WABAN INC, PREM14A, 1996-11-05

WABAN INC
PREM14A, 1996-11-05
VARIETY STORES

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box: [_]CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Preliminary Proxy Statement

[_] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

WABAN INC.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)

-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.

[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).

[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:
Common Stock, $.01 par value of BJ's Wholesale Club, Inc.

(2) Aggregate number of securities to which transaction applies:
32,303,248 shares

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$7.43 per share (based on the per share book value as of the most
recent practicable date)

(4) Proposed maximum aggregate value of transaction:
$240,052,000

(5) Total fee paid:
$48,010.40

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE>

PRELIMINARY COPY

Waban Inc.

ONE MERCER ROAD
NATICK, MASSACHUSETTS 01760
(508) 651-6500

, 1996

Dear Stockholder:

You are cordially invited to attend a Special Meeting of the stockholders of
Waban Inc. ("Waban" or the "Company") which will be held on , 1997
at a.m. at , Boston, Massachusetts. All stockholders
of record as of , 1996 are entitled to vote at the Special Meeting. We
urge you to be present in person or represented by proxy at this important
Special Meeting at which stockholders will be asked to ratify a major
transaction that will separate Waban into two publicly owned companies.

At the Special Meeting, you will be asked to consider and vote upon a group
of related proposals which provide for the tax-free distribution (the
"Distribution") in the form of a special dividend to stockholders, on a one-
for-one basis, of all outstanding shares of the common stock held by Waban of
BJ's Wholesale Club, Inc., a newly formed, wholly-owned subsidiary of Waban
("BJI"). The Distribution will separate BJ's Wholesale Club, the Company's
food and general merchandise warehouse club business (the "Warehouse Club
Business"), from HomeBase, the Company's home improvement warehouse business
(the "Home Improvement Business"). After the Distribution, the Company will
change its name to HomeBase, Inc. and will continue to operate and develop the
Home Improvement Business. BJI will operate and develop the Warehouse Club
Business after the Distribution.

The Company's Board of Directors believes that the Distribution will
accomplish a number of important business goals. Separation of the Home
Improvement Business and the Warehouse Club Business into independent publicly
owned companies will allow each company to concentrate exclusively on its own
business objectives without concern for the business objectives of the other
company, and will allow the financial markets to better recognize and evaluate
the merits of the Warehouse Club Business and the Home Improvement Business,
thereby enhancing the likelihood that each will achieve appropriate market
recognition for its own performance.

The Waban Board also believes the improved recognition by the financial
markets resulting from the separation of the Home Improvement Business and the
Warehouse Club Business into independent publicly owned companies will
facilitate the conversion of the Company's $108.6 million convertible
subordinated debentures (the "Convertible Debentures") into Common Stock. The
Convertible Debentures are convertible into Waban Common Stock at a price of
$24.75 per share, and are redeemable during the period from July 1, 1996 to
June 30, 1997 at a price of 103.611% of par, plus accrued interest. The
Company intends to call the Convertible Debentures for redemption prior to the
Distribution. If the Convertible Debentures are redeemed for cash in response
to such call, the Company expects that BJI will undertake an equity offering
to reduce the indebtedness that Waban would incur to finance the redemption.
This transaction is expected to reduce the aggregate level of indebtedness and
interest cost borne by the two companies, and to improve the debt-to-total
capital ratio of each company, as compared to Waban.
<PAGE>

We at Waban are excited about the future prospects for both HomeBase and BJI
as separate publicly owned companies. The Board of Directors believes that the
Distribution is in the best interests of stockholders and recommends that
stockholders vote "FOR" all of the distribution proposals.

Details of the distribution proposals are set forth in the accompanying
Proxy Statement and should be considered carefully.

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD PROMPTLY TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON
EVEN IF YOU HAVE SENT IN YOUR PROXY CARD.

Sincerely,

Herbert J. Zarkin Lorne R. Waxlax
President and Chief Executive Officer Chairman of the Board
<PAGE>

PRELIMINARY COPY

Waban Inc.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON , 1997

----------------

A Special Meeting of Stockholders of Waban Inc. ("Waban" or the "Company")
will be held at , Boston, Massachusetts on
, 1997, at a.m. The meeting will be conducted:

1. To consider and vote upon six related proposals (the "Distribution
Proposals") described in the accompanying Proxy Statement, as follows:

(i) Proposal One: Approval of a distribution (the "Distribution") in
the form of a tax-free special dividend to all holders of Waban's
outstanding shares of common stock, on a one-for-one basis, of all
outstanding shares of common stock held by Waban, and the associated
stockholders' rights, of a newly formed, wholly-owned subsidiary of the
Company, to be known as "BJ's Wholesale Club, Inc." ("BJI"), which will
own and operate the "BJ's Wholesale Club" business presently conducted
as a division of Waban;

(ii) Proposal Two: Approval of an amendment of the Certificate of
Incorporation of Waban, which will change the name of Waban to
"HomeBase, Inc." after the Distribution;

(iii) Proposal Three: Approval of an amendment to the Waban 1989
Stock Incentive Plan to increase by 2,000,000 shares the number of
shares available for issuance thereunder;

(iv) Proposal Four: Approval of the BJI 1997 Stock Incentive Plan;

(v) Proposal Five: Approval of the BJI Management Incentive Plan;
and

(vi) Proposal Six: Approval of the BJI Growth Incentive Plan; and

2. To consider such other business as may properly come before the
Special Meeting.

The Waban Board believes that the passage of each of the Distribution
Proposals is critical to the Distribution. Accordingly, the Waban Board
reserves the right not to declare the Distribution if any of the Distribution
Proposals is not approved.

The record date for stockholders entitled to notice of, and to vote at, the
Special Meeting is the close of business on , 1996. This Notice,
the Proxy Statement and the accompanying form of proxy are first being mailed
to stockholders of the Company on or about , 1996. The list of
stockholders will be available for examination by stockholders at the offices
of Hale and Dorr, 60 State Street, Boston, MA 02109-1803 for the ten days
prior to the meeting.
<PAGE>

The Board of Directors of the Company has retained discretion, even if
stockholder approval of the Distribution Proposals is obtained and the other
conditions to the Distribution are satisfied, to abandon, defer or modify the
Distribution or any other element contained in the Distribution Proposals. If
the Board of Directors takes any such action, it will be on the basis that the
Board believes it will be in the best interests of the Company and its
stockholders.

By Order of the Board of Directors

SARAH M. GALLIVAN
Secretary

Natick, Massachusetts

, 1996

IT IS EXTREMELY IMPORTANT THAT AS MANY SHARES OF STOCK AS POSSIBLE BE
REPRESENTED AT THE MEETING. THEREFORE, WHETHER OR NOT YOU PLAN TO BE PRESENT
AT THE MEETING IN PERSON, PLEASE SIGN AND DATE THE ACCOMPANYING PROXY AND
PROMPTLY RETURN IT IN THE ENCLOSED ADDRESSED ENVELOPE. NO POSTAGE IS NECESSARY
IF THE PROXY IS MAILED IN THE UNITED STATES. IF YOU ARE PRESENT AT THE
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Proxy Statement Summary................................................... 2
Introduction.............................................................. 16
Matters for Consideration at the Special Meeting........................ 16
Voting Rights and Proxy Information..................................... 17
No Appraisal Rights..................................................... 18
Recent Developments....................................................... 18
Proposal One: The Distribution............................................ 19
Background and Reasons for the Distribution............................. 19
Manner of Effecting the Distribution.................................... 19
Federal Income Tax Aspects of the Distribution.......................... 19
Accounting Treatment.................................................... 21
Listing and Trading of BJI Common Stock................................. 21
Listing and Trading of HomeBase Common Stock............................ 21
Conditions; Termination................................................. 22
Certain Special Considerations............................................ 23
Relationship Between BJI and HomeBase after the Distribution; Conflicts of
Interest................................................................. 27
Distribution Agreement.................................................. 27
Services Agreement...................................................... 28
Tax Sharing Agreement................................................... 28
Policies and Procedures for Addressing Conflicts........................ 30
Financing; Treatment of Outstanding Long-Term Debt........................ 30
Consents; Regulatory Approvals............................................ 31
Waban Capitalization...................................................... 32
Selected Historical Financial Data of Waban............................... 33
Pro Forma Financial Data of Waban......................................... 34
Management's Discussion and Analysis of Unaudited Pro Forma Financial Data
of Waban................................................................. 45
BJI Capitalization........................................................ 46
Selected Historical Financial Data of BJI................................. 47
Pro Forma Financial Data of BJI........................................... 48
Management's Discussion and Analysis of Financial Condition and Results of
Operations of BJI........................................................ 57
BJI Business and Properties............................................... 60
HomeBase Business and Properties.......................................... 65
Management of BJI......................................................... 70
Management of HomeBase.................................................... 79
Price Range of Waban Common Stock......................................... 86
Ownership of BJI Common Stock............................................. 87
Ownership of HomeBase Common Stock........................................ 89
Description of BJI Capital Stock.......................................... 90
Certain Provisions of the BJI Certificate and the BJI By-laws............. 91
Proposal Two: Approval of Amendment to the Waban Certificate of
Incorporation............................................................ 96
Proposal Three: Approval of Amendment to the Waban 1989 Stock Incentive
Plan..................................................................... 97
Proposal Four: Approval of the BJI 1997 Stock Incentive Plan.............. 105
Proposal Five: Approval of the BJI Management Incentive Plan.............. 106
Proposal Six: Approval of the BJI Growth Incentive Plan................... 107
Other Matters............................................................. 109
Independent Accountants................................................. 109
Stockholder Proposals................................................... 109
Incorporation of Certain Documents by Reference......................... 109
Available Information................................................... 109
Reports of BJI.......................................................... 110
Forward Looking Information............................................. 110
Index to Financial Statements............................................. F-1
</TABLE>

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<PAGE>

PROXY STATEMENT SUMMARY

The following is a summary of certain information contained in this Proxy
Statement. This summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information set forth elsewhere in
this Proxy Statement, all of which should be reviewed carefully. Fiscal year
references refer to Waban's fiscal year which ends on the last Saturday of
January of the following calendar year. For example, Waban's 1996 fiscal year
ends on January 25, 1997.

THE SPECIAL MEETING

DATE, TIME AND PLACE OF SPECIAL
MEETING........................ A Special Meeting (the "Special Meeting") of
the stockholders of the Company will be held
on , 1997 at a.m. at
Boston, Massachusetts.

PURPOSE OF THE SPECIAL MEETING.. At the Special Meeting, the stockholders of
the Company will be asked to consider and
vote upon the following six related proposals
(the "Distribution Proposals"):

(i) Approval of a distribution (the
"Distribution") in the form of a tax-free
special dividend to all holders of Waban's
outstanding shares of common stock, on a one-
for-one basis, of all outstanding shares of
common stock held by Waban, and the
associated stockholders' rights, of a newly
formed, wholly-owned subsidiary of the
Company, BJ's Wholesale Club, Inc., which
will own and operate the "BJ's Wholesale
Club" business presently conducted as a
division of Waban;

(ii) Approval of an amendment of the
Certificate of Incorporation of Waban, which
will change the name of Waban to "HomeBase,
Inc." after the Distribution;

(iii) Approval of an amendment to the Waban
1989 Stock Incentive Plan to increase by
2,000,000 shares the number of shares
available for issuance thereunder;

(iv) Approval of the BJI 1997 Stock Incentive
Plan;

(v) Approval of the BJI Management Incentive
Plan; and

(vi) Approval of the BJI Growth Incentive
Plan.

The Waban Board believes that the passage of
each of the Distribution Proposals is
critical to the Distribution. Accordingly,
the Waban Board reserves the right not to
declare the Distribution if any of the
Distribution Proposals is not approved.

VOTING.......................... Each stockholder of record at the close of
business on , 1996 (the "Special Meeting
Record Date") is entitled to notice of, and
to vote at, the Special Meeting. Each share
of

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<PAGE>

Common Stock of Waban ("Waban Common Stock")
is entitled to one vote on each matter
presented at the Special Meeting. All such
shares entitled to notice of and to vote at
the Special Meeting are referred to herein as
"Record Shares". The presence in person or by
proxy of stockholders holding Record Shares
which are entitled to a majority of the votes
of all holders of Record Shares will
constitute a quorum for the transaction of
business at the Special Meeting.

VOTES REQUIRED.................. The Company believes that, under Delaware
law, which governs the Distribution, a vote
of stockholders is not required in connection
with the Distribution (Proposal One).
However, the Company is seeking stockholder
approval of Proposal One because of the
importance of the Distribution. Approval of
Proposals One and Two will require the
affirmative vote of the holders of a majority
of the outstanding Record Shares. Approval of
Proposals Three, Four, Five and Six will
require the affirmative vote of the holders
of a majority of the votes cast at the
Special Meeting.

In the event that stockholders fail to
approve all of the Distribution Proposals,
the Distribution may not be made, in which
case Waban intends to continue to operate the
Warehouse Club Business and the Home
Improvement Business and may consider
alternative restructuring options.

CERTAIN SPECIAL CONSIDERATIONS.. Stockholders should carefully consider the
factors discussed under "Certain Special
Considerations" as well as the other
information set forth herein before voting on
the Distribution Proposals.

BOARD RECOMMENDATION............ THE BOARD OF DIRECTORS OF THE COMPANY
BELIEVES THAT THE DISTRIBUTION IS IN THE BEST
INTERESTS OF STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" ALL OF THE
DISTRIBUTION PROPOSALS.

THE DISTRIBUTION

EFFECT.......................... The Distribution will separate Waban's food
and general merchandise warehouse club
business (the "Warehouse Club Business"),
which is operated as Waban's "BJ's Wholesale
Club" division (the "BJ's Division"), from
Waban's home improvement warehouse business
(the "Home Improvement Business"), which is
operated as Waban's "HomeBase" division (the
"HomeBase Division"). After the Distribution,
BJI (as used herein, to include BJI's
consolidated subsidiaries unless the context
requires otherwise) will be an independent,
publicly owned company that will operate and
develop the Warehouse Club Business. After
the Distribution, Waban will change its name
to HomeBase, Inc. ("HomeBase"), and HomeBase
will continue to operate and develop the Home
Improvement Business.

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<PAGE>

SHARES TO BE DISTRIBUTED........ It is expected that the Waban Board will
declare the Distribution after the Special
Meeting. On the date of the Distribution (the
"Distribution Date"), Waban will make the
Distribution to stockholders of record of
Waban as of the Distribution Record Date (as
defined below). Each such stockholder will
receive one share of BJI Common Stock for
every share of Waban Common Stock held by
such stockholder. See "The Distribution--
Manner of Effecting the Distribution."

DISTRIBUTION RECORD DATE........ The record date for the Distribution (the
"Distribution Record Date") will be
established by the Waban Board of Directors
(the "Waban Board") following the Special
Meeting. The Distribution Record Date will be
a date that is as soon as practicable
following the declaration of the
Distribution. See "The Distribution--Manner
of Effecting the Distribution."

DISTRIBUTION DATE............... The Distribution Date will be established by
the Waban Board following the Special
Meeting. On the Distribution Date, Waban will
deliver shares of BJI Common Stock to the
Distribution Agent. The Distribution Agent
will mail stock certificates as soon as
practicable thereafter. See "The
Distribution--Manner of Effecting the
Distribution."

CONDITIONS TO THE DISTRIBUTION.. The Distribution may not occur unless all of
the Distribution Proposals are approved. In
addition, the Distribution is conditioned
upon a number of other things, including: (i)
the declaration by the Waban Board of the
Distribution; (ii) Waban's receipt of a
ruling that the Distribution will qualify as
a tax-free transaction under Section 355 of
the Internal Revenue Code of 1986, as amended
(the "Code"); (iii) the conversion into
Common Stock or the redemption for cash of
Waban's $108.6 million 6.5% Convertible
Subordinated Debentures (the "Convertible
Debentures") and, if the Convertible
Debentures are redeemed for cash, the closing
of an equity offering by BJI to reduce the
indebtedness that Waban would incur to
finance the redemption; and (iv) BJI and
HomeBase having obtained bank credit
facilities in amounts deemed necessary by
Waban management. Even if all conditions are
satisfied, the Waban Board has reserved
discretion to abandon, defer or modify the
Distribution at any time prior to the
Distribution Date. See "The Distribution--
Conditions; Termination."

BACKGROUND AND REASONS FOR THE
DISTRIBUTION................... The Waban Board believes that the
Distribution will accomplish a number of
important business goals. Separation of the
Home Improvement Business and the Warehouse
Club Business into independent publicly owned
companies will allow each company to
concentrate exclusively on its own

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<PAGE>

business objectives without concern for the
business objectives of the other company, and
will allow the financial markets to better
recognize and evaluate the merits of the
Warehouse Club Business and the Home
Improvement Business, thereby enhancing the
likelihood that each will achieve appropriate
market recognition for its own performance.

The Waban Board also believes the improved
recognition by the financial markets
resulting from the separation of the Home
Improvement Business and the Warehouse Club
Business into independent publicly owned
companies will facilitate the conversion of
the Company's $108.6 million convertible
subordinated debentures (the "Convertible
Debentures") into Common Stock. The
Convertible Debentures are convertible into
Waban Common Stock at a price of $24.75 per
share, and are redeemable during the period
from July 1, 1996 to June 30, 1997 at a price
of 103.611% of par, plus accrued interest.
The Company intends to call the Convertible
Debentures for redemption prior to the
Distribution. If the Convertible Debentures
are redeemed for cash in response to such
call, Waban expects that BJI will undertake
an equity offering to reduce the indebtedness
that Waban would incur to finance the
redemption. This transaction is expected to
reduce the aggregate level of indebtedness
and interest costs borne by the two
companies, and to improve the debt-to-total
capital ratio of each company, as compared to
Waban.

In addition, the Distribution is expected to
enhance the ability of the separate
corporations to attract, motivate and retain
key personnel through the provision of more
effective stock-based incentive compensation
programs that are based on the performance of
the respective business in which such
individuals are employed without being
influenced by the results of the business in
which they have no involvement.

There can be no assurance that any of the
anticipated benefits of the Distribution
described above will be realized.

ASSET TRANSFERS................. Prior to the Distribution Date, Waban intends
to transfer to BJI all of the assets of the
BJ's Division and other related assets,
subject to the assumption by BJI of the
liabilities related to the BJ's Division
(such transfers being referred to
collectively as the "Asset Transfers").

RELATIONSHIP BETWEEN HOMEBASE
AND BJI AFTER THE
DISTRIBUTION................... For purposes of governing certain ongoing
relationships between HomeBase and BJI after
the Distribution and to provide an orderly
transition, Waban and BJI will enter into

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<PAGE>

certain agreements. Such agreements will
include a Distribution Agreement, a Services
Agreement, and a Tax Sharing Agreement.
Following the Distribution, certain persons
who are currently directors of Waban will be
directors of both HomeBase and BJI, and
Herbert J. Zarkin, who is currently President
and Chief Executive Officer of Waban, will be
Chairman of the Board of Directors of both
HomeBase and BJI. HomeBase and BJI will adopt
policies and procedures to be followed by the
board of directors of each company to limit
the involvement of such persons in conflict
situations, including requiring them to
abstain from voting as directors of either
company on certain matters that present a
conflict of interest between the two
companies. See "Relationship Between HomeBase
and BJI after the Distribution; Conflicts of
Interest--Policies and Procedures for
Addressing Conflicts" and "Certain Special
Considerations--Potential Conflicts."

FINANCING; TREATMENT OF
OUTSTANDING LONG-TERM DEBT..... Waban's outstanding indebtedness currently
includes its (i) $24,000,000 9.58% unsecured
senior notes due May 31, 1998 (the "Senior
Notes"); (ii) $100,000,000 11% senior
subordinated notes due May 15, 2004 ("Senior
Subordinated Notes"); (iii) $108,600,000 6.5%
convertible subordinated debt due July 1,
2002 (the "Convertible Debentures"); and (iv)
$150,000,000 line of credit with a group of
banks, under which $35,000,000 of borrowings
were outstanding as of October 26, 1996.
Prior to the Distribution, Waban will repay
the Senior Notes, and will retire (via open
market purchases or a tender offer) or
defease the Senior Subordinated Notes. Waban
will be required to pay certain premiums and
prepayment penalties in connection with the
foregoing transactions. See "Certain Special
Considerations--Repayment of Long-Term Debt."

In addition, Waban expects to call for
redemption the Convertible Debentures. The
Convertible Debentures are convertible by the
holders into Waban Common Stock at a
conversion price of $24.75 per share, and are
redeemable during the period from July 1,
1996 to June 30, 1997 at a price of 103.611%
of par, plus accrued interest. If the
Convertible Debentures are redeemed for cash
in response to such call, Waban expects that
BJI will undertake an equity offering to
reduce the indebtedness that Waban would
incur to finance the redemption. Such
offering could delay the Distribution Date.
It is a condition to the Distribution that
the Convertible Debentures be converted into
Common Stock or redeemed for cash and, if the
Convertible Debentures are redeemed for cash,
that BJI successfully completes such equity
offering. There can be no assurance that such
conversion or such redemption and equity
offering will take place.

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<PAGE>

Waban is currently in discussions with
financial institutions to obtain bank credit
facilities for each of BJI and HomeBase
following the Distribution. It is a condition
of the Distribution that such credit
facilities be obtained in amounts and on
terms considered appropriate by the Waban
Board. Although Waban expects to obtain such
credit facilities, there is no assurance that
such credit facilities can be obtained on
terms similar to those currently available to
Waban or on other terms considered
appropriate by the Waban Board, if at all.

TAX CONSEQUENCES................ The Distribution will not occur unless, on or
before the Distribution Date, Waban has
received a ruling from the IRS to the effect
that the Distribution will constitute a
"spin-off" under Section 355 of the Internal
Revenue Code which is tax-free to Waban and
its stockholders. As of the date hereof, the
IRS has not issued such a ruling, and there
can be no assurance that the IRS will issue a
favorable ruling. If the Distribution so
qualifies, the receipt of BJI Common Stock
will be tax-free for Federal income tax
purposes to Waban stockholders, and Waban
will not recognize income, gain or loss
solely as a result of the Distribution. Waban
stockholders will be required to apportion
their tax basis in Waban Common Stock between
the BJI Common Stock received in the
Distribution and the HomeBase Common Stock
based on the relative fair market values of
such stocks on the Distribution Date. See
"Certain Special Considerations--Certain Tax
Considerations."

ACCOUNTING TREATMENT............ Upon approval of the Distribution Proposals
at the Special Meeting, Waban will present
the Warehouse Club Business as discontinued
operations to the extent financial
information for periods prior to the
Distribution is required to be included in
Waban's historical financial statements.
After the Distribution, the business of BJI
will be reflected in separate consolidated
financial statements. See "Selected
Historical Financial Data of Waban," "Pro
Forma Financial Data of Waban," "Selected
Historical Financial Data of BJI," and "Pro
Forma Financial Data of BJI."

BJ'S WHOLESALE CLUB, INC.

BUSINESS AFTER THE
DISTRIBUTION................... The Warehouse Club Business is presently
conducted by the BJ's Division. Following the
Distribution, BJI will conduct the Warehouse
Club Business. The BJ's Division introduced
the warehouse club concept to New England in
1984 and has since expanded in the
northeastern and Mid-Atlantic states, as well
as in southern Florida. As of October 26,
1996, the BJ's Division was operating 79
warehouse clubs in 12 states and

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<PAGE>

had over four million members. Waban expects
that two additional warehouse clubs will be
opened in fiscal 1996 and approximately ten
additional warehouse clubs will be opened in
fiscal 1997. See "BJI Business and
Properties."

PRINCIPAL OFFICE................ The principal office of BJI is, and after the
Distribution Date will remain, One Mercer
Road, Natick, Massachusetts 01760. Its
telephone number is (508) 651-6500.

BOARD OF DIRECTORS.............. Prior to the Distribution Date, Waban, as the
sole stockholder of BJI, plans to elect the
following nine persons to the Board of
Directors of BJI (the "BJI Board"), effective
as of the Distribution Date: S. James
Coppersmith, Kerry L. Hamilton, Allyn L.
Levy, Arthur F. Loewy, John J. Nugent, Thomas
J. Shields, Lorne R. Waxlax, Edward J.
Weisberger and Herbert J. Zarkin. All of such
persons, other than Messrs. Nugent and
Weisberger, are currently members of the
Waban Board. Members of the BJI Board will be
elected for staggered three-year terms.
Messrs. Zarkin, Waxlax and Weisberger will
serve as directors of both HomeBase and BJI
after the Distribution. Mr. Zarkin will also
serve as Chairman of the Board of Directors
of both HomeBase and BJI after the
Distribution. See "Management of BJI--BJI
Board."

POST-DISTRIBUTION DIVIDEND
POLICY......................... The declaration and payment of dividends by
BJI will be at the discretion of the BJI
Board. It is expected that certain debt
agreements of BJI will substantially limit
its ability to pay cash dividends. Waban has
never paid a cash dividend and does not
expect that the BJI Board will declare any
cash dividends on the BJI Common Stock after
the Distribution. However, the BJI Board will
reevaluate its dividend policy from time to
time in the future in light of its results of
operations, financial conditions, cash
requirements, future prospects and other
factors it deems relevant. There can be no
assurance that any dividends will be paid in
the future. See "Certain Special
Considerations--Dividend Policies."

TRADING MARKET.................. There is presently no public market for BJI
Common Stock. BJI intends to list the BJI
Common Stock on the New York Stock Exchange.
See "Certain Special Considerations--No
Current Public Market for BJI Common Stock"
and "The Distribution--Listing and Trading of
BJI Common Stock."

CERTAIN PROVISIONS OF THE BJI
CERTIFICATE OF INCORPORATION
AND BY-LAWS.................... BJI's Certificate of Incorporation (the "BJI
Certificate") and By-laws (the "BJI By-
laws"), as they will be in effect following
the Distribution, are substantially similar
to the Certificate of Incorporation and By-
laws of Waban on the date hereof. Certain of
the provisions of the BJI Certificate and the
BJI By-laws may have the effect of making
difficult or

8
<PAGE>

expensive an acquisition of control of BJI in
a transaction not approved by the BJI Board.
In addition, prior to the Distribution, the
BJI Board will adopt a Preferred Share
Purchase Rights Plan, which may have a
similar effect. See "Certain Provisions of
the BJI Certificate and the BJI By-laws--
Preferred Share Purchase Rights."

The BJI Certificate eliminates certain
liabilities of BJI directors in connection
with the performance of their duties. See
"Certain Provisions of the BJI Certificate
and the BJI By-laws--Elimination of Liability
in Certain Circumstances."

HOMEBASE, INC.

BUSINESS AFTER THE
DISTRIBUTION................... Following the Distribution, HomeBase will
retain the Home Improvement Business, which
is presently conducted as Waban's HomeBase
Division. The HomeBase Division is the second
largest operator of home improvement
warehouse stores in the western United States
and is one of the nation's largest home
improvement merchandisers using a warehouse
format. The HomeBase Division offers a broad
assortment of home improvement and building
supply products. As of October 26, 1996, the
HomeBase Division was operating 84 warehouse
stores. In recent years, the HomeBase
Division has pursued a series of strategic
initiatives to strengthen its market position
in the western United States and to improve
its profitability. These initiatives have
included (i) a significant increase in the
level of customer service offered at HomeBase
stores; (ii) efforts to improve gross margin
through buying and logistics efficiencies;
and (iii) an aggressive marketing program.
Since 1993, the HomeBase Division has closed
18 underperforming stores, opened 12 new
stores, and completed the remodeling or
relocation of 34 older stores to reflect the
HomeBase Division's new prototype design.
Waban expects to continue the remodeling
program and to open one to three new HomeBase
stores in fiscal 1997. See "HomeBase Business
and Properties."

PRINCIPAL OFFICE................ After the Distribution Date, the principal
office of HomeBase will be at 3345 Michelson
Drive, Irvine, CA, 92715. Its telephone
number is (714) 442-5000.

BOARD OF DIRECTORS.............. Effective as of the Distribution Date, the
Board of Directors of HomeBase (the "HomeBase
Board") is expected to consist of the
following persons: Stanley H. Feldberg, Allan
P. Sherman, Lorne R. Waxlax, Edward J.
Weisberger and Herbert J. Zarkin. All of such
persons, other than Messrs. Sherman and
Weisberger, are currently members of the
Waban Board. The Waban Board expects to
appoint additional independent directors
prior to the Distribution. Members of

9
<PAGE>

the HomeBase Board will continue to be
elected for staggered three-year terms.
Messrs. Zarkin, Waxlax and Weisberger will
serve as directors of both BJI and HomeBase
after the Distribution. Mr. Zarkin will also
serve as Chairman of the Board of Directors
of both BJI and HomeBase after the
Distribution. See "Management of HomeBase--
HomeBase Board."
POST-DISTRIBUTION DIVIDEND
POLICY......................... The declaration and payment of dividends by
HomeBase is at the discretion of the HomeBase
Board. It is expected that certain debt
agreements of HomeBase will substantially
limit its ability to pay cash dividends.
Waban has never paid a cash dividend and the
Waban Board does not expect that it will
declare any cash dividends on the HomeBase
Common Stock after the Distribution. However,
the HomeBase Board will reevaluate its
dividend policy from time to time in the
future in light of its results of operations,
financial conditions, cash requirements,
future prospects and other factors it deems
relevant. There can be no assurance that any
dividends will be paid in the future. See
"Certain Special Considerations--Dividend
Policies."

TRADING MARKET.................. After the Distribution, it is expected that
HomeBase's Common Stock (formerly the Waban
Common Stock) will continue to be listed on
the New York Stock Exchange. As a result of
the Distribution, the trading price range of
the HomeBase Common Stock is expected to be
significantly lower than the trading price
range of the Waban Common Stock prior to the
Distribution. See "Certain Special
Considerations--Change in Trading Prices of
HomeBase Common Stock."

NAME CHANGE..................... The approval of the Distribution Proposals
will authorize the Waban Board to change the
name of the Company to "HomeBase, Inc." after
the Distribution.

AMENDMENT TO WABAN'S 1989 STOCK
INCENTIVE PLAN................. The approval of the Distribution Proposals
will increase the number of shares authorized
for issuance under Waban's 1989 Stock
Incentive Plan by 2,000,000 shares. These
additional shares will be available for grant
by the HomeBase Board following the
Distribution. The Waban Board expects that
options to purchase certain of these shares
will be granted to HomeBase employees who
currently hold Waban options, so that such
persons' options would represent the same
value immediately following the Distribution
as they did immediately before the
Distribution. See "Management of HomeBase--
Incentive and Other Plans--1989 Stock
Incentive Plan."

10
<PAGE>

APPROVAL OF THE BJI 1997 STOCK
INCENTIVE PLAN................. The approval of the Distribution Proposals
will authorize BJI to adopt the BJI 1997
Stock Incentive Plan. This plan would enable
BJI to grant options and other stock
incentive awards to employees of BJI
following the Distribution. Up to an
aggregate of 3,000,000 shares of BJI Common
Stock would be authorized for issuance under
the plan. The Waban Board expects that
options to purchase certain of the shares
issuable under this plan will be granted to
BJI employees who currently hold Waban
options so that such persons' options would
represent the same value immediately
following the Distribution as they did
immediately before the Distribution. See
"Management of BJI--Incentive and Other
Plans--1997 Stock Incentive Plan."

APPROVAL OF THE BJI MANAGEMENT
INCENTIVE PLAN................. The approval of the Distribution Proposals
will authorize BJI to adopt the BJI
Management Incentive Plan (the "BJI MIP").
The BJI MIP is intended to provide executive
officers and other key employees of BJI with
cash incentive awards, based upon the
attainment of annual performance goals. The
BJI MIP is similar to the Waban Management
Incentive Plan and will cover BJI's employees
currently covered by the Waban Management
Incentive Plan.

APPROVAL OF THE BJI GROWTH
INCENTIVE PLAN................. The approval of the Distribution Proposals
will authorize BJI to adopt the BJI Growth
Incentive Plan (the "BJI GIP"). The BJI GIP
is intended to provide certain high-level
management employees with cash awards based
on BJI's financial performance over an award
period that typically consists of two or more
fiscal years. The BJI GIP is similar to the
Waban Growth Incentive Plan and will cover
BJI's employees currently covered by the
Waban Growth Incentive Plan.

11
<PAGE>

WABAN INC.

SUMMARY OF SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA

The data that follows should be read in conjunction with the audited
Consolidated Financial Statements and notes thereto included in Waban's Annual
Report on Form 10-K for the fiscal year ended January 27, 1996 and the
unaudited financial data included in Waban's Quarterly Report on Form 10-Q for
the thirteen-week period ended July 27, 1996, both of which are incorporated
by reference herein, and the unaudited Pro Forma Financial Data of Waban
included elsewhere in this Proxy Statement. For a discussion of the basis of
presentation of the Waban Consolidated Financial Statements, see Summary of
Accounting Policies in Notes to the Waban Consolidated Financial Statements
contained in its Form 10-K for the fiscal year ended January 27, 1996.

The summary unaudited pro forma financial data set forth below illustrates
the estimated effects on Waban of the proposed Distribution and (i) the
repayment by BJI to Waban of intercompany indebtedness and current taxes
payable, (ii) the prepayment of the Senior Notes and Senior Subordinated
Notes, (iii) new borrowings under Waban's proposed credit agreement, and (iv)
the conversion or redemption of the Convertible Debentures (the "related
transactions"). The Company intends to call the Convertible Debentures for
redemption prior to the Distribution. The pro forma financial data has been
prepared to present two alternative scenarios. Scenario A gives pro forma
effect to the conversion of the Convertible Debentures into Waban Common
Stock. Scenario B gives pro forma effect to the redemption of the Convertible
Debentures for cash. It is a condition to the Distribution that such
conversion or redemption take place and, if the Convertible Debentures are
redeemed for cash, that BJI complete an equity offering to reduce the
indebtedness that Waban would incur to finance the redemption. However, there
can be no assurance that holders of the Convertible Debentures will convert
their Convertible Debentures into Common Stock or that, if all Convertible
Debentures are not converted, BJI will complete such an equity offering. The
pro forma balance sheet data is based on the July 27, 1996 balance sheet of
Waban and assumes the Distribution and related transactions were consummated
on that date. The pro forma income statement data gives effect to the
Distribution and related transactions as if they occurred at the beginning of
fiscal 1995. The pro forma financial data of Waban does not purport to
represent what the financial position or results of operations of Waban would
have been if the Distribution and related transactions had in fact been
consummated on the dates indicated or at any future date. The pro forma
adjustments are based upon available information and upon certain assumptions
that Waban's management believes are reasonable in the circumstances.

12
<PAGE>

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (UNAUDITED)
---------------------------------------------------------------- --------------------------
SCENARIO A:
ASSUMING CONVERSION OF
CONVERTIBLE DEBENTURES
--------------------------
(UNAUDITED)
TWENTY-SIX
FISCAL YEAR ENDED WEEKS ENDED FISCAL YEAR TWENTY-SIX
-------------------------------------- ------------------------- ENDED WEEKS ENDED
JAN 29, 1994 JAN 28, 1995 JAN 27, 1996 JUL 29, 1995 JUL 27, 1996 JAN 27, 1996 JUL 27, 1996
------------ ------------ ------------ ------------ ------------ ------------ -------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Total revenues... $3,589,341 $3,650,281 $3,978,384 $1,936,337 $2,132,589 $1,448,776 $776,513
---------- ---------- ---------- ---------- ---------- ---------- --------
Cost of sales,
including buying
and occupancy
costs........... 3,086,670 3,110,787 3,387,992 1,646,831 1,820,630 1,124,460 601,086
Selling, general
and
administrative
expenses........ 423,026 418,404 455,523 228,294 244,723 275,655 148,008
Restructuring
charge.......... 101,133 -- -- -- -- -- --
Interest on debt
and capital
leases (net).... 12,489 14,898 15,431 7,658 9,366 2,088 1,083
---------- ---------- ---------- ---------- ---------- ---------- --------
Income (loss)
before income
taxes and
cumulative
effect of
accounting
principle
changes......... $ (33,977) $ 106,192 $ 119,438 $ 53,554 $ 57,870 $ 46,573 $ 26,336
========== ========== ========== ========== ========== ========== ========
Pro forma income
from continuing
operations...... $ 28,456 $ 15,986
========== ========
Net income
(loss).......... $ (17,782) $ 64,990 $ 72,977 $ 32,668 $ 35,127
========== ========== ========== ========== ==========
Pro forma income
per share from
continuing $0.76 $0.43
operations...... ===== =====
Income (loss) per
common share:
Primary......... $(0.54) $1.95 $2.20 $0.98 $1.05
====== ===== ===== ===== =====
Fully diluted... $(0.54) $1.83 $2.05 $0.92 $0.99
====== ===== ===== ===== =====
Number of common
shares for
earnings per
share
computations:
Primary......... 33,082 33,405 33,220 33,330 33,340
Fully diluted... 33,082 37,793 37,784 37,720 37,728
<CAPTION>
JAN 29, 1994 JAN 28, 1995 JAN 27, 1996 JUL 29, 1995 JUL 27, 1996 JUL 27, 1996
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:
Working capital.. $ 213,315 $ 308,749 $ 265,450 $ 287,327 $ 267,268 $168,986
Total assets..... 1,072,994 1,237,521 1,332,451 1,279,666 1,365,102 625,867
Long-term debt
and obligations
under capital
leases.......... 174,054 258,763 245,313 245,990 232,710 39,443
Stockholders'
equity.......... 420,492 488,089 555,120 516,833 589,365 336,026
WAREHOUSES OPEN
AT END OF PERI-
OD:
BJ's Wholesale
Club............ 52 62 71 65 77
HomeBase......... 82 77 79 78 82
<CAPTION>
--------------------------
SCENARIO B:
ASSUMING REDEMPTION OF
CONVERTIBLE DEBENTURES
-------------------------
FISCAL YEAR TWENTY-SIX
ENDED WEEKS ENDED
JAN 27, 1996 JUL 27, 1996
------------ ------------
<S> <C> <C>
INCOME STATEMENT
DATA: $1,448,776 $776,513
Total revenues... ---------- --------

Cost of sales,
including buying
and occupancy 1,124,460 601,086
costs...........
Selling, general
and
administrative 275,655 148,008
expenses........
Restructuring -- --
charge..........
Interest on debt
and capital 2,230 1,154
leases (net).... ---------- --------

Income (loss)
before income
taxes and
cumulative
effect of
accounting
principle $ 46,431 $ 26,265
changes......... ========== ========

Pro forma income
from continuing $ 28,369 $ 15,943
operations...... ========== ========

Net income
(loss)..........

Pro forma income
per share from $0.86 $0.48
continuing ===== =====
operations......
Income (loss) per
common share:
Primary.........

Fully diluted...

Number of common
shares for
earnings per
share
computations:
Primary.........
Fully diluted...
<CAPTION> JUL 27, 1996
------------
<S> <C>
BALANCE SHEET
DATA:
Working capital.. $170,280
Total assets..... 625,573
Long-term debt
and obligations
under capital
leases.......... 41,331
Stockholders'
equity.......... 335,432
WAREHOUSES OPEN
AT END OF PERI-
OD:
BJ's Wholesale
Club............
HomeBase.........
</TABLE>
<PAGE>

BJ'S WHOLESALE CLUB, INC.

SUMMARY OF SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA

The following table summarizes selected historical financial data of BJI for
the three fiscal years ended January 27, 1996 and for the twenty-six week
periods ended July 29, 1995 and July 27, 1996. The financial statements of BJI
include the assets, liabilities, revenues and expenses of the BJ's Division.
The BJI financial statements include certain allocations of the overhead
expenses incurred by Waban that support the BJ's Division. In management's
opinion, these allocations were made on a reasonable basis. However, such
allocations may not be indicative of the level of expenses which will be
incurred by BJI after the Distribution. The expenses were generally allocated
based on specific identification and estimates of the relative time devoted to
supporting BJI. The historical financial data is not necessarily indicative of
BJI's future results of operations or financial condition. The data set forth
below should be read in conjunction with the unaudited Pro Forma Financial
Data of BJI and the Notes thereto, the audited Financial Statements of BJI and
the Notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations of BJI included elsewhere in this Proxy
Statement. The historical financial data for the twenty-six weeks ended July
29, 1995 and July 27, 1996 is unaudited. For a discussion of the basis of
presentation of the BJI Financial Statements, see Summary of Accounting
Policies in Notes to the BJI Financial Statements.

The following unaudited pro forma financial data illustrates the estimated
effects on BJI of the proposed Distribution and (i) the repayment by BJI to
Waban of the balance of its intercompany indebtedness and current taxes
payable, (ii) new borrowings under BJI's proposed credit agreement, and (iii)
the impact of the conversion or redemption of the Convertible Debentures and
the related equity contribution by Waban (the "related transactions"). The
Company intends to call the Convertible Debentures for redemption prior to the
Distribution. The pro forma financial data has been prepared to present two
alternative scenarios. Scenario A gives pro forma effect to the conversion of
the Convertible Debentures into Waban Common Stock. Scenario B gives pro forma
effect to the redemption of the Convertible Debentures for cash and the
completion of an equity offering by BJI with net proceeds of $110 million at
an assumed offering price of $20.00 per share (net of offering fees and
expenses). It is a condition to the Distribution that such conversion or
redemption take place and, if the Convertible Debentures are redeemed, that
BJI complete an equity offering to reduce the indebtedness that Waban would
incur to finance the redemption. However, there can be no assurance that
holders of the Convertible Debentures will convert their Convertible
Debentures into Common Stock or that, if all Convertible Debentures are not
converted, BJI will complete such an equity offering. The pro forma balance
sheet data is based on the July 27, 1996 balance sheet of BJI and assumes the
Distribution and related transactions were consummated on that date. The pro
forma income statement data gives effect to the Distribution and related
transactions as if they occurred at the beginning of fiscal 1995. The Pro
Forma Financial Data of BJI does not purport to represent what the financial
position or results of operations of BJI would have been if the Distribution
and related transactions had in fact been consummated on the dates indicated
or at any future date. The pro forma adjustments are based upon available
information and upon certain assumptions that BJI's management believes are
reasonable in the circumstances.

14
<PAGE>

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (UNAUDITED)
---------------------------------------------------------------- ----------------------
SCENARIO A:

ASSUMING CONVERSION OF
CONVERTIBLE DEBENTURES
-------------------------
(UNAUDITED) FISCAL YEAR TWENTY-SIX
FISCAL YEAR ENDED TWENTY-SIX WEEKS ENDED ENDED WEEKS
-------------------------------------- ------------------------- JAN 27, ENDED
JAN 29, 1994 JAN 28, 1995 JAN 27, 1996 JUL 29, 1995 JUL 27, 1996 1996 JUL 27, 1996
------------ ------------ ------------ ------------ ------------ ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Total revenues.. $2,003,385 $2,293,091 $2,529,608 $1,163,477 $1,356,076 $2,529,608 $1,356,076
---------- ---------- ---------- ---------- ---------- ---------- ----------
Cost of sales,
including
buying and
occupancy
costs.......... 1,807,586 2,054,167 2,263,532 1,049,167 1,219,544 2,263,532 1,219,544
Selling, general
and
administrative
expenses....... 155,425 174,416 183,419 85,264 98,602 183,419 98,602
Interest on debt
and capital
leases (net)... 7,807 13,665 14,757 7,354 8,211 4,350 2,335
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
income taxes
and cumulative
effect of
accounting
principle
changes........ $ 32,567 $ 50,843 $ 67,900 $ 21,692 $ 29,719 $ 78,307 $ 35,595
========== ========== ========== ========== ========== ========== ==========
Net income...... $ 22,323 $ 30,902 $ 41,550 $ 13,276 $ 18,069 $ 47,742 $ 21,565
========== ========== ========== ========== ========== ========== ==========
Pro forma
earnings per
share.......... $1.27 $0.58
========== ==========
<CAPTION>
JAN 29, 1994 JAN 28, 1995 JAN 27, 1996 JUL 29, 1995 JUL 27, 1996 JUL 27, 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:
Working capital. $ 71,248 $ 58,252 $ 77,207 $ 68,934 $ 94,207 $ 98,643
Total assets.... 506,034 563,931 676,675 611,536 718,589 718,589
Long-term debt
and obligations
under capital
leases......... 3,262 2,960 2,731 2,823 2,667 92,667
Loans and
advances from
Waban Inc...... 152,427 142,512 181,730 167,029 195,904 --
Stockholder's
equity......... 149,531 180,433 221,983 193,709 240,052 350,392
CLUBS OPEN AT
END OF PERIOD.. 52 62 71 65 77

<CAPTION>
PRO FORMA (UNAUDITED)
--------------------------------------------------------
SCENARIO B:
ASSUMING REDEMPTION OF
CONVERTIBLE DEBENTURES AND
EQUITY FINANCING
--------------------------- ----------------------------
FISCAL YEAR TWENTY-SIX
ENDED WEEKS
JAN 27, ENDED
1996 JUL 27, 1996
-------------------------- ----------------------------

<S> <C> <C>
INCOME STATEMENT
DATA:
Total revenues.. $ 2,529,608 $ 1,356,076
------------- -------------
Cost of sales,
including
buying and
occupancy
costs.......... 2,263,532 1,219,544
Selling, general
and
administrative
expenses....... 183,419 98,602
Interest on debt
and capital
leases (net)... 4,371 2,345
------------- -------------
Income before
income taxes
and cumulative
effect of
accounting
principle
changes........ $ 78,286 $ 35,585
============= =============
Net income...... $ 47,730 $ 21,560
============= =============
Pro forma
earnings per
share.......... $1.24 $0.56
============= =============
<CAPTION>
JUL 27, 1996
-------------
<S> <C>
BALANCE SHEET
DATA:
Working capital. $ 98,643
Total assets... 718,589
Long-term debt
and obligations
under capital
leases......... 93,007
Loans and
advances from
Waban Inc...... --
Stockholder's
equity......... 350,052
CLUBS OPEN AT
END OF PERIOD..
</TABLE>

15
<PAGE>

INTRODUCTION

This Proxy Statement is being furnished to stockholders of Waban in
connection with the solicitation of proxies by the Waban Board of Directors
from holders of record of Waban Common Stock as of the close of business on
the Special Meeting Record Date for use at the Special Meeting to be held on
, 1997 at a.m. at , Boston, Massachusetts, and at any
adjournment or postponement thereof. This Proxy Statement is first being
mailed to Waban's stockholders on or about , 1996. References in this
Proxy Statement to "HomeBase" and "HomeBase Common Stock" mean Waban and Waban
Common Stock following the Distribution. The principal executive offices of
Waban are located at One Mercer Road, Natick, Massachusetts 01760. Following
the Distribution, the principal executive offices of BJI will be located at
One Mercer Road, Natick, Massachusetts 01760, and the principal executive
offices of HomeBase will be located at 3345 Michelson Drive, Irvine, CA 92715.

MATTERS FOR CONSIDERATION AT THE SPECIAL MEETING

At the Special Meeting, holders of shares of Waban Common Stock will be
asked:

1. To consider and vote upon the following Distribution Proposals:

(i) Proposal One: Approval of a distribution (the "Distribution") in the
form of a tax-free special dividend to all holders of Waban's outstanding
shares of common stock, on a one-for-one basis, of all outstanding shares
of common stock held by Waban, and the associated stockholders' rights, of
a newly formed, wholly-owned subsidiary of the Company, to be known as
"BJ's Wholesale Club, Inc.", which will own and operate the "BJ's Wholesale
Club" business presently conducted as a division of Waban;

(ii) Proposal Two: Approval of an amendment of the Certificate of
Incorporation of Waban, which will change the name of Waban to "HomeBase,
Inc." after the Distribution;

(iii) Proposal Three: Approval of an amendment to the Waban 1989 Stock
Incentive Plan to increase by 2,000,000 shares the number of shares
available for issuance thereunder;

(iv) Proposal Four: Approval of the BJI 1997 Stock Incentive Plan;

(v) Proposal Five: Approval of the BJI Management Incentive Plan; and

(vi) Proposal Six: Approval of the BJI Growth Incentive Plan; and

2. To consider such other business as may properly come before the Special
Meeting.

THE WABAN BOARD BELIEVES THAT THE DISTRIBUTION IS IN THE BEST INTERESTS OF
STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ALL OF THE
DISTRIBUTION PROPOSALS.

Stockholder approval of the Distribution Proposals may not prevent a
stockholder from subsequently seeking to challenge the Distribution Proposals
or the actions of the Waban Board in approving the Distribution Proposals.
However, although Waban cannot determine in advance its position with respect
to any such challenge, it is possible that Waban could assert a stockholder's
approval of the Distribution Proposals as a defense, in which case if such
defense were held meritorious, such stockholder could effectively be estopped
from asserting such claims.

The Waban Board has retained discretion, even if stockholder approval of the
Distribution Proposals is obtained, to abandon, defer or modify the
Distribution or any other element contained in the Distribution Proposals.

16
<PAGE>

Prior to the Distribution, Waban expects to call for redemption the
Convertible Debentures. The Convertible Debentures are convertible by the
holders into Waban Common Stock at a conversion price of $24.75 per share, and
are redeemable during the period from July 1, 1996 to June 30, 1997 at a price
of 103.611% of par, plus accrued interest. If the Convertible Debentures are
redeemed for cash in response to such call, Waban expects that BJI will
undertake an equity offering to reduce the indebtedness that Waban would incur
to finance the redemption. Such offering could delay the Distribution Date. It
is a condition to the Distribution that the Convertible Debentures be
converted into Common Stock or redeemed for cash, and, if the Convertible
Debentures are redeemed, that BJI successfully completes such equity offering.
There can be no assurance that such conversion or such redemption and equity
offering will take place.

For a description of the reasons for the Distribution, see "The
Distribution--Background and Reasons for the Distribution."

VOTING RIGHTS AND PROXY INFORMATION

Only holders of record of shares of Waban Common Stock as of the close of
business on the Special Meeting Record Date will be entitled to notice of and
to vote at the Special Meeting or any adjournment or postponement thereof.
Such holders of shares of Waban Common Stock are entitled to one vote per
share on any matter which may properly come before the Special Meeting. The
presence, either in person or by properly executed proxy, of a majority of the
shares of Waban Common Stock outstanding on the Special Meeting Record Date
will constitute a quorum and such quorum is necessary to permit action to be
taken by the stockholders at such meeting. The affirmative vote of the holders
of a majority of the shares of Waban Common Stock outstanding on the Special
Meeting Record Date, regardless of whether such shares are present in person
or represented by proxy at the Special Meeting, is required to approve
Proposals One and Two. Under Waban's By-laws, so long as a quorum is present
at the Special Meeting, adoption of Proposals Three, Four, Five and Six will
require the affirmative vote of the holders of a majority of the votes cast at
the Special Meeting. In addition, the New York Stock Exchange requires that
the total votes cast (for or against) on Proposals Three and Four represent at
least a majority of the Record Shares. You have three choices in deciding how
to vote on each of the Distribution Proposals. By checking the appropriate box
you may: (a) vote "For" the Proposal; (b) vote "Against" the Proposal; or (c)
"Abstain" from voting on the Proposal.

