**Exhibit 2**
**ASSET PURCHASE AGREEMENT**

**DATED AS OF JUNE 29, 2004**
**BY AND BETWEEN**
**SEARS, ROEBUCK AND CO.**
**AND**
**KMART CORPORATION**
 

 

**TABLE OF CONTENTS**           PageARTICLE 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 
 

 
            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**       PageAcquisition Right  4 **Agreement**  1 **Applicable Laws**  18 **Approved Subleases**  33 **Assignment of Approved Sublease**  11 **Assignment of Lease**  11 **Assumed Liabilities**  3 **Business Day**  10 **CAA**  34 **CERCLA**  34 **Closing**  10 **Closing Conditions**  10 **Closing Date**  10 **Closing Statement**  14 **Code**  12 **Confidentiality and Access Agreement**  37 **Controlling Party**  41 **Current Tax Year**  16 **Defaulting Properties**  44 **Delinquent Amounts**  16 **Deposit**  8 **Designee**  7 **Effective Date**  1 Election Deadline  4 **Employees**  3 **Employment Law**  3 **Environmental Laws**  33 **EPCRA**  34 **ERISA**  3 **ESA**  34 
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          **Escrowee**  28 **Exchange**  24 **Exchanger**  25 **Excluded Assets**  2 **Excluded Liabilities**  3 **FIFRA**  34 **FIRPTA Certificate**  12 **First Occupancy Delivery Date**  17 **First Occupancy Delivery Date Properties**  17 **FWPCA**  34 **Governmental Entity**  18 **Ground Leases**  34 **Hazardous Materials**  34 **HMTA**  34 **HSR Act**  21 **Improvements**  2 **Indemnified Persons**  40 **Indemnifying Person**  41 **Initial Closing**  9 **Initial Closing Date**  10 **Initial Closing Properties**  8 **Intangible Personal Property**  2 **Landlord**  2 **Leased Properties**  2 **Leased Property**  2 **Leasehold Commitments**  28 **Leases**  2 **Liabilities**  3 **LLC**  17 **Losses**  40 **Material Casualty**  30 **Material Title Defect**  28 **Maximum Violation Cure Amount**  19 **Merchandise Trade Fixtures**  2 **Non-controlling Party**  41 **Non-Seller Violation**  19 **Objection**  42 **Occupancy Delivery Date**  17 **Order**  22 **OSHA**  34 **Owned Properties**  1 **Owned Property**  1 **Owner’s Title Commitments**  27 **Permitted Exceptions**  28,29 Permitted Property Condition  18 **Personal Property**  2 
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          **Pharmacy**  4 **Pharmacy Approvals**  31 **Pharmacy Assets**  4 **Pharmacy Records**  4 **Possession Payment Conditions**  9 **Pre-Closing Allocation Statement**  17 **Prescription Files**  4 **Properties**  2 **Property**  2 **Property Termination Procedure**  19 **Purchase Price**  7 **Purchaser**  1 **Purchaser Closing Conditions**  37 **Purchaser Indemnified Parties**  40 **Purchaser Subsidiary**  45 **Purchaser’s Representatives**  37 **Qualified Contractor**  30 **Qualified Intermediary**  24 **RCRA**  34 **Related Agreements**  31 **Release**  34 **Remaining Properties**  8 **Renewal Notice**  19 **Required Consents**  23 **Retained Pharmacy Business Assets**  3 **SDWA**  34 **Second Occupancy Delivery Date**  17 **Second Occupancy Delivery Date Properties**  17 **Seller**  1 **Seller Closing Conditions**  39 **Seller Indemnified Parties**  40 **Seller Plan**  3 **Seller Subsidiary**  1 **Seller Subtenant Estoppel**  11 **Seller Tenant Estoppel**  12 **Seller Violation**  18 **Seller’s Title Cure Election Period**  28 Service Contract  4 **SNDA**  24 **Store Employee**  26 **Sublease Rents**  16 **Subleased Premises**  27 **Subleases**  32 **Subsequent Closing**  10 **Subsequent Closing Date**  10 **Subtenants**  16 
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          **Surveys**  28 **Take-Back Lease**  17 **Third Party Environmental Claims**  40 **Third Party Proceeding**  40 **Title Commitments**  28 **Title Company**  28 **Title Review Period**  28 **Transferred Assets**  1 **TSCA**  34 **Violations**  18 **WARN Act  3 
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**ASSET PURCHASE AGREEMENT**
This ASSET PURCHASE AGREEMENT (this “**Agreement**”) is made and entered intoas 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, aMichigan corporation (“**Seller**”).
RECITALS:
WHEREAS, Seller and certain wholly owned subsidiaries of Seller (each, a“**Seller Subsidiary**”; and any reference to “Seller” herein shall be deemed toinclude any applicable Seller Subsidiary) are (a) the owners of fee simpletitle to the Owned Properties, (b) the lessees under the Leases with respect tothe Leased Properties, and (c) the owners of all of the other TransferredAssets and Pharmacy Assets (as such terms are hereinafter defined);
WHEREAS, Seller desires to sell and/or assign, as applicable, theTransferred Assets and Pharmacy Assets to Purchaser, and Purchaser desires topurchase the Transferred Assets and Pharmacy Assets from Seller and to assumecertain liabilities in connection therewith, upon the terms and subject toconditions set forth in this Agreement;
NOW, THEREFORE, in consideration of and in reliance upon the aboveRecitals, which are acknowledged to be accurate and are incorporated herein,the terms, covenants and conditions contained in this Agreement, and other goodand valuable consideration, the receipt and sufficiency of which are herebyacknowledged, Seller and Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE
Section 1.1.     Purchase and Sale of Transferred Assets.    Subject to theterms and conditions of this Agreement, Seller shall sell, convey and assign toPurchaser, and Purchaser shall purchase, all right, title and interest ofSeller in and to the assets described in the following clauses (a) through (e)(all of which are hereinafter collectively referred to as the “**TransferredAssets**”):
     (a)      those two (2) parcels of real estate located at the addresseslisted on Schedule 1.1(a)-1 attached hereto and legally described onSchedule 1.1(a)-2 hereto, together with (i) all easements, covenants,agreements, rights, privileges, tenements, hereditaments andappurtenances belonging or appertaining thereto, (ii) all oil, gas andmineral rights relating to the real estate, and any rights to use andappropriate water from or relating to the real estate, and (iii) any landlying in the bed of any street, alley, road or avenue (whether open,closed or proposed) within, in front of, behind or otherwise adjoiningany 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 allmodifications and amendments thereto and assignments thereof, identifiedon Schedule 1.1(b)-1 attached hereto, together with all easements,covenants, agreements, rights, privileges, tenements,
 

 

hereditaments and appurtenances belonging or appertaining thereto(collectively, the “**Leases**”), pursuant to which Seller leases certainreal properties identified on Schedule 1.1(b)-2 attached hereto(individually, a “**Leased Property**” and collectively, the “**LeasedProperties**”);
     (c)      the buildings, structures, fixtures, facilities, installationsand other improvements now or hereafter in, on, or under the OwnedProperties and the Leased Properties, including, without limitation, anyplumbing, 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 theOwned Properties or Leased Properties (collectively, the “**Improvements**”);
     (d)      (i) all existing surveys, blueprints, drawings, plans andspecifications (including, without limitation, structural, HVAC,mechanical, electrical, vertical transportation and plumbing plans andspecifications) relating to the Properties (as hereinafter defined) tothe extent in Seller’s possession or control; (ii) all currentlyeffective use, occupancy, building and operating permits, licenses andapprovals relating to the Properties, to the extent assignable ortransferable; and (iii) all currently effective guarantees and warrantiesissued to Seller in connection with the purchase, construction,alteration, installation or repair of any portion of the Properties, tothe extent assignable or transferable (collectively, the “**IntangiblePersonal Property**”); and
     (e)      all racks, shelves, brackets, displays and other merchandisetrade fixtures located in the Properties as of the Effective Date(collectively, the “**Merchandise Trade Fixtures,**” and, together with theIntangible 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, Sellerwill retain all right, title and interest in all assets of Seller located at orrelating to the Properties other than the Transferred Assets (the “**ExcludedAssets**”), including without limitation, all inventory, all personal propertylocated at the Properties other than the Personal Property (including all pointof sale and inventory scanning systems, cash registers, computer equipment andhardware systems), any consideration payable to Seller, as tenant, prior to theapplicable Closing (and relating to any period prior to the Closing) by anylandlord under a Lease (a “**Landlord**”) pursuant to, or in connection with, suchLease, and any rights or claims retained by Seller, as tenant, under any Leasepursuant to Section 4.3(b) or Section 4.5 hereof, and, solely with respect toSeller’s pharmacy business at locations other than the Properties, allprescription files, “pharmacy scrips,” patient profiles, customer lists andother books, records and files (the “**Retained Pharmacy Business Assets**”).
Section 1.3.     Assumed Liabilities.   Subject to the terms and conditions ofthis Agreement, Purchaser shall assume, perform, pay and discharge any and allliabilities, debts,
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obligations, judgments, fines, penalties and claims (collectively,“**Liabilities**”) relating to any Transferred Asset to the extent that suchLiabilities accrue or arise from or out of events occurring on or after theClosing 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 beobligated to pay, perform or otherwise assume or discharge the followingLiabilities 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 ortermination by Seller or any affiliate thereof of any current or formeremployees, independent contractors or licensed employees of Seller or anysuch affiliate (collectively, “**Employees**”), including, withoutlimitation, any Liabilities with respect to any alleged violation of anyEmployment 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 regardingemployment, including, without limitation, Title VII of the Civil RightsAct of 1964, 42 U.S.C. 198l, the Age Discrimination in Employment Act of1967, the Older Workers Benefit Protection Act of 1990, the Family andMedical Leave Act, the National Labor Relations Act, the WorkerAdjustment and Retraining Notification Act (“**WARN Act**”), the AmericansWith Disabilities Act, the Fair Labor Standards Act, and common lawclaims for breach of contract, wrongful discharge or other claims, andother comparable federal state or local laws, each as amended, and allrules and regulations promulgated pursuant thereto or publishedthereunder;
     (d)      any Liabilities relating to any Transferred Asset to the extentthat such Liabilities accrue or arise from or out of events occurringduring the period prior to the Closing with respect to such TransferredAsset, including, without limitation, the litigation disclosed onSchedule 8.1(g) attached hereto;
     (e)      any Liabilities with respect to any compensation or benefits dueand payable by Seller to any Employees, including, without limitation,any of such Liabilities with respect to (i) any plan or programmaintained by Seller or any of its affiliates that is (x) an “employeebenefit plan” within the meaning of Section 3(3) of ERISA or (y) a fringebenefit program providing vacation, sick leave or other paid time offbenefits (a “**Seller Plan**”) or (ii) any alleged violation of the EmployeeRetirement Income Security Act of 1974, as amended (“**ERISA**”) or otherapplicable federal, state or local laws, each as amended, and all rulesand 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 inSection 4.3 hereof, and except as otherwise provided herein;
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     (g)      all Liabilities of Seller under the Take-Back Leases (ashereinafter defined);
     (h)      all Liabilities of Seller under any service contract or serviceagreement relating to the Properties (each a “**Service Contract**”); and
     (i)      all Liabilities of Seller under any Sublease (as hereinafterdefined) except for those Liabilities arising or accruing from or out ofevents occurring after Closing with respect to any Approved Sublease (ashereinafter defined).
ARTICLE II
PHARMACY ASSETS
Section 2.1.     Right to Acquire PharmacyAssets.    From and after the time ofthe sale, conveyance and assignment by Seller of a Property to Purchaser at aClosing pursuant to this Agreement, Purchaser shall have the right (the“**Acquisition Right**”) to require Seller to convey and assign to Purchaser, tothe extent permitted under applicable law, all right, title and interest ofSeller in and to the following assets (collectively, the “**Pharmacy Assets**”)used in the retail drugstore and pharmaceutical operations of Seller conductedat such Property (each such operation relating to a particular Property being a“**Pharmacy**”):
     (a)      all of the prescription files (including historical and activeprescriptions and pharmacy “scripts”); patient profiles; customer lists;transferable licenses and registrations; and phone numbers used by Sellerin connection with the operation of such Pharmacy (the “**PrescriptionFiles**”); and
     (b)      all books, records, files, papers, databases and compilationsand collections of data, whether in hard copy or computer format,relating to the Prescription Files or customers of such Pharmacy inSeller’s possession or control as of the date of transfer of the PharmacyAssets from Seller to Purchaser (“**Pharmacy Records**”).
In order to exercise its Acquisition Right with respect to the Pharmacy Assetsrelating to a particular Property, Purchaser must deliver written notice ofexercise to Seller on or after the time of the Closing with respect to therelated Property and prior to the date that is 60 days prior to the OccupancyDelivery Date for such Property (the “**Election Deadline**”). If Purchaser doesnot so exercise its Acquisition Right with respect to any particular PharmacyAssets prior to the applicable Election Deadline, Purchaser’s Acquisition Rightwith respect to such Pharmacy Assets shall terminate and all of Seller’sobligations hereunder with respect to such Pharmacy Assets and the relatedPharmacy (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 suchtermination), and Seller shall have the right to retain such Pharmacy Assets orconvey them to a third party. If Purchaser does so exercise its AcquisitionRight with respect to any particular Pharmacy Assets prior to the applicableElection Deadline, Seller shall convey and assign such Pharmacy Assets toPurchaser on a Business Day to be later specified by Purchaser in a writtennotice of closing (the “**Notice**”) to Seller, which
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date shall be no earlier than 10 Business Days after Purchaser’s delivery ofits Notice to Seller and no later than 10 Business Days prior to the OccupancyDelivery Date.
Section 2.2.      No Additional Consideration.    The portion of the PurchasePrice allocable to, and payable by Purchaser with respect to, each Propertyshall be deemed to include payment for the Pharmacy Assets relating to suchProperty and no additional consideration shall be payable by Purchaser toSeller in connection with the exercise by Purchaser of any Acquisition Rightsor the transfer of any Pharmacy Assets. Furthermore, Purchaser shall notassume or be obligated to pay, perform or otherwise assume or discharge anyLiabilities of Seller or any of its affiliates accruing or arising from or outof events occurring during the period of Seller’s ownership of any PharmacyAssets or operation of the related Pharmacy prior to Seller’s transfer of suchPharmacy Assets to Purchaser, and all such Liabilities shall be ExcludedLiabilities 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, toPurchaser such customary documents necessary to effect the transfer from Sellerto Purchaser of the Pharmacy Assets as may be reasonably requested byPurchaser, including, without limitation, assignment agreements relating to thePharmacy 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, toSeller such customary documents necessary to effect the transfer from Seller toPurchaser of the Pharmacy Assets as may be reasonably requested by Seller,including, without limitation, assignment agreements relating to the PharmacyAssets in the form attached hereto as Exhibit G.
