Document:

HOMEBASE, INC.

                       Change of Control Severance Benefit
                             Plan for Key Employees

         HomeBase,  Inc.  (the  "Company")  desires  to  assure  that it and its
Subsidiaries  (collectively,  the  "Employer")  will  have  the  benefit  of the
continued service and experience of certain of their key employees and to assure
the Employer and such  employees of the  continuity of management of the Company
and the Employer in the event of a change of control of the Company,  and adopts
this plan (the  "Plan") to provide  such  assurances.  This Plan is  intended to
cover as  Participants  those  employees of the Employer who are  designated  or
otherwise described as a Participant in Exhibit A, paragraph (j).

         1. Benefits Upon Change of Control.

         1.01 In General. Within 30 days following a Change of Control,  whether
or not a Participant's employment has been terminated,  the Company shall pay to
the Participant the following in a lump sum:

                  (a) an amount  equal to the product of (i) the "Target  Bonus"
         under the HomeBase,  Inc. Management Incentive Plan or any other annual
         incentive  plan which is applicable to the  Participant  for the fiscal
         year in which the Change of Control  occurs  and (ii) a  fraction,  the
         numerator  of which is the number of days in such  fiscal year prior to
         the Change of Control and the denominator of which is 365; and

                  (b) if the  Participant  is a  participant  in any  long-range
         incentive  plan at the time of the Change of Control,  the benefits and
         payment provided for by the terms of such plan upon the occurrence of a
         Change of Control.

         1.02 Benefits  Following a Qualified  Termination.  Participants  whose
employment  terminates  in a  Qualified  Termination  shall be  entitled  to the
following additional benefits:

                  (a)  Within  30  days  following  the  Participant's  Date  of
         Termination,  the Employer shall pay to the Participant an amount equal
         to the  accrued  and unpaid  portion of the  Participant's  Base Salary
         through the Date of Termination.

                  (b) In  addition  to the amount  described  in  paragraph  (a)
         above,  but subject to  paragraph  (c) below,  the  Employer  shall pay
         and/or  provide  to the  Participant  all other  benefits  to which the
         Participant  is  entitled  upon   termination   of  the   Participant's
         employment as set forth in the Company's  Severance Policy in existence
         immediately prior to the Change of Control (or in existence on the Date
         of Termination,  if the benefits thereunder are greater),  at the times
         and in the manner described in such Severance Policy.

                  (c) In addition to amounts  described in paragraph  (a) above,
         the  Employer  shall pay in a single  lump sum an  amount  equal to the
         Participant's   Base  Salary,   determined  as  hereinafter   provided,
         multiplied by the Applicable Number of Weeks, determined as provided on
         Exhibit B, to any Participant who had been employed by the Employer for
         at least 12 months  prior to the Date of  Termination.  The Base Salary
         payable under this paragraph shall equal the Participant's  Base Salary
         as in effect immediately prior to the Change of Control or, if greater,
         the  Participant's  Base Salary as in effect  immediately  prior to the
         Date of Termination.  The benefit  described in this paragraph shall be
         paid in lieu of the  benefit  described  in  paragraph  (b)  unless the
         benefit  described  in  paragraph  (b) is  greater,  in which  case the
         benefit described in paragraph (b) shall be paid in lieu of the benefit
         described in this paragraph (c).

                  (d) The Employer  shall  arrange and pay for  continuation  of
         medical and life insurance benefits for the Participant (which shall be
         in  amount  and  terms  substantially  comparable  to those  in  effect
         immediately  prior to the Change of Control) for a period commencing on
         the Date of Termination  and  continuing  for the Applicable  Number of
         Weeks. To the extent the Participant,  immediately  prior to the Change
         of Control,  was  responsible for paying a portion of the premiums with
         respect to such insurance  benefits,  the Participant shall be required
         to continue to pay such amount.

