Exhibit 10.1

 

As amended through

May 20, 2004

 

BJ’s WHOLESALE CLUB, INC.

1997 STOCK INCENTIVE PLAN

 

1. Purpose

 

The purpose of this 1997 Stock Incentive Plan (the “Plan”) of BJ’s Wholesale
Club, Inc., a Delaware corporation (the “Company”), is to advance the interests
of the Company’s stockholders by enhancing the Company’s ability to attract,
retain and motivate persons who make (or are expected to make) important
contributions to the Company by providing such persons with equity ownership
opportunities and performance-based incentives and thereby better aligning the
interests of such persons with those of the Company’s stockholders. Except where
the context otherwise requires, the term “Company” shall include any present or
future subsidiary corporations of BJ’s Wholesale Club, Inc. as defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the “Code”).

 

2. Eligibility

 

All of the Company’s employees, officers, directors, consultants and advisors
are eligible to be granted options, stock appreciation rights, restricted stock,
or other stock-based awards (each, an “Award”) under the Plan. Any person who
has been granted an Award under the Plan shall be deemed a “Participant”.

 

3. Administration, Delegation

 

(a) Administration by Board of Directors. The Plan will be administered by the
Board of Directors of the Company (the “Board”). The Board shall have authority
to grant Awards and to adopt, amend and repeal such administrative rules,
guidelines and practices relating to the Plan as it shall deem advisable. The
Board may correct any defect, supply any omission or reconcile any inconsistency
in the Plan or any Award in the manner and to the extent it shall deem expedient
to carry the Plan into effect and it shall be the sole and final judge of such
expediency. All decisions by the Board shall be made in the Board’s sole
discretion and shall be final and binding on all persons having or claiming any
interest in the Plan or in any Award. No director or person acting pursuant to
the authority delegated by the Board shall be liable for any action or
determination relating to or under the Plan made in good faith.

 

(b) Delegation to Executive Officers. To the extent permitted by applicable law,
the Board may delegate to one or more executive officers of the Company the
power to make Awards and exercise such other powers under the Plan as the Board
may determine, provided that the Board shall fix the maximum number of shares
subject to Awards and the maximum number of shares for any one Participant to be
made by such executive officers.

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(c) Appointment of Committees. To the extent permitted by applicable law, the
Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a “Committee”). The Board shall
appoint one such Committee of not less than two members, each member of which
shall be (i) an “independent director” within the meaning of Section 303A of The
New York Stock Exchange Listed Company Manual, (ii) an “outside director” within
the meaning of Section 162(m) of the Code and (iii) a “non-employee director” as
defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the
“Exchange Act”). All references in the Plan to the “Board” shall mean the Board
or a Committee of the Board or the executive officer referred to in Section 3(b)
to the extent that the Board’s powers or authority under the Plan have been
delegated to such Committee or executive officer.

 

4. Stock Available for Awards

 

(a) Number of Shares. Subject to adjustment under Section 4(c), Awards may be
made under the Plan for up to the sum of (i) 10,000,000 shares of common stock,
$0.01 par value per share, of the Company (the “Common Stock”) plus (ii) such
additional number of shares of Common Stock (up to 4,000,000) as is equal to the
sum of (x) the number of shares which remained available for grant under the
Company’s 1997 Replacement Stock Incentive Plan (the “Replacement Plan”) upon
its expiration and (y) the number of shares subject to awards granted under the
Replacement Plan which are not actually issued pursuant to such awards because
such awards expire or are terminated, surrendered or cancelled without having
been fully exercised or are forfeited in whole or in part or otherwise result in
any Common Stock not being issued. If any Award expires or is terminated,
surrendered or canceled without having been fully exercised or is forfeited in
whole or in part (including as the result of shares of Common Stock subject to
such Award being repurchased by the Company at the original issuance price
pursuant to a contractual repurchase right) or results in any Common Stock not
being issued (including as the result of an Award being settled for cash), the
unused Common Stock covered by such Award shall again be available for the grant
of Awards under the Plan. Further, shares of Common Stock tendered to the
Company by a Participant to exercise an Award shall be added to the number of
shares of Common Stock available for the grant of Awards under the Plan.
However, in the case of Incentive Stock Options (as hereinafter defined), the
foregoing provisions shall be subject to any limitations under the Code. Shares
issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.

