Asset Purchase Agreement - Sears Roebuck and Co. and Kmart Corp.
ASSET PURCHASE AGREEMENT
DATED AS OF JUNE 29, 2004
BY AND BETWEEN
SEARS, ROEBUCK AND CO.
AND
KMART CORPORATION
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE ................................................................ 1
Section 1.1. Purchase and Sale of Transferred Assets................................... 1
Section 1.2. Excluded Assets........................................................... 2
Section 1.3. Assumed Liabilities....................................................... 2
Section 1.4. Excluded Liabilities...................................................... 3
ARTICLE II PHARMACY ASSETS ................................................................. 4
Section 2.1. Right to Acquire Pharmacy Assets.......................................... 4
Section 2.2. No Additional Consideration............................................... 5
Section 2.3. Pharmacy Transfer Deliveries.............................................. 5
Section 2.4. Operation of Pharmacies................................................... 5
Section 2.5. Cooperation............................................................... 5
Section 2.6. Seller's Representations and Warranties Relating to Pharmacy Assets....... 6
Section 2.7. Transfer to Designee...................................................... 7
ARTICLE III PURCHASE PRICE ................................................................. 7
Section 3.1. Purchase Price............................................................ 7
Section 3.2. Payment of Purchase Price................................................. 8
ARTICLE IV CLOSINGS ........................................................................ 9
Section 4.1. Initial Closing and Subsequent Closings................................... 9
Section 4.2. Closing Documents......................................................... 10
Section 4.3. Closing Prorations and Adjustments........................................ 13
Section 4.4. Closing Costs............................................................. 15
Section 4.5. Certain Retained Claims................................................... 15
Section 4.6. Take-Back Leases.......................................................... 16
Section 4.7. Cooperation Between the Parties........................................... 17
Section 4.8. Separate Transactions..................................................... 17
Section 4.9. Pre-Closing Allocation of Purchase Price.................................. 17
ARTICLE V PRE-CLOSING COVENANTS ............................................................ 17
Section 5.1. Operation of Transferred Assets........................................... 17
Section 5.2. Reasonable Best Efforts to Consummate the Transactions.................... 20
Section 5.3. Tax-Deferred Exchange..................................................... 24
Section 5.4. Disclosure................................................................ 24
Section 5.5. Additional Approved Sublease Documents.................................... 25
Section 5.6. Purchase of Fee Interest in Leased Properties............................. 25
Section 5.7. Employee Matters.......................................................... 25
Section 5.8. Environmental Due Diligence for Approved Sublease Space................... 27
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ARTICLE VI STATUS OF TITLE TO THE PROPERTIES................................................ 27
Section 6.1. Preliminary Evidence of Title............................................. 27
Section 6.2. Title Defects............................................................. 27
Section 6.3. Permitted Exceptions...................................................... 28
ARTICLE VII CASUALTY LOSS AND CONDEMNATION.................................................. 29
Section 7.1. Condemnation or Material Casualty......................................... 29
Section 7.2. Non-Material Casualty..................................................... 30
ARTICLE VIII REPRESENTATIONS AND WARRANTIES................................................. 30
Section 8.1. Seller's Representations and Warranties................................... 30
Section 8.2. Purchaser's Representations and Warranties................................ 34
Section 8.3. Definitions of Knowledge and Notice....................................... 35
Section 8.4. "As-Is" Condition......................................................... 35
ARTICLE IX INVESTIGATION OF EACH PROPERTY................................................... 36
Section 9.1. Access to Properties...................................................... 36
ARTICLE X CLOSING CONDITIONS ............................................................... 36
Section 10.1. Purchaser's Closing Conditions............................................ 36
Section 10.2. Seller's Closing Conditions............................................... 38
ARTICLE XI INDEMNIFICATION ................................................................. 39
Section 11.1. Indemnification........................................................... 39
Section 11.2. Proceedings Involving Third Parties....................................... 39
Section 11.3. Objections to Claims for Indemnification; Resolution by the Parties....... 41
Section 11.4. Treatment of Indemnification Claims....................................... 41
Section 11.5. Exclusive Remedy.......................................................... 41
Section 11.6. Survival.................................................................. 41
Section 11.7. Limitation on Indemnification............................................. 42
ARTICLE XII DEFAULTS AND REMEDIES .......................................................... 43
Section 12.1. Defaults and Remedies..................................................... 43
ARTICLE XIII I MISCELLANEOUS .............................................................. 44
Section 13.1. Assignment................................................................ 44
Section 13.2. Entire Agreement.......................................................... 44
Section 13.3. Time is of the Essence.................................................... 44
Section 13.4. Further Assurances........................................................ 44
Section 13.5. Construction.............................................................. 44
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Section 13.6. Legal Fees................................................................ 44
Section 13.7. Notices................................................................... 45
Section 13.8. Governing Law............................................................. 46
Section 13.9. Counterparts.............................................................. 46
Section 13.10. Invalid Provisions........................................................ 46
Section 13.11. Headings, Gender, Etc..................................................... 46
Section 13.12. No Third Party Beneficiaries.............................................. 46
ARTICLE XIV ESCROW AGENT ................................................................... 46
Section 14.1. Duties and Obligations of Escrow Agent.................................... 46
INDEX OF DEFINED TERMS
Page
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ACQUISITION RIGHT........................................................................... 4
AGREEMENT................................................................................... 1
APPLICABLE LAWS............................................................................. 18
APPROVED SUBLEASES.......................................................................... 32
ASSIGNMENT OF APPROVED SUBLEASE............................................................. 11
ASSIGNMENT OF LEASE......................................................................... 11
ASSUMED LIABILITIES......................................................................... 3
BUSINESS DAY................................................................................ 10
CAA ........................................................................................ 33
CERCLA...................................................................................... 33
CLOSING..................................................................................... 10
CLOSING CONDITIONS.......................................................................... 9
CLOSING DATE................................................................................ 10
CLOSING STATEMENT........................................................................... 13
CODE ....................................................................................... 12
CONFIDENTIALITY AND ACCESS AGREEMENT........................................................ 36
CONTROLLING PARTY........................................................................... 40
CURRENT TAX YEAR............................................................................ 16
DEFAULTING PROPERTIES....................................................................... 43
DELINQUENT AMOUNTS.......................................................................... 15
DEPOSIT..................................................................................... 8
DESIGNEE.................................................................................... 7
EFFECTIVE DATE.............................................................................. 1
ELECTION DEADLINE........................................................................... 4
EMPLOYEES................................................................................... 3
EMPLOYMENT LAW.............................................................................. 3
ENVIRONMENTAL LAWS.......................................................................... 33
EPCRA....................................................................................... 33
ERISA....................................................................................... 3
ESA ........................................................................................ 33
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ESCROWEE.................................................................................... 27
EXCHANGE.................................................................................... 24
EXCHANGER................................................................................... 24
EXCLUDED ASSETS............................................................................. 2
EXCLUDED LIABILITIES........................................................................ 3
FIFRA....................................................................................... 33
FIRPTA CERTIFICATE.......................................................................... 12
FIRST OCCUPANCY DELIVERY DATE............................................................... 16
FIRST OCCUPANCY DELIVERY DATE PROPERTIES.................................................... 16
FWPCA....................................................................................... 33
GOVERNMENTAL ENTITY......................................................................... 18
GROUND LEASES............................................................................... 34
HAZARDOUS MATERIALS......................................................................... 33
HMTA ....................................................................................... 33
HSR ACT..................................................................................... 21
IMPROVEMENTS................................................................................ 2
INDEMNIFIED PERSONS......................................................................... 39
INDEMNIFYING PERSON......................................................................... 40
INITIAL CLOSING............................................................................. 9
INITIAL CLOSING DATE........................................................................ 10
INITIAL CLOSING PROPERTIES.................................................................. 7
INTANGIBLE PERSONAL PROPERTY................................................................ 2
LANDLORD.................................................................................... 2
LEASED PROPERTIES........................................................................... 2
LEASED PROPERTY............................................................................. 2
LEASEHOLD COMMITMENTS....................................................................... 27
LEASES...................................................................................... 2
LIABILITIES................................................................................. 3
LLC ........................................................................................ 17
LOSSES...................................................................................... 39
MATERIAL CASUALTY........................................................................... 29
MATERIAL TITLE DEFECT....................................................................... 27
MAXIMUM VIOLATION CURE AMOUNT............................................................... 18
MERCHANDISE TRADE FIXTURES.................................................................. 2
NON-CONTROLLING PARTY....................................................................... 40
NON-SELLER VIOLATION........................................................................ 19
OBJECTION................................................................................... 41
OCCUPANCY DELIVERY DATE..................................................................... 16
ORDER....................................................................................... 22
OSHA ....................................................................................... 33
OWNED PROPERTIES............................................................................ 1
OWNED PROPERTY.............................................................................. 1
OWNER'S TITLE COMMITMENTS................................................................... 27
PERMITTED EXCEPTIONS........................................................................ 28
PERMITTED PROPERTY CONDITION................................................................ 17
PERSONAL PROPERTY........................................................................... 2
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PHARMACY.................................................................................... 4
PHARMACY APPROVALS.......................................................................... 31
PHARMACY ASSETS............................................................................. 4
PHARMACY RECORDS............................................................................ 4
POSSESSION PAYMENT CONDITIONS............................................................... 8
PRE-CLOSING ALLOCATION STATEMENT............................................................ 17
PRESCRIPTION FILES.......................................................................... 4
PROPERTIES.................................................................................. 2
PROPERTY.................................................................................... 2
PROPERTY TERMINATION PROCEDURE.............................................................. 18
PURCHASE PRICE.............................................................................. 7
PURCHASER................................................................................... 1
PURCHASER CLOSING CONDITIONS................................................................ 36
PURCHASER INDEMNIFIED PARTIES............................................................... 39
PURCHASER SUBSIDIARY........................................................................ 44
PURCHASER'S REPRESENTATIVES................................................................. 36
QUALIFIED CONTRACTOR........................................................................ 30
QUALIFIED INTERMEDIARY...................................................................... 24
RCRA ....................................................................................... 33
RELATED AGREEMENTS.......................................................................... 31
RELEASE..................................................................................... 33
REMAINING PROPERTIES........................................................................ 7
RENEWAL NOTICE.............................................................................. 19
REQUIRED CONSENTS........................................................................... 23
RETAINED PHARMACY BUSINESS ASSETS........................................................... 2
SDWA ....................................................................................... 33
SECOND OCCUPANCY DELIVERY DATE.............................................................. 16
SECOND OCCUPANCY DELIVERY DATE PROPERTIES................................................... 16
SELLER...................................................................................... 1
SELLER CLOSING CONDITIONS................................................................... 38
SELLER INDEMNIFIED PARTIES.................................................................. 39
SELLER PLAN................................................................................. 3
SELLER SUBSIDIARY........................................................................... 1
SELLER SUBTENANT ESTOPPEL................................................................... 11
SELLER TENANT ESTOPPEL...................................................................... 11
SELLER VIOLATION............................................................................ 18
SELLER'S TITLE CURE ELECTION PERIOD......................................................... 28
SERVICE CONTRACT............................................................................ 4
SNDA ....................................................................................... 23
STORE EMPLOYEE.............................................................................. 25
SUBLEASE RENTS.............................................................................. 15
SUBLEASED PREMISES.......................................................................... 27
SUBLEASES................................................................................... 32
SUBSEQUENT CLOSING.......................................................................... 10
SUBSEQUENT CLOSING DATE..................................................................... 10
SUBTENANTS.................................................................................. 15
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SURVEYS..................................................................................... 27
TAKE-BACK LEASE............................................................................. 16
THIRD PARTY ENVIRONMENTAL CLAIMS............................................................ 39
THIRD PARTY PROCEEDING...................................................................... 40
TITLE COMMITMENTS........................................................................... 27
TITLE COMPANY............................................................................... 27
TITLE REVIEW PERIOD......................................................................... 28
TRANSFERRED ASSETS.......................................................................... 1
TSCA ....................................................................................... 33
VIOLATIONS.................................................................................. 18
WARN ACT.................................................................................... 3
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
as of the 29 day of June, 2004 (the "EFFECTIVE DATE"), by and between SEARS,
ROEBUCK AND CO., a New York corporation ( "PURCHASER") and KMART CORPORATION, a
Michigan corporation ("SELLER").
R E C I T A L S:
WHEREAS, Seller and certain wholly owned subsidiaries of Seller (each, a
"SELLER SUBSIDIARY"; and any reference to "Seller" herein shall be deemed to
include any applicable Seller Subsidiary) are (a) the owners of fee simple title
to the Owned Properties, (b) the lessees under the Leases with respect to the
Leased Properties, and (c) the owners of all of the other Transferred Assets and
Pharmacy Assets (as such terms are hereinafter defined);
WHEREAS, Seller desires to sell and/or assign, as applicable, the
Transferred Assets and Pharmacy Assets to Purchaser, and Purchaser desires to
purchase the Transferred Assets and Pharmacy Assets from Seller and to assume
certain liabilities in connection therewith, upon the terms and subject to
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of and in reliance upon the above
Recitals, which are acknowledged to be accurate and are incorporated herein, the
terms, covenants and conditions contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE
Section 1.1. Purchase and Sale of Transferred Assets. Subject to the terms
and conditions of this Agreement, Seller shall sell, convey and assign to
Purchaser, and Purchaser shall purchase, all right, title and interest of Seller
in and to the assets described in the following clauses (a) through (e) (all of
which are hereinafter collectively referred to as the "TRANSFERRED ASSETS"):
(a) those two (2) parcels of real estate located at the addresses
listed on Schedule 1.1(a)-1 attached hereto and legally described on
Schedule 1.1(a)-2 hereto, together with (i) all easements, covenants,
agreements, rights, privileges, tenements, hereditaments and appurtenances
belonging or appertaining thereto, (ii) all oil, gas and mineral rights
relating to the real estate, and any rights to use and appropriate water
from or relating to the real estate, and (iii) any land lying in the bed
of any street, alley, road or avenue (whether open, closed or proposed)
within, in front of, behind or otherwise adjoining any such parcel of real
estate or any portion of it (individually, an "OWNED PROPERTY" and
collectively, the "OWNED PROPERTIES");
(b) those fifty-two (52) lease agreements, together with all
modifications and amendments thereto and assignments thereof, identified
on Schedule 1.1(b)-1 attached hereto, together with all easements,
covenants, agreements, rights, privileges, tenements,
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hereditaments and appurtenances belonging or appertaining thereto
(collectively, the "LEASES"), pursuant to which Seller leases certain real
properties identified on Schedule 1.1(b)-2 attached hereto (individually,
a "LEASED PROPERTY" and collectively, the "LEASED PROPERTIES");
(c) the buildings, structures, fixtures, facilities, installations
and other improvements now or hereafter in, on, or under the Owned
Properties and the Leased Properties, including, without limitation, any
plumbing, air conditioning, heating, ventilating, mechanical, electrical,
sprinklers and other utility systems, vertical transportation systems,
loading docks, parking lots and facilities, landscaping, roadways,
sidewalks, signs, security devices and fixtures that are attached to the
Owned Properties or Leased Properties (collectively, the "IMPROVEMENTS");
(d) (i) all existing surveys, blueprints, drawings, plans and
specifications (including, without limitation, structural, HVAC,
mechanical, electrical, vertical transportation and plumbing plans and
specifications) relating to the Properties (as hereinafter defined) to the
extent in Seller's possession or control; (ii) all currently effective
use, occupancy, building and operating permits, licenses and approvals
relating to the Properties, to the extent assignable or transferable; and
(iii) all currently effective guarantees and warranties issued to Seller
in connection with the purchase, construction, alteration, installation or
repair of any portion of the Properties, to the extent assignable or
transferable (collectively, the "INTANGIBLE PERSONAL PROPERTY"); and
(e) all racks, shelves, brackets, displays and other merchandise
trade fixtures located in the Properties as of the Effective Date
(collectively, the "MERCHANDISE TRADE FIXTURES," and, together with the
Intangible Personal Property, the "PERSONAL PROPERTY").
For purposes of this Agreement, each Owned Property and Leased Property,
together with related Improvements, is referred to individually as a "PROPERTY,"
and collectively as the "PROPERTIES."
Section 1.2. Excluded Assets. Except as provided in Article II, Seller
will retain all right, title and interest in all assets of Seller located at or
relating to the Properties other than the Transferred Assets (the "EXCLUDED
ASSETS"), including without limitation, all inventory, all personal property
located at the Properties other than the Personal Property (including all point
of sale and inventory scanning systems, cash registers, computer equipment and
hardware systems), any consideration payable to Seller, as tenant, prior to the
applicable Closing (and relating to any period prior to the Closing) by any
landlord under a Lease (a "LANDLORD") pursuant to, or in connection with, such
Lease, and any rights or claims retained by Seller, as tenant, under any Lease
pursuant to Section 4.3(b) or Section 4.5 hereof, and, solely with respect to
Seller's pharmacy business at locations other than the Properties, all
prescription files, "pharmacy scrips," patient profiles, customer lists and
other books, records and files (the "RETAINED PHARMACY BUSINESS ASSETS").
Section 1.3. Assumed Liabilities. Subject to the terms and conditions of
this Agreement, Purchaser shall assume, perform, pay and discharge any and all
liabilities, debts,
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obligations, judgments, fines, penalties and claims (collectively,
"LIABILITIES") relating to any Transferred Asset to the extent that such
Liabilities accrue or arise from or out of events occurring on or after the
Closing Date related to such Transferred Asset (the "ASSUMED LIABILITIES"),
excluding in all cases the Excluded Liabilities.
