<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended April 30, 1994
Commission file number 1-10259
WABAN INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0109661
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Mercer Road
Natick, Massachusetts 01760
(Address of principal executive offices) (Zip Code)
(508) 651-6500
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
The number of shares of Registrant's common stock outstanding as of
May 28, 1994: 33,130,346
<PAGE>
<TABLE>
PART 1 FINANCIAL INFORMATION
WABAN INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
--------------------
April 30, May 1,
1994 1993
-------- -------
(In Thousands Except
Per Share Amounts)
<S> <C> <C>
Net sales $820,840 $834,225
------- -------
Cost of sales, including buying and occupancy costs 703,735 720,846
Selling, general and administrative expenses 99,108 103,129
Interest on debt and capital leases (net) 3,032 2,996
------- -------
Total expenses 805,875 826,971
------- -------
Income before income taxes and cumulative effect of
accounting principle changes 14,965 7,254
Provision for income taxes 5,836 2,829
------- -------
Income before cumulative effect of accounting principle
changes 9,129 4,425
Cumulative effect of accounting principle changes
(See Note 5) - 905
------- -------
Net income $ 9,129 $ 5,330
======= =======
Primary and fully diluted income per common share
(see Exhibit 11 for detailed computations):
Income before cumulative effect of accounting
principle changes $ 0.27 $ 0.13
Cumulative effect of accounting principle changes - 0.03
------- -------
Net income $ 0.27 $ 0.16
======= =======
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
WABAN INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
April 30, January 29, May 1,
1994 1994 1993
-------- ---------- --------
(Dollars In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,154 $ 19,877 $ 34,912
Marketable securities - - 594
Accounts receivable 53,110 62,447 41,825
Merchandise inventories (net) 540,200 505,188 583,889
Current deferred income taxes 34,892 36,996 12,705
Prepaid expenses 16,715 9,662 18,214
--------- --------- ---------
Total current assets 664,071 634,170 692,139
--------- --------- ---------
Property at cost:
Land and buildings 233,216 222,522 192,578
Leasehold costs and improvements 59,992 59,844 71,318
Furniture, fixtures and equipment 202,401 195,740 191,565
--------- --------- ---------
495,609 478,106 455,461
Less accumulated depreciation
and amortization 105,430 96,623 99,705
--------- --------- ---------
390,179 381,483 355,756
--------- --------- ---------
Property under capital leases 18,379 18,452 22,368
Less accumulated amortization 7,258 6,924 7,538
--------- --------- ---------
11,121 11,528 14,830
--------- --------- ---------
Property held for sale (net) 27,787 30,247 -
Deferred income taxes 2,344 4,967 -
Other assets 11,033 10,599 8,893
--------- --------- ---------
Total assets $1,106,535 $1,072,994 $1,071,618
========= ========= =========
LIABILITIES
Current liabilities:
Short-term debt $ 20,000 $ - $ -
Current installments of long-
term debt 12,731 13,814 2,312
Accounts payable 272,853 253,232 300,226
Restructuring reserve 23,652 29,444 -
Accrued expenses and other
current liabilities 124,790 129,637 102,986
Accrued federal and state
income taxes 941 2,970 5,154
Obligations under capital leases
due within one year 1,219 1,264 1,396
--------- --------- ---------
Total current liabilities 456,186 430,361 412,074
--------- --------- ---------
Real estate financings, exclusive of
current installments 2,155 4,075 4,721
General corporate debt 48,000 48,000 60,000
Subordinated debt 108,600 108,600 108,600
Obligations under capital leases,
less portion due within one year 13,100 13,379 17,875
Noncurrent restructuring reserve 27,971 28,642 -
Other noncurrent liabilities 20,178 19,445 16,746
Deferred income taxes - - 9,055
STOCKHOLDERS' EQUITY
Common stock, par value $.01,
authorized 190,000,000 shares,
issued and outstanding 33,129,723,
33,086,295 and 33,185,813 shares 331 331 332
Additional paid-in capital 323,639 322,915 321,857
Retained earnings 106,375 97,246 120,358
--------- --------- ---------
Total stockholders' equity 430,345 420,492 442,547
--------- --------- ---------
Total liabilities and
stockholders' equity $1,106,535 $1,072,994 $1,071,618
========= ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
WABAN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
--------------------
April 30, May 1,
1994 1993
-------- -------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,129 $ 5,330
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of property 9,696 8,733
Loss on property disposals 133 74
Amortization of premium on marketable
securities - 9
Other non-cash items, net 191 253
Deferred income taxes 4,727 (3,205)
Increase (decrease) in cash
due to changes in:
Accounts receivable 9,337 (420)
Merchandise inventories (35,012) (58,887)
Prepaid expenses (7,053) (9,003)
Other assets, net (434) 664
Accounts payable 19,621 61,209
Restructuring reserves (6,617) -
Accrued expenses 650 3,130
Accrued income taxes (2,029) 1,231
Other noncurrent liabilities 733 890
------ ------
Net cash provided by operating activities 3,072 10,008
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities - 16,311
Property additions (21,010) (25,946)
Property disposals 9 2
------ ------
Net cash used in investing activities (21,001) (9,633)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of short-term debt 20,000 -
Repayment of long-term debt (3,003) (1,078)
Repayment of capital lease obligations (324) (341)
Proceeds from sale and issuance of
common stock 533 312
------ ------
Net cash provided by (used in)
financing activities 17,206 (1,107)
------ ------
Net decrease in cash
and cash equivalents (723) (732)
Cash and cash equivalents at
beginning of year 19,877 35,644
------ ------
Cash and cash equivalents at
end of period $19,154 $34,912
====== ======
Supplemental cash flow information:
Interest paid $ 286 $ 144
Income taxes paid 3,138 2,721
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the first three months are not necessarily indicative of
results for the full fiscal year because the Company's business, in common with
the business of retailers generally, is subject to seasonal influences. BJ's
sales and profits have been strongest in the Christmas holiday season, while
HomeBase's sales and profits have typically been strongest in the spring
building season.
2. The financial statements are unaudited and reflect all normal recurring
adjustments considered necessary by the Company for a fair presentation of its
financial statements in accordance with generally accepted accounting
principles.
3. These interim financial statements should be read in conjunction with the
consolidated financial statements and related notes contained in the Annual
Report on Form 10-K for the fiscal year ended January 29, 1994.
4. In the quarter ended January 29, 1994, the Company recorded a pre-tax
restructuring charge of $101.1 million primarily related to repositioning its
HomeBase division. Eight warehouse stores were closed in that quarter in
connection with the restructuring. The results for the quarter ended April 30,
1994 exclude the sales and operating income or losses of 16 other HomeBase
warehouse stores planned to be closed as a result of the restructuring. During
the quarter ended April 30, 1994, three of these closings were announced. The
80 HomeBase units reported as warehouses in operation as of April 30, 1994
include the 13 remaining HomeBase warehouse stores planned to be closed.
5. The cumulative effect of accounting principle changes in the fiscal quarter
ended May 1, 1993 includes the adoption of the following accounting
pronouncements (amounts shown on a post-tax basis in thousands):
SFAS No. 109, "Accounting for Income Taxes" $1,616
SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," net of tax benefit of $138 (210)
SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," net of tax benefit of $328 (501)
-----
$ 905
=====
6. Subsequent to April 30, 1994, the Company issued $100,000,000 of 11% Senior
Subordinated Notes due May 15, 2004. The net proceeds to the Company are
approximately $97.2 million.
7. Presented below is information relative to the operating results of the
Company's business segments (dollars in thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
April 30, May 1,
1994 1993
-------- -------
<S> <C> <C>
Net sales:
BJ's Wholesale Club $486,787 $419,669
HomeBase 334,053 414,556
------- -------
$820,840 $834,225
======= =======
Operating income:
BJ's Wholesale Club $ 8,083 $ 3,791
HomeBase 11,792 8,357
General corporate expense (1,878) (1,898)
------- -------
17,997 10,250
Interest on debt and capital
leases (net) (3,032) (2,996)
------- -------
Income before income taxes $ 14,965 $ 7,254
======= =======
</TABLE>
Warehouses in operation - end of period:
- - ---------------------------------------
BJ's Wholesale Club 52 39
HomeBase 80 87
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Thirteen Weeks (First Quarter) Ended April 30, 1994 versus Thirteen Weeks Ended
May 1, 1993.
Results of Operations
- - ---------------------
The Company's results for the quarter ended April 30, 1994 exclude the sales
and operating income or losses of 16 HomeBase warehouse stores planned to be
closed in connection with the Company's restructuring announced last year.
Last year's first quarter results included sales of $80.2 million and a
combined operating loss of $3.2 million from these 16 stores and eight
midwestern stores that were closed at the end of last year. The Company
recorded a $101.1 million pre-tax restructuring charge in the quarter ended
January 29, 1994, primarily to cover expenses related to repositioning its
HomeBase division, including closing the 24 warehouse stores referred to above.
Reflecting the effect of the elimination of HomeBase warehouse stores as part
of the restructuring, net sales for the quarter ended April 30, 1994 were
$820.8 million, a decrease of 1.6% from $834.2 million reported in last year's
first quarter. Comparable warehouse sales decreased by 3.9% at BJ's and by
3.4% at HomeBase in this year's first quarter. These decreases represent some
improvement from the previous two quarters - BJ's comparable warehouse sales
decreases in last year's third and fourth quarters were 11.0% and 6.2%,
respectively, and HomeBase's comparable warehouse sales decreases in the same
period were 3.5% and 4.1%, respectively. Sales comparisons at both of the
Company's divisions continued to be affected by new competition and difficult
economic conditions in their major markets. BJ's comparable warehouse sales
were also impacted by new BJ's clubs opening in the trading areas of existing
BJ's clubs.
Cost of sales (including buying and occupancy costs) as a percentage of sales
was 85.7% in this year's first quarter versus 86.4% in the comparable period
last year despite the increased proportion of sales contributed by BJ's, which
is a lower margin business than HomeBase. Gross selling margins increased at
both divisions, particularly at HomeBase.
Selling, general and administrative (SG&A) expenses, as a percentage of sales,
were 12.1% in the first quarter this year compared with 12.4% in last year's
first quarter. The ratio of SG&A expenses to sales was lower this year because
of BJ's increased proportion of consolidated sales and improved operating
efficiencies at BJ's. HomeBase's SG&A expenses as a percentage of sales
increased this year primarily because of higher payroll to provide better
customer service and higher marketing expenses.
BJ's operating income in this year's first quarter was $8.1 million versus $3.8
million in the comparable period last year. This increase reflects improved
expense control and logistics and a favorable shift in merchandise mix, as well
as a comparison to a weak first quarter performance last year.
<PAGE>
Operating income at HomeBase in this year's first quarter was $11.8 million
compared with $8.4 million in the same period last year. This increase was due
primarily to the elimination of underperforming units as part of HomeBase's
restructuring. Adjusted for their elimination, operating income as a percent
of sales increased by 0.1%. Higher gross margins were offset by higher store
payrolls and advertising costs in this year's first quarter. These results
reflect HomeBase's strategic initiative to increase gross margins and improve
customer service.
The components of net interest expense were as follows (in thousands):
<TABLE>
<CAPTION>
Quarter Ended
------------------------------
April 30, 1994 May 1, 1993
-------------- -----------
<S> <C> <C>
Interest expense on debt $3,050 $2,585
Interest and investment income (472) (250)
----- -----
Interest on debt (net) 2,578 2,335
Interest on capital leases 454 661
----- -----
Interest on debt and capital leases (net) $3,032 $2,996
===== =====
</TABLE>
Interest expense on debt was net of capitalized interest of $641,000 this year
and $823,000 last year.
