HOMEBASE INC, DEF 14A, 1999-04-27

HOMEBASE INC
DEF 14A, 1999-04-27
LUMBER & OTHER BUILDING MATERIALS DEALERS

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<PAGE>

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [_]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

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

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

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

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[_] 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:

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

(2) Aggregate number of securities to which transaction applies:

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

(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):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[_] 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.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:
<PAGE>

HOMEBASE(R), INC

3345 Michelson
Drive
Irvine, CA
92612

April 27, 1999

Dear Stockholder:

We invite you to attend our 1999 Annual Meeting of Stockholders on Thursday,
June 3, 1999 at 10:00 a.m. PDT at the offices of Gibson, Dunn & Crutcher LLP,
14th Floor, 4 Park Plaza, Irvine, California 92614.

At this meeting, you are being asked to elect two directors in Proposal 1,
to re-approve the Company's Management Incentive Plan in Proposal 2 and to re-
approve the Company's Growth Incentive Plan in Proposal 3. Your vote is
important regardless of the number of shares you own. Accordingly, we urge you
to read the proxy statement and to vote your proxy promptly in accordance with
the instructions on your proxy card.

We hope that you will join us on June 3rd.

Sincerely,

/s/ Allan P. Sherman /s/ Herbert J. Zarkin

Allan P. Sherman Herbert J. Zarkin
President and Chief Executive Officer Chairman of the Board
<PAGE>

HOMEBASE(R), INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

June 3, 1999

The Annual Meeting of Stockholders of HomeBase, Inc. (the "Company") will be
held at the offices of Gibson, Dunn & Crutcher LLP, 14th Floor, 4 Park Plaza,
Irvine, California 92614, on Thursday, June 3, 1999 at 10:00 a.m. PDT for the
following purposes:

1. To elect two directors to serve until the 2002 Annual Meeting of
Stockholders;

2. To re-approve the Company's Management Incentive Plan ("MIP") so that
compensation paid under the MIP will continue to be fully deductible by
the Company for Federal Income Tax purposes;

3. To re-approve the Company's Growth Incentive Plan ("GIP") so that
compensation paid under the GIP will continue to be fully deductible by
the Company for Federal Income Tax purposes; and

4. To transact any other business which may properly be brought before the
meeting.

Stockholders of record at the close of business on April 5, 1999 are
entitled to notice of and to vote at the meeting and any adjournments thereof.
A list of stockholders entitled to vote at the meeting will be open to
examination by stockholders during normal business hours for the ten-day
period preceding the meeting at the offices of Gibson, Dunn & Crutcher LLP, 4
Park Plaza, Irvine, California 92614.

By Order of the Board of
Directors

John L. Price
Secretary

Irvine, California
April 27, 1999

PLEASE SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD, OR YOU
MAY VOTE YOUR PROXY BY TELEPHONE OR ON THE INTERNET IN ACCORDANCE WITH
THE INSTRUCTIONS ON YOUR CARD.
<PAGE>

HOMEBASE, (R) INC.

ANNUAL MEETING OF STOCKHOLDERS

June 3, 1999

PROXY STATEMENT

The enclosed proxy is solicited on behalf of the Board of Directors of
HomeBase, Inc. (the "Company"). Unless instructions to the contrary are given,
shares represented by duly completed proxies will be voted for the election of
the two nominees set forth below and in favor of the other two proposals. Any
proxy may be revoked prior to the voting thereof by a written revocation
received by the Secretary of the Company at its address set forth below, the
receipt of a later dated proxy, or by a request at the meeting that the proxy
be revoked.

Stockholders of record at the close of business on April 5, 1999 are
entitled to receive notice of and to vote at the meeting. Each share of Common
Stock, par value $.01, of the Company (the "Common Stock") outstanding on the
record date is entitled to one vote. As of the close of business on April 5,
1999, there were outstanding and entitled to vote 37,881,636 shares of Common
Stock.

This Proxy Statement, the enclosed proxy and the Annual Report for the
Company's fiscal year ended January 30, 1999 ("fiscal 1998") were first mailed
to stockholders on or about the date of the Notice of Meeting. The Company's
address is 3345 Michelson Drive, Irvine, California 92612.

Vote Required

Under the Company's by-laws, so long as a quorum is present at the meeting,
the election of directors will require the affirmative vote of the holders of
shares representing a plurality of the votes cast at the meeting, and the
approval of each of the other two proposals will require the affirmative vote
of the holders of a majority of the votes cast at the meeting. Although shares
that withhold authority for any nominee and broker non-votes (i.e., shares
held by brokers or nominees as to which instructions have not been received
from the beneficial owners and with respect to which the broker or nominee
indicates that it does not have discretionary authority to vote such shares)
will be counted as present at the meeting for quorum purposes, such shares
will not be considered to be votes cast with respect to the election of
directors. Accordingly, shares that withhold authority and broker non-votes
will have no effect on the voting on the matters being presented for
stockholder action at the meeting.

PROPOSAL 1

ELECTION OF DIRECTORS

The Board of Directors has voted to fix the number of directors at seven as
of the date of the Annual Meeting. The Company's Restated Certificate of
Incorporation and by-laws provide for the classification of the Board of
Directors into three classes, as nearly equal in number as possible, with the
term of office of one class expiring each year. The enclosed proxy will be
voted to elect the two nominees named below, unless otherwise instructed, as
directors for a term of three years expiring at the 2002 Annual Meeting of
Stockholders and until their respective successors are duly elected and
qualified. If any nominee should become unavailable, such proxy will be voted
either for a substitute nominee designated by the Board of Directors or such
lesser number of directors as may be designated by the Board of Directors,
unless instructions are given to the contrary. Management does not anticipate
that any of the nominees will become unavailable. The nominees as directors
and incumbent directors are as follows:

Nominees as Directors--Terms Expiring 2002

John D. Barr, 51, has been a Director since July 1997. He is President of
JMB & Associates, a business consulting firm. From 1995 to 1998 Mr. Barr was a
Director, President and Chief Operating Officer of Quaker
<PAGE>

State Corporation. From 1987 to 1995 he served as Senior Vice President of
Ashland, Inc. and President of its subsidiary, The Valvoline Company. Mr. Barr
is Chairman of the Company's Executive Compensation Committee.

Lorne R. Waxlax, 65, has been a Director since January 1990 and was Chairman
of the Board from 1996 to July 1997. From 1985 to 1993, Mr. Waxlax was
Executive Vice President of The Gillette Company. Mr. Waxlax is a Director of
BJ's Wholesale Club, Inc., Clean Harbors, Inc., HON Industries, Inc.,
Pennzoil-Quaker State Company and The Iams Company. Mr. Waxlax is Chairman of
the Audit Committee and a member of the Executive Compensation Committee and
Executive Committee.

Incumbent Directors--Terms Expiring 2001

Robert W. Cox, 61, has been a Director since January 1999. Since 1994 Mr.
Cox has been Chairman Emeritus of the law firm of Baker & McKenzie. From 1992
to 1994 he served as Chairman of the law firm's Policy Committee and from 1984
to 1992 as its Managing Partner and Chairman of its Executive and Strategic
Planning Committees. Mr. Cox is a director of Carey International, Inc. and
HON Industries, Inc. He is a member of the Company's Audit Committee.

Allan P. Sherman, 54, has been a Director, President and Chief Executive
Officer of the Company since July 1997. From 1993 to 1997 he served as
Executive Vice President of the Company and President of its then HomeBase
Division. From May 1993 to September 1993 he served as Executive Vice
President of the Company and President of the Company's former BJ's Wholesale
Club Division (the "BJ's Division"). From 1991 to May 1993 he served as Senior
Vice President and General Merchandise Manager--Non-Food of the BJ's Division.
Mr. Sherman is a member of the Executive Committee and the Finance Committee.

Herbert J. Zarkin, 60, has been Chairman of the Board since July 1997 and a
Director since May 1993. From May 1993 to July 1997 Mr. Zarkin served as
President and Chief Executive Officer of the Company. From 1990 to May 1993 he
served as President of the BJ's Division. From 1989 to May 1993 he served as
Executive Vice President of the Company. Mr. Zarkin is also Chairman of the
Board of Directors of BJ's Wholesale Club, Inc. Mr. Zarkin is the Chairman of
the Company's Executive Committee and a member of the Finance Committee.

Incumbent Directors--Terms Expiring 2000

Harold Leppo, 62, has been a Director since December 1998. Mr. Leppo has
been Chief Executive Officer of Harold Leppo & Company, a retail consulting
firm in Stamford, Connecticut since 1988. Prior to that, he held a number of
managerial positions at Lord & Taylor and Allied Stores, Inc., including
President and Chief Executive Officer of Lord & Taylor in 1987 and Executive
Vice President of Allied Stores in 1988. Mr. Leppo is a Director of Filene's
Basement Corp., Salant Corporation and J. Baker, Inc. He is a member of the
Company's Executive Compensation Committee.