Section 2.4.      Operation of Pharmacies.    From and after the Effective Dateuntil December 31, 2004, Seller shall operate each Pharmacy in the usual andordinary course of business, consistent with past practices with respect tosuch Pharmacy; provided, that nothing in this Section 2.4 shall preclude Sellerfrom commencing a store closing sale with respect to Seller’s non-Pharmacyoperations prior to December 31, 2004 at any Property in which a Pharmacy islocated.
Section 2.5. Cooperation.
     (a)      Seller and Purchaser shall reasonably cooperate to effect an orderlytransfer of any Pharmacy Assets for which Purchaser exercises its AcquisitionRight. In addition, Seller and Purchaser shall cooperate in good faith todevelop within 30 days after the Initial Closing hereunder a preliminaryschedule for the transfer of Pharmacy Assets relating to each Property andshall thereafter consult with each other and cooperate to update such schedulefrom time to time in light of continuing developments with respect to thePharmacies and the transactions contemplated hereunder. Seller shallreasonably cooperate with Purchaser to transfer in an electronic format usableto Purchaser all such Pharmacy Assets that are, or reasonably can be, embodiedin an electronic format; provided, that Purchaser shall reimburse Seller forall
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documented and reasonable out-of-pocket costs and expenses incurred bySeller in complying with its obligations under this sentence.
     (b)      From and after the Effective Date, Seller shall (i) subject to theterms of the Confidentiality and Access Agreement (as hereinafter defined) andapplicable law, allow Purchaser and its representatives and advisors and anyprospective Designee (as hereinafter defined) of Purchaser reasonable access atreasonable 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’soperation of any Pharmacy, and (ii) furnish promptly to Purchaser and itsrepresentatives and advisors and any prospective Designee of Purchaser suchinformation concerning the business, records and personnel of each Pharmacy(including, without limitation, financial, operating and other data andinformation) as may be reasonably requested by Purchaser, to the extent suchinformation is within Seller’s possession or control; provided, that as acondition precedent to Seller’s obligation to allow such access or furnish suchinformation to any prospective Designee of Purchaser, such prospective Designeeshall have executed and delivered to Seller a customary confidentialityagreement reasonably similar to the Confidentiality and Access Agreement.
     (c)      From and after the exercise by Purchaser of its Acquisition Right withrespect to any Pharmacy, Seller shall, subject to receipt of any necessaryapprovals from Landlords or other third parties, permit Purchaser to postreasonably-sized signs around the Pharmacy at each such Property to notifycustomers that Purchaser intends to open a pharmacy at such location.
     (d)      From and after the exercise by Purchaser of its Acquisition Right withrespect to any Pharmacy, Seller shall, subject to receipt of any necessaryapprovals from Landlords or other third parties, permit Purchaser (atPurchaser’s sole cost) to construct a reasonably-sized temporary facility to beused for the operation of a pharmacy in a location reasonably acceptable toPurchaser and Seller outside the store at such Property. From and after thetransfer from Seller to Purchaser of Pharmacy Assets relating to any Property,Seller shall, subject to the receipt of any necessary approvals from Landlordsor other third parties, permit Purchaser (at Purchaser’s sole cost) to operatea pharmacy from such temporary facility. From and after the Effective Date,Seller shall reasonably cooperate with Purchaser to obtain, at Purchaser’s solecost and expense, any requisite Landlord consents and regulatory permits andapprovals necessary for the construction and operation of any temporarypharmacy facility. Purchaser agrees to operate any temporary pharmacy facilityin accordance with all applicable laws and regulations and (notwithstandinganything to the contrary in the Take-Back Lease) agrees to indemnify and holdharmless all Seller Indemnified Parties (as hereinafter defined) against anyand all Losses (as hereinafter defined) incurred or suffered by the SellerIndemnified Parties, or any of them, due to any claim or other assertion ofliability by a third party to the extent such third party claim or assertionrelates to or results from Purchaser’s construction or operation of anytemporary pharmacy facility (which indemnification obligation of Purchasershall survive the Closing).
Section 2.6.      Seller’s Representations and Warranties Relating to PharmacyAssets.    Seller represents and warrants to Purchaser that the following shallbe true, complete and correct as of the date of transfer of any PharmacyAssets:
     (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 transfershall be, in all material respects, complete and correct copies of all suchitems in Seller’s records as of the time of such transfer.
Section 2.7.      Transfer to Designee.    Purchaser may, upon written notice toSeller given at least 30 days prior to the First Occupancy Delivery Date,request that Seller convey the Pharmacy Assets to any Purchaser Subsidiary (ashereinafter defined) or any third party (a “**Designee**”), and in such eventSeller shall convey the Pharmacy Assets on the applicable transfer date to suchDesignee (to the extent permitted under applicable law and subject to receiptof any requisite Landlord consents under the applicable Lease), provided thatPurchaser (and not such Designee) shall retain any rights or obligationshereunder with respect to such Pharmacy Assets, and Seller shall have noliability to such Designee in connection therewith. From and after the timethat Purchaser requests that Seller convey the Pharmacy Assets to its Designee,Seller shall be obligated to Purchaser to cooperate with the Designee for allpurposes under this Article II in the same manner as Seller would be obligatedto 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 forthe conveyance by Seller to Purchaser of the Properties and the otherTransferred Assets, shall be $621,000,000, in cash, subject to adjustmentpursuant to Section 3.1(b) hereof and subject to any adjustments and prorationsas provided under Section 4.3. The portion of the Purchase Price allocable toeach Property is set forth on Schedule 3.1(a) attached hereto. The PurchasePrice shall be payable by Purchaser to Seller in the manner set forth inSection 3.2.
     (b)      Pursuant to Section 4.1(a) hereof, at the Initial Closing (ashereinafter defined) Seller shall convey, and Purchaser shall acquire, inaccordance with and subject to the terms of this Agreement, (i) at leastforty-three (43) Properties or (ii) a lesser number of Properties if Sellershall exercise its option (pursuant to the proviso in the first sentence ofSection 4.1(a) below) to proceed to Closing with respect to less thanforty-three (43) Properties. If, as of the Initial Closing Date, the ClosingConditions (as hereinafter defined) have not been satisfied with respect tocertain of the Properties (and subject to the provisions of Article XII below)(for example, if the Closing Conditions shall have been satisfied forforty-four (44) Properties and the Closing Conditions shall not yet have beensatisfied for the remaining ten (10) Properties) then the parties shall proceedwith the Initial Closing with respect only to the Properties for which theClosing Conditions shall have been satisfied (the “**Initial ClosingProperties**”), and the Purchase Price payable by Purchaser to Seller at theInitial 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 toPurchaser at the Initial Closing (the “**Remaining Properties**”).
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     (c)      In the event that, in accordance with this Agreement, any of theRemaining Properties are conveyed by Seller to Purchaser in a SubsequentClosing (as hereinafter defined), the Purchase Price payable by Purchaser toSeller in respect of the conveyance of any such Remaining Property shall be theallocable portion of the Purchase Price for such Remaining Property as setforth on Schedule 3.1(a).
Section 3.2. Payment of Purchase Price.
     (a)      Within two (2) Business Days after the execution hereof, Purchasershall pay an amount equal to $62,100,000 (the “**Deposit**”), by wire transfer offederal funds, into escrow with the Title Company, as Escrow Agent (as suchterms are hereinafter defined), to be held and disbursed by the Escrow Agent inaccordance with Article XIV hereof. Notwithstanding anything in thisAgreement to the contrary, any interest earned on the Deposit shall be paid toPurchaser.
     (b)      At the Initial Closing, (i) the Deposit (less ten percent (10%) of thePurchase Price allocable to the Remaining Properties pursuant to Schedule3.1(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 Priceallocable to the Properties conveyed at the Initial Closing pursuant toSchedule 3.1(a) by wire transfer of federal funds to an account designated bySeller in writing by notice to Purchaser, and (iii) all adjustments andprorations (relating to the Properties being conveyed at the Initial Closing)as provided in Section 4.3 shall be made and credited between Seller andPurchaser.
     (c)      At any Subsequent Closing, (i) the applicable Deposit for anyRemaining 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% ofthe 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 writingby notice to Purchaser, and (iii) all adjustments and prorations (relating tosuch Remaining Property) as provided in Section 4.3 shall be made and creditedbetween Seller and Purchaser.
     (d)      The balance of the Purchase Price with respect to each Propertyconveyed at the Initial Closing or any Subsequent Closing shall be paid byPurchaser to Seller as follows: (i) on the First Occupancy Delivery Date (ashereinafter defined), and provided that (x) Seller shall have deliveredoccupancy to Purchaser of such First Occupancy Delivery Date Property (ashereinafter defined) in the manner set forth in the Take-Back Lease applicableto such Property, (y) Seller is not otherwise in default in any materialrespect of any of its covenants or obligations under such applicable Take-BackLease, under this Agreement, or under any Seller Tenant Estoppel or any SellerSubtenant Estoppel, as applicable, with respect to such Property, and (z) thereis no uncured Seller Violation (as defined below) (collectively, the“**Possession Payment Conditions**”), Purchaser shall pay to Seller the balance ofthe Purchase Price allocable to such First Occupancy Delivery Date Propertypursuant to Schedule 3.1(a), and (ii) on the Second Occupancy Delivery Date (ashereinafter defined), and provided that Seller shall have satisfied thePossession Payment Conditions with respect to any Second Occupancy DeliveryDate Property, Purchaser shall pay to Seller the balance of the Purchase Priceallocable to such Property pursuant to Schedule 3.1(a).
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     (e)      In the event the Possession Payment Conditions are not satisfied inall material respects with respect to any Property at the applicable OccupancyDelivery Date (as hereinafter defined), the following shall occur: (i) in theevent Seller has not delivered occupancy of such Property to Purchaser,Purchaser shall not be required to pay to Seller any of the balance of thePurchase Price allocable to such Property until occupancy is so delivered toPurchaser, and (ii) in the event Seller has not satisfied the PossessionPayment 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 tosuch Property (which balance, less such withheld amount, shall be paid byPurchaser to Seller on the Occupancy Delivery Date) an amount equal to onehundred fifty percent (150%) of the reasonably estimated cost to cure orotherwise satisfy such Possession Payment Conditions, which amount shall bedeposited by Purchaser with, and held by, the Title Company in escrow until theearliest of (1) its receipt of a joint direction from both Seller andPurchaser, (2) Seller substantially cures the applicable default (in whichevent Purchaser and Seller will provide a joint direction to the TitleCompany), or (3) a court of competent jurisdiction issues an order directingthe disbursement of such funds, whereupon the Title Company shall pay suchwithheld funds to Seller or as otherwise directed pursuant to such jointdirection or court order. Notwithstanding the foregoing, in the eventPurchaser, pursuant to the terms of a Take-Back Lease, has expended funds tocure a default of Seller under a Take-Back Lease, the reasonable costs incurredby Purchaser in curing such default (including, without limitation, anyreasonable attorneys’ fees incurred in connection therewith) may be deductedfrom the balance of the Purchase Price for such Property and such costs shallnot be deposited with the Title Company in escrow but shall be retained byPurchaser.
     (f)      Notwithstanding the foregoing, if any Closing is part of an Exchangepursuant to Section 5.3, the funds paid at such Closing and on the FirstOccupancy Delivery Date or the Second Occupancy Delivery Date (as applicable)shall be wire transferred to an account designated by the QualifiedIntermediary (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 toPurchaser as contemplated hereby (the “**Initial Closing**”) shall occur at theoffices of Jenner & Block LLP in Chicago, Illinois, on the tenth (10th)Business Day (as hereinafter defined) after the satisfaction (or waiver) of theclosing 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 withrespect to at least forty-three (43) of the Properties by August 31, 2004, thenSeller, at its option and upon written notice given to Purchaser within seven(7) Business Days thereafter, may elect to proceed with the Closing withrespect to those Properties for which the Closing Conditions shall have beensatisfied 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 toPurchaser 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 withrespect to which the Closing Conditions shall have been satisfied (or waived)shall be conveyed by Seller to Purchaser in the manner set forth in thisArticle IV and elsewhere in this Agreement. The term “**Business Day**”, as usedherein, shall mean any day other than a Saturday, Sunday or day on which banksin New York City are authorized or required by law to be closed.
