EXHIBIT 10.3
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (the "Agreement"), dated as of June __, 1997, is
between Waban Inc., a Delaware corporation ("Waban") and BJ's Wholesale Club,
Inc., a Delaware corporation and, as of the date hereof, a wholly owned
subsidiary of Waban ("BJI").
WHEREAS, Waban and BJI have entered into a Separation and Distribution
Agreement (the "Distribution Agreement") which contemplates the separation of
Waban's "BJ's Wholesale Club" and "HomeBase" businesses into two distinct
companies by transferring the BJ's Wholesale Club business to BJI (the
"Separation") and, then, distributing all of the outstanding shares of BJI
Common Stock on a pro rata basis to the holders of Waban Common Stock (the
"Distribution");
WHEREAS, following the Distribution, Waban will change its name to
HomeBase, Inc. ("HomeBase");
WHEREAS, beginning with its taxable year ended January 27, 1990, Waban has
filed consolidated federal income Tax Returns (as hereinafter defined) that have
included the operations of the BJ's Wholesale Club division, the HomeBase
division, certain direct and indirect Waban subsidiaries, and certain companies
that have become direct or indirect subsidiaries of Waban;
WHEREAS, the operations of such divisions and such subsidiaries also have
been included with one or more members of the Waban Group (as hereinafter
defined) in state and local unitary or combined income tax and franchise Tax
Returns; and
WHEREAS, the Distribution Agreement contemplates the execution and delivery
of this Agreement, the purpose of which is to provide for the allocation between
the HomeBase Group (as hereinafter defined) and the BJI Group (as hereinafter
defined) of all responsibilities, liabilities and benefits relating to or
affecting Taxes (as hereinafter defined) paid or payable by either of them for
all taxable periods, beginning on or before the Distribution Date, and to
provide for certain other matters.
NOW THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
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Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Separation and Distribution Agreement. As used
in this Agreement, the following terms shall have the following meanings (such
meanings to be equally applicable both to the singular and the plural forms of
the terms defined):
"Affiliated Group" means an affiliated group of corporations within the
meaning of Code section 1504(a) for the taxable period in question.
"BJI Affiliated Group" means, for each taxable period beginning after the
Distribution Date, the Affiliated Group of which BJI is the common parent.
"BJI Assets" means all of the assets held by the members of the BJI
Affiliated Group immediately after the Distribution.
"BJI Business" means the business, assets and operations of the "BJ's
Wholesale Club" division of Waban, including without limitation all businesses,
assets or operations managed or operated by, or operationally related to, such
business which have been sold or otherwise disposed of or discontinued on or
prior to the Distribution Date (provided, however, that warehouse clubs
initially operated by the BJ's Wholesale Club division and subsequently
transferred to the HomeBase division shall be considered part of the BJI
Business only for the period operated by the BJ's Wholesale Club division).
"BJI Group" means, with respect to any taxable period, the corporations
that were members of the Waban Affiliated Group and that are members of the BJI
Affiliated Group immediately after the Distribution Date. The BJI Group shall
include BJI and the BJI Subsidiaries.
"Code" means the Internal Revenue Code of 1986, as amended, and shall
include corresponding provisions of any subsequently enacted federal Tax laws.
"Distribution" has the meaning ascribed in the Preamble.
"Distribution Date" means the close of business on the date determined by
the Waban Board as of which the Distribution shall be effected.
"Final Determination" means the final resolution of any liability for Taxes
for a taxable period. A Final Determination shall result from the first to
occur of:
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(i) the expiration of 30 days after IRS acceptance of a Waiver of
Restrictions on Assessment and Collection of Deficiency in Tax and
Acceptance of Overassessment on IRS Form 870 or 870-AD (or any successor
comparable form or the expiration of a comparable period with respect to
any comparable agreement or form under the laws of other jurisdictions)
unless, within such period, the taxpayer gives notice to the other party of
the taxpayer's intention to attempt to recover all or part of any amount
paid pursuant to the Waiver by the filing of a timely claim for refund;
(ii) a decision, judgment, decree, or other order by a court of
competent jurisdiction that is not subject to further judicial review (by
appeal or otherwise) and has become final;
(iii) the execution of a closing agreement under Section 7121 of the
Code or the acceptance by the IRS or its counsel of an offer in compromise
under Section 7122 of the Code, or comparable agreements under the laws of
other jurisdictions;
(iv) the expiration of the time for filing a claim for refund or for
instituting suit in respect of a claim for refund disallowed in whole or
part by the IRS;
(v) any other final disposition of the Tax liability for such period
by reason of the expiration of the applicable statute of limitations; or
(vi) any other event that the parties agree in writing is a final and
irrevocable determination of the liability at issue.
