------
In Thousands
<S> <C> <C>
Employee compensation and benefits $ 85,473 $ 55,348
Reserves for discontinued operations 23,650 25,253
Store closing and restructuring reserves,
continuing operations 95,867 251,566
Insurance 67,403 54,523
Rent, utilities, advertising and other 348,818 304,406
-------- --------
Accrued expenses and other current liabilities $621,211 $691,096
======== ========
</TABLE>
The reserves for discontinued operations relate primarily to lease obligations
associated with the Company's former Zayre, Hit or Miss and Chadwick's
divisions. The reduction in the reserve balance is primarily due to payments of
lease obligations, net of sublease income, as well as settlement costs on
certain leases, offset by an increase for costs associated with the sale of
Chadwick's.
The reserve for store closings and restructurings is primarily for costs
associated with the disposition and settlement of leases for the T.J. Maxx and
Marshalls closings anticipated as a result of the Marshalls acquisition. The
reserve balance during fiscal 1997 was reduced by adjustments to the initial
reserve established, as well as for expenditures and charges against the
reserve, offset by a $3.1 million increase for costs relating to certain
restructuring costs of HomeGoods. The adjustments to the initial reserve include
a reduction of $8 million due to lower than anticipated costs to close the T.J.
Maxx stores reserved for in fiscal 1996. This reduction to the reserve was
recorded as a reduction to selling, general and administrative expenses. The
other adjustment to the reserve relates to the final allocation of the purchase
price in the acquisition of Marshalls and is a reduction of $86 million due to
fewer planned Marshalls store closings, as well as the lower estimated cost of
those closings. See Note A for the impact of this change in the final allocation
of the purchase price for Marshalls. Expenditures and charges against the
reserve totalled $64.9 million in fiscal 1997 which included $21.3 million for
lease disposal and settlement costs with the remainder primarily for inventory
markdowns, severance and the net book value of property write-offs. Virtually
all the T.J. Maxx store closings took place
22
<PAGE> 25
during fiscal 1997 while approximately 50 Marshalls store closings included in
the reserve will occur in fiscal 1998.
J. SUPPLEMENTAL CASH FLOW INFORMATION
The Company's cash payments for interest expense and income taxes, including
discontinued operations, and its non-cash investing and financing activities are
as follows:
<TABLE>
<CAPTION>
January 25, January 27, January 28,
Fiscal Year Ended 1997 1996 1995
- ------------------------------------------------------------------------------------------
In Thousands
<S> <C> <C> <C>
Cash paid for:
Interest expense $ 44,288 $ 41,924 $ 25,051
Income taxes 159,245 17,275 68,940
Non-cash investing and financing activities:
Conversion of cumulative
convertible preferred
stock into common stock
Series A 25,000 -- --
Series C 82,500 -- --
Series D 25,000 -- --
Note receivable from sale of
Chadwick's of Boston 20,000 -- --
Issuance of preferred stock
for acquisition of Marshalls -- 175,000 --
Note receivable from sale of
Hit or Miss -- 10,000 --
</TABLE>
K. DISCONTINUED OPERATIONS AND RELATED CONTINGENT LIABILITIES
In October 1988, the Company completed the sale of its former Zayre Stores
division to Ames Department Stores, Inc. ("Ames"). In April 1990, Ames filed for
protection under Chapter 11 of the Federal Bankruptcy Code and in December 1992,
Ames emerged from bankruptcy under a plan of reorganization. The Company is
liable for certain amounts to be distributed under the plan for certain
unassigned landlord claims under certain former Zayre store leases on which
Zayre Corp. was liable as of the date of acquisition and which Ames has
rejected.
The Company remains contingently liable for the leases of most of the former
Zayre stores still operated by Ames. In addition, the Company is contingently
liable on a number of leases of the Hit or Miss division, the Company's former
off-price women's specialty stores, sold on September 30, 1995. The Company
believes that in view of the nature of the leases and the fact that Ames and Hit
or Miss are primarily liable, the Company's contingent liability on these leases
will not have a material effect on the Company's financial condition.
Accordingly, the Company believes its available reserves should be adequate to
cover all reasonably expected liabilities associated with these discontinued
operations that it may incur.
23
<PAGE> 26
The Company is also contingently liable on certain leases of Waban Inc., which
was spun off by the Company in fiscal 1990. Since Waban is primarily liable and
has indemnified the Company for any amounts the Company may have to pay with
respect to such leases, the Company believes that its contingent liability on
these leases will not have a material effect on the Company's financial
condition. Waban announced in April 1997 that it would renew its efforts to
consummate a spinoff of its BJ's Wholesale Club division. In the event of such
spinoff, Waban will continue to be primarily liable on such leases. In addition,
Waban, BJ's Wholesale Club, Inc., (the new corporation that would acquire the
assets of Waban's BJ's Wholesale Club division) and the Company have entered
into agreements under which BJ's Wholesale Club, Inc., will have substantial
indemnification responsibility with respect to such leases upon consummation of
the spinoff. Accordingly, the Company believes that its contingent liability on
these leases upon such spinoff will not have a material effect on the Company's
financial condition.
L. SEGMENT INFORMATION
For data on business segments for fiscal 1997, 1996 and 1995, see page 20.
24
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of The TJX Companies, Inc.:
We have audited the accompanying consolidated balance sheets of The TJX
Companies, Inc. and subsidiaries as of January 25, 1997 and January 27, 1996 and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the three fiscal years in the period ended January 25, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The TJX Companies,
Inc. and subsidiaries as of January 25, 1997 and January 27, 1996 and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended January 25, 1997 in conformity with
generally accepted accounting principles.
