SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
[x] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
BJ's Wholesale Club, Inc.
-----------------------------------------------
(Name of Registrant as Specified In Its Charter)
BJ's Wholesale Club, Inc.
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
[BJ'S WHOLESALE CLUB LOGO APPEARS HERE]
One Mercer Road
Natick, Massachusetts 01760
April 24, 2001
Dear Stockholder:
We invite you to attend our 2001 Annual Meeting of Stockholders on Thursday,
May 24, 2001, at 11:00 a.m. at Fleet Conference and Training Center, 100
Federal Street, Boston, Massachusetts. At this meeting, you are being asked to
elect three directors.
We hope that you will join us on May 24th and would like to take this
opportunity to remind you that your vote is important.
Sincerely,
/s/ John J. Nugent /s/ Herbert J. Zarkin
John J. Nugent Herbert J. Zarkin
President and Chief Executive Officer Chairman of the Board
[BJ'S WHOLESALE CLUB LOGO APPEARS HERE]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 24, 2001
----------------
The Annual Meeting of Stockholders of BJ's Wholesale Club, Inc. will be held
at Fleet Conference and Training Center, 100 Federal Street, Boston,
Massachusetts, on Thursday, May 24, 2001 at 11:00 a.m. to:
. Elect three directors to serve until the 2004 Annual Meeting of
Stockholders; and
. Transact other business properly brought before the meeting.
Stockholders of record at the close of business on April 16, 2001 may vote
at the meeting.
By Order of the Board of Directors
SARAH M. GALLIVAN
Secretary
Natick, Massachusetts
April 24, 2001
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD; OR
SUBMIT YOUR VOTE AND PROXY BY TELEPHONE OR BY INTERNET IN ACCORDANCE WITH THE
INSTRUCTIONS ON YOUR PROXY CARD. IF YOU ARE PRESENT AT THE MEETING, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
BJ's WHOLESALE CLUB, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 24, 2001
PROXY STATEMENT
----------------
We sent you this proxy statement and the enclosed proxy card because the
Board of Directors of BJ's Wholesale Club, Inc. ("BJ's" or the "Company") is
soliciting your proxy to vote your shares at the Annual Meeting. Unless you
give different instructions, shares represented by properly executed proxies
will be voted for the election of the three nominees set forth below. You may
revoke your proxy before it is exercised by sending a written revocation to
the Secretary of BJ's at the address below, by a later dated proxy or by a
request at the meeting that the proxy be revoked.
Stockholders of record at the close of business on April 16, 2001 are
entitled to vote at the meeting. Each share of BJ's common stock, par value
$.01 ("Common Stock"), outstanding on the record date is entitled to one vote.
As of the close of business on April 16, 2001, there were outstanding and
entitled to vote 72,791,034 shares of Common Stock.
This Proxy Statement, the enclosed proxy card and the Annual Report of the
Company for the fiscal year ended February 3, 2001 were first mailed to
stockholders on or about April 24, 2001.
The Company's fiscal year ends on the Saturday closest to January 31 of each
year. Fiscal year references apply to the Company's fiscal year which ended on
the Saturday closest to January 31 of the following year. For example, the
fiscal year ended February 3, 2001 is referred to as 2000 or fiscal 2000. The
Company's address is One Mercer Road, Natick, Massachusetts 01760.
Vote Required
Under the Company's by-laws, so long as a quorum is present at the meeting,
the election of directors will require a plurality of votes cast at the
meeting. This means that the three nominees for director with the most votes
will be elected whether or not such nominees receive a majority of the votes
cast. Although proxies which withhold authority to vote for any nominee, or
abstain from voting as to a particular matter, and broker non-votes (i.e.,
shares held by brokers or nominees which are not voted because instructions
have not been received from the beneficial owners and the broker or nominee
does not have discretionary authority) are counted as present for quorum
purposes, these shares are not counted for, and have no effect on the outcome
of, the election of directors.
ELECTION OF DIRECTORS
BJ's Amended and Restated Certificate of Incorporation and by-laws provide
for the classification of the Board of Directors into three classes, as nearly
equal in number as possible, with the term of office of one class expiring
each year. Your proxy will be voted to elect the three nominees named below,
unless otherwise instructed, as directors for a term of three years expiring
at the 2004 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified. The Board has voted to fix the
number of directors at nine. The three nominees have indicated their
willingness to serve, if elected. If a nominee becomes unavailable, your proxy
will be voted either for another nominee proposed by the Board of Directors or
a lesser number of directors as proposed by the Board of Directors. The
nominees for election as directors and incumbent directors are as follows:
Nominees for Election as Directors--Terms Expiring 2004
S. James Coppersmith, 68, has been a director of the Company since July
1997. He was a director of Waban Inc. ("Waban") from December 1993 to July
1997. Mr. Coppersmith is Vice Chairman of Rasky Baerlein Group. Mr.
Coppersmith is also a director of Marketing Services Group, Inc. and Sun
America Asset Management Corporation and a member of the Board of Governors of
the Boston Stock Exchange. Mr. Coppersmith is a member of the Executive
Compensation Committee.
Thomas J. Shields, 54, has been a director of the Company since July 1997.
He was a director of Waban from June 1992 to July 1997. He has served as
President of Shields & Company, Inc., an investment banking firm, since 1991.
Mr. Shields is also a director of Seaboard Corporation, Versar, Inc. and Clean
Harbors, Inc. Mr. Shields is Chairman of the Audit Committee and a member of
the Executive Compensation Committee, the Executive Committee and the Finance
Committee.
Herbert J. Zarkin, 62, has been a director of the Company since November
1996 and Chairman of the Board of Directors of the Company since July 1997.
Mr. Zarkin has been Chairman of HomeBase, Inc., formerly known as Waban
("HomeBase"), since July 1997 and President and Chief Executive Officer of
HomeBase since March 2000. He was a director, President and Chief Executive
Officer of Waban from May 1993 to July 1997. Mr. Zarkin is Chairman of the
Executive Committee and a member of the Finance Committee.
Incumbent Directors--Terms Expiring 2003
Kerry L. Hamilton, 50, has been a director of the Company since July 1997.
She was a director of Waban from September 1994 to July 1997. Ms. Hamilton is
Vice President, Marketing for Marshalls, a leading off-price retailer which is
a division of The TJX Companies, Inc. Prior to joining Marshalls in April
1996, Ms. Hamilton was Vice Chairman of Pamet River Partners, a marketing
consulting firm, for two years. Ms. Hamilton is a member of the Executive
Compensation Committee.
Bert N. Mitchell, 63, has been a director of the Company since May 1998. In
1974, Mr. Mitchell founded Mitchell & Titus, LLP, the nation's largest
minority-owned CPA firm, and serves as its Chairman and Chief Executive
Officer. He is also Chairman of the Board of the Ariel Mutual Funds, which
includes membership on the board of three individual funds. Mr. Mitchell is a
member of the Audit Committee.
John J. Nugent, 54, has been a director, President and Chief Executive
Officer of the Company since July 1997. He was Executive Vice President of
Waban and President of Waban's BJ's Wholesale Club division from September
1993 to July 1997. Mr. Nugent is a member of the Executive Committee and the
Finance Committee.
2
Incumbent Directors--Terms Expiring 2002
Ronald R. Dion, 55, has been a director of the Company since September 1999.