Edward J. Weisberger, 56, has been a Director and Senior Vice President,
Finance of the Company since July 1997. From 1994 to July 1997 he served as
Senior Vice President and Chief Financial Officer of the Company. From April
1989 to September 1994 he served as Vice President--Finance of the Company.
Mr. Weisberger is also an employee and a Director of BJ's Wholesale Club, Inc.
Mr. Weisberger is a member of the Company's Finance Committee.

Incumbent Director - Retiring June 1, 1999

The following Director has elected to retire from the Board of Directors on
June 1, 1999:

Arthur F. Loewy, 70, has been a Director of the Company since February 1989.
From 1982 to 1989 he served as Chief Financial Officer and Executive Vice
President--Finance of Zayre Corp. Mr. Loewy also serves as a Director of The
TJX Companies, Inc.

2
<PAGE>

Director Compensation

Directors who are not employees of the Company are paid an annual retainer
of $20,000 and fees of $2,000 for each Board meeting attended, $900 for each
Committee meeting attended and $750 for certain telephone meetings. The
Chairman of the Audit Committee and the Chairman of the Executive Compensation
Committee are each paid $3,000 per annum for their services as such. All
directors are reimbursed for out-of-pocket expenses incurred in attending such
meetings. Directors may participate in the Company's General Deferred
Compensation Plan.

Each new non-employee director receives an initial grant of stock options to
purchase 5,000 shares of Common Stock and annual grants of options to purchase
3,000 shares of Common Stock thereafter. The exercise price for each of these
options is the fair market value of a share of 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 in three equal annual
installments beginning on the first anniversary of the date of grant. If the
director dies or otherwise ceases to be a director prior to the date that the
option or a portion thereof becomes exercisable, the option will immediately
expire with respect to the shares that are not yet exercisable. Any vested
options will remain exercisable for a period of one year following cessation
of service as a director of the Company. All unexercised options will become
exercisable in full in the event of a defined change of control.

The Company has an employment agreement with Mr. Weisberger under which he
is employed as Senior Vice President, Finance, a non-executive office of the
Company. Mr. Weisberger receives a minimum annual base salary of $150,000 and
participates in specified incentive and other benefit plans. Mr. Weisberger
must generally devote approximately one-half of his working time and attention
to the performance of his duties and responsibilities under his employment
agreement. If his employment is terminated by the Company other than for
cause, Mr. Weisberger is entitled to certain cash compensation amounts and to
certain benefits and continuation of base salary for 12 months after
termination (but not beyond July 29, 2000) at the rate in effect upon
termination. The continuing base salary payments are subject to reduction
after three months for compensation earned by Mr. Weisberger from other
employment (other than employment at BJ's Wholesale Club, Inc.), and the
continuing benefits are 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" beginning on page 10, Mr. Weisberger would be
entitled to the termination benefits described thereunder, to the extent such
benefits would exceed the benefits otherwise described above.

Committees of the Board of Directors

The Company's Board has four committees: (i) Audit, (ii) Executive
Compensation, (iii) Executive and (iv) Finance.

The Audit Committee, which held three meetings during fiscal 1998, reviews
with management, the internal audit group and the independent public
accountants the Company'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 the Company and its
accounting controls and procedures, and such other matters as the Committee
deems appropriate. The Committee reviews with management such matters relating
to compliance with corporate policies as the Committee deems appropriate.

The Executive Compensation Committee, which held four meetings during fiscal
1998, reviews compensation policies and compensation of officers and other
members of management, including incentive compensation plans. In addition,
the Executive Compensation Committee has responsibility for matters of
corporate governance other than recommendations to the Board of Directors of
nominees to fill vacancies on the Board of Directors.

3
<PAGE>

The Executive Committee of the Board of Directors is authorized to act on
behalf of the Board during intervals between meetings of the Company's Board
of Directors. In addition, the Executive Committee has responsibility for
consideration of the qualifications of, and recommendation to the Board of
Directors of, nominees to fill vacancies on the Board of Directors and
considers nominees recommended by stockholders if such recommendations are in
writing and timely filed with the Secretary of the Company. The Executive
Committee did not meet during fiscal 1998.

The Finance Committee of the Board of Directors reviews with management and
advises the Company's Board with respect to the Company's finances, including
exploring methods of meeting the Company's financing requirements and planning
the Company's capital structure. The Finance Committee did not meet during
fiscal 1998.

During fiscal 1998 the Board of Directors held five meetings and took action
by written consent once. Each director attended at least 75% of all meetings
of the Board and Committees of which he was a member.

4
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information, as of April 5, 1999,
concerning beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to beneficially own more than five percent of the
outstanding shares of the Company's Common Stock, (ii) each Director of the
Company, (iii) each Named Executive Officer of the Company appearing in the
Summary Compensation Table on page 7, and (iv) all Directors and executive
officers of the Company as a group. Unless otherwise indicated, all amounts
reflected in the table represent shares in which the beneficial owners have
sole voting and investment power.

<TABLE>
<CAPTION>
Percent of
Shares of Outstanding Shares of
Name and Address of Common Stock Common Stock
Beneficial Owner Beneficially Owned(1) Beneficially Owned(1)
------------------- --------------------- ---------------------
<S> <C> <C>
First Pacific Advisors, Inc....... 6,795,990(2) 17.3%
11400 West Olympic Blvd., Suite
1200
Los Angeles, CA 90064
David J. Greene and Company, LLC.. 5,188,055(3) 13.7%
599 Lexington Avenue
New York, NY 10022
Franklin Resources, Inc. et al.... 3,460,000(4) 9.1%
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, CA 94403-7777
Boston Partners Asset Management,
L.P.............................. 2,831,900(5) 7.5%
28 State Street
Boston, MA 02109
The Prudential Insurance Company
of America....................... 2,548,067(6) 6.7%
751 Broad Street
Newark, NJ 07102-3777
Vanguard Windsor Funds--Windsor
Fund............................. 2,362,900(7) 6.2%
P.O. Box 2600
Valley Forge, PA 19482-2600
FMR Corp.......................... 1,990,000(8) 5.3%
82 Devonshire Street
Boston, MA 02109
John D. Barr...................... 1,500 *
Robert W. Cox..................... -0- *
Harold Leppo...................... -0- *
Arthur F. Loewy................... 18,504(9) *
Lorne R. Waxlax................... 14,000 *
Herbert J. Zarkin................. 559,472 1.5%
Allan P. Sherman.................. 630,628 1.6%
Edward J. Weisberger.............. 123,882 *
Thomas F. Gallagher............... 60,237 *
Scott L. Richards................. 62,100 *
William B. Langsdorf.............. 58,195 *

All Directors and Executive
Officers as a Group (13 Persons). 1,535,018 3.9%
</TABLE>

- --------
* Indicates less than 1%.

5
<PAGE>

(1) Includes the following shares of Common Stock that may be acquired upon
exercise of outstanding stock options which were exercisable on April 5,
1999 or within 60 days thereafter: Mr. Barr 1,500 shares; Mr. Loewy 10,872
shares; Mr. Waxlax, 5,000 shares; Mr. Zarkin, 496,800 shares; Mr. Sherman,
563,803 shares; Mr. Weisberger, 111,340 shares; Mr. Gallagher, 31,558
shares; Mr. Richards, 44,833 shares; Mr. Langsdorf, 41,204 shares; all
Directors and Executive Officers as a group, 1,309,410 shares.

(2) Information is as of December 31, 1998 and is based on a Schedule 13G/A
filed with the Securities and Exchange Commission (the "Commission") by
First Pacific Advisors, Inc., which reported that it has shared power to
vote 1,821,902 shares and shared dispositive power with respect to
6,795,990 shares; includes 1,411,990 shares of Common Stock obtainable
upon conversion of the Company's 5.25% Convertible Subordinated Notes due
2004.

(3) Information is as of December 31, 1998 and is based on a Schedule 13G/A
filed with the Commission by David J. Greene and Company, LLC., which
reported that it has sole power to vote 432,300 shares and shared power to
vote 2,606,660 shares and has sole dispositive power with respect to
432,000 shares and shared dispositive power with respect to 4,755,755
shares.

(4) Information is as of December 31, 1998 and is based on a Schedule 13G/A
filed with the Commission by Franklin Resources, Inc., et al., which
reported that (i) Franklin Advisory Services, Inc. has sole power to vote
or direct the voting of 3,300,000 shares; and Templeton Investment
Counsel, Inc. has the sole power to vote or direct the voting of 160,000
shares; and (ii) Franklin Advisory Services, Inc. has sole dispositive
power with respect to 3,300,000 shares; and Templeton Investment Counsel,
Inc. has sole dispositive power with respect to 160,000 shares.

(5) Information is of December 31, 1998 based on a Schedule 13G/A filed with
the Commission by Boston Partners Asset Management, L.P., which reported
that it has shared power to vote 2,831,900 shares and shared dispositive
power with respect to 2,831,900 shares.