Coopers & Lybrand, L.L.P.
Boston, Massachusetts
February 25, 1997
<PAGE> 28
REPORT OF MANAGEMENT
The financial statements and related financial information in this annual report
have been prepared by management which is responsible for their integrity,
objectivity and consistency. The financial statements were prepared in
accordance with generally accepted accounting principles and necessarily include
amounts which are based upon judgments and estimates made by management.
The Company maintains a system of internal controls designed to
provide, at appropriate cost, reasonable assurance that assets are safeguarded,
transactions are executed in accordance with management's authorization and the
accounting records may be relied upon for the preparation of financial
statements. The system of controls includes the careful selection and training
of associates, and the communication and application of formal policies and
procedures that are consistent with high standards of accounting and
administrative practices. The accounting and control systems are continually
reviewed, evaluated and where appropriate, modified to accommodate changing
business conditions and the recommendations of the Company's internal auditors
and the independent public accountants.
An Audit Committee, comprised of members of the Board of Directors who
are neither officers nor employees of the Company, meets periodically with
management, internal auditors and the independent public accountants to review
matters relating to the Company's financial reporting, the adequacy of internal
accounting controls and the scope and results of audit work. The Committee is
responsible for reporting the results of its activities and for recommending the
selection of independent auditors to the full Board of Directors. The internal
auditors and the independent public accountants have free access to the
Committee and the Board of Directors.
The financial statements have been examined by Coopers & Lybrand
L.L.P., whose report appears separately. Their report expresses an opinion as to
the fair presentation of the consolidated financial statements and is based on
an independent examination performed in accordance with generally accepted
auditing standards.
Bernard Cammarata Donald G. Campbell
President and Chief Executive Officer Senior Vice President - Finance and
Chief Financial Officer
February 25, 1997
<PAGE> 29
SELECTED FINANCIAL DATA (CONTINUING OPERATIONS)
The following selected financial data includes the results of Marshalls for the
periods following its acquisition on November 17, 1995. All prior year data has
been restated to reflect Chadwick's and Hit or Miss as discontinued operations.
<TABLE>
<CAPTION>
Fiscal Year Ended January 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dollars in Thousands Except Per Share Amounts
Income statement and
per common share data:
Net sales $ 6,689,410 $ 3,975,115 $ 3,055,573 $ 2,832,070 $ 2,588,603
Income from
continuing
operations
before extra-
ordinary item and
cumulative effect of
accounting changes 213,826 51,589(1) 84,480 111,266 97,880
Number of common
shares for
primary and fully
diluted earnings
per common share
computations 90,625,009 73,133,349 73,467,003 74,192,358 73,873,276
Earnings per common
share from continuing
operations $ 2.36 $.58 (1) $ 1.05 $ 1.40 $ 1.31
Dividends per common
share .28 .49 .56 .50 .46
Balance sheet data:
Working capital $ 425,595 $ 332,864 $ 240,646 $ 237,358 $ 227,223
Total assets 2,506,761 2,545,825 1,373,964 1,171,412 1,084,944
Capital expenditures 119,153 105,864 109,436 102,279 83,348
Long-term debt 244,410 690,713 194,478 205,408 174,306
Shareholders' equity 1,127,186 764,634 606,952 590,900 505,184
Stores in operation at
year-end:
T.J. Maxx 578 587 551 512 479
Marshalls 454 496 -- -- --
Winners 65 52 37 27 15
HomeGoods 21 22 15 10 6
T.K. Maxx 18 9 5 -- --
</TABLE>
(1) Includes an after-tax charge of $21.0 million, or $.29 per share, for the
estimated cost of closing approximately 30 T.J. Maxx stores in connection with
the acquisition of Marshalls.
<PAGE> 30
PRICE RANGE OF COMMON STOCK
The common stock of the Company is listed on the New York Stock Exchange
(Symbol:TJX). The quarterly high and low stock prices for fiscal 1997 and fiscal
1996 are as follows:
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1996
Quarter High Low High Low
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $30 3/4 $18 1/2 $ 14 $11 1/8
Second 36 5/8 26 3/8 15 1/2 11 3/8
Third 43 3/8 29 1/4 15 3/4 11 1/2
Fourth 48 1/4 38 5/8 19 7/8 13 1/2
</TABLE>
The approximate number of common shareholders at January 25, 1997 was 38,400.
The Company declared four quarterly dividends of $.07 per share for fiscal 1997.
The Company declared quarterly dividends of $.14 per share for the first three
quarters of fiscal 1996 and a quarterly dividend of $.07 per share for the
fourth quarter of fiscal 1996.
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE TJX COMPANIES, INC.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Effective December 7, 1996, the Company sold its Chadwick's of Boston mail order
operation. This transaction was accounted for in the Company's fourth quarter
reporting period ending January 25, 1997. The operating results for Chadwick's
for all periods prior to the sale have been presented as discontinued operations
for comparative purposes. Discontinued operations for the fiscal year ended
January 27, 1996 and prior periods also include the results of the Hit or Miss
division, which was sold by the Company effective September 30, 1995.
On November 17, 1995, the Company acquired the Marshalls off-price family
apparel chain from Melville Corporation. Under the purchase method of
accounting, the assets and liabilities and results of operations associated with
the acquired business have been included in the Company's financial position and
results of operations since the date acquired. Accordingly, the financial
position as of dates subsequent to the acquisition and the results of operations
for periods ending after November 17, 1995, are not directly comparable to the
financial position and the results of the operations of the Company prior to the
acquisition date. The following discussion should be read in conjunction with
the consolidated financial statements and notes thereto contained elsewhere in
this report.