         1.03 Coordination with Certain Tax Rules.  Payments under Sections 1.01
and 1.02 shall be made  without  regard to  whether  the  deductibility  of such
payments (or any other payments to or for the benefit of the Participant)  would
be limited or precluded by Internal Revenue Code Section 280G and without regard
to whether such payments (or any other  payments)  would subject the Participant
to the federal excise tax levied on certain  "excess  parachute  payments" under
Internal Revenue Code Section 4999; provided,  that if the total of all payments
to or for the benefit of the Participant,  after reduction for all federal taxes
(including  the  tax  described  in  Internal  Revenue  Code  Section  4999,  if
applicable)  with respect to such payments (the  "Participant's  total after-tax
payments"),  would be increased by the  limitation or elimination of any payment
under Sections 1.01 or 1.02,  amounts payable under Sections 1.01 and 1.02 shall
be reduced to the extent,  and only to the  extent,  necessary  to maximize  the
Participant's total after-tax  payments.  The determination as to whether and to
what extent  payments under Sections 1.01 and 1.02 are required to be reduced in
accordance with the preceding sentence shall be made at the Company's expense by
Coopers & Lybrand L.L.P.  or by such other certified  public  accounting firm as
the Executive  Compensation  Committee of the  Company's  Board of Directors may
designate  prior to a Change of  Control.  In the event of any  underpayment  or
overpayment  under  Sections  1.01 or 1.02 as  determined  by  Coopers & Lybrand
L.L.P.  (or such other firm as may have been  designated in accordance  with the
preceding  sentence),  the  amount of such  underpayment  or  overpayment  shall
forthwith be paid to the Participant or refunded to the Company, as the case may
be,  with  interest  at the  applicable  Federal  rate  provided  for in Section
7872(f)(2) of the Internal Revenue Code.

         2. Noncompetition; No Mitigation of Damages; Other Severance Payments;
Withholding.

         2.01  Noncompetition.  Upon a Change of  Control,  any  agreement  by a
Participant  not to engage in  competition  with the Employer  subsequent to the
termination of his employment,  whether  contained in an employment  contract or
other agreement, shall no longer be effective.

         2.02 No Duty to Mitigate Damages.  A Participant's  benefits under this
Plan shall be considered  severance pay in  consideration of his past and future
services,  and his entitlement  thereto shall neither be governed by any duty to
mitigate  his  damages  by  seeking   further   employment  nor  offset  by  any
compensation he may receive from future employment.

         2.03 Other Severance Payments. In the event that the Participant has an
employment  contract or any other agreement with the Employer which entitles the
Participant to severance  payments upon the  termination of his employment  with
the  Employer  (other  than  payments to be made under the  Company's  Severance
Policy as  described  in  Section  1.02(b)),  the  amount of any such  severance
payments shall be deducted from the payments to be made to the Participant under
this Plan so as to avoid duplication of severance benefits.

         2.04  Withholding.  Anything  to  the  contrary  notwithstanding,   all
payments required to be made by the Employer hereunder to a Participant shall be
subject to the  withholding of such amounts,  if any,  relating to tax and other
payroll  deductions as the Employer may reasonably  determine it should withhold
pursuant to any applicable law or regulation.

         3. Notice of Termination.  During a Standstill  Period, a Participant's
employment  may be terminated by the Employer only upon 30 days' written  notice
to the Participant.

         4.  Notices.  All notices shall be in writing and shall be deemed given
five days after  mailing  in the  continental  United  States by  registered  or
certified  mail, or upon personal  receipt after  delivery,  telex,  telecopy or
telegram,  to the party entitled  thereto at the address stated below or to such
changed address as the addressee may have given by a similar notice:

                  To the Employer:          c/o HomeBase, Inc.
                                            3345 Michelson Drive
                                            Irvine, California 92715
                                            Attention: Treasurer

                  To the Participant:       At his home address, as last shown
                                            on the records of the Employer

         5. Severability.  In the event that any provision of this Plan shall be
determined to be invalid or  unenforceable,  such provision shall be enforceable
in any  other  jurisdiction  in which  valid and  enforceable.  In any event the
remaining provisions shall remain in full force and effect to the fullest extent
permitted by law.

         6.  Continued  Employment.  This Plan shall not give a Participant  any
right of continued  employment or any right to any compensation or benefits from
the Company or the Employer except the benefits specifically provided for herein
and shall not limit the Employer's right to change the terms of or terminate the
Participant's employment, with or without Cause, at any time other than during a
Standstill  Period,  except as may be otherwise provided in a written employment
agreement between the Participant and the Employer.