(6) Information is as of December 31, 1998 and is based on a Schedule 13G/A
filed with the Commission by the Prudential Insurance Company of America,
which reported that it has sole power to vote 21,800 shares and shared
power to vote 2,453,157 shares and has sole dispositive power with respect
to 21,800 shares and shared dispositive power with respect to 2,453,157
shares; includes 73,206 shares of Common Stock obtainable upon conversion
of the Company's 5.25% Convertible Subordinated Notes due 2004.

(7) Information is as of December 31, 1998 and is based on a Schedule 13G/A
filed with the Commission by Vanguard Windsor Funds--Windsor Fund, which
reported that it has sole power to vote 2,362,900 shares and shared
dispositive power with respect to 2,362,900 shares; such dispositive power
is shared with its investment advisor, Wellington Management Company, LLP,
which has also filed a Schedule 13G/A with the Commission.

(8) Information is as of December 31, 1998 and is based on a Schedule 13G/A
filed with the Commission by FMR Corp, which reported that it had no power
to vote shares and sole dispositive power with respect to 1,990,000
shares.

(9) Excludes 413 shares owned by or for the benefit of the spouse of Arthur F.
Loewy, as to which he disclaims beneficial ownership.

6
<PAGE>

Executive Compensation

The following table sets forth certain information concerning the annual and
long-term compensation provided to the Company's Chief Executive Officer and
to the four other most highly compensated executive officers (collectively the
"Named Executive Officers") whose salary and bonus exceeded $100,000 for
fiscal 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long-Term Compensation
--------------------------------
Annual Compensation Awards Payouts
---------------------------------- --------------------- ----------
Restricted Securities
Fiscal Other Annual Stock Underlying LTIP All Other
ame and Principal Position(1)N Year Salary(1) Bonus Compensation(2) Awards(3) Options(4) Payouts(5) Compensation(6)
- ------------------------------ ------ --------- -------- --------------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allan P. Sherman........ 1998 $544,220 $466,397 $234,899 $ -- 100,000 $ -- $32,011
President and Chief 1997 511,538 -- 237,860 145,560 200,000 83,190 30,354
Executive Officer 1996 451,346 -- 237,562 -- 82,976 83,190 27,019
Herbert J. Zarkin....... 1998 $350,000 $299,950 $ 14,708 -- -- -- $20,430
Chairman of the Board 1997 505,769 -- 15,776 -- 40,000 180,320 $21,259
1996 605,962 199,361 25,633 -- 250,000 360,640 34,792
Thomas F. Gallagher..... 1998 $233,444 $120,037 $ 48,873 -- 25,000 -- $16,472
Executive Vice
President 1997 217,308 -- 83,639 176,248 75,000 80,874 15,665
Store Operations 1996 176,078 40,484 190,318 155,250 46,673 80,874 13,304
Scott L. Richards....... 1998 $230,084 $118,309 $ 10,559 -- 25,000 -- $16,304
Executive Vice
President 1997 217,308 -- 9,972 94,536 75,000 24,957 15,665
Merchandising 1996 167,923 2,709 6,610 129,375 50,822 24,957 12,562
William B. Langsdorf.... 1998 $213,537 $109,801 $ 9,799 -- 25,000 -- $15,002
Executive Vice
President 1997 183,961 -- 7,370 129,516 75,000 27,730 13,377
and Chief Financial 1996 155,558 -- 6,218 -- 16,595 27,730 12,076
Officer
</TABLE>
- -------
(1) Salary is calculated based on 52-week years for fiscal 1998 and 1996 and
on a 53-week year for fiscal 1997.

(2) Includes for Mr. Sherman $119,504, $125,120, and $130,344 in fiscal 1998,
fiscal 1997 and fiscal 1996, respectively, for loan forgiveness and the
value of the interest-free component of a housing loan from the Company
pursuant to the terms of his employment contract, and $86,975, $85,475,
and $80,671 in fiscal 1998, fiscal 1997 and fiscal 1996, respectively, for
reimbursement of tax liabilities related to that loan and certain items
under "All Other Compensation." Includes for Mr. Gallagher $22,692,
$32,961 and $102,141 in fiscal 1998, 1997 and 1996, respectively, for
relocation and housing costs and $10,713, $35,497 and $74,727 in fiscal
1998, 1997 and 1996, respectively, for reimbursement of tax liabilities
related to those costs and certain items under "Other Annual
Compensation." Includes for Messrs. Zarkin, Sherman, Richards, and
Langsdorf in fiscal 1998, 1997 and 1996 the reimbursement for tax
liabilities related to the Company's contributions under the Company's
Executive Retirement Plan and excludes perquisites having an aggregate
value less than the lesser of $50,000 or 10% of salary plus bonus.

(3) Restricted stock awards were issued at no cost to Messrs. Sherman,
Gallagher, Richards and Langsdorf in fiscal 1997 and to Mr. Gallagher and
Mr. Richards in fiscal 1996. All awards issued in fiscal 1997 to Messrs.
Sherman, Gallagher and Richards, as well as approximately 10% of those
issued to Mr. Langsdorf, were automatic adjustments in prior holdings to
reflect the terms of the Distribution (see "Relationship with BJ's
Wholesale Club, Inc." on page 17). The dollar value of these awards is
based on the closing market price of the Company's Common Stock on the
date of grant. The shares subject to each award generally vest in fixed
annual percentages over three to five year periods. Vesting is contingent
upon continued employment on the vesting dates. The dollar values of
restricted stock holdings based on the fair market value of the Company's
Common Stock on January 30, 1999 were as follows: Mr. Zarkin, $ 0; Mr.
Sherman, $27,740; Mr. Gallagher, $118,375; Mr. Richards, $63,625; and Mr.
Langsdorf $104,746. In the event of a change of control (as defined), each
person's restricted shares would become unrestricted. Holders of
restricted shares are entitled to the same dividends as those paid to
holders of unrestricted shares.

7
<PAGE>

(4) Reflects the grant of options to purchase Common Stock. The Company has
never granted stock appreciation rights.

(5) Payouts for fiscal 1996 and fiscal 1997 reflect the Company's Growth
Incentive Plan award earned by the named person for the three-year
performance period ended January 25, 1997.

(6) For fiscal 1998, represents the Company's contributions under its 401(k)
Savings Plan for Salaried Employees and the Company's Executive Retirement
Plan as presented below:

<TABLE>
<CAPTION>
1998 Company
Contributions
------------------
401(k) Executive
Savings Retirement
Name Plan Plan
---- ------- ----------
<S> <C> <C>
Allan P. Sherman...................................... $4,800 $27,211
Herbert J. Zarkin..................................... 2,931 17,499
Thomas F. Gallagher................................... 4,800 11,672
Scott L. Richards..................................... 4,800 11,504
William B. Langsdorf.................................. 4,325 10,677
</TABLE>

Stock Option Grants

The following table sets forth the stock option grants made by the Company
to the Named Executive Officers during fiscal 1998:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise or For Option Term(1)
Options Employees In Base Price Expiration ---------------------
Name Granted Fiscal Year Per Share(2) Date 0%(3) 5% 10%
- ---- ---------- ------------- ------------ ---------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Allan P. Sherman........ 100,000 18.8% $6.125 8/31/08 -- 385,198 976,167
Herbert J. Zarkin....... -- 0% -- -- -- -- --
Thomas F. Gallagher..... 25,000 4.7% $6.125 8/31/08 -- 96,299 244,042
Scott L. Richards....... 25,000 4.7% $6.125 8/31/08 -- 96,299 244,042
William B. Langsdorf.... 25,000 4.7% $6.125 8/31/08 -- 96,299 244,042
</TABLE>
- --------
(1) The dollar amounts in these columns are the result of calculations at 0%
and the arbitrary annual appreciation rates of 5% and 10% set by the
Securities and Exchange Commission and are not intended to forecast
possible future stock price appreciation, if any.

(2) All options granted in fiscal 1998 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; they expire ten years from the date of
grant and vest at specified intervals or upon a change of control (as
defined).

(3) No gain to the optionees is possible without an increase in stock price,
which will benefit all stockholders commensurately.

8
<PAGE>

Aggregated Option Exercises and Valuation

The following table sets forth, on an aggregated basis, the exercise of
stock options during fiscal 1998 by the Named Executive 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
Number of Unexercised Options at In-The-Money Options
Shares Fiscal Year-End at Fiscal Year-End(2)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Allan P. Sherman........ -- -- 489,125 370,422 $1,066,118 $215,864
Herbert J. Zarkin....... 50,000 $296,500 466,800 123,200 1,539,957 335,768
Thomas F. Gallagher..... -- -- 25,128 128,183 15,793 37,656
Scott L. Richards....... -- -- 35,914 126,524 40,434 56,728
William B. Langsdorf.... -- -- 27,098 112,004 39,124 43,987
</TABLE>

- --------
(1) Based on the difference between the option exercise price and the fair
market value of the Common Stock on the date of exercise.