"HomeBase Business" means the business, assets and operations of the
"HomeBase" division of Waban, including without limitation all businesses,
assets or operations managed or operated by, or operationally related to, such
business which have been sold or otherwise disposed of or discontinued on or
prior to the Distribution Date (provided, however, that warehouse clubs
initially operated by the BJ's Wholesale Club division and subsequently
transferred to the HomeBase division shall not be considered part of the
HomeBase Business for the period operated by the BJ's Wholesale Club division).
"HomeBase Group" means, with respect to any taxable period, the
corporations that were members of the Waban Affiliated Group during such period,
exclusive of the corporations that are included in the BJI Affiliated Group
immediately after the Distribution Date.
"IRS" means the United States Internal Revenue Service or any successor
thereto, including but not limited to its agents, representatives, and
attorneys.
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"Joint Tax Return" means any Tax Return that includes a member of the
HomeBase Group and a member of the BJI Group.
"Restructuring Taxes" means any Taxes, other than Transaction Taxes,
incurred by the Waban Affiliated Group as a result of (i) the Separation or (ii)
the Distribution.
"Short Period" means the period commencing on January 26, 1997 and ending
on the Distribution Date.
"Tax" means any federal, state, local or foreign income, profits,
alternative or add-on minimum, severance, sales, use, service, service use, ad
valorem, gross receipts, license, value added, franchise, transfer, recording,
real estate, withholding, payroll, employment, excise, occupation, unemployment
insurance, social security, business license, business organization, stamp,
environmental, premium or property tax, or any other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
related interest, penalties and additions to any such tax, imposed by any
taxing authority upon Waban, the HomeBase Group, the BJI Group or any of their
respective members or divisions or branches.
"Tax Deficiency" means an assessment of Tax, as a result of a Final
Determination.
"Tax Detriment" means any item of income, gain, recapture of credit or any
other Tax Item which increases Taxes paid or payable.
"Tax Item" means any item of income, gain, loss, deduction, credit,
provisions for reserves, recapture of credit or any other item which increases
or decreases Taxes paid or payable, including an adjustment under Code Section
481 resulting from a change in accounting method.
"Tax Refund" means a refund of Tax as the result of a Final Determination.
"Tax Return" means any return, filing, questionnaire, information return or
other document required to be filed, including requests for extensions of time,
filings made with estimated tax payments, claims for refund and amended returns
that may be filed, for any period with any taxing authority (whether domestic or
foreign) in connection with any Tax (whether or not a payment is required to be
made with respect to such filing).
"Transaction Taxes" mean any sales, use, transfer, real estate transfer,
recording or other similar Taxes payable in connection with consummation of the
transactions contemplated by the Separation and Distribution Agreement.
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"Waban Affiliated Group" shall mean, for each taxable period, the
Affiliated Group of which Waban or any successor of Waban is the common parent.
ARTICLE II
FILING OF TAX RETURNS
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Section 2.01 Manner of Filing. All Tax Returns filed after the
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Distribution Date shall be prepared on a basis which is consistent with the
consummation of the transactions as set forth in the Separation and Distribution
Agreement and shall be filed on a timely basis (including extensions) by the
party responsible for such filing under this Agreement. Unless otherwise
required by applicable law, all Tax Returns filed after the date of this
Agreement shall be prepared on a basis consistent with the elections, accounting
methods, conventions, and principles of taxation used for the most recent
taxable periods for which Tax Returns involving similar Tax Items have been
filed, to the extent that a failure to do so could result in a Tax Detriment to
the other party hereto or a member of its Affiliated Group. Subject to the
provisions of this Agreement, all decisions relating to the preparation of Tax
Returns shall be made in the sole discretion of the party responsible under this
Agreement for such preparation.
Section 2.02 Pre-Distribution Tax Returns.
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(a) Consolidated Returns. The Waban and HomeBase consolidated
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federal income Tax Returns required to be filed for all periods beginning on or
before the Distribution Date shall be prepared and filed by HomeBase. HomeBase
and BJI will cooperate in good faith to determine the appropriate amount of Tax
Items attributable to the BJI Business to be reflected in the consolidated
federal income Tax Returns of Waban and HomeBase for periods beginning on or
before the Distribution Date.
(b) Combined, Consolidated and Unitary Returns. All state and
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local combined, consolidated and unitary corporate income Joint Tax Returns
which are required to be filed for all periods beginning on or before the
Distribution Date, which have not been previously filed shall be prepared and
filed by HomeBase. HomeBase and BJI will cooperate in good faith to determine
the appropriate amount of Tax Items attributable to the BJI Business to be
reflected in such Returns of Waban and HomeBase for periods beginning on or
before the Distribution Date.
(c) Other Returns. All other Tax Returns not described elsewhere
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in this Section 2.02 that are required to be filed for periods beginning on or
before the Distribution Date, including Tax Returns in respect of Transaction
Taxes, shall be
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prepared and filed by the party responsible under the appropriate law of the
taxing jurisdiction.
