GameStop 2005 Annual Report Download - page 65

respect to the spin-off to the extent caused by any breach by Historical GameStop of any of its representations,
warranties or covenants made in the separation agreement.
Insurance Agreement
Historical GameStop entered into an “insurance agreement” with Barnes & Noble, pursuant to which we
participated in Barnes & Noble’s worker’s compensation, property and general liability and directors’ and officers’
liability insurance programs. We reimbursed Barnes & Noble for our pro rata share of the cost of providing these
insurance programs. In fiscal 2005, Barnes & Noble charged us approximately $1,726,000 for our insurance
program.
The insurance agreement terminated in part on May 1, 2005 and in full on June 1, 2005, at which time
Historical GameStop procured its own insurance. Although we now have our own insurance coverage, costs will
likely continue to be incurred by Barnes & Noble on insurance claims which were incurred under its programs prior
to June 2005 and any such costs applicable to insurance claims against us will be allocated to the Company.
Operating Agreement
Historical GameStop entered into an “operating agreement” with Barnes & Noble, pursuant to which we
operate the existing video game departments in ten Barnes & Noble stores. We pay Barnes & Noble a licensing fee
equal to 7.0% of the aggregate gross sales of each such department. In fiscal 2005, Barnes & Noble charged us
approximately $857,000 in connection with our operation of such departments in Barnes & Noble stores.
The operating agreement will remain in force unless terminated:
• by mutual agreement of us and Barnes & Noble;
• automatically, in the event that we no longer operate any department within Barnes & Noble’s stores;
• by us or Barnes & Noble, with respect to any department, upon not less than 30 days prior notice;
• by Barnes & Noble because of an uncured default by us;
• automatically, with respect to any department, if the applicable store lease in which we operate that
department expires or is terminated prior to its expiration date; or
• automatically, in the event of the bankruptcy or a change in control of either us or Barnes & Noble.
Tax Disaffiliation Agreement
Historical GameStop entered into a “tax disaffiliation agreement” with Barnes & Noble which governs the
allocation of federal, state, local and foreign tax liabilities and contains agreements with respect to other tax matters
arising prior to and after the date of Historical GameStop’s initial public offering. The tax disaffiliation agreement
became effective at the time of the initial public offering and, among other things, sets forth the procedures for
amending returns filed prior to the date of the initial public offering, tax audits and contests and record retention. In
general, we are responsible for filing and paying our separate taxes for periods after the initial public offering and
Barnes & Noble is responsible for filing and paying its separate taxes for periods after the initial public offering. In
general, with respect to consolidated or combined returns that include Barnes & Noble and Historical GameStop
prior to our initial public offering, Barnes & Noble is responsible for filing and paying the related tax liabilities and
will retain any related tax refunds.
Under the tax disaffiliation agreement, without the prior written consent of Barnes & Noble, we may not
amend any tax return for a period in which we were a member of Barnes & Noble’s consolidated tax group. Barnes &
Noble has the sole right to represent the interests of its consolidated tax group, including us, in any tax audits,
litigation or appeals that involve, directly or indirectly, periods prior to the time that we ceased to be a member of
their consolidated tax group (the date of the offering), unless we are solely liable for the taxes at issue and any
redetermination of taxes would not result in any additional tax liability or detriment to any member of Barnes &
Noble’s consolidated tax group. In addition, we and Barnes & Noble have agreed to provide each other with the
cooperation and information reasonably requested by the other in connection with the preparation or filing of any
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