         7.  Amendment and  Termination.  This Plan shall be effective for three
years starting from the Effective Date and thereafter for successive  three-year
periods unless, prior to the conclusion of each such period the Company,  acting
through its Board of Directors,  elects to discontinue the Plan. Notwithstanding
the  foregoing,  this Plan and the  employee  benefits  described  herein may be
amended or terminated as to all  Participants or as to any specific  Participant
at any time by the  Company  acting  by its  Board  of  Directors  and  shall be
terminated with respect to any specific  Participant  upon the first to occur of
the  following:  (i) he no longer has the title "Senior Vice  President,"  "Vice
President,"  "Assistant  Vice  President,"  "Manager  of," "Buyer," or "District
Manager"  (or such  other  management  title as the  Board of  Directors  of the
Company may from time to time specify for purposes of Exhibit A,  paragraph (j))
or (ii) his  employment is terminated or (iii) if he is employed by a Subsidiary
of the Company,  the Subsidiary  either ceases to be a Subsidiary of the Company
or  sells or  otherwise  disposes  of all or  substantially  all of its  assets;
provided that no such amendment or termination  which occurs during a Standstill
Period  shall  terminate  or  affect  the  existing  rights  of any  Participant
hereunder  except  that all such  rights  shall  terminate  as to a  Participant
employed  by a  Subsidiary  which has either  ceased to be a  Subsidiary  of the
Company  or sold all or  substantially  all of its  assets  during a  Standstill
Period unless the employment of the Participant  shall have been terminated in a
Qualified Termination within 90 days of such event.

         8. Legal Fees and Expenses.  The Employer  shall pay all legal fees and
expenses, including but not limited to counsel fees, stenographer fees, printing
costs, etc. incurred by a Participant in reasonably contesting or disputing that
the  termination  of his employment  during a Standstill  Period is for Cause or
other than for good  reason (as  defined  in  Exhibit  A,  paragraph  (k)) or in
obtaining any right or benefit to which the  Participant  is entitled under this
Plan.  Any amount payable under this Plan that is not paid when due shall accrue
interest at the prime rate as from time to time in effect at BankBoston  (or any
successor  thereto,  or if there is no  successor  entity  thereto,  such  other
commercial   banking   institution   as  shall  be  selected  by  the  Executive
Compensation Committee of the Company's Board of Directors) until paid in full.

         9. Binding on  Successors.  This Plan shall be binding on any successor
to all or substantially all of the Company's business or assets.

         10. Governing Law. This Plan shall be governed by the laws of the State
of California.

<PAGE>

                                   EXHIBIT A

                                  Definitions

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

         (a) "Base  Salary"  shall mean the  Participant's  weekly base  salary,
exclusive of any bonus or other benefits he may receive; provided, however, that
for  purposes of Section  1.02(c)  only,  Base Salary  shall  include the dollar
amount of any auto allowance.

         (b) "Cause" shall mean,  with respect to any  Participant,  dishonesty,
conviction  of a felony,  gross  neglect  of duties  (other  than as a result of
Disability or death),  or conflict of interest which conflict shall continue for
30 days after the Company gives written notice to the Participant requesting the
cessation of such conflict.

         In  respect  of  any  termination   during  a  Standstill  Period,  the
Participant  shall not be deemed to have  been  terminated  for Cause  until the
later to occur of (i) the 30th day after notice of termination is given and (ii)
the delivery to the  Participant  of a copy of a resolution  duly adopted by the
affirmative  vote of not less than a majority of the  Company's  directors  at a
meeting  called  and held for  that  purpose  (after  reasonable  notice  to the
Participant),  and at which the Participant  together with his counsel was given
an opportunity to be heard,  finding that the  Participant was guilty of conduct
described in the  definition of "Cause" above,  and  specifying the  particulars
thereof  in  detail;  provided,  however,  that  the  Company  may  suspend  the
Participant and withhold payment of his Base Salary from the date that notice of
termination  is given  until the  earliest  to occur of (a)  termination  of the
Participant for Cause effected in accordance  with the foregoing  procedures (in
which case the  Participant  shall not be  entitled  to his Base Salary for such
period),  (b) a determination by a majority of the Company's  directors that the
Participant was not guilty of the conduct described in the definition of "Cause"
above (in which case the  Participant  shall be  reinstated  and paid any of his
previously unpaid Base Salary for such period), or (c) the 90th day after notice
of termination is given (in which case the  Participant  shall be reinstated and
paid any of his previously unpaid Base Salary for such period).