ARTICLE III
PAYMENT OF TAXES
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Section 3.01 General. For purposes of determining a party's liability for
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Taxes or entitlement to Tax Refunds, Tax Items clearly attributable to the
HomeBase Business will be taken into account for the HomeBase Group, and Tax
Items clearly attributable to the BJI Business will be taken into account for
the BJI Group. Except as otherwise provided in this Agreement, Tax Items not
clearly attributable either to the HomeBase Business or the BJI Business will
be taken into account (i) for the HomeBase Group in the case of Section 3.02
(Allocation of Tax Liabilities With Respect to Unfiled Returns), and (ii) 25%
for the HomeBase Group and 75% for the BJI Group in the case of Section 3.03
(Redetermined Tax Liabilities).
Section 3.02 Allocation of Tax Liabilities With Respect to Unfiled
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Returns.
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(a) Consolidated Federal Income Tax Liabilities. Except as
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otherwise provided in this Agreement, HomeBase shall pay, on a timely basis, all
Taxes due with respect to the consolidated federal income Tax liability for all
periods beginning on or before the Distribution Date (including the Short
Period) of the Waban Affiliated Group. BJI on behalf of the BJI Group hereby
assumes and agrees to pay (to the extent not previously paid by BJI) the BJI
Group's share of those Taxes for all periods beginning on or before the
Distribution Date (including the Short Period), which payments shall be made
directly to HomeBase which shall then forward any balance due to the IRS.
The allocable shares of the consolidated federal income Tax liability
for such periods for the BJI Group and the HomeBase Group shall be determined by
applying the effective tax rate with respect to the applicable Tax Return to the
positive taxable income, if any, determined in accordance with the principles
set forth in Section 3.01 for each of the BJI Group and the HomeBase Group.
With respect to the taxable year of the HomeBase Group that includes the
Distribution Date and the taxable year of the BJI Group that commences
immediately following the Distribution Date, the HomeBase Group shall claim on
its federal income Tax Returns the benefit of (i) the graduated tax rates of
Code Section 11, (ii) the $25,000 bracket amount in Code Section 38, (iii) the
$40,000 exemption amount and the $150,000 bracket amount in Code Section 55, and
(iv) the $2,000,000 bracket amount in Code Section 59A, and the BJI Group shall
claim none of such benefits.
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If the calculations made pursuant to this Section 3.02(a) indicate
that the BJI Group has either overpaid or underpaid its share of the
consolidated federal income Tax liability for the taxable year ended January 25,
1997, or for the Short Period, respectively, then not later than 90 days after
the filing of HomeBase's consolidated federal income Tax return for the taxable
year ended January 25, 1997, and the taxable year ending January 31, 1998,
respectively, HomeBase shall pay BJI the amount of any such overpayment or BJI
shall pay HomeBase the amount of any such underpayment.
HomeBase shall notify BJI not later than 5 business days prior to the due
date of any quarterly estimated Tax payments of the amount of BJI's share of
such quarterly payments, and BJI shall make such quarterly estimated Tax
payments to HomeBase not later than 3 business days prior to the date such
quarterly payments would be due if BJI were a separate company. HomeBase shall
notify BJI not later than 5 business days prior to the last day for filing any
request for extension of time to file the HomeBase Group's federal Tax Return of
the amount of BJI's share of any additional amount due upon the filing of such
extension request, and BJI shall pay to HomeBase such amount not later than 3
business days prior to the last day for filing such extension request.
All calculations and determinations required to be made pursuant to
this Section 3.02(a) shall be made by HomeBase in good faith.
(b) Combined, Consolidated and Unitary Corporate Income Taxes. Except
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as otherwise provided in this Agreement, HomeBase or a member of the HomeBase
Group shall pay, on a timely basis, all Taxes due with respect to any combined,
consolidated or unitary state, local and foreign corporate income Tax liability
for all periods beginning on or before the Distribution Date (including the
Short Period) with respect to Joint Tax Returns ("Combined Taxes"). BJI hereby
assumes and agrees to pay (to the extent not previously paid by BJI) the BJI
Group's share of Combined Taxes for all periods beginning on or before the
Distribution Date (including the Short Period), which payment shall be made by
BJI to HomeBase, which shall then pay any amount due to the appropriate taxing
authority.
The allocable shares of the Combined Tax liability for such periods
for the BJI Group and the HomeBase Group shall be determined by applying the
effective tax rate with respect to the applicable Tax Return to the positive
taxable income, if any, determined in accordance with the principles set forth
in Section 3.01 for each of the BJI Group and the HomeBase Group.
