EXHIBIT 10.4
EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT (the "Employee Benefits Agreement"), dated
as of June ___, 1997, is between Waban Inc., a Delaware Corporation ("Waban"),
and BJI 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"); and
WHEREAS, the Distribution Agreement contemplates the execution and delivery
of this Employee Benefits Agreement, the purpose of which is to set forth
certain matters regarding the treatment of employee benefit plans as a result
of, and in connection with, the Separation and the Distribution.
NOW, THEREFORE, in consideration of the mutual agreement, provisions and
covenants contained in this Employee Benefits Agreement, the parties hereby
agree as follows:
ARTICLE 1
Definitions
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As used in this Employee Benefits Agreement, terms shall have the meaning
set forth in the Distribution Agreement, unless otherwise expressly provided
herein. In addition, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural form of the
terms defined):
BJI Employee: The term "BJI Employee" shall mean (a) any individual who,
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on or immediately prior to the Distribution Date, is employed by Waban or any
Waban Subsidiary or is on a leave of absence approved by Waban or any Waban
Subsidiary and who, immediately after the Distribution Date, is employed by BJI
or any BJI Subsidiary or who is continuing on a leave of absence approved by BJI
or any BJI Subsidiary, and (b) any individual whose employment is transferred
from Waban or any Waban Subsidiary to BJI or any BJI Subsidiary within three
months after the Distribution Date.
BJI Common Stock Value: The average of the closing prices of BJI Common
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Stock on the New York Stock Exchange during the ten trading days immediately
following the Distribution Date.
Former BJI Employee: Any individual who was an employee of the BJ's
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Wholesale Club division of Waban but terminated such employment prior to the
Distribution Date.
Stock Value Ratio: The number determined by dividing the Waban Common
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Stock Value by the BJI Common Stock Value.
Transfer Date: The term "Transfer Date" means, (i) with respect to any BJI
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Employee described in clause (a) of the definition of BJI Employee, the
Distribution Date, and (ii) with respect to any BJI Employee described in clause
(b) of the definition of BJI Employee, the date on which such BJI Employee's
employment is transferred from Waban or any Waban Subsidiary to BJI or any BJI
Subsidiary.
Waban Common Stock Value: The average of the closing prices of Waban
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Common Stock on the New York Stock Exchange during the ten trading days
immediately preceding the Distribution Date.
ARTICLE 2
CERTAIN BENEFIT PLAN MATTERS
2.1 Certain BJI Plans; Assumptions of Obligations by BJI. Except as
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provided in Section 2.5, BJI hereby agrees to establish as of the Distribution
Date employee benefit plans (the "BJI Plans") having substantially the same
terms and provisions as the employee benefit plans currently maintained by Waban
which are listed on Schedule 2.1 hereto (the "Waban Plans"). Except for
Liabilities arising under such Waban Plans with respect to each BJI Employee or
Former BJI Employee for the period ending on (a) the BJI Employee's Transfer
Date or (b) Former BJI Employee's termination of employment with Waban (the
"Termination Date") which are assumed or retained by Waban pursuant to this
Article 2, BJI hereby agrees to assume or retain under the applicable BJI Plan
with respect to each BJI Employee or Former BJI Employee all Liabilities under
the corresponding Waban Plan accrued for the period ending on (a) the BJI
Employee's Transfer Date, and (b) the Former BJI Employee's Termination Date.
BJI acknowledges and agrees that Waban is making no representations or
warranties hereunder or otherwise that the costs to BJI of providing benefits
under the BJI Plans (including without limitation costs consisting of premiums
and other charges to third party service providers) will be the same as the
corresponding costs heretofore incurred by Waban. Nothing in this Employee
Benefits Agreement shall be construed to prevent BJI from altering or
discontinuing any BJI Plans established by it pursuant to this Section 2.
2.2 Certain Payments by Waban. Waban hereby agrees to pay all insurance
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premiums or similar plan payments attributable to each participant who will
become
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a BJI Employee for the period ending on such participant's Transfer Date (or the
end of the month thereafter if insurance premiums or third party administration
deposits are paid on a monthly basis) under each Waban Plan listed on Schedule
2.2 hereto.
2.3 Certain Medical Claims. Waban hereby agrees to retain all medical
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costs, including insurance premiums or the payment and reimbursement of claims,
of each BJI Employee and his or her covered dependents for claims which are
submitted on or prior to the BJI Employee's Transfer Date with respect to
expenses for medical services rendered to such persons during the period ending
on such Transfer Date.