Section 1.4. Excluded Liabilities. Purchaser shall not assume or be
obligated to pay, perform or otherwise assume or discharge the following
Liabilities of Seller or any of its affiliates (the "EXCLUDED LIABILITIES"):
(a) any indebtedness of Seller or its affiliates for borrowed
money;
(b) any Liabilities not related to the Transferred Assets;
(c) any Liabilities with respect to the employment, engagement or
termination by Seller or any affiliate thereof of any current or former
employees, independent contractors or licensed employees of Seller or any
such affiliate (collectively, "EMPLOYEES"), including, without limitation,
any Liabilities with respect to any alleged violation of any Employment
Law (as hereinafter defined). For purposes of this Agreement, the phrase
"EMPLOYMENT LAW" shall mean any federal, state or local law, statute,
ordinance, rule or regulation and any common laws regarding employment,
including, without limitation, Title VII of the Civil Rights Act of 1964,
42 U.S.C. 1981, the Age Discrimination in Employment Act of 1967, the
Older Workers Benefit Protection Act of 1990, the Family and Medical Leave
Act, the National Labor Relations Act, the Worker Adjustment and
Retraining Notification Act ("WARN ACT"), the Americans With Disabilities
Act, the Fair Labor Standards Act, and common law claims for breach of
contract, wrongful discharge or other claims, and other comparable federal
state or local laws, each as amended, and all rules and regulations
promulgated pursuant thereto or published thereunder;
(d) any Liabilities relating to any Transferred Asset to the
extent that such Liabilities accrue or arise from or out of events
occurring during the period prior to the Closing with respect to such
Transferred Asset, including, without limitation, the litigation disclosed
on Schedule 8.1(g) attached hereto;
(e) any Liabilities with respect to any compensation or benefits
due and payable by Seller to any Employees, including, without limitation,
any of such Liabilities with respect to (i) any plan or program maintained
by Seller or any of its affiliates that is (x) an "employee benefit plan"
within the meaning of Section 3(3) of ERISA or (y) a fringe benefit
program providing vacation, sick leave or other paid time off benefits (a
"SELLER PLAN") or (ii) any alleged violation of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or other applicable
federal, state or local laws, each as amended, and all rules and
regulations promulgated pursuant thereto or published thereunder;
(f) any and all taxes owed by Seller or any of its affiliates,
except for real estate taxes to the extent prorated as provided in Section
4.3 hereof, and except as otherwise provided herein;
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(g) all Liabilities of Seller under the Take-Back Leases (as
hereinafter defined);
(h) all Liabilities of Seller under any service contract or
service agreement relating to the Properties (each a "SERVICE CONTRACT");
and
(i) all Liabilities of Seller under any Sublease (as hereinafter
defined) except for those Liabilities arising or accruing from or out of
events occurring after Closing with respect to any Approved Sublease (as
hereinafter defined).
ARTICLE II
PHARMACY ASSETS
Section 2.1. Right to Acquire Pharmacy Assets. From and after the time of
the sale, conveyance and assignment by Seller of a Property to Purchaser at a
Closing pursuant to this Agreement, Purchaser shall have the right (the
"ACQUISITION RIGHT") to require Seller to convey and assign to Purchaser, to the
extent permitted under applicable law, all right, title and interest of Seller
in and to the following assets (collectively, the "PHARMACY ASSETS") used in the
retail drugstore and pharmaceutical operations of Seller conducted at such
Property (each such operation relating to a particular Property being a
"PHARMACY"):
(a) all of the prescription files (including historical and active
prescriptions and pharmacy "scripts"); patient profiles; customer lists;
transferable licenses and registrations; and phone numbers used by Seller
in connection with the operation of such Pharmacy (the "PRESCRIPTION
FILES"); and
(b) all books, records, files, papers, databases and compilations
and collections of data, whether in hard copy or computer format, relating
to the Prescription Files or customers of such Pharmacy in Seller's
possession or control as of the date of transfer of the Pharmacy Assets
from Seller to Purchaser ("PHARMACY RECORDS").
In order to exercise its Acquisition Right with respect to the Pharmacy Assets
relating to a particular Property, Purchaser must deliver written notice of
exercise to Seller on or after the time of the Closing with respect to the
related Property and prior to the date that is 60 days prior to the Occupancy
Delivery Date for such Property (the "ELECTION DEADLINE"). If Purchaser does not
so exercise its Acquisition Right with respect to any particular Pharmacy Assets
prior to the applicable Election Deadline, Purchaser's Acquisition Right with
respect to such Pharmacy Assets shall terminate and all of Seller's obligations
hereunder with respect to such Pharmacy Assets and the related Pharmacy
(including under Section 2.4) shall cease and be of no further effect (except
that Seller shall remain liable for any breaches of Section 2.4, Section 2.5(b)
and the third sentence of Section 2.5(d) prior to such termination), and Seller
shall have the right to retain such Pharmacy Assets or convey them to a third
party. If Purchaser does so exercise its Acquisition Right with respect to any
particular Pharmacy Assets prior to the applicable Election Deadline, Seller
shall convey and assign such Pharmacy Assets to Purchaser on a Business Day to
be later specified by Purchaser in a written notice of closing (the "NOTICE") to
Seller, which
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date shall be no earlier than 10 Business Days after Purchaser's delivery of its
Notice to Seller and no later than 10 Business Days prior to the Occupancy
Delivery Date.
Section 2.2. No Additional Consideration. The portion of the Purchase
Price allocable to, and payable by Purchaser with respect to, each Property
shall be deemed to include payment for the Pharmacy Assets relating to such
Property and no additional consideration shall be payable by Purchaser to Seller
in connection with the exercise by Purchaser of any Acquisition Rights or the
transfer of any Pharmacy Assets. Furthermore, Purchaser shall not assume or be
obligated to pay, perform or otherwise assume or discharge any Liabilities of
Seller or any of its affiliates accruing or arising from or out of events
occurring during the period of Seller's ownership of any Pharmacy Assets or
operation of the related Pharmacy prior to Seller's transfer of such Pharmacy
Assets to Purchaser, and all such Liabilities shall be Excluded Liabilities
hereunder.
Section 2.3. Pharmacy Transfer Deliveries.
(a) Seller Deliveries. At the time of transfer of any Pharmacy
Assets, Seller shall execute and deliver, or cause to be executed and delivered,
to Purchaser such customary documents necessary to effect the transfer from
Seller to Purchaser of the Pharmacy Assets as may be reasonably requested by
Purchaser, including, without limitation, assignment agreements relating to the
Pharmacy Assets in the form attached hereto as Exhibit G.
(b) Purchaser Deliveries. At the time of transfer of any Pharmacy
Assets, Purchaser shall execute and deliver, or cause to be executed and
delivered, to Seller such customary documents necessary to effect the transfer
from Seller to Purchaser of the Pharmacy Assets as may be reasonably requested
by Seller, including, without limitation, assignment agreements relating to the
Pharmacy Assets in the form attached hereto as Exhibit G.
Section 2.4. Operation of Pharmacies. From and after the Effective Date
until December 31, 2004, Seller shall operate each Pharmacy in the usual and
ordinary course of business, consistent with past practices with respect to such
Pharmacy; provided, that nothing in this Section 2.4 shall preclude Seller from
commencing a store closing sale with respect to Seller's non-Pharmacy operations
prior to December 31, 2004 at any Property in which a Pharmacy is located.
Section 2.5. Cooperation.
(a) Seller and Purchaser shall reasonably cooperate to effect an
orderly transfer of any Pharmacy Assets for which Purchaser exercises its
Acquisition Right. In addition, Seller and Purchaser shall cooperate in good
faith to develop within 30 days after the Initial Closing hereunder a
preliminary schedule for the transfer of Pharmacy Assets relating to each
Property and shall thereafter consult with each other and cooperate to update
such schedule from time to time in light of continuing developments with respect
to the Pharmacies and the transactions contemplated hereunder. Seller shall
reasonably cooperate with Purchaser to transfer in an electronic format usable
to Purchaser all such Pharmacy Assets that are, or reasonably can be, embodied
in an electronic format; provided, that Purchaser shall reimburse Seller for all
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documented and reasonable out-of-pocket costs and expenses incurred by Seller in
complying with its obligations under this sentence.
(b) From and after the Effective Date, Seller shall (i) subject to
the terms of the Confidentiality and Access Agreement (as hereinafter defined)
and applicable law, allow Purchaser and its representatives and advisors and any
prospective Designee (as hereinafter defined) of Purchaser reasonable access at
reasonable times and upon reasonable prior notice to Seller, to the employees,
assets and facilities of Seller related to Seller's operation of any Pharmacy,
provided that such access shall not unreasonably interfere with Seller's
operation of any Pharmacy, and (ii) furnish promptly to Purchaser and its
representatives and advisors and any prospective Designee of Purchaser such
information concerning the business, records and personnel of each Pharmacy
(including, without limitation, financial, operating and other data and
information) as may be reasonably requested by Purchaser, to the extent such
information is within Seller's possession or control; provided, that as a
condition precedent to Seller's obligation to allow such access or furnish such
information to any prospective Designee of Purchaser, such prospective Designee
shall have executed and delivered to Seller a customary confidentiality
agreement reasonably similar to the Confidentiality and Access Agreement.
(c) From and after the exercise by Purchaser of its Acquisition
Right with respect to any Pharmacy, Seller shall, subject to receipt of any
necessary approvals from Landlords or other third parties, permit Purchaser to
post reasonably-sized signs around the Pharmacy at each such Property to notify
customers that Purchaser intends to open a pharmacy at such location.
(d) From and after the exercise by Purchaser of its Acquisition
Right with respect to any Pharmacy, Seller shall, subject to receipt of any
necessary approvals from Landlords or other third parties, permit Purchaser (at
Purchaser's sole cost) to construct a reasonably-sized temporary facility to be
used for the operation of a pharmacy in a location reasonably acceptable to
Purchaser and Seller outside the store at such Property. From and after the
transfer from Seller to Purchaser of Pharmacy Assets relating to any Property,
Seller shall, subject to the receipt of any necessary approvals from Landlords
or other third parties, permit Purchaser (at Purchaser's sole cost) to operate a
pharmacy from such temporary facility. From and after the Effective Date, Seller
shall reasonably cooperate with Purchaser to obtain, at Purchaser's sole cost
and expense, any requisite Landlord consents and regulatory permits and
approvals necessary for the construction and operation of any temporary pharmacy
facility. Purchaser agrees to operate any temporary pharmacy facility in
accordance with all applicable laws and regulations and (notwithstanding
anything to the contrary in the Take-Back Lease) agrees to indemnify and hold
harmless all Seller Indemnified Parties (as hereinafter defined) against any and
all Losses (as hereinafter defined) incurred or suffered by the Seller
Indemnified Parties, or any of them, due to any claim or other assertion of
liability by a third party to the extent such third party claim or assertion
relates to or results from Purchaser's construction or operation of any
temporary pharmacy facility (which indemnification obligation of Purchaser shall
survive the Closing).
Section 2.6. Seller's Representations and Warranties Relating to Pharmacy
Assets. Seller represents and warrants to Purchaser that the following shall be
true, complete and correct as of the date of transfer of any Pharmacy Assets:
(a) Seller shall have good and valid title to the Pharmacy Assets;
and
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(b) The Prescription Files and Pharmacy Records that Seller will
transfer shall be, in all material respects, complete and correct copies of all
such items in Seller's records as of the time of such transfer.
Section 2.7. Transfer to Designee. Purchaser may, upon written notice to
Seller given at least 30 days prior to the First Occupancy Delivery Date,
request that Seller convey the Pharmacy Assets to any Purchaser Subsidiary (as
hereinafter defined) or any third party (a "DESIGNEE"), and in such event Seller
shall convey the Pharmacy Assets on the applicable transfer date to such
Designee (to the extent permitted under applicable law and subject to receipt of
any requisite Landlord consents under the applicable Lease), provided that
Purchaser (and not such Designee) shall retain any rights or obligations
hereunder with respect to such Pharmacy Assets, and Seller shall have no
liability to such Designee in connection therewith. From and after the time that
Purchaser requests that Seller convey the Pharmacy Assets to its Designee,
Seller shall be obligated to Purchaser to cooperate with the Designee for all
purposes under this Article II in the same manner as Seller would be obligated
to cooperate with Purchaser if Purchaser would acquire such Pharmacy Assets.
ARTICLE III
PURCHASE PRICE
Section 3.1. Purchase Price.
(a) The purchase price for the Transferred Assets (the "PURCHASE PRICE")
to be paid by Purchaser to Seller under this Agreement, in consideration for the
conveyance by Seller to Purchaser of the Properties and the other Transferred
Assets, shall be $621,000,000, in cash, subject to adjustment pursuant to
Section 3.1(b) hereof and subject to any adjustments and prorations as provided
under Section 4.3. The portion of the Purchase Price allocable to each Property
is set forth on Schedule 3.1(a) attached hereto. The Purchase Price shall be
payable by Purchaser to Seller in the manner set forth in Section 3.2.
(b) Pursuant to Section 4.1(a) hereof, at the Initial Closing (as
hereinafter defined) Seller shall convey, and Purchaser shall acquire, in
accordance with and subject to the terms of this Agreement, (i) at least
forty-three (43) Properties or (ii) a lesser number of Properties if Seller
shall exercise its option (pursuant to the proviso in the first sentence of
Section 4.1(a) below) to proceed to Closing with respect to less than
forty-three (43) Properties. If, as of the Initial Closing Date, the Closing
Conditions (as hereinafter defined) have not been satisfied with respect to
certain of the Properties (and subject to the provisions of Article XII below)
(for example, if the Closing Conditions shall have been satisfied for forty-four
(44) Properties and the Closing Conditions shall not yet have been satisfied for
the remaining ten (10) Properties) then the parties shall proceed with the
Initial Closing with respect only to the Properties for which the Closing
Conditions shall have been satisfied (the "INITIAL CLOSING PROPERTIES"), and the
Purchase Price payable by Purchaser to Seller at the Initial Closing shall be
reduced by the allocable portion of the Purchase Price (as set forth on Schedule
3.1(a)) of those Properties not conveyed by Seller to Purchaser at the Initial
Closing (the "REMAINING PROPERTIES").
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(c) In the event that, in accordance with this Agreement, any of the
Remaining Properties are conveyed by Seller to Purchaser in a Subsequent Closing
(as hereinafter defined), the Purchase Price payable by Purchaser to Seller in
respect of the conveyance of any such Remaining Property shall be the allocable
portion of the Purchase Price for such Remaining Property as set forth on
Schedule 3.1(a).
Section 3.2. Payment of Purchase Price.
(a) Within two (2) Business Days after the execution hereof, Purchaser
shall pay an amount equal to $62,100,000 (the "DEPOSIT"), by wire transfer of
federal funds, into escrow with the Title Company, as Escrow Agent (as such
terms are hereinafter defined), to be held and disbursed by the Escrow Agent in
accordance with Article XIV hereof. Notwithstanding anything in this Agreement
to the contrary, any interest earned on the Deposit shall be paid to Purchaser.
(b) At the Initial Closing, (i) the Deposit (less ten percent (10%) of
the Purchase Price allocable to the Remaining Properties pursuant to Schedule
3.1(a)), shall be paid by the Escrow Agent to Seller, (ii) Purchaser shall pay,
or cause to be paid, to Seller an additional 20% of the Purchase Price allocable
to the Properties conveyed at the Initial Closing pursuant to Schedule 3.1(a) by
wire transfer of federal funds to an account designated by Seller in writing by
notice to Purchaser, and (iii) all adjustments and prorations (relating to the
Properties being conveyed at the Initial Closing) as provided in Section 4.3
shall be made and credited between Seller and Purchaser.
(c) At any Subsequent Closing, (i) the applicable Deposit for any
Remaining Property being conveyed shall be paid by the Escrow Agent to Seller,
(ii) Purchaser shall pay, or cause to be paid, to Seller an additional 20% of
the Purchase Price for such Remaining Property (pursuant to Schedule 3.1(a)), by
wire transfer of federal funds to an account designated by Seller in writing by
notice to Purchaser, and (iii) all adjustments and prorations (relating to such
Remaining Property) as provided in Section 4.3 shall be made and credited
between Seller and Purchaser.
(d) The balance of the Purchase Price with respect to each Property
conveyed at the Initial Closing or any Subsequent Closing shall be paid by
Purchaser to Seller as follows: (i) on the First Occupancy Delivery Date (as
hereinafter defined), and provided that (x) Seller shall have delivered
occupancy to Purchaser of such First Occupancy Delivery Date Property (as
hereinafter defined) in the manner set forth in the Take-Back Lease applicable
to such Property, (y) Seller is not otherwise in default in any material respect
of any of its covenants or obligations under such applicable Take-Back Lease,
under this Agreement, or under any Seller Tenant Estoppel or any Seller
Subtenant Estoppel, as applicable, with respect to such Property, and (z) there
is no uncured Seller Violation (as defined below) (collectively, the "POSSESSION
PAYMENT CONDITIONS"), Purchaser shall pay to Seller the balance of the Purchase
Price allocable to such First Occupancy Delivery Date Property pursuant to
Schedule 3.1(a), and (ii) on the Second Occupancy Delivery Date (as hereinafter
defined), and provided that Seller shall have satisfied the Possession Payment
Conditions with respect to any Second Occupancy Delivery Date Property,
Purchaser shall pay to Seller the balance of the Purchase Price allocable to
such Property pursuant to Schedule 3.1(a).
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(e) In the event the Possession Payment Conditions are not satisfied in
all material respects with respect to any Property at the applicable Occupancy
Delivery Date (as hereinafter defined), the following shall occur: (i) in the
event Seller has not delivered occupancy of such Property to Purchaser,
Purchaser shall not be required to pay to Seller any of the balance of the
Purchase Price allocable to such Property until occupancy is so delivered to
Purchaser, and (ii) in the event Seller has not satisfied the Possession Payment
Conditions described in clause (y) or (z) of Section 3.2(d)(i) above, Purchaser
shall withhold from the balance of the Purchase Price allocable to such Property
(which balance, less such withheld amount, shall be paid by Purchaser to Seller
on the Occupancy Delivery Date) an amount equal to one hundred fifty percent
(150%) of the reasonably estimated cost to cure or otherwise satisfy such
Possession Payment Conditions, which amount shall be deposited by Purchaser
with, and held by, the Title Company in escrow until the earliest of (1) its
receipt of a joint direction from both Seller and Purchaser, (2) Seller
substantially cures the applicable default (in which event Purchaser and Seller
will provide a joint direction to the Title Company), or (3) a court of
competent jurisdiction issues an order directing the disbursement of such funds,
whereupon the Title Company shall pay such withheld funds to Seller or as
otherwise directed pursuant to such joint direction or court order.