     (b)      The closing of the conveyance of any Remaining Property from Seller toPurchaser as contemplated hereby (a “**Subsequent Closing**”) shall occur at theoffices of Jenner & Block LLP in Chicago, Illinois, on the tenth (10th)Business Day after the satisfaction (or waiver) of the Closing Conditions withrespect to any such Remaining Property. The Initial Closing or any SubsequentClosing shall be referred to herein as a “**Closing**”, and references herein to aClosing shall mean only the Closing with respect to the Property or Propertiesbeing conveyed at such Closing (and not any prior or subsequent closing). Theterm “**Initial Closing Date**” shall mean the date on which the Initial Closingoccurs, the term “**Subsequent Closing Date**” shall mean the date on which anySubsequent Closing occurs, and the term “**Closing Date**” shall mean either theInitial Closing Date or any Subsequent Closing Date. In the event the ClosingConditions with respect to at least forty-three (43) Properties shall not havebeen satisfied or waived by August 31, 2004, then (provided that Seller shallnot have delivered the notice to Purchaser described in the proviso to thefirst sentence in Section 4.1(a)) either Seller or Purchaser may terminate thisAgreement upon written notice given to the other party subsequent to September9, 2004, but prior to the date such Closing Conditions are satisfied or waivedfor at least forty three (43) of the Properties, whereupon the Deposit shall bereturned by the Escrow Agent to Purchaser, and neither party shall have anyfurther liability to the other party hereunder, except for liabilities arisingfrom a default by either party hereunder or other liabilities that expresslysurvive the termination of this Agreement. In the event that the ClosingConditions with respect to any Subsequent Closing shall not have been satisfiedor waived by September 15, 2004, then either Seller or Purchaser may terminatethis Agreement with respect to any such Subsequent Closing upon written noticegiven to the other party subsequent to September 15, 2004, but prior to thedate such Closing Conditions are satisfied or waived, whereupon the Depositallocable to such Remaining Property shall be returned by the Escrow Agent toPurchaser, and neither party shall have any further liability to the otherparty hereunder with respect to such Remaining Property or Subsequent Closing,except for liabilities arising from a default by either party hereunder orother 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 orcause to be delivered to Purchaser each of the following with respect to eachProperty being conveyed at such Closing, in form and substance reasonablyacceptable to Purchaser and Seller, if not attached as a Schedule to thisAgreement, to be executed (if necessary) by Seller at such Closing:
 (i) with respect to each Owned Property beingconveyed at such Closing, a special warranty deed for suchProperty, subject only to the Permitted Exceptions, andotherwise in a form customary for the jurisdiction where theProperty is located and acceptable to the Title Company;
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 (ii) with respect to each Lease being transferred atsuch Closing, an Assignment and Assumption of the Lease (the“**Assignment of Lease**”) executed by Seller in the formattached hereto as Exhibit A together with any otherappropriate documents necessary to convey and transfer toPurchaser Seller’s interest in any improvements owned bySeller;  (iii) the Required Consents (as hereinafterdefined), if any, applicable to any Lease or Property beingtransferred at such Closing;  (iv) with respect to each Lease being transferred atsuch Closing for which a Required Consent was not required, aletter advising the Landlord of the Assignment of Lease;  (v) with respect to each Approved Sublease beingtransferred at such Closing, an Assignment and Assumption ofApproved Sublease (“**Assignment of Approved Sublease**”)executed by Seller in the form attached hereto as Exhibit F;  (vi) with respect to each Approved Sublease beingtransferred at such Closing, an estoppel letter executed bythe respective subtenant in substantially the form set forthin such Approved Sublease, or if no such form is set forth insuch Approved Sublease, then in substantially the form asExhibit E attached hereto, except that in the event theSeller cannot deliver the foregoing estoppel letter atClosing, then in lieu thereof Seller shall deliver anestoppel letter executed by Seller with respect to suchApproved Sublease in substantially the form attached heretoas Exhibit E (a “**Seller Subtenant Estoppel**”);  (vii) a bill of sale and general assignment withrespect to the Personal Property being conveyed at suchClosing, in the form attached hereto as Exhibit B;  (viii) with respect to each Leased Property, an estoppel lettersubstantially in the form set forth in the applicable Lease,and if no form is set forth in the applicable Lease, thensubstantially in the form attached hereto as Exhibit D,except that in the event that Seller cannot deliver theforegoing estoppel letter from a Landlord with respect to anyof the Leases, then in lieu thereof Seller shall deliver anestoppel letter executed by Seller with respect to theapplicable Lease substantially in the form attached hereto asExhibit D (a “**Seller Tenant Estoppel**”);  (ix) a Take-Back Lease for each Property executed bySeller in the form attached hereto as Exhibit C;  (x) with respect to the Leased Properties, anassignment of any existing and effective SNDA (as hereinafterdefined, and provided that such SNDA is assignable) fromSeller to Purchaser in a form reasonably acceptable to Sellerand Purchaser;
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 (xi) a counterpart of the Closing Statement (ashereinafter defined) for each Owned and Leased Property beingconveyed at such Closing;  (xii) a copy of notice of termination from Seller tothe applicable contractor with respect to any servicecontracts affecting or pertaining to the Property beingconveyed at such Closing;  (xiii) to the extent in the possession of Seller, (A) the originalLeases (for each Leased Property being conveyed at suchClosing) (or if Seller is not in possession of originalLeases, then a copy of such Leases certified by Seller asbeing true, complete and correct), and (B) (for any of theProperties being conveyed at such Closing) building plans,blueprints, drawings, surveys, site plans, engineering plans,utility plans, landscaping plans, other plans andspecifications, 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 “**FIRPTACertificate**”) from the Seller in the form and manner thatcomplies with Section 1445 of the Internal Revenue Code of1986, as amended (the “**Code**”), and the Treasury Regulationspromulgated thereunder. Notwithstanding anything to thecontrary contained herein, if any Seller fails to providePurchaser with a FIRPTA Certificate, Purchaser shall beentitled to withhold from the Purchase Price the amountrequired to be withheld pursuant to Section 1445 of the Codeand the Treasury Regulations promulgated thereunder;  (xv) all properly completed transfer tax forms, ifrequired, that are applicable to the Properties beingconveyed at such Closing;  (xvi) any reasonable affidavits and other documentscustomarily required by the Title Company from a Seller inorder to issue an Owner’s Policy or a Leasehold Policy (withextended coverage over the “general exceptions”), asapplicable, in the applicable jurisdiction (provided that nosuch title affidavit or document shall modify or expandSeller’s obligations with respect to Title Objections beyondthose set forth in Article VI hereof), together with a copyof any material Bankruptcy Court order with respect to theassumption by Seller of any such Lease in connection withSeller’s bankruptcy (which copy shall be certified to becorrect and complete by Seller, or by the applicablebankruptcy court if so required by the Title Company in orderto issue the Leasehold Policies), and an executed memorandumof Lease, in recordable form, with respect to such Lease ifprovided by the applicable Landlord (and Seller covenants touse reasonable and good faith efforts prior to Closing toobtain any such executed memorandum of Lease from eachLandlord under a Lease for which no memorandum of Lease iscurrently recorded); and
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 (xvii) all other customary closing documents reasonably approvedby Purchaser and Seller in connection with the consummationof the transactions contemplated by this Agreement,including, without limitation, those customarily provided bysellers of owned or leased commercial real property in theapplicable state and local jurisdictions in order to convey,transfer and assign the Properties being conveyed at suchClosing to Purchaser.
(b)      Purchaser’s Closing Deliveries. Purchaser shall deliver or cause tobe delivered to Seller (or to the Title Company in escrow, if applicable) atClosing: (i) the portion of the Purchase Price due at such Closing pursuant toArticle III hereof, plus or minus prorations and adjustments as set forthherein; (ii) a duly executed counterpart of the Assignment of Lease executed byPurchaser with respect to each Leased Property being conveyed at such Closing;(iii) a duly executed counterpart of the Assignment of Sublease executed byPurchaser with respect to each Approved Sublease being conveyed at suchClosing; (iv) a duly executed counterpart of a Take-Back Lease executed byPurchaser for each Property being conveyed at such Closing; (v) a counterpartof the Closing Statement for each Property being conveyed at such Closingexecuted by Purchaser; (vi) all properly completed transfer tax forms, ifrequired, that are applicable to the Properties being conveyed at such Closing;(vii) any and all reasonable and customary affidavits and other documentsreasonably requested of Purchaser by the Title Company in order to cause theTitle Company to issue its Title Policy; and (viii) all other customary closingdocuments reasonably approved by Seller and Purchaser in connection with theconsummation of the transactions contemplated by this Agreement, including,without limitation, those customarily provided by purchasers in the applicablestate and local jurisdictions in order to perfect the conveyance, transfer andassignment of the Properties being conveyed at such Closing to Purchaser.
Section 4.3.      Closing Prorations and Adjustments. A statement ofprorations and other adjustments shall be prepared by Seller (for each Propertybeing conveyed at a Closing) in conformity with the provisions of thisAgreement 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 Daysprior to any Subsequent Closing Date (the “**Closing Statement**”). For purposesof prorations, Purchaser shall be deemed the owner of the respective Propertyon the Closing Date. In addition to other adjustments that may be provided forin this Agreement, the following items with respect to each Property are to beprorated or adjusted, as the case may require, for each Property as of theClosing Date for such Property:
     (a)      real estate taxes and assessments (initially prorated on thebasis of 100% of the most recent ascertainable bill, but subject toreproration upon issuance of the actual bills therefor to effectuate theactual proration); to the extent that Seller has escrowed any real estatetaxes with the Landlord under a Lease, Seller shall assign all rightsunder such escrow to Purchaser and, provided the amount so escrowed isconfirmed by such Landlord in writing or is confirmed by other reasonablysatisfactory substantiation, Seller shall be credited accordingly inconnection with the proration of taxes or assessments. Real estate taxesshall be apportioned on the basis of the fiscal period for whichassessed. If as of the applicable Closing Date any of the Properties orany portion thereof shall be affected by any special or generalassessments which are or
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may become payable in installments of which the first installment isthen a lien and has become payable, Seller shall be responsible to paythe unpaid installments of such assessments which are due prior to theapplicable Closing Date and Purchaser shall be responsible to pay theinstallments which are due on or after the applicable Closing Date andPurchaser or Seller shall make a payment to the other to the extentnecessary so that the total amount of such special or general assessmentis apportioned as provided above;
     (b)      the rent and other sums, including, without limitation, monthlyinstallments payable by Seller on account of operating costs and taxes,payable by Seller under the Leases. Any percentage rent owed under anyLease with respect to any time period prior to the applicable Closingshall be paid by Seller. To the extent that Seller has paid to orescrowed with the Landlord under any Lease any monthly estimate of taxesor other operating expenses, and the Landlord refunds or credits toPurchaser or its designee (after the applicable Closing) a portion ofsuch estimated or escrowed payments resulting from a reconciliation ofthe actual expenses or taxes for the period prior to such Closing,Purchaser shall deliver to Seller its pro-rata share of such refundwithin twenty (20) days of receipt of said refund. In the event that aLandlord is owed any additional funds as a result of any deficiency shownin such reconciliation for the period of time prior to the applicableClosing, Seller shall deliver to Purchaser the deficient funds withintwenty (20) days of receipt of notice from Purchaser, subject to anyrights of the tenant under the Lease to contest such determination by theLandlord (which rights shall be retained and shall be exercisable bySeller) with respect to any reconciliation for the period of time priorto the applicable Closing. Seller shall retain, subsequent to anyClosing with respect to a Leased Property, any other rights, claims andremedies against the Landlord with respect to any refunds, rebates orcredits due from the Landlord to Seller (as a tenant under the Lease)with respect to any periods prior to the Closing Date (including, withoutlimitation, audit rights and rights to claim adjustments from theLandlord for overcharged amounts of additional rent under the Lease), andPurchaser shall promptly pay to Seller any such amounts received by (orcredited for the benefit of) Purchaser after the Closing Date andattributable to periods prior to the Closing Date;
     (c)      security deposits paid under the Leases, and not theretoforeapplied, shall be credited by Purchaser to Seller on the applicableClosing Date;
     (d)      water, electric, telephone and all other utility and fuelcharges shall be prorated ratably on the basis of the last ascertainablebills (and reprorated upon receipt of the actual bills or invoices)unless final meter readings and final invoices can be obtained. To theextent practicable, Seller shall cause meters for utilities to be readnot more than ten (10) Business Days prior to the applicable ClosingDate;
     (e)      assignable license and permit fees;
     (f)      deposits made by Seller with utility companies, GovernmentalEntities or any other person, which deposits shall be assigned toPurchaser at Closing and shall be credited to Seller, provided, however,that Seller shall have received written notice from the party holdingsuch deposits confirming the amount of such deposits and stating that nodefault has occurred by Seller and no other condition has occurred whichwould
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prohibit all or any portion of such deposit from being refunded (orsuch other substantiation of the foregoing facts reasonably satisfactoryto Purchaser). If Seller is unable to obtain such a notice or providesuch other substantiation, amounts on deposit with utility companiesshall not be prorated; provided, however, that prior to Closing,Purchaser shall substitute its own deposit for any amounts on depositwith utility companies and Seller shall be entitled to arrange for arefund of Seller’s deposit from such utility companies;
     (g)      the rent and other sums, including, without limitation, monthlyinstallments payable by subtenants on account of operating costs andtaxes payable under the Approved Subleases, subject to Section 4.5 below;
     (h)      security deposits paid under the Approved Subleases, and nottheretofore applied, shall be credited by Seller to Purchaser on theapplicable Closing Date; and
     (i)      other operating expenses and any other customarily apportioneditems.
Except with respect to general real estate taxes (which shall bereprorated upon the issuance of the actual bills, if necessary), any prorationwhich must be estimated at a Closing shall be reprorated and finally adjustedas soon as practicable after the applicable Closing, with any refunds payableto Seller or Purchaser to be made as soon as practicable; otherwise allprorations shall be final. The provisions of this Section 4.3 shall survivethe Closings.
Section 4.4.      Closing Costs. Purchaser shall pay the cost of the Owner’sPolicies and Leasehold Policies, with extended coverage (all other endorsementsrequested 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 oftransfer taxes, documentary stamps, intangible taxes and similar taxes orcharges, and Purchaser shall pay 25% of such costs. Purchaser shall pay thecosts of recording the deeds and all costs of Purchaser’s due diligenceactivities, including, without limitation, engineering and environmentalinspections and reports, and Seller and Purchaser shall each pay one-half ofany escrow charges (including any charges for a “New York Style” closing).Seller and Purchaser shall each be responsible for the fees and costs of theirrespective attorneys, accountants, financial advisors, brokers and other agentsand advisors and any expenses and costs incurred by such party except asotherwise specifically set forth herein.
Section 4.5.      Certain Retained Claims.
     (a)      Seller shall have the right to collect and retain all charges due andpayable by the subtenants (“**Subtenants**”) under any subleases, licenses orconcession agreements relating to any Property and attributable to the periodprior to the Closing Date, including without limitation, rent, payments ofcommon area maintenance charges and payments in the nature of the Subtenant’sshare of real estate taxes (collectively, “**Sublease Rents**”). If, at theClosing Date, any of the Subtenants are in arrears in the payment of anySublease Rents (such arrearages being herein referred to as “**DelinquentAmounts**”), Seller shall have the right to collect the same after the ClosingDate. Sublease Rents received after the Closing Date by Purchaser from any ofthe Subtenants shall first be applied to the amount due to Purchaser from suchSubtenant for the time period after Closing and shall then be applied toDelinquent Amounts and be
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promptly paid over by Purchaser to Seller. Seller shall have and reservesthe right to pursue any right or remedy against the Subtenants for DelinquentAmounts; provided, however, that with respect to any of the Approved Subleasesto be assigned to Purchaser as set forth herein, Seller shall have no right tofile an eviction action against such Subtenants after the Closing.
(b) Seller shall retain all rights, claims and remedies, from and afterthe Closing Date (and, with respect to any Leased Property, to the extent ofthe tenant’s rights under the applicable Lease), with regard to any refunds ofreal estate taxes, with respect to any period prior to the Closing Date. Theamount of any tax refund (net of reasonable attorneys’ fees and otherreasonable costs of obtaining such tax refunds) with respect to the tax yearfor any Property in which the Closing Date occurs (a “**Current Tax Year**”) shallbe apportioned between Seller and Purchaser as of the Closing Date. If, inlieu of a tax refund, a tax credit is received by Seller or Purchaser withrespect 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 ofthe actual amount of such tax credit (net of reasonable attorneys’ fees andother reasonable costs of obtaining such tax credit), the tax creditapportionment shall be readjusted between Seller and Purchaser, and (y) uponrealization 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 anamount equal to the savings realized (as apportioned). All refunds, credits orother benefits applicable to any tax year for any Property prior to the CurrentTax Year shall belong solely to Seller (and Purchaser shall have no interesttherein) and, if the same shall be paid or credited to Purchaser or anyoneacting on behalf of Purchaser, same shall be paid to Seller within twenty (20)days following receipt thereof or following the realization of such credit byPurchaser. All refunds, credits or other benefits applicable to any tax yearfor 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 toSeller or anyone acting on behalf of Seller, same shall be paid by Seller toPurchaser 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, andPurchaser, as landlord, shall enter into a lease or sublease for each Propertyconveyed by Seller to Purchaser at such Closing, in the form attached hereto asExhibit C (the “**Take-Back Lease**”). The term of the Take-Back Leases shallexpire (a) on March 15, 2005 (the “**First Occupancy Delivery Date**”) with respectto the Properties described on Schedule 4.6(a) (the “**First Occupancy DeliveryDate Properties**”), and (b) on April 15, 2005 (the “**Second Occupancy DeliveryDate**”, and each of the First Occupancy Delivery Date and the Second OccupancyDelivery Date, an “**Occupancy Delivery Date**”), with respect to the Propertiesdescribed 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 afailure of certain Closing Conditions or for any other reason as set forth inthis Agreement, Seller and Purchaser may mutually agree in good faith to revisethe allocation of Occupancy Delivery Dates as shown on Schedules 4.6(a) and4.6(b). Notwithstanding anything herein to the contrary, in the event aTake-Back Lease is terminated as a result of a default by Seller under suchTake-Back Lease, Purchaser may elect to accelerate the Occupancy Delivery Datefor such Property to a date prior to the First Occupancy Delivery Date or theSecond Occupancy Delivery Date.