Mr. Dion has been Chairman and Chief Executive Officer of R.M. Bradley & Co.,
Inc., a real estate firm, since 1997. From 1989 to 1997 he was President of
R.M. Bradley & Co., Inc. Mr. Dion is a trustee of John Hancock Funds and
Chairman of the Investment Committee of John Hancock Funds. Mr. Dion is a
member of the Audit Committee.
Lorne R. Waxlax, 67, has been a director of the Company since July 1997. He
was a director of Waban from January 1990 to July 1997 and Chairman of the
Board of Directors of Waban from June 1996 to July 1997. He was an Executive
Vice President of The Gillette Company from 1985 to 1993. Mr. Waxlax is also a
director of HomeBase, Pennzoil-Quaker State Company, Hon Industries, Inc. and
Clean Harbors, Inc. Mr. Waxlax is Chairman of the Executive Compensation
Committee and a member of the Executive Committee.
Edward J. Weisberger, 59, has been a director of the Company since November
1996. He was Senior Vice President of the Company from July 1997 to July 2000
and was Senior Vice President and Chief Financial Officer of Waban from
September 1994 to July 1997. Mr. Weisberger is a director of HomeBase. Mr.
Weisberger is Chairman of the Finance Committee.
The Board of Directors and its Committees
The Audit Committee, which consists of three members (each of whom is
independent, as defined by the applicable standards of the New York Stock
Exchange), held three meetings during 2000. The Committee reviews with
management, the internal audit group and the independent accountants the
Company's financial statements, the accounting principles applied in their
preparation, the scope of the audit, any comments made by the independent
accountants on the financial condition of the Company and its accounting
controls and procedures, and such other matters as the Committee deems
appropriate. The Audit Committee also reviews with management such matters
relating to compliance with corporate policies as the Committee deems
appropriate.
The Executive Compensation Committee, which held six meetings during 2000,
reviews salary policies and compensation of officers and other members of
management and approves compensation plans and compensation of certain
officers and other members of management. This Committee administers the
Company's incentive plans, including its stock incentive plan.
The Board of Directors also has an Executive Committee, which has authority
to act for the Board on most matters during intervals between meetings of the
Board and is responsible for considering the qualifications of, and
recommending to the Board of Directors, nominees to fill Board vacancies. This
Committee will consider nominees recommended by stockholders if such
recommendations are in writing and timely filed with the Secretary of the
Company in accordance with the Company's by-laws. This Committee met once
during 2000.
In addition, the Board of Directors has a Finance Committee, which did not
meet during 2000. This Committee reviews with management and advises the Board
with respect to the Company's finances, including exploring methods of meeting
the Company's financing requirements and planning the Company's capital
structure.
During 2000 the Board of Directors held five meetings and took action by
written consent twice. Each director attended all of the meetings of the Board
and Committees of which he or she is a member.
Compensation of Directors
Non-employee directors are paid an annual retainer of $30,000 and fees of
$1,250 for each Board meeting attended, $750 for each Committee meeting
attended and $750 for certain telephone meetings. In addition, the Chairman of
the Audit Committee and the Chairman of the Executive Compensation Committee
are each paid $2,500 per annum for their services as such. All directors are
reimbursed for their expenses related to attendance at meetings.
3
Under the 1997 Director Stock Option Plan, as amended, on the date of each
annual meeting, each continuing non-employee director is granted an option to
acquire 2,500 shares of Common Stock, and each non-employee director newly
elected, or elected after six months subsequent to the then most recent annual
meeting, is granted an option to purchase 5,000 shares of Common Stock. Each
non-employee director first elected as a director within six months after an
annual meeting is granted an option for 5,000 shares of Common Stock on the
date of such election. The option exercise price for each of these options is
the fair market value of a share of Common Stock on the date of grant. Each
option will expire ten years after the date of grant and will become
exercisable in three equal annual installments beginning on the first day of
the month which includes the first anniversary of the date of grant. If the
director ceases to be a director prior to the date the option becomes fully
exercisable, the unvested portion of the option will immediately expire. Any
vested options will remain exercisable for a period of one year following
cessation of service as a director of the Company. All unexercised options
will become exercisable in full beginning 20 days prior to the consummation of
a merger or consolidation, acquisition, reorganization or liquidation and, to
the extent not exercised, shall terminate immediately after the consummation
of such merger, consolidation, acquisition, reorganization or liquidation.
Except as the Board may otherwise determine, options granted under this plan
are not transferable.
The Company had an employment agreement with Mr. Weisberger, which
terminated on July 29, 2000. Under the agreement Mr. Weisberger received a
salary of $75,000 for fiscal 2000 through July 29, 2000 and participated in
specified incentive and other benefit plans through July 29, 2000.
4
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of March 3, 2001 (unless otherwise indicated) by
(i) each person known to the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company named in the Summary Compensation Table
set forth on page 10, and (iv) all of the Company's current directors and
executive officers as a group.
Percentage of
Number of Outstanding
Name Shares(1) Common Stock(1)
---- --------- ---------------
FMR Corp.(2)...................................... 7,264,778 10.0%
Edward C. Johnson 3d
Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
Massachusetts Financial Services Company (3)...... 3,946,732 5.4%
500 Boylston Street
Boston, MA 02116
S. James Coppersmith.............................. 24,050 *
Ronald R. Dion.................................... 3,520 *
Kerry L. Hamilton................................. 20,450 *
Bert N. Mitchell.................................. 9,520 *
Thomas J. Shields................................. 21,050 *
Lorne R. Waxlax................................... 33,520 *
Edward J. Weisberger.............................. 50,544 *
Herbert J. Zarkin................................. 731,283 1.0%
John J. Nugent.................................... 390,057 *
Laura J. Sen...................................... 164,268 *
Michael T. Wedge.................................. 154,052 *
Frank D. Forward.................................. 134,916 *
All current directors and executive officers as a
group (13 persons)............................... 1,805,347 2.4%
--------
* Less than 1%.
(1) Includes, for the persons indicated, the following shares of Common Stock
that may be acquired upon exercise of outstanding stock options which were
exercisable on March 3, 2001 or within 60 days thereafter: Mr.
Coppersmith, 20,050 shares; Mr. Dion, 2,520 shares; Ms. Hamilton, 20,050
shares; Mr. Mitchell, 8,520 shares; Mr. Shields, 20,050 shares; Mr.
Waxlax, 17,520 shares; Mr. Zarkin, 680,000 shares; Mr. Nugent, 379,257
shares; Ms. Sen, 150,172 shares; Mr. Wedge, 151,988 shares; Mr. Forward,
108,290 shares; all directors and executive officers as a group, 1,622,997
shares.
(2) Information is at February 28, 2001, and is based on a Schedule 13G (as
amended) filed with the Securities and Exchange Commission ("SEC") by FMR
Corp., a holding company. FMR Corp. reported that (a) it (directly or
indirectly) has sole dispositive power over all these shares, (b) it has
sole voting power over 1,962,868 of these shares and no shared voting
power, (c) these shares are held principally by Fidelity Management &
Research Company, a wholly-owned investment adviser, and other investment
companies and institutional accounts managed by subsidiaries of FMR Corp.
and (d) the family of Edward C. Johnson 3d, including Mr. Johnson, the
Chairman of FMR Corp., and his daughter Abigail P. Johnson, a director,
and trusts for the family members' benefit may be deemed to form a
controlling group with respect to FMR Corp.
(3) Information is at February 12, 2001, and is based on a Schedule 13G filed
by Massachusetts Financial Services Company ("MFS") with the SEC. MFS
reported that it had sole voting power with respect to 3,617,782 shares
and sole dispositive power with respect to all 3,946,732 shares.