As of 1996, there were shares of Waban Common Stock
outstanding and entitled to vote at the Special Meeting and record holders
of Waban Common Stock. Although shares which abstain from voting as to a
particular matter and broker non-votes (i.e., shares held by brokers or
nominees as to which (i) instructions have not been received from the
beneficial owners and (ii) the broker or nominee does not have the
discretionary authority to vote on a particular matter) will be counted as
present at the meeting for quorum purposes, such shares will not be considered
to be votes cast with respect to Proposals Three, Four, Five and Six.
Accordingly, abstentions and broker non-votes will have no effect on such
Proposals. However, abstentions and broker non-votes will have the effect of a
vote "against" Proposals One and Two.

All shares of Waban Common Stock that are represented at the Special Meeting
by properly executed proxies received prior to or at the Special Meeting and
not revoked will be voted at the Special Meeting in accordance with the
instructions indicated in such proxies. If no instructions are indicated for
any Distribution Proposal, such proxies will be voted FOR such Proposal.

In the event that a quorum is not present at the time the Special Meeting is
convened, or if for any other reason Waban believes that additional time
should be allowed for the solicitation of proxies, Waban may adjourn the
Special Meeting with or without a vote of the stockholders, and the persons
named in the enclosed proxy will vote all shares of Waban Common Stock for
which they have voting authority in favor of such adjournment.

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Waban, at or before the Special Meeting, a written
notice of revocation bearing a later date than the proxy, (ii) duly executing
a subsequent proxy relating

17
<PAGE>

to the same shares of Waban Common Stock and delivering it to the Secretary of
Waban at or before the Special Meeting, or (iii) attending the Special Meeting
and voting in person (although attendance at the Special Meeting will not in
and of itself constitute a revocation of a proxy). Any written notice revoking
a proxy should be sent to the Secretary of Waban at One Mercer Road, Natick,
Massachusetts 01760.

The expense of soliciting proxies and the cost of preparing, assembling and
mailing material in connection with the solicitation of proxies will be paid
by Waban. In addition to the use of mails, certain directors, officers or
employees of Waban and its subsidiaries, who receive no compensation for their
services other than their regular salaries, may solicit and tabulate proxies.
Waban has retained to assist in the solicitation of proxies with respect
to shares of Waban Common Stock held of record by brokers, nominees and
institutions. The estimated cost of the services of is $ plus
expenses.

Waban's transfer agent, The First Chicago Trust Company of New York, will
tabulate the votes. Representatives of the transfer agent will be appointed as
inspector at the Special Meeting to count all votes and ballots and perform
the other duties required of an inspector.

NO APPRAISAL RIGHTS

Stockholders of Waban will not be entitled to appraisal rights under
Delaware law in connection with the Distribution Proposals.

RECENT DEVELOPMENTS

Waban has publicly reported its sales results for the four-week and five-
week periods ended August 31, 1996 and October 5, 1996, respectively. Such
information, together with sales results for the comparable periods of the
prior year, is unaudited, but reflects all adjustments (consisting only of
normal recurring adjustments) which management considers necessary for a fair
presentation of such information. These results are not necessarily indicative
of the results to be expected for the entire quarter or year.

<TABLE>
<CAPTION>
%
FOUR WEEKS ENDED CHANGE COMPARABLE
--------------------------------- TOTAL STORE %
SEPTEMBER 2, 1995 AUGUST 31, 1996 REVENUES CHANGE
----------------- --------------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BJ's Division............. $184,854 $217,062 17.4% 4.7%
HomeBase Division......... $112,405 $113,415 0.9% -4.3%
-------- --------
Total Waban............... $297,259 $330,477 11.2% 1.3%
======== ========
</TABLE>

<TABLE>
<CAPTION>
%
FIVE WEEKS ENDED CHANGE COMPARABLE
------------------------------- TOTAL STORE %
OCTOBER 7, 1995 OCTOBER 5, 1996 REVENUES CHANGE
--------------- --------------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BJ's Division............... $222,301 $259,455 16.7% 4.9%
HomeBase Division........... $138,742 $142,214 2.5% -3.8%
-------- --------
Total Waban................. $361,043 $401,669 11.3% 1.6%
======== ========
</TABLE>

18
<PAGE>

PROPOSAL ONE

THE DISTRIBUTION

BACKGROUND AND REASONS FOR THE DISTRIBUTION

The Waban Board believes that the Distribution will accomplish a number of
important business goals. Separation of the Home Improvement Business and the
Warehouse Club Business into independent companies will allow each company to
concentrate exclusively on its own business objectives without concern for the
business objectives of the other company, and will allow the financial markets
to better recognize and evaluate the merits of the Warehouse Club Business and
the Home Improvement Business, thereby enhancing the likelihood that each will
achieve appropriate market recognition for its own performance. The Waban
Board also believes the improved recognition by the financial markets
resulting from the separation of the Home Improvement Business and the
Warehouse Club Business into independent publicly owned companies will
facilitate the conversion of the Company's $108.6 million convertible
subordinated debentures (the "Convertible Debentures") into Common Stock. The
Convertible Debentures are convertible into Waban Common Stock at a price of
$24.75 per share, and are redeemable during the period from July 1, 1996 to
June 30, 1997 at a price of 103.611% of par, plus accrued interest. The
Company intends to call the Convertible Debentures for redemption prior to the
Distribution. If the Convertible Debentures are redeemed for cash in response
to such call, Waban expects that BJI will undertake an equity offering to
reduce the indebtedness that Waban would incur to finance the redemption. This
transaction is expected to reduce the aggregate level of indebtedness and
interest costs borne by the two companies, and to improve the debt-to-total
capital ratio of each company, as compared to Waban.

In addition, the Distribution is expected to enhance the ability of the
separate corporations to attract, motivate and retain key personnel through
the provision of more effective stock-based incentive compensation programs
that are based on the performance of the respective business in which such
individuals are employed without being influenced by the results of the
business in which they have no involvement.

The proposal to submit the Distribution Proposals to stockholders, as
ultimately developed by management of Waban with advice from its advisors, was
presented to and approved by the Waban Board on October 22, 1996.

In the event that stockholders fail to approve all of the Distribution
Proposals, the Distribution may not be made, in which case Waban intends to
continue to operate the Warehouse Club Business and the Home Improvement
Business and may consider alternative restructuring options.

MANNER OF EFFECTING THE DISTRIBUTION

If Waban's stockholders approve the Distribution Proposals and all other
conditions thereto are satisfied (or waived by the Waban Board), and if the
Waban Board declares the Distribution, the Distribution will occur on the
Distribution Date. The Distribution Record Date will be a date that is as soon
as practicable following the declaration of the Distribution. On the
Distribution Date, Waban will deliver all outstanding shares of BJI Common
Stock held by Waban to the Distribution Agent. As soon as practicable
thereafter, certificates therefor will be mailed by the Distribution Agent to
holders of record of Waban Common Stock as of the Distribution Record Date on
the basis of one share of BJI Common Stock for every share of Waban Common
Stock held on that date. All such shares will be fully paid and nonassessable.

No holder of Waban Common Stock will be required to pay any cash or other
consideration for the shares of BJI Common Stock received in the Distribution
or to surrender or exchange shares of Waban Common Stock in order to receive
BJI Common Stock.

FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION

The Distribution will not occur unless, on or before the Distribution Date,
the Company has received a letter ruling from the IRS to the effect that, for
Federal income tax purposes, the Distribution will qualify as a spin-off

19
<PAGE>

under Section 355 of the Internal Revenue Code (the "Code") that will be tax
free to the holders of Waban Common Stock and to Waban. Waban submitted its
request for the letter ruling on November , 1996. If the Distribution so
qualifies, the principal Federal income tax consequences will be as follows:

1. No income, gain or loss will be recognized by a stockholder of Waban
Common Stock as a result of the receipt of BJI Common Stock in the
Distribution.

2. The basis of a holder of Waban Common Stock in the HomeBase Common
Stock and the BJI Common Stock received on the Distribution Date in
respect of Waban Common Stock will be determined by allocating such
holder's basis in the Waban Common Stock immediately before the
Distribution between the HomeBase Common Stock and the BJI Common
Stock received with respect to such Waban Common Stock in proportion
to their relative fair market values on the Distribution Date.

3. The holding period of the BJI Common Stock received in the
Distribution will include the holding period of the Waban Common Stock
with respect to which the BJI Common Stock will be distributed,
provided the Waban Common Stock is held as a capital asset on the
Distribution Date.

4. No income, gain or loss will be recognized by Waban solely on account
of the Distribution.

A letter ruling by the IRS will be based on and subject to certain
assumptions, facts, representations and advice provided and to be provided by
Waban, BJI, certain of the holders of Waban Common Stock and Waban's financial
advisors. Waban is not aware of any present facts or circumstances which
should make such assumptions, facts, representations and advice unobtainable
or untrue. However, certain future events not within the control of Waban and
BJI, including, for example, certain dispositions of HomeBase Common Stock or
BJI Common Stock after the Distribution, could cause the Distribution not to
qualify for tax-free treatment.

If the Distribution were not to qualify for tax-free treatment under Section
355 of the Code, each holder of Waban Common Stock who receives BJI Common
Stock would be treated as receiving a distribution, generally taxable as a
dividend, in an amount equal to the fair market value of such BJI Common Stock
on the Distribution Date. Furthermore, the tax basis of BJI Common Stock
received in the Distribution would equal its fair market value on the
Distribution Date, the holding period of such stock would begin with and
include the day after the Distribution Date and Waban would recognize taxable
gain on the Distribution. See "Certain Special Considerations--Certain Tax
Considerations."

It is expected that, pursuant to the Preferred Share Purchase Rights Plan to
be adopted by BJI, one preferred share purchase right (a "BJI Right") will
attach to each share of BJI Common Stock distributed in the Distribution.
While the distribution of the BJI Rights should not be taxable to stockholders
or to BJI, stockholders may, depending upon the circumstances, recognize
taxable income in the event that the BJI Rights become exercisable for BJI
Preferred Stock (or other consideration) or for common stock of an acquiring
company. See "Description of BJI Capital Stock" and "Certain Provisions of the
BJI Certificate and the BJI By-laws--Preferred Share Purchase Rights."

For a description of the Tax Sharing Agreement pursuant to which BJI and
Waban have provided for various tax matters, see "Relationship Between BJI and
HomeBase After the Distribution; Conflicts of Interest--Tax Sharing
Agreement."

THE FOREGOING SUMMARY OF THE ANTICIPATED PRINCIPAL FEDERAL INCOME TAX
CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW IS FOR GENERAL INFORMATION
ONLY AND DOES NOT PURPORT TO COVER ALL FEDERAL INCOME TAX CONSEQUENCES
(INCLUDING THOSE THAT MAY APPLY TO PARTICULAR CATEGORIES OF STOCKHOLDERS) OR
ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OF OTHER JURISDICTIONS.
WABAN HAS NOT REQUESTED ANY RULINGS OR OPINIONS WITH RESPECT TO THE TAX
CONSEQUENCES OF THE DISTRIBUTION UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN
GOVERNMENT. EACH HOLDER (INCLUDING ANY CORPORATE HOLDER) OF WABAN COMMON STOCK
SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
OF THE DISTRIBUTION, INCLUDING APPLICATION OF FEDERAL, STATE, LOCAL

20
<PAGE>

AND FOREIGN TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY
AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.

ACCOUNTING TREATMENT

Following approval of the Distribution Proposals at the Special Meeting,
Waban will present the Warehouse Club Business as discontinued operations to
the extent financial information for periods prior to the Distribution is
required to be included in Waban's historical financial statements. Included
separately herein are the financial statements of BJI as if it were a separate
entity for all periods presented. Waban's historical basis in the assets and
liabilities of BJI has been carried over. See "Pro Forma Financial Data of
Waban," "Selected Historical Financial Data of BJI" and "Pro Forma Financial
Data of BJI."

LISTING AND TRADING OF BJI COMMON STOCK

There is not currently a public market for the BJI Common Stock. BJI intends
to list the BJI Common Stock on the New York Stock Exchange. Prior to the
Distribution, BJI Common Stock may trade on a "when-issued" basis. Prices at
which BJI Common Stock may trade on a "when-issued" basis or after the
Distribution cannot be predicted. Until the BJI Common Stock is fully
distributed and an orderly market develops, the prices at which trading in
such stock occurs may fluctuate significantly. The prices at which BJI Common
Stock trades will be determined by the marketplace and may be influenced by
many factors, including, among others, the depth and liquidity of the market
for BJI Common Stock, investor perception of BJI and the industry in which BJI
participates, dividend policy and general economic and market conditions. Such
prices may also be affected by certain provisions of the BJI Certificate and
the BJI By-laws, as each will be in effect following the Distribution, and by
the BJI Preferred Share Purchase Rights Plan. See "Certain Special
Considerations--Dividend Policies" and "Certain Provisions of the BJI
Certificate and the BJI By-laws."

BJI initially will have approximately stockholders of record based on
the number of stockholders of record of Waban as of , 1996.

Waban filed a request for a no-action letter with the Securities and
Exchange Commission (the "Commission") on November , 1996, setting forth,
among other things, Waban's view that the Distribution does not require
registration under the Securities Act of 1933, as amended (the "Securities
Act"), and that the shares of BJI Common Stock so distributed will be freely
transferable, with the exception of securities received by persons who may be
deemed to be "affiliates" of BJI within the meaning of Rule 144 under the
Securities Act. Persons who are affiliates of BJI within the meaning of Rule
144 would be subject to such rule and may not publicly offer or sell the BJI
Common Stock received in connection with the Distribution except pursuant to a
registration statement under the Securities Act or an exemption therefrom. The
no-action letter being sought by Waban also seeks confirmation that the 90-day
waiting period of Rule 144(c)(1) would not apply to such sales by affiliates.

LISTING AND TRADING OF HOMEBASE COMMON STOCK

After the Distribution, it is expected that HomeBase Common Stock (formerly
Waban Common Stock) will continue to be listed and traded on the New York
Stock Exchange. Following the Distribution, HomeBase's financial results will
no longer be consolidated with those of BJI, and as a result, HomeBase's
revenues, income and other results of operations will be substantially below
those of Waban prior to the Distribution. Accordingly, as a result of the
Distribution, the trading price range of HomeBase's Common Stock immediately
after the Distribution is expected to be significantly lower than the trading
price range of the Waban Common Stock prior to the Distribution. The combined
trading prices of the HomeBase Common Stock and the BJI Common Stock held by
stockholders after the Distribution may be less than, equal to or greater than
the trading price of Waban Common Stock prior to the Distribution. The prices
at which HomeBase Common Stock trades after the Distribution will be
determined by the marketplace and may be influenced by many factors,
including, among others, the continuing depth and liquidity of the market for
HomeBase's Common Stock, investor perception of HomeBase's Home Improvement
Business and general economic and market conditions.

21
<PAGE>

CONDITIONS; TERMINATION

The Waban Board has conditioned the Distribution upon, among other things,
(i) the declaration by the Waban Board of the Distribution; (ii) approval of
the Distribution Proposals by Waban's stockholders; (iii) Waban's receipt of a
ruling that the Distribution will qualify as a tax-free transaction under
Section 355 of the Code; (iv) the conversion into Common Stock or redemption
for cash of the Convertible Debentures and, if the Convertible Debentures are
redeemed for cash, the closing of an equity offering by BJI to reduce the
indebtedness that Waban would incur to finance the redemption; (v) the
transfers of assets and liabilities contemplated by the Distribution Agreement
to be entered into between BJI and Waban prior to the Distribution having been
consummated in all material respects; (vi) the BJI Common Stock and associated
BJI Rights having been approved for listing on the New York Stock Exchange
subject to official notice of issuance; (vii) the BJI Board having been
elected by Waban, as the sole stockholder of BJI, and the BJI Certificate and
the BJI By-laws, as each will be in effect after the Distribution, having been
adopted and being in effect; (viii) BJI and HomeBase having entered into
agreements with lenders to provide sufficient financing upon consummation of
the Distribution; (ix) the Registration Statement on Form 10 with respect to
the BJI Common Stock (the "Form 10 Registration Statement") having become
effective under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); and (x) third-party consents, if any, to the transactions contemplated
by the Distribution Proposals having been obtained, except for those the
failure of which to obtain would not have a material adverse effect on BJI or
on HomeBase. Any of these conditions, except for approval of the Distribution
Proposals by Waban's stockholders, may be waived in the discretion of the
Waban Board. Even if all of the above conditions are satisfied, the Waban
Board has reserved the right to abandon, defer or modify the Distribution or
the other elements of the Distribution Proposals at any time prior to the
Distribution Date. See "Relationship Between HomeBase and BJI after the
Distribution; Conflicts of Interest--Distribution Agreement."

22
<PAGE>

CERTAIN SPECIAL CONSIDERATIONS

Stockholders should carefully consider the following factors, as well as
other information set forth herein, before acting on the Distribution
Proposals.

CERTAIN FINANCIAL CONSIDERATIONS. BJI has been incorporated for the purpose
of effecting the Distribution. While the BJ's Division and the HomeBase
Division have substantial operating histories, BJI and HomeBase do not have
operating histories as separate stand-alone companies. Prior to the
Distribution, each of the two businesses had access to the cash flow generated
by the other and to Waban's credit, which was based on the combined assets of
the BJ's Division and the HomeBase Division. There has been no increase in the
monthly comparable store sales of the HomeBase Division since April 1996.
Accordingly, lenders and other capital providers making credit decisions with
respect to HomeBase and BJI may analyze the credit risk, and associated
pricing, of any offered credit facility or capital differently than was the
case with credit facilities made available to Waban. There can be no assurance
that the access of HomeBase and BJI to credit facilities and to the capital
markets will not differ from that currently available to Waban, and the
ability of each of HomeBase and BJI to access such credit facilities and
capital markets in the future will depend on the financial performance of each
such company.

CERTAIN OPERATING CONSIDERATIONS. Immediately following the Distribution,
each of BJI and HomeBase will be a smaller and less diversified company than
historically was the case with respect to Waban prior to the Distribution. The
Distribution is expected to result in some additional general and
administrative costs related to the personnel and other resources needed to
support BJI and HomeBase as separate publicly owned companies. Nevertheless,
the Waban Board believes that separation of the two companies will result in
certain long-term operating efficiencies by allowing the companies to focus on
their respective businesses.

BJI's warehouse clubs are located in the eastern United States, primarily in
the northeast, and HomeBase's home improvement warehouse stores are located in
the western United States, more than half of them in California. Both the BJ's
Division and the HomeBase Division have been adversely affected from time to
time by economic downturns experienced in their respective geographic markets,
and future economic downturns in such regions could adversely affect BJI and
HomeBase, as the case may be. As a result of the separation of the Home
Improvement Business and the Warehouse Club Business into independent
companies, neither company will have the benefit of the broader geographic and
product line diversification that is currently the case with Waban.

The BJ's Division's sales and operating income have been strongest in the
Christmas holiday season and lowest in the first quarter of each fiscal year.
The HomeBase Division'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. As a result of the
Distribution, the financial results of each company will reflect these
seasonal patterns, without the offsetting effect of the operating results of
the other company.

Each of the BJ's Division and the Home Base Division competes with a large
number and variety of retailers and wholesalers, including several large
national chains in the warehouse merchandising business, some of which have
significantly greater financial and marketing resources than either BJI or
HomeBase. Competition for each of the companies will exist primarily in the
areas of price, product selection and service. Competitive factors could
require price reductions or increased operational costs, including increased
expenditures for marketing and customer service, that could adversely affect
each company's operating results. Both BJI and HomeBase also expect to
continue to experience competition for qualified personnel and suitable new
warehouse locations. See "BJI Business and Properties--Competition" and
"HomeBase Business and Properties--Competition."

CERTAIN TAX CONSIDERATIONS. If the Distribution were not to qualify under
Section 355 of the Code, then, in general, Waban would recognize gain equal to
the excess of the fair market value of the BJI Common Stock over Waban's tax
basis in the BJI Common Stock immediately prior to the Distribution. This tax
would be

23
<PAGE>

payable by HomeBase, although under certain limited circumstances, BJI has
agreed to indemnify HomeBase for such tax liability. See "Relationship Between
BJI and HomeBase after the Distribution; Conflicts of Interest--Tax Sharing
Agreement." Each member of the Waban Consolidated Group (including BJI and its
subsidiaries) would remain jointly and severally liable for such tax
liability.

In addition, if the transaction were taxable, each Waban stockholder would
be treated as having received a taxable dividend equal to the fair market
value of the BJI Common Stock received, if, and to the extent that, Waban has
(as expected) sufficient current and accumulated earnings and profits. If, and
to the extent that, Waban did not have sufficient earnings and profits, each
Waban stockholder would (a) first reduce its tax basis in Waban Common Stock
(but not below zero) to the extent that the value of the Waban Common Stock
received exceeds its pro rata share of such earnings and profits and (b) then
recognize gain from the exchange of its Waban Common Stock to the extent the
value of the BJI Common Stock received exceeds both its pro rata share of
earnings and profits and its tax basis in its Waban Common Stock. If the
transaction were taxable, each stockholder's tax basis in its BJI Common Stock
after the Distribution would be equal to its fair market value at the time of
the Distribution.

NO CURRENT PUBLIC MARKET FOR BJI COMMON STOCK. There is not currently a
public market for BJI Common Stock and there can be no assurance as to the
prices at which trading in BJI Common Stock will occur after the Distribution.
Until BJI Common Stock is fully distributed and an orderly market develops,
the prices at which trading in such stock occurs may fluctuate significantly.
BJI intends to list the BJI Common Stock on the New York Stock Exchange. See
"The Distribution--Listing and Trading of BJI Common Stock."

CHANGE IN TRADING PRICES OF HOMEBASE COMMON STOCK. After the Distribution,
it is expected that HomeBase Common Stock (formerly Waban Common Stock) will
continue to be listed and traded on the New York Stock Exchange. As a result
of the Distribution, the trading price range of HomeBase Common Stock is
expected to be significantly lower than the trading price range of Waban
Common Stock prior to the Distribution. The combined trading prices of BJI
Common Stock and Waban Common Stock held by stockholders after the
Distribution may be less than, equal to or greater than the trading prices of
Waban Common Stock prior to the Distribution. See "The Distribution--Listing
and Trading of HomeBase Common Stock."

REPAYMENT OF LONG-TERM DEBT. Prior to the Distribution, Waban intends to
repay its $24,000,000 9.58% unsecured senior notes due May 31, 1998 (the
"Senior Notes"), and to retire (via open market purchases or tender offer) or
defease its $100,000,000 11% senior subordinated notes due May 15, 2004 (the
"Senior Subordinated Notes"). In addition, Waban will terminate its
$150,000,000 line of credit (of which $35,000,000 was outstanding at October
26, 1996) with a group of banks. Waban currently intends to seek bank
financing to repay the Senior Notes and the Senior Subordinated Notes, and
intends to obtain bank credit facilities for both BJI and HomeBase effective
as of the Distribution. The Senior Notes may be prepaid by Waban at any time
on 30 days' prior notice. Upon prepayment of the Senior Notes, Waban is
obligated to pay a "make whole" amount in addition to the principal amount to
be prepaid and interest accrued through the date of prepayment. The make whole
amount is an amount equal to the difference the holders of the Senior Notes
will earn on the prepayment, assuming reinvestment of the prepayment at an
interest rate 50 basis points higher than the rate of U.S. Government
securities with comparable maturities, and 9.58%. Based on interest rates at
October 26, 1996, Waban believes that the make whole amount on the Senior
Notes will total approximately $0.5 million. The Senior Subordinated Notes may
not be prepaid prior to May 15, 1999. At that time they may be prepaid at a
redemption price equal to 105 1/2% of the principal amount to be redeemed. To
satisfy Waban's obligations with respect to the Senior Subordinated Notes in
connection with the Distribution, Waban may retire the Senior Subordinated
Notes via open market purchases or a tender offer. Alternatively, Waban is
entitled to defease the Senior Subordinated Notes by depositing with the
indenture trustee U.S. Government securities maturing as to principal and
interest in such amounts and at such times as are sufficient, without
consideration of any reinvestment of such interest, to pay the amounts due
with respect to the Senior Subordinated Notes to the first permitted call
date. Waban believes that the cost to Waban to defease all of the outstanding
Senior Subordinated Notes would total approximately $15 million in excess of
principal and accrued interest based on interest rates at October 26, 1996.
However, this amount could vary depending upon market interest rates. In
addition, prior to the Distribution, Waban intends to call for redemption the
Convertible Debentures. See "--Conversion or Redemption of the Convertible
Debentures."

24
<PAGE>

CONVERSION OR REDEMPTION OF THE CONVERTIBLE DEBENTURES. Prior to the
Distribution, Waban expects to call for redemption the Convertible Debentures.
The Convertible Debentures are convertible by the holders into Waban Common
Stock at a conversion price of $24.75 per share, and are redeemable during the
period from July 1, 1996 to June 30, 1997 at a price of 103.611% of par, plus
accrued interest. If the Convertible Debentures are redeemed for cash in
response to such call, Waban expects that BJI will undertake an equity
offering to reduce the indebtedness that Waban would incur to finance the
redemption. Such offering could delay the Distribution Date. It is a condition
to the Distribution that the Convertible Debentures be converted or redeemed
and, if the Convertible Debentures are redeemed, that BJI successfully
completes such equity offering. There can be no assurance that such conversion
or such redemption and equity offering will take place.

CONTINGENT LIABILITY OF HOMEBASE FOR BJI LEASE LIABILITIES. After the
Distribution, HomeBase will continue to be liable to third-party lessors with
respect to leases entered into by Waban with respect to the Warehouse Club
Business. BJI has agreed to indemnify HomeBase for such liabilities.

POTENTIAL CONFLICTS. Subsequent to the Distribution, the interests of BJI
and HomeBase may potentially conflict due to the ongoing relationships between
the companies. Such sources of conflict include the fact that after the
Distribution, HomeBase will remain liable for certain contractual obligations
of BJI, including BJI leases. See "Relationship Between BJI and HomeBase after
the Distribution; Conflicts of Interest." In addition, following the
Distribution, Herbert J. Zarkin will serve as Chairman of the HomeBase Board
and as Chairman of the BJI Board, and Lorne R. Waxlax and Edward J. Weisberger
will serve as members of the Board of Directors of both HomeBase and BJI.
Messrs. Zarkin, Weisberger and Waxlax, as well as certain other officers and
directors of BJI and HomeBase, will also own shares (and/or options or other
rights to acquire shares) in both companies following the Distribution. See
"Relationship Between BJI and HomeBase after the Distribution; Conflicts of
Interest," "Management of BJI" and "Management of HomeBase." Such
relationships may present conflicts of interest under certain circumstances.
Appropriate policies and procedures will be followed by the Board of Directors
of each company to limit the involvement of Messrs. Zarkin, Weisberger and
Waxlax (and, if appropriate, other officers and directors of such companies)
in conflict situations, including requiring them to abstain from voting as
directors of either BJI or HomeBase on certain matters which present a
conflict between the two companies. See "Relationship Between BJI and HomeBase
after the Distribution; Conflicts of Interest--Policies and Procedures for
Addressing Conflicts."

DIVIDEND POLICIES. Waban has never paid a cash dividend and the Waban Board
does not believe that either HomeBase or BJI intends to declare any cash
dividends on the HomeBase Common Stock or the BJI Common Stock after the
Distribution. It is expected that certain debt agreements of BJI and HomeBase
or their subsidiaries will substantially limit these companies' respective
abilities to pay dividends. The declaration and payment of dividends by BJI
will be at the discretion of the BJI Board. The declaration and payment of
dividends by HomeBase will be at the discretion of the HomeBase Board. There
can be no assurance that any dividends will be paid in the future.

CERTAIN ANTITAKEOVER FEATURES. If the Distribution Proposals are approved
and the Distribution is consummated, the BJI Certificate and the BJI By-laws
will contain several provisions, all of which are in effect with respect to
Waban and will continue to be in effect with respect to HomeBase, that may
have the effect of making the acquisition of control of BJI difficult or
expensive without the approval of the BJI Board. In addition, BJI is expected
to implement a Preferred Share Purchase Rights Plan, which may have a similar
effect. See "Certain Provisions of the BJI Certificate and the BJI By-laws."

FRAUDULENT TRANSFER CONSIDERATIONS; LEGAL DIVIDEND REQUIREMENTS. The Waban
Board does not intend to consummate the Distribution unless it is satisfied
regarding the solvency of Waban, BJI and HomeBase and the permissibility of
the Distribution under Section 170 of the Delaware General Corporation Law
("DGCL"). There is no certainty, however, that a court would find the evidence
relied on by the Waban Board to be binding on creditors of Waban, BJI or
HomeBase, or that a court would reach the same conclusions as the Waban Board
as to whether Waban, BJI or HomeBase was solvent or insolvent at the time of,
or after giving effect to, the Distribution.

25
<PAGE>

If a court in a lawsuit filed by an unpaid creditor or representative of
unpaid creditors, such as a trustee in bankruptcy, were to find that at the
time either the Asset Transfers or the Distribution was consummated, Waban (i)
was insolvent, (ii) was rendered insolvent by reason of the Asset Transfers or
the Distribution, (iii) was engaged in a business or transaction for which the
remaining assets of Waban constituted unreasonably small capital, or (iv)
intended to incur, or believed it would incur, debts beyond its ability to pay
as such debts matured, such court may be asked to void the Asset Transfers or
the Distribution (in whole or in part) as a fraudulent conveyance and require
that the stockholders return the special dividend (in whole or in part) to
Waban, or require BJI to fund certain liabilities of HomeBase for the benefit
of HomeBase's creditors. The measure of insolvency for purposes of the
foregoing will vary depending upon the jurisdiction whose law is being
applied. Generally, however, Waban would be considered insolvent if either
prior to the Asset Transfers and the Distribution or after giving effect
thereto the fair value of its assets were less than the amount of its probable
liabilities or if it incurred debt beyond its ability to repay such debt as it
matures. In addition, under Section 170 of the DGCL (which is applicable to
Waban in the Distribution), a corporation generally may make distributions to
its stockholders only out of its surplus (net assets minus capital) and not
out of capital.

The Waban Board and management believe that, in accordance with the evidence
examined in connection with the Asset Transfers and the Distribution, (a)
Waban will be solvent prior to and after giving effect to the Asset Transfers
and the Distribution (in accordance with the foregoing definitions), will be
able to repay its debts as they mature following the Distribution, and will
have sufficient capital to carry on its business, and (b) the Distribution
will be made entirely out of surplus, as provided under Section 170 of the
DGCL.

26
<PAGE>

RELATIONSHIP BETWEEN BJI AND HOMEBASE AFTER THE DISTRIBUTION; CONFLICTS OF
INTEREST

DISTRIBUTION AGREEMENT

BJI and Waban will enter into a Separation and Distribution Agreement (the
"Distribution Agreement"), which will provide for, among other things, (i) the
principal corporate transactions required to effect the Distribution, (ii) the
division between BJI and Waban of certain assets and liabilities and (iii)
certain other agreements governing the relationship between BJI and HomeBase
following the Distribution.

The Distribution Agreement will provide that on or prior to the Distribution
Date (i) Waban will transfer to BJI all of the assets of the BJ's Division,
including the stock of certain subsidiaries which hold assets of the BJ's
Division; (ii) BJI will assume the liabilities associated with the BJ's
Division; and (iii) BJI will issue to Waban the BJI Common Stock and the
Preferred Share Purchase Rights to be distributed in the Distribution. See
"The Distribution--Manner of Effecting the Distribution."

Pursuant to the Distribution Agreement, a balance sheet of BJI and its
subsidiaries (the "Balance Sheet") will be prepared as of , 1997
(the "Balance Sheet Date"). The Balance Sheet will be prepared in accordance
with generally accepted accounting principles applied consistently with
Waban's customary practices followed in preparing the unaudited financial
statements of Waban and its subsidiaries for their monthly accounting period
ended on the Balance Sheet Date, subject to certain adjustments specified in
the Distribution Agreement. These adjustments include accruals through the
Balance Sheet Date for certain liabilities to be assumed by BJI pursuant to
the Distribution Agreement that would not otherwise appear on separate
divisional balance sheets of the BJ's Division, and the elimination of certain
liabilities of the BJ's Division which are to be retained by Waban pursuant to
the Distribution Agreement (including certain obligations under employee
benefits plans and certain insured claims, as described below).

The Distribution Agreement will contain a number of provisions pertaining to
employee benefit plan matters. BJI will generally agree to establish employee
benefit plans substantially similar to the employee benefit plans currently
maintained by Waban. Waban will agree to assume or retain certain obligations
under Waban plans, in respect of persons who will become BJI employees, for
the period ending on the date (the "Transfer Date") which is either (i) the
Balance Sheet Date, in the case of persons who become BJI employees on the
Distribution Date, or (ii) in the case of persons who become BJI employees
within three months following the Distribution Date, the date on which such
persons become employees of BJI. (In most cases, the Transfer Date will be the
Balance Sheet Date). These obligations, which will not be accrued on the
Balance Sheet, include the payment of insurance premiums or similar charges
under medical, insurance and similar plans through the applicable Transfer
Date, costs for medical services rendered to BJI employees prior to the
applicable Transfer Date so long as the appropriate reimbursement claim is
submitted within one year following the applicable Transfer Date, and the
payment through the applicable Transfer Date of the company contribution under
Waban's 401(k) Savings Plans and Executive Retirement Plan for persons who
become employees of BJI. BJI will generally agree to assume all other pre-
Transfer Date liabilities to BJI employees under Waban plans (other than
stock-based plans, the treatment of which is described below).

The Distribution Agreement will provide for appropriate asset transfers (and
corresponding credit for service with Waban prior to the applicable Transfer
Date) in respect of persons who will become BJI employees from Waban's 401(k)
Savings Plan and Executive Retirement Plan. In addition, the Distribution
Agreement will contain provisions for the issuance of replacement stock
options by BJI to persons who will become BJI employees on the Distribution
Date, subject to such persons' surrender of their corresponding Waban awards.
See "Management of BJI--Incentive and Other Plans."

The Distribution Agreement will contain provisions dealing with the post-
Distribution settlement of insured claims with respect to HomeBase and BJI.

The Distribution Agreement will provide that, except with respect to the
employee benefits and insurance matters described above, or except as provided
in the Tax Sharing Agreement (see "--Tax Sharing Agreement"

27
<PAGE>

below), HomeBase will indemnify BJI for liabilities relating to the business
retained by HomeBase following the Distribution. Similarly, subject to the
same exceptions, BJI will agree to indemnify HomeBase for liabilities
pertaining to BJI's business. The Distribution Agreement will also provide
that BJI and HomeBase will each indemnify the other in the event of certain
liabilities arising under the Exchange Act.

The Distribution Agreement will provide that the Distribution will be
conditioned upon a number of things, including (i) the declaration by the
Waban Board of the Distribution; (ii) approval of the Distribution Proposals
by Waban's stockholders; (iii) Waban's receipt of a ruling that the
Distribution will qualify as a tax-free transaction under Section 355 of the
Code; (iv) the conversion into Common Stock or redemption for cash of the
Convertible Debentures and, if the Convertible Debentures are redeemed, the
closing of an equity offering by BJI to reduce the indebtedness that Waban
would incur to finance the redemption; (v) the transfers of assets and
liabilities contemplated by the Distribution Agreement having been consummated
in all material respects; (vi) the BJI Common Stock and associated BJI Rights
having been approved for listing on the New York Stock Exchange subject to
official notice of issuance; (vii) the BJI Board having been elected by Waban,
as the sole stockholder of BJI, and the BJI Certificate and the BJI By-laws,
as each will be in effect after the Distribution, having been adopted and
being in effect; (viii) BJI and HomeBase having entered into agreements with
lenders to provide sufficient financing upon consummation of the Distribution;
(ix) the Form 10 Registration Statement having become effective under the
Exchange Act; and (x) third-party consents, if any, to the transactions
contemplated by the Distribution Proposals having been obtained, except for
those the failure of which to obtain would not have a material adverse effect
on BJI or on HomeBase. Any of these conditions, except for approval of the
Distribution Proposals by Waban's stockholders, may be waived in the
discretion of the Waban Board. Even if all of the above conditions are
satisfied, the Waban Board has reserved the right to abandon, defer or modify
the Distribution or the other elements of the Distribution Proposals at any
time prior to the Distribution Date.

SERVICES AGREEMENT

BJI and Waban will enter into a Services Agreement (the "Services
Agreement") pursuant to which BJI will provide certain services to HomeBase
following the Balance Sheet Date. Such services are expected to include tax
and legal services, employee benefits management, insurance claims management
and other administrative services. All such services shall be provided at
rates equal to those which would have been established on an arm's-length
basis. The initial term for most of these services will expire at or before
the end of fiscal 1997. Certain services may be extended beyond their initial
term for a specified limited renewal term by notice from HomeBase. All other
extensions may only be made upon the subsequent mutual agreement of BJI and
HomeBase as to the renewal term and the fees to be charged in such renewal
term. BJI will be required to use all reasonable efforts to perform the
services on a timely basis and HomeBase will be required to use all reasonable
efforts to cooperate with BJI in connection with the provision of services. If
a dispute arises between the parties under the Services Agreement which cannot
be resolved, it will be submitted to arbitration.

TAX SHARING AGREEMENT

Waban and BJI will enter into a Tax Sharing Agreement (the "Tax Sharing
Agreement") to provide for the payment of taxes, and the entitlement to tax
refunds, for periods ending on or prior to the Distribution Date and various
related matters, as described in more detail below.

Note: As used in the following summary of the Tax Sharing Agreement,
references to the "HomeBase Group" include HomeBase and those corporations
that will be members of its consolidated tax group after giving effect to the
Distribution. Similarly, references to the "BJI Group" include BJI and those
corporations which will be members of its consolidated tax group after giving
effect to the Distribution.

HomeBase will retain responsibility pursuant to the Tax Sharing Agreement
for filing all consolidated federal income tax returns (and all similar state
and local tax returns) for periods beginning before the

28
<PAGE>

Distribution Date. In this regard BJI will agree to enter into any election or
consent reasonably requested by HomeBase with respect to such returns, and
will further agree not to elect to be excluded from HomeBase's consolidated
federal income tax returns for periods beginning before the Distribution Date.

The Tax Sharing Agreement will provide that, if, as a result of a tax audit,
there is a change in pre-Distribution income tax liabilities (an "Adjustment")
with respect to a tax item of the BJI Group, and such Adjustment produces (i)
a tax benefit to the BJI Group in a post-Distribution period and (ii) a
liability for the HomeBase Group, then BJI shall reimburse HomeBase for any
such liability. If an Adjustment with respect to a tax item of the BJI Group
produces a tax benefit for the HomeBase Group and a tax detriment to the BJI
Group, then HomeBase shall reimburse BJI for the amount of such detriment.
HomeBase shall also reimburse BJI for any tax detriment suffered by the BJI
Group as a consequence of a tax item of any member of the HomeBase Group.

The Tax Sharing Agreement will contain a special provision pertaining to net
deferred tax liabilities of the BJI Group as of the Distribution Date. If it
is determined (in filing fiscal 1997 tax returns and in accordance with
procedures contained in the Tax Sharing Agreement) that the BJI Group's net
deferred income tax liability as of the Distribution Date was either
overstated or understated by more than $200,000, then a payment will be
required to offset the effect of such understatement or overstatement to the
extent described below. In the case of an understatement, HomeBase will pay
BJI the amount thereof to the extent that the understatement was attributable
to a tax item that reduced the reported income tax liability of the HomeBase
Group. In the case of an overstatement, BJI will pay HomeBase the amount
thereof to the extent that the overstatement was attributable to a tax item
that was not available to reduce the income tax liability of the HomeBase
Group.

Taxes other than income taxes (such as sales, use and property taxes) shall
be paid and returns shall be filed by the party to which the taxes directly
relate. For example, the BJI Group will bear responsibility for sales taxes
applicable to its sales and for property taxes applicable to the property that
it owns.

BJI will agree in the Tax Sharing Agreement to elect to relinquish any net
operating loss carryback or other similar carryback items which could be used
to create or carry forward a tax benefit. In the event that such a carryback
item is nevertheless incurred, then HomeBase shall pay BJI an amount equal to
the tax benefit obtained by the HomeBase Group as a result thereof, but only
after there has been taken into account all tax items and carrybacks generated
by the HomeBase Group and the present value of any tax benefits of the
HomeBase Group that may be deferred (and any future tax detriment that may be
suffered) by any member of the HomeBase Group as a consequence of its use of
such BJI carryback item.

The Tax Sharing Agreement will contain provisions dealing with
responsibility for income taxes attributable to the failure of the
Distribution to be tax-free to HomeBase ("Restructuring Taxes"). BJI will
agree to indemnify HomeBase for any Restructuring Taxes to the extent that
such Restructuring Taxes are directly or indirectly attributable to certain
transactions pertaining to the BJI Group occurring within three years after
the Distribution. These transactions include (i) reorganizations,
consolidations or merger; (ii) the sale or distribution of BJI Group assets
outside the ordinary course of business; (iii) BJI's ceasing to conduct an
active trade or business; (iv) certain changes in BJI's stock ownership
(including certain changes of control); (v) the redemption or repurchase of
shares of BJI stock; (vi) a recapitalization or reclassification of BJI stock;
(vii) a complete or partial liquidation of BJI; (viii) the exercisability,
transferability or repurchase of rights distributed pursuant to a stock
purchase rights plan; and (ix) any other act or omission on BJI's part which
results in a breach of the representations and warranties made to the Internal
Revenue Service in connection with any private letter ruling received by Waban
with respect to the Distribution. See "The Distribution--Federal Income Tax
Aspects of the Distribution."

Similarly, HomeBase will indemnify BJI pursuant to the Tax Sharing Agreement
for Restructuring Taxes which BJI has not agreed to be responsible for as
described above if such taxes are imposed on HomeBase and the relevant taxing
authority seeks to collect them from the BJI Group (e.g. on the theory that
BJI is jointly and

29
<PAGE>

severally liable for such HomeBase taxes). Restructuring Taxes might be
imposed on HomeBase as a result of certain changes in HomeBase's stock
ownership (including certain changes of control).

In the event of an audit contest relating to Restructuring Taxes, HomeBase
will be prohibited from settling such audit in a manner that would give rise
to an indemnity payment from BJI; however, HomeBase will be entitled to
receive a written indemnity from BJI covering the expense of such contest and
an opinion of independent tax counsel to the effect that a sound basis exists
for contesting the proposed audit claim. Moreover, if the contest is to be
conducted in a manner requiring payment of the proposed tax deficiency, BJI
must advance the appropriate amount of funds to HomeBase on an interest-free
basis.

The Tax Sharing Agreement will contain procedural provisions requiring
notice of potential claims for reimbursement, participation in all conferences
with taxing authorities and, more generally, mutual consultation and
cooperation with respect to the tax matters which are the subject of the
agreement. Decisions with respect to negotiations, settlements and litigation
with taxing authorities will be made jointly by HomeBase and BJI. Disputes
under the agreement will be submitted to arbitration.

One consequence of BJI's potential obligations in respect of indemnity
payments for Restructuring Taxes could be to deter a transaction which could
result in a change of control of BJI.

POLICIES AND PROCEDURES FOR ADDRESSING CONFLICTS

After the Distribution, BJI and HomeBase will have significant contractual
and other ongoing relationships, as described herein. Such ongoing
relationships may present certain conflict situations for Mr. Zarkin, who will
serve as Chairman of the Board of Directors of both companies, and for Messrs.
Waxlax and Weisberger, who will serve as directors of both companies. Each of
these persons, and other persons, will also own (or have options or other
rights to acquire) a significant number of shares of common stock in both
companies. See "Certain Special Considerations--Potential Conflicts,"
"Management of BJI," and "Management of HomeBase." BJI and HomeBase will adopt
appropriate policies and procedures to be followed by the board of directors
of each company to limit the involvement of such persons in conflict
situations, including matters relating to contractual relationships or
litigation between the companies. Whether or not a significant conflict of
interest situation exists will be determined on a case-by-case basis depending
on such factors as the dollar value of the matter, the degree of personal
interest in the matter, the respective interests of the stockholders of BJI or
HomeBase and the likelihood that resolution of the matter will have
significant strategic, operational or financial implications for the business
of the respective companies.

FINANCING; TREATMENT OF OUTSTANDING LONG-TERM DEBT

Waban's outstanding indebtedness currently includes its (i) $24,000,000
9.58% unsecured senior notes due May 31, 1998 (the "Senior Notes"); (ii)
$100,000,000 11% senior subordinated notes due May 15, 2004 ("Senior
Subordinated Notes"); (iii) $108,600,000 6.5% convertible subordinated debt
due July 1, 2002 (the "Convertible Debentures"); and (iv) $150,000,000 line of
credit with a group of banks, under which $35,000,000 of borrowings were
outstanding as of October 26, 1996. Prior to the Distribution, Waban will
repay the Senior Notes, and will retire (via open market purchases or a tender
offer) or defease the Senior Subordinated Notes. Waban will be required to pay
certain premiums and prepayment penalties in connection with the foregoing
transactions. See "Certain Special Considerations--Repayment of Long-Term
Debt."

In addition, prior to the Distribution, Waban expects to call for redemption
the Convertible Debentures. The Convertible Debentures are convertible by the
holders into Waban Common Stock at a conversion price of $24.75 per share, and
are redeemable during the period from July 1, 1996 to June 30, 1997 at a price
of 103.611% of par, plus accrued interest. If the Convertible Debentures are
redeemed for cash in response to such call, Waban expects that BJI will
undertake an equity offering to reduce the indebtedness that Waban would incur
to finance the redemption. Such offering could delay the Distribution Date. It
is a condition to the Distribution that the Convertible Debentures be
converted into Common Stock or redeemed for cash and, if the

30
<PAGE>

Convertible Debentures are redeemed for cash, that BJI successfully completes
such equity offering. There can be no assurance that such conversion or such
redemption and equity offering will take place.

Waban is in discussions with financial institutions to obtain bank credit
facilities for each of BJI and HomeBase following the Distribution. It is a
condition of the Distribution that such credit facilities be obtained in
amounts and on terms considered appropriate by the management and boards of
directors of the respective companies. Although Waban expects to obtain such
credit facilities, there is no assurance that such credit facilities can be
obtained on terms similar to those currently available to Waban or on other
terms considered appropriate by the Waban Board, if at all. See "Certain
Special Considerations--Certain Financial Considerations."

CONSENTS; REGULATORY APPROVALS

Other than the filing of a Form 10 with the Securities and Exchange
Commission (which must be filed and declared effective prior to the
Distribution), Waban does not believe that any material consents from third
parties or federal or state regulatory approvals will be necessary in
connection with the Distribution.

31
<PAGE>

WABAN CAPITALIZATION

The following table sets forth the pro forma capitalization of Waban at July
27, 1996 after giving effect to the conversion of the Convertible Debentures
into 4,387,879 shares of Waban Common Stock, or alternatively, the redemption
for cash of the Convertible Debentures by Waban. It is a condition to the
Distribution that such conversion or redemption take place and, if the
Convertible Debentures are redeemed for cash, that BJI complete an equity
offering to reduce the indebtedness that Waban would incur to finance the
redemption. However, there can be no assurance that holders of the Convertible
Debentures will convert their Convertible Debentures into Common Stock or
that, if all Convertible Debentures are not converted, BJI will complete such
an equity offering. Both pro forma presentations give effect to (i) borrowings
of long-term debt under Waban's proposed credit agreement, (ii) retirement of
Waban's Senior Notes and Senior Subordinated Notes and related prepayment
penalties, (iii) payment from BJI of its current taxes payable and
intercompany borrowings, and (iv) the Distribution. This data should be read
in conjunction with the historical financial statements and the unaudited pro
forma financial data of Waban incorporated by reference in or included
elsewhere in this Proxy Statement.

<TABLE>
<CAPTION>
AS OF JULY 27, 1996
-----------------------------------------------
PRO FORMA FOR
CONVERSION OF PRO FORMA FOR
CONVERTIBLE REDEMPTION
DEBENTURES OF CONVERTIBLE
INTO COMMON DEBENTURES
ACTUAL STOCK FOR CASH
-------- ---------------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt and current ma-
turities of long-term debt.... $ 13,302 $ 1,122 $ 1,122
Long-term debt, less current
maturities.................... 232,710 39,443 41,331
Stockholders' equity:
Common stock.................. 333 377 333
Additional paid-in capital.... 329,341 346,298 329,341
Other......................... (10,649) (10,649) (10,649)
Retained earnings............. 270,340 -- 16,407
-------- -------- --------
Total stockholders' equity... 589,365 336,026 335,432
-------- -------- --------
Total capitalization....... $835,377 $376,591 $377,885
======== ======== ========
</TABLE>

32
<PAGE>

SELECTED HISTORICAL FINANCIAL DATA OF WABAN

The data that follows should be read in conjunction with the audited
Consolidated Financial Statements and notes thereto included in Waban's Annual
Report on Form 10-K for the fiscal year ended January 27, 1996 and the
unaudited financial data included in Waban's Quarterly Report on Form 10-Q for
the thirteen-week period ended July 27, 1996, both of which are incorporated
by reference herein. For a discussion of the basis of presentation of the
Waban Consolidated Financial Statements, see Summary of Accounting Policies in
Notes to the Waban Consolidated Financial Statements contained in Form 10-K
for the fiscal year ended January 27, 1996. For a discussion of certain sales
information for the four-week and five-week periods ended August 31, 1996 and
October 5, 1996, respectively, see "Recent Developments."