The Company's provision for income taxes was 39% of pre-tax income in both this
year's and last year's first quarter.
Net income for the first quarter was $9.1 million, or $.27 per share, compared
with $5.3 million, or $.16 per share, in the first quarter of last year. Last
year's results included net income of $.9 million, or $.03 per share, associated
with the adoption of changes in methods of accounting for income taxes,
postretirement benefits and postemployment benefits. (See Note 5 of Notes to
Consolidated Financial Statements for additional information.)
The Company operated 80 HomeBase warehouse stores at April 30, 1994, excluding
three locations which the Company announced will close in the second quarter.
This total includes 13 other HomeBase units which are planned to close as a
result of HomeBase's restructuring. HomeBase operated 87 warehouse stores as
of May 1, 1993. The number of BJ's clubs in operation at April 30, 1994 was
52, versus 39 one year earlier.
Liquidity and Capital Resources
- - -------------------------------
Cash expended for property additions in the first quarter was $21.0 million
compared with $25.9 million in the same period last year. One new HomeBase
warehouse store was opened in the first quarter of this year, and two new BJ's
clubs were opened in the first week of the second quarter. Last year the
Company opened one HomeBase and three BJ's units in the same time period.
<PAGE>
Including the three new units already opened, the Company expects to open
approximately 15 BJ's (including the relocation of one warehouse club) and four
HomeBase warehouse stores in this fiscal year. Capital expenditures are
planned to be approximately $165 million, including an estimated $100 million
for new store real estate. The timing and amount of actual openings and
expenditures could vary from these estimates due to the complexity of the real
estate development process.
The Company's restructuring is expected to generate a significant amount of
cash flow over the remainder of this fiscal year. In addition to tax benefits,
cash flow will be generated by the sale of inventory and property in the
sixteen stores planned to be closed (net of accounts payable and closing
costs), from the liquidation of the remainder of HomeBase's discontinued
inventory, and from the sale of owned real estate. Completion of the initial
phase of the restructuring, including the disposition of all warehouse store
locations and merchandise inventories, is expected to result in $55 million to
$65 million of cash inflow (including tax benefits) in addition to
approximately $35 million already realized in the fourth quarter of last year
and the first quarter of this year. The net cash outflow for long-term lease
obligations (net of tax benefits) after closing these locations is estimated to
be $15 million to $20 million over the remaining terms of the leases, which
expire at various dates through 2012. The actual amount of cash flow could
vary from these estimates, depending on certain factors, principally the
Company's ability to sublease or sell closed HomeBase locations on favorable
terms.
As of April 30, 1994, the balance of the current portion of the restructuring
reserve liability was $23.7 million and the noncurrent restructuring reserve
liability was $28.0 million. Merchandise inventories were stated net of a
reserve for write-down of discontinued inventories of $6.5 million, and
property held for sale was stated net of a reserve for write-down of $12.8
million. The balances of deferred tax assets at April 30, 1994 were
significantly higher than those at May 1, 1993, primarily because most of the
restructuring charge was not currently deductible.
Increases in inventory and accounts payable since the end of the fiscal year
were due primarily to normal seasonal requirements. The decreases in inventory
and accounts payable from May 1, 1993 to April 30, 1994 were due mainly to
lower per store balances at both of the Company's divisions as well as the
closing of the eight midwest HomeBase warehouses.
As of April 30, 1994, the Company had $19.2 million of cash and cash
equivalents and had $20 million of borrowings outstanding under its $80 million
bank credit agreement. The Company also has an additional line of credit which
provides for up to $15 million of short-term borrowings, all of which was
available at the end of the first quarter.
Subsequent to the end of the first quarter, the Company issued $100 million of
11% Senior Subordinated Notes due May 15, 2004. The proceeds (net of expenses)
to the Company are approximately $97.2 million and will be used to fund the
opening of new stores, including acquisition of real estate and the
construction of stores; to make scheduled principal repayments on senior debt,
including a $12 million principal payment due in May 1994 on the Company's
9.58% senior notes; to repay short-term borrowings under the Company's bank
credit agreement (under which $20 million was outstanding at April 30, 1994);
and for general corporate purposes. The Company expects to replace its
existing bank credit facility, which expires on January 28, 1995.
<PAGE>
The Company expects that the proceeds of the senior subordinated debt offering,
together with anticipated cash flow from operations, proceeds from the
disposition of inventory and stores, borrowings available under its current
bank credit facility and borrowings expected to be available under a successor
bank credit facility that the Company plans to negotiate, will be sufficient to
finance its operations through fiscal 1996. However, the Company may from time
to time seek to obtain additional financing. The Company's cash requirements
may vary, based on its success in disposing of the HomeBase stores that it
plans to close.
Seasonality
- - -----------
BJ's sales and operating income have been strongest in the Christmas holiday
season and lowest in the first quarter of each fiscal year. HomeBase's sales
and earnings are typically lower in the first and fourth quarters than they are
in the second and third quarters, which correspond to the most active season
for home construction.
<PAGE>
PART II. Other Information
-----------------
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10.14 Employment Agreement dated as of February 1, 1994
with Dale N. Garth.*
10.17 Form of Change of Control Severance Agreement
between the Company and officers of the Company.*
10.18b Second Amendment and Waiver dated as of March 28,
1994 to Note Purchase Agreement dated as of June 15,
1991.
10.19b Amendment No. 2 dated as of April 22, 1994 to Credit
Agreement dated as of July 8, 1993 among the Company
and certain banks.
10.21 Employment Agreement dated as of February 1, 1994
with John J. Nugent.*
11.0 Statement regarding computation of per share
earnings.
(b) The Company did not file any report on Form 8-K with the
Securities and Exchange Commission during the quarter ended
April 30, 1994.
- - ------------------
*Management contract or other compensatory plan or arrangement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WABAN INC.
----------
(Registrant)
Date: June 9, 1994 /S/ HERBERT J ZARKIN
----------------------------- -----------------------------
Herbert J Zarkin
President and
Chief Executive Officer
Date: June 9, 1994 /S/ DALE N. GARTH
----------------------------- ------------------------------
Dale N. Garth
Senior Vice President and
Chief Financial Officer
<PAGE>
Dale N. Garth
-------------
EMPLOYMENT AGREEMENT
AGREEMENT dated as of February 1, 1994 between Dale N.
Garth, whose address is 3 Wampatuck Road, Dedham, MA 02026
("Executive") and Waban Inc., a Delaware corporation, whose
principal office is in Natick, Massachusetts ("Employer" or
"Company").
The parties hereto, in consideration of the mutual
agreements hereinafter contained and intending to be legally
bound hereby, agree as follows:
1. Employment. The Executive is currently an employee of
----------
the Company. Employer will employ Executive and Executive will
be an employee of Employer under the terms and conditions
hereinafter set forth. This Agreement supersedes and replaces
any prior employment agreement between Executive and Employer or
any of their subsidiaries or divisions, except for any Change of
Control Severance Agreement between Executive and Employer.
2. Effective Date; Term. This Agreement shall become
--------------------
effective on the date hereof and shall continue until June 1,
1996 and thereafter until terminated by either Executive or
Employer, subject to earlier termination as provided herein (such
period of employment hereinafter called the "Employment Period").
3. Duties. Executive shall diligently perform the duties
------
and responsibilities of Senior Vice President, Treasurer and
Chief Financial Officer of Employer or such other executive
duties and responsibilities as shall from time to time be
assigned to him by the President or Board of Directors of
Employer.
4. 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 of his
duties and responsibilities under this Agreement; provided,
--------
however, that nothing herein contained shall be deemed to prevent
- - -------
or limit the right of Executive (a) to make any passive
investments where Executive is not obligated or required to, and
shall not in fact, devote any managerial efforts, (b) to
participate in charitable or community activities or in trade or
professional organizations, or (c) subject to approval of the
Board of Directors (which approval shall not be unreasonably
withheld or withdrawn), hold directorships in public companies,
except only that the President of Employer shall have the right
to limit such services as a director or such participation if the
President believes that the time spent on such activities
infringes in any material repects upon the time required by
Executive for the performance of his duties under this Agreement
<PAGE>
or is otherwise incompatible with those duties.
5. Base Salary. During the Employment Period, Executive
-----------
shall receive a base salary at the rate of $225,000.00 per year,
or such higher amount as Employer shall determine from time to
time. Base salary shall be payable in such manner at such times
as Employer shall pay base salary to other executive employees.
6. Policies and Fringe Benefits. Executive shall be
----------------------------
subject to Employer policies applicable to its executives
generally, and Executive shall be entitled to receive all such
fringe benefits as Employer shall from time to time make
available to other Employer executives generally (subject to the
terms of any applicable fringe benefit plan).
7. Termination of Employment; in General.
-------------------------------------
a) Employer shall have the right to end Executive's
employment at any time and for any reason, with or without cause.
Cause shall consist of 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
of Directors of the Company), 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.
b) The Employment Period shall terminate when Executive
becomes entitled to receive long-term disability compensation
pursuant to Employer's long-term disability plan. In addition,
if by reason of any incapacity, Executive is unable to perform
his duties for at least six months in any 12 month period, upon
written notice by Employer 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 Employer or any parent corporation and any
subsidiaries or divisions of Employer or any such parent.
8. BENEFITS UPON TERMINATION OF EMPLOYMENT.
---------------------------------------
a) Termination by Employer Other Than for Cause, Disability
--------------------------------------------------------
or Incapacity. If the Employment Period shall have been
- - -------------
terminated by Employer for any reason other than cause,
disability or incapacity, no compensation or other benefits shall
be payable to or accrue to Executive hereunder except as follows:
<PAGE>
(i) Employer will continue to pay to Executive his
then base salary for a period of 12 months from the date of
termination, which base salary shall be reduced after three
months for compensation earned from other employment or
self-employment.
(ii) Until the expiration of the period of base salary
payments described in (i) immediately above or until
Executive shall commence other employment or self-
employment, whichever shall first occur, Employer will
provide such medical and hospital insurance and term life
insurance (but not long-term disability insurance) for
Executive and his family, comparable to the insurance
provided for executives generally, as Employer shall
determine, and upon the same terms and conditions as shall
be provided for Employer's executives generally.
(iii) Executive shall be entitled to payment, if any,
pursuant to the terms of Employer's Management Incentive
Plan ("MIP"), or, if greater, such amount as Executive would
have earned under MIP if his employment had continued until
the end of the fiscal year (pro-rated for the period of
active employment during such year).
(iv) Such payments or benefits under other Employer
plans in which Executive participates as are required or
provided by the provisions of such plans.
b) Termination for Death, Disability or Incapacity. If the
-----------------------------------------------
Employment Period shall terminate at any time by reason of death,
disability or incapacity, no compensation or other benefits shall
be payable to or accrue to Executive hereunder except as follows:
Executive shall be entitled to payment, if any, pursuant to
the terms of MIP, or, if greater, such amount as Executive would
have earned under MIP if his employment had continued until the
end of the fiscal year (pro-rated for the period of active
employment during such year).