5
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock, based on the market price of the Common
Stock, with the cumulative total return of companies in the Standard & Poor's
500 Stock Index and the Dow Jones Industry Group Index RTB-Retail, Broadline
from July 29, 1997 (the first day on which the Company's stock was publicly
traded) to February 2, 2001 (the last trading day of fiscal 2000). The Dow
Jones Industry Group Index RTB-Retail, Broadline is comprised currently of 27
specialty retail companies, including the Company. The graph assumes that the
value of the investment at July 29, 1997 was $100 and that all dividends were
reinvested. The values of investments in the companies in the Standard &
Poor's 500 Stock Index and the Dow Jones Industry Group Index RTB-Retail,
Broadline were measured as of the date nearest to the end of the indicated
period for which index data is readily available.
[GRAPH APPEARS HERE]
--------------------------------------------------------------------------------------------------------
7/29/1997 1/30/1998 7/31/1998 1/29/1999 7/30/1999 1/28/2000 7/31/2000 3/02/2001
--------------------------------------------------------------------------------------------------------
BJ's Wholesale Club, Inc. 100.00 102.13 125.96 148.94 208.51 237.87 203.83 282.49
Dow Jones Industry
Group Index RTD
--Retail, Broadline 100.00 100.01 130.40 156.92 158.96 180.85 166.80 176.88
Standard & Poor's
500 Stock Index 100.00 103.56 119.28 137.20 143.38 151.40 156.25 150.04
--------------------------------------------------------------------------------------------------------
6
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report has been submitted to the Board of Directors by its
Executive Compensation Committee, in compliance with requirements of the SEC:
As members of the Executive Compensation Committee (the "ECC"), it is our
responsibility to review the Company's compensation policies and programs,
approve or, with respect to the Chief Executive Officer, recommend to the
Board of Directors for approval incentive plan awards and all elements of
compensation for the Company's executive officers, and administer the
Company's stock incentive plans. All of the members of the ECC are
independent, non-employee directors.
Executive Compensation Principles
The Company's executive compensation program is designed to provide
competitive levels of compensation that:
. Integrate compensation with the achievement of the Company's annual and
long-term performance goals and business strategies,
. Link management's long-term interests with stockholders' interests through
stock-based awards,
. Recognize management initiatives and achievements,
. Reward outstanding corporate performance, and
. Attract and retain key executives critical to the long-term success of
the Company.
With respect to Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), which limits the ability of publicly held corporations
to deduct non-performance-based compensation for certain executive officers,
the ECC believes that the Company's compensation plans should be structured to
satisfy the requirements for tax deductibility, unless doing so is determined
by the ECC to be not in the best interests of the Company.
Compensation Policies for Executive Officers
The total compensation program for all executive officers, including
executive officers named in the Summary Compensation Table, consists of both
cash and equity-based compensation and takes into account applicable
provisions of employment agreements of such officers. Through stock options
and stock grants available under the Company's stock incentive plan, the ECC
seeks to align executive officers' long-range interests with those of
stockholders by providing executive officers with the opportunity to
participate in the growth of the Company's stock value.
The ECC is advised by Frederic W. Cook & Co., Inc. ("Cook"), compensation
consultants, concerning salary competitiveness and the design of the Company's
compensation programs. Cook provides services to the Company, which are billed
at hourly rates, on an "as requested" basis. The Company does not have a
retainer or other contract with Cook. The Company has had consultations with
Cook in the past year.
7
Base Salary. Base salaries for the Company's executive officers, including
Mr. Nugent, are set within ranges that are determined based upon a review of
publicly available information concerning compensation paid to executives with
similar responsibilities at certain peer companies. The ECC utilizes Cook to
assist in the compilation and interpretation of this information. The
companies selected for these purposes are retailing companies, including major
competitors of the Company. Not all of these peer companies are included in
the Dow Jones Industry Group Index RTB-Retail, Broadline which appears in the
Performance Graph on page 6. While the ECC's overall objective is to set base
salaries at approximately the midpoint of competitive ranges, an individual
executive's placement within a range and salary adjustments are based upon the
ECC's subjective evaluation of the executive's performance and value to the
Company. To further encourage long-term equity incentives, the ECC approved
the grant on May 25, 2000, to Ms. Sen and Messrs. Nugent, Forward and Wedge of
stock options in lieu of salary increases for the period June 4, 2000 through
June 3, 2001, in the following amounts: Mr. Nugent, 100,000 shares; Mr.
Forward, 40,000 shares; Ms. Sen, 40,000 shares; and Mr. Wedge, 40,000 shares.
Annual Incentive Program. Under the Company's Management Incentive Plan
("MIP"), executive officers and other members of management are eligible to
receive incentive cash awards based upon the level of achievement of pre-
established annual performance goals. Mr. Zarkin is not eligible to earn
awards under the MIP for periods beginning after February 3, 2001. At the
beginning of each year, the ECC establishes the MIP performance goals and
corresponding target awards, based on one or more of the following objective
performance criteria: 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
goals, criteria and target awards may vary among participants. The ECC reviews
the payout calculations after the year's financial results have been audited.
Target awards for executive officers range from 20% to 50% of salary, but if
targets are not met, there would be either no MIP award or a reduced award
based on a percentage of the target realized. If results exceed goal(s), an
executive officer could earn an additional award, depending upon the extent to
which goals are exceeded. No executive officer may receive a MIP award in
excess of $1,000,000 in any calendar year or, if less, 100% of base salary
earned for the applicable performance period. MIP awards for 2000 for the
Company's executive officers, including Mr. Nugent, were based on the
Company's net income. Net income of the Company exceeded its MIP goal,
resulting in payouts to Mr. Nugent and to the Company's other executive
officers equal to 121.83% of the target awards. MIP performance goals for 2001
for the Company's executive officers, including Mr. Nugent, are based on the
Company's net income.
Long-Term Incentive Program. The Company's Growth Incentive Plan ("BJGIP")
is intended to provide high-level executives of the Company, as selected by
the ECC, with cash awards based upon the growth and performance of the
Company. Mr. Zarkin does not participate in the BJGIP. All other executive
officers, including Mr. Nugent, currently participate in the BJGIP, as do 32
other employees of the Company. Awards are earned based on one or more of the
following objective measures of performance or growth, as selected by the ECC
at the beginning of the award period: operating income, pre-tax income, net
income, costs, any of the preceding measures as a percent of sales, earnings
per share, sales, return on equity, and return on investment. All relevant
factors upon which the cash award is based (e.g., performance measurement,
length of award period, relation between performance and cash award) are
determined at the beginning of the award period by the ECC. Awards issued to
the Company's executive officers in 1998 were based on cumulative net income
for the Company for the three-year period ended February 3, 2001. Fifty
percent of the value of awards issued under the BJGIP in 1998 was paid in cash
in April 2001, and 50% is payable in April 2002, contingent on employment
continuing through March 31, 2002. Awards issued to the Company's executive
officers in 2000 are based on cumulative net income for the Company for the
three-year period ending February 1, 2003 and are payable in cash 50% in April
2003, contingent on employment continuing through February 1, 2003, and 50% in
April 2004, contingent on employment continuing through March 31, 2004. No
awards under the BJGIP were issued to Mr. Zarkin in 1998 or 2000. There is no
target amount for each award. However, there is a threshold amount based on
the Company's growth, and the value of each award increases as achievement of
the performance measurement increases. No individual award payment can exceed
$2,000,000 in any calendar year.
