Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance
Sheet Arrangement of a Registrant.
On October 18, 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., Troy Coolidge
No. 13, LLC, Sears Development Co. and Big Beaver of Florida Development, LLC (collectively, Borrowers), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a Second Amended and Restated Loan
Agreement (the Second Amended and Restated Loan Agreement), which amended and restated its Amended and Restated Loan Agreement, dated as of October 4, 2017, with JPP, LLC and JPP II, LLC (collectively, the Lenders). On
October 4, 2017, pursuant to the Amended and Restated Loan Agreement, the Borrowers borrowed $100 million (the Initial Incremental Loan) from the Lenders. On October 18, 2017, pursuant to the Second Amended and Restated
Loan Agreement, the Borrowers borrowed an additional $40 million (the Second Incremental Loan) from the Lenders. After giving effect to the Second Incremental Loan, the aggregate principal amount outstanding under the Second Amended
and Restated Loan Agreement was $524.1 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 $60 million may be drawn by the Company prior to November 17, 2017
(the Additional Incremental Loan; and the Additional Incremental Loan, if any, together with the Initial Incremental Loan and the Second Incremental Loan, the Incremental Loans). The Incremental Loans will all mature on the
earlier of May 17, 2018 and 181 days following the date on which an Additional Incremental Loan is made. The remainder of the loans under the Second 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 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 Second Amended and Restated Loan Agreement, the Second Incremental Loan is guaranteed by the
Company. The loans under the Second Amended and Restated Loan Agreement are currently secured by 66 real properties owned by the Borrowers.
The Second 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 Second 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 Second 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 Second 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 Second Amended and Restated Loan Agreement does not purport to be complete and is qualified in its
entirety by reference to the Second Amended and Restated Loan Agreement, a copy of which is filed herewith as Exhibit 10.1 and is incorporated by reference herein.