<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 October 29, 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 November
26, 1994: 33,172,102
<PAGE>
<TABLE>
PART I FINANCIAL INFORMATION
WABAN INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
-----------------------
October 29, October 30,
1994 1993
----------- -----------
(In Thousands Except
Per Share Amounts)
<S> <C> <C>
Net sales $905,606 $897,646
------- -------
Cost of sales, including buying and occupancy costs 774,888 773,477
Selling, general and administrative expenses 104,781 108,495
Interest on debt and capital leases (net) 3,972 3,057
------- -------
Total expenses 883,641 885,029
------- -------
Income before income taxes 21,965 12,617
Provision for income taxes 8,566 4,530
------- -------
Net income $ 13,399 $ 8,087
======= =======
Net income per common share (see Exhibit 11 for
detailed computations):
Primary $ 0.40 $ 0.24
======= =======
Fully diluted $ 0.38 $ 0.24
======= =======
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
WABAN INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Thirty-Nine Weeks Ended
-----------------------
October 29, October 30,
1994 1993
----------- -----------
(In Thousands Except
Per Share Amounts)
<S> <C> <C>
Net sales $2,678,250 $2,699,080
--------- ---------
Cost of sales, including buying and occupancy costs 2,286,979 2,324,094
Selling, general and administrative expenses 308,676 323,583
Interest on debt and capital leases (net) 11,005 9,067
--------- ---------
Total expenses 2,606,660 2,656,744
--------- ---------
Income before income taxes and cumulative effect of
accounting principle changes 71,590 42,336
Provision for income taxes 27,920 16,120
--------- -------
Income before cumulative effect of accounting
principle changes 43,670 26,216
Cumulative effect of accounting principle changes - 905
--------- ---------
Net income $ 43,670 $ 27,121
========= =========
Income per common share (see Exhibit 11 for detailed
computations):
Primary earnings per share:
Income before cumulative effect of accounting
principle changes $ 1.31 $ 0.79
Cumulative effect of accounting principle changes - 0.03
--------- ---------
Net income $ 1.31 $ 0.82
========= =========
Fully diluted earnings per share:
Income before cumulative effect of accounting
principle changes $ 1.24 $ 0.78
Cumulative effect of accounting principle changes - 0.03
--------- ---------
Net income $ 1.24 $ 0.81
========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
WABAN INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
October 29, January 29, October 30,
1994 1994 1993
----------- ----------- -----------
(Dollars In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 39,899 $ 19,877 $ 32,129
Marketable securities 97,381 - -
Accounts receivable 50,073 62,447 52,491
Merchandise inventories (net) 561,375 505,188 570,758
Current deferred income taxes 35,464 36,996 16,345
Prepaid expenses 17,452 9,662 19,029
--------- --------- ---------
Total current assets 801,644 634,170 690,752
--------- --------- ---------
Property at cost:
Land and buildings 270,435 222,522 233,798
Leasehold costs and improvements 61,633 59,844 73,907
Furniture, fixtures and equipment 224,346 195,740 217,553
--------- --------- ---------
556,414 478,106 525,258
Less accumulated depreciation
and amortization 121,433 96,623 115,140
--------- --------- ---------
434,981 381,483 410,118
--------- --------- ---------
Property under capital leases 17,482 18,452 22,423
Less accumulated amortization 7,147 6,924 8,482
--------- --------- ---------
10,335 11,528 13,941
--------- --------- ---------
Property held for sale (net) 14,971 30,247 -
Other assets 14,226 10,599 9,503
--------- --------- ---------
Total assets $1,276,157 $1,068,027 $1,124,314
========= ========= =========
LIABILITIES
Current liabilities:
Short-term debt $ - $ - $ 25,000
Current installments of long-
term debt 12,757 13,814 13,809
Accounts payable 318,025 253,232 305,034
Restructuring reserve 18,416 29,444 -
Accrued expenses and other
current liabilities 153,053 129,637 108,391
Accrued federal and state
income taxes 112 2,970 486
Obligations under capital leases
due within one year 1,058 1,264 1,449
--------- --------- ---------
Total current liabilities 503,421 430,361 454,169
--------- --------- ---------
Real estate financings, exclusive of
current installments 1,771 4,075 4,092
General corporate debt 36,000 48,000 48,000
Senior subordinated debt 100,000 - -
Convertible subordinated debt 108,600 108,600 108,600
Obligations under capital leases,
less portion due within one year 12,622 13,379 17,211
Noncurrent restructuring reserve 22,829 28,642 -
Other noncurrent liabilities 23,107 19,445 17,806
Deferred income taxes 1,807 (4,967) 9,816
STOCKHOLDERS' EQUITY
Common stock, par value $.01,
authorized 190,000,000 shares,
issued and outstanding 33,169,969,
33,086,295 and 33,091,099 shares 332 331 331
Additional paid-in capital 324,893 322,915 322,140
Unrealized holding losses (141) - -
Retained earnings 140,916 97,246 142,149
--------- --------- ---------
Total stockholders' equity 466,000 420,492 464,620
--------- --------- ---------
Total liabilities and
stockholders' equity $1,276,157 $1,068,027 $1,124,314
========= ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
WABAN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Thirty-Nine Weeks Ended
-----------------------
October 29, October 30,
1994 1993
----------- -----------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 43,670 $ 27,121
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of property 29,804 27,121
Amortization of premium on marketable securities 254 9
Loss on property disposals 553 547
Other non-cash items, net 780 319
Deferred income taxes 8,400 (6,084)
Increase (decrease) in cash
due to changes in:
Accounts receivable 12,374 (11,086)
Merchandise inventories (56,187) (45,756)
Prepaid expenses (7,790) (9,818)
Other assets, net (880) 54
Accounts payable 64,793 66,017
Restructuring reserves (16,841) -
Accrued expenses 32,118 9,428
Accrued income taxes (2,858) (3,437)
Other noncurrent liabilities 3,662 1,950
------- -------
Net cash provided by operating activities 111,852 56,385
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (102,884) -
Sale of marketable securities 5,014 16,905
Property additions (81,948) (99,239)
Property disposals 5,843 123
------- -------
Net cash used in investing activities (173,975) (82,211)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of short-term debt - 25,000
Borrowings of long-term debt, net of
issuance costs of $2,747 97,253 -
Repayment of long-term debt (15,361) (2,210)
Repayment of capital lease obligations (946) (1,007)
Proceeds from sale and issuance of
common stock 1,199 528
------- -------
Net cash provided by financing
activities 82,145 22,311
------- -------
Net increase (decrease) in cash
and cash equivalents 20,022 (3,515)
Cash and cash equivalents at
beginning of year 19,877 35,644
------- -------
Cash and cash equivalents at
end of period $ 39,899 $32,129
======= ======
Supplemental cash flow information:
Interest paid $ 6,745 $ 6,802
Income taxes paid 22,378 23,559
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the first nine 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 sales and operating income or losses of
