10-K

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended February 3, 2018

or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 000-51217, 001-36693

SEARS HOLDINGS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	20-1920798
(State of Incorporation)	(I.R.S. Employer Identification No.)
3333 Beverly Road, Hoffman Estates, Illinois	60179
(Address of principal executive offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (847) 286-2500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	The NASDAQ Stock Market
Warrants to Purchase Common Stock	The NASDAQ Stock Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ¨  No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ¨  No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such response) and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ¨  Accelerated filer    x   Non-accelerated filer (Do not check if a smaller reporting company)   ¨

Smaller reporting company    ¨ Emerging growth company    ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

On March 16, 2018, the registrant had 107,957,410 shares of common stock outstanding. The aggregate market value (based on the closing price of the Registrant's common stock for stocks quoted on the NASDAQ Global Select Market) of shares of the Registrant's common stock owned by non-affiliates as of the last business day of the Registrant's most recently completed second fiscal quarter, was approximately $200 million.

Documents Incorporated By Reference

Part III of this Form 10-K incorporates by reference certain information from the Registrant’s definitive proxy statement relating to our Annual Meeting of Stockholders to be held on May 9, 2018 (the "2018 Proxy Statement"), which will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Form 10-K relates.

PART I

Item  1. Business

General

Sears Holdings Corporation ("Holdings") is the parent company of Kmart Holding Corporation ("Kmart") and Sears, Roebuck and Co. ("Sears"). Holdings (together with its subsidiaries, "we," "us," "our," or the "Company") was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the "Merger") on March 24, 2005. We are an integrated retailer with significant physical and intangible assets, as well as virtual capabilities enabled through technology. At February 3, 2018, we operated a national network of stores with 1,002 full-line and specialty retail stores in the United States operating through Kmart and Sears. Further, we operate a number of websites under the sears.com and kmart.com banners which offer millions of products and provide the capability for our members and customers to engage in cross-channel transactions such as free store pickup; buy in store/ship to home; and buy online, return in store.

We are also the home of Shop Your Way^®, a free membership program that connects its members to personalized products, programs and partners that help them save time and money every day. Through an extensive network of national and local partners, members can shop thousands of their favorite brands, dine out and access an array of exclusive partners like Uber^® and fuboTV^® to earn CASHBACK in points to redeem for savings on future purchases at Sears, Kmart, Lands' End and at ShopYourWay.com. The Sears MasterCard with Shop Your Way^® features an industry-leading 5-3-2-1 rewards offer, where members can earn rewards points on all purchases everywhere they shop.

The Company is a leading home appliance retailer, as well as a leader in tools, lawn and garden, fitness equipment, automotive repair and maintenance, and is a significant player in the rapidly emerging connected solutions market. We offer key proprietary brands including Kenmore^® and DieHard^®, as well as Craftsman^® branded product offerings. Our Kenmore and DieHard brands are also now available on Amazon.com. We also maintain a broad apparel and home offering including such well-known labels as Jaclyn Smith^®, Joe Boxer^®, Route 66^®, Cannon^®, Adam Levine^® and Levi's^® and also offer Lands' End^® merchandise in some of our Full-line stores. We are the nation's No. 1 provider of appliance and product repair services, with over five million service calls made annually.

The retail industry is changing rapidly. The progression of the Internet, mobile technology, social networking and social media is fundamentally reshaping the way we interact with our core customers and members. As a result, we are transitioning to a member-centric company. Our focus continues to be on our core customers, our members, and finding ways to provide them value and convenience through Integrated Retail and our Shop Your Way membership platform. We have invested significantly in our membership program, our online ecommerce platforms and the technology needed to support these initiatives.

Business Segments

We operate in two reportable segments, Kmart and Sears Domestic. Financial information, including revenues, operating loss, total assets and capital expenditures for each of these business segments is contained in Note 17 of Notes to Consolidated Financial Statements. Information regarding the components of revenue for Holdings is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations as well as Note 17 of Notes to Consolidated Financial Statements.

Kmart

At February 3, 2018, the Company operated a total of 432 Kmart stores across 47 states, Guam, Puerto Rico and the U.S. Virgin Islands. This store count consists of 431 discount stores, averaging 94,000 square feet, and one Super Center, approximately 185,000 square feet. Most Kmart stores are one-floor, free-standing units that carry a wide array of products across many merchandise categories, including consumer electronics, seasonal merchandise, outdoor living, toys, lawn and garden equipment, food and consumables and apparel, including products sold under such well-known labels as Craftsman, Jaclyn Smith, Adam Levine, Joe Boxer, Basic Editions and certain proprietary Sears branded products (such as Kenmore and DieHard) and services. We also offer an assortment of major

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appliances, including Kenmore-branded products, in all of our locations. There are 183 Kmart stores that also operate in-store pharmacies. The Super Center combines a full-service grocery along with the merchandise selection of a discount store. There are also three Sears Auto Centers operating in Kmart stores, offering a variety of professional automotive repair and maintenance services, as well as a full assortment of automotive accessories. Kmart offers a layaway program, which allows members and customers to cost-effectively finance their purchases both in-store and online. In addition, our members and customers have the ability to buy online and pick up in store via mygofer.com, kmart.com or shopyourway.com. Kmart also sells its products through its kmart.com website and provides members and customers enhanced cross-channel options such as buying through a mobile app or online and picking up merchandise in one of our Kmart or Sears Full-line stores.

Sears Domestic

At February 3, 2018, Sears Domestic operations consisted of the following:

• Full-line Stores—547 stores located across 49 states and Puerto Rico, primarily mall-based locations averaging 159,000 square feet. Full-line stores offer a wide array of products and service offerings across many merchandise categories, including appliances, consumer electronics/connected solutions, tools, sporting goods, outdoor living, lawn and garden equipment, certain automotive services and products, such as tires and batteries, home fashion products, as well as apparel, footwear, jewelry and accessories for the whole family. Our product offerings include our proprietary Kenmore, DieHard, WallyHome, Bongo, Covington, Simply Styled, Everlast, Metaphor, Roebuck & Co., Outdoor Life and Structure brand merchandise, and other brand merchandise such as Craftsman, Roadhandler and Levi's. Lands' End, Inc. continues to operate 151 "store within a store" departments inside Sears Domestic Full-line locations. We also have 423 Sears Auto Centers operating in association with Full-line stores. In addition, there are 19 free-standing Auto Centers that operate independently of Full-line stores. Sears extends the availability of its product selection through the use of its sears.com and shopyourway.com websites, which offer an assortment of home, apparel and accessory merchandise and provide members and customers the option of buying through a mobile app or online and picking up their merchandise in one of our Sears Full-line or Kmart stores.

• Specialty Stores—23 specialty stores (primarily consisting of the 19 free-standing Auto Centers noted above) located in free-standing, off-mall locations or high-traffic neighborhood shopping centers, including three DieHard Auto Centers - two in Detroit and one in San Antonio. Specialty stores also include Sears Appliances and Mattresses stores in Ft. Collins, Colorado, Camp Hill, Pennsylvania, Pharr, Texas and Honolulu, Hawaii.

• Commercial Sales—We sell Kenmore appliances to home builders and property managers through Kenmore Direct, the business-to-business sales organization of KCD Brands. Kenmore Direct operates using a number of sales channels including an Amazon Business sales account. We also sell a wide assortment of appliance brands including luxury brands, parts and services to builders, developers, designers, among other commercial and residential customers through Monark Premium Appliance Co., which includes California Builder Appliances, Inc. (d/b/a Monark Premium Appliance Co. of California), Florida Builder Appliances, Inc.  (d/b/a Monark Premium Appliance Co.) and Starwest, LLC. (d/b/a Monark Premium Appliance Co. of Arizona).

• Home Services—Product Repair Services, the nation's No. 1 provider of appliance and product repair services, is a key element in our active relationship with nearly 30 million households. With approximately 5,200 service technicians making over five million service calls annually, this business delivers a broad range of retail-related residential and commercial services across all 50 states, Puerto Rico, Guam and the Virgin Islands under either the Sears Parts & Repair Services or A&E Factory Service trade names. Commercial and residential customers can obtain parts and repair services for all major brands of products within the appliances, lawn and garden equipment, consumer electronics, floor care products, and heating and cooling systems categories. We also provide repair parts with supporting instructions for "do-it-yourself" members and customers through our searspartsdirect.com website. This business also offers protection agreements, home warranties and Kenmore and Carrier brand residential heating and cooling systems. Home Services also includes home improvement services (primarily siding, windows, cabinet refacing, kitchen remodeling, roofing, carpet and upholstery cleaning, air duct

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cleaning, and garage door installation and repair) provided through Sears Home Improvement and Sears Home & Business Franchises.

• Delivery and Installation—Provides both home delivery and retail installation services for Holdings' retail operations with over three million deliveries and installation calls made annually. Also includes Innovel Solutions, which provides delivery services for third party customers.

Real Estate Transactions

In the normal course of business, we consider opportunities to purchase leased operating properties, as well as offers to sell owned, or assign leased, operating and non-operating properties. These transactions may, individually or in the aggregate, result in material proceeds or outlays of cash. In addition, we review leases that will expire in the short term in order to determine the appropriate action to take.

Further information concerning our real estate transactions is contained in Note 11 of Notes to Consolidated Financial Statements.

Trademarks and Trade Names

The KMART^® and SEARS^® trade names, service marks and trademarks, used by us both in the United States and internationally, are material to our retail and other related businesses.

We sell proprietary branded merchandise under a number of brand names that are important to our operations. Our KENMORE^® and DIEHARD^® brands are among the most recognized proprietary brands in retailing. These marks are the subject of numerous United States and foreign trademark registrations. Other well recognized Company trademarks and service marks include ATHLETECH^®, BLUELIGHT^®, COVINGTON^®, ROEBUCK & CO.^®, SHOP YOUR WAY^®, SMART SENSE^®, STRUCTURE^®, THOM MCAN^®, and WALLY^®, which also are registered or are the subject of pending registration applications in the United States. Generally, our rights in our trade names and marks continue so long as we use them.

Seasonality

The retail business is seasonal in nature, and we generate a high proportion of our revenues, operating income and operating cash flows during the fourth quarter of our year, which includes the holiday season. As a result, our overall profitability is heavily impacted by our fourth quarter operating results. Additionally, in preparation for the fourth quarter holiday season, we significantly increase our merchandise inventory levels, which are financed from operating cash flows, credit terms received from vendors and borrowings under our domestic credit agreement (described in the "Uses and Sources of Liquidity" section below). Fourth quarter reported revenues accounted for approximately 26% of total reported revenues in 2017, 27% of total reported revenues in 2016 and 29% of total reported revenues in 2015. See Note 19 of Notes to Consolidated Financial Statements for further information on revenues earned by quarter in 2017 and 2016.

Competition

Our business is subject to highly competitive conditions. We compete with a wide variety of retailers, including other department stores, discounters, home improvement stores, consumer electronics dealers, auto service providers, specialty retailers, wholesale clubs, as well as many other retailers operating on a national, regional or local level in the United States. Online and catalog businesses, which handle similar lines of merchandise, also compete with us. Walmart, Target, Kohl's, J.C. Penney, Macy's, The Home Depot, Lowe's, Best Buy and Amazon are some of the national retailers and businesses with which we compete. The Home Depot and Lowe's are major competitors in relation to our home appliance business, which accounted for approximately 16% of our 2017, 15% of our 2016 and 15% of our 2015 reported revenues. Success in these competitive marketplaces is based on factors such as price, product assortment and quality, service and convenience, including availability of retail-related services such as access to credit, product delivery, repair and installation. Additionally, we are influenced by a number of factors, including, but not limited to, the cost of goods, consumer debt availability and buying patterns, economic conditions, customer preferences, inflation, currency exchange fluctuations, weather patterns, and

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catastrophic events. Item 1A in this Annual Report on Form 10-K contains further information regarding risks to our business.

Employees

At February 3, 2018, subsidiaries of Holdings had approximately 89,000 employees in the United States and U.S. territories. This employee count includes part-time employees.

Our Website; Availability of SEC Reports and Other Information

Our corporate website is located at searsholdings.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports are available, free of charge, through the "SEC Filings" portion of the Investors Home section of our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC").

The Corporate Governance Guidelines of our Board of Directors, the charters of the Audit, Compensation and Nominating and Corporate Governance Committees of the Board of Directors, our Code of Conduct and the Board of Directors Code of Conduct are available in the "Corporate Governance" portion of the Investors Home section of searsholdings.com. References to our website address do not constitute incorporation by reference of the information contained on such website, and the information contained on the website is not part of this document.

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Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described below, which could adversely affect our business, results of operations and financial condition.

We cannot predict whether our plans to enhance our financial flexibility and liquidity to fund our transformation will be successful.

We are continuing to pursue a transformation strategy and to explore potential initiatives to enhance our financial flexibility and liquidity. We have incurred significant losses and experienced negative operating cash flows for the past several years, and accordingly we have taken a number of actions to fund our continued transformation and meet our obligations, including: the amendment and extension of our revolving credit facility; the extension of our first lien term loan facility from June 2018 to January 2019 (with a right on our part to further extend such maturity, subject to the satisfaction of certain conditions, to July 2019); the entrance into the first lien term loan facility due 2020, the second lien term loan facility due 2020 and the second lien line of credit loan facility due 2020, the amendment of the senior secured letter of credit facility; the extension of our real estate term loan facility from July 2017 to July 2018; the entrance into the real estate term loan facility due 2020, the incremental real estate term loan facility due 2018 and the intellectual property/ground lease term loan facility due 2020; the private exchange offers relating to our senior secured notes and senior unsecured notes, the negotiated exchanges of other indebtedness; the entrance into the REMIC real estate term loan facility due December 2018 and the REMIC mezzanine loan facility due 2020; the sale of the Craftsman brand; the rights offering and sale-leaseback transaction with Seritage Growth Properties; the separation of our Lands' End subsidiary; the Sears Canada rights offering; the rights offering for senior unsecured notes with warrants; and various real estate transactions. As a result, we are, and we expect to continue to be, highly leveraged. We expect to pursue other near-term actions to bolster liquidity. If we continue to incur losses, additional actions may be required to further enhance our financial flexibility and liquidity. The success of our initiatives is subject to risks and uncertainties with respect to market conditions and other factors that may cause our actual results, performance or achievements to differ materially from our plans. We cannot assure that cash flows and other internal and external sources of liquidity will at all times be sufficient for our cash requirements. If necessary, we may need to consider further actions and steps to improve our cash position, mitigate any potential liquidity shortfall, pursue additional sources of liquidity, and reduce costs. There can be no assurance that these actions would be successful. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, there can be no assurance that the evaluation and/or completion of any potential transactions will not have a negative impact on our other businesses.

We cannot predict the outcome of any actions to generate liquidity, whether such actions would generate the expected liquidity as currently planned, or the availability of additional debt financing. The specific actions taken or assets involved, the timing, and the overall amount will depend on a variety of factors, including market conditions, interest in specific assets, valuations of those assets and our underlying operating performance.

If we continue to experience operating losses and we are not able to generate additional liquidity through the mechanisms described above or through some combination of other actions, including real estate or other asset sales, while not expected, then our liquidity needs may exceed availability under our Amended Domestic Credit Agreement, our second lien line of credit loan facility and our other existing facilities, and we might need to secure additional sources of funds, which may or may not be available to us. If we are unable to secure such additional funds, we may not be able to meet our obligations as they become due. Additionally, a failure to generate additional liquidity could negatively impact our access to inventory or services that are important to the operation of our business.

Certain factors, including changes in market conditions and our credit ratings, may continue to limit our access to capital markets and other financing sources and materially increase our borrowing costs.

In addition to credit terms from vendors, our liquidity needs are funded by our operating cash flows and borrowings under our credit agreements and commercial paper program, asset sales and access to capital markets. The availability of financing depends on numerous factors, including economic and market conditions, our operating performance, our credit ratings, and lenders' assessments of our prospects and the prospects of the retail industry in

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general. Changes in these factors may affect our cost of financing, liquidity and our ability to access financing sources, including our commercial paper program and possible second lien indebtedness that is permitted under the domestic revolving credit facility, with respect to each of which we have no lender commitments. Rating agencies revise their ratings for the companies that they follow from time to time. Several ratings agencies have previously downgraded the credit rating on certain of our outstanding debt instruments and may further downgrade or otherwise revise such ratings in the future. In addition, our ratings may be withdrawn in their entirety at any time.

The Company's domestic credit facility currently provides up to $2.5 billion of lender commitments, $1.5 billion of which are revolving commitments. Our ability to borrow funds under this facility is limited by a borrowing base determined by the value, from time to time, of eligible inventory and certain accounts receivable. The value of these eligible assets has not always been sufficient to support borrowings of up to the full amount of the commitments under this facility, and we have not always had full access to the facility, but rather have had access to a lesser amount determined by the borrowing base. A decline in the value of eligible assets has also resulted in our inability to borrow up to the full amount of second lien indebtedness permitted by the domestic credit facility as our second-lien borrowings are limited by a borrowing base requirement under the indenture that governs our senior secured notes due 2018. The domestic revolving credit facility imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement. The domestic credit facility also effectively limits full access to the facility if our fixed charge ratio at the last day of any fiscal month is less than 1.0 to 1.0. As of February 3, 2018, our fixed charge ratio continues to be less than 1.0 to 1.0. If availability under the domestic revolving credit facility were to fall below 10%, the Company would be required to test the fixed charge coverage ratio, and would not comply with the facility, and the lenders under the facility could demand immediate payment in full of all amounts outstanding and terminate their obligations under the facility. In addition, the domestic credit facility provides that in the event we make certain prepayments of indebtedness, for a period of one year thereafter we must maintain availability under the facility of at least 12.5%, and it prohibits certain other prepayments of indebtedness. Moreover, if the borrowing base (as calculated pursuant to the indenture relating to our 6 5/8% senior secured notes due 2019, which were issued in March 2018 (the "New Senior Secured Notes")) falls below the principal amount of the New Senior Secured Notes plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for the New Senior Secured Notes on the last day of any two consecutive quarters beginning with the second quarter of our 2018 fiscal year, it could trigger an obligation to offer to repurchase all outstanding New Senior Secured Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest.

The lenders under our various credit facilities may not be able to meet their commitments if they experience shortages of capital and liquidity. Disruptions or turmoil in the financial markets could reduce our ability to meet our capital requirements. There can be no assurance that our ability to otherwise access the credit markets will not be adversely affected by changes in the financial markets and the global economy.

Our business results and ability to fund our transformation depend on our ability to achieve cost savings initiatives and complete our previously announced restructuring program.

In 2017, we initiated a restructuring program targeted to deliver at least $1.25 billion in annualized cost savings. Under the restructuring program, we reduced our corporate overhead, more closely integrated our Sears and Kmart operations and improved our merchandising, supply chain and inventory management. The savings also included cost reductions resulting from the closure of 303 Kmart and 132 Sears stores. In January 2018, we identified an additional $200 million of cost savings, unrelated to store closings. However, if we are unable to deliver the additional cost reductions, while continuing to invest in business growth, our financial results could be adversely impacted. Our ability to successfully manage and execute these initiatives and realize expected savings and benefits in the amounts and at the times anticipated is important to our business success, and any failure to do so, which could result from our inability to successfully execute plans, changes in global or regional economic conditions, competition, changes in the industries in which we compete, unanticipated costs or charges and other factors described herein, could adversely affect our business, financial condition and results of operations. As part of our overhead reduction, we have reduced our corporate and operations headcount, including management level, distribution and field employees. These reductions, as well as employee attrition, could result in the potential loss of specific knowledge relating to our company, operations and industry that could be difficult to replace. Also, we now operate with fewer employees, who have assumed additional duties and responsibilities. The restructuring program and workforce changes may negatively impact communication, morale, management cohesiveness and effective

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decision-making, which could have an adverse impact on our business operations, customer experience, sales and results of operations.

The lack of willingness of our vendors to do business with us or to provide acceptable payment terms could negatively impact our liquidity and/or reduce the availability of products or services we seek to procure.

We depend on our vendors to provide us with financing on our purchases of inventory and services. From time to time, certain of our vendors have sought to limit the availability of vendor credit to us or to modify the other terms under which they sell to us, or both, which has negatively impacted our liquidity. In addition, the inability of vendors to access liquidity, or the insolvency of vendors, could lead to their failure to deliver inventory or other services. Certain of our vendors finance their operations and/or reduce the risk associated with collecting accounts receivable from us by selling or "factoring" the receivables or by purchasing credit insurance or other forms of protection from loss associated with our credit risks. The ability of our vendors to do so is subject to the perceived credit quality of the Company. Such vendors could be limited in their ability to factor receivables or obtain credit protection in the future because of our perceived financial position and creditworthiness, which could reduce the availability of products or services we seek to procure, increase the cost to us of those products and services, or both.

We have ongoing discussions concerning our liquidity and financial position with the vendor community and third parties that offer various credit protection services to our vendors. The topics discussed have included such areas as pricing, payment terms and ongoing business arrangements. As of the date of this report, we have not experienced any significant disruption in our access to merchandise or our operations due to vendors slowing or ceasing merchandise shipments or requiring or conditioning the sale or shipment of merchandise on new payment terms or other assurances. However, there can be no assurances that there will not be a future disruption, and such circumstances could have a negative effect on our business, financial condition and results of operations.

If we are unable to compete effectively in the highly competitive retail industry, our business and results of operations could be materially adversely affected.

The retail industry is highly competitive with few barriers to entry. We compete with a wide variety of retailers, including other department stores, discounters, home improvement stores, appliances and consumer electronics retailers, auto service providers, specialty retailers, wholesale clubs, online and catalog retailers and many other competitors operating on a national, regional or local level. Some of our competitors are actively engaged in new store expansion or increasing their online presence. Online and catalog businesses, which handle similar lines of merchandise, and some of which are not required to collect sales taxes on purchases made by their customers, also compete with us. Competition may intensify as competitors enter into business combinations or alliances. We also experience significant competition from promotional activities of our competitors, and some competitors may be able to devote greater resources to sourcing, promoting and selling their products. In this competitive marketplace, success is based on factors such as price, advertising, product assortment, quality, service, reputation and convenience.

Our success depends on our ability to differentiate ourselves from our competitors with respect to shopping convenience, a quality assortment of available merchandise, functionality of digital channels, and superior customer service and experience. We must also successfully respond to our members' and customers' changing tastes and expectations. The performance of our competitors, as well as changes in their pricing policies, marketing activities, new store openings, online presence, use of purchasing data and other business strategies, could have a material adverse effect on our business, financial condition and results of operations.

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If we fail to offer merchandise and services that our members and customers want, our sales may be limited, which would reduce our revenues and profits.

In order for our business to be successful, we must identify, obtain supplies of, and offer to our members and customers, attractive, innovative and high-quality merchandise. Our products and services must satisfy the desires of our members and customers, whose preferences may change in the future. Our sales and operating results depend in part on our ability to predict consumer demand for products and services we sell, availability of merchandise, product trends, and our members' and customers' purchasing habits, tastes and preferences. If we misjudge these predictions, our relationship with our members and customers may be negatively impacted, and we may be faced with excess inventories of some products, which may impact our sales or require us to sell the merchandise we have obtained at lower prices, and missed opportunities for products and services we chose not to offer. In addition, merchandise misjudgments may adversely impact the perception or reputation of our company, which could result in declines in member and customer loyalty and vendor relationships. These factors could have a negative effect on our business, financial condition and results of operations.

If our integrated retail strategy to transform into a member-centric retailer is not successful, our business and results of operations could be adversely affected.

We are seeking to transform into a member-centric retailer through our integrated retail strategy, which is based on a number of initiatives, including our Shop Your Way program, that depend on, among other things, our ability to respond quickly to ongoing technology developments and implement new ways to understand and rely on the data to interact with our members and customers and our ability to provide attractive, convenient and consistent online and mobile experiences for our members. We must anticipate and meet our members' and customers' evolving expectations, while counteracting developments by our competitors and striving to deliver a seamless experience across all of our sales channels. We may need to adjust our strategic initiatives depending on our members' and customers' reactions to and level of engagement with our initiatives. Failure to execute these initiatives or provide our members with positive experiences may result in a loss of active members, failure to attract new members and lower than anticipated sales. There is no assurance that our initiatives and strategies will improve our operating results.

If we do not successfully manage our inventory levels, our operating results will be adversely affected.

We must maintain sufficient inventory levels to operate our business successfully. However, we also must guard against accumulating excess inventory as we seek to minimize out-of-stock levels across all product categories and to maintain in-stock levels. We obtain a significant portion of our inventory from vendors located outside the United States. Some of these vendors require lengthy advance notice of our requirements in order to be able to supply products in the quantities we request. This usually requires us to order merchandise, and enter into purchase order contracts for the purchase and manufacture of such merchandise, well in advance of the time these products will be offered for sale. As a result, we may experience difficulty in responding quickly to a changing retail environment, which makes us vulnerable to changes in price and demand. If we do not accurately anticipate the future demand for a particular product or the time it will take to obtain new inventory, our inventory levels will not be appropriate and our results of operations may be negatively impacted.

Our business has been and will continue to be affected by worldwide economic conditions; an economic downturn, a renewed decline in consumer-spending levels and other conditions, including inflation and changing prices of energy, could lead to reduced revenues and gross margins, and negatively impact our liquidity.

Many economic and other factors are outside of our control, including consumer and commercial credit availability, consumer confidence and spending levels, as well as the impact of payroll tax and medical cost increases on U.S. consumers, recession, inflation, deflation, employment levels, housing sales and remodels, interest rates, tax rates, rates of economic growth, fiscal and monetary government policies, consumer debt levels, consumer debt payment behaviors, fuel costs and other challenges currently affecting the global economy, the full impact of which on our business, results of operations and financial condition cannot be predicted with certainty. These economic conditions adversely affect the disposable income levels of, and the credit available to, our members and customers, which could lead to reduced demand for our merchandise. Increases in fuel and energy costs may have a

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significant impact on our operations. We require significant quantities of fuel for the vehicles used by technicians in our home services business, and we are exposed to the risk associated with variations in the market price for petroleum products. We could experience a disruption in energy supplies, including our supply of gasoline, as a result of factors that are beyond our control, which could have an adverse effect on our business. Certain of our vendors also could experience increases in the cost of various raw materials, such as cotton, oil-related materials, steel and rubber, which could result in increases in the prices that we pay for merchandise, particularly apparel, appliances and tires. Domestic and international political events also affect consumer confidence. The threat, outbreak or escalation of terrorism, civil unrest, military conflicts or other hostilities could lead to a decrease in consumer spending. Any of these events and conditions could inhibit sales or cause us to increase inventory markdowns and promotional expenses, thereby reducing our gross margins.

Failure to execute effective advertising efforts may adversely impact our financial performance.

Effective advertising and marketing efforts play a crucial role in maintaining high customer traffic both in store and online. We are focused on developing new marketing initiatives and maintaining effective promotional strategies that target further growth in our business. Failure to execute effective advertising efforts to attract new customers or retain existing customers may adversely impact our financial performance.

Our business results may be negatively impacted as a result of the recapture rights included in the Master Leases in connection with the Seritage transaction and JV transactions.

In 2015, we entered into various sale-lease back transactions with respect to certain of our real properties with Seritage Growth Properties ("Seritage") and certain joint ventures we formed with affiliates of Simon Property Group, Inc., General Growth Properties, Inc. and the Macerich Company (collectively, the "JVs"). In connection with the Seritage transaction and JV transactions, Holdings entered into agreements with Seritage and the JVs pursuant to which Holdings leased 255 of the properties (the "Master Leases"). The Master Leases include recapture provisions that allow Seritage or the JVs, as applicable, to reclaim approximately 50% of the space within these properties (subject to certain exceptions, including reclamation rights as to 100% of the space at 21 properties, and further subject to a lease termination payment by Seritage), in addition to all of the automotive care centers which are free-standing or attached as "appendages," and all outparcels or outlots, as well as certain portions of parking areas and common areas. While we believe these provisions are generally beneficial for Holdings as they facilitate the transformation of our physical stores, potentially enable us to rationalize our footprint by reducing the space we occupy in a given location, and provide us with substantial flexibility in how we manage our store network moving forward, if we are unable to successfully manage and execute our plans to operate our stores in the smaller footprint, our business, financial condition and results of operations could be adversely impacted. Additionally, the recapture rights are within the control of Seritage and the JVs and we cannot predict the timing on which the recapture rights may be exercised, if at all, or whether the timing of any such exercise of these rights will align well with the timing of our transformation, which could create disruptions in our operations.

Potential liabilities in connection with the separations of Sears Hometown and Outlet Stores and Lands' End or other asset transactions may arise under fraudulent conveyance and transfer laws and legal capital requirements.

With respect to the separations of our Sears Hometown and Outlet Stores and Lands' End, Inc. subsidiaries, the sale of real estate assets to real estate investment trusts and other third parties, the sale of the Craftsman brand, and any future dispositions of other similar assets, if the Company, Lands' End, or any asset purchaser subsequently fails to pay its creditors or enters insolvency proceedings, the transaction may be challenged under U.S. federal, U.S. state and foreign fraudulent conveyance and transfer laws, as well as legal capital requirements governing distributions and similar transactions. If a court were to determine under these laws that, (a) at the time of the transaction, the entity in question: (1) was insolvent; (2) was rendered insolvent by reason of the transaction; (3) had remaining assets constituting unreasonably small capital; (4) intended to incur, or believed it would incur, debts beyond its ability to pay these debts as they matured; or (b) the transaction in question failed to satisfy applicable legal capital requirements, the court could determine that the transaction was voidable, in whole or in part. Subject to various defenses, the court could then require the Company, Lands' End, the respective purchaser, or other recipients of value in connection with any such transaction, as the case may be, to turn over value to other entities

10

involved in the transaction and contemplated transactions for the benefit of unpaid creditors. The measure of insolvency and applicable legal capital requirements will vary depending upon the jurisdiction whose law is being applied.

Certain dividend payments received by us from Sears Canada Inc., and other transactions involving Sears Canada Inc., may be subject to challenge.

In 2012 and 2013, we received dividend payments from our former subsidiary, Sears Canada Inc. ("Sears Canada") in the aggregate amount of $295 million. The payments of these dividends by Sears Canada, as well as "the surrender by Sears Canada of its exclusive right to use the Craftsman trademark in Canada in connection with the sale by Holdings of the Craftsman business to Stanley Black & Decker in March 2017," have been identified by the court-appointed monitor for Sears Canada in connection with its bankruptcy liquidation as potential "transactions of interest" subject to review. In addition, the Canadian bankruptcy court has appointed a litigation advisor to investigate and potentially recommend claims relating to dividend payments made by Sears Canada. In the event that a court of competent jurisdiction were to determine that any dividend payments made by, or other transactions involving, Sears Canada were subject to recapture, we could suffer financial liability, which could have a materially adverse impact on our liquidity or financial condition.

We rely extensively on computer systems to implement our integrated retail strategy, process transactions, summarize results and otherwise manage our business. Disruptions in these systems could harm our ability to run our business.

Given the significance of our online and mobile capabilities, our collection and use of data to create personalized experiences, and the number of individual transactions we have each year, including in our stores, it is critical that we maintain uninterrupted operation of our computer and communications hardware and software systems, some of which are based on end-of-life or legacy technology, operate with minimal or no vendor support and are otherwise difficult to maintain. Our systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, worms, other malicious computer programs, denial-of-service attacks, security breaches, catastrophic events such as fires, tornadoes, hurricanes, acts of terrorism and usage errors by our employees. If our systems are damaged, breached or cease to function properly, we may have to make a significant investment to repair or replace them, and we may suffer loss of critical data and interruptions or delays in our operations. Operating legacy systems subjects us to inherent costs and risks associated with maintaining, upgrading and replacing these systems and retaining sufficiently skilled personnel to maintain and operate the systems, demands on management time, and other risks and costs. Any material interruption in our computer operations may have a material adverse effect on our business or results of operations, including on our Shop Your Way program and participation in or engagement with that program. We are pursuing initiatives to transform our information technology processes and systems. These initiatives are highly complex and include replacing legacy systems, upgrading existing systems, and acquiring new systems and hardware with updated functionality. The risk of disruption is increased in periods when such complex and significant systems changes are undertaken.

If we do not maintain the security of our member and customer, associate or company information, we could damage our reputation, incur substantial additional costs and become subject to litigation.

The protection of member, customer, employee, and company data is critical to the Company. We have systems and processes in place that are designed to protect information and protect against security and data breaches as well as fraudulent transactions and other activities. Nevertheless, cyber-security risks such as malicious software and attempts to gain unauthorized access to data are rapidly evolving and becoming increasingly sophisticated. Techniques or software used to gain unauthorized access, and/or disable, degrade or harm our systems may be difficult to detect or scope for prolonged periods of time, and we may be unable to anticipate these techniques or put in place protective or preventive measures. These attempts to gain unauthorized access could lead to disruptions in our systems, unauthorized release of confidential or otherwise protected information or corruption of data. If individuals are successful in infiltrating, breaking into, disrupting, damaging or otherwise stealing from the computer systems of the Company or its third-party providers we may have to make a significant investment to fix or replace them, we may suffer interruptions in our operations in the interim, we may face costly litigation,

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government investigations, government enforcement actions, fines and/or lawsuits, the ability for our members to earn or redeem points in our Shop Your Way program may be impacted or halted, and our reputation with our members and customers may be significantly harmed. There is no guarantee that the procedures that we have implemented to protect against unauthorized access to secured data are adequate to safeguard against all data security breaches. A data security breach or any failure by us to comply with applicable privacy and information security laws and regulations could result in a loss of customer or member confidence and negatively impact our business, including our Shop Your Way program, and our results of operations. Moreover, a data security breach could require us to devote significant management resources to address the problems created by the breach and to expend significant additional resources to upgrade further the security measures that we employ to guard against such breaches, which could disrupt our business, operations and financial condition.

We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business operations.

As a retailer that accepts payments using a variety of methods, including credit and debit cards, PayPal, and gift cards, the Company is subject to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. The regulatory environment related to information security and privacy is increasingly rigorous, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs or accelerate these costs. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which could increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these services to us, or if their systems are compromised, it could disrupt our business.

The Payment Card Industry ("PCI") has established standards for securing payment card data through the PCI Data Security Standards ("DSS"). The Company is required to conduct an annual assessment with a PCI Qualified Security Assessor to assess compliance with the PCI DSS. Based on the 2016 assessment, the Company was determined to be non-compliant with PCI DSS. For 2017, we delivered 6 out of 7 compliant reports for PCI. The only outstanding report for automotive is to be delivered in the first quarter of 2018 as has been agreed upon with the relevant processor and card brands. While the Company took corrective actions which allowed it to regain compliance with PCI DSS, there can be no assurance that the Company will achieve compliance in the future. A failure to achieve compliance with PCI DSS could result in the incurrence of fines, penalties or other liabilities by the Company.

Due to the seasonality of our business, our annual operating results would be adversely affected to a heightened degree if our business performs poorly in the fourth quarter.

Due to the seasonality of our business, our operating results vary considerably from quarter to quarter. We generate a high proportion of revenues, operating income and operating cash flows during the fourth quarter of our year, which includes the holiday season. In addition, our Company incurs significant additional expenses for inventory, advertising and employees in the period leading up to the months of November and December in anticipation of higher sales volume in the fourth quarter. As a result, our fourth quarter operating results significantly impact our annual operating results. Our fourth quarter operating results may fluctuate significantly, based on many factors, including holiday spending patterns and weather conditions.