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Section 4.7.     Cooperation Between the Parties.    Seller and Purchaser shallcooperate with one another in order to minimize the transfer taxes payable inconnection with the transactions contemplated by this Agreement, and tominimize any increase in real estate taxes, property valuations or assessments(special or ordinary) including, without limitation, effecting the acquisitionby Purchaser of any Transferred Assets through the merger, consolidation orstock acquisition of or with a newly formed limited liability company (“**LLC**”)that is wholly owned by Seller which has no assets other than the TransferredAssets and no liabilities other than the Assumed Liabilities; provided thatsuch alternative structure has no adverse tax consequences or other adverseconsequences to either party, is otherwise reasonably acceptable to bothparties and does not adversely impact the ability of either party to structuresuch transfer as a like-kind exchange under Section 1031 of the Code. In theevent that the acquisition by Purchaser of any Transferred Assets occursthrough the merger, consolidation or stock acquisition of or with a whollyowned LLC, Seller shall provide reasonable representations and warranties withrespect to such wholly owned LLC covering the matters contained in Section 2.5and Section 8.1, and such LLC shall be bound by the covenants contained hereinthat bind the Seller, as applicable.
Section 4.8.      Separate Transactions.    Seller and Purchaser intend and agreethat for federal and state income tax purposes the sale or Exchange of anindividual Transferred Asset does not take place until the Closing for suchTransferred 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 andapprove a statement (the “**Pre-Closing Allocation Statement**”) setting forth theportion of the Purchase Price that is being paid for Transferred Assets thatare subject to a transfer tax.
ARTICLE V
PRE-CLOSING COVENANTS
Section 5.1.      Operation of Transferred Assets.    With respect to eachProperty, from the Effective Date through and including the first to occur of(i) the termination of this Agreement or (ii) the Closing relating to suchProperty (provided, however, where covenants specifically noted in this Section5.1 run through the Occupancy Delivery Date for such Property, such covenantsshall not expire on the Closing for such Property, but shall survive theClosing and expire on the Occupancy Delivery Date for such Property):
     (a)      Seller shall keep each Property in substantially the samecondition and repair as on the date hereof, ordinary wear and tear anddamage due to a casualty or a taking by condemnation excepted (the“**Permitted Property Condition**”), provided that Seller shall not berequired subsequent to the Effective Date to make any improvements(including capital improvements) to any Property that would upgrade thecondition and repair of any Property beyond the Permitted PropertyCondition (other than Seller’s obligation to cure Seller Violations (asdefined below) under Section 5.1(d));
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     (b)      without the prior written consent of Purchaser, Seller shall notsell, mortgage, pledge, lease, hypothecate or otherwise transfer ordispose of all or any part of any Property or any interest therein or enter into any agreement orarrangement to do so, other than non material subleases, licenses orconcession agreements or other similar agreements entered into in theordinary course of business, each of which will be terminated on orbefore the applicable Occupancy Delivery Date;
     (c)      Seller shall not initiate, consent to, approve or otherwise takeany material action with respect to zoning or any other governmentallaws, rules or regulations presently applicable to any Property, otherthan such action as is necessary to maintain a Property in compliancewith such laws, rules and regulations applicable to such Property, ineach case without the prior written consent of Purchaser, which consentshall not be unreasonably withheld or delayed;
     (d)      Seller shall cure, or cause to be cured, prior to Closing anyviolations (“**Violations**”, which shall include, with respect to a LeasedProperty, only those violations that are the responsibility of the tenantunder 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 orregulatory authority (a “**Governmental Entity**”), applicable to theTransferred Assets and issued in writing by the applicable GovernmentalEntity 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 DeliveryDate, if arising from Seller’s actions or the conduct of Seller’sbusiness at the Property subsequent to the date hereof (each, a “**SellerViolation**”); provided that if any Seller Violation is not capable ofbeing cured by Seller prior to the Closing, then the parties shallnevertheless proceed to Closing with respect to the applicable Propertyin accordance with this Agreement, and Seller shall indemnify, defend andhold harmless the Purchaser Indemnified Parties from and against anyLosses with respect to such uncured Seller Violations, subject to thelimitations set forth in this Section 5.1(d) (and such indemnificationobligation of Seller shall survive the Closing), but without limitingPurchaser’s rights under Section 3.2(e) above. Notwithstanding theforegoing, in the event that the estimated cost of curing all SellerViolations with respect to a Property (as determined by an independentarchitect or engineer selected by Seller and approved by Purchaser)exceeds five percent (5%) of the allocated Purchase Price with respect toany Property (the “**Maximum Violation Cure Amount**”), then Seller, uponwritten notice to Purchaser given within five (5) Business Days afterSeller’s receipt of such determination, shall have the right to terminatethis Agreement with respect to the applicable Property, in which event(i) the portion of the Deposit allocated to such Property shall bereturned to Purchaser, (ii) the Purchase Price shall be deemed to bereduced by the allocated Purchase Price applicable to such Property,(iii) the term “Property” as used herein shall be deemed to be amended toomit any references to the applicable Property, (iv) the parties shallproceed to Closing with respect to the other Properties pursuant to theterms of this Agreement, and (v) neither party hereto shall have anyfurther obligation to the other with respect to the applicable Property,with the exception of those obligations which expressly survive thetermination of this Agreement (clauses (i) through (v) collectively, the“**Property Termination Procedure**”). Notwithstanding the foregoing, withinten (10) Business Days after Purchaser’s receipt of
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such a terminationnotice from Seller, Purchaser may notify Seller that it elects to voidSeller’s termination notice and to proceed to Closing subject to suchSeller Violation, in which event the Purchase Price allocable to such Property shall bereduced by five percent (5%). Any Violation with respect to aTransferred Asset that is not a Seller Violation shall be hereinafterreferred 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 Subleasesset forth on Schedule 8.1(j) attached hereto) relating to each Propertyprior to the applicable Occupancy Delivery Date relating to suchProperty, such that Purchaser shall have sole and exclusive possession ofeach Property at the applicable Occupancy Delivery Date, except for anyApproved Subleases;
     (f)      Seller shall comply in all material respects with all terms andconditions of the Leases and Approved Subleases and Seller shall notterminate, extend or modify any of the Leases or Approved Subleaseswithout the prior written consent of Purchaser, which consent shall notbe unreasonably withheld or delayed. Seller shall provide written notice(“**Renewal Notice**”) to Purchaser of any pending renewal options withrespect to any Lease at least thirty (30) days prior to the last date onwhich any such renewal option may be exercised, and unless Seller isnotified in writing by Purchaser not to exercise any such renewal optionwithin fifteen (15) days after Purchaser’s receipt of the Renewal Notice,Seller shall exercise such renewal option. Seller shall also promptlyforward to Purchaser copies of any material notices received by Sellerfrom any Landlord subsequent to the Effective Date;
     (g)      all Service Contracts and other contracts (other than theLeases, the Approved Subleases and the Permitted Exceptions) which affector pertain to any Property shall be terminated, or caused to beterminated, by Seller prior to and be of no further force or effect as ofthe applicable Occupancy Delivery Date relating to such Property;
     (h)      any mortgage financing relating to any Owned Property, and anyfinancing secured by Seller’s leasehold interest with respect to anyLeased Property, shall be paid off and all related security documentsencumbering 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 eachProperty, Seller shall vacate the Property and remove all personalproperty and inventory therefrom, except for Merchandise Trade Fixtures,which may be left by Seller in their existing location as of thecompletion of Seller’s store closing sale, or in any other reasonablelocation within the Property as reasonably determined by Seller. At theapplicable Occupancy Delivery Date for each Property, Seller shalldeliver the applicable Property to Purchaser in broom-clean condition;
     (j)      Seller shall be responsible for and shall pay all amounts duethrough the applicable Occupancy Delivery Date relating to such Propertyfor each Employee’s salaries, wages, fees, vacation pay, severance pay,withholding and payroll taxes and
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other benefits, and shall otherwisecomply with any and all applicable requirements ofthe WARN Act (including all notice requirements), any similarApplicable Law and the medical and dental continuation requirements ofCOBRA;
     (k)      subject to Section 5.7 hereof, Seller shall (i) terminate theemployment of, or transfer to another Seller store, all of theindividuals rendering services to Seller as employees or independentcontractors in connection with any Property before the applicableOccupancy Delivery Date related to such Property, and (ii) providePurchaser with written notice of the number of employees terminated bySeller during the ninety (90) days preceding and including any applicableOccupancy Delivery Date;
     (l)      Seller shall promptly give written notice to Purchaser of theoccurrence of any event known to Seller which affects in any materialrespect the truth or accuracy of any of the representations or warrantiesmade 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 reasonableaccess to each Property during the time period after the Closing for suchProperty through the Occupancy Delivery Date for such Property forpurposes of inspection of the Property in connection with Purchaser’sintended renovations and operations at the Property, upon reasonableprior notice to Seller and during business hours (or, at Seller’selection and to the extent reasonable, after business hours), providedthat such access by Purchaser shall not interfere in any material respectwith Seller’s business operations at the Property. Seller shall (at nocost to Seller) reasonably cooperate with Purchaser prior to theOccupancy Delivery Date for each Property in connection with Purchaserobtaining any permits from Governmental Entities to perform renovationson the Property, which renovations shall be performed by Purchaser afterthe Occupancy Delivery Date for such Property. Purchaser’s entry on theProperties shall be subject to the terms and conditions of theConfidentiality and Access Agreement.
     (n)      Seller shall use commercially reasonable efforts to obtain a nofurther action letter or no further remediation letter, from theappropriate Governmental Entity providing that the former undergroundstorage tanks identified in Schedule 5.1(n) were closed in accordancewith 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 ApplicableLaws, each of the parties shall use its reasonable best efforts to take, orcause to be taken, all actions, and do, or cause to be done, and assist andcooperate with the other party in doing, in the most expeditious mannerpracticable, all things necessary, proper or advisable to ensure that theconditions set forth in Article X hereof are satisfied and to consummate thetransactions contemplated hereby.
     (b)      Without limiting the generality of the foregoing, and subject to theterms and conditions in this Agreement, each of Purchaser and Seller shall:
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 (i) to the extent required under ApplicableLaws, promptly make any required filings under theHart-Scott-Rodino Antitrust Improvements Act of 1976, asamended, and the rules and regulations promulgatedthereunder (the “**HSR Act**”), with respect to thetransactions contemplated by this Agreement andthereafter respond as promptly as practicable to anyinquiries or requests received from any GovernmentalAuthority for additional information or documentation;  (ii) not extend any waiting period under theHSR Act or enter into any agreement with any GovernmentalAuthority not to consummate the transactions contemplatedby this Agreement, except with the prior consent of theother party hereto (which consent shall not beunreasonably withheld or delayed);  (iii) use their reasonable best efforts tocooperate with one another in (A) determining whichfilings and notifications are required to be made underApplicable Laws with, and which consents, licenses,approvals, permits, waivers, orders or authorizations arerequired to be obtained under Applicable Laws from,Governmental Entities in connection with the executionand delivery of this Agreement and the consummation ofthe transactions contemplated by this Agreement, (B)timely making all such filings and notifications andtimely seeking all such consents, licenses, approvals,permits, waivers, orders or authorizations and (C) aspromptly as practicable, responding to any request forinformation from such Governmental Entities;  (iv) subject to any restrictions underApplicable Laws, to the extent practicable, promptlynotify each other of any communication to that party fromany Governmental Entity with respect to the transactionscontemplated by this Agreement and permit the other partyto review in advance any proposed written communicationto any Governmental Entity;  (v) not agree to participate in any meetingwith any Governmental Entity in respect of any filing,investigation or other inquiry with respect to thetransactions contemplated by this Agreement unless itconsults with the other party in advance and, to theextent permitted by such Governmental Entity, gives theother party the opportunity to attend and participatethereat, in each case to the extent practicable;  (vi) subject to any restrictions underApplicable Laws, furnish the other party with copies ofall correspondence, filings and communications (andmemoranda setting forth the substance thereof) between itand its affiliates and their respective
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   representatives on the one hand, and any GovernmentalEntity or members of its staff on the other hand, withrespect to the transactions contemplated by thisAgreement (excluding documents and communications thatare subject to preexisting confidentiality agreementsand to the attorney-client privilege or work productdoctrine);
 (vii) furnish the other party with suchnecessary information and reasonable assistance as suchother party and its affiliates may reasonably request inconnection with their preparation of necessary filings,registration, or submissions of information to anyGovernmental Entities in connection with this Agreementand the transactions contemplated hereby, including,without limitation, any filings necessary or appropriateunder the provisions of the HSR Act;  (viii) use its reasonable best efforts to avoid the entry of,or to have vacated, lifted, reversed, overturned orterminated, any order, judgment, injunction or decree(whether temporary, preliminary or permanent) or anyother judicial, administrative or legislative action orproceeding (“**Order**”) that would restrain, prevent ordelay the closing of the transactions contemplated bythis Agreement, including, without limitation, defendingthrough litigation on the merits any claim asserted inany court by any party; and  (ix) use its reasonable best efforts to takeany steps necessary to avoid or eliminate any impedimentunder any Applicable Law that may be asserted by anyGovernmental Entity or private party with respect to thetransactions contemplated by the Agreement so as toenable the Closings to occur as soon as reasonablypracticable after the date hereof.