16 other HomeBase warehouse stores planned to be closed as part of the
restructuring have been excluded from results for the periods ended October 29,
1994. Six of these 16 warehouses have been closed as of October 29, 1994.
5. The cumulative effect of accounting principle changes in the nine months
ended October 30, 1993 included 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. In May 1994, the Company issued $100,000,000 of 11% Senior Subordinated
Notes due May 15, 2004. The net proceeds to the Company were approximately
$97.3 million.
7. The Company classifies its marketable securities as available-for-sale
securities in accordance with SFAS No. 115. At October 29, 1994, marketable
securities consisted of high quality debt securities issued by states or their
political subdivisions and high quality corporate debt securities. The
amortized cost basis of marketable securities exceeded the aggregate fair value
by $235,000 as of October 29, 1994. All of the Company's marketable securities
have contractual maturities of less than two years, with approximately 75%
maturing in less than one year.
8. Presented below is information relative to the operating results of the
Company's business segments (dollars in thousands). The 79 HomeBase warehouses
in operation at October 29, 1994 include ten units that are planned to be
closed in connection with that division's restructuring and whose sales and
operating results are excluded from the Company's reported operating results
for the current fiscal year.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------- -----------------------
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales:
BJ's Wholesale Club $558,999 $484,644 $1,609,909 $1,403,410
HomeBase 346,607 413,002 1,068,341 1,295,670
------- ------- --------- ---------
$905,606 $897,646 $2,678,250 $2,699,080
======= ======= ========= =========
Operating income:
BJ's Wholesale Club $ 12,684 $ 8,810 $ 37,128 $ 22,693
HomeBase 15,463 8,359 51,656 35,088
General corporate expense (2,210) (1,495) (6,189) (6,378)
------- ------- --------- ---------
25,937 15,674 82,595 51,403
Interest on debt and capital
leases (net) (3,972) (3,057) (11,005) (9,067)
------- ------- -------- ---------
Income before income taxes $ 21,965 $ 12,617 $ 71,590 $ 42,336
======= ======= ======== =========
</TABLE>
Warehouses in operation - end of period:
- ---------------------------------------
BJ's Wholesale Club 59 47
HomeBase 79 90
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Thirteen Weeks (Third Quarter) and Thirty-Nine Weeks (Nine Months) Ended
October 29, 1994 versus Thirteen and Thirty-Nine Weeks Ended October 30, 1993.
Results of Operations
- ---------------------
The Company's results for the quarter and nine months ended October 29, 1994
exclude the sales and operating income or losses of 16 HomeBase warehouse
stores closed or planned to be closed in connection with the Company's
restructuring announced in last year's fourth quarter, when the Company
recorded a $101.1 million pre-tax restructuring charge. Six of these stores
have been closed in this fiscal year. Last year's third quarter results
included sales of $80.6 million and a combined operating loss of $2.6 million
from these 16 stores and from eight HomeBase stores located in the Midwest that
were closed at the end of last year as part of the restructuring. In the first
nine months of last year, these 24 stores had sales of $255.2 million and
combined operating losses of $7.6 million. Last year's fourth quarter results
included sales of $15.2 million and combined operating losses of $10 thousand
from these stores.
As a result of the elimination of these 24 HomeBase warehouse stores included
in the restructuring, HomeBase's total sales decreased 16.1% in the third
quarter and 17.5% year-to-date compared to sales reported in the same periods
last year. Total sales increased at BJ's 15.3% in the third quarter and 14.7%
year-to-date, and Waban's consolidated net sales increased by 0.9% in the third
quarter and decreased by 0.8% in the first nine months. Comparable warehouse
sales decreased 1.1% at BJ's and increased 0.1% at HomeBase in this year's
third quarter. This represents an improvement over this year's second quarter,
when comparable warehouse sales decreased 3.6% at BJ's and 1.2% at HomeBase,
and the first quarter, when comparable warehouse sales decreased 3.9% at BJ's
and 3.4% at HomeBase. For the first nine months of this year, comparable
warehouse sales decreased 2.9% at BJ's and 1.6% at HomeBase. Sales comparisons
at both divisions continued to be affected by increased levels of competition,
and sales comparisons at BJ's were also impacted by new BJ's clubs opened in
the same markets as existing BJ's clubs.
Cost of sales (including buying and occupancy costs) as a percentage of sales
was 85.6% in this year's third quarter versus 86.2% in the comparable period
last year. For the first nine months, the cost of sales percentage was 85.4%
compared to 86.1% last year. Gross selling margins increased at both
divisions, particularly at HomeBase, while the proportion of sales contributed
by BJ's, which is a lower margin business than HomeBase, increased.
Selling, general and administrative (SG&A) expenses, as a percentage of sales,
were 11.6% in the third quarter this year compared to 12.1% in last year's
third quarter. Year-to-date SG&A expenses were 11.5% this year versus 12.0% in
the comparable period last year. The ratio of SG&A expenses to sales was lower
this year mainly because of BJ's increased proportion of consolidated sales.
This more than offset an increase in HomeBase's SG&A expenses as a percentage
of sales, which was primarily due to increased store payroll to provide
improved customer service.
BJ's operating income in this year's third quarter was $12.7 million versus
$8.8 million in the comparable period last year, and its year-to-date operating
income was $37.1 million compared to $22.7 million last year. These increases
reflect improved gross margin mix, efficiencies in merchandise distribution,
and effective expense control. The year-to-date comparison also benefitted
from a weak first quarter performance last year.