Executive shall also be entitled to payments or benefits
under other Employer plans, including any long-term disability
plan, to the extent therein provided in the circumstances.
c) Voluntary Termination; Termination for Cause; Violation
-------------------------------------------------------
of Certain Covenants. If Executive should end his employment
- - --------------------
voluntarily or if Employer should end Executive's employment for
cause, or if Executive should violate the protected persons or
noncompetition provisions of Section 9, all compensation and
benefits otherwise payable pursuant to this Agreement shall
cease. Employer does not waive any rights it may have for
damages or for injunctive relief.
<PAGE>
9. Agreement Not to Solicit or Compete.
-----------------------------------
(a) Upon the termination of the Employment Period at any
time for any reason, Executive shall not during the Prohibited
Period 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 in which Executive has any direct or
indirect interest (other than a less-than-one percent equity
interest in an entity), with which Executive is affiliated or for
which Executive renders any services. "Prohibited Period" shall
mean a period coterminous with the period of base salary
continuation (without regard to reduction for income from other
employment or self-employment) which is applicable or which would
have been applicable had the termination been pursuant to Section
8(a). A "protected person" shall be a person known by Executive
to be employed by Employer or its subsidiaries at or 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 limitation on (A) employment of, (B)
solicitation of, and (C) unsolicited acceptance of services from,
each "protected person" and (iii) 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 event
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 of the Employer and
its affiliates. Therefore, if Executive should end his
employment voluntarily at any time, including by reason of
retirement, disability or incapacity, or if Employer should end
Executive's employment at any time for cause, then during the
Prohibited Period, Executive will not engage, either as a
principal, employee, partner, consultant or investor (other than
a less-than-one percent equity interest in an entity), in a
business which is a competitor of Employer or its affiliates. A
business shall be deemed a competitor of Employer or its
affiliates if it shall then be so regarded by retailers or
wholesalers generally, or if it shall operate a warehouse outlet
(such as HomeBase, Builder's Square, BJ's Wholesale Club, Home
Depot, Sam's Club, Price/Costco or similar warehouse
merchandisers) within 10 miles of any "then existing" Waban Inc.
warehouse location. The term "then existing" in the previous
sentence shall refer to any such location that is, at the time of
<PAGE>
termination of the Employment Period, operated by Waban Inc. or
any of its subsidiaries or divisions or under lease for operation
as aforesaid. Nothing herein shall restrict the right of
Executive to engage in a business that operates exclusively
conventional or full mark-up department stores or general
merchandise discount department stores. 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.
If the Employment Period terminates, Executive agrees (i) to
notify Employer immediately upon his securing employment or
becoming self-employed during any period when Executive's
compensation from Employer shall be subject to reduction or his
benefits provided by Employer shall be subject to termination as
provided in Section 8 and (ii) to furnish to Employer written
evidence of his compensation earned from any such employment or
self-employment as Employer 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 Employer and shall execute a
certificate certifying that he has returned all such items in his
possession or under his control.
10. ASSIGNMENT. The rights and obligations of Employer
----------
shall inure to the benefit of and shall be binding upon the
successors and assigns of Employer. The rights and obligations
of Executive are not assignable except only that payments payable
to him after his death shall be made to his estate.
11. NOTICES. All notices and other communications required
-------
hereunder shall be in writing and shall be given either by
personal delivery or by mailing the same by certified or
registered mail, return receipt requested, postage prepaid. If
sent to Employer, the same shall be mailed to Employer at One
Mercer Road, Natick, MA 01760, Attention: President, or such
other address as Employer may hereafter designate by notice to
Executive; and if sent to Executive, the same shall be mailed to
Executive at his address set forth above, or at such other
address as Executive may hereafter designate by notice to
Employer. Notices shall be effective upon receipt.
<PAGE>
12. GOVERNING LAW. This Agreement and the rights and
-------------
obligations of the parties hereunder shall be governed by the
laws of the Commonwealth of Massachusetts.
/s/ Dale N. Garth
-------------------------------------
Executive
WABAN INC.
By /s/ Herbert J Zarkin
-----------------------------------
Herbert J Zarkin, President
gargree
<PAGE>
CHANGE OF CONTROL SEVERANCE AGREEMENT
-------------------------------------
THIS AGREEMENT between Waban Inc., a Delaware corporation
(the "Company"), and ("Executive"), dated as of
, 19 .
Executive is a key executive of the Company or a Subsidiary
and an integral part of its management.
The Company recognizes that the possibility of a change of
control of the Company may result in the departure or distraction
of management to the detriment of the Company and its
shareholders.
The Company wishes to assure Executive of fair severance
should his employment terminate in specified circumstances
following a change of control of the Company and to assure
Executive of certain other benefits upon a change of control.
In consideration of Executive's continued employment with
the Company or a Subsidiary and other good and valuable
consideration, the parties agree as follows:
1. Benefits Upon Change of Control.
-------------------------------
1.1 In General. Within 30 days following a Change of
----------
Control, whether or not Executive's employment has been
terminated, the Company shall pay to Executive the following in a
lump sum:
(a) an amount equal to the "Target Bonus" under the
Waban Inc. 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 (or if
Executive's title was changed to a level below that of
Executive's Current Title within 180 days before the
commencement of a Standstill Period, the "Target Bonus"
applicable to Executive for the fiscal year in which such
change occurred as if he continued to hold Executive's
Current Title, if higher);
(b) if Executive is a participant in the Waban Inc.
Long Range Management Incentive Plan ("LRMIP") at the Change
of Control, an amount with respect to each Award Period (as
that term is defined in LRMIP) for which Executive has been
designated as an LRMIP participant equal to 50 percent of
the product of (i) the maximum award payable to Executive
for such Award Period, as designated by the Company's
Executive Compensation Committee under LRMIP (or, if
<PAGE>
Executive's title was changed to a level below that of
Executive's Current Title within 180 days before the
commencement of a Standstill Period, in the case of an Award
Period which commences after such change, the maximum award
payable to Executive for such Award Period shall be deemed
to be the maximum award payable to Executive for the Award
Period which commenced immediately prior to such change, if
higher), and (ii) a fraction, the denominator of which is
the total number of fiscal years in the Award Period and the
numerator of which is the number of fiscal years which have
elapsed in such Award Period prior to the Change of Control
(for purposes of this fraction, if the Change of Control
occurs during the first quarter of a fiscal year, then one-
quarter of the fiscal year shall be deemed to have elapsed
prior to the Change of Control, and if the Change of Control
occurs after the first quarter of the fiscal year, then the
full fiscal year shall be deemed to have elapsed prior to
the Change of Control); and
(c) if Executive is a participant in a performance-
based long-range plan other than LRMIP at the Change of
Control, such amount as is required to be paid to Executive
upon a Change of Control pursuant to the provisions of such
plan.
1.2 Benefits Following Qualified Termination of Employment.
------------------------------------------------------
Executive shall be entitled to the following benefits upon a
Qualified Termination:
(a) Within 30 days following the Date of Termination,
the Company shall pay to Executive the following in a lump sum:
(i) an amount equal to two times Executive's Base
Salary for one year at the rate in effect
immediately prior to the Date of Termination or
the Change of Control (or if Executive's title was
changed to a level below that of Executive's
Current Title within 180 days before the
commencement of a Standstill Period, the rate in
effect immediately prior to such change),
whichever is highest, plus the accrued and unpaid
portion of Executive's Base Salary through the
Date of Termination. Any payments made to
Executive under any long term disability plan of
the Company with respect to the two years
following termination of employment shall be
offset against such two times Base Salary payment.
Executive shall promptly make reimbursement
payments to the Company to the extent any such
disability payments are received after the Base
Salary payment; and
<PAGE>
(ii) an amount equal to two times Executive's
automobile allowance for one year at the rate in
effect immediately prior to the Date of
Termination or the Change of Control (or if
Executive's title was changed to a level below
that of Executive's Current Title within 180 days
before the commencement of a Standstill Period,
the rate in effect immediately prior to such
change), whichever is highest, plus any portion of
Executive's automobile allowance payable but
unpaid through the Date of Termination.
(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 (or if Executive's title was changed to a
level below that of Executive's Current Title within 180 days
before the commencement of a Standstill Period, all such plans
and programs in which Executive was entitled to participate
immediately prior to such change, if the benefits thereunder are
greater), provided that Executive's continued participation is
possible under the general terms and provisions of such plans and
programs. In the event that 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 satisifed to
the extent (but only to the extent) of any such coverage or
benefits provided by another employer.
1.3 Coordination with certain tax rules. Payments under
-----------------------------------
Sections 1.1 and 1.2 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 Sections 1.1 or 1.2, amounts
payable under Sections 1.1 and 1.2 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 Sections 1.1 or 1.2 are required to be
<PAGE>
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 Executive Compensation
Committee of the Company's Board of Directors may designate prior
to a Change of Control. In the event of any underpayment or
overpayment under Sections 1.1 or 1.2, 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 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.
2. Noncompetition; No Mitigation of Damages; Other
-----------------------------------------------
Severance Payments; Withholding.
- - -------------------------------
2.1 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.
2.2 No Duty to Mitigate Damages. Executive's benefits
---------------------------
under this Agreement 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.
2.3 Other Severance Payments. In the event that Executive
------------------------
has an employment contract or any other agreement with the
Company (or a Subsidiary) which entitles Executive to severance
payments upon the termination of his employment with the Company,
the amount of any such severance payments shall be deducted from
the payments to be made under this Agreement.
2.4 Withholding. Anything to the contrary notwithstanding,
-----------
all payments required to be made by the Company hereunder to
Executive shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Company
may reasonably determine it should withhold pursuant to any
applicable law or regulation.
3. Arbitration. Any controversy or claim arising out of or
-----------
relating to this Agreement, or the breach thereof, shall be
settled exclusively by arbitration in Boston, Massachusetts in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect, and judgment upon the
award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof.
<PAGE>
4. Legal Fees and Expenses. The Company shall pay all
-----------------------
legal fees and expenses, including but not limited to counsel
fees, stenographer fees, printing costs, etc. reasonably incurred
by Executive in contesting or disputing that the termination of
his employment during a Standstill Period is for Cause or other
than for good reason (as defined in paragraph (k) of Exhibit A)
or in obtaining any right or benefit to which Executive is
entitled under this Agreement. Any amount payable under this
Agreement that is not paid when due shall accrue interest at the
prime rate as from time to time in effect at the First National
Bank of Boston, until paid in full.
5. Notice of Termination. During a Standstill Period,
---------------------
Executive's employment may be terminated by the Company (or a
Subsidiary) only upon 30 days' written notice to Executive.
6. Notices. All notices shall be in writing and shall be
-------
deemed given five days after mailing in the continental United
States by registered or certified mail, or upon personal receipt
after delivery, telex, telecopy or telegram, to the party
entitled thereto at the address stated below or to such changed
address as the addressee may have given by a similar notice:
To the Company: Waban Inc.
One Mercer Road
Natick, MA 01760
Attn: Vice President - Finance
To Executive: At his home address, as last
shown on the records of the
Company
7. Severability. In the event that any provision of this
------------
Agreement shall be determined to be invalid or unenforceable,
such provision shall be enforceable in any other jurisdiction in
which valid and enforceable and in any event the remaining
provisions shall remain in full force and effect to the fullest
extent permitted by law.
8. General Provisions.
------------------
8.1 Binding Agreement. This Agreement shall be binding
-----------------
upon and inure to the benefit of the parties and be enforceable
by Executive's personal or legal representatives or successors.
