EXHIBIT 10.12
EMPLOYMENT AGREEMENT
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AGREEMENT dated as of July 28, 1997 between Herbert J Zarkin of 8 Lands End
Lane, Sudbury, Massachusetts 01776 ("Executive") and BJ's Wholesale Club, Inc.,
a Delaware corporation (the "Company"), whose principal office is in Natick,
Massachusetts 01760.
RECITALS
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The Executive has served as President and Chief Executive Officer of Waban
Inc., a Delaware corporation ("Waban"), renamed HomeBase, Inc. as of the date
hereof, with its principal offices in California ("HomeBase"), under an
Employment Agreement dated as of September 19, 1996, with a term ending January
29, 2000.
In connection with distribution of common stock of the Company by Waban to
its shareholders (the "Distribution"), the Company and Executive desire to enter
into an agreement with respect to Executive's employment by Company, following
the Distribution, as Chairman of the Board of Directors of the Company.
The Company and Executive deem it desirable and appropriate, therefore, to
enter into this Agreement.
AGREEMENT
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The parties hereto, in consideration of the mutual agreements hereinafter
contained, agree as follows:
1. EFFECTIVE DATE; TERM OF AGREEMENT. This agreement shall become
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effective as of the date first written above (the "Effective Date"). This
Agreement shall supersede any other employment agreement including, without
limitation, the Employment Agreement dated as of September 19, 1996 between
Executive and Waban, other than the Employment Agreement dated as of the date
hereof between the Executive and HomeBase (the "HomeBase Employment Agreement")
and the Change of Control Severance Agreement dated as of the date hereof
between the Company and Executive (the "Change of Control Agreement").
Executive's employment by the Company shall continue on the terms provided
herein until July 31, 2000 and thereafter until terminated by either Executive
or the Company, subject to earlier termination as provided herein (such period
of employment hereinafter called "Employment Period").
2. SCOPE OF EMPLOYMENT.
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(a) Nature of Services. Executive shall diligently perform the duties and
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the responsibilities of Chairman of the Board of Directors of the Company and
such additional duties and responsibilities as an employee of the Company as
shall from time to time be agreed by him and the Board.
(b) Extent of Services. Executive shall devote approximately one-half
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(1/2) of his working time and attention and his best efforts to the performance
of his duties and responsibilities under this Agreement, provided that, to the
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extent of any conflicts between the time required to be devoted under this
Agreement and under the HomeBase Employment Agreement, the Employee shall
allocate his time between the Company and HomeBase in such manner as he deems
reasonably appropriate under the circumstances. However, Executive may (a) make
any passive investments where he is not obligated or required to, and shall not
in fact, devote any managerial efforts, (b) participate in charitable or
community activities or in trade or professional organizations or (c) subject to
Board approval (which approval shall not be unreasonably withheld or withdrawn),
hold directorships in public companies, except only that the Board shall have
the right to limit such services as a director or such participation whenever
the Board shall believe that the time spent on such activities infringes in any
material respect upon the time required by Executive for the performance of his
duties under this Agreement or is otherwise incompatible with those duties.
3. COMPENSATION AND BENEFITS.
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(a) Base Salary. Executive shall be paid a base salary at the rate of
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$350,000 per year to be reviewed annually by the Committee (the "Base Salary");
however, any reduction in the Base Salary shall be subject to Executive's
consent. Base Salary shall be payable in such manner and at such times as the
Company shall pay base salary to other executive employees.
(b) New MIP Awards. Executive shall be eligible to receive awards under
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the Company's Management Incentive Plan ("MIP") applicable to Executive. The
goals, scope, and conditions of any award shall be established annually by
mutual agreement between Executive and the Committee. In each fiscal year,
Executive shall be entitled to earn up to a specified percentage of his Base
Salary as a Target, or Maximum Award, as the case may be. For each fiscal year
of the Company, the Target Award shall equal 50% of Executive's Base Salary
earned during the fiscal year under this Agreement, and the Maximum Award shall
equal $1,000,000, or if less, 100% of the Executive's Base Salary earned by the
Executive during the fiscal year (as defined in the MIP) with respect to which
the Award is made, with the payment potential scaling from 0% to the Maximum
Award, as established by the terms of the Award.
