Exhibit 10.1

EXECUTION VERSION

EXCHANGE AGREEMENT

by and among

ESL PARTNERS, L.P.

and

EDWARD S. LAMPERT

and

SERITAGE GROWTH PROPERTIES, L.P.

and

SERITAGE GROWTH PROPERTIES

June 26, 2015

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

TABLE OF CONTENTS

 

             Page  

1.

 

Definitions

     2   

2.

 

Exchange

     4     

2.1

  Exchange      4     

2.2

  Exchange Closing      4   

3.

 

Representations and Warranties of the Company

     4     

3.1

  Existence and Power      4     

3.2

  Capitalization      5     

3.3

  Authorization      5     

3.4

  Valid Issuance of Exchange Interests      5     

3.5

  Non-Contravention; No Consents      5   

4.

 

Representations and Warranties of the Holders

     6     

4.1

  Organization; Ownership      6     

4.2

  Authorization      6     

4.3

  Non-Contravention, No Consents      6     

4.4

  SHC Securities      6     

4.5

  Securities Act Representations      7     

4.6

  Brokers and Finders      7     

4.7

  No Additional Representations      7   

5.

 

Covenants

     8     

5.1

  Taking of Necessary Action      8     

5.2

  Securities Laws; Legends      8     

5.3

  Proportional Surrender      10   

6.

 

Termination

     10     

6.1

  Conditions of Termination      10     

6.2

  Effect of Termination      10   

7.

 

Miscellaneous Provisions

     11     

7.1

  Survival of Representations and Warranties      11     

7.2

  Notices      11     

7.3

  Entire Agreement; Third Party Beneficiaries; Amendment      12     

7.4

  Counterparts      12     

7.5

  Governing Law; Jurisdiction; Venue      12     

7.6

  Expenses      12     

7.7

  Successors and Assigns      13     

7.8

  Severability      13     

7.9

  Specific Performance      13     

7.10

  Headings      13   

 

i

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

EXCHANGE AGREEMENT

EXCHANGE AGREEMENT, dated as of June 26, 2015 (this “Agreement”), by and among
SERITAGE GROWTH PROPERTIES, a Maryland real estate investment trust (the
“Company”), SERITAGE GROWTH PROPERTIES, L.P., a Delaware limited partnership of
which the Company is the general partner (the “Operating Partnership”) and ESL
Partners, L.P., a Delaware limited partnership, and Edward S. Lampert, a United
States citizen (each a “Holder” and together, the “Holders”).

WHEREAS, Sears Holdings Corporation (“SHC”) has announced its intent to
undertake a separation transaction whereby it will cause its Subsidiaries to
sell to one or more Subsidiaries of the Company certain properties and/or one or
more of its Subsidiaries owning certain properties and lease such properties
back from the Company and/or such Subsidiaries, and, in connection therewith,
the Company, through a pro rata distribution by SHC to holders of shares of its
common stock, par value $0.01 per share (the “SHC Common Stock”) of rights (the
“Rights”), each of which entitles the holder to purchase one half of one Class A
common share of beneficial interest, par value $0.01 per share, of the Company
(the “Shares”), will become a new publicly traded real estate investment trust
(a “REIT”) under the Code (as defined herein) (the “Rights Offering”);

WHEREAS, pursuant to Section 856(d)(2)(B) of the Code, rents received or
accrued, directly or indirectly, from any Person in which a REIT owns, directly
or indirectly, 10% or more of the vote or value of shares of all classes of
stock are excluded from the definition of “rents from real property” under
Section 856(d) of the Code and therefore are not qualifying income for purposes
of the gross income tests under Section 856(c)(2) and (3) of the Code (the
“Related Party Tenant Rule”);

WHEREAS, Article VII of the Declaration of Trust of the Company (the “Company
DOT”) contains restrictions on the ownership and transfer of stock of the
Company, including provisions that prohibit any Person from owning stock of the
Company if such ownership would cause any income of the Company to fail to
qualify as “rents from real property” for purposes of Section 856(d) of the
Code;