Our sales may fluctuate for a variety of reasons, which could adversely affect our results of operations.

Our business is sensitive to customers' spending patterns, which in turn are subject to prevailing economic conditions. Our sales and results of operations have fluctuated in the past, and we expect them to continue to fluctuate in the future. A variety of other factors affect our sales and financial performance, including:

• actions by our competitors, including opening of new stores in our existing markets or changes to the way these competitors go to market online;

• our ability to integrate and deliver an attractive online retail experience;

• seasonal fluctuations due to weather conditions;

• changes in our merchandise strategy and mix;

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• changes in population and other demographics; and

• timing of our promotional events.

Accordingly, our results for any one quarter are not necessarily indicative of the results to be expected for any other quarter, and comparable store sales for any particular future period may increase or decrease. For more information on our results of operations, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Annual Report on Form 10-K.

We rely on foreign sources for significant amounts of our merchandise, and our business may therefore be negatively affected by the risks associated with international trade.

We depend on a large number of products produced in foreign markets. We face risks, including reputational risks, associated with sourcing, purchasing, and the delivery of merchandise originating outside the United States, including:

• potential economic and political instability in countries where our suppliers are located;

• increases in shipping costs;

• manufacturing and transportation delays and interruptions, including without limitation, delays and interruptions resulting from labor slowdowns, strikes, or other disruptions at any port where merchandise we purchase enters the U.S.;

• the availability of raw materials to suppliers;

• supplier financial instability;

• supplier compliance with applicable laws, including labor and environmental laws, and with our global compliance program for suppliers and factories;

• merchandise safety and quality issues, adverse fluctuations in currency exchange rates; and

• changes in U.S. and foreign laws affecting the importation and taxation of goods, including duties, tariffs and quotas, or changes in the enforcement of those laws.

U.S. foreign trade policies, trade restrictions, other impositions on imported goods, trade sanctions imposed on certain countries, the limitation on the importation of certain types of goods or of goods containing certain materials from other countries, and other factors relating to foreign trade are beyond our control. These and other factors affecting our suppliers and our access to products could adversely affect our results of operations.

We rely on third parties to provide us with services in connection with the administration of certain aspects of our business.

We have entered into agreements with third-party service providers (both domestic and overseas) to provide processing and administrative functions over a broad range of areas, and we may continue to do so in the future. These areas include finance and accounting, information technology, including IT development, call center, human resources and procurement functions. Services provided by third parties could be interrupted as a result of many factors, such as acts of God or contract disputes, and any failure by third parties to provide us with these services on a timely basis or within our service level expectations and performance standards could result in a disruption of our business. In addition, to the extent we are unable to maintain our outsourcing arrangements, we could incur substantial costs, including costs associated with hiring new employees or finding an alternative outsourced solution. Moreover, the Company cannot make any assurances that it would be able to arrange for alternate or replacement outsourcing arrangements on terms as favorable as the Company’s existing agreements, if at all. Any inability on the part of the Company to do so could negatively affect our results of operations. These outsourcing arrangements also carry the risk that the Company will fail to adequately retain the significant internal historical knowledge of our business and systems that is transferred to the service providers as the employment of the Company's personnel who possess such knowledge ends.

We could incur charges due to impairment of goodwill, intangible and long-lived assets.

At February 3, 2018, we had goodwill and intangible asset balances of $1.4 billion, which are subject to periodic testing for impairment. Our long-lived assets, primarily stores, also are subject to periodic testing for impairment. A significant amount of judgment is involved in the periodic testing. Failure to achieve sufficient levels of cash flow within our reporting unit, or sales of our branded products or cash flow generated from operations at

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individual store locations could result in impairment charges for goodwill and intangible assets or fixed asset impairment for long-lived assets, which could have a material adverse effect on our reported results of operations. Impairment charges, if any, resulting from the periodic testing are non-cash. A significant decline in the property fair values could result in long-lived asset impairment charges. See Notes 12 and 13 of Notes to Consolidated Financial Statements for further information.

Our failure to attract or retain employees, including key personnel, may disrupt our business and adversely affect our financial results.

Our business is dependent on our ability to attract, develop, and retain qualified employees, many of whom are entry-level or part-time positions with historically high turnover rates. Our ability to meet our labor needs and control labor costs is subject to external factors such as unemployment levels, prevailing wage rates, collective bargaining efforts, health care and other benefit costs, changing demographics, and our reputation within the labor market. If we are unable to attract and retain adequate numbers and an appropriate mix of qualified employees, the quality of service we provide to our customers may decrease and our financial performance may be adversely affected. Further, we depend on the contributions of key personnel, including Edward S. Lampert, our Chairman and Chief Executive Officer, and other key employees, for our future success. Over the past several years, the departures of a number of our executive officers have caused disruptions to, and uncertainty in, our business and operations. Future changes in our senior management team or the departures of other key employees may further disrupt our business and materially adversely affect our results of operations.

Affiliates of our Chairman and Chief Executive Officer, whose interests may be different than your interests, exert substantial influence over our Company.

Affiliates of Edward S. Lampert, our Chairman and Chief Executive Officer, collectively own approximately 49% of the outstanding shares of our common stock at February 3, 2018. These affiliates are controlled, directly or indirectly, by Mr. Lampert. Accordingly, these affiliates, and thus Mr. Lampert, have substantial influence over many, if not all, actions to be taken or approved by our stockholders, including the election of directors and any transactions involving a change of control.

The interests of these affiliates, which have investments in other companies, including Seritage and our former subsidiaries, Sears Hometown and Outlet Stores, Inc., Lands' End, Inc. and Sears Canada, may from time to time diverge from the interests of our other stockholders, particularly with regard to new investment opportunities. This substantial influence may also have the effect of discouraging offers to acquire our Company because the consummation of any such acquisition would likely require the consent of these affiliates.

In addition, as of February 3, 2018, these affiliates collectively hold approximately $1.8 billion of our outstanding indebtedness. As long as these affiliates continue to hold significant amounts of our indebtedness, such affiliates’ interests may be different than those of our other stockholders and debtholders.

We may be unable to protect or preserve the image of our brands and our intellectual property rights, which could have a negative impact on our business.

We regard our copyrights, service marks, trademarks, trade dress, trade secrets, patents and similar intellectual property as critical to our success, particularly those that relate to our private branded merchandise. As such, we rely on trademark and copyright law, patent law, trade secret protection and confidentiality agreements with our associates, consultants, vendors, and others to protect our proprietary rights. Nevertheless, the steps we take to protect our proprietary rights may be inadequate. If we are unable to protect or preserve the value of our trademarks, copyrights, trade secrets, patents or other proprietary rights for any reason, or if we fail to maintain the image of our brands due to merchandise and service quality issues, actual or perceived, adverse publicity, governmental investigations or litigation, or other reasons, our brands and reputation could be damaged and we could lose members and customers.

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Our sales and operating results could be adversely affected by product safety concerns or claims concerning the services we offer.

If our merchandise offerings do not meet applicable safety standards or consumer expectations regarding safety, we could experience decreased sales, increased costs, and exposure to reputational risk and personal injury, death, or property damage claims related to such merchandise. Such matters may require us to take actions such as product recalls and could give rise to government enforcement actions. We also provide various services to our members and customers, which could also give rise to such claims and government actions. Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. Reputational damage caused by, and claims arising from, real or perceived product safety concerns or from the services we offer could negatively affect our business and results of operations.

We may be subject to periodic litigation and other regulatory proceedings. These proceedings may be affected by changes in laws and government regulations or changes in the enforcement thereof.

From time to time, we may be involved in lawsuits and regulatory actions relating to our business, certain of which may be in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. Some of these actions have the potential for significant statutory penalties, and compensatory, treble or punitive damages. Our pharmacy, home services and grocery businesses, in particular, are subject to numerous federal, state and local regulations, and a significant change in, or noncompliance with, these regulations could have a material adverse effect on our compliance costs and results of operations. We are impacted by trends in litigation, including class-action allegations brought under various consumer protection and employment laws, including wage and hour laws, patent infringement claims, and investigations and actions that are based on allegations of untimely compliance or noncompliance with applicable regulations or statutes. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have a material adverse impact on our business, financial condition, and results of operations. In addition, regardless of the outcome of any litigation or regulatory proceedings, these proceedings could result in substantial costs and may require that we devote substantial resources to defend our Company. Further, changes in governmental regulations both in the United States and in the other countries where we operate could have adverse effects on our business and subject us to additional regulatory actions. For a description of current legal proceedings, see Item 3, Legal Proceedings, as well as Note 18 of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

Our pension and postretirement benefit plan obligations are currently underfunded, and we may have to make significant cash payments to some or all of these plans, which would reduce the cash available for our businesses.

We have unfunded obligations under our domestic pension and postretirement benefit plans. The funded status of our pension plans is dependent upon many factors, including returns on invested assets, the level of certain market interest rates and the discount rate used to determine pension obligations. Unfavorable returns on the plan assets or unfavorable changes in applicable laws or regulations could materially change the timing and amount of required plan funding, which would reduce the cash available for our businesses. In addition, a decrease in the discount rate used to determine pension obligations could result in an increase in the valuation of pension obligations, which could affect the reported funding status of our pension plans and future contributions, as well as the periodic pension cost in subsequent years. Moreover, unfavorable regulatory action could materially change the timing and amount of required plan funding and negatively impact our business operations and impair our business strategy.

On March 18, 2016, we entered into a five-year pension plan protection and forbearance agreement (the “PPPFA”) with the Pension Benefit Guaranty Corporation ("PBGC"), pursuant to which the Company has agreed to continue to protect, or "ring-fence," pursuant to customary covenants, the assets of certain special purpose subsidiaries (the "Relevant Subsidiaries") holding real estate and/or intellectual property assets. Also under the agreement, the Relevant Subsidiaries granted PBGC a springing lien on the ring-fenced assets, which lien will be triggered only by (a) failure to make required contributions to the Company's pension plans (the "Plans"), (b)

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prohibited transfers of ownership interests in the Relevant Subsidiaries, (c) termination events with respect to the Plans, or (d) bankruptcy events with respect to the Company or certain of its material subsidiaries.

In connection with the closing of our sale of the Craftsman brand, we agreed to grant the PBGC a lien on, and subsequently contribute to the Plans, the value of the $250 million cash payment payable to the Company on the third anniversary of the Craftsman closing. We subsequently sold the right to receive such payment to a third-party purchaser and deposited the proceeds from such sale into an escrow for the benefit of the Plans. We also granted a lien to the PBGC on the 15-year income stream relating to new Stanley Black & Decker sales of Craftsman products, and agreed to contribute the payments from Stanley Black & Decker under such income stream to the Plans. We also agreed to grant the PBGC a lien on $100 million of real estate assets to secure the Company's minimum pension funding obligations through the end of 2019, and agreed to certain other amendments to the PPPFA.

In November 2017, we entered into an amendment to the PPPFA that allowed the Company to pursue the monetization of 138 of our properties that were subject to a ring-fence arrangement created under the PPPFA. In March 2018, the Company closed on the Secured Loan and the Mezzanine Loan, which transactions released the properties from the ring-fence arrangement. The Company contributed approximately $282 million of the proceeds of such loans to our pension plans, and deposited $125 million into an escrow for the benefit of the Plans. Under our agreement with the PBGC, the escrowed amount will also be contributed to the Plans and, when so contributed, will be fully credited against the Company’s minimum pension funding obligations in 2018 and 2019. Following such transactions, the Company has been relieved of contributions to the Plans for approximately two years (other than the contributions from escrow described above and a $20 million supplemental payment due in the second quarter of 2018). The ultimate amount of pension contributions could be affected by factors such as changes in applicable laws, as well as financial market and investment performance and demographic changes.

The Company will continue to make required contributions to the Plans, the scheduled amounts of which are not, other than as described above, affected by the arrangement. Under the PPPFA, the PBGC has agreed to forbear from initiating an involuntary termination of the Plans, except upon the occurrence of specified conditions, one of which is based on the aggregate market value of the Company’s issued and outstanding stock. As of the date of this report, the Company’s stock price is such that the PBGC would be permitted to cease forbearance. The PBGC has been given notice in accordance with the terms of the PPPFA and has not communicated any intention to cease its forbearance; however, if the PBGC were to initiate an involuntary termination of the Plans, our financial condition could be materially and adversely affected.

We may not realize the full anticipated benefits of the Craftsman sale transaction.

We may not realize the full anticipated benefits of the Craftsman sale transaction (the "Craftsman Sale"), in which case our business, financial results or operations could be adversely affected. Under the terms of our Acquired IP License Agreement with Stanley Black & Decker, we have the right to continue to use the Licensed IP (as defined in such agreement) and sell Craftsman-branded products in certain distribution channels. If the license is terminated, or if the terms of the license agreement are otherwise modified, we may not be able to continue to market, procure or sell Craftsman-branded products on favorable terms or at all, and our business may be adversely affected.

Our failure to comply with federal, state, local and international laws, or changes in these laws could adversely affect our results of operations.

Our business is subject to a wide array of laws and regulations. If we fail to comply with applicable laws and regulations, we could be subject to legal risk, including government enforcement action and class action civil litigation that could increase our cost of doing business. Changes in the regulatory environment regarding topics such as privacy and information security, product safety, environmental protection, payment methods and related fees, responsible sourcing, supply chain transparency, wage and hour laws, health care mandates and other applicable laws and regulations could also cause our compliance costs to increase and adversely affect our results of operations.

Our performance could further be impacted by changes in legislation, trade policies and agreements, energy and environmental standards, and tax laws and regulations. The current U.S. Administration has signaled that it may alter trade agreements and terms with foreign countries, and recently limited trade by announcing upcoming tariffs

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on imported steel and aluminum and imposing tariffs and quotas on imports of residential washers from certain foreign countries. These restrictions and tariffs, as well as future additional tariffs and/or quotas, on products that we import may require that we raise our prices, which could result in decreased sales. Further, changes in environmental and energy efficiency standards and regulations applicable to products that we develop and/or sell, and potential changes in the size and availability of tax incentives applicable to such products, may impact the types, characteristics, and consumer interest in such products, which may negatively impact our results of operations. Moreover, future legislation or regulations, including environmental matters, product certification, product liability, tariffs, duties, taxes, tax incentives and other matters, may impact our results. Major developments in tax policy or trade relations, such as the imposition of unilateral tariffs on imported products, could have a material adverse effect on our business, results of operations and liquidity.

Weather conditions and natural disasters may impact consumer shopping patterns and could adversely affect our results of operations.

Significant weather conditions where our stores are located could negatively affect the Company's business and results of operations. Heavy snowfall, ice storms, rainstorms or other extreme weather conditions over a prolonged period could make it difficult for our members and customers to travel to our stores, thus leading to decreased sales. Our business is also susceptible to unseasonable weather conditions, such as unseasonably warm temperatures during the winter season or cool weather during the summer season, which could reduce demand for certain inventory and compromise our efforts to predict and manage inventory levels effectively. In addition, extreme weather conditions could result in disruption or delay of production and delivery of materials and products in our supply chain. In addition, natural disasters such as hurricanes, tornadoes and earthquakes, or a combination of these or other factors, could damage or destroy our facilities or make it difficult for members and customers to travel to our stores, thereby negatively affecting our business and results of operations as well as causing us to incur significant expenses to repair or replace such facilities.

Our stock price has been and may continue to be volatile.

The market price of our common stock has fluctuated substantially and may continue to fluctuate significantly. Future announcements or disclosures concerning us or any of our competitors, our strategic initiatives, our sales and profitability, any quarterly variations in actual or anticipated operating results or comparable sales, any failure to meet analysts' expectations and sales of large blocks of our common stock, among other factors, could cause the market price of our common stock to fluctuate substantially.

Increases in employee wages and the cost of employee benefits could impact our financial results and cash flow.

Our expenses relating to employee health benefits are significant. Increases in minimum wages or unfavorable changes in the cost of such benefits could negatively affect our financial results and cash flow. Healthcare costs have risen significantly in recent years, and various legislative and private sector initiatives regarding healthcare reform have resulted, and could continue to result, in significant changes to the U.S. healthcare system. Due to the breadth and complexity of the healthcare reform legislation, and the potential for change in this regard under the current U.S. Administration, we are unable at this time to fully determine the impact that further healthcare reform will have on our employee health benefit plans.

Item 1B. Unresolved Staff Comments

Not applicable.

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Item 2. Properties

The following table summarizes the locations of our Kmart and Sears Domestic stores at February 3, 2018:

		Sears Domestic
State / Territory	Kmart	Full-line Stores	Specialty Stores
Alabama	—	2	—
Alaska	—	3	—
Arizona	4	12	—
Arkansas	2	2	—
California	55	70	3
Colorado	4	9	1
Connecticut	3	6	—
Delaware	4	3	—
Florida	20	45	1
Georgia	6	13	—
Hawaii	2	4	1
Idaho	3	4	—
Illinois	12	21	4
Indiana	12	10	—
Iowa	9	5	—
Kansas	3	2	—
Kentucky	5	4	—
Louisiana	4	8	—
Maine	4	3	—
Maryland	11	15	—
Massachusetts	9	17	—
Michigan	15	17	1
Minnesota	5	6	—
Mississippi	2	3	1
Missouri	5	8	—
Montana	5	1	—
Nebraska	1	4	—
Nevada	5	5	1
New Hampshire	4	5	—
New Jersey	17	16	1
New Mexico	7	4	—
New York	30	28	3
North Carolina	15	16	—
North Dakota	5	2	—
Ohio	14	19	—
Oklahoma	2	3	—
Oregon	5	6	1
Pennsylvania	47	23	2
Rhode Island	—	—	—
South Carolina	6	6	—
South Dakota	1	2	—
Tennessee	7	13	—
Texas	3	46	2
Utah	1	2	—
Vermont	2	1	—
Virginia	6	16	—
Washington	6	16	1
West Virginia	7	3	—
Wisconsin	7	8	—
Wyoming	4	1	—
Puerto Rico	21	9	—
U.S. Virgin Islands	4	—	—
Guam	1	—	—
Totals	432	547	23

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		Sears Domestic
	Kmart	Full-line Stores	Specialty Stores
Owned	48	243	16
Leased	384	304	7
February 3, 2018	432	547	23

In addition, at February 3, 2018, we had 30 domestic supply chain distribution centers, of which 10 were owned and 20 were leased with remaining lease terms ranging up to 10 years. Of the total, six primarily support Kmart stores, 20 primarily support Sears stores and four support both Sears and Kmart stores. We also had 400 domestic store warehouses, customer call centers and service facilities (including 20 facilities related to our Monark Premium Appliance Co. of California, Monark Premium Appliance Co., and Monark Premium Appliance Co. of Arizona businesses), most of which are leased for terms ranging from one to six years or are part of other facilities included in the above table. Many of our facilities are also used to support our online channels.

Our principal executive offices are located on a 200-acre site owned by us at the Prairie Stone office park in Hoffman Estates, Illinois. The complex consists of six interconnected office buildings totaling approximately two million gross square feet of office space. We also own an 86,000 square foot office building in Troy, Michigan. We operate numerous buying offices throughout the world that procure product internationally, as well as an information technology center in Pune, India.

A description of our leasing arrangements and commitments appears in Note 14 of Notes to Consolidated Financial Statements.

Item 3. Legal Proceedings

See Part II, Item 8, Financial Statements—Notes to Consolidated Financial Statements, Note 18—Legal Proceedings, for additional information regarding legal proceedings, which information is incorporated herein by this reference.

Item 4. Mine Safety Disclosures

Not applicable.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The following table and information sets forth the names of our executive officers, their current positions and offices with the Company, the date they first became executive officers of the Company, their current ages, and their principal employment during the past five years.

Name	Position	Date First Became an Executive Officer	Age
Edward S. Lampert	Chairman of the Board and Chief Executive Officer	2013	55
Robert A. Riecker	Chief Financial Officer	2012	53
Julie Ainsworth	Chief People Officer	2017	46
J. Mitchell Bowling	Chief Executive Officer, Sears Home Services	2017	51
Leena Munjal	Chief Digital Officer	2013	41
Robert (B.J.) Naedele	Chief Commercial Officer, Shop Your Way	2017	39
Perry (Dean) Schwartz	President, Hardlines	2017	49
Stephen L. Sitley	General Counsel and Chief Compliance Officer	2017	54

__________________

Mr. Lampert has served as Chairman of the Company's Board of Directors since 2004 and as our Chief Executive Officer since February 2013. He also is the Chairman and Chief Executive Officer of ESL Investments, Inc., which he founded in April 1988.

Mr. Riecker was appointed to his current position in April 2017, and had served as Controller and Head of Capital Markets Activities since October 2016. He joined the Company as Assistant Controller in October 2005 and served as Vice President and Assistant Controller from May 2007 to October 2011. From October 2011 until his election as Vice President, Controller and Chief Accounting Officer in January 2012, he served as the Company's Vice President, Internal Audit.

Ms. Ainsworth joined the Company in March 2017 as Chief People Officer. Prior to joining the Company, she was Chief Executive Officer of celectiv LLC, a recruiting platform for technology-based companies, which she co-founded in 2014. From 2010 until 2013 she served as President of Warranty Division and Chief Marketing Officer of North American Services Division of Centrica plc, an energy and services company.

Mr. Bowling joined the Company in November 2017 as Chief Executive Officer, Sears Home Services. Prior to joining the Company, he served as Senior Vice President and Chief Operating Officer of Apollo Education Group, a leading provider of higher education for working adults, from December 2013 until April 2017, and prior to that, served as Senior Vice President and General Manager of New Businesses at Comcast, a global telecommunications provider, from 2009 until 2013.

Ms. Munjal was appointed to her current position in January 2018. She previously served as Senior Vice President, Customer Experience and Integrated Retail, since October 2012. She was appointed as Divisional Vice President, Integrated Retail and Member Experience, in July 2011 and was promoted to Vice President in June 2012. From October 2009 to June 2011, she served as Divisional Vice President, and Chief of Staff, Office of the Chairman, and served as Chief of Staff, Office of the CEO, from November 2007 to November 2009. Ms. Munjal joined Sears as Director, Information Technology, in March 2003.

Mr. Naedele joined the Company in March 2017. Prior to joining the Company, he served in a variety of roles with Nike, Inc., a company engaged in the design, development, marketing and sales of athletic gear and apparel, which he joined in July 2008, most recently as Vice President, Strategic Growth Initiatives from March 2016 until February 2017, and prior to that as Vice President, Global Brand Marketing from July 2014 until March 2016 and Global Business General Manager from July 2012 until July 2014.

Mr. Schwartz was appointed to his current position in April 2017. He previously served as President, Tools, Lawn & Garden, Fitness, Sporting Goods and Children's Entertainment from January 2017 until April 2017, as Vice President, Tools and Lawn & Garden from August 2016 until January 2017, as Vice President, Tools from May 2013 until August 2016, and as Vice President, Lawn & Garden from March 2009 until May 2013.

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Mr. Sitley was appointed General Counsel in November 2017 and became Chief Compliance Officer in December 2017. From June 2016 until November 2017, he served as Vice President, Human Resources Operations, Compliance and Associate Relations, and prior to that, was Deputy General Counsel, Litigation and Employment from June 2011 until June 2016.

21

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Holdings' common stock is quoted on The NASDAQ Stock Market under the ticker symbol SHLD. There were 9,502 shareholders of record at March 16, 2018. The quarterly high and low sales prices for Holdings' common stock are set forth below.

	Fiscal Year 2017
	Sears Holdings
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Common stock price
High	$	14.32	$	11.49	$	9.63	$	5.85
Low	$	5.50	$	6.20	$	5.48	$	2.31
	Fiscal Year 2016
	Sears Holdings
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Common stock price
High	$	19.12	$	16.55	$	18.18	$	13.84
Low	$	14.05	$	10.52	$	10.50	$	7.08

Holdings has not paid cash dividends over the two most recent fiscal years and does not expect to pay cash dividends in the foreseeable future.

Equity Compensation Plan Information

The following table reflects information about securities authorized for issuance under our equity compensation plans at February 3, 2018.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans*
Equity compensation plans approved by security holders	—	—	3,778,115
Equity compensation plans not approved by security holders	—	—	—
Total	—	—	3,778,115

__________________

* Represents shares of common stock that may be issued pursuant to our 2013 Stock Plan. Awards under the 2013 Stock Plan may be restricted stock, stock unit awards, incentive stock options, nonqualified stock options, stock appreciation rights, or certain other stock-based awards. The 2013 Stock Plan also allows common stock of Holdings to be awarded in settlement of an incentive award under the Sears Holdings Corporation Umbrella Incentive Program (and any incentive program established thereunder). The shares shown exclude shares covered by an outstanding plan award that, subsequent to February 3, 2018, ultimately are not delivered on an unrestricted basis (for example, because the award is forfeited, canceled, settled in cash or used to satisfy tax withholding obligations).

22

Stock Performance Graph

Comparison of Five-Year Cumulative Stockholder Return

The following graph compares the cumulative total return to stockholders on Holdings' common stock from February 1, 2013 through February 2, 2018, the last trading day before the end of fiscal year 2017, based on the market prices at the last trading day before the end of each fiscal year through and including fiscal year 2017, with the return on the S&P 500 Index, the S&P 500 Retailing Index and the S&P 500 Department Stores Index for the same period. The graph assumes an initial investment of $100 on February 1, 2013 in each of our common stock, the S&P 500 Index, the S&P Retailing Index and the S&P 500 Department Stores Index. The graph further assumes reinvestment of the value of: (i) subscription rights to purchase shares of common stock of Sears Hometown and Outlet Stores, Inc. on September 13, 2012, the ex-distribution date of the distribution of such rights to Holdings’ shareholders; (ii) common shares of Sears Canada on November 13, 2012, the distribution date of such shares to Holdings’ shareholders; (iii) shares of Lands' End on April 7, 2014, the ex-distribution date of the distribution of such shares to Holdings' shareholders; (iv) subscription rights to purchase shares of common stock of Sears Canada on October 17, 2014, the ex-distribution date of the distribution of such rights to Holdings' shareholders; (v) subscription rights to purchase up to $625 million in aggregate principal amount of 8% senior unsecured notes due 2019 and warrants to purchase shares of Holdings' common stock on November 3, 2014, the ex-distribution date of the distribution of such rights to Holdings' shareholders; and (vi) subscription rights to purchase shares of common stock of Seritage Growth Properties on June 12, 2015, the distribution date of such rights to Holdings’ shareholders.

The S&P 500 Retailing Index consists of companies included in the S&P 500 Index in the broadly defined retail sector, which includes competing retailers of softlines (apparel and domestics) and hardlines (appliances, electronics and home improvement products), as well as food and drug retailers. The S&P 500 Department Stores Index consists primarily of department stores that compete with our full-line stores.

	Feb 1, 2013		Jan 31, 2014		Jan 30, 2015		Jan 29, 2016		Jan 27, 2017		Feb 2, 2018
Sears Holdings	$	100.00	$	76.49	$	88.75	$	56.75	$	24.84	$	7.87
S&P 500 Index	$	100.00	$	120.29	$	137.39	$	136.47	$	164.93	$	202.57
S&P 500 Retailing Index	$	100.00	$	125.31	$	150.49	$	175.76	$	208.37	$	294.43
S&P 500 Department Stores Index	$	100.00	$	116.05	$	144.80	$	104.42	$	84.22	$	103.54

23

Purchase of Equity Securities

During the quarter ended February 3, 2018, we did not repurchase any shares of our common stock under our common share repurchase program. At February 3, 2018, we had approximately $504 million of remaining authorization under the program.

	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of  Publicly Announced Program(2)	Average Price Paid per  Share for Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
October 29, 2017 to November 25, 2017	—	$	—	—	$	—
November 26, 2017 to December 30, 2017	—	—		—	—
December 31, 2017 to February 3, 2018	—	—		—	—
Total	—	$	—	—	$	—	$	503,907,832

__________________

⁽¹⁾  Consists entirely of 0 shares acquired from associates to meet withholding tax requirements from the vesting of restricted stock.

⁽²⁾  Our common share repurchase program was initially announced on September 14, 2005 and has a total authorization since inception of the program of $6.5 billion, including the authorizations to purchase up to an additional $500 million of common stock on each of December 17, 2009 and May 2, 2011. The program has no stated expiration date.

The Amended Domestic Credit Agreement (described in Management's Discussion and Analysis of Financial Condition and Results of Operations - Uses and Sources of Liquidity section below) limits our ability to make restricted payments, including dividends and share repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least 15%, exceptions that may be subject to certain maximum amounts and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. Further, the Amended Domestic Credit Agreement includes customary covenants that restrict our ability to make dispositions, prepay debt and make investments, subject, in each case, to various exceptions. The Amended Domestic Credit Agreement also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0.

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Item 6. Selected Financial Data

The table below summarizes our recent financial information. The data set forth below should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 and our Consolidated Financial Statements and notes thereto in Item 8.

	Fiscal
dollars in millions, except per share data	2017			2016			2015			2014			2013
Summary of Operations
Revenues(1)	$	16,702		$	22,138		$	25,146		$	31,198		$	36,188
Domestic comparable store sales %	(13.5		)%	(7.4		)%	(9.2		)%	(1.8		)%	(3.8		)%
Net loss from continuing operations attributable to Holdings' shareholders	(383		)	(2,221		)	(1,129		)	(1,682		)	(1,365		)
Per Common Share
Basic:
Net loss from continuing operations attributable to Holdings' shareholders	$	(3.57	)	$	(20.78	)	$	(10.59	)	$	(15.82	)	$	(12.87	)
Diluted:
Net loss from continuing operations attributable to Holdings' shareholders	$	(3.57	)	$	(20.78	)	$	(10.59	)	$	(15.82	)	$	(12.87	)
Holdings' book value per common share	$	(34.54	)	$	(35.71	)	$	(18.40	)	$	(8.93	)	$	16.34
Financial Data
Total assets	$	7,262		$	9,362		$	11,337		$	13,185		$	18,234
Long-term debt	2,199			3,470			1,971			2,878			2,531
Long-term capital lease obligations	50			103			137			210			275
Capital expenditures	80			142			211			270			329
Adjusted EBITDA(2)	(562		)	(808		)	(836		)	(718		)	(487		)
Number of stores	1,002			1,430			1,672			1,725			2,429

_________________

⁽¹⁾  We follow a retail-based financial reporting calendar. Accordingly, the fiscal year ended February 3, 2018 contained 53 weeks, while all other years presented contained 52 weeks.

⁽²⁾  See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 for a reconciliation of this measure to GAAP and a discussion of management’s reasoning for using such measure. The periods presented were impacted by certain significant items, which affected the comparability of amounts reflected in the above selected financial data. For 2017, 2016 and 2015, these significant items are discussed within Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." 2014 results include the impact of domestic pension expense of $89 million, store closings and severance of $224 million, other expenses of $50 million and the results of Lands' End and Sears Canada that were included in the results of operations prior to the separations of $(10) million and $71 million, respectively. 2013 results include the impact of domestic pension expense of $162 million, domestic store closings and severance of $130 million, and the results of Lands' End and Sears Canada that were included in the results of our operations prior to the separations of $(150) million and $(3) million, respectively. Both 2014 and 2013 also included charges related to impairments, as well as gains on sales of assets.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

We have divided our Management's Discussion and Analysis of Financial Condition and Results of Operations into the following six sections:

• Overview of Holdings

• Results of Operations:

Fiscal Year

Holdings' Consolidated Results

Business Segment Results

• Analysis of Consolidated Financial Condition

• Contractual Obligations and Off-Balance Sheet Arrangements

• Application of Critical Accounting Policies and Estimates

• Cautionary Statement Regarding Forward-Looking Information

The discussion that follows should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Item 8.

OVERVIEW OF HOLDINGS

Holdings, the parent company of Kmart and Sears, was formed in connection with the March 24, 2005 merger of these two companies. We are an integrated retailer with significant physical and intangible assets, as well as virtual capabilities enabled through technology. We operate a national network of stores, with 1,002 full-line and specialty retail stores in the United States, operating as Kmart and Sears. Further, we operate a number of websites under the sears.com and kmart.com banners which offer millions of products and provide the capability for our members and customers to engage in cross-channel transactions such as free store pickup; buy in store/ship to home; and buy online, return in store. We are also the home of Shop Your Way^®, a free membership program that connects its members to personalized products, programs and partners that help them save time and money every day. Through an extensive network of national and local partners, members can shop thousands of their favorite brands, dine out and access an array of exclusive partners to earn points to redeem for savings on future purchases at Sears, Kmart, Lands' End and at ShopYourWay.com.

We conduct our operations in two business segments: Kmart and Sears Domestic. The nature of operations conducted within each of these segments is discussed within the Business Segments section of Item 1 in this Annual Report on Form 10-K. Our business segments have been determined in accordance with accounting standards regarding the determination, and reporting, of business segments.

RESULTS OF OPERATIONS

Fiscal Year

Our fiscal year end is the Saturday closest to January 31 each year. Fiscal year 2017 consisted of 53 weeks. Fiscal years 2016 and 2015 consisted of 52 weeks. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years.

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Holdings' Consolidated Results

Holdings' consolidated results of operations for 2017, 2016 and 2015 are summarized as follows:

dollars in millions, except per share data	2017			2016			2015
REVENUES
Merchandise sales	$	13,409		$	18,236		$	20,936
Services and other	3,293			3,902			4,210
Total revenues	16,702			22,138			25,146
COSTS AND EXPENSES
Cost of sales, buying and occupancy - merchandise sales	11,349			15,184			16,817
Gross margin dollars - merchandise sales	2,060			3,052			4,119
Gross margin rate - merchandise sales	15.4		%	16.7		%	19.7		%
Cost of sales and occupancy - services and other	1,826			2,268			2,519
Gross margin dollars - services and other	1,467			1,634			1,691
Gross margin rate - services and other	44.5		%	41.9		%	40.2		%
Total cost of sales, buying and occupancy	13,175			17,452			19,336
Total gross margin dollars	3,527			4,686			5,810
Total gross margin rate	21.1		%	21.2		%	23.1		%
Selling and administrative	5,131			6,109			6,857
Selling and administrative expense as a percentage of total revenues	30.7		%	27.6		%	27.3		%
Depreciation and amortization	332			375			422
Impairment charges	142			427			274
Gain on sales of assets	(1,648		)	(247		)	(743		)
Total costs and expenses	17,132			24,116			26,146
Operating loss	(430		)	(1,978		)	(1,000		)
Interest expense	(539		)	(404		)	(323		)
Interest and investment loss	(12		)	(26		)	(62		)
Other income	—			13			—
Loss before income taxes	(981		)	(2,395		)	(1,385		)
Income tax benefit	598			174			257
Net loss	(383		)	(2,221		)	(1,128		)
Income attributable to noncontrolling interests	—			—			(1		)
NET LOSS ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(383	)	$	(2,221	)	$	(1,129	)
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS
Diluted loss per share	$	(3.57	)	$	(20.78	)	$	(10.59	)
Diluted weighted average common shares outstanding	107.4			106.9			106.6

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References to comparable store sales amounts within the following discussion include sales for all stores operating for a period of at least 12 full months, including remodeled and expanded stores, but excluding store relocations and stores that have undergone format changes. Comparable store sales amounts include sales from sears.com and kmart.com shipped directly to customers. These online sales resulted in a negative impact to our comparable store sales results of approximately 70 basis points and 20 basis points for 2017 and 2016, respectively. In addition, comparable store sales have been adjusted for the change in the unshipped sales reserves recorded at the end of each reporting period, which resulted in a benefit of 30 basis points in 2017 and did not have any impact in 2016.