<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWENTY-SIX WEEKS ENDED
----------------------------------------------------------------- -------------------------
JAN 25, 1992 JAN 30, 1993 JAN 29, 1994 JAN 28, 1995 JAN 27, 1996 JUL 29, 1995 JUL 27, 1996
------------ ------------ ------------ ------------ ------------ ------------ ------------
(53 WEEKS) (UNAUDITED) (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues.......... $ 2,783,585 $ 3,357,794 $ 3,589,341 $ 3,650,281 $ 3,978,384 $ 1,936,337 $2,132,589
----------- ----------- ----------- ----------- ----------- ----------- ----------
Cost of sales, including
buying and occupancy
costs.................. 2,399,765 2,881,334 3,086,670 3,110,787 3,387,992 1,646,831 1,820,630
Selling, general and
administrative
expenses............... 322,705 401,905 423,026 418,404 455,523 228,294 244,723
Restructuring charge and
other nonrecurring
charges................ 8,900 -- 101,133 -- -- -- --
Interest on debt and
capital leases (net)... 3,292 6,280 12,489 14,898 15,431 7,658 9,366
----------- ----------- ----------- ----------- ----------- ----------- ----------
Income (loss) before
income taxes and
cumulative effect of
accounting principle
changes................ 48,923 68,275 (33,977) 106,192 119,438 53,554 57,870
Provision (benefit) for
income taxes........... 18,914 24,033 (15,290) 41,202 46,461 20,886 22,743
----------- ----------- ----------- ----------- ----------- ----------- ----------
Income (loss) before
cumulative effect of
accounting principle
changes................ 30,009 44,242 (18,687) 64,990 72,977 32,668 35,127
Cumulative effect of
accounting principle
changes................ -- -- 905 -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net income (loss)....... $ 30,009 $ 44,242 $ (17,782) $ 64,990 $ 72,977 $ 32,668 $ 35,127
=========== =========== =========== =========== =========== =========== ==========
Income (loss) per common
share:
Primary earnings per
share:
Income (loss) before
cumulative effect of
accounting principle
changes............... $ 1.01 $ 1.33 $ (0.56) $ 1.95 $ 2.20 $ 0.98 $ 1.05
Cumulative effect of
accounting principle
changes............... -- -- 0.02 -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net income (loss)...... $ 1.01 $ 1.33 $ (0.54) $ 1.95 $ 2.20 $ 0.98 $ 1.05
=========== =========== =========== =========== =========== =========== ==========
Fully diluted earnings
per share:
Income (loss) before
cumulative effect of
accounting principle
changes............... $ 1.01 $ 1.31 $ (0.56) $ 1.83 $ 2.05 $ 0.92 $ 0.99
Cumulative effect of
accounting principle
changes............... -- -- 0.02 -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net income (loss)...... $ 1.01 $ 1.31 $ (0.54) $ 1.83 $ 2.05 $ 0.92 $ 0.99
=========== =========== =========== =========== =========== =========== ==========
Number of common shares
for earnings per share
computations:
Primary................ 29,807 33,191 33,082 33,405 33,220 33,330 33,340
Fully diluted.......... 29,810 35,707 33,082 37,793 37,784 37,720 37,728
<CAPTION>
JAN 25, 1992 JAN 30, 1993 JAN 29, 1994 JAN 28, 1995 JAN 27, 1996 JUL 29, 1995 JUL 27, 1996
------------ ------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 268,559 $ 286,313 $ 213,315 $ 308,749 $ 265,450 $ 287,327 $ 267,268
Total assets............ 786,405 1,006,663 1,072,994 1,237,521 1,332,451 1,279,666 1,365,102
Long-term debt and
obligations under
capital leases......... 86,774 192,630 174,054 258,763 245,313 245,990 232,710
Stockholders' equity.... 388,645 436,610 420,492 488,089 555,120 516,833 589,365
WAREHOUSES OPEN AT END
OF PERIOD:
BJ's Wholesale Club..... 29 39 52 62 71 65 77
HomeBase................ 73 86 82 77 79 78 82
</TABLE>

33
<PAGE>

PRO FORMA FINANCIAL DATA OF WABAN

The following unaudited pro forma financial data for the periods ended
January 27, 1996 and July 27, 1996 and as of July 27, 1996 illustrate the
estimated effects on Waban of the proposed Distribution and (i) the repayment
by BJI to Waban of intercompany indebtedness and current taxes payable, (ii)
the prepayment of the Senior Notes and Senior Subordinated Notes, (iii) new
borrowings under Waban's proposed credit agreement and (iv) the conversion or
redemption of the Convertible Debentures ("the related transactions"). The
Company intends to call the Convertible Debentures for redemption prior to the
Distribution. Such pro forma financial data has been prepared to present two
alternative scenarios. Scenario A gives pro forma effect to the conversion of
the Convertible Debentures into Waban Common Stock. Scenario B gives pro forma
effect to the redemption of the Convertible Debentures for cash. It is a
condition to the Distribution that such conversion or redemption take place
and, if the Convertible Debentures are redeemed for cash, that BJI complete an
equity offering to reduce the indebtedness that Waban would incur to finance
the redemption. However, there can be no assurance that holders of the
Convertible Debentures will convert their Convertible Debentures into Common
Stock or that, if all Convertible Debentures are not converted, BJI will
complete such an equity offering.

The following unaudited pro forma financial data for the periods ended
January 29, 1994 and January 28, 1995 illustrate the effect on Waban of the
Distribution.

The unaudited pro forma financial data of Waban does not purport to
represent what the financial position or results of operations of Waban would
have been if the Distribution and related transactions had in fact been
consummated on the dates indicated or at any future date. The pro forma
adjustments are based upon available information and upon certain assumptions
that Waban's management believes are reasonable in the circumstances.

34
<PAGE>

WABAN INC.

PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)

JULY 27, 1996

(DOLLARS IN THOUSANDS)

SCENARIO A--CONVERSION OF CONVERTIBLE DEBENTURES INTO COMMON STOCK

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
ASSETS
------
<S> <C> <C> <C>
Current Assets:
Cash and marketable securities.......... $ 19,794 $ 30,000 (2) $ 294
(139,500)(3)
90,000 (4)
Accounts receivable..................... 56,561 (27,456)(4) 29,105
Merchandise inventories................. 615,450 (298,984)(4) 316,466
Current deferred income taxes........... 21,265 (8,221)(4) 13,044
Prepaid expenses........................ 11,913 (6,511)(4) 5,402
---------- --------
Total current assets.................. 724,983 364,311
Property, net of depreciation............. 608,940 (367,364)(4) 241,576
Other assets.............................. 31,179 (7,291)(4) 19,980
(1,520)(1)
(2,388)(3)
---------- --------
Total assets.......................... $1,365,102 $625,867
========== ========
<CAPTION>
LIABILITIES
-----------
<S> <C> <C> <C>
Current liabilities:
Current installments of long-term debt.. $ 13,302 (12,000)(3) $ 1,122
(180)(4)
Accounts payable........................ 299,388 (184,200)(4) 115,188
Accrued expenses and other current
liabilities............................ 136,455 (58,149)(4) 78,306
Accrued federal and state income taxes.. 8,570 (4,436)(4) 709
4,436 (4)
(616)(1)
(6,278)(3)
(967)(3)
---------- --------
Total current liabilities............. 457,715 195,325
Noncurrent liabilities.................... 85,312 (30,239)(4) 55,073
Long-term debt............................ 232,710 (108,600)(1) 39,443
30,000 (2)
(112,000)(3)
(2,667)(4)
<CAPTION>
STOCKHOLDERS' EQUITY
--------------------
<S> <C> <C> <C>
Common stock.............................. 333 44 (1) 377
Additional paid-in capital................ 329,341 107,652 (1) 346,298
(90,695)(4)
Other..................................... (10,649) (10,649)
Retained earnings......................... 270,340 (9,222)(3) --
(1,421)(3)
(259,697)(4)
---------- --------
Total stockholders' equity............ 589,365 336,026
---------- --------
Total liabilities and stockholders'
equity............................... $1,365,102 $625,867
========== ========
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

35
<PAGE>

WABAN INC.

PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
TWENTY-SIX WEEKS ENDED JULY 27, 1996

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

SCENARIO A--CONVERSION OF CONVERTIBLE DEBENTURES INTO COMMON STOCK

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Total revenues............................ $2,132,589 $(1,356,076)(1) $776,513
---------- --------
Cost of sales, including buying and
occupancy costs.......................... 1,820,630 (1,219,544)(1) 601,086
Selling, general and administrative
expenses................................. 244,723 (96,715)(1) 148,008
Interest on debt and capital leases, net.. 9,366 (8,283)(2) 1,083
---------- --------
Total expenses............................ 2,074,719 750,177
---------- --------
Income from continuing operations before
income taxes............................. 57,870 26,336
Provision for income taxes................ 22,743 (12,393)(3) 10,350
---------- --------
Income from continuing operations......... $ 35,127 $ 15,986
========== ========
Pro forma earnings per share from
continuing operations.................... $ 0.43
========
</TABLE>

The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

36
<PAGE>

WABAN INC.

PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
FISCAL YEAR ENDED JANUARY 27, 1996

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

SCENARIO A--CONVERSION OF CONVERTIBLE DEBENTURES INTO COMMON STOCK

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Total revenues........................... $3,978,384 $(2,529,608)(1) $1,448,776
---------- ----------
Cost of sales, including buying and
occupancy costs......................... 3,387,992 (2,263,532)(1) 1,124,460
Selling, general and administrative
expenses................................ 455,523 (179,868)(1) 275,655
Interest on debt and capital leases, net. 15,431 (13,343)(2) 2,088
---------- ----------
Total expenses........................... 3,858,946 1,402,203
---------- ----------
Income from continuing operations before
taxes................................... 119,438 46,573
Provision for income taxes............... 46,461 (28,344)(3) 18,117
---------- ----------
Income from continuing operations........ $ 72,977 $ 28,456
========== ==========
Pro forma earnings per share from
continuing operations................... $ 0.76
==========
</TABLE>

The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

37
<PAGE>

WABAN INC.

NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

SCENARIO A--CONVERSION OF CONVERTIBLE DEBENTURES INTO COMMON STOCK

NOTES TO PRO FORMA CONDENSED BALANCE SHEET

(1) Adjustment to record conversion of the Convertible Debentures into
4,387,879 shares of common stock, including the write-off of unamortized
debt expense of $1,520,000, and related tax benefit.

(2) Adjustment to record borrowings under Waban's proposed credit
agreement to repay the Senior Notes and Senior Subordinated Notes.

(3) Adjustment to record repayment of the Senior Notes and Senior
Subordinated Notes and related prepayment penalties of $15,500,000, the
write-off of unamortized debt expense of $2,388,000, and related tax
benefits.

(4) Adjustment to record transfer of BJ's Wholesale Club, Inc.'s current
taxes payable to Waban through the intercompany balance, to record cash
received from BJ's Wholesale Club, Inc. for repayment of its remaining
intercompany debt and to reflect the distribution of BJ's Wholesale Club,
Inc.'s net assets.

NOTES TO PRO FORMA CONDENSED STATEMENTS OF INCOME

(1) Adjustment to separate the operating revenues and expenses of BJ's
Wholesale Club, Inc.'s discontinued operations.

(2) Adjustment to reflect interest expense on anticipated reduced
borrowings using an assumed interest rate of 7.50%.

(3) Adjustment to income tax provision for the estimated income tax
effect of the pro forma adjustments.

Pro forma earnings per share from continuing operations is based on
37,095,915 shares of common stock outstanding (including 4,387,879 shares of
common stock issued upon conversion of the Convertible Debentures) plus
279,409 common equivalent shares, using the treasury stock method of
accounting for outstanding stock options.

38
<PAGE>

WABAN INC.

PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)

JULY 27, 1996
(DOLLARS IN THOUSANDS)

SCENARIO B--REDEMPTION OF CONVERTIBLE DEBENTURES FOR CASH

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
------
Current Assets:
Cash and marketable securities.......... $ 19,794 $ 200,340 (1) $ --
31,888 (2)
(252,022)(3)
Accounts receivable..................... 56,561 (27,456)(1) 29,105
Merchandise inventories................. 615,450 (298,984)(1) 316,466
Current deferred income taxes........... 21,265 (8,221)(1) 13,044
Prepaid expenses........................ 11,913 (6,511)(1) 5,402
---------- --------
Total current assets.................. 724,983 364,017
Property, net of depreciation............. 608,940 (367,364)(1) 241,576
Other assets.............................. 31,179 (7,291)(1) 19,980
(3,908)(3)
---------- --------
Total assets.......................... $1,365,102 $625,573
========== ========
LIABILITIES
-----------
Current liabilities:
Current installments of long-term debt.. $ 13,302 (180)(1) $ 1,122
(12,000)(3)
Accounts payable........................ 299,388 (184,200)(1) 115,188
Accrued expenses and other current
liabilities............................ 136,455 (58,149)(1) 78,306
Accrued federal and state income taxes.. 8,570 (4,436)(1) (879)
4,436 (1)
(7,866)(3)
(1,583)(3)
---------- --------
Total current liabilities............. 457,715 193,737
Noncurrent liabilities.................... 85,312 (30,239)(1) 55,073
Long-term debt............................ 232,710 (220,600)(3) 41,331
31,888 (2)
(2,667)(1)
STOCKHOLDERS' EQUITY
--------------------
Common stock.............................. 333 333
Additional paid-in capital................ 329,341 329,341
Other..................................... (10,649) (10,649)
Retained earnings......................... 270,340 (240,052)(1) 16,407
(11,556)(3)
(2,325)(3)
---------- --------
Total stockholders' equity............ 589,365 335,432
---------- --------
Total liabilities and stockholders'
equity............................... $1,365,102 $625,573
========== ========
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

39
<PAGE>

WABAN INC.

PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
TWENTY-SIX WEEKS ENDED JULY 27, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

SCENARIO B--REDEMPTION OF CONVERTIBLE DEBENTURES FOR CASH

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Total revenues............................ $2,132,589 $(1,356,076)(1) $776,513
---------- --------
Cost of sales, including buying and
occupancy costs.......................... 1,820,630 (1,219,544)(1) 601,086
Selling, general and administrative
expenses................................. 244,723 (96,715)(1) 148,008
Interest on debt and capital leases, net.. 9,366 (8,212)(2) 1,154
---------- --------
Total expenses............................ 2,074,719 750,248
---------- --------
Income from continuing operations before
income taxes............................. 57,870 26,265
Provision for income taxes................ 22,743 (12,421)(3) 10,322
---------- --------
Income from continuing operations......... $ 35,127 $ 15,943
========== ========
Pro forma earnings per share from
continuing operations.................... $ 0.48
========
</TABLE>

The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

40
<PAGE>

WABAN INC.

PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
FISCAL YEAR ENDED JANUARY 27, 1996

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

SCENARIO B--REDEMPTION OF CONVERTIBLE DEBENTURES FOR CASH

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Total revenues........................... $3,978,384 $(2,529,608)(1) $1,448,776
---------- ----------
Cost of sales, including buying and occu-
pancy costs............................. 3,387,992 (2,263,532)(1) 1,124,460
Selling, general and administrative ex-
penses.................................. 455,523 (179,868)(1) 275,655
Interest on debt and capital leases, net. 15,431 (13,201)(2) 2,230
---------- ----------
Total expenses........................... 3,858,946 1,402,345
---------- ----------
Income from continuing operations before
taxes................................... 119,438 46,431
Provision for income taxes............... 46,461 (28,399)(3) 18,062
---------- ----------
Income from continuing operations........ $ 72,977 $ 28,369
========== ==========
Pro forma earnings per share from contin-
uing operations......................... $ 0.86
==========
</TABLE>

The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

41
<PAGE>

WABAN INC.

NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

SCENARIO B--REDEMPTION OF CONVERTIBLE DEBENTURES FOR CASH

NOTES TO PRO FORMA CONDENSED BALANCE SHEET

(1) Adjustment to record transfer of BJ's Wholesale Club, Inc.'s current
taxes payable to Waban through the intercompany balance, to record cash
received from BJ's Wholesale Club, Inc. for repayment of its remaining
intercompany debt and to reflect the distribution of BJ's Wholesale Club,
Inc.'s net assets.

(2) Adjustment to record borrowings under Waban's proposed credit
agreement to repay the Senior Notes, Senior Subordinated Notes and
Convertible Debentures.

(3) Adjustment to record repayment of the Senior Notes, Senior
Subordinated Notes and Convertible Debentures and related prepayment
penalties of $19,422,000, and the write-off of unamortized debt expense of
$3,908,000 and related tax benefits.

NOTES TO PRO FORMA CONDENSED STATEMENTS OF INCOME

(1) Adjustment to separate the operating revenues and expenses of BJ's
Wholesale Club, Inc.'s discontinued operations.

(2) Adjustment to reflect interest expense on anticipated reduced
borrowings using an assumed interest rate of 7.50%.

(3) Adjustment to income tax provision for the estimated income tax
effect of the pro forma adjustments.

Pro forma earnings per share from continuing operations is based on
32,708,036 shares of common stock outstanding plus 279,409 common equivalent
shares, using the treasury stock method of accounting for outstanding stock
options.

42
<PAGE>

WABAN INC.

PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
FISCAL YEAR ENDED JANUARY 28, 1995

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Net sales............................... $3,650,281 $(2,293,091)(1) $1,357,190
---------- ----------
Cost of sales, including buying and oc-
cupancy costs.......................... 3,110,787 (2,054,167)(1) 1,056,620
Selling, general and administrative ex-
penses................................. 418,404 (170,292)(1) 248,112
Interest on debt and capital leases,
net.................................... 14,898 (7,836)(2) 7,062
---------- ----------
Total expenses.......................... 3,544,089 1,311,794
Income from continuing operations before
income taxes........................... 106,192 45,396
Provision for income taxes.............. 41,202 (23,589)(3) 17,613
---------- ----------
Income from continuing operations....... $ 64,990 $ 27,783
========== ==========
Pro forma earnings per share from
continuing operations:
Primary and fully diluted............. $ 0.83
==========
</TABLE>

- --------
Notes:
(1) Adjustment to remove the operating revenues and expenses of the BJ's
Wholesale Club Division.
(2) Adjustment to allocate interest expense to the discontinued operation
based on the ratio of net assets of the discontinued operation to the sum
of consolidated net assets plus consolidated debt of Waban.
(3) Adjustment to income tax provision for the estimated income tax effect of
the pro forma adjustments.

Pro forma earnings per share from continuing operations is based on
33,405,014 common and common equivalent shares outstanding.

43
<PAGE>

WABAN INC.

PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
FISCAL YEAR ENDED JANUARY 29, 1994

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Net sales.............................. $3,589,341 $(2,003,385)(1) $1,585,956
---------- ----------
Cost of sales, including buying and
occupancy costs....................... 3,086,670 (1,807,586)(1) 1,279,084
Selling, general and administrative
expenses.............................. 423,026 (150,770)(1) 272,256
Restructuring charge................... 101,133 101,133
Interest on debt and capital leases,
net................................... 12,489 (6,182)(2) 6,307
---------- ----------
Total expenses....................... 3,623,318 1,658,780
Loss from continuing operations before
income taxes.......................... (33,977) (72,824)
Income tax benefit..................... (15,290) (14,840)(3) (30,130)
---------- ----------
Loss from continuing operations........ $ (18,687) $ (42,694)
========== ==========
Pro forma loss per share from
continuing operations:
Primary and fully diluted............ $ (1.29)
==========
</TABLE>

Pro forma loss per share from continuing operations is based on 33,082,362
common and common equivalent shares outstanding.

44
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF UNAUDITED PRO FORMA FINANCIAL DATA OF WABAN

Waban's Pro Forma Condensed Balance Sheet as of July 27, 1996 and Waban's
Pro Forma Condensed Statements of Income for the twenty-six weeks ended July
27, 1996 and the fiscal year ended January 27, 1996 summarize the estimated
effects on Waban of the proposed Distribution and related transactions. These
transactions (the "related transactions") include the repayment by BJI of its
intercompany debt and current taxes payable to Waban, the retirement of the
Senior Notes and Senior Subordinated Notes, new borrowings under Waban's
proposed credit agreement and the conversion or redemption of the Convertible
Debentures. The Pro Forma Condensed Balance Sheet assumes that the
Distribution and the related transactions occurred on July 27, 1996. The Pro
Forma Condensed Statements of Income for the periods ended January 27, 1996
and July 27, 1996 assume that the Distribution and related transactions
occurred at the beginning of fiscal 1995 and summarize the results of
continuing operations. Each of these statements is presented under two
scenarios. One scenario assumes the conversion of the Convertible Debentures
into common stock; the other scenario assumes the redemption of the
Convertible Debentures for cash.

Under either scenario, pro forma long-term debt would be approximately $39
million to $41 million as of July 27, 1996, including approximately $30
million to $32 million of new borrowings under the proposed credit agreement.
(Other long-term debt consists principally of capital lease obligations.)
Stockholders' equity would be approximately $336 million under either
scenario.

In the Pro Forma Condensed Statements of Income, pro forma total revenues,
cost of sales (including buying and occupancy costs) and selling, general and
administrative (SG&A) expenses exclude the results of BJ's operations. Pro
forma sales and cost of sales represent HomeBase's results. Pro forma SG&A
expenses represent HomeBase's expenses and all of Waban's corporate overhead,
which corporate overhead totaled $3.9 million for the twenty-six weeks ended
July 27, 1996 and $7.1 million for the fiscal year ended January 27, 1996. As
a public entity, HomeBase will incur SG&A costs in addition to the costs it
incurred as a separate division, but the incremental amount is expected to be
substantially less than that of Waban, which operated two divisions. Waban's
pro forma interest expense is based on the pro forma debt presented in the Pro
Forma Condensed Balance Sheet as of July 27, 1996.

Waban's Pro Forma Condensed Statements of Income for the fiscal years ended
January 28, 1995 and January 29, 1994 represent Waban's historical
consolidated results of operations adjusted to exclude BJ's historical results
of operations only. Pro forma sales and cost of sales represent HomeBase's
results. Pro forma SG&A expenses represent HomeBase's expenses and all of
Waban's corporate overhead, which corporate overhead totaled $8.2 million in
the fiscal year ended January 28, 1995 and $10.7 million in the fiscal year
ended January 29, 1994. Pro forma interest expense represents Waban's
consolidated interest less an allocation of interest expense to BJ's, which
was based on BJ's ratio of net assets to Waban's consolidated net assets plus
debt.

The pro forma financial data of Waban should be read in conjunction with the
audited Consolidated Financial Statements of Waban and the notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations of Waban included in Waban's Annual Report on Form 10-K for the
fiscal year ended January 27, 1996 and the unaudited financial data included
in Waban's Quarterly Report on Form 10-Q for the thirteen-week period ended
July 27, 1996, both of which are incorporated by reference herein.

45
<PAGE>

BJI CAPITALIZATION

The following table sets forth the pro forma capitalization of BJI at July
27, 1996 after giving effect to the conversion of the Convertible Debentures
into 4,387,879 shares of Waban Common Stock, or alternatively, the redemption
for cash of the Convertible Debentures by Waban and the completion of an
equity offering by BJI with net proceeds of $110 million, at an assumed
offering price of $20.00 per share (net of offering fees and expenses). Both
pro forma presentations give effect to (i) the transfer of BJI's current taxes
payable to Waban through its intercompany account, and (ii) borrowings of
long-term debt under BJI's proposed credit agreement and repayment of the
remaining intercompany debt to Waban. The pro forma capitalization which gives
effect to the conversion of the Convertible Debentures also gives effect to
Waban's contribution to BJI's equity through the forgiveness of a portion of
intercompany debt. This data should be read in conjunction with the historical
financial statements and the unaudited pro forma financial data of BJI
included elsewhere in this Proxy Statement.

<TABLE>
<CAPTION>
AS OF JULY 27, 1996
------------------------------------
(DOLLARS IN THOUSANDS)
PRO FORMA FOR
PRO FORMA FOR REDEMPTION OF
CONVERSION OF CONVERTIBLE
CONVERTIBLE DEBENTURES
DEBENTURES FOR CASH AND
INTO COMMON BJI EQUITY
ACTUAL STOCK FINANCING
-------- ------------- -------------
<S> <C> <C> <C>
Short-term debt and current maturities of
long-term debt........................... $ 180 $ 180 $ 180
Loans and advances from Waban Inc......... 195,904 -- --
Long-term debt, less current maturities... 2,667 92,667 93,007
Stockholder's equity:
Common stock............................ 327 371 382
Additional paid-in capital.............. -- 110,340 109,945
Retained earnings....................... 239,725 239,681 239,725
-------- -------- --------
Total stockholder's equity.............. 240,052 350,392 350,052
-------- -------- --------
Total capitalization.................. $438,803 $443,239 $443,239
======== ======== ========
</TABLE>

46
<PAGE>

SELECTED HISTORICAL FINANCIAL DATA OF BJI

The following table summarizes selected historical financial data of BJI for
each fiscal year in the five-year period ended January 27, 1996 and for the
twenty-six week periods ended July 29, 1995 and July 27, 1996. The financial
statements of BJI include the assets, liabilities, revenues and expenses of
the BJ's Division. The BJI financial statements include certain allocations of
the overhead expenses incurred by Waban that support BJI's business. In
management's opinion, these allocations were made on a reasonable basis.
However, such allocations may not be indicative of the level of expenses which
will be incurred by BJI after the Distribution. The expenses were generally
allocated based on specific identification and estimates of the relative time
devoted to supporting BJI.

The historical financial data is not necessarily indicative of BJI's future
results of operations or financial condition. The data set forth below should
be read in conjunction with the unaudited pro forma financial data and the
notes thereto of BJI, the audited Combined Financial Statements of BJI and the
notes thereto and Management's Discussion and Analysis of Financial Condition
and Results of Operations of BJI included elsewhere in this Proxy Statement.
The historical financial data is unaudited except for the 1993, 1994 and 1995
fiscal years. For a discussion of the basis of presentation of the BJI
Combined Financial Statements, see Summary of Accounting Policies in Notes to
the BJI Combined Financial Statements. For a discussion of certain sales
information for the four-week and five-week periods ended August 31, 1996 and
October 5, 1996, respectively, see "Recent Developments."

<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWENTY-SIX WEEKS ENDED
---------------------------------------------------------------- -------------------------
JAN 25, 1992 JAN 30, 1993 JAN 29, 1994 JAN 28, 1995 JAN 27, 1996 JUL 29, 1995 JUL 27, 1996
------------ ------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(53 WEEKS)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues.......... $1,432,228 $1,786,916 $2,003,385 $2,293,091 $2,529,608 $1,163,477 $1,356,076
---------- ---------- ---------- ---------- ---------- ---------- ----------
Cost of sales, including
buying and occupancy
costs.................. 1,302,343 1,618,004 1,807,586 2,054,167 2,263,532 1,049,167 1,219,544
Selling, general and
administrative
expenses............... 110,677 137,596 155,425 174,416 183,419 85,264 98,602
Cost of closing BJ's
warehouse clubs in
Chicago................ 5,500 -- -- -- -- -- --
Interest on debt and
capital leases (net)... (625) 446 7,807 13,665 14,757 7,354 8,211
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes and cumulative
effect of accounting
principle changes...... 14,333 30,870 32,567 50,843 67,900 21,692 29,719
Provision for income
taxes.................. 5,320 9,733 12,351 19,941 26,350 8,416 11,650
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before cumulative
effect of accounting
principle changes...... 9,013 21,137 20,216 30,902 41,550 13,276 18,069
Cumulative effect of
accounting principle
changes................ -- -- 2,107 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. $ 9,013 $ 21,137 $ 22,323 $ 30,902 $ 41,550 $ 13,276 $ 18,069
========== ========== ========== ========== ========== ========== ==========
<CAPTION>
JAN 25, 1992 JAN 30, 1993 JAN 29, 1994 JAN 28, 1995 JAN 27, 1996 JUL 29, 1995 JUL 27, 1996
------------ ------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 32,022 $ 43,907 $ 71,248 $ 58,252 $ 77,207 $ 68,934 $ 94,207
Total assets............ 238,895 369,533 506,034 563,931 676,675 611,536 718,589
Long-term debt and
obligations under
capital leases......... 3,093 3,502 3,262 2,960 2,731 2,823 2,667
Loans and advances from
Waban Inc.............. 8,818 73,984 152,427 142,512 181,730 167,029 195,904
Stockholder's equity.... 106,071 127,208 149,531 180,433 221,983 193,709 240,052
CLUBS OPEN AT END OF
PERIOD................. 29 39 52 62 71 65 77
</TABLE>

47
<PAGE>

PRO FORMA FINANCIAL DATA OF BJI

The following unaudited pro forma financial data illustrates the estimated
effects on BJI of the proposed Distribution and (i) the repayment by BJI to
Waban of intercompany indebtedness and current taxes payable, (ii) new
borrowings under BJI's proposed credit agreement, and (iii) the impact of the
conversion or redemption of the Convertible Debentures for cash and the
related equity contribution by Waban (the "related transactions"). The Company
intends to call the Convertible Debentures for redemption prior to the
Distribution. The pro forma financial data has been prepared to present two
alternative scenarios. Scenario A gives pro forma effect to the conversion of
the Convertible Debentures into Waban Common Stock. Scenario B gives pro forma
effect to the redemption of the Convertible Debentures for cash and the
completion of an equity offering by BJI with net proceeds of $110 million, at
an assumed offering price of $20.00 per share (net of offering fees and
expenses). The pro forma balance sheet data is based on the July 27, 1996
balance sheet of BJI and assumes the Distribution and related transactions
were consummated on that date. The pro forma income statement data gives
effect to the Distribution and related transactions as if they occurred at the
beginning of fiscal 1995. The unaudited pro forma financial data should be
read in conjunction with the historical financial statements of BJI included
elsewhere in this Proxy Statement.

The pro forma financial data of BJI does not purport to represent what the
financial position or results of operations of BJI would have been if the
Distribution and related transactions had in fact been consummated on the
dates indicated or at any future date. The pro forma adjustments are based
upon available information and upon certain assumptions that BJI's management
believes are reasonable in these circumstances.

48
<PAGE>

BJ'S WHOLESALE CLUB, INC.

PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)

JULY 27, 1996
(DOLLARS IN THOUSANDS)

SCENARIO A--CONVERSION OF CONVERTIBLE DEBENTURES INTO COMMON STOCK

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
------
Current Assets:
Cash..................................... $ -- $ --
Accounts receivable...................... 27,456 27,456
Merchandise inventories.................. 298,984 298,984
Current deferred income taxes............ 8,221 8,221
Prepaid expenses......................... 6,511 6,511
-------- --------
Total current assets................... 341,172 341,172
Property, net of depreciation.............. 367,364 367,364
Other assets............................... 10,053 10,053
-------- --------
Total assets........................... $718,589 $718,589
======== ========

LIABILITIES
-----------
Current liabilities:
Current maturities of long-term debt..... $ 180 $ 180
Accounts payable......................... 184,200 184,200
Accrued expenses and other current
liabilities............................. 58,149 58,149
Accrued federal and state income taxes... 4,436 (4,436)(1) --
-------- --------
Total current liabilities.............. 246,965 242,529
Noncurrent liabilities..................... 30,239 30,239
Deferred income taxes...................... 2,762 2,762
Loans and advances from Waban Inc.......... 195,904 4,436 (1) --
(110,340)(3)
(90,000)(4)
Long-term debt............................. 2,667 90,000 (4) 92,667

STOCKHOLDER'S EQUITY
--------------------
Common stock............................... 327 44 (2) 371
Additional paid-in capital................. -- 110,340 (3) 110,340
Retained earnings.......................... 239,725 (44)(2) 239,681
-------- --------
Total stockholder's equity............... 240,052 350,392
-------- --------
Total liabilities and stockholder's
equity.................................. $718,589 $718,589
======== ========
</TABLE>

The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

49
<PAGE>

BJ'S WHOLESALE CLUB, INC.

PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)

TWENTY-SIX WEEKS ENDED JULY 27, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

SCENARIO A--CONVERSION OF CONVERTIBLE DEBENTURES INTO COMMON STOCK

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Net sales................................... $1,332,392 $1,332,392
Membership fee income....................... 23,684 23,684
---------- ----------
Total revenues.............................. $1,356,076 $1,356,076
========== ==========
Cost of sales, including buying and
occupancy costs............................ 1,219,544 1,219,544
Selling, general and administrative
expenses................................... 98,602 98,602
Interest on debt and capital leases, net.... 8,211 (5,876)(1) 2,335
========== ==========
Total expenses.............................. 1,326,357 1,320,481
========== ==========
Income before income taxes.................. 29,719 35,595
Provision for income taxes.................. 11,650 2,380 (2) 14,030
========== ==========
Net income.................................. $ 18,069 $ 21,565
========== ==========
Pro forma earnings per share................ $ 0.58
==========
</TABLE>

The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

50
<PAGE>

BJ'S WHOLESALE CLUB, INC.

PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)

FISCAL YEAR ENDED JANUARY 27, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

SCENARIO A--CONVERSION OF CONVERTIBLE DEBENTURES INTO COMMON STOCK

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Net sales.................................. $2,478,319 $2,478,319
Membership fee income...................... 51,289 51,289
---------- ----------
Total revenues............................. 2,529,608 2,529,608
---------- ----------
Cost of sales, including buying and occu-
pancy costs............................... 2,263,532 2,263,532
Selling, general and administrative ex-
penses.................................... 183,419 183,419
Interest on debt and capital leases, net... 14,757 (10,407)(1) 4,350
---------- ----------
Total expenses............................. 2,461,708 2,451,301
---------- ----------
Income before income taxes................. 67,900 78,307
Provision for income taxes................. 26,350 4,215 (2) 30,565
---------- ----------
Net income................................. $ 41,550 $ 47,742
========== ==========
Pro forma earnings per share............... $ 1.27
==========
</TABLE>

The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

51
<PAGE>

BJ'S WHOLESALE CLUB, INC.

NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

SCENARIO A--CONVERSION OF CONVERTIBLE DEBENTURES INTO COMMON STOCK

NOTES TO PRO FORMA CONDENSED BALANCE SHEET

(1) Adjustment to record transfer to Waban of current taxes payable
through the intercompany balance.

(2) Adjustment to reflect additional shares outstanding as a result of
conversion of Waban's Convertible Debentures into 4,387,879 shares of
common stock.

(3) Adjustment to record Waban's contribution of $110,340,000 to the
equity of BJ's Wholesale Club, Inc. through the forgiveness of intercompany
indebtedness.

(4) Adjustment to record borrowings under BJ's Wholesale Club, Inc.'s
proposed credit agreement and repayment of outstanding intercompany
indebtedness to Waban.

NOTES TO PRO FORMA CONDENSED STATEMENTS OF INCOME

(1) Adjustment to reflect interest expense in connection with the
$90,000,000 borrowing under BJ's Wholesale Club, Inc.'s proposed credit
agreement in lieu of interest expense on intercompany borrowings from
Waban. Interest on credit agreement borrowings is assumed to be 6.25%.

(2) Adjustment to income tax provision for the estimated income tax
effect of the pro forma adjustment at a marginal tax rate of 40.5%.

Pro forma earnings per share is based on 37,095,915 shares of common stock
outstanding (including 4,387,879 shares of common stock issued upon conversion
of Waban's Convertible Debentures) plus 404,788 common equivalent shares,
using the treasury stock method of accounting for outstanding stock options.

Management believes the historical financial statements reflect BJ's
Wholesale Club Inc.'s historical costs of doing business. As a publicly owned
company, BJ's Wholesale Club, Inc. will likely incur additional costs. Such
additional costs, estimated to be approximately $1.3 million on an annual
basis and approximately $325,000 on a quarterly basis, are not reflected in
the Pro Forma Condensed Statements of Income.

52
<PAGE>

BJ'S WHOLESALE CLUB, INC.

PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)

JULY 27, 1996

(DOLLARS IN THOUSANDS)

SCENARIO B--REDEMPTION OF CONVERTIBLE DEBENTURES FOR CASH

<TABLE>
<CAPTION>
SUPPLEMENTAL INFORMATION
------------------------------
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS AS ADJUSTED
FOR FOR EQUITY FOR EQUITY
HISTORICAL REDEMPTION PRO FORMA FINANCING FINANCING
---------- ----------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
------
Current Assets:
Cash.................. $ -- $ -- $ --
Accounts receivable... 27,456 27,456 27,456
Merchandise
inventories.......... 298,984 298,984 298,984
Current deferred
income taxes......... 8,221 8,221 8,221
Prepaid expenses...... 6,511 6,511 6,511
--------- --------- ------------
Total current
assets............. 341,172 341,172 341,172
Property, net of
depreciation........... 367,364 367,364 367,364
Other assets............ 10,053 10,053 10,053
--------- --------- ------------
Total assets........ $ 718,589 $ 718,589 $ 718,589
========= ========= ============

LIABILITIES
-----------
Current liabilities:
Current maturities of
long-term debt....... $ 180 $ 180 $ 180
Accounts payable...... 184,200 184,200 184,200
Accrued expenses and
other current
liabilities.......... 58,149 58,149 58,149
Accrued federal and
state income taxes... 4,436 (4,436)(1) -- --
--------- --------- ------------
Total current
liabilities........ 246,965 242,529 242,529
Noncurrent liabilities.. 30,239 30,239 30,239
Deferred income taxes... 2,762 2,762 2,762
Loans and advances from
Waban Inc.............. 195,904 4,436 (1) -- --
(200,340)(2)
Long-term debt.......... 2,667 200,340 (2) 203,007 (110,000)(3) 93,007

STOCKHOLDER'S EQUITY
--------------------
Common stock............ 327 327 55 (3) 382
Additional paid-in
capital................ -- -- 109,945 (3) 109,945
Retained earnings....... 239,725 239,725 239,725
--------- --------- ------------
Total stockholder's
equity............... 240,052 240,052 350,052
--------- --------- ------------
Total liabilities and
stockholder's equity. $ 718,589 $ 718,589 $ 718,589
========= ========= ============
</TABLE>

The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

53
<PAGE>

BJ'S WHOLESALE CLUB, INC.

PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
TWENTY-SIX WEEKS ENDED JULY 27, 1996

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

SCENARIO B--REDEMPTION OF CONVERTIBLE DEBENTURES FOR CASH

<TABLE>
<CAPTION>
SUPPLEMENTAL INFORMATION
---------------------------------
PRO FORMA PRO FORMA AS
ADJUSTMENTS ADJUSTMENTS FOR ADJUSTED FOR
HISTORICAL FOR REDEMPTION PRO FORMA EQUITY FINANCING EQUITY FINANCING
----------- -------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Net sales............... $ 1,332,392 $ 1,332,392 $ 1,332,392
Membership fee income... 23,684 23,684 23,684
----------- ----------- -----------
Total revenues.......... 1,356,076 1,356,076 1,356,076
----------- ----------- -----------
Cost of sales, including
buying and occupancy
costs.................. 1,219,544 1,219,544 1,219,544
Selling, general and
administrative
expenses............... 98,602 98,602 98,602
Interest on debt and
capital leases, net.... 8,211 (2,428)(1) 5,783 (3,438)(3) 2,345
----------- ----------- -----------
Total expenses.......... 1,326,357 1,323,929 1,320,491
----------- ----------- -----------
Income before income
taxes.................. 29,719 32,147 35,585
Provision for income
taxes.................. 11,650 983 (2) 12,633 1,392 (4) 14,025
----------- ----------- -----------
Net income.............. $ 18,069 $ 19,514 $ 21,560
=========== =========== ===========
Pro forma earnings per
share.................. $ 0.59 $ 0.56
=========== ===========
</TABLE>

The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

54
<PAGE>

BJ'S WHOLESALE CLUB, INC.

PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)

FISCAL YEAR ENDED JANUARY 27, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

SCENARIO B--REDEMPTION OF CONVERTIBLE DEBENTURES FOR CASH

<TABLE>
<CAPTION>
SUPPLEMENTAL INFORMATION
---------------------------------
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS FOR AS ADJUSTED FOR
HISTORICAL FOR REDEMPTION PRO FORMA EQUITY FINANCING EQUITY FINANCING
---------- -------------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Net sales............... $2,478,319 $2,478,319 $2,478,319
Membership fee income... 51,289 51,289 51,289
---------- ---------- ----------
Total revenues.......... 2,529,608 2,529,608 2,529,608
---------- ---------- ----------
Cost of sales, including
buying and occupancy
costs.................. 2,263,532 2,263,532 2,263,532
Selling, general and
administrative
expenses............... 183,419 183,419 183,419
Interest on debt and
capital leases, net.... 14,757 (3,511)(1) 11,246 (6,875)(3) 4,371
---------- ---------- ----------
Total expenses.......... 2,461,708 2,458,197 2,451,322
---------- ---------- ----------
Income before income
taxes.................. 67,900 71,411 78,286
Provision for income
taxes.................. 26,350 1,422 (2) 27,772 2,784 (4) 30,556
---------- ---------- ----------
Net income.............. $ 41,550 $ 43,639 $ 47,730
========== ========== ==========
Pro forma earnings per
share.................. $ 1.32 $ 1.24
========== ==========
</TABLE>

The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Financial Statements.

55
<PAGE>

BJ'S WHOLESALE CLUB, INC.

NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

SCENARIO B--REDEMPTION OF CONVERTIBLE DEBENTURES FOR CASH

NOTES TO PRO FORMA CONDENSED BALANCE SHEET

(1) Adjustment to record transfer to Waban of current taxes payable
through the intercompany balance.

(2) Adjustment to record borrowings under BJ's Wholesale Club, Inc.'s
proposed credit agreement and repayment of outstanding intercompany
indebtedness to Waban.

(3) Adjustment to record net proceeds of $110,000,000 from completion of
an equity offering by BJ's Wholesale Club, Inc. to repay borrowings under
its proposed credit agreement. Such equity offering assumes the sale of
5,500,000 shares of common stock at $20.00 per share, net of offering fees
and expenses.

NOTES TO PRO FORMA CONDENSED STATEMENTS OF INCOME

(1) Adjustment to reflect interest expense in connection with the
$200,340,000 borrowing under BJ's Wholesale Club, Inc.'s proposed credit
agreement in lieu of interest expense on intercompany borrowings from
Waban. Interest on proposed credit agreement borrowings is assumed to be
6.25%.

(2) Adjustment to income tax provision for the estimated income tax
effect of the pro forma adjustment at a marginal tax rate of 40.5%.

(3) Adjustment to pro forma interest expense resulting from reduction in
borrowings noted in Balance Sheet adjustment (3) above.

(4) Adjustment to income tax provision for the estimated income tax
effect of Statements of Income adjustment (3) above.

Pro forma net income per common share is based on 32,708,036 shares of
common stock outstanding plus 404,788 common equivalent shares, using the
treasury stock method of accounting for outstanding stock options. Adjusted
pro forma net income per common share is based on 38,208,036 shares of common
stock outstanding plus 404,788 common equivalent shares.

Management believes the historical financial statements reflect BJ's
Wholesale Club, Inc.'s historical costs of doing business. As a publicly owned
company, BJ's Wholesale Club, Inc. will likely incur additional costs. Such
additional costs, estimated to be approximately $1.3 million on an annual
basis and approximately $325,000 on a quarterly basis, are not reflected in
the Pro Forma Condensed Statements of Income.

It is a condition to the Distribution that if the Convertible Debentures are
redeemed for cash, BJ's Wholesale Club, Inc. complete an equity offering to
reduce the indebtedness that Waban would incur to finance such redemption.
Accordingly, supplemental information showing the effect of an assumed equity
offering is included.

56
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BJI

Fiscal year references apply to BJI's fiscal year which ends on the last
Saturday in January of the following calendar year. For example, the fiscal
year ended January 27, 1996 is referred to as "1995" or "fiscal 1995."

RESULTS OF OPERATIONS

The following table presents selected income statement data for the periods
indicated:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWENTY-SIX WEEKS ENDED
----------------------------------------------------- -----------------------------------
JAN 29, 1994 JAN 28, 1995 JAN 27, 1996 JUL 29, 1995 JUL 27, 1996
----------------- ----------------- ----------------- ----------------- -----------------
% OF % OF % OF % OF % OF
$ REVENUES $ REVENUES $ REVENUES $ REVENUES $ REVENUES
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $1,964.4 98.1% $2,244.6 97.9% $2,478.3 98.0% $1,140.5 98.0% $1,332.4 98.3%
Membership fee income... 39.0 1.9 48.5 2.1 51.3 2.0 23.0 2.0 23.7 1.7
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total revenues.......... $2,003.4 100.0% $2,293.1 100.0% $2,529.6 100.0% $1,163.5 100.0% $1,356.1 100.0%
Cost of sales, including
buying and occupancy
costs.................. 1,807.6 90.2 2,054.2 89.6 2,263.5 89.5 1,049.2 90.2 1,219.5 89.9
Selling, general and
administrative
expenses............... 155.4 7.8 174.4 7.6 183.4 7.2 85.3 7.3 98.6 7.3
Interest on debt and
capital leases (net)... 7.8 .4 13.7 .6 14.8 .6 7.4 .7 8.2 .6
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Income before income
taxes and cumulative
effect of accounting
principle changes...... 32.6 1.6 50.8 2.2 67.9 2.7 21.7 1.8 29.7 2.2
Provision for income
taxes.................. 12.4 .6 19.9 .9 26.3 1.1 8.4 .7 11.6 .9
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Income before cumulative
effect of accounting
principle changes...... 20.2 1.0 30.9 1.3 41.6 1.6 13.3 1.1 18.1 1.3
Cumulative effect of
accounting principle
changes................ 2.1 .1 -- -- -- -- -- -- -- --
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Net income.............. $ 22.3 1.1% $ 30.9 1.3% $ 41.6 1.6% $ 13.3 1.1% $ 18.1 1.3%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>

1995 COMPARED WITH 1994 AND 1993

Total revenues of BJI increased by 10.3% from 1994 to 1995 and by 14.5% from
1993 to 1994. The increases in both years were due principally to the opening
of new warehouse stores. Comparable store sales increased by .4% from 1994 to
1995, and decreased by 2.5% from 1993 to 1994. Comparable store sales over the
last two years were affected by increased competition and the opening of new
BJ's clubs in the same markets as existing BJ's clubs, especially in 1994.
BJ's had comparable store sales increases in each of the last nine months of
fiscal 1995.

Total revenues included membership fee income of $51.3 million in 1995,
$48.5 million in 1994 and $39.0 million in 1993. Beginning in March 1994, BJ's
changed its membership fee policy by charging $30 for a primary membership and
providing one free supplemental membership. Additional supplemental
memberships cost $15. Previously, primary memberships cost $25 each and
supplemental memberships cost $10 each.

Cost of sales (including buying and occupancy costs) as a percentage of
total revenues was 89.5% in 1995, 89.6% in 1994 and 90.2% in 1993. The
decreases in the cost of sales percentage, particularly from 1993 to 1994,

57
<PAGE>

were due mainly to a shift in the mix of sales from high-ticket, lower margin
categories to higher margin categories and to efficiencies in the acquisition
and distribution of merchandise.

Selling, general and administrative ("SG&A") expenses as a percentage of
total revenues were 7.2% in 1995, 7.6% in 1994 and 7.8% in 1993. SG&A expenses
in 1993 included a charge of $2.2 million related to the relocation of BJ's
Syracuse, New York club. The decreases in the SG&A ratio throughout the period
were due to effective expense control and leveraging home office expenses on a
growing number of warehouse clubs.

The components of net interest expense in the last three years were as
follows (dollars in millions):

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------
JAN 29, 1994 JAN 28, 1995 JAN 27, 1996
------------ ------------ ------------
<S> <C> <C> <C>
Interest expense on debt............. $7.7 $14.4 $ 14.5
Interest income...................... (.3) (1.1) --
---- ----- ------
Interest on debt (net)............... 7.4 13.3 14.5
Interest on capital leases........... .4 .4 .3
---- ----- ------
Interest on debt and capital leases
(net)............................... $7.8 $13.7 $ 14.8
==== ===== ======
</TABLE>

Interest expense on debt represents interest on intercompany borrowings from
Waban, charged at an annual rate of 10%, less capitalized interest. The
increase in interest expense from 1993 to 1994 was due primarily to higher
intercompany borrowings. Capitalized interest was $1.5 million, $1.1 million
and $1.6 million in 1995, 1994 and 1993, respectively.

BJI's income tax provision was 38.8% of pre-tax income in 1995, 39.2% in
1994 and 37.9% in 1993. The decrease in the tax provision rate from 1994 to
1995 was due primarily to a lower effective state income tax rate. The
increase in the tax provision rate from 1993 to 1994 was due mainly to a
reduction in the impact of targeted jobs tax credits and a higher effective
state income tax rate.

In the first quarter of 1993, BJI adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes," SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," and
SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The
cumulative effect of these accounting principle changes increased (decreased)
after-tax income by the following amounts (in millions):

<TABLE>
<S> <C>
SFAS No. 109, "Accounting for Income Taxes"........................ $2.3
SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," net of tax benefit.......................... (.1)
SFAS No. 112, "Employers' Accounting for Postemployment Benefits,"
net of tax benefit................................................ (.1)
----
$2.1
====
</TABLE>

Income before cumulative effect of accounting principle changes was $41.6
million, or 1.6% of total revenues, in 1995 versus $30.9 million, or 1.3% of
total revenues, in 1994 and $20.2 million, or 1.0% of total revenues, in 1993.

TWENTY-SIX WEEKS ENDED JULY 27, 1996 COMPARED WITH TWENTY-SIX WEEKS ENDED JULY
29, 1995

Total revenues for the first half of 1996 were $1.4 billion, or 16.6% higher
than the first half of 1995. Comparable store sales increased 6.4% during the
period. Total revenues included membership fee income of $23.7 million in 1996
versus $23.0 million in 1995. During the quarter ended July 27, 1996,
membership fee income declined to $11.6 million from $12.2 million one year
earlier because the trial membership program in the second quarter of 1995
offered bonus months to new paid members, deferring their membership renewals
until the third quarter of 1996.

58
<PAGE>

Cost of sales (including buying and occupancy costs) as a percentage of
total revenues was 89.9% in the first half of 1996 versus 90.2% in 1995's
comparable period. This decrease was due mainly to a shift in the mix of sales
to higher margin categories and efficiencies in merchandise distribution.

Selling, general and administrative expenses as a percentage of total
revenues were 7.3% in the first half of both 1996 and 1995.

The components of net interest expense were as follows (dollars in
millions):

<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS ENDED
-----------------
JULY 29, JULY 27,
1995 1996
-------- --------
<S> <C> <C>
Interest on debt (net).................................. $7.2 $8.0
Interest on capital leases.............................. .2 .2
---- ----
Interest on debt and capital leases (net)............... $7.4 $8.2
==== ====
</TABLE>

Interest on debt was net of capitalized interest of $.6 million in the first
half of both 1996 and 1995.

BJI's income tax provision was 39.2% of pre-tax income in the first half of
1996 and 38.8% in the comparable previous year period.

Net income in the first half of 1996 was $18.1 million, or 1.3% of total
revenues, versus $13.3 million, or 1.1% of total revenues in the first half of
1995.

BJI's business, in common with the business of retailers generally, is
subject to seasonal influences. BJ's sales and operating income have typically
been strongest in the Christmas holiday season and lowest in the first quarter
of each fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $50.6 million in 1995 versus
$70.1 million in 1994. In the first half of fiscal 1996, net cash provided by
operating activities was $23.2 million versus $18.2 million in the comparable
prior year period.

Cash expended for property additions was $90.2 million in 1995 versus $74.5
million in 1994. In the first half of 1996, cash expended for property
additions was $37.2 million compared with $43.3 million in the first half of
1995.

BJI opened nine new BJ's clubs in 1995 and 11 new clubs in 1994. In the
first half of 1996, six new BJ's clubs were opened versus three in the same
period the previous year.

Capital expenditures for the full 1996 year are expected to be approximately
$75 million, based on opening ten new BJ's clubs, including those opened in
the first half of the year. The timing of actual store openings and the amount
of related expenditures could vary from these estimates due to the complexity
of the real estate development process.

To date, BJI's operations and expansion have been financed through loans
advanced by Waban as needed. BJI expects to establish its own credit agreement
to finance its operations and expansion after the Distribution.

