Second Amendment to Holdco Master Lease, dated as of June 3, 2020, by and among Seritage SRC Finance LLC, Seritage KMT Finance LLC, Transform SR Operations LLC and Transform KM Operations LLC

Landlord and Tenant entered into that certain Master Lease dated February 28, 2019 (the “Master Lease”).  Capitalized terms used but not defined herein shall have the meaning ascribed to such term in the Master Lease;

Pursuant to the terms of the Master Lease, Tenant leases from Landlord certain premises set forth on Exhibit A hereto and as more particularly described in the Master Lease (the “Stores”);

On account of the COVID-19 pandemic and for other reasons, Tenant has requested that the Master Lease terminate with respect to twelve (12) of the Stores as identified on Exhibit A (the “Termination Stores”); which Termination Stores are eligible for termination effective March 1, 2021, without payment of a termination fee under the Master Lease; and

Landlord and Tenant desire to modify certain terms of the Master Lease with respect to (i) the Termination Stores and (ii) the remaining five (5) Stores as identified on Exhibit A (such remaining five (5) stores, the “Remaining Stores”).

Surrender of Termination Stores. (a) Landlord acknowledges that Tenant wishes to surrender and terminate the Master Lease with respect to the Termination Stores on the earlier of (i) Tenant’s completion of the going out of business sales at all such locations or (ii) September 30, 2020 (the “Surrender Date”).  Tenant shall provide Landlord with no less than five (5) business days’ notice of the Surrender Date.  On or prior to the Surrender Date, Tenant shall remit to Landlord a surrender fee equal to $5,300,000 (“Surrender Payment”). So long as Tenant continues to maintain the Termination Stores in the physical condition required under the Master Lease, ordinary wear and tear excepted (consistent with prior surrenders under the Master Lease), subject to receipt by Landlord of the Surrender Payment, Landlord agrees to accept the surrender of the Termination Stores and to terminate the Master Lease with respect to the Termination Stores as of the Surrender Date subject to those continuing obligations of Tenant which survive the Surrender Date pursuant to the terms of the Master Lease.

Deferral of Base Rent on the Remaining Stores.  Landlord and Tenant agree that Tenant shall be entitled to defer Base Rent at the Remaining Stores (the “Deferred Rent”) for the period commencing on April 1, 2020 and ending on September 30, 2020 (the “Deferral Period”).  During the Deferral Period, Tenant shall continue to pay all Additional Rent as required pursuant to the Master Lease. All Deferred Rent shall be paid back in equal monthly installments over a period of twelve (12) months commencing on October 1, 2020 and ending on September 1, 2021. In the event that Tenant (i) fails to make the Surrender Payment in accordance with this Agreement, (ii) fails to pay any Additional Rent on the Remaining Stores as required pursuant to the Master Lease, or (iii) exercises its termination right with respect to any of the Remaining Stores, then in any of the foregoing circumstances and at Landlord’s option, all Deferred Rent shall become immediately due and payable.

Acknowledgment of Liability of Tenant to Landlord Regarding the Termination Stores.  Tenant agrees and acknowledges that, as of the date that this Agreement is entered into, but for the terms and conditions of this Agreement Tenant is and remains liable to Landlord with respect to all Base Rent, Additional Charges, and other payments related to the Termination Stores through the Initial Term (the “Liable Amount”).

Effectiveness of Release by Landlord. Subject to payment of the Surrender Amount, Landlord hereby releases Tenant and its affiliates, and all persons or entities claiming by, through or under them, and their respective heirs, predecessors, successors, and assigns, from the Liable Amount, subject to automatic rescission of such releases and reinstatement of the Liable Amount in full in the event (a) Tenant or any third-party commences any case, proceeding, or other action under any law relating to bankruptcy, insolvency, reorganization, or relief of debtors, including under Title 11 of the U.S. Code, (i) seeking to have any order for relief of Tenant’s debts, or seeking to adjudicate Tenant as bankrupt or insolvent, or (ii) seeking appointment of a receiver, trustee, custodian, or other similar official for Tenant or for all or any substantial  part of Tenant’s assets (an “Insolvency Proceeding”), and (b) in or as a result of such Insolvency Proceeding Landlord is required to disgorge all or any portion of the Surrender Payment (whether pursuant to 11 U.S.C. §§ 547 or 548 or any analogous law of any jurisdiction).  

Tenant Warranties.  In consideration of Landlord’s agreement to the terms and conditions of this Agreement, Landlord relies upon Tenant’s warranty that it has reviewed its financial situation and that it currently is solvent within the meaning of 11 U.S.C. § § 547(b)(3) and 548(a)(I)(B)(ii)(I), and will remain solvent following its payment to the Landlord of the Surrender Payment. Furthermore, the Parties warrant that, in evaluating whether to execute this Agreement, they (a) intended that the mutual promises, covenants, and obligations set forth herein constitute a contemporaneous exchange for new value given to Tenant, within the meaning of 11 U.S.C. § 547(c)(1); and (b) concluded that the mutual promises, covenants, and obligations set forth herein do, in fact, constitute such a contemporaneous exchange. In addition, the Parties warrant that the mutual promises, covenants, and obligations set forth herein are intended to and do, in fact, represent a reasonably equivalent exchange of value which is not meant to hinder or delay payment to, or to defraud any entity to which Tenant was or became indebted on or after the date of this transfer, all within the meaning of 11 U.S.C. § 548(a)(l).

Tenant’s obligations under this Agreement may not be avoided pursuant to 11 U.S.C. §§ 547 or 548 or any analogous law of any

jurisdiction, and Tenant will not argue or otherwise take the position in any such case, proceeding, or action that: (i) Tenant’s obligations under this Agreement may be avoided under 11  U.S.C. §§ 547 or 548 or any analogous law of any jurisdiction; (ii) Tenant was insolvent at the time this Agreement was entered into, or became insolvent as a result of the payment made to the Landlord hereunder; or (iii) the mutual promises, covenants, and obligations set forth in this Agreement do not constitute a contemporaneous exchange for new value given to Tenant;

Release. (a) In consideration of the promises contained in this Agreement, the receipt and sufficiency of which are acknowledged, and except for the obligations set forth in this Agreement Tenant on behalf of itself and its affiliates, and all persons or entities claiming by, through or under them, and their respective heirs, predecessors, successors, and assigns, hereby fully, completely, and finally waive, release, remise, acquit, and forever discharge and covenant not to sue Landlord, as well as Landlord’s respective predecessors, successors, affiliates, subsidiaries, parents, divisions, partnerships, and joint ventures, and all of the foregoing entities’ respective past, present, and future associates, representatives, owners, members, estates, assigns, insurers, reinsurers, shareholders, creditors, administrators, executors, partners, principals, trustees, directors, officers, employees, committee members, independent contractors, attorneys, agents, and all others acting or claiming by, through, under, or in concert with any of the foregoing with respect to any and all claims, demands, suits, manner of obligation, debt, liability, tort, covenant, contract, or causes of action of any kind whatsoever, at law or in equity, relating to the Master Lease and that certain Master Lease dated July 7, 2015 by and between Landlord, as landlord and Kmart Operations LLC and Sears Operations LLC, as tenant.  

No Further Modification.  Except as set forth in this Agreement, all of the terms and provisions of the Master Lease are hereby ratified, approved and confirmed and shall remain unmodified and in full force and effect.  

Entire Agreement. The Parties represent and agree that no promise, inducement, or agreement other than as expressed herein has been made to them and that subject to the terms and conditions of the Master Lease this Agreement is fully integrated, supersedes all prior agreements and understandings between the Parties, and contains the entire agreement between the Parties. This Agreement shall bind and inure to the benefit of the heirs, beneficiaries, representatives, successors, and assigns of the Parties.

Authority. The Parties represent and warrant that they possess full authority to enter into this Agreement and to lawfully and effectively release the opposing Party as set forth herein, free of any rights of settlement, approval, subrogation, or other condition or impediment. This undertaking includes specifically, without limitation, the representation and warranty that no third party has now acquired or will acquire rights to present or pursue any claims arising from or based upon the claims that have been released herein.  Landlord represents and warrants that no consent of any lender is required for this Amendment or if required has been obtained.

Severability. The Parties agree that if, for any reason, a provision of this Agreement is held unenforceable by any court of competent jurisdiction, this Agreement shall be automatically conformed to the law, and otherwise this Agreement shall continue in full force and effect.

Counterparts. This Agreement may be executed in several counterparts and all counterparts so executed shall constitute one agreement binding on all Parties hereto, notwithstanding that all the Parties are not signatories to the original or the same counterpart.  Facsimile and e-mailed signatures shall be accepted the same as an original signature. A photocopy of this Agreement may be used in any action brought to enforce or construe this Agreement.

Governing Law. This Agreement will be interpreted and construed in accordance with the laws of the State of New York (without regard to principles of conflicts of laws).