If the calculations made pursuant to this Section 3.02(b) indicate
that BJI has either overpaid or underpaid its share of the Combined Tax
liability, then at such time as HomeBase shall reasonably determine, but in any
event not later than 90 days
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after the filing of the relevant return, HomeBase shall pay BJI the amount of
any such overpayment or BJI shall pay HomeBase the amount of any such
underpayment.
HomeBase shall notify BJI not later than 5 business days prior to the due
date of any quarterly estimated Tax payments of the amount of BJI's share of
such quarterly payments, and BJI shall make quarterly estimated tax payments to
HomeBase not later than 3 business days prior to the date such quarterly
payments would be due if BJI were a separate company. HomeBase shall notify
BJI not later than 5 business days prior to the last day for filing any request
for extension of time to file the HomeBase Group's Combined Tax Return of the
amount of BJI's share of any additional amount due upon the filing of such
extension request, and BJI shall pay to HomeBase such amount not later than 3
business days prior to the last day for filing such extension request.
All calculations and determinations required to be made pursuant to
this Section 3.02(b) shall be made by HomeBase in good faith.
(c) Other Taxes. All other Taxes for periods beginning on or
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before the Distribution Date shall be paid, on a timely basis, by the party
responsible under this Agreement for filing the Tax Return pursuant to which
such Taxes are due, or, if no Tax Return is required, by the party responsible
for payment of such Tax under the laws of the taxing jurisdiction. In the case
of Transaction Taxes, HomeBase shall be liable for 25% of such Taxes and BJI
shall be liable for 75% of such Taxes. The party not responsible under this
Agreement for paying such Taxes to the taxing authority shall pay the
responsible party for its share of such Taxes not later than 3 business days
prior to the due date for such Taxes.
Section 3.03 Redetermined Tax Liabilities.
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(a) Joint Tax Returns. In the case of any Final Determination
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regarding a Joint Tax Return, any Tax Deficiency shall be paid to the
appropriate taxing authority by, and any Tax Refund received from the
appropriate taxing authority shall be paid to, HomeBase; provided, however, that
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whether or not there is a Tax Deficiency or Tax Refund or whether or not a
payment is required to or from the appropriate taxing authority, BJI shall make
payments to HomeBase or receive payments from HomeBase based upon the following
principles:
(i) BJI shall make a payment to HomeBase in an amount equal
to any increase in the BJI Group's allocable share of Tax with respect to such
Joint Tax Return resulting from any adjustments to Tax Items attributable to the
BJI Business, less any payments therefor previously made by BJI to HomeBase (or
directly to the appropriate taxing authority). For the purpose of computing the
amount of any such increase in the BJI Group's allocable share of Tax, any
offsetting
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adjustments to Tax Items attributable to the HomeBase Business will not be taken
into account.
(ii) HomeBase shall pay to BJI, to the extent not previously paid to
BJI by the appropriate taxing authority or by HomeBase, the amount of any
decrease in the BJI Group's allocable share of Tax with respect to such Joint
Tax Return resulting from adjustments to Tax Items attributable to the BJI
Business. For the purpose of computing the amount of any such decrease in the
BJI Group's allocable share of Tax, any offsetting adjustments to Tax Items
attributable to the HomeBase Business will not be taken into account.
Any Tax Liability or Refund with respect to (i) a Tax Item not clearly
attributable either to the HomeBase Business or the BJI Business, (ii) a Joint
Tax Return not arising from an adjustment to, or change in, a Tax Item (e.g.,
change in applicable law), or (iii) Transaction Taxes, shall be allocated 25% to
HomeBase and 75% to BJI.
(b) Separate Returns. HomeBase shall be liable for and shall
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indemnify, defend and hold harmless the BJI Group from and against all Taxes for
all periods with respect to Tax Returns that include only members of the
HomeBase Group, and BJI shall be liable for and shall indemnify, defend and hold
harmless the HomeBase Group from and against all Taxes for all periods with
respect to Tax Returns that include only members of the BJI Group. HomeBase
shall be entitled to receive and retain all Tax Refunds for all periods with
respect to Tax Returns that include only members of the HomeBase Group. BJI
shall be entitled to receive and retain all Tax Refunds for all periods with
respect to Tax Returns that include only members of the BJI Group.
(c) Calculation and Payment of Amounts. Except in the case of Tax
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Returns that include only members of the BJI Group, all calculations and
determinations required to be made pursuant to this Section 3.03 shall be made
by HomeBase in good faith and on a basis reasonably consistent with prior years.
Any payments made by the parties hereunder to each other shall be treated by
each of the parties as satisfaction of liabilities of such paying party and
shall not be subject to any gross-up or additional payment.
