Item 1.01 Entry Into a Material Definitive Agreement
New Senior Secured Notes Indenture
In connection
with the consummation of the Exchange Offers, the Company, the guarantors party thereto and Computershare Trust Company, N.A., as trustee (the New Senior Secured Notes Trustee), entered into that certain Indenture (the New Senior
Secured Notes Indenture) pursuant to which the Company issued the New Senior Secured Notes.
The summary of the New Senior Secured Notes Indenture
set forth in Item 2.03 of this Current Report on Form
8-K
under the heading New Senior Secured Notes is incorporated by reference into this Item 1.01.
New Senior Unsecured Notes Supplemental Indenture
In connection with the consummation of the Exchange Offers, the Company and Computershare Trust Company, N.A., as trustee (the New Senior Unsecured Notes
Trustee) entered into that certain Second Supplemental Indenture (the New Senior Unsecured Notes Supplemental Indenture) to that certain Indenture, dated as of November 21, 2014, by and between the Company and the New Senior
Unsecured Notes Trustee, pursuant to which the Company issued the New Senior Unsecured Notes.
The summary of the New Senior Unsecured Notes Supplemental
Indenture set forth in Item 2.03 of this Current Report on Form
8-K
under the heading New Senior Unsecured Notes is incorporated by reference into this Item 1.01.
Old Senior Secured Notes Supplemental Indenture
In connection with the consummation of the Exchange Offers and the Consent Solicitation, the Company, the guarantors party thereto, and Wilmington Trust,
National Association, as successor Trustee and Collateral Agent (the Old Senior Secured Notes Trustee) entered into that certain Fifth Supplemental Indenture (the Old Senior Secured Notes Supplemental Indenture) supplementing
the Indenture, dated as of October 12, 2010 (as amended by the First Supplemental Indenture, dated as of April 5, 2011, the Second Supplemental Indenture, dated as of July 7, 2015, the Third Supplemental Indenture, dated as of
September 19, 2016 and the Fourth Supplemental Indenture, dated as of January 9, 2018, and as further amended, supplemented or modified, the Old Senior Secured Notes Indenture), by and among the Company, the guarantors party
thereto and the Old Senior Secured Notes Trustee. The Old Senior Secured Notes Supplemental Indenture, among other things, eliminates substantially all of the restrictive covenants and certain events of default previously contained in the Old Senior
Secured Notes Indenture. The foregoing summary of the Old Senior Secured Notes Supplemental Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the Old Senior Secured Notes Supplemental
Indenture, which is attached to this Current Report on Form
8-K
as Exhibit 4.1 and is incorporated by reference into this Item 1.01.
Amendment to Second Lien Term Loan
In connection
with the consummation of the Exchange Offers, the Company and the other parties thereto entered into that certain Fourth Amendment (the Second Lien Credit Agreement Amendment) to that certain Second Lien Credit Agreement (as previously
amended, amended and restated, supplemented or otherwise modified, the Second Lien Credit Agreement), dated as of September 1, 2016, among the Company, Sears Roebuck Acceptance Corp. (SRAC) and Kmart Corporation, as
borrowers (the Borrowers), the lenders party thereto, and JPP, LLC (JPP), as administrative agent and collateral administrator. The Second Lien Credit Agreement Amendment provides that interest on the $300.0 million
principal amount term loan (the Second Lien Term Loan) outstanding under the Second Lien Credit Agreement may, at the Borrowers option, be paid by increasing the principal amount of the Second Lien Term Loan, and that the
Companys obligations with respect to such Second Lien Term Loan (i) may be converted into shares of common stock, par value $0.01, of the Company (Common Stock) at the option of the lenders at a conversion rate of 200 shares
of Common Stock per $1,000 in principal amount of indebtedness outstanding under the Second Lien Term Loan (subject to adjustment as set forth in the Second Lien Credit Agreement Amendment) (the Term Loan Conversion Price) and
(ii) are mandatorily convertible into Common Stock at the option of the Company at the Term Loan Conversion Price within 30 days following the end of any period of 30 consecutive trading days, ending on or after July 2, 2018, during which
the volume weighted average trading price of Common Stock on the NASDAQ exceeds $10.00 for a period of 20 trading days.