2.4 Employees on Certain Leave. If any individual who becomes a BJI
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Employee is on a leave of absence approved by Waban or any Waban Subsidiary on
his or her Transfer Date, and continues on a leave approved by BJI or any BJI
Subsidiary after the Transfer Date, then such leave shall continue under BJI's
leave policies and BJI shall assume any liability for any benefits provided by
Waban prior to the Transfer Date or any benefits required to be provided by law;
provided that the maximum amount and duration of such benefits as well as the
duration of the leave shall not exceed such limits under the applicable Waban
policy.
2.5 Retirement Plan. The Waban Retirement Plan (the "Retirement Plan")
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was frozen in 1992. Waban intends to terminate the Retirement Plan in the 1997
fiscal year. Benefits accrued by BJI Employees while they were employees of
Waban will be distributed in accordance with the terms of the Retirement Plan
(including any provisions applicable to the intended termination) and consistent
with applicable law. BJI will not assume the Retirement Plan nor any
liabilities thereunder; provided that if the Plan Administrator of the
Retirement Plan initiates a standard termination of the Retirement Plan under
Section 4041 of the Employee Retirement Income Security Act of 1974, as amended,
during fiscal year 1997 and no amendments to the Retirement Plan are made which
would increase the present value of the accrued benefits, then BJI will pay to
Waban 75% of any amount contributed or to be contributed to the Retirement Plan
after the Distribution Date by Waban, net of the income tax benefit to Waban of
such contribution, in order for the Retirement Plan to pay all accrued benefits.
2.6 Savings Plan. Pursuant to Section 2.1 hereof, BJI will establish one
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or more savings plans for BJI Employees (the "BJI Savings Plan"), effective
immediately after the Distribution Date, with terms and provisions similar to
those of the Waban 401(k) Savings Plan for Hourly Employees and the Waban 401(k)
Savings Plan for Salaried Employees (the "Waban Savings Plans"). BJI will cause
the BJI Savings Plan to credit, for all purposes under the BJI Savings Plan,
each BJI Employee's service with Waban or any Waban Subsidiaries as if it were
service with BJI.
2.6.1. Participation. Each BJI Employee who is participating in one
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of the Waban Savings Plans immediately prior to his or her Transfer Date shall
cease to participate in such Waban Savings Plan as of such Transfer Date and
shall become a
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participant in the BJI Savings Plan. Each BJI Employee who makes salary
reduction contributions to a Waban Savings Plan during the calendar quarter in
which his or her Transfer Date occurs, with respect to compensation paid on or
before such Transfer Date, and who continues to be employed by BJI or a BJI
Subsidiary at the end of such calendar quarter, will have matching contributions
made to the BJI Savings Plan as the successor to the Waban Savings Plans, by
Waban, with respect to those contributions, as of the end of such calendar
quarter.
2.6.2. Transfer of Accounts. Waban will cause the Trustees of the
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trust established under the Waban Savings Plans (the "Waban Savings Trust") to
transfer to one or more trusts established under the BJI Savings Plan (the "BJI
Savings Trust"), as soon as practicable after the Transfer Date, any assets
allocable to the individual accounts maintained in the Waban Savings Trust for
any individual who becomes a BJI Employee on such Transfer Date other than any
assets held in the subtrusts established for certain Executive Life Insurance
Contracts. The Trustee of the Waban Savings Trust shall comply with any
reasonable requests by the Trustee of the BJI Savings Trust concerning the
manner and the timing of such transfers.
2.6.3. Closing Agreement. To the extent that amounts held in the
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suspense account maintained in accordance with the terms of the Closing
Agreement on Final Determination Covering Specific Matters entered into by Waban
Inc. and the Trustees of the Waban Savings Trusts and the Internal Revenue
Service (the "Closing Agreement") would have been distributed to BJI or
allocated to accounts which have been transferred to the BJI Savings Plan in
accordance with the terms of this Section 2.6 if they were still maintained in
the Waban Savings Trust, then an appropriate amount agreed to by Trustees of The
Waban Savings Trust and The BJI Savings Trust will be transferred to BJI or the
BJI Savings Trusts and allocated thereunder, to the extent consistent with the
Closing Agreement. Any loan by Waban to the Waban Savings Trusts made in
accordance with the Closing Agreement shall not be affected by the Distribution
and shall not be assumed, in whole or in part, by BJI.
2.7 Executive Retirement Plan and Executive Life Insurance Policies.
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2.7.1. Executive Retirement Plan. BJI will establish an Executive
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Retirement Plan (the "BJI Executive Retirement Plan") with substantially the
same terms and provisions as the Waban Inc. Executive Retirement Plan (the
"Waban Executive Retirement Plan"). Waban hereby agrees to transfer to BJI, as
of the Distribution Date, by executing instruments and taking such other action
as BJI may reasonably require, any interest Waban has in the investment or
insurance contracts or other arrangements used to provide benefits to BJI
Employees participating under the Waban Executive Retirement Plan, and which are
listed on Schedule 2.7A.