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(c) Qualified Plans. Executive shall be entitled during the Employment
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Period to participate in the Company's tax-qualified retirement and profit-
sharing plans, if any, in accordance with the provisions of those plans.
(d) Policies and Fringe Benefits. Executive shall be subject to Company
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policies applicable to its executives generally and Executive shall be entitled
to receive all such fringe benefits as the Company shall from time to time make
available to other executives generally (subject to the terms of any applicable
fringe benefits plan other than terms requiring minimum hours served for
participation).
4. TERMINATION OF EMPLOYMENT; IN GENERAL.
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(a) The Company and the Executive shall each have the right to end the
Executive's employment at any time and for any reason, with or without Cause.
(b) The Employment Period shall terminate when Executive becomes Disabled.
In addition, if by reason of Incapacity Executive is unable to perform his
duties for at least six continuous months, upon written notice by the Company to
Executive the Employment Period will be terminated for Incapacity.
(c) Whenever the Employment Period shall terminate, Executive shall resign
all offices or other positions he shall hold with the Company and any affiliated
corporations, including his position as a Director of the Company.
5. BENEFITS UPON TERMINATION OF EMPLOYMENT.
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(a) Certain Terminations for Death, Disability or Incapacity; Termination
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by Company without Cause; Termination under Specified Circumstances. If the
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Employment Period shall be terminated prior to, on, or after July 31, 2000 (i)
by reason of death, Disability or Incapacity of Executive, (ii) by termination
by the Company for any reason other than Cause or (iii) by termination by
Executive in the event that either (A) Executive shall be removed from or fail
to be reelected to the office of Chairman of the Board of Directors and a member
of the Executive Committee of the Board (other than in connection with
termination of Executive's employment for Cause or by Executive's voluntary
termination for reasons not specified in this clause (iii)) or (B) Executive is
relocated more than 40 miles from the current corporate headquarters of the
Company, in either case without his prior written consent (a "Specified
Voluntary Termination," which termination shall not constitute a voluntary
termination for any purpose of this Agreement), then all compensation and
benefits for Executive shall be as follows:
(i) For 12 months after such termination, the Company will continue to pay
to Executive Base Salary at the rate in effect at termination of employment.
Base Salary shall be paid for the first three months of the period without
reduction for
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compensation earned from other employment or self-employment, and shall
thereafter be reduced by such compensation earned from other employment or self-
employment (other than any compensation received from HomeBase).
(ii) Until the expiration of the period of Base Salary payments described
in (i) above, except to the extent that Executive shall obtain the same from
another employer or from self-employment (other than such employment by
HomeBase), the Company will provide such medical and hospital insurance, and
life insurance for Executive and his family, comparable to the insurance
provided for executives generally, as the Company shall determine, and upon the
same terms and conditions as the same shall be provided for other Company
executives generally; provided, however, that in no event shall such benefits or
the terms and conditions thereof be less favorable to Executive than those
afforded to him as of his termination of employment.
(iii) The Company will pay to Executive, without offset for
compensation earned from other employment or self-employment, the following
amounts under the Company's MIP applicable to Executive:
. First, if not already paid, any amounts to which Executive is entitled
under MIP for the fiscal year of the Company 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 his
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.
In addition, the Company will pay to Executive such amounts as Executive
shall have deferred (but not received) under the Company's General Deferred
Compensation Plan in accordance with the provisions of that Plan.