WHEREAS, absent a realignment of the interests of the Holders, if the Holders
were to exercise all Rights received by the Holders pursuant to the Rights
Offering, for purposes of the Related Party Tenant Rule, the Company would own,
directly or indirectly, 10% or more of SHC, in part by virtue of the Beneficial
Ownership by the Holders of 10% or more of both SHC and the Company;

WHEREAS, if, for purposes of the Related Party Tenant Rule, the Company were to
own, directly or indirectly, 10% or more of SHC, the Company would not be
expected to meet the gross income tests under Section 856(c)(2) and (3) of the
Code, and therefore would not qualify to be taxed as a REIT; and

 

1

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

WHEREAS, in connection with the proposed separation transaction, and so that the
Company may qualify to be taxed as a REIT, the Holders and the Company have
agreed to exchange any and all Rights held by the Holders as of immediately
prior to the closing of the Rights Offering the “Rights Offering Closing”) that
would, if exercised, result in the Holders Beneficially Owning more than 3.2% of
the aggregate value or number of all of the common shares of beneficial interest
of the Company outstanding immediately following the Rights Offering Closing,
calculated in accordance with Section 2.3 (such Rights, the “Excess Rights”),
together with cash as provided herein, for units representing limited
partnership interests in the Operating Partnership (the “Partnership Units”) and
Class B common shares of beneficial interest, par value $0.01 per share (the
“Class B Shares”) of the Company, subject to the terms and conditions set forth
herein.

NOW THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants in this Agreement contained, the parties agree as
follows:

1. Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:

“Affiliate” shall mean, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person; provided, that each of the Holders and their respective
Affiliates (other than the Company, the Operating Partnership and SHC) shall not
be deemed to be an Affiliate of the Company, the Operating Partnership or SHC,
and vice versa.

“Beneficial Ownership” shall mean ownership of securities by a Person who would
be treated as an owner of such securities within the meaning of
Section 856(d)(2)(B) of the Code either directly, indirectly or constructively
through the application of Section 318(a) of the Code, as modified by
Section 856(d)(5) of the Code. The terms “Beneficial Owner,” “Beneficially Own,”
“Beneficially Owns” and “Beneficially Owned” shall have the correlative
meanings.

“Business Day” means any day other than the days on which banks in New York, New
York are required or authorized to remain closed.

“Code” means the Internal Revenue Code of 1986, as amended.

“Exchange Shares Purchase Price” means the product obtained by multiplying
(a) the aggregate number of Exchange Shares to be received by the Holders in the
Exchange by (b) $0.53.

“Exchange Units Purchase Price” means the product obtained by multiplying
(a) the aggregate number of Excess Units to be received by the Holders in the
Exchange by (b) $29.58.

“Exchange Rate” shall mean one (1) Partnership Unit per one (1) Share.

 

2

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

“Governmental Authority” means any court, administrative agency or commission or
other governmental authority or instrumentality, whether federal, state, local
or foreign, and any applicable industry self-regulatory organization.

“Law” means applicable statutes, common law, rules, ordinances, regulations,
codes, licensing requirements, orders, judgments, injunctions, writs, decrees,
licenses, governmental guidelines or interpretations having the force of law,
permits, rules and bylaws, in each case, of a Governmental Authority.

“Purchase Price” means amount in cash in U.S. dollars equal to the sum of
(a) the Exchange Units Purchase Price and (b) the Exchange Shares Purchase
Price.

“Person” means any individual, corporation, company, limited liability company,
partnership, association, trust, joint venture, group or any other entity or
organization, including any government or political subdivision or any agency or
instrumentality thereof.

“Securities Act” shall mean the Securities Act of 1933, as amended, and all of
the rules and regulations promulgated thereunder.