2.7.2. Executive Life Insurance. Waban hereby agrees to transfer to
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BJI as of the Distribution Date, by executing any instruments and taking such
other
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action BJI may reasonably require, the life insurance policies listed on
Schedule 2.7B, hereto.
2.8 Incentive Plans.
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2.8.1. Replacement Stock Incentive Plan.
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(a) Replacement Options.
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(i) General. BJI has adopted the BJ's Wholesale
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Club, Inc. 1997 Replacement Stock Incentive Plan ("BJI Replacement Stock Plan")
pursuant to which BJI will grant to officers and key employees on or after the
Distribution Date options to purchase BJI Common Stock (the "BJI Replacement
Options") which have substantially the same terms and provisions as outstanding
Waban options granted under the Waban Inc. 1989 Stock Incentive Plan (the "Waban
Stock Plan"), to the extent then unexercised, (the "Waban Option") which are
surrendered by BJI Employees (the "Surrendered Waban Options").
(ii) For BJI Employees Who Will Not Be HomeBase
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Employees. Each BJI Replacement Option shall provide for the
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purchase of a number of shares of BJI Common Stock equal to (a) the number of
shares of Waban Common Stock subject to the Surrendered Waban Option it replaces
multiplied by (b) the Stock Value Ratio, and then rounding down to the nearest
whole share. The per share exercise price of each BJI Replacement Option will
equal (a) the per share exercise price of the Surrendered Waban Option it
replaces divided by (b) the Stock Value Ratio; provided that the price per share
of each BJI Replacement Option will be rounded up to the next higher cent.
(iii) For BJI Employees Will Also Be HomeBase
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Employees. Each Waban Option which is held by a person who is an
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employee of both BJI and HomeBase after the Distribution, will be treated as
follows: (i) a new option to purchase BJI Common Stock will be granted under the
BJI Replacement Stock Plan for the same aggregate number of shares covered by
the applicable Waban Option ("New BJI Option"), with an exercise price equal to
(a) the exercise price of the applicable Waban Option divided by (b) the Stock
Value Ratio, and (ii) the applicable Waban Option will remain outstanding for
the purchase of the same number of shares but the exercise price of such Waban
Option will equal (a) the exercise price of such Waban Option, minus (b) the
exercise price of the New BJI Option granted with respect to such Waban Option.
(b) Restricted Stock.
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(i) General. Holders of restricted Waban Common
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Stock granted under the Waban Stock Plan ("Restricted Waban Common Stock") will
receive the same dividends as those paid to holders of unrestricted shares,
including shares of BJI Common Stock to be issued in the Distribution. Shares of
BJI Common Stock received by such holders of Restricted Waban Common Stock will
be subject to the same restrictions and vesting schedule as the Restricted Waban
Common Stock on account of which the special dividend was made.
(ii) For BJI Employees Who Will Not Be HomeBase
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Employees. After the Distribution, on the Transfer Date of each BJI Employee
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who is a holder of Restricted Waban Common Stock, the Restricted Waban Common
Stock and the BJI Common Stock received in the Distribution will be forfeited to
Waban. A replacement award of BJI Common Stock subject to the same restrictions
and vesting schedule as the forfeited shares will be made to such BJI Employee
under the BJI Replacement Stock Plan. The number of shares of restricted BJI
Common Stock awarded will equal (a) the number of shares of Restricted Waban
Common Stock forfeited multiplied by (b) the Stock Value Ratio (with any
fractional interest of 0.5 or more to be rounded up and any fractional interest
of less than 0.5 to be rounded down to the nearest whole number).
(iii) For BJI Employees Who Will Also Be HomeBase
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Employees. After the Distribution, any holders of Restricted Waban Common Stock
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who are employees of both BJI and HomeBase will be treated as follows: (a) their
shares of Restricted Waban Common Stock will continue to be subject to the same
restrictions and vesting schedule as they were prior to the Distribution and
(b) the shares of BJI Common Stock issued as a result of the Distribution will
be subject to the same restrictions and vesting schedule as the shares of
Restricted Waban Common Stock to which they related, provided that all
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references to a requirement of continued employment in connection with the BJI
Common Stock shall be deemed to refer exclusively to employment by BJI or a BJI
Subsidiary.
2.8.2. 1997 Stock Incentive Plan. BJI has adopted the BJ's Wholesale
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Club, Inc. 1997 Stock Incentive Plan (the "New Stock Incentive Plan") which
contains substantially the same terms and conditions as the Waban Inc. 1997
Stock Incentive Plan. Under the New Stock Incentive Plan, BJI intends to grant
options and other equity based awards to BJI employees, and others, who make, or
are expected to make, important contributions to BJI.