     (c)      Seller and Purchaser agree that they will seek with respect to eachLease set forth on Schedule 5.2(c) attached hereto a written consent and/orwaiver from either the Landlord under such Lease, any ground lessor and/or fromother property owners pursuant to a recorded declaration, pursuant to whichsuch Landlord, ground lessors or property owners, as applicable, consents to(as applicable, based upon the terms of such Lease, ground lease ordeclaration): (i) the assignment of such Lease from Seller to Purchaser andLandlord waives any termination or recapture rights in favor of such Landlordunder the Lease, (ii) the closing of business at the Leased Property byPurchaser (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 unusuallysevere weather conditions, labor strikes, latent defects or conditions in or onthe Property discovered by Purchaser during construction, and other materiallyadverse events not within Purchaser’s reasonable control, provided that if anysuch latent defects or conditions require that Purchaser obtain a buildingpermit 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 theissuance by the Governmental Entity to Purchaser of such building permit) forpurposes of renovating the
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Property for Purchaser’s intended use, (iii) Purchaser making exteriorand/or structural alterations to the Improvements on the Property for purposesof (x) compliance with the Americans with Disabilities Act, (y) constructing anawning 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 signageon the Property, and/or (iv) the recording of a memorandum of lease or similarinstrument sufficient to enable the Title Company to issue a Leasehold Policy(and execution of such document by the Landlord) with respect to those LeasedProperties located in Puerto Rico for which no memorandum of lease or similarinstrument is currently recorded (such consents being hereinafter referred tocollectively as the “**Required Consents**”). The form of Required Consents to besent to Landlords, ground lessors or property owners, as applicable, shall beapproved by Seller and Purchaser, and, once approved, Seller shall send theRequired Consent forms to the Landlords, ground lessors and property owners.Seller and Purchaser shall each use their reasonable best efforts to obtain theRequired Consents as soon as practicable after the Effective Date, provided,however, that neither Seller nor Purchaser shall have any obligation to pay anysum of money or commence any action or proceeding in order to obtain the same.In connection with seeking each Required Consent, Purchaser shall cooperatewith the reasonable requests of the Landlords, ground lessors or propertyowners (including, without limitation, reasonable modifications to the Lease orother applicable documents), provided that in no event shall Purchaser berequired, in connection with obtaining a Required Consent, to (i) pay any sumof money to any Landlord, ground lessor or property owner (including throughany increase in rent or additional charges), or (ii) make any agreements thatcould increase Purchaser’s liability under a Lease or other applicabledocuments or materially interfere with or otherwise adversely affect in anymaterial respect Purchaser’s ability to conduct its intended business on theProperty. Seller and Purchaser (x) shall jointly meet and/or communicate witheach Landlord, ground lessor or property owner with respect to any initialrequest for a Required Consent, and (y) following such initial meeting orcommunication, shall establish and adhere to mutually acceptable procedures forcommunicating with Landlords, ground lessors or property owners and theirrepresentatives and attorneys with respect to such Required Consents andkeeping the other party (to the extent that such other party is not involved insuch subsequent meetings or communications) advised with respect thereto.
     (d)      Seller and Purchaser shall promptly request, and use reasonable andgood faith efforts to obtain prior to Closing with respect to any LeasedProperty, (i) an estoppel letter from each Landlord of the Leased Properties,in substantially the form specified in the particular Lease (provided such formof estoppel is customary for retail leases of such age and location) or, if noform of estoppel is prescribed in a Lease, in substantially the form attachedhereto as Exhibit E, and dated within thirty (30) days of such Closing; (ii)with respect to any Properties as requested by Purchaser, including withoutlimitation the Properties set forth on Schedule 5.2(d) attached hereto, asubordination, non-disturbance and attornment agreement (an “**SNDA**”) from theLandlord’s lender and/or, in the event the Lease is actually a sublease subjectto a Ground Lease (as hereinafter defined), from Landlord’s ground lessor, inform and substance reasonably acceptable to Purchaser; (iii) a release from theLandlord in favor of Seller with respect to the Lease, in form and substancereasonably satisfactory to Seller, and (iv) an estoppel letter from eachsubtenant of the Approved Subleases, in form and substance similar to the formattached to the applicable Approved Sublease, or if no form of estoppel letteris attached to such Approved Sublease, an estoppel letter in substantially theform attached hereto as Exhibit F, in each case dated within thirty (30) daysof Closing. Notwithstanding the foregoing, (x) the receipt by
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Purchaser of executed estoppels with respect to any Lease or ApprovedSublease shall not be a condition to Purchaser’s obligation to close withrespect to the transfer and assignment of the applicable Lease provided thatSeller delivers a Seller Tenant Estoppel or Seller Subtenant Estoppel atClosing for any Leases or Approved Subleases for which such estoppels are notobtained, (y) the receipt by Seller of an executed release with respect to anyLease shall not be a condition of Seller’s obligation to close with respect tothe transfer and assignment of such Lease, and (z) the receipt by Purchaser ofany SNDAs shall not be a condition to Purchaser’s obligation to close withrespect to the transfer and assignment of the applicable Lease except withrespect to those Leased Properties described in Section 10.1(a)(iii)(y).
(e)      Notwithstanding the foregoing, nothing in this Agreement shall requirePurchaser to agree to the sale, transfer, divestiture or other disposition ofany assets (including any lines of business and any Transferred Assets orPharmacy 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 takeany 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 orPurchaser, the other party agrees to cooperate with the requesting party toeffectuate a tax deferred like kind exchange (an “**Exchange**”) as contemplated bySection 1031 of the Code, or other tax efficient transaction, including, in thecase of an Exchange, by use of a qualified intermediary (a “**QualifiedIntermediary**”), 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 ofPurchaser; provided, however, that (i) neither party shall have any liabilityto the other if such other party is unable to effectuate an Exchange (or othertax efficient transaction) for any reason, other than by reason of a defaultunder this Agreement by the other party, including, without limitation, thatneither party shall have liability under any circumstances for any part of anytax savings or tax benefit that the other party might have enjoyed by reason ofan Exchange; (ii) either party’s ability to effectuate an Exchange (or othertax efficient transaction) shall not be a condition to its obligation toconsummate any transaction contemplated by this Agreement, and (iii) neitherparty shall be obligated to incur any costs, expenses or liabilities of theother 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 shallbe 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 QualifiedIntermediary. Should a Property become part of an Exchange, each partyelecting to exchange the Property (the “**Exchanger**”) hereby agrees that theother party may enforce and all representations, warranties, covenants andother obligations of the Exchanger under this Agreement directly against theExchanger, and the other party agrees that the Exchanger may enforce any andall representations, warranties, covenants and other obligations of the otherparty under this Agreement directly against the other party. If both partiesrequest an Exchange with respect to the same Property, the parties agree tocooperate to effectuate such Exchange in accordance with the precedingprinciples.
Section 5.4.      Disclosure.     Purchaser and Seller will each use theirreasonable best efforts to coordinate and simultaneously release their firstpublic announcement or press release relating to the transactions contemplatedby this Agreement. In addition, prior to the Initial
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Closing Date, Purchaser and Seller shall consult with each other beforeissuing, and provide each other a reasonable opportunity to review and commentupon, any press release or other similar written public statements with respectto the transactions contemplated hereby (including, without limitation, thefirst public announcement or press release) and shall not issue any such pressrelease or written public statement prior to such consultation, except as maybe required by Applicable Law, by court process or by obligations pursuant toany listing agreement with any national securities exchange.
Section 5.5.      Additional Approved Sublease Documents. With respect to anydocuments (or portions thereof) set forth on Schedule 5.5 or noted on Schedule8.1(j) as having not been made available by Seller to Purchaser prior to theEffective Date (collectively, “**Additional Approved Sublease Documents**”), Sellershall use good faith efforts to provide to Purchaser, at least ten (10)Business Days prior to the applicable Closing, true and complete copies of suchAdditional Approved Sublease Documents. Notwithstanding the foregoing, Sellershall deliver to Purchaser, at least ten (10) Business Days prior to the thenapplicable Closing, true and complete copies of the Additional ApprovedSublease Documents set forth on Schedule 5.5 attached hereto.
Section 5.6.     Purchase of Fee Interest in LeasedProperties.    Prior to theClosing Date with respect to a Leased Property, Purchaser shall not acquire orattempt to acquire the underlying fee simple interest with respect to suchLeased Property, or make any offer or purchase inquiry with respect thereto.Seller (or its affiliates) shall be entitled to acquire or enter into acontract to acquire the underlying fee simple interest with respect to anyLeased Property prior to the Closing Date with respect to such Leased Property,provided, that, in the event of such acquisition, Seller shall, as the feeowner of such Leased Property, consent to (without requiring Purchaser to agreeto amend or otherwise modify the Lease) (i) the assignment of the leaseholdinterest in the Lease to Purchaser, (ii) the closing of business at the LeasedProperty by Purchaser in connection with any renovation of the Leased Propertyfor Purchaser’s intended use as contemplated hereunder, and (iii) structural orexterior alterations or changes in signage in accordance with the standardplans and specifications for Purchaser’s use as a [Sears] brand store to theextent such Lease requires the consent of the Landlord to any of the foregoing.Notwithstanding the foregoing, neither Seller nor any affiliate of any ofSeller shall purchase or enter into a contract to purchase the fee simpleinterest with respect to more than twenty five (25) of the Leased Propertiesprior to the final Closing Date, without the prior written approval ofPurchaser.
Section 5.7.      Employee Matters.
(a)      From and after the applicable Closing Date until the OccupancyDelivery Date with respect to a Property, Seller shall cooperate with Purchaserto attempt to make available to Purchaser (or any of its officers, employees oragents or its Designee) each Employee (including all pharmacy personnel)employed by Seller at such Property (a “**Store Employee**”) for the purpose ofinterviewing such individuals for possible employment with Purchaser or itsDesignee, to the extent that such individuals desire to interview for possibleemployment with Purchaser or its Designee. Prior to the Occupancy DeliveryDate with respect to a Property, Purchaser shall arrange an interview with eachinterested Store Employee employed at such Property for possible employmentwith Purchaser or its Designee. However, notwithstanding the
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foregoing, nothing in this Agreement shall obligate or constitute theagreement of Purchaser or any of its affiliates or its Designee to recruit orhire any Store Employee or any other employee or former employee of Seller.Furthermore, in the event that Purchaser or any of its affiliates or itsDesignee determines to hire any Store Employee or any other employee or formeremployee of Seller, any such hiring and employment shall be at the solediscretion of Purchaser or its Designee and any terms or conditions of suchemployment shall be determined by Purchaser or its Designee, in its respectivesole discretion.
     (b)      From and after the Effective Date until thirty (30) days (or sixty(60) with respect to Pharmacy Employee) after the applicable Closing withrespect to a Property, Seller shall not transfer or reassign any pharmacypersonnel employed by Seller in connection with Seller’s operation of itspharmacy business from any Property (a “**Pharmacy Employee**”) or any storemanager or assistant store manager (either, a “**Store Manager**”) employed bySeller at such Property to any other stores of Seller or any of itssubsidiaries, unless such a Pharmacy Employee or Store Manager requests atransfer or reassignment for health or family reasons or for similar reasons,in which case Seller may transfer or reassign such employee and Seller shallpromptly notify Purchaser of any such transfer or reassignment. From and afterthe Effective Date until the applicable Closing Date with respect to aProperty, Seller may communicate with, but shall not make an offer to, anyPharmacy Employee or Store Manager employed by Seller at such Property tocontinue to work for Seller after the applicable Occupancy Delivery Date;provided, however, in the event Seller notifies Purchaser that it desires tomake an offer to a Store Manager prior to the applicable Closing Date andprovides Purchaser with no less than ten (10) days after Purchaser’s receipt ofsuch notice to interview such Store Manager for possible employment withPurchaser, Seller may make an offer to such Store Manager at any time aftersuch ten (10) day period. Except as set forth in the preceding sentence,Purchaser shall not recruit, solicit, interview, make an offer to or otherwisecommunicate with Seller’s Employees prior to the Closing Date for theapplicable Property. After the Closing Date for the applicable Property, bothSeller and Purchaser shall have the right to recruit, solicit, interview, makean offer to and communicate with Seller’s Employees with respect to prospectiveemployment, except that (notwithstanding anything to the contrary set forth inthis Section 5.7(b)) with respect to Pharmacy Employees Seller may not make anoffer of employment to such Pharmacy Employee (or engage such Pharmacy Employeeas an independent contractor or leased employee) for any other store of Selleror any of its subsidiaries during the period beginning on the Effective Dateand ending on the sixtieth (60th) day after the applicable Closing Date,subject to the limitations on Seller’s right to transfer or reassign PharmacyEmployees or Store Managers, for health or family or similar reasons, pursuantto the first sentence of this Section 5.7(b).
     (c)      Seller shall be liable for all claims relating to COBRA continuationcoverage (within the meaning of Treas. Reg.Section 59.4980B-9) attributable to“qualifying events” with respect to any Employee and his or her beneficiariesand dependents that occur on or before the Occupancy Delivery Date with respectto the Property at which the Employee rendered service; provided that Purchasershall not take, or encourage any other person to take, any measures thatdiscourage or are intended to discourage any Employee hired by Purchaser fromenrolling in Purchaser’s health and medical plans, programs, policies orarrangements, nor shall Purchaser take, or encourage or facilitate any otherperson to take, any measures that encourage or are intended to encourage anyEmployee 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 AccessAgreement to perform Phase I and Phase II environmental investigations withrespect to the portions of the Properties subleased pursuant to the ApprovedSubleases (each a “**Subleased Premises**”) identifiedon Schedule 5.8. In theevent any such report discloses an environmental condition in, on, under orrelating to any such Subleased Premises which is in violation of anyEnvironmental Law and the estimated cost to remediate such environmentalcondition is reasonably estimated by Purchaser’s consultant to exceed fivepercent (5%) of the Purchase Price allocable to such Property, Purchaser shallnotify Seller in writing of the same, and Purchaser shall have the right,within thirty (30) days after the Effective Date, to terminate this Agreementwith respect to such Property, in which event the Property TerminationProcedure shall apply.
ARTICLE VI
STATUS OF TITLE TO THE PROPERTIES
Section 6.1.      Preliminary Evidence of Title.     Within thirty (30) daysfollowing the Effective Date, Purchaser shall use commercially reasonableefforts to obtain each of the following documents (and shall provide to Sellera copy of such documents promptly after Purchaser’s receipt thereof):
     (a)      with respect to the Owned Properties, title insurancecommitments (the “**Owner’s Title Commitments**”) for ALTA Form B (1992)Owner’s Title Insurance Policies proposing to insure Purchaser andcommitting to insure each Owned Property, issued by First American TitleInsurance Company (referred to herein as the “**Title Company**” or“**Escrowee**”).
     (b)      with respect to the Leased Properties, leasehold title insurancecommitments (the “**Leasehold Commitments**,” and, together with the Owner’sTitle Commitments, the “**Title Commitments**”) for ALTA Leasehold OwnersTitle Insurance Policies proposing to insure Purchaser and committing toinsure the leasehold interest in each Leased Property, issued by theTitle Company.