Comparable store sales results for 2017 were calculated based on the 52-week period ended January 27, 2018 as compared to the comparable 52-week period in the prior year, while comparable store sales results for 2016 were calculated based on the 52-week period ended January 28, 2017 as compared to the comparable 52-week period in the prior year.

2017 Compared to 2016

Net Loss Attributable to Holdings' Shareholders

We recorded a net loss attributable to Holdings' shareholders of $383 million ($3.57 loss per diluted share) and $2.2 billion ($20.78 loss per diluted share) for 2017 and 2016, respectively. The decrease in net loss for the year primarily reflected an increase in gain on sales of assets, a decrease in selling and administrative expenses and an increase in income tax benefit, partially offset by a decline in gross margin, which was primarily driven by the decline in revenues. Our results for 2017 and 2016 were affected by a number of significant items.

In addition to our net loss attributable to Holdings' shareholders determined in accordance with Generally Accepted Accounting Principles ("GAAP"), for purposes of evaluating operating performance, we use Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA").

Adjusted EBITDA was determined as follows:

millions	2017			2016			2015
Net loss attributable to Holdings per statement of operations	$	(383	)	$	(2,221	)	$	(1,129	)
Income attributable to noncontrolling interests	—			—			1
Income tax benefit	(598		)	(174		)	(257		)
Interest expense	539			404			323
Interest and investment loss	12			26			62
Other income	—			(13		)	—
Operating loss	(430		)	(1,978		)	(1,000		)
Depreciation and amortization	332			375			422
Gain on sales of assets	(1,648		)	(247		)	(743		)
Impairment charges	142			427			274
Before excluded items	(1,604		)	(1,423		)	(1,047		)
Closed store reserve and severance	462			384			98
Pension expense	656			288			229
Other(1)	2			31			(64		)
Amortization of deferred Seritage gain	(78		)	(88		)	(52		)
Adjusted EBITDA	$	(562	)	$	(808	)	$	(836	)

⁽¹⁾ Consisted of items associated with legal matters, expenses associated with natural disasters, transaction costs associated with strategic initiatives, one-time credits from vendors and other expenses.

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Adjusted EBITDA for our segments was as follows:

	2017									2016									2015
millions	Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Holdings
Operating income (loss) per statement of operations	$	367		$	(797	)	$	(430	)	$	(530	)	$	(1,448	)	$	(1,978	)	$	(292	)	$	(708	)	$	(1,000	)
Depreciation and amortization	60			272			332			71			304			375			72			350			422
Gain on sales of assets	(881		)	(767		)	(1,648		)	(181		)	(66		)	(247		)	(185		)	(558		)	(743		)
Impairment charges	16			126			142			22			405			427			14			260			274
Before excluded items	(438		)	(1,166		)	(1,604		)	(618		)	(805		)	(1,423		)	(391		)	(656		)	(1,047		)
Closed store reserve and severance	281			181			462			318			66			384			86			12			98
Pension expense	—			656			656			—			288			288			—			229			229
Other(1)	(23		)	25			2			15			16			31			43			(107		)	(64		)
Amortization of deferred Seritage gain	(11		)	(67		)	(78		)	(17		)	(71		)	(88		)	(11		)	(41		)	(52		)
Adjusted EBITDA	$	(191	)	$	(371	)	$	(562	)	$	(302	)	$	(506	)	$	(808	)	$	(273	)	$	(563	)	$	(836	)
% to revenues	(3.4		)%	(3.3		)%	(3.4		)%	(3.5		)%	(3.8		)%	(3.6		)%	(2.7		)%	(3.8		)%	(3.3		)%

⁽¹⁾ Consisted of items associated with legal matters, expenses associated with natural disasters, transaction costs associated with strategic initiatives, one-time credits from vendors and other expenses.

The following tables set forth the impact each excluded item used in calculating Adjusted EBITDA had on specific income and expense amounts reported in our Consolidated Statements of Operations during the years 2017, 2016 and 2015.

millions	Year Ended February 3, 2018
Other Excluded Items:	Closed store reserve and severance		Pension expense		Other(1)			Amortization of deferred Seritage gain			Total
Gross margin impact	$	227	$	—	$	—		$	(78	)	$	149
Selling and administrative impact	235		656		2			—			893
Total	$	462	$	656	$	2		$	(78	)	$	1,042
millions	Year Ended January 28, 2017
Other Excluded Items:	Closed store reserve and severance		Pension expense		Other(1)			Amortization of deferred Seritage gain			Total
Gross margin impact	$	226	$	—	$	(33	)	$	(88	)	$	105
Selling and administrative impact	158		288		64			—			510
Total	$	384	$	288	$	31		$	(88	)	$	615
millions	Year Ended January 30, 2016
Other Excluded Items:	Closed store reserve and severance		Pension expense		Other(1)			Amortization of deferred Seritage gain			Total
Gross margin impact	$	44	$	—	$	(146	)	$	(52	)	$	(154	)
Selling and administrative impact	54		229		82			—			365
Total	$	98	$	229	$	(64	)	$	(52	)	$	211

⁽¹⁾ Consisted of items associated with legal matters, expenses associated with natural disasters, transaction costs associated with strategic initiatives, one-time credits from vendors and other expenses.

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Adjusted EBITDA is computed as net loss attributable to Sears Holdings Corporation appearing on the Statements of Operations excluding income attributable to noncontrolling interests, income tax benefit, interest expense, interest and investment loss, other income, depreciation and amortization, gain on sales of assets and impairment charges. In addition, it is adjusted to exclude certain significant items as set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our businesses, as well as executive compensation metrics, for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.

While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of ongoing operating performance, and useful to investors, because:

• EBITDA excludes the effects of financings and investing activities by eliminating the effects of interest and depreciation costs;

• Management considers gains/(losses) on the sale of assets to result from investing decisions rather than ongoing operations; and

• Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results. We have adjusted our results for these items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations and reflect past investment decisions.

These other significant items included in Adjusted EBITDA are further explained as follows:

• Closed store reserve and severance – We are transforming our Company to a less asset-intensive business model. Throughout this transformation, we continue to make choices related to our stores, which could result in sales, closures, lease terminations or a variety of other decisions.

• Pension expense – Contributions to our pension plans remain a significant use of our cash on an annual basis. Cash contributions to our pension and postretirement plans are separately disclosed on the cash flow statement. While the Company's pension plan is frozen, and thus associates do not currently earn pension benefits, we have a legacy pension obligation for past service performed by Kmart and Sears associates. The annual pension expense included in our statement of operations related to these legacy domestic pension plans was relatively minimal in years prior to 2009. However, due to the severe decline in the capital markets that occurred in the latter part of 2008, and the resulting abnormally low interest rates, which continue to persist, our domestic pension expense was $656 million in 2017, $288 million in 2016 and $229 million in 2015. Pension expense is comprised of interest cost, expected return on plan assets and recognized net loss and other. This adjustment eliminates the entire pension expense from the statement of operations to improve comparability. Pension expense is included in the determination of net loss.

As further described in Note 7 of Notes to Consolidated Financial Statements, settlement charges also impacted pension expense in 2017. In conjunction with executing two separate agreements to purchase group annuity contracts in May 2017 and August 2017, the Company recorded non-cash charges of $200 million and $203 million, respectively, during the second and third quarters of 2017 for losses previously accumulated in other comprehensive income (loss), which were recognized through the statement of operations upon settlement. In addition, in conjunction with a lump sum offer completed in 2017, the Company recorded a non-cash charge of $76 million for losses previously accumulated in other comprehensive income (loss), which was recognized through the statement of operations immediately upon settlement during the fourth quarter of 2017.

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The components of the adjustments to EBITDA related to pension expense were as follows:

millions	2017			2016			2015
Components of net periodic expense:
Interest cost	$	180		$	227		$	210
Expected return on plan assets	(190		)	(202		)	(249		)
Settlements	479			—			—
Recognized net loss and other	187			263			268
Net periodic expense	$	656		$	288		$	229

In accordance with GAAP, we recognize on the balance sheet actuarial gains and losses for defined benefit pension plans annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. For income statement purposes, these actuarial gains and losses are recognized throughout the year through an amortization process. The Company recognizes in its results of operations, as a corridor adjustment, any unrecognized actuarial net gains or losses that exceed 10% of the larger of projected benefit obligations or plan assets. Accumulated gains/losses that are inside the 10% corridor are not recognized, while accumulated actuarial gains/losses that are outside the 10% corridor are amortized over the "average future service" of the population and are included in the recognized net loss and other line item above.

Actuarial gains and losses occur when actual experience differs from the estimates used to allocate the change in value of pension plans to expense throughout the year or when assumptions change, as they may each year. Significant factors that can contribute to the recognition of actuarial gains and losses include changes in discount rates used to remeasure pension obligations on an annual basis or upon a qualifying remeasurement, differences between actual and expected returns on plan assets and other changes in actuarial assumptions. Management believes these actuarial gains and losses are primarily financing activities that are more reflective of changes in current conditions in global financial markets (and in particular interest rates) that are not directly related to the underlying business and that do not have an immediate, corresponding impact on the benefits provided to eligible retirees. For further information on the actuarial assumptions and plan assets referenced above, see Management's Discussion and Analysis of Financial Condition and Results of Operations - Application of Critical Accounting Policies and Estimates - Defined Benefit Pension Plans, and Note 7 of Notes to Consolidated Financial Statements.

• Other – Consisted of items associated with legal matters, expenses associated with natural disasters, transaction costs associated with strategic initiatives, one-time credits from vendors and other expenses.

• Amortization of deferred Seritage gain – A portion of the gain on the Seritage transaction and certain other sale-leaseback transactions were deferred and will be recognized in proportion to the related rent expense, which is a component of cost of sales, buying and occupancy in the Consolidated Statements of Operations, over the lease terms. Management considers the amortization of the deferred Seritage gain to result from investing decisions rather than ongoing operations.

Revenues and Comparable Store Sales

Total revenues decreased $5.4 billion, or 24.6%, to $16.7 billion in 2017 compared to 2016 primarily driven by the decline in merchandise sales of $4.8 billion. The decline in merchandise sales included a decrease of approximately $3.2 billion as a result of having fewer Kmart and Sears Full-line stores in operation. For the full year, comparable store sales declined 13.5%, which contributed to $1.9 billion of the revenue decline relative to the prior year. The Company recognized approximately $189 million of revenues during the 53rd week of 2017. Services and other revenues declined $609 million during 2017 as compared to 2016, primarily driven by a decline in service-related revenues of approximately $295 million, as well as a decline in revenues from Sears Hometown and Outlet Stores, Inc. ("SHO") of approximately $208 million during 2017 as compared to 2016.

Kmart comparable store sales declined 11.4% for the full year primarily driven by declines in the pharmacy, grocery & household, home, drugstore, consumer electronics and apparel categories. Sears Domestic comparable

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store sales for the year declined 15.2% primarily driven by decreases in the home appliances, apparel, consumer electronics and lawn & garden categories.

Gross Margin

Total gross margin declined $1.2 billion to $3.5 billion in 2017 as compared to the prior year primarily as a result of the above noted decline in sales, as well as a slight decline in gross margin rate, as the decline in gross margin rate for merchandise sales was partially offset by an improvement in gross margin rate for services and other. Gross margin for 2017 and 2016 included charges of $227 million and $226 million, respectively, related to store closures. Gross margin for 2017 and 2016 also included credits of $78 million and $88 million, respectively, related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction, while 2016 also included one-time vendor credits of $33 million.

As compared to the prior year, Kmart's gross margin rate for 2017increased10 basis points, while Sears Domestic's gross margin rate decreased60 basis points. Gross margin for Kmart and Sears Domestic were negatively impacted by expenses associated with store closures. Excluding the impact of significant items as noted in the Adjusted EBITDA tables, Kmart's gross margin rate would have improved 60 basis points in 2017 as compared to the prior year, while Sears Domestic's gross margin rate would have been flat to the prior year. The improvement in Kmart's gross margin rate was primarily driven by margin rate improvement in the apparel, home and drugstore categories, partially offset by a decline in the pharmacy category. Sears Domestic's gross margin rate for 2017 reflects improvement in the apparel category, which was offset by declines in the home appliances and tools categories. Kmart experienced lower clearance markdowns and Shop Your Way points expense, partially offset by an increase in promotional markdowns, while Sears Domestic experienced lower clearance markdowns, offset by an increase in both promotional markdowns and Shop Your Way points expense.

In addition, as a result of the Seritage and JV transactions, 2017 and 2016 included additional rent expense of approximately $169 million and $197 million, respectively. Due to the structure of the leases, we expect that our cash rent obligations to Seritage and the joint venture partners will decline, over time, as space in these stores is recaptured. From the inception of the Seritage transaction to date, we have received recapture notices on 55 properties and we also exercised our right to terminate the lease on 56 properties.

Selling and Administrative Expenses

Selling and administrative expenses decreased $978 million to $5.1 billion in 2017 from $6.1 billion in 2016 and included significant items, as noted in the Adjusted EBITDA tables, which aggregated to an expense of $893 million and $510 million for 2017 and 2016, respectively. Excluding these items, selling and administrative expenses declined $1.4 billion, primarily due to a decrease in payroll expense. In addition, advertising expense also declined as we continued to shift away from traditional advertising to use of Shop Your Way points expense, which is included within gross margin.

Selling and administrative expenses as a percentage of total revenues ("selling and administrative expense rate") were 30.7% and 27.6% for 2017 and 2016, respectively, as the decreases in overall selling and administrative expenses were more than offset by the above noted decline in revenues.

Depreciation and Amortization

Depreciation and amortization expense decreased by $43 million during 2017 to $332 million, as compared to 2016, primarily due to having fewer assets to depreciate.

Impairment Charges

We recorded impairment charges of $142 million in 2017, which consisted of impairment of $72 million related to the Sears trade name, as well as $70 million related to the impairment of long-lived assets. We recorded impairment charges of $427 million in 2016, which consisted of impairment of $381 million related to the Sears trade name, as well as $46 million related to the impairment of long-lived assets. Impairment charges recorded in both years are described further in Notes 1 and 13 of Notes to Consolidated Financial Statements.

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Gain on Sales of Assets

We recorded total gains on sales of assets of $1.6 billion in 2017 and $247 million in 2016, which were primarily attributable to several significant real estate transactions. The gains recorded during 2017 included gains of $708 million recognized on the sale or amendment and lease terminations of 95 locations, $492 million recognized on the Craftsman Sale, $253 million as a result of recapture and lease termination activity and two stores that qualified for sales recognition and sale-leaseback accounting and $79 million related to other asset sales. Gains on sales of assets are described further in Note 11 of Notes to Consolidated Financial Statements.

Operating Loss

We recorded an operating loss of $430 million and $2.0 billion in 2017 and 2016, respectively. The operating loss for 2017 included significant items, as noted in the Adjusted EBITDA tables, which totaled $1.0 billion, while operating loss for 2016 included significant items which totaled $615 million. Both 2017 and 2016 also included charges related to impairments, as well as gains on sales of assets. Taking these significant items into consideration, the decrease in operating loss in 2017 was primarily driven by the decrease in selling and administrative expenses, partially offset by the decline in gross margin noted above.

Interest Expense

We incurred $539 million and $404 million in interest expense during 2017 and 2016, respectively. The increase is due to an increase in average outstanding borrowings in 2017, as well as an increase in the annual weighted-average interest rate for our borrowings.

Interest and Investment Loss

We recorded interest and investment loss of $12 million during 2017 compared to $26 million during 2016. Interest and investment loss is described further in Note 6 of Notes to Consolidated Financial Statements.

Income Taxes

We recorded an income tax benefit of $598 million in 2017 compared with an income tax benefit of $174 million in 2016. Our effective tax rate for 2017 was a benefit of 61.0% compared to a benefit of 7.3% for 2016. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code that affected our fiscal year ended February 3, 2018, including, but not limited to, (1) reducing the U.S. federal corporate tax rate to 21%, (2) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years and (3) various other miscellaneous changes that are effective in fiscal 2017. With the lower U.S. federal corporate rate effective beginning January 1, 2018, our U.S. federal corporate tax rate for fiscal 2017 is a blended rate of 33.717%. The income tax benefit for the period ended February 3, 2018 included a tax benefit of approximately $470 million related to the impacts of the Tax Act. In addition to the impact of the Tax Act, the Company also realized a significant tax benefit during 2017 on the reversal of deferred taxes mainly related to the Craftsman Sale, but also related to indefinite-life assets associated with property sold. Our tax rate in 2017 continues to reflect the effect of not recognizing the benefit of current period losses in certain domestic and foreign jurisdictions where it is more likely than not that such benefits would be realized. In addition, 2017 was negatively impacted by foreign branch taxes and state income taxes. 

During 2016, the Company realized a significant tax benefit on the deferred taxes related to the partial impairment of the Sears trade name. In addition, the Company recorded a tax benefit related to the net gain on pension and other postretirement benefits in continuing operations and a corresponding tax expense of the same amount in other comprehensive income. Also, the application of the requirements for accounting for income taxes, after consideration of our valuation allowance, caused a significant variation in the typical relationship between income tax expense and pretax income. Our tax rate in 2016 reflected the effect of not recognizing the benefit of current period losses in certain domestic and foreign jurisdictions where it was not more likely than not that such benefits would be realized. In addition, 2016 was negatively impacted by foreign branch taxes and state income taxes. 

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2016 Compared to 2015

Net Loss Attributable to Holdings' Shareholders

We recorded a net loss attributable to Holdings' shareholders of $2.2 billion ($20.78 loss per diluted share) and $1.1 billion ($10.59 loss per diluted share) for 2016 and 2015, respectively. The increase in net loss for the year primarily reflected a decline in gross margin, which was driven by a decline in both revenues and gross margin rate, partially offset by a decrease in selling and administrative expenses.

Revenues and Comparable Store Sales

Total revenues decreased $3.0 billion, or 12.0%, to $22.1 billion in 2016, as compared to revenues of $25.1 billion in 2015, primarily driven by the decline in merchandise sales of $2.7 billion. The decline in merchandise sales included a decrease of $1.3 billion as a result of having fewer Kmart and Sears Full-line stores in operation. For the full year, comparable store sales declined 7.4%, which contributed to $1.4 billion of the revenue decline relative to the prior year. Services and other revenues declined $308 million during 2016 as compared to 2015, primarily driven by a decline in service-related revenues of approximately $30 million, as well as a decline in revenues from SHO of approximately $238 million during 2016 as compared to 2015.

Kmart comparable store sales declined 5.3% for the full year primarily driven by declines in the grocery & household, consumer electronics and pharmacy categories. Sears Domestic comparable store sales for the year declined 9.3% primarily driven by decreases in the home appliances, apparel and consumer electronics categories.

Gross Margin

Total gross margin declined $1.1 billion to $4.7 billion in 2016 from $5.8 billion in 2015 as a result of the above noted decline in sales, as well as a decline in gross margin rate, as the decline in gross margin rate for merchandise sales was partially offset by an improvement in gross margin rate for services and other. Gross margin for 2016 included one-time vendor credits of $33 million, as well as a credit of $88 million related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction, while 2015 included one-time vendor credits of $146 million, as well as a credit of $52 million related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction. Gross margin for 2016 and 2015 also included charges of $226 million and $44 million, respectively, related to store closures.

As compared to the prior year, Kmart's gross margin rate for 2016 declined 310 basis points. Excluding significant items primarily related to store closures as noted in the Adjusted EBITDA tables, Kmart's gross margin rate would have declined 130 basis points with margin rate declines experienced across most categories, most notably in the apparel, grocery & household, drugstore, home and pharmacy categories. Sears Domestic's gross margin rate for 2016 decreased 130 basis points. Excluding the impact of significant items in both years primarily related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction, one-time vendor credits and store closures, Sears Domestic's gross margin rate declined 60 basis points, with the most notable decreases experienced in the apparel, home appliances and footwear categories. The decline in margin rate experienced in both Kmart and Sears Domestic is primarily attributable to increased markdowns, including an increase in Shop Your Way points expense.

In addition, as a result of the Seritage and JV transactions, 2016 and 2015 included additional rent expense and assigned sub-tenant rental income of approximately $197 million and $133 million, respectively.

Selling and Administrative Expenses

Selling and administrative expenses decreased $748 million to $6.1 billion in 2016 from $6.9 billion in 2015 and included significant items, as noted in the Adjusted EBITDA tables, which aggregated to an expense of $510 million and $365 million for 2016 and 2015, respectively. Excluding these items, selling and administrative expenses declined $893 million, primarily due to a decrease in payroll expense. In addition, advertising expense also declined as we continued to shift away from traditional advertising to use of Shop Your Way points expense, which is included within gross margin.

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Selling and administrative expenses as a percentage of total revenues ("selling and administrative expense rate") were 27.6% and 27.3% for 2016 and 2015, respectively, as the decreases in overall selling and administrative expenses were more than offset by the above noted decline in revenues.

Depreciation and Amortization

Depreciation and amortization expense decreased by $47 million during 2016 to $375 million, as compared to 2015, primarily due to having fewer assets to depreciate.

Impairment Charges

We recorded impairment charges of $427 million in 2016, which consisted of impairment of $381 million related to the Sears trade name, as well as $46 million related to the impairment of long-lived assets. We recorded impairment charges of $274 million in 2015, which consisted of impairment of $180 million related to the Sears trade name, as well as $94 million related to the impairment of long-lived assets. Impairment charges recorded in both years are described further in Notes 1 and 13 of Notes to Consolidated Financial Statements.

Gain on Sales of Assets

We recorded total gains on sales of assets of $247 million in 2016 and $743 million in 2015, which were primarily attributable to several significant real estate transactions. The gains recorded in 2015 included $508 million recognized in connection with the joint venture transactions and the sale-leaseback transaction with Seritage. Gains on sales of assets recorded in both years are described further in Note 11 of Notes to Consolidated Financial Statements.

Operating Loss

We recorded an operating loss of $2.0 billion and $1.0 billion in 2016 and 2015, respectively. The operating loss for 2016 included significant items, as noted in the Adjusted EBITDA tables, which totaled $615 million, while operating loss for 2015 included significant items which totaled $211 million. Both 2016 and 2015 also included charges related to impairments, as well as gains on sales of assets. Taking these significant items into consideration, the decrease in operating loss in 2016 was primarily driven by the decrease in selling and administrative expenses, partially offset by the decline in gross margin noted above.

Interest Expense

We incurred $404 million and $323 million in interest expense during 2016 and 2015, respectively. The increase is due to an increase in average outstanding borrowings in 2016.

Interest and Investment Loss

We recorded interest and investment loss of $26 million during 2016 compared to interest and investment loss of $62 million during 2015. Interest and investment income loss is described further in Note 6 of Notes to Consolidated Financial Statements.

Income Taxes

We recorded an income tax benefit of $174 million in 2016 compared with an income tax benefit of $257 million in 2015. Our effective tax rate for 2016 was a benefit of 7.3% compared to a benefit of 18.6% for 2015. During 2016, the Company realized a significant tax benefit on the deferred taxes related to the partial impairment of the Sears trade name. In addition, the Company recorded a tax benefit related to the net gain on pension and other postretirement benefits in continuing operations and a corresponding tax expense of the same amount in other comprehensive income. Also, the application of the requirements for accounting for income taxes, after consideration of our valuation allowance, caused a significant variation in the typical relationship between income tax expense and pretax income. Our tax rate in 2016 reflected the effect of not recognizing the benefit of current period losses in certain domestic and foreign jurisdictions where it was not more likely than not that such benefits would be realized. In addition, 2016 was negatively impacted by foreign branch taxes and state income taxes. 

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The 2015 rate was favorably impacted by the significant tax benefit realized on the deferred taxes related to indefinite-life assets associated with the property sold in the transaction with Seritage and the tax benefit realized on the deferred taxes related to the partial impairment of the Sears trade name. These items were partially offset by foreign branch taxes and state income taxes. 

Business Segment Results

Kmart

Kmart results and key statistics were as follows:

dollars in millions	2017			2016			2015
Total revenues	$	5,618		$	8,650		$	10,188
Comparable store sales %	(11.4		)%	(5.3		)%	(7.3		)%
Cost of sales, buying and occupancy	4,601			7,093			8,042
Gross margin dollars	1,017			1,557			2,146
Gross margin rate	18.1		%	18.0		%	21.1		%
Selling and administrative	1,455			2,175			2,537
Selling and administrative expense as a percentage of total revenues	25.9		%	25.1		%	24.9		%
Depreciation and amortization	60			71			72
Impairment charges	16			22			14
Gain on sales of assets	(881		)	(181		)	(185		)
Total costs and expenses	5,251			9,180			10,480
Operating income (loss)	$	367		$	(530	)	$	(292	)
Adjusted EBITDA	$	(191	)	$	(302	)	$	(273	)
Total Kmart stores	432			735			941

2017 Compared to 2016

Revenues and Comparable Store Sales

Kmart’s revenues decreased by $3.0 billion to $5.6 billion in 2017, primarily due to the effect of having fewer stores in operation, which accounted for approximately $2.4 billion of the decline. Revenues were also impacted by a decrease in comparable store sales of 11.4%, which accounted for approximately $689 million of the decline. The Company recognized approximately $64 million of revenues during the 53rd week of 2017. The decline in comparable store sales was primarily driven by declines in the pharmacy, grocery & household, home, drugstore, consumer electronics and apparel categories.

Gross Margin

Kmart generated $1.0 billion in gross margin in 2017 compared to $1.6 billion in 2016. The decrease in Kmart’s gross margin is due to the above noted decrease in sales, partially offset by an increase in gross margin rate. Gross margin included charges related to store closures of $154 million and $187 million in 2017 and 2016, respectively, as well as credits of $11 million and $17 million in 2017 and 2016, respectively, related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction.

Kmart's gross margin rate increased10 basis points to 18.1% in 2017 from 18.0% in 2016. Excluding the impact of significant items, as noted in the Adjusted EBITDA tables, Kmart's gross margin rate would have improved 60 basis points in 2017 as compared to the prior year, primarily driven by margin rate improvement in the apparel, home and drugstore categories, partially offset by a decline in the pharmacy category. Kmart experienced lower clearance markdowns and Shop Your Way points expense, partially offset by an increase in promotional markdowns.

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In addition, as a result of the Seritage and JV transactions, 2017 and 2016 included additional rent expense of approximately $21 million and $35 million, respectively.

Selling and Administrative Expenses

Kmart's selling and administrative expenses decreased $720 million in 2017. Selling and administrative expenses included significant items, as noted in the Adjusted EBITDA tables, which aggregated to expense of $104 million and $146 million for 2017 and 2016, respectively. Excluding these items, selling and administrative expenses decreased $678 million primarily due to decreases in payroll and advertising expenses.

Kmart's selling and administrative expense rate was 25.9% in 2017 and 25.1% in 2016 and increased primarily as a result of lower expense leverage due to the sales decline noted above.

Impairment charges

Kmart recorded impairment charges of $16 million and $22 million in 2017 and 2016, respectively, related to the impairment of long-lived assets. Impairment charges recorded during 2017 and 2016 are further described in Note 13 of Notes to Consolidated Financial Statements.

Gain on Sales of Assets

Kmart recorded total gains on sales of assets of $881 million and $181 million in 2017 and 2016, respectively. The gains recorded during 2017 included gains of $492 million recognized on the Craftsman Sale, $164 million recognized on the sale or amendment and lease terminations of 43 locations, $43 million as a result of recapture and lease termination activity and $79 million related to other asset sales. Gains on sales of assets are described further in Note 11 of Notes to Consolidated Financial Statements.

Operating Income (Loss)

Kmart recorded operating income of $367 million in 2017 as compared to an operating loss of $530 million in 2016. Operating income for 2017 included significant items, as noted in the Adjusted EBITDA tables, which totaled $247 million, while operating loss for 2016 included significant items which totaled $316 million. Both 2017 and 2016 also included gains on sales of assets, as well as charges related to impairments. Taking these significant items into consideration, the decrease in Kmart's operating loss was primarily driven by the decrease in selling and administrative expenses, partially offset by a decline in gross margin noted above.

2016 Compared to 2015

Revenues and Comparable Store Sales

Kmart’s revenues decreased by $1.5 billion to $8.7 billion in 2016, primarily due to the effect of having fewer stores in operation, which accounted for approximately $1.0 billion of the decline. Revenues were also impacted by a decrease in comparable store sales of 5.3%, which accounted for approximately $477 million of the decline. The decline in comparable store sales was primarily driven by declines in the grocery & household, consumer electronics and pharmacy categories.

Gross Margin

Kmart generated $1.6 billion in gross margin in 2016 compared to $2.1 billion in 2015. The decrease in Kmart’s gross margin is due to the above noted decrease in sales, as well as a decline in gross margin rate. Gross margin included significant items which aggregated to expense of $170 million and $28 million for 2016 and 2015, respectively.

Kmart's gross margin rate declined 310 basis points to 18.0% in 2016 from 21.1% in 2015. Excluding the impact of significant items primarily related to store closures, as noted in the Adjusted EBITDA tables, Kmart's gross margin rate would have declined 130 basis points due to margin rate declines experienced across most

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categories, most notably in the apparel, grocery & household, drugstore, home and pharmacy categories driven by increased markdowns, including an increase in Shop Your Way points expense.

In addition, as a result of the Seritage and JV transactions, 2016 and 2015 included additional rent expense and assigned sub-tenant rental income of approximately $35 million and $25 million, respectively.

Selling and Administrative Expenses

Kmart's selling and administrative expenses decreased $362 million in 2016. Selling and administrative expenses included significant items, as noted in the Adjusted EBITDA tables, which aggregated to expense of $146 million and $90 million for 2016 and 2015, respectively. Excluding these items, selling and administrative expenses decreased $418 million primarily due to decreases in payroll and advertising expenses.

Kmart's selling and administrative expense rate was 25.1% in 2016 and 24.9% in 2015 and increased primarily as a result of lower expense leverage due to the sales decline noted above.

Impairment charges

Kmart recorded impairment charges of $22 million and $14 million in 2016 and 2015, respectively, related to the impairment of long-lived assets. Impairment charges recorded during 2016 and 2015 are further described in Note 13 of Notes to Consolidated Financial Statements.

Gain on Sales of Assets

Kmart recorded total gains on sales of assets of $181 million and $185 million in 2016 and 2015, respectively. Gains on sales of assets recorded in both years are described further in Note 11 of Notes to Consolidated Financial Statements.

Operating Loss

Kmart recorded an operating loss of $530 million in 2016 as compared to $292 million in 2015. Operating loss for 2016 included significant items, as noted in the Adjusted EBITDA tables, which totaled $316 million, while operating loss for 2015 included significant items which totaled $118 million. Both 2016 and 2015 also included gains on sales of assets, as well as charges related to impairments. Taking these significant items into consideration, the decrease in Kmart's operating loss was primarily driven by the decrease in selling and administrative expenses, partially offset by a decline in gross margin.

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Sears Domestic

Sears Domestic results and key statistics were as follows:

dollars in millions	2017			2016			2015
Total revenues	$	11,084		$	13,488		$	14,958
Comparable store sales %	(15.2		)%	(9.3		)%	(11.1		)%
Cost of sales, buying and occupancy	8,574			10,359			11,294
Gross margin dollars	2,510			3,129			3,664
Gross margin rate	22.6		%	23.2		%	24.5		%
Selling and administrative	3,676			3,934			4,320
Selling and administrative expense as a percentage of total revenues	33.2		%	29.2		%	28.9		%
Depreciation and amortization	272			304			350
Impairment charges	126			405			260
Gain on sales of assets	(767		)	(66		)	(558		)
Total costs and expenses	11,881			14,936			15,666
Operating loss	$	(797	)	$	(1,448	)	$	(708	)
Adjusted EBITDA	$	(371	)	$	(506	)	$	(563	)
Number of:
Full-line stores	547			670			705
Specialty stores	23			25			26
Total Sears Stores	570			695			731

2017 Compared to 2016

Revenues and Comparable Store Sales

Sears Domestic's revenues decreased by $2.4 billion to $11.1 billion in 2017 as compared to 2016. This decline in revenues was primarily driven by a decrease in comparable store sales of 15.2%, which accounted for $1.2 billion of the decline, and the effect of having fewer Full-line stores in operation, which accounted for $760 million of the decline. The decline in Sears Domestic comparable store sales was primarily driven by decreases in the home appliances, apparel, consumer electronics and lawn & garden categories. The Company recognized approximately $125 million of revenues during the 53rd week of 2017. In addition, we also experienced a decline in revenues from SHO of approximately $208 million during 2017 as compared to 2016.

Gross Margin

Sears Domestic generated gross margin of $2.5 billion and $3.1 billion in 2017 and 2016, respectively, which included charges related to store closures of $73 million and $39 million in 2017 and 2016, respectively. Gross margin also included credits of $67 million and $71 million in 2017 and 2016, respectively, related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction, while 2016 also included one-time vendor credits of $33 million.

Sears Domestic's gross margin rate for the year declined 60 basis points to 22.6% in 2017 from 23.2% in 2016. Excluding the impact of significant items in both years primarily related to store closures, the amortization of the deferred gain on sales of assets associated with the Seritage transaction and one-time vendor credits, Sears Domestic's gross margin rate in 2017 would have been flat to the prior year, which reflects improvement in the apparel category, which was offset by declines in the home appliances and tools categories. Sears Domestic experienced lower clearance markdowns, offset by an increase in both promotional markdowns and Shop Your Way points expense.

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In addition, as a result of the Seritage and JV transactions, 2017 and 2016 included additional rent expense of approximately $148 million and $162 million, respectively.

Selling and Administrative Expenses

Sears Domestic’s selling and administrative expenses decreased $258 million in 2017 as compared to 2016 and included significant items, as noted in the Adjusted EBITDA tables, which aggregated to $789 million and $364 million for 2017 and 2016, respectively. Excluding these items, selling and administrative expenses decreased $683 million, primarily due to decreases in payroll and advertising expenses.

Sears Domestic's selling and administrative expense rate was 33.2% in 2017 and 29.2% in 2016 and increased as the above noted expense reduction was more than offset by the decline in sales noted above.

Depreciation and Amortization

Depreciation and amortization expense decreased by $32 million during 2017 to $272 million, as compared to 2016, primarily due to having fewer assets to depreciate.

Impairment Charges

Sears Domestic recorded impairment charges of $126 million in 2017 which consisted of impairment of $72 million related to the Sears trade name, as well as $54 million related to the impairment of long-lived assets. We recorded impairment charges of $405 million in 2016 which consisted of impairment of $381 million related to the Sears trade name, as well as $24 million related to the impairment of long-lived assets. Impairment charges recorded in both years are described further in Notes 1 and 13 of Notes to Consolidated Financial Statements.

