Second Master Lease Modification and Settlement Agreement, dated December 02, 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, as amended by that certain Master Lease Modification and Settlement Agreement dated June 3, 2020 (collectively, 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 the Remaining Stores set forth on Exhibit A hereto and as more particularly described in the Master Lease;

On account of the COVID-19 pandemic and for other reasons, Tenant has requested that the Master Lease be modified and, upon the satisfaction of certain conditions as set forth herein, terminate with respect to the five (5) Remaining Stores as defined in the Master Lease and identified on Exhibit A, upon termination of which, there shall no longer be any properties subject to the Master Lease; and

Landlord and Tenant desire to modify certain terms of the Master Lease with respect to (i) the Remaining Stores as identified on Exhibit A, and (ii) upon the satisfaction of certain conditions as set forth herein, terminate the Master Lease.

Surrender of Remaining Stores and Termination of Master Lease.

Abatement of Base Rent on the Remaining Stores.  Landlord and Tenant agree that Tenant shall be entitled to abate Base Rent at the Remaining Stores (the “Abated Rent”) for the period commencing on April 1, 2020 and ending on the Termination Date (the “Abatement Period”).  During the Abatement Period, Tenant shall continue to pay all Additional Rent as required pursuant to the Master Lease (including Tenant’s Proportionate Share of any past due real estate taxes at the Remaining Stores). Tenant shall not be obligated to pay any Abated Rent; provided, however, in the event that Tenant (i) fails to make the Termination Payment in accordance with this Agreement, or (ii) fails to pay any Additional Rent on the Remaining Stores as required pursuant to the Master Lease, then in any of the foregoing circumstances and at Landlord’s option, all Abated Rent shall become immediately due and payable.

Acknowledgment of Liability of Tenant to Landlord Regarding the Remaining 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 Remaining Stores through the Initial Term (the “Remaining Liable Amount”).

Effectiveness of Release by Landlord. Subject to payment of the Termination Payment, 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 (collectively, the “Tenant Parties”), from the Remaining Liable Amount, subject to automatic rescission of such releases and reinstatement of the Guarantees and the Remaining Liable Amount in full in the event (a) Tenant or any third-party commences any Insolvency Proceeding (as defined by the Master Lease),  and (b) in or as a result of such Insolvency Proceeding Landlord is required to disgorge all or any portion of the Termination Payment (whether pursuant to 11 U.S.C. §§ 547 or 548 or any analogous law of any jurisdiction).  

Termination of Tenant’s PR ROFO Rights.  As of the Termination Date, upon termination of the Master Lease and subject to Landlord’s release of Tenant and the Tenant Parties pursuant to Paragraph 4 above, Tenant’s PR ROFO Rights under the Master Lease shall be deemed terminated, of no further force and effect, and shall not survive the termination of the Master Lease. Tenant and the Tenant Parties shall execute (at Tenant’s cost and expense in accordance with Section 1.6 of the Master Lease) all documentation reasonably necessary to release Tenant’s PR ROFO Rights from the public record in Puerto Rico.

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 Termination 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).

Landlord:

Seritage SRC Finance LLC

Seritage KMT Finance LLC

By:_________________________

By:_________________________

Name:  Matthew Fernand

Name:  Matthew Fernand

Title: Vice President

Title: Vice President

Tenant

Transform SR Operations LLC

Transform KM Operations LLC

By:_________________________

By:_________________________

Name:  

Name:  

Title:

Title: