Exhibit 10.1

 

Execution Version

 

 

MASTER LEASE MODIFICATION AND SETTLEMENT AGREEMENT

 

This Master Lease Modification and Settlement Agreement (the “Agreement”) is
made and entered into as of this 3rd day of June, 2020 and is by and between
Transform SR Operations LLC and Transform KM Operations LLC (the “Tenant”) and
Seritage SRC Finance LLC and Seritage KMT Finance LLC (the “Landlord”),
collectively the “Parties” and each a “Party” to this Agreement.

 

BACKGROUND

 

 

A.

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;

 

 

B.

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”);

 

 

C.

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

 

 

D.

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”).

 

NOW, THEREFORE, in consideration of the mutual obligations and promises
contained herein, Landlord and Tenant agree as follows:

 

 

1.

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.

 

(b)  Tenant on behalf of itself and its affiliates (collectively, “Transform”)
agrees that (i) if Transform enters into an agreement with any other Portfolio
Landlord (as defined below) for the surrender of any locations leased to
Transform by such Portfolio Landlord and (ii) the surrender payment or other
monetary consideration paid by Transform to such Portfolio Landlord, on a
recovery percentage basis exceeds the amount of the Surrender Payment that
Landlord has agreed to accept pursuant to this Agreement, then in such instance
Landlord shall be entitled to additional consideration in the amount necessary
provide Landlord with the same recovery percentage as such Portfolio
Landlord.  As used herein “Portfolio Landlord” means any landlord that currently
leases ten (10) or more locations to Transform.

 

--------------------------------------------------------------------------------

 

 

 

2.

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.

 

 

3.

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”).

 

 

4.

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).  

 

 

5.

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).

 

If Tenant commences, or a third-party commences, any Insolvency Proceeding,
Tenant agrees as follows:

 

 

a.

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

 

2

--------------------------------------------------------------------------------

 

 

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;

 

 

b.   If Landlord is required to disgorge all or any portion of the Surrender
Payment, Landlord shall have an allowed claim against the Tenant for the entire
Liable Amount; and

 

c.Tenant acknowledges that its agreements in this Paragraph are provided in
exchange for valuable consideration provided by and through this Agreement.

 

 

6.

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.  

 

(b) Tenant warrants and represents that they have not assigned or otherwise
transferred any claim or cause of action released by this Agreement.  Tenant
acknowledges and agrees that the release set forth herein is a general release
and further expressly waives and assumes the risk of any and all claims for
damages which exist as of this date but which they do not know or expect to
exist, whether through ignorance, oversight, error, negligence, or otherwise,
and which, if known, would materially affect Tenant’s decision to enter into
this Agreement.

 

 

7.

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.  

 

 

8.

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.

 

3

--------------------------------------------------------------------------------

 

 

9.

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.

 

 

10.

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.

 

 

11.

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.

 

 

12.

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).

4

--------------------------------------------------------------------------------

 

 

IN WITNESS WHEREOF, Landlord and Tenant have executed the Agreement on the day
and year first above-written.

 

 

 

Landlord:

 

 

 

Seritage SRC Finance LLC

Seritage KMT Finance LLC

 

 

 

 

By: /s/ Matthew Fernand

 

 

 

 

By: /s/ Matthew Fernand

Name: Matthew Fernand

Name: Matthew Fernand

Title: Vice President

Title: Vice President

 

 

 

 

 

Tenant

 

 

 

Transform SR Operations LLC

Transform KM Operations LLC

 

 

 

 

By: /s/ D. Scott Carr

 

 

 

 

By: /s/ D. Scott Carr

Name: D. Scott Carr

Name: D. Scott Carr

Title: Authorized Signatory

Title: Authorized Signatory

 

 

 

5

--------------------------------------------------------------------------------

 

Agreed to and acknowledged by: ORIGINAL GUARANTORS:

 

TRANSFORM MIDCO LLC,

a Delaware limited liability company

By:/s/ Harold Talisman
Name:Harold Talisman
Title:Authorized Signatory

 

TRANSFORM SR HOLDINGS LLC,

a Delaware limited liability company

By:/s/ D. Scott Carr
Name:D. Scott Carr
Title:Authorized Signatory

 

 

TRANSFORM A&E FACTORY SERVICE LLC

TRANSFORM A&E LAWN AND GARDEN LLC

TRANSFORM CALIFORNIA BUILDER APPLIANCES LLC

TRANSFORM FLORIDA BUILDER APPLIANCES LLC

TRANSFORM INNOVEL SOLUTIONS LLC

TRANSFORM KM LLC

TRANSFORM KM OF MICHIGAN LLC

TRANSFORM KM OF WASHINGTON LLC

TRANSFORM KM OPERATIONS LLC

TRANSFORM KM STORES OF ILLINOIS LLC

TRANSFORM KM STORES OF TEXAS LLC

TRANSFORM KM.COM LLC

TRANSFORM MAXSERV LLC

TRANSFORM MYGOFER LLC

TRANSFORM SERVICELIVE LLC

TRANSFORM SR BRANDS MANAGEMENT LLC

TRANSFORM SR DE PUERTO RICO LLC

TRANSFORM SR HOLDINGS LLC

TRANSFORM SR HOME & BUSINESS FRANCHISES LLC

TRANSFORM SR HOME IMPROVEMENT PRODUCTS LLC

TRANSFORM SR LLC

TRANSFORM SR OPERATIONS LLC

TRANSFORM STARWEST LLC

TRANSFORM WALLY LABS LLC

 

 

 

By:/s/ Harold Talisman
Name:Harold Talisman
Title:Authorized Signatory

6

--------------------------------------------------------------------------------

 

Exhibit A

Stores

 

 

 

 

 

7