“Subsidiary” means, with respect to any Person, any other Person of which the
first Person owns, directly or indirectly, securities or other ownership
interests having voting power to elect a majority of the board of directors or
other persons performing similar functions (or, if there are no such voting
interests, more than 50% of the equity interests of the second Person).

Index of Defined Terms

 

     Page  

Affiliate

     2   

Agreement

     1   

Beneficial Ownership

     2   

Business Day

     2   

Class B Shares

     2   

Closing

     4   

Code

     2   

Company

     1   

Enforceability Exceptions

     5   

Excess Rights

     2   

Exchange

     4   

Exchange Interests

     4   

Exchange Rate

     2   

Exchange Shares

     4   

Exchange Shares Purchase Price

     2   

Exchange Units

     4   

Exchange Units Purchase Price

     2   

Governmental Authority

     3   

     Page  

Holder Shares

     7   

Holders

     1   

Law

     3   

Operating Partnership

     1   

Partnership Agreement

     4   

Partnership Units

     2   

Person

     3   

Purchase Price

     3   

REIT

     1   

Rights Offering

     1   

Rights Offering Closing

     2   

Securities Act

     3   

Shares

     1   

SHC

     1   

SHC Common Stock

     1   

Subsidiary

     3   

Transactions

     5   

Transfer

     10   

 

 

3

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

2. Exchange.

2.1. Exchange. Subject to and upon the terms and conditions set forth in this
Agreement, the Company, the Operating Partnership and the Holders hereby agree
that at the Closing, all of the Holders’ Excess Rights that would otherwise be
exercisable for Shares may be tendered to the Company together with the Purchase
Price in exchange for the issuance and sale to the Holders of their pro rata
portion of (a) Partnership Units (the “Exchange Units”) at the Exchange Rate and
(b) such number of Class B Shares (the “Exchange Shares,” and together with the
Exchange Units, the “Exchange Interests”) as are required for the Holders to
hold, in the aggregate and taking into account all Shares to be held by the
Holders, 9.8% of the voting power of the Company immediately following the
Rights Offering Closing (collectively, the “Exchange”); provided, that
notwithstanding the Holders’ exercise of the foregoing right, the Holders shall
have the right to exercise its over-subscription privilege relating to its
Excess Rights (as described in the Company’s Registration Statement on Form
S-11) to the same extent as it would have if it were to exercise such Excess
Rights for Shares, except that in lieu of Shares, the Holders shall receive
additional Exchange Units at the Exchange Rate for each Share that would have
been issuable pursuant to the exercise of such over-subscription privilege.

2.2. Exchange Closing. The closing of the Exchange (the “Closing”) shall occur
immediately prior to the Rights Offering Closing. At the Closing, (a) the
Holders shall (i) deliver to the Company all of the Excess Rights, free and
clear of all liens, together with any necessary or appropriate instruments of
transfer relating thereto, and (ii) pay, or cause to be paid, to Operating
Partnership or its designee the Purchase Price, (b) each of the Holders and the
Operating Partnership shall execute the amended and restated agreement of
limited partnership of Operating Partnership (the “Partnership Agreement”) and
(c) the Operating Partnership shall issue to the Holders free and clear of all
liens, and deliver to the Holders evidence of book-entry notations representing
the Exchange Interests (in each case, pro rata based on the number of Rights
held by each Holders prior to the Exchange), together with a copy of the
executed Partnership Agreement with a notation evidencing the Holders as the
holders of the Exchange Units and a duly executed certificate evidencing the
Exchange Shares; provided, however, that the delay or failure by any party to
satisfy its obligations pursuant to this sentence shall not in any way delay or
invalidate the automatic exchange effectuated pursuant to Section 2.1.