(2) Based on the fair market value of the Company's Common Stock on January
30, 1999, less the option exercise price.

Retirement Benefits

Under the Company's Executive Retirement Plan, employees in high-level
management positions in the Company, as selected by the Company's Executive
Compensation Committee (the "ECC"), including all executive officers, are
eligible to receive annual cash retirement contributions in an amount
determined by the ECC, 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 Executive Retirement
Plan are to be used exclusively to fund an investment vehicle, selected by the
ECC, which is appropriate to provide retirement income, such as an insurance
policy.

The Company made retirement contributions after the end of fiscal 1998 equal
to 5% (net of taxes) of each participant's base salary during 1998. 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 Executive Retirement Plan. As of
January 30, 1999, all Named Executive Officers were credited with at least
four years of service.

Employment Agreements

The Company has entered into employment agreements with each of the Named
Executive Officers. Pursuant to his employment agreement, Mr. Zarkin is
employed as Chairman of the Board of Directors of the Company. Mr. Zarkin
receives an annual base salary of $350,000 and participates in specified
incentive and other benefit plans. Mr. Zarkin generally must devote
approximately one-half of his working time and attention to the performance of
his duties and responsibilities under his employment agreement. The Company is
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 the Company other than for cause, or
if Mr. Zarkin resigns as a result of his being removed from his positions with
the Company or as a result of his failure to be reelected to the office of
Chairman of the Board of Directors and a member of the Executive Committee,
Mr. Zarkin is entitled to payments of certain cash compensation amounts and
continuation of base salary and certain benefits for a period of 12 months
after termination at the rate in effect upon termination. In addition, Mr.
Zarkin will be entitled to payments under the Company's Management Incentive
Plan (the "MIP") for the

9
<PAGE>

fiscal year ended immediately prior to the date of termination of Mr. Zarkin's
employment (if not already paid), and a pro rated MIP award for the year of
termination. Any stock options or other stock-based awards held by Mr. Zarkin
on the date of termination continue to vest. The continuing base salary
payments are subject to reduction after three months for compensation earned
by Mr. Zarkin from other employment (other than employment at BJ's Wholesale
Club, Inc.), and the continuing benefits are subject to reduction at any time
for comparable benefits received by Mr. Zarkin from other employment.

Under the Company's employment agreement with Mr. Sherman, Mr. Sherman is
employed as the President and Chief Executive Officer of the Company and
receives a minimum annual base salary of $556,000. Mr. Sherman also
participates in specified incentive and other benefit plans. In addition, in
connection with his election as President of the Company's then HomeBase
Division in 1993, the Company agreed to extend to him an interest-free loan of
$700,000 for the purchase of a residence in California and to forgive the loan
over seven years in equal installments, $100,000 of which was forgiven in each
of fiscal 1994, 1995, 1996, 1997 and 1998. The Company also agreed to make
certain tax "gross-up" payments to Mr. Sherman. The Company is entitled to
terminate Mr. Sherman's employment at any time with or without cause (as
defined). If Mr. Sherman's employment terminates by reason of death,
disability or termination by the Company other than for cause, the Company is
required to pay certain cash compensation amounts, to continue payment of Mr.
Sherman's base salary and certain benefits for 78 weeks after termination at
the rate in effect upon termination, and to extend the term of Mr. Sherman's
relocation loan, including the provisions for debt forgiveness. In addition,
Mr. Sherman will be entitled to payments under the MIP for the fiscal year
ended immediately prior to the date of termination of his employment (if not
already paid), and a pro rated MIP award for the year of termination. The
continuing base salary payments are subject to reduction after three months
for compensation earned by Mr. Sherman from other employment, and the
continuing benefits are subject to reduction at any time for comparable
benefits received by Mr. Sherman from other employment.

The Company has entered into an employment agreement with each of Messrs.
Gallagher, Richards and Langsdorf under which each serves as an executive
officer of the Company, receives an annual base salary of $240,000, $235,000
and $225,000, respectively, and participates in specified incentive and other
benefit plans. If employment terminates by reason of termination by the
Company 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 Executive 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

The Company provides change of control severance benefits, under separate
change of control agreements, to each of the Company's Named Executive
Officers and Mr. Weisberger. Under such agreements, in general, upon a change
of control (as defined) of the Company, the executive would be entitled to
accelerated payment of the MIP target award for the year in which the change
of control occurs. If, during the 24-month period following a change of
control, the Company 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 a lump-sum amount equal to the amount of the executive's MIP target
award plus a multiple of the executive's annual base salary. In the case of
Mr. Sherman, the multiple is three times his annual base salary, for Messrs.
Gallagher, Richards and Langsdorf the multiple is two and one-half and for
Messrs. Zarkin and Weisberger the multiple is

10
<PAGE>

two. The Company would also be obligated to provide specified benefits,
including continued health, medical and life insurance benefits for between
two and three years. 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. The Company 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 the
Company following termination of his employment would cease to be effective.
Messrs. Gallagher, Richards and Langsdorf have also entered into agreements
with the Company providing, among other things, for the cash payment of change
of control severance benefits equal to the value of 100,000 shares of Common
Stock calculated at the then current market, but in no event less than $6.00
per share nor more than $12.00 per share.

Indemnification Agreements

The Company entered 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 the Company or served at the Company's request as a
director or officer 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 interest of the Company, 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 the Company's Certificate of Incorporation and by Delaware law.

11
<PAGE>

PROPOSAL 2

RE-APPROVAL OF MANAGEMENT INCENTIVE PLAN

Stockholder re-approval of the Management Incentive Plan ("MIP") is being
sought this year to preserve the Company's tax deduction for all awards earned
and paid under the MIP without limitation under Section 162(m) of the Internal
Revenue Code ("Code Section 162(m)").

Description of the MIP. The following summary of the MIP is qualified in its
entirety by reference to the plan, a copy of which may be obtained by making a
written request to the Secretary of the Company.

Key employees of the Company, as designated by the Executive Compensation
Committee (the "ECC"), are eligible to receive cash awards under the MIP. The
total number of participants in the MIP is approximately 850. The following
persons participate in the MIP: (i) six executive officers, including the
Named Executive Officers; (ii) Mr. Weisberger and (iii) other key employees of
the Company.

At the commencement of the performance period (i.e., the fiscal year), the
ECC establishes 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 may include 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 are based upon the level of achievement of the pre-established
performance goals. Awards are paid in cash as soon as practicable after the
performance period, except to the extent deferred under any deferred
compensation plan that may be adopted by the Company and applicable to the
awards. Under the MIP, no participant may receive a cash award in excess of
$1,000,000 in any calendar year.

The ECC has full power to administer and interpret the MIP and to establish
rules for its administration. The ECC or the Board may amend, suspend or
terminate the MIP at any time.

Discussion of Code Section 162(m). Under the provisions of Code Section
162(m), the allowable deduction for compensation paid or accrued with respect
to the Named Executive Officers, defined as "covered employees," is limited to
$1 million per year (the "deductibility limitation"). However, certain types
of compensation are exempted from the deductibility limitation, including
performance-based compensation. "Performance-based compensation" is
compensation paid (1) upon the attainment of an objective performance goal or
goals; (2) upon approval by the ECC, which committee must be composed of
outside directors; and (3) pursuant to a plan as to which stockholders have
approved certain material terms, specifically the eligibility, per-person
limits, and the business criteria upon which the performance goals are based.
The Company intends that awards under the MIP qualify as "performance-based
compensation" so that these awards will not be subject to the deductibility
limitation.

Under Treasury Regulations promulgated under Code Section 162(m), the
material terms of the MIP must be submitted to stockholders for approval every
five years because the ECC has discretion under the MIP to fix the targets
under specific performance goals annually. Stockholders last approved the MIP
at the 1994 Annual Meeting; accordingly, re-approval of the material terms of
the MIP relating to eligibility, annual per-person limits, and business
criteria used in performance goals, as described in this Proposal 2, is being
sought to preserve full deductibility of awards under the MIP going forward.
In the event stockholders disapprove this Proposal, awards will not be granted
or paid out under the MIP to the extent required under Treasury Regulation
1.162-27(e)(4) to meet the stockholder re-approval requirements of that
regulation.

The Board of Directors unanimously recommends re-approval of the MIP.

12
<PAGE>

PROPOSAL 3

RE-APPROVAL OF GROWTH INCENTIVE PLAN

Stockholder re-approval of the Growth Incentive Plan ("GIP") is being sought
this year to preserve the Company's tax deduction for all awards earned and
paid under the GIP without limitation under Section 162(m) of the Internal
Revenue Code ("Code Section 162(m)").

Description of the GIP. The following summary of the GIP is qualified in its
entirety by reference to the plan, a copy of which may be obtained by making a
written request to the Secretary of the Company.

Employees in high-level management positions in the Company, as selected by
the ECC, are eligible to receive cash awards under the GIP. The total number
of employees eligible to participate in the GIP is 22, including the following
persons: (i) six executive officers, including the Named Executive Officers,
and (ii) 16 other officers of the Company.

