Case No. 02-B02474, (Jointly Administred)United States Bankruptcy Court, N.D. Illinois, Eastern Division.
April 15, 2003
ORDER PURSUANT TO 11 U.S.C. § 365 AND FED. R. BANKR. P. 6006 AUTHORIZING THE TERMINATION OF LEASE FOR STORE NO. 4404 (EUGENE, OR)
SUSAN PIERSON SONDERBY, United States Bankruptcy Judge
Upon the Emergcncy Motion for Order Pursuant to 11 U.S.C. § 363 and 365 and Fed.R.Bank.P. 6004 and 6006 Authorizing Debtors to Sell, Assume and Assign Certain Real Property to Successful Bidders and Other Purchasers and in furtherance of the Order Pursuant to 11 U.S.C. § 105(A) and 365(A) Approving Procedures for Rejecting Certain Unexpired Non-residential Real Property Leases for Closing Stores (Docket No. 4653), and upon the agreement of Kmart Corporation and certain of its domestic subsidiaries and affiliates, debtors and debtors-in-possession in the above-captioned cases (the “Debtors”), and U.S. Realty 86 Associatcs (“Landlord”);
1. The lease termination agreement by and between the Debtors and Landlord, attached hereto as Exhibit 1 (the “Termination Agreement”), is approved, and the Debtors are authorized to implement the transactions set forth therein, The Debtors and Landlord, as well as their officers, employees and agents are authorized to perform all of their obligations, take whatever actions necessary, and issue, execute and deliver whatever documents, deeds and bills of sale as may be necessary or appropriate to implement and effectuate the Agreements in accordance with the terms thereof and of this Order. Any actions taken by the Debtors and the Landlord necessary or desirable to consummate such transactions prior to the entry of this Order are hereby ratified.
2. The Court shall retain exclusive jurisdiction to resolve any dispute arising from the matters set forth herein.
3. To the extent that this Order is inconsistent with any prior order or pleading with respect to this matter, the terms of this Order shall govern.
4. Notwithstanding anything to the contrary in the Federal Rules of Bankruptcy Procedure, this Order shall take effect immediately upon being signed and entered.
5. The transactions contemplated by the Termination Agreement were negotiated by the parties in good faith and are entitled to the full protections of section 363(m) of the Bankruptcy Code.
EXHIBIT I LEASE TERMINATION AGREEMENT THIS LEASE TERMINATION AGREEMENT (this “Agreement”) is made as of this 8th day of April, 2003, by and between U.S. Realty 86 Associates, a New Jersey general partnership (“Landlord”) and Kmart Corporation, a Michigan corporation having an address at 3100 W. Big Beaver Road, Troy, Michigan 48084-3163 (“Tenant”).
WITNESSETH WHEREAS, Landlord’s predecessor in interest Jack Coogan and Roland Walters, and Tenant entered in a lease dated January 19, 1970 (as the same may have been amended from time to time, and together with any and all other agreements affecting the Premises, the “Lease”), covering certain premises known as Kmart Store No. 4404 located at 846 Goodpasture Island Road, Eugene, Oregon and more particularly described in the Lease (the “Premises”); and
WHEREAS, on January 22, 2002, Tenant and certain of its affiliates filed voluntary petitions for reorganization under Chapter 11 of title 11 of the United States Code, 11 U.S.C. § 101 et seq., as amended (the “Code”), in the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”); and
WHEREAS, pursuant to that certain Order Approving Standing Bidding Procedures to be Utilized in Connection with Asset Sales (the “BiddingProcedures”) the parties negotiated this Agreement to terminate the Lease; and
WHEREAS, except as otherwise provided herein, and subject to the conditions set forth herein, the parties desire to terminate the Lease, effective as of the later of (i) the date the Bankruptcy Court approves this Agreement and (ii) five (5) days following the completion of Tenant’s going-out-of-business sale at the Premises (the “TerminationDate”), and release and discharge each other from any and all obligations and liability under the Lease.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby covenant and agree as follows:
1. Termination. The Lease shall terminate effective as of the Termination Date and Tenant shall, on or before the Termination Date, vacate the Premises. As of the Termination Date, Tenant hereby gives, grants and surrenders unto Landlord all of Tenant’s right, title and interest in and to the Lease and the Premises, and Landlord hereby accepts such surrender. Except as otherwise provided herein, each of the parties hereto acknowledge performance of all obligations of the other party under this Lease or otherwise in connection with the Premises through and including the date of this Agreement, and agree that, from and after the Termination Date, the Lease and all rights and obligations of the parties thereunder shall be deemed to have expired and terminated as fully and completely and with the same force and effect as if such date were the expiration date set forth in the Lease. In addition, any and all rights and obligations of the parties which may have arisen in connection with the Premises shall be deemed to have expired and terminated as of the Termination Date.