3. Representations and Warranties of the Company. The Company and the Operating
Partnership hereby represent and warrant to the Holders, as of the date hereof
and as of the Closing, as follows:

3.1. Existence and Power. The Company is a real estate investment trust duly
organized, validly existing and in good standing under the laws of the State of
Maryland and has all requisite trust power and authority to own, operate and
lease its properties and to carry on its business as it is being conducted on
the date of this Agreement. The Operating Partnership is a limited partnership
duly organized, validly existing

 

4

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

and in good standing under the laws of the State of Delaware and has all
requisite partnership power and authority to own, operate and lease its
properties and to carry on its business as it is being conducted on the date of
this Agreement.

3.2. Capitalization.

(a) The authorized shares of beneficial interest of the Company consist of
100,000,000 Shares, 50,000,000 Class B Shares, 50,000,000 Class C common shares
of beneficial interest, par value $0.01 per share, and 50,000,000 preferred
shares of beneficial interest. As of the date of this Agreement, no shares of
beneficial interest of the Company are issued and outstanding.

(b) The number of Partnership Units that may be issued by the Operating
Partnership is not limited by the Operating Partnership’s organizational
documents. As of the date of this Agreement, no Partnership Units are issued and
outstanding. The Company is the sole general partner of the Operating
Partnership.

3.3. Authorization. The execution, delivery and performance of this Agreement
(the “Transactions”) have been duly authorized by all necessary action on the
part of the Company and on the part of the Operating Partnership, and this
Agreement is a valid and binding obligation of each of the Company and the
Operating Partnership, enforceable against each of them in accordance with its
terms, subject to the limitation of such enforcement by (i) the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to creditors’ rights
generally or (ii) the rules governing the availability of specific performance,
injunctive relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at law (the
“Enforceability Exceptions”).

3.4. Valid Issuance of Exchange Interests. The Exchange Units have been duly
authorized by all necessary limited partnership action of the Operating
Partnership. When issued and sold against receipt of the consideration therefor,
the Exchange Units will be validly issued, fully paid and nonassessable. The
Exchange Shares have been duly authorized by all necessary trust action of the
Company. When issued and sold against receipt of the consideration therefor, the
Exchange Shares will be validly issued, fully paid and nonassessable.

3.5. Non-Contravention; No Consents. The execution, delivery and performance of
this Agreement, and the consummation by the Company and by the Operating
Partnership of the Transactions, does not conflict with, violate or result in a
breach of any provision of, or constitute a default under, or result in the
termination of or accelerate the performance required by, or result in a right
of termination or acceleration under, (i) the organizational documents of the
Company or of the Operating Partnership, (ii) any mortgage, note, indenture,
deed of trust, lease, loan agreement or other agreement binding upon the
Company, the Operating Partnership or any of their respective Subsidiaries or
(iii) any permit, license, judgment, order, decree, ruling, injunction, statute,
law, ordinance, rule or regulation applicable to the Company, the Operating
Partnership or any of their respective

 

5

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

Subsidiaries, other than in the cases of clauses (ii) and (iii) as would not
reasonably be expected to have a material adverse effect on the Company, the
Operating Partnership and their respective Subsidiaries, taken as a whole.
Assuming the accuracy of the representations of the Holders set forth herein,
other than as have been obtained prior to the date of this Agreement, no
material consent, approval, order or authorization of, or material registration,
declaration or filing with, any Governmental Authority is required on the part
of the Company, the Operating Partnership or any of their respective
Subsidiaries in connection with the execution, delivery and performance by the
Company and the Operating Partnership of this Agreement and the consummation by
the Company and the Operating Partnership of the Transactions.

4. Representations and Warranties of the Holders. The Holders hereby represent
and warrant to the Company and the Operating Partnership, as of the date hereof
and as of the Closing, as follows:

4.1. Organization; Ownership. ESL Partners, L.P. is a Delaware limited
partnership and is duly organized, validly existing and in good standing under
the laws of Delaware and has all requisite power and authority to own, operate
and lease its properties and to carry on its business as it is being conducted
on the date of this Agreement.

