EXHIBIT 10.1
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SEPARATION AND DISTRIBUTION AGREEMENT
Dated as of June ____, 1997
BETWEEN
WABAN INC.
AND
BJ'S WHOLESALE CLUB, INC.
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TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS................................................. 1
ARTICLE 2 THE SEPARATION.............................................. 6
2.1 Adoption of BJI Charter, BJI By-Laws and BJI Rights Plan..... 6
2.2 Transfer of BJI Assets and Assumption of BJI Assumed
Liabilities.................................................. 6
2.2.1 BJI Assets............................................ 6
2.2.2 BJI Assumed Liabilities............................... 6
2.2.3 Transfers Not Consummated On or Prior to the
Distribution Date..................................... 7
2.2.4 Further Assurances; Subsequent Transfers.............. 7
2.2.5 No Representations or Warranties; Consents............ 8
2.3 Intercompany Accounts......................................... 9
2.4 Ancillary Agreements.......................................... 9
2.5 Issuance of BJI Common Stock.................................. 9
2.6 Resignations.................................................. 9
2.7 Insurance..................................................... 10
2.7.1. General................................................ 10
2.7.2 Certain Insured Claims................................. 10
2.8 Non-Exclusive License to Name................................. 11
ARTICLE 3 THE DISTRIBUTION............................................. 11
3.1 Action Prior to the Distribution.............................. 11
3.1.1 BJI Form 8-A........................................... 11
3.1.2 S-8 Registration Statement............................. 11
3.1.3 Matters Pertaining to Blue Sky Laws Compliance......... 11
3.1.4 New York Stock Exchange Listing........................ 12
3.2 Conditions Precedent to the Distribution...................... 12
3.3 Waban Board Action............................................ 13
3.4 The Distribution.............................................. 13
ARTICLE 4 CERTAIN MATTERS RELATING TO LEASE LIABILITIES................ 13
4.1 Certain Definitions........................................... 13
4.2 Indemnified Home Base Lease Liabilities....................... 15
4.2.1 Control of HomeBase Third Party Claims................. 15
4.2.2 Reports................................................ 17
4.2.3 Settlements............................................ 17
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4.2.4 Indemnification Agreement............................ 17
4.3 Lease Renewals.............................................. 17
4.4 Reimbursement............................................... 18
ARTICLE 5 INDEMNIFICATION............................................ 18
5.1 Certain Definitions......................................... 18
5.2 Indemnification by Waban.................................... 19
5.3 Indemnification by BJI...................................... 19
5.4 Limitations on Indemnification Obligations.................. 19
5.5 Procedure for Indemnification............................... 20
5.5.1 Third Party Claims; Notice........................... 20
5.5.2 Defense of Third Party Claims........................ 20
5.5.3 Cooperation by Indemnitee............................ 20
5.5.4 Limitation on Authority to Settle Claim.............. 21
5.5.5 Other Claims......................................... 21
5.5.6 Advancement of Certain Expenses...................... 21
5.5.7 Subrogation to Rights of Indemnitee.................. 22
5.6 Insurance and Indemnification............................... 22
5.7 Special Provision Relating to Certain Pre-Distribution
Liabilities................................................. 22
5.8 Remedies Cumulative......................................... 22
ARTICLE 6 ACCESS TO INFORMATION...................................... 22
6.1 Provision of Corporate Records.............................. 22
6.2 Access to Information....................................... 22
6.3 Production of Witnesses..................................... 23
6.4 Reimbursement............................................... 23
6.5 Retention of Records........................................ 23
6.6 Confidentiality............................................. 24
ARTICLE 7 MISCELLANEOUS.............................................. 24
7.1 Rule of Construction........................................ 24
7.2 Survival of Agreements...................................... 24
7.3 Expenses.................................................... 24
7.4 Governing Law............................................... 25
7.5 Notices..................................................... 25
7.6 Amendments.................................................. 25
Successors and Assigns...................................... 25
7.8 Termination................................................. 26
7.9 No Third Party Beneficiaries................................ 26
7.10 Titles and Headings......................................... 26
7.11 Exhibits and Schedules...................................... 26
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7.12 Counterparts................................................ 26
7.13 Legal Enforceability........................................ 26
SCHEDULES
A BJ's Assets
B BJ's Assumed Liabilities
C BJ's Subsidiaries
D HomeBase Subsidiaries
E Intercompany Accounts
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SEPARATION AND DISTRIBUTION AGREEMENT
This SEPARATION AND DISTRIBUTION 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 currently owns and operates "BJ's Wholesale Club," a food
and general merchandise warehouse club business, and "HomeBase", a home
improvement warehouse business;
WHEREAS, the Board of Directors of Waban has determined that it is in the
best interests of Waban and its stockholders to separate the "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, Waban and BJI have determined that it is necessary and desirable
to set forth the principal corporate transactions required to effect the
Separation and the Distribution and to set forth other agreements that will
govern certain relationships and other matters between Waban and BJI in
connection with, and following, the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Action" means any action, suit, arbitration, inquiry, proceeding or
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investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
"Affiliate" means "affiliate" as defined in Rule 12b-2 promulgated under
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the Exchange Act, as such Rule is in effect on the date hereof; provided,
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however, that
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BJI and the BJI Subsidiaries, on the one hand, and Waban and the Waban
Subsidiaries, on the other hand, shall not be deemed Affiliates of each other
for purposes of this Agreement.
"Ancillary Agreements" means all of the agreements, instruments,
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understandings, assignments or other arrangements entered into in connection
with the Distribution, including, without limitation, (i) the Conveyancing
Instruments, (ii) the Services Agreement, (iii) the Tax Sharing Agreement and
(iv) the Employee Benefits Agreement.
"BJI" has the meaning ascribed in the Preamble.
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"BJI Assets" means collectively, those assets of Waban identified on
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Schedule A hereto to be transferred to BJI in accordance with Article 2 of this
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Agreement.
"BJI Assumed Liabilities" means collectively, those Liabilities of Waban
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identified on Schedule B hereto to be assumed by BJI in accordance with Article
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2 of this Agreement.
"BJI Board" means the Board of Directors of BJI.
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"BJI Business" means the business, assets and operations of the "BJ's
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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 prior to
the Distribution Date (provided, however, that the 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 By-Laws" means the Amended and Restated By-Laws of BJI, substantially
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in the form filed as an exhibit to the BJI Form S-1, to be in effect on the
Distribution Date.
"BJI Charter" means the Amended and Restated Certificate of Incorporation
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of BJI, substantially in the form filed as an exhibit to the BJI Form S-1, to be
in effect on the Distribution Date.
"BJI Common Stock" means the common stock, par value $.01 per share, of
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BJI.
"BJI Default Period" has the meaning ascribed in Section 4.1.
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"BJI Form S-1" means the Registration Statement on Form S-1 filed by BJI
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and the Registration Statement on Form S-3 filed by Waban with the Commission to
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effect, among other things, the registration of the BJI Common Stock and the BJI
Rights to be issued in the Distribution pursuant to the Securities Act.
"BJI Indemnitees" has the meaning ascribed in Section 5.1.
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"BJI Lease" has the meaning ascribed in Section 4.1.
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"BJI Rights" means the Preferred Stock Purchase Rights of BJI issued under
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the BJI Rights Plan.
"BJI Rights Plan" means the BJI Preferred Stock Purchase Rights Plan, in
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substantially the form filed as an exhibit to the BJI Form S-1, to be adopted by
BJI prior to the Distribution Date.
"BJI Subsidiaries" means the Subsidiaries of Waban listed on Schedule C
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hereto, each of which will become Subsidiaries of BJI, or of another Subsidiary
of BJI, on or prior to the Distribution Date.
"Code" means the Internal Revenue Code of 1986, as amended, and shall
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include corresponding provisions of any subsequently enacted federal tax law.
