IN RE KMART CORPORATION (Bankr.N.D.Ill. 2003)

In re: KMART CORPORATION, et al., Chapter 11, Reorganized Debtors,

Case No. 02-BO2474 (Jointly Administered)United States Bankruptcy Court, N.D. Illinois
September 10, 2003

STIPULATION AND CONSENT ORDER OF KMART CORPORATION, CERTAIN OFITS SUBSIDIARIES AND AFFILIATES, WIENM PROPERTIES, L.P., W.T. CORPORATION,KIN PARK ASSOCIATES, LAURIE INDUSTRIES, INC., AND FUNDAMENTALS COMPANY
SUSAN SONDERBY, Chief Judge, Bankruptcy

WHEREAS, on January 22, 2002 (the “Petition Date”), Kmart Corporation and certain of its subsidiaries and affiliates (collectively, “Kmart”) each filed a voluntary petition in this Court for reorganization relief under chapter 11 of Title 11 of the United States Code, 11 U.S.C. § 101, et seq., as amended (the “Bankruptcy Code”);

WHEREAS, WIENM Properties, L.P. (“WTENM”) leases four properties to Kmart Corporation (the “Leases”), including the following: (i) Store #4376 in Waukesha, Wisconsin; (ii) Store #4385 in Greenfield, Wisconsin; (iii) Store #4381 in Bridgeview, Illinois; and (iv) Store #4380 in Wauwatosa, Wisconsin (collectively, the “Properties”)

WHEREAS, with respect to each of the Properties, WIENM is the ground lessee under ground leases with the owners of the real property on which the Kmart stores are located (the “Ground Leases”);

WHEREAS, on August 9, 2002, WIENM filed a voluntary petition under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Michigan, Case Number 02-58324, Honorable Marci B. McIvor (the “WTENM Bankruptcy Court”);

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WHEREAS, on April 23, 2003, this Court entered an order confirming the First Amended Joint Plan of Reorganization of Kmart Corporation and its Affiliate Debtors and Debtors-in-Possession, as modified (the “Plan”), which became effective on May 6, 2003;

WHEREAS, under the Plan, Kmart assumed the Leases;

WHEREAS, on June 2, 2003, the ground lessor for store 4376 (“W.T. Corporation”) filed a supplemental claim to WTENM’s Cure Claim for store 4376 for amounts W.T, Corporation paid with respect to its property, (the “W.T, Cure Claim”);

WHEREAS, on June 18, 2003, WTENM timely filed cure claims for stores 4376, 4380, 4381, and 4385 (as supplemented, the “WTENM Cure Claims”) for Kmart’s assumption of the Leases;

WHEREAS, on June 18, 2003, Kinpark Associates, Laurie Industries, Inc. and Fundamentals Company, the ground lessors for store 4380 (the “Kinpark Landlords”) filed a cure claim for store 43 80 (the “Kinpark Cure Claim” and together with the WT Cure Claim and WIENM Cure Claims, the “Cure Claims”);

WHEREAS, the Cure Claims include charges for, among other things, 2001 and 2002 real property taxes, exclusive of penalties, interest, delinquent water and sewer charges, fire inspections, weight/measure fees, and/or sign maintenance (the “Principal Real Property Taxes”);

WHEREAS, on July 21, 2003, pursuant to the Plan, Kmart filed the Omnibus Objection to Lease Cure Claims and Motion to Determine and Allow Claims Under 11 U.S.C §§ 102(1), 105(a), 502(b) and F.R.Bankr.P. 3007 (the “Omnibus Objection”), objecting to the Cure Claims;

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WHEREAS, on July 21, 2003, WIENM filed the Motion of WIENM Properties, L.P. for Expedited Determination, Allowance and Payment of the WIENM Cure Claims (the “Motion”);

WHEREAS, on July 25, 2003, W.T. Corporation filed a response to the Omnibus Objection, which asserts that the amount it paid for Principal Real Property Taxes for store 4380 is $119,484.55 ($114,055.90 for 2001 and $5,428.65 for 2002);

WHEREAS, on August 19 and 22, 2003, WTENM filed its Response in Opposition to Debtors1 Omnibus Objection to Lease Cure Claims and Motion to Determine and Allow Claims Under 11 U.S.C. § 102(1), 105(a), 502(b) and F.R.Bankr.P. 3007 (the “Response”);

WHEREAS, WIENM is entering into an agreement with the Kinpark Landlords, which among other things, provides for WIENM to assign the WTENM Cure Claim for store 4380 to the Kinpark Landlords and the Kinpark Landlords are anticipated to withdraw the Kinpark Cure Claim (the “Kinpark Agreement”) and WIENM has provided the Kinpark Landlords with a copy of this Stipulation and Consent Order;

WHEREAS, an evidentiary hearing is currently scheduled on the Motion for September 10, 2003, at 2:00 p.m.;

WHEREAS, the WIENM Bankruptcy Court has scheduled a hearing on September 16, 2003 to consider confirmation of WIENM’s plan of reorganization, which presently contemplates assumption of the Ground Leases for stores 4376, 4380, 4381, and 4385;

WHEREAS, Kmart can consensually resolve contested cure claims by agreement under the Plan, and Kmart, WIENM, W.T. Corporation, and the Kinpark Landlords have determined that it is in their best interests to resolve the Cure Claims to the extent they relate to Principal Real Property Taxes and adjourn the evidentiary hearing on the Motion with respect to all other issues;

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NOW, THEREFORE, in consideration of the foregoing, and for good and sufficient cause, IT IS HEREBY AGREED and STIPULATED by and among Kmart, WIENM, W.T. Corporation, and the Kinpark Landlords that:

1. Kmart, WIENM, and W.T. Corporation agree that the total amount of the Principal Real Property Taxes for store 4376 to be cured by Kmart is $124,754.63. On or before ten days after this Stipulation and Consent Order is approved by this Court, Kmart will (i) pay $119,484.55 directly to W.T. Corporation on account of W.T. Corporation’s prior payment on Principal Real Property Taxes, and (ii) pay $5,270,08 to WTENM on account of WIENM’s prior payment on Principal Real Property Taxes, thus satisfying the currently outstanding Principal Real Property Taxes for store 4376.