BJI's Pro Forma Condensed Balance Sheet (see "Pro Forma Financial Data of
BJI") summarizes BJI's financial position assuming the Distribution and
related transactions were consummated on July 27, 1996. The Distribution is
conditioned upon, among other things, the conversion into common stock or the
redemption for cash of Waban's Convertible Debentures. Under either scenario,
BJI would repay approximately $90 million of its intercompany indebtedness
with borrowings under BJI's proposed credit agreement. If the Convertible
Debentures were converted into common stock on July 27, 1996, Waban would have
contributed approximately $110 million to BJI's equity through forgiveness of
BJI's remaining intercompany indebtedness to Waban. If the Convertible
Debentures were redeemed for cash, BJI would have undertaken an equity
offering, the net proceeds of which (estimated at approximately $110 million)
would have been used to repay BJI's remaining intercompany indebtedness to
Waban.

59
<PAGE>

BJI BUSINESS AND PROPERTIES

GENERAL

BJI introduced the warehouse club concept to New England in 1984 and has
since expanded in the northeastern and mid-Atlantic states, as well as in
southern Florida. As of October 26, 1996, BJI operated 79 warehouse clubs in
twelve states and had over four million members. The table below shows BJ's
warehouse club locations by state.

<TABLE>
<CAPTION>
NUMBER OF
STATE LOCATIONS
----- ---------
<S> <C>
New York....................................... 20
Massachusetts.................................. 12
New Jersey..................................... 9
Pennsylvania................................... 9
Maryland....................................... 6
Virginia....................................... 6
Connecticut.................................... 5
Florida........................................ 4
New Hampshire.................................. 4
Maine.......................................... 2
Delaware....................................... 1
Rhode Island................................... 1
---
Total........................................ 79
===
</TABLE>

INDUSTRY OVERVIEW

Warehouse clubs typically sell a narrow assortment of food and general
merchandise items within a wide range of product categories. In order to
achieve high sales volumes and rapid inventory turnover, merchandise
selections are generally limited to items that are brand name leaders in their
categories. Since warehouse clubs sell a diversified selection of product
categories, they attract customers from a wide range of other traditional
wholesale and retail distribution channels, such as supermarkets, discount
stores, office supply stores, consumer electronics stores, automotive stores
and wholesale distributors. BJI believes that it is difficult for these higher
cost channels of distribution to effectively compete with the low prices
offered by warehouse clubs.

Warehouse clubs eliminate many of the merchandise handling costs associated
with traditional multiple-step distribution channels by purchasing directly
from manufacturers and by storing merchandise on the sales floor rather than
in central warehouses. By operating no-frills, self-service warehouse
facilities, warehouse clubs have fixturing and operating costs substantially
below those of traditional retailers. Two broad groups of customers,
individual households and small businesses, have been attracted to the savings
on brand name merchandise made possible by the high sales volumes and low
operating costs achieved by warehouse clubs. The customers at warehouse clubs
are generally limited to members who pay an annual fee.

The warehouse club industry has grown from sales of approximately $14
billion in 1988 to approximately $41 billion in 1995, rapidly gaining market
share of both food and general merchandise sales. BJI believes that continued
growth in the industry's market share will come from the addition of new clubs
as well as from sales growth of existing clubs, primarily at the expense of
more traditional channels of distribution.

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<PAGE>

EXPANSION

Since the beginning of fiscal 1991, BJI has grown from 27 clubs to 79 clubs
in operation at October 26, 1996. Two additional BJ's warehouse clubs are
expected to open in fiscal 1996, and approximately ten additional clubs are
expected to open in fiscal 1997 in the Northeast and Florida.

<TABLE>
<CAPTION>
WAREHOUSE WAREHOUSE WAREHOUSE WAREHOUSE
CLUBS IN CLUBS CLUBS CLUBS IN
OPERATION AT OPENED CLOSED OPERATION
BEGINNING DURING DURING AT END
FISCAL YEAR OF PERIOD PERIOD PERIOD OF PERIOD
----------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C>
1991 27 6 4 29
1992 29 10 -- 39
1993 39 13 -- 52
1994 52 11 1 62
1995 62 9 -- 71
1996* 71 8 -- 79
</TABLE>
- --------
* First three fiscal quarters only.

STORE PROFILE

BJI currently operates 70 traditional "big box" warehouse clubs with an
average size of 112,000 square feet and nine smaller format warehouse clubs
that average approximately 69,000 square feet. Two of the ten new BJ's
warehouse clubs planned for 1997 are expected to incorporate the smaller
format. The smaller format clubs, a relatively recent company initiative, are
designed to serve markets whose population is not sufficient to support a
full-sized warehouse club. The smaller format clubs are also intended to
enhance market penetration where BJI has established a presence with two or
more larger clubs. Including space for parking, a typical full-sized BJ's
warehouse club requires eight to ten acres of land. The smaller version
typically requires approximately eight acres. BJ's warehouse clubs are located
in both free-standing locations and local shopping centers. In some locations,
BJ's warehouse clubs are combined with other large store retailers in shopping
centers known as power centers.

Construction and site development costs for a new BJ's warehouse club
average approximately $5.0 million. Land acquisition costs for a warehouse
club generally range from $2.5 million to $5.5 million, but can be
significantly higher in some locations. Opening a traditional-sized BJ's
warehouse club entails an initial capital investment of approximately $2.0
million for fixtures and equipment, as well as approximately $2.0 million for
inventory (net of accounts payable) and pre-opening expenses.

MERCHANDISING

BJI seeks to service its current members and attract new members by
providing a broad range of high quality, brand name merchandise at everyday
prices consistently lower than the prices available through traditional
wholesalers, discount retailers, supermarkets and specialty retail operators.
BJI limits the items offered in each product line to fast selling styles,
sizes and colors and, therefore, carries an average of approximately 5,000
active stock-keeping units ("SKUs"). By contrast, supermarkets typically stock
approximately 25,000 SKUs, and discount stores typically stock approximately
60,000 SKUs. BJI works closely with manufacturers to develop packaging and
sizes which are best suited to selling through the warehouse club format in
order to minimize handling costs and to provide increased value to members.

A primary component of the company's merchandising strategy is to provide a
constantly changing mix of food and general merchandise items for the retail
"Inner Circle(R)" member to create an exciting shopping experience. An equally
important merchandising objective is to provide the business member with
consistent low prices for frequently purchased items such as food service
items and cleaning and office supplies. A number of BJI's specialty product
categories such as eye care products and accessories, jewelry, perfume,
cellular phones and pagers and a variety of member services such as discount
travel, one-hour photo finishing, discounts for real

61
<PAGE>

estate and new car purchases and an in-store food court featuring well-known
fast food brands are designed for member convenience as well as for their
potential income and the potential to offset store expenses and increase
operating margins. BJI's "Members First" training programs for BJI's team
members support the creation and maintenance of a customer-friendly shopping
experience, despite the warehouse club's no-frills physical environment.

In recent years, food has accounted for an increasing percentage of BJI's
sales mix and currently represents approximately 61% of annual sales. The
remaining 39% consists of a wide variety of general merchandise items. Food
categories at BJI include frozen foods, meat and dairy products, dry grocery
items, fresh produce, canned goods, and household paper products and cleaning
supplies. BJI also offers fresh meat and bakery departments and imported
cheeses in nearly all its clubs, and in some clubs is testing new specialty
food offerings such as a fresh deli counter, prepared foods and refrigerated
produce. General merchandise includes office supplies, office equipment,
televisions, stereos, small appliances, auto accessories, tires, jewelry,
housewares, health and beauty aids, greeting cards and apparel. Other products
and services offered by BJI include cellular phones, optical centers, lottery
tickets, an auto buying service and a travel service.

To ensure that its merchandise selection is closely attuned to the tastes of
its members, BJI employs regional food buyers who are responsible for
tailoring the product selection in individual warehouse clubs to the regional
and ethnic tastes of the local market.

MEMBERSHIP

Paid membership is an integral part of the warehouse club concept. In
addition to providing a source of revenue which permits BJI to offer low
prices, membership also reinforces customer loyalty and allows BJI to
concentrate on serving high-volume, repeat customers. BJI's demographic data
indicate that its customers are more likely to be home owners and tend to have
incomes and family sizes which are above the average for its trading areas.
BJI has two primary types of members: business members and Inner Circle
(household) members. BJI believes that a significant percentage of its
business members are also active BJI shoppers for their personal needs. At
October 26, 1996, BJI had over four million members (including supplemental
cardholders).

BJI charges an annual membership fee for individuals and qualified
businesses of $30 for the primary membership and provides one free
supplemental membership. Additional supplemental memberships for business
members cost $15 each. BJI's membership policy has historically been less
restrictive than certain of its competitors, who have required individual
members to belong to certain qualifying groups. BJI believes that its more
liberal membership policy has attracted incremental sales without adversely
affecting its costs.

ADVERTISING

BJI increases customer awareness of its warehouse clubs primarily through
public relations efforts, new store marketing programs, direct mail
solicitations and, at certain times of the year, radio and television
advertising. BJI also employs a team of dedicated marketing personnel who
solicit potential business members and who contact selected community groups
to increase the number of members. From time to time, BJI runs free trial
membership promotions to attract new members with the objective of converting
them to paid membership status and also uses one-day passes to introduce non-
members to its warehouse clubs.

BJI's policy is generally to limit advertising and promotional expenses to
new warehouse club openings and to utilize print and electronic media
advertising sparingly. BJI uses limited vendor-funded television and radio
advertising during the holiday season. These policies result in low marketing
expenses as compared to typical discount retailers and supermarkets.

WAREHOUSE CLUB OPERATIONS

BJI's ability to achieve profitable operations while offering high quality
merchandise at low prices depends upon the efficient operation of its
warehouse clubs and high sales volumes. BJI buys most of its merchandise at

62
<PAGE>

volume discounts from manufacturers for shipment either to a BJI's cross-
docking facility or directly to BJ's warehouse clubs. This eliminates many of
the costs associated with traditional multiple-step distribution channels,
including distributors' commissions and the costs of storing merchandise in
central distribution facilities.

BJI routes a significant percentage of its general merchandise as well as an
increasing percentage of food purchases through cross-docking facilities which
break down truckload quantity shipments from manufacturers and re-allocate
these goods for shipment, generally on a same-day basis, to individual
warehouse clubs. This permits BJI to negotiate better volume discounts and
reduces freight expense, the number of trucks received at each warehouse club
and related receiving costs.

BJI works closely with manufacturers to minimize the amount of handling
required once merchandise is received at a warehouse club. Most merchandise is
pre-marked by the manufacturer with the universal product code (UPC) so that
it does not require ticketing at the warehouse club. In addition, BJI
minimizes labor costs by designing its warehouse clubs to be self service for
members. Merchandise for sale is displayed on pallets containing large
quantities of each item, thereby reducing labor required for handling,
stocking and restocking. Back-up merchandise is generally stored on racks
above the sales floor. BJI's goal is to keep at least one day's supply of each
item on the selling floor.

BJI has been able to limit inventory losses to levels well below those
typical of discount retailers by strictly controlling the exits of its
warehouse clubs, by generally limiting customers to members and by using
state-of-the-art electronic article surveillance technology. Problems
associated with payments by check have also been insignificant, since members
who issue dishonored checks are restricted to cash-only terms.

In October 1995, BJI became the first warehouse club chain to accept
MasterCard, and at the same time introduced a co-branded BJ's MasterCard.
Purchases made at BJ's warehouse clubs with the co-branded BJ's MasterCard
earn a 2% rebate. All other purchases with the BJ's MasterCard earn a 1%
rebate. All rebates are issued in the form of "BJ's Bucks," which can be
redeemed by members only at BJ's warehouse clubs. In addition to MasterCard,
BJI permits members to pay for their purchases by cash, check, Discover card,
or a BJI private label credit card, which is provided by a major financial
institution on a non-recourse basis.

MANAGEMENT INFORMATION SYSTEMS

Over the past several years, BJI has made a significant investment in
enhancing the efficiency with which it handles purchases and captures sales
information. BJI was the first warehouse club to introduce scanning devices
which work in conjunction with its electronic point of sale (EPOS) terminals.
Sales data from the EPOS terminals is continually transmitted to a
minicomputer in the warehouse club and transmitted daily to a mainframe
computer which provides detailed sales information to BJI's management and
buying staff. BJI utilizes a sophisticated merchandise replenishment algorithm
to suggest quantities to be re-ordered, which are then monitored daily by
BJI's buying staff. BJI's fully integrated system also maintains detailed
purchasing data on individual members, permitting the buying staff and store
managers to track changes in members' buying behavior.

COMPETITION

BJI competes with a wide range of national, regional and local retailers and
wholesalers selling food or general merchandise in its markets, including
supermarkets, general merchandise chains, specialty chains and other warehouse
clubs, some of which have significantly greater financial and marketing
resources than BJI. Major competitors that operate warehouse clubs include
Price/Costco Inc. and Sam's Clubs (a division of Wal-Mart Stores, Inc.).

There are a large number of competitive membership warehouse clubs in BJI's
markets. Sixty-eight of BJI's 70 "big box" warehouse clubs have at least one
competitive membership warehouse club in their trading areas

63
<PAGE>

at an average distance of approximately seven miles. None of the smaller
format clubs has direct competition from other warehouse clubs.

BJI believes price is the major competitive factor in the markets in which
it competes. Other competitive factors include store location, merchandise
selection and name recognition. BJI believes its efficient, low-cost form of
distribution gives it a significant competitive advantage over more
traditional channels of wholesale and retail distribution. As a regional
chain, BJI strives to differentiate itself from other membership warehouse
club operators by its attention to local buying preferences and seasonality.

EMPLOYEES

As of October 26, 1996, BJI had approximately 11,000 employees, of whom
approximately 300 were considered part-time employees (persons who work less
than 20 hours per week). Approximately 600 employees were corporate and
divisional management and office support employees; the balance were warehouse
personnel. None of BJI's employees is represented by unions. BJI considers its
relations with its employees to be excellent.

PROPERTIES

BJI operated 79 warehouse locations as of October 26, 1996, of which 42 are
leased under long-term leases and 28 are owned. BJI owns the buildings at the
remaining nine locations, which are subject to long-term ground leases.

The unexpired terms of these leases range from approximately three to 37
years, and average approximately 15 years. BJI has options to renew all of its
leases for periods that range from approximately five to 50 years and average
approximately 20 years. These leases require fixed monthly rental payments
which are subject to various adjustments. In addition, certain leases require
payment of a percentage of the warehouse's gross sales in excess of certain
amounts. All leases require that BJI pay all property taxes, insurance,
utilities and other operating costs.

BJI's home office in Natick, Massachusetts occupies 125,000 square feet
under a lease expiring January 31, 1999 with options to extend this lease
through January 31, 2006.

LEGAL PROCEEDINGS

BJI is involved in various legal proceedings incident to the character of
its business. Although it is not possible to predict the outcome of these
proceedings, or any claims against BJI related thereto, BJI believes that such
proceedings will not, individually or in the aggregate, have a material
adverse effect on its financial condition or results of operations.

64
<PAGE>

HOMEBASE BUSINESS AND PROPERTIES

GENERAL

The HomeBase Division is the second largest operator of home improvement
warehouse stores in the western United States and is one of the nation's
largest home improvement merchandisers using a warehouse format. The HomeBase
Division offers a very broad assortment of home improvement and building
supply products at attractive prices to a customer base that includes both
serious and casual "Do-It-Yourself" ("DIY") customers, as well as professional
contractors. This merchandising presentation is supported by a strong
commitment to customer service aimed at developing ongoing relationships with
its customers.

The HomeBase Division opened its first warehouse store in California in
October 1983 and, as of October 26, 1996, operated 84 warehouse stores in ten
western states (including two stores identified for closing as part of the
HomeBase Division's restructuring; see "--Strategic Initiatives and
Restructuring"). The table below shows HomeBase's locations by state as of
October 26, 1996.

<TABLE>
<CAPTION>
NUMBER OF
STATE LOCATIONS
----- ---------
<S> <C>
California..................................... 48
Washington..................................... 9
Colorado....................................... 7
Arizona........................................ 5
Oregon......................................... 4
New Mexico..................................... 3
Utah........................................... 3
Nevada......................................... 2
Texas.......................................... 2
Idaho.......................................... 1
---
Total........................................ 84
===
</TABLE>

INDUSTRY OVERVIEW

Warehouse-format home centers typically provide lower prices than
traditional channels of home improvement and building supply product
distribution. The warehouse format also offers a broad assortment of home
improvement products, combined with a high level of service from
knowledgeable, well-trained warehouse staff. These factors are communicated to
customers through ongoing, aggressive advertising.

The warehouse format generally serves two broad customer groups within the
home improvement industry. The first group consists of individuals and
families that are making purchases and completing projects for their own homes
on a Do-It-Yourself ("DIY") basis. These DIY customers range from casual to
serious, and require varying levels of support in planning and selecting their
purchases. The second customer group consists of professional contractors and
facility managers who use home improvement and building supply products on a
daily basis in their businesses. This group is primarily interested in product
availability and pricing and fast, efficient service.

The Company believes that demographic and lifestyle factors such as the
aging of baby boomers, the increase in home-centered activities and the aging
housing stock will create growing demand for home improvement products and
services. The Company believes that the overall market for home improvement
products was approximately $132 billion in 1995.

Over the last ten years, warehouse-format home center retailers have gained
significant market share in the United States by offering lower prices,
greater product selection and more in-stock merchandise than traditional home
center, hardware and lumber yard operators. In addition, warehouse stores have
been able to take advantage of economies created by large sales volumes.

65
<PAGE>

EXPANSION

The HomeBase Division is currently the largest or second largest home
improvement operator in most of the metropolitan markets which it serves. The
HomeBase Division's current expansion strategy is oriented towards reinforcing
its position in these existing markets and expanding selectively to contiguous
markets.

The following table shows the number of HomeBase stores opened and closed
during the last five fiscal years and during the first three quarters of the
current fiscal year:

<TABLE>
<CAPTION>
WAREHOUSE WAREHOUSE WAREHOUSE WAREHOUSE
STORES IN STORES STORES STORES IN
OPERATION AT OPENED CLOSED OPERATION
BEGINNING DURING DURING AT END
FISCAL YEAR OF PERIOD THE PERIOD THE PERIOD OF PERIOD
----------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
1991 66 7 -- 73
1992 73 13 -- 86
1993 86 5 9 82
1994 82 3 8 77
1995 77 4 2 79
1996* 79 5 -- 84
</TABLE>
- --------
* First three fiscal quarters only

Since 1993, the HomeBase Division has completed the remodeling or relocation
of 34 older warehouse stores to reflect its new prototype design. Waban
expects to continue the remodeling program and to open one to three new
HomeBase stores in fiscal 1997.

STRATEGIC INITIATIVES AND RESTRUCTURING

At the end of 1993, the HomeBase Division introduced a series of strategic
initiatives designed to strengthen its market position in the western United
States and improve its profitability. These initiatives included (i) a
significant increase in the level of customer service offered at HomeBase
stores, through an increase in the number of salespeople, including hiring
experienced tradespeople and others with specialized product knowledge in home
improvement fields, and enhanced sales and service training for both new and
existing store employees, (ii) improvement in gross margin through buying and
logistics efficiencies created by centralization of the merchandise
replenishment function, improved distribution of merchandise to reduce freight
costs, and selective price increases, and (iii) an aggressive marketing
program to communicate to customers the benefits of shopping at HomeBase and
its improved levels of customer service.

CUSTOMER SERVICE

The HomeBase Division is committed to providing superior service to every
customer. Carefully selected home improvement specialists, many of whom have
extensive experience in their respective fields, are available throughout the
store to assist DIY customers and professional contractors. The HomeBase
Division's project design centers and kitchen design centers feature computer
assisted design tools where customers can work with design coordinators to
conceptualize and plan virtually any home improvement project. The majority of
HomeBase stores also offer professional interior decorators who provide free
design consultations in the homes of HomeBase's customers.

The HomeBase Division believes that it is important to expand the DIY
marketplace by encouraging new DIY customers and upgrading the skills and
confidence levels of existing DIY customers. The HomeBase Division provides
assistance and training to DIY customers, including regularly scheduled
customer clinics on a wide range of home improvement projects. Delivery and
installation are also available as services to DIY customers.

The HomeBase Division offers services to specifically address the needs of
contractors. A majority of HomeBase warehouse stores have Contractor Desks,
with staff dedicated to handling contractors' special needs, including the
ability to receive faxed orders and pre-assemble them for pick-up, and quickly
obtaining special items and sizes. The HomeBase Division will also deliver
bulk purchases to job sites for a nominal fee. HomeBase warehouse stores offer
extended hours, opening early in the morning to serve professional
contractors.

66
<PAGE>

The HomeBase Division strives to develop the skills of its store personnel
to ensure that customers consistently receive knowledgeable and courteous
assistance. The HomeBase Division's training programs emphasize the importance
of customer service and improve store employees' selling skills. The HomeBase
Division provides extensive training for its entry level warehouse store
personnel through a comprehensive in-house training program that combines on-
the-job training with formal seminars and meetings. On an ongoing basis,
warehouse store personnel attend periodic in-house training sessions conducted
by the HomeBase Division's training staff or by manufacturers'
representatives, and they receive sales, product and other information in
frequent meetings with their managers. The HomeBase Division's satellite
television system (HBTV) permits it to simultaneously broadcast training
sessions from its Irvine, California headquarters to every individual
warehouse store location.

Most of the HomeBase Division's merchandise is purchased from manufacturers
for shipment either directly to the selling warehouse store or to cross-
docking facilities where large shipments are broken down and separated for
transfer to individual warehouse stores, generally on a same-day basis. By
operating no-frills warehouse stores, the HomeBase Division's fixturing and
operating costs are kept substantially below those of traditional home
improvement retailers.

The HomeBase Division offers its own private label credit card to customers
under a non-recourse program operated by a major financial institution and
also accepts MasterCard, Visa, Discover and American Express.

MERCHANDISING

The HomeBase Division's large product offering (approximately 28,000 SKUs)
provides a broad selection of brand name merchandise to both DIY customers and
professional contractors. The HomeBase Division believes that the operating
efficiencies of the warehouse format provide substantial savings over other
channels of home improvement and building supply product distribution. In
order to achieve greater operational efficiencies and reduce freight and
handling costs, as well as improve the manner in which it acquires products,
the HomeBase Division has centralized its merchandise replenishment operations
and improved its logistics of distribution. This program also permits the
HomeBase Division to redeploy more store personnel to customer service
activities.

Merchandise sold by the HomeBase Division includes lumber, building
materials, plumbing supplies and fixtures, electrical materials and fixtures,
kitchen cabinets, hand and power tools, hardware, paint, garden supplies,
nursery items, home decorative items and related seasonal and household
merchandise. The HomeBase Division's brand name orientation allows customers
to compare the HomeBase Division's prices to the same items offered by
competitors. In selected categories, the HomeBase Division supplements these
brand name offerings with high quality private label products at lower prices.

MARKETING AND ADVERTISING

The HomeBase Division addresses its primary target customers through a mix
of newspaper, direct mail, radio and television advertising. The primary
advertising medium is newspaper advertisements, including both freestanding
inserts and run-of-press ads. Television and radio advertising is used to
reinforce the HomeBase Division's image of providing superior customer service
and a broad assortment of merchandise at everyday low prices. Additionally,
the HomeBase Division participates in or hosts a variety of home shows,
customer hospitality events and contractor product shows. The HomeBase
Division solicits vendor participation in many of its advertising programs.

STORE PROFILE

The average size of the 84 HomeBase warehouse stores in operation at October
26, 1996 was approximately 102,000 square feet. Most HomeBase warehouse stores
also utilize additional outside selling space for nursery and garden centers.
HomeBase warehouse stores are located in both free-standing locations and
local shopping centers. In some locations, HomeBase warehouse stores are
combined with membership warehouse clubs or other large store retailers in
shopping centers known as power centers.

67
<PAGE>

Including space for parking, a typical new HomeBase warehouse store requires
eight to ten acres of land. Construction and site development costs for a new
HomeBase warehouse store average approximately $5.0 million. Land acquisition
costs for a new warehouse store generally range from $2.0 million to $6.0
million. A new HomeBase warehouse store entails an initial capital investment
of approximately $1.6 million for fixtures and equipment. In addition to
capital expenditures, each new warehouse store requires an investment of
approximately $2.5 million for inventory (net of accounts payable) and pre-
opening expenses.

MANAGEMENT INFORMATION SYSTEMS

The HomeBase Division uses a fully integrated management information system
to monitor sales, track inventory and provide rapid feedback on the
performance of its business. Each HomeBase warehouse store operates point-of-
sale terminals which capture information on each item sold via UPC scanning.
Minicomputers at each warehouse store process and consolidate this information
during the selling day and transmit it each night to the HomeBase Division's
information center via satellite, where it is processed daily to support
merchandising, inventory replenishment and promotional decisions.

The HomeBase Division introduced scanning to the home improvement industry
and is a leader in implementing electronic data interchange ("EDI"). EDI
permits both the HomeBase Division and its vendors to save money and reduce
errors by electronically transmitting advance shipment notices and purchase
order and invoicing information. The HomeBase Division now uses EDI with more
than 1,200 vendors and continues to expand its use of this technology.

COMPETITION

The HomeBase Division competes with other home improvement warehouse stores
and a wide range of businesses engaged in the wholesale or retail sale of home
improvement and building supply merchandise, including home centers, hardware
stores, lumber yards and discount stores. The HomeBase Division believes the
major competitive factors in the markets in which it competes are customer
service, price, product selection, location and name recognition. The HomeBase
Division believes that its improved level of customer service, the value
offered by its low prices and the one-stop shopping available through its full
range of home improvement products give it an advantage over many of its
traditional home center competitors. The major competitor in the HomeBase
Division's market areas that also uses the warehouse merchandising format is
The Home Depot, Inc., which has significantly greater financial and marketing
resources than HomeBase. Approximately 85% of the HomeBase Division's
warehouse stores compete with Home Depot units. The HomeBase Division also
competes with Builders Square (a division of Kmart Corp.), and a number of
smaller regional operators such as Eagle Hardware & Garden, Inc., Orchard
Supply & Hardware (a division of Sears) and Contractor's Warehouse (a division
of Grossman's Inc.). Approximately 95% of the HomeBase Division's warehouse
stores have at least one warehouse home improvement retailer in their trading
areas at an average distance of approximately three miles.

EMPLOYEES

As of October 26, 1996, the HomeBase Division had approximately 10,000
employees, of whom approximately 3,500 were considered part-time employees
(persons who work less than 33 hours per week). Approximately 500 employees
were corporate and divisional management and office support employees; the
balance were warehouse personnel. None of the HomeBase Division's employees is
represented by unions. The HomeBase Division considers its relations with its
employees to be excellent.

PROPERTIES

The HomeBase Division operated 84 warehouse locations as of October 26,
1996, of which 65 are leased under long-term leases, 18 are owned and one is
occupied under a tenancy at will. The unexpired terms of the leases range from
approximately four years to 20 years, and average approximately 12 years. The
HomeBase Division has options to renew all of its leases for periods that
range from approximately five to 25 years and

68
<PAGE>

average approximately 18 years. These leases require fixed monthly rental
payments which are subject to various adjustments. In addition, certain leases
require payment of a percentage of the warehouse's gross sales in excess of
certain amounts. Most leases require that the HomeBase Division pay all
property taxes, insurance, utilities and other operating costs.

The HomeBase Division's home office in Irvine, California occupies 164,000
square feet under a lease expiring July 24, 2004, with options to extend this
lease through July 24, 2019.

LEGAL PROCEEDINGS

The HomeBase Division is involved in various legal proceedings incident to
the character of its business. Although it is not possible to predict the
outcome of these proceedings, or any claims against the HomeBase Division
related thereto, the HomeBase Division believes that such proceedings will
not, individually or in the aggregate, have a material adverse effect on its
financial condition or results of operations.

69
<PAGE>

MANAGEMENT OF BJI

BJI BOARD

The business of BJI will be managed under the direction of the BJI Board.
Prior to the Distribution Date, Waban, as the sole stockholder of BJI, plans
to elect nine persons to the BJI Board, as set forth below. In accordance with
the BJI Certificate and the BJI By-laws, the BJI Board will be divided into
three classes with staggered terms. The initial terms for Class I Directors,
Class II Directors, and Class III Directors will expire in 1998, 1999 and
2000, respectively. With the exception of the initial terms, each class of
directors is elected for a term of three years. Directors for each class will
be elected at the annual meeting of stockholders held in the year in which the
term for such class expires.

The following table sets forth the names and information as to the persons
who are expected to serve as directors of BJI immediately after the
Distribution.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATIONS OR EMPLOYMENT
NAME, AGE AND YEAR TERM EXPIRES AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------------- -------------------------------------------
<C> <S>
S. James Coppersmith, 63 (1998)..... Director of Waban since December 1993. He was
President and General Manager of WCVB-TV, a
Boston television station, from 1990 to 1994.
From 1982 to 1990 he was Vice President and
General Manager of WCVB-TV. Mr. Coppersmith is a
director of Kushner-Locke Company, Chyron
Corporation, Sun America Management Corporation
and Uno Restaurant Corporation, Chairman of the
Board of Trustees of Emerson College and a member
of the Board of Governors of the Boston Stock
Exchange.
Thomas J. Shields, 49 (1998)........ Director of Waban since June 1992. He is President
of Shields & Company, Inc., an investment banking
firm. From 1989 to 1991 he was a Managing
Director of Bear, Stearns & Co., Inc. Mr. Shields
is also a director of Seaboard Corporation.
Herbert J. Zarkin, 58 (1998)........ Director, President and Chief Executive Officer of
Waban since May 1993 and was President of BJ's
from May 1990 to May 1993. From April 1989 to May
1993 he was Executive Vice President of Waban.
Mr. Zarkin will be Chairman of the BJI Board and
Chairman of the HomeBase Board following the
Distribution.
Allyn L. Levy, 68 (1999)............ Director of Waban since October 1993. He has been
a private investor since 1988. From 1974 until
1986, he was founder, Chairman of the Board and
Chief Executive Officer of Patriot Bank
Corporation, a commercial bank holding company.
He is a director of CV Reit, Inc.
</TABLE>

70
<PAGE>

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATIONS OR EMPLOYMENT
NAME, AGE AND YEAR TERM EXPIRES AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------------- -------------------------------------------
<C> <S>
Lorne R. Waxlax, 63 (1999).......... Director of Waban since January 1990, and Chairman
of the Board of Waban since June 1996. He was an
Executive Vice President of The Gillette Company
from 1985 to 1993. Mr. Waxlax is also a director
of Quaker State Corporation, The Iams Company,
Hon Industries, Inc., Clean Harbors, Inc. and
AMTROL Inc. Mr. Waxlax will also be a member of
the HomeBase Board following the Distribution.
Edward J. Weisberger, 54 (1999)..... Senior Vice President and Chief Financial Officer
of Waban since September 1994. From April 1989
until September 1994 he was Vice President-
Finance of Waban. Mr. Weisberger will be an
employee of both BJI and HomeBase after the
Distribution. Mr. Weisberger will also be a
member of the HomeBase Board following the
Distribution.
Kerry L. Hamilton, 45 (2000)........ Director of Waban since September 1994. Ms.
Hamilton is Vice President, Marketing at
Marshalls, a division of The TJX Companies, Inc.
("TJX"). Prior to joining Marshalls in April
1996, Ms. Hamilton was Vice Chairman of Pamet
River Partners, a marketing consulting firm, for
two years. Prior to joining Pamet River Partners,
Ms. Hamilton spent 17 years at Ingalls, Quinn &
Johnson in various capacities, during which time
she was a member of the Board of Directors, a
member of the Agency Executive Committee and
Senior Vice President, Director of Media
Services.
Arthur F. Loewy, 67 (2000).......... Director of Waban since February 1989. He is a
director of TJX and was Chief Financial Officer
and Executive Vice President--Finance of Zayre
Corp. from 1982 to 1989.
John J. Nugent, 49 (2000)........... Executive Vice President of Waban and President of
the BJ's Division since September 1993. From 1991
until 1993 he was Senior Vice President, Sales
Operations of the BJ's Division, and from 1989
until 1993, he was Vice President and Director,
Sales Operations of the BJ's Division.
</TABLE>

DIRECTOR COMPENSATION

Directors who are not employees of BJI will be paid an annual retainer of
$20,000 and fees of $1,250 for each Board meeting and $750 for each Committee
meeting attended. In addition, the Chairman of the Audit Committee and the
Chairman of the Executive Compensation Committee will each be paid $2,500 per
annum for their services as such. All directors will be reimbursed for out-of-
pocket expenses incurred in attending such meetings. Directors may participate
in BJI's General Deferred Compensation Plan.

Prior to March 1995, Waban reimbursed TJX for one-half of TJX's payments
under an employment agreement pursuant to which Mr. Loewy performed financial
consulting and other services for TJX and Waban. During fiscal 1995, Mr. Loewy
was paid $14,077 by TJX under his employment agreement, of which 50% was
reimbursed to TJX by Waban.

71
<PAGE>

Waban's retirement plan for directors was terminated on June 13, 1995 when
Waban stockholders approved a stock option plan for non-employee directors,
and lump sum payouts of accrued pension benefits as of July 1, 1995 were made
to the following directors in the indicated amounts: Mr. Waxlax, $81,492; Mr.
Levy, $28,132; Mr. Coppersmith, $24,544; and Mr. Shields $20,031.

Pursuant to the director stock option plan to be adopted by BJI (the "BJI
Director Plan"), on the date of each annual meeting, each continuing non-
employee director will be granted an option to acquire 1,500 shares of BJI
Common Stock, and each director newly elected or elected subsequent to the
then most recent annual meeting (other than persons who, immediately prior to
the Distribution, were directors of Waban) will receive an option to purchase
3,000 shares of BJI Common Stock. The option exercise price for each of these
options is the fair market value of a share of BJI Common Stock on the date of
grant. Each option is non-transferable except upon death, will expire ten
years after the date of grant and will become exercisable on a cumulative
basis as to one-third of the shares subject to the option on each of the first
three anniversaries of the date of grant. If the director dies or otherwise
ceases to be a director prior to the date the option becomes exercisable, the
option will immediately expire. Any vested options will remain exercisable for
a period of one year following cessation of service as a director of BJI. All
unexercised options will become exercisable in full beginning 20 days prior to
the consummation of a merger or consolidation (as described in the BJI
Director Plan), acquisition, reorganization or liquidation and, to the extent
not exercised, shall terminate immediately after the consummation of such
merger, consolidation, acquisition, reorganization or liquidation.

Options granted under the Waban 1995 Director Stock Option Plan to persons
who will become directors of BJI following the Distribution will be replaced
with options granted under the BJI Director Plan on a basis similar to that
applicable to Waban options granted under the Waban 1989 Stock Incentive Plan
to persons who will become employees of BJI. See "--Incentive and Other
Plans."

COMMITTEES OF THE BOARD

The BJI Board will have four committees: (i) Audit; (ii) Executive; (iii)
Executive Compensation; and (iv) Finance. Committee appointments are expected
to be determined prior to the Distribution.

The Audit Committee will review with management, the internal audit group
and the independent public accountants BJI's financial statements, the
accounting principles applied in their preparation, the scope of the audit,
any comments made by the public accountants upon the financial condition of
BJI and its accounting controls and procedures, and such other matters as the
Committee deems appropriate, and the Committee will review with management
such matters relating to compliance with corporate policies as the Committee
deems appropriate.

The Executive Committee will be authorized to act on behalf of the BJI Board
during intervals between meetings of the BJI Board. In addition, the Executive
Committee will have responsibility for consideration of the qualifications of,
and recommendation to the Board of Directors of, nominees to fill Board
vacancies and will consider nominees recommended by stockholders if such
recommendations are in writing and timely filed with the Secretary of the
Company.

The Executive Compensation Committee will review salary policies and
compensation of officers and other members of management, including
compensation plans for certain officers and other members of management. In
addition, the Executive Compensation Committee will have responsibility for
matters of corporate governance other than recommendation to the Board of
Directors of nominees to fill Board vacancies.

The Finance Committee will review with management and advise the BJI Board
with respect to BJI's finances, including exploring methods of meeting BJI's
financing requirements and planning BJI's capital structure.

72
<PAGE>

EXECUTIVE OFFICERS

Set forth below is certain information with respect to the persons who are
expected to serve as executive officers of BJI immediately following the
Distribution. Mr. Zarkin will serve as Chairman of the Board of Directors of
both BJI and HomeBase following the Distribution.

<TABLE>
<CAPTION>
NAME AND TITLE AGE FIVE-YEAR EMPLOYMENT HISTORY
-------------- --- ----------------------------
<C> <C> <S>
Herbert J. Zarkin................... 58 President, Chief Executive Officer
Chairman of the Board of Directors and Director of Waban since May 1993;
Executive Vice President of Waban
(1989-1993); President of the BJ's
Division (1990-1993)
John J. Nugent...................... 49 Executive Vice President of Waban and
President and Chief Executive President of the BJ's Division since
Officer September 1993; Senior Vice President
of the BJ's Division (1991-1993);
Director of Sales Operations of the
BJ's Division (1989-1993)
Frank D. Forward.................... 42 Senior Vice President, Finance of the
Senior Vice President and Chief BJ's Division since June 1994; Vice
Financial Officer President, Finance of the BJ's
Division (1991-1994)
Kenneth J. Kirwin................... 52 Senior Vice President, Food of the
Senior Vice President, Food BJ's Division since 1990
Laura J. Sen........................ 40 Senior Vice President, General
Senior Vice President, General Merchandise of the BJ's Division
Merchandise since 1993; Vice President, Logistics
of the BJ's Division (1991-1993)
Michael T. Wedge.................... 43 Senior Vice President, Sales
Senior Vice President, Sales Operations of the BJ's Division since
Operations 1993; Vice President, Sales
Operations of the BJ's Division
(1989-1993)
Sarah M. Gallivan................... 53 Vice President and General Counsel of
Vice President and General Counsel Waban since December 1989
</TABLE>

73
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth with respect to BJI certain information
concerning the annual and long-term compensation paid for services rendered to
Waban for fiscal 1993, 1994 and 1995 by those persons who are expected to be
the Chief Executive Officer and the four other most highly compensated
executive officers of BJI following the Distribution (collectively, the "Named
BJI Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------- ---------------------
OTHER ALL
NAME AND ANNUAL RESTRICTED SECURITIES OTHER
PRINCIPAL COMPEN- STOCK UNDERLYING COMPEN-
POSITION YEAR(1) SALARY BONUS SATION(2) AWARDS(3) OPTIONS(4) SATION(5)
--------- ------- -------- -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Herbert J. Zarkin....... 1995 $570,000 $171,285 $24,112 $ -- 100,000 $33,000
Chairman of the Board 1994 552,692 442,154 23,380 -- 100,000 31,969
1993 494,038 193,861 -- 640,625 100,000 5,396
John J. Nugent.......... 1995 350,000 134,967 14,806 -- 50,000 22,000
President and Chief
Executive 1994 332,692 188,038 14,074 -- 65,000 21,135
Officer 1993 237,923 84,592 -- 229,375 35,000 5,439
Kenneth J. Kirwin....... 1995 195,404 62,793 8,266 -- -- 14,270
Senior Vice President,
Food 1994 188,769 88,910 7,985 -- 16,000 13,938
1993 182,730 59,753 -- 66,875 8,000 5,621
Laura J. Sen............ 1995 190,500 61,217 8,059 -- -- 14,025
Senior Vice President,
General 1994 179,577 84,580 6,593 -- 20,000 13,479
Merchandise 1993 128,173 37,492 -- 72,625 10,000 3,887
Michael T. Wedge........ 1995 178,769 57,447 7,562 -- -- 13,439
Senior Vice President,
Sales 1994 164,577 77,515 6,042 -- 20,000 12,729
Operations 1993 119,437 34,074 -- 59,250 7,000 4,107
</TABLE>
- --------
(1) Refers to fiscal year ended in January of the following year.
(2) Includes the reimbursement for tax liabilities related to Waban's
contributions under the Waban Inc. Executive Retirement Plan ("WERP") and
excludes perquisites having an aggregate value of the lesser of $50,000 or
10% of salary plus bonus.
(3) Restricted Stock Awards represent grants of Performance Accelerated
Restricted Stock ("PARS") under Waban's 1989 Stock Incentive Plan. The
dollar value of the PARS is based on the closing market price of Waban
Common Stock on the date of grant. The following table presents the number
of shares of PARS issued to Named BJI Officers in each of the last three
fiscal years, their aggregate restricted stock holdings (which consist
entirely of PARS) as of January 27, 1996 and the value of such holdings
based on the closing market price of Waban Common Stock on January 26,
1996 ($19.125).
<TABLE>
<CAPTION>
RESTRICTED
NUMBER OF SHARES OF STOCK HOLDINGS
RESTRICTED STOCK ISSUED AT 1/27/96
------------------------- --------------
1995 1994 1993 SHARES VALUE
------- ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Herbert J. Zarkin.............. 0 0 50,000 2,559 $48,941
John J. Nugent................. 0 0 17,500 2,160 41,310
Kenneth J. Kirwin.............. 0 0 5,000 2,160 41,310
Laura J. Sen................... 0 0 5,500 1,296 24,786
Michael T. Wedge............... 0 0 4,500 864 16,524
</TABLE>

All of the PARS issued in 1993 to the Named BJI Officers vested at the end
of fiscal 1995. Holders of restricted shares are entitled to the same
dividends as those paid to holders of unrestricted shares, including

74
<PAGE>

shares of BJI Common Stock to be issued in the Distribution. Such shares of
BJI Common Stock will be subject to the same restrictions and vesting
schedule as the restricted shares of Waban Common Stock on account of which
the special dividend was made. Restricted stock holdings of the Named BJI
Officers at January 27, 1996 consist entirely of PARS issued prior to 1993.
In the event of a change of control (as defined), each Named BJI Officer's
restricted shares would become unrestricted.
(4) Reflects the grant of options to purchase Common Stock. Waban has never
granted stock appreciation rights.
(5) For fiscal 1995, represents Waban's contributions under its 401(k) Savings
Plan and WERP (see "--Incentive and Other Plans--Executive Retirement
Plan") as presented below.

<TABLE>
<CAPTION>
1995 WABAN
CONTRIBUTIONS
---------------
401(K)
SAVINGS
PLAN WERP
------- -------
<S> <C> <C>
Herbert J. Zarkin....................... $4,500 $28,500
John J. Nugent.......................... $4,500 17,500
Kenneth J. Kirwin....................... $4,500 9,770
Laura J. Sen............................ $4,500 9,525
Michael T. Wedge........................ $4,500 8,939
</TABLE>

STOCK OPTION GRANTS

The following table sets forth the stock option grants made by Waban to each
of the Named BJI Officers during fiscal 1995.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM(1)
OPTIONS TO EMPLOYEES IN BASE PRICE PER EXPIRATION -------------------------------
NAME GRANTED FISCAL YEAR SHARE(2) DATE 0%(3) 5% 10%
---- ---------- --------------- -------------- ---------- ----- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Herbert J. Zarkin(4).... 100,000 40.1% $15.625 6/13/05 $ 0 $ 982,648 $ 2,490,222
John J. Nugent(4)....... 50,000 20.0% $15.625 6/13/05 0 491,324 1,245,111
Kenneth J. Kirwin(4).... -- -- -- -- -- -- --
Laura J. Sen(4)......... -- -- -- -- -- -- --
Michael T. Wedge(4)..... -- -- -- -- -- -- --
</TABLE>
- --------
(1) The dollar amounts in these columns are the result of calculations at 0%
and the arbitrary appreciation rates of 5% and 10% set by the Securities
and Exchange Commission (the "Commission") and are not intended to
forecast possible future stock price appreciation, if any.
(2) All options granted in fiscal 1995 were granted with an exercise price
equal to the closing price of the Common Stock on the New York Stock
Exchange on the date of grant. These options expire ten years from the
date of grant and vested on June 13, 1996.
(3) No gain to the optionees is possible without an increase in stock price,
which will benefit all stockholders commensurately. A zero percent stock
price appreciation will result in zero gain for the optionee.
(4) Does not include options granted by Waban to the Named BJI Officers during
fiscal 1996, as follows: Mr. Zarkin, 250,000 shares; Mr. Nugent, 20,000
shares; Mr. Kirwin, 5,000 shares; Ms. Sen, 5,000 shares; and Mr. Wedge,
5,000 shares.

75
<PAGE>

AGGREGATED OPTION EXERCISES AND VALUATION

The following table sets forth, on an aggregated basis, the exercise of
Waban stock options during fiscal 1995 by each of the Named BJI Officers and
the fiscal year-end value of unexercised options to purchase Waban Common
Stock held by such officers:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
NUMBER OF AT FISCAL YEAR-END FISCAL YEAR-END(1)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Herbert J. Zarkin....... 15,172 $178,271 113,750 236,250 $424,375 $775,625
John J. Nugent.......... 13,125 131,250 48,500 121,500 162,188 351,813
Kenneth J. Kirwin....... -- -- 25,200 18,800 66,400 40,600
Laura J. Sen............ 1,500 17,438 17,750 22,250 51,438 51,688
Michael T. Wedge........ 2,183 19,442 12,125 20,125 31,906 43,063
</TABLE>
- --------
(1) Based on the fair market value of Waban Common Stock on January 27, 1996
($19.125 per share), less the option exercise price.

INCENTIVE AND OTHER PLANS

1997 Stock Incentive Plan. BJI is expected to adopt the BJI 1997 Stock
Incentive Plan, pursuant to which BJI will be permitted to grant a variety of
stock and stock-based awards to officers and key employees of BJI and its
subsidiaries. A description of the BJI 1997 Stock Incentive Program is set
forth below, under "Proposal Four: Approval of the BJI 1997 Stock Incentive
Plan."

Current Waban employees who are expected to become employees of BJI on the
Distribution Date held as of October 26, 1996 options to purchase an aggregate
of 1,887,091 shares of Waban Common Stock under the Waban 1989 Stock Incentive
Plan. Generally, under such plan, outstanding vested options may be exercised
during the 90-day period following termination and unvested options lapse upon
termination. The Distribution will result in termination of employment of such
persons from Waban under the terms of the Waban 1989 Stock Incentive Plan.

BJI is expected to issue, following the Distribution, options to purchase
BJI Common Stock under the BJI 1997 Stock Incentive Plan in replacement of the
outstanding Waban options (covering an aggregate of 1,887,091 shares of Waban
Common Stock as of October 26, 1996) held by persons who become employees of
BJI on the Distribution Date. The exercise price and the number of the
replacement options will be calculated so as to preserve the Waban options'
approximate value as of the date of the Distribution. To accomplish this, the
number of BJI options and their exercise price will be determined as follows:
the number of shares subject to each outstanding Waban option that is
unexercised as of the Distribution Date will be multiplied by the pre-
Distribution price per share of Waban Common Stock and the resulting number
will be divided by the average of the closing prices of shares of BJI Common
Stock on the New York Stock Exchange during the ten trading days immediately
following the date of the Distribution (the "Post-Distribution BJI Share
Price"). The exercise price of the Waban option will be multiplied by the
Post-Distribution BJI Share Price and the resulting number will be divided by
the pre-Distribution price per share of Waban Common Stock. Fractions will be
rounded to the next highest share and next lowest cent, respectively. The pre-
Distribution price per share of Waban Common Stock will be the average of the
closing prices of shares of Waban Common Stock on the New York Stock Exchange
during the ten trading days immediately preceding the date of the
Distribution.

Waban options held by Messrs. Zarkin and Weisberger, who will become
employees of both BJI and HomeBase after the Distribution, will be replaced by
options to purchase an equal number of shares of both BJI Common Stock and
HomeBase Common Stock. The aggregate exercise prices of the BJI and HomeBase
options

76
<PAGE>

will equal the exercise price of the replaced Waban options, with the exercise
price of the BJI options being based on the ratio of the Post-Distribution BJI
Share Price to the pre-Distribution price per share of Waban Common Stock.

Replacement options granted under the BJI 1997 Stock Incentive Plan pursuant
to the foregoing adjustments will be subject to the same vesting schedule as
the corresponding replaced Waban options, and will otherwise be subject to the
terms of the BJI 1997 Stock Incentive Plan.

Cash Incentive Plans. Waban has in place its Management Incentive Plan and
its Growth Incentive Plan. Amounts paid under these plans to the Named BJI
Officers during fiscal 1995 are reflected in the BJI Summary Compensation
Table. BJI expects to adopt cash incentive plans similar to the Waban
Management Incentive Plan and Growth Incentive Plan. A description of each of
these plans is set forth below, under the respective discussions of Proposal
Five ("Approval of the BJI Management Incentive Plan") and Proposal Six
("Approval of the BJI Growth Incentive Plan").

Executive Retirement Plan. Effective as of January 30, 1994, the Waban
Executive Retirement Plan ("WERP"), a defined contribution plan, was adopted.
Under the WERP, those employees in high-level management positions in Waban,
as selected by the Executive Compensation Committee, including all executive
officers, are eligible to receive cash annual retirement contributions in an
amount determined by the Executive Compensation Committee; provided that the
smallest annual retirement contribution shall equal, on an after-tax basis, at
least three percent of the participant's base salary. All amounts paid under
the WERP are to be used exclusively to fund an investment vehicle selected by
the Executive Compensation Committee which is appropriate to provide
retirement income, such as an insurance policy. BJI expects to adopt an
executive retirement plan similar to the WERP.

Waban made retirement contributions after the end of 1995 equal to 5% of
each participant's base salary during 1995. If the participant terminates
employment prior to the end of the fiscal year in which the participant is
credited with four years of service, the participant forfeits the right to any
benefit under the WERP. As of January 27, 1996, all Named BJI Officers were
credited with at least four years of service.

Retirement Plan. Waban's Retirement Plan (the "Retirement Plan"), in which
all Named BJI Officers participate, was frozen on July 4, 1992 and benefits
under the Retirement Plan ceased to accrue after that date. All Named BJI
Officers are fully vested in their accrued benefits. The estimated annual
benefits payable under the Retirement Plan upon normal retirement (age 65) on
the basis of a straight-line annuity are as follows: Mr. Zarkin, $65,667; Mr.
Nugent, $5,121, Mr. Kirwin, $18,450; Ms. Sen, $6,200; and Mr. Wedge, $2,982.

EMPLOYMENT AGREEMENTS

BJI expects to enter into an employment agreement with Mr. Zarkin, pursuant
to which he would receive a minimum annual base salary of $ and would
participate in specified incentive and other benefit plans. BJI will be
entitled to terminate Mr. Zarkin's employment at any time with or without
cause (as defined). If his employment terminates by reason of death,
disability, incapacity or termination by BJI other than for cause, or if Mr.
Zarkin resigns as a result of his being removed from his positions with BJI or
as a result of being relocated more than 40 miles from the current
headquarters of BJI, Mr. Zarkin will be entitled to payment of certain cash
compensation amounts and continuation of base salary and certain benefits for
a period of 24 months after termination at the rate in effect upon
termination. In addition, Mr. Zarkin will be entitled to payments under the
BJI Management Incentive Plan (the "BJI MIP") for the fiscal year ended
immediately prior to the date of termination of Mr. Zarkin's employment, and
an amount equal to Mr. Zarkin's MIP target award for the year of termination.
Mr. Zarkin will also be entitled to the benefits with respect to any stock
options or other stock-based awards held by him on the date of termination.
The continuing base salary payments are subject to reduction after six months
for compensation earned by Mr. Zarkin from other employment (other than
employment at HomeBase), and the continuing benefits are subject to reduction
at any time for comparable benefits received by

77
<PAGE>

Mr. Zarkin from other employment. Mr. Zarkin will enter into a substantially
similar employment agreement with HomeBase, providing for salary and other
compensation equivalent to that payable by BJI.