Gain on Sales of Assets

Sears Domestic recorded total gains on sales of assets of $767 million and $66 million in 2017 and 2016, respectively. The gains recorded during 2017 included gains of $544 million recognized on the sale or amendment and lease terminations of 52 locations and $210 million as a result of recapture and lease termination activity and two stores that qualified for sales recognition and sale-leaseback accounting. Gains on sales of assets are described further in Note 11 of Notes to Consolidated Financial Statements.

Operating Loss

Sears Domestic reported an operating loss of $797 million in 2017 compared to $1.4 billion in 2016. Sears Domestic's operating loss in 2017 included significant items, as noted in the Adjusted EBITDA tables, which totaled $795 million, while operating loss for 2016 included significant items which totaled $299 million. Both 2017 and 2016 also included charges related to impairments, as well as gains on sales of assets. Taking these significant items into consideration, the decrease in Sears Domestic's operating loss in 2017 was driven by the decrease in selling and administrative expenses, partially offset by the decline in gross margin noted above.

2016 Compared to 2015

Revenues and Comparable Store Sales

Sears Domestic's revenues decreased by $1.5 billion to $13.5 billion in 2016 as compared to 2015. This decline in revenues was primarily driven by a decrease in comparable store sales of 9.3%, which accounted for $890 million of the decline, and the effect of having fewer Full-line stores in operation, which accounted for $241 million of the decline. The decline in Sears Domestic comparable store sales was primarily driven by decreases in the home appliances, apparel and consumer electronics categories. In addition, we also experienced a decline in revenues from SHO of approximately $238 million during 2016 as compared to 2015.

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Gross Margin

Sears Domestic generated gross margin of $3.1 billion and $3.7 billion in 2016 and 2015, respectively, which included significant items which aggregated to additional gross margin of $65 million and $182 million for 2016 and 2015, respectively.

Sears Domestic's gross margin rate for the year declined 130 basis points to 23.2% in 2016 from 24.5% in 2015. Excluding the impact of significant items in both years primarily related to the amortization of the deferred gain on sales of assets associated with the Seritage transaction, one-time vendor credits and store closures, s noted in the Adjusted EBITDA tables, Sears Domestic's gross margin rate declined 60 basis points, with the most notable decreases experienced in the apparel, home appliances and footwear categories driven by increased markdowns, including an increase in Shop Your Way points expense.

In addition, as a result of the Seritage and JV transactions, 2016 and 2015 included additional rent expense and assigned sub-tenant rental income of approximately $162 million and $108 million, respectively.

Selling and Administrative Expenses

Sears Domestic’s selling and administrative expenses decreased $386 million in 2016 as compared to 2015 and included significant items, as noted in the Adjusted EBITDA tables, which aggregated to $364 million and $275 million for 2016 and 2015, respectively. Excluding these items, selling and administrative expenses decreased $475 million, primarily due to decreases in payroll and advertising expenses.

Sears Domestic's selling and administrative expense rate was 29.2% in 2016 and 28.9% in 2015 and increased as the above noted expense reduction was more than offset by the decline in sales noted above.

Depreciation and Amortization

Depreciation and amortization expense decreased by $46 million during 2016 to $304 million, as compared to 2015, primarily due to having fewer assets to depreciate.

Impairment Charges

Sears Domestic recorded impairment charges of $405 million in 2016 which consisted of impairment of $381 million related to the Sears trade name, as well as $24 million related to the impairment of long-lived assets. We recorded impairment charges of $260 million in 2015 which consisted of impairment of $180 million related to the Sears trade name, as well as $80 million related to the impairment of long-lived assets. Impairment charges recorded in both years are described further in Notes 1 and 13 of Notes to Consolidated Financial Statements.

Gain on Sales of Assets

Sears Domestic recorded total gains on sales of assets of $66 million and $558 million in 2016 and 2015, respectively. The gains recorded in 2015 included $371 million recognized in connection with the joint venture transactions and the sale-leaseback transaction with Seritage. Gains on sales of assets recorded in both years are described further in Note 11 of Notes to Consolidated Financial Statements.

Operating Loss

Sears Domestic reported an operating loss of $1.4 billion in 2016 compared to $708 million in 2015. Sears Domestic's operating loss in 2016 included significant items, as noted in the Adjusted EBITDA tables, which totaled $299 million, while operating loss for 2015 included significant items which totaled $93 million. Both 2016 and 2015 also included charges related to impairments, as well as gains on sales of assets. Taking these significant items into consideration, the decrease in Sears Domestic's operating loss in 2016 was driven by the decrease in selling and administrative expenses, partially offset by the above noted decline in gross margin.

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ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION

Cash Balances

Our cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the date of purchase. Our cash balances as of February 3, 2018 and January 28, 2017 are detailed in the following table.

millions	February 3, 2018		January 28, 2017
Cash and equivalents	$	113	$	196
Cash posted as collateral	4		3
Credit card deposits in transit	65		87
Total cash and cash equivalents	182		286
Restricted cash	154		—
Total cash balances	$	336	$	286

We had total cash balances of $336 million and $286 million at February 3, 2018 and January 28, 2017, respectively.

At various times, we have posted cash collateral for certain outstanding letters of credit and self-insurance programs. Such cash collateral is classified within cash and cash equivalents given we have the ability to substitute letters of credit at any time for this cash collateral and it is therefore readily available to us. Our invested cash may include, from time to time, investments in, but not limited to, commercial paper, federal, state and municipal government securities, floating-rate notes, repurchase agreements and money market funds. Cash amounts held in these short-term investments are readily available to us. Credit card deposits in transit include deposits in transit from banks for payments related to third-party credit card and debit card transactions. The Company classifies cash balances that are legally restricted pursuant to contractual arrangements as restricted cash. The restricted cash balance relates to amounts deposited into an escrow for the benefit of our pension plans.

We classify outstanding checks in excess of funds on deposit within other current liabilities and reduce cash balances when these checks clear the bank on which they were drawn. Outstanding checks in excess of funds on deposit were $74 million and $29 million as of February 3, 2018 and January 28, 2017, respectively.

Operating Activities

The Company used $1.8 billion of cash in its operations during 2017, $1.4 billion during 2016 and $2.2 billion during 2015. Our primary source of operating cash flows is the sale of goods and services to customers, while the primary use of cash in operations is the purchase of merchandise inventories and the payment of operating expenses. We used more cash in operations in 2017 compared to 2016 primarily due to declines in merchandise payables and other liabilities, partially offset by a decline in merchandise inventories. We used less cash in operations in 2016 compared to 2015 primarily due to a decrease in our net inventory.

Merchandise inventories were $2.8 billion and $4.0 billion, respectively, at February 3, 2018 and January 28, 2017, while merchandise payables were approximately $0.6 billion and $1.0 billion, respectively, at February 3, 2018 and January 28, 2017. Our inventory balances decreased approximately $1.2 billion primarily due to both store closures and improved productivity. Sears Domestic inventory decreased in virtually all categories, with the most notable decreases in the apparel, tools and home appliances categories. Kmart inventory decreased in all categories with the most notable decreases in the apparel, home, drugstore and grocery & household categories.

Investing Activities

We generated net cash flows from investing activities of $1.9 billion in 2017, $244 million in 2016 and $2.5 billion in 2015.

For 2017, net cash flows from investing activities consisted of cash proceeds from the sale of properties and investments of $1.1 billion, proceeds from the Craftsman Sale of $572 million and proceeds from the sale of

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receivables of $293 million, partially offset by cash used for capital expenditures of $80 million. For 2016, net cash flows from investing activities primarily consisted of cash proceeds from the sale of properties and investments of $386 million, partially offset by cash used for capital expenditures of $142 million. For 2015, net cash flows from investing activities primarily consisted of cash proceeds from the sale of properties and investments of $2.7 billion, partially offset by cash used for capital expenditures of $211 million. Proceeds from the sales of properties and investments in 2015 included approximately $2.6 billion of net proceeds from the Seritage transaction.

We spent $80 million, $142 million and $211 million during 2017, 2016 and 2015, respectively, for capital expenditures. Capital expenditures during all three years primarily included investments in online and mobile shopping capabilities, enhancements to the Shop Your Way platform, information technology infrastructure and store maintenance.

We anticipate 2018 capital expenditure levels to be similar to 2017 levels. In the normal course of business, we consider opportunities to purchase leased operating properties, as well as offers to sell owned, or assign leased, operating and non-operating properties. These transactions may, individually or in the aggregate, result in material proceeds or outlays of cash and cause our capital expenditure levels to vary from period to period. In addition, we review leases that will expire in the short term in order to determine the appropriate action to take with respect to them.

Financing Activities

During 2017, the Company used net cash flows in financing activities of $2 million, which consisted of debt repayments of $1.4 billion and the payment of debt issuance costs of $43 million, offset by proceeds from debt issuances of $1.0 billion, an increase in short-term borrowings of $271 million and $106 million of net cash proceeds received from sale-leaseback financing transactions.

During 2016, we generated net cash flows from financing activities of $1.2 billion, which consisted of proceeds from debt issuances of $2.0 billion and $71 million of net cash proceeds received from a sale-leaseback financing transaction for five Sears Full-line stores and two Sears Auto Centers that have continuing involvement, partially offset by a decrease in short-term borrowings of $797 million, debt repayments of $66 million and the payment of debt issuance costs of $51 million.

During 2015, the Company used net cash flows in financing activities of $364 million, which consisted of debt repayments of $1.4 billion, of which $927 million was the purchase of Senior Secured Notes pursuant to the tender offer and $400 million was the repayment of the secured short-term loan, the payment of debt issuance costs of $50 million related to the amendment and extension of our Domestic Credit Facility and fees related to the tender offer related to our Senior Secured Notes. These uses of cash were partially offset by an increase in short-term borrowings of $583 million and $508 million of net cash proceeds from sale-leaseback financing, which consisted of $426 million of proceeds from the JV transactions received during 2015 and $82 million of proceeds received in 2015 related to four joint venture properties that have continuing involvement.

During 2017, 2016 and 2015, we did not repurchase any of our common shares under our share repurchase program. The common share repurchase program was initially announced in 2005 and had a total authorization since inception of the program of $6.5 billion. At February 3, 2018, we had approximately $504 million of remaining authorization under the program. The common share repurchase program has no stated expiration date and share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods.

Uses and Sources of Liquidity

Our primary need for liquidity is to fund working capital requirements of our businesses, capital expenditures and for general corporate purposes, including debt repayments and pension plan contributions. The Company has taken a number of actions to support its ongoing transformation efforts, while continuing to support its operations and meet its obligations in light of the incurred losses and negative cash flows experienced over the past several years. These actions included:

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• The completion of various secured and unsecured financing transactions, the extension of the maturity of certain of our indebtedness, and the amendment to other terms of certain of our indebtedness to increase our overall financial flexibility, including:

◦ a $750 million Senior Secured Term Loan (the "2016 Term Loan") under its domestic credit facility maturing in July 2020;

◦ a $500 million real estate loan facility in April 2016 (the "2016 Secured Loan Facility"), initially maturing in July 2017, initially extended to January 2018, subsequently extended to April 2018, and then further extended to July 2018, subject to the payment of an extension fee;

◦ an additional $500 million real estate loan facility in January 2017 (the "2017 Secured Loan Facility"), maturing in July 2020;

◦ a Second Lien Credit Agreement in September 2016, pursuant to which the Company borrowed $300 million under a term loan (the "Second Lien Term Loan"), maturing in July 2020;

◦ an amendment in July 2017 to the Second Lien Credit Agreement to provide for the creation of a $500 million uncommitted second-lien line of credit loan facility under which the Company may borrow line of credit loans (the "Line of Credit Loans"), and a subsequent amendment to that facility to extend the maximum duration of the Line of Credit Loans from 180 days to 270 days and permit total borrowings of up to $600 million;

◦ a Letter of Credit and Reimbursement Agreement in December 2016, originally providing for up to a $500 million secured standby letter of credit facility (the "LC Facility") from certain affiliates of ESL Investments, Inc. ("ESL");

◦ a $200 million real estate loan facility (the "Incremental Loans") in October 2017, with the Incremental Loans maturing in April 2018, with the option to extend to July 2018, subject to the extension of the 2016 Secured Loan Facility;

◦ the extension of the maturity date of the initial $1.0 billion term loan (the "Term Loan") under our Amended Domestic Credit Agreement from June 2018 to January 2019 (with a right of the borrowers thereunder to further extend such maturity, subject to the satisfaction of certain conditions, to July 2019);

◦ amendments to our Amended Domestic Credit Agreement and certain other indebtedness which reduced the aggregate revolver commitments from $1.971 billion to $1.5 billion, but also implemented other modifications to covenants and reserves against the domestic credit facility borrowing base that improved net liquidity, and increased the maximum permissible short-term borrowings of the Company from $750 million to $1.25 billion;

◦ a Term Loan Credit Agreement in January 2018 providing for a secured term loan facility (the "Term Loan Facility"), 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. An aggregate principal amount of $250 million was borrowed with the ability to borrow an additional $50 million against the same collateral;

◦ an amendment to the indenture governing our 6 5/8% Senior Secured Notes due 2018 to increase the maximum permissible borrowings secured by inventory to 75% of book value of such inventory from 65% and defer the collateral coverage test for purposes of the repurchase offer covenant in the indenture to restart it with the second quarter of 2018 (such that no collateral coverage event can occur until the end of the third quarter of 2018);

◦ an amendment to the March 2016 Pension Plan Protection and Forbearance Agreement (the "PPPFA") with the Pension Benefit Guaranty Corporation (the "PBGC") providing for the release of 138 of our properties from a ring-fence arrangement created under our five-year PPPFA in exchange for the payment of approximately $407 million into the Sears pension plans. This agreement provides the Company with financial flexibility through the ability to monetize properties, and, in addition, provides funding relief from contributions to the pension plans for the next two years; and

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◦ various commercial paper issuances to meet short-term liquidity needs, with the maximum amount outstanding during fiscal 2017 of $160 million.

• Achievement of $1.25 billion in annualized cost savings in 2017 as part of the restructuring program announced earlier this year. Actions taken to realize the annualized cost savings have included simplification of the organizational structure of Holdings, streamlining of operations, reducing unprofitable categories and the closure of under-performing stores. In 2017, we closed approximately 435 stores, and an additional 103 stores previously announced for closure are expected to be closed by the end of the first quarter of 2018. As a result of these actions, the Company has begun to see improvement in the operations in fiscal 2017, as the restructuring program actions, including the closing of unprofitable stores, have begun to take effect.

• The sale of the Craftsman brand to Stanley Black & Decker for consideration consisting of cash payments and a royalty.

• Sales of properties and investments for proceeds of $1.1 billion and $386 million in 2017 and 2016, respectively.

On March 8, 2018, the Company secured an additional $100 million incremental real estate loan (the "Second Incremental Loan"), pursuant to an amendment to the Second Amended and Restated Loan Agreement, dated as of October 18, 2017, with JPP, LLC and JPP II, LLC, entities affiliated with ESL Investments, Inc. The Second Incremental Loan is secured by the same real estate properties as the 2017 Secured Loan Facility, and certain properties under the previous Incremental Loans outstanding, and matures in July 2020. The Company used the proceeds from the Incremental Loan for general corporate purposes.

In March 2018, the Company also closed on the $200 million Secured Loan and the $240 million Mezzanine Loan, both as defined in Note 3 of Notes to Consolidated Financial Statements, in connection with the release of 138 of our properties from the ring-fence arrangement with the PBGC as described above. The properties, which have an aggregate appraised value of nearly $980 million, serve as collateral for the Secured Loan, and the Mezzanine Loan is secured by pledge of the equity interests in the direct parent company of the entities that own such properties. The Company contributed approximately $282 million of the proceeds of such loans to our pension plans, and deposited $125 million into an escrow for the benefit of our pension plans. The Mezzanine Loan Agreement, as defined in Note 3 of Notes to Consolidated Financial Statements, contains an uncommitted accordion feature pursuant to which we may incur additional loans of not more than $200 million in aggregate, subject to certain conditions, including that such additional loans not exceed an amount equal to the principal amount of the Secured Loan repaid. The Company expects to pay down the Secured Loan over the next three to six months using proceeds generated from the sale of the underlying properties.

In February 2018, the Company commenced private exchange offers for its outstanding 8% Senior Unsecured Notes Due 2019 and 6 5/8% Senior Secured Notes Due 2018 (the "Exchange Offers"), pursuant to which it offered to (1) issue in exchange for its outstanding 8% Senior Unsecured Notes Due 2019 (the "Old Senior Unsecured Notes") new 8% Senior Unsecured Notes Due 2019, of a like principal amount, convertible into common stock of the Company, with interest on such notes to be payable in kind at the Company's option (the "New Senior Unsecured Notes"), and (2) issue in exchange for its outstanding 6 5/8% Senior Secured Notes Due 2018 (the "Old Senior Secured Notes") new 6 5/8% Senior Secured Notes Due 2019, of a like principal amount, convertible into common stock of the Company, with interest on such notes to be payable in kind at the Company's option (the "New Senior Secured Notes"). The Exchange Offers expired on March 15, 2018. Approximately $214 million aggregate principal amount of the Old Senior Unsecured Notes and approximately $170 million aggregate principal amount of the Old Senior Secured Notes were validly tendered, accepted and canceled in the Exchange Offers, and the Company issued a like principal amount of New Senior Unsecured Notes and New Senior Secured Notes. The New Senior Unsecured Notes and New Senior Secured Notes are optionally convertible by the holders thereof into shares of the Company’s common stock at conversion prices of $8.33 and $5.00, respectively, per share of common stock, and are mandatorily convertible at the Company's option if the volume weighted average trading price of the common stock on the NASDAQ exceeds $10.00 for a prescribed period. In connection with the closing of the Exchange Offers, the Company also obtained the requisite consent of holders of Old Senior Secured Notes to adopt amendments to the indenture governing those notes to eliminate substantially all of the restrictive covenants and certain events of default in the indenture, and make the liens securing senior second lien obligations, including the new Senior

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Secured Notes and the Second Lien Term Loan described below, effectively senior to the liens securing junior second lien obligations, including the Old Senior Secured Notes.

Also in connection with the closing of the Exchange Offers, the Company entered into an amendment to its Second Lien Credit Agreement. The amendment provides the Company with the option to pay interest on its outstanding $300 million principal amount Second Lien Term Loan in kind, and also provides that the Company's obligation under the Second Lien Term Loan is convertible into common stock of the Company, on the same conversion terms as the New Senior Secured Notes. Also in connection with the closing of the Exchange Offers, the Company’s subsidiary, Sears Roebuck Acceptance Corp. ("SRAC"), consummated a private exchange with certain third parties of approximately $100 million in principal amount of senior unsecured notes issued by SRAC maturing between 2027 and 2043 and bearing interest at rates between 6.50% and 7.50% per annum, pursuant to which SRAC issued a like principal amount of new unsecured notes (the "SRAC Exchange Notes"). The SRAC Exchange Notes mature in March 2028 and bear interest at a rate of 7.0% per annum, and provide the Company with the option to pay such interest in kind at an interest rate of 12.0% per annum. The SRAC Exchange Notes are also guaranteed by the same subsidiaries of the Company that guarantee the New Senior Secured Notes.

On March 21, 2018, we obtained a $125 million FILO term loan (the "FILO Loan") from JPP, LLC and JPP II, LLC, entities affiliated with ESL, and Benefit Street 2018 LLC, an entity affiliated with Thomas J. Tisch, under our Amended Domestic Credit Agreement. The Company received approximately $122 million in net proceeds from the FILO Loan, which proceeds were using to reduce outstanding borrowings under our revolving credit facility. The FILO Loan has a maturity date of July 20, 2020, which is the same maturity date as the Company's revolving credit facility commitments, and does not amortize.

In addition to pursuing several transactions to adjust our capital structure in order to enhance our liquidity and financial position, the Company is also taking incremental actions to further streamline operations to drive profitability, including cost reductions of $200 million on an annualized basis in 2018 unrelated to store closures.

In addition to the actions taken above, the Company has other resources available to support its operations. Our domestic credit facility permits us up to $2.0 billion of second lien loan capacity (of which $1.1 billion was utilized at February 3, 2018) outside the credit agreement, all depending on the applicable and available borrowing base as defined in our applicable debt agreements, as well as our ability to secure commitments from lenders. We also have the ability to obtain longer-term secured financing maturing outside of the domestic credit facility maturity date which would not be subject to borrowing base limitations (see Note 3 of Notes to Consolidated Financial Statements). Other options available to us, which we will evaluate and execute as appropriate,include refinancing existing debt, borrowing against facilities in place with availability and additional real estate loans against unencumbered properties, which we have successfully executed in the past.

We also continue to explore ways to unlock value across a range of assets, including entering into or renegotiating commercial arrangements, and exploring ways to maximize the value of our Home Services, Innovel and Sears Auto Centers businesses, as well as our Kenmore and DieHard brands, through partnerships, sales or other means of externalization that could expand distribution of our brands and service offerings to realize significant growth. We expect to continue to right-size, redeploy and highlight the value of our assets, including monetizing our real estate portfolio and exploring potential asset sales, in our transition from an asset intensive, historically "store-only" based retailer to a more asset light, integrated membership-focused company.

We expect to continue to face a challenging competitive environment. While we continue to focus on our overall profitability, including managing expenses, we reported a loss in 2017, and were required to fund cash used in operating activities with cash from investing and financing activities. If we continue to experience operating losses, and we are not able to generate additional liquidity through the actions described below or through some combination of other actions, including real estate or other asset sales, while not expected, then our liquidity needs may exceed availability under our Amended Domestic Credit Agreement, our second lien line of credit loan facility and our other existing facilities, and we might need to secure additional sources of funds, which may or may not be available to us. A failure to secure such additional funds could cause us to be in default under the Amended Domestic Credit Agreement. Moreover, if the borrowing base (as calculated pursuant to our outstanding second lien debt) falls below the principal amount of such second lien debt plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for such debt on the last day of any two consecutive quarters, it could trigger an obligation to repurchase our New Senior Secured Notes in an amount equal to such

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deficiency. As of February 3, 2018, we are in a deferral period of the collateral coverage test and the calculation restarts in the second quarter of 2018 (such that no collateral coverage event can occur until the end of the third quarter of 2018). Additionally, a failure to generate additional liquidity could negatively impact our access to inventory or services that are important to the operation of our business.

We believe the following actions, some of which we expect, subject to our governance processes, to include related party participation and funding, are probable of occurring and will be sufficient to satisfy our liquidity needs for the next twelve months from the issuance of the financial statements:

• Sales of the properties securing the $200 million Secured Loan to fund the repayment of such Secured Loan;

• Additional borrowings under the Mezzanine Loan Agreement and the Term Loan Facility;

• Renegotiation of certain commercial arrangements;

• Monetization of the Kenmore brand;

• Extension of maturities beyond March 2019 of Line of Credit Loans under the Second Lien Credit Agreement, the 2016 Secured Loan Facility, the Incremental Secured Loan Facility and the LC Facility and the Term Loan under the Amended Domestic Credit Agreement;

• Additional borrowings secured by real estate assets or borrowings under the short-term basket; and

• Further restructurings to help manage expenses and improve profitability.

The PPPFA contains certain limitations on our ability to sell assets, which could impact our ability to complete asset sale transactions or our ability to use proceeds from those transactions to fund our operations. Therefore, the analysis of liquidity needs includes consideration of the applicable restrictions under the PPPFA. We expect that the actions outlined above will further enhance our liquidity and financial flexibility and we expect that these actions will be executed in alignment with the anticipated timing of our liquidity needs.

Our outstanding borrowings at February 3, 2018 and January 28, 2017 were as follows:

millions	February 3, 2018		January 28, 2017
Short-term borrowings:
Unsecured commercial paper	$	—	$	—
Secured borrowings	271		—
Line of credit loans	500		—
Incremental loans	144		—
Long-term debt, including current portion:
Notes, term loan and debentures outstanding	3,145		4,018
Capitalized lease obligations	72		145
Total borrowings	$	4,132	$	4,163

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We fund our peak sales season working capital needs through our domestic revolving credit facility and commercial paper markets and secured short-term debt.

millions	2017			2016
Secured borrowings:
Maximum daily amount outstanding during the period	$	799		$	1,150
Average amount outstanding during the period	374			334
Amount outstanding at period-end	271			—
Weighted average interest rate	6.2		%	4.6		%
Unsecured commercial paper:
Maximum daily amount outstanding during the period	$	160		$	250
Average amount outstanding during the period	26			106
Amount outstanding at period-end	—			—
Weighted average interest rate	9.1		%	7.9		%
Line of credit loans:
Maximum daily amount outstanding during the period	$	500		$	—
Average amount outstanding during the period	214			—
Amount outstanding at period-end	500			—
Weighted average interest rate	10.2		%	—		%

Information about our Domestic Credit Agreement, Letter of Credit Facility, Secured Loan and Mezzanine Loan, Term Loan Facility, 2017 Secured Loan Facility, 2016 Secured Loan Facility, Second Lien Credit Agreement, Old Senior Secured Notes and New Senior Secured Notes, Old Senior Unsecured Notes and New Senior Unsecured Notes, Unsecured Commercial Paper, Secured Short-Term Loan and Wholly-owned Insurance Subsidiary and Intercompany Securities is included in Note 3 of Notes to Consolidated Financial Statements.

Domestic Pension Plans Funding

Contributions to our pension plans remain a significant use of our cash on an annual basis. While the Company's pension plans are frozen, and thus associates do not currently earn pension benefits, the Company has a legacy pension obligation for past service performed by Kmart and Sears associates. During 2017, we contributed $295 million to our domestic pension plans, including amounts contributed from the escrow created pursuant to the PPPFA. We estimate that our minimum pension funding obligations will be approximately $280 million in 2018 (excluding the $20 million supplemental payment described below) and approximately $276 million in 2019. As previously noted, the Company agreed to grant the PBGC a lien on, and subsequently contribute to the Company's pension plans, the value of the $250 million cash payment payable to the Company on the third anniversary of the Craftsman closing (the "Craftsman Receivable"). During the 13 weeks ended July 29, 2017, we sold the Craftsman Receivable to a third-party purchaser, and deposited the proceeds into an escrow for the benefit of our pension plans. We subsequently contributed a portion of the proceeds received from the sale of the Craftsman Receivable to our pension plans, which contribution was credited against the Company's minimum pension funding obligations in 2017. Under our agreement with the PBGC, the remaining proceeds will also be contributed to our pension plans, and when so contributed, will be fully credited against the Company's minimum pension funding obligations in 2018 and 2019.

The Company also agreed to grant a lien to the PBGC on the 15-year income stream relating to new Stanley Black & Decker sales of Craftsman products, and agreed to contribute the payments from Stanley Black & Decker under such income stream to the Company's pension plans, with such payments to be credited against the Company's minimum pension funding obligations starting no later than five years from the closing date. The Company also

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agreed to grant the PBGC a lien on $100 million of real estate assets to secure the Company's minimum pension obligations through the end of 2019.

In November 2017, the Company announced an amendment to the PPPFA that allowed the Company to pursue the monetization of 138 of our properties that were subject to a ring-fence arrangement created under the PPPFA. In March 2018, the Company closed on the Secured Loan and the Mezzanine Loan, which transactions released the properties from the ring-fence arrangement. The Company contributed approximately $282 million of the proceeds of such loans to our pension plans, and deposited $125 million into an escrow for the benefit of our pension plans. Under our agreement with the PBGC, the escrowed amount will also be contributed to our pension plans and, when so contributed, will be fully credited against the Company’s minimum pension funding obligations in 2018 and 2019 described above. Following such transactions, the Company has been relieved of contributions to our pension plans for approximately two years (other than the contributions from escrow described above and a $20 million supplemental payment due in the second quarter of 2018). The ultimate amount of pension contributions could be affected by factors such as changes in applicable laws, as well as financial market and investment performance and demographic changes.

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Contractual Obligations and Off-Balance Sheet Arrangements

Information concerning our obligations and commitments to make future payments under contracts such as debt and lease agreements, and under contingent commitments, is aggregated in the following table.

	Total		Payments Due by Period
Contractual Obligations			Within 1  Year		1-3 Years		3-5 Years		After 5  Years		Other
millions
Operating leases	$	2,839	$	537	$	807	$	534	$	961	$	—
Short-term borrowings	915		915		—		—		—		—
Capital lease obligations	115		28		21		8		58		—
Royalty license fees(1)	60		36		24		—		—		—
Other	2		2		—		—		—		—
Pension funding obligations(2)	1,682		280		485		431		486		—
Long-term debt including current portion and interest	4,155		1,222		2,381		40		512		—
Liability and interest related to uncertain tax positions(3)	181		—		—		—		—		181
Total contractual obligations	$	9,949	$	3,020	$	3,718	$	1,013	$	2,017	$	181

⁽¹⁾  We pay royalties under various merchandise license agreements, which are generally based on sales of products covered under these agreements. We currently have license agreements for which we pay royalties, including those to use Joe Boxer and Everlast. Royalty license fees represent the minimum the Company is obligated to pay, regardless of sales, as guaranteed royalties under these license agreements.

⁽²⁾  In March 2018, the Company contributed approximately $282 million to our pension plans and deposited $125 million into an escrow for the benefit of our pension plans, both from proceeds of the Secured Loan and the Mezzanine Loan. The remaining proceeds from the sale of the Craftsman Receivable are also held within an escrow for the benefit of our pension plans. Under our agreement with the PBGC, these escrowed amounts will be contributed to our pension plans and, when so contributed, will be fully credited against the Company’s minimum pension funding obligations in 2018 and 2019. As a result of these transactions, the Company has been relieved of contributions to our pension plans for approximately two years (other than the contributions from escrow described above and a $20 million supplemental payment due in the second quarter of 2018). See Note 7 of Notes to Consolidated Financial Statements for further information.

⁽³⁾  At February 3, 2018, our uncertain tax position liability and gross interest payable were $130 million and $51 million, respectively. We are unable to reasonably estimate the timing of liabilities and interest payments arising from uncertain tax positions in individual years due to the uncertainties in the timing of the effective settlement of tax positions.

Other Commercial Commitments

We issue various types of guarantees in the normal course of business. We had the following guarantees outstanding at February 3, 2018:

millions	Bank Issued		SRAC Issued		Other		Total
Standby letters of credit	$	647	$	6	$	—	$	653
Commercial letters of credit	—		31		—		31
Secondary lease obligations and performance guarantee	—		—		164		164

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The secondary lease obligations relate to certain store leases that have been assigned and previously divested Sears businesses. The secondary lease obligations represent the maximum potential amount of future payments, including renewal option periods pursuant to the lease agreements. We remain secondarily liable if the primary obligor defaults.

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Application of Critical Accounting Policies and Estimates

In preparing the financial statements, certain accounting policies require considerable judgment to select the appropriate assumptions to calculate financial estimates. These estimates are complex and subject to an inherent degree of uncertainty. We base our estimates on historical experience, terms of existing contracts, evaluation of trends and other assumptions that we believe to be reasonable under the circumstances. We continually evaluate the information used to make these estimates as our business and the economic environment change. Although the use of estimates is pervasive throughout the financial statements, we consider an accounting estimate to be critical if:

• it requires assumptions to be made about matters that were highly uncertain at the time the estimate was made; and

• changes in the estimate that are reasonably likely to occur from period to period or different estimates that could have been selected would have a material effect on our financial condition, cash flows or results of operations.

Management believes the current assumptions and other considerations used to estimate amounts reflected in the financial statements are appropriate. However, if actual experience differs from the assumptions and the considerations used in estimating amounts, the resulting changes could have a material adverse effect on our consolidated results of operations, and in certain situations, could have a material adverse effect on our financial condition.

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed the disclosure presented below relating to the selection of these estimates.

The following is a summary of our most critical policies and estimates. See Note 1 of Notes to Consolidated Financial Statements for a listing of our other significant accounting policies.

Valuation of Inventory

Our inventory is valued at the lower of cost or market determined primarily using the retail inventory method ("RIM"). RIM is an averaging method that is commonly used in the retail industry. To determine inventory cost under RIM, inventory at its retail selling value is segregated into groupings of merchandise having similar characteristics, which are then converted to a cost basis by applying specific average cost factors for each grouping of merchandise. Cost factors represent the average cost-to-retail ratio for each merchandise group based upon the year purchasing activity for each store location. Accordingly, a significant assumption under the retail method is that inventory in each group is similar in terms of its cost-to-retail relationship and has similar turnover rates. Management monitors the content of merchandise in these groupings to prevent distortions that would have a material effect on inventory valuation.

RIM inherently requires management judgment and certain estimates that may significantly affect the ending inventory valuation, as well as gross margin. Among others, two significant estimates used in inventory valuation are the level and timing of permanent markdowns (clearance markdowns used to clear unproductive or slow-moving inventory) and shrinkage. Amounts are charged to cost of sales, buying and occupancy at the time the retail value of inventory is reduced through the use of permanent markdowns.

Factors considered in the determination of permanent markdowns include current and anticipated demand, customer preferences, age of the merchandise, fashion trends and weather conditions. In addition, inventory is also evaluated against corporate pre-determined historical markdown cadences. When a decision is made to permanently markdown merchandise, the resulting gross margin reduction is recognized in the period the markdown is recorded. The timing of the decision, particularly surrounding the balance sheet date, can have a significant effect on the results of operations.

Shrinkage is estimated as a percentage of sales for the period from the date of the last physical inventory to the end of the year. Physical inventories are taken annually for all stores and inventory records are adjusted accordingly. The shrinkage rate from the most recent physical inventory, in combination with historical experience, is used as the basis for the shrinkage accrual following the physical inventory.

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Self-insurance Reserves

We use a combination of third-party insurance and/or self-insurance for a number of risks including workers' compensation, asbestos, environmental, automobile, warranty, product and general liability claims. General liability costs relate primarily to litigation that arises from store operations. Self-insurance reserves include actuarial estimates of both claims filed and carried at their expected ultimate settlement value and claims incurred but not yet reported. Our estimated claim amounts are discounted using a rate with a duration that approximates the duration of our self-insurance reserve portfolio. Our liability reflected in the Consolidated Balance Sheets represents an estimate of the ultimate cost of claims incurred at the balance sheet date. In estimating this liability, we utilize loss development factors based on Company-specific data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claims settlements and reported claims. These projections are subject to a high degree of variability based upon future inflation rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. Although we do not expect the amounts ultimately paid to differ significantly from our estimates, self-insurance reserves could be affected if future claim experience differs significantly from the historical trends and the actuarial assumptions. A 10% change in our self-insurance reserves would have impacted net loss by approximately $65 million.

Defined Benefit Pension Plans

The fundamental components of accounting for defined benefit pension plans consist of the compensation cost of the benefits earned, the interest cost from deferring payment of those benefits into the future and the results of investing any assets set aside to fund the obligation. Such retirement benefits were earned by associates ratably over their service careers. Therefore, the amounts reported in the income statement for these retirement plans have historically followed the same pattern. Accordingly, changes in the obligations or the value of assets to fund them have been recognized systematically and gradually over the associate's estimated period of service. The largest drivers of losses or charges in recent years have been the discount rate used to determine the present value of the obligation and the actual return on pension assets. We recognize the changes by amortizing experience gains/losses in excess of the 10% corridor into expense over the associated service period.