Notwithstanding the foregoing, in the event Purchaser, pursuant to the terms of
a Take-Back Lease, has expended funds to cure a default of Seller under a
Take-Back Lease, the reasonable costs incurred by Purchaser in curing such
default (including, without limitation, any reasonable attorneys' fees incurred
in connection therewith) may be deducted from the balance of the Purchase Price
for such Property and such costs shall not be deposited with the Title Company
in escrow but shall be retained by Purchaser.
(f) Notwithstanding the foregoing, if any Closing is part of an Exchange
pursuant to Section 5.3, the funds paid at such Closing and on the First
Occupancy Delivery Date or the Second Occupancy Delivery Date (as applicable)
shall be wire transferred to an account designated by the Qualified Intermediary
(as hereinafter defined).
(g) The provisions of this Section 3.2 shall survive the Closings.
ARTICLE IV
CLOSINGS
Section 4.1. Initial Closing and Subsequent Closings.
(a) The initial closing of the conveyance of the Properties from Seller
to Purchaser as contemplated hereby (the "INITIAL CLOSING") shall occur at the
offices of Jenner & Block LLP in Chicago, Illinois, on the tenth (10th) Business
Day (as hereinafter defined) after the satisfaction (or waiver) of the closing
conditions set forth in Article X hereof (the "CLOSING CONDITIONS") with respect
to at least forty-three (43) of the Properties; provided, however, that if the
Closing Conditions shall not have been satisfied or waived with respect to at
least forty-three (43) of the Properties by August 31, 2004, then Seller, at its
option and upon written notice given to Purchaser within seven (7) Business Days
thereafter, may elect to proceed with the Closing with respect to those
Properties for which the Closing Conditions shall have been satisfied or waived
as of such date, and in such event such Closing shall (i) occur on the tenth
(10th) Business Day after such notice from Seller to Purchaser shall have been
delivered, and (ii) be deemed to be the
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Initial Closing. At the Initial Closing, all of the Properties with respect to
which the Closing Conditions shall have been satisfied (or waived) shall be
conveyed by Seller to Purchaser in the manner set forth in this Article IV and
elsewhere in this Agreement. The term "BUSINESS DAY", as used herein, shall mean
any day other than a Saturday, Sunday or day on which banks in New York City are
authorized or required by law to be closed.
(b) The closing of the conveyance of any Remaining Property from Seller
to Purchaser as contemplated hereby (a "SUBSEQUENT CLOSING") shall occur at the
offices of Jenner & Block LLP in Chicago, Illinois, on the tenth (10th) Business
Day after the satisfaction (or waiver) of the Closing Conditions with respect to
any such Remaining Property. The Initial Closing or any Subsequent Closing shall
be referred to herein as a "CLOSING", and references herein to a Closing shall
mean only the Closing with respect to the Property or Properties being conveyed
at such Closing (and not any prior or subsequent closing). The term "INITIAL
CLOSING DATE" shall mean the date on which the Initial Closing occurs, the term
"SUBSEQUENT CLOSING DATE" shall mean the date on which any Subsequent Closing
occurs, and the term "CLOSING DATE" shall mean either the Initial Closing Date
or any Subsequent Closing Date. In the event the Closing Conditions with respect
to at least forty-three (43) Properties shall not have been satisfied or waived
by August 31, 2004, then (provided that Seller shall not have delivered the
notice to Purchaser described in the proviso to the first sentence in Section
4.1(a)) either Seller or Purchaser may terminate this Agreement upon written
notice given to the other party subsequent to September 9, 2004, but prior to
the date such Closing Conditions are satisfied or waived for at least forty
three (43) of the Properties, whereupon the Deposit shall be returned by the
Escrow Agent to Purchaser, and neither party shall have any further liability to
the other party hereunder, except for liabilities arising from a default by
either party hereunder or other liabilities that expressly survive the
termination of this Agreement. In the event that the Closing Conditions with
respect to any Subsequent Closing shall not have been satisfied or waived by
September 15, 2004, then either Seller or Purchaser may terminate this Agreement
with respect to any such Subsequent Closing upon written notice given to the
other party subsequent to September 15, 2004, but prior to the date such Closing
Conditions are satisfied or waived, whereupon the Deposit allocable to such
Remaining Property shall be returned by the Escrow Agent to Purchaser, and
neither party shall have any further liability to the other party hereunder with
respect to such Remaining Property or Subsequent Closing, except for liabilities
arising from a default by either party hereunder or other liabilities that
expressly survive the termination of this Agreement.
Section 4.2. Closing Documents.
(a) Seller's Closing Deliveries. At a Closing, Seller shall deliver or
cause to be delivered to Purchaser each of the following with respect to each
Property being conveyed at such Closing, in form and substance reasonably
acceptable to Purchaser and Seller, if not attached as a Schedule to this
Agreement, to be executed (if necessary) by Seller at such Closing:
(i) with respect to each Owned Property being conveyed at such
Closing, a special warranty deed for such Property, subject
only to the Permitted Exceptions, and otherwise in a form
customary for the jurisdiction where the Property is located
and acceptable to the Title Company;
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(ii) with respect to each Lease being transferred at such Closing,
an Assignment and Assumption of the Lease (the "ASSIGNMENT OF
LEASE") executed by Seller in the form attached hereto as
Exhibit A together with any other appropriate documents
necessary to convey and transfer to Purchaser Seller's
interest in any improvements owned by Seller;
(iii) the Required Consents (as hereinafter defined), if any,
applicable to any Lease or Property being transferred at such
Closing;
(iv) with respect to each Lease being transferred at such Closing
for which a Required Consent was not required, a letter
advising the Landlord of the Assignment of Lease;
(v) with respect to each Approved Sublease being transferred at
such Closing, an Assignment and Assumption of Approved
Sublease ("ASSIGNMENT OF APPROVED SUBLEASE") executed by
Seller in the form attached hereto as Exhibit F;
(vi) with respect to each Approved Sublease being transferred at
such Closing, an estoppel letter executed by the respective
subtenant in substantially the form set forth in such Approved
Sublease, or if no such form is set forth in such Approved
Sublease, then in substantially the form as Exhibit E attached
hereto, except that in the event the Seller cannot deliver the
foregoing estoppel letter at Closing, then in lieu thereof
Seller shall deliver an estoppel letter executed by Seller
with respect to such Approved Sublease in substantially the
form attached hereto as Exhibit E (a "SELLER SUBTENANT
ESTOPPEL");
(vii) a bill of sale and general assignment with respect to the
Personal Property being conveyed at such Closing, in the form
attached hereto as Exhibit B;
(viii) with respect to each Leased Property, an estoppel letter
substantially in the form set forth in the applicable Lease,
and if no form is set forth in the applicable Lease, then
substantially in the form attached hereto as Exhibit D, except
that in the event that Seller cannot deliver the foregoing
estoppel letter from a Landlord with respect to any of the
Leases, then in lieu thereof Seller shall deliver an estoppel
letter executed by Seller with respect to the applicable Lease
substantially in the form attached hereto as Exhibit D (a
"SELLER TENANT ESTOPPEL");
(ix) a Take-Back Lease for each Property executed by Seller in the
form attached hereto as Exhibit C;
(x) with respect to the Leased Properties, an assignment of any
existing and effective SNDA (as hereinafter defined, and
provided that such SNDA is assignable) from Seller to
Purchaser in a form reasonably acceptable to Seller and
Purchaser;
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(xi) a counterpart of the Closing Statement (as hereinafter
defined) for each Owned and Leased Property being conveyed at
such Closing;
(xii) a copy of notice of termination from Seller to the applicable
contractor with respect to any service contracts affecting or
pertaining to the Property being conveyed at such Closing;
(xiii) to the extent in the possession of Seller, (A) the original
Leases (for each Leased Property being conveyed at such
Closing) (or if Seller is not in possession of original
Leases, then a copy of such Leases certified by Seller as
being true, complete and correct), and (B) (for any of the
Properties being conveyed at such Closing) building plans,
blueprints, drawings, surveys, site plans, engineering plans,
utility plans, landscaping plans, other plans and
specifications, and all currently effective use, occupancy,
building and operating permits, licenses and approvals, bonds,
guarantees, and warranties;
(xiv) a certificate of non-foreign status (a "FIRPTA CERTIFICATE")
from the Seller in the form and manner that complies with
Section 1445 of the Internal Revenue Code of 1986, as amended
(the "CODE"), and the Treasury Regulations promulgated
thereunder. Notwithstanding anything to the contrary contained
herein, if any Seller fails to provide Purchaser with a FIRPTA
Certificate, Purchaser shall be entitled to withhold from the
Purchase Price the amount required to be withheld pursuant to
Section 1445 of the Code and the Treasury Regulations
promulgated thereunder;
(xv) all properly completed transfer tax forms, if required, that
are applicable to the Properties being conveyed at such
Closing;
(xvi) any reasonable affidavits and other documents customarily
required by the Title Company from a Seller in order to issue
an Owner's Policy or a Leasehold Policy (with extended
coverage over the "general exceptions"), as applicable, in the
applicable jurisdiction (provided that no such title affidavit
or document shall modify or expand Seller's obligations with
respect to Title Objections beyond those set forth in Article
VI hereof), together with a copy of any material Bankruptcy
Court order with respect to the assumption by Seller of any
such Lease in connection with Seller's bankruptcy (which copy
shall be certified to be correct and complete by Seller, or by
the applicable bankruptcy court if so required by the Title
Company in order to issue the Leasehold Policies), and an
executed memorandum of Lease, in recordable form, with respect
to such Lease if provided by the applicable Landlord (and
Seller covenants to use reasonable and good faith efforts
prior to Closing to obtain any such executed memorandum of
Lease from each Landlord under a Lease for which no memorandum
of Lease is currently recorded); and
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(xvii) all other customary closing documents reasonably approved by
Purchaser and Seller in connection with the consummation of
the transactions contemplated by this Agreement, including,
without limitation, those customarily provided by sellers of
owned or leased commercial real property in the applicable
state and local jurisdictions in order to convey, transfer and
assign the Properties being conveyed at such Closing to
Purchaser.
(b) Purchaser's Closing Deliveries. Purchaser shall deliver or cause to
be delivered to Seller (or to the Title Company in escrow, if applicable) at
Closing: (i) the portion of the Purchase Price due at such Closing pursuant to
Article III hereof, plus or minus prorations and adjustments as set forth
herein; (ii) a duly executed counterpart of the Assignment of Lease executed by
Purchaser with respect to each Leased Property being conveyed at such Closing;
(iii) a duly executed counterpart of the Assignment of Sublease executed by
Purchaser with respect to each Approved Sublease being conveyed at such Closing;
(iv) a duly executed counterpart of a Take-Back Lease executed by Purchaser for
each Property being conveyed at such Closing; (v) a counterpart of the Closing
Statement for each Property being conveyed at such Closing executed by
Purchaser; (vi) all properly completed transfer tax forms, if required, that are
applicable to the Properties being conveyed at such Closing; (vii) any and all
reasonable and customary affidavits and other documents reasonably requested of
Purchaser by the Title Company in order to cause the Title Company to issue its
Title Policy; and (viii) all other customary closing documents reasonably
approved by Seller and Purchaser in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation,
those customarily provided by purchasers in the applicable state and local
jurisdictions in order to perfect the conveyance, transfer and assignment of the
Properties being conveyed at such Closing to Purchaser.
Section 4.3. Closing Prorations and Adjustments. A statement of prorations
and other adjustments shall be prepared by Seller (for each Property being
conveyed at a Closing) in conformity with the provisions of this Agreement and
submitted to Purchaser for review and approval not less than five (5) Business
Days prior to the Initial Closing Date and three (3) Business Days prior to any
Subsequent Closing Date (the "CLOSING STATEMENT"). For purposes of prorations,
Purchaser shall be deemed the owner of the respective Property on the Closing
Date. In addition to other adjustments that may be provided for in this
Agreement, the following items with respect to each Property are to be prorated
or adjusted, as the case may require, for each Property as of the Closing Date
for such Property:
(a) real estate taxes and assessments (initially prorated on the
basis of 100% of the most recent ascertainable bill, but subject to
reproration upon issuance of the actual bills therefor to effectuate the
actual proration); to the extent that Seller has escrowed any real estate
taxes with the Landlord under a Lease, Seller shall assign all rights
under such escrow to Purchaser and, provided the amount so escrowed is
confirmed by such Landlord in writing or is confirmed by other reasonably
satisfactory substantiation, Seller shall be credited accordingly in
connection with the proration of taxes or assessments. Real estate taxes
shall be apportioned on the basis of the fiscal period for which assessed.
If as of the applicable Closing Date any of the Properties or any portion
thereof shall be affected by any special or general assessments which are
or
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may become payable in installments of which the first installment is then
a lien and has become payable, Seller shall be responsible to pay the
unpaid installments of such assessments which are due prior to the
applicable Closing Date and Purchaser shall be responsible to pay the
installments which are due on or after the applicable Closing Date and
Purchaser or Seller shall make a payment to the other to the extent
necessary so that the total amount of such special or general assessment
is apportioned as provided above;
(b) the rent and other sums, including, without limitation,
monthly installments payable by Seller on account of operating costs and
taxes, payable by Seller under the Leases. Any percentage rent owed under
any Lease with respect to any time period prior to the applicable Closing
shall be paid by Seller. To the extent that Seller has paid to or escrowed
with the Landlord under any Lease any monthly estimate of taxes or other
operating expenses, and the Landlord refunds or credits to Purchaser or
its designee (after the applicable Closing) a portion of such estimated or
escrowed payments resulting from a reconciliation of the actual expenses
or taxes for the period prior to such Closing, Purchaser shall deliver to
Seller its pro-rata share of such refund within twenty (20) days of
receipt of said refund. In the event that a Landlord is owed any
additional funds as a result of any deficiency shown in such
reconciliation for the period of time prior to the applicable Closing,
Seller shall deliver to Purchaser the deficient funds within twenty (20)
days of receipt of notice from Purchaser, subject to any rights of the
tenant under the Lease to contest such determination by the Landlord
(which rights shall be retained and shall be exercisable by Seller) with
respect to any reconciliation for the period of time prior to the
applicable Closing. Seller shall retain, subsequent to any Closing with
respect to a Leased Property, any other rights, claims and remedies
against the Landlord with respect to any refunds, rebates or credits due
from the Landlord to Seller (as a tenant under the Lease) with respect to
any periods prior to the Closing Date (including, without limitation,
audit rights and rights to claim adjustments from the Landlord for
overcharged amounts of additional rent under the Lease), and Purchaser
shall promptly pay to Seller any such amounts received by (or credited for
the benefit of) Purchaser after the Closing Date and attributable to
periods prior to the Closing Date;
(c) security deposits paid under the Leases, and not theretofore
applied, shall be credited by Purchaser to Seller on the applicable
Closing Date;
(d) water, electric, telephone and all other utility and fuel
charges shall be prorated ratably on the basis of the last ascertainable
bills (and reprorated upon receipt of the actual bills or invoices) unless
final meter readings and final invoices can be obtained. To the extent
practicable, Seller shall cause meters for utilities to be read not more
than ten (10) Business Days prior to the applicable Closing Date;
(e) assignable license and permit fees;
(f) deposits made by Seller with utility companies, Governmental
Entities or any other person, which deposits shall be assigned to
Purchaser at Closing and shall be credited to Seller, provided, however,
that Seller shall have received written notice from the party holding such
deposits confirming the amount of such deposits and stating that no
default has occurred by Seller and no other condition has occurred which
would
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prohibit all or any portion of such deposit from being refunded (or such
other substantiation of the foregoing facts reasonably satisfactory to
Purchaser). If Seller is unable to obtain such a notice or provide such
other substantiation, amounts on deposit with utility companies shall not
be prorated; provided, however, that prior to Closing, Purchaser shall
substitute its own deposit for any amounts on deposit with utility
companies and Seller shall be entitled to arrange for a refund of Seller's
deposit from such utility companies;
(g) the rent and other sums, including, without limitation,
monthly installments payable by subtenants on account of operating costs
and taxes payable under the Approved Subleases, subject to Section 4.5
below;
(h) security deposits paid under the Approved Subleases, and not
theretofore applied, shall be credited by Seller to Purchaser on the
applicable Closing Date; and
(i) other operating expenses and any other customarily apportioned
items.
Except with respect to general real estate taxes (which shall be
reprorated upon the issuance of the actual bills, if necessary), any proration
which must be estimated at a Closing shall be reprorated and finally adjusted as
soon as practicable after the applicable Closing, with any refunds payable to
Seller or Purchaser to be made as soon as practicable; otherwise all prorations
shall be final. The provisions of this Section 4.3 shall survive the Closings.
Section 4.4. Closing Costs. Purchaser shall pay the cost of the Owner's
Policies and Leasehold Policies, with extended coverage (all other endorsements
requested by Purchaser shall be paid for by Purchaser), and (ii) the Surveys (as
hereinafter defined); and at Closing, Seller shall pay 75% of the cost of
transfer taxes, documentary stamps, intangible taxes and similar taxes or
charges, and Purchaser shall pay 25% of such costs. Purchaser shall pay the
costs of recording the deeds and all costs of Purchaser's due diligence
activities, including, without limitation, engineering and environmental
inspections and reports, and Seller and Purchaser shall each pay one-half of any
escrow charges (including any charges for a "New York Style" closing). Seller
and Purchaser shall each be responsible for the fees and costs of their
respective attorneys, accountants, financial advisors, brokers and other agents
and advisors and any expenses and costs incurred by such party except as
otherwise specifically set forth herein.
Section 4.5. Certain Retained Claims.
(a) Seller shall have the right to collect and retain all charges due
and payable by the subtenants ("SUBTENANTS") under any subleases, licenses or
concession agreements relating to any Property and attributable to the period
prior to the Closing Date, including without limitation, rent, payments of
common area maintenance charges and payments in the nature of the Subtenant's
share of real estate taxes (collectively, "SUBLEASE RENTS"). If, at the Closing
Date, any of the Subtenants are in arrears in the payment of any Sublease Rents
(such arrearages being herein referred to as "DELINQUENT AMOUNTS"), Seller shall
have the right to collect the same after the Closing Date. Sublease Rents
received after the Closing Date by Purchaser from any of the Subtenants shall
first be applied to the amount due to Purchaser from such Subtenant for the time
period after Closing and shall then be applied to Delinquent Amounts and be
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promptly paid over by Purchaser to Seller. Seller shall have and reserves the
right to pursue any right or remedy against the Subtenants for Delinquent
Amounts; provided, however, that with respect to any of the Approved Subleases
to be assigned to Purchaser as set forth herein, Seller shall have no right to
file an eviction action against such Subtenants after the Closing.