 

(b) Sub-limits. Subject to adjustment under Section 4(c), the following
sub-limits on the number of shares subject to Awards shall apply:

 

(1) Section 162(m) Per-Participant Limit. The maximum number of shares with
respect to which Awards may be granted to any Participant under the Plan shall
be 1,000,000 per fiscal year. For purposes of the foregoing limit, the
combination of an Option in tandem with an SAR (as each is hereafter defined)
shall be treated as a single Award. The per-participant limit described in this
Section 4(b)(1) shall be construed and applied consistently with Section 162(m)
of the Code or any successor provision thereto, and the regulations thereunder
(“Section 162(m)”).

 

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(2) Limit on Awards other than Options and SARS. The maximum number of shares
with respect to which Awards other than Options and SARs may be granted from and
after the date of the 2004 Annual Meeting of Stockholders shall be 1,000,000.

 

(3) Limit on Awards to Directors. The maximum number of shares with respect to
which Awards may be granted from and after the date of the 2004 Annual Meeting
of Stockholders to directors who are not employees of the Company at the time of
grant shall be 300,000.

 

(c) Adjustment to Common Stock. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than an ordinary
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the sub-limits set forth in Section 4(b), (iii) the number and class of
security and exercise price per share subject to each outstanding Option and
each Option issuable under Section 6, (iv) the share- and per-share-related
provisions of each Stock Appreciation Right, (v) the repurchase price per
security subject to each outstanding Restricted Stock Award and (vi) the terms
of each other outstanding stock-based Award shall be appropriately adjusted by
the Company (or substituted Awards may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate. If this Section 4(c) applies and Section 10(e)(1)
and/or Section 10(e)(2) also applies to any event, then Section 10(e)(2) or
Section 10(e)(1) (in that order) shall be applicable to such event, and this
Section 4(c) shall not be applicable.

 

5. Stock Options

 

(a) General. The Board may grant options to purchase Common Stock (each, an
“Option”) and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a “Nonstatutory Stock
Option”.

 

(b) Incentive Stock Options. An Option that the Board intends to be an
“incentive stock option” as defined in Section 422 of the Code (an “Incentive
Stock Option”) shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.

 

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(c) Exercise Price. The Board shall establish the exercise price of each Option
and specify it in the applicable option agreement; provided, however, that no
Option shall be granted at an exercise price of less than 100% of fair market
value on the date of grant.

 

(d) Duration of Options. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
option agreement; provided, however, that no Option will be granted for a term
in excess of 10 years.

 

(e) Exercise of Option. Options may be exercised by delivery to the Company of a
written notice of exercise signed by the proper person or by any other form of
notice (including electronic notice) approved by the Board together with payment
in full as specified in Section 5(f) for the number of shares for which the
Option is exercised. Shares of Common Stock subject to the Option will be
delivered by the Company following exercise either as soon as practicable or,
subject to such conditions as the Board shall specify, on a deferred basis (with
the Company’s obligation to be evidenced by an instrument providing for future
delivery of the deferred shares at the time or times specified by the Board).

 

(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option
granted under the Plan shall be paid for as follows:

 

(1) in cash or by check, payable to the order of the Company;

 

(2) except as the Board may otherwise provide in an Option Agreement, by (i)
delivery of an irrevocable and unconditional undertaking by a creditworthy
broker to deliver promptly to the Company sufficient funds to pay the exercise
price and any required tax withholding, (ii) delivery by the Participant to the
Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price and any required tax withholding or (iii)
delivery of shares of Common Stock owned by the Participant valued at their fair
market value as determined by (or in a manner approved by) the Board in good
faith (“Fair Market Value”), which Common Stock (x) was owned by the Participant
for such minimum period of time, if any, as may be established by the Board in
its discretion and (y) is not subject to any repurchase, forfeiture, unfulfilled
vesting or other similar requirements;

 

(3) to the extent permitted by applicable law and by the Board and explicitly
provided in an Option Agreement (i) by delivery of a promissory note of the
Participant to the Company on terms determined by the Board or (ii) by payment
of such other lawful consideration as the Board may determine; or

 

(4) any combination of the above permitted forms of payment.

 

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(g) Limitation on Repricing. Unless such action is approved by the Company’s
stockholders: (1) no outstanding Option granted under the Plan may be amended to
provide an exercise price per share that is lower than the then-current exercise
price per share of such outstanding Option (other than adjustments pursuant to
Section 4(c)) and (2) the Board may not cancel any outstanding Option and grant
in substitution therefor new Options under the Plan covering the same or a
different number of shares of Common Stock and having an exercise price per
share lower than the then-current exercise price per share of the cancelled
Option.