     (c)      current survey plats (collectively, the “**Surveys**”) of each ofthe Properties certified to Purchaser and the Title Company (and suchother persons or entities as Purchaser may designate) by a surveyorregistered in the state in which such Property is located, prepared inaccordance with the Minimum Standard Detail Requirements for ALTA/ACSMLand Title Surveys.
Section 6.2.      Title Defects.     If any Title Commitment or Survey disclosesany (i) mortgages, deeds of trust, financing statements, judgments, mechanic’sliens, materialmen’s liens, tax liens, or similar monetary liens, (ii) materialencroachments, or (iii) other title exceptions or defects that materially andadversely affect the future use or operation of a Property as a Sears brandretail store, including, without limitation, the sale of consumables andtransactional merchandise (a “**Material Title Defect**”), Purchaser shall usecommercially reasonable efforts to notify Seller in writing of such MaterialTitle Defect within ten (10) days after Purchaser’s receipt of a TitleCommitment 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 ReviewPeriod**”), and Seller shall have ten (10) days from the receipt of Purchaser’snotice (“**Seller’s Title Cure Election Period**”) to elect whether to have theMaterial Title Defect removed or cured (or to commit to do the same), to thereasonable satisfaction of Purchaser. In the event Seller elects, withinSeller’s Title Cure Election Period, not to remove or cure such Material TitleDefect, Purchaser shall have the option, within ten (10) days after theexpiration of Seller’s Title Cure Election Period, to either (i) waive suchMaterial Title Defect and proceed to Closing for such Property in accordancewith this Agreement, or (ii) elect not to acquire such Property and relatedTransferred Assets, in which event the Property Termination Procedure shallapply. 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 aperiod ending on the later of (1) 30 days after the expiration of Seller’sTitle Cure Election Period, or (2) the Closing Date with respect to suchProperty, to remove or cure such Material Title Defect, upon which removal orcure the parties shall proceed to Closing for such Property in accordance withthis Agreement. Any liens, encumbrances, title defects or other titleexceptions disclosed in any Title Commitment or Survey and which do notconstitute Material Title Defects (and any Material Title Defects whichPurchaser elects to waive pursuant to this Section 6.2), shall be referred toherein as the “**Permitted Exceptions**”. Notwithstanding the foregoing, Sellershall cause to be removed and discharged of record prior to Closing (i) anylien encumbering the Property and securing money borrowed by Seller, and (ii)any mechanic’s lien, judgment lien or other lien securing a liquidated sumrelating to work performed by or on behalf of Seller or otherwise required tobe removed by Seller pursuant to the applicable Lease for such Property,provided that Seller shall not be required to remove or discharge at Closingany bona fide mechanic’s liens, judgment liens or other liens (excludingjudgment liens relating to non-appealable judgments) encumbering the Propertyand described in this clause (ii) if the aggregate amount of such liens exceedsfive percent (5%) of the Purchase Price allocated to such Property, and ifSeller so elects not to remove and discharge such liens at Closing pursuant tothis proviso, then Purchaser shall have the same rights (as set forth in thesecond sentence of this Section 6.2) as if Seller shall have elected not tocure a Material Title Defect, except that if Purchaser elects to waive suchMaterial Title Defect and to proceed to Closing, the Purchase Price allocatedto 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 toSection 6.2;
     (b)      any title exceptions or defects (A) over which the Title Companyis willing to insure (without additional cost to Purchaser or whereSeller pays such cost for Purchaser’s account), (B) against which theTitle Company is willing to provide affirmative insurance (withoutadditional cost to Purchaser or where Seller pays such cost forPurchaser’s account) (provided that any insurance by the Title Companypursuant to clauses (A) and (B) shall be in a form acceptable toPurchaser in its reasonable discretion), (C) which will be extinguishedupon the Closing of the Property, or (D) which are the responsibility ofa Landlord under a Lease to cure, correct or remove and which will notresult in a forfeiture of the tenant’s interest under the Lease or in theProperty;
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     (c)      Real property taxes which are a lien but not yet due andpayable, 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 ofassessments imposed after the date hereof and affecting the Property orany portion thereof; and
     (f)      any utility company rights, easements and franchises forelectricity, water, steam, gas, telephone or other service or the rightto use and maintain poles, lines, wires, cables, pipes, boxes and otherfixtures and facilities in, over, under and upon the Property, providedthe same do not materially and adversely affect the present use of theProperty and will not materially and adversely affect Purchaser’sintended use of the Property.
Section 6.4.      Cooperation By Seller.    If necessary in order for the TitleCompany to issue a Title Commitment or to deliver to Purchaser copies of theunderlying title documents, Seller shall, promptly after request from Purchaseror Purchaser’s attorneys, (and, if necessary, shall request that the applicableLandlord) deliver to the Title Company or any applicable Governmental Entityany authorizations reasonably required by the Title Company or the applicableGovernmental 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 materiallydamaged by fire or other casualty (that is, damage or destruction whichPurchaser and Seller reasonably estimate would cost in excess of $750,000 torepair or restore or which materially impedes access to the respective Propertyor any material part thereof) (a “**Material Casualty**”), Purchaser shall have theoption, which may be exercised not later than the later of (x) ten (10) daysprior to the applicable Closing, or (y) ten (10) days following the datePurchaser receives written notice of the condemnation or material damage, to:
(a)      proceed to consummate the transactions contemplated by thisAgreement with respect to the Property, notwithstanding such casualty orcondemnation, and receive a credit at Closing in the amount of the coststo repair any damage (in an amount reasonably acceptable to Seller andPurchaser); or
(b)      elect not to acquire the Property and other Transferred Assetsrelated to such Property, in which event the Property TerminationProcedure shall apply.
(c)      In the event that Seller and Purchaser cannot agree as to theamount of credit set forth in Section 7.1(a) above, Seller and Purchaseragree to promptly submit the matter to an independent, licensed thirdparty 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 theamount of such credit. If the parties are unable to agree upon suchcontractor, 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. Eachparty shall pay the cost of its respective contractor and the partiesshall each pay for one-half of the cost of the mutually acceptablecontractor or the third contractor, as applicable.
     Section 7.2.      Non-Material Casualty. If there is any other damage ordestruction (that is, damage or destruction which Purchaser and Sellerreasonably estimate would cost $750,000 or less to repair or restore, or whichdoes not materially impede access to the Property or any material partthereof), Seller shall either, at Seller’s option, (i) completely repair suchdamage prior to Closing in a manner reasonably satisfactory to Purchaser, or(ii) allow Purchaser a credit against the Purchase Price in an amount equal tothe estimated cost of repair (determined as set forth in Section 7.1 above), asof the Closing Date.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1.      Seller’s Representations and Warranties.  Seller representsand warrants to Purchaser that the following are true, complete and correct asof the Effective Date and shall be true, complete and correct as of eachClosing Date (with respect to the Properties being transferred and conveyed asof such Closing Date):
     (a)      Seller is duly organized, validly existing, and in good standingunder the laws of the State in which Seller was incorporated. Seller hasall requisite corporate power and authority to execute and deliver thisAgreement, to perform its obligations hereunder and to consummate thetransactions contemplated hereby. The execution and delivery of thisAgreement by Seller and the consummation by Seller of the transactionscontemplated hereby has been duly authorized by all necessary corporateaction and no other corporate proceedings on the part of Seller arenecessary to authorize this Agreement or to consummate the transactionscontemplated hereby. This Agreement has been duly executed and deliveredby Seller and, assuming the due authorization, execution and delivery ofthis Agreement by Purchaser, constitutes the legal, valid and bindingobligation of Seller, enforceable against Seller in accordance with itsterms, except as may be limited by (i) any bankruptcy, insolvency,reorganization, moratorium or other similar laws now or hereafter ineffect relating to creditors’ rights, and (ii) the law of fraudulenttransfer and conveyance.
     (b)      Neither the execution and delivery of this Agreement nor itsperformance by Seller will conflict with or result in the breach of anycontract, agreement, or Applicable Laws to which Seller is a party, otherthan Leases, ground leases or Permitted Exception documents for whichRequired 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 notbeen received or made is required by or with respect to Seller inconnection with the execution, delivery and performance of this Agreementby Seller or the consummation by Seller of the transactions contemplatedhereby except for (i) the filing of any premerger notification and reportforms and the expiration or termination of any waiting periods requiredby the HSR Act, (ii) any applicable approvals, consents, authorizations,declarations, registrations or notices under any pharmacy regulations orto any Governmental Entities or third party administrators in connectionwith the transactions contemplated under Article II (**“PharmacyApprovals”**), 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 toperform its obligations under this Agreement or under any instrument,document or agreement required to be executed and delivered pursuanthereto (collectively, the “**Related Agreements**”) or to consummate thetransactions contemplated hereby or thereby.
     (d)      Seller is the owner of the Personal Property, free and clear ofall liens and encumbrances.
     (e)      Seller has not entered into any currently effective agreement tolease (other than the Leases), sell, mortgage or otherwise encumber ordispose of its interest in any of the Transferred Assets or any partthereof (other than currently effective Subleases, or otherwise in theordinary course of business), except for this Agreement, any PermittedExceptions and mortgages, deeds of trust or other encumbrances that willbe satisfied and released from the Properties at or before the Closing.
     (f)      Except as set forth on Schedule 8.1(f) attached hereto, to theknowledge of Seller, Seller has not received any written notice that theTransferred Assets or any part thereof are presently in violation in anymaterial respect of any Applicable Laws, or any covenants or restrictionsof record applicable to the particular Transferred Assets, provided thatnotwithstanding anything to the contrary herein, the provisions of thisSection 8.1(f) relating to Violations shall be applicable only as of theEffective Date, and any Violations issued with respect to the Propertiessubsequent 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 ofSeller, there is no action, proceeding or investigation pending orthreatened against or involving the Transferred Assets or against Sellerwith respect to the Transferred Assets before any court or governmentaldepartment, commission, board, agency or instrumentality.
     (h)      Except as set forth on Schedule 8.1(h) attached hereto, Sellerhas not received written notice of any proposed material reassessment ofany Property for purposes of real estate taxes. Except as set forth onSchedule 8.1(h-1), Seller has not received written notice of any specialor general assessments affecting any Property.
     (i)      Schedule 1.1(b)-1 describes all of the Leases, including allamendments, modifications and revisions thereof (all of which are deemedincluded within the term
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“Leases” defined herein), and Seller has made available to Purchasertrue and complete copies of all Leases, except as set forth on Schedule1.1(b)-1. Each of the Leases is in full force and effect. To Seller’sknowledge, no commissions to any broker or leasing agent and payable bySeller are due or will become due pursuant to an agreement made bySeller on account of any of the Leases or upon extension or renewal ofthe original term thereof, whether or not pursuant to an option or otherrights contained in the Lease. Except as set forth on Schedule 8.1(i)-1attached hereto, Seller has not received or given any written notice fromor to a Landlord that any default exists on the part of the Seller or therespective Landlord under any of the Leases, which default has not beencured. Schedule 8.1(i)-2 discloses all unapplied security and otherdeposits held by Landlords under the Leases. Seller has not made anyadvance payment of rent (other than for the current month) on account ofany of the Leases. All written or oral leases, subleases, licenseagreements, concession agreements or tenancies or rights of possessionaffecting the Leased Properties entered into by Seller other than theLeases (collectively, the “**Subleases**”) shall be terminated effective ator prior to each Occupancy Delivery Date (except for those Subleases andconsent agreements listed on Schedule 8.1(j), which shall not beterminated (the “**Approved Subleases**”)). All of the Leases are assignableby Seller at Closing as contemplated by this Agreement without theconsent of any other party, except for the Required Consents. The squarefootage amounts for Seller’s stores at the Properties set forth onSchedule 8.1(i)-3 do not include any of the space subleased under theApproved Subleases.
     (j)      (i) Schedule 8.1(j) describes the Approved Subleases, includingall amendments, modifications and revisions thereof (all of which aredeemed included within the term “**Approved Subleases**”), and, except forthe Additional Approved Sublease Documents, Seller has made available toPurchaser true and complete copies of all the Approved Subleases, (ii)each of the Approved Subleases is in full force and effect, (iii) exceptas set forth in Schedule 8.1(j), Seller has not received or given anywritten notice from or to a subtenant that any default exists on the partof Seller or the subtenant under any of the Approved Subleases, whichdefault has not been cured, and, to Seller’s knowledge, no subtenant iscurrently in default in any material respect under any Approved Sublease,(v) to Seller’s knowledge, no right or claim of setoff against rentexists or has been claimed in writing to exist by any subtenant under theApproved Subleases, (vi) Schedule 8.1(j) discloses all security and otherdeposits made by each subtenant under the Approved Subleases, (vii)Seller has not received any advance payment of rent (other than for thecurrent month) under any of the Approved Subleases except as shown onSchedule 8.1(j), and (viii) the premises subleased pursuant to theApproved Subleases are located outside the walls of Seller’s storeoperated on each Property. Notwithstanding the foregoing, with respectto those Approved Subleases comprising consent agreements and not actualSubleases, Seller’s representations and warranties set forth above shallonly be made to Seller’s knowledge. Notwithstanding anything herein tothe contrary, with respect to Seller’s representations and warranties setforth in Section 8.1(i) and (j) of this Agreement, upon receipt byPurchaser of an estoppel letter (in the form described in this Agreement)from a Landlord or subtenant, as applicable, for any Property, Seller’srepresentations and warranties with respect to the matters contained insuch estoppel letter shall terminate and be of no further force oreffect.
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     (k)      Except as disclosed on Schedule 8.1(k) attached hereto andexcept as disclosed in any Phase 1 or Phase 2 reports or other duediligence information or materials received by Purchaser, Seller hasreceived no written notice: (i) of the presence of any under orabove-ground storage tanks on, in or under any Property; (ii) that thereare any uncured violations of Environmental Laws that have been issuedand are currently in effect with respect to (x) any Hazardous Materialsor any asbestos-containing materials, lead-based paint, or moldcontamination on, in or under any Property; or (y) the presence of anypolychlorinated biphenyls or radioactive materials located on anyProperty. To Seller’s knowledge, there is no ongoing environmentalremediation or investigation being performed by or on behalf of Sellerwith 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 Actof 1980, as amended, 42 U.S.C. § 9601, et seq. (“**CERCLA**”); the ResourceConservation and Recovery Act, 42 U.S.C. § 6901, et seq. (“**RCRA**”); theToxic Substances Control Act, 15 U.S.C. § 2601, et seq. (“**TSCA**”), theOccupational, Safety and Health Act, 29 U.S.C. § 651, et seq. (“**OSHA**”),the Clean Air Act, 42 U.S.C. § 7401, et seq. (“**CAA**”), the Federal WaterPollution Control Act, 33 U.S.C. § 1251, et seq. (“**FWPCA**”), the SafeDrinking Water Act, 42 U.S.C. § 3001, et seq. (“**SDWA**”), the HazardousMaterials Transportation Act, 49 U.S.C. § 1802, et seq. (“**HMTA**”) and theEmergency Planning and Community Right to Know Act, 42 U.S.C. § 11001, etseq. (“**EPCRA**”), the Endangered Species Act of 1973, 16 U.S.C. § 1531 etseq. (“**ESA**”), the Federal Insecticide, Fungicide and Rodenticide Act, 7U.S.C. § 136 et seq. (“**FIFRA**”) and other comparable federal, state orlocal laws, each as amended, and all rules, regulations and guidancedocuments promulgated pursuant thereto or published thereunder. Thephrase “**Hazardous Materials**” shall mean each element, compound, chemicalmixture, contaminant, pollutant, material, waste or other substance whichis defined, determined or identified as hazardous or toxic underEnvironmental Laws or the Release of which is regulated underEnvironmental Laws. The term “**Release**” shall mean the discharge,disposal, deposit, injection, dumping, spilling, leaking, leaching,placing, presence, pumping, pouring, emitting, emptying, escaping, orother release of any Hazardous Material.
