Kmart and Penske Reach Agreement On Service Center Closings

Autoparts Report, April 20, 2002

Kmart Corp. and Penske Corp., Penske Auto Centers, Inc. (PAC), and Penske Auto Centers, LLC (collectively "Penske") said that they have reached an agreement whereby Penske and Kmart will work together to achieve an orderly wind-down of operations at auto service centers at more than 550 Kmart stores across the U.S. Under terms of the agreement, which is subject to the issuance of a signed order by the United States Bankruptcy Court for the Northern District of Illinois, Penske and Kmart will cooperate to assure an orderly wind-down of the business following Penske's unilateral decision to close the business as of April 6, 2002.

Under the agreement, Penske has earmarked funds for certain close down expenses, including facility restoration, removal of hazardous waste and materials associated with the wind-down, and monies to support Penske Auto Center's future customer's warranty needs.

Penske Corp. has approved funding PAC's payment of approximately $10 million for salaries, severance, and future medical expenses of PAC employees. Penske has also agreed to pay $6 million to Kmart under the terms of a master lease guarantee, and Penske Auto Centers, LLC also has agreed to waive a claim of $5 million that allegedly was owed as a result of Kmart's previously announced store closing plan.

"We're pleased to have reached this agreement and are moving forward with a plan to convert the space occupied by Penske to additional Kmart selling space," said James B. Adamson, Kmart's Chairman and Chief Executive Officer. "Furthermore, we are confident Penske's departure will not have any adverse affect on our business."

Roger S. Penske, Chairman of Penske Corp., said: "This agreement allows us to meet our primary objective of taking care of our employees and customers."