RESULTS OF OPERATIONS
CONTINUING OPERATIONS: Income from continuing operations before extraordinary
item ("income from continuing operations") was $213.8 million in fiscal 1997
versus $51.6 million and $84.5 million in fiscal 1996 and 1995, respectively.
Income from continuing operations per common share, on a fully diluted basis,
was $2.36 in fiscal 1997, versus $.58 in fiscal 1996 and $1.05 in fiscal 1995.
The results for fiscal 1996 include a $35 million pre-tax ($21.0 million
after-tax) charge for closing certain T.J. Maxx stores in connection with the
acquisition of Marshalls. Excluding the $35 million pre-tax charge, income from
continuing operations for fiscal 1996 would have been $72.6 million, or $.87 per
share.
Net sales for fiscal 1997 increased 68.3% to $6.69 billion from $3.98 billion in
1996. Net sales for fiscal 1996 increased 30.1% to $3.98 billion from $3.06
billion in fiscal 1995. These consolidated sales results include Marshalls for
the post-acquisition period. Same store sales, on a consolidated basis,
increased 7% in fiscal 1997 while decreasing 2% in fiscal 1996.
On a divisional basis, same store sales at T.J. Maxx increased 5% in fiscal 1997
while decreasing 2% in fiscal 1996. Same store sales for Marshalls increased 10%
in fiscal 1997 while decreasing 1% in fiscal 1996 from the date of acquisition.
Winners achieved same store sales increases of 13% in fiscal 1997 and 7% in
fiscal 1996. The fiscal 1996 results reflect the continuation of weak apparel
sales in the U.S. as well as the
<PAGE> 32
highly promotional retail environment. Sales results for fiscal 1997 primarily
reflect the many benefits associated with the Marshalls acquisition, along with
some improvement in apparel sales industrywide. At Marshalls, the Company
replaced frequent promotional activity with an everyday low price strategy and
also implemented a more timely markdown policy. These changes conformed the
Marshalls operation to that of the T.J. Maxx stores and were significant factors
in the Marshalls same store sales performance for fiscal 1997. In addition, the
enhanced buying power of the combined entities allowed the Company to offer
lower prices to the consumers at both chains.
Cost of sales, including buying and occupancy costs, as a percentage of net
sales, was 77.7%, 79.1% and 77.6% in fiscal 1997, 1996 and 1995, respectively.
The increase in this percentage in fiscal 1996 reflects higher than planned
markdowns taken as a result of the weak apparel environment and the highly
promotional retail environment. The improvement in this ratio in fiscal 1997 is
largely due to strong inventory management, resulting in lower markdowns despite
a more aggressive markdown policy, and the benefits associated with the
acquisition of Marshalls. The fiscal 1997 ratio also reflects the full impact of
Marshalls cost of sales which is typically higher than that of T.J. Maxx.
Selling, general and administrative expenses as a percentage of net sales were
16.3% in fiscal 1997, 16.9% in fiscal 1996 and 16.9% in fiscal 1995. The
improvement in this ratio in fiscal 1997 reflects the stronger sales performance
as well as expense savings provided by the consolidation of the Marshalls and
T.J. Maxx operations.
The Company recorded a pre-tax charge of $35 million in fiscal 1996 for the
closing of approximately 30 T.J. Maxx stores in connection with the acquisition
of Marshalls, which consists primarily of estimated costs associated with
subletting stores or otherwise disposing of store leases. During fiscal 1997,
the reserve requirement was reduced by $8 million as the actual cost of closing
stores was less than anticipated. This savings, however, was more than offset by
a $12.2 million impairment charge on certain T.J. Maxx distribution center
assets relating to a restructuring and realignment plan of the T.J. Maxx and
Marshalls distribution facilities. The net impact of these items is reflected in
selling, general and administrative expenses.
Interest expense was $37.4 million, $38.2 million and $22.2 million in fiscal
1997, 1996 and 1995, respectively. The Company's strong cash position throughout
fiscal 1997, as well as funds obtained from the sale of Chadwick's, allowed the
Company to prepay approximately $450 million of long-term debt. In addition to
$46.5 million of scheduled debt maturities, the Company retired the entire loan
incurred to acquire Marshalls. These factors led to a fourth quarter interest
expense, net of interest income, in fiscal 1997 of only $1.7 million versus
$13.8 million in the prior year's fourth quarter. The increase in interest
expense for fiscal 1996 was primarily due to additional borrowings, including
the $375 million term loan incurred in the fourth quarter to acquire Marshalls
and the $200 million of notes issued in June 1995 under the Company's shelf
registration statement.
<PAGE> 33
The Company's effective income tax rate was 42% in each of the fiscal years
ending in 1997, 1996 and 1995. The difference in the U.S. federal statutory tax
rate and the Company's worldwide effective income tax rate in each fiscal year
is primarily attributable to the effective state income tax rate and the impact
of foreign operations.
DISCONTINUED OPERATIONS AND NET INCOME: Net income for fiscal 1997 includes a
gain on the sale of the Chadwick's discontinued operation, net of income taxes,
of $125.6 million. Net income for fiscal 1996 includes a loss on the disposal of
the Hit or Miss discontinued operation, net of income taxes, of $31.7 million.