2. Kmart, WIENM, and the Kinpark Landlords agree that the total amount of the Principal Real Property Taxes for store 4380 to be cured by Kmart is $161,486,12. On or before ten days after this Stipulation and Consent Order is approved by this Court, Kmart will (i) pay $156,000.76 directly to the Milwaukee County Wisconsin Treasurer, and (ii) pay $5,485.36 to WIENM on account of WIENM’s prior payment on Principal Real Property Taxes, thus satisfying the currently outstanding Principal Real Property Taxes for store 4380.

3. Kmart and WTENM agree that the total amount of the Principal Real Property Taxes for store 4381 to be cured by Kmart is $376,182.93. On or before ten days after this Stipulation and Consent Order is approved by this Court, Kmart will (i) pay $355,556.70 directly to the Cook County Treasurer, Chicago, Illinois, and (ii) pay $20,626.23 to WIENM on account of WIENM’s prior payment of the Principal Real Property Taxes, thus satisfying the currently outstanding Principal Real Property Taxes for store 4381.

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4. Kmart and WIENM agree that the total amount of the Principal Real Property Taxes for store 4385 to be cured by Kmart is $148,236.04. On or before ten days after this Stipulation and Consent Order is approved by this Court, Kmart will (i) pay $140,039.79 directly to the Milwaukee County Wisconsin Treasurer, and (ii) pay $8,196.25 to WIENM on account of WIENM’s prior payment on Principal Real Property Taxes, thus satisfying the currently outstanding Principal Real Property Taxes for store 4385.

5. In the event that an applicable taxing authority refuses to accept all or any portion of the payment on Principal Real Property Taxes as provided for in this Stipulation and Consent Order, upon the return of any such payment to Kmart, Kmart will deliver such payment to WIENM or its successor or assignee to hold in trust for such taxing authority,

6. In the event that one of the applicable taxing authorities asserts that additional Principal Real Property Taxes are currently outstanding, Kmart will either pay such additional Principal Real Property Taxes or schedule a hearing on such dispute. The taxing authorities, W.T. Corporation, the Kinpark Landlords, and WIENM assert that interest and penalties are due to the taxing authorities, and that such charges continue to accrue.

7. The Cure Claims are amended and reduced by the amount paid pursuant to paragraphs 1 through 6 of this Stipulation and Consent Order in satisfaction of the Principal Real Property Taxes.

8. Kmart, WIENM, W.T. Corporation, and the Kinpark Landlords reserve all rights and defenses with respect to all issues other than the Cure Claims for Principal Real Property Taxes, including but not limited to, claims for interest and penalties on 2001 and 2002 real property

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taxes, delinquent water and sewer charges, fire inspections, weight/measure fees, sign maintenance, repairs, and property damage claims, to the extent that they are included in the Cure Claims.

9. After the order of this Court approving this Stipulation and Consent Order and the order of the WIENM Bankruptcy Court approving the Kinpark Settlement Agreement have become final, nonappealable orders, WIENM will assign the WIENM Cure Claim for store 4380 to the Kinpark Landlords and it is anticipated that the Kinpark Landlords will withdraw the Kinpark Cure Claim.

10. The evidentiary hearing on the Motion with respect to all issues other than the WIENM Cure Claims for Principal Real Property Taxes is adjourned for evidentiary hearing to 5′.30 October 29, 2003, at 3.00 p.m., or as soon thereafter as the Court is available for an evidentiary hearing (the “Adjourned Hearing”).

11. The briefing and discovery schedule for the Adjourned Hearing shall he established pursuant to a subsequent scheduling order.

12. Kmart will not object to the admissibility, pursuant to the Federal Rules of Evidence, of any uncertified tax statements submitted by WIENM at the Adjourned Hearing or any other hearing on the basis that such statements are not certified by the relevant taxing authority or otherwise properly authenticated. Kmart and WIENM and their successors and/or assignees will work diligently to stipulate to the facts underlying the legal issues raised in Kmart’s Omnibus Objection as it pertains to the WIENM Cure Claims and WTENM Response.

13. Kmart, WTENM, W.T. Corporation, and the Kinpark Landlords represent and warrant to each other that the signatories to this Stipulation and Consent Order are authorized to execute this Stipulation and Consent Order; that each has full power and authority to enter into this

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Stipulation and Consent Order; that this Stipulation and Consent Order is duly executed and delivered, and constitutes a valid., binding agreement in accordance with its terms.

14. This Stipulation and Consent Order shall be binding on Kmart, WIENM, W.T. Corporation, and the Kinpark Landlords and their respective successors and assigns from the date of its execution, and is expressly subject to and contingent upon its approval by this Court.

15, Kmart shall serve a copy of this Stipulation and Consent Order on WIENM, W.T, Corporation, and the Kinpark Landlords upon its approval by this Court.

16, Notwithstanding Rules 4001 and 6004(g) of the Federal Rules of Bankruptcy Procedure, this order shall take effect immediately upon its entry,

17. This Court shall retain authority to interpret and implement the terms of this Stipulation and Consent Order.

Respectfully submitted,

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