"Commission" means the Securities and Exchange Commission.
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"Conveyancing Instruments" means collectively, the various agreements,
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instruments and other documents, in form and substance mutually satisfactory to
Waban and BJI, to be entered into to effect the transfer of the BJI Assets by
Waban to BJI and the assumption by BJI of the BJI Assumed Liabilities.
"Distribution" has the meaning ascribed in the Preamble.
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"Distribution Agent" means the distribution agent for the stockholders of
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Waban, as appointed by Waban, to distribute shares of BJI Common Stock and the
BJI Rights pursuant to the Distribution.
"Distribution Date" means the close of business on the date to be
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determined by the Waban Board as of which the Distribution shall be effected.
"Distribution Record Date" means the close of business on the date to be
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determined by the Waban Board as the record date for the Distribution.
"Employee Benefits Agreement" means the Employee Benefits Agreement in
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substantially the form filed as an exhibit to the BJI Form S-1, to to be entered
into between Waban and BJI.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"HomeBase Control Event" has the meaning ascribed in Section 4.2.
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"HomeBase Control Period" has the meaning ascribed in Section 4.1.
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"HomeBase Business" means the business, assets and operations of the
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"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 prior to
Distribution Date (provided, however, that the warehouse clubs initially
operated by the BJ's Wholesale Club division of Waban 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 Lease" has the meaning ascribed in Section 4.1.
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"HomeBase Third Party Claim" has the meaning ascribed in Section 4.1.
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"Indemnifiable Losses" has the meaning ascribed in Section 5.1.
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"Indemnified HomeBase Lease Liabilities" has the meaning ascribed in
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Section 4.1.
"Indemnifying Party" has the meaning ascribed in Section 5.4.
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"Indemnitee" has the meaning ascribed in Section 5.4.
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"Information" has the meaning ascribed in Section 6.2.
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"Insurance Program" means the various insurance policies maintained by
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Waban pursuant to which various insurance carriers provide insurance coverage to
Waban and its subsidiaries (including, prior to the Distribution Date, BJI and
the BJI Subsidiaries).
"IRS" means the Internal Revenue Service.
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"Liabilities" means any and all debts, liabilities and obligations,
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absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising (unless otherwise
specified in this Agreement), including all costs and expenses (including
attorneys' fees) relating thereto, and including, without limitation, those
debts, liabilities and obligations arising under any law, rule, regulation,
Action, threatened Action, order or consent decree of any governmental entity or
any award of any arbitrator of any kind, and those arising under any contract,
commitment or undertaking.
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"Person" means any natural person or any corporation, association,
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partnership, limited liability company, joint venture, company, trust,
organization, business or government or any governmental agency or political
subdivision thereof.
"Prospectus/Proxy Statement" means the Prospectus/Proxy Statement included
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in the BJ's Form S-1 and sent to the holders of Waban Common Stock in connection
with the meeting of stockholders of Waban called to approve the Distribution.
"Securities Act" means the Securities Act of 1933, as amended.
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"Services Agreement" means the Services Agreement, in substantially the
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form filed as an exhibit to the BJI Form S-1, pursuant to which BJI will provide
various services to Waban.
"Subsidiary" means with respect to any Person, any other Person of which
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such Person shall at the time own, directly or indirectly through one or more
Subsidiaries, at least a majority of the outstanding capital stock (or other
shares of beneficial interest) entitled to vote generally, or shall hold at
least a majority of partnership or similar interests, or shall be a general
partner.
"Tax Sharing Agreement" means the Tax Sharing Agreement, in substantially
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the form filed as an exhibit to the BJI Form S-1, to be entered into between
Waban and BJI.
"Third Party Claim" has the meaning ascribed in Section 5.5.1.
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"TJX" means The TJX Companies, Inc.
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"TJX Indemnification Agreement" has the meaning ascribed in Section 4.1.
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"Waban" has the meaning ascribed in the Preamble.
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"Waban Board" means the Board of Directors of Waban.
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"Waban Business" means the assets, business and operations of Waban
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heretofore, currently or hereafter held or conducted, including without
limitation all businesses, assets or operations managed or operated by, or
operationally related to, any of such businesses which have been sold or
otherwise disposed of or discontinued prior to the Distribution Date, in each
case other than the BJI Business.
"Waban Common Stock" means the common stock, par value $.01 per share, of
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Waban.
"Waban Indemnitees" has the meaning ascribed in Section 5.1.
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"Waban Liabilities" means all Liabilities of Waban or any Waban Subsidiary,
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including all Liabilities arising out of or in connection with or relating
principally to the Waban Business including, without limitation, any and all
liabilities arising under any lease for which Waban is or may be liable, other
than leases which are BJI Assumed Liabilities (such leases, excluding leases
which are BJI Assumed Liabilities, being referred to as the "Waban Leases");
provided, however, that the term "Waban Liabilities" shall not include any BJI
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Assumed Liabilities.
"Waban Rights" means the Preferred Stock Purchase Rights of Waban issued
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under Waban's Preferred Stock Purchase Rights Plan.
"Waban Subsidiaries" means the Subsidiaries of Waban other than BJI or any
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BJI Subsidiary, including, without limitation, the entities listed on
Schedule D.
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ARTICLE 2
THE SEPARATION
This Article 2 sets forth certain transactions to be consummated on or
prior to the Distribution Date in connection with the separation of Waban's BJ's
Wholesale Club and HomeBase divisions into two separate companies and the
transfer of the BJ's Wholesale Club business of Waban to BJI in contemplation of
the Distribution. Subject to the terms and conditions of this Agreement, the
parties shall consummate such transactions on or prior to the Distribution Date
at such times and in such sequence as they shall mutually agree.
2.1 Adoption of BJI Charter, BJI By-Laws and BJI Rights Plan. On or prior
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to the Distribution Date, BJI and Waban shall cause the Certificate of
Incorporation and By-Laws of BJI to be amended and restated, substantially in
the form of the BJI Charter and the BJI By-Laws, respectively, and shall cause
the BJI Rights Plan to be adopted.
2.2 Transfer of BJI Assets and Assumption of BJI Assumed Liabilities.
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2.2.1 BJI Assets. On or prior to the Distribution Date, Waban
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shall, by means of appropriate Conveyancing Instruments, convey, transfer,
assign and deliver to BJI, and BJI will accept from Waban, all of Waban's
rights, title and interest in and to all of the BJI Assets, which transfers
shall be deemed to be effective as of ________, 1997.
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2.2.2 BJI Assumed Liabilities. On or prior to the Distribution
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Date, except as set forth in the Tax Sharing Agreement or the Employee
Benefits Agreement, BJI shall, by means of appropriate Conveyancing
Instruments, assume all of Waban's duties, obligations and responsibilities
with respect to the BJI Assumed Liabilities, which assumption shall be
deemed to be effective as of ________, 1997.
2.2.3 Transfers Not Consummated On or Prior to the Distribution Date.
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Subject to Section 2.2.4 hereof, to the extent that the transfer to BJI of
any of the BJI Assets or the assumption by BJI of any of the BJI Assumed
Liabilities shall not have been consummated on or prior to the Distribution
Date, Waban and BJI shall cooperate to effect such consummation as promptly
thereafter as shall be practicable, it nonetheless being understood and
agreed by Waban and BJI that neither shall be liable in any manner to any
person who is not a party to this Agreement for any failure of any of the
transfers contemplated by Section 2 to be consummated on or subsequent to
the Distribution Date. Whether or not all of the BJI Assets or the BJI
Assumed Liabilities shall have been legally transferred to BJI as of the
Distribution Date, Waban and BJI agree that, as of the Distribution Date,
BJI shall have, and shall be deemed to have acquired, complete and sole
beneficial ownership over all of the BJI Assets, together with all of
Waban's rights, powers and privileges incident thereto, and shall be deemed
to have assumed in accordance with the terms of this Agreement all of the
BJI Assumed Liabilities and all of Waban's duties, obligations and
responsibilities incident thereto.