The results of both of these divisions prior to their respective sale
measurement dates have been reclassified as net income (loss) from discontinued
operations, net of income taxes, which amounted to income of $29.4 million in
fiscal 1997 and $9.7 million in fiscal 1996 and a loss of $1.9 million in fiscal
1995. In addition, in fiscal 1997 and 1996, the Company retired certain
long-term debt prior to scheduled maturities resulting in extraordinary losses,
net of income taxes, of $5.6 million in fiscal 1997 and $3.3 million in fiscal
1996.
Net income, after reflecting the above items, was $363.1 million, or $4.01 per
common share, in fiscal 1997, $26.3 million, or $.23 per common share, in fiscal
1996, and $82.6 million, or $1.03 per common share, in fiscal 1995.
CAPITAL SOURCES AND LIQUIDITY
Net cash provided by operating activities was $664.5 million, $254.6 million and
$83.8 million in fiscal 1997, 1996 and 1995, respectively. The increase in cash
provided by operating activities in fiscal 1997 versus that of fiscal 1996
reflects the increased earnings attributable to the Marshalls acquisition. The
strong sales volume, coupled with tight inventory control, resulted in faster
inventory turns, all of which were favorable to cash flows for fiscal 1997. The
improved cash flow in fiscal 1996 versus that of fiscal 1995 is primarily
attributable to the Marshalls acquisition. Although Marshalls was included only
in the fourth quarter of fiscal 1996, the timing of the Marshalls acquisition
allowed the Company to benefit from the favorable cash flow generated by the
holiday selling season. The cash flows from operating activities for fiscal 1997
have been reduced by expenditures associated with the Company's discontinued
operations and store closing and restructuring reserves. The reserve balances as
of January 25, 1997 are primarily for lease obligations. Cash flows from
operating activities over the next several years will be impacted by settlements
and disposition of these leases. The Company is also contingently liable on
certain leases of its discontinued operations. See Note I and K to the
consolidated financial statements for further information.
(A bar graph is included to the left of the above paragraph entitled "Net Cash
Provided by Operating Activities." The bar graph compares net cash provided by
operating activities with property additions for the fiscal years ended January
1993 through January 1997. The dollar values are presented in millions with a
scale on the left side of the graph. The
<PAGE> 34
fiscal years are presented along the bottom of the graph. The data plotted on
the graph is presented in the table below:)
<TABLE>
<CAPTION>
Fiscal Year Cash From Property
Ended January Operating Activities Additions
- ------------- -------------------- ---------
($'s in Millions)
<S> <C> <C>
1993 $114.3 $ 83.3
1994 87.8 102.3
1995 83.8 109.4
1996 254.6 105.9
1997 664.5 119.2
</TABLE>
Inventories as a percentage of net sales were 15.8% in fiscal 1997, 31.6% in
fiscal 1996 and 25.7% in fiscal 1995. The fiscal 1996 percentage is not
comparable since Marshalls' net sales are included only from November 18, 1995.
Using unaudited pro forma net sales for fiscal 1996 (see Note A to the
consolidated financial statements), which assumes Marshalls was acquired at the
beginning of the fiscal year, inventories as a percentage of net sales in fiscal
1996 would be 20.7%. The improvement in the unaudited pro forma percentage for
fiscal 1996 versus fiscal 1995 reflects a higher warehouse inventory related to
opportunistic merchandise purchases and a large percentage of spring merchandise
on hand at the end of fiscal 1995. Further improvement in this ratio for fiscal
1997 reflects the strong sales performance and inventory turns experienced in
fiscal 1997. Working capital was $425.6 million in fiscal 1997, $332.9 million
in fiscal 1996 and $240.6 million in fiscal 1995. The increase in both years
reflects the acquisition of Marshalls and, additionally in fiscal year 1997,
reflects the benefits of strong operating cash flows.
The Company's cash flows for investing activities include capital expenditures
for the last two years as set forth in the table below:
<TABLE>
<CAPTION>
Fiscal Year Ended January 1997 1996
- --------------------------------------------------------------------------------
In Millions
<S> <C> <C>
New stores $ 36.7 $ 44.6
Store renovations and improvements 56.1 36.5
Office and distribution centers 26.4 24.8
------ ------
Capital expenditures $119.2 $105.9
====== ======
</TABLE>
The Company expects that capital expenditures will approximate $200 million for
fiscal 1998. This includes capital expenditures for the T.J. Maxx and Marshalls
operations of $24 million for new stores and $93 million for improvements for
existing stores. In addition, approximately $25 million is estimated for the
expansion of Winners and T.K. Maxx operations and $55 million for all of the
Company's office and distribution center facilities.
Investing activities for fiscal 1997 and 1996 include payments of $49.3 million
and $378.7 million, respectively, relating to the acquisition of Marshalls. In
addition to the cash outlay for the acquisition of Marshalls, the Company issued
$175 million of convertible junior preferred stock in fiscal 1996. See Note F to
the consolidated financial statements
<PAGE> 35
for further information on the preferred stock issued. The total purchase price
for Marshalls, including acquisition costs, was $606 million. The allocation of
purchase price was revised during fiscal 1997 with the most significant change
being a reduction of $86 million to the reserve for store closings. See Note A
to the consolidated financial statements for further information on the
acquisition of Marshalls.
Fiscal 1997 investing activities include the proceeds from the sale of the
Chadwick's division, which totaled $222.8 million. The purchase price is subject
to final adjustment based on the net assets of Chadwick's as of the sale date;
this adjustment is estimated to be a reduction in the purchase price of
approximately $30 million which will be settled by the Company in fiscal 1998.