Operating income at HomeBase in this year's third quarter was $15.5 million
compared to $8.4 million in the same period last year, and year-to-date
operating income was $51.7 million versus $35.1 million last year. While part
of this improvement was due to the elimination of underperforming units as part
of HomeBase's restructuring, the ongoing stores accounted for most of the
increase in HomeBase's third quarter operating income and the majority of the
increase year-to-date. Higher gross margins more than offset higher store
payrolls. These results reflect HomeBase's strategic initiative to improve
customer service and achieve higher gross margins through a better mix of
sales, efficiencies in merchandise distribution, and selective price increases.
The components of net interest expense were as follows (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------------- ------------------
Oct. 29, Oct. 30, Oct. 29, Oct. 30,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest expense on debt $5,352 $2,913 $13,590 $8,156
Interest and investment income (1,815) (492) (3,919) (1,030)
----- ----- ------ -----
Interest on debt (net) 3,537 2,421 9,671 7,126
Interest on capital leases 435 636 1,334 1,941
----- ----- ------ -----
Interest on debt and capital
leases (net) $3,972 $3,057 $11,005 $9,067
===== ===== ====== =====
</TABLE>
This year's increases in interest expense on debt and in interest and
investment income were due primarily to the issuance of $100 million of 11%
Senior Subordinated Notes in May 1994 and investment of the net proceeds of
approximately $97.3 million. Interest expense on debt was net of capitalized
interest of $489,000 in this year's third quarter and $1,777,000 year-to-date.
Last year's capitalized interest was $656,000 and $2,242,000 in the third
quarter and the first nine months, respectively.
The year-to-date provision for income taxes was 39% this year versus 38.1% last
year.
Net income for the third quarter was $13.4 million, or $.38 per share, fully
diluted, compared to $8.1 million, or $.24 per share, in the third quarter of
last year. For the first nine months, net income was $43.7 million, or $1.24
per share, fully diluted, versus $27.1 million, or $.81 per share, in the
comparable period last year. Last year's nine-month 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.)
HomeBase operated 79 warehouse stores at October 29, 1994, including 10 units
which are planned to close in connection with its restructuring, and whose
sales and operating results are excluded from the Company's reported operating
results. HomeBase operated 90 warehouse stores as of October 30, 1993. The
number of BJ's clubs in operation at October 29, 1994 was 59 versus 47 one year
earlier.
Liquidity and Capital Resources
- -------------------------------
Cash expended for property additions in the first nine months of the fiscal
year was $81.9 million compared to $99.2 million in the same period last year.
Through October 29, 1994 the Company opened three new HomeBase warehouse stores
and eight new BJ's clubs, including the relocation of one club, and closed six
HomeBase warehouse stores. Last year the Company opened five HomeBase stores
and eight BJ's clubs, and closed one HomeBase store in the same time period.
The Company expects to open three additional BJ's clubs in the fourth quarter
of this fiscal year. Capital expenditures this year are expected to be
approximately $130 million, including approximately $75 million for real estate
acquisition and development. The timing and amount of actual expenditures may
vary from these estimates due to the complexity of the real estate development
process.
In May 1994 the Company issued $100 million of 11% Senior Subordinated Notes
due May 15, 2004. The proceeds (net of expenses) to the Company of
approximately $97.3 million will be used primarily to fund the opening of new
stores, including the acquisition of real estate and the construction of
stores, and for general corporate purposes. The funds are being temporarily
invested in high quality securities of less than two-year maturity issued by
corporations and governmental entities.
The Company's restructuring is expected to generate a significant amount of
cash flow as HomeBase warehouse stores are closed. In addition to tax
benefits, cash flow will be generated principally by the sale of inventory and
property in the ten stores remaining to be closed (net of accounts payable and
closing costs) 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 $30
million to $35 million of cash inflow (including tax benefits) in addition to
approximately $60 million realized to date since November 1993. 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 and timing 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 October 29, 1994, the balance of the current portion of the restructuring
reserve liability was $18.4 million and the noncurrent restructuring reserve
liability was $22.8 million. Merchandise inventories were stated net of a
reserve for write-down of discontinued inventories of $1.2 million, and
property held for sale was stated net of a reserve for write-down of $9.9
million.
The balance of cash, cash equivalents and marketable securities was $137.3
million as of October 29, 1994. The Company also had approved lines of credit
with three banks in the aggregate amount of $45 million, all of which was
unused at the end of the third quarter. The Company expects that its current
resources, together with anticipated cash flow from operations and proceeds
from the disposition of HomeBase inventory and stores, will be sufficient to
finance its operations through January 1996. However, the Company may from
time to time seek to obtain additional financing and currently intends to
negotiate a new bank credit facility. The Company's cash requirements may
vary, based on, among other things, the rate at which it disposes of the
HomeBase stores that are included in the restructuring.
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
10.13 Employment Agreement dated as of September
29, 1994 with Edward J. Weisberger.
10.14(a) Separation Agreement dated as of September
28, 1994 with Dale N. Garth.
10.18(c) Third Amendment and Waiver dated as of
September 29, 1994 to Note Purchase Agreement
dated as of June 15, 1991.
11.0 Statement regarding computation of per share
earnings.
(b) The Company did not file any reports on Form 8-K with
the Securities and Exchange Commission during the quarter
ended October 29, 1994.
<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: December 9, 1994 /S/ HERBERT J ZARKIN
----------------------------- -----------------------------
Herbert J Zarkin
President and
Chief Executive Officer
Date: December 9, 1994 /S/ EDWARD J. WEISBERGER
----------------------------- ------------------------------
Edward J. Weisberger
Senior Vice President and
Chief Financial Officer
Edward J. Weisberger
--------------------
EMPLOYMENT AGREEMENT
AGREEMENT dated as of September 29, 1994 between Edward J. Weisberger,
whose address is 451 Winch Street, Framingham, Massachusetts 01701
("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 its subsidiaries or divisions, except for any Change of Control
Severance Agreement between Executive and Employer.
2. Term. Executive's employment under the terms of this Agreement shall
-----
commence on the date hereof and shall continue until March 31, 1997 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 of Senior Vice
-------
President, Treasurer and Chief Financial Officer or such 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
Employment 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 or (b) to participate in charitable or
community activities or in trade or professional organizations, except only
that the President of Employer shall have the right to limit such participation
if the President believes that the time spent on such activities infringes upon
the time required by Executive for the performance of his duties under this
Agreement 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 mean 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:
(i) Vested vacation pay accrued at date of termination shall be
paid one week after date of termination.
(ii) 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.
(iii) Until the expiration of the period of base salary payments
described in (ii) 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.
(iv) 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).
(v) With respect to shares of Performance Accelerated Restricted
Stock that were awarded to Executive on June 23, 1989 (the "1989 PARS"), any
such shares that are still subject to restrictions on Executive's date of
termination shall become unrestricted and vest in Executive according to the
following schedule:
(A) If the date of termination precedes January 28, 1996,
50% of the 1989 PARS that are still subject to
restrictions shall become unrestricted and vest in
Executive;
(B) If the date of termination is after January 27, 1996, 100%
of the 1989 PARS that are still subject to restrictions
shall become unrestricted and vest in Executive.
(vi) The eligibility of Executive and his spouse to participate in
Employer's medical insurance program for retired employees shall be determined
as if Executive's date of termination was not earlier than March 31, 1997.
(vii) Executive shall also be entitled to payments or benefits under
other Employer plans to the extent therein provided in the circumstances.
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:
(i) Vested vacation pay accrued at date of termination shall be
paid one week after date of termination.
(ii) Executive shall be entitled to payment, if any, pursuant to
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).
(iii) 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, except that the eligibility of Executive
and his spouse to participate in Employer's medical insurance program for
retired employees shall be determined as if Executive's date of termination was
not earlier than March 31, 1997.
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.
d) Deemed Termination by Employer. Termination of employment by
------------------------------
Executive in the event that Executive is required to relocate to a regular
place of business that is more than 20 miles outside the Commonwealth of
Massachusetts, without Executive's prior written consent, shall be deemed a
termination by Employer other than for cause, disability or incapacity,
pursuant to Section 8(a) of this Agreement.
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. 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. A business shall be deemed a competitor of
Employer if it shall then be so regarded by retailers or wholesalers generally,
or if it shall operate a warehouse outlet (such as HomeBase, 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 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, general merchandise discount department stores, or apparel 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.
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.
13. ARBITRATION. In the event that there is any claim or dispute arising
-----------
out of or relating to this Agreement, or the breach thereof, and the parties
hereto shall not have resolved such claim or dispute within 60 days after
written notice from one party to the other setting forth the nature of such
claim or dispute, then such claim or dispute shall be settled exclusively by
binding arbitration in Boston, Massachusetts in accordance with the Commercial
Arbitration Rules of the American Arbitration Association by an arbitrator
mutually agreed upon by the parties hereto or, in the absence of such
agreement, by an arbitrator selected according to such Rules, and judgment upon
the award rendered by the arbitrator shall be entered in any Court having
jurisdiction thereof upon the application of either party.
WITNESS the execution hereof the day and year first above written.
/s/ E. J. Weisberger
-------------------------
Executive
WABAN INC.
By /s/ Herbert J Zarkin
-----------------------
Herbert J Zarkin
President
weisagree
CONFIDENTIAL CONFIDENTIAL
- ------------ ------------
WABAN INC.
INTRA-COMPANY COMMUNICATION
TO: DALE N. GARTH
FROM: HERBERT J ZARKIN DEPT: CORPORATE DATE: 9/28/94
SUBJ: SEPARATION OF EMPLOYMENT AND RELEASE OF CLAIMS
This memorandum ("Agreement") confirms the discussion and agreement by and
among Dale N. Garth ("Employee") and Waban Inc., a Delaware Corporation (the
"Company"), concerning Employees resignation from employment with the Company,
and from his position as Senior Vice President, Treasurer and Chief Financial
Officer of the Company, and sets forth below the terms and conditions which
have been agreed upon in that connection.
In consideration of the mutual covenants and agreements contained herein, the
recitals set forth below and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Resignation.
-----------
(a) Employee confirms his resignation from employment with the Company and
from all officerships or directorships with the Company or its
subdivisions or affiliates effective Wednesday, September 28, 1994, and he
shall not have any further responsibilities with respect to the business
of the Company, and will have no authority to enter into any obligation on
behalf of or to bind the Company in any manner.
(b) Employee undertakes and agrees to execute and deliver at all times
hereafter, upon the request of the Company, such instruments of transfer,
resignations or other documents and to take such other action, all as may
reasonably be required to properly effectuate the actions contemplated by
this Agreement.
2. Salary Continuation.
-------------------
(a) Pursuant to the terms of an Employment Agreement ("the Employment
Agreement") dated February 1, 1994, the Company will pay to Employee his
weekly base salary of $4,615.39, (to be paid weekly as always) less
customary deductions and withholding for federal and state taxes, for
twelve (12) months from the effective date of resignation of employment.
(b) The Company will waive its right to offset such salary by other
earnings from other employment after three months.
CONFIDENTIAL CONFIDENTIAL
- ------------ ------------
(c) If after twelve (12) months, Employee has not been able to find new
employment or established a business of his own, the Company will continue
Employee's weekly base salary of $4,615.39, less customary deductions and
withholding for federal and state income taxes, for an additional period
not to exceed thirteen (13) weeks, or if earlier, to the date he accepts
new employment or establishes a business of his own.
3. Annual Bonus Plan.
-----------------
Pursuant to the terms of the Employment Agreement, Employee will remain
eligible to participate in the Company's Management Incentive Plan for the
fiscal year ending January 28, 1995. Any payment received will be
prorated for the period of active employment during the fiscal year and
will be paid at the time such awards are paid to other executives of the
Company.
4. Insurance.
---------
(a) Employee shall continue to participate in the Company's medical,
dental and life insurance plans (excluding long term disability insurance)
on the same basis of participation prior to resignation of employment so
long as he is paid his base salary by the Company, or until he commences
other employment, or becomes self employed, whichever occurs first.
(b) Employee will be provided the appropriate forms to continue his
participation in the Company's medical insurance plan at his expense after
his base salary ceases to be paid by the Company, or until he commences
other employment, or becomes self employed, whichever occurs first,
pursuant to the provisions of the Consolidated Omnibus Reconciliation Act
of 1985, as amended ("COBRA").
5. Vested Vacation.
---------------
Employee shall be paid for 136 hours of unused vested vacation which
includes vacation time credited as of May, 1994, and approved carryover
vacation from prior vacation crediting periods and will be included in his
first salary continuation payment. Employee will not receive additional
vacation vesting after the date of resignation of employment.
6. 401(k) Plan.
-----------
Employee's contributions to the Waban Inc. 401(k) Savings Plan ("the
Plan") will cease as of the date of resignation of employment, and his
account balance may remain in the Plan pursuant to the terms of the Plan.
7. Stock Incentive Plans.
---------------------
(a) Pursuant to the Company's Stock Incentive Plan, any stock options
issued to Employee that have vested as of the date of resignation of
employment may be exercised within three months thereafter, after which
time all unexercised
CONFIDENTIAL CONFIDENTIAL
- ------------ ------------
options will be cancelled. No vesting of options will occur after the
date of resignation of employment.
(b) Pursuant to the Company's Stock Incentive Plan, all restricted shares
of the Company's common stock, including Performance Accelerate Restricted
Stock (PARS), to which Employee may have rights, will be cancelled as of
the date of resignation of employment and will revert to the Company.
8. Auto Allowance.
--------------
Employee's executive automobile allowance will cease as of the date of
resignation of employment.
9. Other Incentive Plans.
---------------------
Employee acknowledges that he is not entitled to any benefit under the
Company's Executive Retirement and Growth Incentive Plans.
10. Return of Company Property.
--------------------------
Employee will vacate his office promptly on request by the Company and
will immediately relinquish and return all Company files, records,
property, equipment, and keys maintained by him in his office or
elsewhere, including, without limitation, any credit cards, security access
cards, financial statements, and business plans.
11. Indemnification.
---------------
In the event the Company is or becomes involved in any legal action
relating to events which occurred while Employee rendered services to the
Company or about which Employee possesses any information, Employee agrees
to assist in the capacity of a witness in the preparation, prosecution or
defense of any such action involving the Company, including, without
limitation, executing truthful declarations or documents or providing
information requested by the Company. The Company agrees to defend and
indemnify Employee for any and all loss or damage, in connection with any
claims, demands, suits or other causes of action made or brought by any
third party or parties for any action by Employee arising out of his
employment and within the scope of his employment with the Company. The
Company reserves the right to designate and employ attorneys,
investigators, and such other persons as are necessary to appear and
defend any action by Employee or on behalf of any third party of parties
for any action by Employee during his employment and within the scope of
his employment with the Company. In that regard, Employee and the Company
agree that the Company does not agree to indemnify Employee for any losses
incurred as a result of any act of fraud, dishonesty, wanton, criminal
action, willful or gross misconduct by Employee or any other action
outside the scope of his employment, or if it shall be determined that a
conflict of interest existed in connection with his employment with the
Company.
CONFIDENTIAL CONFIDENTIAL
- ------------ ------------
12. Compliance with Securities Laws.
-------------------------------
Employee agrees to provide promptly any and all information requested by
the Company in order for it to comply with federal securities or other
laws.
13. Binding Effect.
--------------
This Agreement, and all the terms and provisions hereof, shall be binding
upon and shall inure to the benefit of the parties and their respective
heirs, legal representatives, successors and assigns. The parties further
agree that the terms and conditions of this Agreement and any and all
actions in accordance therewith are strictly confidential and shall not
hereafter be disclosed, discussed or revealed to any other persons,
entities or organizations, except: (i) to the extent necessary to report
income to appropriate taxing authorities; (ii) in response to an order of
a court of competent jurisdiction or a subpoena issued under the authority
thereof after prompt notice of such subpoena has been given by Employee to
the Company so that Company may seek a protective order if it desires;
(iii) in response to a subpoena issued by a state or federal government
agency after prompt notice of such subpoena has been given by Employee to
the Company so that Company may seek a protective order if it desires;
(iv) to the parties' immediate family members, attorneys, accountants,
auditors, financial advisors, tax advisors, lenders and banks; (v) to
directors, officers and employees of the Company in the ordinary course of
business; (vi) as necessary to enforce this Agreement between the parties
hereto or to prevent a breach thereof; (vii) as otherwise required by the
Company to the extent it is a public company; or (viii) as otherwise
required by law. Employee acknowledges that the Company shall be entitled
to injunctive and other equitable relief to prevent or remedy a breach of
this section by Employee.
14. Disclosure of Confidential Information.
--------------------------------------
(a) Employee acknowledges and agrees that (i) by reason of his positions
with the Company, he has been given access to information, trade secrets,
strategies, procedures, and expertise unique to the Company, as well as
confidential information concerning financial matters that pertain to the
Company and other confidential materials and information; and (ii) the
foregoing constitute trade secrets and/or confidential, privileged and
proprietary information respecting the business affairs of the Company
which gravely affect the successful and effective operation of the
Company. As such, Employee agrees that he will not directly or indirectly
disclose to any third person or use for the benefit of anyone other than
the Company, or use for his own benefit or purposes any such confidential
or proprietary information without the prior written approval of the
Company. Such confidential and/or proprietary information shall not
include any materials or information which (i) are generally available to
the public other than as a result of a disclosure by Employee or any of
Employee's representatives, attorneys, agents or affiliates;
CONFIDENTIAL CONFIDENTIAL
- ------------ ------------
(ii) were available to Employee on a non-confidential basis from a source
other than the Company; (iii) have been independently acquired or
developed by Employee without violating any of Employee's obligations
under this section; or (iv) are identified in writing by the Company as
not being confidential. Employee agrees to immediately return all
documents and writings of any kind, including both originals and copies
and whether printed, recorded or reproduced by electronic process or
included in computer memory or on computer disk, within his custody,
possession or control, which contain any non-public information which in
any way relates or refers to the Company.
(b) Employee acknowledges the particular value to the Company of this
section, the loss of which cannot be reasonably or adequately compensated
in an action at law. Therefore, Employee expressly agrees that the
Company, in addition to any other rights or remedies that the Company
shall possess, shall be entitled to injunctive and other equitable relief
to prevent or remedy a breach of this section by Employee.
15. General Release of Claims.
-------------------------
In consideration of this Agreement and for the waiver of offsets against
severance payments and other consideration referred to herein, and except
for the obligations undertaken by the Company hereunder, Employee agrees
to, and by signing this Agreement does, forever release, acquit, relieve
and discharge Waban Inc. and each of its affiliated or related entities,
subsidiaries, divisions, partnerships, general partners, limited partners,
joint ventures, joint venturers, investors, shareholders, officers,
directors, licensees, employees, agents, representatives, accountants,
attorneys, consultants, benefit plans, successors and assigns, and all
persons acting by, through, under or in concert with any of them
(collectively, the "Company Releasees"), from any and all known and
unknown claims, suits, rights, actions, complaints, liabilities,
obligations, promises, agreements, contracts, causes of action, demands,
costs, losses, damages, debts, and expenses (including attorneys' fees and
costs) of any nature whatsoever, whether known or unknown, whether
suspected or unsuspected, whether disclosed or undisclosed, whether
contingent or vested, which Employee ever had, now has, or may claim to
have as of the moment he signs this Agreement by reason of any act, event
or omission concerning any matter, cause, or thing, including, without
limiting the generality of the foregoing, any claim arising out of (i)
Employee's employment with the Company, or the cessation of that
employment; (ii) any restrictions on the right of the Company or any of
the other Company Releasees to terminate any employee, including Employee;
(iii) any statements, oral or written, express or implied, made by any of
the Company Releasees concerning or relating to Employee; (iv) any
purported right of Employee to receive any bonus, insurance, severance
pay, Management Incentive Plan award, stock options, and/or PARS in, or
from, the Company other than the recitals above; (v) any impairment of
CONFIDENTIAL CONFIDENTIAL
- ------------ ------------
Employee's ability to complete in the labor market; (vi) any permanent or
temporary disability or loss of future earnings as a result of injury or
disability arising from or associated with his employment or the
termination of his employment relationship with the Company; (vii) any
common law causes of action or torts, including, without limitation,
wrongful termination and infliction of emotional distress; (viii) any
federal, state or governmental constitution, statute, regulation or
ordinance or law of the United States, or any state, territory or
possession thereof, including, without limitation, Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Americans With Disabilities Act, the
Employee Retirement Income Security Act of 1974, as amended, the
Massachusetts Civil Rights Act and Equal Rights Act, the Massachusetts
Wage and Hour Laws, G.L. c. 151, the Massachusetts Law Against
Discrimination, G.L. c. 151B, the Massachusetts Privacy Statute, G.L.
c. 214, section 1B, any other federal, state, or local human or civil
rights, wage-hour, pension or labor laws, rules and/or regulations, or
public policy, contract or tort laws, rules and/or regulations, or any
claim arising under common law, such as claims for defamation, false
imprisonment, libel, slander, invasion of privacy, negligence,
interference with advantageous relations, infliction of emotional
distress, or otherwise, or any other action; or (ix) any agreement
between Employee and the Company, oral or written, express or implied,
including, without limitation, the Employment Agreement dated February
1, 1994.
For the purpose of implementing a full and complete release and discharge of
the Company Releasees, Employee expressly acknowledges that this Agreement is
intended to include and does include in its effect, without limitation, all
claims which he does not know or suspect to exist in his favor against the
Company Releasees at the moment of execution hereof, and that this Agreement
expressly contemplates the extinguishment of such claims.
16. Severability.
------------
Should any portion, word, clause, phrase, sentence or paragraph of this
Agreement be declared void or unenforceable, such portion may be
considered independent and severable from the remainder, the validity of
which shall remain unaffected.
17. Waiver.
------
Failure to insist on compliance with any term, covenant or condition
contained in this Agreement shall not be deemed a waiver of that term,
covenant or condition, nor shall any waiver or relinquishment of any right
or power contained in this Agreement at any one time or more times be
deemed a waiver or relinquishment of any right or power at any other time
or times.
CONFIDENTIAL CONFIDENTIAL
- ------------ ------------
18. Representations and Warranties.
------------------------------
Both parties to this Agreement represent and warrant as follows:
(a) This Agreement in all respects has been voluntarily and knowingly
executed;
(b) They have had an opportunity to seek and have sought independent
legal advice from attorneys of their choice with respect to the
advisability of executing this Agreement, and they are not relying on
the representations of any other party or the counsel of any other
party;
(c) They have had an opportunity to seek and have sought independent tax
advice from accountants, attorneys or tax advisors of their own
choice with respect to the tax ramifications, if any, which may
result from entering into this Agreement;
(d) They have made such investigation of the facts pertaining to this
Agreement as they deem necessary;
(e) The terms of this Agreement are contractual and are the result of
discussions;
(f) The consideration Employee is receiving pursuant to this Agreement is
in addition to anything of value to which he already is entitled; and
(g) They have carefully read this Agreement and the contents hereof are
know and understood by them.
19. Choice of Law/Forum Selection.
-----------------------------
This Agreement had been negotiated and executed in the Commonwealth of
Massachusetts and shall be interpreted, enforced and governed in
accordance with the laws of Massachusetts. Any dispute, controversy or
claim arising between the parties hereto, or any of them, concerning the
breach, meaning or interpretation of this Agreement, or the rights, duties
or obligations of the parties hereto, including those respecting
Employee's employment or its termination, whether based upon contract or
tort, shall be brought in Middlesex County, Massachusetts, or upon mutual
agreement Employee and the Company may submit matters in dispute to
binding arbitration for settlement."
20. Entire Agreement.
----------------
This Agreement, together with the Employment Agreement dated February 1,
1994, constitutes the entire integrated agreement between the parties and
supersedes any and all other agreement, understandings, negotiations, or
discussions, either oral or in writing, express or implied, between the
parties to this Agreement. The parties to this Agreement each acknowledge
that no representations, inducements, promises, agreements or warranties,
oral or
CONFIDENTIAL CONFIDENTIAL
- ------------ ------------
otherwise, have been made by them, or anyone acting on their behalf, which
are not embodied in this Agreement, that they have not executed this
Agreement in reliance on any such representation, inducement, promise,
agreement or warranty, and that no representation, inducement, promise,
agreement of warranty not contained in this Agreement including, without
limitation, any purported supplements, modifications, waivers or
terminations of this Agreement shall be valid or binding, unless executed
in writing by all of the parties to this Agreement.