2.2.4 Further Assurances; Subsequent Transfers.
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(a) Each of Waban and BJI will execute and deliver such further
instruments of conveyance, transfer and assignment and will take such other
actions as each of them may reasonably request of the other in order to
effectuate the purposes of this Agreement and to carry out the terms
hereof. Without limiting the generality of the foregoing, at any time and
from time to time after the Distribution Date, at the request of BJI and
without further consideration, Waban will execute and deliver to BJI such
other instruments of transfer, conveyance, assignment and confirmation
(including estoppel certificates) and take such action as BJI may
reasonably deem necessary or desirable in order to more effectively
transfer, convey and assign to BJI and to confirm BJI's title to all of the
BJI Assets, to put BJI in actual possession and operating control thereof
and to permit BJI to exercise all rights with respect thereto (including,
without limitation, rights under contracts and other arrangements as to
which the consent of any third party to the transfer thereof shall not have
previously been obtained) and BJI will execute and deliver to Waban all
instruments, undertakings or other documents and take such other
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action as Waban may reasonably deem necessary or desirable in order to have
BJI properly assume and discharge the BJI Assumed Liabilities and relieve
Waban of any Liability or obligations with respect thereto and evidence the
same to third parties. Notwithstanding the foregoing, Waban and BJI shall
not be obligated, in connection with the foregoing, to expend monies other
than reasonable out-of-pocket expenses and attorneys' fees.
(b) Waban and BJI will use their best efforts to obtain any consent
required to assign all agreements, leases, licenses and other rights of any
nature whatsoever relating to the BJI Assets to BJI and the BJI
Subsidiaries; provided, however, that Waban shall not be obligated to pay
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any consideration therefor (except for filing fees and other administrative
charges) to the third party from whom such consents, approvals and
amendments are requested. In the event and to the extent that Waban is
unable to obtain any such required consent, (i) Waban shall continue to be
bound thereby and (ii) unless not permitted by law or the terms thereof,
BJI shall pay, perform and discharge fully all the obligations of Waban
thereunder from and after the Distribution Date and indemnify Waban for all
Indemnifiable Losses arising out of such performance by BJI. Waban shall,
without further consideration therefor, pay, assign and remit to BJI
promptly all monies, rights and other considerations received in respect of
such performance. Waban shall exercise or exploit its rights and options
under all such agreements, leases, licenses and other rights and
commitments referred to in this Section 2.2.4(b) only as reasonably
directed by BJI and at BJI's expense. If and when any such consent shall be
obtained or such agreement, lease, license or other right shall otherwise
become assignable or able to be novated, Waban shall promptly assign and
novate all its rights and obligations thereunder to BJI without payment of
further consideration and BJI shall, without the payment of any further
consideration therefor, assume such rights and obligations.
2.2.5 No Representations or Warranties; Consents. BJI understands and
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hereby agrees that Waban is not, in this Agreement or in any other
agreement or document contemplated by this Agreement or otherwise, nor
shall Waban be deemed or implied to be, representing or warranting in any
way (i) as to the value or freedom from encumbrance of, or any other matter
concerning, any assets to be transferred to BJI as contemplated by this
Section 2.2 or (ii) as to the legal sufficiency to convey title to any such
asset of the execution, delivery and filing of this Agreement or any
Conveyancing Instrument, IT BEING UNDERSTOOD AND HEREBY AGREED THAT ALL
SUCH ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS" and that BJI shall bear
the economic and legal risk that any conveyances of such assets shall prove
to be insufficient (subject to Section 2.2.4(a)) or that BJI or any of its
Subsidiaries' title to any such assets shall be other than good and
marketable
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and free from encumbrances. Similarly, BJI understands and hereby agrees
that Waban is not, in this Agreement or in any other agreement or document
contemplated by this Agreement or otherwise, nor shall Waban be deemed or
implied to be, representing or warranting in any way that the obtaining of
any consents or approvals, the execution and delivery of any amendatory
agreements and the making of any filings or applications contemplated by
this Agreement or such other agreements or documents shall satisfy the
provisions of any or all applicable agreements or the requirements of any
or all applicable laws or judgments, it being understood and hereby agreed
that BJI shall bear the economic and legal risk that any necessary consents
or approvals are not obtained or that any requirements of laws or judgments
are not complied with. Notwithstanding the foregoing, the parties shall use
reasonable efforts to obtain all consents and approvals, to enter into all
amendatory agreements and to make all filings and applications which may be
required for the consummation of the transactions contemplated by this
Agreement.
2.3 Intercompany Accounts. On or prior to the Distribution Date, Waban
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and BJI shall pay or otherwise settle all intercompany accounts between them all
as more specifically provided on Schedule E and shall make the other payments or
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dividends specifically provided on Schedule E.
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2.4 Ancillary Agreements. On or prior to the Distribution Date, Waban and
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BJI shall enter into each of the (i) Tax Sharing Agreement, (ii) the Services
Agreement and (iii) the Employee Benefits Agreement.
2.5 Issuance of BJI Common Stock. In consideration for the conveyance,
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assignment, transfer and delivery of the BJI Assets pursuant to Article 2
hereof, BJI shall issue to Waban, on or prior to the Distribution Date, one
share of BJI Common Stock (including one BJI Right) for each share of Waban
Common Stock outstanding on the Distribution Record Date, reduced by the number
of shares of BJI Common Stock (and associated BJI Rights) theretofore held by
Waban.
2.6 Resignations. Each party shall cause all of its own and all of
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its Subsidiaries' employees to resign, effective upon the Distribution, from all
boards of directors or similar governing bodies of the other party or any
Subsidiary of the other party on which they serve, and from all positions as
officers of the other party or any Subsidiary of the other party in which they
serve, except as otherwise provided in the Prospectus/Proxy Statement with
respect to individuals continuing to hold positions with both Waban and BJI.
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Prior to the Distribution Date, Waban shall take all steps necessary so that,
effective immediately after the Distribution, the directors and officers of BJI
shall be those individuals named in the Prospectus/Proxy Statement.
2.7. Insurance.
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2.7.1. General. Waban shall keep in effect all policies under its
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Insurance Program in effect as of the date of this Agreement insuring the
BJI Assets and operations of the BJI Business until 12:00 midnight on the
Distribution Date, unless BJI shall have earlier obtained appropriate
coverage and notified Waban in writing to that effect. In addition, Waban
shall keep in effect all property insurance policies under its Insurance
Program in effect as of the date of this Agreement insuring the BJI Assets
and operations of the BJI Business until 12:00 midnight on October 31,
1997, unless BJI shall have earlier obtained appropriate coverage and
notified Waban in writing to that effect. BJI agrees that, prior to the
expiration of each insurance policy referred to in the first two sentences
of this Section, it will purchase insurance policies which (i) provide
coverage similar to that provided by the policies maintained by Waban
under the Insurance Program with respect to the BJI Assets and the BJI
Business and (ii) allow BJI to make claims for occurrences prior to the
Distribution Date (provided, however, that clause (ii) shall not apply to
the Director and Officer liability policy to be obtained by BJI). Waban
shall, if so requested by BJI, use reasonable efforts to assist BJI in
obtaining such initial insurance coverage for BJI from and after the
Distribution Date in such amounts as are agreed upon by Waban and BJI.
Following the Distribution Date, each of Waban and BJI shall cooperate with
and assist the other party in the prevention of conflicts or gaps in
insurance coverage and/or collection of proceeds.