As part of the sale of Chadwick's, the Company retained the consumer credit card
receivables of the division as of the closing date which totalled approximately
$125 million, with $54.5 million still outstanding as of January 25, 1997. The
proceeds from these receivables are reflected as cash provided by discontinued
operations when received. The Company also received a $20 million convertible
note due in ten years with annual interest currently at 6%. Investing activities
for fiscal 1996 reflect proceeds of $3 million for the sale of the Hit or Miss
division for which the Company also received a $10 million note, due in seven
years, at 10% annual interest.
FINANCING ACTIVITIES: The strong cash flow from operations as well as proceeds
generated from the sale of the Chadwick's division allowed the Company to prepay
certain long-term debt in addition to regularly scheduled maturities. On
September 16, 1996, pursuant to a call for redemption, the Company prepaid $88.8
million of its 9 1/2% sinking fund debentures. The Company recorded an after-tax
extraordinary charge of $2.9 million, or $.03 per common share, related to the
early retirement of this debt. In addition, during the Company's fourth quarter,
the Company retired the entire outstanding balance of the $375 million term loan
incurred to acquire Marshalls (see discussion below). The Company recorded an
after-tax extraordinary charge of $2.7 million, or $.03 per common share, due to
the early retirement of this debt. In total, during fiscal 1997, the Company
paid a total of $455.6 million for the prepayment of certain long-term debt and
a total of $46.5 million for regularly scheduled maturities of long-term debt.
During fiscal 1996, the Company's cash flow from financing activities includes
the proceeds of $574.9 million from additional long-term borrowings. In June
1995, the Company filed a shelf registration statement with the Securities and
Exchange Commission, which provides for the issuance of up to $250 million of
long-term debt. In June 1995, the Company issued $200 million of long-term notes
under the registration statement. The proceeds were used, in part, to repay
short-term borrowings and for general corporate purposes. In connection with the
purchase of Marshalls, the Company entered into an $875 million bank credit
agreement under which the Company borrowed $375 million on a long-term loan
basis to fund the cash portion of the Marshalls purchase price. The agreement
also includes a $500 million revolving loan capability for the working capital
needs of the Company which is discussed further below. The Company had entered
into two interest rate swap agreements which effectively provided for a fixed
rate of 5.9% on $200 million of the $375 million on a long-term loan basis to
fund the cash portion of the Marshalls purchase price. The agreement also
includes a $500 million revolving loan capability for the working capital needs
of the Company which is discussed further below. The Company had entered into
two interest rate swap agreements which effectively provided for a fixed rate
of 5.9% on $200 million of the $375
<PAGE> 36
million term loan. The swap agreements were cancelled upon the repayment of the
term loan.
The Company declared quarterly dividends on its common stock of $.07 per share
in fiscal 1997. In fiscal 1996, the Company had declared quarterly dividends on
its common stock of $.14 per share for the first three quarters which was
reduced to $.07 per common share for the fourth quarter of fiscal 1996, in
connection with the acquisition of Marshalls. Annual dividends on common stock
totalled $21.3 million in fiscal 1997 and $35.5 million in fiscal 1996. The
Company also had dividend requirements on all of its outstanding preferred stock
which totalled $13.7 million in fiscal 1997, $9.4 million in fiscal 1996 and
$7.2 million in fiscal 1995. During fiscal 1997, both the Series A Cumulative
Convertible Preferred Stock and the Series C Cumulative Convertible Preferred
Stock were converted into common stock pursuant to separate calls for
redemption. In June 1996, the Series A converted into 1.2 million shares of
common stock and in September 1996 the Series C converted into 3.2 million
shares of common stock. Preferred dividends were paid through the respective
conversion dates. Dividends also include the dividend requirements of the Series
D and Series E Junior Preferred Stock issued in the acquisition of Marshalls.
The Series D preferred stock carried an annual dividend of $0.5 million and the
Series E preferred stock carries an annual dividend of $10.5 million. The Series
D preferred stock automatically converted on November 17, 1996 into 1.3 million
shares of common stock. As of January 25, 1997, the Series E Junior Preferred
Stock is the only outstanding preferred issue of the Company. Financing
activities for fiscal 1997 also includes proceeds of $34.4 million from the
exercise of employee of employee stock options, including $10.2 million for
related tax benefits.
The Company has traditionally funded its seasonal merchandise requirements
through short-term bank borrowings and the issuance of short-term commercial
paper. The Company has the ability to borrow up to $500 million on a revolving
loan basis under the bank agreement it entered into at the time of the Marshalls
acquisition. This agreement expires on November 17, 1998 and contains certain
financial covenants which include a minimum net worth requirement and certain
leverage and fixed charge ratios. As of January 25, 1997, the entire $500
million was available for use. The Company's strong cash position throughout
fiscal 1997 required minimal short-term borrowings during the year. The maximum
amount of short-term borrowings outstanding during fiscal 1997, 1996 and 1995
was $3 million, $200 million and $181.5 million, respectively. The Company also
has C$20 million of committed lines for its Canadian operations, all of which
were available for use as of January 25, 1997. The maximum amount outstanding
under its Canadian credit line during fiscal 1997 was C$6 million. Management
believes that its current credit facilities are more than adequate to meet its
needs. See Notes B and F to the consolidated financial statements for further
information regarding the Company's long-term debt, capital stock transactions
and available financing sources.