8
The Company has made it a practice to provide incentives to its executive
officers and other senior executives to achieve long-range goals that are
typically expressed as either a compounded rate of earnings growth or three-
year cumulative earnings. In determining the level of long-term incentive
awards, the ECC takes into account a survey of the same peer companies
referred to above, but does not target a specific percentile.
Stock-Based Incentives. Stock options are awarded to the Company's key
employees, including Mr. Nugent and other executive officers, by the ECC,
based on its subjective assessment of the following factors: the compensation
level and responsibility of the particular employee, the employee's
contribution towards Company performance, and a survey of competitive
compensation data of the same group of peer companies referred to previously
in this report. The ECC generally targets awards to the median of such survey.
The options are designed to reward recipients to the extent the Company's
stock value is enhanced. Because of the vesting provisions of such grants, the
options also provide an incentive for the employee to remain with the Company.
Since the ECC does not grant options on a cumulative basis, the size of
previous grants is not a factor in making current grants.
Chief Executive Officer Compensation
Pursuant to the terms of Mr. Nugent's employment contract, his salary is
reviewed annually by the ECC. His salary was set at $650,000, effective June
6, 1999. As discussed above, the ECC approved the grant on May 25, 2000 to Mr.
Nugent of 100,000 stock options in lieu of a salary increase for the 52-week
period beginning June 4, 2000. Mr. Nugent's salary and the number of options
(165,000) granted to him in 2000 were subjectively determined to provide a
fully competitive compensation opportunity, based on Mr. Nugent's success in
providing leadership to the Company, and after a review of competitive
compensation data of the same group of peer companies referred to previously
in this report without targeting a specific percentile range. The ECC believes
stock option grants encourage long-term performance and promote management
retention while further aligning stockholders' and management's common
interest in enhancing the value of the Company's Common Stock.
Mr. Nugent's current MIP award provides a target opportunity equal to 50% of
base salary if performance goals are met; the actual payout can vary between
0% and 100% of base salary for the performance period. The MIP payout to Mr.
Nugent for 2000 was equal to 61% of his fiscal 2000 salary.
Executive Compensation Committee
Lorne R. Waxlax, Chairman
S. James Coppersmith
Kerry L. Hamilton
Thomas J. Shields
9
Compensation of Executives
The following table sets forth certain information concerning the annual and
long-term compensation paid for fiscal 2000, 1999 and 1998 to (i) the
Company's Chief Executive Officer and (ii) the Company's four other most
highly compensated executive officers during 2000 who were serving as
executive officers of the Company on February 3, 2001 (collectively, the
"Named Executive Officers").
Summary Compensation Table
Long-Term
Annual Compensation Compensation
--------------------------- ---------------------
Awards Payouts
---------- ----------
Other All
Annual Securities Other
Name and Compen- Underlying LTIP Compen-
Principal Position Year(1) Salary Bonus sation(2) Options(3) Payouts(4) sation(5)
------------------ ------- -------- -------- --------- ---------- ---------- ---------
John J. Nugent.......... 2000 $662,500 $403,562 $27,789 165,000 $454,740 $38,225
President and Chief 1999 632,692 614,913 26,763 100,000 386,528 36,435
Executive Officer 1998 572,308 360,096 24,209 200,000 386,528 33,249
Herbert J. Zarkin....... 2000 356,731 217,302 14,963 250,000 -- 21,237
Chairman of the Board 1999 350,000 340,165 14,805 -- 257,685 20,645
1998 350,000 220,220 14,805 -- 257,685 20,609
Laura J. Sen............ 2000 280,289 102,443 11,757 65,000 303,160 19,114
Executive Vice
President, 1999 269,808 157,335 11,413 30,000 180,380 18,290
Merchandising 1998 260,000 98,155 10,998 50,000 180,380 17,800
Michael T. Wedge........ 2000 280,289 102,443 11,757 65,000 303,160 18,514
Executive Vice
President, 1999 269,808 157,335 11,413 30,000 180,380 17,840
Club Operations 1998 260,000 98,155 10,998 50,000 180,380 17,800
Frank D. Forward........ 2000 265,000 96,855 11,116 65,000 303,160 18,350
Executive Vice
President, 1999 249,615 145,561 10,559 30,000 128,843 17,281
Chief Financial Officer 1998 230,000 86,830 9,729 50,000 128,843 15,932
--------
(1) Refers to fiscal year ended on the Saturday closest to January 31 of the
following year. 2000 was a 53-week fiscal year. 1999 and 1998 were 52-week
years.
(2) Includes reimbursement for tax liabilities related to the Company's
contributions under the Company's Executive Retirement Plan ("BJERP") (see
"Retirement Benefits") and excludes perquisites having an aggregate value
less than the lesser of $50,000 or 10% of salary plus bonus.
(3) Reflects the grant of options to purchase Common Stock. The Company has
never granted stock appreciation rights.
(4) Payouts for 2000 represent 50% of the BJGIP award earned by the Named
Executive Officers, other than Mr. Zarkin, for the three-year performance
period ended February 3, 2001. The remaining 50% of the award is payable
in April 2002, contingent on employment continuing through March 31, 2002.
Payouts for 1999 and 1998 represent the BJGIP award earned by the Named
Executive Officers for the three-year performance period ended January 30,
1999.
10
(5) For 2000, represents the Company's contributions under the BJ's 401(k)
Savings Plan for Salaried Employees and the BJERP (see "Retirement
Benefits") as presented below:
2000 Company
Contributions
---------------
401(k)
Savings
Plan BJERP
------- -------
John J. Nugent............................................ $5,100 $33,125
Herbert J. Zarkin......................................... 3,400 17,837
Laura J. Sen.............................................. 5,100 14,014
Michael T. Wedge.......................................... 4,500 14,014
Frank D. Forward.......................................... 5,100 13,250
Stock Option Grants
The following table sets forth the stock option grants made by the Company
to each of the Named Executive Officers during 2000:
Option Grants in Last Fiscal Year
Individual Grants
---------------------------------------------
Percent of
Total Potential Realizable Value
Number of Options at Assumed Annual Rates of
Securities Granted to Stock Price Appreciation
Underlying Employees Exercise or For Option Term(2)
Options in Fiscal Base Price Expiration ---------------------------
Name Granted(1) Year Per Share(1) Date 0%(3) 5% 10%
---- ---------- ---------- ------------ ---------- ----- ---------- ----------
John J. Nugent.......... 100,000 7.4% $31.0000 5/25/10 $ 0 $1,949,573 $4,940,602
65,000 4.8 37.0625 9/14/10 0 1,515,046 3,839,425
Herbert J. Zarkin....... 250,000 18.6 37.0625 9/14/10 0 5,827,102 14,767,020
Laura J. Sen............ 40,000 3.0 31.0000 5/25/10 0 779,829 1,976,241
25,000 1.9 37.0625 9/14/10 0 582,710 1,476,702
Michael T. Wedge........ 40,000 3.0 31.0000 5/25/10 0 779,829 1,976,241
25,000 1.9 37.0625 9/14/10 0 582,710 1,476,702
Frank D. Forward........ 40,000 3.0 31.0000 5/25/10 0 779,829 1,976,241
25,000 1.9 37.0625 9/14/10 0 582,710 1,476,702
--------
(1) All options granted in 2000 were granted with an exercise price equal to
the closing price of the Common Stock on the New York Stock Exchange on
the date of grant and expire ten years from the date of grant. The options
which expire on May 25, 2010 vest in equal annual installments over two
years. The options which expire on September 14, 2010 vest in equal annual
installments over four years. All options vest upon a change of control
(as defined).