Each participant in the GIP is eligible to receive a cash award for each
award period, which consists of a certain number of fiscal years. Each
participant's cash award corresponds to the Company's level of performance or
growth during such award period. Such award is determined by and based upon
one or more of the following objective measures of performance or growth, as
selected by the ECC 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 to
be based (e.g., performance measurement, length of award period, relation
between performance and cash award) are determined at the beginning of the
award period by the ECC. Currently no targets have been set, and no cash
awards have been paid since fiscal 1997.

Under the GIP, no participant may receive a cash award in excess of
$2,000,000 in any calendar year. Cash awards are paid as soon as practicable
after the end of the award period, and, in the ECC's discretion, payment of a
portion of the cash award may be deferred until one or more years thereafter.
In the event of a change of control (as defined), the participants are
entitled to a cash award based on the Company's performance for that portion
of the award period immediately preceding the change of control.

The ECC has full power to administer and interpret the GIP and to establish
rules for its administration. The ECC or the Board may amend, suspend or
terminate the GIP at any time.

Under Treasury Regulations promulgated under Code Section 162(m), the
material terms of the GIP must be submitted to stockholders for approval every
five years because the ECC has discretion under the GIP to fix the targets
under specific performance goals annually. Stockholders last approved the GIP
at the 1994 Annual Meeting; accordingly, re-approval of the material terms of
the GIP relating to eligibility, annual per-person limits, and business
criteria used in performance goals, as described in this Proposal 3, is being
sought to preserve full deductibility of awards under the GIP going forward.
In the event stockholders disapprove this Proposal, awards will not be granted
or paid out under the GIP to the extent required under Treasury Regulation
1.162-27(e)(4) to meet the stockholder re-approval requirements of that
regulation.

The Board of Directors unanimously recommends re-approval of the GIP.

13
<PAGE>

EXECUTIVE COMPENSATION COMMITTEE REPORT

The following report has been submitted to the Board of Directors of the
Company by its Executive Compensation Committee, in compliance with
requirements of the Securities and Exchange Commission:

As members of the Executive Compensation Committee ("ECC") of the Company it
is our responsibility to review the Company's compensation policies and
programs, approve or, with respect to the Chairman of the Board and the Chief
Executive Officer, recommend to the Board of Directors for approval, incentive
plan awards and all elements of compensation for the Company's executive
officers, and administer the Company's stock incentive plans. All of the
members of the ECC are independent, non-employee directors.

Executive Compensation Principles

The Company's executive compensation program is designed to provide
competitive levels of compensation that:

--Integrate compensation with the achievement of the Company's annual and
long-term performance goals and business strategies

--Recognize management initiatives and achievements

--Reward outstanding corporate performance

--Attract and retain key executives critical to the long-term success of
the Company

--Link management's long-term interests with stockholders' interests
through stock-based awards.

With respect to Section 162(m) of the Internal Revenue Code, which limits
the ability of publicly-held corporations to deduct non-performance-based
compensation for certain executive officers, the ECC believes that the
Company's compensation plans should be structured to satisfy the requirements
for tax deductibility unless doing so is determined by the ECC to be not in
the best interest of the Company.

Compensation Policies for Executive Officers

The total compensation program for all executive officers consists of both
cash and equity-based compensation and takes into account applicable
provisions of employment agreements of such officers. Through stock options
and stock grants available under the Company's stock incentive plan, the ECC
seeks to align executive officers' long-range interests with those of
stockholders by providing executive officers with the opportunity to
participate in the growth of the Company's stock value. The ECC is advised by
Towers Perrin, compensation consultants, concerning salary competitiveness and
the design of the Company's executive compensation programs. Towers Perrin
provides services to the Company, which are billed at hourly rates, on an "as
requested" basis. The Company does not have a retainer or other contract with
Towers Perrin. The Company has consulted with Towers Perrin during the past
year.

Base Salary. Base salaries for the Company's executive officers, including
Mr. Sherman, are set within ranges that are determined based upon a review of
publicly available information concerning compensation paid to executives with
similar responsibilities at certain peer companies. The ECC utilizes the
compensation consulting firm to assist in the compilation and interpretation
of this data. The companies selected for these purposes are retail companies,
including major competitors of the Company, as to which compensation
information is available. While some of these peer companies are included in
the Dow Jones Industry Group Index OTS--Other Specialty Retailers appearing in
the Performance Graph on page 19, these peer companies are not all the same as
the companies constituting that index. The ECC's overall objective is to set
base salaries at approximately the midpoint of competitive ranges. However,
any individual executive's placement within a range and salary adjustments are
based upon the ECC's evaluation of the executive's performance and value to
the Company.

14
<PAGE>

Annual Incentive Program. Under the Company's Management Incentive Plan
("MIP"), executive officers and other members of management are eligible to
receive incentive awards based upon the attainment of annual performance
goals, primarily a specified level of after-tax income. The ECC approves the
MIP goals and participation opportunities at the beginning of each fiscal year
and reviews the payout calculations after the year's financial results have
been audited. Target awards for executive officers and Mr. Weisberger range
from 25% to 50% of base salary but if target goals are not met, there would be
either no MIP award or a reduced award based on a percentage of the target
realized. If results exceed goal(s), an executive officer could earn an
additional award, depending upon the extent to which goals are exceeded. No
award may exceed $1,000,000 in any calendar year. For 1998, Named Executive
Officers received MIP awards shown in the "Annual Compensation--Bonus" column
in the Summary Compensation Table on page 7.

Long-Term Incentive Program. The Company's Growth Incentive Plan ("GIP") is
intended to provide high-level executives of the Company, as selected by the
ECC, with cash awards based upon the growth and performance of the Company.
Six executive officers of the Company, including all of the Named Executive
Officers, are eligible to participate in the GIP, as well as 16 other officers
of the Company. Depending on responsibilities within the Company, awards are
earned based on one or more of the following objective measures of performance
or growth, as selected by the ECC 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 based (e.g., performance measurement, length of award
period, relation between performance and cash award) are determined at the
beginning of the award period by the ECC. There is no target amount for each
award. However, there is a threshold amount based on the Company's growth, and
the value of each award increases as achievement of the performance
measurement increases. No awards were issued in fiscal 1998 to the Named
Executive Officers.

Stock-Based Incentives. Stock options are awarded to the Company's key
employees, including executive officers, by the ECC based upon such factors as
the compensation level and responsibility of the particular employee, the
employee's contribution towards Company performance, and review of competitive
compensation data for executives at the same group of peer companies referred
to previously in this report, with the ECC generally targeting awards to the
median of such surveys. The options are designed to reward recipients to the
extent the Company's stock value is enhanced and, because of the vesting
provisions of such grants, also provide an incentive for the employee to
remain with the Company. Since the ECC does not grant options on a cumulative
basis, the size of previous grants is not a factor in making future grants.

Chief Executive Officer Compensation

Pursuant to the terms of Mr. Sherman's employment contract, his salary is
reviewed annually by the ECC. His salary was increased to $556,000 effective
June 1, 1998, setting his salary to approximately the 40th percentile of the
compensation range of the survey of peer companies referred to previously in
this report. The number of options granted to Mr. Sherman in 1998 was
determined based on Mr. Sherman's success in providing leadership to the
Company and after a review of competitive compensation data of executives at
the same group of peer companies referred to previously in this report without
targeting a specific percentile range. The granting of options encourages
long-term performance and promotes management retention while further aligning
shareholders' and management's interest in enhancing the value of the
Company's Common Stock.

15
<PAGE>

Mr. Sherman's MIP award provides a target opportunity equal to 50% of base
salary earned during the fiscal year if performance goals are met; the actual
payout can vary between 0% and 100% of annualized base salary at the beginning
of the fiscal year. The MIP payout to Mr. Sherman for fiscal 1998 was equal to
86% of his fiscal 1998 salary.

Executive Compensation Committee

John D. Barr, Chairman
Harold Leppo
Lorne R. Waxlax*

* Mr. Waxlax was chairman of the Executive Compensation Committee during
fiscal 1998

16
<PAGE>

RELATIONSHIP WITH BJ's WHOLESALE CLUB, INC.

Prior to July 28, 1997, the Company, then known as Waban Inc., operated
through two divisions--the HomeBase Division and the BJ's Wholesale Club
Division (the "BJ's Division"). As of July 26, 1997, the Company transferred
all of the net assets of its BJ's Division to a wholly-owned subsidiary, BJ's
Wholesale Club, Inc. ("BJI"). On July 28, 1997, the Company distributed to its
stockholders on a pro rata basis all of the outstanding common stock of BJI
(the "Distribution") and changed its name from Waban Inc. to HomeBase, Inc.

In connection with the Distribution, BJI and the Company entered into a
series of agreements, including those described below. Although the following
summaries of these agreements set forth an accurate description of their
material terms and provisions, such summaries are qualified in their entirety
by reference to the detailed provisions of the agreements, copies of which
have been filed with the Securities and Exchange Commission.