 

6. Director Options.

 

(a) Initial Grant. Upon the commencement of service on the Board by any
individual who is not then an employee of the Company or any subsidiary of the
Company, the Company shall grant to such person a Nonstatutory Stock Option to
purchase 10,000 shares of Common Stock (subject to adjustment under Section
4(c)).

 

(b) Annual Grant. On the date of each annual meeting of stockholders of the
Company, the Company shall grant to each member of the Board of Directors of the
Company who is both serving as a director of the Company immediately prior to
and immediately following such annual meeting and who is not then an employee of
the Company or any of its subsidiaries, a Nonstatutory Stock Option to purchase
5,000 shares of Common Stock (subject to adjustment under Section 4(c));
provided, however, that a director shall not be eligible to receive an option
grant under this Section 6(b) until such director has served on the Board for at
least six months.

 

(c) Terms of Director Options. Options granted under this Section 6 shall (i)
have an exercise price equal to the closing sale price (for the primary trading
session) of the Common Stock on The New York Stock Exchange or on the other
national securities exchange or national securities association on which the
Common Stock is then traded on the trading date immediately prior to the date of
grant (and if the Common Stock is not then traded on a national securities
exchange or national securities association, the fair market value of the Common
Stock on such date as determined by the Board), (ii) vest on a cumulative basis
as to one-third of the shares subject to the Option on the first day of the
month of each of the first three anniversaries of the date of grant of such
Option (provided that no additional vesting shall take place after the
Participant ceases to serve as a director and further provided that the Board
may provide for accelerated vesting in the case of death, disability, attainment
of mandatory retirement age or retirement following at least 10 years of
service), (iii) expire on the earlier of 10 years from the date of grant or one
year following cessation of service on the Board and (iv) contain such other
terms and conditions as the Board shall determine.

 

(d) Board Discretion. The Board retains the specific authority to from time to
time increase or decrease the number of shares subject to options granted under
this Section 6, subject to the provisions of Section 4(b)(3).

 

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7. Stock Appreciation Rights.

 

(a) General. A Stock Appreciation Right, or SAR, is an Award entitling the
holder, upon exercise, to receive an amount in cash or Common Stock or a
combination thereof (such form to be determined by the Board) determined in
whole or in part by reference to appreciation, from and after the date of grant,
in the fair market value of a share of Common Stock. SARs may be based solely on
appreciation in the fair market value of Common Stock or on a comparison of such
appreciation with some other measure of market growth such as (but not limited
to) appreciation in a recognized market index. The date as of which such
appreciation or other measure is determined shall be the exercise date unless
another date is specified by the Board in the SAR Award.

 

(b) Grants. Stock Appreciation Rights may be granted in tandem with, or
independently of, Options granted under the Plan.

 

(1) Tandem Awards. When Stock Appreciation Rights are expressly granted in
tandem with Options, (i) the Stock Appreciation Right will be exercisable only
at such time or times, and to the extent, that the related Option is exercisable
(except to the extent designated by the Board in connection with an Acquisition
Event or a Change in Control Event) and will be exercisable in accordance with
the procedure required for exercise of the related Option; (ii) the Stock
Appreciation Right will terminate and no longer be exercisable upon the
termination or exercise of the related Option, except to the extent designated
by the Board in connection with an Acquisition Event or a Change in Control
Event and except that a Stock Appreciation Right granted with respect to less
than the full number of shares covered by an Option will not be reduced until
the number of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock Appreciation
Right; (iii) the Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right; and (iv) the Stock
Appreciation Right will be transferable only with the related Option.

 

(2) Independent SARS. A Stock Appreciation Right not expressly granted in tandem
with an Option will become exercisable at such time or times, and on such
conditions, as the Board may specify in the SAR Award.

 

(c) Exercise. Stock Appreciation Rights may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board,
together with any other documents required by the Board.

 

8. Restricted Stock

 

(a) General. The Board may grant Awards entitling recipients to acquire shares
of Common Stock, subject to the right of the Company to repurchase all or part
of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the

 

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Board in the applicable Award are not satisfied prior to the end of the
applicable restriction period or periods established by the Board for such Award
(each, “Restricted Stock Award”).