4.2. Authorization. The Transactions have been duly authorized by all necessary
corporate or equivalent action on the part of each Holder, and this Agreement is
a valid and binding obligation of each Holder, enforceable against it in
accordance with its terms, subject to the limitation of such enforcement by the
Enforceability Exceptions.

4.3. Non-Contravention; No Consents. The execution, delivery and performance of
this Agreement by the Holders, and the consummation by the Holders of the
Transactions, does not conflict with, violate or result in a breach of any
provision of, or constitute a default under, or result in the termination of or
accelerate the performance required by, or result in a right of termination or
acceleration under, (i) the organizational documents of any of the Holders,
(ii) any mortgage, note, indenture, deed of trust, lease, loan agreement or
other agreement binding upon any of the Holders or (iii) any permit, license,
judgment, order, decree, ruling, injunction, statute, law, ordinance, rule or
regulation applicable to the Holders or any of their respective Subsidiaries,
other than in the cases of clauses (ii) and (iii) as would not reasonably be
expected to adversely affect or delay the consummation of the Transactions by
the Holders. Assuming the accuracy of the representations of the Company and the
Operating Partnership set forth herein, other than as have been obtained prior
to the date of this Agreement, no material consent, approval, order or
authorization of, or material registration, declaration or filing with, any
Governmental Authority is required on the part of the Holders or any of their
respective Subsidiaries in connection with the execution, delivery and
performance by the Holders of this Agreement and the consummation by the Holders
of the Transactions.

4.4. SHC Securities and Rights.

 

6

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

(a) As of the record date for the Rights Offering, the Holders owned of record,
and, to the Holders’ knowledge, the Holders Beneficially Owned, (a) shares of
SHC Common Stock as set forth on Exhibit A (the “Holder Shares”) and (b) no
other (i) voting securities, or securities of SHC or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities, of SHC, (ii) options or other rights to acquire from SHC any shares
of capital stock, voting securities or securities convertible into or
exchangeable for shares of capital stock or voting securities of SHC or
(iii) equity equivalent interests in the ownership or earnings of SHC, other
than as set forth on Exhibit A.

(b) A Holder owns and has valid title to each of the Holder Shares, free and
clear of any and all liens. Other than this Agreement, no Holder is party to any
option, warrant, purchase right or other contract or commitment obligating it to
sell, transfer, pledge or otherwise dispose of the Holder Shares or to any
voting trust, proxy or other agreement or understanding with respect to the
voting of the Holder Shares.

(c) As of the Closing, a Holder owns and has valid title to each of the Excess
Rights, free and clear of any and all liens. As of the Closing, other than this
Agreement, no Holder is party to any option, warrant, purchase right or other
contract or commitment obligating it to sell, transfer, pledge or otherwise
dispose of the Excess Rights or to any voting trust, proxy or other agreement or
understanding with respect to the voting of the Excess Rights.

4.5. Securities Act Representations. Each Holder is an accredited investor (as
defined in Rule 501 of the Securities Act) and is aware that the issuance and
exchange of Exchange Interests is being made in reliance on a private placement
exemption from registration under the Securities Act. Each Holder is acquiring
the Exchange Interests for its own account, and not with a view toward, or for
sale in connection with, any distribution thereof in violation of any federal or
state securities or “blue sky” law, or with any present intention of
distributing or selling such Exchange Interests in violation of the Securities
Act. Each Holder has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in such Exchange Interests and is capable of bearing the economic
risks of such investment. Each Holder has been provided a reasonable opportunity
to undertake and has undertaken such investigation and has been provided with
and has evaluated such documents and information as it has deemed necessary to
enable it to make an informed and intelligent decision with respect to the
execution, delivery and performance of this Agreement.

4.6. Brokers and Finders. None of the Holders nor any of their respective
officers, directors, employees or agents has utilized any broker, finder,
placement agent or financial advisor or incurred any liability for any brokers’,
finders’ or similar fees or commissions in connection with any of the
Transactions which are or may become payable by the Company or any of its
Subsidiaries.