If Executive dies while any amounts would still be payable to him
hereunder, benefits would still be provided to his family
hereunder or rights would still be exercisable by him hereunder
as if he had continued to live, such amounts shall be paid to
Executive's estate, such benefits shall be provided to
Executive's family and such rights shall remain exercisable by
<PAGE>
Executive's estate in accordance with the terms of this
Agreement. This Agreement shall not otherwise be assignable by
Executive.
8.2 Successors. This Agreement shall inure to and be
----------
binding upon the Company's successors. The Company will require
any successor to all or substantially all of the business and/or
assets of the Company by sale, merger (where the Company is not
the surviving corporation), lease or otherwise, by agreement in
form and substance satisfactory to Executive, to assume expressly
this Agreement. If the Company shall not obtain such agreement
prior to the effective date of any such succession, Executive
shall have all rights resulting from termination by Executive for
good reason (as defined in paragraph (k) of Exhibit A) under this
Agreement. This Agreement shall not otherwise be assignable by
the Company.
8.3 Amendment or Modification; Waiver. This Agreement may
---------------------------------
not be amended unless agreed to in writing by Executive and the
Company. No waiver by either party of any breach of this
Agreement shall be deemed a waiver of a subsequent breach.
8.4 Titles. No provision of this Agreement is to be
------
construed by reference to the title of any section.
8.5 Continued Employment. This Agreement shall not give
--------------------
Executive any right of continued employment or any right to
compensation or benefits from the Company or any Subsidiary
except the right specifically stated herein to certain severance
and other benefits, and shall not limit the Company's (or a
Subsidiary's) right to change the terms of or to terminate
Executive's employment, with or without Cause, at any time other
than during a Standstill Period, except as may be otherwise
provided in a written employment agreement between the Company
(or a Subsidiary) and Executive.
8.6 Termination of Agreement Outside of Standstill Period.
-----------------------------------------------------
This Agreement shall be automatically terminated upon the first
to occur of (i) the termination of Executive's employment for any
reason, whether voluntary or involuntary, at any time other than
during a Standstill Period or (ii) the 180th day after a change
in Executive's title to a level below that of Executive's Current
Title unless a Standstill Period was in effect on the date of
such change or within 180 days thereafter or (iii) if Executive
is employed by a Subsidiary of the Company, the date on which the
Subsidiary either ceases to be a Subsidiary of the Company or
sells or otherwise disposes of all or substantially all of its
assets, unless such event occurs during a Standstill Period and
Executive's employment shall have been terminated in a Qualified
Termination within 90 days of such event.
<PAGE>
8.7 Prior Agreement. This Agreement shall supersede and
---------------
replace any prior change of control severance agreement between
the Company or any of its subsidiaries, or any predecessor, and
Executive.
8.8 Binding on Successors. This Agreement shall be binding
---------------------
on any successor to all or substantially all of the Company's
business or assets.
8.9 Definitions. The terms defined in Exhibits A and B
-----------
hereto are used herein as so defined.
8.10 Governing Law. The validity, interpretation,
-------------
performance and enforcement of this Agreement shall be governed
by the laws of the Commonwealth of Massachusetts.
8.11 Pronouns. All personal pronouns used in this
--------
Agreement shall include either gender, as applicable.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
-----------------------------
EXECUTIVE
WABAN INC.
By
--------------------------
chcon
<PAGE>
EXHIBIT A
---------
Definitions
-----------
The following terms as used in this Agreement shall have
the following meanings:
(a) "Base Salary" shall mean Executive's annual base
salary, exclusive of any bonus or other benefits he may
receive.
(b) "Cause" shall mean dishonesty, conviction of a
felony, 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.
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 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 effected in accordance with the foregoing
procedures (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) the 90th day after notice of termination is given (in
which case Executive shall be reinstated and paid any of his
previously unpaid Base Salary for such period).
(c) "Change of Control" shall have the meaning set forth
in Exhibit B.
(d) "Company" shall mean Waban Inc. or any successor.
<PAGE>
(e) "Current Title" shall mean Executive's title on the
date 180 days prior to the commencement of a Standstill
Period.
(f) "Date of Termination" shall mean the date on which
Executive's employment is terminated.
(g) "Disability" shall have the meaning given it in the
Company's long-term disability plan. Executive's employment
shall be deemed to be terminated for Disability on the date
on which Executive is entitled to receive long-term
disability compensation pursuant to such long-term disability
plan.
(h) Intentionally Omitted.
(i) "Executive" shall have the meaning set forth in the
first paragraph of this Agreement.
(j) "Incapacity" shall mean a disability (other than
Disability within the meaning of the immediately preceding
definition) or other impairment of health that renders
Executive unable to perform his duties to the satisfaction of
the Executive Compensation Committee of the Board of
Directors of the Company. If by reason of Incapacity
Executive is unable to perform his duties for at least six
months in any 12-month period, upon written notice by the
Company the employment of Executive shall be deemed to have
terminated by reason of Incapacity.
(k) "Qualified Termination" shall mean the termination
of Executive's employment during a Standstill Period (1) by
the Company other than for Cause, or (2) by Executive for
good reason, or (3) by reason of death, Incapacity or
Disability.
For purposes of this definition, termination for "good
reason" shall mean the voluntary termination by Executive of
his employment (A) within 120 days after the occurrence
without Executive's express written consent of any of the
events described in clauses (I), (II), (III), (IV), (V) or
(VI) below, provided that Executive gives notice to the
Company at least 30 days in advance requesting that the
situation described in those clauses be remedied, and the
situation remains unremedied upon expiration of such 30-day
period; (B) within 120 days after the occurrence without
Executive's express written consent (which must expressly
refer to such consent as being given under this Agreement) of
the events described in clauses (VII) or (VIII) below,
provided that Executive gives notice to the Company at least
<PAGE>
30 days in advance; or (C) upon occurrence of the events
described in clause (IX) below, provided that Executive gives
notice to the Company at least 30 days in advance:
(I) the assignment to him of any duties inconsistent
with his positions, duties, responsibilities,
reporting requirements, and status with the Company
(or a Subsidiary) immediately prior to a Change of
Control, or a substantive change in Executive's
titles or offices as in effect immediately prior to
a 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 (or a Subsidiary) for Cause or by Executive
other than for good reason; or any other action by
the Company (or a Subsidiary) which results in a
diminishment in such position, authority, duties or
responsibilities, other than an insubstantial and
inadvertent action which is remedied by the Company
or the Subsidiary promptly after receipt of notice
thereof given by Executive; or
(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, unless
any such reduction represents an overall reduction
in the rate of Base Salary paid or cash
compensation opportunities made available, as the
case may be, to executives in the same
organizational level (it being the Company's burden
to establish this fact); or
(III) the failure of the Company (or a Subsidiary) to
continue in effect any benefits or perquisites, or
any pension, life insurance, medical insurance or
disability plan in which Executive was
participating immediately prior to a Change of
Control unless the Company (or a Subsidiary)
provides Executive with a plan or plans that
provide substantially similar benefits, or the
taking of any action by the Company (or a
Subsidiary) that would adversely affect Executive's
participation in or materially reduce Executive's
benefits under any of such plans or deprive
<PAGE>
Executive of any material fringe benefit enjoyed by
Executive immediately prior to a Change of Control,
unless the elimination or reduction of any such
benefit, perquisite or plan affects all other
executives in the same organizational level (it
being the Company's burden to establish this fact);
or
(IV) any purported termination of Executive's employment
by the Company (or a Subsidiary) for Cause during a
Standstill Period which is not effected in
compliance with paragraph (b) of this Exhibit; or
(V) any relocation of Executive of more than 40 miles
from the place where Executive was located at the
time of the 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 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 B); or
(VIII) if Executive is employed by a Subsidiary of the
Company, such Subsidiary either ceases to be a
Subsidiary of the Company or sells or otherwise
disposes of, in one transaction or a series of
related transactions, assets or earning power
aggregating more than 30 percent of the assets
(taken at asset value as stated on the books of the
Subsidiary determined in accordance with generally
accepted accounting principles consistently
applied) or earning power of such Subsidiary (on an
individual basis) or such Subsidiary and its
subsidiaries (on a consolidated basis) to any other
Person or Persons (as those terms are defined in
Exhibit B); or
(IX) the voluntary termination by Executive of his
employment (i) at any time within one year after
the Change of Control or (ii) at any time during
the second year after the Change of Control until
the Company (or a Subsidiary) offers Executive an
<PAGE>
employment contract having a minimum two-year
duration which provides Executive with
substantially the same title, responsibilities,
annual and long-range compensation, benefits and
perquisites that he had immediately prior to the
Standstill Period. Notwithstanding the foregoing,
the Board of Directors of the Company may expressly
waive the application of this clause (IX) 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 such
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 (IX) shall be within the complete
discretion of the Board of Directors of the Company
but shall be made prior to the Change of Control.
(l) "Standstill Period" shall be the period commencing
on the date of a Change of Control and continuing until the
close of business on the last business day of the 24th
calendar month following such Change of Control.
(m) "Subsidiary" shall mean any corporation in which the
Company owns, directly or indirectly, 50 percent or more of
the total combined voting power of all classes of stock.
<PAGE>
EXHIBIT B
---------
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 the 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
the 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
<PAGE>
(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 if, immediately
after such transaction, the 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 the 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 B 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.
<PAGE>
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
(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; provided,
--------
however, that the term "Person" shall not include (a) any
- - -------
individuals who are descendants of Max Feldberg or Morris
Feldberg, (b) any relatives of the fourth degree of
consanguinity or closer of such descendants or (c)
custodians, trustees or legal representatives of such
persons.
An "Executive Related Party" shall mean any affiliate or
associate of the Executive 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).
chcon
<PAGE>
SECOND AMENDMENT AND WAIVER TO NOTE PURCHASE AGREEMENT
SECOND AMENDMENT AND WAIVER (the "Amendment") dated as of
March 28, 1994, by and among Waban Inc., a Delaware corporation
(the "Company"), and Massachusetts Mutual Life Insurance Company,
The Equitable Life Assurance Society of The United States, The
Chase Manhattan Bank, N.A., as trustee for EQ ASSET TRUST 1993,
Northern Life Insurance Company, The North Atlantic Life
Insurance Company of America, Farm Bureau Life Insurance Company
of Michigan, FB Annuity Company, Inter-State Assurance Company,
Texas Life Insurance Company, Life Insurance Company of Georgia,
Southland Life Insurance Company, Wisconsin National Life
Insurance Company and UNUM Life Insurance Company of America
(individually, a "Noteholder" and, collectively, the
"Noteholders").
WHEREAS, the Company entered into those certain Note
Purchase Agreements, dated as of June 15, 1991, as amended
pursuant to that certain Amendment to Note Purchase Agreement,
dated as of December 16, 1991, (collectively, as in effect prior
to the effectiveness of this Amendment, the "Existing Agreement,"
and, as amended by this Amendment, the "Amended Agreement"), with
each of the purchasers named on Annex 1 thereto (the
"Purchasers"), pursuant to which the Company issued and sold to
the Purchasers, and the Purchasers purchased from the Company, an
aggregate principal amount of Sixty Million Dollars ($60,000,000)
of the Company's 9.58% Senior Notes Due May 31, 1998; and
WHEREAS, the Company and the Noteholders are now desirous of
amending the Existing Agreement to make certain changes to the
covenants of the Company set forth in the Existing Agreement; and
WHEREAS, the capitalized terms defined in the Amended
Agreement not otherwise defined herein are used herein as so
defined;
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. AMENDMENTS TO THE EXISTING AGREEMENT.