The Company's actuarial valuations utilize key assumptions including discount rates and expected returns on plan assets. We are required to consider current market conditions, including changes in interest rates and plan asset investment returns, in determining these assumptions. The determination of our obligations and expense for pension benefits is dependent upon certain assumptions used in calculating such amounts. Key assumptions used in the actuarial valuations include the discount rate, expected long-term rate of return on plan assets and mortality rate assumptions. To determine the discount rate used in the development of the benefit obligation and net periodic benefit cost, a cash flow matching analysis of the expected future benefit payments is performed. In addition to considering the results that cash flow matching produces, the Company gives consideration to changes in industry benchmark yield curve rates. Actuarial assumptions may differ materially from actual results due to changing market and economic conditions, changes in investment strategies, higher or lower withdrawal rates, and longer or shorter life spans of participants. For further information, see Note 7 of Notes to Consolidated Financial Statements.

The actual and expected return on plan assets for 2017, 2016 and 2015 were as follows:

	2017		2016		2015
Actual return on plan assets	7.98	%	16.08	%	(7.35	)%
Expected return on plan assets	6.50	%	6.50	%	7.00	%

The Sears Holdings Corporation Investment Committee is responsible for the investment of the assets of Holdings' domestic pension plans. The Investment Committee, made up primarily of select members of senior management, has appointed a non-affiliated third party professional to advise the Investment Committee with respect to the assets of Holdings' domestic pension plans. The plans' overall investment objective is to provide a long-term return that, along with Company contributions, is expected to meet future benefit payment requirements. A long-term horizon has been adopted in establishing investment policy such that the likelihood and duration of investment losses are carefully weighed against the long-term potential for appreciation of assets. The plans' investment policies require investments to be diversified across individual securities, industries, market

53

capitalization and valuation characteristics. In addition, various techniques are utilized to monitor, measure and manage risk.

For purposes of determining the periodic expense of our defined benefit plans, we use the fair value of plan assets as the market related value. A one-percentage-point change in the assumed discount rate would have the following effects on the pension liabilities:

millions	1 percentage-point Increase			1 percentage-point Decrease
Effect on interest cost component	$	20		$	(26	)
Effect on pension benefit obligation	$	(384	)	$	460

Income Taxes

We account for income taxes according to accounting standards for such taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the book basis and tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If future utilization of deferred tax assets is uncertain, the Company may record a valuation allowance against its deferred tax assets. Our accounting policies related to the valuation allowance are further described in Note 1 of Notes to Consolidated Financial Statements. After consideration of evidence regarding the ability to realize our deferred tax assets, we established a valuation allowance against deferred income tax assets in 2017, 2016 and 2015. For the year ended February 3, 2018, the valuation allowance decreased by $1.3 billion of which an increase of $62 million was recorded through other comprehensive income. The Company continues to monitor its operating performance and evaluate the likelihood of the future realization of these deferred tax assets.

Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against our net deferred tax assets, if any. Management considers estimates of the amount and character of future taxable income in assessing the likelihood of realization of deferred tax assets. Our actual effective tax rate and income tax expense could vary from estimated amounts due to the future impacts of various items, including changes in income tax laws, tax planning and the Company's forecasted financial condition and results of operations in future periods. Although management believes current estimates are reasonable, actual results could differ from these estimates.

Domestic and foreign tax authorities periodically audit our income tax returns. These audits include questions regarding our tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposures associated with our various tax filing positions, we record reserves in accordance with accounting standards for uncertain tax positions. A number of years may elapse before a particular matter, for which we have established a reserve, is audited and fully resolved. Management's estimates at the date of the financial statements reflect our best judgment, giving consideration to all currently available facts and circumstances. As such, these estimates may require adjustment in the future, as additional facts become known or as circumstances change. For further information, see Note 10 of Notes to Consolidated Financial Statements.

Goodwill and Intangible Asset Impairment Assessments

At both February 3, 2018 and January 28, 2017, we had goodwill balances of $269 million. At February 3, 2018 and January 28, 2017, we had intangible asset balances of $1.2 billion and $1.5 billion, respectively. The Company evaluates the carrying value of goodwill and intangible assets for possible impairment under accounting standards governing goodwill and other intangible assets. Our accounting policies related to goodwill and intangible asset impairment assessments are further described in Note 1 of Notes to Consolidated Financial Statements.

Goodwill Impairment Assessments

Our goodwill balance relates to our Home Services business. We did not record any goodwill impairment charges in 2017, 2016 or 2015.

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The use of different assumptions, estimates or judgments in either step of the goodwill impairment testing process, such as the estimated future cash flows of the reporting unit, the discount rate used to discount such cash flows, or the estimated fair value of the reporting unit's tangible and intangible assets and liabilities, could significantly increase or decrease the estimated fair value of the reporting unit or its net assets. At the 2017 annual impairment test date, the conclusion that no indication of goodwill impairment existed for the reporting unit would not have changed had the test been conducted assuming: (1) a 100 basis point increase in the discount rate used to discount the aggregate estimated cash flows of the reporting unit to its net present value in determining their estimated fair values; and/or (2) a 100 basis point decrease in the estimated sales growth rate and/or terminal period growth rate.

Based on our sensitivity analysis, we do not believe that the remaining recorded goodwill balance is at risk of impairment at the reporting unit at the end of the year because the fair value is in excess of the carrying value and not at risk of failing step one. However, goodwill impairment charges may be recognized in future periods in the reporting unit to the extent changes in factors or circumstances occur, including deterioration in the macroeconomic environment, retail industry or in the equity markets, which includes the market value of our common shares, deterioration in our performance or our future projections, or changes in our plans for the reporting unit.

Intangible Asset Impairment Assessments

The majority of our indefinite-lived intangible assets relate to the Sears, KenmoreandDieHardtrade names. In 2017, 2016 and 2015, we recorded impairment related to the Sears trade name of $72 million, $381 million and $180 million, respectively, which reduced the carrying value to $359 million at February 3, 2018 and $431 million at January 28, 2017.

The use of different assumptions, estimates or judgments in our intangible asset impairment testing process, such as the estimated future cash flows of assets and the discount rate used to discount such cash flows, could significantly increase or decrease the estimated fair value of an asset, and therefore, impact the related impairment charge. At the 2017 annual impairment test date, the above-noted conclusion that no indication of intangible asset impairment existed at the test date for the Kenmore and DieHardtrade names would have changed had the test been conducted assuming: (1) a 100 basis point increase in the discount rate used to discount the aggregate estimated cash flows of our assets to their net present value in determining their estimated fair values (without any change in the aggregate estimated cash flows of our intangibles); (2) a 100 basis point decrease in the terminal period growth rate; (3) a 10% decrease in the revenue growth rate for fiscal year 2018; or (4) a 10 basis point decrease in the royalty rate applied to the forecasted net sales stream of our assets and would have resulted in a potential impairment of up to $99 million under any combination of those scenarios. Also, the above-noted impairment related to the Sears trade name would have changed under any combination of those scenarios and would have resulted in potential incremental impairment of up to $102 million.

We believe the impairment charges of $72 million, $381 million and $180 million in 2017, 2016 and 2015, respectively, are appropriate based on the judgments and estimates used in our analysis. We do not believe that the other indefinite-lived intangible balances are impaired at the end of the year because the fair values are in excess of the carrying values based on our analysis. However, further indefinite-lived intangible impairment charges may be recognized in future periods to the extent changes in factors or circumstances occur, including deterioration in the macroeconomic environment, retail industry, deterioration in our performance or our future projections, if actual results are not consistent with our estimates and assumptions used in the analysis, or changes in our plans for one or more indefinite-lived intangible assets. We will continue to monitor for such changes in facts or circumstances, which may be indicators of potential impairment triggers, and may result in impairment charges in the future, which could be material to our results of operations.

Impairment of Long-Lived Assets

In accordance with accounting standards governing the impairment or disposal of long-lived assets, the carrying value of long-lived assets, including property and equipment and definite-lived intangible assets, is evaluated whenever events or changes in circumstances indicate that a potential impairment has occurred relative to a given asset or assets. Our accounting policies related to long-lived asset impairment assessments are further described in Note 1 of Notes to Consolidated Financial Statements. As a result of this impairment testing, the

55

Company recorded impairment charges of $70 million, $46 million and $94 million during 2017, 2016 and 2015, respectively. Our impairment testing includes uncertainty because it requires management to make assumptions and to apply judgment to estimate future cash flows and asset fair values. If actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to additional impairment charges in the future, which could be material to our results of operations.

New Accounting Pronouncements

See Note 1 of Notes to Consolidated Financial Statements for information regarding new accounting pronouncements.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements made in this Annual Report on Form 10-K and in other public announcements by us contain forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning our future financial performance, business strategy, plans, goals and objectives. Statements preceded or followed by, or that otherwise include, the words "believes," "expects," "anticipates," "intends," "estimates," "plans," "forecast," "is likely to" and similar expressions or future or conditional verbs such as "will," "may" and "could" are generally forward-looking in nature and not historical facts. Such statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties, many of which are beyond the Company's control, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Actual results may differ materially from those set forth in the forward-looking statements.

The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: our ability to offer merchandise and services that meet our customers and members' needs; our ability to successfully implement our integrated retail strategy to transform our business; our ability to successfully manage our inventory levels; initiatives to improve our liquidity through inventory management and other actions; our substantial level of indebtedness and related debt service obligations and restrictions imposed by covenants in our debt agreements, vendors' lack of willingness to provide acceptable payment terms or otherwise restricting financing to purchase inventory or services; possible limits on our access to our domestic credit facility, which is subject to a borrowing base limitation and a springing fixed charge coverage ratio covenant, capital markets and other financing sources, including additional second lien financings, with respect to which we do not have commitments from lenders; our ability to successfully achieve our plans to generate liquidity through potential transactions or otherwise; our ability to achieve cost savings initiatives; our failure to implement and execute an effective advertising and marketing strategy; potential liabilities in connection with the separations of Sears Hometown and Outlet Stores and Lands' End and disposition of a portion of our ownership interest in Sears Canada or other transactions; failure to realize the anticipated benefits from the Craftsman Sale; payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business operations; the impact of seasonal buying patterns, including seasonal fluctuations due to weather conditions, which are difficult to forecast with certainty; fluctuations in our sales due to changes in customers’ spending patterns and prevailing economic conditions; risks and uncertainties related to the Seritage transaction and the amendment and extension of our credit facility, such as the impact of the evaluation of any such transaction on our other businesses; our dependence on sources outside the United States for significant amounts of our merchandise; our reliance on third parties to provide us with services in connection with the administration of certain aspects of our business and the transfer of significant internal historical knowledge to such parties; impairment charges for goodwill and intangible assets or fixed-asset impairment for long-lived assets; our ability to attract, motivate and retain key executives and other associates; the substantial influence exerted over the Company by affiliates of our Chairman and Chief Executive Officer, whose interests may diverge from other stockholders' interests; our ability to protect or preserve the image of our brands and our intellectual property; the outcome of pending and/or future legal proceedings; our failure to comply with federal, state, local and international laws, or changes in these laws; and the timing, amount and other risks related to required pension plan funding.

56

Certain of these and other factors are discussed in more detail in Part I, Item 1A of this Annual Report on Form 10-K. While we believe that our forecasts and assumptions are reasonable, we caution that actual results may differ materially. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available, except as required by law.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We face market risk exposure in the form of interest rate risk. This market risk arises from our debt obligations.

Interest Rate Risk

We manage interest rate risk through the use of fixed and variable-rate funding. All debt securities are considered non-trading. At February 3, 2018, 42% of our debt portfolio was variable rate. Based on the size of this variable rate debt portfolio at February 3, 2018, which totaled approximately $1.8 billion, an immediate 100 basis point change in interest rates would have affected annual pretax funding costs by $18 million. These estimates do not take into account the effect on income resulting from invested cash or the returns on assets being funded. These estimates also assume that the variable rate funding portfolio remains constant for an annual period and that the interest rate change occurs at the beginning of the period.

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Item 8. Financial Statements and Supplementary Data

	Page
Consolidated Statements of Operations for the years ended February 3, 2018, January 28, 2017 and January 30, 2016	59
Consolidated Statements of Comprehensive Income (Loss) for the years ended February 3, 2018, January 28, 2017 and January 30, 2016	60
Consolidated Balance Sheets at February 3, 2018 and January 28, 2017	61
Consolidated Statements of Cash Flows for the years ended February 3, 2018, January 28, 2017 and January 30, 2016	62
Consolidated Statements of Deficit for the years ended February 3, 2018, January 28, 2017 and January 30, 2016	63
Notes to Consolidated Financial Statements	64
Schedule II—Valuation and Qualifying Accounts	135
Management's Annual Report on Internal Control over Financial Reporting	136
Report of Independent Registered Public Accounting Firm	137

58

SEARS HOLDINGS CORPORATION

Consolidated Statements of Operations

dollars in millions, except per share data	2017			2016			2015
REVENUES
Merchandise sales	$	13,409		$	18,236		$	20,936
Services and other(1)(2)	3,293			3,902			4,210
Total revenues	16,702			22,138			25,146
COSTS AND EXPENSES
Cost of sales, buying and occupancy - merchandise sales(3)	11,349			15,184			16,817
Cost of sales and occupancy - services and other(1)	1,826			2,268			2,519
Total cost of sales, buying and occupancy	13,175			17,452			19,336
Selling and administrative	5,131			6,109			6,857
Depreciation and amortization	332			375			422
Impairment charges	142			427			274
Gain on sales of assets	(1,648		)	(247		)	(743		)
Total costs and expenses	17,132			24,116			26,146
Operating loss	(430		)	(1,978		)	(1,000		)
Interest expense	(539		)	(404		)	(323		)
Interest and investment loss	(12		)	(26		)	(62		)
Other income	—			13			—
Loss before income taxes	(981		)	(2,395		)	(1,385		)
Income tax benefit	598			174			257
Net loss	(383		)	(2,221		)	(1,128		)
Income attributable to noncontrolling interests	—			—			(1		)
NET LOSS ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(383	)	$	(2,221	)	$	(1,129	)
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS
Basic loss per share	$	(3.57	)	$	(20.78	)	$	(10.59	)
Diluted loss per share	$	(3.57	)	$	(20.78	)	$	(10.59	)
Basic weighted average common shares outstanding	107.4			106.9			106.6
Diluted weighted average common shares outstanding	107.4			106.9			106.6

⁽¹⁾  Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $918 million, $1.1 billion and $1.3 billion in 2017, 2016 and 2015, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

⁽²⁾ Includes revenue from Lands' End, Inc. ("Lands' End") for retail services and rent for Lands' End Shops at Sears, participation in the Shop Your Way program and corporate shared services of $47 million, $52 million and $59 million in 2017, 2016 and 2015, respectively.

⁽³⁾ Includes rent expense (consisting of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback) of $70 million, $83 million and $49 million in 2017, 2016, and 2015, respectively, and installment expenses of $43 million, $64 million and $40 million in 2017, 2016 and 2015, respectively, pursuant to the master lease with Seritage Growth Properties ("Seritage").

See accompanying Notes to Consolidated Financial Statements.

59

SEARS HOLDINGS CORPORATION

Consolidated Statements of Comprehensive Income (Loss)

millions	2017			2016			2015
Net loss	$	(383	)	$	(2,221	)	$	(1,128	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	478			366			113
Currency translation adjustments, net of tax	2			—			(1		)
Dissolution of noncontrolling interest	—			(7		)	—
Total other comprehensive income	480			359			112
Comprehensive income (loss)	97			(1,862		)	(1,016		)
Comprehensive (income) loss attributable to noncontrolling interests	—			7			(1		)
Comprehensive income (loss) attributable to Holdings' shareholders	$	97		$	(1,855	)	$	(1,017	)

See accompanying Notes to Consolidated Financial Statements.

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SEARS HOLDINGS CORPORATION

Consolidated Balance Sheets

millions	February 3, 2018			January 28, 2017
ASSETS
Current assets
Cash and cash equivalents	$	182		$	286
Restricted cash	154			—
Accounts receivable(1)	343			466
Merchandise inventories	2,798			3,959
Prepaid expenses and other current assets(2)	335			285
Total current assets	3,812			4,996
Property and equipment
Land	659			770
Buildings and improvements	2,432			2,954
Furniture, fixtures and equipment	868			1,133
Capital leases	151			224
Gross property and equipment	4,110			5,081
Less accumulated depreciation and amortization	(2,381		)	(2,841		)
Total property and equipment, net	1,729			2,240
Goodwill	269			269
Trade names and other intangible assets	1,168			1,521
Other assets	284			336
TOTAL ASSETS	$	7,262		$	9,362
LIABILITIES
Current liabilities
Short-term borrowings(3)	$	915		$	—
Current portion of long-term debt and capitalized lease obligations(4)	968			590
Merchandise payables	576			1,048
Other current liabilities(5)	1,568			1,956
Unearned revenues	641			748
Other taxes	247			339
Total current liabilities	4,915			4,681
Long-term debt and capitalized lease obligations(6)	2,249			3,573
Pension and postretirement benefits	1,619			1,750
Deferred gain on sale-leaseback	362			563
Sale-leaseback financing obligation	247			235
Other long-term liabilities	1,467			1,641
Long-term deferred tax liabilities	126			743
Total Liabilities	10,985			13,186
Commitments and contingencies
DEFICIT
Sears Holdings Corporation deficit
Preferred stock, 20 shares authorized; no shares outstanding	—			—
Common stock $0.01 par value; 500 shares authorized; 108 and 107 shares outstanding, respectively	1			1
Treasury stock—at cost	(5,820		)	(5,891		)
Capital in excess of par value	9,063			9,130
Retained deficit	(5,895		)	(5,512		)
Accumulated other comprehensive loss	(1,072		)	(1,552		)
Total Deficit	(3,723		)	(3,824		)
TOTAL LIABILITIES AND DEFICIT	$	7,262		$	9,362

⁽¹⁾  Includes $28 million and $81 million at February 3, 2018 and January 28, 2017, respectively, of net amounts receivable from SHO, $1 million and $14 million of amounts receivable from Seritage at February 3, 2018 and January 28, 2017, respectively, and $1 million of net amounts receivable from Lands' End at February 3, 2018.

⁽²⁾  Includes $6 million of prepaid rent to Seritage at February 3, 2018.

⁽³⁾ Includes balances held by related parties of $645 million at February 3, 2018 related to our Line of Credit Loans and Incremental Loans (each as defined in Note 3). See Notes 3 and 15 for further information.

⁽⁴⁾ Includes balances held by related parties of $146 million and $216 million at February 3, 2018 and January 28, 2017, respectively, related to our 2016 Secured Loan Facility for both periods and also related to our Senior Secured Notes at February 3, 2018. See Note 3 for defined terms.

⁽⁵⁾ Includes $1 million of net amounts payable to Lands' End and $11 million of amounts payable to Seritage at January 28, 2017.

⁽⁶⁾ Includes balances held by related parties of $1.5 billion and $1.7 billion at February 3, 2018 and January 28, 2017, respectively, related to our Subsidiary Notes, Senior Unsecured Notes, Second Lien Term Loan, 2016 Term Loan and 2017 Secured Loan Facility for both periods and also related to our Term Loan Facility at February 3, 2018 and our Senior Secured Notes at January 28, 2017. See Note 3 for defined terms and Notes 3 and 15 for further information.

See accompanying Notes to Consolidated Financial Statements.

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SEARS HOLDINGS CORPORATION

Consolidated Statements of Cash Flows

millions	2017			2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(383	)	$	(2,221	)	$	(1,128	)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred tax valuation allowance	(1,395		)	836			217
Tax benefit resulting from Other Comprehensive Income allocation	—			(71		)	—
Depreciation and amortization	332			375			422
Impairment charges	142			427			274
Gain on sales of assets	(1,648		)	(247		)	(743		)
Pension and postretirement plan contributions	(312		)	(334		)	(311		)
Pension plan settlements	479			—			—
Mark-to-market adjustments of financial instruments	17			15			66
Amortization of deferred gain on sale-leaseback	(78		)	(88		)	(52		)
Amortization of debt issuance costs and accretion of debt discount	124			81			60
Other	(36		)	—			—
Change in operating assets and liabilities (net of acquisitions and dispositions):
Deferred income taxes	778			(987		)	(519		)
Merchandise inventories	1,144			1,213			(229		)
Merchandise payables	(472		)	(526		)	(47		)
Income and other taxes	(108		)	80			(95		)
Other operating assets	51			(52		)	54
Other operating liabilities	(477		)	118			(136		)
Net cash used in operating activities	(1,842		)	(1,381		)	(2,167		)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and investments(1)	1,109			386			2,730
Proceeds from Craftsman Sale	572			—			—
Proceeds from sales of receivables(2)	293			—			—
Purchases of property and equipment	(80		)	(142		)	(211		)
Net cash provided by investing activities	1,894			244			2,519
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt issuances(3)	1,020			2,028			—
Repayments of debt(4)	(1,356		)	(66		)	(1,405		)
Increase (decrease) in short-term borrowings, primarily 90 days or less	271			(797		)	583
Proceeds from sale-leaseback financing(1)	106			71			508
Debt issuance costs(5)	(43		)	(51		)	(50		)
Net cash provided by (used in) financing activities	(2		)	1,185			(364		)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	50			48			(12		)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	286			238			250
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR	$	336		$	286		$	238
SUPPLEMENTAL INFORMATION:
Capital lease obligation incurred	$	—		$	25		$	6
Supplemental Cash Flow Data:
Income taxes paid, net of refunds	$	37		$	23		$	45
Cash interest paid(6)	412			275			252
Unpaid liability to acquire equipment and software	10			18			27

⁽¹⁾ Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction (including $745 million and $297 million, respectively, received from ESL Investments, Inc. and its affiliates ("ESL") and Fairholme Capital Management, LLC and its affiliates ("Fairholme")), and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in proceeds from sales of property and investments ($2.6 billion), and proceeds from sale-leaseback financing ($82 million) for 2015. Proceeds from the JV transactions are included in proceeds from sale-leaseback financing ($426 million) for 2015. See Note 11 for further information and defined terms.

⁽²⁾ Proceeds in 2017 include $63 million from JPP, LLC and JPP II, LLC, entities affiliated with ESL (as defined in Note 1), for the sale of receivables.

⁽³⁾ Proceeds in 2017 and 2016, respectively, include amounts from related parties of $876 million in connection with the Term Loan Facility, Line of Credit Loans and Incremental Loans and $1.3 billion received from the 2017 Secured Loan Facility, 2016 Secured Loan Facility, 2016 Term Loan and Second Lien Term Loan. See Notes 3 and 15 for further information and defined terms.

⁽⁴⁾ Repayments in 2017 and 2015, respectively, include $345 million to related parties in connection with the 2017 Secured Loan Facility, 2016 Secured Loan Facility, Incremental Loans, 2016 Term Loan and Line of Credit Loans and $400 million of the Secured Short-Term Loan with related parties and $482 million of Senior Secured Notes tendered by related parties, respectively. See Notes 3 and 15 for further information and defined terms.

⁽⁵⁾ Includes one-time extension fees equal to $5 million to JPP, LLC and JPP II, LLC, entities affiliated with ESL during 2017. See Note 3 for further information.

⁽⁶⁾ Cash interest paid includes $180 million, $94 million and $83 million interest paid to related parties related to our borrowings in 2017, 2016 and 2015, respectively. See Notes 3 and 15 for further information.

See accompanying Notes to Consolidated Financial Statements.

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SEARS HOLDINGS CORPORATION

Consolidated Statements of Deficit

	Deficit Attributable to Holdings’ Shareholders
dollars and shares in millions	Number of Shares	Common Stock		Treasury Stock			Capital in Excess of Par Value			Retained Deficit			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total
Balance at January 31, 2015	107	$	1	$	(5,949	)	$	9,189		$	(2,162	)	$	(2,030	)	$	6		$	(945	)
Comprehensive loss
Net loss	—	—		—			—			(1,129		)	—			1			(1,128		)
Pension and postretirement adjustments, net of tax	—	—		—			—			—			113			—			113
Currency translation adjustments, net of tax	—	—		—			—			—			(1		)	—			(1		)
Total Comprehensive Loss																			(1,016		)
Stock awards	—	—		16			(16		)	—			—			—			—
Associate stock purchase	—	—		5			—			—			—			—			5
Balance at January 30, 2016	107	$	1	$	(5,928	)	$	9,173		$	(3,291	)	$	(1,918	)	$	7		$	(1,956	)
Comprehensive loss
Net loss	—	—		—			—			(2,221		)	—			—			(2,221		)
Pension and postretirement adjustments, net of tax	—	—		—			—			—			366			—			366
Dissolution of noncontrolling interest	—	—		—			—			—			—			(7		)	(7		)
Total Comprehensive Loss																			(1,862		)
Stock awards	—	—		29			(30		)	—			—			—			(1		)
Reclassification of warrants	—	—		—			(13		)	—			—			—			(13		)
Associate stock purchase	—	—		8			—			—			—			—			8
Balance at January 28, 2017	107	$	1	$	(5,891	)	$	9,130		$	(5,512	)	$	(1,552	)	$	—		$	(3,824	)
Comprehensive income
Net loss	—	—		—			—			(383		)	—			—			(383		)
Pension and postretirement adjustments, net of tax	—	—		—			—			—			478			—			478
Currency translation adjustments, net of tax	—	—		—			—			—			2			—			2
Total Comprehensive Income																			97
Stock awards	1	—		63			(67		)	—			—			—			(4		)
Associate stock purchase	—	—		8			—			—			—			—			8
Balance at February 3, 2018	108	$	1	$	(5,820	)	$	9,063		$	(5,895	)	$	(1,072	)	$	—		$	(3,723	)

See accompanying Notes to Consolidated Financial Statements.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations, Consolidation and Basis of Presentation

Sears Holdings Corporation ("Holdings") is the parent company of Kmart Holding Corporation ("Kmart") and Sears, Roebuck and Co. ("Sears"). Holdings (together with its subsidiaries, "we," "us," "our," or the "Company") was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the "Merger"), on March 24, 2005. We are an integrated retailer with 1,002 full-line and specialty retail stores in the United States, operating through Kmart and Sears. We operate in two reportable segments: Kmart and Sears Domestic.

The consolidated financial statements include all majority-owned subsidiaries in which Holdings exercises control. Investments in companies in which Holdings exercises significant influence, but which we do not control (generally 20% to 50% ownership interest), are accounted for under the equity method of accounting. Investments in companies in which we have less than a 20% ownership interest and do not exercise significant influence are accounted for at cost. All intercompany transactions and balances have been eliminated.

Fiscal Year

Our fiscal year ends on the Saturday closest to January 31 each year. Fiscal year 2017 consisted of 53 weeks. Fiscal years 2016 and 2015 consisted of 52 weeks. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years.

Pension Benefit Guaranty Corporation Agreement

On March 18, 2016, we entered into a five-year pension plan protection and forbearance agreement (the "PPPFA") with the Pension Benefit Guaranty Corporation ("PBGC"), pursuant to which the Company has agreed to continue to protect, or "ring-fence," pursuant to customary covenants, the assets of certain special purpose subsidiaries (the "Relevant Subsidiaries") holding real estate and/or intellectual property assets. Also under the agreement, the Relevant Subsidiaries granted the PBGC a springing lien on the ring-fenced assets, which lien will be triggered only by (a) failure to make required contributions to the Company's pension plans (the "Plans"), (b) prohibited transfers of ownership interests in the Relevant Subsidiaries, (c) termination events with respect to the Plans, or (d) bankruptcy events with respect to the Company or certain of its material subsidiaries. In November 2017, the Company announced an amendment to the PPPFA which is further described below and in Note 7. Under the PPPFA, the PBGC has agreed to forbear from initiating an involuntary termination of the Plans, except upon the occurrence of specified conditions, one of which is based on the aggregate market value of the Company's issued and outstanding stock. As of the date of this report, the Company's stock price is such that the PBGC would be permitted to cease forbearance. The PBGC has been given notice in accordance with the terms of the PPPFA and has not communicated any intention to cease its forbearance. In November 2017, we entered into an amendment to the PPPFA which provided for the release of 138 of our properties from a ring-fence arrangement, which is further described below and in Note 7. In March 2018, we closed on the $200 million Secured Loan and the $240 million Mezzanine Loan, both as defined in Note 3, in connection with the release of 138 properties from the ring-fence arrangement with the PBGC.

Craftsman Brand Sale

On January 5, 2017, Holdings announced that it had entered into a definitive agreement under which Stanley Black & Decker would purchase the Craftsman brand from Holdings (the "Craftsman Sale"). On March 8, 2017, the Company closed its sale of the Craftsman brand to Stanley Black & Decker. The transaction provides Stanley Black & Decker with the right to develop, manufacture and sell Craftsman-branded products outside of Holdings and Sears Hometown & Outlet Stores, Inc. distribution channels. As part of the agreement, Holdings is permitted to continue to offer Craftsman-branded products, sourced from existing suppliers, through its current retail channels via a perpetual license from Stanley Black & Decker, which will be royalty-free for the first 15 years after closing and royalty-bearing thereafter.

The Company received an initial upfront payment of $525 million, subject to closing costs and an adjustment for working capital changes, at closing. In addition, Stanley Black & Decker will pay a further $250 million in cash

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

in three years (the "Craftsman Receivable") and Holdings will receive payments of between 2.5% and 3.5% on new Stanley Black & Decker sales of Craftsman products made during the 15 year period following the closing. In connection with the Craftsman Sale, we recognized a gain in our Kmart segment of $492 million within gain on sales of assets in the Consolidated Statements of Operations during 2017, and initially established a receivable of $234 million for the net present value of the Craftsman Receivable. During the 13 weeks ended July 29, 2017, we sold the Craftsman Receivable to a third-party purchaser.

In connection with the closing of the Craftsman Sale, Holdings reached an agreement with the PBGC pursuant to which the PBGC consented to the sale of the Craftsman-related assets that had been "ring-fenced" under the PPPFA and certain related transactions. As a condition to obtaining this consent, the Company agreed to grant the PBGC a lien on, and subsequently contribute to the Company's pension plans, the value of the Craftsman Receivable, with such payments being fully credited against certain of the Company's minimum pension funding obligations in 2017, 2018 and 2019.

The Company also granted a lien to the PBGC on the 15-year income stream relating to new Stanley Black & Decker sales of Craftsman products, and agreed to contribute the payments from Stanley Black & Decker under such income stream to the Company's pension plans, with such payments to be credited against the Company's minimum pension funding obligations starting no later than five years from the closing date. The Company also agreed to grant the PBGC a lien on $100 million of real estate assets to secure the Company's minimum pension funding obligations through the end of 2019, and agreed to certain other amendments to the PPPFA.

Uses and Sources of Liquidity

Our primary need for liquidity is to fund working capital requirements of our businesses, capital expenditures and for general corporate purposes, including debt repayments and pension plan contributions. The Company has taken a number of actions to support its ongoing transformation efforts, while continuing to support its operations and meet its obligations in light of the incurred losses and negative cash flows experienced over the past several years. These actions included:

• The completion of various secured and unsecured financing transactions, the extension of the maturity of certain of our indebtedness, and the amendment to other terms of certain of our indebtedness to increase our overall financial flexibility, including:

◦ a $750 million Senior Secured Term Loan (the "2016 Term Loan") under its domestic credit facility maturing in July 2020;

◦ a $500 million real estate loan facility in April 2016 (the "2016 Secured Loan Facility"), initially maturing in July 2017, initially extended to January 2018, subsequently extended to April 2018, and then further extended to July 2018, subject to the payment of an extension fee;

◦ an additional $500 million real estate loan facility in January 2017 (the "2017 Secured Loan Facility"), maturing in July 2020;

◦ a Second Lien Credit Agreement in September 2016, pursuant to which the Company borrowed $300 million under a term loan (the "Second Lien Term Loan"), maturing in July 2020;

◦ an amendment in July 2017 to the Second Lien Credit Agreement to provide for the creation of a $500 million uncommitted second-lien line of credit loan facility under which the Company may borrow line of credit loans (the "Line of Credit Loans"), and a subsequent amendment to that facility to extend the maximum duration of the Line of Credit Loans from 180 days to 270 days and permit total borrowings of up to $600 million;

◦ a Letter of Credit and Reimbursement Agreement in December 2016, originally providing for up to a $500 million secured standby letter of credit facility (the "LC Facility") from certain affiliates of ESL Investments, Inc. ("ESL");

◦ a $200 million real estate loan facility (the "Incremental Loans") in October 2017, with the Incremental Loans maturing in April 2018, with the option to extend to July 2018, subject to the extension of the 2016 Secured Loan Facility;

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

◦ the extension of the maturity date of the initial $1.0 billion term loan (the "Term Loan") under our Amended Domestic Credit Agreement from June 2018 to January 2019 (with a right of the borrowers thereunder to further extend such maturity, subject to the satisfaction of certain conditions, to July 2019);

◦ amendments to our Amended Domestic Credit Agreement and certain other indebtedness which reduced the aggregate revolver commitments from $1.971 billion to $1.5 billion, but also implemented other modifications to covenants and reserves against the domestic credit facility borrowing base that improved net liquidity, and increased the maximum permissible short-term borrowings of the Company from $750 million to $1.25 billion;

◦ a Term Loan Credit Agreement in January 2018 providing for a secured term loan facility (the "Term Loan Facility"), 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. An aggregate principal amount of $250 million was borrowed with the ability to borrow an additional $50 million against the same collateral;

◦ an amendment to the indenture governing our 6 5/8% Senior Secured Notes due 2018 to increase the maximum permissible borrowings secured by inventory to 75% of book value of such inventory from 65% and defer the collateral coverage test for purposes of the repurchase offer covenant in the indenture to restart it with the second quarter of 2018 (such that no collateral coverage event can occur until the end of the third quarter of 2018);

◦ an amendment to the PPPFA with the PBGC providing for the release of 138 of our properties from a ring-fence arrangement created under our five-year PPPFA in exchange for the payment of approximately $407 million into the Sears pension plans. This agreement provides the Company with financial flexibility through the ability to monetize properties, and, in addition, provides funding relief from contributions to the pension plans for the next two years; and

◦ various commercial paper issuances to meet short-term liquidity needs, with the maximum amount outstanding during fiscal 2017 of $160 million.

• Achievement of $1.25 billion in annualized cost savings in 2017 as part of the restructuring program announced earlier this year. Actions taken to realize the annualized cost savings have included simplification of the organizational structure of Holdings, streamlining of operations, reducing unprofitable categories and the closure of under-performing stores. In 2017, we closed approximately 435 stores, and an additional 103 stores previously announced for closure are expected to be closed by the end of the first quarter of 2018. As a result of these actions, the Company has begun to see improvement in the operations in fiscal 2017, as the restructuring program actions, including the closing of unprofitable stores, have begun to take effect.

• The sale of the Craftsman brand to Stanley Black & Decker for consideration consisting of cash payments and a royalty.

• Sales of properties and investments for proceeds of $1.1 billion and $386 million in 2017 and 2016, respectively.

On March 8, 2018, the Company secured an additional $100 million incremental real estate loan (the "Second Incremental Loan"), pursuant to an amendment to the Second Amended and Restated Loan Agreement, dated as of October 18, 2017, with JPP, LLC and JPP II, LLC, entities affiliated with ESL Investments, Inc. The Second Incremental Loan is secured by the same real estate properties as the 2017 Secured Loan Facility, and certain properties under the previous Incremental Loans outstanding, and matures in July 2020. The Company used the proceeds from the Incremental Loan for general corporate purposes.