(b) Seller shall retain all rights, claims and remedies, from and after
the Closing Date (and, with respect to any Leased Property, to the extent of the
tenant's rights under the applicable Lease), with regard to any refunds of real
estate taxes, with respect to any period prior to the Closing Date. The amount
of any tax refund (net of reasonable attorneys' fees and other reasonable costs
of obtaining such tax refunds) with respect to the tax year for any Property in
which the Closing Date occurs (a "CURRENT TAX YEAR") shall be apportioned
between Seller and Purchaser as of the Closing Date. If, in lieu of a tax
refund, a tax credit is received by Seller or Purchaser with respect to any
Property for the Current Tax Year, then (x) within thirty (30) days after
receipt by Seller or Purchaser, as the case may be, of evidence of the actual
amount of such tax credit (net of reasonable attorneys' fees and other
reasonable costs of obtaining such tax credit), the tax credit apportionment
shall be readjusted between Seller and Purchaser, and (y) upon realization by
Purchaser or Seller of a tax savings on account of such credit, Purchaser or
Seller, as the case may be, shall pay to Seller or Purchaser an amount equal to
the savings realized (as apportioned). All refunds, credits or other benefits
applicable to any tax year for any Property prior to the Current Tax Year shall
belong solely to Seller (and Purchaser shall have no interest therein) and, if
the same shall be paid or credited to Purchaser or anyone acting on behalf of
Purchaser, same shall be paid to Seller within twenty (20) days following
receipt thereof or following the realization of such credit by Purchaser. All
refunds, credits or other benefits applicable to any tax year for any Property
after the Current Tax Year shall belong solely to Purchaser (and Seller shall
have no interest therein) and, if the same shall be paid to Seller or anyone
acting on behalf of Seller, same shall be paid by Seller to Purchaser within
twenty (20) days following receipt thereof.
(c) The provisions of this Section 4.5 shall survive the Closing.
Section 4.6. Take-Back Leases. At each Closing, Seller, as tenant, and
Purchaser, as landlord, shall enter into a lease or sublease for each Property
conveyed by Seller to Purchaser at such Closing, in the form attached hereto as
Exhibit C (the "TAKE-BACK LEASE"). The term of the Take-Back Leases shall expire
(a) on March 15, 2005 (the "FIRST OCCUPANCY DELIVERY DATE") with respect to the
Properties described on Schedule 4.6(a) (the "FIRST OCCUPANCY DELIVERY DATE
PROPERTIES"), and (b) on April 15, 2005 (the "SECOND OCCUPANCY DELIVERY DATE",
and each of the First Occupancy Delivery Date and the Second Occupancy Delivery
Date, an "OCCUPANCY DELIVERY DATE"), with respect to the Properties described on
Schedule 4.6(b) (the "SECOND OCCUPANCY DELIVERY DATE PROPERTIES"). In the event
that Purchaser acquires less than 54 Properties as a result of a failure of
certain Closing Conditions or for any other reason as set forth in this
Agreement, Seller and Purchaser may mutually agree in good faith to revise the
allocation of Occupancy Delivery Dates as shown on Schedules 4.6(a) and 4.6(b).
Notwithstanding anything herein to the contrary, in the event a Take-Back Lease
is terminated as a result of a default by Seller under such Take-Back Lease,
Purchaser may elect to accelerate the Occupancy Delivery Date for such Property
to a date prior to the First Occupancy Delivery Date or the Second Occupancy
Delivery Date.
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Section 4.7. Cooperation Between the Parties. Seller and Purchaser shall
cooperate with one another in order to minimize the transfer taxes payable in
connection with the transactions contemplated by this Agreement, and to minimize
any increase in real estate taxes, property valuations or assessments (special
or ordinary) including, without limitation, effecting the acquisition by
Purchaser of any Transferred Assets through the merger, consolidation or stock
acquisition of or with a newly formed limited liability company ("LLC") that is
wholly owned by Seller which has no assets other than the Transferred Assets and
no liabilities other than the Assumed Liabilities; provided that such
alternative structure has no adverse tax consequences or other adverse
consequences to either party, is otherwise reasonably acceptable to both parties
and does not adversely impact the ability of either party to structure such
transfer as a like-kind exchange under Section 1031 of the Code. In the event
that the acquisition by Purchaser of any Transferred Assets occurs through the
merger, consolidation or stock acquisition of or with a wholly owned LLC, Seller
shall provide reasonable representations and warranties with respect to such
wholly owned LLC covering the matters contained in Section 2.5 and Section 8.1,
and such LLC shall be bound by the covenants contained herein that bind the
Seller, as applicable.
Section 4.8. Separate Transactions. Seller and Purchaser intend and agree
that for federal and state income tax purposes the sale or Exchange of an
individual Transferred Asset does not take place until the Closing for such
Transferred Asset, and agree to report the transactions accordingly.
Section 4.9. Pre-Closing Allocation of Purchase Price. Not less than ten
(10) days prior to each Closing, Purchaser and Seller will jointly prepare and
approve a statement (the "PRE-CLOSING ALLOCATION STATEMENT") setting forth the
portion of the Purchase Price that is being paid for Transferred Assets that are
subject to a transfer tax.
ARTICLE V
PRE-CLOSING COVENANTS
Section 5.1. Operation of Transferred Assets. With respect to each
Property, from the Effective Date through and including the first to occur of
(i) the termination of this Agreement or (ii) the Closing relating to such
Property (provided, however, where covenants specifically noted in this Section
5.1 run through the Occupancy Delivery Date for such Property, such covenants
shall not expire on the Closing for such Property, but shall survive the Closing
and expire on the Occupancy Delivery Date for such Property):
(a) Seller shall keep each Property in substantially the same
condition and repair as on the date hereof, ordinary wear and tear and
damage due to a casualty or a taking by condemnation excepted (the
"PERMITTED PROPERTY CONDITION"), provided that Seller shall not be
required subsequent to the Effective Date to make any improvements
(including capital improvements) to any Property that would upgrade the
condition and repair of any Property beyond the Permitted Property
Condition (other than Seller's obligation to cure Seller Violations (as
defined below) under Section 5.1(d));
(b) without the prior written consent of Purchaser, Seller shall
not sell, mortgage, pledge, lease, hypothecate or otherwise transfer or
dispose of all or any part of
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any Property or any interest therein or enter into any agreement or
arrangement to do so, other than non material subleases, licenses or
concession agreements or other similar agreements entered into in the
ordinary course of business, each of which will be terminated on or before
the applicable Occupancy Delivery Date;
(c) Seller shall not initiate, consent to, approve or otherwise
take any material action with respect to zoning or any other governmental
laws, rules or regulations presently applicable to any Property, other
than such action as is necessary to maintain a Property in compliance with
such laws, rules and regulations applicable to such Property, in each case
without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld or delayed;
(d) Seller shall cure, or cause to be cured, prior to Closing any
violations ("VIOLATIONS", which shall include, with respect to a Leased
Property, only those violations that are the responsibility of the tenant
under the Lease) of laws, ordinances, requirements, rules, regulations,
notices and orders (collectively, "APPLICABLE LAWS") of any federal, state
or local governmental agency, quasi-governmental agency or regulatory
authority (a "GOVERNMENTAL ENTITY"), applicable to the Transferred Assets
and issued in writing by the applicable Governmental Entity to Seller (i)
on or prior to the date of this Agreement, or (ii) subsequent to the date
of this Agreement and prior to Occupancy Delivery Date, if arising from
Seller's actions or the conduct of Seller's business at the Property
subsequent to the date hereof (each, a "SELLER VIOLATION"); provided that
if any Seller Violation is not capable of being cured by Seller prior to
the Closing, then the parties shall nevertheless proceed to Closing with
respect to the applicable Property in accordance with this Agreement, and
Seller shall indemnify, defend and hold harmless the Purchaser Indemnified
Parties from and against any Losses with respect to such uncured Seller
Violations, subject to the limitations set forth in this Section 5.1(d)
(and such indemnification obligation of Seller shall survive the Closing),
but without limiting Purchaser's rights under Section 3.2(e) above.
Notwithstanding the foregoing, in the event that the estimated cost of
curing all Seller Violations with respect to a Property (as determined by
an independent architect or engineer selected by Seller and approved by
Purchaser) exceeds five percent (5%) of the allocated Purchase Price with
respect to any Property (the "MAXIMUM VIOLATION CURE AMOUNT"), then
Seller, upon written notice to Purchaser given within five (5) Business
Days after Seller's receipt of such determination, shall have the right to
terminate this Agreement with respect to the applicable Property, in which
event (i) the portion of the Deposit allocated to such Property shall be
returned to Purchaser, (ii) the Purchase Price shall be deemed to be
reduced by the allocated Purchase Price applicable to such Property, (iii)
the term "Property" as used herein shall be deemed to be amended to omit
any references to the applicable Property, (iv) the parties shall proceed
to Closing with respect to the other Properties pursuant to the terms of
this Agreement, and (v) neither party hereto shall have any further
obligation to the other with respect to the applicable Property, with the
exception of those obligations which expressly survive the termination of
this Agreement (clauses (i) through (v) collectively, the "PROPERTY
TERMINATION PROCEDURE"). Notwithstanding the foregoing, within ten (10)
Business Days after Purchaser's receipt of such a termination notice from
Seller, Purchaser may notify Seller that it elects to void Seller's
termination notice and to proceed to Closing subject to such Seller
Violation, in
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which event the Purchase Price allocable to such Property shall be reduced
by five percent (5%). Any Violation with respect to a Transferred Asset
that is not a Seller Violation shall be hereinafter referred to as a
"NON-SELLER VIOLATION".
(e) Seller shall terminate any leases (for the Owned Properties),
subleases and/or license agreements (except for the Approved Subleases set
forth on Schedule 8.1(j) attached hereto) relating to each Property prior
to the applicable Occupancy Delivery Date relating to such Property, such
that Purchaser shall have sole and exclusive possession of each Property
at the applicable Occupancy Delivery Date, except for any Approved
Subleases;
(f) Seller shall comply in all material respects with all terms
and conditions of the Leases and Approved Subleases and Seller shall not
terminate, extend or modify any of the Leases or Approved Subleases
without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld or delayed. Seller shall provide written notice
("RENEWAL NOTICE") to Purchaser of any pending renewal options with
respect to any Lease at least thirty (30) days prior to the last date on
which any such renewal option may be exercised, and unless Seller is
notified in writing by Purchaser not to exercise any such renewal option
within fifteen (15) days after Purchaser's receipt of the Renewal Notice,
Seller shall exercise such renewal option. Seller shall also promptly
forward to Purchaser copies of any material notices received by Seller
from any Landlord subsequent to the Effective Date;
(g) all Service Contracts and other contracts (other than the
Leases, the Approved Subleases and the Permitted Exceptions) which affect
or pertain to any Property shall be terminated, or caused to be
terminated, by Seller prior to and be of no further force or effect as of
the applicable Occupancy Delivery Date relating to such Property;
(h) any mortgage financing relating to any Owned Property, and any
financing secured by Seller's leasehold interest with respect to any
Leased Property, shall be paid off and all related security documents
encumbering the Owned Properties or Leased Properties, as applicable,
shall be released at the Closing relating to such Property;
(i) prior to the applicable Occupancy Delivery Date for each
Property, Seller shall vacate the Property and remove all personal
property and inventory therefrom, except for Merchandise Trade Fixtures,
which may be left by Seller in their existing location as of the
completion of Seller's store closing sale, or in any other reasonable
location within the Property as reasonably determined by Seller. At the
applicable Occupancy Delivery Date for each Property, Seller shall deliver
the applicable Property to Purchaser in broom-clean condition;
(j) Seller shall be responsible for and shall pay all amounts due
through the applicable Occupancy Delivery Date relating to such Property
for each Employee's salaries, wages, fees, vacation pay, severance pay,
withholding and payroll taxes and other benefits, and shall otherwise
comply with any and all applicable requirements of
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the WARN Act (including all notice requirements), any similar Applicable
Law and the medical and dental continuation requirements of COBRA;
(k) subject to Section 5.7 hereof, Seller shall (i) terminate the
employment of, or transfer to another Seller store, all of the individuals
rendering services to Seller as employees or independent contractors in
connection with any Property before the applicable Occupancy Delivery Date
related to such Property, and (ii) provide Purchaser with written notice
of the number of employees terminated by Seller during the ninety (90)
days preceding and including any applicable Occupancy Delivery Date;
(l) Seller shall promptly give written notice to Purchaser of the
occurrence of any event known to Seller which affects in any material
respect the truth or accuracy of any of the representations or warranties
made or to be made by Seller under this Agreement; and
(m) Notwithstanding any provisions of the Take-Back Leases,
Purchaser and its representatives and contractors shall have reasonable
access to each Property during the time period after the Closing for such
Property through the Occupancy Delivery Date for such Property for
purposes of inspection of the Property in connection with Purchaser's
intended renovations and operations at the Property, upon reasonable prior
notice to Seller and during business hours (or, at Seller's election and
to the extent reasonable, after business hours), provided that such access
by Purchaser shall not interfere in any material respect with Seller's
business operations at the Property. Seller shall (at no cost to Seller)
reasonably cooperate with Purchaser prior to the Occupancy Delivery Date
for each Property in connection with Purchaser obtaining any permits from
Governmental Entities to perform renovations on the Property, which
renovations shall be performed by Purchaser after the Occupancy Delivery
Date for such Property. Purchaser's entry on the Properties shall be
subject to the terms and conditions of the Confidentiality and Access
Agreement.
(n) Seller shall use commercially reasonable efforts to obtain a
no further action letter or no further remediation letter, from the
appropriate Governmental Entity providing that the former underground
storage tanks identified in Schedule 5.1(n) were closed in accordance with
all applicable Environmental Laws.
Section 5.2. Reasonable Best Efforts to Consummate the Transactions.
(a) Subject to the terms and conditions provided herein and to
Applicable Laws, each of the parties shall use its reasonable best efforts to
take, or cause to be taken, all actions, and do, or cause to be done, and assist
and cooperate with the other party in doing, in the most expeditious manner
practicable, all things necessary, proper or advisable to ensure that the
conditions set forth in Article X hereof are satisfied and to consummate the
transactions contemplated hereby.
(b) Without limiting the generality of the foregoing, and subject to the
terms and conditions in this Agreement, each of Purchaser and Seller shall:
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(i) to the extent required under Applicable Laws, promptly
make any required filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR
ACT"), with respect to the transactions contemplated by
this Agreement and thereafter respond as promptly as
practicable to any inquiries or requests received from
any Governmental Authority for additional information or
documentation;
(ii) not extend any waiting period under the HSR Act or enter
into any agreement with any Governmental Authority not
to consummate the transactions contemplated by this
Agreement, except with the prior consent of the other
party hereto (which consent shall not be unreasonably
withheld or delayed);
(iii) use their reasonable best efforts to cooperate with one
another in (A) determining which filings and
notifications are required to be made under Applicable
Laws with, and which consents, licenses, approvals,
permits, waivers, orders or authorizations are required
to be obtained under Applicable Laws from, Governmental
Entities in connection with the execution and delivery
of this Agreement and the consummation of the
transactions contemplated by this Agreement, (B) timely
making all such filings and notifications and timely
seeking all such consents, licenses, approvals, permits,
waivers, orders or authorizations and (C) as promptly as
practicable, responding to any request for information
from such Governmental Entities;
(iv) subject to any restrictions under Applicable Laws, to
the extent practicable, promptly notify each other of
any communication to that party from any Governmental
Entity with respect to the transactions contemplated by
this Agreement and permit the other party to review in
advance any proposed written communication to any
Governmental Entity;
(v) not agree to participate in any meeting with any
Governmental Entity in respect of any filing,
investigation or other inquiry with respect to the
transactions contemplated by this Agreement unless it
consults with the other party in advance and, to the
extent permitted by such Governmental Entity, gives the
other party the opportunity to attend and participate
thereat, in each case to the extent practicable;
(vi) subject to any restrictions under Applicable Laws,
furnish the other party with copies of all
correspondence, filings and communications (and
memoranda setting forth the substance thereof) between
it and its affiliates and their respective
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representatives on the one hand, and any Governmental
Entity or members of its staff on the other hand, with
respect to the transactions contemplated by this
Agreement (excluding documents and communications that
are subject to preexisting confidentiality agreements
and to the attorney-client privilege or work product
doctrine);
(vii) furnish the other party with such necessary information
and reasonable assistance as such other party and its
affiliates may reasonably request in connection with
their preparation of necessary filings, registration, or
submissions of information to any Governmental Entities
in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, any
filings necessary or appropriate under the provisions of
the HSR Act;
(viii) use its reasonable best efforts to avoid the entry of,
or to have vacated, lifted, reversed, overturned or
terminated, any order, judgment, injunction or decree
(whether temporary, preliminary or permanent) or any
other judicial, administrative or legislative action or
proceeding ("ORDER") that would restrain, prevent or
delay the closing of the transactions contemplated by
this Agreement, including, without limitation, defending
through litigation on the merits any claim asserted in
any court by any party; and
(ix) use its reasonable best efforts to take any steps
necessary to avoid or eliminate any impediment under any
Applicable Law that may be asserted by any Governmental
Entity or private party with respect to the transactions
contemplated by the Agreement so as to enable the
Closings to occur as soon as reasonably practicable
after the date hereof.