Distribution Agreement

BJI and the Company entered into a Separation and Distribution Agreement
(the "Distribution Agreement"), which provided for, among other things, (i)
the principal corporate transactions required to effect the Distribution, (ii)
the division between BJI and the Company of certain assets and liabilities and
(iii) the execution and delivery of certain agreements governing the
relationship between BJI and the Company following the Distribution.

The Distribution Agreement provided for, among other things, (i) the
transfer by the Company to BJI of all of the assets of the BJ's Division,
including the stock of subsidiaries which held assets of the BJ's Division,
and the assets associated with the Company's corporate headquarters in
Massachusetts, (ii) BJI's assumption of the leases and other liabilities of
the BJ's Division and 75% of the amount of all bank indebtedness of the
Company existing as of the date of the Distribution, and (iii) the issuance by
BJI to the Company of the Common Stock of BJI to be distributed in the
Distribution.

Under the Distribution Agreement the Company agreed to indemnify BJI for
certain liabilities relating to the Company's business. Similarly, BJI agreed
to indemnify the Company for certain liabilities pertaining to BJI's business.
The Distribution Agreement also requires BJI and the Company to indemnify each
other for losses incurred due to a failure to perform their respective
obligations under the Distribution Agreement or any other agreement entered
into in connection with the Distribution. In addition, the Distribution
Agreement provides that the Company will provide liability insurance for a
period of six years following the Distribution to each individual who served
as a director or officer of the Company prior to the Distribution. BJI also
agreed to indemnify, defend and hold harmless each such individual from any
losses and liabilities incurred by them in connection with the approval of the
Distribution Agreement.

Leases

Upon the Distribution, BJI assumed all liabilities to third-party lessors
with respect to leases entered into by the Company with respect to the BJ's
Division. While the Company continues to be liable, by law, with respect to
such lease liabilities, BJI has agreed to indemnify the Company for such
liabilities.

In connection with the spin-off of the Company by The TJX Companies, Inc.
("TJX") in 1989, the Company and TJX entered into an agreement (the "1989
Agreement") pursuant to which the Company must indemnify TJX against any
liabilities that TJX might incur with respect to 44 current Company real
estate leases as to which TJX is either a lessee or guarantor.

17
<PAGE>

In connection with the Distribution, BJI agreed that for approximately five
years after the Distribution it will indemnify TJX with respect to any
liabilities (as defined in the 1989 Agreement) that TJX may incur with respect
to the Company leases and thereafter it will indemnify TJX for 50% of such
liabilities. In addition, the Company has agreed that after the Distribution,
the Company will not renew any lease identified in the 1989 Agreement as to
which TJX is a lessee or guarantor unless the applicable lessor agrees to
remove TJX as a lessee or guarantor.

The Distribution Agreement contains restrictions on the renewal of Company
leases similar to those contained in the agreement between the Company and
TJX. BJI may not renew any of its real estate leases (other than ground
leases) for which the Company may be liable during any period during which BJI
does not meet certain standards of creditworthiness.

Tax Sharing Agreement

The Company and BJI entered into a Tax Sharing Agreement (the "Tax Sharing
Agreement") providing for the allocation between the parties of federal,
state, local and foreign tax liabilities, and the entitlement to tax refunds,
for periods beginning prior to the Distribution Date, and various related
matters.

Procedures for Addressing Conflicts

As a result of the Distribution, BJI and the Company have significant
contractual and other ongoing relationships that may present certain conflict
situations for Mr. Zarkin, who serves as Chairman of the Board of Directors of
both companies, and for Messrs. Waxlax and Weisberger, who serve as directors
of both companies. Each of these persons also owns (or has options or other
rights to acquire) significant number of shares of common stock in both
companies. The Company has adopted procedures to be followed by its Board of
Directors to limit the involvement of each such person in conflict situations
whereby all transactions being considered by the Company which relate to BJI
must (i) be approved by a majority of the Board of Directors and by a majority
of the disinterested members of the Board of Directors and (ii) be on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties.

18
<PAGE>

PERFORMANCE GRAPH

Set forth below is a line graph comparing the cumulative total return on the
Company's Common Stock, based on the market price of the Common Stock (as
adjusted to reflect the Distribution), with the cumulative total return on the
common stock of companies in the Standard and Poor's 500 Stock Index and the
Dow Jones Industry Group Index OTS--Other Specialty Retailers from February 1,
1994 to January 31, 1999. The Dow Jones Industry Group Index OTS--Other
Specialty Retailers currently includes 250 specialty retail companies,
including the Company and all other publicly traded home improvement chains
(other than those operated as divisions of other companies). This index does
not include department stores, discount stores, drug stores or supermarkets.
The graph assumes that the value of the investment at February 1, 1994 was
$100 and that all dividends were reinvested. The values of investments in the
companies in the Standard & Poor's 500 Stock Index and the Dow Jones Industry
Group Index OTS--Other Specialty Retailers were measured as of the date
nearest the end of the Company's fiscal year for which index data is readily
available. This information was furnished by Media General Financial Services.

FIVE-YEAR PERFORMANCE

- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------
HomeBase, Inc. $100.00 $119.83 $132.76 $187.07 $207.82 $205.90
- --------------------------------------------------------------------------------
Dow Jones Retaler Index $100.00 $ 96.28 $ 98.19 $114.09 $147.67 $218.72
- --------------------------------------------------------------------------------
Standard & Poor's 500 Index $100.00 $100.53 $139.40 $176.13 $223.52 $296.14
- --------------------------------------------------------------------------------

<PAGE>

OTHER MATTERS

Independent Accountants

The Directors have appointed PricewaterhouseCoopers LLP as independent
accountants to audit the financial statements of the Company for the fiscal
year ending January 29, 2000. The Company expects that representatives of
PricewaterhouseCoopers LLP will be present at the Meeting, will have the
opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the SEC
and the New York Stock Exchange initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater-than-ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

To the Company's knowledge, based on a review of the copies of such reports
furnished to the Company and written representations that no other reports
were required, all Section 16(a) filing requirements applicable to its
executive officers and directors were complied with during fiscal 1998.

Stockholder Proposals

Proposals of stockholders intended to be presented at the next annual
meeting of stockholders must be received by the Company no later than 5 p.m.
PST on December 18, 1999 in order to be considered for inclusion in the
Company's proxy materials for that meeting. Proposals must be in writing and
sent via registered or certified mail addressed to HomeBase, Inc., Attention:
Corporate Secretary at 3345 Michelson Drive, Irvine, CA 92612. In addition,
the Company's by-laws specify requirements relating to the timing and content
of the notice which stockholders must provide to the Secretary of the Company
for any matter, including a stockholder nomination for director, to be
properly presented at a meeting of stockholders.

Other Matters

The Company has no knowledge of any other matter which may come before the
Meeting and does not intend to present any such other matter. However, if any
such other matters shall properly come before the Meeting or any adjournment
thereof, the persons named as proxies will have discretionary authority to
vote the shares represented by the accompanying proxy in accordance with their
own judgment.

Neither the Executive Compensation Committee Report appearing above at pages
14, 15 and 16 nor the Performance Graph appearing above on page 19 shall be
deemed incorporated by reference by any general statement incorporating this
proxy statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates such information by reference, and shall not
otherwise be deemed filed under such Acts.

The cost of solicitation of proxies will be borne by the Company. The
Company has retained Kissel-Blake, a division of Shareholder Communications
Corporation, to assist in soliciting proxies by mail, telephone and personal
interview for a fee of $4,000 plus expenses. Officers and employees of the
Company may also assist in soliciting proxies in the same manner.

BY ORDER OF THE BOARD OF DIRECTORS

John L. Price
Secretary

20
<PAGE>

[X]PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.

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 (IF YOU ARE VOTING BY ????); ???
BOXES NEED TO BE CHECKED. UNLESS MARKED OTHERWISE, THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD NOMINEES:
<S> <C> <C> <C> <C>
1. Election of two 1. John D. Barr and 2. To re-approve the Company's
Directors for a [__] [__] 2. Lome R. Waxlax Management Incentive Plan ("MIP")
term to expire so that compensation paid under
in 2002 the MIP will continue to be fully
(for all nominees except deductible by the Company for Federal
marked below) Income Tax purposes.

3. To re-approve the Company's Growth
Incentive Plan ("GIP") so that
compensation paid under the GIP will
continue to be fully deductive by the
Company for Federal Income Tax purposes.
- -------------------------------------------------------------------------------------------
4. 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 ON THE REVERSE SIDE OF THIS
CARD. [_]

MARK HERE IF YOU PLAN TO ATTEND THE
ANNUAL MEETING. [_]
------------------------------------
<CAPTION>
FOR AGAINST WITHHELD
<C> <C> <C>
[_] [_] [_]

[_] [_] [_]
- -------------------------------------
</TABLE>

SIGNATURE(S) ____________________________ DATE _____________
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH.