2.7.2 Certain Insured Claims. Notwithstanding anything to the contrary
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in this Agreement, Waban will indemnify and hold BJI harmless from and
against any and all Indemnifiable Losses resulting, directly or indirectly,
from claims made or deemed made (under the applicable insurance policy)
prior to the Distribution Date (or with respect to property insurance
policies, prior to October 31, 1997) which relate to the BJI Assets or the
BJI Business and which arise from or relate to events or occurrences prior
to the Distribution Date (or with respect to property insurance policies,
prior to October 31, 1997), if such claims would be covered by the
Insurance Program; provided, however, that Waban shall only be required to
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indemnify and hold BJI harmless pursuant to this Section 2.7.2 (i) to the
extent such Indemnifiable Losses exceed any applicable deductibles under
the Insurance Program (the payment of which deductibles shall be the
responsibility of BJI) and (ii) to the
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extent Waban actually receives a payment under the Insurance Program with
respect to such Indemnifiable Losses. To the extent that BJI seeks any
indemnity pursuant to this Section 2.7.2, the provisions of Section 5
hereof shall apply thereto, and BJI shall be treated as the Indemnitee and
Waban shall be treated as the Indemnifying Party under such provisions;
provided, however, that BJI shall pay all out of pocket costs which are
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reasonably incurred by Waban after the Distribution Date in defending any
such claims under an insurance policy relating to the BJI Assets or the BJI
Business and BJI shall make available to Waban such of its employees as
Waban may reasonably request as witnesses or deponents in connection with
Waban's defense of claims, at BJI's sole cost and expense.
2.8 Non-Exclusive License to Name. Waban hereby grants to BJI a non-
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exclusive right and license during the period commencing on the Distribution
Date and ending on the date which is six months after the Distribution Date to
use the trademark "Waban" in connection with the BJI Business.
ARTICLE 3
THE DISTRIBUTION
3.1 Action Prior to the Distribution.
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3.1.1 BJI Form 8-A. Waban and BJI shall prepare, and shall cause to
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be filed with the Commission, the BJI Form 8-A with respect to the BJI
Common Stock and the BJI Rights. Waban and BJI shall use reasonable efforts
to cause the BJI Form 8-A to become effective under the Exchange Act.
3.1.2 S-8 Registration Statements. Waban and BJI shall cooperate in
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preparing and filing with the Commission any registration statements or
amendments thereof which are necessary or appropriate to reflect the
establishment of, or amendments to, any employee benefit and other plans
contemplated by the Employee Benefits Agreement or otherwise described in
the Prospectus/Proxy Statement.
3.1.3 Matters Pertaining to Blue Sky Laws Compliance. Waban and BJI
----------------------------------------------
shall use reasonable efforts to take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement.
-11-
3.1.4 New York Stock Exchange Listing. Waban and BJI shall prepare,
-------------------------------
and BJI shall file and seek to make effective, an application to permit the
listing of BJI Common Stock and the BJI Rights on the New York Stock
Exchange, subject to official notice of issuance.
3.2 Conditions Precedent to the Distribution. The obligation of the
----------------------------------------
parties hereto to consummate the Distribution shall be subject to each of the
following conditions, any of which may be waived by Waban in its sole
discretion:
(a) the declaration by the Waban Board of the Distribution;
(b) the conversion into Waban Common Stock or redemption for cash of
all of Waban's 6.5% Convertible Subordinated Debentures due 2002 (the
"Convertible Debentures") and, if applicable, the consummation of the
transactions contemplated by the standby agreement entered into in connection
with the call for redemption of the Convertible Debentures.
(c) the transactions contemplated by Article 2 hereof shall have been
consummated in all material respects;
(d) the BJI Common Stock and the BJI Rights shall have been approved
for listing on the New York Stock Exchange, subject to official notice of
issuance;
(e) BJI and Waban having entered into agreements with lenders to
provide sufficient financing upon consummation of the Distribution;
(f) the BJI Form 8-A shall have been declared or become effective and
the transactions contemplated by this Agreement shall otherwise be in compliance
with all applicable federal and state securities laws; and
(g) as of the Distribution Date, the private letter ruling previously
received by Waban from the IRS shall remain applicable with respect to the tax-
free nature of the Distribution;
provided, however, that the satisfaction of such conditions shall not create any
-----------------
obligation on the part of Waban to effect the Distribution or in any way limit
Waban's power of termination set forth in Section 7.8 hereof or alter the
consequences of any such termination from those specified in said Section 7.8.
-12-
3.3 Waban Board Action. Subject to the satisfaction of the conditions set
------------------
forth in Section 3.2, the Waban Board shall, in its sole discretion, establish
the Distribution Record Date and the Distribution Date and any appropriate
procedures in connection with the Distribution.
3.4 The Distribution. Prior to the Distribution Date, subject to the terms
----------------
and conditions of this Agreement, Waban shall deliver to the Distribution Agent
a certificate representing all of the then outstanding shares of BJI Common
Stock (including the associated BJI Rights) owned by Waban. Subject to the terms
and conditions of this Agreement, Waban and BJI shall instruct the Distribution
Agent to distribute, on or as soon as practicable following the Distribution
Date, one share of BJI Common Stock (including the associated BJI Right) in
respect of each share of Waban Common Stock held by holders of record of Waban
Common Stock on the Distribution Record Date. BJI agrees to provide all
certificates that the Distribution Agent shall require in order to effect the
Distribution. All of the shares of BJI Common Stock issued in the Distribution
shall be fully paid, nonassessable and free of preemptive rights.
ARTICLE 4
CERTAIN MATTERS RELATING TO LEASE LIABILITIES
4.1 Certain Definitions.
-------------------
"BJI Default Period" shall mean a period commencing upon the occurrence of
------------------
any of the events set forth in clauses (i) through (iv) below and ending on the
first date thereafter when none of the events set forth in clauses (i) through
(iv) below are continuing:
(i) BJI is in default with respect to rent payments under at least five BJI
Leases, which such defaults have not been cured within the applicable grace
period;
(ii) (a) BJI shall fail to maintain at the end of any fiscal quarter an
actual or implied senior debt rating of at least B- by Standard & Poor's or B3
by ▇▇▇▇▇'▇ Investors Service ("Moody's"), or, if not rated by Standard & Poor's
or Moody's, a National Association of Insurance Commissioners ("NAIC") rating of
at least 4, and (b) at the end of such quarter, BJI shall have failed to
maintain on a consolidated basis as of the end of such fiscal quarter a Fixed
Charge Coverage Ratio (as such term is defined in the Agreement, dated as of
April 4, 1995, between Waban, The First National Bank of Boston, and the other
lenders party thereto, without regard to any subsequent amendments) greater than
1.20 to 1.0;
-13-
(iii) BJI or any of its subsidiaries shall be in default in the payment of
any obligation for borrowed money exceeding $10 million in principal amount
which has been accelerated and is beyond any grace period provided with respect
thereto; or
(iv) any of the following bankruptcy events shall have occurred and be
continuing:
(a) any decree or order for relief in respect of BJI or any
Significant Subsidiary (as defined in SEC Regulation S-X) of BJI
or any other three subsidiaries of BJI is entered under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law
(collectively, the "Bankruptcy Law") of any jurisdiction; or
(b) BJI or any Significant Subsidiary of BJI or any other three
subsidiaries of BJI petitions or applies to any tribunal for, or
consents to, the appointment of, or the taking of possession by,
a trustee, receiver, custodian, liquidator or similar official of
BJI or any Significant Subsidiary of BJI or any other three
subsidiaries of BJI, or of any substantial part of the assets of
BJI or any Significant Subsidiary of BJI or any other three
subsidiaries of BJI, or commences a voluntary case under the
Bankruptcy Law of the United States or any similar proceedings
relating to BJI or any Significant Subsidiary of BJI or any
other three subsidiaries of BJI under the Bankruptcy Law of any
other jurisdiction; or
(c) any petition or application referred to in clause (b) above is
filed, or any such proceedings are commenced, against BJI, any
Significant Subsidiary of BJI or any other three subsidiaries of
BJI and BJI or such Significant Subsidiary or such other three
subsidiaries by any act indicates its or their approval thereof
or acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian,
liquidator or similar official, or approving the petition in any
such proceedings, and such order, judgment or decree remains
unstayed and in effect for more than 60 days.