21. Revocation Period.
-----------------
Under the Older Workers Benefit Protection Act of 1990, Employee, who is
over the age of 40, is advised as follows: (i) that he should consult an
attorney regarding this Agreement before executing it; (ii) that he has
twenty-one (21) days in which to consider this Agreement and whether he
will enter into it; (iii) this Agreement does not waive rights or claims
that may arise after it is executed; and (iv) that, at any time within
seven (7) days after executing this Agreement, Employee may revoke this
Agreement. This Agreement shall not become effective or enforceable until
the seven (7)-day revocation period set forth herein has passed.
22. Counterparts.
------------
This Agreement may be executed in one or more counterparts and the
counterparts signed in the aggregate shall constitute a single, original
agreement.
By: /s/ Dale N. Garth Dated: 10/7/94
------------------------ -----------------------
Dale N. Garth
By: /s/ Herbert J. Zarkin Dated: 9/28/94
----------------------- -----------------------
Herbert J Zarkin
President & Chief Executive Officer
WABAN INC.
----------
THIRD AMENDMENT AND WAIVER AGREEMENT
------------------------------------
Dated as of September 29, 1994
9.58% Senior Notes due MAY 31, 1998
<PAGE>
THIRD AMENDMENT AND WAIVER AGREEMENT
THIRD AMENDMENT AND WAIVER AGREEMENT (this "Third Amendment"), dated as
of September 29, 1994, among WABAN INC. (together with its successors and
assigns, the "Company"), and each of the holders of Notes (as such term is
defined below) whose name appears on the signature pages hereof (individually,
a "Holder" and, collectively, the "Holders").
RECITALS:
WHEREAS, the Company entered into those certain separate Note Purchase
Agreements, each dated as of June 15, 1991, between the Company and the
purchasers identified on Annex 1 thereto, as previously amended by that
certain Amendment to Note Purchase Agreement, dated as of December 16, 1991,
and that certain Second Amendment and Waiver to Note Purchase Agreement, dated
as of March 28, 1994 (collectively, as in effect immediately prior to the
Effective Date, the "Existing Note Purchase Agreement," and, as further
amended by this Third Amendment, the "Amended Note Purchase Agreement"),
pursuant to which the Company has issued its 9.58% Senior Notes due May 31,
1998 (the "Notes");
WHEREAS, each of the Holders is a holder of the Notes;
WHEREAS, the Company has requested the Holders to amend the Existing Note
Purchase Agreement to make a change to a certain covenant of the Company set
forth in the Existing Note Purchase Agreement and to waive all rights,
remedies and powers such Holders may have as a result of any failure by the
Company to comply with the provisions of such covenant prior to the Effective
Date of this Third Amendment; and
WHEREAS, the Holders are willing to enter into such amendment, and to
give such waiver, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
SECTION 1. AMENDMENT TO EXISTING NOTE PURCHASE AGREEMENT.
1.1 Insurance. Section 7.2(b) of the Existing Note Purchase Agreement
---------
is hereby amended and restated in its entirety to read as follows:
(b) Insurance -- maintain, with (i) Lloyd's of
London, (ii)other financially sound and reputable
insurers accorded a rating by (1) A.M. Best Company
of "A- (VI)" or better, (2) Standard & Poor's
Corporation of "AA" or better, or (3) Moody's
Investors Service, Inc. of "A-2" or better (or a
comparable rating by any comparable successor rating
agency), or (iii) other foreign insurers having
claims paying ability and financial resources
substantially identical to domestic insurers accorded
the ratings specified in the preceding clause (ii),
insurance with respect to its Property and business
against such casualties and contingencies, of such
types (including, without limitation, loss or damage,
public liability, business interruption, larceny,
embezzlement or other criminal misappropriation) and
in such amounts as is customary in the case of
corporations of established reputations engaged in
the same or a similar business and similarly
situated. Notwithstanding the foregoing, the Company
shall be permitted to maintain, without violation of
the provisions of this Section 7.2(b), a policy of
excess coverage property damage insurance with a
policy limit of Two Million Five Hundred Thousand
Dollars ($2,500,000) issued by Marine Indemnity
Company (which the Company represents to have, as of
September 15, 1994, a rating of "A (IV)" by A.M.
Best Company) so long as such policy is replaced on
or prior to November 1, 1994 by one or more policies
of insurance or other insurance coverage which fully
complies with all of the provisions of this Section
7.2(b).
SECTION 2. WAIVER; REAFFIRMATION.
(a) Each of the Holders hereby waives all rights, remedies and powers
it may have under the Amended Note Purchase Agreement or applicable law as the
result of any failure by the Company to comply with the provisions of Section
7.2(b) of the Existing Note Purchase Agreement prior to the date of the
effectiveness of the amendment set forth in Section 1 hereof.
(b) The terms of this Third Amendment shall not, except as expressly
provided in Section 2(a) hereof, operate as or constitute a waiver by the
Holders of, or otherwise prejudice, the rights, remedies or powers of the
Holders under, the Amended Note Purchase Agreement or under applicable law.
Except as expressly provided in Section 1 hereof, (i) no other terms and
provisions of the Existing Note Purchase Agreement are modified or changed by
this Third Amendment, and (ii) the terms and provisions of the Existing Note
Purchase Agreement shall continue in full force and effect. Except to the
extent specifically contemplated by Section 2(a), this Amendment is not a
limitation on the ability of any Holder to exercise any of its rights and
remedies due to any Default or Event of Default under the Amended Note
Purchase Agreement.
(c) The Company hereby acknowledges and reaffirms all of its
obligations and duties under the Amended Note Purchase Agreement and under the
Notes.
SECTION 3. CONDITIONS TO EFFECTIVENESS.
The amendment to the Existing Note Purchase Agreement set forth in
Section 1 hereof and the waiver by the Holders set forth in Section 2 hereof
shall become effective only upon the execution of a counterpart of this Third
Amendment by Holders constituting the Majority Holders and delivery thereof to
the Company, and the execution of a counterpart of this Third Amendment by the
Company and delivery thereof to each of the Holders. The first date upon
which such conditions shall have been satisfied is herein referred to as the
"Effective Date."
SECTION 4. COSTS AND EXPENSES.