In March 2018, the Company also closed on the $200 million Secured Loan and the $240 million Mezzanine Loan, both as defined in Note 3, in connection with the release of 138 of our properties from the ring-fence arrangement with the PBGC as described above. The properties, which have an aggregate appraised value of nearly $980 million, serve as collateral for the Secured Loan, and the Mezzanine Loan is secured by pledge of the equity interests in the direct parent company of the entities that own such properties. The Company contributed approximately $282 million of the proceeds of such loans to our pension plans, and deposited $125 million into an escrow for the benefit of our pension plans. The Mezzanine Loan Agreement, as defined in Note 3, contains an uncommitted accordion feature pursuant to which we may incur additional loans of not more than $200 million in

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

aggregate, subject to certain conditions, including that such additional loans not exceed an amount equal to the principal amount of the Secured Loan repaid. The Company expects to pay down the Secured Loan over the next three to six months using proceeds generated from the sale of the underlying properties.

In February 2018, the Company commenced private exchange offers for its outstanding 8% Senior Unsecured Notes Due 2019 and 6 5/8% Senior Secured Notes Due 2018 (the "Exchange Offers"), pursuant to which it offered to (1) issue in exchange for its outstanding 8% Senior Unsecured Notes Due 2019 (the "Old Senior Unsecured Notes") new 8% Senior Unsecured Notes Due 2019, of a like principal amount, convertible into common stock of the Company, with interest on such notes to be payable in kind at the Company's option (the "New Senior Unsecured Notes"), and (2) issue in exchange for its outstanding 6 5/8% Senior Secured Notes Due 2018 (the "Old Senior Secured Notes") new 6 5/8% Senior Secured Notes Due 2019, of a like principal amount, convertible into common stock of the Company, with interest on such notes to be payable in kind at the Company's option (the "New Senior Secured Notes"). The Exchange Offers expired on March 15, 2018. Approximately $214 million aggregate principal amount of the Old Senior Unsecured Notes and approximately $170 million aggregate principal amount of the Old Senior Secured Notes were validly tendered, accepted and canceled in the Exchange Offers, and the Company issued a like principal amount of New Senior Unsecured Notes and New Senior Secured Notes. The New Senior Unsecured Notes and New Senior Secured Notes are optionally convertible by the holders thereof into shares of the Company’s common stock at conversion prices of $8.33 and $5.00, respectively, per share of common stock, and are mandatorily convertible at the Company's option if the volume weighted average trading price of the common stock on the NASDAQ exceeds $10.00 for a prescribed period. In connection with the closing of the Exchange Offers, the Company also obtained the requisite consent of holders of Old Senior Secured Notes to adopt amendments to the indenture governing those notes to eliminate substantially all of the restrictive covenants and certain events of default in the indenture, and make the liens securing senior second lien obligations, including the new Senior Secured Notes and the Second Lien Term Loan described below, effectively senior to the liens securing junior second lien obligations, including the Old Senior Secured Notes.

Also in connection with the closing of the Exchange Offers, the Company entered into an amendment to its Second Lien Credit Agreement. The amendment provides the Company with the option to pay interest on its outstanding $300 million principal amount Second Lien Term Loan in kind, and also provides that the Company's obligation under the Second Lien Term Loan is convertible into common stock of the Company, on the same conversion terms as the New Senior Secured Notes. Also in connection with the closing of the Exchange Offers, the Company’s subsidiary, Sears Roebuck Acceptance Corp. ("SRAC"), consummated a private exchange with certain third parties of approximately $100 million in principal amount of senior unsecured notes issued by SRAC maturing between 2027 and 2043 and bearing interest at rates between 6.50% and 7.50% per annum, pursuant to which SRAC issued a like principal amount of new unsecured notes (the "SRAC Exchange Notes"). The SRAC Exchange Notes mature in March 2028 and bear interest at a rate of 7.0% per annum, and provide the Company with the option to pay such interest in kind at an interest rate of 12.0% per annum. The SRAC Exchange Notes are also guaranteed by the same subsidiaries of the Company that guarantee the New Senior Secured Notes.

On March 21, 2018, we obtained a $125 million FILO term loan (the "FILO Loan") from JPP, LLC and JPP II, LLC, entities affiliated with ESL, and Benefit Street 2018 LLC, an entity affiliated with Thomas J. Tisch, under our Amended Domestic Credit Agreement. The Company received approximately $122 million in net proceeds from the FILO Loan, which proceeds were using to reduce outstanding borrowings under our revolving credit facility. The FILO Loan has a maturity date of July 20, 2020, which is the same maturity date as the Company's revolving credit facility commitments, and does not amortize.

In addition to pursuing several transactions to adjust our capital structure in order to enhance our liquidity and financial position, the Company is also taking incremental actions to further streamline operations to drive profitability, including cost reductions of $200 million on an annualized basis in 2018 unrelated to store closures.

In addition to the actions taken above, the Company has other resources available to support its operations. Our domestic credit facility permits us up to $2.0 billion of second lien loan capacity (of which $1.1 billion was utilized at February 3, 2018) outside the credit agreement, all depending on the applicable and available borrowing base as defined in our applicable debt agreements, as well as our ability to secure commitments from lenders. We also have the ability to obtain longer-term secured financing maturing outside of the domestic credit facility maturity date which would not be subject to borrowing base limitations (see Note 3 of Notes to Consolidated Financial Statements). Other options available to us, which we will evaluate and execute as appropriate, include refinancing

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

existing debt, borrowing against facilities in place with availability and additional real estate loans against unencumbered properties, which we have successfully executed in the past.

We also continue to explore ways to unlock value across a range of assets, including entering into or renegotiating commercial arrangements, and exploring ways to maximize the value of our Home Services, Innovel and Sears Auto Centers businesses, as well as our Kenmore and DieHard brands, through partnerships, sales or other means of externalization that could expand distribution of our brands and service offerings to realize significant growth. We expect to continue to right-size, redeploy and highlight the value of our assets, including monetizing our real estate portfolio and exploring potential asset sales, in our transition from an asset intensive, historically "store-only" based retailer to a more asset light, integrated membership-focused company.

We expect to continue to face a challenging competitive environment. While we continue to focus on our overall profitability, including managing expenses, we reported a loss in 2017, and were required to fund cash used in operating activities with cash from investing and financing activities. If we continue to experience operating losses, and we are not able to generate additional liquidity through the actions described below or through some combination of other actions, including real estate or other asset sales, while not expected, then our liquidity needs may exceed availability under our Amended Domestic Credit Agreement, our second lien line of credit loan facility and our other existing facilities, and we might need to secure additional sources of funds, which may or may not be available to us. A failure to secure such additional funds could cause us to be in default under the Amended Domestic Credit Agreement. Moreover, if the borrowing base (as calculated pursuant to our outstanding second lien debt) falls below the principal amount of such second lien debt plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for such debt on the last day of any two consecutive quarters, it could trigger an obligation to repurchase our New Senior Secured Notes in an amount equal to such deficiency. As of February 3, 2018, we are in a deferral period of the collateral coverage test and the calculation restarts in the second quarter of 2018 (such that no collateral coverage event can occur until the end of the third quarter of 2018). Additionally, a failure to generate additional liquidity could negatively impact our access to inventory or services that are important to the operation of our business.

We believe the following actions, some of which we expect, subject to our governance processes, to include related party participation and funding, are probable of occurring and will be sufficient to satisfy our liquidity needs for the next twelve months from the issuance of the financial statements:

• Sales of the properties securing the $200 million Secured Loan to fund the repayment of such Secured Loan;

• Additional borrowings under the Mezzanine Loan Agreement and the Term Loan Facility;

• Renegotiation of certain commercial arrangements;

• Monetization of the Kenmore brand;

• Extension of maturities beyond March 2019 of Line of Credit Loans under the Second Lien Credit Agreement, the 2016 Secured Loan Facility, the Incremental Secured Loan Facility, and the LC Facility and the Term Loan under the Amended Domestic Credit Agreement;

• Additional borrowings secured by real estate assets or borrowings under the short-term basket; and

• Further restructurings to help manage expenses and improve profitability.

The PPPFA contains certain limitations on our ability to sell assets, which could impact our ability to complete asset sale transactions or our ability to use proceeds from those transactions to fund our operations. Therefore, the analysis of liquidity needs includes consideration of the applicable restrictions under the PPPFA. We expect that the actions outlined above will further enhance our liquidity and financial flexibility and we expect that these actions will be executed in alignment with the anticipated timing of our liquidity needs.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. The estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances. Adjustments to estimates and assumptions are made when facts and circumstances dictate. As future events and their effects cannot be determined

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

with absolute certainty, actual results may differ from the estimates used in preparing the accompanying consolidated financial statements. Significant estimates and assumptions are required as part of determining inventory and accounts receivable valuation, estimating depreciation, amortization and recoverability of long-lived assets, establishing self-insurance, warranty, legal and other reserves, performing goodwill and intangible impairment analyses, and in establishing valuation allowances on deferred income tax assets and reserves for tax examination exposures, and calculating retirement benefits.

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with original maturities of three months or less at the date of purchase. The Company classifies cash balances that are legally restricted pursuant to contractual arrangements as restricted cash. The restricted cash balance relates to amounts deposited into an escrow for the benefit of our pension plans. We also include deposits in-transit from banks for payments related to third-party credit card and debit card transactions within cash equivalents. The deposits in-transit balances included within cash equivalents were $65 million and $87 million at February 3, 2018 and January 28, 2017, respectively.

We classify outstanding checks in excess of funds on deposit within other current liabilities and reduce cash and cash equivalents when these checks clear the bank on which they were drawn. Outstanding checks in excess of funds on deposit included in other current liabilities were $74 million and $29 million at February 3, 2018 and January 28, 2017, respectively.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows at February 3, 2018 and January 28, 2017, respectively.

millions	February 3, 2018		January 28, 2017
Cash and equivalents	$	113	$	196
Cash posted as collateral	4		3
Credit card deposits in transit	65		87
Total cash and cash equivalents	182		286
Restricted cash	154		—
Total cash balances	$	336	$	286

Allowance for Doubtful Accounts

We provide an allowance for doubtful accounts based on both historical experience and a specific identification basis. Allowances for doubtful accounts on accounts receivable balances were $35 million and $37 million at February 3, 2018 and January 28, 2017, respectively. Our accounts receivable balance on our Consolidated Balance Sheet is presented net of our allowance for doubtful accounts and is comprised of various vendor-related and customer-related accounts receivable, including receivables related to our pharmacy operations.

Merchandise Inventories

Merchandise inventories are valued at the lower of cost or market. For Kmart and Sears Domestic, cost is primarily determined using the retail inventory method ("RIM"). Kmart merchandise inventories are valued under the RIM using primarily a first-in, first-out ("FIFO") cost flow assumption. Sears Domestic merchandise inventories are valued under the RIM using primarily a last-in, first-out ("LIFO") cost flow assumption.

Inherent in the RIM calculation are certain significant management judgments and estimates including, among others, merchandise markons, markups, markdowns and shrinkage, which significantly impact the ending inventory valuation at cost, as well as resulting gross margins. The methodologies utilized by us in our application of the RIM are consistent for all periods presented. Such methodologies include the development of the cost-to-retail ratios, the groupings of homogenous classes of merchandise, the development of shrinkage and obsolescence reserves, the accounting for price changes and the computations inherent in the LIFO adjustment (where applicable).

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Management believes that the RIM provides an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market.

Approximately 58% of consolidated merchandise inventories are valued using LIFO. To estimate the effects of inflation on inventories, we utilize external price indices determined by an outside source, the Bureau of Labor Statistics. If the FIFO method of inventory valuation had been used instead of the LIFO method, merchandise inventories would have been $31 million higher at February 3, 2018 and $33 million higher at January 28, 2017. During 2017 and 2016, a reduction in inventory quantities resulted in a liquidation of applicable LIFO inventory quantities carried at lower costs in prior years. This LIFO liquidation resulted in a decrease in cost of sales of approximately $6 million and $12 million in 2017 and 2016, respectively.

Vendor Rebates and Allowances

We receive rebates and allowances from certain vendors through a variety of programs and arrangements intended to offset our costs of promoting and selling certain vendor products. These vendor payments are recognized and recorded as a reduction to the cost of merchandise inventories when earned and, thereafter, as a reduction of cost of sales, buying and occupancy as the merchandise is sold. Upfront consideration received from vendors linked to purchases or other commitments is initially deferred and amortized ratably to cost of sales, buying and occupancy over the life of the contract or as performance of the activities specified by the vendor to earn the fee is completed.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Additions and substantial improvements are capitalized and include expenditures that materially extend the useful lives of existing facilities and equipment. Maintenance and repairs that do not materially improve or extend the lives of the respective assets are expensed as incurred.

Depreciation expense, which includes depreciation on assets under capital leases, is recorded over the estimated useful lives of the respective assets using the straight-line method for financial statement purposes, and accelerated methods for tax purposes. The range of lives are generally 20 to 50 years for buildings, 3 to 10 years for furniture, fixtures and equipment, and 3 to 5 years for computer systems and computer equipment. Leasehold improvements are depreciated over the shorter of the associated lease term or the estimated useful life of the asset. Depreciation expense included within depreciation and amortization expense reported in the Consolidated Statements of Operations was $328 million, $370 million and $415 million for the years ended February 3, 2018, January 28, 2017 and January 30, 2016, respectively.

Primarily as a result of store closing actions, certain property and equipment are considered held for sale. The value of assets held for sale was $70 million and $96 million at February 3, 2018 and January 28, 2017, respectively. These assets were included in prepaid expenses and other current assets in the Consolidated Balance Sheets at February 3, 2018 and January 28, 2017 at the lower of their historical net book value or their estimated fair value, less estimated costs to sell. We expect to sell the properties within a year and we continually remarket them. The majority of assets held for sale are held within the Sears Domestic segment.

Impairment of Long-Lived Assets and Costs Associated with Exit Activities

In accordance with accounting standards governing the impairment or disposal of long-lived assets, the carrying value of long-lived assets, including property and equipment, is evaluated whenever events or changes in circumstances indicate that a potential impairment has occurred relative to a given asset or assets. Factors that could result in an impairment review include, but are not limited to, a current period cash flow loss combined with a history of cash flow losses, current cash flows that may be insufficient to recover the investment in the property over the remaining useful life, or a projection that demonstrates continuing losses associated with the use of a long-lived asset, significant changes in the manner of use of the asset or significant changes in business strategies. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value as determined based on quoted market prices or through the use of other valuation techniques. See Note 13 for further information regarding long-lived asset impairment charges recorded.

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We account for costs associated with location closings in accordance with accounting standards pertaining to accounting for costs associated with exit or disposal activities. As such, we record a liability for costs associated with location closings, which includes employee severance and other liquidation fees when management makes the decision to exit a location. We record a liability for future lease costs (net of estimated sublease income) when we cease to use the location.

Goodwill, Trade Names and Related Impairments

Trade names acquired as part of the Merger account for the majority of our intangible assets recognized in the Consolidated Balance Sheet. The majority of these trade name assets, such as Sears and Kenmore, are expected to generate cash flows indefinitely, do not have estimable or finite useful lives and, therefore, are accounted for as indefinite-lived assets not subject to amortization. Certain intangible assets, including favorable lease rights, have estimable, finite useful lives, which are used as the basis for their amortization. The estimated useful lives of such assets are determined using a number of factors, including the demand for the asset, competition and the level of expenditure required to maintain the cash flows associated with the asset.

Our goodwill results from the Merger. We perform an annual goodwill impairment test at the last day of our November accounting period each year and assess the need to update the tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of the reporting unit or an indefinite-lived intangible asset below its carrying amount. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and the testing for recoverability of a significant asset group within the reporting unit. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

Goodwill Impairment Assessments

Our goodwill balance relates to our Home Services business. The goodwill impairment test involves a two-step process. The first step is a comparison of the reporting unit's fair value to its carrying value. We estimate fair value using the best information available, using a discounted cash flow model, commonly referred to as the income approach. The income approach uses the reporting unit's projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate for the reporting unit. The projection uses management's best estimates of economic and market conditions over the projected period, including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. We were unable to use a market approach due to there being no market comparables.

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss, if any. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. See Note 12 for further information.

Intangible Asset Impairment Assessments

We consider the income approach when testing intangible assets with indefinite lives for impairment on an annual basis. We utilize the income approach, specifically the relief from royalty method, for analyzing our indefinite-lived assets. This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates for the assets; and (2) the application of these royalty rates to a net sales stream and discounting the resulting cash flows to determine a value. We multiplied the selected royalty rate by the forecasted net sales stream to calculate the cost savings (relief from royalty payment) associated with the assets.

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The cash flows are then discounted to present value by the selected discount rate and compared to the carrying value of the assets.

In our quarterly reports on Form 10-Q filed during 2017, the Company disclosed that if its results continued to decline it could result in revisions in management's estimates of the fair value of the Company's trade names and may result in impairment charges. As a result of recently announced store closures and the further decline in revenue experienced in the fourth quarter at Sears Domestic, our analysis indicated that the fair value of the Sears trade name was less than its carrying value. Accordingly, we recorded impairment related to the Sears trade name during 2017 of $72 million, which reduced the carrying value to $359 million at February 3, 2018. We also recorded impairment charges of $381 million and $180 million in 2016 and 2015, respectively. See Note 12 for further information.

Fair Value of Financial Instruments

We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value in GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. We report the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of temporary cash investments and accounts receivable. We place our cash and cash equivalents in investment-grade, short-term instruments with high quality financial institutions and, by policy, limit the amount of credit exposure in any one financial instrument.

Self-insurance Reserves

We are self-insured for certain costs related to workers' compensation, asbestos, environmental, automobile, warranty, product and general liability claims. We obtain third-party insurance coverage to limit our exposure to certain of these self-insured risks. A portion of these self-insured risks is managed through a wholly-owned insurance subsidiary. Our liability reflected in the Consolidated Balance Sheet, classified within other liabilities (current and long-term), represents an estimate of the ultimate cost of claims incurred at the balance sheet date. In estimating this liability, we utilize loss development factors based on Company-specific data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claims settlements and reported claims. The liabilities for self-insured risks are discounted to their net present values using an interest rate which is based upon the expected duration of the liabilities. Expected payments as of February 3, 2018 were as follows:

millions
2018	$	148
2019	100
2020	74
2021	54
2022	42
Later years	311
Total undiscounted obligation	729
Less—discount	(83		)
Net obligation	$	646

Loss Contingencies

Under accounting standards, loss contingency provisions are recorded for probable losses at management's best estimate of a loss, or when a best estimate cannot be made, the minimum amount in the estimated range is

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recorded. These estimates are often initially developed substantially earlier than the ultimate loss is known, and the estimates are refined each accounting period, as additional information is known.

Revenue Recognition

Revenues include sales of merchandise, services and extended service contracts, net commissions earned from leased departments in retail stores, delivery and handling revenues related to merchandise sold, and fees earned from co-branded credit card programs. We recognize revenues from retail operations at the later of the point of sale or the delivery of goods to the customer. Direct to customer revenues are recognized when the merchandise is delivered to the customer. Revenues from product installation and repair services are recognized at the time the services are provided. Revenues from the sale of service contracts and the related direct acquisition costs are deferred and amortized over the lives of the associated contracts, while the associated service costs are expensed as incurred.

We earn revenues through arrangements with third-party financial institutions that manage and directly extend credit relative to our co-branded credit card programs. The third-party financial institutions pay us for generating new accounts and sales activity on co-branded cards, as well as for selling other financial products to cardholders. We recognize these revenues in the period earned, which is when our related performance obligations have been met. We sell gift cards to customers at our retail stores and through our direct to customer operations. The gift cards generally do not have expiration dates. Revenues from gift cards are recognized when (i) the gift card is redeemed by the customer, or (ii) the likelihood of the gift card being redeemed by the customer is remote (gift card breakage) based on historical redemption patterns and we determine that we do not have a legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions.

Revenues from merchandise sales and services are reported net of estimated returns and allowances and exclude sales taxes. The reserve for returns and allowances is calculated as a percentage of sales based on historical return percentages. Estimated returns are recorded as a reduction of sales and cost of sales. We defer the recognition of layaway sales and profit until the period in which the customer takes possession of the merchandise.

Cost of Sales, Buying and Occupancy

Cost of sales, buying and occupancy are comprised principally of the costs of merchandise, buying, warehousing and distribution (including receiving and store delivery costs), retail store occupancy costs, product repair, and home service and installation costs, customer shipping and handling costs, vendor allowances, markdowns and physical inventory losses.

The Company has a Shop Your Way program in which customers earn points on purchases which may be redeemed to pay for future purchases. The expense for customer points earned is recognized as customers earn them and recorded in cost of sales.

During 2016 and 2015, respectively, the Company received $33 million and $146 million related to one-time credits from vendors associated with prior supply arrangements, which have been reflected as credits within cost of sales, buying and occupancy in the Consolidated Statements of Operations.

Selling and Administrative Expenses

Selling and administrative expenses are comprised principally of payroll and benefits costs for retail and corporate employees, occupancy costs of corporate facilities, advertising, pre-opening costs and other administrative expenses.

Pre-Opening Costs

Pre-opening and start-up activity costs are expensed in the period in which they occur.

Advertising Costs

Advertising costs are expensed as incurred, generally the first time the advertising occurs, and amounted to $415 million, $684 million and $850 million for 2017, 2016 and 2015, respectively. These costs are included within selling and administrative expenses in the Consolidated Statements of Operations.

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Income Taxes

We provide deferred income tax assets and liabilities based on the estimated future tax effects of differences between the financial and tax basis of assets and liabilities based on currently enacted tax laws in effect for the year in which the differences are expected to reverse. The tax balances and income tax expense recognized by us are based on management's interpretation of the tax laws of multiple jurisdictions. Income tax expense also reflects our best estimates and assumptions regarding, among other things, the level of future taxable income, tax planning, and any valuation allowance. Future changes in tax laws, changes in projected levels of taxable income, tax planning, and adoption and implementation of new accounting standards could impact the effective tax rate and tax balances recorded by us. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. In evaluating the objective evidence that historical results provide, we consider cumulative operating income (loss) over the past three years. These assumptions require significant judgment about the forecasts of future taxable income.

Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and other comprehensive income ("OCI"). An exception is provided in the authoritative accounting guidance when there is income from categories other than continuing operations and a loss from continuing operations in the current year. In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expense recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets. In instances where a valuation allowance is established against current year losses, income from other sources, including gain from pension and other postretirement benefits recorded as a component of OCI or the creation of a deferred tax liability through additional paid-in capital for the book to tax difference for the original issue discount relating to the $625 million8% senior unsecured notes due 2019, is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets.

Stock-based Compensation

We account for stock-based compensation arrangements in accordance with accounting standards pertaining to share-based payment transactions, which requires us to both recognize as expense the fair value of all stock-based compensation awards (which includes stock options, although there were no options outstanding in 2017) and to classify excess tax benefits associated with share-based compensation deductions as cash from financing activities rather than cash from operating activities. We recognize compensation expense as awards vest on a straight-line basis over the requisite service period of the award.

Earnings Per Common Share

Basic earnings per common share is calculated by dividing net income attributable to Holdings' shareholders by the weighted average number of common shares outstanding for each period. Diluted earnings per common share also includes the dilutive effect of potential common shares, exercise of stock options, warrants and the effect of restricted stock when dilutive.

New Accounting Pronouncements

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the Financial Accounting Standards Board ("FASB") issued an accounting standards update which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The amendments in this update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the

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Notes to Consolidated Financial Statements—(Continued)

effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We are currently evaluating the effect the update will have on our consolidated financial statements.

Compensation - Retirement Benefits

In March 2017, the FASB issued an accounting standards update which requires an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the update must be applied retrospectively. We are currently evaluating the effect the update will have on our consolidated financial statements.

Goodwill

In January 2017, the FASB issued an accounting standards update which simplifies the test for goodwill impairment. To address concerns over the cost and complexity of the two-step goodwill impairment test, the amendments in this update remove the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted the update in the fourth quarter of 2017. The adoption of the new standard did not have an impact on our consolidated financial statements.

Business Combinations

In January 2017, the FASB issued an accounting standards update which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The amendments in this update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this update require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the update must be applied prospectively. We are currently evaluating the effect the updates will have on our consolidated financial statements.

Statement of Cash Flows

In November 2016, the FASB issued accounting standards updates which address diversity in practice in the classification and presentation of changes in restricted cash in the statement of cash flows. The amendments in this update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Therefore, restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. These updates are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the updates must be applied using a retrospective transition method to each period presented. The Company adopted the update in the first quarter of 2017. The adoption of the new standard impacted the presentation of the Condensed Consolidated Statements of Cash Flows.

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Notes to Consolidated Financial Statements—(Continued)

Consolidation - Interests held through related parties that are under common control

In October 2016, the FASB issued an accounting standards update to amend the accounting standards on how a reporting entity that is the single decision maker of a variable interest entity ("VIE") should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The primary beneficiary of a VIE is the reporting entity that has a controlling financial interest in a VIE and, therefore, consolidates the VIE. A reporting entity has an indirect interest in a VIE if it has a direct interest in a related party that, in turn, has a direct interest in the VIE. Under the amendments, a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. The Company adopted the update in the first quarter of 2017. The adoption of the new standard did not have an impact on the Company's consolidated financial position, results of operations or cash flows.

Income Taxes - Intra-entity transfers of assets other than inventory

In October 2016, the FASB issued an accounting standards update to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current accounting standards prohibit the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice for transfers of certain intangible and tangible assets. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in accounting standards. To more faithfully represent the economics of intra-entity asset transfers, the amendments in this update require that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this update do not change accounting standards for the pre-tax effects of an intra-entity asset transfer under accounting standards applicable to consolidation, or for an intra-entity transfer of inventory. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted as of the beginning of an annual reporting period. The amendments in this update should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating the effect the update will have on our consolidated financial statements.

Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued accounting standards updates which address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, including: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. These updates are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the update must be applied using a retrospective transition method to each period presented. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We are currently evaluating the effect the update will have on our consolidated financial statements.

Leases

In February 2016, the FASB issued an accounting standards update which replaces the current lease accounting standard. The update will require, among other items, lessees to recognize a right-of-use asset and a lease liability for most leases. Extensive quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing contracts. The update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The new standard must be

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Notes to Consolidated Financial Statements—(Continued)

adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently evaluating the effect the update will have on our consolidated financial statements, and expect the update will have a material impact on our consolidated financial statements.

Fair Value Measurements

In May 2015, the FASB issued an accounting standards update which requires certain investments measured at net asset value to be removed from the fair value hierarchy categorization and presented as a single reconciling line item between the fair value of the pension plans assets and the amounts reported in the fair value hierarchy table. The Company adopted the update in fiscal 2016. The adoption of the new standard did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows.

Presentation of Financial Statements - Going Concern

In August 2014, the FASB issued an accounting standards update which requires management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued. If substantial doubt exists, additional disclosures are required. This update was effective for the Company's annual period ended January 28, 2017. The Company's assessment of our ability to continue as a going concern is further discussed in the "Uses and Sources of Liquidity" paragraph above. The adoption of the new standard did not have a material impact on the Company’s consolidated financial position, results of operations, cash flows or disclosures.

Revenue from Contracts with Customers

In May 2014, the FASB issued an accounting standards update which replaces the current revenue recognition standards. Subsequently, the FASB has also issued accounting standards updates which clarify the guidance. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard was initially released as effective for fiscal years beginning after December 15, 2016; however, the FASB has decided to defer the effective date of this accounting standard update for one year. Early adoption of the update is permitted, but not before the original date for fiscal years beginning after December 15, 2016. The update may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption.

The Company has completed its evaluation of the standard and will apply the update retrospectively for each period presented, beginning in the first quarter of 2018. Based on our assessment, we determined the adoption will impact the accounting for our Shop Your Way program, revenues from gift cards and merchandise returns. The expense for Shop Your Way points is currently recognized as customers earn them and recorded in cost of sales. The new guidance will require the Company to allocate the transaction price to products and points on a relative standalone selling price basis, deferring the portion of revenue allocated to the points and recognizing a contract liability for unredeemed points. The change in the accounting for the Shop Your Way program will reduce revenue by approximately 2.7% and 2.6% in 2017 and 2016, respectively, but will have no impact to gross margin. The new guidance will also change the timing of recognition of the unredeemed portion of our gift cards, which is currently recognized using the remote method. The new guidance will require application of the proportional method. The Company currently reports revenues from merchandise sales net of estimated returns. The new guidance will require the Company to record both an asset and a liability for anticipated customer returns. These changes will not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows, with the exception of the Shop Your Way program described above.

NOTE 2—SEARS CANADA

At both February 3, 2018 and January 28, 2017, the Company was the beneficial holder of approximately 12 million, or 12%, of the common shares of Sears Canada. Sears Canada filed for court protection and in July 2017 trading of its common shares was suspended. Accordingly, we recognized other-than-temporary impairment of $12

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Notes to Consolidated Financial Statements—(Continued)

million within interest and investment loss in our Consolidated Statements of Operations during 2017. Our equity method investment in Sears Canada was $17 million at January 28, 2017, and was included within other assets in the Consolidated Balance Sheets. The fair value of our equity method investment in Sears Canada was determined based on quoted market prices for its common stock. Our equity method investment in Sears Canada was valued using Level 1 measurements as defined in Note 5.

NOTE 3—BORROWINGS

Total borrowings outstanding at February 3, 2018 and January 28, 2017 were $4.1 billion and $4.2 billion, respectively. At February 3, 2018, total short-term borrowings were $915 million, consisting of secured borrowings, line of credit loans and incremental loans. At January 28, 2017, we had no short-term borrowings outstanding. The weighted-average annual interest rate paid on short-term borrowings was 8.0% in 2017 and 5.4% in 2016.

Long-term debt was as follows:

ISSUE	February 3, 2018			January 28, 2017
millions
SEARS ROEBUCK ACCEPTANCE CORP.
6.50% to 7.50% Notes, due 2027 to 2043	$	284		$	327
Term Loan (Credit Facility), $1.0B due 2019	391			963
2016 Term Loan (Credit Facility), $750M due 2020	559			726
Second Lien Term Loan (Credit Facility), $300M due 2020	294			292
SEARS HOLDINGS CORP.
8% Secured Loan Facility, due 2018	251			494
6.625% Senior Secured Notes, due 2018	303			303
8% Senior Unsecured Notes, due 2019	483			428
8% Secured Loan Facility, due 2020	374			485
Term Loan Facility (Credit Facility), $300M due 2020	206			—
CAPITALIZED LEASE OBLIGATIONS	72			145
Total long-term borrowings	3,217			4,163
Current maturities	(968		)	(590		)
Long-term debt and capitalized lease obligations	$	2,249		$	3,573
Weighted-average annual interest rate on long-term debt	7.6		%	7.2		%

The fair value of long-term debt, excluding capitalized lease obligations, was $2.8 billion at February 3, 2018 and $4.0 billion at January 28, 2017. The fair value of our debt was estimated based on quoted market prices for the same or similar issues or on current rates offered to us for debt of the same remaining maturities. Our long-term debt instruments are valued using Level 2 measurements as defined in Note 5.

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Notes to Consolidated Financial Statements—(Continued)

At February 3, 2018, long-term debt maturities for the next five years and thereafter were as follows:

millions
2018	$	979
2019	637
2020	1,471
2021	3
2022	3
Thereafter	312
Total maturities	3,405
Unamortized debt discount	(152		)
Unamortized debt issuance costs	(36		)
Long-term debt, net of discount & debt issuance costs	$	3,217

Interest

Interest expense for years 2017, 2016 and 2015 was as follows:

millions	2017		2016		2015
COMPONENTS OF INTEREST EXPENSE
Interest expense (1)	$	377	$	288	$	223
Amortization of debt issuance costs	58		31		25
Accretion of debt discount	66		50		35
Accretion of self-insurance obligations at net present value	19		16		19
Accretion of lease obligations at net present value	19		19		21
Interest expense	$	539	$	404	$	323

⁽¹⁾ Includes paid-in-kind interest of $1 million for 2017.

Unsecured Commercial Paper

We borrow through the commercial paper markets. At both February 3, 2018 and January 28, 2017, we had no commercial paper borrowings outstanding.

Secured Short-Term Loan

On September 15, 2014, the Company, through Sears, Sears Development Co. and Kmart Corporation ("Short-Term Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a $400 million secured short-term loan (the "Short-Term Loan'") with JPP II, LLC and JPP, LLC (collectively, the "Lenders"), entities affiliated with ESL. Proceeds of the Short-Term Loan were used for general corporate purposes.

The Short-Term Loan was originally scheduled to mature on December 31, 2014, and was subsequently amended and extended. We repaid the Short-Term Loan during 2015, resulting in no balance outstanding at February 3, 2018 or January 28, 2017.

Letter of Credit Facility

On December 28, 2016, the Company, through Sears Roebuck Acceptance Corp. ("SRAC") and Kmart Corporation (together with SRAC, the "Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into the Letter of Credit and Reimbursement Agreement (the "LC Facility") providing for a $500 million secured standby letter of credit facility (of which $271 million was committed at February 3, 2018) from the Lenders, with Citibank, N.A., serving as administrative agent and issuing bank (the "Issuing Bank").

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Notes to Consolidated Financial Statements—(Continued)

In August 2017, the Company executed amendments to the LC Facility. The amendments, among other things, extended the maturity to December 28, 2018, eliminated the unused portion of the facility and released the real estate collateral that secured the original LC Facility. The amended LC Facility also permits the Lenders to syndicate all or a portion of their commitments under the facility to other lenders, of which $138 million has been syndicated to unaffiliated third party lenders as of February 3, 2018.

The amended LC Facility is guaranteed by the same subsidiaries of the Company that guarantee the obligations under the Amended Domestic Credit Agreement, as defined below. The amended LC Facility is secured by substantially the same collateral as the Amended Domestic Credit Agreement. The amended LC Facility contains a borrowing base calculation, pursuant to which the borrowers are required to cash collateralize the LC Facility if the aggregate obligations under the Amended Domestic Credit Agreement, amended LC Facility and certain other cash management and similar obligations exceed the Modified Borrowing Base, as defined in the amended LC Facility, as of the end of any calendar month.

To secure their obligation to participate in letters of credit issued under the LC Facility, the lenders under the LC Facility are required to maintain cash collateral on deposit with the Issuing Bank in an amount equal to 102% of the commitments under the LC Facility (the "Lender Deposit"). The Borrowers paid the Lenders an upfront fee equal to 1.00% of the aggregate amount of the Lender Deposit. In addition, the Borrowers are required to pay a commitment fee on the average daily amount of the Lender Deposit (as such amount may be increased or decreased from time to time) equal to the Eurodollar Rate (as defined under the Amended Domestic Credit Facility) plus 11.0%, as well as certain other fees. In the event of reductions of the commitments under the LC Facility or a termination of the LC Facility prior to the six month anniversary of the effective date of the amendments, under certain circumstances the Borrowers will be required to pay an early reduction/termination fee equal to the commitment fee that would have accrued with respect to the reduced or terminated commitments from the date of reduction or termination until the six month anniversary.