(2) The dollar amounts in these columns are the result of calculations at 0%
and the arbitrary appreciation rates of 5% and 10% set by the SEC and are
not intended to forecast possible future appreciation, if any, of the
Company's stock price.
(3) No gain to the optionees is possible without an appreciation in stock
price, which will benefit all stockholders commensurately. A zero percent
stock price appreciation will result in zero gain for the optionee.
11
Aggregated Option Exercises and Valuation
The following table sets forth, on an aggregated basis, the exercise of
stock options during fiscal 2000 by each of the Named Executive Officers and
the fiscal year-end value of unexercised options held by such officers:
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at Fiscal Year-End at Fiscal Year-End(1)
------------------------- -------------------------
Number of
Shares Acquired Value
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
--------------- ---------- ----------- ------------- ----------- -------------
John J. Nugent.......... 312,393 $8,427,615 379,257 390,000 $10,743,713 $5,871,663
Herbert J. Zarkin....... 200,000 5,675,205 680,000 250,000 21,653,600 1,106,875
Laura J. Sen............ -- -- 142,672 125,000 4,198,229 1,904,906
Michael T. Wedge........ 6,056 158,864 144,488 125,000 4,264,011 1,904,906
Frank D. Forward........ -- -- 100,790 125,000 2,713,253 1,904,906
(1) Based on the fair market value of the Common Stock on February 2, 2001
($41.49 per share), less the option exercise price.
Long-Term Incentive Awards
The following table sets forth information related to long-term incentive
awards granted to the Named Executive Officers during fiscal 2000 pursuant to
the BJGIP:
Long-Term Incentive Plans--Awards in Last Fiscal Year
Number
of Performance Estimated Future Payouts
Shares, or Other under Non-Stock Price-Based
Units or Period Until Plans
Other Maturation or ---------------------------
Name Rights Payout Threshold Target Maximum
---- -------- ------------- --------- ------ ----------
John J. Nugent............... 15 Units FYE 1/01-1/03 $427,485 $ 0 $4,000,000
Laura J. Sen................. 10 Units FYE 1/01-1/03 284,990 0 4,000,000
Michael T. Wedge............. 10 Units FYE 1/01-1/03 284,990 0 4,000,000
Frank D. Forward............. 10 Units FYE 1/01-1/03 284,990 0 4,000,000
Employees in high-level management positions in the Company, as selected by
the Executive Compensation Committee, were awarded units under the BJGIP
during fiscal 2000. Mr. Zarkin did not receive an award under the BJGIP in
2000. Each unit has a value in dollars equal to a designated percentage of
improvement in net income during the three-year fiscal period ending February
1, 2003 over base period income, as defined, for the year ended January 29,
2000. No payment will be made unless cumulative net income is at least equal
to 10% compounded growth over the base period amount. The "threshold" amounts
in the table above would be earned upon achievement of 10% compounded growth
in earnings. No individual award payment can exceed $2,000,000 in any calendar
year. This limit is reflected in the "maximum" amount column of the table
above. The BJGIP does not specify a target payout amount. Accordingly,
pursuant to SEC rules, the target payout level in the table above assumes in
each case that fiscal 2000's income level will be achieved in each of the
three fiscal years during the award period. (If fiscal 2000's income level
were achieved in each of fiscal 2001 and 2002, cumulative net income for the
three-year period would be less than 10% compounded growth over the base
period amount, and
12
therefore, no payment would be earned.) The dollar amounts in the table are
not intended to forecast future payments, if any, under the BJGIP.
One-half of the cash award earned under the BJGIP for the three-year award
period ending February 1, 2003 will be paid in April 2003 to participants
employed through February 1, 2003. The remaining one-half of the award will be
paid in April 2004, contingent upon employment continuing through March 31,
2004.
Retirement Benefits
Under the BJERP, employees in high-level management positions in the
Company, as selected by the ECC, including all executive officers, are
eligible to receive annual cash retirement contributions in an amount
determined by the ECC; provided that the annual retirement contribution shall
equal, on an after-tax basis, at least three percent of the participant's base
salary. All amounts paid under the BJERP are to be used exclusively to fund an
investment vehicle, selected by the ECC, which is appropriate to provide
retirement income, such as an insurance policy.
The Company made retirement contributions after the end of 2000 equal to 5%
(net of taxes) of each participant's base salary during 2000. If a participant
terminates employment prior to the end of the fiscal year in which the
participant is credited with four years of service, the participant forfeits
the right to any benefit under the BJERP. As of February 3, 2001, all
executive officers were credited with at least four years of service.
Employment Agreements
Pursuant to his employment agreement, Mr. Nugent receives an annual base
salary of $650,000 and participates in specified incentive and other benefit
plans. The Company is entitled to terminate Mr. Nugent's employment at any
time with or without cause (as defined). If Mr. Nugent's employment is
terminated by the Company other than for cause, the Company is required to pay
certain cash compensation amounts and to continue payment of Mr. Nugent's base
salary and certain benefits for 12 months after termination at the rate in
effect upon termination. The continuing base salary payments are subject to
reduction after three months for compensation earned by Mr. Nugent from other
employment, and the continuing benefits are subject to reduction at any time
for comparable benefits received by Mr. Nugent from other employment.
Pursuant to his employment agreement, Mr. Zarkin receives an annual base
salary of $350,000 and participates in specified incentive and other benefit
plans. Mr. Zarkin is not eligible to earn any awards under the Company's MIP
for periods beginning after February 3, 2001. Mr. Zarkin must generally devote
approximately one-half of his working time and attention to the performance of
his duties and responsibilities under his employment agreement. The Company is
entitled to terminate Mr. Zarkin's employment at any time with or without
cause (as defined). If his employment terminates by reason of death,
disability, incapacity or termination by the Company other than for cause, or
if Mr. Zarkin resigns as a result of his being removed from his positions with
the Company or as result of being relocated more than 40 miles from the
Company's current headquarters, Mr. Zarkin is entitled to payment of certain
cash compensation amounts and continuation of base salary and certain benefits
for a period of 12 months after termination at the rate in effect upon
termination. Any stock options or other stock-based awards held by Mr. Zarkin
on the date of termination will continue to vest for three years, when they
will expire, unless they expire earlier by their terms. The continuing base
salary payments are subject to reduction after three months for compensation
earned by Mr. Zarkin from other employment (other than employment at
HomeBase), and the continuing benefits are subject to reduction at any time
for comparable benefits received by Mr. Zarkin from other employment.
The Company has an employment agreement with each of Ms. Sen and Messrs.
Wedge and Forward under which they receive annual base salaries of $275,000,
$275,000 and $260,000, respectively, and participate in specified incentive
and other benefit plans. If employment is terminated by the Company other than
for cause, each such executive is entitled to payment of certain cash
compensation amounts and to certain benefits and continuation of base salary
for 12 months after termination at the rate in effect upon termination. The
continuing
13
base salary payments are subject to reduction after three months for
compensation earned by the executive from other employment, and the continuing
benefits are subject to reduction at any time for comparable benefits received
by the executive from other employment.
In the event of a change of control followed by termination of employment as
described below under "Change of Control Severance Benefits," each of the
Company's executive officers would be entitled to the termination benefits
described thereunder, to the extent such benefits would exceed the benefits
otherwise described above.