         (c) "Change of Control" shall have the meaning set forth in Exhibit C.

         (d) "Company" shall mean HomeBase, Inc. or any successor.

         (e) "Date  of   Termination"   shall   mean  the  date  on  which  the
Participant's employment is terminated.

         (f) "Disability"  shall  have the  meaning  given it in the  Company's
long-term  disability  plan. A  Participant's  employment  shall be deemed to be
terminated  for  Disability on the date on which the  Participant is entitled to
receive long-term disability  compensation pursuant to such long-term disability
plan.

         (g) "Employer"  shall have the meaning set forth in the first paragraph
of this Plan.

         (h) "Effective Date" shall mean the date on which the Company completes
the spin-off of the BJ's Wholesale Club division of the Company by  distributing
to the  stockholders  of the  Company,  on a pro  rata  basis,  all of the  then
outstanding shares of Common Stock of BJ's Wholesale Club, Inc.

         (i) "Incapacity"  shall mean a disability (other than Disability within
the meaning of paragraph  (f) of this Exhibit A) or other  impairment  of health
that renders the Participant unable to perform his duties to the satisfaction of
the Executive  Compensation  Committee of the Board of Directors of the Company.
If by reason of Incapacity  the  Participant is unable to perform his duties for
at least six months in any 12-month  period,  upon written notice by the Company
to the  Participant  the employment of the  Participant  shall be deemed to have
been terminated by reason of Incapacity.

         (j) "Participant"  shall mean any employee of the Employer who has the
management  title "Senior Vice  President,"  "Vice  President,"  "Assistant Vice
President,"  "Manager  of,"  "Buyer,"  or  "District  Manager"  (or  such  other
management  title as the Board of Directors of the Company may from time to time
specify,  with reference to this  definition),  and who does not have a separate
severance  agreement  with the  Employer  relating to a Change of  Control.  The
Company shall keep a current list of the names of all Participants.

         (k) "Qualified   Termination"   shall  mean  the  termination  of  the
Participant's  employment  during a Standstill  Period (i) by the Employer other
than for Cause, or (ii) by the  Participant for good reason,  or (iii) by reason
of death, Incapacity or Disability.

         For purposes of this  definition,  termination  for "good reason" shall
mean,  with  respect  to  any  Participant,  the  voluntary  termination  by the
Participant of his  employment (A) within 120 days after the occurrence  without
the  Participant's  express  written  consent of any of the events  described in
clauses (I), (II), (III), (IV), (V) or (VI) below, provided that the Participant
gives  notice to the  Company  at least 30 days in advance  requesting  that the
situation  described in those  clauses be remedied,  and the  situation  remains
unremedied upon  expiration of such 30-day period;  or (B) within 120 days after
the occurrence  without the Participant's  express written consent of the events
described in clauses (VII) or (VIII) below,  provided that the Participant gives
notice to the Company at least 30 days in advance:

         (I)      the  assignment  to him of any  duties  inconsistent  with his
                  positions,  duties,  responsibilities,  and  status  with  the
                  Employer immediately prior to a Change of Control, or a change
                  in  the   Participant's   titles  or   offices  as  in  effect
                  immediately  prior to a Change of  Control,  or any removal of
                  the  Participant  from or any  failure to reelect  him to such
                  positions,  except in connection  with the  termination of the
                  Participant's  employment  by the Employer for Cause or by the
                  Participant other than for good reason; or

         (II)     if the Participant's rate of Base Salary for any fiscal year
                  is less than 100 percent of the rate of Base Salary paid to
                  the Participant in the completed fiscal year immediately
                  preceding the Change of Control, or if the Participant's total
                  cash compensation opportunities, including salary and
                  incentives, for any fiscal year are less than 100 percent of
                  the total cash compensation opportunities made available to
                  the Participant in the completed fiscal year immediately
                  preceding the Change of Control, unless any such reduction
                  represents an overall reduction of no less than 10 percent in
                  the rate of Base Salary paid or cash compensation
                  opportunities made available, as the case may be, to employees
                  having similar job titles (it being the Employer's burden to
                  establish this fact); or