 

(b) Terms and Conditions. The Board shall determine the terms and conditions of
any such Restricted Stock Award, including the conditions for repurchase (or
forfeiture) and the issue price, if any. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant’s death (the “Designated Beneficiary”). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant’s estate.

 

(c) Deferred Delivery of Shares. The Board may, at the time any Restricted Stock
Award is granted, provide that, at the time Common Stock would otherwise be
delivered pursuant to the Award, the Participant shall instead receive an
instrument evidencing the right to future delivery of Common Stock at such time
or times, and on such conditions, as the Board shall specify. The Board may at
any time accelerate the time at which delivery of all or any part of the Common
Stock shall take place. The Board may also permit an exchange of unvested shares
of Common Stock that have already been delivered to a Participant for an
instrument evidencing the right to future delivery of Common Stock at such time
or times, and on such conditions, as the Board shall specify.

 

9. Other Stock-Based Awards

 

The Board shall have the right to grant other Awards based upon the Common Stock
having such terms and conditions as the Board may determine, including the grant
of shares based upon certain conditions, and the grant of securities convertible
into Common Stock. At the time any such Award is granted, the Board may provide
that, at the time Common Stock would otherwise be delivered pursuant to the
Award, the Participant will instead receive an instrument evidencing the
Participant’s right to future delivery of the Common Stock.

 

10. General Provisions Applicable to Awards

 

(a) Transferability of Awards. Except as the Board may otherwise determine or
provide in an Award, Awards shall not be sold, assigned, transferred, pledged or
otherwise encumbered by the person to whom they are granted, either voluntarily
or by operation of law, except by will or the laws of descent and distribution
or, other than in the case of an Incentive Stock Option, pursuant to a qualified
domestic relations order, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.

 

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(b) Documentation. Each Award shall be evidenced in such form (written,
electronic or otherwise) as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.

 

(c) Board Discretion. Except as otherwise provided by the Plan, each type of
Award may be made alone or in addition or in relation to any other type of
Award. The terms of each Award need not be identical, and the Board need not
treat Participants uniformly.

 

(d) Termination of Status. The Board shall determine the effect on an Award of
the disability, death, retirement, authorized leave of absence or other change
in the employment or other status of a Participant and the extent to which, and
the period during which, the Participant, the Participant’s legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.

 

(e) Acquisition Events; Change of Control Events

 

(1) Consequences of Acquisition Events. Subject to Section 10(e)(2), upon the
occurrence of an Acquisition Event (as defined below), or the execution by the
Company of any agreement with respect to an Acquisition Event, the Board shall
take any one or more of the following actions with respect to then outstanding
Awards: (i) provide that outstanding Options shall be assumed, or equivalent
Options shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof), provided that any such Options substituted for Incentive
Stock Options shall satisfy, in the determination of the Board, the requirements
of Section 424(a) of the Code; (ii) upon written notice to the Participants,
provide that all then unexercised Options will become exercisable in full as of
a specified time (the “Acceleration Time”) prior to the Acquisition Event and
will terminate immediately prior to the consummation of such Acquisition Event,
except to the extent exercised by the Participants between the Acceleration Time
and the consummation of such Acquisition Event; (iii) in the event of an
Acquisition Event under the terms of which holders of Common Stock will receive
upon consummation thereof a cash payment for each share of Common Stock
surrendered pursuant to such Acquisition Event (the “Acquisition Price”),
provide that all outstanding Options shall terminate upon consummation of such
Acquisition Event and each Participant shall receive, in exchange therefor, a
cash payment equal to the amount (if any) by which (A) the Acquisition Price
multiplied by the number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable), exceeds (B) the aggregate exercise
price of such Options; (iv) provide that all Restricted Stock Awards then
outstanding shall become free of all restrictions prior to the consummation of
the Acquisition Event; and (v) provide that any Stock Appreciation Rights or
other stock-based Awards outstanding (A) shall become exercisable, realizable or
vested in full, or shall be free of all conditions or restrictions, as
applicable to each such Award, prior to the consummation of the

 

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Acquisition Event, or (B), if applicable, shall be assumed, or equivalent Awards
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof).

 

An “Acquisition Event” shall mean: (a) any merger or consolidation which results
in the voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation; (b) any sale of all or substantially all of the assets of the
Company; or (c) the complete liquidation of the Company.