Subject to the satisfaction of the conditions set forth in
Section 3 hereof, the Noteholders hereby consent and agree to the
following amendments to the Existing Agreement:
1.1 Defined Terms.
-------------
(a) Section 10.1 of the Existing Agreement is amended
by changing clause (e) of the definition of "Restricted
<PAGE>
Investments" contained therein to read, in its entirety, as
follows:
"(e) Investments in certificates of deposit, time
deposits and bankers' acceptances (which are rated not
lower than "A-2" by Standard and Poor's Corporation)
maturing within one (1) year from the date of
acquisition issued or created by, as applicable, a bank
or trust company organized under the laws of The United
States of America or any state thereof having capital,
surplus and undivided profits aggregating at least Five
Hundred Million Dollars ($500,000,000), total assets in
excess of Ten Billion Dollars ($10,000,000,000), and
outstanding unsecured and unsupported Debt rated "A" or
better by Standard and Poor's Corporation or Moody's
Investors' Service, Inc. (a "Permitted Bank");"
(b) Section 10.1 of the Existing Agreement is amended
by changing clause (i) of the definition of "Restricted
Investments" contained therein to read, in its entirety, as
follows:
"(i) loans and advances to employees, up to Five
Million Dollars ($5,000,000) in aggregate principal
amount outstanding at any time, in the ordinary course
and in furtherance of the Company's business;"
(c) Section 10.01 of the Existing Agreement is amended
by changing the definition of "Corporate Securities" contained
therein to read, in its entirety, as follows:
"Corporate Securities -- means any Security of a
United States corporation, which Security is rated "A"
or better by Standard and Poor's Corporation or "A 2"
or better by Moody's Investors Service, Inc. (or a
comparable rating by any comparable successor rating
agency).
(d) Section 10.1 of the Existing Agreement is amended
by adding thereto, in their proper alphabetical order, the
following new defined terms:
"Subordinated Indenture -- means that certain
Indenture between the Company and the First National
Bank of Boston relating to the issuance of the
Company's Subordinated Notes, in the form and upon the
terms appended as Exhibit E to this Agreement, as in
---------
effect upon the initial issuance of the Subordinated
Notes.
Subordinated Notes -- means the Company's 11%
Senior Subordinated Notes due May 15, 2004 issued, in
an aggregate principal amount of up to One Hundred
Million Dollars ($100,000,000), under the Subordinated
Indenture.
<PAGE>
1.2 Limitations on Payment Restrictions Affecting
---------------------------------------------
Restricted Subsidiaries.
-----------------------
The following new Section 7.23 is added after
Section 7.22 of the Existing Agreement:
"7.23 Limitation on Payment Restrictions Affecting
--------------------------------------------
Restricted Subsidiaries. The Company shall not, and
-----------------------
shall not permit any Restricted Subsidiary to, directly
or indirectly, create or otherwise cause or permit to
exist or become effective, or enter into any agreement
with any Person that would cause or permit to exist or
become effective, any encumbrance or restriction on the
ability of (i) any Wholly-Owned Subsidiary to pay
dividends or make any other distributions on its
Capital Stock or any other interest or participation
in, or measured by, its profits, owned by the Company
or any of its Subsidiaries or (ii) any Restricted
Subsidiary to (A) pay any Indebtedness owed to the
Company or any Restricted Subsidiary, (B) make loans or
advances to the Company, or (C) transfer any of its
properties or assets to the Company, except for
purposes of clauses (i) and (ii), for such encumbrances
or restrictions existing under or by reason of (1)
applicable law, (2) this Agreement or the Subordinated
Indenture, (3) customary non-assignment provisions of
any lease governing a leasehold interest of the Company
or any of the Restricted Subsidiaries, (4) any
instrument governing Indebtedness of a Person acquired
by the Company or any of the Restricted Subsidiaries at
the time of such acquisition, which encumbrance or
restriction is applicable to any Person so acquired or
its properties or assets and was not entered into in
connection with such acquisition, (5) encumbrances or
restrictions under Existing Indebtedness or (6)
encumbrances or restrictions under any Real Estate
Financing by any of the Restricted Subsidiaries."
1.3 Limitation on Use of Proceeds from Asset Sales.
----------------------------------------------
The following new Section 7.24 is added after
Section 7.23 of the Existing Agreement:
"7.24 Limitation on Use of Proceeds from Asset Sales.
----------------------------------------------
The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly,
consummate any Asset Sales unless (i) the Company or
the Restricted Subsidiary, as the case may be, receives
consideration at the time of any such Asset Sale at
<PAGE>
least equal to the Fair Market Value of the assets
sold or otherwise disposed of, (ii) at least eighty
percent (80%) of the Net Proceeds from the Asset Sales
are received in Cash and Marketable Securities at
closing and (iii) with respect to any Asset Sale
involving the Equity Interests of any Restricted
Subsidiary, the Company shall sell all of the Equity
Interests it owns of such Restricted Subsidiary in such
Asset Sale. Within twelve (12) months (or, in the
event of a sale-and-leaseback transaction, twenty-four
(24) months) after the receipt of Cash in respect of
any Asset Sale, the Company or a Restricted Subsidiary
may use all such Cash either to (x) invest in capital
assets, (y) purchase properties and assets that are of
a type similar to the properties and assets that were
the subject of such Asset Sale, and in the case of
clauses (x) and (y) the acquired capital assets or
properties and assets, as the case may be, are to be
used primarily in a retail warehousing business of the
Company which is operated by the Company or a
Significant Subsidiary of the Company (or is a business
which meets the test necessary to be a Significant
Subsidiary) immediately prior to such acquisition or
(z) permanently reduce Senior Indebtedness (it being
understood that any such reduction of the aggregate
principal amount of the Notes shall be made as an
optional prepayment in accordance with Section 5.2
hereof). "Excess Proceeds" shall mean any Cash from an
Asset Sale that is not invested or used to permanently
reduce Senior Indebtedness as provided in the preceding
sentence. When the aggregate amount of Excess Proceeds
from any Asset Sale or series of related Asset Sales
exceeds ten percent (10%) of the aggregate book value
of the tangible assets of the Company and its
Subsidiaries (measured at the end of the most recent
fiscal quarter ended prior to such Asset Sale), the
Company shall be permitted to apply such Excess
Proceeds in the manner set forth in the Subordinated
Indenture, so long as any payments or prepayments of
any amounts owing in respect of the Subordinated Notes
are, at such time, otherwise permitted under the terms
and provisions of this Agreement (including, without
limitation, the terms and provisions of Section 7.15
hereof). Upon such application, the amount of Excess
Proceeds shall be reset at zero. Notwithstanding the
foregoing, Five Million Dollars ($5,000,000) of Cash
received from any Asset Sale or Asset Sales in any
fiscal year shall not be subject to the restrictions
contained in this Section 7.24.
The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the
<PAGE>
extent such laws and regulations are applicable in
connection with any application of Excess Proceeds."
1.4 Transactions with Affiliates. Section 7.18 of the
----------------------------
Existing Agreement is amended and restated to read, in its
entirety, as follows:
"7.18 Transactions with Affiliates.
The Company will not, nor will it permit any
Restricted Subsidiary to, enter into any transaction,
(including, without limitation, the purchase, sale,
lease or exchange of Property, the making of any
Investment, loan, advance, capital contribution, the
execution and delivery of any contract, agreement or
other understanding (or any amendment thereto) or the
rendering of any service), with any Affiliate, unless
(a) the board of directors of the Company or such
Restricted Subsidiary, as the case may be, determines
in its reasonable good faith judgment, that such
transaction or series of transactions is in the best
interest of the Company or such Restricted Subsidiary
based on full disclosure of all relevant facts and
circumstances,
(b) such transaction or series of transactions is
fair to the Company or such Restricted Subsidiary and
in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such
Restricted Subsidiary's business and on fair and
reasonable terms that are no less favorable to the
Company or such Restricted Subsidiary, as the case may
be, than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate, and
(c) with respect to a transaction or series of
transactions involving aggregate payments by the
Company or a Restricted Subsidiary in excess of Five
Million Dollars ($5,000,000), a majority of independent
directors of the Company shall approve such transaction
or series of transactions by a resolution certifying
that such transaction or series of related transactions
comply with clause (b) hereof."
1.5 Mergers. Section 7.4(a) of the Existing Agreement is
-------
amended by (a) deleting the word "and" after clause (iv) thereof,
(b) substituting "; and" for the period after clause (v) thereof
and (c) adding the following:
"(vi) immediately after giving effect to such
transaction on a pro forma basis, the Consolidated Net
<PAGE>
Worth of the Surviving Corporation shall be equal to or
greater than the Consolidated Net Worth of the Company
immediately before such transaction.
As used in clause (vi) of this Section 7.4(a),
"Consolidated Net Worth" shall have the meaning
set forth in the Subordinated Indenture.
In connection with any consolidation or merger
contemplated hereby, the Company shall deliver or cause
to be delivered, to the holders of the Notes, an
Officer's Certificate and an Opinion of Counsel (in
each case, as shall be reasonably satisfactory to the
holders of the Notes), each stating that such
consolidation or merger complies with this
Section 7.4(a) and that all conditions precedent herein
provided for relating to such transactions have been
complied with."
1.6 Subsidiary Guarantees. The Existing Agreement is
---------------------
amended by adding the following new Section 7.26 after
Section 7.25 of the Existing Agreement:
"7.26 Subsidiary Guarantees. The Company shall not
---------------------
permit any Subsidiary to guaranty the Subordinated
Notes or any amounts owing in respect of the
Subordinated Indenture (whether pursuant to the terms
of Section 4.14 of the Subordinated Indenture or
otherwise) unless such Subsidiary concurrently
guaranties the Company's obligations under the Notes
and this Agreement and the guaranty of the Subordinated
Notes or the Company's obligations pursuant to the
Subordinated Indenture shall be subordinated to any
such guaranty granted to the holders of the Notes, in
accordance with the provisions of the Subordinated
Indenture, and shall be on terms no less favorable to
the holders of the Notes than the terms of the guaranty
granted to the holders of the Subordinated Notes issued
under the Subordinated Indenture.
The delivery of any such guaranty to the holders of the
Notes shall be accompanied by such other documents and
instruments (such as opinions of counsel and solvency
opinions) as shall be delivered to the holders of the
Subordinated Notes in connection with any guaranty
delivered pursuant to the terms of the Subordinated
Indenture."
1.7 Distributions, Subordinated Prepayments and
-------------------------------------------
Investments. The Existing Agreement is amended by adding the
- - -----------
following new subsection (c) to Section 7.15 of the Existing
<PAGE>
Agreement, immediately after subsection (b) thereof:
"(c) Additional Limit on Restricted Payments.