(c) Seller and Purchaser agree that they will seek with respect to each
Lease set forth on Schedule 5.2(c) attached hereto a written consent and/or
waiver from either the Landlord under such Lease, any ground lessor and/or from
other property owners pursuant to a recorded declaration, pursuant to which such
Landlord, ground lessors or property owners, as applicable, consents to (as
applicable, based upon the terms of such Lease, ground lease or declaration):
(i) the assignment of such Lease from Seller to Purchaser and Landlord waives
any termination or recapture rights in favor of such Landlord under the Lease,
(ii) the closing of business at the Leased Property by Purchaser (after such
assignment and transfer of the Lease) for up to ninety (90) days (subject to
extension for up to forty-five (45) days due to unusually severe weather
conditions, labor strikes, latent defects or conditions in or on the Property
discovered by Purchaser during construction, and other materially adverse events
not within Purchaser's reasonable control, provided that if any such latent
defects or conditions require that Purchaser obtain a building permit from a
Governmental Entity in order to remedy such defect or condition, then the
extension period shall end on the date forty five (45) days after the issuance
by the Governmental Entity to Purchaser of such building permit) for purposes of
renovating the
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Property for Purchaser's intended use, (iii) Purchaser making exterior and/or
structural alterations to the Improvements on the Property for purposes of (x)
compliance with the Americans with Disabilities Act, (y) constructing an awning
or rain shelter at the front entrance of the Property, and/or (z) constructing a
customer pick up dock, and consents to a change in the signage on the Property,
and/or (iv) the recording of a memorandum of lease or similar instrument
sufficient to enable the Title Company to issue a Leasehold Policy (and
execution of such document by the Landlord) with respect to those Leased
Properties located in Puerto Rico for which no memorandum of lease or similar
instrument is currently recorded (such consents being hereinafter referred to
collectively as the "REQUIRED CONSENTS"). The form of Required Consents to be
sent to Landlords, ground lessors or property owners, as applicable, shall be
approved by Seller and Purchaser, and, once approved, Seller shall send the
Required Consent forms to the Landlords, ground lessors and property owners.
Seller and Purchaser shall each use their reasonable best efforts to obtain the
Required Consents as soon as practicable after the Effective Date, provided,
however, that neither Seller nor Purchaser shall have any obligation to pay any
sum of money or commence any action or proceeding in order to obtain the same.
In connection with seeking each Required Consent, Purchaser shall cooperate with
the reasonable requests of the Landlords, ground lessors or property owners
(including, without limitation, reasonable modifications to the Lease or other
applicable documents), provided that in no event shall Purchaser be required, in
connection with obtaining a Required Consent, to (i) pay any sum of money to any
Landlord, ground lessor or property owner (including through any increase in
rent or additional charges), or (ii) make any agreements that could increase
Purchaser's liability under a Lease or other applicable documents or materially
interfere with or otherwise adversely affect in any material respect Purchaser's
ability to conduct its intended business on the Property. Seller and Purchaser
(x) shall jointly meet and/or communicate with each Landlord, ground lessor or
property owner with respect to any initial request for a Required Consent, and
(y) following such initial meeting or communication, shall establish and adhere
to mutually acceptable procedures for communicating with Landlords, ground
lessors or property owners and their representatives and attorneys with respect
to such Required Consents and keeping the other party (to the extent that such
other party is not involved in such subsequent meetings or communications)
advised with respect thereto.
(d) Seller and Purchaser shall promptly request, and use reasonable and
good faith efforts to obtain prior to Closing with respect to any Leased
Property, (i) an estoppel letter from each Landlord of the Leased Properties, in
substantially the form specified in the particular Lease (provided such form of
estoppel is customary for retail leases of such age and location) or, if no form
of estoppel is prescribed in a Lease, in substantially the form attached hereto
as Exhibit E, and dated within thirty (30) days of such Closing; (ii) with
respect to any Properties as requested by Purchaser, including without
limitation the Properties set forth on Schedule 5.2(d) attached hereto, a
subordination, non-disturbance and attornment agreement (an "SNDA") from the
Landlord's lender and/or, in the event the Lease is actually a sublease subject
to a Ground Lease (as hereinafter defined), from Landlord's ground lessor, in
form and substance reasonably acceptable to Purchaser; (iii) a release from the
Landlord in favor of Seller with respect to the Lease, in form and substance
reasonably satisfactory to Seller, and (iv) an estoppel letter from each
subtenant of the Approved Subleases, in form and substance similar to the form
attached to the applicable Approved Sublease, or if no form of estoppel letter
is attached to such Approved Sublease, an estoppel letter in substantially the
form attached hereto as Exhibit F, in each case dated within thirty (30) days of
Closing. Notwithstanding the foregoing, (x) the receipt by
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Purchaser of executed estoppels with respect to any Lease or Approved Sublease
shall not be a condition to Purchaser's obligation to close with respect to the
transfer and assignment of the applicable Lease provided that Seller delivers a
Seller Tenant Estoppel or Seller Subtenant Estoppel at Closing for any Leases or
Approved Subleases for which such estoppels are not obtained, (y) the receipt by
Seller of an executed release with respect to any Lease shall not be a condition
of Seller's obligation to close with respect to the transfer and assignment of
such Lease, and (z) the receipt by Purchaser of any SNDAs shall not be a
condition to Purchaser's obligation to close with respect to the transfer and
assignment of the applicable Lease except with respect to those Leased
Properties described in Section 10.1(a)(iii)(y).
(e) Notwithstanding the foregoing, nothing in this Agreement shall
require Purchaser to agree to the sale, transfer, divestiture or other
disposition of any assets (including any lines of business and any Transferred
Assets or Pharmacy Assets to be acquired hereunder) of Purchaser. Furthermore,
notwithstanding anything to the contrary in this Agreement, Seller shall not,
without Purchaser's prior written consent, take any action or commit to take any
action that would limit the Purchaser's freedom of action with respect to, or
its ability to retain, any of the Transferred Assets or Pharmacy Assets.
Section 5.3. Tax-Deferred Exchange. Upon the written request of Seller or
Purchaser, the other party agrees to cooperate with the requesting party to
effectuate a tax deferred like kind exchange (an "EXCHANGE") as contemplated by
Section 1031 of the Code, or other tax efficient transaction, including, in the
case of an Exchange, by use of a qualified intermediary (a "QUALIFIED
INTERMEDIARY"), with respect to (a) the sale of any Property by Seller and/or
(b) the acquisition of any Property by Purchaser or a permitted assignee of
Purchaser; provided, however, that (i) neither party shall have any liability to
the other if such other party is unable to effectuate an Exchange (or other tax
efficient transaction) for any reason, other than by reason of a default under
this Agreement by the other party, including, without limitation, that neither
party shall have liability under any circumstances for any part of any tax
savings or tax benefit that the other party might have enjoyed by reason of an
Exchange; (ii) either party's ability to effectuate an Exchange (or other tax
efficient transaction) shall not be a condition to its obligation to consummate
any transaction contemplated by this Agreement, and (iii) neither party shall be
obligated to incur any costs, expenses or liabilities of the other party with
respect to the Exchange. Either party's election to exchange, rather than sell
or buy any Property for other real estate of a like kind shall be at no cost or
liability to the other, and the Exchanger (as defined below) shall pay all
additional costs associated with the use of the Qualified Intermediary. Should a
Property become part of an Exchange, each party electing to exchange the
Property (the "EXCHANGER") hereby agrees that the other party may enforce and
all representations, warranties, covenants and other obligations of the
Exchanger under this Agreement directly against the Exchanger, and the other
party agrees that the Exchanger may enforce any and all representations,
warranties, covenants and other obligations of the other party under this
Agreement directly against the other party. If both parties request an Exchange
with respect to the same Property, the parties agree to cooperate to effectuate
such Exchange in accordance with the preceding principles.
Section 5.4. Disclosure. Purchaser and Seller will each use their
reasonable best efforts to coordinate and simultaneously release their first
public announcement or press release relating to the transactions contemplated
by this Agreement. In addition, prior to the Initial
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Closing Date, Purchaser and Seller shall consult with each other before issuing,
and provide each other a reasonable opportunity to review and comment upon, any
press release or other similar written public statements with respect to the
transactions contemplated hereby (including, without limitation, the first
public announcement or press release) and shall not issue any such press release
or written public statement prior to such consultation, except as may be
required by Applicable Law, by court process or by obligations pursuant to any
listing agreement with any national securities exchange.
Section 5.5. Additional Approved Sublease Documents. With respect to any
documents (or portions thereof) set forth on Schedule 5.5 or noted on Schedule
8.1(j) as having not been made available by Seller to Purchaser prior to the
Effective Date (collectively, "ADDITIONAL APPROVED SUBLEASE DOCUMENTS"), Seller
shall use good faith efforts to provide to Purchaser, at least ten (10) Business
Days prior to the applicable Closing, true and complete copies of such
Additional Approved Sublease Documents. Notwithstanding the foregoing, Seller
shall deliver to Purchaser, at least ten (10) Business Days prior to the then
applicable Closing, true and complete copies of the Additional Approved Sublease
Documents set forth on Schedule 5.5 attached hereto.
Section 5.6. Purchase of Fee Interest in Leased Properties. Prior to the
Closing Date with respect to a Leased Property, Purchaser shall not acquire or
attempt to acquire the underlying fee simple interest with respect to such
Leased Property, or make any offer or purchase inquiry with respect thereto.
Seller (or its affiliates) shall be entitled to acquire or enter into a contract
to acquire the underlying fee simple interest with respect to any Leased
Property prior to the Closing Date with respect to such Leased Property,
provided, that, in the event of such acquisition, Seller shall, as the fee owner
of such Leased Property, consent to (without requiring Purchaser to agree to
amend or otherwise modify the Lease) (i) the assignment of the leasehold
interest in the Lease to Purchaser, (ii) the closing of business at the Leased
Property by Purchaser in connection with any renovation of the Leased Property
for Purchaser's intended use as contemplated hereunder, and (iii) structural or
exterior alterations or changes in signage in accordance with the standard plans
and specifications for Purchaser's use as a [Sears] brand store to the extent
such Lease requires the consent of the Landlord to any of the foregoing.
Notwithstanding the foregoing, neither Seller nor any affiliate of any of Seller
shall purchase or enter into a contract to purchase the fee simple interest with
respect to more than twenty five (25) of the Leased Properties prior to the
final Closing Date, without the prior written approval of Purchaser.
Section 5.7. Employee Matters.
(a) From and after the applicable Closing Date until the Occupancy
Delivery Date with respect to a Property, Seller shall cooperate with Purchaser
to attempt to make available to Purchaser (or any of its officers, employees or
agents or its Designee) each Employee (including all pharmacy personnel)
employed by Seller at such Property (a "STORE EMPLOYEE") for the purpose of
interviewing such individuals for possible employment with Purchaser or its
Designee, to the extent that such individuals desire to interview for possible
employment with Purchaser or its Designee. Prior to the Occupancy Delivery Date
with respect to a Property, Purchaser shall arrange an interview with each
interested Store Employee employed at such Property for possible employment with
Purchaser or its Designee. However, notwithstanding the
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foregoing, nothing in this Agreement shall obligate or constitute the agreement
of Purchaser or any of its affiliates or its Designee to recruit or hire any
Store Employee or any other employee or former employee of Seller. Furthermore,
in the event that Purchaser or any of its affiliates or its Designee determines
to hire any Store Employee or any other employee or former employee of Seller,
any such hiring and employment shall be at the sole discretion of Purchaser or
its Designee and any terms or conditions of such employment shall be determined
by Purchaser or its Designee, in its respective sole discretion.
(b) From and after the Effective Date until thirty (30) days (or sixty
(60) with respect to Pharmacy Employee) after the applicable Closing with
respect to a Property, Seller shall not transfer or reassign any pharmacy
personnel employed by Seller in connection with Seller's operation of its
pharmacy business from any Property (a "PHARMACY EMPLOYEE") or any store manager
or assistant store manager (either, a "STORE MANAGER") employed by Seller at
such Property to any other stores of Seller or any of its subsidiaries, unless
such a Pharmacy Employee or Store Manager requests a transfer or reassignment
for health or family reasons or for similar reasons, in which case Seller may
transfer or reassign such employee and Seller shall promptly notify Purchaser of
any such transfer or reassignment. From and after the Effective Date until the
applicable Closing Date with respect to a Property, Seller may communicate with,
but shall not make an offer to, any Pharmacy Employee or Store Manager employed
by Seller at such Property to continue to work for Seller after the applicable
Occupancy Delivery Date; provided, however, in the event Seller notifies
Purchaser that it desires to make an offer to a Store Manager prior to the
applicable Closing Date and provides Purchaser with no less than ten (10) days
after Purchaser's receipt of such notice to interview such Store Manager for
possible employment with Purchaser, Seller may make an offer to such Store
Manager at any time after such ten (10) day period. Except as set forth in the
preceding sentence, Purchaser shall not recruit, solicit, interview, make an
offer to or otherwise communicate with Seller's Employees prior to the Closing
Date for the applicable Property. After the Closing Date for the applicable
Property, both Seller and Purchaser shall have the right to recruit, solicit,
interview, make an offer to and communicate with Seller's Employees with respect
to prospective employment, except that (notwithstanding anything to the contrary
set forth in this Section 5.7(b)) with respect to Pharmacy Employees Seller may
not make an offer of employment to such Pharmacy Employee (or engage such
Pharmacy Employee as an independent contractor or leased employee) for any other
store of Seller or any of its subsidiaries during the period beginning on the
Effective Date and ending on the sixtieth (60th) day after the applicable
Closing Date, subject to the limitations on Seller's right to transfer or
reassign Pharmacy Employees or Store Managers, for health or family or similar
reasons, pursuant to the first sentence of this Section 5.7(b).
(c) Seller shall be liable for all claims relating to COBRA continuation
coverage (within the meaning of Treas. Reg. Section 59.4980B-9) attributable to
"qualifying events" with respect to any Employee and his or her beneficiaries
and dependents that occur on or before the Occupancy Delivery Date with respect
to the Property at which the Employee rendered service; provided that Purchaser
shall not take, or encourage any other person to take, any measures that
discourage or are intended to discourage any Employee hired by Purchaser from
enrolling in Purchaser's health and medical plans, programs, policies or
arrangements, nor shall Purchaser take, or encourage or facilitate any other
person to take, any measures that encourage or are intended to encourage any
Employee to apply for COBRA continuation coverage.
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Section 5.8. Environmental Due Diligence for Approved Sublease Space.
Purchaser shall have the right subject to the Confidentiality and Access
Agreement to perform Phase I and Phase II environmental investigations with
respect to the portions of the Properties subleased pursuant to the Approved
Subleases (each a "SUBLEASED PREMISES") identified on Schedule 5.8. In the event
any such report discloses an environmental condition in, on, under or relating
to any such Subleased Premises which is in violation of any Environmental Law
and the estimated cost to remediate such environmental condition is reasonably
estimated by Purchaser's consultant to exceed five percent (5%) of the Purchase
Price allocable to such Property, Purchaser shall notify Seller in writing of
the same, and Purchaser shall have the right, within thirty (30) days after the
Effective Date, to terminate this Agreement with respect to such Property, in
which event the Property Termination Procedure shall apply.
ARTICLE VI
STATUS OF TITLE TO THE PROPERTIES
Section 6.1. Preliminary Evidence of Title. Within thirty (30) days
following the Effective Date, Purchaser shall use commercially reasonable
efforts to obtain each of the following documents (and shall provide to Seller a
copy of such documents promptly after Purchaser's receipt thereof):
(a) with respect to the Owned Properties, title insurance
commitments (the "OWNER'S TITLE COMMITMENTS") for ALTA Form B (1992)
Owner's Title Insurance Policies proposing to insure Purchaser and
committing to insure each Owned Property, issued by First American Title
Insurance Company (referred to herein as the "TITLE COMPANY" or
"ESCROWEE").
(b) with respect to the Leased Properties, leasehold title
insurance commitments (the "LEASEHOLD COMMITMENTS," and, together with the
Owner's Title Commitments, the "TITLE COMMITMENTS") for ALTA Leasehold
Owners Title Insurance Policies proposing to insure Purchaser and
committing to insure the leasehold interest in each Leased Property,
issued by the Title Company.
(c) current survey plats (collectively, the "SURVEYS") of each of
the Properties certified to Purchaser and the Title Company (and such
other persons or entities as Purchaser may designate) by a surveyor
registered in the state in which such Property is located, prepared in
accordance with the Minimum Standard Detail Requirements for ALTA/ACSM
Land Title Surveys.
Section 6.2. Title Defects. If any Title Commitment or Survey discloses
any (i) mortgages, deeds of trust, financing statements, judgments, mechanic's
liens, materialmen's liens, tax liens, or similar monetary liens, (ii) material
encroachments, or (iii) other title exceptions or defects that materially and
adversely affect the future use or operation of a Property as a Sears brand
retail store, including, without limitation, the sale of consumables and
transactional merchandise (a "MATERIAL TITLE DEFECT"), Purchaser shall use
commercially reasonable efforts to notify Seller in writing of such Material
Title Defect within ten (10) days after Purchaser's receipt of a Title
Commitment and Survey for a Property, but in no event later
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than forty five (45) days after the Effective Date (the "TITLE REVIEW PERIOD"),
and Seller shall have ten (10) days from the receipt of Purchaser's notice
("SELLER'S TITLE CURE ELECTION PERIOD") to elect whether to have the Material
Title Defect removed or cured (or to commit to do the same), to the reasonable
satisfaction of Purchaser. In the event Seller elects, within Seller's Title
Cure Election Period, not to remove or cure such Material Title Defect,
Purchaser shall have the option, within ten (10) days after the expiration of
Seller's Title Cure Election Period, to either (i) waive such Material Title
Defect and proceed to Closing for such Property in accordance with this
Agreement, or (ii) elect not to acquire such Property and related Transferred
Assets, in which event the Property Termination Procedure shall apply. In the
event Seller elects, within Seller's Title Cure Election Period, to remove or
cure such Material Title Defect, Seller shall be entitled to a period ending on
the later of (1) 30 days after the expiration of Seller's Title Cure Election
Period, or (2) the Closing Date with respect to such Property, to remove or cure
such Material Title Defect, upon which removal or cure the parties shall proceed
to Closing for such Property in accordance with this Agreement. Any liens,
encumbrances, title defects or other title exceptions disclosed in any Title
Commitment or Survey and which do not constitute Material Title Defects (and any
Material Title Defects which Purchaser elects to waive pursuant to this Section
6.2), shall be referred to herein as the "PERMITTED EXCEPTIONS". Notwithstanding
the foregoing, Seller shall cause to be removed and discharged of record prior
to Closing (i) any lien encumbering the Property and securing money borrowed by
Seller, and (ii) any mechanic's lien, judgment lien or other lien securing a
liquidated sum relating to work performed by or on behalf of Seller or otherwise
required to be removed by Seller pursuant to the applicable Lease for such
Property, provided that Seller shall not be required to remove or discharge at
Closing any bona fide mechanic's liens, judgment liens or other liens (excluding
judgment liens relating to non-appealable judgments) encumbering the Property
and described in this clause (ii) if the aggregate amount of such liens exceeds
five percent (5%) of the Purchase Price allocated to such Property, and if
Seller so elects not to remove and discharge such liens at Closing pursuant to
this proviso, then Purchaser shall have the same rights (as set forth in the
second sentence of this Section 6.2) as if Seller shall have elected not to cure
a Material Title Defect, except that if Purchaser elects to waive such Material
Title Defect and to proceed to Closing, the Purchase Price allocated to such
Property shall be reduced by five percent (5%).
