Item 1.01
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Entry Into a Material Definitive Agreement
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On January 4, 2018, Sears Holdings Corporation (the
Company), through Sears Roebuck Acceptance Corp. and Kmart Corporation (collectively, the Borrowers), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a Term Loan Credit Agreement (the
Term Loan Credit Agreement) providing for a secured term loan facility (the Term Loan Facility) from JPP, LLC and JPP II, LLC, as lenders (collectively, the Initial Lenders), with JPP, LLC, serving as
administrative and collateral agent (the Agent). 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.
$100 million was borrowed from the Initial Lenders under the Term Loan Facility on January 4, 2018 and an
additional $30 million was borrowed from the Initial Lenders under the Term Loan Facility on January 19, 2018.
On January 29, 2018, the
Company, the Borrowers, the Initial Lenders, certain other lenders and the Agent entered into an Amendment to the Term Loan Credit Agreement (the Amendment), pursuant to which an additional $20 million was borrowed from the Initial
Lenders and a further $60 million was borrowed from certain unaffiliated lenders, bringing the total amount borrowed under the Term Loan Facility to date to $210 million. The Amendment, among other changes, separates the loans under the
Term Loan Facility into two tranches.
The Term Loan Facility is guaranteed by the Company and certain of its subsidiaries that guarantee the
Companys other material debt or own material intellectual property. The Term Loan Facility is secured by substantially all of the unencumbered intellectual property of the Company and its subsidiaries, other than intellectual property relating
to the Kenmore and DieHard brands, as well as by certain real property interests, in each case subject to certain exclusions.
The Term Loan Facility
contains an uncommitted incremental loan feature that, subject to the satisfaction of certain conditions, including the consent of the Agent, would permit up to an additional $90 million to be borrowed and secured by the same collateral as the
existing loan under the Term Loan Facility.
The loans under the Term Loan Facility bear interest at a weighted average annual interest rate of LIBOR plus
12.5%, which during the first year must be paid in kind by capitalizing interest. The loans under the Term Loan Facility mature on July 20, 2020. The Company expects to use the proceeds of the Term Loan Facility for general corporate purposes,
including the repayment of loans under its ABL credit facility.
No upfront or arrangement fees were paid in connection with the Term Loan Facility. The
loans under the Term Loan Facility are prepayable without premium or penalty.
The Term Loan Facility includes certain representations and warranties, indemnities and covenants, including with
respect to the condition and maintenance of the intellectual property and real property collateral. The Term Loan Facility 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 (including against the collateral), and require the Borrowers to pay a default interest rate.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Amendment, a copy of which is filed herewith as
Exhibit 10.1 and is incorporated by reference herein.