BJI is expected to enter into an employment agreement with each of Messrs.
Nugent, Kirwin and Wedge, and Ms. Sen under which each will receive a minimum
annual base salary of $ , $ , $ and $ , respectively, and
participate in specified incentive and other benefit plans. If employment
terminates by reason of death, disability, incapacity or termination by BJI
other than for cause, each such executive officer will be entitled to payment
of certain cash compensation amounts and to certain benefits and continuation
of base salary for 12 months after termination at the rate in effect upon
termination. The continuing base salary payments will be subject to reduction
after three months for compensation from other employment, and the continuing
benefits will be subject to reduction at any time for comparable benefits
received from other employment.

In the event of a change of control followed by termination of employment as
described below under""--Change of Control Severance Benefits," each of the
Named BJI Officers would be entitled to the termination benefits described
thereunder, to the extent such benefits would exceed the benefits otherwise
described above.

CHANGE OF CONTROL SEVERANCE BENEFITS

BJI is expected to provide change of control severance benefits to each of
the Named BJI Officers under individual agreements. Under the agreements, in
general, upon a change of control (as defined) of BJI, the executive would be
entitled to accelerated lump-sum payments of the BJI MIP target award for the
year in which the change of control occurs. If, during the 24-month period
following a change of control, BJI were to terminate the executive's
employment other than for cause (as defined) or the executive were to
terminate his employment for reasons specified in the agreement, or if
employment were to terminate by reason of death, disability or incapacity, the
executive would be entitled to receive an amount equal to two times the
executive's annual base salary. For up to two years following termination BJI
would also be obligated to provide specified benefits, including continued
health, medical and life insurance benefits. The foregoing benefits would be
payable whether or not they gave rise to a federal excise tax on so-called
"excess parachute payments" or were non-deductible, except to the extent a
reduction in amounts paid would increase the executive's after-tax benefits.
BJI would also be obligated to pay all legal fees and expenses reasonably
incurred by the executive in seeking enforcement of contractual rights
following a change of control. In addition, upon involuntary termination
within 24 months following a change of control, any agreement by the executive
not to compete with BJI following termination of his employment would cease to
be effective.

INDEMNIFICATION AGREEMENTS

BJI will enter into indemnification agreements with each of its directors
and executive officers indemnifying them against expenses, settlements,
judgments and fines incurred in connection with any threatened, pending or
completed action, suit, arbitration or proceeding, where the individual's
involvement is by reason of the fact that he or she is or was a director or
officer of BJI or served at BJI's request as a director of another
organization (except that indemnification is not provided against judgments
and fines in a derivative suit unless permitted by Delaware law). An
individual may not be indemnified if he or she is found not to have acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of BJI, except to the extent Delaware law
permits broader contractual indemnification. The indemnification agreements
provide procedures, presumptions and remedies designed to substantially
strengthen the indemnity rights beyond those provided by BJI's Certificate of
Incorporation and by Delaware law.

BOARD AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In fiscal 1995, decisions concerning compensation of Waban's executive
officers were made by the Executive Compensation Committee, which consisted of
Messrs. Waxlax, Coppersmith and Feldberg. Messrs. Waxlax, Zarkin and
Weisberger will serve as directors of both HomeBase and BJI following the
Distribution. Other than Mr. Zarkin, no person who is expected to become an
executive officer of BJI or HomeBase

78
<PAGE>

immediately following the Distribution has served as a director or member of
the compensation committee (or other committee serving an equivalent function)
of any other entity whose executive officers served as a director of Waban or
are expected to serve as a director of BJI or HomeBase immediately following
the Distribution.

MANAGEMENT OF HOMEBASE

HOMEBASE BOARD

The business of HomeBase will be managed under the direction of the HomeBase
Board. In accordance with the HomeBase Certificate, the HomeBase Board is
divided into three classes with staggered terms. Each class of directors is
elected for a term of three years. Directors for each class will be elected at
the annual meeting of stockholders held in the year in which the term for such
class expires.

The following table sets forth the names and information as to the persons
who are expected to serve as directors of HomeBase immediately after the
Distribution. All of such directors are currently members of the Waban Board,
with the exceptions of Mr. Weisberger and Mr. Sherman, who are expected to be
elected by the remaining board members to fill vacancies created by the
resignations of other members of the Waban Board who will continue only as
members of the BJI Board following the Distribution. The Waban Board expects
to appoint additional independent directors prior to the Distribution.

<TABLE>
<CAPTION>
NAME, AGE AND YEAR TERM PRESENT PRINCIPAL OCCUPATIONS OR EMPLOYMENT AND
EXPIRES FIVE-YEAR EMPLOYMENT HISTORY
----------------------- -----------------------------------------------
<S> <C>
Stanley H. Feldberg, 71
(1997)....................... Director of Waban since February 1989. He was
President of Zayre Corp. from 1956 to 1978. He
is also an independent general partner of ML-Lee
Acquisition Funds I and II.
Edward J. Weisberger, 54
(1997)....................... Senior Vice President and Chief Financial
Officer of Waban since September 1994. From
April 1989 until September 1994 he was Vice
President-Finance of Waban. Mr. Weisberger will
be an employee of both BJI and the HomeBase
Division after the Distribution. Mr. Weisberger
will also be a member of the BJI Board following
the Distribution.

Allan P. Sherman, 52 (1998)... Executive Vice President of Waban since May 1993
and President of the HomeBase Division since
September 1993. He was President of the BJ's
Division from May 1993 to September 1993 and
Senior Vice President and General Merchandise
Manager--Non-Food of the BJ's Division from 1991
to 1993.

Herbert J. Zarkin, 58 (1998).. Director, President and Chief Executive Officer
of Waban since May 1993. He was President of the
BJ's Division from May 1990 to May 1993. From
April 1989 to May 1993 he was Executive Vice
President of Waban. Mr. Zarkin will be Chairman
of the BJI Board and Chairman of the HomeBase
Board following the Distribution.

Lorne R. Waxlax, 63 (1999).... Director of Waban since January 1990, and
Chairman of the Board of Waban since June 1996.
He was an Executive Vice President of The
Gillette Company from 1985 to 1993. Mr. Waxlax
is also a director of Quaker State Corporation,
The Iams Company, Hon Industries, Inc., Clean
Harbors, Inc. and AMTROL Inc. Mr. Waxlax will
also be a member of the BJI Board following the
Distribution.
</TABLE>

79
<PAGE>

DIRECTOR COMPENSATION

The compensation to be paid to the members of the Board of Directors of
HomeBase after the Distribution will be the same as that currently payable to
the members of the Waban Board. Directors who are not employees of HomeBase
will be paid an annual retainer of $20,000 and fees of $1,250 for each Board
meeting and $750 for each Committee meeting attended. In addition, the
Chairman of the Audit Committee and the Chairman of the Executive Compensation
Committee will each be paid $2,500 per annum for their services as such. All
directors will be reimbursed for out-of-pocket expenses incurred in attending
such meetings. Directors may participate in HomeBase's General Deferred
Compensation Plan.

Waban's retirement plan for directors was terminated on June 13, 1995 when
the stockholders approved a stock option plan for non-employee directors, and
a lump sum payout of accrued pension benefits as of July 1, 1995 was made to
Mr. Waxlax in the amount of $81,492.

The stockholders approved the 1995 Director Stock Option Plan (the "Waban
Director Plan") at Waban's 1995 annual meeting of stockholders and each non-
employee director of Waban was granted on June 13, 1995 an option to purchase
3,000 shares of Waban Common Stock. On the date of each annual meeting
following the Distribution, each continuing non-employee director will be
granted an option to acquire an additional 1,500 shares of HomeBase Common
Stock, and each director newly elected or elected subsequent to the then most
recent annual meeting will receive an option to purchase 3,000 shares of
HomeBase Common Stock. The option exercise price for each of these options is
the fair market value of a share of HomeBase Common Stock on the date of
grant. Each option is nontransferable except upon death, will expire 10 years
after the date of grant and will become exercisable on a cumulative basis as
to one-third of the shares subject to the option on each of the first three
anniversaries of the date of grant. If the director dies or otherwise ceases
to be a director prior to the date the option becomes exercisable, the option
will immediately expire. Any vested options will remain exercisable for a
period of one year following cessation of service as a director of HomeBase.
All unexercised options will become exercisable in full beginning 20 days
prior to the consummation of a merger or consolidation (as described in the
Waban Director Plan), acquisition, reorganization or liquidation and, to the
extent not exercised, shall terminate immediately after the consummation of
such merger, consolidation, acquisition, reorganization or liquidation.

Options granted under the Waban Director Plan to persons who will continue
as directors of HomeBase following the Distribution will be adjusted on a
basis similar to that applicable to Waban options granted under the Waban 1989
Stock Incentive Plan to persons who will continue as employees of HomeBase.
See "--Incentive and Other Plans."

COMMITTEES OF THE BOARD

The HomeBase Board will continue to have four committees: (i) Audit; (ii)
Executive; (iii) Executive Compensation; and (iv) Finance. Committee
appointments are expected to be determined prior to the Distribution.

The Audit Committee reviews with management, the internal audit group and
the independent public accountants HomeBase's financial statements, the
accounting principles applied in their preparation, the scope of the audit,
any comments made by the public accountants upon the financial condition of
HomeBase and its accounting controls and procedures, and such other matters as
the Committee deems appropriate, and the Committee will review with management
such matters relating to compliance with corporate policies as the Committee
deems appropriate.

The Executive Committee is authorized to act on behalf of the HomeBase Board
during intervals between meetings of the HomeBase Board. In addition, the
Executive Committee has responsibility for consideration of the qualifications
of, and recommendation to the Board of Directors of, nominees to fill Board
vacancies and considers nominees recommended by stockholders if such
recommendations are in writing and timely filed with the Secretary of
HomeBase.

80
<PAGE>

The Executive Compensation Committee reviews salary policies and
compensation of officers and other members of management, including
compensation plans for certain officers and other members of management. In
addition, the Executive Compensation Committee has responsibility for matters
of corporate governance other than recommendation to the Board of Directors of
nominees to fill Board vacancies.

The Finance Committee reviews with management and advises the HomeBase Board
with respect to HomeBase's finances, including exploring methods of meeting
HomeBase's financing requirements and planning HomeBase's capital structure.

EXECUTIVE OFFICERS

Set forth below is certain information with respect to the persons who are
expected to serve as executive officers of HomeBase immediately following the
Distribution. Mr. Zarkin will serve as Chairman of the Board of Directors of
both BJI and HomeBase following the Distribution.

<TABLE>
<CAPTION>
NAME AND TITLE AGE FIVE-YEAR EMPLOYMENT HISTORY
-------------- --- ----------------------------
<C> <C> <S>
Herbert J. Zarkin................... 58 President, Chief Executive Officer and Director
Chairman of the Board of Directors of Waban since May 1993; Executive Vice
President of Waban (1989-1993); President of the
BJ's Division (1990-1993)
Allan P. Sherman.................... 52 Executive Vice President of Waban since May
President and Chief Executive 1993; President of the HomeBase Division since
Officer September 1993; President of the BJ's Division
(May 1993-September 1993); Senior Vice President
and General Merchandise Manager-Non-Food of the
BJ's Division (1991-1993)
Thomas F. Gallagher ................ 44 Executive Vice President, Store Operations of
Executive Vice President, the HomeBase Division since May 1996; Vice
Store Operations President, Sales Operations of the BJ's Division
(1993-1996); Assistant Vice President, Regional
Manager of the BJ's Division (1991-1993)
Scott Richards...................... 38 Executive Vice President, Merchandising of the
Executive Vice President, Merchan- HomeBase Division since August 1996; Vice
dising President, Merchandising of the HomeBase
Division (1993-1996); Buyer for the HomeBase
Division (1991-1993)
William B. Langsdorf................ 40 Senior Vice President, Finance of the HomeBase
Senior Vice President and Division since September 1993; Assistant Vice
Chief Financial Officer President, Finance of the HomeBase Division
(1991-1993)
</TABLE>

81
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth with respect to HomeBase certain information
concerning the annual and long-term compensation paid for services rendered to
Waban for fiscal 1993, 1994 and 1995 by those persons who are expected to be
the Chief Executive Officer and the four other most highly compensated
executive officers of HomeBase following the Distribution (collectively, the
"Named HomeBase Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------- ---------------------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
NAME AND PRINCIPAL COMPEN- STOCK UNDERLYING COMPEN-
POSITION YEAR(1) SALARY BONUS SATION(2) AWARDS(3) OPTIONS(4) SATION(5)
------------------ ------- -------- -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Herbert J. Zarkin....... 1995 $570,000 $171,285 $ 24,112 $ -- 100,000 $ 33,000
Chairman of the Board 1994 552,692 442,154 23,380 -- 100,000 31,969
1993 494,038 193,861 -- 640,625 100,000 5,396
Allan P. Sherman........ 1995 435,000 40,000 241,786 -- 50,000 26,250
President and 1994 422,885 189,420 219,829 -- 65,000 101,114
Chief Executive Officer 1993 332,692 123,756 -- 224,688 35,000 172,277
Thomas F. Gallagher..... 1995 114,634 29,470 3,895 -- -- 10,232
Executive Vice Presi-
dent, 1994 106,558 40,152 3,621 -- 4,000 9,191
Store Operations 1993 95,164 20,019 -- 26,750 5,375 3,505
Scott Richards.......... 1995 131,538 11,122 5,229 -- -- 11,027
Executive Vice Presi-
dent, 1994 123,943 40,871 4,870 -- 7,000 10,125
Merchandising 1993 95,952 -- 10,151 26,750 3,938 3,889
William B. Langsdorf.... 1995 143,942 7,500 5,766 -- -- 11,697
Senior Vice President 1994 129,904 38,790 5,204 -- 12,000 10,366
and Chief Financial Of-
ficer 1993 106,786 -- -- 26,000 6,000 3,312
</TABLE>
- --------
(1)Refers to fiscal year ended in January of the following year.
(2) Includes for Mr. Sherman $135,204 and $137,240 in fiscal 1995 and fiscal
1994, respectively, for loan forgiveness and the value of the interest-
free component of a housing loan from Waban pursuant to the terms of his
employment contract, and $80,797 and $60,374 in fiscal 1995 and fiscal
1994, respectively, for reimbursement of tax liabilities related to that
loan and certain items under "All Other Compensation." Includes for Mr.
Richards $9,764 in fiscal 1993 for automobile allowance. Includes for
Messrs. Zarkin, Gallagher, Richards and Langsdorf in fiscal 1995 and
fiscal 1994 the reimbursement for tax liabilities related to Waban's
contributions under the WERP and excludes perquisites having an aggregate
value of the lesser of $50,000 or 10% of salary plus bonus.
(3) Restricted Stock Awards represent grants of Performance Accelerated
Restricted Stock ("PARS") under Waban's 1989 Stock Incentive Plan. The
dollar value of the PARS is based on the closing market price of Waban
Common Stock on the date of grant. The following table presents the number
of shares of PARS issued to Named HomeBase Officers in each of the last
three fiscal years, their aggregate restricted stock holdings (which
consist entirely of PARS) as of January 27, 1996 and the value of such
holdings based on the closing market price of Waban Common Stock on
January 26, 1996 ($19.125).
<TABLE>
<CAPTION>
RESTRICTED
NUMBER OF SHARES OF STOCK HOLDINGS
RESTRICTED STOCK ISSUED AT 1/27/96
------------------------- --------------
1995 1994 1993 SHARES VALUE
------- ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Herbert J. Zarkin................. 0 0 50,000 2,559 $48,941
Allan P. Sherman.................. 0 0 17,500 7,500 143,438
Thomas F. Gallagher............... 0 0 2,000 648 12,393
Scott Richards.................... 0 0 2,000 600 11,475
William B. Langsdorf.............. 0 0 2,000 600 11,475
</TABLE>

82
<PAGE>

Of the PARS issued in fiscal 1993, the following shares vested at the end
of fiscal 1995: Mr. Zarkin, 50,000; Mr. Sherman, 13,750; Mr. Gallagher,
2,000; Mr. Richards, 1,400; and Mr. Langsdorf, 1,400. PARS issued in 1993
to Messrs. Sherman, Richards and Langsdorf that remain restricted will vest
in equal 25% increments annually at the end of January 1997 through January
2000. In the event of a change of control (as defined), each Named HomeBase
Officer's restricted shares would become unrestricted. Holders of
restricted shares are entitled to the same dividends as those paid to
holders of unrestricted shares.
(4) Reflects the grant of options to purchase Common Stock. Waban has never
granted stock appreciation rights.
(5) For fiscal 1995, represents Waban's contributions under its 401(k) Savings
Plan and WERP (see "--Incentive and Other Plans--Executive Retirement
Plan") as presented below.

<TABLE>
<CAPTION>
1995 WABAN
CONTRIBUTIONS
---------------
401(K)
SAVINGS
PLAN WERP
------- -------
<S> <C> <C>
Herbert J. Zarkin............................................ $4,500 $28,500
Allan P. Sherman............................................. $4,500 21,750
Thomas F. Gallagher.......................................... $4,500 5,732
Scott Richards............................................... $4,500 6,527
William B. Langsdorf......................................... $4,500 7,197
</TABLE>

STOCK OPTION GRANTS

The following table sets forth the stock option grants made by Waban to each
of the Named HomeBase Officers during fiscal 1995.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
NUMBER PERCENT OF POTENTIAL REALIZABLE
OF TOTAL OPTIONS VALUE AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO OF STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(1)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ---------------------------------
NAME GRANTED YEAR PER SHARE(2) DATE 0%(3) 5% 10%
---- ---------- ------------- ------------ ---------- ------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Herbert J. Zarkin(4).... 100,000 40.1% $15.625 6/13/05 $ 0 $ 982,648 $ 2,490,222
Allan P. Sherman(4)..... 50,000 20.0% $15.625 6/13/05 0 491,324 1,245,111
Thomas F. Gallagher(4).. -- -- -- -- -- -- --
Scott Richards(4)....... -- -- -- -- -- -- --
William B. Langsdorf(4). -- -- -- -- -- -- --
</TABLE>
- --------
(1) The dollar amounts in these columns are the result of calculations at 0%
and the arbitrary appreciation rates of 5% and 10% set by the Commission
and are not intended to forecast possible future stock price appreciation,
if any.
(2) All options granted in fiscal 1995 were granted with an exercise price
equal to the closing price of the Common Stock on the New York Stock
Exchange on the date of grant. These options expire ten years from the
date of grant and vested on June 13, 1996.
(3) No gain to the optionees is possible without an increase in stock price,
which will benefit all stockholders commensurately. A zero percent stock
price appreciation will result in zero gain for the optionee.
(4) Does not include options granted to the Named HomeBase Officers during
fiscal 1996, as follows: Mr. Zarkin 250,000 shares; Mr. Sherman, 20,000
shares; Mr. Gallagher, 15,000 shares; Mr. Richards, 13,000 shares; and Mr.
Langsdorf, 4,000 shares.

83
<PAGE>

AGGREGATED OPTION EXERCISES AND VALUATION

The following table sets forth, on an aggregated basis, the exercise of
stock options during fiscal 1995 by each of the Named HomeBase Officers and
the fiscal year-end value of unexercised options held by such officers:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>

NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NUMBER OF AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Herbert J. Zarkin....... 15,172 $178,271 113,750 236,250 $424,375 $775,625
Allan P. Sherman........ -- -- 53,000 122,000 176,625 356,500
Thomas F. Gallagher..... 2,700 14,175 800 5,875 1,100 19,781
Scott Richards.......... -- -- 5,380 7,558 19,811 18,958
William B. Langsdorf.... 1,108 12,050 8,400 12,600 30,769 30,919
</TABLE>
- --------
(1) Based on the fair market value of Waban Common Stock on January 27, 1996
($19.125 per share), less the option exercise price.

INCENTIVE AND OTHER PLANS

1989 Stock Incentive Plan. HomeBase grants stock and stock-based awards to
officers and key employees of HomeBase and its subsidiaries pursuant to the
1989 Stock Incentive Plan. A description of the 1989 Stock Incentive Plan is
set forth below under "Proposal Three: Approval of Amendment to the Waban 1989
Stock Incentive Plan."

Effective upon the Distribution, all unvested options and vested but
unexercised options granted under the 1989 Stock Incentive Plan and held by
persons who remain HomeBase employees (other than persons who will also be
employees of BJI) will be adjusted so that the number of shares subject to
such options and the exercise price of such options will preserve the
approximate value of the Waban options held by such persons immediately prior
to the Distribution. To accomplish this, the number of Waban options held by
each such person immediately prior to the Distribution will be multiplied by
the pre-Distribution price of a share of Waban Common Stock and the resulting
number will be divided by the average of the closing prices of shares of Waban
Common Stock on the New York Stock Exchange during the ten trading days
immediately following the date of the Distribution (the "Post-Distribution
Waban Share Price"). The exercise price of the Waban option will be multiplied
by the Post-Distribution Waban Share Price and the resulting number will be
divided by the pre-Distribution price of a share of Waban Common Stock.
Fractions will be rounded to the next highest share and the next lowest cent,
respectively. The pre-Distribution price per share of Waban Common Stock will
be the average of the closing prices of shares of Waban Common Stock on the
New York Stock Exchange during the ten trading days immediately preceding the
date of the Distribution.

Cash Incentive Plans. Waban has in place its Management Incentive Plan and
its Growth Incentive Plan. Amounts paid under these plans to the Named
HomeBase Officers during fiscal 1995 are reflected in the HomeBase Summary
Compensation Table. These plans are similar to the Management Incentive Plan
and the Growth Incentive Plan proposed to be adopted by BJI and described
below under the respective discussions of Proposal Five ("Approval of the BJI
Management Incentive Plan") and Proposal Six ("Approval of the BJI Growth
Incentive Plan").

Executive Retirement Plan. Effective as of January 30, 1994, the Waban Inc.
Executive Retirement Plan ("WERP"), a defined contribution plan, was adopted.
Under the WERP, those employees in high-level management positions in Waban,
as selected by the Executive Compensation Committee, including all executive
officers, are eligible to receive cash annual retirement contributions in an
amount determined by the Executive

84
<PAGE>

Compensation Committee; provided that the smallest annual retirement
contribution shall equal, on an after-tax basis, at least three percent of the
participant's base salary. All amounts paid under the WERP are to be used
exclusively to fund an investment vehicle selected by the Executive
Compensation Committee which is appropriate to provide retirement income, such
as an insurance policy.

Waban made retirement contributions after the end of 1995 equal to 5% of
each participant's base salary during 1995. If the participant terminates
employment prior to the end of the fiscal year in which the participant is
credited with four years of service, the participant forfeits the right to any
benefit under the WERP. As of January 27, 1996, all Named HomeBase Officers
were credited with at least four years of service.

Retirement Plan. Waban's Retirement Plan (the "Retirement Plan"), in which
Messrs. Zarkin, Richards and Langsdorf participated, was frozen on July 4,
1992 and benefits under the Retirement Plan ceased to accrue after that date.
Messrs. Zarkin, Richards and Langsdorf are fully vested in their accrued
benefits. The estimated annual benefits payable to such persons under the
Retirement Plan upon normal retirement (age 65) on the basis of a straight-
line annuity are as follows: Mr. Zarkin, $65,667; Mr. Richards, $7,140; and
Mr. Langsdorf, $5,209.

EMPLOYMENT AGREEMENTS

HomeBase expects to enter into an employment agreement with Mr. Zarkin
substantially similar to the employment agreement he will enter into with BJI.
See "Management of BJI--Employment Agreements."

HomeBase is expected to enter into an employment agreement with each of
Messrs. Sherman, Gallagher, Richards and Langsdorf under which each will
receive a minimum annual base salary of $ , $ , $ and $ ,
respectively, and participate in specified incentive and other benefit plans.
If employment terminates by reason of death, disability, incapacity or
termination by HomeBase other than for cause, each such executive officer will
be entitled to payment of certain cash compensation amounts and to certain
benefits and continuation of base salary for 12 months after termination at
the rate in effect upon termination. The continuing base salary payments will
be subject to reduction after three months for compensation from other
employment, and the continuing benefits will be subject to reduction at any
time for comparable benefits received from other employment.

In the event of a change of control followed by termination of employment as
described below under "--Change of Control Severance Benefits", each of the
Named HomeBase Officers would be entitled to the termination benefits
described thereunder, to the extent such benefits would exceed the benefits
otherwise described above.

CHANGE OF CONTROL SEVERANCE BENEFITS

HomeBase is expected to provide change of control severance benefits to each
of the Named HomeBase Officers under individual agreements. Under the
agreements, in general, upon a change of control (as defined) of HomeBase, the
executive would be entitled to accelerated lump-sum payments of the HomeBase
Management Incentive Plan target award for the year in which the change of
control occurs. If, during the 24-month period following a change of control,
HomeBase were to terminate the executive's employment other than for cause (as
defined) or the executive were to terminate his employment for reasons
specified in the agreement, or if employment were to terminate by reason of
death, disability or incapacity, the executive would be entitled to receive an
amount equal to two times the executive's annual base salary. For up to two
years following termination HomeBase would also be obligated to provide
specified benefits, including continued health, medical and life insurance
benefits. The foregoing benefits would be payable whether or not they gave
rise to a federal excise tax on so-called "excess parachute payments" or were
non-deductible, except to the extent a reduction in amounts paid would
increase the executive's after-tax benefits. HomeBase would also be obligated
to pay all legal fees and expenses reasonably incurred by the executive in
seeking enforcement of contractual rights following a change of control. In
addition, upon involuntary termination within 24 months following a change of
control, any agreement by the executive not to compete with HomeBase following
termination of his employment would cease to be effective.

85
<PAGE>

INDEMNIFICATION AGREEMENTS

HomeBase will enter into indemnification agreements with each of its
directors and executive officers indemnifying them against expenses,
settlements, judgments and fines incurred in connection with any threatened,
pending or completed action, suit, arbitration or proceeding, where the
individual's involvement is by reason of the fact that he or she is or was a
director or officer of HomeBase or served at HomeBase's request as a director
of another organization (except that indemnification is not provided against
judgments and fines in a derivative suit unless permitted by Delaware law). An
individual may not be indemnified if he or she is found not to have acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of HomeBase, except to the extent Delaware law
permits broader contractual indemnification. The indemnification agreements
provide procedures, presumptions and remedies designed to substantially
strengthen the indemnity rights beyond those provided by HomeBase's
Certificate of Incorporation and by Delaware law.

PRICE RANGE OF WABAN COMMON STOCK

The Waban Common Stock is listed on the New York Stock Exchange and is
traded under the symbol "WBN". The following table sets forth, for the fiscal
periods indicated, the high and low sales prices per share of the Waban Common
Stock as reported on the New York Stock Exchange Composite Tape. On October
22, 1996, the trading date preceding public announcement of the Distribution,
the high, low and closing prices per share of Waban Common Stock on the New
York Stock Exchange were $24 1/4, $23 5/8 and $23 7/8, respectively. On
November 1, 1996, the closing price per share of Waban Common Stock on the New
York Stock Exchange was $26.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1994
1st Quarter............................................ $20 1/8 $14 1/8
2nd Quarter............................................ $ 19 $14 1/2
3rd Quarter............................................ $ 20 $16 3/4
4th Quarter............................................ $19 3/4 $14 7/8
1995
1st Quarter............................................ $20 3/8 $15 7/8
2nd Quarter............................................ $16 3/4 $13 1/2
3rd Quarter............................................ $19 1/4 $15 1/2
4th Quarter............................................ $19 5/8 $15 1/4
1996
1st Quarter............................................ $27 1/8 $18 3/4
2nd Quarter............................................ $28 $17 7/8
3rd Quarter............................................ $27 5/8 $18 3/8
4th Quarter (through November 1, 1996)................. $26 7/8 $25 3/4
</TABLE>

86
<PAGE>

OWNERSHIP OF BJI COMMON STOCK

The table following sets forth information as to the beneficial ownership of
BJI Common Stock as of the Distribution Date as if the Distribution took place
on October 26, 1996, by all persons expected to serve as directors of BJI and
the persons listed in the BJI Summary Compensation Table as well as by
expected Directors and Executive Officers of BJI as a group and, to the best
of BJI's knowledge, beneficial owners of 5% or more of the BJI Common Stock
after the Distribution. The information in the following table is based on the
ownership of Waban Common Stock as of October 26, 1996 and the number of
shares of BJI Common Stock expected to be distributed to each existing Waban
stockholder in the Distribution.

<TABLE>
<CAPTION>
SHARES OF BJI COMMON PERCENT OF OUTSTANDING SHARES OF
NAME AND ADDRESS OF STOCK EXPECTED TO BE COMMON STOCK EXPECTED TO BE
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED (1)
- ------------------- --------------------- --------------------------------
<S> <C> <C>
FMR Corp................ 2,613,967(2) 8.0%
82 Devonshire Street
Boston, Massachusetts
02109.................
The Prudential Insurance
Company of America 2,468,254(3) 7.5%
Prudential Plaza
Newark, New Jersey
01702
David J. Greene and
Company................ 2,427,050(4) 7.4%
599 Lexington Avenue
New York, New York
10022
S. James Coppersmith.... 3,000 *
Kerry L. Hamilton....... 1,200 *
Allyn L. Levy........... 6,000 *
Arthur F. Loewy(5)...... 9,632 *
John J. Nugent.......... 142,816 *
Thomas J. Shields....... 1,500 *
Lorne R. Waxlax......... 8,000 *
Edward J. Weisberger.... 93,417 *
Herbert J. Zarkin....... 377,682 1.1%
Kenneth J. Kirwin....... 32,368 *
Laura J. Sen............ 17,296 *
Michael T. Wedge........ 20,614 *
All Directors and
Executive Officers as a
Group
(14 persons)(5)........ 756,443 2.3%
</TABLE>
- --------
*Indicates less than 1%
(1) Includes the following shares of Common Stock that may be acquired upon
exercise of outstanding stock options which were exercisable on October
26, 1996 or within 60 days thereafter: Mr. Coppersmith, 1,000 shares; Ms.
Hamilton, 1,000 shares; Mr. Levy, 1,000 shares; Mr. Loewy, 1,000 shares,
Mr. Nugent, 122,250 shares; Mr. Shields, 1,000 shares; Mr. Waxlax, 1,000
shares; Mr. Weisberger, 72,000 shares; Mr. Zarkin, 265,000 shares; Mr.
Kirwin, 20,400 shares; Ms. Sen, 10,500 shares; Mr. Wedge, 18,500 shares;
all directors and executive officers as a group, 542,400 shares.
Unexercised Waban stock options held by BJI employees as of the
Distribution Date will be replaced by options that are exercisable for
shares of BJI Common Stock based upon a conversion formula to be
calculated after the Distribution Date. See "Management of BJI--Incentive
and Other Plans."
(2) Information is as of December 31, 1995 and is based on a Schedule 13G
filed with the Commission by FMR Corp., Edward C. Johnson 3d and Abigail
P. Johnson. FMR Corp. reported that it has sole power to

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vote or to direct the voting of 261,088 shares, and sole dispositive power
as to all such shares. Includes 2,333,479 shares beneficially owned by
Fidelity Management & Research Company, a registered investment adviser.
(3) Information is as of December 31, 1995 and is based on a Schedule 13G
filed with the Commission by The Prudential Insurance Company of America
("Prudential"). Prudential reported that it has sole power to vote 5,900
shares and shared power to vote 2,460,981 shares and has sole dispositive
power with respect to 5,900 and shared dispositive power with respect to
2,460,981 shares. Includes 1,373 shares issuable upon conversion of the
Convertible Debentures.
(4) Information is as of December 31, 1995 and is based on a Schedule 13G
filed with the Commission by David J. Greene and Company, a registered
broker-dealer and investment adviser. David J. Greene and Company reported
that it has sole power to vote 144,200 shares and shared power to vote
1,611,800 shares and has sole dispositive power with respect to 144,200
shares and shared dispositive power with respect to 2,282,850 shares.
(5) Excludes the following shares beneficially owned by or held in trust by or
for the benefit of the respective spouses of the following persons and any
shares held in a trust for which the following persons are income
beneficiaries, as to which the following persons disclaim beneficial
ownership: Arthur F. Loewy (413 shares).

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OWNERSHIP OF HOMEBASE COMMON STOCK

The table following sets forth information as to the beneficial ownership of
HomeBase Common Stock as of the Distribution Date as if the Distribution took
place on October 26, 1996, by all persons expected to serve as directors of
HomeBase and the persons listed in the HomeBase Summary Compensation Table as
well as by expected Directors and Executive Officers of HomeBase as a group
and, to the best of HomeBase's knowledge, beneficial owners of 5% or more of
the HomeBase Common Stock after the Distribution. The information in the
following table is based on the ownership of Waban Common Stock as of October
26, 1996.

<TABLE>
<CAPTION>
SHARES OF HOMEBASE
COMMON STOCK PERCENT OF OUTSTANDING SHARES
EXPECTED TO BE OF COMMON STOCK EXPECTED TO
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BE BENEFICIALLY OWNED(1)
- ------------------------------------ --------------------- -----------------------------
<S> <C> <C>
FMR Corp.................... 2,613,967(2) 8.0%
82 Devonshire Street
Boston, Massachusetts 02109
The Prudential Insurance
Company of America......... 2,468,254(3) 7.5%
Prudential Plaza
Newark, New Jersey 01702
David J. Greene and Company. 2,427,050(4) 7.4%
599 Lexington Avenue
New York, New York 10022
Stanley H. Feldberg(5)...... 21,134 *
Allan P. Sherman............ 133,250 *
Lorne R. Waxlax............. 8,000 *
Edward J. Weisberger........ 93,417 *
Herbert J. Zarkin........... 377,682 1.1%
Thomas F. Gallagher......... 6,648 *
Scott Richards.............. 10,656 *
William B. Langsdorf........ 8,150 *
All Directors and Executive
Officers as a Group
(8 persons)(5)............. 658,937 2.0%
</TABLE>
- --------
*Indicates less than 1%
(1) Includes the following shares of Common Stock that may be acquired upon
exercise of outstanding stock options which were exercisable on October
26, 1996 or within 60 days thereafter: Mr. Feldberg, 1,000 shares; Mr.
Sherman, 108,250 shares; Mr. Waxlax, 1,000 shares; Mr. Weisberger, 72,000
shares; Mr. Zarkin, 265,000 shares; Mr. Richards, 4,800 shares; Mr.
Langsdorf, 7,550 shares; all directors and executive officers as a group,
459,600 shares. See "Management of HomeBase--Incentive and Other Plans"
for a discussion of adjustments to outstanding options that will be made
after the Distribution Date.
(2) Information is as of December 31, 1995 and is based on a Schedule 13G
filed with the Commission by FMR Corp., Edward C. Johnson 3d and Abigail
P. Johnson. FMR Corp. reported that it has sole power to vote or to direct
the voting of 261,088 shares, and sole dispositive power as to all such
shares. Includes 2,333,479 shares beneficially owned by Fidelity
Management & Research Company, a registered investment adviser.

(3) Information is as of December 31, 1995 and is based on a Schedule 13G
filed with the Commission by Prudential. Prudential reported that it has
sole power to vote 5,900 shares and shared power to vote 2,460,981 shares
and has sole dispositive power with respect to 5,900 and shared
dispositive power with respect to 2,460,981 shares. Includes 1,373 shares
issuable upon conversion of the Convertible Debentures.

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<PAGE>

(4) Information is as of December 31, 1995 and is based on a Schedule 13G
filed with the Commission by David J. Greene and Company, a registered
broker-dealer and investment adviser. David J. Greene and Company reported
that it has sole power to vote 144,200 shares and shared power to vote
1,611,800 shares and has sole dispositive power with respect to 144,200
shares and shared dispositive power with respect to 2,282,850 shares.
(5) Includes the following shares beneficially owned by the following persons
as trustees or custodians of which beneficial interest is disclaimed
unless otherwise indicated: Stanley H. Feldberg (13,366 shares). Excludes
the following shares beneficially owned by or held in trust by or for the
benefit of the respective spouses of the following persons and any shares
held in a trust for which the following persons are income beneficiaries,
as to which the following persons disclaim beneficial ownership: Stanley
H. Feldberg (10,000 shares).

DESCRIPTION OF BJI CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

As of the Distribution Date, BJI's authorized capital stock will consist of
200 million shares of capital stock, of which 180 million shares will be
designated as BJI Common Stock, $.01 par value per share, and 20 million
shares will be designated as preferred stock, $.01 par value per share (the
"Preferred Stock"). The following summary description of BJI's capital stock
is qualified in its entirety by reference to the BJI Certificate and the BJI
By-laws, as the same will be in effect on the Distribution Date.

COMMON STOCK

BJI will be authorized to issue 180 million shares of BJI Common Stock.
Based on the number of shares of Waban Common Stock outstanding as of October
26, 1996, approximately 32.7 million shares of BJI Common Stock are expected
to be issued and outstanding immediately following the Distribution Date. If
the Convertible Debentures are converted prior to the Distribution, an
additional 4,387,879 shares of BJI Common Stock would be outstanding
immediately following the Distribution Date.

Subject to the rights of holders of Preferred Stock and any other senior
class of stock, holders of BJI Common Stock will be entitled to receive such
dividends as may from time to time be declared by the Board of Directors of
BJI. Holders of BJI Common Stock will be entitled to one vote per share on
every question submitted to them at a meeting of stockholders or otherwise. In
the event of a liquidation, dissolution or winding up and distribution of the
assets of BJI, after paying or setting aside for the holders of Preferred
Stock and any other senior class of stock the full preferential amounts to
which they are entitled, and subject to the rights of any series of Preferred
Stock to participate pro rata with the BJI Common Stock with respect to
distributions, the holders of BJI Common Stock will be entitled to receive pro
rata all of the remaining assets of BJI available for distribution to BJI
stockholders. There are no pre-emptive rights with respect to BJI Common
Stock. The shares of BJI Common Stock to be issued in the Distribution will
not be liable to further calls or assessments.

PREFERRED STOCK

BJI will be authorized to issue up to 20 million shares of Preferred Stock
without further stockholder approval (except as may be required by applicable
stock exchange rules). Accordingly, the Board of Directors will be authorized
to determine, without any further action by the holders of the BJI Common
Stock, the dividend rights, dividend rate, conversion or exchange rights,
voting rights, rights and terms of redemption, liquidation preferences and
sinking fund terms of any series of Preferred Stock, the number of shares
constituting any such series, and the designation thereof. No shares of
Preferred Stock are expected to be issued and outstanding immediately
following the Distribution.

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Should the BJI Board elect to exercise its authority to issue any additional
series of Preferred Stock, the rights, preferences and privileges of holders
of BJI Common Stock would be made subject to the rights, preferences and
privileges of such additional series. BJI has no present plans to issue any
such additional series of Preferred Stock.

CERTAIN PROVISIONS OF THE BJI CERTIFICATE AND THE BJI BY-LAWS

The internal affairs of BJI will be governed by, among other things, the
laws of the State of Delaware, the BJI Certificate and the BJI By-laws. The
BJI Certificate will contain several provisions, certain of which are
substantially similar to provisions in Waban's Certificate of Incorporation,
that may impede the acquisition of control of BJI by means of a tender offer,
proxy fight or other means. The BJI By-laws will also contain provisions,
certain of which are substantially similar to provisions contained in Waban's
By-laws, that could have an anti-takeover effect. Set forth below is a
description of such provisions in the BJI Certificate and the BJI By-laws, and
of certain related provisions of Delaware law.

CLASSIFIED BOARD OF DIRECTORS

The BJI Certificate and BJI By-laws will provide for the BJI Board to be
divided into three classes of directors serving staggered three-year terms. As
a result, beginning in 1998, approximately one-third of the BJI Board will be
elected each year. The classified board is designed to ensure continuity and
stability in the BJI Board's leadership and policies in the event of a hostile
takeover attempt or proxy contest.

The classified board would significantly extend the time required to effect
any change in control of the BJI Board and may tend to discourage any hostile
takeover bid for BJI. Because only a minority of the directors will be elected
at each annual meeting, it would normally take at least two annual meetings
for holders of even a significant majority of BJI's voting stock to effect a
change in the composition of a majority of the BJI Board, absent approval of
the BJI Board. Because of the additional time required to change the
composition of the BJI Board, a classified board may also make the removal of
incumbent management more difficult, even if such removal would be beneficial
to stockholders generally, and may tend to discourage certain tender offers.

The Waban Board believes the classified board provisions will enable the BJI
Board to better protect the interests of BJI stockholders by aiding the BJI
Board in any attempt to negotiate more favorable terms with a potential
acquiror since such acquiror would be faced with a delay in obtaining control
of BJI absent approval of the BJI Board.

NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES

The BJI By-laws will provide that the number of directors will be not less
than three, with the exact number of directors to be determined from time to
time by resolution adopted by the affirmative vote of a majority of the entire
BJI Board. The authority of the BJI Board to determine the exact number of
directors could be used to prevent a stockholder from obtaining majority
representation on the BJI Board simply by enlarging the BJI Board and filling
the new directorships with its own nominees. Moreover, the BJI Certificate
will provide that directors may be removed only for cause (as defined therein)
and only by a vote of at least 67% of the outstanding shares of BJI Common
Stock. This removal provision of the BJI Certificate may only be amended by
the supermajority stockholder votes described below under "--Amendment of
Certain Provisions of the BJI Certificate and the BJI By-laws."

The BJI By-laws will provide that vacancies on the BJI Board may only be
filled by the majority vote of the remaining directors and not by the
stockholders, except that in the case of newly created directorships, if the
remaining directors fail to fill any such vacancy, the stockholders may do so
at the next annual meeting or a special meeting called for that purpose. Any
director so elected to fill a vacancy shall hold office until the next
election of the class for which such director shall have been chosen and until
his or her successor shall have

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been elected and qualified. This provision may have the effect in practice of
limiting the power to fill vacancies only to the BJI Board because the BJI By-
laws will not permit stockholders to call a special meeting (at which such
vacancies could be filled). See "--Stockholder Action by Written Consent;
Special Meetings" below. In addition, this vacancy provision of the BJI By-
laws may not be amended by the stockholders without the supermajority
stockholder votes described below under "--Amendment of Certain Provisions of
the BJI Certificate and the BJI By-laws."

These removal and vacancy provisions of the BJI Certificate and the BJI By-
laws will preclude the holder of a majority of the BJI Common Stock from
removing incumbent directors, or otherwise taking advantage of vacancies on
the BJI Board, and simultaneously gaining control of the BJI Board by filling
such resulting vacancies with its own nominees.

STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

The BJI By-laws will provide that special meetings of stockholders may be
called only by the President or the Chairman of the Board or by vote of a
majority of the entire BJI Board. This provision precludes independent
stockholder action to call a special meeting of stockholders for consideration
of any proposals, including proposals for certain takeovers or proposals to
remove directors from office prior to the annual meeting of stockholders,
unless such officers or the BJI Board believe consideration of such proposals
to be appropriate.

The BJI Certificate will provide that all stockholder action must be
effected at a duly called meeting (and not by a consent in writing). This
provision will give all of the stockholders of BJI an opportunity to
participate in determining the appropriateness of any proposed action and
prevents the holders of a majority of the voting stock from using the written
consent procedure permitted by Delaware law to take action, including any
attempt to gain control of BJI.

ADVANCE NOTICE PROVISION FOR STOCKHOLDER NOMINATIONS OF DIRECTORS AND OTHER
STOCKHOLDER PROPOSALS

The BJI By-laws will establish an advance notice procedure for stockholder
proposals to be brought before an annual meeting of stockholders and for
nominations by stockholders of candidates for election as directors at an
annual or special meeting at which directors are to be elected. Only such
business may be conducted at an annual meeting of stockholders as has been
brought before the meeting by, or at the direction of, the Chairman of the
Board of Directors, or by a stockholder of BJI who is entitled to vote at the
meeting who has given to the Secretary of BJI timely written notice, in proper
form, of the stockholder's intention to bring that business before the
meeting. The chairman of such meeting has the authority to make such
determinations. Only persons who are nominated by, or at the direction of, the
Chairman of the Board of Directors, or who are nominated by a stockholder who
has given timely notice, in proper form, to the Secretary prior to a meeting
at which directors are to be elected will be eligible for election as
directors of BJI.

To be timely, a stockholder's notice of business to be brought before an
annual meeting and nominations of candidates for election as directors at any
annual meeting shall be delivered to the Secretary of BJI at the principal
executive offices of BJI not less than 70 days nor more than 90 days prior to
the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 20 days, or delayed by more than 70 days, from such anniversary
date, notice by the stockholder to be timely must be so delivered not earlier
than the ninetieth day prior to such annual meeting and not later than the
close of business on the later of the seventieth day prior to such annual
meeting or the tenth day following the day on which public announcement of the
date of such meeting is first made.

To be timely, a stockholder's notice of nominations of persons for election
to the Board of Directors may be made at a special meeting of stockholders if
the stockholder's notice shall be delivered to the Secretary of BJI at the
principal executive offices of BJI not earlier than the ninetieth day prior to
such special meeting and not later than the close of business on the later of
the seventieth day prior to such special meeting or the tenth day following
the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected
at such meeting.

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The notice of any nomination for election as a director must set forth the
name and address of, and the class and number of shares of BJI held by, the
stockholder who intends to make the nomination and the beneficial owner, if
any, on whose behalf the nomination is being made; the name and address of the
person or persons to be nominated; a representation that the stockholder is a
holder of record of stock of BJI entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; a description of all arrangements or
understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; such other information
regarding each nominee proposed by such stockholder as would have been
required to be included in a proxy statement filed pursuant to the proxy rules
of the Commission had each nominee been nominated, or intended to be
nominated, by the Board of Directors; and the consent of each nominee to serve
as a director if so elected.

CONSIDERATION OF NON-STOCKHOLDER CONSTITUENCIES

The BJI Certificate will provide that in determining whether to take or
refrain from taking corporate action on any matter, the BJI Board may take
into account the interests of creditors, customers, employees and other
constituencies of BJI and its subsidiaries, and the effect upon communities in
which BJI and its subsidiaries do business in addition to any other
considerations which the BJI Board may lawfully take into account. The purpose
of these provisions is to specifically authorize the BJI Board to consider the
interests of various constituencies of BJI and its subsidiaries, in addition
to the interests of stockholders. Waban believes that these provisions are
desirable to emphasize the BJI Board's authority to act to maintain and
protect BJI as an enterprise.

AMENDMENT OF CERTAIN PROVISIONS OF THE BJI CERTIFICATE AND THE BJI BY-LAWS

Under Delaware law, the stockholders may adopt, amend or repeal the by-laws,
and with the approval of the board of directors, the certificate of
incorporation. If the certificate so provides, the by-laws may be adopted,
amended or repealed by the board of directors. The BJI Certificate will
provide for such actions to be taken by the BJI Board, except as provided
below. The BJI Certificate will contain provisions requiring the affirmative
vote of the holders of at least 80% of all outstanding shares of BJI Common
Stock, (i) to alter, amend, repeal or adopt certain provisions of the BJI
Certificate (including the provisions of the BJI Certificate discussed above
in this Section and including the amendment provisions described in this
sentence) or (ii) to amend, alter or repeal certain provisions of the BJI By-
laws (including the provisions of the BJI By-laws described above in this
Section). These supermajority voting requirements will make it more difficult
for stockholders to make changes in the above-described provisions of the BJI
Certificate or the BJI By-laws, including changes designed to facilitate the
exercise of control over BJI. In addition, these supermajority voting
requirements will enable the holders of a minority of the outstanding shares
of BJI Common Stock to prevent the holders of a majority or more from amending
the above-described provisions of the BJI Certificate or the BJI By-laws. The
supermajority vote requirements may be difficult to obtain, since the holders
of at least 80% of all outstanding shares of BJI Common Stock must be present
or represented by proxy at any meeting at which any such amendment is proposed
and must vote in favor of such amendment.

PREFERRED STOCK

The BJI Certificate will authorize the BJI Board to determine (without any
further vote of the stockholders, except as may be required by applicable
stock exchange rules), with respect to any series of Preferred Stock, the
terms and rights of such series. See "Description of BJI Capital Stock--
Preferred Stock."

In connection with the planned adoption of its Preferred Share Purchase
Rights, BJI will designate and reserve for issuance upon exercise of such
Rights shares of Series A Preferred Stock. See "--Preferred Share Purchase
Rights" below. Although BJI has no intention at the present time of doing so,
it could issue another series of Preferred Stock that could, depending on the
terms of such series, either impede or facilitate the completion of a merger,
tender offer or other takeover attempt. The BJI Board is not expected to seek
stockholder approval prior to any issuance of authorized capital stock,
including Preferred Stock, unless

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otherwise required by law or stock exchange rules. Frequently, opportunities
arise that require prompt action, and the Waban Board believes that the delay
occasioned by seeking stockholder approval of a specific issuance could be
detrimental to BJI and its stockholders.

The provisions of the BJI Certificate and the BJI By-laws described above
pertaining to the classification of the BJI Board, the number, removal and
nomination of directors, the filling of vacancies on the BJI Board,
stockholder action by written consent, special meetings of stockholders and
the related amendment provisions will be made subject to the provisions of any
series of Preferred Stock or any other securities of BJI with respect to the
election of directors upon specified circumstances or the voting of such
securities, as the case may be.

CERTAIN RELATED PROVISIONS OF DELAWARE LAW

Under Section 203 of the Delaware General Corporation Law, a corporation is
prohibited from engaging in a business combination (as defined in said Section
203) with any Interested Stockholder (defined to include any person or group
owning more than 15% of the corporation's outstanding voting stock) for a
period of three years following the time such person or group became an
Interested Stockholder. This prohibition does not apply if (i) prior to such
time, the corporation's Board of Directors approved either the pertinent
business combination or the transaction in which the Interested Stockholder
became such, (ii) upon consummation of the transaction which resulted in such
person or group first becoming an Interested Stockholder, such Interested
Stockholder owned at least 85% of the corporation's voting stock outstanding
at the time the transaction commenced (excluding, in the calculation of such
85% ownership level, shares owned by persons who are both officers and
directors and shares owned by employee benefit plans under which participants
do not have the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer) or
(iii) subsequent to such time, the pertinent business combination is approved
by the corporation's Board of Directors and holders of at least two-thirds of
the corporation's voting stock not owned by the Interested Stockholder voting
at an annual or special stockholders' meeting. Any such special stockholders'
meeting could only be called in the manner described above under "--
Stockholder Action by Written Consents; Special Meetings." In addition,
subject to certain notice and related timing requirements, business
combinations consisting of (x) mergers or consolidations requiring stockholder
approval, (y) certain asset sales or related transactions and (z) tender or
exchange offers for more than 50% of the corporation's voting stock are
permitted where such business combination (i) is with a person or group which
either was not an Interested Stockholder during the preceding three years or
which became such with the approval of the corporation's Board of Directors
and (ii) is approved (or not opposed) by a majority of the disinterested
directors (as defined in said Section 203).