Section 6.3. Permitted Exceptions. As used in this Agreement, the term
"PERMITTED EXCEPTIONS" shall mean the following:
(a) the matters deemed to be Permitted Exceptions pursuant to
Section 6.2;
(b) any title exceptions or defects (A) over which the Title
Company is willing to insure (without additional cost to Purchaser or
where Seller pays such cost for Purchaser's account), (B) against which
the Title Company is willing to provide affirmative insurance (without
additional cost to Purchaser or where Seller pays such cost for
Purchaser's account) (provided that any insurance by the Title Company
pursuant to clauses (A) and (B) shall be in a form acceptable to Purchaser
in its reasonable discretion), (C) which will be extinguished upon the
Closing of the Property, or (D) which are the responsibility of a Landlord
under a Lease to cure, correct or remove and which will not result in a
forfeiture of the tenant's interest under the Lease or in the Property;
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(c) Real property taxes which are a lien but not yet due and
payable, subject to proration in accordance with Section 4;
(d) any Applicable Laws, rules, regulations, statutes, ordinances,
orders or other legal requirements affecting the Property, including,
without limitation, those relating to zoning and land use;
(e) any installment not due and payable as of the Closing Date of
assessments imposed after the date hereof and affecting the Property or
any portion thereof; and
(f) any utility company rights, easements and franchises for
electricity, water, steam, gas, telephone or other service or the right to
use and maintain poles, lines, wires, cables, pipes, boxes and other
fixtures and facilities in, over, under and upon the Property, provided
the same do not materially and adversely affect the present use of the
Property and will not materially and adversely affect Purchaser's intended
use of the Property.
Section 6.4. Cooperation By Seller. If necessary in order for the Title
Company to issue a Title Commitment or to deliver to Purchaser copies of the
underlying title documents, Seller shall, promptly after request from Purchaser
or Purchaser's attorneys, (and, if necessary, shall request that the applicable
Landlord) deliver to the Title Company or any applicable Governmental Entity any
authorizations reasonably required by the Title Company or the applicable
Governmental Entity, in order to release such documents to Purchaser.
ARTICLE VII
CASUALTY LOSS AND CONDEMNATION
Section 7.1. Condemnation or Material Casualty. If, prior to any Closing,
any Property or any part thereof shall be condemned, or destroyed or materially
damaged by fire or other casualty (that is, damage or destruction which
Purchaser and Seller reasonably estimate would cost in excess of $750,000 to
repair or restore or which materially impedes access to the respective Property
or any material part thereof) (a "MATERIAL CASUALTY"), Purchaser shall have the
option, which may be exercised not later than the later of (x) ten (10) days
prior to the applicable Closing, or (y) ten (10) days following the date
Purchaser receives written notice of the condemnation or material damage, to:
(a) proceed to consummate the transactions contemplated by this
Agreement with respect to the Property, notwithstanding such casualty or
condemnation, and receive a credit at Closing in the amount of the costs
to repair any damage (in an amount reasonably acceptable to Seller and
Purchaser); or
(b) elect not to acquire the Property and other Transferred Assets
related to such Property, in which event the Property Termination
Procedure shall apply.
(c) In the event that Seller and Purchaser cannot agree as to the
amount of credit set forth in Section 7.1(a) above, Seller and Purchaser
agree to promptly submit the matter to an independent, licensed third
party contractor that has performed similar work
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in the area where the Property is located (a "QUALIFIED CONTRACTOR") and
that is mutually acceptable to Seller and Purchaser, to determine the
amount of such credit. If the parties are unable to agree upon such
contractor, each party shall select a Qualified Contractor, and the two
(2) contractors shall mutually agree on a third Qualified Contractor,
which third contractor shall determine the amount of such credit. Each
party shall pay the cost of its respective contractor and the parties
shall each pay for one-half of the cost of the mutually acceptable
contractor or the third contractor, as applicable.
Section 7.2. Non-Material Casualty. If there is any other damage or
destruction (that is, damage or destruction which Purchaser and Seller
reasonably estimate would cost $750,000 or less to repair or restore, or which
does not materially impede access to the Property or any material part thereof),
Seller shall either, at Seller's option, (i) completely repair such damage prior
to Closing in a manner reasonably satisfactory to Purchaser, or (ii) allow
Purchaser a credit against the Purchase Price in an amount equal to the
estimated cost of repair (determined as set forth in Section 7.1 above), as of
the Closing Date.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1. Seller's Representations and Warranties. Seller represents
and warrants to Purchaser that the following are true, complete and correct as
of the Effective Date and shall be true, complete and correct as of each Closing
Date (with respect to the Properties being transferred and conveyed as of such
Closing Date):
(a) Seller is duly organized, validly existing, and in good
standing under the laws of the State in which Seller was incorporated.
Seller has all requisite corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of Seller
are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by Seller and, assuming the due authorization, execution and
delivery of this Agreement by Purchaser, constitutes the legal, valid and
binding obligation of Seller, enforceable against Seller in accordance
with its terms, except as may be limited by (i) any bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii) the law of
fraudulent transfer and conveyance.
(b) Neither the execution and delivery of this Agreement nor its
performance by Seller will conflict with or result in the breach of any
contract, agreement, or Applicable Laws to which Seller is a party, other
than Leases, ground leases or Permitted Exception documents for which
Required Consents are necessary as set forth in Section 5.2(c).
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(c) No approvals, consents, authorizations, declarations,
registrations or notices of or to any Governmental Entity that have not
been received or made is required by or with respect to Seller in
connection with the execution, delivery and performance of this Agreement
by Seller or the consummation by Seller of the transactions contemplated
hereby except for (i) the filing of any premerger notification and report
forms and the expiration or termination of any waiting periods required by
the HSR Act, (ii) any applicable approvals, consents, authorizations,
declarations, registrations or notices under any pharmacy regulations or
to any Governmental Entities or third party administrators in connection
with the transactions contemplated under Article II ("PHARMACY
APPROVALS"), and (iii) any other approvals, consents, authorizations,
declarations, registrations or notices that, if not made or obtained,
would not materially and adversely affect the ability of Seller to perform
its obligations under this Agreement or under any instrument, document or
agreement required to be executed and delivered pursuant hereto
(collectively, the "RELATED AGREEMENTS") or to consummate the transactions
contemplated hereby or thereby.
(d) Seller is the owner of the Personal Property, free and clear
of all liens and encumbrances.
(e) Seller has not entered into any currently effective agreement
to lease (other than the Leases), sell, mortgage or otherwise encumber or
dispose of its interest in any of the Transferred Assets or any part
thereof (other than currently effective Subleases, or otherwise in the
ordinary course of business), except for this Agreement, any Permitted
Exceptions and mortgages, deeds of trust or other encumbrances that will
be satisfied and released from the Properties at or before the Closing.
(f) Except as set forth on Schedule 8.1(f) attached hereto, to the
knowledge of Seller, Seller has not received any written notice that the
Transferred Assets or any part thereof are presently in violation in any
material respect of any Applicable Laws, or any covenants or restrictions
of record applicable to the particular Transferred Assets, provided that
notwithstanding anything to the contrary herein, the provisions of this
Section 8.1(f) relating to Violations shall be applicable only as of the
Effective Date, and any Violations issued with respect to the Properties
subsequent to the Effective Date shall be governed by Section 5.1(d)
hereof.
(g) Except as set forth on Schedule 8.1(g), to the knowledge of
Seller, there is no action, proceeding or investigation pending or
threatened against or involving the Transferred Assets or against Seller
with respect to the Transferred Assets before any court or governmental
department, commission, board, agency or instrumentality.
(h) Except as set forth on Schedule 8.1(h) attached hereto, Seller
has not received written notice of any proposed material reassessment of
any Property for purposes of real estate taxes. Except as set forth on
Schedule 8.1(h-1), Seller has not received written notice of any special
or general assessments affecting any Property.
(i) Schedule 1.1(b)-1 describes all of the Leases, including all
amendments, modifications and revisions thereof (all of which are deemed
included within the term
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"Leases" defined herein), and Seller has made available to Purchaser true
and complete copies of all Leases, except as set forth on Schedule
1.1(b)-1. Each of the Leases is in full force and effect. To Seller's
knowledge, no commissions to any broker or leasing agent and payable by
Seller are due or will become due pursuant to an agreement made by Seller
on account of any of the Leases or upon extension or renewal of the
original term thereof, whether or not pursuant to an option or other
rights contained in the Lease. Except as set forth on Schedule 8.1(i)-1
attached hereto, Seller has not received or given any written notice from
or to a Landlord that any default exists on the part of the Seller or the
respective Landlord under any of the Leases, which default has not been
cured. Schedule 8.1(i)-2 discloses all unapplied security and other
deposits held by Landlords under the Leases. Seller has not made any
advance payment of rent (other than for the current month) on account of
any of the Leases. All written or oral leases, subleases, license
agreements, concession agreements or tenancies or rights of possession
affecting the Leased Properties entered into by Seller other than the
Leases (collectively, the "SUBLEASES") shall be terminated effective at or
prior to each Occupancy Delivery Date (except for those Subleases and
consent agreements listed on Schedule 8.1(j), which shall not be
terminated (the "APPROVED SUBLEASES")). All of the Leases are assignable
by Seller at Closing as contemplated by this Agreement without the consent
of any other party, except for the Required Consents. The square footage
amounts for Seller's stores at the Properties set forth on Schedule
8.1(i)-3 do not include any of the space subleased under the Approved
Subleases.
(j) (i) Schedule 8.1(j) describes the Approved Subleases,
including all amendments, modifications and revisions thereof (all of
which are deemed included within the term "APPROVED SUBLEASES"), and,
except for the Additional Approved Sublease Documents, Seller has made
available to Purchaser true and complete copies of all the Approved
Subleases, (ii) each of the Approved Subleases is in full force and
effect, (iii) except as set forth in Schedule 8.1(j), Seller has not
received or given any written notice from or to a subtenant that any
default exists on the part of Seller or the subtenant under any of the
Approved Subleases, which default has not been cured, and, to Seller's
knowledge, no subtenant is currently in default in any material respect
under any Approved Sublease, (v) to Seller's knowledge, no right or claim
of setoff against rent exists or has been claimed in writing to exist by
any subtenant under the Approved Subleases, (vi) Schedule 8.1(j) discloses
all security and other deposits made by each subtenant under the Approved
Subleases, (vii) Seller has not received any advance payment of rent
(other than for the current month) under any of the Approved Subleases
except as shown on Schedule 8.1(j), and (viii) the premises subleased
pursuant to the Approved Subleases are located outside the walls of
Seller's store operated on each Property. Notwithstanding the foregoing,
with respect to those Approved Subleases comprising consent agreements and
not actual Subleases, Seller's representations and warranties set forth
above shall only be made to Seller's knowledge. Notwithstanding anything
herein to the contrary, with respect to Seller's representations and
warranties set forth in Section 8.1(i) and (j) of this Agreement, upon
receipt by Purchaser of an estoppel letter (in the form described in this
Agreement) from a Landlord or subtenant, as applicable, for any Property,
Seller's representations and warranties with respect to the matters
contained in such estoppel letter shall terminate and be of no further
force or effect.
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(k) Except as disclosed on Schedule 8.1(k) attached hereto and
except as disclosed in any Phase 1 or Phase 2 reports or other due
diligence information or materials received by Purchaser, Seller has
received no written notice: (i) of the presence of any under or
above-ground storage tanks on, in or under any Property; (ii) that there
are any uncured violations of Environmental Laws that have been issued and
are currently in effect with respect to (x) any Hazardous Materials or any
asbestos-containing materials, lead-based paint, or mold contamination on,
in or under any Property; or (y) the presence of any polychlorinated
biphenyls or radioactive materials located on any Property. To Seller's
knowledge, there is no ongoing environmental remediation or investigation
being performed by or on behalf of Seller with respect to any of the
Properties.
For purposes of this Agreement, the phrase "ENVIRONMENTAL
LAWS" shall mean any federal, state or local law, statute, ordinance,
order, decree, rule or regulation and any common laws regarding health,
safety, radioactive materials, or the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
("CERCLA"); the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq. ("RCRA"); the Toxic Substances Control Act, 15 U.S.C.
Section 2601, et seq. ("TSCA"), the Occupational, Safety and Health Act,
29 U.S.C. Section 651, et seq. ("OSHA"), the Clean Air Act, 42 U.S.C.
Section 7401, et seq. ("CAA"), the Federal Water Pollution Control Act, 33
U.S.C. Section 1251, et seq. ("FWPCA"), the Safe Drinking Water Act, 42
U.S.C. Section 3001, et seq. ("SDWA"), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1802, et seq. ("HMTA") and the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section
11001, et seq. ("EPCRA"), the Endangered Species Act of 1973, 16 U.S.C.
Section 1531 et seq. ("ESA"), the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. Section 136 et seq. ("FIFRA") and other
comparable federal, state or local laws, each as amended, and all rules,
regulations and guidance documents promulgated pursuant thereto or
published thereunder. The phrase "HAZARDOUS MATERIALS" shall mean each
element, compound, chemical mixture, contaminant, pollutant, material,
waste or other substance which is defined, determined or identified as
hazardous or toxic under Environmental Laws or the Release of which is
regulated under Environmental Laws. The term "Release" shall mean the
discharge, disposal, deposit, injection, dumping, spilling, leaking,
leaching, placing, presence, pumping, pouring, emitting, emptying,
escaping, or other release of any Hazardous Material.
For purposes of the representations and warranties set forth
in the foregoing clause (l) of Section 8.1 hereof, "HAZARDOUS MATERIALS"
shall not include consumer products, office supplies, and cleaning and
maintenance supplies stored and used in the ordinary course of operation
of the Properties and in compliance with applicable Environmental Laws.
(l) Seller has not received any written notice that any fact or
condition exists which would result in the termination or discontinuation
of any necessary utilities at any Property, including, without limitation,
gas, electricity, telephone, water and sanitary and storm sewers.
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(m) No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission from Seller in connection
with the transactions contemplated by this Agreement based upon
arrangements made by Seller.
(n) To Seller's knowledge, Schedule 8.1(n) (i) lists (by store
number) those Leased Properties that are subject to ground leases (i.e.,
where the Leases are actually subleases by Seller which are subject to
ground leases between the Landlord (or its predecessor in interest), as
ground lessee, and the owner of the fee title to the Property, as ground
lessor (collectively the "GROUND LEASES", and (ii) Seller has made
available to Purchaser such Ground Lease documents (including amendments,
modifications and revisions) in Seller's possession and control. To
Seller's knowledge, each of the Ground Leases is in full force and effect.
Seller has not received any written notice that any default exists on the
part of the fee owner of the Property or the respective Landlord under any
of the Ground Leases, which default has not been cured.
Section 8.2. Purchaser's Representations and Warranties. Purchaser
represents and warrants to Seller that the following are true, complete and
correct as of the date of this Agreement and shall be true, complete and correct
as of each Closing Date (with respect to the Properties being transferred and
conveyed as of such Closing Date):
(a) Purchaser is duly organized, validly existing and in good
standing under the laws of the State of New York. Purchaser has all
requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part
of Purchaser are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Purchaser and, assuming the due authorization,
execution and delivery of this Agreement by Seller, constitutes the legal,
valid and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms.
(b) Neither the execution and delivery of this Agreement nor its
performance by Purchaser, will conflict with or result in the breach of
any contract, agreement, law, rule or regulation to which Purchaser is a
party or by which Purchaser is bound.
(c) No approvals, consents, authorizations, declarations,
registrations or notices of or to any Governmental Entity that has not
been received or made is required by or with respect to Purchaser in
connection with the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby except for (i)
the filing of any premerger notification and report forms and the
expiration or termination of any waiting periods required by the HSR Act,
(ii) any Pharmacy Approvals, and (iii) any other approvals, consents,
authorizations, declarations, registrations or notices that, if not made
or obtained, would not materially and adversely affect the ability of
Purchaser to perform its obligations under this Agreement or any Related
Agreement or to consummate the transactions contemplated hereby or
thereby.
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(d) Except for the fees payable to Morgan Stanley & Co.
Incorporated (which shall be paid solely by Purchaser), no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee,
commission or expense in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Purchaser.
(e) Purchaser presently intends to spend in the aggregate amongst
all the Properties the sum of $150,000,000 to renovate the Properties
(based on acquiring all 54 Properties).
Section 8.3. Definitions of Knowledge and Notice. As used in Section 8.1
above, the term "SELLER'S KNOWLEDGE" (or variations thereof) means with respect
to any matter, the actual knowledge of Jeff Stollenwerck, Vice President of Real
Estate of Seller. As used in Section 8.1 above, the term "WRITTEN NOTICE
RECEIVED BY", "RECEIPT OF WRITTEN NOTICE BY" or "WRITTEN NOTICE GIVEN BY" Seller
(or variations thereof) means, with respect to any matter, any written notice
received or given by the person described in the first sentence of this Section
8.3.