(d) Certain Penalties. Notwithstanding anything in this Agreement to
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the contrary, with respect to Joint Tax Returns, HomeBase shall be responsible
for the payment of 100% of any penalties which (i) would have been waived or not
imposed but for HomeBase's failure to adequately disclose on any Tax Return a
position which, prior to the filing of such Tax Return, BJI indicated in writing
to HomeBase should be disclosed, or (ii) are solely attributable to a position
taken by HomeBase on a Joint Tax Return without the prior written agreement of
BJI, which
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position is inconsistent with the information or Tax Returns provided by BJI to
HomeBase.
Section 3.04 Liability for Taxes with Respect to Post-Distribution
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Periods. Unless otherwise provided in this Agreement, the HomeBase Group shall
pay all Taxes and shall be entitled to receive and retain all Tax Refunds with
respect to periods beginning after the Distribution Date which are attributable
to the HomeBase Business. Unless otherwise provided in this Agreement, the BJI
Group shall pay all Taxes and shall be entitled to receive and retain all
refunds of Taxes with respect to periods beginning after the Distribution Date
which are attributable to the BJI Business.
Section 3.05 Carrybacks. BJI agrees that it will not carry back any Tax
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Item arising after the Distribution Date to a taxable period with respect to a
Tax Return which includes a member of the HomeBase Group, without the consent of
HomeBase. In the event that BJI does carry back any such Tax Item with
HomeBase's consent, any Tax Refund resulting therefrom shall be paid over to
BJI. To the extent that the carryback of any Tax Item does not result in a Tax
Refund (or would not result in a refund if a claim were filed) solely as the
result of an offsetting Tax Item attributable to the HomeBase Group, HomeBase
shall remit to BJI the amount of any decrease in the BJI Group's allocable share
of Tax with respect to such return as a result of such carryback as determined
under the principles contained in Section 3.03(a).
Section 3.06 Responsibility for Restructuring Taxes.
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(a) Responsibility of BJI Group. BJI and any successor
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corporation shall be responsible for, and shall indemnify and hold harmless
HomeBase and each member of the HomeBase Group from, all liability, loss, cost,
expense or damage in any way occasioned by any Restructuring Taxes which are
directly or indirectly attributable to one or more of the following described
events or transactions occurring after the Distribution Date with respect to BJI
or any successor corporation: a reorganization, consolidation or merger; the
sale or other disposition of BJI Assets other than in the ordinary course of
business; BJI ceasing to conduct an active trade or business; the acquisition or
disposition of shares of stock of BJI by any person or persons; the redemption
or repurchase of shares of its stock by BJI or any successor; the
recapitalization or other reclassification of the shares of BJI or any
successor; the complete or partial liquidation of BJI or any successor; the
exercisability, transferability or repurchase of rights distributed pursuant to
a stock purchase rights plan; or any other act or omission of BJI which results
in failure to comply with each representation and statement made to the IRS in
connection with the rulings received with respect to the Distribution.
(b) Responsibility of HomeBase Group. HomeBase and any successor
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corporation shall be responsible for, and shall indemnify and hold harmless
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BJI and each member of the BJI Group from, all liability, loss, cost, expense or
damage in any way occasioned by any Restructuring Taxes which are directly or
indirectly attributable to one or more of the following described events or
transactions occurring after the Distribution Date with respect to HomeBase or
any successor corporation: a reorganization, consolidation or merger; the sale
or other disposition of HomeBase Assets other than in the ordinary course of
business; HomeBase ceasing to conduct an active trade or business; the
acquisition or disposition of shares of stock of HomeBase by any person or
persons; the redemption or repurchase of shares of its stock by HomeBase or any
successor; the recapitalization or other reclassification of the shares of
HomeBase or any successor; the complete or partial liquidation of HomeBase or
any successor; the exercisability, transferability or repurchase of rights
distributed pursuant to a stock purchase rights plan or any other act or
omission of HomeBase which results in failure to comply with each representation
and statement made to the IRS in connection with the rulings received with
respect to the Distribution.
(c) Joint Responsibility of BJI Group and HomeBase Group. If any
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Restructuring Taxes should arise for which neither BJI nor HomeBase is
responsible under Section 3.06(a) or Section 3.06(b), respectively, each of BJI
and HomeBase shall be responsible for 50 percent of such Restructuring Taxes,
and each party shall indemnify, defend and hold harmless the other party and
each member of their respective Groups from and against all liability, loss,
cost, expense or damage in any way occasioned by such Restructuring Taxes.
ARTICLE IV
INDEMNITY; COOPERATION AND EXCHANGE OF INFORMATION
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Section 4.01 Breach. HomeBase shall be liable for and shall indemnify,
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defend and hold harmless the BJI Group and its officers and directors, from and
against, and BJI shall be liable for and shall indemnify, defend and hold
harmless the HomeBase Group and its officers and directors, from and against,
any payment required to be made as a result of the breach by a member of the
HomeBase Group or the BJI Group, as the case may be, of any obligation under
this Agreement.