"BJI Lease" means any real estate lease that constitutes a BJI Assumed
---------
Liability, other than any ground lease.
"HomeBase Control Period" shall mean the period commencing on the date
-----------------------
hereof and ending upon a HomeBase Control Event (as defined in Article 4).
-14-
"HomeBase Lease" means any lease under which Waban may be liable as a
--------------
tenant, sublessee, surety or guarantor, other than leases that constitute BJI
Assumed Liabilities.
"HomeBase Third Party Claim" means the assertion by any Person (other
--------------------------
than Waban, BJI or any of their Affiliates) of any claim, or the commencement by
any such Person of any Action, against BJI or Waban with respect to an
Indemnified HomeBase Lease Liability.
"Indemnified HomeBase Lease Liabilities" means any liabilities of Waban
--------------------------------------
that arise under a HomeBase Lease and for which BJI may have liability,
including liability for indemnification to TJX under the TJX Indemnification
Agreement.
"TJX Indemnification Agreement" means the Indemnification Agreement dated
-----------------------------
as of April 18, 1997 between BJI and TJX.
Section 4.2 Indemnified HomeBase Lease Liabilities.
--------------------------------------
4.2.1. Control of HomeBase Third Party Claims.
--------------------------------------
(a) During the HomeBase Control Period, (i) Waban shall have the right
to control the defense and settlement of all HomeBase Third Party Claims, (ii)
BJI shall have the right to participate, at its expense, with Waban in the
defense and settlement of any such HomeBase Third Party Claims, and (iii) Waban
shall not consent to the entry of any judgment or enter into any settlement with
respect to any HomeBase Third Party Claims without the prior written consent of
BJI, which consent will not be unreasonably withheld.
(b) BJI shall have the right at any time following the occurrence of a
HomeBase Control Event (as defined below), which is not cured within 30 days
following written notice thereof by BJI to Waban, to elect to control the
defense and settlement of all HomeBase Third Party Claims. A HomeBase Control
Event shall mean the occurrence of any of the following events:
(i) the first date on which Waban is in default with respect to
rent payments under at least five HomeBase Leases;
(ii) Waban shall have failed to perform in a material respect
any of its obligations hereunder;
(iii) (a) Waban shall have failed to maintain at the end of
any fiscal quarter an actual or implied senior debt rating of at least B- by
Standard & Poor's or B3 by Moody's or, if not rated by Standard & Poor's or
Moody's, a NAIC
-15-
rating of at least 4, and (b) at the end of such quarter, Waban shall have
failed to maintain on a consolidated basis as of the end of such fiscal quarter
a Fixed Charge Coverage Ratio (as such term is defined in the Agreement, dated
as of April 4, 1995, between Waban, The First National Bank of Boston, and the
other lenders party thereto, without regard to any subsequent amendments)
greater than 1.20 to 1.0;
(iv) Waban or any of its subsidiaries shall have defaulted in
the payment of any obligation for borrowed money exceeding $10 million in
principal amount which has been accelerated and is beyond any grace period
provided with respect thereto; or
(v) any of the following bankruptcy events shall have
occurred:
(a) any decree or order for relief in respect of Waban or
any Significant Subsidiary (as defined in SEC
Regulation S-X) of Waban or any other three
subsidiaries of Waban is entered under any Bankruptcy
Law, of any jurisdiction; or
(b) Waban or any Significant Subsidiary of Waban or any
other three subsidiaries of Waban petitions or applies
to any tribunal for, or consents to, the appointment
of, or the taking of possession by, a trustee,
receiver, custodian, liquidator or similar official of
Waban or any Significant Subsidiary of Waban or any
other three subsidiaries of Waban, or of any
substantial part of the assets of Waban or any
Significant Subsidiary of Waban or any other three
subsidiaries of Waban, or commences a voluntary case
under the Bankruptcy Law of the United States or any
similar proceedings relating to Waban or any
Significant Subsidiary of Waban or any other three
subsidiaries of Waban under the Bankruptcy Law of any
other jurisdiction; or
(c) any petition or application referred to in clause (b)
above is filed, or any such proceedings are commenced,
against Waban, any Significant Subsidiary of Waban or
any other three subsidiaries of Waban and Waban or such
Significant Subsidiary or such other three subsidiaries
by any act indicates its or their approval thereof or
acquiescence therein, or an order, judgment or decree
is entered appointing any
-16-
such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any
such proceedings, and such order, judgment or
decree remains unstayed and in effect for more
than 60 days.
4.2.2 Reports. Waban shall promptly report in writing to BJI any failure
-------
at any time of Waban to comply with any of the tests set forth in Section
4.2.1(b).
4.2.3 Settlements. After the exercise by BJI of the right to control
-----------
HomeBase Third Party Claims pursuant to Section 4.2.1(b), BJI shall have the
right to consent to the entry of any judgment or enter into any settlement with
respect to any HomeBase Third Party Claims in any manner it may deem
appropriate. BJI shall provide Waban with prior written notice of any
settlement agreement between BJI and the holder of any HomeBase Third Party
Claim. Waban shall have the right to participate, at its expense, in the
defense and settlement of any such HomeBase Third Party Claim.
4.2.4 Indemnification Agreement. Notwithstanding anything to the
-------------------------
contract in this Article 4, all rights of Waban and BJI with respect to the
defense and settlement of HomeBase Third Party Claims shall be subject to the
rights of TJX under the TJX Indemnification Agreement, and to the extent of any
inconsistency between the rights of the parties under this Agreement and the
rights of BJI and TJX under the TJX Indemnification Agreement, the provisions of
the TJX Indemnification Agreement shall control.
Section 4.3 Lease Renewals.
--------------
(a) Waban hereby covenants that it shall not increase the amount of base
rents scheduled to come due under, extend the term of, or exercise any option to
renew or extend any HomeBase Lease without first securing from the Person
holding the landlord's interest and from any mortgagee with respect to the
HomeBase Lease in question (if the consent of such Person or mortgagee is
required to release any liability of TJX and its Affiliates or BJI and its
Affiliates, as the case may be, on such HomeBase Lease), a full and complete
release of liability of TJX and its Affiliates, or BJI and its Affiliates, as
the case may be, on any such HomeBase Lease, in a form reasonably satisfactory
to BJI. Waban shall not transfer or assign any HomeBase Lease unless the
transferee or assignee shall execute and deliver an agreement to be bound by
terms equivalent to the terms of this Section 4.3 (which would also condition
subsequent transfers or assignments upon an equivalent transfer restriction),
and Waban shall be liable to BJI for any breach thereof.
-17-
(b) BJI hereby covenants that it will not, during any BJI Default
Period, increase the amount of base rents scheduled to come due under, extend
the term of, or exercise any option to renew or extend any BJI Lease without
first securing from the Person holding the landlord's interest and from any
mortgagee with respect to the BJI Lease in question (if the consent of such
Person or mortgagee is required to release any liability of Waban and its
Affiliates on such BJI Lease), a full and complete release of liability of Waban
and its Affiliates on any such BJI Lease, in a form reasonably satisfactory to
Waban.
Section 4.4 Reimbursement. If BJI is required to make any payment to any
-------------
Person other than Waban with respect to any HomeBase Third Party Claim, Waban
shall promptly reimburse BJI for any such payments. To the extent of any
inconsistency between the provisions of this Article 4 and Article 5, the
provisions of this Article 4 shall control.