Section 8.4. "As-Is" Condition. Purchaser confirms that prior to the
Effective Date, it has inspected the Properties and the Leases, environmental
reports, engineering reports, inspection reports and other reports, documents
and agreements relating to, or prepared or received in connection with,
Purchaser's due diligence investigation of the Transferred Assets, and except as
expressly set forth in (a) this Agreement, including, without limitation, in
Section 8.1 hereof, (b) the Related Agreements, and (c) the closing documents to
be delivered by Seller pursuant to Section 4.2, the Properties shall be conveyed
by Seller, and accepted by Purchaser, in their "as-is" condition as of the
Effective Date, ordinary wear and tear between the Effective Date and the
Closing Date excepted. Other than the express representations and warranties of
Seller expressly set forth herein, Purchaser has not relied upon any oral or
written information from Seller or its employees, affiliates, agents,
consultants, advisors or representatives, nor has Purchaser relied on any
representation or warranty, express or implied, regarding any of the Owned
Properties or the Leased Properties, including, without limitation, any
representation or warranty with respect to (i) the physical condition of the
Property, including the physical condition of any improvement comprising all or
a part of an Owned Property or a Leased Property, (ii) the compliance or
non-compliance with any laws, codes, ordinances, rules or regulations of any
Governmental Entity (including, without limitation, Environmental Laws), (iii)
the presence or alleged presence of any Hazardous Substances at, within, under
or generated by or from any Property, (iv) the current or future use of an Owned
Property, or a Leased Property, including, but not limited to, any Property's
use for commercial, retail, industrial or other purposes. Except as expressly
set forth herein (including in Section 8.1 with regard to the representations
and warranties of Seller as to the Leases), Purchaser further acknowledges that
all materials which have been provided by or on behalf of Seller with respect to
the Properties have been provided without any warranty or representation,
expressed or implied, as to their content, suitability for any purpose,
accuracy, truthfulness or completeness, and Purchaser shall not have any
recourse against Seller in the event of any errors therein or omissions
therefrom. Purchaser is acquiring the Properties based solely on its own
independent investigation and inspection of the Properties and not in reliance
on any information provided by Seller, except for the representations expressly
set forth herein. Purchaser expressly disclaims any intent to rely on any such
materials provided to it by Seller in connection with its due
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diligence and agrees that it shall rely solely on its own independently
developed or verified information, except for the representations of Seller
expressly set forth herein. In amplification, and not in limitation, of the
foregoing, with respect to any Properties conveyed by Seller to Purchaser
hereunder, Purchaser shall acquire such Properties subject to, and without
recourse to Seller (except for any violation or breach by Purchaser of any
representation, warranty or covenant set forth in this Agreement that survives
the Closing, and also subject to the provisions of Section 11.1(d) with respect
to Third Party Environmental Claims) with respect to, any matters or conditions
described in clauses (i) through (iv) of the second sentence of this Section
8.4, and notwithstanding anything to the contrary in Sections 1.3 and 1.4
hereof, none of such matters or conditions shall constitute Excluded Liabilities
or Assumed Liabilities hereunder. The provisions of this Section 8.4 shall
survive Closing.
ARTICLE IX
INVESTIGATION OF EACH PROPERTY
Section 9.1. Access to Properties. From the Effective Date through the
applicable Closing for each Property, Purchaser and its employees, agents,
engineers, surveyors, appraisers, and other representatives (collectively,
"PURCHASER'S REPRESENTATIVES"), shall have the right to enter upon the
Properties and to inspect the same subject to and in accordance with that
certain letter agreement between the parties dated March 16, 2004, as amended by
a First Amendment to such letter agreement dated the date hereof (as so amended,
the "CONFIDENTIALITY AND ACCESS AGREEMENT").
ARTICLE X
CLOSING CONDITIONS
Section 10.1. Purchaser's Closing Conditions. The following conditions
shall be satisfied at Closing with respect to each Property and other
Transferred Asset being conveyed at a Closing:
(a) Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the acquisition of a Property and the related
Transferred Assets at a Closing shall be subject to the fulfillment, at or
prior to the Closing, of each of the following conditions with respect to
such Property and other Transferred Assets (the "PURCHASER CLOSING
CONDITIONS"), any or all of which may be waived in writing by Purchaser in
whole or in part, to the extent permitted by Applicable Law:
(i) the representations and warranties of Seller set forth in this
Agreement with respect to such Transferred Assets shall be
true, correct and complete in all material respects (other
than to the extent already qualified by materiality, in which
case each shall be true, correct and complete in all respects)
as if made by Seller as of such Closing Date;
(ii) Seller shall have performed and satisfied in all material
respects each material obligation, term and condition
hereunder to be performed and
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satisfied by Seller prior to such Closing with respect to the
Transferred Assets being conveyed at such Closing, including,
without limitation, delivery of all closing documents
referenced in Section 4.2(a) of this Agreement or otherwise
required hereunder;
(iii) with respect to any Property being transferred and assigned at
such Closing that is listed on Schedule 5.2(c) hereto,
Purchaser shall have received a Required Consent, executed and
delivered by the Landlord or other third party, as applicable;
with respect to each Lease being assigned and conveyed at such
Closing, (x) an estoppel letter from the Landlord or a Seller
Tenant Estoppel in accordance with Section 5.2(d) hereof, and
(y) an SNDA in accordance with Section 5.2(d) hereof from (I)
the ground lessor with respect to Store No. 7784 (Vega Alta,
Puerto Rico) and (II) from mortgage lenders with respect to
Store Nos. 7446 (Cayey, Puerto Rico) and 7427 (Londonderry,
New Hampshire); and with respect to each Approved Sublease
being assigned at such Closing an estoppel letter from the
subtenant or a Seller Subtenant Estoppel in accordance with
Section 5.2(d) hereof;
(iv) at Closing, Seller shall convey to Purchaser (or, to the
extent permitted hereunder, Purchaser's designee) fee title or
leasehold title, as applicable, to the Property as required by
this Agreement, subject only to the Permitted Exceptions (as
evidenced by an updated title commitment for such Property
ordered by Purchaser and issued by the Title Company showing
no title exceptions other than the Permitted Exceptions);
(v) at the time of Closing, each Property shall be in
substantially the same condition and repair as existed on the
Effective Date, ordinary wear and tear and damage from an
event of casualty or condemnation (subject to Article VII
hereof) excepted;
(vi) no Non-Seller Violation affecting the Property which has not
been cured shall have been issued by any Governmental Entity
with respect to which the estimated cost of correcting or
curing such Non-Seller Violation (as estimated by an
independent architect or engineer designated by Purchaser and
approved by Seller) shall exceed five percent (5%) of the
allocated Purchase Price of such Property;
(vii) as of the applicable Closing Date, there shall not be any
currently effective injunction prohibiting the closing of the
transfer of the applicable Property;
(viii) any applicable waiting periods under the HSR Act with respect
to the transactions contemplated by this Agreement shall have
expired or been terminated; and
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(ix) None of the Additional Approved Sublease Documents provided to
Purchaser pursuant to Section 5.5 hereof shall prohibit
Purchaser from operating a Sears brand store at the Property,
including without limitation the sale of consumable and
transactional merchandise. Purchaser shall promptly review any
Additional Approved Sublease Documents provided by Seller and
shall notify Seller in writing, within five (5) Business Days
of receipt of any Additional Approved Sublease Documents,
whether such documents, in Purchaser's reasonable judgment,
prohibit Purchaser from operating a Sears brand store at the
Property, including without limitation the sale of consumable
and transactional merchandise.
Section 10.2. Seller's Closing Conditions. The obligations of Seller to
consummate the sale of a Property and the related Transferred Assets at a
Closing shall be subject to the fulfillment, at or prior to the applicable
Closing, of each of the following conditions with respect to such Property and
other Transferred Assets (the "SELLER CLOSING CONDITIONS"), any or all of which
may be waived by Seller in whole or in part, to the extent permitted by
Applicable Law:
(i) Purchaser shall have paid the portion of the Purchase Price
due to Seller pursuant to Article III with respect to the
applicable Property and other Transferred Assets;
(ii) Purchaser shall have performed and satisfied in all material
respects each material obligation, term and condition to be
performed and satisfied by Purchaser under this Agreement with
respect to the Property and other Transferred Assets,
including, without limitation, delivery of all closing
documents referenced in Section 4.2(b) of this Agreement or
otherwise required hereunder;
(iii) Each representation or warranty of Purchaser set forth in this
Agreement shall be true and correct in all material respects
(other than to the extent already qualified by materiality, in
which case each shall be true, correct and complete in all
respects) as if made by Purchaser as of such Closing Date;
(iv) as of the applicable Closing Date, there shall not be any
currently effective injunction prohibiting the closing of the
transfer of the applicable Property;
(v) any applicable waiting periods under the HSR Act with respect
to the transactions contemplated by this Agreement shall have
expired or been terminated; and
(vi) with respect to any Property being transferred and assigned at
such Closing that is listed on Schedule 5.2(c) and for which a
Required Consent is required, Seller shall have received such
Required Consent, executed and delivered by the Landlord or
other third party, as applicable; provided, however, that if
Purchaser has elected to waive the receipt of
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such Required Consent as a Purchaser Closing Condition and
agrees to indemnify, defend and hold harmless Seller from and
against all Losses (as defined below) resulting from Seller
assigning such Lease to Purchaser without such Required
Consent, Seller shall waive this Seller Closing Condition and
proceed to the Closing for such Property.
ARTICLE XI
INDEMNIFICATION
Section 11.1. Indemnification.
(a) Indemnification by Seller. Subject to the provisions of this Article
XI, from and after the applicable Closing, Seller agrees to indemnify and hold
harmless Purchaser and its officers, directors, employees and affiliates
(collectively, the "PURCHASER INDEMNIFIED PARTIES"), against any and all actual
loss, damage, liability, cost and expense (including, without limitation,
reasonable attorneys' fees) (collectively, "LOSSES") incurred or suffered by the
Purchaser Indemnified Parties, or any of them, to the extent arising or
resulting from (i) the breach of any representation or warranty made by Seller
in this Agreement, (ii) the breach by Seller of any covenant set forth in
Sections 5.1(b), (c), (e), (f), (j), (m) and (n) hereof, which breach is not
discovered by Purchaser until after Closing, (iii) the breach by Seller of any
covenant set forth in Article II hereof, (iv) any Excluded Liability, other than
Third Party Environmental Claims, as hereinafter defined, and (v) any material
misrepresentation by Seller contained in a Seller Subtenant Estoppel or a Seller
Tenant Estoppel.
(b) Indemnification by Purchaser. Subject to the provisions of this
Article XI from and after the applicable Closing, Purchaser agrees to indemnify
and hold harmless Seller and its officers, directors, employees and affiliates
(the "SELLER INDEMNIFIED PARTIES" and together with the Purchaser Indemnified
Parties, the "INDEMNIFIED PERSONS"), against any and all Losses incurred or
suffered by the Seller Indemnified Parties, or any of them, to the extent
arising or resulting from (i) the breach of any representation or warranty made
by Purchaser in this Agreement and (ii) any Assumed Liability, other than Third
Party Environmental Claims.
(c) As used herein, the term "THIRD PARTY ENVIRONMENTAL CLAIMS" shall
mean shall mean all suits, actions, claims or proceedings of or by Governmental
Entities, Landlords or other third parties with respect to (i) the presence or
alleged presence of Hazardous Materials at, in, under, or generated by or from
any Property, (ii) any Release at or from any Property, or (iii) any alleged or
actual non-compliance with any Environmental Laws with respect to any Property.
(d) Nothing in this Section 11.1 or any other provision of this
Agreement shall preclude either Seller or Purchaser from exercising any rights
or remedies available against each other or any third parties under any
Applicable Laws, including, without limitation, Environmental Laws, common law
or in equity with respect to Third Party Environmental Claims.
Section 11.2. Proceedings Involving Third Parties. The rights and
obligations of Purchaser and Seller in connection with their respective
indemnities pursuant to Section 11.1
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hereunder resulting from any claim or other assertion of liability by a third
party (a "THIRD PARTY PROCEEDING") shall be subject to the following terms and
conditions:
(a) The Indemnified Person shall give prompt written notice of
such Third Party Proceeding to the party from whom indemnification is
sought (the "INDEMNIFYING PERSON"), but the failure to give such notice or
a delay in giving such notice shall not affect the Indemnified Person's
right to indemnification or the Indemnifying Person's obligation to
indemnify as set forth in this Agreement, except to the extent the
Indemnifying Person's ability to remedy, contest, defend or settle with
respect to such Third Party Proceeding is actually prejudiced thereby.
Such written notice shall describe in reasonable detail the facts
constituting the basis for such Third Party Proceeding and the amount of
the potential Loss, in each case to the extent known. Within twenty (20)
days after delivery of such notification, the Indemnifying Person may,
upon written notice thereof to the Indemnified Person, elect to assume
control of the Third Party Proceeding with counsel reasonably satisfactory
to the Indemnified Person. Notwithstanding the foregoing, the Indemnified
Person shall retain control of such Third Party Proceeding if (i) the
Indemnifying Person elects not to assume control, (ii) the Indemnifying
Person shall fail to undertake to defend such Third Party Proceeding, or
diligently pursue or maintain such defense, within a reasonable time after
receipt of notice thereof, (iii) the Indemnified Person reasonably
concludes that the Indemnifying Person and Indemnified Person have
conflicting interests with respect to such Third Party Proceeding which
may materially and adversely affect the Indemnified Person, or (iv) the
Third Party Proceeding involves a claim for injunctive, equitable or other
non-monetary relief.
(b) The party not controlling such Third Party Proceeding (the
"NON-CONTROLLING PARTY") may participate therein at its own expense. The
party controlling such Third Party Proceeding (the "CONTROLLING PARTY")
shall keep the Non-controlling Party advised of the status of such Third
Party Proceeding and shall consider in good faith recommendations made by
the Non-controlling Party with respect thereto. The Non-controlling Party
shall promptly furnish the Controlling Party with such non-privileged
information as it may have with respect to such Third Party Proceeding
(including copies of any summons, complaint or other pleading that may
have been served on such party and any written claim, demand, invoice,
billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party with respect to
such Third Party Proceeding. The Indemnifying Person shall not agree to
any settlement of, or the entry of any judgment arising from, any such
Third Party Proceeding without the prior written consent of the
Indemnified Person, which shall not be unreasonably withheld, conditioned
or delayed; provided that the consent of the Indemnified Person shall not
be required if (i) the Indemnifying Person agrees in writing to pay all
amounts payable pursuant to such settlement or judgment, and (ii) the
proposed settlement of such Third Party Proceeding (x) includes as an
unconditional term thereof a complete and irrevocable release of the
Indemnified Person from all liability with respect to such Third Party
Proceeding, (y) provides for no injunctive, equitable or other
non-monetary relief against the Indemnified Person, and (z) has no other
adverse effect on the Indemnified Person. The Indemnified Person shall not
agree to any settlement of, or the entry of any judgment arising from (and
the
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Indemnifying Person shall have no indemnification obligations with respect
to), any such Third Party Proceeding without the prior written consent of
the Indemnifying Person, which shall not be unreasonably withheld,
conditioned or delayed.
Section 11.3. Objections to Claims for Indemnification; Resolution by the
Parties. An Indemnifying Person may make a written objection ("OBJECTION") to
any claim for indemnification, which Objection shall state in reasonable detail
the basis therefor. The Objection shall be delivered to the Indemnified Person
within thirty (30) days after receipt by the Indemnifying Person of notice of a
claim for indemnification from an Indemnified Person. The Indemnifying Person
and the Indemnified Person shall attempt in good faith to resolve any claim for
indemnification to which an Objection is made. If the Indemnifying Person and
the Indemnified Person are unable to resolve a claim for indemnification to
which an Objection has been made within thirty (30) days of receiving such
Objection (as such period may be extended by mutual agreement between Purchaser
and Seller), either the Indemnifying Person or the Indemnified Person shall
serve the other with a written demand for arbitration within forty-five (45)
days of the expiration of such thirty (30) day period. Any such arbitration
shall be held in New York City and shall be conducted before a single arbitrator
mutually agreeable to Purchaser and Seller and in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. In the event that
within thirty (30) days after submission of any dispute to arbitration Purchaser
and Seller cannot mutually agree on one arbitrator, Purchaser and Seller shall
each select one arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The decision of the arbitrator or, if applicable, the majority
of the three arbitrators regarding any claim for indemnification to which an
Objection has been made shall be binding and conclusive. Such decision shall be
written and shall be supported by written findings of fact and conclusions,
which shall set forth the award, judgment, decree or order awarded by the
arbitrator. The parties agree to complete such arbitration as expeditiously as
reasonably practicable.
Section 11.4. Treatment of Indemnification Claims. All indemnification
payments made under this Agreement shall be treated by the parties as an
adjustment to the Purchase Price.
Section 11.5. Exclusive Remedy. The parties hereby acknowledge and agree
that, from and after the Closing Date with respect to an applicable Property,
the exclusive remedy of the parties hereto with respect to any Losses described
in Sections 11.1(a) and 11.1(b) relating to such Property shall be pursuant to
indemnification under this Article XI; provided, however, that the foregoing
shall not limit the remedies of the parties in the event of any breach or
default under any Take-Back Lease.
Section 11.6. Survival. All representations and warranties set forth in
Article II and Article VIII of this Agreement, and the indemnification
obligations set forth in Sections 11.1(a)(i), and 11.1(b)(i), shall survive the
Closing and shall expire and terminate on the date that is twelve (12) months
after the Second Occupancy Delivery Date. The indemnification obligations set
forth in Sections 11.1(a)(ii), (iv) and (v) and 11.1(b)(ii) shall survive the
Closing Date without limitation except as provided under Applicable Law. The
indemnification obligations set forth in Section 11.1(a)(iii) with respect to
any Pharmacy Assets shall survive the Closing Date for the related Property and
shall expire and terminate at the later to occur of (1) the Occupancy Delivery
Date for the related Property and (2) the date that is 30 days after the
transfer of such Pharmacy Assets. Notwithstanding anything herein to the
contrary, each
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representation or warranty that is the subject of one or more claims asserted in
writing prior to the expiration of the twelve (12) month period set forth above
shall survive with respect to the related claim or claims until the final
resolution thereof.