---------------------------------------
Notwithstanding any of the other provisions of this
Section 7.15, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or make any
distribution or repurchase on account of the Company's
or any Restricted Subsidiary's Capital Stock or other
Equity Interests (other than dividends or distributions
payable to the Company or any of its Wholly-owned
Subsidiaries (as defined in the Subordinated Indenture)
or payable in shares of Capital Stock of the Company
other than Redeemable Stock), (ii) purchase, redeem or
otherwise retire for value any Equity Interests of the
Company or any of its Subsidiaries (other than any
purchase, redemption or retirement of such Equity
Interests owned by the Company or any of its Wholly-
owned Subsidiaries (as defined in the Subordinated
Indenture)); (iii) purchase, redeem, prepay, defease or
otherwise retire for value prior to scheduled maturity,
repayment or sinking fund payment (a) any Indebtedness
of the Company that is contractually subordinated in
right of payment to the Subordinated Notes or (b) any
Indebtedness of any Subsidiary that is contractually
subordinated in right of payment to the Subordinated
Notes other than Indebtedness to the Company; or
(iv) make Investments (either through the Company or
any of its Wholly-owned Subsidiaries) other than
Permitted Investments (the foregoing actions set forth
in clauses (i) through (iv) being referred to as
"Restricted Payments"), if at the time of such
Restricted Payment:
(A) a Default or Event of Default shall have
occurred and be continuing or shall occur as a
consequence thereof;
(B) such Restricted Payment, together with the
aggregate of all other Restricted Payments made on or
after May 11, 1994, exceeds (x) Thirty-Five Million
Dollars ($35,000,000) (in the event the Subordinated
Notes on the date of computation are rated BBB- (or
better) by Standard & Poor's Corporation and Baa3 (or
better) by Moody's Investors Service, Inc., such amount
shall be increased by Fifty Million Dollars
($50,000,000)) plus fifty percent (50%) of the amount
of the cumulative Consolidated Net Income of the
Company for the period (taken as one accounting period)
from January 29, 1994 through the last fiscal quarter
immediately preceding such Restricted Payment (or, if
<PAGE>
Consolidated Net Income for such period is a deficit,
minus one hundred percent (100%) of such deficit); plus
(y) one hundred percent (100%) of the aggregate net
cash proceeds received by the Company on or after
January 29, 1994 from (i) the issue or sale of Equity
Interests of the Company (other than such Equity
Interests issued or sold to a Subsidiary of the Company
and other than Redeemable Stock), (ii) the conversion
of Indebtedness of the Company (other than (a) in
respect of the Convertible Subordinated Debentures or
(b) such Indebtedness held by a Subsidiary of the
Company) into Capital Stock of the Company (other than
Redeemable Stock), which for purposes of this clause
(b) shall be valued at the net cash proceeds received
by the Company upon the initial issuance of such
Indebtedness plus such additional Cash consideration
payable to the Company upon such conversion, or
(iii) the net cash proceeds received by the Company
from its investment in, and the sale, disposition or
other liquidation of, Investments that are not
Permitted Investments or
(C) immediately after such Restricted Payment,
the Company would not be permitted to incur One Dollar
($1.00) of additional Indebtedness pursuant to
Section 4.09 of the Subordinated Indenture.
The foregoing provisions of this Section 7.15(c) will
not prohibit, so long as no Default or Event of Default
shall have occurred and be continuing, (i) the payment
of any dividend within sixty (60) days after the date
of declaration thereof, if at the said date of
declaration such payment would have complied with the
provisions of this Section 7.15(c); (ii) the retirement
of any shares of the Company's Capital Stock in
exchange for, or out of the net proceeds of the
substantially concurrent sale (other than to a
Subsidiary of the Company) of other shares of the
Company's Capital Stock, other than any Redeemable
Stock; (iii) Investments by the Company or a Restricted
Subsidiary of the Company in the Company or a Wholly-
owned Subsidiary (as defined in the Subordinated
Indenture) of the Company or the purchase, redemption,
or other acquisition or retirement for value of such
Investments; (iv) acquisitions of Wholly-owned
Subsidiaries (as defined in the Subordinated
Indenture); (v) the purchase, redemption, prepayment,
defeasance or other acquisition or retirement for value
prior to scheduled maturity or any repayment or sinking
fund payment of any Indebtedness of any Wholly-owned
Subsidiary (as defined in the Subordinated Indenture)
of the Company which is not contractually subordinated
in right of payment to the Subordinated Notes; (vi) the
redemption, repurchase or other acquisition or
<PAGE>
retirement for value of subordinated Indebtedness of
the Company which is made in exchange for, or out of
proceeds of the substantially concurrent issue and sale
(other than to a Subsidiary) of (a) shares of Capital
Stock (other than Redeemable Stock) of the Company,
provided, however, that any net cash proceeds from such
issue are excluded from clause (B)(y)(i) of the
preceding paragraph or (b) new Indebtedness of the
Company, so long as (1) such Indebtedness is expressly
subordinated to the Subordinated Notes at least to the
same extent as the subordinated Indebtedness being so
refinanced; (2) such Indebtedness has an Average Life
to Stated Maturity equal to or greater than the
remaining Average Life to Stated Maturity of the
Subordinated Notes; and (3) such Indebtedness has a
final scheduled maturity which exceeds the final Stated
Maturity of the Subordinated Notes, provided, however,
that any net cash proceeds from such issue are excluded
from clause (B)(y)(ii) of the preceding paragraph; and
(vii) loans and advances to officers and employees of
the Company or any of its Subsidiaries up to Five
Million Dollars ($5,000,000) in the aggregate
outstanding at any one time. For purposes of
determining the aggregate permissible amount of
Restricted Payments in accordance with this
Section 7.15(c), no amounts expended pursuant to
clauses (iii), (iv), (v), (vi) and (vii) of this
paragraph shall be included in the calculations
provided in the foregoing clause (B) hereof.
The Company shall deliver to the holders of the
Notes, at the same time that the Company is required to
deliver its annual financial statements to the holders
of the Notes pursuant to Section 8.1(b) hereof, a
certificate of an officer of the Company setting forth
each Restricted Payment made in the fiscal year covered
by such financial statements (other than Restricted
Payments made to purchase Marketable Securities that do
not constitute Permitted Investments but that are
liquidated for cash within ninety (90) days of the date
of such Investment in an amount at least equal to the
initial purchase price of such investment), stating
that each such Restricted Payment is permitted and
setting forth the basis upon which the calculations
required by this Section 7.15(c) were computed."
1.8 Definitions. The following paragraph is added at the
-----------
end of Section 10.1 of the Note Purchase Agreement:
"As used solely in Sections 7.15(c), 7.23, 7.24, 7.25
and 7.26 of this Agreement, except as otherwise
expressly stated therein, all capitalized terms (other
than the terms "Company," "Notes," "Restricted
<PAGE>
Subsidiary," "Wholly-Owned Subsidiary," "Subordinated
Notes" and "Subordinated Indenture") shall have the
meanings assigned to such terms in Section 1.01 of the
Subordinated Indenture."
1.9 Exhibit E. A new Exhibit E is added to the Existing
---------
Agreement in the form of Exhibit B to this Amendment.
SECTION 2. CONSENT AND WAIVER.
(a) In connection with the proposed issuance by the Company
of Senior Subordinated Notes (the "Subordinated Notes") in the
aggregate principal amount of up to One Hundred Million Dollars
($100,000,000) having terms substantially as described in the
Company's prospectus dated May 4, 1994, the Noteholders hereby
consent and agree that the subordination provisions attached as
Exhibit A hereto are satisfactory in form and substance as
- - ---------
specified in the provisions of clause (iii) of the definition of
"Subordinated Adjusted Funded Debt" contained in Section 10.1 of
the Amended Agreement.
(b) The Noteholders hereby waive the restriction against
the incurrence of Subordinated Adjusted Funded Debt contained in
Section 7.11(a) of the Note Purchase Agreement to the extent, and
only to the extent, necessary to permit the Company to issue and
become liable for up to One Hundred Million Dollars
($100,000,000) of the Subordinated Notes, provided that such
--------
Subordinated Notes, after they are issued by the Company, shall
be considered as outstanding for purposes of determining
compliance with all applicable covenants and other terms and
provisions set forth in the Note Purchase Agreement.
(c) The terms of this Amendment shall not, except as
expressly provided in Section 2(b) hereof, operate as or
constitute a waiver by the Noteholders of, or otherwise
prejudice, the rights, remedies or powers of the Noteholders
under, the Existing Agreement or under applicable law. Except as
expressly provided herein, (i) no other terms and provisions of
the Existing Agreement are modified or changed by this Amendment,
and (ii) the terms and provisions of the Existing Agreement shall
continue in full force and effect. The Company hereby
acknowledges, confirms, reaffirms and ratifies all of its
obligations and duties under the Notes and the Amended Agreement.
This Amendment is not a limitation on the ability of any
Noteholder to exercise any of its rights and remedies due to any
Default or Event of Default under the Notes or the Amended
Agreement.
<PAGE>
SECTION 3. WARRANTIES AND REPRESENTATIONS.
To induce the Noteholders to enter in this Amendment, the
Company warrants and represents to the Noteholders that as of the
Effective Date (as defined below):
3.1 Organization, Existence and Authority. The Company is
-------------------------------------
a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company
has all requisite legal and corporate power and authority to
execute and deliver this Amendment and to perform its obligations
hereunder.
3.2 Litigation. There are no proceedings pending, or to
----------
the knowledge of the Company or any of its Subsidiaries
threatened, against or affecting the Company, any Subsidiary or
any of their respective Properties in any court or before any
Governmental Authority or arbitration board or tribunal which,
either individually or in the aggregate, would conflict with or
interfere with the ability of the Company to execute and deliver
this Amendment or to perform its obligations under the Amended
Agreement and the Notes.
3.3 Authorization, Execution and Enforceability. The
-------------------------------------------
execution and delivery by the Company of this Amendment, and the
performance by the Company of its obligations under the Amended
Agreement, have been duly authorized by all necessary action on
the part of the Company. This Amendment has been duly executed
and delivered by the Company and this Amendment and the Amended
Agreement are legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, except
that the enforceability thereof may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the
enforceability of creditors' rights generally, and may be subject
to the availability of equitable remedies.
3.4 No Conflicts or Defaults. (a) Neither the execution
------------------------
and delivery by the Company of this Amendment, nor the
performance by the Company of its obligations under the Amended
Agreement, conflicts with, results in any breach of any of the
provisions of, constitutes a default under, or violates or
results in the creation of any Lien upon any Property of the
Company or any Subsidiary under the provisions of: (i) its
charter or bylaws; or (ii) any agreement, instrument, statute,
rule or regulation, or any order, judgment or award of any court,
tribunal or arbitrator, by which it or any of its Property may be
bound, except to the extent that the Amended Agreement may, in
certain events, restrict or prohibit prepayments of the
Subordinated Notes.
(b) No event has occurred and no condition exists
which would constitute a Default or an Event of Default under the
Existing Agreement or under the Amended Agreement.
<PAGE>
3.5 Governmental Consent. Neither the execution and
--------------------
delivery by the Company of this Amendment, nor the performance by
the Company of its obligations under the Amended Agreement,
requires as a condition thereto any consent, approval or
authorization of, the filing, registration or qualification with,
any Governmental Authority on the part of the Company or the
Subsidiaries.
3.6 Disclosure. The financial statements heretofore
----------
delivered to the Noteholders by the Company pursuant to
Section 8.1 of the Existing Agreement do not, nor does this
Amendment, the Existing Agreement, the Company's Annual Report on
Form 10-K for the fiscal year ended January 30, 1993, the
Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended May 1, 1993, July 31, 1993 and October 30, 1993, and any
written statement furnished by the Company to the Noteholders in
connection herewith, taken as a whole, contain any untrue
statement of a material fact or omit a material fact necessary to
make the statements contained therein or herein not misleading.
There is no fact (other than facts of a general political or
economic nature) which the Company has not disclosed to the
Noteholders in writing which has had or, so far as the Company
can now reasonably foresee, will have a materially adverse effect
on the business, prospects, profits, Properties or condition
(financial or otherwise) of the Company and the Restricted
Subsidiaries, taken as a whole, or the ability of the Company to
perform its obligations under the Amended Agreement and the
Notes.