<PAGE> 37
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The TJX Companies, Inc.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
In Thousands Except Per Share Amounts
Fiscal year ended January 25, 1997
Net sales $ 1,472,247 $ 1,548,259 $ 1,722,429 $ 1,946,475
Gross earnings* 304,888 326,069 417,158 442,512
Income from continuing
operations before
extraordinary item 23,024 33,690 81,590 75,522
Per common share,
fully diluted .25 .37 .90 .84
Net income 30,086 36,054 87,510 209,473
Per common share,
fully diluted .33 .40 .97 2.32
Fiscal year ended January 27, 1996
Net sales $ 713,819 $ 761,343 $ 861,214 $ 1,638,739
Gross earnings* 148,526 159,616 199,596 324,120
Income from continuing
operations before
extraordinary item 7,372 9,575 26,660 7,982
Per common share,
fully diluted .08 .11 .35 .05
Net income (loss) 8,065 (24,842) 33,877 9,161
Per common share,
fully diluted .09 (.37) .44 .07
</TABLE>
* Gross earnings equal net sales less cost of sales, including buying and
occupancy costs.
Net income for the fourth quarter of fiscal 1997 includes an after-tax gain on
the sale of Chadwick's of $125.6 million, or $1.39 per common share. The
operating results for Chadwick's for fiscal 1997 and 1996 have been reflected as
discontinued operations. Net income for fiscal 1997 includes after-tax
extraordinary charges of $2.9 million and $2.7 million for third and fourth
quarter, respectively, for the early retirement of debt.
The financial data for the fourth quarter of fiscal 1996 includes the results of
Marshalls since the date of acquisition on November 17, 1995. Income from
continuing operations and net income for the fourth quarter of fiscal 1996
includes an after-tax charge of $21.0 million, or $.29 per common share, for the
estimated cost of closing approximately 30 T.J. Maxx stores in connection with
the acquisition of Marshalls. Net income for the fourth quarter of fiscal 1996
includes an after-tax extraordinary charge of $3.3 million for the early
retirement of debt.
Net income for the second quarter of fiscal 1996 includes an after-tax loss on
the sale of the discontinued Hit or Miss operation of $31.7 million, or $.43 per
common share. The operating results for Hit or Miss for fiscal 1996 have been
reflected as a discontinued operation.
FORWARD-LOOKING INFORMATION
Certain statements contained in this Annual Report are forward-looking and
involve a number of risks and uncertainties. Among the factors that could cause
actual results to differ materially are the following: general economic
conditions and consumer demand and consumer preferences and weather patterns in
the U.S., Canada and the United Kingdom; competitive factors, including
continuing pressure from pricing and promotional activities of major
competitors; impact of excess retail capacity and the availability of desirable
store locations on suitable terms; the availability, selection and purchasing
of attractive merchandise on favorable terms; import risks, including potential
disruptions and duties, tariffs and quotas on imported merchandise; acquisition
and divestment activities; and other factors that may be described in the
Company's filings with the Securities and Exchange Commission, including
without limitation Exhibit 99.2 to the Form 8-K filed November 20, 1996. The
Company does not undertake to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that any
projected results expressed or implied therein will not be realized.
<PAGE> 38
SHAREHOLDER INFORMATION
TRANSFER AGENT AND REGISTRAR,
COMMON AND SERIES E PREFERRED STOCK
Boston EquiServe
Canton, Massachusetts
1-800-426-5523
TRUSTEES
PUBLIC DEBENTURES
9 1/2% Sinking Fund Debentures
Chase Manhattan Bank
New York, New York
6 5/8% Promissory Notes
7% Promissory Notes
The First National Bank of Chicago
Chicago, Illinois
AUDITORS
Coopers & Lybrand L.L.P.
INDEPENDENT COUNSEL
Ropes & Gray
FORM 10-K
Information concerning the Company's operations and financial position is
provided in this report and in the Form 10-K filed with the Securities and
Exchange Commission. A copy of the 10-K may be obtained without charge by
writing or calling:
The TJX Companies, Inc.
Investor Relations
770 Cochituate Road
Framingham, Massachusetts 01701
(508)390-2323
INVESTOR RELATIONS
Analysts and investors seeking financial data about the Company are asked to
contact:
Sherry Lang, Investor and Public
Relations Director
(508)390-2323
ANNUAL MEETING
The 1997 annual meeting will be held at 11:00 a.m. on Tuesday, June 3, 1997 at
BankBoston, Lobby Auditorium, 1st Floor, 100 Federal Street, Boston,
Massachusetts.
EXECUTIVE OFFICES
Framingham, Massachusetts 01701
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
<TABLE>
<CAPTION>
State or Jurisdiction Name Under Which
of Incorporation Does Business
Operating Subsidiaries or Organization (if Different)
- ---------------------- --------------------- ----------------
<S> <C> <C>
Code Blazer, Inc. Massachusetts
Newton Buying Corp. Delaware
NBC Distributors Inc. Massachusetts
NBC Merchants, Inc. Indiana
NBC Charlotte Merchants, Inc. North Carolina
NBC Nevada Merchants, Inc. Nevada
T.J. Maxx of Illinois, Inc. Illinois T.J. Maxx
Marmaxx Operating Corp. Delaware T.J. Maxx/
Marshalls
Marshalls of MA, Inc. Massachusetts
New York Department Stores
de Puerto Rico Puerto Rico Marshalls
Marshalls of Richfield, MN., Inc.