ARTICLE 5
INDEMNIFICATION
5.1 Certain Definitions.
-------------------
"BJI Indemnitees" means BJI and each Affiliate of BJI and each of
---------------
their respective directors, officers, employees and agents and each of the
heirs, executors, successors and assigns of any of the foregoing.
"Indemnifiable Losses" means all losses, liabilities, claims, damages,
--------------------
obligations, payments, costs and expenses, matured or unmatured, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown
(including, without limitation, the costs and expenses of any and all Actions,
threatened Actions, demands, assessments, judgments, settlements and compromises
relating thereto and reasonable attorneys' fees and any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such Actions or threatened Actions).
"Waban Indemnitees" means Waban and each Affiliate of Waban and each
-----------------
of their respective directors, officers, employees and agents and each of the
heirs, executors, successors and assigns of any of the foregoing.
5.2 Indemnification by Waban. Except as set forth in the Tax Sharing
------------------------
Agreement, the Services Agreement or the Employee Benefits Agreement, Waban
shall indemnify, defend and hold harmless the BJI Indemnitees from and against:
-18-
(i) the Waban Liabilities; and
(ii) any and all Indemnifiable Losses of the BJI Indemnitees arising
out of, or due to, directly or indirectly, any failure to perform, or violation
of, any provision of this Agreement, the Ancillary Agreements or any other
agreement entered into in connection with this Agreement, which is to be
performed or complied with by Waban or the Waban Subsidiaries.
5.3 Indemnification by BJI. Except as set forth in the Tax Sharing
----------------------
Agreement, the Services Agreement or the Employee Benefits Agreement, BJI shall
indemnify, defend and hold harmless the Waban Indemnitees from and against:
(i) the BJI Assumed Liabilities; and
(ii) any and all Indemnifiable Losses of the Waban Indemnitees arising
out of, or due to, directly or indirectly, any failure to perform, or violation
of, any provision of this Agreement, the Ancillary Agreements or any other
agreements to be entered into in connection with this Agreement, which is to be
performed or complied with by BJI or the BJI Subsidiaries.
5.4 Limitations on Indemnification Obligations. The amount which any
------------------------------------------
party (an "Indemnifying Party") is or may be required to pay to any other party
(an "Indemnitee") pursuant to this Article 5 hereof shall be reduced (including,
without limitation, retroactively) by any insurance proceeds or other amounts
actually recovered by or on behalf of such Indemnitee in reduction of the
related Indemnifiable Loss. If any Indemnitee shall have received the payment
required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive insurance proceeds or
other amounts in respect of such Indemnifiable Loss, then such Indemnitee shall
pay to such Indemnifying Party a sum equal to the amount of such insurance
proceeds or other amounts actually received (net of any expenses in obtaining
the same), but not to exceed the net amount of the payments previously received
by the Indemnitee from the Indemnifying Party in respect of such Indemnifiable
Loss.
5.5 Procedure for Indemnification.
-----------------------------
5.5.1 Third Party Claims; Notice. If an Indemnitee shall receive
--------------------------
notice or otherwise learn of the assertion by any other Person of any claim
or of the commencement by any such Person of any Action (a "Third Party
Claim") with respect to which an Indemnifying Party may be obligated to
provide indemnification pursuant to this Article 5, such Indemnitee shall
give the Indemnifying Party written notice thereof within 10 business days
after becoming aware of such Third Party Claim; provided, however, that the
-------- -------
failure
-19-
of any Indemnitee to give notice as provided in this Section 5.5.1 shall
not relieve the related Indemnifying Party of its obligations under this
Article 5, except to the extent that such Indemnifying Party actually is
prejudiced by such failure to give notice. Such notice shall describe the
Third Party Claim in reasonable detail, and shall indicate the amount
(estimated if necessary) of the Indemnifiable Loss that has been or may be
sustained by such Indemnitee. Thereafter, such Indemnitee shall deliver to
such Indemnifying Party, within five business days after the Indemnitee's
receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnitee relating to the Third Party Claim.
5.5.2 Defense of Third Party Claims. In case any Third Party Claim is
-----------------------------
brought against an Indemnitee, the Indemnifying Party will be entitled to
participate in and to assume the defense thereof to the extent that it may
wish, with counsel reasonably satisfactory to such Indemnitee, and after
notice from an Indemnifying Party to such Indemnitee of its election so to
assume the defense thereof and for so long as the Indemnifying Party
diligently pursues such defense, such Indemnifying Party will not be liable
to such Indemnitee for any legal or other expenses subsequently incurred by
such Indemnitee in connection with the defense thereof; provided, however,
-------- -------
that, if the defendants in any such claim include both the Indemnifying
Party and one or more Indemnitees and in any Indemnitee's reasonable
judgment a conflict of interest between one or more of such Indemnitees and
such Indemnifying Party exists in respect of such claim, such Indemnitees
shall have the right to employ separate counsel to represent such
Indemnitees, and in that event the reasonable fees and expenses of such
separate counsel (but not more than one separate counsel reasonably
satisfactory to the Indemnifying Party for all Indemnitees with respect to
any single Third Party Claim or group of consolidated related Third Party
Claims) shall be paid by such Indemnifying Party. If the Indemnifying Party
undertakes to assume the defense of a Third Party Claim, it shall promptly
notify the Indemnitee in writing of its intention to do so.
5.5.3 Cooperation by Indemnitee. If an Indemnifying Party chooses to
-------------------------
defend or to seek to compromise or settle any Third Party Claim, each
related Indemnitee shall make available to such Indemnifying Party any
personnel or any books, records or other documents within its control or
which it otherwise has the ability to make available that are necessary or
appropriate for such defense, settlement or comprise, and shall otherwise
cooperate in the defense, settlement or compromise of such Third Party
Claim.
5.5.4 Limitation on Authority to Settle Claim. Notwithstanding
---------------------------------------
anything else in this Section 5.5 to the contrary, neither an Indemnifying
Party
-20-
nor an Indemnitee shall settle or compromise any Third Party Claim over the
objection of the other; provided, however, that consent to compromise or
-------- -------
settlement shall not be unreasonably withheld, except that consent to any
compromise or settlement involving equitable or injunctive relief against any
Indemnifying Party or Indemnitee may be withheld by such Indemnifying Party or
Indemnitee for any reason. No Indemnifying Party shall consent to any judgment
or enter into any settlement or compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
related Indemnitee of a written release from all Liability with respect to such
Third Party Claim.
5.5.5 Other Claims. Any claim on account of any Indemnifiable Loss
------------
which does not result from a Third Party Claim shall be asserted by written
notice given by the Indemnitee to the related Indemnifying Party. Such
Indemnifying Party shall have a period of 30 days after the receipt of such
notice within which to respond thereto. If such Indemnifying Party does not
respond within such 30-day period, such Indemnifying Party shall be deemed to
have accepted responsibility to make payment and shall have no further right to
contest the validity of such claim. If such Indemnifying Party does respond
within such 30-day period and rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
Indemnitee under applicable law.
5.5.6 Advancement of Certain Expenses. Upon the written demand of an
-------------------------------
Indemnitee, an Indemnifying Party shall reimburse or advance funds to such
Indemnitee for all Indemnifiable Losses reasonably incurred by it in connection
with investigating or defending any Third Party Claim in advance of its final
disposition; provided, however, that such reimbursement need be made only upon
-------- -------
delivery to the Indemnifying Party of an undertaking by such Indemnitee to repay
all amounts so reimbursed or advanced if it shall ultimately be determined that
such Indemnitee is not entitled to indemnification under this Article 5 or
otherwise.