          For purposes of the representations and warranties set forth in theforegoing clause (l) of Section 8.1 hereof, “**Hazardous Materials**” shallnot include consumer products, office supplies, and cleaning andmaintenance supplies stored and used in the ordinary course of operationof the Properties and in compliance with applicable Environmental Laws.
     (l)      Seller has not received any written notice that any fact orcondition exists which would result in the termination or discontinuationof any necessary utilities at any Property, including, withoutlimitation, gas, electricity, telephone, water and sanitary and stormsewers.
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     (m)      No broker, finder or investment banker is entitled to anybrokerage, finder’s or other fee or commission from Seller in connectionwith the transactions contemplated by this Agreement based uponarrangements made by Seller.
     (n)      To Seller’s knowledge, Schedule 8.1(n) (i) lists (by storenumber) those Leased Properties that are subject to ground leases (i.e.,where the Leases are actually subleases by Seller which are subject toground leases between the Landlord (or its predecessor in interest), asground lessee, and the owner of the fee title to the Property, as groundlessor (collectively the “**Ground Leases**”, and (ii) Seller has madeavailable to Purchaser such Ground Lease documents (including amendments,modifications and revisions) in Seller’s possession and control. ToSeller’s knowledge, each of the Ground Leases is in full force andeffect. Seller has not received any written notice that any defaultexists on the part of the fee owner of the Property or the respectiveLandlord under any of the Ground Leases, which default has not beencured.
Section 8.2.      Purchaser’s Representations and Warranties.     Purchaserrepresents and warrants to Seller that the following are true, complete andcorrect as of the date of this Agreement and shall be true, complete andcorrect as of each Closing Date (with respect to the Properties beingtransferred and conveyed as of such Closing Date):
     (a)      Purchaser is duly organized, validly existing and in goodstanding under the laws of the State of New York. Purchaser has allrequisite corporate power and authority to execute and deliver thisAgreement, to perform its obligations hereunder and to consummate thetransactions contemplated hereby. The execution and delivery of thisAgreement by Purchaser and the consummation by Purchaser of thetransactions contemplated hereby have been duly authorized by allnecessary corporate action and no other corporate proceedings on the partof Purchaser are necessary to authorize this Agreement or to consummatethe transactions contemplated hereby. This Agreement has been dulyexecuted and delivered by Purchaser and, assuming the due authorization,execution and delivery of this Agreement by Seller, constitutes thelegal, valid and binding obligation of Purchaser, enforceable againstPurchaser in accordance with its terms.
     (b)      Neither the execution and delivery of this Agreement nor itsperformance by Purchaser, will conflict with or result in the breach ofany contract, agreement, law, rule or regulation to which Purchaser is aparty or by which Purchaser is bound.
     (c)      No approvals, consents, authorizations, declarations,registrations or notices of or to any Governmental Entity that has notbeen received or made is required by or with respect to Purchaser inconnection with the execution, delivery and performance of this Agreementor the consummation of the transactions contemplated hereby except for(i) the filing of any premerger notification and report forms and theexpiration 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 madeor obtained, would not materially and adversely affect the ability ofPurchaser to perform its obligations under this
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Agreement or any RelatedAgreement or to consummate the transactions contemplated hereby orthereby.
     (d)      Except for the fees payable to Morgan Stanley & Co. Incorporated(which shall be paid solely by Purchaser), no broker, finder orinvestment banker is entitled to any brokerage, finder’s or other fee,commission or expense in connection with the transactions contemplated bythis Agreement based upon arrangements made by or on behalf of Purchaser.
     (e)      Purchaser presently intends to spend in the aggregate amongstall 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 8.1above, the term “**Seller’s knowledge**” (or variations thereof) means with respectto any matter, the actual knowledge of Jeff Stollenwerck, Vice President ofReal Estate of Seller. As used in Section 8.1 above, the term “**written noticereceived by**”, “**receipt of written notice by**” or “**written notice given by**”Seller (or variations thereof) means, with respect to any matter, any writtennotice received or given by the person described in the first sentence of thisSection 8.3.
Section 8.4. “As-Is” Condition.    Purchaser confirms that prior to theEffective Date, it has inspected the Properties and the Leases, environmentalreports, engineering reports, inspection reports and other reports, documentsand agreements relating to, or prepared or received in connection with,Purchaser’s due diligence investigation of the Transferred Assets, and exceptas expressly set forth in (a) this Agreement, including, without limitation, inSection 8.1 hereof, (b) the Related Agreements, and (c) the closing documentsto be delivered by Seller pursuant to Section 4.2, the Properties shall beconveyed by Seller, and accepted by Purchaser, in their “as-is” condition as ofthe Effective Date, ordinary wear and tear between the Effective Date and theClosing Date excepted. Other than the express representations and warrantiesof Seller expressly set forth herein, Purchaser has not relied upon any oral orwritten information from Seller or its employees, affiliates, agents,consultants, advisors or representatives, nor has Purchaser relied on anyrepresentation or warranty, express or implied, regarding any of the OwnedProperties or the Leased Properties, including, without limitation, anyrepresentation or warranty with respect to (i) the physical condition of theProperty, including the physical condition of any improvement comprising all ora part of an Owned Property or a Leased Property, (ii) the compliance ornon-compliance with any laws, codes, ordinances, rules or regulations of anyGovernmental Entity (including, without limitation, Environmental Laws), (iii)the presence or alleged presence of any Hazardous Substances at, within, underor generated by or from any Property, (iv) the current or future use of anOwned Property, or a Leased Property, including, but not limited to, anyProperty’s use for commercial, retail, industrial or other purposes. Except asexpressly set forth herein (including in Section 8.1 with regard to therepresentations and warranties of Seller as to the Leases), Purchaser furtheracknowledges that all materials which have been provided by or on behalf ofSeller with respect to the Properties have been provided without any warrantyor representation, expressed or implied, as to their content, suitability forany purpose, accuracy, truthfulness or completeness, and Purchaser shall nothave any recourse against Seller in the event of any errors therein oromissions therefrom. Purchaser is acquiring the Properties based solely on itsown independent
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investigation and inspection of the Properties and not inreliance on any information provided by Seller, except for the representationsexpressly set forth herein. Purchaser expressly disclaims any intent to relyon any such materials provided to it by Seller in connection with its duediligence and agrees that it shall rely solely on its own independentlydeveloped or verified information, except for the representations of Sellerexpressly set forth herein. In amplification, and not in limitation, of theforegoing, with respect to any Properties conveyed by Seller to Purchaserhereunder, Purchaser shall acquire such Properties subject to, and withoutrecourse to Seller (except for any violation or breach by Purchaser of anyrepresentation, warranty or covenant set forth in this Agreement that survivesthe Closing, and also subject to the provisions of Section 11.1(d) with respectto Third Party Environmental Claims) with respect to, any matters or conditionsdescribed in clauses (i) through (iv) of the secondsentence of this Section8.4, and notwithstanding anything to the contrary in Sections 1.3 and 1.4hereof, none of such matters or conditions shall constitute ExcludedLiabilities or Assumed Liabilities hereunder. The provisions of this Section8.4 shall survive Closing.
ARTICLE IX
INVESTIGATION OF EACH PROPERTY
Section 9.1.      Access to Properties.    From the Effective Date through theapplicable 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 theProperties and to inspect the same subject to and in accordance with thatcertain letter agreement between the parties dated March 16, 2004, as amendedby a First Amendment to such letter agreement dated the date hereof (as soamended, the **“Confidentiality and Access Agreement”**).
ARTICLE X
CLOSING CONDITIONS
Section 10.1.     Purchaser’s Closing Conditions.    The following conditionsshall be satisfied at Closing with respect to each Property and otherTransferred Asset being conveyed at a Closing:
     (a)      Conditions to Obligations of Purchaser.    The obligations ofPurchaser to consummate the acquisition of a Property and the relatedTransferred Assets at a Closing shall be subject to the fulfillment, ator prior to the Closing, of each of the following conditions with respectto such Property and other Transferred Assets (the **“Purchaser ClosingConditions”**), any or all of which may be waived in writing by Purchaserin whole or in part, to the extent permitted by Applicable Law:
 (i) the representations and warranties of Seller setforth in this Agreement with respect to such TransferredAssets shall be true, correct and complete in all materialrespects (other than to the extent already qualified bymateriality, in which case each shall be true, correct andcomplete in all respects) as if made by Seller as of suchClosing Date;
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 (ii) Seller shall have performed and satisfied in allmaterial respects each material obligation, term and conditionhereunder to be performed andsatisfied by Seller prior to such Closing with respect tothe Transferred Assets being conveyed at such Closing,including, without limitation, delivery of all closingdocuments referenced in Section 4.2(a) of this Agreement orotherwise required hereunder;  (iii) with respect to any Property being transferredand 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 andconveyed at such Closing, (x) an estoppel letter from theLandlord or a Seller Tenant Estoppel in accordance withSection 5.2(d) hereof, and (y) an SNDA in accordance withSection 5.2(d) hereof from (I) the ground lessor with respectto Store No. 7784 (Vega Alta, Puerto Rico) and (II) frommortgage lenders with respect to Store Nos. 7446 (Cayey,Puerto Rico) and 7427 (Londonderry, New Hampshire); and withrespect to each Approved Sublease being assigned at suchClosing an estoppel letter from the subtenant or a SellerSubtenant 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) feetitle or leasehold title, as applicable, to the Property asrequired by this Agreement, subject only to the PermittedExceptions (as evidenced by an updated title commitment forsuch Property ordered by Purchaser and issued by the TitleCompany showing no title exceptions other than the PermittedExceptions);  (v) at the time of Closing, each Property shall be insubstantially the same condition and repair as existed on theEffective Date, ordinary wear and tear and damage from anevent of casualty or condemnation (subject to Article VIIhereof) excepted;  (vi) no Non-Seller Violation affecting the Propertywhich has not been cured shall have been issued by anyGovernmental Entity with respect to which the estimated costof correcting or curing such Non-Seller Violation (asestimated by an independent architect or engineer designatedby 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 shallnot be any currently effective injunction prohibiting theclosing of the transfer of the applicable Property;  (viii) any applicable waiting periods under the HSR Act withrespect to the transactions contemplated by this Agreementshall have expired or been terminated; and
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 (ix) None of the Additional Approved SubleaseDocuments provided to Purchaser pursuant to Section 5.5 hereofshall prohibit Purchaser from operating a Sears brand store atthe Property, including without limitation the sale ofconsumable and transactional merchandise. Purchaser shallpromptly review any Additional Approved Sublease Documentsprovided by Seller and shall notify Seller in writing, withinfive (5) Business Days of receipt of any Additional ApprovedSublease Documents, whether such documents, in Purchaser’sreasonable judgment, prohibit Purchaser from operating a Searsbrand store at the Property, including without limitation thesale of consumable and transactional merchandise.
Section 10.2.      Seller’s Closing Conditions. The obligations of Seller toconsummate the sale of a Property and the related Transferred Assets at aClosing shall be subject to the fulfillment, at or prior to the applicableClosing, of each of the following conditions with respect to such Property andother Transferred Assets (the “**Seller Closing Conditions**”), any or all of whichmay be waived by Seller in whole or in part, to the extent permitted byApplicable Law:
 (i) Purchaser shall have paid the portion of thePurchase Price due to Seller pursuant to Article III withrespect to the applicable Property and other TransferredAssets;  (ii) Purchaser shall have performed and satisfied inall material respects each material obligation, term andcondition to be performed and satisfied by Purchaser underthis Agreement with respect to the Property and otherTransferred Assets, including, without limitation, delivery ofall closing documents referenced in Section 4.2(b) of thisAgreement or otherwise required hereunder;  (iii) Each representation or warranty of Purchaser setforth in this Agreement shall be true and correct in allmaterial respects (other than to the extent already qualifiedby materiality, in which case each shall be true, correct andcomplete in all respects) as if made by Purchaser as of suchClosing Date;  (iv) as of the applicable Closing Date, there shallnot be any currently effective injunction prohibiting theclosing of the transfer of the applicable Property;  (v) any applicable waiting periods under the HSR Actwith respect to the transactions contemplated by thisAgreement shall have expired or been terminated; and  (vi) with respect to any Property being transferredand assigned at such Closing that is listed on Schedule 5.2(c)and for which a Required Consent is required, Seller shallhave received such Required Consent, executed and delivered bythe 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 andagrees to indemnify, defend and hold harmless Seller fromand against all Losses (as defined below) resulting fromSeller assigning such Lease to Purchaser without suchRequired Consent, Seller shall waive this Seller ClosingCondition 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 ArticleXI, from and after the applicable Closing, Seller agrees to indemnify and holdharmless Purchaser and its officers, directors, employees and affiliates(collectively, the “**Purchaser Indemnified Parties**”), against any and all actualloss, damage, liability, cost and expense (including, without limitation,reasonable attorneys’ fees) (collectively, “**Losses**”) incurred or suffered bythe Purchaser Indemnified Parties, or any of them, to the extent arising orresulting from (i) the breach of any representation or warranty made by Sellerin this Agreement, (ii) the breach by Seller of any covenant set forth inSections 5.1(b), (c), (e), (f), (j), (m) and (n) hereof, which breach is notdiscovered by Purchaser until after Closing, (iii) the breach by Seller of anycovenant set forth in Article II hereof, (iv) any Excluded Liability, otherthan Third Party Environmental Claims, as hereinafter defined, and (v) anymaterial misrepresentation by Seller contained in a Seller Subtenant Estoppelor a Seller Tenant Estoppel.