         (III)    the failure of the Employer to continue in effect any benefit
                  or perquisite, or any pension, life insurance, medical
                  insurance or disability plan in which the Participant was
                  participating immediately prior to a Change of Control unless
                  the Employer provides the Participant with a plan or plans
                  that provide substantially similar benefits, or the taking of
                  any action by the Employer that would adversely affect the
                  Participant's participation in or materially reduce the
                  Participant's benefits under any of such plans or deprive the
                  Participant of any material fringe benefit enjoyed by the
                  Participant immediately prior to a Change of Control, unless
                  the elimination or reduction of any such benefit, perquisite
                  or plan is of an aggregate value of no more than 5 percent of
                  the rate of Base Salary and affects all other employees having
                  similar job titles (it being the Employer's burden to
                  establish this fact); or

         (IV)     any purported  termination of the Participant's  employment by
                  the Employer for Cause during a Standstill Period which is not
                  effected in compliance with paragraph (b) of this Exhibit; or

         (V)      any  relocation of the  Participant of more than 40 miles from
                  the place where the Participant was located at the time of the
                  Change of Control; or

         (VI)     any  other   breach  by  the  Company   with  respect  to  the
                  Participant of any provision of this Plan; or

         (VII)    the Company sells or otherwise disposes of, in one transaction
                  or a series of related  transactions,  assets or earning power
                  aggregating more than 30 percent of the assets (taken at asset
                  value as  stated  on the books of the  Company  determined  in
                  accordance  with  generally  accepted  accounting   principles
                  consistently  applied) or earning  power of the Company (on an
                  individual  basis) or the Company and its  Subsidiaries  (on a
                  consolidated  basis) to any other  Person or Persons (as those
                  terms are defined in Exhibit C); or

         (VIII)   if the Participant is employed by a Subsidiary of the Company,
                  such  Subsidiary  either  ceases  to be a  subsidiary  of  the
                  Company or sells or otherwise  disposes of, in one transaction
                  or a series of related  transactions,  assets or earning power
                  aggregating more than 30 percent of the assets (taken at asset
                  value as stated on the books of the  Subsidiary  determined in
                  accordance  with  generally  accepted  accounting   principles
                  consistently  applied) or earning power of such Subsidiary (on
                  an individual  basis) or such Subsidiary and its  subsidiaries
                  (on a  consolidated  basis) to any other Person or Persons (as
                  those terms are defined in Exhibit C).

         (l) "Standstill Period" shall be the period commencing on the date of a
Change  of  Control  and  continuing  until the  close of  business  on the last
business day of the 24th calendar month following such Change of Control.

         (m) "Subsidiary"  shall mean any corporation in which the Company owns,
directly or indirectly, 50 percent or more of the total combined voting power of
all classes of stock.

<PAGE>

                                   EXHIBIT B

          Determination of Benefits Following a Qualified Termination

The "Applicable Number of Weeks" with respect to a Participant is as follows:

        --------------------------------------- --------------------------------
        If the Participant's title              Then the Applicable Number of
        immediately prior to the Change of      Weeks
        Control is...                           is...
        ======================================= ================================

        Senior Vice President                   104 weeks
        --------------------------------------- --------------------------------

        Vice President                          104 weeks
        --------------------------------------- --------------------------------

        Assistant Vice President                52 weeks
        --------------------------------------- --------------------------------

        Buyer                                   39 weeks
        --------------------------------------- --------------------------------

        District Manager                        39 weeks
        --------------------------------------- --------------------------------

        Director/Manager of                     26 weeks
        --------------------------------------- --------------------------------

<PAGE>

                                   EXHIBIT C

                        Definition of Change of 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 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.Thomas F. Gallagher

                              EMPLOYMENT AGREEMENT

          AGREEMENT  dated as of August 21, 2001  between  Thomas F.  Gallagher,
whose address is _________________________________  ("Executive"), and HomeBase,
Inc., a Delaware  corporation,  whose principal office is in Irvine,  California
("Employer" or "Company")

          The  parties  hereto,   in  consideration  of  the  mutual  agreements
hereinafter  contained  and  intending  to be  legally  bound  hereby,  agree as
follows:

          1. Employment.  The Executive is currently an employee of the Company.
Employer will employ  Executive  and  Executive  will be an employee of Employer
under the terms and conditions  hereinafter set forth. This Agreement supersedes
and replaces any prior employment  agreement  between  Executive and Employer or
its  subsidiaries  or  divisions,  except for any  Change of  Control  Severance
Agreement between Executive and Employer.