Change of Control Severance Benefits
The Company provides change of control severance benefits to its executive
officers under individual agreements. Under the agreements, in general, upon
the earlier of a Change of Control or a Potential Change of Control (as such
terms are defined in the agreements) of the Company, the executive would be
entitled to accelerated lump-sum payments of the MIP target award prorated for
the year in which the change of control occurs. If, during the Standstill
Period (which is 24 months after a Change of Control, except that if a Change
of Control does not occur within 12 months of the Potential Change of Control,
the Standstill Period will end 12 months after the Potential Change of
Control), the Company were to terminate the executive's employment other than
for cause (as defined) or the executive were to terminate employment for
reasons specified in the agreement, or if employment were to terminate by
reason of death, disability or incapacity, the executive would be entitled to
receive an amount equal to two times the executive's annual base salary and
MIP, except for Mr. Nugent who would be entitled to receive three times his
annual base salary and MIP, unless the executive's termination occurs between
eight and twelve months after a Change of Control and is voluntary, in which
event the executive would be entitled to receive an amount equal to the
executive's annual salary and MIP. For up to two years following termination,
the Company would also be obligated to provide specified benefits, including
continued medical and life insurance benefits, except for Mr. Nugent who would
be entitled to receive such benefits for up to three years, unless the
executive's termination occurs between eight and twelve months after a Change
of Control and is voluntary, in which event the executive would be entitled to
receive such benefits for up to one year. In the event of a Change of Control,
the Company may reduce any payments to the executive to the extent necessary
to preserve the tax deductibility of such payments under the Code. The Company
would also be obligated to pay all legal fees and expenses reasonably incurred
by the executive in seeking enforcement of contractual rights to which the
executive becomes entitled during the Standstill Period. In addition, upon
involuntary termination within the Standstill Period, any agreement by the
executive not to compete with the Company following termination of the
executive's employment would cease to be effective.
Indemnification Agreements
The Company has entered into indemnification agreements with each of its
directors and executive officers indemnifying them against expenses,
settlements, judgments and fines incurred in connection with any threatened,
pending or completed action, suit, arbitration or proceeding, where the
individual's involvement is by reason of the fact that he or she is or was a
director or officer of the Company or served at the Company's request as a
director of another organization (except that indemnification is not provided
against judgments and fines in a derivative suit unless permitted by Delaware
law). An individual may not be indemnified if he or she is found not to have
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company, except to the extent
Delaware law permits broader contractual indemnification. The indemnification
agreements provide procedures, presumptions and remedies designed to
substantially strengthen the indemnity rights beyond those provided by the
Company's Amended and Restated Certificate of Incorporation and by Delaware
law.
14
RELATIONSHIP WITH HOMEBASE; CONFLICTS OF INTEREST
In connection with the spin-off of the Company from Waban in July 1997 (the
"Distribution"), BJ's and HomeBase entered into several agreements. Although
the following summaries of certain of these agreements set forth an accurate
description of their material terms and provisions, such summaries are
qualified in their entirety by reference to the detailed provisions of the
agreements, each of which has previously been filed with the SEC.
Distribution Agreement
BJ's and HomeBase entered into a Separation and Distribution Agreement (the
"Distribution Agreement"), which provided for, among other things, (i) the
division between BJ's and HomeBase of certain assets and liabilities; (ii)
other agreements governing certain aspects of the relationship between BJ's
and HomeBase following the Distribution; and (iii) an agreement regarding
certain matters relating to lease liabilities described below.
Under the Distribution Agreement, except as provided in the other
agreements, BJ's agreed to indemnify HomeBase for liabilities relating to BJ's
business. Similarly, HomeBase agreed to indemnify BJ's for liabilities
pertaining to HomeBase's business. The Distribution Agreement also requires
BJ's and HomeBase to indemnify each other for losses incurred due to a failure
to perform their respective obligations under the Distribution Agreement or
any other agreement entered into in connection with the Distribution. In
addition, the Distribution Agreement provides that HomeBase will provide
liability insurance for a period of six years following the Distribution to
each individual who served as a director or officer of Waban prior to the
Distribution. BJ's also agreed to indemnify, defend and hold harmless each
such individual from any losses and liabilities incurred in connection with
the approval of the Distribution Agreement.
Leases
Pursuant to the Distribution Agreement, effective upon the Distribution,
BJ's assumed all liabilities to third-party lessors with respect to leases
entered into by Waban with respect to the BJ's Division. While HomeBase will
continue to be liable, by law, with respect to such lease liabilities, BJ's
has agreed to indemnify HomeBase for such liabilities.
In connection with the spin-off of Waban by The TJX Companies, Inc. ("TJX")
in 1989, Waban and TJX entered into an agreement (the "1989 Agreement")
pursuant to which Waban agreed to indemnify TJX against any liabilities that
TJX might incur with respect to 42 current HomeBase real estate leases as to
which TJX was either a lessee or guarantor. In connection with the
Distribution, BJ's agreed to indemnify TJX with respect to any liabilities (as
defined in the 1989 Agreement) that TJX may incur for HomeBase leases through
January 31, 2003, and thereafter it will indemnify TJX for 50% of such
liabilities. In addition, HomeBase agreed that it will not renew any lease
identified in the 1989 Agreement as to which TJX is a lessee or guarantor
unless TJX is removed as lessee or guarantor.
The Distribution Agreement contains restrictions on the renewal of HomeBase
leases similar to those agreed to by HomeBase and TJX. In addition, BJ's may
not renew any of its real estate leases (other than ground leases) for which
HomeBase may be liable during any period during which BJ's does not meet
certain minimum standards of creditworthiness.
Tax Sharing Agreement
BJ's and HomeBase entered into a Tax Sharing Agreement (the "Tax Sharing
Agreement") providing for the allocation between the parties of federal,
state, local and foreign tax liabilities, and the entitlement to tax refunds,
for periods beginning prior to the date of the Distribution, and various
related matters. Each party has agreed to indemnify the other in specified
circumstances if certain events cause the Distribution or related transactions
to become taxable. The Tax Sharing Agreement will continue in effect until
otherwise agreed to in writing by BJ's and HomeBase.
15
Procedures for Addressing Conflicts
As a result of the Distribution, BJ's and HomeBase have significant
contractual and other ongoing relationships that may present certain conflict
situations for Mr. Zarkin, who serves as Chairman of the Board of Directors of
both companies and as President and Chief Executive Officer of HomeBase, and
for Messrs. Waxlax and Weisberger, who serve as directors of both companies.
Each of these persons also owns (or has options or other rights to acquire) a
significant number of shares of common stock in both companies. BJ's has
adopted procedures to be followed by its Board of Directors to limit the
involvement of such persons in conflict situations whereby all transactions
being considered by BJ's which relate to HomeBase must (i) be approved by a
majority of the Board of Directors and by a majority of the disinterested
members of the Board of Directors and (ii) be on terms no less favorable to
BJ's than could be obtained from unaffiliated third parties, as determined by
a majority of the Board of Directors and by a majority of the disinterested
members of the Board of Directors.
Tax-Free Spin-Off
Prior to the Distribution, Waban received a letter ruling from the Internal
Revenue Service to the effect that, for federal income tax purposes, the
Distribution would qualify as a spin-off under Section 355 of the Code and
would be tax-free to Waban and the holders of its common stock at the time of
the Distribution. Certain future events not within the control of BJ's could
cause the Distribution not to qualify for tax-free treatment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file with the SEC and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater-than-
ten-percent stockholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
directors, officers and greater-than-ten-percent beneficial owners with
respect to fiscal 2000 were met, except that Mr. Weisberger filed late by two
days a Form 4 reporting a gift transaction.
