Item 2.03.
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Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance
Sheet Arrangement of a Registrant.
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On October 4, 2017, Sears Holdings Corporation (the Company), through Sears, Roebuck and Co., Kmart Stores of Illinois LLC, Kmart of
Washington LLC, Kmart Corporation, SHC Desert Springs, LLC, Innovel Solutions, Inc., Sears Holdings Management Corporation, Maxserv, Inc. and Troy Coolidge No. 13, LLC (collectively, Borrowers), entities wholly-owned and controlled,
directly or indirectly by the Company, entered into an Amended and Restated Loan Agreement (the Amended and Restated Loan Agreement), which amended and restated its Loan Agreement, dated as of January 3, 2017 (as amended), with JPP,
LLC and JPP II, LLC (collectively, the Lenders). Pursuant to the Amended and Restated Loan Agreement, the Borrowers borrowed an additional $100 million (the Initial Incremental Loan) from the Lenders. After giving effect
to the Initial Incremental Loan, the aggregate principal amount outstanding under the Amended and Restated Loan Agreement was $499.4 million. Mr. Edward S. Lampert, the Companys Chief Executive Officer and Chairman, is the sole
stockholder, chief executive officer and director of ESL Investments, Inc., which controls JPP, LLC and JPP II, LLC. Subject to the satisfaction of certain conditions, including pledging additional properties or other assets as collateral, up to an
additional $100 million may be drawn by the Company prior to December 1, 2017 (the Additional Incremental Loan; and the Additional Incremental Loan, if any, together with the Initial Incremental Loan, the Incremental
Loans). The Incremental Loans mature on April 3, 2018. The original loans under the Amended and Restated Loan Agreement continue to mature on July 20, 2020. The Company expects to use the proceeds of the Incremental Loans for general
corporate purposes.
The Incremental Loans will have an annual interest rate of 11%, with accrued interest payable monthly. No upfront or funding fees
will be paid in connection with the Incremental Loans. As with the existing loans under the Amended and Restated Loan Agreement, the Initial Incremental Loan is guaranteed by the Company and is currently secured by a first priority lien on 61 real
properties owned by the Borrowers.
The Amended and Restated Loan Agreement includes certain representations and warranties, indemnities and covenants,
including with respect to the condition and maintenance of the real property collateral. The Amended and Restated Loan Agreement has certain events of default, including (subject to certain materiality thresholds and grace periods) payment default,
failure to comply with covenants, material inaccuracy of representation or warranty, and bankruptcy or insolvency proceedings. If there is an event of default, the Lenders may declare all or any portion of the outstanding indebtedness to be
immediately due and payable, exercise any rights they might have under the Amended and Restated Loan Agreement and related documents (including against the collateral), and require the Borrowers to pay a default interest rate equal to the greater of
(i) 2.5% in excess of the base interest rate and (ii) the prime rate plus 1%.
The Amended and Restated Loan Agreement permits the Lenders to
syndicate or participate all or a portion of the outstanding loans, and the Lenders have advised the Borrowers that they are amenable to syndicating all or a portion of the Incremental Loans to third parties on the same terms.
The foregoing description of the Incremental Loans and the Amended and Restated Loan Agreement does not purport to be complete and is qualified in its
entirety by reference to the Amended and Restated Loan Agreement, a copy of which is filed herewith as Exhibit 10.1 and is incorporated by reference herein.