. FOLD AND DETACH HERE IF YOU ARE VOTING BY MAIL .

HOMEBASE, INC.

Dear Stockholder:

HomeBase, Inc. encourages you to take advantage of new and convenient ways by
which you can vote your shares. You can vote your shares electronically through
the internet or the telephone. This eliminates the need to return the proxy
card.

To vote your shares electronically you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.

1. To vote over the internet:

* Log on to the internet and go to the web site
HTTP://WWW.VOTE-BY-NET.COM

2. To vote over the telephone:

* On a touch-tone telephone call 1-800-OK2-VOTE (1-800-652-8683) 24
hours a day, 7 days a week

Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.

If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.

YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.

PROXY

PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1999

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 Annual Meeting and the Board
of Directors' proxy statement therefor, and revoking all prior proxies, hereby
appoint(s) Harold Leppo, William B. Langsdorf and John L. Price, 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 Annual Meeting of Stockholders of HomeBase, Inc. (the "Company") to be held
on Thursday, June 3, 1999, at 10:00 a.m. PDT at the offices of Gibson, Dunn &
Crutcher LLP, 14th floor, 4 Park Plaza, Irvine, California 92614, 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.

Change of address:

_____________________________________________

(If you have written in the above space,
please mark the corresponding box on the
reverse side of this card.)

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 IF
YOU ARE VOTING BY MAIL.

SEE REVERSE SIDE

. FOLD AND DETACH HERE IF YOU ARE VOTING BY MAIL .
<PAGE>

X Please mark your
votes as in this 2741 01428 68480 53 352 2741
example.

The Board of Directors of the Company recommends that stockholders vote "FOR"
all of the following proposal. 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.

FOR WITHHELD

1. Election of two Directors for a term to expire in 2001 (for all nominees
except marked below)

_________________________________________________
NOMINEES: John D. Barr and Lorne R. Waxlax

2. 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 ON THE REVERSE SIDE OF THIS CARD.

SIGNATURE(S) _________________________________________ DATE ________________

NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.

<PAGE>

HOMEBASE, INC.

MANAGEMENT INCENTIVE PLAN

____________________

As Amended Through April 8, 1999
<PAGE>

HOMEBASE, INC.

MANAGEMENT INCENTIVE PLAN

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
Page
<S> <C>
1 Purpose ............................................................ 1

2 Definitions ........................................................ 1

2.1. Committee .................................................... 1
2.2. Company ...................................................... 1
2.3. ECC .......................................................... 1
2.4. Effective Date ............................................... 1
2.5. Fiscal Year .................................................. 1
2.6. Participant .................................................. 1
2.7. Performance Criteria ......................................... 1
2.8. Performance Goals ............................................ 2
2.9. Performance Period ........................................... 2

3 Administration ..................................................... 2

4 Eligibility ........................................................ 2

5 Description of Awards .............................................. 3

6 Determination of Awards ............................................ 5

7 Payment of Awards .................................................. 6

8 Deferral of Awards ................................................. 7

9 Designation of Beneficiary ......................................... 7

10 Notices ............................................................ 7

11 Rights of Participants ............................................. 8

12 No Employment Rights ............................................... 8

13 Certain Payments Upon a Change of Control .......................... 8

14 Nonalienation of Awards ............................................ 8

15 Withholding Taxes .................................................. 8

16 Termination, Amendment, and Modification ........................... 8
</TABLE>

i
<PAGE>

<TABLE>
<S> <C>
17 Headings and Captions .............................................. 9

18 Controlling Law .................................................... 9

19 Miscellaneous Provisions ........................................... 9

20 Continuation Incentive Awards in Connection With

Change in Plan Sponsorship ......................................... 9

ANNEX A - DEFINITION OF CHANGE IN CONTROL ............................... 11
</TABLE>

ii
<PAGE>

HOMEBASE, INC.

MANAGEMENT INCENTIVE PLAN

1. Purpose
-------

The purpose of the HomeBase, Inc. Management Incentive Plan (the "Plan")
is to provide officers and other employees who are key to the growth and
profitability of HomeBase, Inc. and its subsidiaries with reward opportunities
commensurate with their performance relative to annual objectives. This Plan is
an amendment, restatement and continuation of the Waban Inc. Management
Incentive Plan.

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.

2.1 "Committee" shall mean the HomeBase, Inc., Incentive Plan Committee,
consisting of the President and Chief Executive Officer of HomeBase, Inc., who
shall serve as the Chairman of the Committee; the Chairman of the Board of
HomeBase, Inc.; the Chief Financial Officer of HomeBase, Inc.; and others who
from time to time are designated by the Chairman of the Committee to serve as
members of the Committee.

2.2 "Company" shall mean HomeBase, Inc. and its subsidiaries.

2.3 "ECC" shall mean the Executive Compensation Committee of the Board of
Directors of HomeBase, Inc.

2.4 "Effective Date" shall mean April 6, 1989.

2.5 "Fiscal Year" shall mean the period ending on the last Saturday in
January, and commencing on the Sunday following the last Saturday in January of
the preceding calendar year.

2.6 "Participant" shall mean an officer or other employee of the Company
who is designated a participant pursuant to Section 5 below.

2.7 "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 5
below.
<PAGE>

2.8 "Performance Goals" shall mean the levels of performance with respect
to each Performance Criterion at which awards are payable pursuant to this Plan.
Performance goals are established by the Committee and the ECC pursuant to
paragraph (b) of Section 5 below.

2.9 "Performance Period" shall mean one Fiscal Year.

3. Administration
--------------

This Plan shall be administered by the ECC, which in its sole discretion
may take 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.

4. 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 such executives and
other employees of the Company as the ECC shall, at any time,
designate as Participants for said Performance Period.

2
<PAGE>

5. 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 may include the
following measures: operating income, pre-tax income, net income,
gross profit dollars, costs, any or the preceding measures as a
percent or 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
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 maximum award
opportunities 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
opportunities are 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

3
<PAGE>

Opportunity in any calendar year shall exceed $1,000,000.

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 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.

(2) Disposal of a business segment or a group of two or more stores, a
major administrative unit, or major assets, if qualified 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 outstanding shares of
stock, it such a repurchase has a 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 Stock Incentive Plans or any similar plan.

(4) Balance sheet recapitalization or restructuring that materially alters
the allocation between debt and equity for the Company.

(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.

4
<PAGE>

(6) Unusual and material losses beyond the Company's control, such as
acts of God (e.g., earthquake, flood, 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
subsidiary.

(11) Net incremental expense incurred by the Company as a result of
opening new 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 stores opened by the
Company in the same fiscal year.

In no event, however, shall the Committee make any adjustment which would
cause incentive awards not to quality as performance-based compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended.

6. 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
5 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.

5
<PAGE>

(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)
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 iliness but shall
complete active employment during one-half of the weeks of 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 active employment during one-half of the weeks of 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.

7. 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.

6
<PAGE>

8. Deferral of Awards
------------------

Participants who are designated by the ECC as being eligible to participate
in the Company's General Deferred Compensation Plan may elect to defer all or a
portion of their awards in accordance with the terms of such General Deferred
Compensation Plan.

9 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(ies) who
shall be entitled to receive the amount, it 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 Participants'
death shall be made to the Participants' 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 to 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.

10. Notices
-------

Each Participant whose employment relationship with the Company has
terminated, either voluntarily or involuntarily, shall be responsible for
furnishing the Committee 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. If any item mailed to such address is returned undeliverable to the
addressee, mailing will be suspended until the Participant furnishes the proper
address.

7
<PAGE>

11. 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.

12. No Employment Rights
--------------------

Nothing in the Plan or any other document describing or referring to the
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.

13. Certain Payments Upon a Change of Control
-----------------------------------------

If, upon a Change of Control (as defined in Annex A hereto) 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.

14. Nonalienation of Awards
-----------------------

No amounts payable or other rights under the Plan shall be sold,
transferred, assigned, pledged, or otherwise disposed of or encumbered by a
Participant, except an provided herein, nor shall they be subject to attachment,
garnishment, execution, or other creditor's processes.

15. 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 obligation, for withholding federal,
state, or local income or other taxes from payments to the Participant.

16. 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

8
<PAGE>

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.

17. 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.

18. Controlling Law
---------------

This Plan shall be construed and enforced according to the laws of the
State of California, to the extent not preempted by federal law, which shall
otherwise control.

19. Miscellaneous Provisions
------------------------

(a) All costs and expenses involved in administering the Plan as provided
herein, or incident thereto, shall be borne by the Company.

(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 the Plan with the other plan.

(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 others, 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.

20. Continuation Incentive Awards in Connection With Change in Plan Sponsorship
---------------------------------------------------------------------------

Notwithstanding any other provision of the Plan, in connection with the
change of Plan sponsorship from Waban Inc. to the Company, as its successor
entity, the Company shall continue the Incentive Awards previously granted to
each Participant under the Waban Inc. Management Incentive Plan ("WMIP") who is
a Company employee as of July 27, 1997.

