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EXHIBIT 10.13
INDEMNIFICATION AND REIMBURSEMENT AGREEMENT
INDEMNIFICATION AND REIMBURSEMENT AGREEMENT, dated as of April 20,
1994 (the "Agreement"), by and among MC Sports Company, a Delaware corporation
("MC"), Michigan Sporting Goods Distributors, Inc., a Michigan corporation
("MSG"), Xxxxx'x Sporting Goods, Inc., an Illinois corporation ("Xxxxx'x"),
Gart Sports Company, a Delaware corporation ("Gart"), Gart Bros. Sporting Goods
Company, a Colorado corporation ("GBS"), Sports Castle Travels, Inc., a
Colorado corporation ("Sports Castle") and Colorado Wholesale Sporting Goods
Co., a Colorado corporation ("Colorado Wholesale" and together with MC, MSG,
Brown's, Gart, GBS and Sports Castle, the "MC/Gart Entities"), on the one hand,
and Thrifty PayLess Holdings, Inc., a Delaware corporation ("TPH"), Thrifty
PayLess, Inc., a California corporation ("TPI"), Thrifty Corporation, a
California corporation ("TC" and together with TPH, TPI and any of their
current and hereafter acquired subsidiaries, "Thrifty"), on the other hand.
WHEREAS, TPH, TPI and Kmart Corporation, a Michigan corporation
("Seller"), and the sole stockholder of Pay Less Drugstores Northwest, Inc., a
Maryland corporation ("PayLess"), have entered into a Purchase and Sale
Agreement, dated December 1, 1993, as amended (the "Purchase Agreement"),
pursuant to which Seller will sell to TPH and TPI all of the outstanding shares
of capital stock of PayLess in consideration for, among other things, a certain
percentage of the outstanding common stock of TPH;
WHEREAS, in connection with the consummation of the transactions
contemplated by the Purchase Agreement, Thrifty will cause dividends of all of
the capital stock of MC and of Gart to the stockholders of TPH prior to the
Acquisition to be declared with a record date prior to the Closing (as defined
in the Purchase Agreement) and paid following the Closing (the "Distribution");
WHEREAS, the execution and delivery of this Agreement is a condition
to consummation of the transactions contemplated by the Purchase Agreement; and
WHEREAS, the parties hereto desire to enter into this Agreement
pursuant to which the MC/Gart Entities will jointly and severally reimburse,
indemnify and hold harmless Thrifty on the terms and subject to the conditions
provided herein.
NOW, THEREFORE, in consideration of the premises stated herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. (a) Indemnification by the MC/Gart Entities. The MC/Gart
Entities shall, jointly and severally, reimburse, indemnify and hold Thrifty
and its affiliates, directors, officers, employees, representatives and agents
(each an "Indemnified Party") harmless against any and all (i) cost, expense,
damage, loss, liability or obligation, including reasonable attorney's fees and
expenses (collectively "Expenses") incurred by Thrifty for Income Taxes (as
defined below) and Other Taxes (as defined below), resulting from,
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arising out of, or in connection with, the Distribution, to the extent that
such Expenses exceed $15 million, (ii) Expenses arising out of, resulting from
or in connection with any guarantee or similar agreement or arrangement entered
into by Thrifty for the benefit of any of the MC/Gart Entities and (iii)
Expenses arising out of, resulting from or in connection with the operation of
the business of the MC/Gart Entities (whether before or after the date of the
Distribution), including any Income Tax resulting from or applicable to the
operation of the business of the MC/Gart Entities for any period ending on or
before the Closing Date (as defined in the Purchase Agreement), without
duplication of amounts due under the Tax Sharing Agreement dated September 25,
1992 among Thrifty and the MC/Gart Entities (the "Tax Sharing Agreement"). To
the extent the subject matter of the indemnification provided for by Section
1(a)(iii) hereof is governed by the Tax Sharing Agreement, the procedures
specified therein (as in effect as of the date hereof, except for such changes
therein as would not adversely affect Thrifty's rights hereunder) shall govern
any such rights to indemnification under this Agreement. The MC/Gart Entities
shall reimburse and indemnify the Indemnified Parties promptly after notice by
Thrifty of the incurrence or payment of any such Expenses.
(b) Termination of Thrifty's Obligation to Guarantee Trade
Payables. Effective as of the date hereof, Thrifty shall have no obligation to
the MC/Gart Entities to guarantee their respective trade payables.
(c) Definitions.
(1) "Income Tax" means (i) any income, alternative or
add-on minimum tax, gross income, gross receipts, franchise, profits, including
estimated taxes relating to any of the foregoing, or other similar tax or other
like assessment or charge of similar kind whatsoever, except Other Taxes,
together with any interest and any penalty, addition to tax or additional
amount imposed by any federal, state, local or foreign governmental authority
(a "Taxing Authority") responsible for the imposition of any such tax (domestic
or foreign); or (ii) any liability of any of the MC/Gart Entities for the
payment of any taxes, interest, penalty, addition to tax or like additional
amount resulting from the application of Treas. Reg. Section 1.1502-6 or
comparable provisions of any Taxing Authority in respect of a Consolidated
Return (as defined in the Purchase Agreement).