(Owner of 39 subsidiaries
operating Marshalls stores
in the United States) Minnesota Marshalls
Marshalls of Nevada, Inc. Nevada
Winners Apparel Ltd. Ontario, Canada
Winners Investments Limited Ontario, Canada
Winners Merchants Ltd. Ontario, Canada
Strathmex Corp. Delaware
HomeGoods, Inc. Delaware
H.G. Merchants, Inc. Massachusetts
NBC Apparel, Inc. Delaware
TKM Holding Corp. Delaware
NBC Apparel United Kingdom T.K. Maxx
NBC Apparel Group United Kingdom
T.K. Maxx United Kingdom T.K. Maxx
NBC Apparel Management Limited United Kingdom T.K. Maxx
Leasing Subsidiaries
Cochituate Realty, Inc. Massachusetts
NBC First Realty Corp. Indiana
NBC Second Realty Corp. Massachusetts
NBC Fourth Realty Corp. Nevada
NBC Fifth Realty Corp. Illinois
NBC Sixth Realty Corp. North Carolina
NBC 195 Realty Corp. New York
</TABLE>
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Bernard Cammarata and Donald G. Campbell
and each of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign the form 10-K to be
filed by The TJX Companies, Inc. for the fiscal year ended January 25, 1997 and
any or all amendments thereto and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ Bernard Cammarata /s/ Donald G. Campbell
- ------------------------------- -----------------------------
Bernard Cammarata, President, Donald G. Campbell, Executive
Principal Executive Officer and Vice President - Finance
Director Principal Financial and
Accounting Officer
/s/ Phyllis B. Davis /s/ John F. O'Brien
- ------------------------------- -----------------------------
Phyllis B. Davis, Director John F. O'Brien, Director
/s/ Dennis F. Hightower /s/ Robert F. Shapiro
- ------------------------------- -----------------------------
Dennis F. Hightower, Director Robert F. Shapiro, Director
/s/ Richard Lesser /s/ Willow B. Shire
- ------------------------------- -----------------------------
Richard Lesser, Director Willow B. Shire, Director
/s/ Arthur F. Loewy /s/ Fletcher H. Wiley
- ------------------------------- -----------------------------
Arthur F. Loewy, Director Fletcher H. Wiley, Director
/s/ John M. Nelson
- -------------------------------
John M. Nelson, Director
Dated: April 9, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statements of income and balance sheets and is qualified in its entirety by
reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> JAN-25-1997
<CASH> 474,732,000
<SECURITIES> 0
<RECEIVABLES> 57,275,000
<ALLOWANCES> 0
<INVENTORY> 1,059,505,000
<CURRENT-ASSETS> 1,662,342,000
<PP&E> 1,059,613,000
<DEPRECIATION> 419,129,000
<TOTAL-ASSETS> 2,561,212,000
<CURRENT-LIABILITIES> 1,182,296,000
<BONDS> 244,410,000
150,000,000
0
<COMMON> 79,576,000
<OTHER-SE> 897,610,000
<TOTAL-LIABILITY-AND-EQUITY> 2,561,212,000
<SALES> 6,689,410,000
<TOTAL-REVENUES> 6,689,410,000
<CGS> 5,198,783,000
<TOTAL-COSTS> 5,198,783,000
<OTHER-EXPENSES> 1,087,137,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,350,000
<INCOME-PRETAX> 366,140,000
<INCOME-TAX> 152,314,000
<INCOME-CONTINUING> 213,826,000
<DISCONTINUED> 154,917,000
<EXTRAORDINARY> (5,620,000)
<CHANGES> 0
<NET-INCOME> 363,123,000
<EPS-PRIMARY> 4.01
<EPS-DILUTED> 4.01
</TABLE>
<PAGE> 1
EXHIBIT 99
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
3(i).1 Second Restated Certificate of Incorporation filed June 5, 1985 is
incorporated herein by reference to Exhibit (3i)(a) to the Form 10-K
filed for the fiscal year ended January 28, 1995.
3(i).2 Certificate of Amendment of Second Restated Certificate of
Incorporation filed June 3, 1986 is incorporated herein by reference
to Exhibit (3i)(b) to the Form 10-K filed for the fiscal year ended
January 28, 1995.
3(i).3 Certificate of Amendment of Second Restated Certificate of
Incorporation filed June 2, 1987 is incorporated herein by reference
to Exhibit (3i)(c) to the Form 10-K filed for the fiscal year ended
January 28, 1995.
3(i).4 Certificate of Amendment of Second Restated Certificate of
Incorporation filed June 20, 1989 is incorporated herein by
reference to Exhibit (3i)(d) to the Form 10-K filed for the fiscal
year ended January 28, 1995.
3(i).5 Certificate of Designations, Preferences and Rights of Series E
Cumulative Convertible Preferred Stock is incorporated herein by
reference to Exhibit 10.2 of the Form 8-K dated November 17, 1995.
3(ii).1 The by-laws of the Company, as amended, are incorporated herein by
reference to Exhibit (3ii)(a) to the Form 10-K filed for the fiscal
year ended January 28, 1995.
4.1 Credit Agreement dated as of November 17, 1995 among The First
National Bank of Chicago, Bank of America Illinois, The Bank of New
York, and Pearl Street L.P., as co-arrangers, the other financial
institution parties thereto, and the Company is incorporated by
reference to the Current Report on Form 8-K dated November 17, 1995.
Each other instrument relates to securities the total amount of
which does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. The Company agrees to furnish to
the Securities and Exchange Commission copies of each
<PAGE> 2
such instrument not otherwise filed herewith or incorporated herein by
reference.