          2. Effective Date; Term of Agreement. Executive's employment under the
terms of this  Agreement  shall  commence on the date hereof and shall  continue
until August 21, 2002 and  thereafter  until  terminated by either  Executive or
Employer,  subject to earlier  termination  as provided  herein  (such period of
employment  hereinafter  called the "Employment  Period").  Notwithstanding  the
foregoing,  the Change of Control  Severance  Agreement  between the Company and
Executive of even date herewith (the Change of Control Agreement),  shall remain
in full force and effect.

          3. Duties.  Executive shall diligently perform the duties of President
and  Chief  Operating  Officer  of the  Company  or such  executive  duties  and
responsibilities  as shall from time to time be  assigned  to  Executive  by the
Chief Executive Officer.

          4. Extent of Services.  Except for  illnesses  and  vacation  periods,
Executive  shall  devote  substantially  all of  Executive's  working  time  and
attention and Executive's best efforts to the performance of Executive's  duties
and responsibilities  under this Employment Agreement;  provided,  however, that
nothing  herein  contained  shall be  deemed  to  prevent  or limit the right of
Executive (a) to make any passive  investments  where Executive is not obligated
or required to, and shall not in fact,  devote any managerial  efforts or (b) to
participate  in charitable or community  activities or in trade or  professional
organizations,  except  only that  Employer  shall  have the right to limit such
participation  if the Chief  Executive  Officer  believes that the time spent on
such  activities   infringes  upon  the  time  required  by  Executive  for  the
performance  of  Executive's   duties  under  this  Agreement  or  is  otherwise
incompatible with those duties.

          5. Base Salary. During the Employment Period,  Executive shall receive
a base salary at the rate of  $350,000.00  per year,  or such  higher  amount as
Employer shall determine from time to time. Base salary shall be payable in such
manner and at such times as Employer  shall pay base  salary to other  executive
employees.

          6.  Policies  and  Fringe  Benefits.  Executive  shall be  subject  to
Employer's policies applicable to its executives generally,  and Executive shall
be entitled to receive all such fringe  benefits as Employer  shall from time to
time make available to other Employer executives generally (subject to the terms
of any applicable fringe benefit plan).

          7.     Termination of Employment; in General.

          a) Employer shall have the right to end Executive's  employment at any
time and for any reason,  with or without cause.  Cause shall mean dishonesty by
Executive in the  performance  of  Executive's  duties,  conviction  of a felony
(other than a conviction  arising  solely under a statutory  provision  imposing
criminal  liability upon Executive on a per se basis due to the Company  offices
held by Executive,  so long as any act or omission of Executive  with respect to
such matter was not taken or omitted in contravention  of any applicable  policy
or directive of the Board of Directors of the Company),  gross neglect of duties
(other  than as a result of  incapacity,  disability  or death),  or conflict of
interest  which  conflict  shall  continue  for 30 days after the Company  gives
written notice to Executive requesting the cessation of such conflict.

          b) The  Employment  Period shall  terminate  when  Executive  -becomes
entitled to receive  long-term  disability  compensation  pursuant to Employer's
long-term disability plan. In addition, if by reason of any incapacity Executive
is unable to perform  Executive's duties for at least six months in any 12 month
period,  the Employment  Period will be terminated  for incapacity  upon written
notice by Employer to Executive.

          c) Whenever the Employment  Period shall  terminate,  Executive  shall
resign all offices or other positions  Executive shall hold with Employer or any
parent  corporation  and any  subsidiaries  or divisions of Employer or any such
parent.

          8.     BENEFITS UPON TERMINATION OF EMPLOYMENT.

          a)  Termination  by  Employer  Other  Than for  Cause.  Disability  or
Incapacity.  If the Employment Period shall have been terminated by Employer for
any reason other than cause, disability or incapacity,  no compensation or other
benefits shall be payable to or accrue to Executive hereunder except as follows:
                   (i) Vested vacation pay accrued at date of termination  shall
be paid upon termination.

                   (ii) Employer  will continue to pay to Executive  Executive's
          then  base  salary  for a  period  of  12  months  from  the  date  of
          termination, which base salary shall be reduced after three months for
          compensation earned from other employment or self-employment.