4.7. No Additional Representations.

(a) The Holders acknowledge that neither the Company nor the Operating
Partnership makes any representation or warranty as to any matter whatsoever
except as

 

7

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

expressly set forth in Section 3, and specifically (but without limiting the
generality of the foregoing), that neither the Company nor the Operating
Partnership makes any representation or warranty with respect to (i) any
projections, estimates or budgets delivered or made available to the Holders (or
any of their Affiliates or their respective, officers, trustees or employees) of
future revenues, results of operations (or any component thereof), cash flows or
financial condition (or any component thereof) of the Company and its
Subsidiaries or (ii) the future business and operations of the Company and its
Subsidiaries, and none of the Holders relied on such information or any other
representations or warranties not set forth in Section 3.

(b) Each Holder has conducted its own independent review and analysis of the
business, operations, assets, liabilities, results of operations, financial
condition and prospects of the Company and its Subsidiaries and acknowledges
that each Holder has been provided sufficient access for such purposes. Except
for the representations and warranties expressly set forth in Section 3 by the
Company and the Operating Partnership in accordance with the terms hereof, in
entering into this Agreement, each Holder has relied solely upon its independent
investigation and analysis of the Company and its Subsidiaries, and each Holder
acknowledges and agrees that it has not been induced by and has not relied upon
any representations, warranties or statements, whether express or implied, made
by the Company, its Subsidiaries or any of their respective affiliates,
shareholders, controlling persons or representatives that are not expressly set
forth in Section 3, whether or not such representations, warranties or
statements were made in writing or orally. Each Holder acknowledges and agrees
that, except for the representations and warranties expressly set forth in
Section 3, (i) the Company or the Operating Partnership does not make, or has
not made, any representations or warranties relating to itself or its business
or otherwise in connection with the Transactions and no Holder is relying on any
representation or warranty except for those expressly set forth in this
Agreement, (ii) no person has been authorized by the Company or the Operating
Partnership to make any representation or warranty relating to either of them or
their respective businesses or otherwise in connection with the Transactions,
and if made, such representation or warranty must not be relied upon by the
Holders as having been authorized by the Company or the Operating Partnership,
and (iii) any estimates, projections, predictions, data, financial information,
memoranda, presentations or any other materials or information provided or
addressed to the Holders or any of their respective Affiliates or
representatives are not and shall not be deemed to be or include representations
or warranties of the Company or the Operating Partnership unless any such
materials or information is the subject of any express representation or
warranty set forth in Section 3 of this Agreement.

5. Covenants.

5.1. Taking of Necessary Action. Each of the parties hereto agrees to use its
reasonable best efforts promptly to take or cause to be taken all action and
promptly to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
Transactions. In case at any time before or after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party to this Agreement shall, at such
party’s expense, take all such necessary action as may be reasonably requested
by another party to this Agreement.

 

8

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

5.2. Securities Laws; Legends.

(a) Each Holder acknowledges and agrees that as of the Closing the Exchange
Interests will not have been registered under the Securities Act or the
securities laws of any state and that they may be sold or otherwise disposed of
only in one or more transactions registered under the Securities Act and, where
applicable, such laws, or as to which an exemption from the registration
requirements of the Securities Act and, where applicable, such laws, is
available. Each Holder acknowledges that it has no right to require the Company
or the Operating Partnership to register the Exchange Interests. Each Holder
further acknowledges and agrees that any certificate for the Exchange Units
shall bear a legend substantially as set forth in paragraph (b) of this
Section 5.2 (and any Exchange Units evidenced in book entry form shall contain
appropriate comparable notation and reflect related stop transfer instructions)
and any certificate for the Exchange Shares shall bear a legend substantially as
set forth in paragraph (c) of this Section 5.2 (and any Exchange Shares
evidenced in book entry form shall contain appropriate comparable notation and
reflect related stop transfer instructions).