Section 4.02 Indemnity. Whenever a party hereto (hereinafter an
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"Indemnitee") becomes aware of the existence of an issue which could increase
the liability for any Tax of the other party hereto or any member of its Group
or require a payment hereunder (hereinafter an "Indemnity Issue"), the
Indemnitee shall promptly give notice to such other party (hereinafter the
"Indemnitor") of such Indemnity Issue. The failure of any Indemnitee to give
such notice shall not relieve any Indemnitor of its obligations under this
Agreement except to the extent such Indemnitor or its affiliate is actually
materially prejudiced by such failure to give
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notice. The Indemnitor and its representatives, at the Indemnitor's expense,
shall be entitled to participate (i) in all conferences, meetings or proceedings
with any taxing authority, the subject matter of which is or includes an
Indemnity Issue and (ii) in all appearances before any court, the subject matter
of which is or includes an Indemnity Issue. The party who has responsibility
for filing the Tax Return under this Agreement (the "Responsible Party") with
respect to which there is an increase in liability for any Tax or with respect
to which a payment is required hereunder shall have the right to decide as
between the parties hereto how such matter is to be dealt with and finally
resolved with the appropriate taxing authority and shall control all audits and
similar proceedings. The Responsible Party agrees to cooperate in the
settlement of any Indemnity Issue with the other party and to take such other
party's interests into account. If the Indemnitor is not the Responsible Party,
such cooperation shall include permitting the Indemnitor, at the Indemnitor's
sole expense, to litigate or otherwise resolve any Indemnity Issue.
Notwithstanding the foregoing, if the Responsible Party is not the Indemnitor,
the Responsible Party shall not enter into a final settlement with the relevant
taxing authority with respect to any matter involving an Indemnity Issue without
first presenting the proposed settlement to the Indemnitor, who shall provide
the Responsible Party with written consent to such settlement within ten days of
receipt, whereupon (or if the Indemnitor fails to respond to such settlement in
writing within such ten day period) the Responsible Party may enter into such
settlement with the relevant taxing authority, provided, however, that the
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Indemnitor may withhold its consent to the proposed settlement by notifying the
Responsible Party in writing within such ten day period that the Indemnitor does
not consent to the proposed settlement, if the Indemnitor provides the
Responsible Party with an opinion, from tax counsel reasonably satisfactory to
the Responsible Party, to the effect that there is a reasonable possibility that
the Indemnitor will prevail on the merits with respect to one or more Indemnity
Issues with an aggregate value of not less than $100,000 (including Tax,
interest and/or penalties) in a tribunal with jurisdiction to adjudicate the
Indemnitor's defense of such Indemnity Issue. If the Indemnitor provides the
Responsible Party with written notification withholding consent in accordance
with the immediately preceding sentence, then:
(i) The Indemnitor shall fully indemnify and hold harmless the
Responsible Party from and against any and all liabilities (other than
liability for payments to the Indemnitor hereunder) for Taxes and other
costs and expenses (including, without limitation, attorneys' and
accountants' fees) over and above the payments that the Responsible Party
would have been liable for if the Responsibility Party had entered into the
proposed settlement; and
(ii) The Responsible Party shall select one of the following
alternatives:
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(1) enter into a closing agreement or other final resolution with the
relevant taxing authority with respect to all issues in accordance with the
proposed settlement other than Indemnity Issues, provided that such closing
agreement shall (i) allow the Indemnitor to continue to defend the
Indemnity Issues in proceedings with the relevant taxing authority, and
(ii) permit the Indemnitor, if successful, to obtain the full monetary
benefit of a successful defense or claim for a refund, taking into account
any payments to be made pursuant to Section 3.03; or
(2) settle all issues with the relevant taxing authority in
accordance with the proposed settlement and/or pay any additional liability
for Taxes as provided for in such proposed settlement, provided that such
settlement shall (i) permit the Indemnitor to file a claim for refund with
respect to the Indemnity Issues and (ii) permit the Indemnitor, if
successful, to obtain the full monetary benefit of such claim for refund,
taking into account any payments to be made under Section 3.03, which
payments shall be made by the Indemnitor to the Responsible Party not later
than 3 business days prior to the date payment is required under the
proposed settlement, notwithstanding the lack of a Final Determination at
such time; or
(3) pay to the Indemnitor any additional liability for Taxes as
provided for in such settlement to the extent that such liability relates
to issues other than Indemnity Issues, whereupon the Indemnitor shall
assume control over and responsibility for any proceeding related to such
matter and shall be fully liable for and shall fully indemnify and hold the
Responsible Party harmless from and against any and all liability for Taxes
with respect to such matter. The Indemnitor shall have no obligation or
duty to reimburse or refund to the Responsible Party any portion of any
refund or settlement payment regardless of the resolution of the matter.