                   (iii)  Until the  expiration  of the  period  of base  salary
          payments  described in (ii) immediately above or until Executive shall
          commence other  employment or  self-employment,  whichever shall first
          occur,  Employer will provide such medical and hospital  insurance and
          life insurance (but not long-term disability  insurance) for Executive
          and  Executive's  family,  comparable  to the  insurance  provided for
          executives generally,  as Employer shall determine,  and upon the same
          terms and  conditions as shall be provided for  Employer's  executives
          generally.

                   (iv)  Employer  will pay to  Executive,  without  offset  for
          compensation  earned from other  employment  or  self-employment,  the
          following amounts under Employer's  Management  Incentive Plan ("MIP")
          applicable to Executive:

                   First, if not already paid, any amounts to which Executive is
                   entitled  under MIP for the  fiscal  year  ended  immediately
                   prior to Executive's termination of employment. These amounts
                   will be paid at the same time as other  awards for such prior
                   year are paid.

                   Second,  such amount as Executive would have earned under MIP
                   if Executive's  employment had continued until the end of the
                   fiscal year during which the termination of employment occurs
                   (prorated  for the period of active  employment  during  such
                   fiscal  year).  This  amount will be paid at the same time as
                   other MIP awards for the year of termination are paid.

                   (v) Executive  shall also be entitled to payments or benefits
          under other  plans of  Employer to the extent that such plans  provide
          benefits following a termination of employment.

          b) Termination for Death. Disability or Incapacity.  If the Employment
Period  shall  terminate  at  any  time  by  reason  of  death,  disability,  or
incapacity,  no  compensation or other benefits shall be payable to or accrue to
Executive hereunder except as follows:

                   (i) Vested vacation pay accrued at date of termination  shall
be paid upon termination.

                   (ii)  Employer  will pay to  Executive,  without  offset  for
          compensation  earned from other  employment  or  self-employment,  the
          following amounts under MIP applicable to Executive:

                   First, if not already paid, any amounts to which Executive is
                   entitled  under MIP for the  fiscal  year  ended  immediately
                   prior to Executive's termination of employment. These amounts
                   will be paid at the same time as other  awards for such prior
                   year are paid.

                   Second,  such amount as Executive would have earned under MIP
                   if Executive's  employment had continued until the end of the
                   fiscal year during which the termination of employment occurs
                   (prorated  for the period of active  employment  during  such
                   fiscal  year).  This  amount will be paid at the same time as
                   other MIP awards for the year of termination are paid.

                 (iii)  Executive shall also be entitled to payments or benefits
          under other  plans of  Employer to the extent that such plans  provide
          benefits following a termination of employment.

          c) Voluntary Termination;  Termination for Cause; Violation of Certain
Covenants.  If Executive  should end  Executive's  employment  voluntarily or if
Employer  should end Executive's  employment for cause,  or if Executive  should
violate the protected  persons or  non-competition  provisions of Section 9, all
compensation  and benefits  otherwise  payable  pursuant to this Agreement shall
cease.  Employer  does not  waive  any  rights  it may have for  damages  or for
injunctive relief.

          9.     Agreement Not to Solicit or Compete.

          (a) Upon the termination of the Employment  Period at any time for any
reason, Executive shall not during the Prohibited Period under any circumstances
employ,  solicit the employment of, or accept  unsolicited  the services of, any
"protected person", or recommend the employment of any "protected person" to any
other  business  organization  in which  Executive  has any  direct or  indirect
interest (other than a less-than-one percent equity interest in an entity), with
which  Executive is  affiliated  or for which  Executive  renders any  services.
"Prohibited  Period"  shall  mean a period  coterminous  with the period of base
salary  continuation   (without  regard  to  reduction  for  income  from  other
employment  or  self-employment)  which is  applicable  or which would have been
applicable  had the  termination  been  pursuant to Section  8(a).  A "protected
person"  shall be a person  known by Executive to be employed by Employer or its
subsidiaries at or within six months prior to the  commencement of conversations
with such person with respect to employment.