(b) Any certificates for the Exchange Units shall bear legends in substantially
the following form:

THE COMMON UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION COMPLIES WITH THE PROVISIONS OF THE PARTNERSHIP AGREEMENT AS OF [●],
2015 AS IT MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH IS ON FILE WITH THE
PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENT, NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE COMMON UNITS
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR (B) IF THE PARTNERSHIP HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF
COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER.

(c) Any certificates for the Exchange Shares shall bear legends in substantially
the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO A REGISTRATION IN EFFECT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

 

9

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

(d) When issued pursuant hereto, any certificates evidencing the Exchange
Interests shall also bear any legend required by any applicable state blue sky
law.

(e) Any holder of Exchange Units may request the Operating Partnership, and any
holder of Exchange Shares may request the Company, to remove any or all of the
legends described in this Section 5.2 from the certificates evidencing such
Exchange Units or Exchange Shares, as applicable, by submitting to the Operating
Partnership or the Company, as applicable, such certificates, together with an
opinion of counsel reasonably satisfactory to the Operating Partnership or the
Company, as applicable, to the effect that such legend or legends are no longer
required under the Securities Act or applicable state laws, as the case may be.

5.3. Proportional Surrender. Each Holder hereby agrees that from and after the
Closing, upon any sale, transfer or other disposition (a “Transfer”) of one or
more Exchange Units to any Person other than an Affiliate of the Holders, it
shall surrender to the Company as promptly as practicable a number of Class B
Shares equal to the product obtained by multiplying (a) the number of Class B
Shares then held by such Holder by (b) the quotient obtained by dividing (i) the
number of Exchange Units subject to such Transfer by such Holder by (ii) the
number of Exchange Units held by such Holder immediately prior to such Transfer,
rounded down to the nearest whole number; provided, that upon any Transfer of
one or more Exchange Units to any Affiliate of the Holders, the foregoing
surrender obligation shall be assumed by such Affiliate and shall apply in the
event of any Transfer by such Affiliate to any Person other than Affiliate of
the Holders.

6. Termination.

6.1. Conditions of Termination. Notwithstanding anything to the contrary
contained in this Agreement, this Agreement:

(a) may be terminated at any time:

(i) by mutual consent of SHC, the Company and the Holders;

(ii) by either the Company, on the one hand, or the Holders, on the other hand,
if any temporary restraining order, preliminary or permanent injunction or other
judgment or order issued by any court of competent jurisdiction or other Law
prohibiting, restraining or rendering illegal the consummation of the
Transactions shall be in effect and shall have become final and nonappealable;
or

(b) shall be terminated automatically if at any time SHC publicly announces that
it has determined to cancel the Rights Offering.

6.2. Effect of Termination. In the event of any termination pursuant to
Section 6.1, this Agreement shall become null and void and have no effect, with
no continuing obligation or liability on the part of the Company, the Operating

 

10

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

Partnership or the Holders, or their respective directors, officers, agents or
stockholders, with respect to this Agreement, provided that nothing herein shall
relieve any party of any liability for its willful breach.

7. Miscellaneous Provisions.

7.1. Survival of Representations and Warranties. All covenants and agreements
contained herein, other than those which by their terms apply in whole or in
part after the Closing, shall terminate as of the Closing. The representations
and warranties contained in Section 3 and Section 4 shall survive the Closing
until the expiration of the applicable statute of limitations.

7.2. Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given, if delivered personally, by
facsimile, by email or sent by overnight courier as follows:

 

If to the Holders, to: c/o ESL Investment, Inc. 1170 Kane Concourse, Suite 200
Bay Harbor Islands, Florida 33154 Attention: Harold Talisman Fax: 305-864-1370
Email: harold@eslinvest.com If to the Company and/or the Operating Partnership,
to: Seritage Growth Properties c/o Sears Holdings Corporation 3333 Beverly Road
Hoffman Estates, Illinois 60179 Attention: General Counsel Email:
mfernand@seritage.com With a copy (which shall not constitute notice) to:
Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, NY 10019

 

11

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

Attention: Robin Panovka Fax: (212) 403-2000 Email: RPanovka@wlrk.com

or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.