2. Condition of Premises. Landlord agrees to accept on the Termination Date the Premises in their then “AS IS” and “WHERE IS” physical and environmental condition, free and clear of all liens resulting from any act or omission of Tenant. Landlord acknowledges and agrees that neither Tenant nor its employees or agents has made any express representation or warranty regarding the condition of the Premises. Landlord further agrees that, notwithstanding any provision to the Contrary contained in the Lease, Tenant shall have no obligation under the Lease or this Agreement to restore the Premises to any condition which existed prior to the Termination Date, nor to remove any additions or alterations to the Premises. This Section shall survive the termination of the Lease and the performance of this Agreement. Notwithstanding the foregoing, Tenant shall have the right, but not the obligation, to remove by sale or otherwise prior to the Termination Date any trade fixtures, signs and other personal property of Tenant including, without limitation, track lights, track fixtures, modular wall systems and hardware, portable wood fixtures, counters, shelving, showcases, mirrors and other movable personal property, external signage and any other items that Tenant is permitted to remove under the Lease.
3. Right to “Go Dark” and Conduct GOB Sale: Post-Petition Rent. Notwithstanding anything to the contrary contained in the Lease including, without limitation, any covenant to operate continuously or not “go dark,” Tenant may discontinue its operations at the Premises prior to the Termination Date. Notwithstanding anything to the contrary contained in the Lease, Tenant shall have the right to conduct a “going-out-of-business” or similar sale at the Premise; at any time prior to the Termination Date in accordance with the terms and conditions of that certain Order Approving the Conduct of Store Closing Sales Pursuant to Sections 105 and 363 of the Bankruptcy Code by Detors and/or Their Store Closing Agent, an Operating Agreement with the Store Closing Agent to Conduct Store Closing Sales, and Granting Other Relief entered January 28, 2003.
4. Termination Fee. In consideration of each party’s entering into this Agreement, Landlord agrees to pay, and Tenant agrees to accept, the sum of Five Hundred Thousand Dollars ($500,000.00) (the “Termination Fee”), which Termination Fee shall be paid by Landlord to Tenant on or prior to the Termination Date.
5. Reimbursement of Prepaid Amounts. Any prepaid rents, common area maintenance fees, merchants’ association fees, real estate taxes, utility expenses or any other amounts prepaid by Tenant pursuant to the terms of the Lease or otherwise in connection with the Premises shall be prorated and, on or prior to the Termination Date, Landlord shall reimburse Tenant for such amounts allocable to the period after the Termination Date.
6. Irrevocable Bid/Landlord Bound by Bidding Procedures. Landlord acknowledges that, in accordance with the Bidding Procedures, all bids made or deemed to be made at the Auction (as defined in the Bidding Procedures), if held, or otherwise in accordance with the Bidding Procedures including, without limitation, the bid reflected in this Agreement, shall remain open and irrevocable until (A) three (3) Business Days after the Premises have been disposed of by Tenant pursuant to the Bidding Procedures or withdrawn from any Auction by Seller, or (B) at 5:00 p.m. on the forty-fifth (45th) day following the entry of an order by the Bankruptcy Court approving the sale of the Premises to a third party (other than Landlord). In the event of any conflict or inconsistency between the provisions of this Agreement and the Bidding Procedures, the provisions of the Bidding Procedures shall govern and control, In the event of any conflict or inconsistency between the provisions of this Agreement and the order approving this Agreement, the provisions of the order shall govern and control.