5.5.7 Subrogation to Rights of Indemnitee. In the event of payment by
-----------------------------------
an Indemnifying Party to any Indemnitee in connection with any Third Party Claim
of the full amount payable under this Article 5 in respect thereof, such
Indemnifying Party shall be subrogated to and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of which such Indemnitee
may have any right or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or as against any other
Person. In such event, such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense of such Indemnifying
Party, in prosecuting any subrogated right or claim.
-21-
5.6 Insurance and Indemnification. Waban shall provide each
-----------------------------
individual who served as a director or officer of Waban at any time prior to the
Distribution Date with liability insurance for a period of six years after the
Distribution Date no less favorable in coverage and amount than any applicable
insurance in effect immediately prior to the Distribution Date. Waban shall not,
for a period of six years after the Distribution Date, take any action to alter
or impair any exculpatory or indemnification provisions now existing in any
indemnification agreement or in the Certificate of Incorporation or By-laws of
Waban for the benefit of any individual who served as a director or officer of
Waban at any time prior to the Distribution Date, except, with respect to the
Certificate of Incorporation or By-laws of Waban, for changes in applicable law
and any changes which do not affect the application of such provisions to acts
or omissions of such individuals prior to the Distribution Date. BJI agrees to
indemnify, defend and hold harmless each individual who served as a director or
officer of Waban at any time prior to the Distribution Date, and their heirs,
executors, successors and assigns, from and against any and all Indemnifiable
Losses suffered by any such persons arising out of, or due to, the approval by
such persons of the Separation and the Distribution in their capacities as
director or officer; provided, however, that BJI's obligation to provide such
indemnification shall only apply to the extent that (A) such persons have no
right to indemnification from Waban or insurance coverage for such
Indemnification Losses, or (B) Waban, following written demand therefor by such
director or officer, fails to satisfy any such indemnification obligation. In
the event that BJI provides such indemnification because of the circumstances in
clause (B) of the preceding sentence, the amount so paid by BJI shall be deemed
to be a Waban Liability for purposes of this Agreement.
5.7 Special Provision Relating to Certain Pre-Distribution
------------------------------------------------------
Liabilities. Notwithstanding anything contained herein to the contrary, if a
-----------
Third Party Claim relates to a Liability referred to in Item 2(b) of Schedule B
as to which BJI is assuming 75% of the Liability, then BJI shall have the right
to control the defense and settlement of such claim.
5.8 Remedies Cumulative. The remedies provided in this Article 5
-------------------
shall be cumulative and shall not preclude assertion by any Indemnitee of any
other rights or the seeking of any and all other remedies against any
Indemnifying Party; provided, however, that all remedies sought or asserted by
-------- -------
an Indemnitee against an Indemnifying Party with respect to an Indemnifiable
Loss shall be limited by and be subject to the provisions of this Article 5.
ARTICLE 6
ACCESS TO INFORMATION
6.1 Provision of Corporate Records. Prior to or as soon as
------------------------------
practicable following the Distribution Date, Waban shall deliver to BJI all
existing corporate books and records in Waban's possession relating to the BJI
Business, including original corporate minute books, stock ledgers and
certificates and corporate seals of each of BJI and each BJI Subsidiary, and all
active agreements, active litigation files and records of filings. From and
after the Distribution Date, all such books and records shall be the property of
BJI.
6.2 Access to Information. From and after the Distribution Date,
---------------------
each of Waban and BJI shall afford to the other and the other's authorized
accountants, counsel and other designated representatives reasonable access
(including using reasonable efforts to give access to third parties possessing
information and providing reasonable access to its own employees who are in
possession of relevant information) and duplicating rights during normal
business hours to all records, books, contracts, instruments, computer data and
other data and information (collectively, "Information") within the possession
or control of Waban or BJI, as the case may be, relating to the other's pre-
Distribution business, insofar as such access is reasonably required by the
other party. Information may be requested under this Section 6.2 for, without
limitation, audit, accounting, claims, litigation, insurance and tax purposes,
as well as for purposes of fulfilling disclosure and reporting obligations and
for performing this Agreement and the transactions contemplated hereby.
-22-
6.3 Production of Witnesses. From and after the Distribution Date,
-----------------------
each of BJI and Waban shall use reasonable efforts to make available to the
other upon written request, its and its Subsidiaries' officers, directors,
employees and agents as witnesses to the extent that such persons may reasonably
be required in connection with any legal, administrative or other proceedings in
which the requesting party may from time to time be involved relating to its
pre-Distribution business.
6.4 Reimbursement. Except to the extent otherwise contemplated by
-------------
the Services Agreement or any other Ancillary Agreement, a party providing
Information or personnel to the other party under this Article 6 shall be
entitled to receive from the recipient, upon the presentation of invoices
therefor, payments for such amounts, relating to supplies, disbursements and
other out-of-pocket expenses, as may be reasonably incurred in providing such
Information; provided, however, that no such reimbursements shall be required
-------- -------
for the salary or cost of fringe benefits or similar expenses pertaining to
employees or directors of the providing party.
6.5 Retention of Records. Except as otherwise required by law or
--------------------
agreed to in writing, each of Waban and BJI shall retain, and shall cause each
of its Subsidiaries to retain, in accordance with such party's record retention
program, all material Information within such party's possession or under its
control relating to the other and the other's Subsidiaries. Notwithstanding the
foregoing, in lieu of retaining any specific Information, Waban or BJI may offer
in writing to deliver such Information to the other and, if such offer is not
accepted within 45 days, the offered Information may be destroyed or otherwise
disposed of at any time. If a recipient of such offer shall request in writing
prior to the scheduled date for such destruction or disposal that any of the
information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the information as was requested at the cost
of the requesting party.
6.6 Confidentiality. Each of Waban and BJI shall hold, and shall
---------------
use reasonable efforts to cause its Subsidiaries, Affiliates, consultants and
advisors to hold, in strict confidence all Information concerning the other
obtained by it prior to the Distribution Date or furnished by the other or the
other's representatives pursuant to this Agreement (except to the extent that
such Information has been (i) in the public domain through no fault of such
party, or (ii) later lawfully acquired from other sources by such party), and
each party shall not release or disclose such Information to any other Person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors, unless compelled to disclose by judicial or
administrative process or, as advised by its counsel, by other requirements of
law.
ARTICLE 7
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MISCELLANEOUS
7.1 Rules of Construction. Notwithstanding any other provisions in this
---------------------
Agreement, in the event and to the extent that there shall be a conflict between
the provisions of this Agreement (or any Conveyancing Instrument) and the
provisions of the Tax Sharing Agreement, the Services Agreement or the Employee
Benefits Agreement, the provisions of the Tax Sharing Agreement, the Services
Agreement or the Employee Benefits Agreement, as the case may be, shall control.
Waban and BJI have participated jointly in the negotiation and drafting of this
Agreement and the Ancillary Agreements. In the event an ambiguity or question
of intent or interpretation arises, this Agreement and the Ancillary Agreements
shall be construed as if drafted jointly by the parties and no presumption or
burden of proof shall arise favoring or disfavoring either party by virtue of
the authorship of any of the provisions of this Agreement or the Ancillary
Agreements.
7.2 Survival of Agreements. Except as otherwise contemplated by this
----------------------
Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
7.3 Expenses. Except as otherwise set forth in this Agreement or any
--------
Ancillary Agreement, Waban and BJI shall bear 25% and 75%, respectively, of all
costs and expenses incurred in connection with the preparation, execution,
delivery and implementation of this Agreement, and with the consummation of the
transactions to effect the Distribution contemplated by this Agreement,
including, without limitation, registration fees, listing fees, printing costs
and legal and accounting fees, to the extent such fees have not been paid prior
to the Distribution Date.
7.4 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.
7.5 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 Waban:
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Waban Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
to BJI:
BJ's Wholesale Club, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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.
7.6 Amendments. This Agreement may not be modified or amended except by
----------
an agreement in writing signed by the parties hereto.