Each such continuation Incentive Award shall (i) be considered to be a
continuation of the incentive award previously granted under the WMIP, as
adjusted to reflect the assumption by

9
<PAGE>

the Company of Waban's obligations under such incentive award, (ii) be based
upon the same Performance Periods and Performance Criteria as the continuation
incentive award, as adjusted to reflect the effects of the spin-off BJ's
Wholesale Club, Inc. on the Company structure (e.g., interest expense, corporate
---
overhead), and (iii) as determined by the Committee (subject to the approval of
the ECC), provide no additional value or benefits other than those provided by
the continued Incentive Award, the approval of the ECC to be final and binding
for all purposes. Except as otherwise set forth in this Section 20 or determined
by the Committee (subject to the approval of the ECC), each continuation
Incentive Award shall be subject to all other terms of the Plan and shall be
subject, before payment, to certification by the ECC that all Performance
Criteria have been satisfied.

10
<PAGE>

ANNEX A

DEFINITION OF CHANGE IN CONTROL

________________________

For the purposes of this plan, a "Change of Control" shall mean:

(a) The acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which satisfies the
criteria set forth in clauses (i), (ii) and (iii) of subsection (c) of this
definition; or

(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any Individual becoming a director subsequently
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (except that this proviso shall
not apply to any individual whose initial assumption of office as a director
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
proxies or consents by or on behalf of a Person other than the Board); or

(c) Consummation of a reorganization, merger or consolidation involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless, immediately
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, of the
corporation resulting from such Business Combination (which as used in section
(c) of this definition shall include, without limitation, a corporation which as
a

11
<PAGE>

result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination, of the outstanding Company common stock and outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, and (iii) at least half
of the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or

(d) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.

<PAGE>

HOMEBASE, INC.

GROWTH INCENTIVE PLAN

___________________

As Amended and Restated
As of July 27, 1997
<PAGE>

HOMEBASE, INC.

GROWTH INCENTIVE PLAN

________________

TABLE OF CONTENTS

________________

<TABLE>
<CAPTION>
Article Page
<S> <C>
ARTICLE 1 Definitions.............................................. 1

1.1 Award Period................................................. 1
1.2 Committee.................................................... 1
1.3 Company...................................................... 1
1.4 Effective Date............................................... 1
1.5 Incentive Measurement........................................ 1
1.6 Incentive Unit............................................... 2
1.7 Participant.................................................. 2
1.8 Plan......................................................... 2

ARTICLE 2 Benefits Under the Plan.................................. 2

2.1 Granting of Awards........................................... 2
2.2 Value of Incentive Units..................................... 2
2.3 Award Opportunity............................................ 2
2.4 Payment of Awards............................................ 3
2.5 Restrictions on Adjustments to Incentive Measurement......... 3

ARTICLE 3 Designation of Beneficiary............................... 5

ARTICLE 4 Plan Administration and Indemnification.................. 5

4.1 Plan Administration.......................................... 5
4.2 Indemnification.............................................. 5

ARTICLE 5 Effect on Employment Rights.............................. 5

ARTICLE 6 Change of Control........................................ 5
</TABLE>

i
<PAGE>

<TABLE>
<S> <C>
ARTICLE 7 Amendment or Termination of the Plan....................... 6

ARTICLE 8 Non-Assignment............................................. 6

ARTICLE 9 Construction............................................... 6

9.1 Heading and Captions........................................... 6
9.2 Singular Includes Plural....................................... 6

ARTICLE 10 Continuation Incentive Units In Connection
With Change in Sponsorship................................. 6

ARTICLE 11 Relevant Law............................................... 7

ANNEX A DEFINITION OF CHANGE IN CONTROL............................ 8
</TABLE>

ii
<PAGE>

HOMEBASE, INC.

GROWTH INCENTIVE PLAN

HomeBase, Inc. (the "Company") hereby amends and restates the Waban Inc.
Growth Incentive Plan, effective as of July 27, 1997 and renames it the
HomeBase, Inc. Growth Incentive Plan (the "Plan").

WITNESSETH

WHEREAS, Waban Inc. initially established Plan effective as of January 30,
1994, and the Company desires to continue to maintain the Plan;

WHEREAS, the Participants are in high-level management positions in
HomeBase, Inc. 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 amends and restates the Plan, as
hereinafter set forth, effective as of July 27, 1997.

ARTICLE 1. DEFINITIONS

The following terms as used in the Plan shall have the following meanings:

1.1 "Award Period" shall mean a period of a certain number of consecutive
fiscal years (or portions thereof), 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 HomeBase, Inc.

1.3 "Company" shall mean HomeBase, Inc. and its subsidiaries.

1.4 "Effective Date" shall mean January 30, 1994.

1.5 "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 measures as a percent of sales, earnings per share, sales, return on
equity, and return on investment.
<PAGE>

1.6 "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.

1.7 "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 HomeBase, Inc. Growth Incentive Plan, as herein
set forth, including any and all amendments hereto and restatements hereof.

ARTICLE 2. BENEFITS UNDER THE 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 payment 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 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 accountants 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

2
<PAGE>

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 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 $2,000,000 in any calendar year.

(b) Termination of Employment in the Event of Death, Disability or
--------------------------------------------------------------
Retirement. If the termination of employment of a Participant occurs before the
- ----------
end of an 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 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 the Participant's termination of employment due to death,
disability or retirement occurs. Payment shall be made as soon as practicable
following the end of the fiscal year in which termination of employment due to
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.

2.5 Restrictions on Adjustments to Incentive Measurement. The Committee
----------------------------------------------------
shall make no adjustments to the Incentive Measurement whose effect is to
increase the growth incentive payment to 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.

3
<PAGE>

(b) Disposal of a business segment or a group of two or more 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 outstanding shares of stock,
if such a repurchase has a material impact on the Incentive Measurement; 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 Stock
Incentive Plans or any similar plan.

(d) Balance sheet recapitalization or restructuring that materially
alters the allocation between debt and equity for the Company.

(e) 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.

(f) Unusual and material losses beyond the Company's control, such as
acts of God (e.g., earthquake, flood 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 Award 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 the Company as a result of
opening new stores in excess of the number incorporated in the Incentive
Measurement. The amount of the adjustment shall be equal to the average
operating loss incurred by new stores opened by the Company 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 of 1986, as amended (the "Code").

4
<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

The Plan shall not constitute an employment contract and nothing contained
in the 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 the Plan.

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 Annex A hereto), 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

5
<PAGE>

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 THE 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. NON-ASSIGNMENT

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 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.

9.2 Singular Includes Plural. Except where otherwise clearly indicated by
------------------------
context, the singular shall include the plural, and vice-versa.

ARTICLE 10. CONTINUATION INCENTIVE UNITS IN CONNECTION
WITH CHANGE IN SPONSORSHIP

Notwithstanding any other provision of the Plan, in connection with the
change of Plan sponsorship from Waban Inc. to the Company, as its successor
entity, the Committee shall continue the Incentive Units previously granted to
each Participant under the Waban Growth Incentive Plan ("WGIP") who is a Company
Employee, as of July 27, 1997.

Each such continuation Incentive Unit shall (i) be considered to be a
continuation of the incentive unit previously granted under the WGIP, as
adjusted to reflect the assumption by the Company of Waban's obligations under
such incentive unit, (ii) be based upon the same Award Periods and Incentive
Measurements as the continued Incentive Unit, as adjusted to reflect the effects
of the BJ's Wholesale Club, Inc.'s spin-off on the Company structure (e.g.,
---
interest

6
<PAGE>

expense, corporate overhead), and (iii) as determined by the Committee, provide
no additional value or benefits other than those provided by the continued
Incentive Unit. Except as otherwise set forth in this Article 10 or determined
by the Committee, each continuation Incentive Unit shall be subject to all other
terms of the Plan and shall be subject, before payment, to certification by the
Committee that all Incentive Measurements have been satisfied.

ARTICLE 11. RELEVANT LAW

This Plan shall be construed and enforced in accordance with the laws of
the State of California to the extent such laws are not preempted by federal
law.

7
<PAGE>

ANNEX A

DEFINITION OF CHANGE IN CONTROL
-------------------------------

For the purposes of this Plan, a "Change of Control" shall mean:

(a) The acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which satisfies the
criteria set forth in clauses (i), (ii) and (iii) of subsection (c) of this
definition; or

(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequently
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (except that this proviso shall
not apply to any individual whose initial assumption of office as a director
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board); or

(c) Consummation of a reorganization, merger or consolidation
involving the Company or a sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
immediately following such Business Combination, (i) all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, of the
corporation resulting from such Business Combination (which as used in section
(c) of this definition shall include, without limitation, a corporation which as
a result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination, of the Outstanding Company

8
<PAGE>

Common Stock and Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination, or the
combined voting power of the then-outstanding voting securities of such
corporation and, (iii) at least half of the members of the board of directors of
the corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or

(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.