7. Representations and Warranties. Each of the parties represents and warrants to the other that (i) it has not assigned or transferred any of its respective rights under the Lease to any other party and (ii) subject to entry of the order approving this Agreement, it has the corporate power and authority to execute and deliver this Agreement and such other documents contemplated by this Agreemnt without the consent of its mortgagee(s), if any, or any other third party.
8. Release. As of the Tennination Date, except us to the obligations of Tenant pursuant to this Agreement, Landlord hereby releases and discharges Tenant and its respective successors and assigns of and from all manner of actions, causes of action, suits, debts, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, controversies, agreements, promises, variances, trespasses, damages, judgments, claims and demands whatsoever, in law or in equity which Landload ever had, now has or hereafter can, shall or may have against Tenant or its successors or assigns for, upon or by reason of any matter, cause or thing whatsoever relating to or arising out of the Lease, this Agreement or the Premesis including, without limitation, any and all lease rejection claims (whether under Section 502 of the Code or otherwise), administrative expense claims, or claims relating to Tenant’s prepetition or postpetition use and occupancy of the Premises. To the extent Landlord has filed, or does file any proof(s) of claim with respect to the Lease and/ar the Premises, Landlord hereby consents to the expungement of such claims, with prejudice.
9. Successor-In-Interest/Governing Law. This Agreement shall be binding upon and shall inure to the benefit of each party and its respective successors and assigns and shall be governed by and construed in accordance with the law of the state where the Premises are located.
10. Entire Agreement/Modifications. This Agreement, and any agreement and/or instruments delivered in connection herewith, contain the entire agreement between the parties hereto and except as otherwise specifically set forth herein, supersede all prior agreements and undertakings between the parties hereto or any of them or any of their affiliates relating to the subject matter hereof. No modification, amendment, waiver or release of any provision of this Agreement or of any right, obligation, claim or cause of action arising hereunder shall be valid or binding for any purpose whatsoever unless in writing. and duly executed by the party against whom the same is sought to be asserted.
11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and it shall constitute sufficient proof of the Agreement to present any copy, copies or facsimiles signed by the parties to be charged.
12. Severability. Should any provision of this Agreement be declared invalid or unenforceable, whether in whole or in part, by any court of competent jurisdiction, the remaining provisions and/or portions of the affected provisions which remain valid or enforceable shall not be affected thereby.
13. Discharge of Memorandum. If the parties have previously executed and recorded a memorandum of this Lease, upon entry of the Lease Termination Order, Tenant shall execute and acknowledge a discharge of memorandum of lease within five (5) days receipt from Landlord of a form reasonably acceptable to Tenant. Landlord, at its sole cost and expense, shall have the right to cause the discharge of memorandum of lease to be filed or recorded in the applicable recorder’s office.
14. Bankruptcy Court Approval. This Agreement is subject to approval of the Bankruptcy Court, following notice to creditors and parties in interest, under the Code and the rules promulgated thereunder, all as set forth more fully in the motion filed with the Bankruptcy Court to approve this Agreement. Landlord agrees to cooperate with Tenant in obtaining the order and shall execute such documents and perform such other acts as maybe reasonably requested by Tenant in connection therewith.
15. Jurisdiction The Bankruptcy Court shall retain exclusive jurisdiction over any matter, claim or dispute arising from or relating to this Agreement and Landlord hereby consents to such exclusive jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date and year first written above.
LANDLORD TENANT US. REALTY 86 ASSOCIATES K-MART CORPORATION By HFK Realty Partners