SECTION 4. CONDITIONS PRECEDENT TO THIS AGREEMENT.
The amendments of the Existing Agreement provided for in
Section 1 hereof and the consent and waiver provided for in
Section 2 hereof shall not become effective unless all of the
following conditions precedent shall have been satisfied on or
before July 31, 1994 (the date of such satisfaction being herein
referred to as the "Effective Date").
4.1 Execution and Delivery of Agreements. This Agreement
------------------------------------
shall have been executed and delivered to the Company by
Noteholders constituting holders of at least 66 2/3% in principal
amount of the outstanding Notes, and the Company shall have
executed and delivered to each of the Purchasers a counterpart of
this Agreement.
4.2 No Default; Representations and Warranties True. No
-----------------------------------------------
Default or Event of Default under the Existing Agreement shall
exist, the warranties and representations set forth in Section 3
hereof shall be true and correct on the Effective Date; and the
Purchasers shall have received a certificate of the Treasurer of
the Company, dated as of the Effective Date, certifying that all
of the conditions specified in this Section 4 have been
satisfied.
<PAGE>
4.3 Secretary's Certificate. The Purchasers shall have
-----------------------
received a certificate, in form and substance satisfactory to the
Noteholders and their special counsel, certifying (i) the
adoption of resolutions of the Executive Committee of the Board
of Directors of the Company authorizing the execution, delivery
and performance of this Amendment and the adoption of resolutions
of the Board of Directors of the Company granting authority to
such Executive Committee, each of which resolutions shall be
attached to such certificate and shall be in full force and
effect, and (ii) that such resolutions have not been amended or
rescinded by, and are not in conflict with, any other resolution
of such Executive Committee or Board of Directors.
4.4 Opinions of Counsel. The Purchasers shall have
-------------------
received from Sarah M. Gallivan, general counsel to the Company
and Hale and Dorr, special counsel to the Company, opinions dated
the Effective Date, as to such matters as the Purchasers may
reasonably request.
4.5 Expenses. The Company shall have made satisfactory
--------
arrangements to pay all costs and expenses of the Noteholders
relating to this Amendment in accordance with Section 5 hereof.
4.6 Proceedings Satisfactory. All proceedings taken in
------------------------
connection with this Amendment and all documents and papers
relating thereto shall be reasonably satisfactory to the
Noteholders and their special counsel. The Noteholders and their
special counsel shall have received copies of such documents and
papers as they may reasonably request in connection therewith, in
form and substance reasonably satisfactory to them.
4.7 Closing of Offering. The Company shall have closed its
-------------------
offering of the Subordinated Notes (it being understood that,
assuming satisfaction of the conditions set forth in Sections 4.1
through 4.6 above, the Effective Date shall be deemed to occur
concurrently with such closing).
SECTION 5. MISCELLANEOUS.
5.1 Governing Law. This Amendment shall be construed,
-------------
interpreted and enforced in accordance with, and governed by,
internal Massachusetts law.
5.2 Duplicate Originals. Two or more duplicate originals
-------------------
of this Amendment may be signed by the parties, each of which
shall be an original but all of which together shall constitute
one and the same instrument. This Amendment may be executed in
one or more counterparts and shall be effective when at least one
counterpart shall have been executed by each party hereto, and
each set of counterparts which, collectively, show execution by
each party hereto shall constitute one duplicate original.
<PAGE>
5.3 Waivers and Amendments. Neither this Amendment or any
----------------------
term hereof may be changed, waived, discharged or terminated
orally, or by any action or inaction, but only by an instrument
in writing signed by the party against which enforcement of the
charge, waiver, discharge or termination is sought.
5.4 Section Headings. The titles of the sections hereof
----------------
appear as a matter of convenience only, do not constitute a part
of this Amendment and shall not affect the construction hereof.
5.5 Cost and Expenses. Without limiting the provisions of
-----------------
the Existing Agreement, the Company shall pay all costs and
expenses of the Noteholders relating to this Amendment,
including, but not limited to, the statement for reasonable fees
and disbursements of special counsel to the Noteholders,
regardless of whether the Effective Date shall occur. The
Company will also pay upon receipt thereof each additional
statement for reasonable fees and disbursements of such special
counsel to the Noteholders rendered from time to time in
connection with this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on their behalf by a duly authorized
officer of agent thereof, as the case may be, as of the date
first above written.
WABAN INC.
By: /s/ Dale N. Garth
----------------------------
Name: Dale N. Garth
Title: SR. V.P. + CFO
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Bruce E. Gaudette
----------------------------
Name:
Title: VICE PRESIDENT
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/ Basil P. Livanos
---------------------------
Name: BASIL P. LIVANOS
Title:INVESTMENT OFFICER
THE CHASE MANHATTAN BANK, N.A., AS
TRUSTEE FOR EQ ASSET TRUST 1993
By: /s/ Diana Jacobs
----------------------------
Name: Diana Jacobs
Title:Second Vice President
NORTHERN LIFE INSURANCE COMPANY
By: /s/ Mark S. Jordahl
----------------------------
Name: Mark S. Jordahl
Title: Assistant Treasurer
THE NORTH ATLANTIC LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Mark S. Jordahl
----------------------------
Name: Mark S. Jordahl
Title: Assistant Treasurer
FARM BUREAU LIFE INSURANCE COMPANY
OF MICHIGAN
By:
--------------------------------
Name:
Title:
FB ANNUITY COMPANY
By:
--------------------------------
Name:
Title:
INTER-STATE ASSURANCE COMPANY
By:
--------------------------------
Name:
Title:
TEXAS LIFE INSURANCE COMPANY
By:
--------------------------------
Name:
Title:
LIFE INSURANCE COMPANY OF GEORGIA
By: Internationale Nederlanden
North America Investment
Centre, Inc.
its Agent
By: /s/ Fred C. Smith
------------------------------
Name: Fred C. Smith
Title:S.V.P. and Managing Director
SOUTHLAND LIFE INSURANCE COMPANY
By: Internationale Nederlanden
North America Investment
Centre, Inc.
its Agent
By: /s/ Fred C. Smith
------------------------------
Name: Fred C. Smith
Title:S.V.P. and Managing Director
WISCONSIN NATIONAL LIFE INSURANCE
COMPANY
By: /s/ A.S. Williams, III
-----------------------------
Name: A.S. Williams, III
Title: Senior Vice President, Investments and
Treasurer
UNUM LIFE INSURANCE COMPANY OF
AMERICA
By: /s/ David R. Murray
----------------------------
Name: David R. Murray
Title: Director, Corporate Securities
<PAGE>
AMENDMENT NO. 2
TO
CREDIT AGREEMENT
AMONG
WABAN INC.
AND THE BANKS PARTY THERETO
---------------------------
This Amendment No. 2 (this "Amendment"), dated as of April 22, 1994, among
Waban Inc., a Delaware corporation (the "Borrower") and The First National Bank
of Boston, Continental Bank, N.A., Bank of America National Trust and Savings
Association and The First National Bank of Chicago (collectively, the "Banks"
and individually, a "Bank"), amends the Credit Agreement dated as of July 8,
1993, among the Borrower and the Banks (as amended by Amendment No. 1 dated as
of November 15, 1993, the "Credit Agreement").
WHEREAS, the Borrower has requested that the Banks make certain amendments
to the Credit Agreement and the Banks are agreeable thereto upon certain terms
and conditions;
NOW, THEREFORE, in consideration of the foregoing premises, the parties
hereby agree as follows:
1. Outside Financing. Section 5.01(f) of the Credit Agreement is hereby
------- ---------
amended by adding the following provision after the amount "$95,000,000"
contained in such Section 5.01(f):
",except that if the Borrower has not received at least $30,000,000
of Outside Financing prior to July 30, 1994, then the cumulative
amount of the Real Estate Expenditures for the period beginning
May 2, 1993 and ending on July 30, 1994 will not exceed
$130,000,000"
2. First Year Outside Financing. Section 5.01(g) of the Credit
----- ---- ------- ---------
Agreement is hereby amended by deleting the date "June 30, 1994" contained in
such Section 5.01(g) and substituting the date "October 29, 1994" therefor.
3. Conditions to Effectiveness. The effectiveness of this Amendment
---------- -- -------------
shall be conditioned upon the satisfaction of the following conditions
precedent:
3.1. Delivery of Documents. The Borrower shall have delivered to the
-------- -- ---------
Banks, contemporaneously with the execution and delivery of this Amendment, the
following, in form and substance satisfactory to the Banks:
<PAGE>
(a) certified copies of the resolutions of the Borrower approving this
Amendment and the other documents referred to herein together with Officer's
Certificates as to the incumbency and true signatures of officers;
(b) Officer's Certificates of the Borrower certifying as to the legal
existence, good standing, and qualification to do business of the Borrower.
3.2. Legality of Transaction. No change in applicable law shall have
-------- -- -----------
occurred as a consequence of which it shall have become and continue to be
unlawful on the date this Amendment is to become effective (a) for the Banks to
perform any of their obligations under any of the Loan Documents or (b) for the
Borrower to perform any of its agreements or obligations under any of the Loan
Documents.
3.3. Performance. The Borrower shall have duly and properly performed,
-----------
complied with and observed in all material respects its covenants, agreements
and obligations contained in the Loan Documents required to be performed,
complied with or observed by it on or prior to the date this Amendment is to
become effective. No event shall have occurred on or prior to the date this
Amendment is to become effective and be continuing, and no condition shall
exist on the date this Amendment is to become effective which constitutes a
Default or Event of Default under any of the Loan Documents, except for such
Defaults or Events of Default as will be cured upon the effectiveness of this
Amendment.
3.4. Proceedings and Documents. All corporate, governmental and other
----------- --- ---------
proceedings in connection with the transactions contemplated by this Amendment
and all instruments and documents incidental thereto shall be in the form and
substance reasonably satisfactory to the Banks and the Banks shall have received
all such counterpart originals or certified or other copies of all such
instruments and documents, as any of the Banks shall have reasonably requested.
4. Representations and Warranties. The Borrower hereby represents and
--------------- --- ----------
warrants to the Banks as follows:
(a) The representations and warranties of the Borrower contained in the
Credit Agreement, as amended hereby, were true and correct in all material
respects when made and continue to be true and correct in all material respects
on the date hereof, except that the financial statements referred to therein
shall be the financial statements of the Borrower most recently delivered to
the Banks, and except as such representations and warranties are affected by
the transactions contemplated hereby;
(b) The execution, delivery and performance by the Borrower of this
Amendment and the consummation of the transactions contemplated hereby; (i) are
within the corporate powers of the Borrower and have been duly authorized by all
necessary corporate action on the part of the Borrower, (ii) do not require any
approval, consent of, or filing with, any governmental agency or authority,
or any other person,
<PAGE>
association or entity, which bears on the validity of
this Amendment and which is required by law or the regulation or rule of any
agency or authority, or other person, association or entity, (iii) do not
violate any provisions of any order, writ, judgment, injunction, decree,
determination or award presently in effect in which the Borrower is named, or
any provision of the charter documents or by-laws of the Borrower, (iv) do
not result in any breach of or constitute a default under any agreement or
instrument to which the Borrower is a party or to which it or any of its
properties are bound, including without limitation any indenture, loan or credit
agreement, lease, debt instrument or mortgage, except for such breaches and
defaults which would not have a material adverse effect on the Borrower and its
subsidiaries taken as a whole, and (v) do not result in or require the creation
or imposition of any mortgage, deed of trust, pledge or encumbrance of any
nature upon any of the assets or properties of the Borrower; and
(c) This Amendment, the Credit Agreement as amended hereby, and the other
Loan Documents constitute the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their
respective terms, provided that (i) enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors, and (ii)
enforcement may be subject to general principles of equity, and the
availability of the remedies of specific performance and injunctive relief may
be subject to the discretion of the court before which any proceeding for
such remedies may be brought.