An Indemnitor may, at its election, pay to or deposit with the
relevant taxing authority an amount of additional Tax liability for which the
Indemnitor would be liable hereunder if such payment or deposit would have the
effect of stopping the accrual of interest with respect to such Tax liability.
The Indemnitor shall have no further responsibility hereunder for interest with
respect to any amount so deposited or paid for so long as such deposit or
payment stops the accrual of interest; provided, however, that any such payment
or deposit does not affect any right of the Responsible Party or any other
liability of the Indemnitor hereunder.
Section 4.03 Cooperation and Exchange of Information.
----------------------------------------
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(a) BJI shall, and shall cause each appropriate member of the BJI
Group to, prepare and submit to HomeBase, at BJI's expense, no later than 90
days after the Distribution Date, all information as HomeBase shall reasonably
request to enable HomeBase to file the HomeBase consolidated federal income Tax
Return and any state and local combined or unitary corporate income Tax Returns
for the taxable year ending January 31, 1998. HomeBase shall be entitled to
require BJI to engage a certified public accounting firm reasonably acceptable
to HomeBase (it being agreed that BJI's outside auditors as of the Distribution
Date are acceptable to HomeBase) to review the information which BJI is required
to provide under this Section 4.03(a). The expenses of such accounting firm
shall be borne by HomeBase.
(b) HomeBase, on behalf of itself and each member of the HomeBase
Group, agrees to provide the BJI Group, and BJI, on behalf of itself and each
member of the BJI Group, agrees to provide the HomeBase Group, with such
cooperation and information as a party shall reasonably request of the other in
connection with the preparation or filing of any Tax Return or claim for refund
not inconsistent with this Agreement or in conducting any audit or other
proceeding in respect to Taxes. Such cooperation and information shall include
without limitation promptly forwarding copies of appropriate notices and forms
or other communications received from or sent to any taxing authority which
relate (i) to the HomeBase Group or the HomeBase Business, to HomeBase in the
case of the BJI Group, and (ii) to the BJI Group or the BJI Business to BJI in
the case of the HomeBase Group; and providing copies of all relevant Tax
Returns, together with accompanying schedules and related workpapers, documents
relating to rulings or other determinations by taxing authorities, including
without limitation, foreign taxing authorities, and records concerning the
ownership and Tax basis of property, which either party may possess. Each party
shall make its employees and facilities available on a mutually convenient basis
to provide explanations of any documents or information provided hereunder.
(c) BJI and HomeBase agree to retain all Tax Returns, related
schedules and workpapers, and all material records and other documents as
required under Section 6001 of the Code and the regulations promulgated
thereunder relating thereto existing on the date hereof or created through the
Distribution Date, until the expiration of the statute of limitations (including
extensions) of the taxable years to which such Tax Returns and other documents
relate and until the Final Determination of any payments which may be required
in respect of such years under this Agreement. HomeBase and BJI agree to advise
each other promptly of any such Final Determination. Any information obtained
under this Section 4.03 shall be kept confidential, except as may be otherwise
necessary in connection with the filing of Tax Returns or claims for refund or
in conducting any audit or other proceeding.
(d) If any member of the HomeBase Group or the BJI Group, as the case
may be, fails to provide any information requested pursuant to this Section 4.03
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by (i) the dates, specified in subsection (a) hereof or, (ii) with respect to
information not requested pursuant to subsection (a) hereof, within a reasonable
period, as determined in good faith by the party requesting information, then
the requesting party shall have the right to engage a certified public
accounting firm of its choice to gather such information. BJI and HomeBase, as
the case may be, agree upon 24 hours' notice, in the case of a failure to
provide information pursuant to subsection (a) hereof, and otherwise upon 30
days' notice after the expiration of such reasonable period, to permit any such
accounting firm full access to all appropriate records or other information in
the possession of any member of the HomeBase Group or the BJI Group, as the case
may be, during reasonable business hours, and to reimburse or pay directly all
costs and expenses in connection with the engagement of such public accountants.
(e) If any member of the HomeBase Group or the BJI Group, as the case
may be, supplies information to a member of the other Group pursuant to this
Section 4.03 and an officer of the requesting party signs a statement or other
document under penalties of perjury in reliance upon the accuracy of such
information, then a duly authorized officer of the party supplying such
information shall certify, under penalties of perjury, the accuracy and
completeness of the information so supplied. HomeBase agrees to indemnify and
hold harmless each member of the BJI Group and its directors, officers and
employees, from and against any cost, fine, penalty or other expense of any kind
attributable to the negligence or willful misconduct of a member of the HomeBase
Group, in supplying a member of the BJI Group with inaccurate or incomplete
information. BJI agrees to indemnify and hold harmless each member of the
HomeBase Group and its directors, officers and employees, from and against any
cost, fine, penalty or other expense of any kind attributable to the negligence
or willful misconduct of a member of the BJI Group in supplying a member of the
HomeBase Group with inaccurate or incomplete information.
Section 4.04 Injunction. The parties hereto agree that the payment of
----------
monetary compensation would not be an adequate remedy to a breach of the
obligations contained in Section 4.03 hereof, and each party consents to the
issuance and entry of an injunction against the taking of any action by it or a
member of its Group described in the preceding section.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.01 Expenses. Unless otherwise expressly provided in this
--------
Agreement, each party shall bear any and all expenses that arise from its
obligations under this Agreement.
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Section 5.02 Entire Agreement; Termination of Prior Agreements. This
-------------------------------------------------
Agreement constitutes the entire agreement of the parties concerning the subject
matter hereof and supersedes all other agreements, whether or not written, in
respect of any Tax between or among any member or members of the HomeBase Group,
on the one hand, and any member or members of the BJI Group, on the other hand.
Except as otherwise provided herein, effective as of the Distribution Date, all
such agreements are hereby cancelled and any rights or obligations existing
thereunder are hereby fully and finally settled without any payment by any party
thereto. Anything in this Agreement or the Separation and Distribution
Agreement to the contrary notwithstanding, in the event and to the extent that
there shall be a conflict between the provisions of this Agreement and the
Separation and Distribution Agreement, the provisions of this Agreement shall
control.
Section 5.03 Notices. Any notice, request, demand, claim, or other
-------
communication hereunder shall be in writing and shall be delivered by registered
or certified mail, return receipt requested, postage prepaid, and addressed to
the intended recipient as set forth below, and shall be deemed duly given on the
date which is three days after the date such notice, request, demand, claim, or
other communication is sent:
To HomeBase or any member of the HomeBase Group:
HomeBase, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Treasurer
To BJI or any member of the BJI Group:
BJ's Wholesale Club, Inc.
Xxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Treasurer
Notwithstanding the foregoing, any party may send any notice, request,
demand, claim, or other communication hereunder to the intended recipient at the
address set forth above using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it is
actually received by the intended recipient. Any party may change the address
to which notices, requests,
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demands, claims, and other communications hereunder are to be delivered by
giving the other party notice in the manner herein set forth.
Section 5.04 Resolution of Disputes. Any disputes between the parties
----------------------
with respect to this Agreement shall be resolved by a certified public
accounting firm or a law firm satisfactory to HomeBase and BJI, whose fees and
expenses shall be shared equally by HomeBase and BJI.
Section 5.05 Application to Present and Future Subsidiaries. This
----------------------------------------------
Agreement is being entered into by each of HomeBase and BJI on behalf of itself
and each member of the HomeBase Group and the BJI Group, respectively. This
Agreement shall constitute a direct obligation of each such member and shall be
deemed to have been readopted and affirmed on behalf of any corporation which
becomes a member of the HomeBase Group or the BJI Group in the future. HomeBase
and BJI hereby guarantee the performance of all actions, agreements and
obligations provided for under this Agreement of each member of the HomeBase
Group and the BJI Group, respectively. Each of HomeBase and BJI shall, upon the
written request of the other, cause any of its respective group members formally
to execute this Agreement.
Section 5.06 Term. This Agreement shall commence on the date of
----
execution indicated below and shall continue in effect until otherwise agreed to
in writing by HomeBase and BJI, or their successors.
Section 5.07 Titles and Headings Titles and headings to sections herein
-------------------
are inserted for the convenience of reference only and are not intended to be a
part or to affect the meaning or interpretation of this Agreement.
Section 5.08 Legal Enforceability Any provision of this Agreement which
--------------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
Section 5.09 Successors and Assigns. This Agreement and all of the
-----------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and assigns. Notwithstanding any other
provision of this Agreement, neither HomeBase nor BJI shall sell or otherwise
transfer all or substantially all of its business, operations or assets, whether
by merger, consolidation, stock sale, asset sale or otherwise, unless the
obligation of the transferor to pay Restructuring Taxes pursuant to the terms
hereof is assumed by or
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otherwise becomes the obligation of the transferee, either by operation of law
or by agreement among the parties.
Section 5.10 Amendments. This Agreement may not be modified or amended
----------
except by an agreement in writing, signed by the parties hereto.
Section 5.11 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
Section 5.12 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic substantive laws of the Commonwealth
of Massachusetts without regard to any choice or conflict of law rule or
provision that would result in the application of the domestic substantive laws
of any other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this agreement as of the ____
day of June, 1997.
HOMEBASE, INC.
By
-----------------------------
Title:
-------------------------
BJ'S WHOLESALE CLUB, INC.
By
-----------------------------
Title:
-------------------------
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