**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”) ofBJ’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 areexpected 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’sstockholders. 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 ofthe 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 hasbeen 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 suchadministrative 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 shalldeem 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 claimingany 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 byapplicable 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 sharessubject to Awards and the maximum number of shares for any one Participant to be made by such executive officers. 

(c) *Appointment of Committees*. To the extent permitted by applicable law, the Board may delegateany 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-employeedirector” 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 executiveofficer 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 sumof (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 whichremained 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 notactually 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 anyAward 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 originalissuance 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 thegrant 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 thecase 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 Section4(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 anyParticipant 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 limitdescribed 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 withrespect 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 dateof 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 underthis 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-relatedprovisions 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 (orsubstituted 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 Stockto 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 oradvisable. 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 aParticipant, 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 inthe 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 asthe 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 anyother 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 bedelivered 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 futuredelivery 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 OptionAgreement, 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 tothe 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 ofCommon 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 minimumperiod 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 OptionAgreement (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-currentexercise price per share of the cancelled Option. 

 

**6.*****DirectorOptions.*******

 

(a) *Initial Grant.* Upon thecommencement 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 (subjectto adjustment under Section 4(c)). 

 

(b) *Annual Grant*. Onthe 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 suchannual 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 notbe 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 theprimary 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 ofgrant (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 toone-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 adirector 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 yearsfrom 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 optionsgranted 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 anamount 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 ofwhich 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 areexpressly 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 anAcquisition 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 terminationor 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 ofshares 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 terminateand 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 willbecome 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 orby 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 repurchaseall 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 periodsestablished 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 stockcertificates 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 theCompany (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 thebeneficiary 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 aneffective 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 wouldotherwise 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 anytime 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 instrumentevidencing 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, includingthe 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 theAward, 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 aqualified 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 othertype 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 orother 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 rightsunder the Award. 

 

(e) *Acquisition Events; Change of ControlEvents*

 

(1) *Consequences of AcquisitionEvents.* 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 followingactions 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 Optionssubstituted 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 exercisablein 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 theAcceleration 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 Stocksurrendered 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 cashpayment 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 suchOptions; (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 Awardsoutstanding (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, bythe 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 orby 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 orconsolidation; (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 inany 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) therestrictions 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.* TheBoard 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 theCompany 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 limitationscontained 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 taxobligations 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 taxwithholding 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 payrolltaxes, 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 extentpermitted 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 optionrepricing, 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 IncentiveStock 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 affectthe 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 satisfactionof 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 orstock 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 orregulations. 

 

(i) *Acceleration*. The Board may at anytime 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 Committeeapproved 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 oran 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 CoveredEmployee (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 thereonand 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 absoluteattainment 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 performancegoals 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 tothis 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 goalsexcept 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 allrequirements 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 whichis 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) inaccordance 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 FinancialCondition 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 ofstock, 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 rulespromulgated 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’scontrol, 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 ofa newly acquired business. 

 

(I) Adjustments ofgoals 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 inthe 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 Section10(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 withthe 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 provisionsof 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 thedividend (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 stockdividend 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 andapproved 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 theCompany 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 ofsuch 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 beenapproved 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 approvalis 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 effectivedate 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 therequirements 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 conflictsof 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) ofthe 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-outstandingshares 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 acquisitionby 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 whichsatisfies 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 atleast 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 ofthe 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 occursas 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 orconsolidation 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 orsubstantially 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 corporationresulting 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 moresubsidiaries) 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 (excludingany 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 membersof 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 theCompany of a complete liquidation or dissolution of the Company. 

 

*kw04:1997stockincentiveplan052004*

 

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