The LC Facility includes certain representations and warranties, affirmative and negative covenants and other undertakings, which are subject to important qualifications and limitations set forth in the LC Facility. The LC Facility also contains 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 an event of default occurs, the Lenders may terminate all or any portion of the commitments under the LC Facility, require the Borrowers to cash collateralize the LC Facility and/or exercise any rights they might have under any of the related facility documents (including against the collateral), subject to certain limitations. At February 3, 2018 and January 28, 2017, respectively, we had $271 million and $200 million of letters of credit outstanding under the LC Facility.

Secured Loan and Mezzanine Loan

On March 14, 2018, the Company, through SRC O.P. LLC, SRC Facilities LLC and SRC Real Estate (TX), LLC (collectively, the "Secured Loan Borrowers"), entities wholly-owned and controlled indirectly by the Company, entered into a Credit Agreement (the "Credit Agreement") with the lenders party thereto (collectively, the "Secured Lenders"). The Credit Agreement provides for a $200 million term loan (the "Secured Loan") that is secured by the Secured Loan Borrowers' interests in 138 real properties that were released from a ring-fence arrangement with the PBGC. The Secured Loan matures on December 14, 2018. The Company used the proceeds of the Secured Loan to make a contribution to the Company's pension plans and for general corporate purposes.

Also on March 14, 2018, the Company, through SRC Sparrow 2 LLC (the "Mezzanine Loan Borrower"), an entity wholly-owned and controlled indirectly by the Company, entered into a Mezzanine Loan Agreement (the "Mezzanine Loan Agreement") with the Lenders, entities affiliated with ESL. The Mezzanine Loan Agreement provides for a $240 million term loan (the "Mezzanine Loan") that is secured by a pledge of the equity interests in SRC O.P. LLC, the direct parent company of the entities that own the 138 real properties that secure the obligations of the Secured Loan Borrowers under the Credit Agreement. The Mezzanine Loan matures on July 20, 2020. The Company used the proceeds of the Mezzanine Loan to make a contribution to the Company’s pension plans.

The Mezzanine Loan Agreement contains an uncommitted accordion feature pursuant to which the Mezzanine Loan Borrower may incur additional loans ("Additional Mezzanine Loans") of not more than $200 million in aggregate, subject to certain conditions set forth in the Mezzanine Loan Agreement and the Credit Agreement,

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including that the Additional Mezzanine Loans shall not exceed an amount equal to the principal amount of the Secured Loan repaid by the Secured Loan Borrowers.

The Secured Loan and the Mezzanine Loan are both guaranteed by the Company and certain of its subsidiaries. The Secured Loan bears interest at an annual interest rate of LIBOR plus 6.5% for the first three months the Secured Loan is outstanding, LIBOR plus 7.5% for the fourth through the sixth month the Secured Loan is outstanding and LIBOR plus 8.5% for the seventh through the ninth month the Secured Loan is outstanding. Accrued interest is payable monthly during the term of the Secured Loan. The Mezzanine Loan bears interest at an annual interest rate of LIBOR plus 11.0%, with accrued interest payable monthly during the term of the Mezzanine Loan. The Company paid an upfront commitment fee of 1.5% of the principal amount of the Secured Loan, and paid an arrangement fee. The Mezzanine Borrowers paid an upfront commitment fee equal to 1.8% of the principal amount of the Mezzanine Loan.

To the extent permitted under other debt of the Company or its affiliates, the Secured Loan and the Mezzanine Loan may be prepaid at any time in whole or in part, without penalty or premium. The Secured Loan Borrowers are required to apply the net proceeds of the sale of any real property collateral for the Secured Loan to repay the Secured Loan. Following repayment in full of the Secured Loan, the Mezzanine Loan Borrower is required to apply the net proceeds of the sale of any real property that served as collateral for the Secured Loan to repay the Mezzanine Loan.

The Credit Agreement and the Mezzanine Loan Agreement include certain representations and warranties, indemnities and covenants, including with respect to the condition and maintenance of the real property collateral.The Credit Agreement and the Mezzanine Loan Agreement have 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 Secured Loan Lenders and the Mezzanine 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 Secured Loan Borrowers or Mezzanine Loan Borrower to pay a default interest rate of 2.0% in excess of the base interest rate.

Term Loan Facility

On January 4, 2018, the Borrowers entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) providing for a secured term loan facility (the “Term Loan Facility”) from the Lenders, entities affiliated with ESL. The Term Loan Facility is guaranteed by the Company and certain of its subsidiaries that guarantee the Company’s 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. On January 4, 2018, $100 million was borrowed under the Term Loan Facility. The Term Loan Facility also 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 $200 million to be borrowed from other counterparties and secured by the same collateral as the initial loan under the Term Loan Facility. An additional $30 million was borrowed under the Term Loan Facility on January 19, 2018.

On January 29, 2018, the Company entered into an Amendment to the Term Loan Credit Agreement (the "Amendment"), pursuant to which an additional $20 million was borrowed from the Lenders and a further $60 million was borrowed from certain unaffiliated lenders, bringing the total amount borrowed under the Term Loan Facility to $210 million at February 3, 2018. The Amendment, among other changes, separates the loans under the Term Loan Facility into two tranches. On February 26, 2018, the Company entered into another amendment to the Term Loan Credit Agreement pursuant to which an additional $40 million was borrowed from the Lenders.

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 used the proceeds of the Term Loan Facility for general corporate purposes. 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.

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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.

At February 3, 2018, the carrying value of the Term Loan Facility, net of the remaining debt issuance costs, was $206 million. The carrying value includes paid-in-kind interest of $1 million at February 3, 2018.

2017 Secured Loan Facility

On January 3, 2017, the Company, through Sears, Kmart Stores of Illinois LLC, Kmart of Washington LLC and Kmart Corporation (collectively, "2017 Secured Loan Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, obtained a $500 million real estate loan facility (the "2017 Secured Loan Facility") from the Lenders, entities affiliated with ESL. On January 3, 2017, $321 million was funded under the 2017 Secured Loan Facility, and an additional $179 million was drawn by the Company prior to January 28, 2017. The 2017 Secured Loan Facility matures on July 20, 2020. The Company used the proceeds of the 2017 Secured Loan Facility for general corporate purposes.

During October 2017, the Company, through the 2017 Secured Loan Borrowers and 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, "Incremental Loan Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into amended and restated loan agreements (the "Incremental Loans") with the Lenders, entities affiliated with ESL. The Company borrowed $200 million pursuant to the Incremental Loans, and used the proceeds for general corporate purposes. The Incremental Loans mature on April 23, 2018, except that if the maturity date of the 2016 Secured Loan Facility (as defined below) is extended to July 6, 2018, then the Incremental Loans will mature on July 6, 2018.

On March 8, 2018, the Company, through the 2017 Secured Loan Borrowers and SHC Desert Springs, LLC, Innovel Solutions, Inc., Sears Holdings Management Corporation, Maxserv, Inc. and Troy Coolidge No. 13, LLC (collectively, "Second Incremental Loan Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a second amendment to the Incremental Loans (the "Second Amendment") with the Lenders, entities affiliated with ESL. Pursuant to the Second Amendment, the Second Incremental Loan Borrowers borrowed an additional $100 million from the Lenders (the "Second Incremental Loan") and used the proceeds for general corporate purposes. The Second Incremental Loan matures on July 20, 2020.

Initially, the 2017 Secured Loan Facility had an annual base interest rate of 8%, with accrued interest payable monthly during the term of the 2017 Secured Loan Facility. Pursuant to the Second Amendment, the interest rate increased to LIBOR plus 9%. The Borrowers paid an upfront commitment fee equal to 1.0% of the full principal amount of the 2017 Secured Loan Facility and paid a funding fee equal to 1.0% of the amounts drawn under the 2017 Secured Loan Facility at the time such amounts were drawn. The Incremental Loans have an annual interest rate of 11%, with accrued interest payable monthly. The Second Incremental Loan has an annual interest rate of LIBOR plus 9%, with accrued interest payable monthly. No upfront or funding fees were paid in connection with the Incremental Loans or Second Incremental Loan.

The 2017 Secured Loan Facility, Incremental Loans and Second Incremental Loan are guaranteed by the Company and certain of its subsidiaries, and were secured by a first priority lien on 69 real properties owned by the 2017 Secured Loan Borrowers and Incremental Loan Borrowers and guarantors at inception of the 2017 Secured Loan Facility, and an additional 7 real properties owned by the Incremental Loan Borrowers at inception of the Incremental Loans. In certain circumstances, the Lenders and the 2017 Secured Loan Borrowers, Incremental Loan Borrowers and Second Incremental Loan Borrowers may elect to substitute one or more properties as collateral. To the extent permitted under other debt of the Company or its affiliates, the 2017 Secured Loan Facility may be prepaid at any time in whole or in part, without penalty or premium. The 2017 Secured Loan Borrowers are required to apply the net proceeds of the sale of any real property collateral for the 2017 Secured Loan Facility to repay the

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loan. The Company used proceeds of $116 million to pay interest and a portion of the 2017 Secured Loan Facility and $55 million to pay interest and a portion of the Incremental Loans during 2017.

The 2017 Secured Loan Facility, Incremental Loans and Second Incremental Loan include certain representations and warranties, indemnities and covenants, including with respect to the condition and maintenance of the real property collateral. The 2017 Secured Loan Facility, Incremental Loans and Second Incremental Loan have 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 any of the 2017 Secured Loan Facility, Incremental Loan or Second Incremental Loan documents (including against the collateral), and require the 2017 Secured Loan Borrowers, Incremental Loan Borrowers or Second Incremental Loan 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 carrying value of the 2017 Secured Loan Facility, net of the remaining debt issuance costs, was $374 million and $485 million at February 3, 2018 and January 28, 2017, respectively. The carrying value of the Incremental Loans, net of the remaining debt issuance costs, was $144 million at February 3, 2018. The Incremental Loans are included within short-term borrowings in the Consolidated Balance Sheets for all periods presented.

2016 Secured Loan Facility

On April 8, 2016, the Company, through Sears, Sears Development Co., Innovel, Big Beaver of Florida Development, LLC and Kmart Corporation (collectively, "2016 Secured Loan Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, obtained a $500 million real estate loan facility (the "2016 Secured Loan Facility") from JPP, LLC, JPP II, LLC, and Cascade Investment, LLC (collectively, the "2016 Secured Loan Lenders"). JPP, LLC and JPP II, LLC are entities affiliated with ESL. The first $250 million of the 2016 Secured Loan Facility was funded on April 8, 2016 and the remaining $250 million was funded on April 22, 2016. The funds were used to reduce outstanding borrowings under the Company's asset-based revolving credit facility and for general corporate purposes. The 2016 Secured Loan Facility had an original maturity date of July 7, 2017. In May 2017, the Company reached an agreement to extend the maturity of $400 million of the 2016 Secured Loan Facility to January 2018, with options to further extend the maturity of the loan for up to an additional six months, to July 6, 2018, subject to the satisfaction of certain conditions and the payment of certain fees. On November 21, 2017, the Company notified the 2016 Secured Loan Lenders of its exercise of the first such option to extend the maturity to April 6, 2018, subject to the payment of an extension fee on January 8, 2018, which fee was paid on January 8, 2018. On February 5, 2018, the Company notified the 2016 Secured Loan Lenders of its exercise of the second such option to extend the maturity to July 6, 2018, subject to the payment of an extension fee on April 6, 2018. The 2016 Secured Loan Facility is included within current portion of long-term debt in the Consolidated Balance Sheets for all periods presented. The carrying value of the 2016 Secured Loan Facility, net of the remaining debt issuance costs, was $251 million and $494 million at February 3, 2018 and January 28, 2017, respectively.

The 2016 Secured Loan Facility has an annual base interest rate of 8%, with accrued interest payable monthly during the term of the 2016 Secured Loan Facility. The 2016 Secured Loan Borrowers paid an upfront commitment fee equal to 1.0% of the full principal amount of the 2016 Secured Loan Facility and paid a funding fee equal to 1.0% at the time such amounts were drawn. In connection with the May 2017 maturity extension, the Company paid a one-time extension fee equal to $8 million to the extending lenders.

The 2016 Secured Loan Facility is guaranteed by the Company and was originally secured by a first priority lien on 21 real properties owned by the 2016 Secured Loan Borrowers. The 2016 Secured Loan Facility includes customary representations and warranties, indemnities and covenants, including with respect to the condition and maintenance of the real property collateral.

The 2016 Secured Loan Facility has customary 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 2016 Secured Loan Lenders may declare all or any portion of the outstanding indebtedness to be immediately due and payable, exercise any rights they might have under any of the 2016 Secured Loan Facility documents (including

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against the collateral), and require the 2016 Secured Loan 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 2016 Secured Loan Facility may be prepaid at any time in whole or in part, without penalty or premium and $250 million of proceeds from real estate transactions was used to pay interest and a portion of the loan during the 2017.

Domestic Credit Agreement

The Borrowers and Holdings are party to an amended and restated credit agreement (the "Amended Domestic Credit Agreement") with a syndicate of lenders. Pursuant to the Amended Domestic Credit Agreement, the Borrowers have borrowed two senior secured term loan facilities having original principal amounts of $1.0 billion and $750 million (the "Term Loan" and "2016 Term Loan," respectively). The Amended Domestic Credit Agreement currently provides for a $1.5 billion asset-based revolving credit facility (the "Revolving Facility") with a $1.0 billion letter of credit sub-facility, which matures on July 20, 2020. The Term Loan had an original maturity of June 30, 2018 and the 2016 Term Loan matures on July 20, 2020. In December 2017, the Company entered into an agreement to extend the maturity of the Term Loan to January 20, 2019, with the option to further extend the maturity to July 20, 2019, subject to certain conditions, including payment of an extension fee equal to 2.0% of the principal amount of the Term Loan outstanding at the time of such extension. The Amended Domestic Credit Agreement includes an accordion feature that allows the Borrowers to use, subject to borrowing base requirements, existing collateral for the facility to obtain up to $1.0 billion of additional borrowing capacity, of which $750 million was utilized for the 2016 Term Loan (described below). The Amended Domestic Credit Agreement also includes a FILO tranche feature that allows up to an additional $500 million of borrowing capacity and allows Holdings and its subsidiaries to undertake short-term borrowings outside the facility up to $1.0 billion. In February 2018, the Borrowers entered into an amendment that increased the size of the general debt basket to $1.25 billion.

Revolving advances under the Amended Domestic Credit Agreement bear interest at a rate equal to, at the election of the Borrowers, either the London Interbank Offered Rate ("LIBOR") or a base rate, in either case plus an applicable margin dependent on Holdings' consolidated leverage ratio (as measured under the Amended Domestic Credit Agreement). The margin with respect to borrowings ranges from 3.50% to 4.00% for LIBOR loans and from 2.50% to 3.00% for base rate loans. The Amended Domestic Credit Agreement also provides for the payment of fees with respect to issued and undrawn letters of credit at a rate equal to the margin applicable to LIBOR loans and a commitment fee with respect to unused amounts of the Revolving Facility at a rate equal to 0.625% per annum.

The Revolving Facility is in place as a funding source for general corporate purposes and is secured by a first lien on substantially all of our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability. The Revolving Facility is guaranteed by all domestic subsidiaries of Holdings that own inventory or credit card or pharmacy receivables. The Revolving Facility also permits aggregate second lien indebtedness of up to $2.0 billion, of which $1.1 billion in second lien notes were outstanding at February 3, 2018, resulting in $896 million of permitted second lien indebtedness, subject to limitations contained in our other outstanding indebtedness. If, through asset sales or other means, the value of the above eligible assets is not sufficient to support borrowings of up to the full amount of the commitments under this facility, we will not have full access to the facility, but rather could have access to a lesser amount determined by the borrowing base. Such a decline in the value of eligible assets also could result in our inability to borrow up to the full amount of second lien indebtedness permitted by the domestic credit facility, but rather we could be limited to borrowing a lesser amount determined by the borrowing base as calculated pursuant to the terms of such indenture.

The Term Loan bears interest at a rate equal to, at the election of the Borrowers, either LIBOR (subject to a 1.00% LIBOR floor) or a base rate, plus an applicable margin for LIBOR loans of 4.50% and for base rate loans of 3.50%. Currently, the Borrowers are required to repay the Term Loan in quarterly installments of $2.5 million, with the remainder of the Term Loan maturing January 20, 2019, subject to the right of the Borrowers to extend the maturity to July 20, 2019. Additionally, the Borrowers are required to make certain mandatory repayments of the Term Loan from excess cash flow (as defined in the Amended Domestic Credit Agreement). The Term Loan may be prepaid in whole or part without penalty. The Term Loan is secured by the same collateral as the Revolving Facility on a pari passu basis with the Revolving Facility, and is guaranteed by the same subsidiaries of the Company that guarantee the Revolving Facility. At February 3, 2018 and January 28, 2017, respectively, we had borrowings of $400 million and $970 million under the Term Loan, and carrying value, net of the remaining discount and debt issuance costs, of $391 million and $963 million. During the fourth quarter, the Company paid down the Term Loan

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by $325 million, reducing the outstanding balance, and bringing our total Term Loan repayment during 2017 to approximately $570 million. The Company made additional repayments in 2018 of $97 million through the date of this report. A portion of the proceeds received from the Craftsman Sale were also used to reduce outstanding borrowings under the Term Loan.

Amounts borrowed pursuant to the 2016 Term Loan bear interest at a rate equal to LIBOR plus 750 basis points, subject to a 1.00% LIBOR floor. The Company received approximately $722 million in net proceeds from the 2016 Term Loan, which proceeds were used to reduce outstanding borrowings under its asset-based revolving credit facility. The 2016 Term Loan has a maturity date of July 20, 2020, which is the same maturity date as the Company's revolving credit facility commitments, and does not amortize. The 2016 Term Loan is subject to a prepayment premium of 2% of the aggregate principal amount of the 2016 Term Loan prepaid on or prior to April 8, 2017 and 1% of the aggregate principal amount of the 2016 Term Loan prepaid after April 8, 2017 and on or prior to April 8, 2018. The obligations under the Amended Domestic Credit Agreement, including the 2016 Term Loan, are secured by a first lien on substantially all of the domestic inventory and credit card and pharmacy receivables of the Company and its subsidiaries and aggregate advances under the Amended Domestic Credit Agreement are subject to a borrowing base formula. The carrying value of the 2016 Term Loan, net of the remaining discount and debt issuance costs, was $559 million and $726 million at February 3, 2018 and January 28, 2017, respectively. A portion of the proceeds received from the Craftsman Sale were used to reduce outstanding borrowings under the 2016 Term Loan.

The Amended Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, to be at least 15%, exceptions that may be subject to certain maximum amounts and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. Further, the Amended Domestic Credit Agreement includes customary covenants that restrict our ability to make dispositions, prepay debt and make investments, subject, in each case, to various exceptions. The Amended Domestic Credit Agreement also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0. As of February 3, 2018, our fixed charge ratio continues to be less than 1.0 to 1.0, and we are subject to these other requirements based on our availability. If availability under the domestic revolving credit facility were to fall below 10%, the Company would be required to test the fixed charge coverage ratio, and would not comply with the facility, and the lenders under the facility could demand immediate payment in full of all amounts outstanding and terminate their obligations under the facility. In addition, the domestic credit facility provides that in the event we make certain prepayments of indebtedness, for a period of one year thereafter we must maintain availability under the facility of at least 12.5%, and it prohibits certain other prepayments of indebtedness.

At February 3, 2018, we had $271 million of Revolving Facility borrowings, and at January 28, 2017, we had no borrowings outstanding under the Revolving Facility. We had $377 million and $464 million at February 3, 2018 and January 28, 2017, respectively, of letters of credit outstanding under the Revolving Facility. At February 3, 2018 and January 28, 2017, the amount available to borrow under the Revolving Facility was $69 million and $165 million, respectively, which reflects the effect of the springing fixed charge coverage ratio covenant and the borrowing base limitation. The majority of the letters of credit outstanding are used to provide collateral for our insurance programs.

Second Lien Credit Agreement

On September 1, 2016, the Company, SRAC, and Kmart Corporation (together with SRAC, the "ABL Borrowers") entered into a Second Lien Credit Agreement with the Lenders thereunder, entities affiliated with ESL, pursuant to which the ABL Borrowers borrowed $300 million under a term loan (the "Second Lien Term Loan"). The Company received net proceeds of $291 million, which were used for general corporate purposes.

The maturity date for the Second Lien Term Loan is July 20, 2020 and the Second Lien Term Loan will not amortize. The Second Lien Term Loan bears interest at a rate equal to, at the election of the ABL Borrowers, either LIBOR (subject to a 1.00% floor) or a specified prime rate ("Base Rate"), in either case plus an applicable margin. The margin with respect to the Second Lien Term Loan is 7.50% for LIBOR loans and 6.50% for Base Rate loans.

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The Second Lien Credit Agreement was amended on July 7, 2017, providing an uncommitted line of credit facility under which subsidiaries of the Company may from time to time borrow line of credit loans ("Line of Credit Loans") with maturities less than 180 days, subject to applicable borrowing base limitations, in an aggregate principal amount not to exceed $500 million at any time outstanding. In February 2018, the Second Lien Credit Agreement was further amended to, among other things, increase the maximum aggregate principal amount of the Line of Credit Loans to $600 million, extend the maximum duration of the Line of Credit Loans to 270 days and increase the size of the general debt basket to $1.25 billion. During 2017, the Company received aggregate proceeds of $610 million from the issuance of Line of Credit Loans from various lenders, some of which are entities affiliated with ESL, Bruce R. Berkowitz, and Thomas J. Tisch. The Company made repayments of $110 million during 2017, some of which were to related parties. See Note 15 for further information. The proceeds were used for the repayment of indebtedness and general corporate purposes.

The Second Lien Credit Agreement was further amended on January 9, 2018. This amendment amended the borrowing base definition in the Second Lien Credit Agreement to increase the advance rate for inventory to 75% from 65% and also deferred the collateral coverage test for purposes of the mandatory repayment covenant in the Second Lien Credit Agreement such that no such mandatory repayment can be required until the end of the third quarter of 2018. In connection with the closing of the Exchange Offers, the Company also entered into an amendment to its Second Lien Credit Agreement. The amendment provides the Company with the option to pay interest on its outstanding $300 million principal amount Second Lien Term Loan in kind, and also provides that the Company's obligation under the term loan is convertible into common stock of the Company, on the same conversion terms as the New Senior Secured Notes.

Following consummation of the Exchange Offers, the Company's obligations under the Second Lien Credit Agreement are secured on a pari passu basis with the Company’s obligations under that certain Indenture, dated as of March 20, 2018, pursuant to which the Company issued its New Senior Secured Notes (defined below). The collateral includes inventory, receivables and other related assets of the Company and its subsidiaries which are obligated on the Second Lien Term Loan and the New Senior Secured Notes. The Second Lien Credit Agreement is guaranteed by all domestic subsidiaries of the Company that guarantee the Company’s obligations under its existing Revolving Facility.

The Second Lien Credit Agreement includes representations and warranties, covenants and other undertakings, and events of default that are substantially similar to those contained in the Amended Domestic Credit Agreement. The Second Lien Credit Agreement requires the ABL Borrowers to prepay amounts outstanding under the Amended Domestic Credit Agreement and/or the Second Lien Credit Agreement in order to avoid a Collateral Coverage Event (as defined below). The carrying value of the Second Lien Term Loan, net of the remaining debt issuance costs, was $294 million and $292 million at February 3, 2018 and January 28, 2017, respectively. The carrying value of the Line of Credit Loans was $500 million at February 3, 2018.

Old Senior Secured Notes and New Senior Secured Notes

In October 2010, we sold $1.0 billion aggregate principal amount of senior secured notes (the "Old Senior Secured Notes"), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Old Senior Secured Notes, the Company sold $250 million aggregate principal amount of Old Senior Secured Notes to the Company's domestic pension plan in a private placement, none of which remain in the domestic pension plan as a result of the Tender Offer discussed below. The Old Senior Secured Notes are guaranteed by certain subsidiaries of the Company and are secured by a security interest in certain assets consisting primarily of domestic inventory and receivables (the "Collateral"). The lien that secures the Old Senior Secured Notes is junior in priority to the liens on such assets that secure obligations under the Amended Domestic Credit Agreement, as well as certain other first priority lien obligations, and, following consummation of the Exchange Offers, obligations under the indenture relating to the New Senior Secured Notes. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for general corporate purposes. Prior to consummation of the Exchange Offers, the indenture under which the Old Senior Secured Notes (the "Old Senior Secured Notes Indenture") were issued contained restrictive covenants that, among other things, (1) limited the ability of the Company and certain of its domestic subsidiaries to create liens and enter into sale and leaseback transactions and (2) limited the ability of the Company to consolidate with or merge

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Notes to Consolidated Financial Statements—(Continued)

into, or sell other than for cash or lease all or substantially all of its assets to, another person. The indenture also provided for certain events of default, which, if any were to occur, would permit or require the principal and accrued and unpaid interest on all the then outstanding Senior Secured Notes to be due and payable immediately. In connection with the consummation of the Exchange Offers, we entered into a supplemental indenture to the Old Senior Secured Notes Indenture that eliminated substantially all of the restrictive covenants and certain events of default in the Old Senior Secured Notes Indenture. The supplemental indenture, among other things, eliminated the obligation of the Company to offer to repurchase all outstanding Old Senior Secured Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if the borrowing base (as calculated pursuant to the indenture) falls below the principal value of the Old Senior Secured Notes plus any other indebtedness for borrowed money that is secured by liens on the Collateral for two consecutive quarters or upon the occurrence of certain change of control triggering events. The Company may call the Old Senior Secured Notes at a premium based on the "Treasury Rate" as defined in the indenture, plus 50 basis points.

On August 3, 2015, the Company commenced a tender offer (the "Tender Offer") to purchase for cash up to $1.0 billion principal amount of its Old Senior Secured Notes, which expired on August 28, 2015. Approximately $936 million principal amount of the Old Senior Secured Notes were validly tendered and not validly withdrawn in the Tender Offer. Holders who validly tendered and did not validly withdraw Old Senior Secured Notes at or prior to the early tender date of August 14, 2015 received total consideration of $990 per $1,000 principal amount of Old Senior Secured Notes that were accepted for purchase, which included an early tender payment of $30 per $1,000 principal amount of Old Senior Secured Notes accepted for purchase, plus accrued and unpaid interest up to, but excluding, the settlement date. Holders who validly tendered and did not validly withdraw Old Senior Secured Notes after the early tender date but at or prior to the expiration date of August 28, 2015 received total consideration of $960 per $1,000 principal amount of Old Senior Secured Notes accepted for purchase, plus accrued and unpaid interest up to, but excluding, the settlement date.

We accounted for the Tender Offer in accordance with accounting standards applicable to extinguishment of liabilities and debt modifications and extinguishments. Accordingly, we de-recognized the net carrying amount of Old Senior Secured Notes of $929 million (comprised of the principal amount of $936 million, offset by unamortized debt issuance costs and discount of $7 million), and the reacquisition cost was $929 million.

On January 9, 2018, the Company and certain of its subsidiaries entered into a Fourth Supplemental Indenture (the "Supplemental Indenture") with Wilmington Trust, National Association, as successor trustee and collateral agent, amending the Old Senior Secured Notes Indenture. The Supplemental Indenture amended the borrowing base definition in the Old Senior Secured Notes Indenture to increase the advance rate for inventory to 75% from 65%. The Supplemental Indenture also defers the collateral coverage test for purposes of the repurchase offer covenant in the Indenture and restarts it with the second quarter of 2018 (such that no collateral coverage event can occur until the end of the third quarter of 2018).

The carrying value of Old Senior Secured Notes, net of the remaining discount and debt issuance costs, was $303 million and $303 million at February 3, 2018 and January 28, 2017, respectively. The carrying value of Old Senior Secured Notes is included within current portion of long-term debt in the Consolidated Balance Sheets at February 3, 2018.

In February 2018, the Company commenced the Exchange Offers pursuant to which it offered to issue in exchange for its outstanding Senior Secured Notes new 6 5/8% Senior Secured Notes Due 2019, of a like principal amount, convertible into common stock of the Company, with interest on such notes to be payable in kind at the Company's option. The Exchange Offers expired on March 15, 2018. Approximately $169.8 million principal amount of the Senior Secured Notes were validly tendered, accepted and canceled, including $20 million principal amount of Old Senior Secured Notes held by ESL, and the Company issued a like principal amount of New Senior Secured Notes. The New Senior Secured Notes are optionally convertible by the holders thereof into shares of the Company’s common stock at a conversion price of $5.00 per share of common stock, and are mandatorily convertible at the Company's option if the volume weighted average trading price of the common stock on the NASDAQ exceeds $10.00 for a prescribed period. The New Senior Unsecured Notes bear interest at a rate of 6.625% per annum and the Company will pay interest semi-annually on April 15 and October 15 of each year, which interest may, at the option of the Company, be paid in kind. The New Senior Secured Notes mature in October 2019.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

The New Senior Secured Notes are guaranteed by certain subsidiaries of the Company and are secured by a security interest in the Collateral. The lien that secures the New Senior Secured Notes is junior in priority to the liens on such assets that secure obligations under the Amended Domestic Credit Agreement, as well as certain other first priority lien obligations, and senior to the lien on such assets that secure obligations under the Old Senior Secured Notes Indenture. The indenture under which the New Senior Secured Notes (the "New Senior Secured Notes Indenture") were issued contains restrictive covenants that, among other things, (1) limit the ability of the Company and certain of its domestic subsidiaries to create liens and enter into sale and leaseback transactions and (2) limit the ability of the Company to consolidate with or merge into, or sell other than for cash or lease all or substantially all of its assets to, another person. The New Senior Secured Notes Indenture also provides for certain events of default, which, if any were to occur, would permit or require the principal and accrued and unpaid interest on all the then outstanding New Senior Secured Notes to be due and payable immediately. The New Senior Secured Notes Indenture also requires the Company to offer to repurchase all outstanding New Senior Secured Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if the borrowing base (as calculated pursuant to the indenture) falls below the principal value of the New Senior Secured Notes plus any other indebtedness for borrowed money that is secured by liens on the Collateral for two consecutive quarters or upon the occurrence of certain change of control triggering events.

Old Senior Unsecured Notes and New Senior Unsecured Notes

On October 20, 2014, the Company announced its Board of Directors had approved a rights offering allowing its stockholders to purchase up to $625 million in aggregate principal amount of 8% senior unsecured notes due 2019 and warrants to purchase shares of its common stock. The subscription rights were distributed to all stockholders of the Company as of October 30, 2014, the record date for this rights offering, and every stockholder had the right to participate on the same terms in accordance with its pro rata ownership of the Company's common stock, except that holders of the Company's restricted stock that was unvested as of the record date received cash awards in lieu of subscription rights. This rights offering closed on November 18, 2014 and was oversubscribed.

Accordingly, on November 21, 2014, the Company issued $625 million aggregate original principal amount of 8% senior unsecured notes due 2019 (the "Old Senior Unsecured Notes") and received proceeds of $625 million which were used for general corporate purposes. The Old Senior Unsecured Notes are the unsecured and unsubordinated obligations of the Company and rank equal in right of payment with the existing and future unsecured and unsubordinated indebtedness of the Company. The Old Senior Unsecured Notes bear interest at a rate of 8% per annum and the Company will pay interest semi-annually on June 15 and December 15 of each year. The Old Senior Unsecured Notes are not guaranteed.

We accounted for the Old Senior Unsecured Notes in accordance with accounting standards applicable to distinguishing liabilities from equity and debt with conversion and other options. Accordingly, we allocated the proceeds received for the Senior Unsecured Notes based on the relative fair values of the Old Senior Unsecured Notes and warrants, which resulted in a discount to the notes of approximately $278 million. The fair value of the Old Senior Unsecured Notes and warrants was estimated based on quoted market prices for the same issues using Level 1 measurements as defined in Note 5. The discount is being amortized over the life of the Old Senior Unsecured Notes using the effective interest method with an effective interest rate of 11.55%. Approximately $55 million and $44 million of the discount was amortized during 2017 and 2016, respectively. The remaining discount was approximately $140 million and $195 million at February 3, 2018 and January 28, 2017, respectively. The carrying value of the Old Senior Unsecured Notes net of the remaining discount and debt issuance costs was approximately $483 million and $428 million at February 3, 2018 and January 28, 2017, respectively.

In February 2018, the Company commenced the Exchange Offers, pursuant to which it offered to issue in exchange for its outstanding Senior Unsecured Notes new 8% Senior Unsecured Notes Due 2019, of a like principal amount, convertible into common stock of the Company, with interest on such notes to be payable in kind at the Company's option. The Exchange Offers expired on March 15, 2018. Approximately $214 million principal amount of the Old Senior Unsecured Notes were validly tendered, accepted and canceled, including $187.6 million principal amount of Old Senior Unsecured Notes by ESL, and the Company issued a like principal amount of New Senior Unsecured Notes. The New Senior Unsecured Notes are optionally convertible by the holders thereof into shares of the Company’s common stock at a conversion price of $8.33 per share of common stock, and are mandatorily

88

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

convertible at the Company's option if the volume weighted average trading price of the common stock on the NASDAQ exceeds $10.00 for a prescribed period. 

The New Senior Unsecured Notes are the unsecured and unsubordinated obligations of the Company and rank equal in right of payment with the existing and future unsecured and unsubordinated indebtedness of the Company. The New Senior Unsecured Notes bear interest at a rate of 8% per annum and the Company will pay interest semi-annually on June 15 and December 15 of each year, which interest may, at the option of the Company, be paid in kind. The Senior Unsecured Notes are not guaranteed.

Cash Collateral

We post cash collateral for certain self-insurance programs. We continue to classify the cash collateral posted for self-insurance programs as cash and cash equivalents due to our ability to substitute letters of credit for the cash at any time at our discretion. At February 3, 2018 and January 28, 2017, $4 million and $3 million of cash, respectively, was posted as collateral for self-insurance programs.

Wholly-owned Insurance Subsidiary and Intercompany Securities

We have numerous types of insurable risks, including workers’ compensation, product and general liability, automobile, warranty, asbestos and environmental claims and the extended service contracts we sell to our customers. Certain of the associated risks are managed through Holdings’ wholly-owned insurance subsidiary, Sears Reinsurance Company Ltd. ("Sears Re"), a Bermuda Class 3 insurer.

In accordance with applicable insurance regulations, Sears Re holds marketable securities to support the insurance coverage it provides. Sears has utilized two securitization structures to issue specific securities in which Sears Re has invested its capital to fund its insurance obligations. In November 2003, Sears formed a Real Estate Mortgage Investment Conduit, or REMIC. The real estate associated with 138 properties was contributed to indirect wholly-owned subsidiaries of Sears, and then leased back to Sears. The contributed stores were mortgaged and the REMIC issued to wholly-owned subsidiaries of Sears (including Sears Re) $1.3 billion (par value) of securities (the "REMIC Securities") that were secured by the mortgages and collateral assignments of the store leases. Payments to the holders on the REMIC Securities were funded by the lease payments. In March 2018, in connection with the Credit Agreement and Mezzanine Loan Agreement described above, the REMIC was unwound and the REMIC Securities were extinguished.