(iv) Executive shall also be entitled to the benefits with respect to any
Stock Options or other Stock-based awards held by Executive on his termination
of employment as provided under the terms of any Company options or any
applicable Company equity incentive plan including, without limitation, the
benefit of continued vesting following such termination of employment; provided
that if any option does not expire by its terms (or the terms of the option plan
under which it was issued) by the third anniversary of the Executive's
termination of employment, then such options shall terminate on such third
anniversary.
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(v) In addition, Executive shall be entitled to payments or benefits under
other Company plans, such as the Company's 401(k) Savings Plan, to the extent
that such plans provide benefits following a termination of employment.
(vi) If termination occurs by reason of Incapacity or Disability, Executive
shall be entitled to such compensation, if any, as is payable pursuant to the
Company's long-term disability plan or any successor Company disability plan.
Any payments made to Executive under any long-term disability plan of the
Company with respect to the salary continuation period in clause (i) above shall
be offset against such salary continuation payments and to the extent not so
offset, Executive shall promptly make reimbursement payments to the Company of
such disability payments.
(b) Certain Voluntary Terminations; Termination for Cause; Violation of
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Certain Agreements. If, prior to, on, or after July 31, 2000, Executive should
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end his employment voluntarily or if the Company should end Executive's
employment for Cause, or, notwithstanding (a) above, if Executive should violate
the protected persons or noncompetition provisions of Section 6 to the extent
then applicable, all compensation and benefits otherwise payable pursuant to
this Agreement shall cease, other than (x) such amounts as Executive shall have
deferred (but not received) under the Company's General Deferred Compensation
Plan in accordance with the provisions of that Plan, and (y) any benefits to
which the Executive may be entitled under other Company plans to the extent, if
any, such plans provide benefits following such termination of employment. The
Company does not waive any rights it may have for damages or for injunctive
relief.
(c) Benefits Upon Change of Control. Following a Change of Control (as
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defined in the Change of Control Agreement), any rights of Executive under this
Agreement or any other agreement or plan with respect to uncompleted MIP periods
shall be governed solely by the Change of Control Agreement. Upon a termination
constituting Qualified Termination (as defined in the Change of Control
Agreement), all rights of Executive with respect to salary continuation, life
insurance, medical insurance and disability benefits shall be governed solely by
the Change of Control Agreement unless Executive shall elect to have all such
rights governed by the applicable terms of this Agreement (including a
determination of whether the termination was voluntary or involuntary), in which
case the Change of Control Agreement shall have no effect as to such rights
(upon such election, the nature of the termination, e.g. voluntary, involuntary
or for Specified Voluntary Termination, shall be determined by reference to this
Agreement and shall not be determined by reference to the classification of the
termination under the Change of Control Agreement). To be effective, written
notice of such election must be furnished by Executive to the Company within
seven days following the Qualified Termination.
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6. AGREEMENT NOT TO SOLICIT OR COMPETE.
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(a) Upon the termination of employment at any time, then for a period of
two years after the termination of the Employment Period, Executive shall not
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. A "protected person"
shall be a person known by Executive (i) to be employed by the Company or its
Subsidiaries or (ii) to have been employed by the Company or its Subsidiaries
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, (B) solicitation and (C) unsolicited acceptance of
services of 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 his employment, Executive has learned many trade
secrets of the Company and has had access to confidential information and
business plans for the Company. Therefore, if Executive should end his
employment at any time during the Employment Period for any reason, including by
reason of retirement or disability, or if the Company should end Executive's
employment at any time during the Employment Period for any reason, and whether
with or without Cause, then for a period of two years thereafter, Executive will
not engage, either as a principal, employee, partner, consultant or investor
(other than a less-than-1% stock interest in a corporation), in a business which
is a competitor of the Company (a "Competitive Business"). A business shall be
deemed a Competitive Business if it shall operate a chain of membership
warehouse clubs (such as Sam's Club or Costco), or warehouse stores selling food
and/or general merchandise, that includes a warehouse store located within 10
miles of any "then existing" BJ's Wholesale Club warehouse store. The term
"then existing" in the previous sentence shall refer to any such warehouse 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 the Executive to engage
in a business that operates exclusively a chain of home improvement stores,
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,
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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. In addition, if during a
period of salary continuation under Section 5(a)(i) following Executive's
termination by the Company for any reason other than Cause, Executive so engages
in a Competitive Business (whether or not the provisions of this paragraph (b)
are otherwise then applicable to Executive), Executive's rights to any further
salary continuation or benefits continuation under Sections 5(a)(i) and 5(a)(ii)
shall terminate.