Section 11.7. Limitation on Indemnification. Notwithstanding anything to
the contrary set forth in Section 11.1(a) of this Agreement or elsewhere in this
Agreement, (a) Purchaser hereby expressly waives, relinquishes and releases any
right or remedy available to it at law, in equity or under this Agreement, in
the event the Closing occurs, to make a claim against Seller for Losses that
Purchaser may incur, or to rescind this Agreement and the transactions
contemplated hereby, as the result of any of Seller's representations or
warranties in Articles II or VIII hereof or in any Seller Subtenant Estoppel or
Seller Tenant Estoppel being untrue, inaccurate or incorrect in any material
respect if Purchaser has actual knowledge that such representation or warranty
was untrue, inaccurate or incorrect at the time of the Closing and Purchaser
nevertheless proceeds with the Closing hereunder, (b) Seller's liability for the
breach of any representations or warranties of Seller contained in Articles II
or VIII or pursuant to Section 11.1(a)(i) of this Agreement, shall be limited to
claims in excess of $1,500,000 in the aggregate; upon reaching such claims which
exceed $1,500,000 in the aggregate, Purchaser may pursue such claims against
Seller for Losses resulting from Seller's breach of any representations and
warranties under this Agreement (including the first $1,500,000 of such claims)
and (c) Seller's aggregate liability for all claims arising out of any breach of
such representations or warranties shall not exceed $62,100,000, except that
there shall be no cap on Seller's liability for such breaches of the
representations or warranties set forth in Sections 8.1(a), (b), or (c) hereof
or in any Seller Tenant Estoppel or Seller Subtenant Estoppel. As used in this
paragraph, the term "actual knowledge" of Purchaser shall mean the actual
knowledge of Tony Will with no duty of inquiry or investigation.
Notwithstanding anything to the contrary set forth in this
Agreement, (a) Seller hereby expressly waives, relinquishes and releases any
right or remedy available to it at law, in equity or under this Agreement, in
the event the Closing occurs, to make a claim against Purchaser for Losses that
Seller may incur, or to rescind this Agreement and the transactions contemplated
hereby, as the result of any of Purchaser's representations or warranties in
Section 11.1(b)(i) being untrue, inaccurate or incorrect if Seller has actual
knowledge (as defined in Section 8.3 hereof) that such representation or
warranty was untrue, inaccurate or incorrect at the time of the Closing and
Seller nevertheless proceeds with the Closing hereunder, and (b) Purchaser's
liability for breach of any representations or warranties of Purchaser contained
in Article VIII hereof or pursuant to Section 11.1(b)(i) shall be limited to
claims in excess of $1,500,000 in the aggregate. Upon reaching such claims which
exceed $1,500,000 in the aggregate, Seller may pursue such claims against
Purchaser for Losses resulting from Purchaser's breach of any representations
and warranties under this Agreement (including the first $1,500,000 of such
claims). Purchaser's aggregate liability for all claims arising out of any
breach of such representations or warranties shall not exceed $62,100,000,
except that there shall be no cap on Purchaser's liability for breaches of the
representations or warranties set forth in Sections 8.2(a), (b), or (c) hereof.
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ARTICLE XII
DEFAULTS AND REMEDIES
Section 12.1. Defaults and Remedies.
(a) Defaults and Remedies Which Relate to Five (5) Or Less Properties.
If Purchaser shall default in the performance of its material obligations under
this Agreement, which default relates solely to five (5) or less Properties
(such Properties relating to the default of either Seller or Purchaser shall be
referred to herein as the "DEFAULTING PROPERTIES"), and if such default is not
cured by Purchaser within fifteen (15) Business Days after written notice
thereof from Seller to Purchaser, then Seller shall have the right, at Seller's
option, to terminate this Agreement solely with respect to the Defaulting
Properties (in which event clauses (ii) through (v) of the Property Termination
Procedure shall apply), and (i) sue Purchaser for actual damages suffered by
Seller as a result of such default which relates to the Defaulting Properties
(in which event the Deposit allocable to the Defaulting Properties shall
continue to be held by Escrow Agent pursuant to Article XIV hereof until such
claim for damages is adjudicated and paid) or (ii) retain the Deposit allocable
to the Defaulting Properties as liquidated damages. If Seller shall default in
the performance of its material obligations under this Agreement, which default
relates to five (5) or less Properties, and if such default is not cured by
Seller within fifteen (15) Business Days after written notice thereof from
Purchaser to Seller, then Purchaser shall have the right, at Purchaser's option,
to (x) terminate this Agreement solely with respect to the Defaulting Properties
and receive the Deposit allocable to the Defaulting Properties from the Escrow
Agent (in which event the Property Termination Procedure shall apply), and
Purchaser may sue Seller for actual damages suffered by Purchaser as a result of
such default which relates to the Defaulting Properties, or (y) institute a suit
against Seller for specific performance of Seller's obligations under this
Agreement with respect to the Defaulting Properties.
(b) Defaults and Remedies Which Relate to More Than Five (5) Properties.
If Purchaser shall default in the performance of its material obligations under
this Agreement, which default relates to more than five (5) Properties, and if
such default is not cured by Purchaser within fifteen (15) Business Days after
written notice thereof from Seller to Purchaser, then Seller shall have the
right, at Seller's option, to terminate this Agreement and (i) sue Purchaser for
actual damages as a result of such default (in which event the Deposit shall
continue to be held by Escrow Agent pursuant to Article XIV hereof until such
claim for damages is adjudicated and paid) or (ii) to retain the Deposit (or the
remaining portion thereof than being held by the Escrow Agent) as liquidated
damages. If Seller shall default in the performance of its material obligations
under this Agreement, which default relates to more than five (5) Properties,
and such default is not cured by Seller within fifteen (15) Business Days after
written notice thereof from Purchaser to Seller, then Purchaser shall have the
right, at Purchaser's option, to (x) terminate this Agreement and receive the
Deposit (or the remaining portion thereof then being held by the Escrow Agent)
from the Escrow Agent, and Purchaser may sue Seller for actual damages suffered
by Purchaser as a result of such default, or (y) institute a suit against Seller
for specific performance of Seller's obligations under this Agreement.
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ARTICLE XIIII
MISCELLANEOUS
Section 13.1. Assignment. Except as set forth in Section 5.3 hereof, this
Agreement may not be assigned by operation of law or otherwise without the
express written consent of Purchaser, in the case of Seller, or Seller, in the
case of Purchaser, which consent in each such case may be granted or withheld in
the sole discretion of each such party. Notwithstanding the foregoing, Purchaser
may, upon written notice to Seller given at least five (5) Business Days prior
to the applicable Closing Date, designate one or more of its direct or indirect
wholly owned subsidiaries (a "PURCHASER SUBSIDIARY") to take title to any
Transferred Asset at the Closing (in lieu of Purchaser), provided that any such
transfer and assignment of a Lease to a Purchaser Subsidiary shall either (a)
not require the consent or approval of the Landlord under the Lease or of any
other third party, or (b) be in accordance with, and be permitted under, the
terms of any Required Consent obtained with respect to the transfer and
assignment of such Lease.
Section 13.2. Entire Agreement. This Agreement constitutes the entire
agreement between Seller and Purchaser with respect to the subject matter hereof
and shall not be modified or amended except in a written document signed by
Seller and Purchaser. Any prior agreement or understanding between Seller and
Purchaser concerning the subject matter hereof is hereby rendered null and void,
other than the Confidentiality and Access Agreement, which remains in full force
and effect.
Section 13.3. Time is of the Essence. Time is of the essence with respect
to the matters covered by this Agreement. In the computation of any period of
time provided for in this Agreement or by law, the day of the act or event from
which the period of time runs shall be excluded, and the last day of such period
shall be included, unless it is not a Business Day, in which case the period
shall be deemed to run until the end of the next Business Day.
Section 13.4. Further Assurances. Each party will promptly execute and
deliver or cause to be executed and delivered all such other and further
instruments, documents or assurances, and promptly do or cause to be done all
such other and further things as may be necessary and reasonably required in
order to further and more fully vest in the other party, all rights, interests,
powers or benefits intended to be conferred upon it by this Agreement.
Section 13.5. Construction. The parties acknowledge that each party and
its counsel have reviewed and revised this Agreement, and that any rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or schedules hereto.
Section 13.6. Legal Fees. In the event of a default by either party of its
obligations under this Agreement, the prevailing party in any action or
proceeding in any court in connection therewith shall be entitled to recover
from such other party its costs and expenses, including, without limitation,
reasonable legal fees and associated court costs.
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Section 13.7. Notices. All notices, requests, demands or other
communications required or permitted under this Agreement shall be in writing
and delivered personally, by facsimile transmission, or by overnight courier
(such as Federal Express), addressed as follows:
If to Seller:
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
Attn: Harold W. Lueken, Esq.
Senior Vice President and General Counsel
Fax: (248) 614-0951
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Stephen G. Gellman, Esq.
Scott K. Charles, Esq.
Fax: (212) 403-2000
And a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Chetan Gulati
Fax: (212) 403-2000
If to Purchaser:
Sears, Roebuck and Co.
3333 Beverly Road
Hoffman Estates, Illinois 60192-3322
Attn: General Counsel
Fax: (847) 286-6544
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With a copy to:
Jenner & Block LLP
One IBM Plaza
Chicago, Illinois 60611
Attn: Donald I. Resnick, Esq.
Fax: (312) 840-7656
Section 13.8. Governing Law. This Agreement shall be governed and
interpreted in accordance with the laws of the State of New York, without regard
to principles of conflicts of law.
Section 13.9. Counterparts. This Agreement may be executed in any number
of identical counterparts, any or all of which may contain the signatures of
fewer than all of the parties but all of which shall be taken together as a
single instrument.
Section 13.10. Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under any present or future law,
rule, or regulation, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof. The remaining provisions of this
Agreement shall remain in full force and effect, and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid, or unenforceable provision, there
shall be added automatically as a part of this Agreement a legal, valid, and
enforceable provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible.
Section 13.11. Headings, Gender, Etc. The headings used in this Agreement
have been inserted for convenience only and do not constitute matter to be
construed or interpreted in connection with this Agreement. Unless the context
of this Agreement otherwise requires, (a) words of any gender shall be deemed to
include each other gender, (b) words using the singular or plural number shall
also include the plural or singular number, respectively, (c) references to
"hereof," "herein," "hereby" and similar terms shall refer to this entire
Agreement, and (d) the term "including," as used herein shall mean "including,
without limitation," unless the context otherwise requires. The language used in
this Agreement shall be deemed to be the language chosen by the parties hereto
to express their mutual intent and no rule of strict construction shall be
applied against any party.
Section 13.12. No Third Party Beneficiaries. Except with respect to the
Purchaser Indemnified Parties and Seller Indemnified Parties, nothing contained
herein, express or implied, is intended to confer upon any person other than the
parties hereto and their respective successors and permitted assigns any rights
or remedies under or by reason of this Agreement.
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ARTICLE XIV
ESCROW AGENT
Section 14.1. Duties and Obligations of Escrow Agent.
(a) Upon receipt by Escrow Agent of the Deposit (which term, as used
herein, shall refer either to the entire Deposit or, following the Initial
Closing, the remaining portion of the Deposit then held by the Escrow Agent),
Escrow Agent shall cause the same to be deposited into an interest bearing
account selected by Escrow Agent, it being agreed that Escrow Agent shall not be
liable for (y) any loss of such investment (unless due to Escrow Agent's gross
negligence or willful misconduct) or (z) any failure to attain a favorable rate
of return on such investment. Escrow Agent shall deliver the Deposit (or
applicable portion thereof) to Seller or to Purchaser, as the case may be, under
the following conditions:
(i) The portion of the Deposit applicable to the Properties being
conveyed at such Closing shall be delivered to Seller at the
Closing upon receipt by Escrow Agent of a statement duly
executed by Seller and Purchaser authorizing such portion of
the Deposit to be released.
(ii) The Deposit (or applicable portion thereof) shall be delivered
to Seller within ten (10) Business Days following receipt by
Escrow Agent of written demand therefor from Seller (a copy of
which shall be simultaneously sent by Seller to Purchaser)
stating that Purchaser has defaulted in the performance of its
material obligations under this Agreement, and specifying the
Section of this Agreement that entitles Seller to be paid the
Deposit (or portion thereof), if Purchaser shall not have
given notice of objection in accordance with the provisions
set forth below; or
(iii) The Deposit (or applicable portion thereof) shall be delivered
to Purchaser within ten (10) Business Days following receipt
by Escrow Agent of written demand therefor from Purchaser (a
copy of which shall be simultaneously sent by Purchaser to
Seller) stating that Seller has defaulted in the performance
of its material obligations under this Agreement or that this
Agreement was terminated under circumstances entitling
Purchaser to the return of the Deposit (or portion thereof),
and specifying the Section of this Agreement that entitles
Purchaser to the return of the Deposit (or portion thereof),
if Seller shall not have given written notice of objection in
accordance with the provisions set forth below; or
(iv) The Deposit shall be delivered to Purchaser or Seller as
directed by joint written instructions of Seller and
Purchaser.
(b) Upon the delivery of a written demand for the Deposit (or applicable
portion thereof) by Seller or Purchaser, pursuant to subsection (ii) or (iii)
above, the other party shall have the right to object to the delivery of the
Deposit (or applicable portion thereof), by giving notice of such objection to
Escrow Agent (with a copy to the party demanding the Deposit (or applicable
portion thereof)) at any time within seven (7) days after such party's receipt
of notice of the demand for the Deposit (or applicable portion thereof), but not
thereafter. Such notice shall set forth the basis for objecting to the delivery
of the Deposit. If Escrow Agent shall have timely received such notice of
objection, Escrow Agent shall continue to hold the Deposit until
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(x) Escrow Agent receives a notice jointly signed by Seller and Purchaser
directing the disbursement of the Deposit (or applicable portion thereof), in
which case Escrow Agent shall then disburse the Deposit (or applicable portion
thereof) in accordance with said direction, or (y) litigation is commenced
between Seller and Purchaser, in which case Escrow Agent shall deposit the
Deposit (or applicable portion thereof) with the clerk of the court in which
said litigation is pending, or (z) Escrow Agent takes such affirmative steps as
Escrow Agent may elect, at Escrow Agent's sole option, in order to terminate
Escrow Agent's duties hereunder, including but not limited to depositing the
Deposit (or applicable portion thereof) in court and commencing an action for
interpleader, the costs thereof to be borne by whichever of Seller or Purchaser
is the losing party in such interpleader action.
(c) Escrow Agent may rely and act upon any instrument or other writing
reasonably believed by Escrow Agent to be genuine and purporting to be signed
and presented by any person or persons purporting to have authority to act on
behalf of Seller or Purchaser, as the case may be, and shall not be liable in
connection with the performance of any duties imposed upon Escrow Agent by the
provisions of this Agreement, except for Escrow Agent's own gross negligence or
willful misconduct. Escrow Agent shall have no duties or responsibilities except
those set forth herein. Escrow Agent shall not be bound by any modification,
cancellation or rescission of this Agreement unless the same is in writing and
signed by Purchaser and Seller, and, if Escrow Agent's duties hereunder are
affected, unless Escrow Agent shall have given prior written consent thereto.
Escrow Agent shall be reimbursed by Seller and Purchaser for any expenses
(including reasonable legal fees and disbursements of outside counsel),
including all of Escrow Agent's fees and expenses with respect to any
interpleader action incurred in connection with this Agreement, and such
liability shall be joint and several; provided, however, that, as between
Purchaser and Seller, the prevailing party in any dispute over the Deposit shall
be entitled to reimbursement by the losing party of any such expenses paid to
Escrow Agent. In the event that Escrow Agent shall be uncertain as to Escrow
Agent's duties or rights hereunder, or shall receive instructions from Purchaser
or Seller that, in Escrow Agent's opinion, are in conflict with any of the
provisions hereof, Escrow Agent shall be entitled to hold and apply the Deposit,
and may decline to take any other action. After delivery of the Deposit (or
applicable portion thereof) in accordance herewith, Escrow Agent shall have no
further liability or obligation of any kind whatsoever.
(d) Escrow Agent shall have the right at any time to resign as Escrow
Agent upon ten (10) Business Days' prior notice to Seller and Purchaser. Seller
and Purchaser shall jointly select a successor Escrow Agent and shall notify
Escrow Agent of the name and address of such successor Escrow Agent within ten
(10) Business Days after receipt of notice of Escrow Agent of its intent to
resign. If Escrow Agent has not received notice of the name and address of such
successor Escrow Agent within such period, Escrow Agent shall have the right to
select on behalf of Seller and Purchaser a bank or trust company to act as
successor Escrow Agent hereunder. At any time after the expiration of such ten
(10) Business Day period, Escrow Agent shall have the right to deliver the
Deposit to any successor Escrow Agent selected hereunder, provided such
successor Escrow Agent shall execute and deliver to Seller and Purchaser an
assumption agreement whereby it assumes all of Escrow Agent's obligations
hereunder. Upon the delivery of all such amounts and such assumption agreement,
the successor Escrow Agent shall become the Escrow Agent for all purposes
hereunder and shall have all of the rights and obligations of
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the Escrow Agent hereunder, and the resigning Escrow Agent shall have no further
responsibilities or obligations hereunder.
(e) Seller and Purchaser shall jointly and severally indemnify and hold
harmless Escrow Agent from and against any and all costs, losses, claims,
damages, liabilities and expenses, including reasonable costs of investigation,
court costs, attorneys' fees and disbursements, which may be imposed upon or
incurred by Escrow Agent in connection with its acceptance of, or appointment
as, Escrow Agent hereunder, or in connection with the performance of its duties
hereunder (other than due to the gross negligence or willful misconduct of
Escrow Agent), including, without limitation, any litigation arising out of this
Agreement or involving the subject matter hereof.
(f) The interest earned on the Deposit shall be paid to Purchaser and
Purchaser shall pay any income taxes thereon.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SEARS, ROEBUCK AND CO., a New York corporation
By: ____________________________________
Name: __________________________________
Its: ___________________________________
KMART CORPORATION, a Michigan corporation, on behalf of itself and all Seller
Subsidiaries owning any portion of the Transferred Assets and Pharmacy Assets
By: ____________________________________
Name: __________________________________
Its: ___________________________________
The undersigned hereby executes this Agreement as Escrow Agent, and agrees to be
bound by the terms and conditions of this Agreement that are applicable to the
Escrow Agent:
FIRST AMERICAN TITLE INSURANCE COMPANY, as Escrow Agent
By: ____________________________________
Name: __________________________________
Its: ___________________________________
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