AUDIT COMMITTEE REPORT
The Audit Committee (the "Committee") consists of three directors, each of
whom is independent as defined by the applicable standards of the New York
Stock Exchange. A brief description of the responsibilities of the Committee
is set forth above under the caption "The Board of Directors and its
Committees" on page 3 and a copy of the Committee's Charter is attached hereto
as Appendix A.
The Committee has reviewed and discussed the Company's audited financial
statements for fiscal 2000 with the management of the Company. The Committee
has discussed with PricewaterhouseCoopers, the Company's independent
accountants, the matters required to be discussed by Statement on Auditing
Standards 61 (as modified or supplemented). The Committee also has received
the written disclosures and the letter from PricewaterhouseCoopers required by
Independence Standards Board Standard No. 1 (as modified or supplemented), and
has discussed with PricewaterhouseCoopers its independence.
Based on the review and the discussions referred to above, the Committee
recommended to the Board of Directors that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended February 3, 2001 for filing with the Securities and Exchange
Commission.
The Audit Committee
Thomas J. Shields, Chairman
Ronald R. Dion
Bert N. Mitchell
16
INDEPENDENT AUDITORS FEES AND OTHER MATTERS
Audit Fees
PricewaterhouseCoopers billed the Company an aggregate of $282,690 in fees
for professional services rendered in connection with the audit of the
Company's financial statements for the most recent fiscal year and the reviews
of the financial statements included in each of the Company's quarterly
reports on Form 10-Q during the fiscal year ended February 3, 2001.
Financial Information Systems Design and Implementation Fees
PricewaterhouseCoopers did not bill the Company for any professional
services rendered to the Company and its affiliates for the fiscal year ended
February 3, 2001 in connection with financial information systems design or
implementation, the operation of the Company's information system or the
management of its local area network.
All Other Fees
PricewaterhouseCoopers billed the Company an aggregate of $638,331 in fees
for other services rendered to the Company and its affiliates for the fiscal
year ended February 3, 2001.
Appointment
The Board of Directors has appointed PricewaterhouseCoopers as independent
auditors to examine the financial statements of the Company for the fiscal
year ending February 2, 2002. The Company expects that representatives of
PricewaterhouseCoopers will be present at the meeting, will have the
opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next annual
meeting of stockholders, pursuant to Rule 14a-8 under the Exchange Act, must
be received by the Company no later than 5 p.m. EST on December 26, 2001 in
order to be considered for inclusion in the Company's proxy materials for that
meeting. Proposals must be in writing and sent via registered or certified
mail addressed to Sarah M. Gallivan, Secretary, BJ's Wholesale Club, Inc., One
Mercer Road, Natick, Massachusetts 01760.
The Company's by-laws require that the Company be given advance written
notice of stockholder nominations for election to the Company's Board of
Directors and of other matters which stockholders wish to present for action
at an annual meeting of stockholders (other than matters included in the
Company's proxy materials in accordance with Rule 14a-8 under the Exchange
Act). The Secretary must receive such notice at the address noted above not
less than 70 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than 20 days, or delayed by
more than 70 days, from such anniversary date, the Secretary must receive such
notice not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 70th day prior to such
annual meeting or the 10th day following the day on which public announcement
of the date of such annual meeting is first made. Assuming that the 2002
Annual Meeting is held during the period from May 7, 2002 to August 3, 2002
(as it is expected to be), in order to comply with the time periods set forth
in the Company's by-laws, appropriate notice would need to be provided to the
Secretary of the Company at the address noted above no earlier than February
23, 2002 and no later than March 15, 2002. If a stockholder fails to provide
timely notice of a proposal to be presented at the 2002 Annual Meeting, the
proxies designated by the Board of Directors of the Company will have
discretionary authority to vote on any such proposal which may come before the
meeting.
The Company's by-laws also specify requirements relating to the content of
the notice which stockholders must provide to the Secretary of the Company for
any matter, including a stockholder nomination for director, to be properly
presented at a stockholder meeting.
17
OTHER MATTERS
The Board of Directors has no knowledge of any other matter which may come
before the meeting and does not intend to present any such other matter.
However, if any such other matters shall properly come before the meeting or
any adjournment thereof, the persons named as proxies will have discretionary
authority to vote the shares represented by the accompanying proxy in
accordance with their own judgment.
The Executive Compensation Committee Report on Executive Compensation
appearing above on pages 7 through 9, the Audit Committee Report appearing on
page 16, the Charter of the Audit Committee attached as Appendix A and the
Performance Graph appearing on page 6, shall not be deemed incorporated by
reference by any general statement incorporating this proxy statement into any
filing under the Securities Act of 1933, as amended, or under the Exchange
Act, except to the extent that the Company specifically incorporates such
information by reference, and shall not otherwise be deemed filed under such
Acts.
The cost of solicitation of proxies will be borne by the Company. The
Company has retained Georgeson Shareholder Communications Inc. to assist in
soliciting proxies by mail, telephone and personal interview for a fee of
$5,000 plus expenses. Officers and employees of the Company may, without
additional remuneration, also assist in soliciting proxies in the same manner.
By Order of the Board of Directors
SARAH M. GALLIVAN
Secretary
18
Appendix A
BJ's Wholesale Club, Inc.
Charter of the Audit Committee of the Board of Directors
Members:
The Board of Directors shall appoint an Audit Committee to assist the Board
of Directors in fulfilling its responsibilities to shareholders concerning the
Company's accounting and reporting practices and to facilitate open
communication between the Audit Committee, Board of Directors, outside
auditors and management. The Audit Committee shall consist of at least three
directors of the Board, one of whom shall be designated as chairperson and all
of whom shall be "independent". Independent means a director who meets the New
York Stock Exchange definition of "independence," as determined by the Board
of Directors.
Each member of the Company's Audit Committee must be financially literate
and at least one member of the Audit Committee shall have accounting or
related financial management expertise, both as determined in the Board of
Directors' business judgment.
Responsibilities:
The Audit Committee of the Board of Directors shall represent the Board of
Directors in discharging its responsibilities relating to the accounting,
reporting, and financial practices of the Company. The Audit Committee shall
discharge its responsibilities and shall assess the information provided by
management and the independent auditors in accordance with its business
judgment.
While the Audit Committee has the responsibilities and powers as set forth
in this Charter, it is not the duty or obligation of the Audit Committee to
plan, conduct, oversee or determine the appropriate scope of audits or to
determine that the Company's financial statements are complete and accurate,
fairly presented or are in accordance with generally accepted accounting
principles or applicable law. Nor is it the duty of the Audit Committee to
conduct investigations, to resolve disagreements, if any, between management
and the independent auditors or to assure compliance with laws and regulations
and the Company's code of conduct. In exercising its business judgment the
Audit Committee shall rely on information and advice provided by management
and the independent auditors.
The Audit Committee shall:
1. Review factors related to the qualifications and independence of the
Company's independent auditors so as to help preserve their independence.
Pursuant to such a review, the Committee shall:
A. Recommend appointment of the Company's independent auditors annually,
which auditors shall be ultimately accountable to the Board of
Directors through the Audit Committee;
B. Approve any discharge of auditors when circumstances warrant;
C. Review and approve the independent auditors' fee arrangements;
D. Conduct a post-audit review of the financial statements and audit
findings, including any significant suggestions for improvements
provided to management by the independent auditors;
E. Review the nature of any management advisory services performed by the
independent auditors; and
F. Review information, including written statements from the independent
auditors, concerning any relationships between the auditors and the
Company or any other relationships that may adversely affect the
independence of the auditors and otherwise assess the independence of
the independent auditors as set forth in Independence Standards Board
Standard No. 1.