 

(2) Consequences of Change of Control Events. Except to the extent otherwise
provided in the instrument evidencing an Award or in any other agreement between
a Participant and the Company, (i) upon the occurrence of a Change of Control
Event, all Options and Stock Appreciation Rights then outstanding shall
automatically become immediately exercisable in full and (ii) the restrictions
and conditions on all other Awards then outstanding shall be deemed waived only
if and to the extent specified (whether at the time of grant or otherwise) by
the Board.

 

A “Change of Control Event” shall have the meaning set forth on Annex A hereto.

 

(3) Assumption of Options Upon Certain Events. The Board may grant Awards under
the Plan in substitution for stock and stock-based awards held by employees of
another corporation who become employees of the Company as a result of a merger
or consolidation of the employing corporation with the Company or the
acquisition by the Company of property or stock of the employing corporation.
The substitute Awards shall be granted on such terms and conditions as the Board
considers appropriate in the circumstances notwithstanding any limitations
contained in Section 2 and Section 5.

 

(f) Withholding. Each Participant shall pay to the Company, or make provision
satisfactory to the Company for payment of, any taxes required by law to be
withheld in connection with Awards to such Participant. The Board may allow
Participants to satisfy such tax obligations in whole or in part in shares of
Common Stock, including shares retained from the Award creating the tax
obligation, valued at their Fair Market Value; provided, however, that, except
as otherwise provided by the Board, the total tax withholding where stock is
being used to satisfy such tax obligations cannot exceed the Company’s minimum
statutory withholding obligations (based on minimum statutory withholding rates
for federal and state tax purposes, including payroll taxes, that are applicable
to such supplemental income). Shares surrendered to satisfy tax withholding
requirements cannot be subject to any repurchase, forfeiture, unfulfilled
vesting or other similar requirements. The Company may, to the extent permitted
by law, deduct any such tax obligations from any payment of any kind otherwise
due to a Participant.

 

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(g) Amendment of Award. Except as otherwise provided in Section 5(g) with
respect to option repricing, the Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant’s consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.

 

(h) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company’s counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.

 

(i) Acceleration. The Board may at any time provide that any Award shall become
immediately exercisable in full or in part, free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.

 

(j) Performance Conditions.

 

(1) This Section 10(j) shall be administered by a Committee approved by the
Board, all of the members of which are “outside directors” as defined by Section
162(m) (the “Section 162(m) Committee”).

 

(2) Notwithstanding any other provision of the Plan, if the Section 162(m)
Committee determines at the time a Restricted Stock Award or an other
stock-based Award is granted to a Participant who is then an officer, that such
Participant is, or is likely to be as of the end of the tax year in which the
Company would claim a tax deduction in connection with such Award, a Covered
Employee (as defined in Section 162(m)), then the Section 162(m) Committee may
provide that this Section 10(j) is applicable to such Award.

 

(3) If a Restricted Stock Award or an other stock-based Award is subject to this
Section 10(j), than the lapsing of restrictions thereon and the distribution of
cash or Shares pursuant thereto, as applicable, shall be subject to the
achievement of one or more objective performance goals established by the
Section 162(m) Committee, which shall be based on the relative or absolute
attainment of specified levels of one or any combination of the following:
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. Such performance goals may be
applied by excluding the impact of charges for

 

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restructurings, discontinued operations, extraordinary items, and other unusual
or non-recurring items, and the cumulative effects of accounting changes, each
as defined by generally accepted accounting principles, subject to paragraph (6)
below. Such performance goals may vary by Participant and may be different for
different Awards. Such performance goals shall be set by the Section 162(m)
Committee within the time period prescribed by, and shall otherwise comply with
the requirements of, Section 162(m).

 

(4) Notwithstanding any provision of the Plan, with respect to any Restricted
Stock Award or other stock-based Award that is subject to this Section 10(j),
the Section 162(m) Committee may adjust downwards, but not upwards, the cash or
number of Shares payable pursuant to such Award, and the Section 162(m)
Committee may not waive the achievement of the applicable performance goals
except in the case of the death or disability of the Participant.

 

(5) The Section 162(m) Committee shall have the power to impose such other
restrictions on Awards subject to this Section 10(j) as it may deem necessary or
appropriate to ensure that such Awards satisfy all requirements for
“performance-based compensation” within the meaning of Section 162(m)(4)(C) of
the Code, or any successor provision thereto.