     (b)      Indemnification by Purchaser.    Subject to the provisions of thisArticle XI from and after the applicable Closing, Purchaser agrees to indemnifyand hold harmless Seller and its officers, directors, employees and affiliates(the “**Seller Indemnified Parties**” and together with the Purchaser IndemnifiedParties, the “**Indemnified Persons**”), against any and all Losses incurred orsuffered by the Seller Indemnified Parties, or any of them, to the extentarising or resulting from (i) the breach of any representation or warranty madeby Purchaser in this Agreement and (ii) any Assumed Liability, other than ThirdParty Environmental Claims.
     (c)      As used herein, the term “**Third Party Environmental Claims**” shall meanshall mean all suits, actions, claims or proceedings of or by GovernmentalEntities, Landlords or other third parties with respect to (i) the presence oralleged presence of Hazardous Materials at, in, under, or generated by or fromany Property, (ii) any Release at or from any Property, or (iii) any alleged oractual non-compliance with any Environmental Laws with respect to any Property.
     (d)      Nothing in this Section 11.1 or any other provision of this Agreementshall preclude either Seller or Purchaser from exercising any rights orremedies available against each other or any third parties under any ApplicableLaws, including, without limitation, Environmental Laws, common law or inequity with respect to Third Party Environmental Claims.
Section 11.2.      Proceedings Involving Third Parties.    The rights andobligations of Purchaser and Seller in connection with their respectiveindemnities pursuant to Section 11.1
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hereunder resulting from any claim or other assertion of liability by athird party (a “**Third Party Proceeding**”) shall be subject to the followingterms and conditions:
     (a)      The Indemnified Person shall give prompt written notice of suchThird Party Proceeding to the party from whom indemnification is sought(the “**Indemnifying Person**”), but the failure to give such notice or adelay in giving such notice shall not affect the Indemnified Person’sright to indemnification or the Indemnifying Person’s obligation toindemnify as set forth in this Agreement, except to the extent theIndemnifying Person’s ability to remedy, contest, defend or settle withrespect to such Third Party Proceeding is actually prejudiced thereby.Such written notice shall describe in reasonable detail the factsconstituting the basis for such Third Party Proceeding and the amount ofthe 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 assumecontrol of the Third Party Proceeding with counsel reasonablysatisfactory to the Indemnified Person. Notwithstanding the foregoing,the Indemnified Person shall retain control of such Third PartyProceeding if (i) the Indemnifying Person elects not to assume control,(ii) the Indemnifying Person shall fail to undertake to defend such ThirdParty Proceeding, or diligently pursue or maintain such defense, within areasonable time after receipt of notice thereof, (iii) the IndemnifiedPerson reasonably concludes that the Indemnifying Person and IndemnifiedPerson have conflicting interests with respect to such Third PartyProceeding which may materially and adversely affect the IndemnifiedPerson, or (iv) the Third Party Proceeding involves a claim forinjunctive, 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. Theparty controlling such Third Party Proceeding (the “**Controlling Party**”)shall keep the Non-controlling Party advised of the status of such ThirdParty Proceeding and shall consider in good faith recommendations made bythe Non-controlling Party with respect thereto. The Non-controllingParty shall promptly furnish the Controlling Party with suchnon-privileged information as it may have with respect to such ThirdParty Proceeding (including copies of any summons, complaint or otherpleading that may have been served on such party and any written claim,demand, invoice, billing or other document evidencing or asserting thesame) and shall otherwise cooperate with and assist the Controlling Partywith respect to such Third Party Proceeding. The Indemnifying Personshall not agree to any settlement of, or the entry of any judgmentarising from, any such Third Party Proceeding without the prior writtenconsent of the Indemnified Person, which shall not be unreasonablywithheld, conditioned or delayed; provided that the consent of theIndemnified Person shall not be required if (i) the Indemnifying Personagrees in writing to pay all amounts payable pursuant to such settlementor judgment, and (ii) the proposed settlement of such Third PartyProceeding (x) includes as an unconditional term thereof a complete andirrevocable release of the Indemnified Person from all liability withrespect 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. TheIndemnified Person shall not agree to any settlement of, or the entry ofany judgment arising from (and the
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Indemnifying Person shall have no indemnification obligations withrespect to), any such Third Party Proceeding without the prior writtenconsent of the Indemnifying Person, which shall not be unreasonablywithheld, conditioned or delayed.
Section 11.3.      Objections to Claims for Indemnification; Resolution by theParties.    An Indemnifying Person may make a written objection (“**Objection**”)to any claim for indemnification, which Objection shall state in reasonabledetail the basis therefor. The Objection shall be delivered to the IndemnifiedPerson within thirty (30) days after receipt by the Indemnifying Person ofnotice of a claim for indemnification from an Indemnified Person. TheIndemnifying Person and the Indemnified Person shall attempt in good faith toresolve any claim for indemnification to which an Objection is made. If theIndemnifying Person and the Indemnified Person are unable to resolve a claimfor indemnification to which an Objection has been made within thirty (30) daysof receiving such Objection (as such period may be extended by mutual agreementbetween Purchaser and Seller), either the Indemnifying Person or theIndemnified Person shall serve the other with a written demand for arbitrationwithin 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 conductedbefore a single arbitrator mutually agreeable to Purchaser and Seller and inaccordance with the Commercial Arbitration Rules of the American ArbitrationAssociation. In the event that within thirty (30) days after submission of anydispute to arbitration Purchaser and Seller cannot mutually agree on onearbitrator, Purchaser and Seller shall each select one arbitrator, and the twoarbitrators so selected shall select a third arbitrator. The decision of thearbitrator or, if applicable, the majority of the three arbitrators regardingany claim for indemnification to which an Objection has been made shall bebinding and conclusive. Such decision shall be written and shall be supportedby written findings of fact and conclusions, which shall set forth the award,judgment, decree or order awarded by the arbitrator. The parties agree tocomplete such arbitration as expeditiously as reasonably practicable.
Section 11.4.      Treatment of Indemnification Claims.    All indemnificationpayments made under this Agreement shall be treated by the parties as anadjustment to the Purchase Price.
Section 11.5.      Exclusive Remedy.    The parties hereby acknowledge and agreethat, from and after the Closing Date with respect to an applicable Property,the exclusive remedy of the parties hereto with respect to any Losses describedin Sections 11.1(a) and 11.1(b) relating to such Property shall be pursuant toindemnification under this Article XI; provided, however, that the foregoingshall not limit the remedies of the parties in the event of any breach ordefault under any Take-Back Lease.
Section 11.6.      Survival.    All representations and warranties set forth inArticle II and Article VIII of this Agreement, and the indemnificationobligations set forth in Sections 11.1(a)(i), and 11.1(b)(i), shall survive theClosing and shall expire and terminate on the date that is twelve (12) monthsafter the Second Occupancy Delivery Date. The indemnification obligations setforth in Sections 11.1(a)(ii), (iv) and (v) and 11.1(b)(ii) shall survive theClosing Date without limitation except as provided under Applicable Law. Theindemnification obligations set forth in Section 11.1(a)(iii) with respect toany Pharmacy Assets shall survive the Closing Date for the related Property andshall expire and terminate at the later to occur of (1) the Occupancy DeliveryDate for the related Property and (2) the date that is 30 days after thetransfer of such Pharmacy Assets. Notwithstanding anything herein to thecontrary, each
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representation or warranty that is the subject of one or more claimsasserted in writing prior to the expiration of the twelve (12) month period setforth above shall survive with respect to the related claim or claims until thefinal resolution thereof.
Section 11.7.      Limitation on Indemnification.    Notwithstanding anything tothe contrary set forth in Section 11.1(a) of this Agreement or elsewhere inthis Agreement, (a) Purchaser hereby expressly waives, relinquishes andreleases any right or remedy available to it at law, in equity or under thisAgreement, in the event the Closing occurs, to make a claim against Seller forLosses that Purchaser may incur, or to rescind this Agreement and thetransactions contemplated hereby, as the result of any of Seller’srepresentations or warranties in Articles II or VIII hereof or in any SellerSubtenant Estoppel or Seller Tenant Estoppel being untrue, inaccurate orincorrect in any material respect if Purchaser has actual knowledge that suchrepresentation or warranty was untrue, inaccurate or incorrect at the time ofthe Closing and Purchaser nevertheless proceeds with the Closing hereunder, (b)Seller’s liability for the breach of any representations or warranties ofSeller contained in Articles II or VIII or pursuant to Section 11.1(a)(i) ofthis Agreement, shall be limited to claims in excess of $1,500,000 in theaggregate; upon reaching such claims which exceed $1,500,000 in the aggregate,Purchaser may pursue such claims against Seller for Losses resulting fromSeller’s breach of any representations and warranties under this Agreement(including the first $1,500,000 of such claims) and (c) Seller’s aggregateliability for all claims arising out of any breach of such representations orwarranties shall not exceed $62,100,000, except that there shall be no cap onSeller’s liability for such breaches of the representations or warranties setforth in Sections 8.1(a), (b), or (c) hereof or in any Seller Tenant Estoppelor Seller Subtenant Estoppel. As used in this paragraph, the term “actualknowledge” of Purchaser shall mean the actual knowledge of Tony Will with noduty 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 remedyavailable to it at law, in equity or under this Agreement, in the event theClosing occurs, to make a claim against Purchaser for Losses that Seller mayincur, or to rescind this Agreement and the transactions contemplated hereby,as the result of any of Purchaser’s representations or warranties in Section11.1(b)(i) being untrue, inaccurate or incorrect if Seller has actual knowledge(as defined in Section 8.3 hereof) that such representation or warranty wasuntrue, inaccurate or incorrect at the time of the Closing and Sellernevertheless proceeds with the Closing hereunder, and (b) Purchaser’s liabilityfor breach of any representations or warranties of Purchaser contained inArticle VIII hereof or pursuant to Section 11.1(b)(i) shall be limited toclaims in excess of $1,500,000 in the aggregate. Upon reaching such claimswhich exceed $1,500,000 in the aggregate, Seller may pursue such claims againstPurchaser for Losses resulting from Purchaser’s breach of any representationsand warranties under this Agreement (including the first $1,500,000 of suchclaims). Purchaser’s aggregate liability for all claims arising out of anybreach 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 therepresentations 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 underthis Agreement, which default relates solely to five (5) or less Properties(such Properties relating to the default of either Seller or Purchaser shall bereferred to herein as the **“Defaulting Properties”)**, and if such default is notcured by Purchaser within fifteen (15) Business Days after written noticethereof from Seller to Purchaser, then Seller shall have the right, at Seller’soption, to terminate this Agreement solely with respect to the DefaultingProperties (in which event clauses (ii) through (v) of the Property TerminationProcedure shall apply), and (i) sue Purchaser for actual damages suffered bySeller as a result of such default which relates to the Defaulting Properties(in which event the Deposit allocable to the Defaulting Properties shallcontinue to be held by Escrow Agent pursuant to Article XIV hereof until suchclaim for damages is adjudicated and paid) or (ii) retain the Deposit allocableto the Defaulting Properties as liquidated damages. If Seller shall default inthe performance of its material obligations under this Agreement, which defaultrelates to five (5) or less Properties, and if such default is not cured bySeller within fifteen (15) Business Days after written notice thereof fromPurchaser to Seller, then Purchaser shall have the right, at Purchaser’soption, to (x) terminate this Agreement solely with respect to the DefaultingProperties and receive the Deposit allocable to the Defaulting Properties fromthe Escrow Agent (in which event the Property Termination Procedure shallapply), and Purchaser may sue Seller for actual damages suffered by Purchaseras a result of such default which relates to the Defaulting Properties, or (y)institute a suit against Seller for specific performance of Seller’sobligations 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 underthis Agreement, which default relates to more than five (5) Properties, and ifsuch default is not cured by Purchaser within fifteen (15) Business Days afterwritten notice thereof from Seller to Purchaser, then Seller shall have theright, at Seller’s option, to terminate this Agreement and (i) sue Purchaserfor actual damages as a result of such default (in which event the Depositshall continue to be held by Escrow Agent pursuant to Article XIV hereof untilsuch 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) asliquidated damages. If Seller shall default in the performance of its materialobligations 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, thenPurchaser shall have the right, at Purchaser’s option, to (x) terminate thisAgreement and receive the Deposit (or the remaining portion thereof then beingheld by the Escrow Agent) from the Escrow Agent, and Purchaser may sue Sellerfor actual damages suffered by Purchaser as a result of such default, or (y)institute a suit against Seller for specific performance of Seller’sobligations under this Agreement.
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ARTICLE XIII I
MISCELLANEOUS
Section 13.1.      Assignment.    Except as set forth in Section 5.3 hereof, thisAgreement may not be assigned by operation of law or otherwise without theexpress written consent of Purchaser, in the case of Seller, or Seller, in thecase of Purchaser, which consent in each such case may be granted or withheldin the sole discretion of each such party. Notwithstanding the foregoing,Purchaser may, upon written notice to Seller given at least five (5) BusinessDays prior to the applicable Closing Date, designate one or more of its director indirect wholly owned subsidiaries (a “**Purchaser Subsidiary**”) to take titleto any Transferred Asset at the Closing (in lieu of Purchaser), provided thatany such transfer and assignment of a Lease to a Purchaser Subsidiary shalleither (a) not require the consent or approval of the Landlord under the Leaseor of any other third party, or (b) be in accordance with, and be permittedunder, the terms of any Required Consent obtained with respect to the transferand assignment of such Lease.
Section 13.2.      Entire Agreement.    This Agreement constitutes the entireagreement between Seller and Purchaser with respect to the subject matterhereof and shall not be modified or amended except in a written document signedby Seller and Purchaser. Any prior agreement or understanding between Sellerand Purchaser concerning the subject matter hereof is hereby rendered null andvoid, other than the Confidentiality and Access Agreement, which remains infull force and effect.
Section 13.3.      Time is of the Essence.    Time is of the essence with respectto the matters covered by this Agreement. In the computation of any period oftime provided for in this Agreement or by law, the day of the act or event fromwhich the period of time runs shall be excluded, and the last day of suchperiod shall be included, unless it is not a Business Day, in which case theperiod shall be deemed to run until the end of the next Business Day.
Section 13.4.      Further Assurances.    Each party will promptly execute anddeliver or cause to be executed and delivered all such other and furtherinstruments, documents or assurances, and promptly do or cause to be done allsuch other and further things as may be necessary and reasonably required inorder 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 andits counsel have reviewed and revised this Agreement, and that any rule ofconstruction to the effect that any ambiguities are to be resolved against thedrafting party shall not be employed in the interpretation of this Agreement orany amendments or schedules hereto.
Section 13.6.      Legal Fees.    In the event of a default by either party ofits obligations under this Agreement, the prevailing party in any action orproceeding in any court in connection therewith shall be entitled to recoverfrom 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 othercommunications required or permitted under this Agreement shall be in writingand delivered personally, by facsimile transmission, or by overnight courier(such as Federal Express), addressed as follows:
If to Seller:
Kmart Corporation**