Whether or not the conditions to effectiveness set forth in Section 3
hereof are satisfied, on or prior to the Effective Date, the Company shall pay
all out-of-pocket expenses of the Holders in connection with the negotiation,
preparation, execution and delivery of this Third Amendment, including,
without limitation, the reasonable fees and expenses of special counsel
engaged by the Holders in connection therewith. Without limiting the
generality of the foregoing, the Company will pay the reasonable fees and
disbursements of Holders' special counsel on the date the Company is presented
with a statement of such fees and disbursements, and shall also pay, upon
receipt of any subsequent statement thereof, each such subsequent statement
for reasonable fees and disbursements of Holders' special counsel rendered
after the date of any prior statement.
SECTION 5. MISCELLANEOUS.
5.1 Binding Effect. All the provisions of this Third Amendment by or
--------------
for the benefit of the Company and the Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder.
5.2 Duplicate Originals. Two or more duplicate originals of this
-------------------
Third Amendment may be signed by the parties, each of which shall be an
original but all of which taken together shall constitute one and the same
instrument. This Third Amendment may be executed in one or more counterparts
and shall be effective when at least one counterpart shall have been executed
by the Company and Holders constituting the Majority Holders, and each set of
counterparts which, collectively, show execution by the parties hereto shall
constitute one duplicate original.
5.3 Governing Law. THIS THIRD AMENDMENT SHALL BE CONSTRUED,
-------------
INTERPRETED AND ENFORCED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
5.4 Severability. Any provision of this Third Amendment which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
5.5 Waivers and Amendment. This Third Amendment or any term or
---------------------
provision hereof may be changed, waived, discharged or terminated only in
accordance with Section 11.5 of the Amended Note Purchase Agreement.
5.6 Defined Terms. Capitalized terms used in herein and not otherwise
-------------
defined herein shall have the respective meanings ascribed to them in the
Amended Note Purchase Agreement.
5.7 Section Headings. The titles of the sections hereof appear as a
----------------
matter of convenience only, do not constitute a part of this Third Amendment
and shall not affect the construction hereof.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be duly executed by their respective authorized officers as of the day and
year first above written.
WABAN INC.
By: /s/ Herbert J Zarkin
--------------------------------
Name: Herbert J Zarkin
Title: President
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Richard C. Morrison
--------------------------------
Name: Richard C. Morrison
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/ A.K. Crain
--------------------------------
Name: A.K. Crain
Title: 2VP
NORTHERN LIFE INSURANCE COMPANY
By: /s/ Mark S. Jordahl
--------------------------------
Name:
Title:
Signature Page 1 to the THIRD AMENDMENT AND WAIVER AGREEMENT, dated as of
September 29, 1994, among WABAN INC. and the holders of Notes named therein.
<PAGE>
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:
------------------------------
Name:
Title:
UNUM LIFE INSURANCE COMPANY OF
AMERICA
By: /s/ Mark A. Fernandez
------------------------------
Name: Mark A. Fernandez
Title: Second Vice President
Signature Page 2 to the THIRD AMENDMENT AND WAIVER AGREEMENT, dated as of
September 29, 1994, among WABAN INC. and the holders of Notes named therein.
<PAGE>
THE NORTH ATLANTIC LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Mark S. Jordahl
------------------------------
Name:
Title
FARM BUREAU LIFE INSURANCE
COMPANY OF MICHIGAN
By:
------------------------------
FB ANNUITY COMPANY
By:
------------------------------
INTER-STATE ASSURANCE COMPANY
By:
------------------------------
Name:
Title:
TEXAS LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
Signature Page 3 to the THIRD AMENDMENT AND WAIVER AGREEMENT, dated as of
September 29, 1994, among WABAN INC. and the holders of Notes named therein.
<PAGE>
<TABLE>
Exhibit 11
WABAN INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(Unaudited)
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------- -----------------------
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income as reported $13,399,000 $ 8,087,000 $43,670,000 $27,121,000
========== ========== ========== ==========
Net income used for primary
computation $13,399,000 $ 8,087,000 $43,670,000 $27,121,000
Add (where dilutive):
Tax effected interest and
amortization of debt expense
on convertible debt 1,086,000 1,053,000 3,262,000 3,256,000
---------- ---------- ---------- ----------
Net income used for fully
diluted computation $14,485,000 $ 9,140,000 $46,932,000 $30,377,000
========== ========== ========== ==========
Weighted average number of
common shares outstanding 33,155,689 33,089,752 33,131,654 33,078,335
Add (where dilutive):
Assumed exercise of those
options that are common
stock equivalents net of
treasury shares deemed to
have been repurchased
348,807 85,013 277,561 87,846
---------- ---------- ---------- ----------
Weighted average number of
common and common equivalent
shares outstanding, used for
primary computation 33,504,496 33,174,765 33,409,215 33,166,181
Add (where dilutive):
Shares applicable to stock
options in addition to those
used in primary computation
due to the use of period-end
market price when higher than
average price - - 5,101 -
Assumed exercise of
convertible debt 4,387,879 4,387,879 4,387,879 4,387,879
---------- ---------- ---------- ----------
Adjusted shares outstanding
used for fully diluted
computation 37,892,375 37,562,644 37,802,195 37,554,060
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Waban
Inc. consolidated statements of income and consolidated balance sheets filed
with the Form 10-Q for the quarter ended October 29, 1994 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> OCT-29-1994
<CASH> 39,899
<SECURITIES> 97,381
<RECEIVABLES> 50,073
<ALLOWANCES> 0
<INVENTORY> 561,375
<CURRENT-ASSETS> 801,644
<PP&E> 573,896
<DEPRECIATION> 128,580
<TOTAL-ASSETS> 1,276,157
<CURRENT-LIABILITIES> 503,421
<BONDS> 258,993
<COMMON> 332
0
0
<OTHER-SE> 465,668
<TOTAL-LIABILITY-AND-EQUITY> 1,276,157
<SALES> 2,678,250
<TOTAL-REVENUES> 2,678,250
<CGS> 2,286,979
<TOTAL-COSTS> 2,286,979
<OTHER-EXPENSES> 308,676
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,005
<INCOME-PRETAX> 71,590
<INCOME-TAX> 27,920
<INCOME-CONTINUING> 43,670
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,670
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.24
</TABLE>