 

(6) The Section 162(m) Committee shall make no adjustments to the performance
goals included in an outstanding Award, the effect of which is to increase the
incentive payment to the Chief Executive Officer or to other executive officers,
except for the following:

 

(A) Events classified as extraordinary items or discontinued operations or
presented as special nonrecurring charges (or income) in accordance with
generally accepted accounting principles.

 

(B) Disposal of a business segment or a group of two or more warehouse stores, a
major administrative unit, or major assets, if quantified and disclosed in
Management’s Discussion and Analysis of Financial Condition and Results of
Operations of the Company’s Annual Report on Form 10-K.

 

(C) Conversion of convertible bonds or preferred stock convertible into common
stock; a repurchase by the Company of outstanding shares of stock, if 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 Awards under this Plan or any similar plan.

 

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

 

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(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 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 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.

 

(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
warehouse stores in excess of the number incorporated in the performance goals.
The amount of the adjustment shall be equal to the average operating loss
incurred by new warehouse stores opened by the Company in the same fiscal year.

 

In no event, however, shall the Section 162(m) Committee make any adjustment
which would cause Awards to which this Section 10(j) applies not qualify as
performance-based compensation under Section 162(m).

 

11. Miscellaneous

 

(a) No Right To Employment or Other Status. No person shall have any claim or
right to be granted an Award, and the grant of an Award shall not be construed
as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.

 

(b) No Rights As Stockholder. Subject to the provisions of the applicable Award,
no Participant or Designated Beneficiary shall have any rights as a stockholder
with respect to any shares of Common Stock to be distributed with respect to an
Award until becoming the record holder of such shares. Notwithstanding the
foregoing, in the event the Company effects a split of the Common Stock by means
of a stock dividend and the

 

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exercise price of and the number of shares subject to an Option are adjusted as
of the date of the distribution of the dividend (rather than as of the record
date for such dividend), then an optionee who exercises an Option between the
record date and the distribution date for such stock dividend shall be entitled
to receive, on the distribution date, the stock dividend with respect to the
shares of Common Stock acquired upon such Option exercise, notwithstanding the
fact that such shares were not outstanding as of the close of business on the
record date for such stock dividend.

 

(c) Effective Date and Term of Plan.

 

(1) The Plan was adopted by the Board on May 30, 1997 and approved by the
stockholders of Waban Inc. on July 10, 1997 and by Waban Inc. as the sole
stockholder of the Company on July 10, 1997. The Plan initially became effective
on July 28, 1997, the date on which Waban Inc. completed the spin-off of the
Company by distributing to the stockholders of Waban Inc., on a pro rata basis,
in a tax-free distribution, all of the then outstanding shares of Common Stock
of the Company (the “Distribution Date”).

 

(2) No Awards shall be granted under the Plan after July 27, 2007, but Awards
previously granted may extend beyond that date.

 

(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any
portion thereof at any time, provided that (1) no Award granted to a Participant
designated as subject to Section 162(m) by the Board after the date of such
amendment shall become exercisable, realizable or vested, as applicable to such
Award (to the extent that such amendment to the Plan was required to grant such
Award to a particular Participant), unless and until such amendment shall have
been approved by the Company’s stockholders; (2) to the extent determined by the
Board, no amendment requiring stockholder approval under any applicable legal,
regulatory or listing requirement shall become effective until such stockholder
approval is obtained; and (3) if the New York Stock Exchange amends its
corporate governance rules so that such rules no longer require stockholder
approval of “material revisions” of equity-compensation plans, then, from and
after the effective date of such an amendment to the NYSE rules, no amendment of
the Plan which (i) materially increases the benefits accruing to participants
under the Plan, (ii) materially increases the number of securities which may be
issued under the Plan or (iii) materially modifies the requirements as to
eligibility for participation in the Plan shall become effective unless
stockholder approval is obtained.

 

(e) Stockholder Approval. For purposes of this Plan, stockholder approval shall
mean approval by a vote of the stockholders in accordance with the requirements
of Section 162(m) and any other applicable law or regulation.

 

(f) Governing Law. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware, without regard to any applicable conflicts of law.

 

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ANNEX A

 

DEFINITION OF CHANGE OF CONTROL EVENT

 

For the purpose 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

 

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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.

 

kw04:1997stockincentiveplan052004

 

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