10.2 The Employment Agreement dated as of January 26, 1997 with Bernard
Cammarata is filed herewith. *
10.3 The Amended and Restated Employment Agreement dated as of February
1, 1995 with Richard Lesser is incorporated herein by reference to
Exhibit (10)(e) to the Form 10-K for the fiscal year ended January
28, 1995. The Amendment dated as of April 7, 1997 to the Amended and
Restated Employment Agreement dated as of February 1, 1995 with
Richard Lesser is filed herewith. *
10.4 The Amended and Restated Employment Agreement dated as of February
1, 1995 with Donald G. Campbell is incorporated herein by reference
to Exhibit (10)(f) to the Form 10-K filed for the fiscal year ended
January 28, 1995. The Amendment dated as of April 7, 1997 to the
Amended and Restated Employment Agreement dated as of February 1,
1995 with Donald G. Campbell is filed herewith. *
10.5 The Management Incentive Plan, as amended, is incorporated herein by
reference to Exhibit 10(g) to the Form 10-K filed for the fiscal
year ended January 29, 1994. *
10.6 The 1982 Long Range Management Incentive Plan, as amended, is
incorporated herein by reference to Exhibit 10(h) to the Form 10-K
filed for the fiscal year ended January 29, 1994. *
10.7 The 1986 Stock Incentive Plan as amended through April 9, 1997 is
filed herewith. *
10.8 The TJX Companies, Inc. Long Range Performance Incentive Plan, as
amended, is incorporated herein by reference to Exhibit 10(j) to the
Form 10-K filed for the fiscal year ended January 29, 1994. *
10.9 The General Deferred Compensation Plan, as amended, is incorporated
herein by reference to Exhibit 10(n) to the Form 10-K filed for the
fiscal year ended January 27, 1990. *
10.10 The Supplemental Executive Retirement Plan, as amended, is
incorporated herein by reference to Exhibit 10(l) to the Form 10-K
filed for the fiscal year ended January 25, 1992. *
<PAGE> 3
10.11 The 1993 Stock Option Plan for Non-Employee Directors is
incorporated herein by reference to Exhibit 10.1 to the Form 10-Q
filed for the quarter ended May 1, 1993. *
10.12 The Retirement Plan for Directors, as amended, is incorporated
herein by reference to Exhibit 10.2 to the Form 10-Q filed for the
quarter ended May 1, 1993. *
10.13 The form of Indemnification Agreement between the Company and each
of its officers and directors is incorporated herein by reference to
Exhibit 10(r) to the Form 10-K filed for the fiscal year ended
January 27, 1990. *
10.14 The Trust Agreement dated as of April 8, 1988 between the Company
and State Street Bank and Trust Company is incorporated herein by
reference to Exhibit 10(y) to the Form 10-K filed for the fiscal
year ended January 30, 1988. *
10.15 The Trust Agreement dated as of April 8, 1988 between the Company
and Shawmut Bank of Boston, N.A. is incorporated herein by reference
to Exhibit 10(z) to the Form 10-K filed for the fiscal year ended
January 30, 1988. *
10.16 Stock Purchase Agreement dated as of October 14, 1995 between the
Company and Melville Corporation is incorporated herein by reference
to the Current Report on Form 8-K dated October 14, 1995.
10.17 Amendment Number One dated as of November 17, 1995 to the Stock
Purchase Agreement dated as of October 14, 1995 between the Company
and Melville Corporation is incorporated herein by reference to the
Current Report on Form 8-K dated November 17, 1995.
10.18 Transitional Services Agreement dated as of November 17, 1995
between the Company and Melville Corporation is incorporated herein
by reference to the Current Report on Form 8-K dated November 17,
1995.
10.19 Amendment Number Two dated as of February 1, 1996 to Stock Purchase
Agreement and Transitional Services Agreement between the Company
and Melville Corporation is incorporated herein by reference to the
Form 10-K filed for the fiscal year ended January 27, 1996.
<PAGE> 4
10.20 Standstill and Registration Rights Agreement dated as of November
17, 1995 between the Company and Melville Corporation is
incorporated herein by reference to the Form 10-K filed for the
fiscal year ended January 27, 1996.
10.21 Asset Purchase Agreement dated as of October 18, 1996 between the
Company and Brylane, L.P. is incorporated herein by reference to the
Current Report on Form 8-K dated October 18, 1996.
10.22 The Distribution Agreement dated as of May 1, 1989 between the
Company and Waban Inc. is incorporated herein by reference to
Exhibit 3 to the Company's Current Report on Form 8-K dated June 21,
1989. The First Amendment to Distribution Agreement dated as of
April 18, 1997 between the Company and Waban Inc. is filed herewith.
10.23 The Indemnification Agreement dated as of April 18, 1997 by and
between the Company and BJ's Wholesale Club, Inc. is filed herewith.
11 Statement re computation of per share earnings.
This statement is filed herewith.
13 Annual Report to security holders.
Portions of the Annual Report to Stockholders for the fiscal year
ended January 25, 1997 are filed herewith.
21 Subsidiaries.
A list of the Registrant's subsidiaries is filed herewith.
23 Consents of experts and counsel.
The Consent of Coopers & Lybrand L.L.P. is contained on Page F-3 of
the Financial Statements filed herewith.
24 Power of Attorney.
The Power of Attorney given by the Directors and certain Executive
Officers of the Company is filed herewith.
* Management contract or compensatory plan or arrangement.