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. The foregoing summary of the Second Lien Credit Agreement Amendment does not purport to be complete and is qualified in its entirety by reference to the
full text of the Second Lien Credit Agreement Amendment, which is attached to this Current Report on Form
8-K
as Exhibit 10.1 and is incorporated by reference into this Item 1.01.
Amendment & Restatement of Security Agreement
In connection with the consummation of the Exchange Offers, the Company entered into the Amended and Restated Security Agreement (the Amended and
Restated Security Agreement) among the Company, certain of its subsidiaries party thereto, and Wilmington Trust, National Association, as Collateral Agent, amending and restating that certain Security Agreement, dated as of October 12,
2010 (as previously amended, restated, amended and restated, supplemented or otherwise modified from time to time), to, among other things, make certain amendments thereto in connection with the consummation of the Exchange Offers and the
transactions contemplated thereby, including making the liens securing senior second lien obligations, including the New Senior Secured Notes and the Second Lien Credit Agreement, effectively senior to the liens securing the Old Senior Secured
Notes.
The foregoing description of the Amended and Restated Security Agreement does not purport to be complete and is qualified in its entirety by
reference to the Amended and Restated Security Agreement, which is attached to this Current Report on Form
8-K
as Exhibit 10.2 and is incorporated by reference into this Item 1.01.
Amendment & Restatement of Intercreditor Agreement
In connection with the consummation of the Exchange Offers, Bank of America, N.A. and Wells Fargo Bank, National Association, as ABL Agents, and Wilmington
Trust, National Association, as Second Lien Agent, entered into the Second Amended and Restated Intercreditor Agreement (the Second Amended and Restated Intercreditor Agreement) amending and restating that certain Amended and Restated
Intercreditor Agreement, dated as of September 1, 2016 (as previously amended, restated, amended and restated, supplemented or otherwise modified from time to time), to, among other things, make certain amendments thereto in connection with the
consummation of the Exchange Offers and the transactions contemplated thereby.
The foregoing description of the Second Amended and Restated Intercreditor
Agreement does not purport to be complete and is qualified in its entirety by reference to the Second Amended and Restated Intercreditor Agreement, which is attached to this Current Report on Form
8-K
as
Exhibit 10.3 and is incorporated by reference into this Item 1.01.
Amendments to ABL Credit Agreement and FILO Loan
On March 21, 2018, the Company, through the Borrowers, entered into a fifth amendment (the Fifth Amendment) and a sixth amendment (the
Sixth Amendment) to the Third Amended and Restated Credit Agreement, dated as of July 21, 2015 (as in effect prior to the Fifth Amendment, the Credit Agreement, and the Credit Agreement, as amended by the Fifth Amendment
and the Sixth Amendment, the Amended Credit Agreement), pursuant to which the Borrowers borrowed a $125 million first-in, last-out term loan (the FILO Loan) and made certain other changes to the Credit
Agreement.
The FILO Loan matures on July 20, 2020. The FILO Loan bears interest at a rate per annum equal to the Eurodollar Rate plus a margin of
8.50% (subject to a floor of 1.50%) (or a base rate plus a margin of 7.50%). The Borrowers are required to pay an early repayment premium of the greater of a make-whole through eight months and 3.00% in the event the FILO Loan is repaid within the
first year, and 2.00% in the event the FILO Loan is repaid within the second year. The FILO Loan is guaranteed by the same guarantors and secured by the same assets as the existing loans under the Credit Agreement, but ranks junior in right of
recovery from the collateral relative to such existing loans. The Company paid a fee of 2.25% of the FILO Loan to the initial lenders of the FILO Loan.
The initial lenders of the FILO Loan include JPP, LLC, JPP II, LLC and Benefit Street 2018 LLC. 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. Benefit Street 2018 LLC is an entity affiliated with Mr. Thomas J. Tisch, a director of the
Company.
The foregoing description of the Fifth Amendment, the Sixth Amendment and the FILO Loan does not purport to be complete and is qualified in its
entirety by reference to the Fifth Amendment, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.4 and is incorporated by reference into this Item 1.01, and the Sixth Amendment, a copy of which is attached to this Current
Report on Form 8-K as Exhibit 10.5 and is incorporated by reference into this Item 1.01.