Delaware law provides certain procedures for a corporation to elect not to
be covered by Section 203. BJI will not seek to adopt any procedure opting out
of Section 203 prior to the Distribution, and, consequently, absent such an
election in the future, any business combination involving an Interested
Stockholder must comply with these provisions of Delaware law. Following the
Distribution Date, any future election to opt out of Section 203 can be
effected only by an amendment to the BJI Certificate or the BJI By-laws. Any
such election would not be effective for a period of 12 months following the
date of adoption of such amendment and would not apply to a business
combination with any Interested Stockholder who became such prior to such date
of adoption.

INDEMNIFICATION AND INSURANCE

Under Delaware law, directors and officers of BJI, as well as other
employees and individuals, may be indemnified against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation (a "derivative action")) if they acted in good faith
in a manner they reasonably believed to be in or not opposed to the best
interests of BJI, and, with respect to any criminal action or proceeding had
no reasonable cause to believe their conduct was unlawful. A similar standard
of care is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) incurred
in connection with defense or settlement of such actions and Delaware law
requires court approval before there can be any indemnification where the
person seeking indemnification has been found liable to BJI.

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The BJI Certificate will provide that each person who was or is made a party
to, or is involved in, any threatened, pending or completed action, suit,
proceeding or claim by reason of the fact that he or she is or was a director
or officer of BJI (or if such person is or was serving at the request of BJI
as a director, officer, employee or agent for any other entity) shall be
indemnified and held harmless by BJI, to the full extent authorized by
Delaware law, as in effect from time to time, against all expenses (including
attorneys' fees), judgments, fines, penalties and amounts to be paid in
settlement incurred by such person in connection with the investigation,
preparation to defend or defense of such action, suit, proceeding or claim.

The rights to indemnification and the payment of expenses to be provided by
the BJI Certificate do not apply to any action, suit, proceeding or claim
initiated by or on behalf of a person otherwise entitled to the benefit of
such provisions. Any person seeking indemnification under the BJI Certificate
shall be deemed to have met the standard of conduct required for such
indemnification unless the contrary shall be established. The BJI Certificate
will provide that the rights to indemnification and the payment of expenses
provided thereby shall not be exclusive of any other right which any person
may have or acquire under any statute, provision of the BJI Certificate or BJI
By-laws, or otherwise. Any repeal or modification of such indemnification
provisions shall not adversely affect any right or protection of a director or
officer with respect to any acts or omissions of such director or officer
occurring prior to such repeal or modification.

BJI will also enter into indemnification agreements with each of its
directors and officers. See "Management of BJI--Indemnification Agreements."

BJI is expected to maintain insurance, at its expense, to protect itself and
any of its directors, officers, employees or agents covered thereby against
any expense, liability or loss, whether or not BJI would have the power to
indemnify such person against such expense, liability or loss under the
Delaware law, so long as such insurance is available at reasonable rates.

ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES

Consistent with applicable provisions of Delaware law, the BJI Certificate
will limit a director's monetary liability to BJI or its stockholders for
breach of fiduciary duty, except for situations entailing bad faith,
intentional misconduct, a knowing violation of law, unlawful dividend payments
or stock purchases or redemptions, acquisition of improper personal benefit or
breach of duty of loyalty. Future amendments to such provisions of Delaware
law will automatically be applied to BJI without any requirement of
stockholder approval. Consequently, such amendments could result in the
expansion of directors' protections under such exculpation provisions without
additional consideration by stockholders. As a result of inclusion of this
provision, stockholders may be unable to recover monetary damages against
directors for actions which constitute negligence or gross negligence or which
are in violation of their fiduciary duties, although it may be possible to
obtain injunctive or other equitable relief with respect to such actions. If
equitable remedies are found not to be available to stockholders for any
particular case, stockholders may not have any effective remedy against the
challenged conduct. Thus, directors will have a personal stake, at the
potential expense of stockholders, in such exculpation provisions of the BJI
Certificate. Such exculpation provisions would not limit directors' liability
for violation of the federal securities laws. Such provisions will not apply
to officers who are not directors of BJI.

PREFERRED SHARE PURCHASE RIGHTS

The BJI Board is expected to authorize a Rights Plan, pursuant to which one
preferred share purchase right (a "Right") will be distributed together with
and will attach to each share of BJI Common Stock to be distributed in the
Distribution. The Rights will expire on , unless earlier redeemed or
exchanged. Each Right entitles the holder to purchase one one-thousandth of a
share of Series A Preferred Stock of BJI at an exercise price of $ per
Right (subject to adjustment). The Rights will be exercisable only if a person
or group has acquired beneficial ownership of 20% or more of the outstanding
BJI Common Stock or announces a tender or exchange offer that would result in
such person or group owning 30% or more of the BJI Common Stock. Such
percentages may, in the Board's discretion, be lowered, although in no event
below 10%. If any person becomes the

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beneficial owner of 20% or more of the shares of BJI Common Stock (an
"Acquiring Person"), except pursuant to a tender or exchange offer for all
shares at a fair price as determined by the outside members of the BJI Board,
each Right not owned by such Acquiring Person will enable its holder to
purchase that number of shares of the BJI Common Stock which equals the
exercise price of the right divided by one-half of the current market price of
the BJI Common Stock at the date of the occurrence of the event. In addition,
if, after a person or group has become an Acquiring Person, BJI is involved in
a merger or other business combination transaction with another person or
group in which it is not the surviving corporation or in connection with which
the BJI Common Stock is changed or converted, or it sells or transfers 50% or
more of its assets or earning power to another person, each Right that has not
previously been exercised will entitle its holder to purchase that number of
shares of common stock of such other person which equals the exercise price of
the Right divided by one-half of the current market price of such common stock
at the date of the occurrence of the event. BJI will generally be entitled to
redeem the Rights at $.01 per Right at any time until the 10th day following
public announcement that a person or group has become an Acquiring Person.

The Series A Preferred Stock purchasable upon exercise of the Rights will
not be redeemable. Subject to the rights of holders of any shares of any
Preferred Stock ranking prior and superior to the Series A Preferred Stock,
each share of Series A Preferred Stock will be entitled to a preferential
quarterly dividend payment of the greater of (a) $1.00 per share or (b) an
aggregate dividend of 1,000 times the dividend declared per share of BJI
Common Stock. In the event of liquidation, the holders of the Series A
Preferred Stock will be entitled to a minimum preferential liquidation payment
of $100 per share and will be entitled to an aggregate payment of 1,000 times
the payment made per share of BJI Common Stock. Each share of Series A
Preferred Stock will have 1,000 votes, voting together with the BJI Common
Stock. Finally, in the event of any merger, consolidation or other transaction
in which BJI Common Stock is exchanged, each share of Series A Preferred Stock
will be entitled to receive 1,000 times the amount received per share of BJI
Common Stock. These rights are protected by customary antidilution provisions.

Because of the nature of the Series A Preferred Stock's dividend,
liquidation and voting rights, the value of one one-thousandth of a share of
Series A Preferred Stock purchasable upon exercise of the Right associated
with each share of BJI Common Stock should approximate the value of one share
of BJI Common Stock.

Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of BJI, including without limitation the right to vote or
receive dividends.

The Rights are designed to protect stockholders of BJI in the event of
unsolicited offers to acquire BJI and other coercive takeover tactics. The
Rights may cause substantial dilution to a person or group that attempts to
acquire BJI on terms not approved by the BJI Board, and therefore may render
an unsolicited takeover of BJI more difficult or less likely to occur.
However, the Rights should not interfere with any merger or other business
combination approved by the BJI Board since the Rights may be redeemed by BJI
at $.01 per Right prior to the tenth day after the public announcement that a
person or group has become an Acquiring Person.

PROPOSAL TWO

APPROVAL OF AMENDMENT TO THE WABAN CERTIFICATE OF INCORPORATION

Approval of the Distribution Proposals will also constitute approval of an
amendment to the Certificate of Incorporation of Waban which would change the
name of Waban Inc. to "HomeBase, Inc.", effective only if the Distribution
occurs (the "Name Change"). Even if the Distribution Proposal is approved by
stockholders, the Waban Board may determine not to file the amendment to the
Waban Certificate reflecting the Name Change, including if further
investigation reveals that "HomeBase, Inc." may not be reasonably available
for use by Waban. In such case, Waban intends to propose an alternative name
change for a vote by the stockholders of Waban at the next annual meeting of
stockholders.

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PROPOSAL THREE

APPROVAL OF AMENDMENT TO THE WABAN 1989 STOCK INCENTIVE PLAN

Approval of the Distribution Proposals will also constitute approval of an
amendment to Waban's 1989 Stock Incentive Plan (the "Waban Stock Incentive
Plan") increasing the maximum number of shares of Common Stock issuable under
the Waban Stock Incentive Plan from 5,750,000 to 7,750,000. Stockholder
approval of the additional 2,000,000 shares is being sought in part to provide
the increased number of shares required in connection with the proportionate
adjustment to be made to currently outstanding options under the Waban Stock
Incentive Plan as a result of the Distribution. See "Management of HomeBase--
Incentive and Other Plans."

As of October 26, 1996, options and stock-based awards had been granted
under the Waban Stock Incentive Plan with respect to an aggregate of 4,214,526
shares (net of cancellations and forfeitures) and 1,535,474 shares remained
available for future grants under the Waban Stock Incentive Plan. Waban
believes the 2,000,000 additional shares, together with those which currently
remain available for grant and those which will become available for grant as
a result of the termination of outstanding options currently held by persons
who do not continue as employees of Waban after the Distribution, should
provide a sufficient number of shares to enable option and other awards to be
granted through the life of the Waban Stock Incentive Plan, which currently
expires on June 14, 1999. The following persons are expected to be eligible to
participate in the Waban Stock Incentive Plan immediately following the
Distribution: five executive officers and approximately 200 other key
employees of HomeBase.

DESCRIPTION OF THE WABAN STOCK INCENTIVE PLAN

The Waban Stock Incentive Plan permits the granting of a variety of stock
and stock-based awards to officers and key employees of Waban and its
subsidiaries, including: stock options; restricted and unrestricted shares;
rights to receive cash or shares on a deferred basis or based on performance;
rights to receive cash or shares in respect of increases in the value of
Common Stock; cash payments sufficient to offset the federal ordinary income
taxes of participants resulting from transactions under the Waban Stock
Incentive Plan; loans to participants in connection with awards; and other
Common Stock-based awards, including the sale or award of convertible
securities, that meet the requirements of the Waban Stock Incentive Plan. The
Waban Stock Incentive Plan also provides that option holders may, unless
otherwise provided at the time of grant, surrender outstanding options in
exchange for a cash payment during the 60-day period following a Change of
Control of Waban (as defined in the Waban Stock Incentive Plan).

The Waban Stock Incentive Plan is administered by the Executive Compensation
Committee. The Executive Compensation Committee has full power to select, from
among the employees eligible for awards, the individuals to whom awards will
be granted, to make any combination of awards to any participants and to
determine the specific terms of each grant, subject to the provisions of the
Waban Stock Incentive Plan.

Subject to adjustment for stock splits and similar events, currently a total
of 5,750,000 shares of Common Stock may be issued under the Waban Stock
Incentive Plan. The Waban Stock Incentive Plan also permits the issuance of
securities convertible into Common Stock, including a maximum of 500,000
shares of preferred stock of Waban. Awards and shares which are forfeited,
reacquired by Waban or satisfied by a cash payment or otherwise without the
issuance of Common Stock are not counted toward this limitation. Shares
delivered under awards in substitution for awards held by employees of
companies or businesses acquired by Waban or its subsidiaries are in addition
to the maximum number of shares authorized under the Waban Stock Incentive
Plan to the extent that the substitute awards (i) are granted to persons whose
relationship to Waban does not make (and is not expected to make) them subject
to Section 16(b) of the Exchange Act and (ii) are granted in substitution for
awards issued under a plan approved, to the extent then required under Rule
16b-3 under the Exchange Act, by the stockholders of the predecessor entity.

The Executive Compensation Committee is required to make appropriate
adjustments in connection with outstanding awards to reflect stock dividends,
stock splits and similar events. In the event of a merger, liquidation or
similar event, the Committee may provide for substitution or adjustments or
may accelerate or, upon payment

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or other consideration for the vested portion of any awards as the Executive
Compensation Committee deems equitable, terminate such awards (subject to the
provisions described under "Change of Control" below). The Board of Directors
may at any time amend or discontinue the Waban Stock Incentive Plan and the
Executive Compensation Committee may at any time amend or cancel awards (or
provide substitute awards or reduced exercise or purchase prices, including
lower-priced awards upon the termination of any then outstanding awards) and
may accelerate awards and waive conditions and restrictions on any awards to
the extent it may determine to be appropriate. However, no such action may
adversely affect any rights under outstanding awards without the holder's
consent. Moreover, any amendment that would cause the Waban Stock Incentive
Plan to fail to satisfy any then applicable incentive stock option rules under
the Code shall be ineffective unless approved by the stockholders.

Persons eligible to participate in the Waban Stock Incentive Plan are those
full- or part-time officers and other key employees of Waban or its
subsidiaries who are responsible for or contribute to the management, growth
or profitability of the business of Waban, as selected from time to time by
the Executive Compensation Committee. Persons who are not employees of Waban
or a parent or subsidiary (as those terms are used in Section 422 of the Code)
are not eligible to receive grants of incentive options, as defined below. The
Waban Stock Incentive Plan limits the terms of awards to ten years (ten years
and one day in the case of non-statutory options, as defined below) and
currently prohibits the granting of awards after June 14, 1999.

Stock Options. The Waban Stock Incentive Plan permits the granting of non-
transferable stock options to acquire Common Stock that qualify as incentive
stock options ("incentive options") under Section 422 of the Code and non-
transferable stock options that do not so qualify ("non-statutory options").
The Executive Compensation Committee may provide that, upon exercise of an
option, the participant will receive shares of Restricted Stock or Deferred
Stock awards (see below). The exercise price of each option is determined by
the Executive Compensation Committee, but may not be less than 100% of the
fair market value of the shares on the date of grant.

The Executive Compensation Committee determines the term of each option and
at what time or times each option may be exercised, and the exercisability of
options may be accelerated by the Executive Compensation Committee. In the
event of termination of employment by reason of normal retirement, disability
or death, an option may thereafter be exercised (to the extent it was then
exercisable) for a period of three years, or such shorter period as may be
specified by the Executive Compensation Committee at the time of grant,
subject to the stated term of the option. In the event of termination of
employment for any reason other than normal retirement, disability or death,
an option may thereafter be exercised, to the extent then exercisable, for
three months (or such longer period of up to three years as the Executive
Compensation Committee determines at or after the grant date) following
termination, subject to the stated term of the option. However, options cease
to be exercisable upon termination for Cause (as defined in the Waban Stock
Incentive Plan).

Stock Appreciation Rights. The Executive Compensation Committee may grant
non-transferable stock appreciation rights entitling the holder upon exercise
to receive an amount, in any combination of cash or shares of unrestricted
Common Stock, Restricted Stock or Deferred Stock awards, not greater in value
than the increase since the date of grant in the value of the shares covered
by such right. Stock appreciation rights may be granted separately from or in
tandem with the grant of an option. In addition, the Executive Compensation
Committee may determine, if so requested by an option holder, that Waban will
pay the optionee, in cancellation of an option not accompanied by a related
stock appreciation right, any combination of cash, unrestricted Common Stock,
Restricted Stock or Deferred Stock awards not greater in value than the
increase since the date of grant in the value of the shares covered by the
option.

The exercise value of a stock appreciation right is generally determined by
reference to the closing sale price of Common Stock on the date of exercise.
However, the Executive Compensation Committee may establish, by rule of
general application, a uniform method of determining an exercise value of any
rights exercised or requests honored with respect to officers of Waban subject
to Section 16(b) of the Exchange Act who are able to exercise such rights only
during certain limited periods, not in excess of the highest closing sale

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price of Common Stock reported on the New York Stock Exchange Composite
Transactions Index during such period.

Restricted Stock and Unrestricted Stock. The Executive Compensation
Committee may award shares of Common Stock subject to such conditions and
restrictions (including vesting) as the Committee may determine ("Restricted
Stock"). The purchase price, if any, of shares of Restricted Stock may not
exceed the par value of those shares.

The Executive Compensation Committee may at any time waive such
restrictions, including through accelerated vesting. Shares of Restricted
Stock are non-transferable and if a participant who holds shares of Restricted
Stock terminates employment for any reason (including death) prior to the
lapse or waiver of the restrictions, Waban may require the forfeiture of or
repurchase the shares. A holder of Restricted Stock has all rights of a
stockholder with respect to such stock, subject only to conditions and
restrictions generally applicable to Restricted Stock or specifically set
forth in the Restricted Stock award agreement.

The Executive Compensation Committee may grant shares (at no cost or for a
purchase price equal to par value or less) which are free from any
restrictions under the Waban Stock Incentive Plan ("Unrestricted Stock").

Deferred Stock. The Executive Compensation Committee may make Deferred Stock
awards under the Waban Stock Incentive Plan. These are non-transferable awards
entitling the recipient to receive shares of Common Stock without any payment
in one or more installments at a future date or dates. Receipt of Deferred
Stock may be conditioned on such matters as the Executive Compensation
Committee shall determine, including continued employment or attainment of
performance goals. Except as otherwise determined by the Executive
Compensation Committee prior thereto, all such rights terminate upon the
participant's termination of employment.

Performance Units. The Executive Compensation Committee may award non-
transferable Performance Units entitling the recipient to receive shares of
Common Stock or cash in such combinations as the Executive Compensation
Committee may determine. Payment of the award may be conditioned on
achievement of specified performance goals over a fixed or determinable period
and such other conditions as the Executive Compensation Committee may
determine. Except as otherwise determined by the Executive Compensation
Committee prior thereto, rights under a Performance Unit award terminate upon
a participant's termination of employment.

Other Stock-Based Awards. The Executive Compensation Committee may grant
other types of awards of, or based on, Common Stock ("Other Stock-Based
Awards"). Such awards may include securities convertible into or exchangeable
for shares of Common Stock upon such conditions, including attainment of
performance goals, as the Executive Compensation Committee may determine.
Convertible securities offered under Other Stock-Based Awards may be
convertible debt or shares, not exceeding in the aggregate 500,000 shares, of
convertible preferred stock.

The Executive Compensation Committee may determine the amount and form of
consideration, if any, payable upon the issuance or exercise of Other Stock-
Based Awards. However, Common Stock must be issued (including upon conversion,
exchange or otherwise) either as bonus stock or for a price equal to at least
50% of its fair market value on the grant or the effective date (or conversion
or exchange date), and securities convertible into Common Stock must be issued
as a bonus or for a price equal to at least 50% of their fair market value on
the grant or issuance date. The Executive Compensation Committee may prescribe
limitations or conditions requiring forfeiture by the participant, or
permitting repurchase by Waban, of Other Stock-Based Awards or related Common
Stock or securities, and may at any time accelerate or waive any such
limitations or conditions. The recipient of an Other Stock-Based Award will
have rights of a stockholder to the extent, if any, specified by the Executive
Compensation Committee in the Other Stock-Based Award agreement.

Supplemental Grants. The Executive Compensation Committee may authorize
loans from Waban in connection with awards granted or exercised under the
Waban Stock Incentive Plan. Loans may be for up to ten

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years, may be secured or unsecured and may be with or without recourse against
the participant. Each loan shall be subject to such additional terms and
conditions and shall bear such rate of interest, if any, as the Executive
Compensation Committee shall determine. However, the amount of any loan may
not exceed the total exercise or purchase price plus an amount equal to the
cash payment which could have been paid to the borrower in respect of taxes as
described in the next paragraph.

The Executive Compensation Committee may at any time grant to a participant
the right to receive a cash payment in connection with taxable events
(including the lapse of restrictions) under grants or awards. The amount of
such payment is determined in relation to the taxable amount recognized in
respect of such other grant or award, based on the maximum marginal federal
tax rate (or such lower rate as the Executive Compensation Committee may
determine) in effect at the time such taxable income is recognized. The amount
of any such payment may be up to but may not exceed the amount estimated to be
necessary to cover the federal income tax so calculated as due with respect to
such other grant or award and with respect to the cash payment itself.

Dividends and Deferrals. The Executive Compensation Committee may require or
permit the immediate payment or the waiver, deferral or investment of
dividends paid on awards under the Waban Stock Incentive Plan and amounts
equal to dividends which would have been paid if shares subject to an award
had been outstanding, and may permit participants to make elections to defer
receipt of benefits under the Waban Stock Incentive Plan. The Executive
Compensation Committee may also provide for the accrual of interest or
dividends on amounts deferred under the Waban Stock Incentive Plan on such
terms as the Executive Compensation Committee may determine.

Change of Control. The Waban Stock Incentive Plan provides that, in the
event of a Change of Control of Waban, unless otherwise expressly provided at
the time of grant, all stock options and stock appreciation rights will become
immediately exercisable. Restrictions and conditions on other awards will
automatically be deemed satisfied to the extent that the Executive
Compensation Committee may determine (whether at or after the time of grant).
The definition of Change of Control, however, provides that, unless otherwise
determined by the Executive Compensation Committee, a transaction shall not be
deemed to be a Change of Control with respect to a participant if the
participant takes part in the transaction (within the meaning of the
definition).

Also in the event of a Change of Control, during the 60-day period following
such Change of Control each optionholder (other than the holder of an option
as to whom the Executive Compensation Committee determined at the time of
grant that the rights described below would not apply, and other than any
optionholder who initiates the Change of Control or who participates in the
transaction in the manner specified in the definition of Change of Control)
may, upon notice to Waban, surrender outstanding options to Waban in exchange
for a cash payment equal to the excess of the fair market value (subject to
the special rule for non-statutory options described below) on the date of
surrender of the shares subject to the option over the aggregate exercise
price. Persons subject to Section 16(b) of the Exchange Act must have held
such options for at least six months prior to surrender. In addition, except
as otherwise provided by the Executive Compensation Committee, the
availability to persons subject to Section 16(b) of the Exchange Act of this
right to surrender options for cash upon a Change of Control is conditioned on
the receipt of a favorable interpretive letter of the staff of the Securities
and Exchange Commission with respect to this right. For purposes of the
surrender of non-statutory options, "fair market value" means the highest
reported sales price, regular way, of a share of Common Stock on the New York
Stock Exchange Composite Transactions Index during the 60-day period prior to
the Change of Control or, if higher (in the case of a Change of Control
occurring by reason of certain acquisitions), the highest per share price paid
or reported in connection with such acquisition.

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The granting of awards under the Waban Stock Incentive Plan is
discretionary, and Waban cannot now determine the number or type of awards to
be granted in the future to any particular person or group. The following
table sets forth the benefits received by the Named HomeBase Officers and the
indicated groups under the Waban Stock Incentive Plan during fiscal 1995:

NEW PLAN BENEFITS

<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION(1) VALUES(2) OF SHARES
-------------------- --------- ---------
<S> <C> <C>
Herbert J. Zarkin, Chairman of the Board................... $ 0 100,000
Allan P. Sherman, President and Chief Executive Officer.... 0 50,000
Thomas F. Gallagher, Executive Vice President, Store Opera-
tions..................................................... -- --
Scott Richards, Executive Vice President, Merchandising.... -- --
Willliam B. Langsdorf, Senior Vice President and Chief Fi-
nancial Officer........................................... -- --
HomeBase Executive Officers, as a Group.................... 0 150,000
HomeBase Non-Executive Officer Directors, as a Group(3).... -- --
HomeBase Non-Executive Officer Employees, as a Group(3).... 19,000 9,500
</TABLE>
- --------
(1) The amounts in this table reflect benefits under the Waban Stock Incentive
Plan granted during fiscal 1995. In addition, the following stock option
awards were made under the Waban Stock Incentive Plan during fiscal 1996:
Mr. Zarkin, 250,000 shares; Mr. Sherman, 20,000 shares; Mr. Gallagher,
15,000 shares; Mr. Richards, 13,000 shares; Mr. Langsdorf, 4,000 shares;
HomeBase Executive Officers, as a group, 302,000 shares; and HomeBase Non-
Executive Officer Employees, as a group, 168,075 shares. In addition, in
fiscal 1996 Mr. Gallagher was granted 6,000 shares of restricted stock at
zero cost and Mr. Richards was granted 5,000 shares of restricted stock at
zero cost and 11,000 shares of restricted stock were granted to HomeBase
Non-Executive Officer Employees at zero cost. Since the granting of awards
is discretionary, Waban cannot now determine the number or type of awards
to be granted in the future under the plan.
(2) Represents the difference between the exercise price per share payable by
the indicated person and the fair market value of the Common Stock on the
date of grant for stock options and, for restricted stock, represents the
market price on the date of grant.
(3) Excludes options to purchase 40,000 shares granted in 1995 and 70,000
shares granted in 1996 to Mr. Weisberger in his capacity as an executive
officer of Waban.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion is for general information only and does not
purport to be a complete description of federal tax aspects of the Stock
Incentive Plan.

Incentive Options. The grant of an incentive option does not produce taxable
income to the optionee or a deduction to Waban. If an incentive option is
exercised while the optionee is employed or within three months following the
termination of employment (twelve months in the case of termination of
employment because of permanent disability), or after the optionee's death if
death occurs during the foregoing periods, exercise of the option will in
general also not produce taxable ordinary income to the optionee or a
deduction to Waban. For alternative minimum tax purposes, however, such
exercise will increase the optionee's "alternative minimum taxable income" and
may result in a liability to pay the alternative minimum tax.

If an incentive option is exercised other than as described above, the tax
consequences will be the same as those described below for non-statutory
options. Also, to the extent that the aggregate fair market value of the stock
(determined at time of grant) with respect to which incentive options granted
under all option plans of Waban and its subsidiary corporations are
exercisable for the first time by an individual during any calendar year
exceeds $100,000, such options will be treated as non-statutory stock options.

If stock acquired upon the exercise of an incentive option is not disposed
of within two years from the date the option is granted or within one year
after the date the option is exercised, gain or loss recognized upon
disposition of the stock will be capital gain or loss. If these one-year and
two-year holding period requirements

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are not satisfied, the participant will realize ordinary income at the time of
disposition of the stock. (A disposition giving rise to such ordinary income
is referred to as "disqualifying disposition".) Upon a disqualifying
disposition, a participant will generally realize ordinary income equal to the
difference between fair market value of the stock on the date of exercise and
the exercise price, and Waban will be entitled to a deduction equal to such
amount. Any additional gain recognized in the disposition will be a capital
gain for which no deduction will be available. If the disqualifying
disposition is a sale or exchange with respect to which loss (if sustained)
would be recognized, then the amount of ordinary income realized upon the
disqualifying disposition (and the amount of Waban's deduction) will not
exceed the excess of the amount realized on such sale or exchange over the
adjusted basis of the stock.

If a participant exercises an incentive option in whole or in part by
surrendering previously acquired stock, no gain or loss is recognized on the
exchange of the previously acquired shares unless the exchange results in a
disqualifying disposition of the shares surrendered. Such a disqualifying
disposition may result in the realization of ordinary income.

Non-Statutory Options. The grant of a non-statutory option does not produce
taxable income to the optionee or a deduction to Waban. A participant
exercising a non-statutory option realizes ordinary income in the amount of
the difference between the exercise price and the then market value of the
shares, and Waban is entitled to a corresponding deduction (subject to any
withholding or reporting requirements). If a participant exercises a non-
statutory option by surrendering previously acquired stock, no gain or loss is
recognized on the exchange for an equivalent number of new shares. The
participant will realize ordinary income, and Waban will be entitled to a
corresponding deduction (subject to any withholding or reporting
requirements), in general equal to the fair market value of any new shares
received in excess of the number of previously acquired shares surrendered in
the exchange.

Surrender of Options. If an individual surrenders all or any portion of an
option in exchange for cash or stock, the individual realizes ordinary income
subject to withholding (and Waban is in general entitled to a deduction) equal
to the amount of cash and the fair market value of the stock received.

Stock Appreciation Rights. No income is realized by an individual in
connection with the grant of a stock appreciation right. A participant
exercising a stock appreciation right realizes ordinary income subject to
withholding (and Waban is entitled to a corresponding deduction) equal to the
amount of cash and the fair market value of any shares received.

Restricted Stock. In general, an award of Restricted Stock under the Waban
Stock Incentive Plan will result in ordinary income to the employee only if,
and when, the shares of Restricted Stock become transferable or are no longer
subject to a substantial risk of forfeiture. Notwithstanding these general
rules, an employee may elect under Section 83(b) of the Code to recognize
immediately the ordinary income associated with an award of Restricted Stock.
In any case, the ordinary income will equal the excess of the fair market
value of the shares of Restricted Stock, determined as of the date the income
with respect to such shares is recognized, over the price (if any) paid. Waban
will in general be entitled to a deduction equal to the amount of the ordinary
income, if any, subject to the limitations of Section 162(m) of the Code,
recognized by the employee in respect of the transfer of shares of Restricted
Stock. If any employee who has elected immediate recognition under Section
83(b) of the Code subsequently forfeits such shares, he or she will be
entitled to a capital loss equal to the excess, if any, of the amount of the
adjusted basis of the stock over any refund of the purchase price paid to the
employee upon the forfeiture. An employee selling shares after forfeiture
restrictions have lapsed or been removed will recognize capital gain or loss
equal to the difference between the ordinary income previously recognized
(plus any amount paid for the shares) and the amount received upon sale. If
Restricted Stock is received in connection with another award under the Stock
Incentive Plan, the ordinary income and the deduction, if any, associated with
such award may be deferred in accordance with the rules described above for
Restricted Stock.

Deferred Stock. An employee granted an award of Deferred Stock will not
realize income upon grant, nor will Waban be entitled to any deduction at that
time. The employee will generally recognize ordinary income

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(and Waban will be entitled to a deduction, subject to the limitations of
Section 162(m) of the Code) equal to the fair market value of the shares upon
the transfer of shares to the employee at the expiration of the last
applicable deferral period. Amounts paid to an employee in respect of Deferred
Stock prior to such transfer, and dividends paid on shares of Deferred Stock
after such transfer, will be taxable as ordinary income to the employee. Waban
will in general be entitled to a deduction for any amounts paid in respect of
awarded shares prior to such transfer. Upon a sale of such shares, the
employee will recognize capital gain or loss equal to the difference between
the ordinary income previously recognized in respect of the transfer of the
shares to the employee and the amount received upon sale. If a right to
Deferred Stock is received under another award under the Waban Stock Incentive
Plan (for example, upon exercise of an option), the ordinary income and the
deduction, if any, associated with such award may be deferred as described
above for Deferred Stock.

Other Stock-Based Awards. The tax consequences associated with Stock-Based
Awards under the Stock Incentive Plan other than those specifically described
above, will, in general, be as follows:

Prior to the receipt of shares by an employee, the employee will recognize
no income and Waban will not be entitled to a deduction. Upon such receipt, or
if later, when the shares become transferable or are no longer subject to a
substantial risk of forfeiture, the employee will realize ordinary income (and
Waban will in general be entitled to a deduction, subject to the limitations
of Section 162(m) of the Code) equal to the excess of the fair market value of
the shares at such time over any amount paid for the shares. If shares at the
time of receipt are subject to a substantial risk of forfeiture and are non-
transferable, the employee may elect, at the time of receipt, under Section
83(b) of the Code, to have the ordinary income in respect of the receipt
recognized and measured at the time of receipt. (If such shares are
subsequently forfeited, the employee will be entitled to a capital loss equal
to the excess, if any, of the amount of the adjusted basis of the stock over
the amount received upon forfeiture.)

Upon a sale of shares received under an Other Stock-Based Award, the
difference between the amount of ordinary income previously realized in
respect of such shares (plus any amount paid for the shares) and the amount
received in the sale will be a capital gain or loss. If cash is transferred to
the employee under an Other Stock-Based Award, the employee will include as
ordinary income at the time of receipt the full amount of cash received.

It is unclear how the receipt of convertible securities under the Waban
Stock Incentive Plan will be treated for federal tax purposes. The tax
consequences will depend in part on whether, under the law at the time of the
receipt, the receipt is deemed to involve an option and, if so, whether the
option element has a readily ascertainable fair market value. If the
convertible security is analyzed for tax purposes as a single unit of
property, rather than property having a separate option feature, or if the
option feature is deemed to have a readily ascertainable fair market value,
then the employee will realize ordinary income (and Waban will in general be
entitled to a deduction), at the time of receipt of the security equal to the
fair market value at that time (except that if the security is not
transferable and is subject to a substantial risk of forfeiture, income will
be recognized and a deduction will generally be available to Waban at such
later time as the security becomes transferable or the relevant restrictions
lapse unless immediate recognition is elected under Section 83(b) of the
Code). If the convertible security is analyzed for tax purposes as a single
unit of property, the subsequent exercise of the conversion feature will not
result in the recognition of income. On the other hand, if the security is
viewed under applicable tax principles as consisting in part of property and
in part of an option without a readily ascertainable fair market value, no
income will be recognized by the employee in respect of the option element
until conversion of the security at which time the employee will be treated
for tax purposes as if he or she had exercised a non-statutory option.

Supplemental Grants. In general, bona fide loans made under the Waban Stock
Incentive Plan will not result in taxable income to the recipient or in a
deduction to Waban. However, any such loan made at a rate of interest lower
than certain rates specified under the Code may result in the difference being
included in the borrower's income. Forgiveness of all or a portion of a loan
will also result in income to the borrower and a deduction for Waban, subject
to the limitations of Section 162(m) of the Code. In general, interest paid on
loans

103
<PAGE>

under the Waban Stock Incentive Plan will be deductible only if it constitutes
"investment interest", and the deductibility of investment interest will in
general be limited by the borrower's investment income. If outright cash
grants are given in order to facilitate the payment of award-related taxes,
the grants will be included as ordinary income by the recipient at the time of
receipt and will in general be deductible by Waban.

Payments in Respect of Change of Control. The Waban Stock Incentive Plan
provides for acceleration or payment of awards and related stock in the event
of a Change of Control, as defined in the Waban Stock Incentive Plan. Under
the Code's so-called "parachute payment" rules, if a "disqualified individual"
receives or is deemed to have received compensation, contingent on a Change of
Control, in an amount equal to or greater than three times his or her average
compensation for the five years preceding the year in which the Change of
Control occurs, the excess received (or deemed to have been received) over the
five-year average base amount is treated as an "excess parachute payment".
Except to the extent it can be shown that such an "excess parachute payment"
involved reasonable compensation, such excess will be nondeductible to Waban
and its recipient will be subject to a 20 percent excise tax (in addition to
any other taxes).

REASONS FOR STOCKHOLDER APPROVAL

The Waban Stock Incentive Plan has been designed so that compensation
recognized as a result of awards granted under the plan will qualify as
performance-based compensation, and, accordingly, not be subject to the
deduction limit imposed by Section 162(m) of the Code. However, in order to
qualify as performance-based compensation, and thereby ensure the Federal tax
deductibility of all compensation recognized as a result of awards granted
under the plan, stockholder approval of the amendment to the plan at the
meeting is required.

104
<PAGE>

PROPOSAL FOUR

APPROVAL OF THE BJI 1997 STOCK INCENTIVE PLAN

Approval of the Distribution Proposals will also constitute approval of
BJI's 1997 Stock Incentive Plan.

DESCRIPTION OF THE BJI STOCK INCENTIVE PLAN

The principal provisions of the BJI Stock Incentive Plan are identical to
those of the Waban Stock Incentive Plan. See "Proposal Three: Approval of
Amendment to the Waban 1989 Stock Incentive Plan--Description of the Waban
Stock Incentive Plan."

Under the terms of the BJI Stock Incentive Plan, a maximum of 3,000,000
shares (subject to adjustment as provided in the plan) of authorized but
unissued BJI Common Stock will be reserved for issuance. To date, no awards
have been made under the BJI Stock Incentive Plan and it is not expected that
any awards will be made prior to the Distribution Date. The following persons
are expected to be eligible to participate in the BJI Stock Incentive Plan
immediately following the Distribution: seven executive officers and
approximately 200 other key employees of BJI.

The granting of awards under the BJI Stock Incentive Plan will be
discretionary, and other than with respect to the replacement awards to be
made effective as of the Distribution Date, Waban cannot now determine the
number or type of awards to be granted in the future to any particular person
or group. The following table sets forth the benefits received by the Named
BJI Officers and the indicated groups under the Waban Stock Incentive Plan,
which is similar to the BJI Stock Incentive Plan, during fiscal 1995.

NEW PLAN BENEFITS

<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUES(2) OF SHARES
----------------- --------- ---------
<S> <C> <C>
Herbert J. Zarkin, Chairman of the Board............. $ 0 100,000
John J. Nugent, President and Chief Executive Offi-
cer................................................. 0 50,000
Kenneth J. Kirwin, Senior Vice President, Food....... -- --
Laura J. Sen, Senior Vice President, General Merchan-
dise................................................ -- --
Michael T. Wedge, Senior Vice President, Sales Opera-
tions............................................... -- --
BJI Executive Officers, as a Group................... 0 150,000
BJI Non-Executive Officer Directors, as a Group(3)... -- --
BJI Non-Executive Officer Employees, as a Group(3)... 23,438 2,500
</TABLE>
- --------
(1) The amounts in this table reflect benefits under the Waban Stock Incentive
Plan granted during fiscal 1995. In addition, the following awards were
made under the Waban Stock Incentive Plan during fiscal 1996 (all in the
form of stock options): Mr. Zarkin, 250,000 shares; Mr. Nugent, 20,000
shares; Mr. Kirwin, 5,000 shares; Ms. Sen, 5,000 shares; Mr. Wedge, 5,000
shares; BJI Executive Officers, as a group, 296,000 shares; and BJI Non-
Executive Officer Employees, as a group, 184,500 shares. Since the
granting of awards is discretionary, Waban cannot now determine the number
or type of awards to be granted in the future under the BJI Stock
Incentive Plan.
(2) Represents the difference between the exercise price per share payable by
the indicated person and the fair market value of the Common Stock on the
date of grant for stock options and, for restricted stock, represents the
market price on the date of grant.
(3) Excludes options to purchase 40,000 shares granted in 1995 and 70,000
shares granted in 1996 to Mr. Weisberger in his capacity as an executive
officer of Waban.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

For federal income tax purposes, awards under the BJI Stock Incentive Plan
will be treated in the same manner as described above under "Proposal Three:
Approval of Amendment to the Waban 1989 Stock Incentive Plan--Certain Federal
Income Tax Consequences."

105
<PAGE>

REASONS FOR STOCKHOLDER APPROVAL

The BJI Stock Incentive Plan has been designed so that compensation
recognized as a result of awards granted under the plan will qualify as
performance-based compensation and, accordingly, not be subject to the
deduction limit imposed by Section 162(m) of the Code. However, in order to
qualify as performance-based compensation, and thereby ensure the Federal tax
deductibility of all compensation recognized as a result of awards granted
under the plan, stockholder approval of the plan at the meeting is required.

PROPOSAL FIVE

APPROVAL OF THE BJI MANAGEMENT INCENTIVE PLAN

Approval of the Distribution Proposals will also constitute approval of the
BJI Management Incentive Plan (the "BJI MIP"). The BJI MIP is intended to
provide executive officers and other key employees of BJI with cash incentive
awards, based upon the attainment of annual performance goals. The BJI MIP is
similar to the Waban Management Incentive Plan and will cover BJI's employees
currently covered by the Waban Management Incentive Plan.

DESCRIPTION OF BJI MANAGEMENT INCENTIVE PLAN

Key employees of BJI, as designated by the Executive Compensation Committee,
will be eligible to receive cash awards under the BJI MIP. The total number of
participants in the BJI MIP is expected to be approximately 400. The following
persons are expected to participate in the BJI MIP: (i) seven executive
officers, including the Named BJI Officers; and (ii) approximately 393 other
employees of the Company.

The features of the BJI MIP are summarized below, but the summary is
qualified in its entirety by reference to the BJI MIP itself, copies of which
may be obtained by making written request of Waban's Secretary.

At the commencement of the performance year (i.e., the fiscal year), the BJI
Executive Compensation Committee will establish performance goals and
corresponding target awards, based on one or more objective performance
criteria. Such goals, criteria and target awards may vary among participants.
The performance criteria are expected to be one or more of the following
objective measurements: operating income, pre-tax income, net income, gross
profit dollars, costs, any of the preceding measures as a percent of sales,
earnings per share, sales, return on equity, and return on investment.

Awards will be based upon the level of achievement of the pre-established
performance goals. Awards will be paid in cash as soon as practicable after
the performance year, except to the extent deferred under any deferred
compensation plan which may be adopted by BJI and applicable to the awards.
Under the BJI MIP, the Executive Compensation Committee may not make any
adjustments to the performance criteria to increase the incentive payment to
executive officers subject to Section 162(m) of the Code, except to make
appropriate adjustments in the event of certain specified types of
transactions; provided that in no case shall any such adjustment be made if it
would cause an award to no longer qualify as performance-based compensation
under Section 162(m) of the Code.

Under the BJI MIP, no participant may receive a cash award in excess of 100%
of the participant's annualized base salary as of the beginning of the
performance period.

106
<PAGE>

The granting of awards under the BJI MIP will be discretionary, and Waban
cannot now determine the nature of the awards to be granted in the future to
any particular person or group. The following table shows the amounts paid to
the Named BJI Officers and indicated groups for fiscal 1995 under the Waban
Management Incentive Plan. The performance goals under the Waban Management
Incentive Plan may differ from those which may be established from time to
time under the BJI MIP.

NEW PLAN BENEFITS
<TABLE>
<CAPTION>
DOLLAR
NAME AND POSITION VALUES
----------------- ----------
<S> <C>
Herbert J. Zarkin, Chairman of the Board....................... $ 171,285
John J. Nugent, President and Chief Executive Officer.......... 134,967
Kenneth J. Kirwin, Senior Vice President, Food................. 62,793
Laura J. Sen, Senior Vice President, General Merchandise....... 61,217
Michael T. Wedge, Senior Vice President, Sales Operations...... 57,447
BJI Executive Officers, as a Group............................. 551,649
BJI Non-Executive Officer Directors, as a Group(1)............. 0
BJI Non-Executive Officer Employees, as a Group................ 3,013,834
</TABLE>
- --------
(1)Excludes $40,567 awarded to Mr. Weisberger in his capacity as an executive
officer of Waban.

FEDERAL INCOME TAX CONSEQUENCES

When a cash award is paid, the participant will recognize ordinary income
equal to the amount paid, and BJI is expected to be entitled to a
corresponding deduction, subject to the requirements of the Code discussed in
"--Reasons for Stockholder Approval" below.

PLAN ADMINISTRATION AND TERMINATION

The Executive Compensation Committee shall have full power to administer and
interpret the BJI MIP and to establish rules for its administration.

The Executive Compensation Committee or the Board of Directors may amend,
suspend or terminate the BJI MIP at anytime.

REASONS FOR STOCKHOLDER APPROVAL

The BJI MIP has been designed so that cash awards made under the BJI MIP
will qualify as performance-based compensation, and, accordingly, not be
subject to the deduction limit imposed by Section 162(m) of the Code. However,
in order to qualify as performance-based compensation, and thereby ensure the
Federal tax deductibility of all cash awards under the BJI MIP, stockholder
approval of the BJI MIP at the Special Meeting is required.

PROPOSAL SIX

APPROVAL OF THE BJI GROWTH INCENTIVE PLAN

Approval of the Distribution Proposals will also constitute approval of the
BJI Growth Incentive Plan (the "BJI GIP"). The BJI GIP is intended to provide
high-level executives of BJI with cash awards, based upon the growth and
performance of BJI. The BJI GIP is designed to enhance the ability of BJI to
attract and retain individuals of exceptional managerial talent upon whom the
sustained progress, growth and profitability of BJI will depend. The BJI GIP
is similar to the Waban Growth Incentive Plan and will cover BJI's employees
currently covered by the Waban Growth Incentive Plan.

DESCRIPTION OF BJI GROWTH INCENTIVE PLAN

Employees in high-level management positions in BJI, as selected by the
Executive Compensation Committee, will be eligible to receive cash awards
under the BJI GIP. The total number of participants in the BJI GIP immediately
following the Distribution is expected to be 22. The following persons are
expected to participate in the BJI GIP: (i) seven executive officers,
including the Named BJI Officers, and (ii) approximately 15 non-executive
officer employees of BJI.

107
<PAGE>

The features of the BJI GIP are summarized below, but the summary is
qualified in its entirety by reference to the BJI GIP itself, copies of which
may be obtained by making written request of Waban's Secretary. It is
anticipated that awards granted under the Waban Growth Incentive Plan prior to
the Distribution will be replaced by awards under the BJI GIP for Waban
employees who become employees of BJI.

Each participant in the BJI GIP will be eligible to receive a cash award for
each award period, which is expected to consist of a certain number of fiscal
years. Each participant's cash award will correspond to BJI's level of
performance or growth during such award period. Such growth is determined by
and based upon one or more of the following objective measures of performance
or growth, as selected by the Executive Compensation Committee at the
beginning of the award period: operating income, pre-tax income, net income,
gross profit dollars, costs, any of the preceding measures as a percent of
sales, earnings per share, sales, return on equity, and return on investment.
All relevant factors upon which the cash award is expected to be based (e.g.,
performance measurement, length of award period, relation between performance
and cash award) will be determined at the beginning of the award period by the
Executive Compensation Committee.

No participant may receive a cash award in excess of 300% of the
participant's annualized base salary as of the beginning of the award period.

Cash awards will be paid within three months after the end of the award
period, and, in the Executive Compensation Committee's discretion, payment of
a portion of the cash award may be deferred until one or more years
thereafter. Under the BJI GIP, the Executive Compensation Committee may not
make any adjustments to the performance criteria to increase the incentive
payment to executive officers subject to Section 162(m) of the Code, except to
make appropriate adjustments in the event of certain specified types of
transactions; provided that in no case shall any such adjustment be made if it
would cause an award to no longer qualify as performance-based compensation
under Section 162(m) of the Code.

In the event of a change of control (as defined), the participants are
entitled to a cash award based on BJI's performance for that portion of the
award period immediately preceding the change of control.

The granting of awards under the BJI GIP will be discretionary, and Waban
cannot now determine the nature of the awards to be granted in the future to
any particular person or group. The first performance period under the Waban
Growth Incentive Plan ends January 25, 1997 and, therefore, no awards have
been paid to date under such plan.

FEDERAL INCOME TAX CONSEQUENCES

PLAN ADMINISTRATION AND TERMINATION

The Executive Compensation Committee will have full power to administer and
interpret the BJI GIP and to establish rules for its administration.

The Executive Compensation Committee or the BJI Board may amend, suspend or
terminate the BJI GIP at any time.

REASONS FOR STOCKHOLDER APPROVAL

The BJI GIP has been designed so that cash awards made under the BJI GIP
will qualify as performance-based compensation, and, accordingly, not be
subject to the deduction limit imposed by Section 162(m) of the Code. However,
in order to qualify as performance-based compensation, and thereby ensure the
Federal tax deductibility of all cash awards under the BJI GIP, stockholder
approval of the BJI GIP at the Special Meeting is required.

108
<PAGE>

OTHER MATTERS

INDEPENDENT ACCOUNTANTS

BJI has appointed Coopers & Lybrand, L.L.P. as BJI's independent accountants
to audit BJI's financial statements for each fiscal year in the three-year
period ended January 27, 1996. Coopers & Lybrand, L.L.P. has served as Waban's
auditors for many years, including the periods covered by the financial
statements included in this Proxy Statement. It is anticipated that
representatives of Coopers & Lybrand, L.L.P. will attend the Special Meeting,
will have the opportunity to make a statement and will be available to respond
to appropriate questions from stockholders.

STOCKHOLDER PROPOSALS

As described in Waban's proxy statement for the 1996 annual meeting of
stockholders, proposals which stockholders intend to present at the 1997
annual meeting of stockholders must be received by Waban at its principal
offices no later than December 27, 1996 in order to be considered for
inclusion in the proxy materials for the 1997 annual meeting.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by Waban with the Commission are incorporated
herein by reference:

1. Annual Report on Form 10-K for the fiscal year ended January 27, 1996.

2. Quarterly Report on Form 10-Q for the quarterly period ended April 27,
1996.

3. Quarterly Report on Form 10-Q for the quarterly period ended July 27,
1996.

Waban will provide without charge to each person to whom a copy of this
Proxy Statement is delivered, on the written or oral request of any such
person, by first class mail or other equally prompt means within one business
day of receipt of such request, a copy of any or all of the foregoing
documents incorporated herein by reference (other than any exhibits to such
documents which are not specifically incorporated herein by reference).
Requests should be directed to:

Waban Inc.
One Mercer Road
Natick Massachusetts 01760
Attn: Investor Relations Department
Telephone No. (508) 651-6500

All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the date of the Special Meeting or any adjournment thereof shall be deemed
to be incorporated by reference herein.

Any statements contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes hereof to the extent
that a statement contained herein (or in any other subsequently filed document
that also is incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.

AVAILABLE INFORMATION

Waban is subject to the informational requirements of the Exchange Act and
the rules and regulations promulgated hereunder and in accordance therewith
files reports, proxy statements and other information with the Commission.
Reports, proxy statements and other information filed by Waban may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W.,

109
<PAGE>

Washington, D.C. 20549 and in the public reference facilities in the Regional
Offices of the Commission at Seven World Trade Center, Suite 1300, New York,
New York 10048 and in the Citicorp Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such information may be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. Material that Waban files
electronically with the Commission is available at the Commission's Web site,
http://www.sec.gov, which contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the
Commission. In addition, reports and other information concerning Waban may be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.

BJI will file with the Commission a Registration Statement on Form 10 with
respect to the shares of BJI Common Stock to be received by the stockholders
of BJI in the Distribution and will request effectiveness of such Registration
Statement prior to the Distribution Date. After its filing, the Registration
Statement on Form 10 and the exhibits thereto may be inspected and copied at
the public reference facilities of the Commission listed above.

REPORTS OF BJI

After the Distribution, BJI will be required to comply with the reporting
requirements of the Exchange Act and, in accordance therewith, to file
reports, proxy statements and other information with the Commission. After the
Distribution, such reports, proxy statements and other information may be
inspected and copied at the public reference facilities of the Commission
listed above under "--Available Information" and obtained by mail from the
Commission as described above under "--Available Information."

Additionally, BJI intends to provide annual reports, containing audited
financial statements, to its shareholders in connection with its annual
meetings of stockholders.