(c) If the Employment Period terminates, Executive agrees (i) to notify the
Company promptly upon his securing employment or becoming self-employed during
any period when Executive's compensation from the Company shall be subject to
reduction or his benefits provided by the Company shall be subject to
termination as provided in Section 5 and (ii) to furnish to the Company written
evidence of his compensation earned from any such employment or self-employment
as the Company shall from time to time reasonably request. In addition, upon
termination of the Employment Period for any reason other than the death of
Executive, Executive shall immediately return all written trade secrets,
confidential information and business plans of the Company and shall execute a
certificate certifying that he has returned all such items in his possession or
under his control. In the event of the death of Executive, Executive's estate
shall comply with this obligation.
7. ASSIGNMENT. The rights and obligations of the Company shall inure to
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the benefit of and shall be binding upon the successors and assigns of the
Company. The rights and obligations of Executive are not assignable except only
that payments payable to him after his death shall be made by devise or descent.
8. NOTICES. All notices and other communications required hereunder
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shall be in writing and shall be given by mailing the same by certified or
registered mail, return receipt requested, postage prepaid. If sent to the
Company the same shall be mailed to the Company at One Mercer Road, Natick,
Massachusetts 01701, Attention: President, or such other address as the
Company may hereafter designate by notice to Executive; and if sent to
Executive, the same shall be mailed to Executive at 8 Lands End Lane, Sudbury ,
Massachusetts 01776 or at such other address as Executive may hereafter
designate by notice to the Company.
9. WITHHOLDING. Anything to the contrary notwithstanding, all payments
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required to be made by the Company hereunder to Executive shall be subject to
the withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation.
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10. GOVERNING LAW. This Agreement and the rights and obligations of the
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parties hereunder shall be governed by and construed in accordance with the
domestic substantive laws of The Commonwealth of Massachusetts without giving
effect to any choice or conflict of laws, rules or provisions that would cause
the application of the domestic substantive laws of any other jurisdiction.
11. LEGAL FEES. The Company will pay the reasonable fees and expenses of
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Executive's legal counsel in connection with Executive's entering into this
Agreement.
12. ENTIRE AGREEMENT. This Agreement, including Exhibit A, supersedes all
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prior written or oral agreements between the Company and Executive and
represents the entire agreement between the parties relating to the terms of
Executive's employment by the Company, except the Change of Control Agreement.
/s/ HERBERT J ZARKIN
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Herbert J Zarkin
BJ'S WHOLESALE CLUB, INC.
By: /s/ John J. Nugent
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President
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EXHIBIT "A"
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Certain Definitions.
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In this Agreement, the following terms shall have the following meanings:
(a) "Base Salary" means, for any period, the amount described in Section
3(a).
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Executive Compensation Committee of the Board.
(d) "Cause" means dishonesty by Executive in the performance of his
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), 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.
(e) "Termination of Employment" means the date on which Executive's
employment is terminated.
(f) "Disability" has the meaning given it in the Company's long-term
disability plan. Executive's employment shall be deemed to be terminated for
Disability on the date on which Executive is entitled to receive long-term
disability compensation pursuant to such long-term disability plan.
(g) "Incapacity" means a disability (other than Disability within the
meaning of (f) above) or other impairment of health that renders Executive
unable to perform his duties to the reasonable satisfaction of the Board.
(h) "Stock" means the common stock, $0.01 par value, of the Company.
(i) "Subsidiary" means 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.
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