7.3. Entire Agreement; Third Party Beneficiaries; Amendment. This Agreement,
together with the Partnership Agreement (when executed), sets forth the entire
agreement between the parties hereto with respect to the Transactions and is not
intended to and shall not confer upon any person other than the parties hereto
any rights or remedies hereunder. Any provision of this Agreement may be amended
or modified in whole or in part at any time by an agreement in writing between
the parties hereto executed in the same manner as this Agreement. No failure on
the part of any party to exercise, and no delay in exercising, any right shall
operate as a waiver thereof nor shall any single or partial exercise by any
party of any right preclude any other or future exercise thereof or the exercise
of any other right.

7.4. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to constitute any original, but all of which
together shall constitute one and the same documents. Signatures to this
Agreement transmitted by facsimile transmission, by electronic mail in “portable
document format” (“.pdf”) form, or by any other electronic means intended to
preserve the original graphic and pictorial appearance of a document will have
the same effect as physical delivery of the paper document bearing the original
signature.

7.5. Governing Law; Jurisdiction; Venue. This Agreement shall be governed by,
and interpreted in accordance with, the laws of the State of New York. EACH
PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE COURTS OF THE STATE
OF NEW YORK LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK (AND OF THE
APPROPRIATE APPELLATE COURTS THEREFROM) FOR THE PURPOSE OF ANY JUDICIAL
PROCEEDING ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. The
parties hereby waive, to the fullest extent permitted by applicable law, any
objection which they now or hereafter may have to personal jurisdiction or to
the laying of venue of any such suit, action or proceeding brought in any court
referred to in this Section 7.5 and such parties agree not to plead or claim the
same. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN
CONNECTION WITH ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY

7.6. Expenses. Except as otherwise expressly provided herein, each party hereto
shall bear its own costs and expenses (including attorneys’ fees) incurred in
connection with this Agreement and the Transactions.

 

12

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

7.7. Successors and Assigns. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, each of
the Company’s, the Operating Partnership’s and the Holders’ respective
successors and assigns, and no other person.

7.8. Severability. If any provision of this Agreement is determined to be
invalid, illegal, or unenforceable, the remaining provisions of this Agreement
shall remain in full force and effect provided that the economic and legal
substance of, any of the Transactions is not affected in any manner materially
adverse to any party. In the event of any such determination, the parties agree
to negotiate in good faith to modify this Agreement to fulfill as closely as
possible the original intent and purpose hereof. To the extent permitted by law,
the parties hereby to the same extent waive any provision of law that renders
any provision hereof prohibited or unenforceable in any respect.

7.9. Specific Performance. The parties agree that if any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached, irreparable damage would occur, no adequate remedy at
law would exist and damages would be difficult to determine, and that the
parties will be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.

7.10. Headings. The headings of Articles and Sections contained in this
Agreement are for reference purposes only and are not part of this Agreement.

*        *        *         *        *        *

 

13

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

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

 

SERITAGE GROWTH PROPERTIES By: 

/s/ Matthew Fernand

Name: Matthew Fernand Title: Executive Vice President and General Counsel
SERITAGE GROWTH PROPERTIES, L.P. By: 

/s/ Matthew Fernand

Name: Matthew Fernand Title: Executive Vice President and General Counsel

[Signature Page to Exchange Agreement]

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

ESL PARTNERS, L.P. By:

/s/ Edward S. Lampert

Name: Title: EDWARD S. LAMPERT By:

/s/ Edward S. Lampert

Name: Title:

[Signature Page to Exchange Agreement]