FORWARD LOOKING INFORMATION

This Proxy Statement contains "Forward-Looking Statements," including
certain information with respect to the plans and strategies of Waban, BJI and
HomeBase. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause actual
events for the results of Waban, BJI and HomeBase to differ materially from
those indicated by such forward-looking statements. These factors include,
without limitation, those set forth in the section of this Proxy Statement
entitled "Certain Special Considerations," as well as other factors noted
elsewhere in this Proxy Statement.

BY ORDER OF THE BOARD OF DIRECTORS

Sarah M. Gallivan
Secretary

110
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................................ F-2
BJ's Wholesale Club, Inc. Combined Statements of Income for the fiscal
years ended January 29, 1994, January 28, 1995 and January 27, 1996 with
supplemental unaudited information for the twenty-six weeks ended July
29, 1995 and July 27, 1996.............................................. F-3
BJ's Wholesale Club, Inc. Combined Balance Sheets as of January 28, 1995
and January 27, 1996, with supplemental unaudited information as of July
27, 1996................................................................ F-4
BJ's Wholesale Club, Inc. Combined Statements of Cash Flows for the
fiscal years ended January 29, 1994, January 28, 1995 and January 27,
1996 with supplemental unaudited information for the twenty-six weeks
ended July 29, 1995 and July 27, 1996................................... F-5
BJ's Wholesale Club, Inc. Combined Statements of Stockholder's Equity for
the fiscal years ended January 29, 1994, January 28, 1995 and January
27, 1996 with supplemental unaudited information for the twenty-six
weeks ended July 27, 1996............................................... F-6
Notes to Combined Financial Statements of BJ's Wholesale Club, Inc. ..... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF BJ'S WHOLESALE CLUB, INC.

We have audited the accompanying combined balance sheets of BJ's Wholesale
Club, Inc. and subsidiaries as of January 28, 1995 and January 27, 1996, and
the related combined statements of income, stockholder's equity, and cash
flows for each of the three fiscal years in the period ended January 27, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of BJ's Wholesale
Club, Inc. and subsidiaries as of January 28, 1995 and January 27, 1996 and
the combined results of their operations and their cash flows for each of the
three fiscal years in the period ended January 27, 1996 in conformity with
generally accepted accounting principles.

As discussed in Notes A, E and G to the Combined Financial Statements, the
Company changed its methods of accounting for postretirement benefits other
than pensions, for postemployment benefits and for income taxes in the fiscal
year ended January 29, 1994.

Coopers & Lybrand, L.L.P.

Boston Massachusetts
November 4, 1996

F-2
<PAGE>

BJ'S WHOLESALE CLUB, INC.

COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
TWENTY-
SIX WEEKS ENDED
FISCAL YEAR ENDED (UNAUDITED)
----------------------------------- ---------------------
JANUARY 29, JANUARY 28, JANUARY 27, JULY 29, JULY 27,
1994 1995 1996 1995 1996
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales............... $1,964,410 $2,244,591 $2,478,319 $1,140,511 $1,332,392
Membership fee income... 38,975 48,500 51,289 22,966 23,684
---------- ---------- ---------- ---------- ----------
Total revenues.......... 2,003,385 2,293,091 2,529,608 1,163,477 1,356,076
---------- ---------- ---------- ---------- ----------
Cost of sales, including
buying and occupancy
costs.................. 1,807,586 2,054,167 2,263,532 1,049,167 1,219,544
Selling, general and
administrative
expenses............... 155,425 174,416 183,419 85,264 98,602
Interest on debt and
capital leases (net)... 7,807 13,665 14,757 7,354 8,211
---------- ---------- ---------- ---------- ----------
Total expenses.......... 1,970,818 2,242,248 2,461,708 1,141,785 1,326,357
---------- ---------- ---------- ---------- ----------
Income before income
taxes and cumulative
effect of accounting
principle changes...... 32,567 50,843 67,900 21,692 29,719
Provision for income
taxes.................. 12,351 19,941 26,350 8,416 11,650
---------- ---------- ---------- ---------- ----------
Income before cumulative
effect of accounting
principle changes...... 20,216 30,902 41,550 13,276 18,069
Cumulative effect of ac-
counting principle
changes................ 2,107 -- -- -- --
---------- ---------- ---------- ---------- ----------
Net income.............. $ 22,323 $ 30,902 $ 41,550 $ 13,276 $ 18,069
========== ========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-3
<PAGE>

BJ'S WHOLESALE CLUB, INC.

COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27, JULY 27,
1995 1996 1996
----------- ----------- -----------
(UNAUDITED)
ASSETS
------
<S> <C> <C> <C>
Current assets:
Cash..................................... $ 599 $ -- $ --
Accounts receivable...................... 23,202 30,942 27,456
Merchandise inventories.................. 233,857 271,438 298,984
Current deferred income taxes............ 7,744 8,375 8,221
Prepaid expenses......................... 5,693 6,732 6,511
-------- -------- --------
Total current assets................... 271,095 317,487 341,172
-------- -------- --------
Property at cost:
Land and buildings....................... 178,423 234,972 254,785
Leasehold costs and improvements......... 31,337 33,230 33,595
Furniture, fixtures and equipment........ 132,171 163,908 176,830
-------- -------- --------
341,931 432,110 465,210
Less accumulated depreciation and
amortization............................ 59,172 83,338 97,846
-------- -------- --------
282,759 348,772 367,364
-------- -------- --------
Property under capital leases.............. 4,100 4,100 3,871
Less accumulated amortization............ 1,729 2,090 2,031
-------- -------- --------
2,371 2,010 1,840
-------- -------- --------
Other assets............................... 7,706 8,406 8,213
-------- -------- --------
Total assets........................... $563,931 $676,675 $718,589
======== ======== ========
<CAPTION>
LIABILITIES
-----------
<S> <C> <C> <C>
Current liabilities:
Accounts payable......................... $150,204 $169,115 $184,200
Accrued expenses and other current
liabilities............................. 48,929 60,808 58,149
Accrued federal and state income taxes... 13,380 10,102 4,436
Obligations under capital leases due
within one year......................... 330 255 180
-------- -------- --------
Total current liabilities.............. 212,843 240,280 246,965
-------- -------- --------
Obligations under capital leases, less por-
tion due within one year.................. 2,960 2,731 2,667
Other noncurrent liabilities............... 20,857 26,034 30,239
Deferred income taxes...................... 4,326 3,917 2,762
Loans and advances from Waban Inc.......... 142,512 181,730 195,904
<CAPTION>
STOCKHOLDER'S EQUITY
--------------------
<S> <C> <C> <C>
Common stock, par value $.01, authorized
180,000,000 shares, issued and outstanding
32,708,036 shares......................... 327 327 327
Retained earnings.......................... 180,106 221,656 239,725
-------- -------- --------
Total stockholder's equity............. 180,433 221,983 240,052
-------- -------- --------
Total liabilities and stockholder's
equity................................ $563,931 $676,675 $718,589
======== ======== ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-4
<PAGE>

BJ'S WHOLESALE CLUB, INC.

COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
TWENTY-SIX
WEEKS ENDED
FISCAL YEAR ENDED (UNAUDITED)
----------------------------------- ----------------
JANUARY 29, JANUARY 28, JANUARY 27, JULY 29, JULY 27,
1994 1995 1996 1995 1996
----------- ----------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income............. $ 22,323 $ 30,902 $ 41,550 $13,276 $18,069
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization of
property.............. 16,106 21,829 27,185 12,884 16,202
Loss on property
disposals............. 470 903 142 49 88
Deferred income taxes.. (3,654) (1,161) (1,040) (217) (1,002)
Increase (decrease) in
cash due to changes
in:
Accounts receivable.. (8,820) 1,118 (7,740) 819 3,486
Merchandise
inventories......... (49,123) (22,462) (37,581) (15,550) (27,546)
Prepaid expenses..... 321 (944) (1,039) (2,594) 221
Other assets......... (12) (1,477) (700) (107) 193
Accounts payable..... 24,686 12,280 18,911 3,401 15,085
Accrued expenses..... 5,485 8,213 9,014 6,467 (134)
Accrued income taxes. (1,328) 11,612 (3,278) (3,000) (5,666)
Other noncurrent
liabilities......... 7,361 9,306 5,177 2,806 4,205
-------- -------- -------- ------- -------
Net cash provided by
operating activities.. 13,815 70,119 50,601 18,234 23,201
-------- -------- -------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property additions..... (93,099) (74,506) (90,212) (43,302) (37,244)
Property disposals..... 77 6,508 98 100 8
-------- -------- -------- ------- -------
Net cash used in
investing activities.. (93,022) (67,998) (90,114) (43,202) (37,236)
-------- -------- -------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment of capital
lease obligations..... (251) (276) (304) (148) (139)
Increase (decrease) in
loans and advances
from Waban Inc........ 78,443 (9,915) 39,218 24,517 14,174
-------- -------- -------- ------- -------
Net cash provided by
(used in) financing
activities............ 78,192 (10,191) 38,914 24,369 14,035
-------- -------- -------- ------- -------
Net increase
(decrease) in cash.. (1,015) (8,070) (599) (599) --
Cash at beginning of
period.............. 9,684 8,669 599 599 --
-------- -------- -------- ------- -------
Cash at end of
period.............. $ 8,669 $ 599 $ -- $ -- $ --
======== ======== ======== ======= =======
Supplemental cash flow
information:
Interest paid........ $ 9,681 $ 14,774 $ 14,811 $ 7,380 $ 8,231
Income taxes paid.... 17,333 9,490 30,668 11,633 18,318
Noncash financing and
investing activities:
Capital lease
obligations......... 46 -- -- -- --
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-5
<PAGE>

BJ'S WHOLESALE CLUB, INC.

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK RETAINED STOCKHOLDER'S
PAR VALUE $.01 EARNINGS EQUITY
-------------- -------- -------------
<S> <C> <C> <C>
Balance, January 30, 1993................. $ 327 $126,881 $127,208
Net income.............................. -- 22,323 22,323
----- -------- --------
Balance, January 29, 1994................. 327 149,204 149,531
Net income.............................. -- 30,902 30,902
----- -------- --------
Balance, January 28, 1995................. 327 180,106 180,433
Net income.............................. -- 41,550 41,550
----- -------- --------
Balance, January 27, 1996................. 327 221,656 221,983
Net income (unaudited).................. -- 18,069 18,069
----- -------- --------
Balance, July 27, 1996 (unaudited)........ $ 327 $239,725 $240,052
===== ======== ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6
<PAGE>

BJ'S WHOLESALE CLUB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

SUMMARY OF ACCOUNTING POLICIES

Basis of Presentation

BJ's Wholesale Club, Inc. (the "Company") is a newly formed Delaware
corporation which initially will be a wholly-owned subsidiary of Waban Inc.
("Waban"). On October 23, 1996, Waban announced a proposal for a tax-free
distribution (the "Distribution") of all of the outstanding shares of common
stock of the Company held by Waban. Prior to the Distribution, Waban will
transfer all of the assets and liabilities of its BJ's Wholesale Club Division
to the Company. The combined financial statements of the Company present the
financial results of the BJ's Wholesale Club Division.

Fiscal Year

The Company's fiscal year ends on the last Saturday in January.

Merchandise Inventories

Inventories are stated at the lower of cost, determined under the average
cost method, or market. The Company recognizes the write-down of slow-moving
or obsolete inventory in cost of sales when such write-downs are probable and
estimable.

Property and Equipment

Buildings, furniture, fixtures and equipment are depreciated by use of the
straight-line method over the estimated useful lives of the assets. Leasehold
costs and improvements are amortized by use of the straight-line method over
the lease term or their estimated useful life, whichever is shorter.

Preopening Costs

Preopening costs consist of direct incremental costs of opening a facility
and are charged to operations within the fiscal year that a new warehouse club
opens.

Membership Fees

Membership fees are included in revenue when received, but not before a
warehouse club opens.

Interest on Debt and Capital Leases (Net)

Interest on debt and capital leases in the Combined Statements of Income is
presented net of interest income and investment income of $54,000 in 1995,
$1,109,000 in 1994 and $312,000 in 1993. Interest on debt represents interest
on intercompany loans and advances.

Capitalized Interest

The Company capitalizes interest related to the development of owned
facilities. Interest in the amount of $1,547,000, $1,061,000 and $1,562,000
was capitalized in 1995, 1994 and 1993, respectively.

Stock-Based Compensation

The Company applies the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations in accounting for its
stock-based compensation.

F-7
<PAGE>

BJ'S WHOLESALE CLUB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Estimates Included in Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Interim Financial Information

The combined financial statements for the twenty-six weeks ended July 27,
1996 and July 25, 1995 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.

A. CUMULATIVE EFFECT OF ACCOUNTING PRINCIPLE CHANGES

Effective the first day of fiscal 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," and SFAS No. 112, "Employers' Accounting for Postemployment
Benefits." The cumulative effect of these accounting principle changes
increased (decreased) after-tax income by the following amounts (in
thousands):

<TABLE>
<S> <C>
SFAS No. 109, "Accounting for Income Taxes"....... $2,336
SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," net
of tax benefit of $67............................ (99)
SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," net of tax benefit of
$89.............................................. (130)
------
$2,107
======
</TABLE>

B. RELATED PARTY TRANSACTIONS

Waban loans funds to the Company as needed. The intercompany balance is
considered to be long-term debt. Waban charges interest expense to the Company
at the annual rate of 10% based on the Company's average monthly intercompany
balance (net of cash). The Company's intercompany interest expense was
$16,032,000, $15,480,000 and $9,303,000 in fiscal 1995, 1994 and 1993,
respectively.

Selling, general and administrative expenses include certain allocations of
overhead incurred by Waban that support the Company's business. The expenses
were generally allocated based on specific identification and management's
estimates of the relative time devoted to supporting the Company.

C. COMMITMENTS AND CONTINGENCIES

The Company is obligated under long-term leases for the rental of real
estate and fixtures and equipment, some of which are classified as capital
leases pursuant to SFAS No. 13. In addition, the Company is generally required
to pay insurance, real estate taxes and other operating expenses and, in some
cases, additional rentals based on a percentage of sales or increases in the
Consumer Price Index. The real estate leases range up to 45 years and have
varying renewal options. The fixture and equipment leases range up to 5 years.

F-8
<PAGE>

BJ'S WHOLESALE CLUB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Future minimum lease payments as of January 27, 1996 were:

<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEARS ENDING JANUARY LEASES LEASES
--------------------------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
1997........................................... $ 528 $ 38,348
1998........................................... 419 43,322
1999........................................... 426 46,648
2000........................................... 427 46,550
2001........................................... 427 45,580
Later years.................................... 2,814 583,322
---------- ------------
Total minimum lease payments................... 5,041 $ 803,770
============
Less amount representing interest.............. 2,055
----------
Present value of net minimum capital lease
payments...................................... $ 2,986
==========
</TABLE>

Rental expense under operating leases (including contingent rentals which
were not material) amounted to $37,561,000, $33,282,000 and $28,627,000 in
1995, 1994 and 1993, respectively.

The Company is involved in various legal proceedings incident to the
character of its business. Although it is not possible to predict the outcome
of these proceedings, or any claims against the Company related thereto, the
Company believes that such proceedings will not, individually or in the
aggregate, have a material effect on its financial condition or results of
operations.

D. CAPITAL STOCK, STOCK OPTIONS AND STOCK PURCHASE PLANS

The historical capitalization of the Company has been retroactively restated
to reflect the anticipated issuance of 32,708,036 shares of common stock for
all periods presented in order to reflect the equity of the Company on an
ongoing basis, as a result of the planned distribution of all of the Company's
common stock to holders of Waban's outstanding shares (the "Distribution").
The Company's authorized capital stock also includes 20,000,000 shares of
Preferred Stock, $.01 par value per share.

The Company intends to adopt a 1997 Stock Incentive Plan (the "1997 Plan").
This plan will permit the granting of stock options, restricted stock and
other stock-based awards. The Company intends to reserve 3,000,000 shares of
common stock for issuance under this plan. The Company also intends to adopt a
1997 Director Stock Option Plan for non-employee directors and intends to
reserve 150,000 shares of common stock for issuance under this plan.

Certain key employees participate in the Waban stock incentive plan. As of
October 26, 1996, these individuals held a total of 1,887,091 options to
purchase Waban stock (of which 817,156 were exercisable). Upon completion of
the Distribution, the Company intends to issue options of equal value under
the 1997 Plan to replace unexercised options outstanding under the Waban stock
incentive plan held by the Company's employees.

SFAS No. 123, "Accounting for Stock-Based Compensation," was issued in
October 1995 and becomes effective for the Company's fiscal year ending
January 25, 1997. SFAS No. 123 provides a choice of adopting its fair value
based method of expense recognition for stock-based awards granted to
employees or applying the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion (APB) No. 25, "Accounting
for Stock Issued to Employees". The Company expects to continue to apply the
accounting provisions of APB No. 25 and adopt the disclosure-only provisions
of SFAS No. 123 in 1996; consequently, SFAS No. 123 is expected to have no
effect on the Company's financial position or results of operations in the
fiscal year ending January 25, 1997.

F-9
<PAGE>

BJ'S WHOLESALE CLUB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

E. INCOME TAXES

The Company is included in the consolidated federal income tax return of
Waban and, where applicable, is consolidated for state reporting purposes. The
Company believes the income tax provision is representative of the Company's
tax provision as if it were a stand-alone company.

Effective the first day of fiscal 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 changed the Company's method of
accounting for income taxes from the income statement approach prescribed by
Accounting Principles Board Opinion No. 11 to an assets and liabilities
approach. The cumulative effect of this accounting change was to increase net
income by $2,336,000 in 1993 (See Note A).

The provision (benefit) for income taxes on income before the cumulative
effect of accounting changes includes the following:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 29, JANUARY 28, JANUARY 27,
1994 1995 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal
Current................................ $11,586 $17,187 $22,710
Deferred............................... (1,010) (903) (814)
State
Current................................ 2,083 3,915 4,680
Deferred............................... (308) (258) (226)
------- ------- -------
Total income tax provision............... $12,351 $19,941 $26,350
======= ======= =======
</TABLE>

The following is a reconciliation of the statutory federal income tax rate
and the effective income tax rate on income before the cumulative effect of
accounting principle changes:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 29, JANUARY 28, JANUARY 27,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Statutory federal income tax rate....... 35% 35% 35%
State income taxes, net of federal tax
benefit................................ 4 5 4
Targeted jobs tax credit................ (1) (1) --
--- --- ---
Effective income tax rates.............. 38% 39% 39%
=== === ===
</TABLE>

F-10
<PAGE>

BJ'S WHOLESALE CLUB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Significant components of the Company's deferred tax assets and liabilities
as of January 28, 1995 and January 27, 1996 are as follows:

<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27,
1995 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Self-insurance reserves............................ $8,774 $10,858
Rental step liabilities............................ 2,661 3,294
Compensation and benefits.......................... 2,036 2,788
Other.............................................. 2,823 2,518
------ -------
Total deferred tax assets........................ 16,294 19,458
------ -------
Deferred tax liabilities:
Accelerated depreciation-property.................. 12,638 14,696
Other.............................................. 238 304
------ -------
Total deferred tax liabilities................... 12,876 15,000
------ -------
Net deferred tax assets.............................. $3,418 $ 4,458
====== =======
</TABLE>

The Company has not established a valuation allowance because its deferred
tax assets can be realized by offsetting deferred tax liabilities and future
taxable income, which management believes will more likely than not be earned,
based on the Company's historical earnings record.

F. PENSIONS

The Company participates in Waban's non-contributory defined benefit
retirement plan covering full-time employees who have attained twenty-one
years of age and have completed one year of service. Benefits are based on
compensation earned in each year of service. No benefits have accrued under
this plan since July 4, 1992, when it was frozen. In December 1993, Waban
terminated its unfunded defined benefit plan which provided additional
retirement benefits for certain key employees, and in June 1995, terminated
its non-contributory retirement plan covering directors who were not employees
or officers of Waban. The net income effect of the termination and settlement
of these plans was not material. The Company's share of Waban's pension
expense amounted to $124,000, $144,000 and $402,000 in fiscal 1995, 1994 and
1993, respectively.

Waban does not segregate plan assets or liabilities by each participating
subsidiary company and, as a result, the following tables present the periodic
pension cost and funded status of the Waban plans in accordance with SFAS No.
87:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 29, JANUARY 28, JANUARY 27,
1994 1995 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost............................ $ 451 $ 209 $ 182
Interest cost on projected benefit
obligation............................. 592 435 429
Actual return on assets................. (380) (73) (1,245)
Net amortization and deferrals.......... 21 (264) 892
----- ----- -------
Net pension cost........................ $ 684 $ 307 $ 258
===== ===== =======
</TABLE>

F-11
<PAGE>

BJ'S WHOLESALE CLUB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27,
1995 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit
obligation:
Vested benefits................................... $4,622 $ 5,991
Nonvested benefits................................ 474 --
------ -------
$5,096 $ 5,991
====== =======
Projected benefit obligation........................ $5,096 $ 5,991
Plan assets at fair market value.................... 5,106 5,997
------ -------
Projected benefit obligation less than plan assets.. (10) (6)
Prior service cost reduction not yet recognized..... 17 --
Unrecognized net loss from past experience different
from that assumed and effects of changes in
assumptions........................................ (891) (1,088)
------ -------
Prepaid pension cost included in balance sheets..... $ (884) $(1,094)
====== =======
</TABLE>

The weighted average discount rates used in determining the actuarial
present value of the projected benefit obligation were 7.25% and 8.0%,
respectively, in 1995 and 1994. The expected long-term rate of return on
assets used was 9.0% in 1995 and 1994. The Company's funding policy is to
contribute annually an amount allowable for federal income tax purposes.
Pension plan assets consist primarily of equity and fixed income securities.

The Company also participates in Waban's 401(k) Savings Plans, under which
participating employees may make pre-tax contributions up to 15% of covered
compensation. Waban matches employee contributions at 100% of the first one
percent of covered compensation and 50% of the next four percent, payable at
the end of the year. Beginning in 1996, Waban's matching contribution is
payable as of the end of each calendar quarter. The Company's share of expense
under these plans was $1,867,000 in 1995, $1,669,000 in 1994 and $1,435,000 in
1993.

In 1994, Waban established a non-contributory defined contribution
retirement plan for certain key employees, including certain of the Company's
employees. Under the plan, Waban funds annual retirement contributions for the
designated participants, on an after-tax basis. For 1995 and 1994, Waban's
contribution equaled 5% of the participants' base salary. Participants become
fully vested in their contribution accounts at the end of the fiscal year in
which they complete four years of service. The Company's share of expense
under this plan was $485,000 in 1995 and $439,000 in 1994.

G. POSTRETIREMENT MEDICAL BENEFITS

The Company participates in Waban's defined benefit postretirement medical
plan that covers employees (and their spouses) who retire after age 55 with at
least 10 years of service, who are not eligible for Medicare, and who
participated in a Waban-sponsored medical plan. Amounts contributed by retired
employees under this plan are based on years of service prior to retirement.
The plan is not funded.

SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," requires employers to recognize postretirement benefits over the
periods during which employees render services rather than at the time
benefits are paid. SFAS No. 106 was implemented by Waban by recognizing its
transition obligation of $348,000 in the first quarter of 1993. The Company's
share of this transition obligation was $166,000.

F-12
<PAGE>

BJ'S WHOLESALE CLUB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

In fiscal 1995, 1994 and 1993, the Company's share of Waban's postretirement
medical benefit expense was $73,000, $76,000 and $66,000, respectively. Waban
does not segregate plan liabilities by participating subsidiary company and,
as a result, the following tables present the net periodic postretirement
benefit cost and the funded status of the Waban plan in accordance with SFAS
No. 106:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 29, JANUARY 28, JANUARY 27,
1994 1995 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost............................ $100 $128 $120
Interest cost........................... 38 42 44
Net amortization and deferrals.......... -- -- (10)
---- ---- ----
Net periodic postretirement benefit
cost................................... $138 $170 $154
==== ==== ====
</TABLE>

<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27,
1995 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retired participants.............................. $ -- $ --
Fully eligible active participants................ 37 63
Other active participants......................... 387 515
---- ----
Unfunded accumulated postretirement benefit
obligation......................................... 424 578
Unrecognized net gain............................... 232 232
---- ----
Accrued postretirement benefit cost included in
balance sheets..................................... $656 $810
==== ====
</TABLE>

For measurement purposes, an annual rate of increase in the per capita cost
of medical coverage of 9.5% in 1995 grading down to 5% after 9 years was
assumed as of January 28, 1995, and an annual rate of increase in the per
capita cost of medical coverage of 8% in 1996 grading down to 4.5% after 8
years was assumed as of January 27, 1996. Increasing the assumed health care
cost trend rate one percentage point would increase the aggregate of the
service and interest cost components of net periodic postretirement benefit
cost for 1995 by $30,000 and would increase the accumulated postretirement
benefit obligation as of January 27, 1996 by $101,000.

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% as of January 27, 1996 and 8.0% as
of January 28, 1995.

H. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The major components of accrued expenses and other current liabilities are
as follows:

<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27,
1995 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Employee compensation............................... $10,727 $11,208
Self-insurance reserves............................. 9,742 11,565
Sales and use taxes, rent, utilities, advertising,
fixed asset additions and other.................... 28,460 38,035
------- -------
$48,929 $60,808
======= =======
</TABLE>

F-13
<PAGE>

BJ'S WHOLESALE CLUB, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The Company's reported expense and reserves for insurance are derived from
estimated ultimate cost based upon individual claim file reserves. Waban
maintains insurance coverage for the Company for individual occurrences above
$250,000 for worker's compensation and general liability, and above $200,000
for medical claims. In addition to the amounts shown above in current
liabilities, noncurrent self-insurance reserves of $15.2 million and $11.9
million as of January 27, 1996 and January 28, 1995, respectively, are
included in other noncurrent liabilities.

I. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fiscal year ended January 28, 1995
Total revenues....................... $486,787 $564,123 $558,999 $683,182
Gross earnings(a).................... 43,972 57,727 55,820 81,405
Net income........................... 2,285 7,371 4,797 16,449
Fiscal year ended January 27, 1996
Total revenues....................... $531,106 $632,371 $604,426 $761,705
Gross earnings(a).................... 48,959 65,351 61,719 90,047
Net income........................... 3,123 10,151 6,926 21,350
</TABLE>
- --------
(a) Gross earnings equals total revenues less cost of sales, including buying
and occupancy costs.

F-14
<PAGE>

WABAN INC.
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY AND
SHOULD BE RETURNED AS SOON AS POSSIBLE TO THE FIRST CHICAGO TRUST COMPANY OF
NEW YORK

The undersigned, having received notice of the Special Meeting and the Board
of Directors' proxy statement therefor, and revoking all prior proxies, hereby
appoint(s) Arthur F. Loewy, Edward J. Weisberger and Sarah M. Gallivan, and
each of them, attorneys or attorney of the undersigned (with full power of
substitution in them and each of them) for and in the name(s) of the
undersigned to attend the Special Meeting of Stockholders of WABAN INC. (the
"Company") to be held on , 1997 at a.m. at , Boston,
Massachusetts, and any adjournments thereof, and there to vote and act upon the
following matters in respect of all shares of stock of the Company which the
undersigned may be entitled to vote or act upon, with all the powers the
undersigned would possess if personally present.

IN THEIR DISCRETION, THE PROXY HOLDERS ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
The shares represented by this proxy will be voted as directed by the
undersigned. If no direction is given with respect to any proposal, this proxy
will be voted as recommended by the Board of Directors. Attendance of the
undersigned at the meeting or at any adjournment thereof will not be deemed to
revoke this proxy unless the undersigned shall revoke this proxy in writing.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
ALL OF THE FOLLOWING PROPOSALS. TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS JUST SIGN THIS PROXY; NO BOXES NEED TO BE CHECKED.
UNLESS MARKED OTHERWISE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD
OF DIRECTORS' RECOMMENDATIONS.

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING ENVELOPE.

1. Approval of a distribution (the "Distribution") in the form of a tax-free
special dividend to all holders of the Company's outstanding shares of
common stock, on a one-for-one basis, of all outstanding shares of common
stock, and the associated stockholders' rights, of BJ's Wholesale Club, Inc.
("BJ's") held by the Company on the date of the Distribution.
[_] FOR[_] AGAINST[_] ABSTAIN
(Continued on reverse side)
<PAGE>

2. Approval of an amendment to the Company's Certificate of Incorporation to
change the name of the Company to "HomeBase, Inc."
[_] FOR[_] AGAINST[_] ABSTAIN
3. Approval of an amendment to the Company's 1989 Stock Incentive Plan to
increase by 2,000,000 shares the number of shares available for issuance
thereunder.
[_] FOR[_] AGAINST[_] ABSTAIN
4. Approval of the BJ's 1997 Stock Incentive Plan.
[_] FOR[_] AGAINST[_] ABSTAIN
5. Approval of the BJ's Management Incentive Plan.
[_] FOR[_] AGAINST[_] ABSTAIN
6. Approval of the BJ's Growth Incentive Plan.
[_] FOR[_] AGAINST[_] ABSTAIN
7. To consider such other business, if any, as may properly come before the
meeting or any adjournment thereof.

MARK HERE FOR ADDRESS CHANGE AND NOTE
AT LEFT [_]
MARK HERE IF YOU
PLAN TO ATTEND
THE MEETING [_]

The undersigned hereby revokes all
proxies heretofore given by the un-
dersigned to vote at said meeting or
any adjournments thereof.

Dated: _____________________, 199

______________________________________
Signature
______________________________________
Signature if held jointly

PLEASE SIGN EXACTLY AS NAME APPEARS
HEREON. WHEN SHARES ARE HELD BY JOINT
OWNERS, BOTH SHOULD SIGN. WHEN SIGN-
ING AS ATTORNEY, EXECUTOR, ADMINIS-
TRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH. IF A CORPO-
RATION, PLEASE SIGN IN FULL CORPORATE
NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE
SIGN IN PARTNERSHIP NAME BY AUTHO-
RIZED PERSON.
<PAGE>

WABAN INC.

1989 STOCK INCENTIVE PLAN

<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS............ 1

SECTION 2. COMMITTEE AUTHORITY TO SELECT PARTICIPANTS AND
DETERMINE AWARDS, ETC............................... 3

SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS;
SUBSTITUTION........................................ 3

SECTION 4. ELIGIBILITY......................................... 5

SECTION 5. LIMITATIONS ON TERM AND DATES OF AWARD.............. 5

SECTION 6. STOCK OPTIONS....................................... 5

SECTION 7. STOCK APPRECIATION RIGHTS; DISCRETIONARY
PAYMENTS............................................ 9

SECTION 8. RESTRICTED STOCK; UNRESTRICTED STOCK................ 12

SECTION 9. DEFERRED STOCK AWARDS............................... 13

SECTION 10. PERFORMANCE UNIT AWARDS............................. 15

SECTION 11. OTHER STOCK-BASED AWARDS; SUPPLEMENTAL
GRANTS.............................................. 16

SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC..................... 19

SECTION 13. AMENDMENTS AND TERMINATION.......................... 19

SECTION 14. STATUS OF PLAN...................................... 19

SECTION 15. CHANGE OF CONTROL PROVISIONS........................ 20

SECTION 16. GENERAL PROVISIONS.................................. 20

SECTION 17. EFFECTIVE DATE OF PLAN.............................. 21
</TABLE>
<PAGE>

WABAN INC.
1989 STOCK INCENTIVE PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS.

The name of the plan is the Waban Inc. 1989 Stock Incentive Plan (the
"Plan"). The purpose of the Plan is to secure for Waban Inc. (the "Company") and
its stockholders the benefit of the incentives inherent in Common Stock
ownership and the receipt of incentive awards by selected key employees of the
Company and its Subsidiaries who contribute to and will be responsible for its
continued long term growth. The Plan is intended to stimulate the efforts of
such key employees by providing an opportunity for capital appreciation and
giving suitable recognition for services which contribute materially to the
success of the Company.

The following terms shall be defined as set forth below:

(a) "Act" means the Securities Exchange Act of 1934.

(b) "Award" or "Awards" except where referring to a particular category of
grant under the Plan shall include Incentive Stock Options, Non-Qualified
Stock Options, Stock Appreciation Rights, Restricted Stock Awards,
Unrestricted Stock Awards, Deferred Stock Awards, Performance Unit Awards
and Other Stock-based Awards.

(d) "Cause" means a felony conviction of a participant or the failure of a
participant to contest prosecution for a felony, or a participant's willful
misconduct or dishonesty, any of which is directly harmful to the business
or reputation of the Company or any Subsidiary.

(e) "Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

(f) "Committee" means the Committee referred to in Section 2. If at any
time no Committee shall be in office, the functions of the Committee shall
be exercised by the Board.

(g) "Deferred Stock Award" is defined in Section 9(a).

(h) "Disability" means disability as determined in accordance with
standards and procedures similar to those used under the Company's long
term disability program.

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<PAGE>

(i) "Disinterested Person" shall have the meaning set forth in Rule 16b-
3(d)(3) promulgated under the Act, or any successor definition under the
Act.

(j) "Fair Market Value" on any given date means the last sale price
regular way at which Stock is traded on such date as reflected in the New
York Stock Exchange Composite Transactions Index or, where applicable, the
value of a share of Stock as determined by the Committee in accordance with
the applicable provisions of the Code.

(k) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" as defined in the Code.

(l) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

(m) "Normal Retirement" means retirement from active employment with the
Company and its Subsidiaries on or after the normal retirement date
specified in the Waban Inc. Retirement Plan.

(n) "Other Stock-based Award" is defined in Section 11(a).

(o) "Performance Unit Award" is defined in Section 10(a).

(p) "Restricted Stock Award" is defined in Section 8(a).

(q) "Stock" means the Common Stock, $.01 par value, of the Company,
subject to adjustments pursuant to Section 3.

(r) "Stock Appreciation Right" means a right described in Section 7(a) and
granted, either independently of other Awards or in tandem with the grant
of a Stock Option.

(s) "Stock Option" means any option to purchase shares of Stock granted
pursuant to Section 6.

(t) "Subsidiary" means any corporation or other entity (other than the
Company) 50% or more of the total combined voting power of all classes of
stock or other interests of which is owned, directly or indirectly, by the
Company.

(u) "Unrestricted Stock Award" is defined in Section 8(b).

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<PAGE>

SECTION 2. COMMITTEE AUTHORITY TO SELECT PARTICIPANTS AND DETERMINE AWARDS,
ETC.

The Plan shall be administered by a Committee of not less than three
Disinterested Persons, who shall be appointed by the Board and who shall serve
at the pleasure of the Board.

The Committee shall have the power and authority to grant Awards consistent
with the terms of the Plan, including the power and authority:

(i) to select the officers and other key employees of the Company and
its Subsidiaries to whom Awards may from time to time be granted;

(ii) to determine the time or times of grant, and the extent, if any, of
Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Unrestricted Stock, Deferred
Stock, Performance Units and any Other Stock-based Awards, or any
combination of the foregoing, granted to any one or more
participants;

(iii) to determine the number of shares to be covered by any Award;

(iv) to determine the terms and conditions, including restrictions, not
inconsistent with the terms of the Plan, of any Award, which terms
and conditions may differ among individual Awards and participants;

(v) to determine whether, to what extent, and under what circumstances
Stock and other amounts payable with respect to an Award shall be
deferred either automatically or at the election of the participant
and whether and to what extent the Company shall pay or credit
amounts equal to interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and

(vi) to adopt, alter and repeal such rules, guidelines and practices for
administration of the Plan and for its own acts and proceedings as
it shall deem advisable; to interpret the terms and provisions of
the Plan and any Award (including related Award Agreements); to make
all determinations it deems advisable for the administration of the
Plan; to decide all disputes arising in connection with the Plan;
and to otherwise supervise the administration of the Plan.

All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.

SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION.

-3-
<PAGE>

(a) Shares Issuable.

The maximum number of shares of Stock reserved and available for issuance
under the Plan shall be 3,750,000, including shares issued in lieu of or upon
reinvestment of dividends arising from Awards. For purposes of this limitation,
Awards and Stock which are forfeited, reacquired by the Company or satisfied
without the issuance of Stock shall not be counted and such limitation shall
apply only to shares which have become free of any restrictions under the Plan.
Subject to such overall limitation, shares may be issued up to such maximum
pursuant to any type or types of Award, including Incentive Stock Options.
Shares issued under the Plan may be authorized but unissued shares or shares
reacquired by the Company.

(b) Stock Dividends, Mergers, etc.

In the event of a stock dividend, stock split or similar change in
capitalization affecting the Stock, the Committee shall make appropriate
adjustments in (i) the number and kind of shares of stock or securities on which
Awards may thereafter be granted, (ii) the number and kind of shares remaining
subject to outstanding Awards, and (iii) the option or purchase price in respect
of such shares. In the event of any merger, consolidation, dissolution or
liquidation of the Company, the Committee in its sole discretion may, as to any
outstanding Awards, make such substitution or adjustment in the aggregate number
of shares reserved for issuance under the Plan and in the number and purchase
price (if any) of shares subject to such Awards as it may determine, or
accelerate, amend or terminate such Awards upon such terms and conditions as it
shall provide (which, in the case of the termination of the vested portion of
any Award, shall require payment or other consideration which the Committee
deems equitable in the circumstances), subject, however, to the provisions of
Section 15.

The Company may grant Awards under the Plan in substitution for stock and
stock based awards held by employees of another corporation who concurrently
become employees of the Company or a Subsidiary as the result of a merger or
consolidation of the employing corporation with the Company or a Subsidiary or
the acquisition by the Company or a Subsidiary of property or stock of the
employing corporation. The Committee may direct that the substitute Awards be
granted on such terms and conditions as the Committee considers appropriate in
the circumstances. The shares which may be delivered under such substitute
Awards shall be in addition to the maximum number of shares provided for in
Section 3(a) only to the extent that the substitute Awards are (i) granted to
persons whose relationship to the Company does not make (and is not expected to
make) them subject to Section 16(b) of the Act, (ii) granted in substitution for
awards issued under a plan approved, to the extent then required under Rule 16b-
3 (or any

-4-
<PAGE>

successor rule under the Act) by the stockholders of the entity which issued
such predecessor awards, and (iii) granted other than in connection with the
spin-off of the Company by Zayre Corp.

SECTION 4. ELIGIBILITY.

Participants in the Plan will be such full or part time officers and other
key employees of the Company and its Subsidiaries (excluding any director who is
not an employee) who are responsible for or contribute to the management, growth
or profitability of the Company and its Subsidiaries and who are selected from
time to time by the Committee, in its sole discretion. Persons who are not
employees of the Company or a subsidiary (within the meaning of Section 422A of
the Code) shall not be eligible to receive grants of Incentive Stock Options.

SECTION 5. LIMITATIONS ON TERM AND DATES OF AWARDS.

(a) Duration of Awards.

Subject to Sections 16(a) and 16(c) below, no restrictions or limitations
on Awards shall extend beyond 10 years (or 10 years and one day in the case of
Non-Qualified Stock Options) from the grant date, except that deferrals elected
by participants of the receipt of Stock or other benefits under the Plan may
extend beyond such date.

(b) Latest Grant Date.

No Award shall be granted more then 10 years after the effective date of
the Plan, but then outstanding Awards may extend beyond such date.

SECTION 6. STOCK OPTIONS.

Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. To the extent that any option does not qualify
as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.

Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted to the Committee under the Plan be
so exercised, so as to disqualify the Plan or, without the consent of the
optionee, any Incentive Stock Option under Section 422A of the Code.

-5-
<PAGE>

Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:

(a) Option Price.

The option price per share of Stock purchasable under a Stock Option shall
be determined by the Committee at the time of grant but shall be, in the case of
Incentive Stock Options, not less than 100% of Fair Market Value on the date of
grant and, in the case of Non-Qualified Stock Options, not less than 50% of Fair
Market Value on the date of grant. If an employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 425(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation and an Incentive Stock Option is
granted to such employee, the option price shall be not less than 110% of Fair
Market Value on the grant date.

(b) Option Term.

The term of each Stock Option shall be fixed by the Committee, but no
Incentive Stock Option shall be exercisable more than ten years after the date
the option is granted and no Non-Qualified Stock Option shall be exercisable
more than ten years and one day after the date the option is granted. If an
employee owns or is deemed to own (by reason of the attribution rules of Section
425(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation and an Incentive
Stock Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.

Stock Options shall be exercisable at such future time or times, whether or
not in installments, as shall be determined by the Committee at or after the
grant date. The Committee may at any time accelerate the exercisability of all
or any portion of any Stock Option.

(d) Method of Exercise.

Stock Options may be exercised in whole or in part, by giving written
notice of exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the purchase
price, either by certified or bank check or other instrument acceptable to the
Committee. As determined by the Committee, in its discretion, at (or, in the
case of Non-Qualified Stock Options, after) grant, payment in full or in part
may also be made either (i) through the surrender by the optionee of shares of
Stock not then subject to

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<PAGE>

restrictions under any Company plan or (ii) through the withholding by the
Company of shares of Stock which would otherwise be delivered to the optionee
upon exercise of the option. Such surrendered or withheld shares shall be
valued at Fair Market Value on the exercise date. An optionee shall have the
rights of a shareholder only as to shares acquired upon the exercise of a Stock
Option and not as to unexercised Stock Options. In the case of a participant
subject to the restrictions of Section 16(b) of the Act no exercise involving
payment through withholding of shares as described in (ii) above shall be
effective unless made in compliance with any applicable requirements of Rule
16b-3(e) or any successor Rule under the Act.

Notwithstanding the foregoing paragraph, during the 60-day period following
a Change of Control as defined in Exhibit A, any optionee shall have the right
(by giving written notice to the Company in form satisfactory to the Committee)
to surrender all or part of the Stock Option to the Company and to receive a
cash payment equal to the excess of the fair market value per share of Stock on
the date of exercise over the option exercise price per share times the number
of shares subject to the surrendered Stock Option. The foregoing right shall not
apply to (i) any Stock Option as to which the Committee shall expressly exclude
such right at the date of grant, (ii) any Stock Option which has been held for
less than six months by a participant subject to the restrictions of Section
16(b) of the Act, (iii) any Stock Option held by an optionee who initiates the
Change of Control or (iv) any Stock Option held by an optionee described in any
of the following provisions of the definition of Change of Control set forth in
Exhibit A: the proviso to paragraph (a) of such definition; the proviso to
paragraph (b) of such definition; or the first proviso to paragraph (d) of such
definition. For purposes of clause (iv) of the immediately preceding sentence,
whether an optionee is described in any of the provisos specified in such clause
shall be determined without regard to any discretionary determination by the
Committee pursuant to the terms of Exhibit A hereto. As used in this paragraph
with respect to an election by an optionee to receive cash in respect of a Non-
Qualified Stock Option the term "fair market value" shall mean the higher of (x)
the highest reported sales price, regular way, of a share of the Stock on the
New York Stock Exchange Composite Transactions Index during the 60-day period
prior to the Change of Control and (y) if the Change of Control is the result of
a transaction or series of transactions described in paragraphs (a), (b) or (d)
of the definition of Change of Control set forth in Exhibit A, the highest price
per share of the Stock paid in such transaction or series of transactions (which
in the case of paragraph (b) shall be the highest price per share of the Stock
as reflected in a Schedule 13D filed by the person having made the acquisition),
and as used in this paragraph with respect to an election by an optionee to
receive cash in respect of an Incentive Stock Option the term "fair market
value" shall mean Fair Market Value.

(e) Non-transferability of Options.

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<PAGE>

No Stock Option shall be transferable by the optionee otherwise then by
will or by the laws of descent and distribution, and all Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee.

(f) Termination by Death.

If an optionee's employment by the Company and its Subsidiaries terminates
by reason of death, the Stock Option may thereafter be exercised, to the extent
then exercisable (or on such accelerated basis as the Committee shall at any
time determine prior to death), by the legal representative or legatee of the
optionee, for a period of three years (or such shorter period as the Committee
shall specify at time of grant) from the date of death or until the expiration
of the stated term of the option, if earlier.

(g) Termination by Reason of Disability.

Any Stock Option held by an optionee whose employment by the Company and
its Subsidiaries has terminated, or who has been designated an inactive
employee, by reason of Disability may thereafter be exercised to the extent it
was exercisable at the time of the earlier of such termination or such
designation (or on such accelerated basis as the Committee shall at any time
determine prior to such termination or designation) for a period of three years
(or such shorter period as the Committee shall specify at time of grant) from
the date of such termination of employment or designation or until the
expiration of the stated term of the option, if earlier. Except as otherwise
provided by the Committee at the time of grant, the death of an optionee during
the final year of such exercise period shall extend such period for one year
following death, subject to termination on the expiration of the stated term of
the option, if earlier. The Committee shall have the authority to determine
whether a participant has been terminated or designated an inactive employee by
reason of Disability.

(h) Termination by Reason of Normal Retirement.

If an optionee's employment by the Company and its Subsidiaries terminates
by reason of Normal Retirement, any Stock Option held by such optionee may
thereafter be exercised to the extent that it was then exercisable (or on such
accelerated basis as the Committee shall at any time determine) for a period of
three years (or such shorter period as the Committee shall specify at time of
grant) from the date of Normal Retirement or until the expiration of the stated
term of the option, if earlier. Except as otherwise provided by the Committee at
the time of grant, the death of an optionee during the final year of such
exercise period shall extend such period for one year following death, subject
to earlier termination on the expiration of the stated term of the option, if
earlier.

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<PAGE>

(i) Other Termination.

Unless otherwise determined by the Committee, if an optionee's employment
by the Company and its Subsidiaries terminates for any reason other than death,
Disability, Normal Retirement, or for Cause, any Stock Option held by such
optionee may thereafter be exercised to the extent it was exercisable on the
date of termination of employment (or on such accelerated basis as the Committee
shall determine at or after grant) for a period of three months (or such longer
period up to three years as the Committee shall specify at or after grant) from
the date of termination of employment or until the expiration of the stated term
of the option, if earlier. If an optionee's employment terminates for Cause, the
unexercised portion of any Stock Option then held by the optionee shall
immediately terminate.

(j) Form of Settlement.

Subject to Section 16(a) and Section 16(c) below, shares of Stock issued
upon exercise of a Stock Option shall be free of all restrictions under the
Plan, except as provided in the following sentence. The Committee may provide at
time of grant that the shares to be issued upon the exercise of a Stock Option
shall be in the form of Restricted Stock or Deferred Stock, or may reserve the
right to so provide after time of grant.

SECTION 7. STOCK APPRECIATION RIGHTS; DISCRETIONARY PAYMENTS.

(a) Nature of Stock Appreciation Right.

A Stock Appreciation Right is an Award entitling the recipient to receive
an amount in cash or shares of Stock (or in a form of payment permitted under
paragraph (e) below) or a combination thereof having a value equal to (or if the
Committee shall so determine at time of grant, less than) the excess of the Fair
Market Value of a share of Stock on the date of exercise over the Fair Market
Value of a share of Stock on the date of grant (or over the option exercise
price, if the Stock Appreciation Right was granted in tandem with a Stock
Option) multiplied by the number of shares with respect to which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.

(b) Grant and Exercise of Stock Appreciation Rights.

Stock Appreciation Rights may be granted in tandem with, or independently
of, any Stock Option granted under the Plan. In the case of a Stock Appreciation
Right granted in tandem with a Non-Qualified Stock Option, such Right may be
granted either at or after the time of the grant of such option. In the case of
a Stock Appreciation Right granted in tandem with an Incentive Stock Option,
such Right may be granted only at the time of the grant of the option.

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<PAGE>

A Stock Appreciation Right or applicable portion thereof granted in tandem
with a given Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option, except that a Stock
Appreciation Right granted with respect to less than the full number of shares
covered by a related Stock Option shall not be reduced until the exercise or
termination of the related Stock Option exceeds the number of shares not covered
by the Stock Appreciation Right.

Stock Appreciation Rights shall be subject to such terms and conditions as
shall be determined from time to time by the Committee, subject to the
following:

(i) Stock Appreciation Rights granted in tandem with Stock Options shall
be exercisable only at such time or times and to the extent that the
related Stock Options shall be exercisable.

(ii) Upon the exercise of a Stock Appreciation Right, the applicable
portion of any related Stock Option shall be surrendered.

(iii) Stock Appreciation Rights granted in tandem with a Stock Option
shall be transferable only with such Stock Option. Other Stock
Appreciation Rights shall not be transferable otherwise than by will
or the laws of descent and distribution. All Stock Appreciation
Rights shall be exercisable during the participant's lifetime only
by the participant or the participant's legal representative.

(iv) A Stock Appreciation Right granted in tandem with an Incentive Stock
Option may be exercised only when the market price of the Stock
subject to the Incentive Stock Option exceeds the exercise price of
such option.

(d) Discretionary Payments.

Notwithstanding that a Stock Option at the time of exercise shall not be
accompanied by a related Stock Appreciation Right, if the market price of the
shares subject to such Stock Option exceeds the exercise price of such Stock
Option at the time of its exercise, the Committee may, in its discretion, cancel
such Stock Option, in which event the Company shall pay to the person exercising
such Stock Option an amount equal to the difference between the Fair Market
Value of the Stock to have been purchased pursuant to such exercise of such
Stock Option (determined on the date the Stock Option is cancelled) and the
aggregate consideration to have been paid by such person upon such exercise.
Such payment shall be by check, bank draft or in Stock (or in a form of payment
permitted under paragraph (e) below) having a Fair

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<PAGE>

Market Value (determined on the date the payment is to be made) equal to the
amount of such payments or any combination thereof, as determined by the
Committee. The Committee may exercise its discretion under the first sentence of
this paragraph (d) only in the event of a written request of the person
exercising the option, which request shall not be binding on the Committee.

(e) Settlement in the Form of Restricted Shares or Rights to Receive
Deferred Stock.

Subject to Sections 16(a) and 16(c) below, shares of Stock issued upon
exercise of a Stock Appreciation Right or as a Discretionary Payment shall be
free of all restrictions under the Plan, except as provided in the following
sentence. The Committee may provide at the time of grant in the case of a Stock
Appreciation Right (and at the time of payment in the case of a Discretionary
Payment) that such shares shall be in the form of shares of Restricted Stock or
rights to acquire Deferred Stock, or in the case of a Stock Appreciation Right
may reserve the right to so provide at any time after the time of grant. Any
such shares and any shares subject to rights to acquire Deferred Stock shall be
valued at Fair Market Value on the date of exercise of the Stock Appreciation
Right or the date the Stock Option is cancelled in the case of Discretionary
Payments.

(f) Rules Relating to Exercise.

In the case of a participant subject to the restrictions of Section 16(b)
of the Act no stock appreciation right (as referred to in Rule 16b-3(e) or any
successor Rule under the Act) shall be exercised (and no request or payment
under paragraph (d) above shall be honored or made) except in compliance with
any applicable requirements of Rule 16b-3(e) or any successor rule.
Notwithstanding paragraph (a) above, in the event of such exercise (or request
and payment) during the exercise period ("window period") currently prescribed
by such rule, the Committee may prescribe, by rule of general application, such
other measure of value as it may determine but not in excess of the highest per
share closing sale price of the Common Stock reported on the New York Stock
Exchange Composite Transactions Index during such window period and, where a
Stock Appreciation Right relates to an Incentive Stock Option, not in excess of
an amount consistent with the qualification of such Stock Option as an
"incentive stock option" under Section 422A of the Code.