2.8.3. Cash Incentive Plans. BJI has adopted a Management Incentive
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Plan and a Growth Incentive Plan containing substantially the same terms and
conditions as the comparable Waban Management Incentive and Growth Incentive
Plans (the "WMIP" and "WGIP"). Persons who become BJI Employees on the
Distribution Date and who were participants in the WMIP and/or WGIP will be
granted replacement awards under the BJI Management Incentive Plan and Growth
Incentive Plan on substantially the same terms as applied to their prior
unmatured
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awards, with modifications necessary to reflect the changes resulting from the
Distribution. BJI will pay all amounts due to BJI employees under the
replacement awards and Waban will have no liability to such BJI Employees with
respect to the awards under the WMIP and WGIP.
2.8.4. Director Stock Option Plan. BJI has adopted the BJ's
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Wholesale Club, Inc. 1997 Director Stock Option Plan (the "BJI Director Plan")
with substantially the same terms and provisions as the Waban Inc. 1995 Director
Stock Option Plan (the "Waban Director Plan"). Options granted under the Waban
Director Plan to persons who will become directors of BJI following the
Distribution and cease to be directors of Waban will be replaced, to the extent
then unexercised, and upon their surrender, with options granted under the BJI
Director Plan, calculating the number and price of such replacement options in
the manner set forth under Section 2.8.1(a)(ii) with respect to the replacement
of Surrendered Waban Options for BJI Employees. Options granted under the Waban
Director Plan to directors of BJI who continue to be directors of Waban after
the Distribution Date will be retained by such directors. Directors of BJI who
also continue as directors of Waban will also be granted a new option to
purchase BJI Common Stock under the BJI Director Plan. The number of shares
which can be purchased under such new option and the exercise price for such
option, as well as the recalculated exercise price for the retained Waban
options, will be determined in the manner set forth in Section 2.8.1(a)(iii) for
BJI Employees who are also HomeBase Employees.
ARTICLE THREE
MISCELLANEOUS
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3.1 Relationship of Parties. Nothing in this Agreement shall be deemed or
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construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.
3.2 No Third Party Beneficiaries. This Agreement is solely for the
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parties hereto and their respective Subsidiaries and Affiliates and shall not be
deemed to confer upon third parties any remedy, claim, Liability, reimbursement,
claim of action or other right in excess of those existing without reference to
this Agreement.
3.3 Governing Law. To the extent not preempted by applicable federal law,
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this Employee Benefits Agreement shall be governed by, construed and interpreted
in accordance with the laws of the Commonwealth of Massachusetts, irrespective
of the choice or conflict of law rules or provisions of the Commonwealth of
Massachusetts,
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as to all matters, including matters of validity, construction, effect,
performance and remedies.
3.4 Incorporation of Distribution Agreement Provisions. The following
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provisions of the Distribution Agreement are hereby incorporated herein by
reference and, unless otherwise expressly specified herein, such provisions
shall apply as if set forth herein: Article 5 (relating to Indemnification);
Article 6 (relating to Access to Information and Service); and Article 7
(relating to Miscellaneous) other than Section 7.4 (relating to Governing Law)
and Section 7.9 (relating to No Third Party Beneficiaries).
3.5 Notices. Any notice, request, demand, claim, or other communication
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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 Waban:
Waban Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: President
to BJI:
BJ's Wholesale Club, Inc.
Xxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: President
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, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
IN WITNESS WHEREOF, the parties have caused this Employee Benefits
Agreement to be duly executed as of the day and year first above written.
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WABAN INC.
By:
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President
BJ'S WHOLESALE CLUB, INC.
By:
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President
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SCHEDULE 2.1 -- WABAN PLANS
Waban Inc. 401(k) Saving Plan for Salaried Employees
Waban Inc. 401(k) Saving Plan for Hourly Employees
Waban Inc. 401(k) Master Trust
Waban Inc. Healthcare Plan
BJ's Wholesale Club Educational Assistance Plan of Waban Inc.
Waban Inc. Group Insurance Plan
Waban Inc. 1989 Stock Incentive Plan
Waban Inc. 1997 Stock Incentive Plan
Waban Inc. Management Incentive Plan
Waban Inc. Growth Incentive Plan
Waban Inc. 1995 Director Stock Option Plan
Waban Inc. Executive Retirement Plan
Waban Inc. General Deferred Compensation Plan
Waban Inc. Change of Control Severance Benefit Plan for Key Employees
Waban Inc. Change of Control Severance Benefit Plan for Key Senior Management
SCHEDULE 2.2 -- WABAN PLANS
Waban Inc. Healthcare Plan
Waban Inc. Group Insurance Plan