5. No Other Amendments. Except as expressly provided in this Amendment,
-- ----- ----------
all of the terms and conditions of the Credit Agreement, the Notes and the other
Loan Documents shall remain in full force and effect.
6. Execution in Counterparts. This Amendment may be executed in any
--------- -- ------------
number of counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Amendment, it
shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
7. Effective Date. Subject to the satisfaction of the conditions
--------- ----
precedent set forth in Section 3 hereof, this Amendment shall be deemed to
be effective as of the date hereof.
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Banks have duly executed this
Amendment No. 2 as of the date first above written.
WABAN INC.
By: /s/ Dale N. Garth
---------------------------
Title: Sr. V.P. & C.F.O.
THE FIRST NATIONAL BANK
OF BOSTON
By: /s/ Mitchell B. Feldman
--------------------------
Title: Director
CONTINENTAL BANK, N.A.
By: /s/ James C. Higgins
--------------------------
Title: Managing Director
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By:
--------------------------
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
By: /s/ John Runger
---------------------------
Title: VP
<PAGE>
John J. Nugent
--------------
EMPLOYMENT AGREEMENT
AGREEMENT dated as of February 1, 1994 between John J.
Nugent, whose address is 50 Walnut Street, Braintree, MA 02184
("Executive") and Waban Inc., a Delaware corporation, whose
principal office is in Natick, Massachusetts ("Employer" or
"Company").
The parties hereto, in consideration of the mutual
agreements hereinafter contained and intending to be legally
bound hereby, agree as follows:
1. Employment. The Executive is currently an employee of
----------
the Company. Employer will employ Executive and Executive will
be an employee of Employer under the terms and conditions
hereinafter set forth. This Agreement supersedes and replaces
any prior employment agreement between Executive and Employer or
any of their subsidiaries or divisions, except for any Change of
Control Severance Agreement between Executive and Employer.
2. Term. This Agreement shall become effective on the date
----
hereof and shall continue until June 1, 1996 and thereafter until
terminated by either Executive or Employer, subject to earlier
termination as provided herein (such period of employment
hereinafter called the "Employment Period").
3. Duties. Executive shall diligently perform the duties
------
and responsibilities of President and General Manager of
Employer's BJ's Wholesale Club division or such other executive
duties and responsibilities as shall from time to time be
assigned to him by the President or Board of Directors of
Employer.
4. 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 of his
duties and responsibilities under this Agreement; provided,
--------
however, that nothing herein contained shall be deemed to prevent
- - -------
or limit the right of Executive (a) to make any passive
investments where Executive is not obligated or required to, and
shall not in fact, devote any managerial efforts, (b) to
participate in charitable or community activities or in trade or
professional organizations, or (c) subject to approval of the
Board of Directors (which approval shall not be unreasonably
withheld or withdrawn), hold directorships in public companies,
except only that the President of Employer shall have the right
to limit such services as a director or such participation if the
President believes that the time spent on such activities
infringes in any material respects upon the time required by
Executive for the performance of his duties under this Agreement
or is otherwise incompatible with those duties.
<PAGE>
5. Base Salary. During the Employment Period, Executive
-----------
shall receive a base salary at the rate of $300,000.00 per year,
or such higher amount as Employer shall determine from time to
time. Base salary shall be payable in such manner at such times
as Employer shall pay base salary to other executive employees.
6. Policies and Fringe Benefits. Executive shall be
----------------------------
subject to Employer policies applicable to its executives
generally, and Executive shall be entitled to receive all such
fringe benefits as Employer shall from time to time make
available to other Employer executives generally (subject to the
terms of any applicable fringe benefit plan).
7. Termination of Employment; in General.
-------------------------------------
a) Employer shall have the right to end Executive's
employment at any time and for any reason, with or without cause.
Cause shall consist of 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
of Directors of the Company), 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.
b) The Employment Period shall terminate when Executive
becomes entitled to receive long-term disability compensation
pursuant to Employer's long-term disability plan. In addition,
if by reason of any incapacity, Executive is unable to perform
his duties for at least six months in any 12 month period, upon
written notice by Employer 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 Employer or any parent corporation and any
subsidiaries or divisions of Employer or any such parent.
8. BENEFITS UPON TERMINATION OF EMPLOYMENT.
---------------------------------------
a) Termination by Employer Other Than for Cause, Disability
--------------------------------------------------------
or Incapacity. If the Employment Period shall have been
- - -------------
terminated by Employer for any reason other than cause,
disability or incapacity, no compensation or other benefits shall
be payable to or accrue to Executive hereunder except as follows:
<PAGE>
(i) Employer will continue to pay to Executive his
then base salary for a period of 12 months from the date of
termination, which base salary shall be reduced after three
months for compensation earned from other employment or
self-employment.
(ii) Until the expiration of the period of base salary
payments described in (i) immediately above or until
Executive shall commence other employment or self-
employment, whichever shall first occur, Employer will
provide such medical and hospital insurance and term life
insurance (but not long-term disability insurance) for
Executive and his family, comparable to the insurance
provided for executives generally, as Employer shall
determine, and upon the same terms and conditions as shall
be provided for Employer's executives generally.
(iii) Executive shall be entitled to payment, if any,
pursuant to the terms of Employer's Management Incentive
Plan ("MIP"), or, if greater, such amount as Executive would
have earned under MIP if his employment had continued until
the end of the fiscal year (pro-rated for the period of
active employment during such year).
(iv) Such payments or benefits under other Employer
plans in which Executive participates as are required or
provided by the provisions of such plans.
b) Termination for Death, Disability or Incapacity. If the
-----------------------------------------------
Employment Period shall terminate at any time by reason of death,
disability or incapacity, no compensation or other benefits shall
be payable to or accrue to Executive hereunder except as follows:
Executive shall be entitled to payment, if any, pursuant to
the terms of MIP, or, if greater, such amount as Executive would
have earned under MIP if his employment had continued until the
end of the fiscal year (pro-rated for the period of active
employment during such year).
Executive shall also be entitled to payments or benefits
under other Employer plans, including any long-term disability
plan, to the extent therein provided in the circumstances.
c) Voluntary Termination; Termination for Cause; Violation
-------------------------------------------------------
of Certain Covenants. If Executive should end his employment
- - --------------------
voluntarily or if Employer should end Executive's employment for
cause, or if Executive should violate the protected persons or
noncompetition provisions of Section 9, all compensation and
benefits otherwise payable pursuant to this Agreement shall
cease. Employer does not waive any rights it may have for
damages or for injunctive relief.
<PAGE>
9. Agreement Not to Solicit or Compete.
-----------------------------------
(a) Upon the termination of the Employment Period at any
time for any reason, Executive shall not during the Prohibited
Period 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 in which Executive has any direct or
indirect interest (other than a less-than-one percent equity
interest in an entity), with which Executive is affiliated or for
which Executive renders any services. "Prohibited Period" shall
mean a period coterminous with the period of base salary
continuation (without regard to reduction for income from other
employment or self-employment) which is applicable or which would
have been applicable had the termination been pursuant to Section
8(a). A "protected person" shall be a person known by Executive
to be employed by Employer or its subsidiaries at or 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 limitation on (A) employment of, (B)
solicitation of, and (C) unsolicited acceptance of services from,
each "protected person" and (iii) 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 event
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 of the Employer and
its affiliates. Therefore, if Executive should end his
employment voluntarily at any time, including by reason of
retirement, disability or incapacity, or if Employer should end
Executive's employment at any time for cause, then during the
Prohibited Period, Executive will not engage, either as a
principal, employee, partner, consultant or investor (other than
a less-than-one percent equity interest in an entity), in a
business which is a competitor of Employer or its affiliates. A
business shall be deemed a competitor of Employer or its
affiliates if it shall then be so regarded by retailers or
wholesalers generally, or if it shall operate a warehouse outlet
(such as HomeBase, Builder's Square, BJ's Wholesale Club, Home
Depot, Sam's Club, Price/Costco or similar warehouse
merchandisers) within 10 miles of any "then existing" Waban Inc.
warehouse location. The term "then existing" in the previous
sentence shall refer to any such location that is, at the time of
<PAGE>
termination of the Employment Period, operated by Waban Inc. or
any of its subsidiaries or divisions or under lease for operation
as aforesaid. Nothing herein shall restrict the right of
Executive to engage in a business that operates exclusively
conventional or full mark-up department stores or general
merchandise discount department stores. 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.
If the Employment Period terminates, Executive agrees (i) to
notify Employer immediately upon his securing employment or
becoming self-employed during any period when Executive's
compensation from Employer shall be subject to reduction or his
benefits provided by Employer shall be subject to termination as
provided in Section 8 and (ii) to furnish to Employer written
evidence of his compensation earned from any such employment or
self-employment as Employer 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 Employer and shall execute a
certificate certifying that he has returned all such items in his
possession or under his control.
10. ASSIGNMENT. The rights and obligations of Employer
----------
shall inure to the benefit of and shall be binding upon the
successors and assigns of Employer. The rights and obligations
of Executive are not assignable except only that payments payable
to him after his death shall be made to his estate.
11. NOTICES. All notices and other communications required
-------
hereunder shall be in writing and shall be given either by
personal delivery or by mailing the same by certified or
registered mail, return receipt requested, postage prepaid. If
sent to Employer, the same shall be mailed to Employer at One
Mercer Road, Natick, MA 01760, Attention: President, or such
other address as Employer may hereafter designate by notice to
Executive; and if sent to Executive, the same shall be mailed to
Executive at his address set forth above, or at such other
address as Executive may hereafter designate by notice to
Employer. Notices shall be effective upon receipt.
<PAGE>
12. GOVERNING LAW. This Agreement and the rights and
-------------
obligations of the parties hereunder shall be governed by the
laws of the Commonwealth of Massachusetts.
/s/ John J. Nugent
------------------------------------
Executive
WABAN INC.
By /s/ Herbert J Zarkin
---------------------------------
Herbert J Zarkin, President
nugree
<PAGE>
<TABLE>
Exhibit 11
WABAN INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
--------------------
April 30, May 1,
1994 1993
-------- -----
<S> <C> <C>
Net income as reported $ 9,129,000 $ 5,330,000
========== ==========
Net income used for primary
computation $ 9,129,000 $ 5,330,000
Add (where dilutive):
Tax effected interest
and amortization
of debt expense on
convertible debt 1,085,000 -
---------- ----------
Net income used for fully
diluted computation $10,214,000 $ 5,330,000
========== ==========
Weighted average number of
common shares outstanding 33,103,735 33,043,884
Add (where dilutive):
Assumed exercise of those
options that are common
stock equivalents net
of treasury shares
deemed to have been
repurchased 273,277 97,303
---------- ----------
Weighted average number of
common and common equivalent
shares outstanding, used for
primary computation 33,377,012 33,141,187
Add (where dilutive):
Assumed exercise of con-
vertible securities 4,387,879 -
---------- ----------
Adjusted shares outstanding
used for fully diluted
computation 37,764,891 33,141,187
========== ==========
</TABLE>