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<PAGE>

SECTION 8. RESTRICTED STOCK; UNRESTRICTED STOCK.

(a) Nature of Restricted Stock Award.

A Restricted Stock Award is an Award entitling the recipient to acquire
shares of Stock for a purchase price (which may be zero) equal to or less than
their par value, subject to such conditions, including a Company right during a
specified period or periods to repurchase such shares at their original purchase
price (or to require forfeiture of such shares, if the purchase price was zero)
upon participant's termination of employment, as the Committee may determine at
the time of grant.

(b) Award Agreement.

A participant who is granted a Restricted Stock Award shall have no rights
with respect to such Award unless the participant shall have accepted the Award
within 60 days (or such shorter date as the Committee may specify) following the
award date by making payment to the Company by certified or bank check or other
instrument acceptable to the Committee in an amount equal to the specified
purchase price, if any, of the shares covered by the Award and by executing and
delivering to the Company a Restricted Stock Award Agreement in such form as the
Committee shall determine.

Upon complying with paragraph (b) above, a participant shall have all the
rights of a shareholder with respect to the Restricted Stock including voting
and dividend rights, subject to nontransferability restrictions and Company
repurchase or forfeiture rights described in this Section and subject to any
other conditions contained in the Award Agreement. Unless the Committee shall
otherwise determine, certificates evidencing shares of Restricted Stock shall
remain in the possession of the Company until such shares are free of any
restrictions under the Plan.

(d) Restrictions.

Shares of Restricted Stock may not be sold, assigned, transferred, pledged
or otherwise encumbered or disposed of except as specifically provided herein.
In the event of termination of employment with the Company and its subsidiaries
for any reason such shares shall be resold to the Company at their purchase
price, or forfeited to the Company if the purchase price was zero, except as set
forth below.

(i) The Committee at the time of grant shall specify the date or dates
(which may depend upon or be related to the attainment of
performance goals and other conditions) on which the

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<PAGE>

nontransferability of the Restricted Stock and the obligation to
resell such shares to the Company shall lapse. The Committee at any
time may accelerate such date or dates and otherwise waive or,
subject to Section 13, amend any conditions of the Award.

(ii) Except as may otherwise be provided in the Award Agreement, in the
event of termination of employment by the Company and its
Subsidiaries for any reason (including death), a participant or the
participant's legal representative shall offer to resell to the
Company, at the price paid therefor, all Restricted Stock, and the
Company shall have the right to purchase the same at such price, or
if the price was zero to require forfeiture of the same, provided
that except as otherwise specified in the Award Agreement, the
Company must exercise such right of repurchase or forfeiture not
later than the 60th day following such termination of employment.

(e) Waiver, Deferral and Reinvestment of Dividends.

The Restricted Stock Award Agreement may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Stock. Unless otherwise specified in the Award Agreement, dividends will be paid
at the same time as dividends are paid with respect to shares of Stock not
subject to restrictions under the Plan.

(f) Unrestricted Stock.

The Committee may, in its sole discretion, grant (or sell at a purchase
price not to exceed par value per share) to any participant shares of Stock free
of restrictions under the Plan ("Unrestricted Stock"). Shares of Unrestricted
Stock may be granted or sold as described in the preceding sentence in respect
of past services or other valid consideration.

SECTION 9. DEFERRED STOCK AWARDS.

(a) Nature of Deferred Stock Award.

A Deferred Stock Award is an award entitling the recipient to acquire
shares of Stock without payment in one or more installments at a future date or
dates, all as determined by the Committee. The Committee may condition such
acquisition on the attainment of specified performance goals.

-13-
<PAGE>

(b) Award Agreement.

A participant who is granted a Deferred Stock Award shall have no rights
with respect to a such Award unless within 60 days of the grant of such Award or
such shorter period as the Committee may specify, the participant shall have
accepted the Award by executing and delivering to the Company a Deferred Stock
Award Agreement.

Deferred Stock Awards and all rights with respect to such Awards may not be
sold, assigned, transferred, pledged or otherwise encumbered. Rights with
respect to such Awards shall be exercisable during the participant's lifetime
only by the participant or the participant's legal representative.

(d) Rights as a Shareholder.

A participant receiving a Deferred Stock Award will have rights of a
shareholder only as to shares actually received by the participant under the
Plan and not with respect to shares subject to the Award but not actually
received by the participant. A participant shall be entitled to receive a stock
certificate for shares of Deferred Stock only upon satisfaction of all
conditions therefor specified in the Deferred Stock Award Agreement.

(e) Termination.

Except as may otherwise be provided by the Committee at any time prior to
termination of employment, a participant's rights in all Deferred Stock Awards
shall automatically terminate upon the participant's termination of employment
by the Company and its Subsidiaries for any reason (including death).

(f) Acceleration, Waiver, etc.

At any time prior to the participant's termination of employment the
Committee may in its discretion accelerate, waive, or, subject to Section 13,
amend any or all of the restrictions or conditions imposed under any Deferred
Stock Award.

(g) Payments in Respect of Deferred Stock.

Without limiting the right of the Committee to specify different terms, the
Deferred Stock Award Agreement may either make no provisions for, or may require
or permit the immediate payment, deferral or investment of amounts equal to, or
less

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<PAGE>

than, any cash dividends which would have been payable on the Deferred Stock had
such Stock been outstanding, all as determined by the Committee in its sole
discretion.

SECTION 10. PERFORMANCE UNIT AWARDS.

(a) Nature of Performance Units.

A Performance Unit Award is an award entitling the recipient to acquire
cash or shares of Stock, or a combination of cash and Stock, upon the attainment
of specified performance goals. The Committee in its sole discretion shall
determine whether and to whom Performance Unit Awards shall be made, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Unit. Performance Units may be awarded
independently of or in connection with the granting of any other Award under the
Plan.

(b) Award Agreement.

A participant shall have no rights with respect to a Performance Unit Award
unless within 60 days of the grant of such Award or such shorter period as the
Committee may specify, the participant shall have accepted the Award by
executing and delivering to the Company a Performance Unit Award Agreement.

Performance Unit Awards and all rights with respect to such Awards may not
be sold, assigned, transferred, pledged or otherwise encumbered, and if
exercisable over a specified period, shall be exercisable during the
participant's lifetime only by the participant or the participant's legal
representative.

(d) Rights as a Shareholder.

A participant receiving a Performance Unit Award will have rights of a
shareholder only as to shares actually received by the participant under the
Plan and not with respect to shares subject to the Award but not actually
received by the participant. A participant shall be entitled to receive a stock
certificate evidencing the acquisition of shares of Stock under a Performance
Unit Award only upon satisfaction of all conditions therefor specified in the
Performance Unit Award Agreement.

-15-
<PAGE>

(e) Termination.

Except as may otherwise be provided by the Committee at any time prior to
termination of employment, a participant's rights in all Performance Unit Awards
shall automatically terminate upon the participant's termination of employment
by the Company and its Subsidiaries for any reason (including death).

(f) Acceleration, Waiver, etc.

At any time prior to the participant's termination of employment by the
Company and its Subsidiaries, the Committee may in its sole discretion
accelerate, waive or, subject to Section 13, amend any or all of the goals,
restrictions or conditions imposed under any Performance Unit Award.

(g) Exercise.

The Committee in its sole discretion shall establish procedures to be
followed in exercising any Performance Unit, which procedures shall be set forth
in the Performance Unit Award Agreement. The Committee may at any time provide
that payment under a Performance Unit shall be made, upon satisfaction of the
applicable performance goals, without exercise by the participant. Except as
otherwise specified by the Committee, (i) a Performance Unit granted in tandem
with a Stock Option may be exercised only while the Stock Option is exercisable,
and (ii) the exercise of a Performance Unit granted in tandem with any Award
shall reduce the number of shares subject to the related Award on such basis as
is specified in the Performance Unit Award Agreement.

SECTION 11. OTHER STOCK-BASED AWARDS; SUPPLEMENTAL GRANTS.

(a) Nature of Awards.

The Committee may grant other Awards under which Stock is or may in the
future be acquired ("Other Stock-based Awards"). Such awards may include,
without limitation, securities (including shares of Preferred Stock not
exceeding in the aggregate 500,000 shares) convertible into or exchangeable for
shares of Stock upon such conditions, including attainment of performance goals,
as the Committee shall determine. Subject to the purchase price limitations in
paragraph (b) below, such convertible or exchangeable securities may have such
terms and conditions as the Committee may determine at the time of grant.
However, no convertible or exchangeable debt or preferred stock shall be issued
unless the Committee shall have provided (by Company right of repurchase, right
to require conversion or exchange or other means deemed appropriate by the
Committee) a means of avoiding any right of the holders of such debt or
Preferred Stock to prevent a Company transaction by reason of covenants in such
debt or voting rights in such Preferred Stock.

-16-
<PAGE>

(b) Purchase Price; Form of Payment.

The Committee may determine the consideration, if any, payable upon the
issuance or exercise of an Other Stock-based Award, subject to the following
conditions. No equity security other than Stock may be issued pursuant to an
Other Stock-based Award unless (i) issued at no cost to the recipient (or for a
purchase price not in excess of the par value of any preferred stock so issued)
or (ii) sold by the Company and the Company shall have received payment for such
equity security equal to at least 50% of its par value on the grant or issuance
date, as determined in good faith by the Committee. In addition, no shares of
Stock (whether acquired by purchase, conversion or exchange or otherwise) shall
be issued unless (i) issued at no cost to the recipient (or for a purchase price
not in excess of the par value of the Stock) or (ii) sold, converted or
exchanged by the Company, and the Company shall have received payment for such
Stock or securities so exchanged or converted equal to at least 50% of Fair
Market Value of the Stock on the grant or effective date, or the exchange or
conversion date, under the Award, as specified by the Committee. The Committee
may permit payment by certified check or bank check or other instrument
acceptable to the Committee or by surrender of other shares of Stock (excluding
shares then subject to restrictions under the Plan).

The Committee may determine the conditions under which an Other Stock-based
Award shall be forfeited or, in the case of an Award involving a payment by the
recipient, the conditions under which the Company may or must repurchase such
Award or related Stock. At any time the Committee may in its sole discretion
accelerate, waive or, subject to Section 13, amend any or all of the limitations
or conditions imposed under any Other Stock-based Award.

(d) Award Agreements.

A participant shall have no rights with respect to any Other Stock-based
Award unless within 60 days after the grant of such Award (or such shorter
period as the Committee may specify) the participant shall have accepted the
Award by executing and delivering to the Company an Other Stock-based Award
Agreement.

(e) Nontransferability,

Other Stock-based Awards may not be sold, assigned, transferred, pledged or
encumbered except as may be provided in the Other Stock-based Award Agreement.
However, in no event shall any Other Stock-based Award be transferred other than

-17-
<PAGE>

by will or by the laws of descent and distribution or be exercisable during the
participant's lifetime by other than the participant or the participant's legal
representative.

(f) Rights as a Shareholder.

A recipient of any Other Stock-based Award will have rights of a
shareholder only at the time and to the extent, if any, specified by the
Committee in the Other Stock-based Award Agreement.

(g) Deemed Dividend Payments; Deferrals.

Without limiting the right of the Committee to specify different terms at
or after grant, an Other Stock-based Award Agreement may require or permit the
immediate payment, waiver, deferral or investment of dividends or deemed
dividends payable on Stock subject to the Award.

(h) Supplemental Grants.

The Company may in its sole discretion make a loan to the recipient of an
Award hereunder, either on or after the date of grant of such Award. Such loans
may be made either in connection with the exercise of a Stock Option, a Stock
Appreciation Right, or an Other Stock-based Award, in connection with the
purchase of shares under any Award, or in connection with the payment of any
federal income tax in respect of income recognized under an Award. The Committee
shall have full authority to decide whether to make a loan hereunder and to
determine the amount, term and provisions of any such loan, including the
interest rate (which may be zero) charged in respect of any such loan, whether
the loan is to be secured or unsecured or with or without recourse against the
borrower, the terms on which the loan is to be repaid and the conditions, if
any, under which it may be forgiven. However, no loan hereunder shall have a
term (including extensions) exceeding ten years in duration or be in an amount
exceeding the total exercise or purchase price paid by the borrower under an
Award under the Plan plus an amount equal to the cash payment permitted in the
following paragraph.

The Committee may at any time authorize a cash payment, in respect of the
grant or exercise of an Award under the Plan or the lapse or waiver of
restrictions under an Award, which shall not exceed the amount which would be
required in order to pay in full the federal income tax due as a result of
ordinary income recognized by the recipient under both the Award and such cash
payment, in each case assuming that such income is taxed at the regular maximum
marginal rate applicable to individuals under the Code as in effect at the time
such income is includable in the recipient's income. Subject to the foregoing,
the Committee shall have complete authority to decide whether to make such cash
payments in any case,

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<PAGE>

to make provision for such payments either simultaneously with or after the
grant of the associated Award, and to determine the amount of each such payment.

SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC.

For purposes of the Plan, the following events shall not be deemed a
termination of employment:

(a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to
another;

(b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's
right to reemployment is guaranteed either by a statute or by
contract or under the policy pursuant to which the leave of
absence was granted or if the Committee otherwise so provides in
writing.

For purposes of the Plan, the employees of a Subsidiary of the Company shall be
deemed to have terminated their employment on the date on which such Subsidiary
ceases to be a Subsidiary of the Company.

SECTION 13. AMENDMENTS AND TERMINATION.

The Board may at any time amend or discontinue the Plan and the Committee
may at any time amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price, but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Award if it were then initially granted
under this Plan) for the purpose of satisfying changes in law or for any other
lawful purpose, but no such action shall adversely affect rights under any
outstanding Award without the holder's consent. However, no such amendment,
unless approved by stockholders, shall be effective if it would cause the Plan
to fail to satisfy the incentive stock option requirements of the Code or the
requirements of Rule 16b-3 or any successor rule under the Act as in effect on
the date of such amendment.

SECTION 14. STATUS OF PLAN.

With respect to the portion of any Award which has not been exercised and
any payments in cash, stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver

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<PAGE>

Stock or make payments with respect to awards hereunder, provided that the
existence of such trusts or other arrangements is consistent with the provision
of the foregoing sentence.

SECTION 15. CHANGE OF CONTROL PROVISIONS.

As used herein, a Change of Control and related definitions shall have the
meanings set forth in Exhibit A to this Plan.

Upon the occurrence of a Change of Control:

(a) Each Stock Option and Stock Appreciation Right shall automatically
become fully exercisable unless the Committee shall otherwise
expressly provide at the time of grant.

(b) Restrictions and conditions on Restricted Stock, Deferred Stock,
Performance Units and Other Stock-based Awards shall automatically
be deemed waived only if and to the extent, if any, specified
(whether at or after time of grant) by the Committee.

The Committee may at any time prior to or after a Change of Control accelerate
the exercisability of any Stock Options and Stock Appreciation Rights and may
waive restrictions, limitations and conditions on Restricted Stock, Deferred
Stock, Performance Units and Other Stock-based Awards to the extent it shall in
its sole discretion determine.

SECTION 16. GENERAL PROVISIONS.

(a) No Distribution; Compliance with Legal Requirements, etc.

The Committee may require each person acquiring shares pursuant to an Award
to represent to and agree with the Company in writing that such person is
acquiring the shares without a view to distribution thereof.

No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange requirements have
been satisfied. The Committee may require the placing of such stop-orders and
restrictive legends on certificates for Stock and Awards as it deems
appropriate.

(b) Other Compensation Arrangements; No Employment Rights.

Nothing contained in this Plan shall prevent the Board of Directors from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally

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<PAGE>

applicable or applicable only in specific cases. The adoption of the Plan does
not confer upon any employee any right to continued employment with the Company
or a Subsidiary, nor does it interfere in any way with the right of the Company
or a Subsidiary to terminate the employment of any of its employees at any time.

Each participant shall, no later than the date as of which the value of an
Award or of any Stock or other amounts received thereunder first becomes
includable in the gross income of the participant for Federal income tax
purposes, pay to the Company, or make arrangements satisfactory to the Committee
regarding payment of, any Federal, state, or local taxes of any kind required by
law to be withheld with respect to such income. The Company and its Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant.

The Committee may provide, in respect of any transfer of Stock or Preferred
Stock under an Award, that if and to the extent withholding of any Federal,
state or local tax is required in respect of such transfer, the participant may
elect, at such time and in such manner as the Committee shall prescribe, to have
the Company hold back from the transfer Stock (or Preferred Stock) having a
value calculated to satisfy such withholding obligation. Notwithstanding the
foregoing, in the case of a participant subject to the restrictions of Section
16(b) of the Act no such election shall be effective unless made in compliance
with any applicable requirements of Rule 16b-3(e) or any successor Rule under
the Act.

SECTION 17. EFFECTIVE DATE OF PLAN.

The Plan was adopted by the Board and approved by Zayre Corp. as sole
stockholder of the Company on April 6, 1989. The effective date of the Plan is
the date of the spin-off by Zayre Corp. of the stock of the Company to the
stockholders of Zayre Corp.

-21-
<PAGE>

EXHIBIT A
---------

Definition of "Change of Control"
--------------------------------

"Change of Control" shall mean the occurrence of any one of the following
events:

(a) there occurs a change of control of the Company of a nature that
would be required to be reported in response to Item 1(a) of the Current Report
on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act") or in any other filing under the Exchange Act;
provided, however, that no transaction shall be deemed to be a Change of Control
- -------- -------
as to a Participant (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 Participant or a Participant 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 as to a Participant if the Participant or a Participant Related Party
is the Person or a member of a group constituting the Person acquiring such
ownership; or

(c) there occurs any solicitation or series of solicitations of
proxies by or on behalf of any Person other than the Company's Board of
Directors and thereafter individuals who were not directors of the Company prior
to the commencement of such solicitation or series of solicitations are elected
as directors pursuant to an arrangement or understanding with, or upon the
request of or nomination by, such Person and constitute at least 1/4 of the
Company's Board of Directors; or

-22-
<PAGE>

Change of Control as to a Participant if, immediately after such transaction,
the Participant or any Participant Related Party shall own equity securities of
any surviving corporation ("Surviving Entity") having a fair value as a
percentage of the fair value of the equity securities of such Surviving Entity
greater than 125% of the fair value of the equity securities of the Company
owned by the Participant and any Participant Related Party immediately prior to
such transaction, expressed as a percentage of the fair value of all equity
securities of the Company immediately prior to such transaction (for purposes of
this paragraph ownership of equity securities shall be determined in the same
manner as ownership of Common Stock); and provided, further, that, for purposes
-------- -------
of this paragraph (d), if such agreement requires as a condition precedent
approval by the Company's shareholders of the agreement or transaction, a Change
of Control shall not be deemed to have taken place unless and until such
approval is secured (but upon any such approval, a Change of Control shall be
deemed to have occurred on the date of execution of such agreement).

In addition, for purposes of this Exhibit A the following terms have the
meanings set forth below:

"Common Stock" shall mean the then outstanding Common Stock of the Company
plus, for purposes of determining the stock ownership of any Person, the number
of unissued shares of Common Stock which such Person has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) upon the exercise of conversion rights, exchange rights, warrants or
options or otherwise. Notwithstanding the foregoing, the term Common Stock
shall not include shares of Preferred Stock or convertible debt or options or
warrants to acquire shares of Common Stock (including any shares of Common Stock
issued or issuable upon the conversion or exercise thereof) to the extent that
the Board of Directors of the Company shall expressly so determine in any future
transaction or transactions.

A Person shall be deemed to be the "owner" of any Common Stock:

(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

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<PAGE>

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.

A "Participant Related Party" shall mean, with respect to a Participant,
any affiliate or associate of the Participant other than the Company or a
Subsidiary of the Company. The terms "affiliate" and "associate" shall have the
meanings ascribed thereto in Rule 12b-2 under the Exchange Act (the term
"registrant" in the definition of "associate" meaning, in this case, the
Company).

"Participant" means a participant in the Plan.

-24-
<PAGE>

(As amended through 3/30/94)

WABAN INC.
MANAGEMENT INCENTIVE PLAN

<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<S> <C> <C>
1 Purpose 1

2 Definitions 1

3 Effective Date 2

4 Administration 2

5 Eligibility 2

6 Description of Awards 3

7 Determination of Awards 6

8 Payment of Awards 7

9 Deferral of Awards 7

10 Designation of Beneficiary 7

11 Notices 8

12 Rights of Participants 8

13 No Employment Rights 8

14 Certain Payments Upon a 9
Change of Control

15 Nonalienation of Award 9

16 Withholding Taxes 9

17 Termination, Amendment, 9
and Modification

18 Headings and Captions 9

19 Controlling Law 9

20 Miscellaneous Provisions 10

21 Definition of Change of Control 10
</TABLE>
<PAGE>

WABAN INC.
MANAGEMENT INCENTIVE PLAN

1. Purpose

The purpose of the Waban Inc. Management Incentive Plan (the "Plan") is to
provide officers and other employees who are key to the annual growth and
profitability of Waban Inc. and its subsidiaries with reward opportunities
commensurate with their performance relative to annual objectives.

2. Definitions

Unless the context requires otherwise, the following expressions as used in
the Plan shall have the meanings ascribed to each below, it being
understood that masculine, feminine and neuter pronouns are used
interchangeably, and that each comprehends the others.

(a) "Committee" shall mean the Waban Inc. Incentive Plan Committee,
consisting of the President and Chief Executive Officer of Waban Inc.,
who shall serve as the Chairman of the Committee; the Chairman of the
Board of Waban Inc.; the Director of Finance of Waban Inc.; and others
who from time to time are designated by the Chairman of the Committee
to serve as members of the Committee.

(b) "Company" shall mean Waban Inc. and its subsidiaries.

(d) "Fiscal Year" shall mean the fifty-two or fifty-three week period
ending on the last Saturday in January, and commencing on the Sunday
following the last Saturday in January of the preceding calendar year.

(e) "Participant" shall mean an officer or other employee of Waban Inc.
who is designated a participant pursuant to Section 5 below.

(f) "Performance Criteria" shall mean the standards of measurement of
Company performance and individual performance for each Performance
Period as established by the Committee and the ECC pursuant to
paragraph (a) of Section 6 below.

(g) "Performance Goals" shall mean the levels of performance with respect
to each Performance Criterion at which awards are payable pursuant to
this Plan.
<PAGE>

Performance goals are established by the Committee and the ECC
pursuant to paragraph (b) of Section 6 below.

(h) "Performance Period" shall mean one Fiscal Year.

3. Effective Date

The effective date of the Plan shall be April 6, 1989.

4. Administration

This Plan shall be administered by the ECC, taking into account
recommendations of the Committee. The ECC shall have full authority to
interpret the Plan; to establish, amend, and rescind rules for carrying out
the Plan; to administer the Plan; to determine the terms and provisions of
any agreements pertaining to the Plan; and to make all other determinations
necessary or advisable for its administration.

Any person objecting to any interpretation, rule, determination or other
action made or taken by the Committee or the ECC which affects said person
shall have the right to appeal in writing to the ECC, setting forth the
objections in reasonable detail, provided that such appeal shall be made
within 90 days after promulgation of such interpretation, rule, or other
determination, or such additional time as the ECC shall deem reasonable.

The ECC shall not be bound to any standards of uniformity or similarity of
action, interpretation or conduct in the discharge of its duties hereunder,
regardless of the apparent similarity of the matters coming before the ECC.
Its determination shall be binding on all parties.

No member or former member of the Committee, the ECC, or the Board of
Directors of the Company shall be liable for any action or determination
made in good faith with respect to the Plan or any award or payment made
under the Plan.

5. Eligibility

For each Performance Period, the ECC shall designate, based upon
recommendations of the Committee, Participants to receive annual management
incentive awards, subject to the terms and conditions of the Plan.
Participants in the Plan shall be key employees of the Company, including
<PAGE>

such executives and other full time employees of the Company as the ECC
shall, at any time, designate as Participants for said Performance Period.

The Chairman of the Board of Waban Inc. is specifically excluded from
participation in this Plan.

6. Description of Awards

(a) Designation of Performance Criteria

At the commencement of each Performance Period, the Committee shall
recommend, for the ECC's approval, one or more Performance Criteria
for said Performance Period and the relative weight to be given to
each Performance Criterion. Performance Criteria and the weighting
thereof may vary by Participant and may be different for different
Performance Periods. Such Performance Criteria shall include only the
following measures: operating income, pre-tax income, net income,
gross profit dollars, costs, any of the preceding measures as a
percent of sales, earnings per share, sales, return on equity, and
return on investment.

(b) Performance Goals

At the commencement of each Performance Period, the Committee shall
establish a range of Performance Goals from minimum to target to
maximum for each Performance Criterion for said Performance Period.

Performance Goals may vary by Participant and may be different for
different Performance Periods.

At any time designated by the ECC during a Performance Period or
thereafter, but prior to award payment, appropriate adjustments in the
Performance Goals may be made to avoid undue windfalls or hardships
due to external conditions outside the control of management,
nonrecurring or abnormal items, changes in accounting practices or
such other matters as the Committee shall, in its sole discretion,
determine, subject to paragraph (d) below.

Performance Goals and any adjustments thereto shall be reported to the
<PAGE>

ECC. The ECC shall have the right at its election to reject any
Performance Goals or adjustments and direct reconsideration by the
Committee.

At the commencement of each Performance Period, the Committee shall
assign to each Participant the minimum, target, and the maximum award
opportunity to be earned for said Performance Period based upon the
Participant's position and ability to impact annual performance
relative to goals during the Performance Period. Said award
opportunity is subject to the approval of the ECC. Award opportunity
may be expressed as a fixed amount or as a percentage of the
Participant's base salary earned for the Performance Period. No
individual award opportunity shall exceed 100% of the Participant's
annualized base salary at the commencement of the applicable
Performance Period.

From time to time, discretionary awards, in addition to the annual
management incentive awards, may be made by the Committee to any
Participant due to outstanding performance or extraordinary
circumstances which occur during the Performance Period. No
discretionary award shall be made to any Participant whose
compensation is subject to the approval of the ECC, unless such award
shall be approved by the ECC. All discretionary awards shall be
reported to the ECC for each Performance Period.

(d) Adjustments to Performance Goals for Certain Officers

The Committee shall make no adjustments to the Performance Goals whose
effect is to increase the incentive payment to the Chief Executive
Officer or to other executive officers as of the end of the fiscal
year who are named in the proxy statement, except for the following:

1) Events classified as extraordinary items or discontinued
operations or presented as special nonrecurring charges (or
income) in accordance with generally accepted accounting
principles.
<PAGE>

2) Disposal of a business segment or a group of two or more
warehouse stores, a major administrative unit, or major assets,
if quantified and disclosed in Management's Discussion and
Analysis of Financial Condition and Results of Operations of the
Company's Annual Report on Form 10-K.

3) Conversion of convertible bonds or preferred stock convertible
into common stock; a repurchase by the Company of a large number
of outstanding shares of stock, if it has material impact on the
performance that is being measured; or an increase in the number
of shares of common stock for earnings per share calculation
purposes due to a new equity or convertible debenture offering,
but not by exercise of stock options, restricted stock or other
stock-based awards under the Company's 1989 Stock Incentive Plan.

4) Balance sheet recapitalization or restructuring that materially
alters the allocation between debt and equity for a division.

5) Changes in accounting practice to comply with new legislation or
with rules promulgated by the Securities and Exchange Commission
or the Financial Accounting Standards Board and changes in tax
laws that affect tax rates, credits, or the definition of taxable
income, if material.

6) Unusual and material losses beyond the Company's control, such as
acts of God, (e.g., earthquake or widespread hurricane damage).

7) Reserves for future period events which will not occur until
after the performance measurement period.

8) Adjustments attributable to prior periods in the case of a newly
acquired business.

9) Adjustments of goals made immediately after completion by the
Company's independent public accountants of the audit of the
Company's financial statements for the fiscal year immediately
preceding the Performance Period, made solely to "true-up" goals
that were based on estimated results for said preceding year.

10) Gains and losses from sales of a minority interest in a
<PAGE>

subsidiary.

11) Net incremental expense incurred by a division as a result of
opening new warehouse stores in excess of the number incorporated
in the Performance Goals. The amount of the adjustment shall be
equal to the average operating loss incurred by new warehouse
stores opened by the same division in the same fiscal year.

In no event, however, shall the Committee make any adjustment which
would cause incentive awards not to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code.

7. Determination of Awards

(a) Upon completion of each Performance Period and certification of the
Company's financial statements by the Company's independent public
accountants for the Fiscal Year included in such Performance Period,
the ECC will review performance relative to Performance Goals, as
adjusted from time to time in accordance with paragraph (b) of Section
6 above, and determine the value of the awards for each Performance
Period.

Achievement of all Performance Goals will result in payment of a
Participant's target award. Failure to achieve Performance Goals will
result in a decrease or elimination of the Participant's award.
Exceeding performance goals will result in an award greater than the
target award but not greater than the maximum award.

(b) If an employee becomes a Participant after the beginning of a
Performance Period, the award payable to such employee will be
prorated in accordance with the portion of the Performance Period
during which such employee is a Participant.

(c) In the event of termination of employment of a Participant for any
reason prior to the last day of the Performance Period, a Participant
shall have no further rights under the Plan thereafter and shall not
be entitled to payment of any award.

If termination of employment occurs (i) by reason of death, (ii) due
to normal retirement under a retirement plan of the Company, or (iii)
<PAGE>

due to early retirement after age 55 with the consent of the Company,
the ECC may, in its sole discretion, value and direct that some
portion of the award be deemed earned and payable, taking into account
the duration or employment during the Performance Period, the
Participant's performance, and such other matters as the ECC shall
deem appropriate.

In the event of termination of employment for cause, as defined and
determined by the ECC in its sole discretion, no payment shall be made
with regard to any prior or current Performance Period.

(d) If a Participant shall be actively employed less than a full
Performance Period because of an accident or illness but shall
complete 26 weeks of active employment during said Performance Period,
the incentive award otherwise payable to said Participant for said
Performance Period shall not be reduced because of a failure of active
employment because of such accident or illness.

If a Participant shall be actively employed less than a full
Performance Period because of an accident or illness and shall not
complete 26 weeks of active employment during said Performance Period,
said Participant shall receive such incentive award, if any, for said
Performance Period as the Committee shall determine, subject to
approval by the ECC. The time during which a Participant receives
sick leave and/or vacation payments shall be deemed active employment
time. Time during which a Participant receives short-term income
protection, short-term disability and/or long-term disability payments
shall not be deemed active employment time.

8. Payment of Awards

As soon as practicable after valuation of the award for each Performance
Period, payment will be made in cash with respect to the award earned by
each Participant.

9. Deferral of Awards

Participants who are designated by the ECC as being eligible to participate
in the Waban Inc. General Deferred Compensation Plan may elect to defer all
<PAGE>

or a portion of their awards in accordance with the terms of such General
Deferred Compensation Plan.

10. Designation of Beneficiary

(a) Subject to applicable law, each Participant shall have the right to
file with the Company, to the attention of the ECC or the Committee, a
written designation of one or more persons as the beneficiary who
shall be entitled to receive the amount, if any, payable under the
Plan upon his death. A Participant may from time to time revoke or
change the beneficiary by filing a new designation with the ECC or the
Committee. The last such designation received by the ECC or the
Committee shall be controlling, provided, however, that no
designation, change, or revocation thereof shall be effective unless
received by the ECC or the Committee prior to the Participant's death,
and in no event shall it be effective as of a date prior to receipt.

(b) If no such beneficiary designation is in effect at the time of a
Participant's death, or if no designated beneficiary survives the
Participant, or if such designation conflicts with law, the payment of
the amount, if any, payable under the Plan upon the Participant's
death shall be made to the Participant's estate by the Committee. If
the Committee is in doubt as to the right of any person to receive any
amount, the Committee may retain such amount, without liability for
any interest thereon, until the rights thereto are determined, or the
Committee may pay such amount into any court of appropriate
jurisdiction, and such payment shall be a complete discharge of the
liability of the Plan, the Company, the Committee and the ECC
therefor.

11. Notices

Each Participant whose employment relationship with the Company has
terminated, either voluntarily or involuntarily, shall be responsible for
furnishing the Committee or the Vice President-Finance of Waban Inc. with
the current and proper address for mailing of notices and the delivery of
agreements and payments. Any notice required or permitted to be given
shall be deemed given if directed to the person to whom addressed at such
address and mailed by regular United States mail, first-class and prepaid.
<PAGE>

If any item mailed to such address is returned undeliverable to the
addressee, mailing will be suspended until the Participant furnishes the
proper address.

12. Rights of Participants

Nothing contained in the Plan and no action taken pursuant to the Plan
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and any Participant or such Participant's
legal representative or designated beneficiary, or other persons.

If and to the extent that any Participant or his legal representative or
designated beneficiary, as the case may be, acquires a right to receive any
payment from the Company pursuant to the Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company.

13. No Employment Rights

Nothing in this Plan or any other document describing or referring to this
Plan shall be deemed to confer on any Participant the right to continue in
the employ of the Company or affect the right of the Company to terminate
the employment of any such person with or without cause.

14. Certain Payments Upon a Change of Control

If, upon a Change of Control (as defined in Section 21 below) of the
Company, amounts payable or that would or might be payable in respect of an
individual under the Plan instead are paid to such individual or such
individual's estate or beneficiary pursuant to any change of control
severance plan or agreement, or any similar plan, agreement or arrangement
to which the Company is a party, payments in respect of such individual
hereunder shall be reduced pro tanto.

15. Nonalienation of Award

No amounts payable or other rights under the Plan shall be sold,
<PAGE>

transferred, assigned, pledged, or otherwise disposed of or encumbered by a
Participant, except as provided herein, nor shall they be subject to
attachment, garnishment, execution, or other creditor's processes.

16. Withholding Taxes

The Company shall have the right to deduct withholding taxes from any
payments made pursuant to the Plan, or make such other provisions as it
deems necessary or appropriate to satisfy its obligations for withholding
federal, state, or local income or other taxes from payments to the
Participant.

17. Termination, Amendment, and Modification

The Committee, ECC or the Board of Directors may from time to time amend,
modify, or discontinue the Plan or any provision hereof. No amendment to
or discontinuance or termination of the Plan shall, without the written
consent of the Participant, adversely affect any rights of such Participant
that have vested. This Plan shall continue until terminated by the
Committee, ECC or the Board of Directors of the Company.

18. Headings and Captions

The headings and captions herein are provided for reference and convenience
only, shall not be considered part of the Plan, and shall not be employed
in the construction of the Plan.

19. Controlling Law

This Plan shall be construed and enforced according to the laws of the
Commonwealth of Massachusetts, to the extent not preempted by Federal law,
which shall otherwise control.

20. Miscellaneous Provisions

(a) All costs and expenses involved in administering the Plan as provided
herein, or incident thereto, shall be borne by the Company.
<PAGE>

(b) If any Participant shall also participate in other annual incentive
plans of the Company, the ECC shall determine the amount, if any, by
which such Participant's award under the Plan shall be adjusted, so as
to coordinate the benefits under this Plan with the other plans.

(c) The Committee or the ECC may, in its sole discretion, reduce or
eliminate awards granted or money payable to any Participant or all
Participants if it determines that such awards or payments may cause
the Company to violate any applicable law, regulation, controls, or
guidelines. Such reduction or elimination may be made notwithstanding
that the possible violation might be eliminated by reducing or not
increasing compensation or benefits of other associates, it being the
intent of the Plan not to inhibit the discretion of the Company to
provide such forms and amounts of compensation and benefits to
employees as it deems advisable.

21. 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"); provided, however, that no
-------- -------
transaction shall be deemed to be a Change of Control as to a Participant
(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 ECC shall otherwise determine prior to such occurrence, if the
Participant or a Participant Related Party is the Person or a member of a
group constituting the Person acquiring control; or

least 1/4 of the Company's Board of Directors; provided, however, that
-------- -------
unless the ECC shall otherwise determine prior to the acquisition of such
20% ownership, such acquisition of ownership shall not constitute a Change
of Control as to a Participant if the Participant or a Participant Related
Party is the Person or a member of a group constituting the Person
acquiring such ownership; or

(c) there occurs any solicitation or series of solicitations of
proxies by or on behalf of any Person other than the Company's Board of
Directors and thereafter individuals who were not directors of the Company
prior to the commencement of such solicitation or series of solicitations
are elected as directors pursuant to an arrangement or understanding with,
or upon the request of or nomination by, such Person and constitute at
least 1/4 of the Company's Board of Directors; or

(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 ECC, no transaction shall constitute a
Change of Control as to Participant if, immediately after such transaction,
the Participant or any Participant Related Party shall own equity
securities of any surviving corporation ("Surviving Entity") having a fair
value as a percentage of the fair value of the equity securities of such
Surviving Entity greater than 125% of the fair value of the equity
securities of the Company owned by the Participant and any Participant
Related Party immediately prior to such transaction, expressed as a
percentage of the fair value of all equity securities of the Company
immediately prior to such transaction (for purposes of this paragraph
ownership of equity securities shall be determined in the same manner as
ownership of Common Stock); and provided, further, that, for purposes of
-------- -------
this paragraph (d), if such agreement requires as a condition precedent
approval by the Company's shareholders of the agreement or transaction, a
Change of Control shall not be deemed to have taken place unless and until
such approval is secured (but upon any such approval, a Change of Control
shall be deemed to have occurred on the date of execution of such
agreement).
<PAGE>

In addition, for purposes of this Section 21 the following terms have the
meanings set forth below:

A Person shall be deemed to be the "owner" of any Common Stock:

(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.

A "Participant Related Party" shall mean any affiliate or associate of the
Participant other than the Company or a Subsidiary of the Company. The terms
"affiliate" and "associate" shall have the meanings ascribed thereto in Rule
12b-2 under the Exchange Act (the term "registrant" in the definition of
"associate" meaning, in this case, the Company).

"Participant" means a participant in the Plan.
<PAGE>

WABAN INC.

GROWTH INCENTIVE PLAN

----------------

Effective as of January 30, 1994
(as amended through March 30, 1994)

WABAN INC.

GROWTH INCENTIVE PLAN

----------------

TABLE OF CONTENTS

----------------

<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
ARTICLE 1. DEFINITIONS.............................. 1
ARTICLE 2. BENEFITS UNDER THIS PLAN................. 2
ARTICLE 3. DESIGNATION OF BENEFICIARY............... 5
ARTICLE 4. PLAN ADMINISTRATION AND INDEMNIFICATION.. 5
ARTICLE 5. EFFECT ON EMPLOYMENT RIGHTS.............. 5
ARTICLE 6. CHANGE OF CONTROL........................ 5
ARTICLE 7. AMENDMENT OR TERMINATION OF PLAN......... 6
ARTICLE 8. NON-ASSIGNMENT........................... 6
ARTICLE 9. CONSTRUCTION............................. 6
ARTICLE 10. RELEVANT LAW............................. 6
</TABLE>

WABAN INC.

GROWTH INCENTIVE PLAN

----------------
<PAGE>

Waban Inc. hereby establishes the Waban Inc. Growth Incentive
Plan (the "Plan"), effective as of January 30, 1994.

W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Participants are in high-level management positions in
Waban Inc. or its subsidiaries and are key to the long-term success of the
Company;

WHEREAS, the Company desires to provide an incentive to focus the
Participants' attention and efforts on long-term growth and profitability;

NOW THEREFORE, the Company hereby adopts the Plan, as hereinafter
set forth, effective as of January 30, 1994.

* * * * * *

ARTICLE 1. DEFINITIONS. The following terms as used in this Plan
shall have the following meanings:

1.1 "Award Period" shall mean a period of a certain number of
consecutive fiscal years, as determined by the Committee in its discretion.
Award Periods may overlap and employees may participate simultaneously with
respect to more than one Award Period.

1.2 "Committee" shall mean the Executive Compensation Committee of
the Board of Directors of Waban Inc.

1.3 "Company" shall mean Waban Inc. and its subsidiaries.

1.4 "Effective Date" shall mean January 30, 1994.

1.5 "Incentive Unit" shall mean an incentive unit granted to each
Participant, the value of which equals a certain percentage of the growth in the
Incentive Measurement achieved over the Award Period, as determined by the
Committee.

1.6 "Incentive Measurement" shall mean any one or combination of the
following objective measures of performance or growth, as the Committee shall
determine: operating income, pre-tax income, net income, costs, any of the
preceding
<PAGE>

measures as a percent of sales, earnings per share, sales, return on equity,
and return on investment.

1.7 "Participant" shall mean an employee in a high-level management
position in the Company who is selected by the Committee, in its discretion, to
be a Participant in the Plan.

1.8 "Plan" shall mean the Waban Inc. Growth Incentive Plan, as herein
set forth, including any and all amendments hereto and restatements hereof.

ARTICLE 2. BENEFITS UNDER THIS PLAN.

2.1 Granting of Awards.

(a) The Grant. On or before the commencement of each Award
Period, the Committee shall determine (i) which employees shall be Participants
in the Plan, (ii) the amount of Incentive Units to be granted to each
Participant, and (iii) the method or formula for determining the value of each
Incentive Unit, based on the Incentive Measurement.

(b) Payment Dates. On or before the commencement of each Award
Period, the Committee shall determine (i) the date or dates on or about which
payment in respect of Incentive Units shall be made, and (ii) the amount of each
Participant's Incentive Units which may be redeemed on such payment dates. One
such payment date shall occur at some time within three (3) months after the end
of the Award Period and other date(s) may occur one (1) or more years after such
date (the "Deferred Payment Date").

2.2 Value of Incentive Units. On or before the commencement of each
Award Period, the Committee shall determine (i) the factor(s) comprising the
Incentive Measurement, and (ii) the Incentive Measurement's base value, i.e.,
the value against which growth shall be measured. Notwithstanding the prior
sentence, the Incentive Measurement's base value may be appropriately adjusted
by the Committee, pursuant to Section 2.5(i) hereof, after the certification of
the Company's financial statements by the Company's independent public
accountant for the fiscal year immediately preceding the commencement of the
Award Period. In the Committee's discretion, Incentive Measurements may vary
with respect to Incentive Unit grants made to individual Participants or groups
<PAGE>

of Participants.

2.3 Award Opportunity. Upon the completion of each Award Period and
the certification of the Company's financial statements by the Company's
independent public accountant for the last fiscal year in said Award Period,
the Committee shall cause to be re-valued the Incentive Measurement in order to
determine the growth over the Incentive Measurement's base value and, thus, the
value of each Incentive Unit.

Notwithstanding anything to the contrary herein contained or implied,
the Committee may make appropriate adjustments to the value of the Incentive
Measurement to avoid undue windfalls or hardships due to external conditions
outside the control of management, nonrecurring or abnormal items, changes in
accounting practices, or such other matters as the Committee, in its discretion,
shall determine; however, the Committee shall make no adjustments to the
performance criteria whose effect is to increase the growth incentive payment to
the Chief Executive Officer or to other executive officers as of the end of the
year who are named in the proxy statement, except as provided in Section 2.5
hereof.

2.4 Payment of Awards.

(a) Employees on Last Day of Award Period or Deferred Payment
Date. Participants employed by the Company on the last day of the Award Period
shall be entitled to receive payment (to the extent not deferred) as soon as
practicable thereafter; Participants employed on the Deferred Payment Date shall
be entitled to receive payment of deferred amounts, if applicable, as soon as
practicable thereafter. Notwithstanding anything to the contrary herein
contained or implied, in no event shall a Participant's incentive payment for an
Award Period exceed 300% of such Participant's annualized base salary at the
beginning of the Award Period.

(b) Termination of Employment in the Event of Death, Disability
or Retirement. If the termination of employment occurs before the end of the
Award Period due to: (i) death, (ii) disability (as defined under the Company's
long-term disability plan), or (iii) retirement on or after the attainment of
<PAGE>

age fifty-five (55), the Participant shall be entitled to pro rated payment in
respect of Incentive Units, determined as of the end of the fiscal year in
which occurs the Participant's death, disability or retirement. Payment shall
be made as soon as practicable following the end of the fiscal year in which
death, disability or retirement has occurred. In the event of termination of
employment due to death, disability or retirement after the end of the Award
Period and prior to a Deferred Payment Date, payment with respect to any
outstanding deferred payment amount shall be made as soon as practicable after
such termination.

(c) Termination of Employment for any Reason Other than Death,
Disability or Retirement. In the event of the Participant's termination of
employment for any reason other than death, disability or retirement prior to
the end of the Award Period, the Participant shall have no rights under the Plan
and shall not be entitled to receive payment with respect to any Incentive Unit.
In the event of the Participant's termination of employment for any reason other
than death, disability or retirement prior to a Deferred Payment Date, the
Participant shall not be entitled to receive payment with respect to any
outstanding deferred payment amount. In the event of termination of employment
for cause, as determined by the Committee in its discretion, no payment shall be
made with respect to any Incentive Unit.

2.5 Restrictions on Adjustments to Performance Criteria. The
Committee shall make no adjustments to the performance criteria whose effect is
to increase the growth incentive payment to the Chief Executive Officer or to
other executive officers as of the end of the year who are named in the proxy
statement, except for the following:

(a) Events classified as extraordinary items or discontinued
operations or presented as special nonrecurring charges (or income) in
accordance with generally accepted accounting principles.

(b) Disposal of a business segment or a group of two or more
warehouse stores, a major administrative unit, or major assets, if quantified
and disclosed in Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company's Annual Report on Form 10-K.

(c) Conversion of convertible bonds or convertible preferred
stock into common stock; a repurchase by the Company of a large number of
<PAGE>

outstanding shares of stock, if it has material impact on the performance that
is being measured; or an increase in the number of common shares for earnings
per share calculation purposes due to a new equity or convertible debenture
offering, but not by stock options, restricted stock or other stock-based
awards under the Company's 1989 Stock Incentive Plan.

(d) Balance sheet recapitalization or restructuring that
materially alters the allocation between debt and equity for a division.

(e) Changes in accounting practice to comply with new
legislation or with rules promulgated by the S.E.C. or the F.A.S.B. and
changes in tax laws that affect tax rates, credits, or the definition of
taxable income, if material.

(f) Unusual and material losses beyond the Company's control,
such as acts of God (e.g., earthquake or widespread hurricane damage).

(g) Reserves for future period events which will not occur
until after the performance measurement period.

(h) Adjustments attributable to prior periods in the case of
a newly acquired business.

(i) Adjustments of the Incentive Measurement's base value made
immediately after completion of the audit of the fiscal year immediately
preceding the performance period, made solely to "true-up" amounts that were
based on estimated results for said preceding year.

(j) Gains and losses from sales of a minority interest in a
subsidiary.

(k) Net incremental expense incurred by a division as a result
of opening new warehouse stores in excess of the number incorporated in the
performance criteria. The amount of the adjustment shall be equal to the average
operating loss incurred by new warehouse stores opened by the same division in
the same fiscal year.

In no event, however, shall the Committee make any adjustment which
would cause incentive awards not to qualify as performance-based compensation
under Section 162(m) of the Internal Revenue Code.
<PAGE>

ARTICLE 3. DESIGNATION OF BENEFICIARY. Each Participant shall have
the right to file with the Committee a written designation of one or more
persons as beneficiary(ies) who shall be entitled to receive the amount, if any,
payable under the Plan upon the Participant's death. A Participant may modify
the beneficiary designation by filing a new designation with the Committee. The
last such designation received by the Committee shall be controlling, provided,
--------
however, that no designation or modification thereof shall be effective unless
- -------
received by the Committee prior to the Participant's death.

If no such beneficiary designation is in effect at the time of a
Participant's death, or if no designated beneficiary survives the Participant,
the amount payable under the Plan upon the Participant's death shall be made to
the Participant's surviving spouse; if there is no surviving spouse, payment
shall be made to the Participant's estate.

ARTICLE 4. PLAN ADMINISTRATION AND INDEMNIFICATION.

4.1 Plan Administration. This Plan shall be administered by the
Committee. The Committee shall have full authority to interpret the Plan; to
establish, amend, and rescind rules for carrying out the Plan; to interpret the
terms and provisions of the Plan; and to make all other determinations necessary
or advisable for its administration. The Committee's determination shall be
final and binding on all parties.

4.2 Indemnification. The Company shall indemnify and save harmless
each member of the Committee against all expenses and liabilities arising out of
membership on such Committee, excepting only expenses and liabilities arising
from such member's own gross negligence or willful misconduct, as determined by
the Board of Directors or outside counsel designated by the Board of Directors.

ARTICLE 5. EFFECT ON EMPLOYMENT RIGHTS. This Plan shall not
constitute an employment contract and nothing contained in this Plan shall
confer upon the Participant the right to be retained in the service of the
Company nor limit the right of the Company to discharge or otherwise deal with
the Participant without regard to the existence of this Plan.
<PAGE>

ARTICLE 6. CHANGE OF CONTROL. In the event of the merger, sale,
consolidation, dissolution, liquidation, or Change of Control of the Company (as
defined

in the Change of Control Severance Benefit Plan for Key Employees), the
Committee shall thereupon cause to be re-valued the Incentive Measurement, in
the manner described herein, and shall provide that Incentive Units be redeemed
as soon as practicable thereafter in lieu of payments that would otherwise be
made under Article 2 hereof, regardless of when the end of the Award Period or
Deferred Payment Date is scheduled to occur. Such re-valuation of the Incentive
Measurement shall be determined based on (i) the Company's actual performance or
growth with respect to those fiscal years within the Award Period which have
ended prior to the merger, sale, consolidation, dissolution, liquidation, or
Change of Control, plus (ii) for the fiscal year in which occurs the merger,
sale, consolidation, dissolution, liquidation, or Change of Control, the
Company's projected performance or growth as provided in the fiscal year's
financial plan (as presented to the Company's Board of Directors at the
beginning of the fiscal year) pro rated based on the number of days in said
fiscal year preceding the merger, sale, consolidation, dissolution, liquidation,
or Change of Control.

ARTICLE 7. AMENDMENT OR TERMINATION OF PLAN. The Plan may be
amended, suspended or terminated in whole or in part at any time and from time
to time by the Committee. No such amendment, suspension or termination shall
retroactively impair or otherwise adversely affect the rights of any Participant
to benefits under this Plan if the end of the Award Period has occurred prior to
the date of such amendment, suspension or termination.

ARTICLE 8. NONASSIGNMENT. The right to benefits hereunder shall not
be assignable, and the Participant shall not be entitled to have such payments
commuted or made otherwise than in accordance with the provisions of the Plan.

ARTICLE 9. CONSTRUCTION.

9.1 Heading and Captions. The headings and captions herein are
provided
<PAGE>

for reference and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.

9.2 Singular Includes Plural. Except where otherwise clearly
indicated by context, the singular shall include the plural, and vice-versa.

ARTICLE 10. RELEVANT LAW. This Plan shall be construed and enforced
in accordance with the laws of the Commonwealth of Massachusetts to the extent
such laws are not preempted by federal law.