7.7 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.
7.8 Termination. This Agreement may be terminated and the Distribution
-----------
abandoned at any time prior to the Distribution Date by and in the sole
discretion of the Waban Board without the approval of BJI or of Waban's
stockholders. In the event of such termination, no party shall have any
liability of any kind under this Agreement to any other party.
7.9 No Third Party Beneficiaries. Except for the provisions of Article 5
----------------------------
hereof relating to Indemnitees, this Agreement is solely for the benefit of the
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.
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7.10 Titles and Headings. Titles and headings to sections herein are
-------------------
inserted for the convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
7.11 Exhibits and Schedules. The Exhibits and Schedules shall be
----------------------
construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
7.12 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.
7.13 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 or remedies otherwise available to any party
hereto. 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
WABAN INC.
By
--------------------------------------
President
BJ'S WHOLESALE CLUB, INC.
By
--------------------------------------
President
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SCHEDULE A
BJI Assets
----------
1. All assets arising out of or in connection with or related principally to
the BJI Business, including, without limitation:
(a) all assets reflected on the pro forma condensed balance sheet of BJI as
at the fiscal month end coincident with or immediately preceding the
Distribution Date, as prepared and agreed to by Waban and BJI;
(b) all of the issued and outstanding stock of the BJI Subsidiaries held,
directly or indirectly, by Waban;
(c) the real property owned by Waban or a Waban Subsidiary and used
exclusively in the BJI Business, including all buildings, structures and
improvements thereon;
(d) all right, title and interest of Waban or any Waban Subsidiary in and
to all agreements, contracts and leases relating to the operations of the BJI
Business;
(e) all machinery, equipment and other items of tangible personal property
owned by Waban or a Waban Subsidiary which are used exclusively in the BJI
Business;
(f) all right, title and interest of Waban or any Waban Subsidiary in and
to intellectual property rights consisting of tradenames, trademarks and similar
intangible items relating solely to the BJI Business;
(g) all books and records of Waban or any Waban Subsidiary (including
computerized books and records) that relate principally to the BJI Business and
are necessary for BJI and its Subsidiaries to operate the BJI Business,
including without limitation, the corporate documents and records of corporate
proceedings of the BJI Business, all books and records relating to BJI
employees, the purchase of supplies and services by the BJI Business, and all
files relating to any Action being assumed by BJI as part of the BJI Assumed
Liabilities owned by Waban or any Waban Subsidiary (other than those required by
law to be maintained by Waban or any Waban Subsidiary); and
(h) cash (as calculated by Waban in accordance with past practices) in an
amount of $5,000,000.
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2. All of Waban's right, title and interest in and to the leases relating to
Waban's headquarters located in Natick, Massachusetts and all machinery,
equipment and other items of tangible personal property owned by Waban which are
located in Natick, Massachusetts.
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SCHEDULE B
BJI Assumed Liabilities
-----------------------
1. All Liabilities arising out of or in connection with or related principally
to the BJI Business, whether arising before or after the Distribution Date,
including without limitation:
(a) all Liabilities reflected on the pro forma condensed balance sheet of
BJI as at the fiscal month end coincident with or immediately preceding the
Distribution Date, as prepared and agreed to by Waban and BJI;
(b) all Liabilities of Waban under agreements, contracts and leases that
are BJI Assets; and
(c) all Liabilities relating to Actions arising out of or in connection
with the operations of the BJI Business.
2. The following liabilities of Waban:
(a) 75% of the principal amount of all bank indebtedness of Waban existing
as of the Distribution Date; and
(b) 75% of all other Liabilities of Waban not specifically allocable to the
BJI Business or the HomeBase Business relating to events occurring prior to the
Distribution and any Actions relating thereto.
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SCHEDULE C
BJI Subsidiaries
----------------
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
Natick Security Corp.................Massachusetts
Natick Corporation...................Delaware
Natick First Realty Corp.............Connecticut
Natick Second Realty Corp............Massachusetts
Natick NJ Flemington Realty Corp.....New Jersey
Natick Fourth Realty Corp............New Jersey
Natick Fifth Realty Corp.............Maryland
Natick Sixth Realty Corp.............Connecticut
Natick MA Realty Corp................Massachusetts
Natick NH Realty Corp................New Hampshire
Natick NY Realty Corp................New York
Natick NY 1992 Realty Corp...........New York
Natick PA Realty Corp................Pennsylvania
Natick VA Realty Corp................Virginia
Natick Portsmouth Realty Corp........New Hampshire
Natick NJ Realty Corp................New Jersey
Natick NJ 1993 Realty Corp...........New Jersey
BJ's PA Distribution Center, Inc.....Pennsylvania
BJ's MA Distribution Center, Inc.....Massachusetts
Natick CT Realty Corp................Connecticut
Natick ME 1995 Realty Corp...........Maine
Natick NY 1995 Realty Corp...........New York
Natick MA 1995 Realty Corp...........Massachusetts
Natick NH 1994 Realty Corp...........New Hampshire
Natick PA 1995 Realty Corp...........Pennsylvania
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CWC Beverages Corp...................Connecticut
FWC Beverages Corp...................Florida
JWC Beverages Corp...................New Jersey
Mormax Beverages Corp................Delaware
Mormax Corporation...................Massachusetts
RWC Beverages Corp...................Rhode Island
YWC Beverages Corp...................New York
Natick Lancaster Realty Corp.........Pennsylvania
Natick Yorktown Realty Corp..........New York
Natick Waterford Realty Corp.........Connecticut
Natick ▇▇▇▇▇▇▇ Realty Corp...........New York
Natick Bowie Realty Corp.............Maryland
Natick Pembroke Realty Corp..........Florida
Natick PA Plymouth Realty Corp.......Pennsylvania
Natick Realty, Inc...................Maryland
Waban Export Inc.....................Barbados
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SCHEDULE D
Waban Subsidiaries
------------------
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
HomeClub, Inc.............................Nevada
HomeClub, Inc. of Texas...................Delaware
Fullerton Corporation.....................Delaware
HCI Development Corp......................California
HomeClub First Realty Corp................Colorado
HCWA Realty Corp..........................Washington
HCCA Realty Corp..........................California
HBNM Realty Corp..........................New Mexico
HBCA 1993 Realty Corp.....................California
HBOR Realty Corp..........................Oregon
HBUT Realty Corp..........................Utah
HCWA 1993 Realty Corp.....................Washington
HBCO Realty Corp..........................Colorado
HBNM 1994 Realty Corp.....................New Mexico
HBCO 1994 Realty Corp.....................Colorado
HBCA Pomona Realty Corp...................California
HBCA Vacaville Realty Corp................California
-32-
SCHEDULE E
Intercompany Accounts
---------------------
Matters Relating to Natick Corporation
--------------------------------------
On or prior to the Distribution Date, Waban will repay to Natick
Corporation all outstanding loans made by Natick Corporation to Waban, together
with all accrued interest thereon. Immediately after such repayment, Natick
Corporation shall declare and pay to Waban a dividend equal to all of the
retained earnings and surplus of Natick Corporation.
Cash
----
As contemplated by Item 1(h) of Schedule A, as of the Distribution Date,
Waban shall provide for BJI to have cash (as calculated by Waban in accordance
with past practices) in an amount of $5,000,000.
General
-------
As contemplated by Item 2(a) of Schedule B, BJI shall assume 75% of the
principal amount of all bank indebtedness of Waban existing as of the
Distribution Date. Except as otherwise contemplated by this Agreement or any
Ancillary Agreement, effective as of the Distribution Date, all loans and
advances from Waban to BJI (or any corporation which will become a BJI
Subsidiary) outstanding immediately prior to the Distribution shall be deemed to
be a contribution to capital from Waban to BJI.
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