          As to (i) each "protected person" to whom the foregoing applies,  (ii)
each limitation on (A) employment of, (B)  solicitation  of, and (C) unsolicited
acceptance of services from, each "protected person" and (iii) each month of the
period during which the  provisions of this  subsection (a) apply to each of the
foregoing,  the  provisions  set forth in this  subsection  (a) are deemed to be
separate and independent  agreements and in the event of unenforceability of any
such  agreement,  such  unenforceable  agreement  shall be deemed  automatically
deleted  from the  provisions  hereof  and such  deletion  shall not  affect the
enforceability  of any other  provision of this subsection (a) or any other term
of this Agreement.

          (b) During the course of Executive's  employment,  Executive will have
learned many trade  secrets of the Company and will have access to  confidential
information and business plans of the Employer.  Therefore,  if Executive should
end  Executive's  employment  voluntarily  at any time,  including  by reason of
retirement,  disability or  incapacity,  or if Employer  should end  Executive's
employment at any time for cause, then during the Prohibited  Period,  Executive
will not  engage,  either  as a  principal,  employee,  partner,  consultant  or
investor (other than a less-than-one  percent equity interest in an entity) , in
a business  which is a  competitor  of  Employer.  A business  shall be deemed a
competitor  of  Employer  if  it  shall  operate  a  chain  of  home  decorating
superstores that includes a store located within 10 miles of any "then existing"
Company  superstore.  The term "then  existing" in the previous  sentence  shall
refer to any such store that is, at the time of  termination  of the  Employment
Period, operated by the Company or any of its subsidiaries or divisions or under
lease for operation as  aforesaid.  Nothing  herein shall  restrict the right of
Executive  to  engage  in a  business  that  operates  exclusively  a  chain  of
membership  warehouse  clubs,  conventional or full mark-up  department  stores,
general  merchandise  discount  department stores, or apparel stores.  Executive
agrees that if, at any time,  pursuant to action of any court or  administrative
or  governmental  body,  the  operation of any part of this  paragraph  shall be
determined to be unlawful or otherwise unenforceable,  then the coverage of this
paragraph shall be deemed to be restricted as to duration, geographical scope or
otherwise,  to the  extent,  and  only to the  extent,  necessary  to make  this
paragraph  lawful and  enforceable in the particular  jurisdiction in which such
determination is made.

          If the Employment  Period  terminates,  Executive agrees (i) to notify
Employer   immediately   upon  Executive's   securing   employment  or  becoming
self-employed  during any period when  Executive's  compensation  from  Employer
shall be subject to reduction or Executive's benefits provided by Employer shall
be  subject  to  termination  as  provided  in Section 8, and (ii) to furnish to
employer  written  evidence  of  Executive's  compensation  earned from any such
employment or  self-employment  as Employer shall from time to time request.  In
addition,  upon  termination of the Employment  Period for any reason other than
the death of  Executive,  Executive  shall  immediately  return to Employer  all
written trade secrets,  confidential  information and business plans of Employer
and shall execute a certificate  certifying that Executive has returned all such
items in Executive's  possession or under Executive's  control.  In the event of
the death of Executive, Executive's estate shall comply with this obligation.

          10. ASSIGNMENT.  The rights and obligations of Employer shall inure to
the benefit of and shall be binding upon the successors and assigns of Employer.
The rights and  obligations  of Executive  are not  assignable  except only that
payments  payable  to  Executive  after  Executive's  death  shall  be  made  to
Executive's estate.

          11. NOTICES. All notices and other  communications  required hereunder
shall be in writing and shall be given either by personal delivery or by mailing
the same by certified or registered  mail,  return  receipt  requested,  postage
prepaid.  If sent to  Employer,  the same  shall be mailed to  Employer  at 3345
Michelson Drive, Irvine, CA 92612,  Attention:  Chief Executive Officer, or such
other address as Employer may hereafter designate by notice to Executive; and if
sent to  Executive,  the same shall be mailed to  Executive  at his  address set
forth above,  or at such other address as Executive  may hereafter  designate by
notice to Employer. Notices shall be effective upon receipt.

          12.  GOVERNING LAW. This  Agreement and the rights and  obligations of
the parties hereunder shall be governed by the -laws of the State of California.

         WITNESS the execution hereof the day and year first above written.

                                      HOMEBASE, INC.

/s/THOMAS F. GALLAGHER                /s/HERBERT J. ZARKIN
------------------------              ---------------------------
Thomas F. Gallagher, Executive        Herbert J. Zarkin, Chief Executive Officer

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