2. Review and discuss with management and the independent auditors the
Company's annual audited financial statements, including a discussion with
the auditors of their judgment as to the Company's accounting principles
and the matters about which Statement on Auditing Standards No. 61
requires discussion.
3. Review with management and the independent auditors the results of any
significant matters identified as a result of the independent auditors'
interim review procedures prior to the filing of each Form 10-Q. The Audit
Committee Chairman may perform this function on behalf of the Audit
Committee.
4. Annually review the Company's process of ensuring accurate and reliable
financial reporting. Pursuant to such a review, the Committee shall:
A. Ascertain through discussions with management the adequacy of the
Company's system of internal controls, and discuss such system with the
independent auditors and the Company's Vice President of Internal
Audit;
B. Review the appointment and dismissal of the Vice President of Internal
Audit;
C. Review the Internal Audit Department's annual plan; and
D. Review reports issued by the Internal Audit Department summarizing its
findings, recommendations and responses from management as to the
corrective actions to be implemented.
5. Review changes in the accounting policies of the Company and accounting
and financial reporting proposals that may have a significant impact on
the Company's financial reports.
6. Provide open lines of communication with the Company's Chief Financial
Officer and Vice President of Internal Audit.
7. On at least an annual basis, review with the Company's counsel any legal
matters that could have a significant impact on the Company's financial
statements.
8. If necessary, institute special investigations and, if appropriate, hire
special counsel or experts to assist the Audit Committee.
9. Regularly update the Board of Directors about the Committee's activities.
10. Review and reassess the adequacy of the Audit Committee Charter and
present the revised or unchanged charter annually to the Board of
Directors for approval.
11. After each change in the composition of the Audit Committee, and
otherwise annually, request that the Board of Directors instruct the
Company to prepare and provide to the New York Stock Exchange written
confirmation of : (i) any determination by the Board of Directors
concerning the independence of the Audit Committee members; (ii) the
financial literacy of the Audit Committee members; (iii) the
determination by the Board of Directors that at least one member of the
Audit Committee has accounting or related management experience; and (iv)
the Audit Committee's annual review of this Charter.
12. Prepare for inclusion where necessary in a proxy or information statement
of the Company relating to an annual meeting of security holders at which
directors are to be elected (or special meeting or written consents in
lieu of meeting), the report described in Item 306 of Regulation S-K of
the Securities and Exchange Commission.
Meetings:
The Audit Committee will meet as often as it deems necessary or appropriate
in its judgment, either in person or telephonically, and at such times and
places as the Audit Committee determines. As it deems appropriate, but not
less than once each year, the Audit Committee will meet privately with the
independent accountants, the Chief Financial Officer or Controller and the
Vice President of Internal Audit. At any meeting the majority of the members
of the Audit Committee shall constitute a quorum.
2
Printed on Recycled Paper
and
PRINTED WITH SOY INK
PROXY
BJ's WHOLESALE CLUB, INC.
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders, May 24, 2001
The undersigned hereby appoints Frank D. Forward, Sarah M. Gallivan and Thomas
J. Shields, and each of them, as proxies, with full power of substitution, to
represent and to vote, as designated herein, all shares of Common Stock of BJ's
Wholesale Club, Inc., at the Annual Meeting of Stockholders of BJ's Wholesale
Club, Inc. to be held at Fleet Conference and Training Center, 100 Federal
Street, Boston, Massachusetts, on Thursday, May 24, 2001 at 11:00 a.m., and at
all adjournments thereof, which the undersigned could vote, if present, in such
manner as they may determine on any matters which may properly come before the
meeting and to vote on the following as specified below:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING: (Change of Address)
ELECTION OF DIRECTORS for a term to expire in 2004. ------------------------------------------------------
Nominees: 01, S. James Coppersmith; 02, Thomas J. Shields; ------------------------------------------------------
and 03, Herbert J. Zarkin ------------------------------------------------------
------------------------------------------------------
You are encouraged to specify your choices by marking the ------------------------------------------------------
appropriate boxes on the reverse side but you need not mark ------------------------------------------------------
any boxes if you wish to vote in accordance with the Board ------------------------------------------------------
of Directors' recommendation. Please sign and return this (If you have written in the above space, please mark
card if you are voting by mail. the corresponding box on the reverse side of this card)
THIS PROXY, WHEN PROPERLY EXECUTED ON THE REVERSE SIDE OF THIS CARD, WILL BE VOTED IN THE --------------
MANNER DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL SEE REVERSE
NOMINEES. THE PROXIES, IN THEIR DISCRETION, ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS SIDE
AS MAY PROPERLY COME BEFORE THE MEETING. --------------
--------------------------------------------------------------------------------
FOLD AND DETACH HERE ONLY IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL
As part of BJ's Wholesale Club, Inc.'s ongoing efforts to reduce expenses, we
are asking our stockholders to authorize us to send only one copy of stockholder
publications to their household. If you are receiving multiple copies of
stockholder reports at your address and wish to eliminate them for the account
shown on the attached Proxy Card, please mark the appropriate box. You will
continue to receive your proxy mailings for shares held in this account.
We urge you to vote your shares. Thank you very much for your cooperation and
continued loyalty as a BJ's Wholesale Club, Inc. stockholder.
----- Please mark your
X votes as in this
----- example.
FOR ALL
Except
FOR nominee(s) WITHHELD
ALL written below ALL
Election of ------- ------- ------- -------
Directors Change of Address on Reverse Side
(see reverse) ------- ------- ------- -------
-------
FOR, except vote withheld from the following nominee(s): Will Attend Annual Meeting
-------
--------------------------------------------------------- -------
Discontinue Mailing Publications
to this Account -------
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or
any adjournment thereof.
SIGNATURE(S) _____________________________________________ DATE _______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. Only authorized officers should sign for
corporations. PLEASE SIGN AND DATE HERE AND RETURN PROMPTLY ONLY IF YOU ARE
VOTING BY MAIL.
--------------------------------------------------------------------------------
FOLD AND DETACH HERE ONLY IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL.
BJ'S WHOLESALE CLUB, INC.
Dear Stockholder:
BJ's Wholesale Club, Inc. encourages you to take advantage of convenient
ways by which you can vote your shares. You can vote your shares electronically
through the Internet or by telephone. This eliminates the need to return the
proxy card.
To vote your shares electronically you must use the control number printed
in the box above, just below the perforation. The series of numbers that appear
in the box above is your personal code to access the system.
1. To vote through the Internet:
. Log on to the Internet and go to the web site
http://www.epoxyvote.com/bj
2. To vote by telephone:
. On a touch-tone telephone call 1-877-PRX-VOTE (1-877-779-8683) 24
hours a day, 7 days a week. From outside the U.S. or Canada, you may
dial 1-201-536-8073.
Your electronic vote authorizes the named proxies in the same manner as if
you marked, signed, dated and returned the proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
IMPORTANT: PLEASE VOTE, DATE AND SIGN YOUR PROXY CARD AND
RETURN IT IN THE ENVELOPE PROVIDED ONLY IF YOU ARE VOTING BY MAIL.
PLEASE DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY
TELEPHONE OR THROUGH THE INTERNET.