(2) "Other Tax" means (i) any sales, use, ad valorem,
business license, withholding, payroll, employment, excise, stamp, transfer,
recording, occupation, premium, property, value added, custom duty, severance,
windfall profit tax, license, or other tax, governmental fee or other similar
assessment or charge, together with any interest and any penalty, addition to
tax or additional amount imposed by any Taxing Authority responsible for the
imposition of any such tax (domestic or foreign); but specifically excluding
(ii) liability for an Income Tax.
2. Indemnification by Thrifty. Thrifty shall reimburse,
indemnify and hold the MC/Gart Entities and their affiliates, directors,
officers, employees, representatives and
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agents harmless against any and all Expenses arising out of, resulting from or
in connection with the operation of the business of Thrifty, including any
Income Tax resulting from or applicable to the operation of the business of
Thrifty for any period ending on or before the Closing Date, without
duplication of amounts due under the Tax Sharing Agreement. To the extent the
indemnification provided for by this Section 2 is governed by the Tax Sharing
Agreement, the procedures specified therein (as in effect as of the date
hereof, except for such changes therein as would not adversely affect Thrifty's
rights hereunder) shall govern any such rights to indemnification under this
Agreement. Thrifty shall reimburse and indemnify such indemnified parties
promptly after notice from the MC/Gart Entities of the incurrence or payment of
any such Expenses.
3. Guarantees. At all times following the date hereof, the
MC/Gart Entities agree to use all commercially reasonable efforts to release
Thrifty from any and all guarantees that have been entered into by Thrifty for
the benefit of any of the MC/Gart Entities, provided that such efforts shall
not require the expenditure of significant funds.
4. Amendments, Etc. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by all of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed ;or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
5. Binding Effect, Etc. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of the MC/Gart Entities, the Indemnified Parties or
their spouses, heirs, executors and personal and legal representatives.
6. Severability. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) is held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable in any
respect, and the validity and enforceability of any such provision in every
other respect and of the remaining provisions hereof shall not be in any way
impaired and shall remain enforceable to the fullest extent permitted by law.
7. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the state of California
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.
8. Counterparts. This Agreement may be executed simultaneously
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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9. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given upon receipt if delivered personally or
sent by facsimile transmission (receipt of which is confirmed) or by courier
service promising overnight delivery (with delivery confirmed the next day) or
five (5) days after deposit in the U.S. Mails, first class postage prepaid.
Notices shall be addressed as follows:
To the MC/Gart Entities: Gart Sports Company
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Chief Financial Officer
Fax: (000) 000-0000
and
MC Sports Company
0000 Xxxxxxxx Xxxx, X.X.
Xxxxx Xxxxxx, Xxxxxxxx 00000
Attn: Chief Financial Officer
Fax: (000) 000-0000
With a copy to: Brownstein, Hyatt, Xxxxxx & Xxxxxxxxxx, P.C.
000 00xx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
To Thrifty: Thrifty Companies
0000 Xxxxxxxx Xxxx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Mr. Xxxxxx Xxxxxx
Fax: (000) 000-0000
With a copy to: x/x Xxxxxxx Xxxxx & Xxxxxxxx
000 Xx. Grand Avenue
Suite 5400
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
With a copy to: Kmart Corporation
0000 Xxxx Xxx Xxxxxx Xxxx
Xxxx, Xxxxxxxx 00000-00000
Attn: General Counsel
Fax: (000) 000-0000
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With a copy to: Irell & Xxxxxxx
000 Xxxxx Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
With a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxx Xxxxxx, Esq.
Fax: (000) 000-0000
Any party may from time to time change its address for the purpose of notices
by a similar notice specifying the new address but no such change shall be
effective as against any person until such person shall have actually received
it.
10. Governing Laws. The rights and liabilities of the parties
shall be governed by the laws of the State of Michigan, regardless of the
choice of laws provisions of such state or any other jurisdiction.
* * * * * *
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be signed by its duly authorized officer as of the date first written above.
MICHIGAN SPORTS COMPANY
By:
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Name:
Title:
MICHIGAN SPORTING GOODS
DISTRIBUTORS, INC.
By:
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Name:
Title:
XXXXX'X SPORTING GOODS, INC.
By:
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Name:
Title:
GART SPORTS COMPANY
By:
---------------------------------
Name:
Title:
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GART BROS. SPORTING GOODS
COMPANY
By:
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Name:
Title:
SPORTS CASTLE TRAVELS, INC.
By:
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Name:
Title:
COLORADO WHOLESALE SPORTING
GOODS CO.
By:
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Name:
Title:
THRIFTY PAYLESS HOLDINGS, INC.
By:
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Name:
Title:
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THRIFTY PAYLESS, INC.
By:
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Name:
Title:
THRIFTY CORPORATION
By:
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Name:
Title:
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