In May 2006, a subsidiary of Holdings contributed the rights to use the Kenmore, Craftsman and DieHard trademarks in the U.S. and its possessions and territories to KCD IP, LLC, an indirect wholly-owned subsidiary of Holdings. KCD IP, LLC has licensed the use of the trademarks to subsidiaries of Holdings, including Sears and Kmart. Asset-backed securities with a par value of $1.8 billion (the "KCD Securities") were issued by KCD IP, LLC and subsequently purchased by Sears Re, the collateral for which includes the trademark rights and royalty income. Payments to the holders on the KCD Securities are funded by the royalty payments. In connection with the Craftsman Sale, KCD Securities with par value of $900 million were redeemed in March 2017.

The issuers of the REMIC Securities and KCD Securities and the owners of these real estate and trademark assets are bankruptcy remote, special purpose entities that are indirect wholly-owned subsidiaries of Holdings. Cash flows received from rental streams and licensing fee streams paid by Sears, Kmart, other affiliates and third parties, are used for the payment of fees and interest on these securities, through the extinguishment of the REMIC Securities in March 2018. Since the inception of the REMIC and KCD IP, LLC, the REMIC Securities and the KCD Securities have been entirely held by our wholly-owned consolidated subsidiaries, through the extinguishment of the REMIC Securities in March 2018. At February 3, 2018 and January 28, 2017, respectively, the net book value of the securitized trademark rights was approximately $0.7 billion and $1.0 billion. The net book value of the securitized real estate assets was approximately $0.5 billion and $0.6 billion at February 3, 2018 and January 28, 2017, respectively.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Trade Creditor Matters

We have ongoing discussions concerning our liquidity and financial position with the vendor community and third parties that offer various credit protection services to our vendors. The topics discussed have included such areas as pricing, payment terms and ongoing business arrangements. As of the date of this report, we have not experienced any significant disruption in our access to merchandise or our operations.

NOTE 4—FINANCIAL GUARANTEES

Financial Guarantees

We issue various types of guarantees in the normal course of business. We had the following guarantees outstanding at February 3, 2018:

millions	Bank Issued		SRAC Issued		Other		Total
Standby letters of credit	$	647	$	6	$	—	$	653
Commercial letters of credit	—		31		—		31
Secondary lease obligations	—		—		164		164

The secondary lease obligations related to certain store leases that have been assigned and previously divested Sears businesses. The secondary lease obligations represent the maximum potential amount of future payments, including renewal option periods pursuant to the lease agreements. We remain secondarily liable if the primary obligor defaults.

NOTE 5—FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

We determine fair value of financial assets and liabilities based on the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels:

Level 1 inputs – unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.

Level 2 inputs – inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and default rates.

Level 3 inputs – unobservable inputs for the asset or liability.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Cash and cash equivalents, accounts receivable, merchandise payables, short-term borrowings and accrued liabilities are reflected in the Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. The fair value of our equity method investment in Sears Canada is disclosed in Note 2. The fair value of our long-term debt is disclosed in Note 3. The fair value of pension and other postretirement benefit plan assets is disclosed in Note 7.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, we measure the impairment and adjust the carrying value as discussed in Note 1. With the exception of the indefinite-lived intangible asset impairments and fixed asset impairments described in Note 12 and Note 13, respectively, we had no significant remeasurements of such assets or liabilities to fair value during 2017 and 2016.

All of the fair value remeasurements were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived based on discussions with real estate brokers, review of comparable properties, if available, and internal expertise related to the current marketplace conditions. Inputs for the goodwill and intangible asset analyses included discounted cash flow analyses, comparable marketplace fair value data, as well as management's assumptions in valuing significant tangible and intangible assets, as described in Note 1, Summary of Significant Accounting Policies.

NOTE 6—INTEREST AND INVESTMENT LOSS

The following table sets forth the components of interest and investment loss as reported in our Consolidated Statements of Operations:

millions	2017			2016			2015
Interest income on cash and cash equivalents	$	2		$	1		$	1
Other investment loss	(14		)	(27		)	(63		)
Total	$	(12	)	$	(26	)	$	(62	)

Interest Income on Cash and Cash Equivalents

We recorded interest income of $2 million, $1 million and $1 million in 2017, 2016 and 2015, respectively, primarily related to interest earned on cash and cash equivalents. These cash and cash equivalents consist of highly liquid investments with original maturities of three months or less at the date of purchase. Our invested cash may include, from time to time, investments in, but not limited to, commercial paper, federal, state and municipal government securities, floating-rate notes, repurchase agreements and money market funds. All invested cash amounts are readily available to us.

Other Investment Loss

Other investment loss primarily includes income or loss generated by (and sales of investments in) certain real estate joint ventures and other equity investments in which we do not have a controlling interest. During 2017, 2016 and 2015, respectively, the investment loss from equity investments included a loss of $17 million, $35 million and $59 million.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

NOTE 7—BENEFIT PLANS

We sponsor a number of pension and postretirement benefit plans. We account for our retirement programs in accordance with employers' accounting for defined benefit pension and other postretirement plans under Generally Accepted Accounting Principles ("GAAP"). GAAP requires that amounts recognized in financial statements be determined using an actuarial basis. As a result, our pension benefit programs are based on a number of statistical and judgmental assumptions that attempt to anticipate future events and are used in calculating the expense and liability related to our plans each year at January 31. These assumptions include, but are not limited to, discount rates used to value liabilities, assumed rates of return on plan assets, actuarial assumptions relating to retirement age and participant turnover, and mortality rates. The actuarial assumptions we use may differ significantly from actual results. These differences may result in a material impact to the amount of net periodic benefit cost to be recorded in our consolidated financial statements in the future.

Expenses for retirement and savings-related benefit plans were as follows:

millions	2017		2016		2015
Pension plans	$	657	$	289	$	230
Postretirement benefits	—		28		(2		)
Total	$	657	$	317	$	228

Retirement Savings Plans

Holdings sponsors retirement savings plans for employees meeting service eligibility requirements. The Company does not match employee contributions.

Other Benefit Plans

Certain full-time and part-time employees of Kmart and Sears are eligible to participate in noncontributory defined benefit plans after meeting age and service requirements. Effective January 31, 1996 and January 1, 2006, respectively, the Kmart tax-qualified defined benefit pension plan and the Sears domestic pension plan were frozen and associates no longer earn additional benefits under the plan. The Kmart tax-qualified defined benefit pension plan was merged with and into the Sears domestic pension plan effective as of January 30, 2008. The merged plan was renamed as the Sears Holdings Pension Plan ("SHC Domestic plan") and Holdings accepted sponsorship of the SHC Domestic plan effective as of that date.

Pension benefits are based on length of service, compensation and, in certain plans, social security or other benefits. Funding for the various plans is determined using various actuarial cost methods.

In addition to providing pension benefits, Sears provides employees and retirees certain medical benefits. These benefits provide access to medical plans. Certain Sears retirees are also provided life insurance benefits. To the extent we share the cost of the retiree medical benefits with retirees, such cost sharing is based on years of service and year of retirement. Sears' postretirement benefit plans are not funded. We have the right to modify or terminate these plans. Effective December 31, 2014, the Company amended its retiree medical plan to eliminate Company subsidies to the plan.

Pension Plan Amendment

Effective December 1, 2016, the Sears Holdings Pension Plan was amended to change its plan year from a calendar year end to a November 30th year end, to spin off a new Sears Holdings Pension Plan 2 ("Plan 2") and to rename the Sears Holdings Pension Plan as Sears Holdings Pension Plan 1 ("Plan 1"). In conjunction with these amendments, the Company requested that the Internal Revenue Service ("IRS") approve the foregoing change in plan year and to approve a change in actuarial funding method in connection with the spin-off and change in plan year. The Company has received IRS approval of both changes.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Pension Plan Settlements    

In May 2017, the Company executed an irrevocable agreement to purchase a group annuity contract from Metropolitan Life Insurance Company ("MLIC"), under which MLIC will pay future pension benefit payments to approximately 51,000 retirees from Plan 2. The agreement calls for a transfer of approximately $515 million of Plan 2's benefit obligations to MLIC. This action had an immaterial impact on the funded status of our total pension obligations, but reduced the size of the Company's combined pension plan, reduced future cost volatility, and reduced future plan administrative expenses. Due to the annuity purchase, we were required to remeasure our pension obligations. In connection with the remeasurement, we updated the effective discount rate assumption to 3.85% as of May 31, 2017. The annuity purchase resulted in a non-cash charge of $200 million for losses previously accumulated in other comprehensive income (loss), which were recognized through the statement of operations upon settlement during the 13 week period ending July 29, 2017.

In August 2017, the Company reached another agreement with MLIC to annuitize an additional $512 million of its pension liability, under which MLIC will pay future pension benefit payments to an additional approximately 20,000 retirees from Plan 2. This action had an immaterial impact on the funded status of our total pension obligations, but reduced the size of the Company's combined pension plan, reduced future cost volatility, and reduced future plan administrative expenses. Due to the annuity purchase, we were required to remeasure our pension obligations. In connection with the remeasurement, we updated the effective discount rate assumption to 3.75% as of August 31, 2017. This annuity purchase resulted in a non-cash charge of $203 million for losses previously accumulated in other comprehensive income (loss), which were recognized through the statement of operations immediately upon settlement during the 13 week period ending October 28, 2017.

Effective August 25, 2017, the Company amended Plan 2, primarily related to lump sum benefit eligibility, and began notifying certain former employees of the Company of its offer to pay those employees' pension benefit in lump sum. Former employees eligible for the voluntary lump sum payment option are generally those who are vested traditional formula participants of Plan 2 who terminated employment prior to January 1, 2017 and who have not yet started receiving monthly payments of their pension benefits. The Company offered the one-time voluntary lump sum window in an effort to reduce its long-term pension obligations and ongoing annual pension expense. This voluntary offer was made to approximately 20,000 eligible terminated vested participants representing approximately $300 million of the Company's total qualified pension plan liabilities. Eligible participants had until November 1, 2017 to make their election. The Company made payments of approximately $209 million to employees who made the election and funded the payments from existing assets of Plan 2. This lump sum offer resulted in a non-cash charge of $76 million for losses previously accumulated in other comprehensive income (loss), which were recognized through the statement of operations immediately upon settlement during the 14 week period ending February 3, 2018.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Pension Plans

millions	2017			2016
Change in projected benefit obligation:
Beginning balance	$	5,165		$	5,265
Interest cost	180			227
Actuarial loss	227			108
Benefits paid	(316		)	(435		)
Settlements	(1,249		)	—
Other	(4		)	—
Balance at the measurement date	$	4,003		$	5,165
Change in assets at fair value:
Beginning balance	$	3,567		$	3,189
Actual return on plan assets	231			499
Company contributions	295			314
Benefits paid	(316		)	(435		)
Settlements	(1,249		)	—
Balance at the measurement date	$	2,528		$	3,567
Net amount recognized	$	(1,475	)	$	(1,598	)

The accumulated benefit obligation for the SHC Domestic plan was $4.0 billion at February 3, 2018 and $5.2 billion at January 28, 2017.

Postretirement Benefit Obligations

millions	2017			2016
Change in accumulated postretirement benefit obligation:
Beginning balance	$	168		$	143
Interest cost	6			5
Plan participants' contributions	—			—
Benefits paid	(17		)	(19		)
Actuarial loss	1			9
Other	—			30
Balance at the measurement date	$	158		$	168
Change in plan assets at fair value:
Beginning of year balance	$	—		$	—
Company contributions	17			19
Plan participants' contributions	—			—
Benefits paid	(17		)	(19		)
Balance at the measurement date	$	—		$	—
Funded status	$	(158	)	$	(168	)

The current portion of our liability for postretirement benefit obligations is $16 million, which we expect to pay during fiscal 2018.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Weighted-average assumptions used to determine plan obligations were as follows:

	2017	2016	2015
Pension benefits:
Discount rate	3.75%	4.15%	4.50%
Postretirement benefits:
Discount rate	3.60%	3.85%	4.00%

The decrease in the discount rate in 2017 resulted in an increase in the 2017 year-end pension obligation of approximately $229 million.

Net Periodic Benefit Cost

The components of net periodic benefit cost were as follows:

millions	2017			2016			2015
Pension benefits:
Interest cost	$	180		$	227		$	211
Expected return on plan assets	(190		)	(202		)	(249		)
Settlements	479			—			—
Recognized net loss and other	188			264			268
Net periodic benefit cost	$	657		$	289		$	230
Postretirement benefits:
Interest cost	$	6		$	5		$	5
Recognized net loss and other	(6		)	23			(7		)
Net periodic benefit cost	$	—		$	28		$	(2	)

Weighted-average assumptions used to determine net cost were as follows:

	2017	2016	2015
Pension benefits:
Discount Rate(1)	4.15%	4.50%	3.70%
Return of plan assets	6.50%	6.50%	7.00%
Postretirement benefits:
Discount Rate	3.85%	4.00%	3.30%

⁽¹⁾ In connection with the annuitizations noted above, we updated the effective discount rate assumption to 3.85% as of May 31, 2017 and to 3.75% as of August 31, 2017 for Plan 2.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

For purposes of determining the periodic expense of our defined benefit plans, we use the fair value of plan assets as the market-related value. A one-percentage-point change in the assumed discount rate would have the following effects on the pension liability:

millions	1 percentage-point Increase			1 percentage-point Decrease
Effect on interest cost component	$	20		$	(26	)
Effect on pension benefit obligation	$	(384	)	$	460

Approximately $146 million of the unrecognized net losses in accumulated other comprehensive income are expected to be amortized as a component of net periodic benefit cost during 2018.

Investment Strategy

The Investment Committee, made up of select members of senior management, has delegated to a non-affiliated third party professional, as a limited-purpose named fiduciary, the authority to provide certain investment-related services with respect to the assets of Holdings' domestic pension plans. The plans' overall investment objective is to provide a long-term return that, along with Company contributions, is expected to meet future benefit payment requirements. A long-term horizon has been adopted in establishing investment policy such that the likelihood and duration of investment losses are carefully weighed against the long-term potential for appreciation of assets. The plans' investment policy requires investments to be diversified across individual securities, industries, market capitalization and valuation characteristics. In addition, various techniques are utilized to monitor, measure and manage risk.

Domestic plan assets were invested in the following classes of securities:

	Plan Assets at
	February 3, 2018		January 28, 2017
Equity securities	36	%	35	%
Fixed income and other debt securities	63		63
Other	1		2
Total	100	%	100	%

The domestic plans' target allocation is determined by taking into consideration the amounts and timing of projected liabilities, our funding policies and expected returns on various asset classes. At February 3, 2018, the plans' target asset allocation was 35% equity and 65% fixed income. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Future Cash Flows of Benefit Plans

Information regarding expected future cash flows for the SHC Domestic plan is as follows:

millions
Pension benefits:
Employer contributions:
2018 (expected)	$	280
Expected benefit payments:
2018	$	334
2019	308
2020	298
2021	291
2022	283
2023-2027	1,289
Postretirement benefits:
Employer contributions:
2018 (expected)	$	16
Expected employer contribution for benefit payments:
2018	$	16
2019	17
2020	17
2021	16
2022	15
2023-2027	58

Domestic Pension Plans Funding

Contributions to our pension plans remain a significant use of our cash on an annual basis. While the Company's pension plan is frozen, and thus associates do not currently earn pension benefits, the Company has a legacy pension obligation for past service performed by Kmart and Sears associates. During 2017, we contributed $295 million to our domestic pension plans, including amounts contributed from the escrow created pursuant to the PPPFA. We estimate that our minimum pension funding obligations will be $280 million in 2018 (excluding the $20 million supplemental payment described below) and approximately $276 million in 2019. As discussed in Note 1, the Company agreed to grant the PBGC a lien on, and subsequently contribute to the Company's pension plans, the Craftsman Receivable. During the second quarter of 2017, we sold the Craftsman Receivable to a third-party purchaser, and deposited the proceeds into an escrow for the benefit of our pension plans. We subsequently contributed a portion of the proceeds received from the sale of the Craftsman Receivable to our pension plans, which contribution was credited against the Company's minimum pension funding obligations in 2017. Under our agreement with the PBGC, the remaining proceeds will also be contributed to our pension plans, and when so contributed, will be fully credited against the Company's minimum pension funding obligations in 2018 and 2019.

The Company also agreed to grant a lien to the PBGC on the 15-year income stream relating to new Stanley Black & Decker sales of Craftsman products, and agreed to contribute the payments from Stanley Black & Decker under such income stream to the Company's pension plans, with such payments to be credited against the Company's minimum pension funding obligations starting no later than five years from the closing date. The Company also agreed to grant the PBGC a lien on $100 million of real estate assets to secure the Company's minimum pension obligations through the end of 2019.

In November 2017, the Company announced an amendment to the PPPFA that allowed the Company to pursue the monetization of 138 of our properties that were subject to a ring-fence arrangement created under the PPPFA. In

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

March 2018, the Company closed on the Secured Loan and the Mezzanine Loan, which transactions released the properties from the ring-fence arrangement. The Company contributed approximately $282 million of the proceeds of such loans to our pension plans, and deposited $125 million into an escrow for the benefit of our pension plans. Under our agreement with the PBGC, the escrowed amount will also be contributed to our pension plans and, when so contributed, will be fully credited against the Company’s minimum pension funding obligations in 2018 and 2019 described above. Following such transactions, the Company has been relieved of contributions to our pension plans for approximately two years (other than the contributions from escrow described above and a $20 million supplemental payment due in the second quarter of 2018). The ultimate amount of pension contributions could be affected by factors such as changes in applicable laws, as well as financial market and investment performance and demographic changes.

Fair Value of Pension Plan Assets

The following table presents our plan assets using the fair value hierarchy at February 3, 2018 and January 28, 2017:

	Investment Assets at Fair Value at
	February 3, 2018
millions	Total			Level 1		Level 2			Level 3
Equity securities:
U.S. companies	$	727		$	720	$	—		$	7
International companies	164			164		—			—
U.S. registered investment companies	6			6		—			—
Fixed income securities:
Corporate bonds and notes	1,423			—		1,423			—
Sears Holdings Corporation 2016 Term Loan	77			—		77			—
Mortgage-backed and asset-backed	9			—		6			3
Other	(3		)	—		(3		)	—
Total investment assets at fair value	$	2,403		$	890	$	1,503		$	10
Cash	4
Accounts receivable	39
Accounts payable	(28		)
Investments measured at NAV:
Cash equivalents and short-term investments	110
Net assets available for plan benefits	$	2,528

98

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

	Investment Assets at Fair Value at
	January 28, 2017
millions	Total			Level 1		Level 2		Level 3
Equity securities:
U.S. companies	$	980		$	978	$	—	$	2
International companies	224			224		—		—
U.S. registered investment companies	3			3		—		—
Fixed income securities:
Corporate bonds and notes	1,994			—		1,994		—
Sears Holdings Corporation 2016 Term Loan	100			—		100		—
Mortgage-backed and asset-backed	3			—		1		2
Other	1			—		1		—
Ventures and partnerships	1			—		—		1
Total investment assets at fair value	$	3,306		$	1,205	$	2,096	$	5
Cash	8
Accounts receivable	65
Accounts payable	(69		)
Investments measured at NAV:
Cash equivalents and short-term investments	257
Net assets available for plan benefits	$	3,567

Equity securities, which include common and preferred stocks, are actively traded and valued at the closing price reported in the active market in which the security is traded and are assigned to Level 1.

Fixed income securities are assigned to Level 2 as they are primarily valued by institutional bid evaluation, which determines the estimated price a dealer would pay for a security and which is developed using proprietary models established by the pricing vendors for this purpose.

Certain mortgage-backed and other asset-backed debt securities are assigned to Level 3 based on the relatively low position in the preferred hierarchy of the pricing source. Valuation of the Plan's non-public limited partnerships requires significant judgment by the general partners due to the absence of quoted market value, inherent lack of liquidity, and the long-term nature of the assets, and may result in fair value measurements that are not indicative of ultimate realizable value. Our Level 3 assets, including activity related to our Level 3 assets, are immaterial.

Collective short-term investment funds are stated at net asset value (NAV) as determined by the investment managers and have not been classified in the fair value hierarchy. Investment managers value the underlying investments of the funds at amortized cost, which approximates fair value.

99

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

NOTE 8—EARNINGS PER SHARE

The following table sets forth the components used to calculate basic and diluted loss per share attributable to Holdings' shareholders. Warrants, restricted stock awards and restricted stock units, totaling 2 thousand shares in 2016 and 5 million shares in 2015 were not included in the computation of diluted loss per share attributable to Holdings' shareholders because the effect of their inclusion would have been anti-dilutive.

millions, except earnings per share	2017			2016			2015
Basic weighted average shares	107.4			106.9			106.6
Dilutive effect of restricted stock awards, restricted stock units and warrants	—			—			—
Diluted weighted average shares	107.4			106.9			106.6
Net loss attributable to Holdings' shareholders	$	(383	)	$	(2,221	)	$	(1,129	)
Loss per share attributable to Holdings' shareholders:
Basic	$	(3.57	)	$	(20.78	)	$	(10.59	)
Diluted	$	(3.57	)	$	(20.78	)	$	(10.59	)

NOTE 9—EQUITY

Stock-based Compensation

We account for stock-based compensation using the fair value method in accordance with accounting standards regarding share-based payment transactions. We do not currently have an employee stock option plan and at February 3, 2018, there are no outstanding options. Compensation expense related to stock-based compensation arrangements was immaterial during 2017, 2016 and 2015.

We granted restricted stock awards and restricted stock units to certain associates. These restricted stock awards and restricted stock units typically vest in zero to three years from the date of grant, provided the grantee remains employed by us at the vesting date. The fair value of these awards and units is equal to the market price of our common stock on the date of grant. We do not currently have a broad-based program that provides for restricted stock awards or restricted stock units on an annual basis. Changes in restricted stock awards and restricted stock units for 2017, 2016 and 2015 were as follows:

	2017				2016				2015
(Shares in thousands)	Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant
Beginning of year balance	151		$	28.89	60		$	42.88	73		$	45.82
Granted	606		7.15		384		16.87		198		31.26
Vested	(623	)	8.10		(293	)	16.00		(200	)	32.01
Forfeited	(119	)	25.27		—		—		(11	)	51.39
End of year balance	15		$	42.09	151		$	28.89	60		$	42.88

millions	2017		2016		2015
Aggregate fair value of shares granted based on weighted average fair value at date of grant	$	4	$	6	$	6
Aggregate fair value of shares vesting during period	4		4		6
Aggregate fair value of shares forfeited during period	1		—		—

100

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Approximately 15,000 shares of the 15,000 shares of unvested restricted stock and restricted stock units outstanding at February 3, 2018 are scheduled to vest during 2018, subject to satisfaction of applicable vesting conditions.

Common Share Repurchase Program

From time to time, we repurchase shares of our common stock under a common share repurchase program authorized by our Board of Directors. The common share repurchase program was initially announced in 2005 with a total authorization since inception of the program of $6.5 billion. During 2017, 2016 and 2015, we repurchased no shares of our common stock under our common share repurchase program. At February 3, 2018, we had approximately $504 million of remaining authorization under our common share repurchase program.

The share repurchase program has no stated expiration date and share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods.

Accumulated Other Comprehensive Loss

The following table displays the components of accumulated other comprehensive loss:

millions	February 3, 2018			January 28, 2017			January 30, 2016
Pension and postretirement adjustments (net of tax of $(225), $(225) and $(296), respectively)	$	(1,071	)	$	(1,549	)	$	(1,915	)
Currency translation adjustments (net of tax of $0 for all periods presented)	(1		)	(3		)	(3		)
Accumulated other comprehensive loss	$	(1,072	)	$	(1,552	)	$	(1,918	)

Pension and postretirement adjustments relate to the net actuarial loss on our pension and postretirement plans recognized as a component of accumulated other comprehensive loss.

Income Tax Expense Allocated to Each Component of Other Comprehensive Income (Loss)

Income tax expense allocated to each component of other comprehensive income (loss) was as follows:

	2017
millions	Before Tax Amount			Tax Expense		Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience loss	$	(182	)	$	—	$	(182	)
Less: cost of settlements	479			—		479
Less: recognized net loss and other included in net periodic benefit cost(1)	181			—		181
Pension and postretirement adjustments, net of tax	478			—		478
Currency translation adjustments	2			—		2
Total other comprehensive income	$	480		$	—	$	480

101

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

	2016
millions	Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience gain	$	181		$	(71	)	$	110
Less: recognized net loss and other included in net periodic benefit cost(1)	256			—			256
Pension and postretirement adjustments, net of tax	437			(71		)	366
Dissolution of noncontrolling interest	(7		)	—			(7		)
Total other comprehensive income	$	430		$	(71	)	$	359

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 7 to the Consolidated Financial Statements.

	2015
millions	Before Tax Amount			Tax Expense		Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience loss	$	(148	)	$	—	$	(148	)
Less: recognized net loss and other included in net periodic benefit cost(1)	261			—		261
Pension and postretirement adjustments, net of tax	113			—		113
Currency translation adjustments	(1		)	—		(1		)
Total other comprehensive income	$	112		$	—	$	112

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 7 to the Consolidated Financial Statements.

Issuance of Warrants to Purchase Common Stock

On November 21, 2014, the Company issued an aggregate of approximately 22 million warrants pursuant to the exercise of rights in the rights offering for $625 million in aggregate principal amount of 8% Senior Unsecured Notes due 2019 and warrants to purchase shares of its common stock. The exercise price and the number of shares of common stock issuable upon exercise of a warrant are both subject to adjustment in certain circumstances. As of October 31, 2015, each warrant, when exercised, will entitle the holder thereof to purchase 1.11 shares of the Company's common stock at an exercise price of $25.686 per share under the terms of the warrant agreement, adjusted from the previously disclosed one share of the Company's common stock at an exercise price of $28.41 per share. The exercise price is payable in cash or by surrendering Old Senior Unsecured Notes or New Senior Unsecured Notes, in each case with a principal amount at least equal to the exercise price. The warrants may be exercised at any time after November 24, 2014. Unless earlier exercised, the warrants will expire on December 15, 2019.

We accounted for the warrants in accordance with accounting standards applicable to distinguishing liabilities from equity and debt with conversion and other options. Accordingly, the warrants have been classified as additional paid-in capital in the Consolidated Balance Sheets based on the relative fair value of the warrants and the related 8% Senior Unsecured Notes due 2019 at the time of issuance. We monitor changes in circumstances that could cause the classification of the warrants to change. The fair value of the warrants and the related 8% Senior Unsecured Notes due 2019 was estimated based on quoted market prices for the same issues using Level 1 measurements as defined in Note 5.

102

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

NOTE 10—INCOME TAXES

millions	2017			2016			2015
Loss before income taxes:
U.S.	$	(1,012	)	$	(2,429	)	$	(1,420	)
Foreign	31			34			35
Total	$	(981	)	$	(2,395	)	$	(1,385	)
Income tax benefit:
Current:
Federal	$	9		$	13		$	11
State and local	(3		)	16			20
Foreign	13			18			17
Total current	19			47			48
Deferred:
Federal	(429		)	(87		)	(239		)
State and local	(187		)	(134		)	(66		)
Foreign	(1		)	—			—
Total deferred	(617		)	(221		)	(305		)
Total	$	(598	)	$	(174	)	$	(257	)

	2017		2016		2015
Effective tax rate reconciliation:
Federal income tax rate (benefit rate)	(33.7	)%	(35.0	)%	(35.0	)%
State and local tax (benefit) net of federal tax benefit	(11.8	)	(3.0	)	(1.8	)
Federal tax rate change	(22.6	)	—		—
Federal and state valuation allowance	21.2		41.1		37.4
Land and indefinite-lived intangibles	(12.1	)	(0.2	)	(16.9	)
Impairment of indefinite-lived trade names	(1.8	)	(6.0	)	(4.9	)
Loss disallowance	—		—		3.5
Tax credits	(0.4	)	(0.3	)	(0.7	)
Resolution of income tax matters	(0.8	)	—		(0.3	)
Adjust foreign statutory rates	(1.0	)	0.1		(0.3	)
Repatriation toll charge	1.8		—		—
Tax benefit resulting from other comprehensive income allocation	—		(2.9	)	—
Other	0.2		(1.1	)	0.4
	(61.0	)%	(7.3	)%	(18.6	)%

103

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

millions	February 3, 2018			January 28, 2017
Deferred tax assets and liabilities:
Deferred tax assets:
Federal benefit for state and foreign taxes	$	117		$	148
Accruals and other liabilities	142			135
Net operating loss carryforwards	1,736			2,255
Pension and postretirement benefit plans	972			1,244
Property and equipment	139			231
Deferred income	266			479
Credit carryforwards	899			875
Other	208			218
Total deferred tax assets	4,479			5,585
Valuation allowance	(4,187		)	(5,519		)
Net deferred tax assets	292			66
Deferred tax liabilities:
Trade names/Intangibles	285			573
Inventory	105			193
Other	28			43
Total deferred tax liabilities	418			809
Net deferred tax liability	$	(126	)	$	(743	)

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code that will affect our fiscal year ended February 3, 2018, including, but not limited to, (1) reducing the U.S. federal corporate tax rate to 21%, (2) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years and (3) various other miscellaneous changes that are effective in fiscal 2017. With the lower U.S. federal corporate rate effective beginning January 1, 2018, our U.S. federal corporate tax rate for 2017 is a blended rate of 33.717%.

In addition to the 21% reduced federal corporate tax rate, the Tax Act also establishes new tax laws that will affect fiscal 2018, including, but not limited to, (1) the creation of the base erosion anti-abuse tax ("BEAT"), a new minimum tax; (2) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (3) a new provision designed to tax global intangible low-taxed income ("GILTI"); (4) a new limitation on deductible interest expense; (5) limitations on the deductibility of certain executive compensation; (6) limitations on the use of foreign tax credits ("FTCs") to reduce the U.S. income tax liability; and (7) limitations on net operating losses ("NOLs") generated in tax years beginning after December 31, 2017, to 80% of taxable income with indefinite carryovers.

The SEC staff issued Staff Accounting Bulletin ("SAB") 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting in accordance with accounting standards applicable to income taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under accounting standards applicable to income taxes is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply accounting standards applicable to income taxes on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

104

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

The income tax benefit for the period ended February 3, 2018 included a tax benefit of approximately $470 million related to the impacts of the Tax Act. The impacts of the Tax Act primarily consist of a net benefit for the corporate rate reduction of $222 million, a net tax benefit for the valuation allowance release of $270 million, and a net expense for the transition tax of $11 million.

For various reasons that are discussed below, our accounting for the following elements of the Tax Act is incomplete. However, we were able to make reasonable estimates of certain effects and, therefore, recorded provisional adjustments as follows:

Reduction of U.S. federal corporate tax rate: As a result of the reduced corporate rate, our deferred tax assets, liabilities and valuation allowance decreased. Further, as we had a net deferred tax liability after valuation allowance, these decreases resulted in a deferred income tax benefit of $222 million for the year ended February 3, 2018. While we were able to make a reasonable estimate of the impact of the reduction in the corporate rate, it may be affected by other analyses related to the Tax Act, including, but not limited to, our calculation of deemed repatriation of deferred foreign income and state tax effect of adjustments made to federal temporary differences.

Deemed Repatriation Transition Tax: The Deemed Repatriation Transition Tax ("Transition Tax") is a tax on previously untaxed accumulated and current earnings and profits ("E&P") of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. We are able to make a reasonable estimate of the Transition Tax and recorded a provisional Transition Tax obligation of $6 million and a provisional withholding tax obligation of $11 million. As a result of our valuation allowance on NOLs, only the $11 million withholding tax obligation resulted in a current tax expense. However, we are continuing to gather additional information to more precisely compute the amount of the Transition Tax.

Valuation Allowances: The Company assessed whether its valuation allowance analyses are affected by various aspects of the Tax Act (e.g., deemed repatriation of deferred foreign income, new categories of FTCs, and other miscellaneous provisions of the Tax Act), any corresponding determination of the need for or change in a valuation allowance is also provisional.

Global Intangible Low Taxes Income (GILTI): The Tax Act creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations ("CFCs") must be included currently in the gross income of the CFC’s U.S. shareholder. GILTI is the excess of the shareholder’s "net CFC tested income" over the net deemed tangible income return, which is currently defined as the excess of (1) 10% of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income.

Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of accounting standards applicable to income taxes. In accordance with accounting standards applicable to income taxes, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the "period cost method") or (2) factoring such amounts into a company’s measurement of its deferred taxes (the "deferred method"). We selected the period cost method.

Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and other comprehensive income ("OCI"). An exception is provided in the authoritative accounting guidance when there is income from categories other than continuing operations and a loss from continuing operations in the current year. In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expense recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets. In instances where a valuation allowance is established against current year losses, income from other sources, including gain from pension and other postretirement benefits recorded as a component of OCI and creation of a deferred tax liability through additional paid in capital, is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets. As a result, for the year ended January 28, 2017, the Company recorded a tax expense of $71 million in OCI related to the net gain on pension and other postretirement benefits, and recorded a corresponding tax benefit of $71 million in continuing operations. The Company did not have this situation for the year ended February 3, 2018.

105

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Accounting standards for income taxes require that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the financial reporting and tax bases of recorded assets and liabilities. Accounting standards also require that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion of or all of the deferred tax asset will not be realized.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year periods ended February 3, 2018, January 28, 2017 and January 30, 2016. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future income.

On the basis of this analysis and the significant negative objective evidence, the Company has a valuation allowance to record only the portion of the deferred tax asset that more likely than not will be realized.For the year ended January 30, 2016, the valuation allowance increased by $279 million of which $63 million was recorded through other comprehensive income. For the year ended January 28, 2017, the valuation allowance increased by $762 million of which $3 million was recorded through other comprehensive income and paid in capital. For the year ended February 3, 2018, the valuation allowance decreased by $1.3 billion, primarily due to the reduction of the U.S. corporate tax rate from 35% to 21% and the re-characterization of future net operating losses to indefinite life resulting in a valuation allowance release of 80% of our remaining indefinite life deferred tax liability. Included within the net decrease in the valuation allowance was an increase of $62 million recorded through other comprehensive income.

At February 3, 2018 and January 28, 2017, we had a valuation allowance of $4.2 billion and $5.5 billion, respectively. The amount of the deferred tax asset considered realizable, however, could be adjusted in the future if estimates of future taxable income during the carryforward period are reduced or increased, or if the objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. We will continue to evaluate our valuation allowance in future years for any change in circumstances that causes a change in judgment about the realizability of the deferred tax asset.

At the end of 2017 and 2016, respectively, we had a federal and state net operating loss ("NOL") deferred tax asset of $1.7 billion and $2.3 billion, which will expire predominately between 2019 and 2037. We have credit carryforwards of $899 million, which will expire between 2018 and 2037.

In connection with the Craftsman Sale in the first quarter of 2017, the Company realized a tax benefit of $101 million on the deferred taxes related to the indefinite-life intangible for the trade name sold to Stanley Black & Decker. In addition, the Company incurred a taxable gain of approximately $963 million. There was no federal income tax payable resulting from the taxable gain due to the utilization of NOL tax attributes of approximately $361 million with a valuation allowance release of the same amount. However, there was state income tax of $4 million payable after the utilization of state tax attributes.

In July, 2016, the Company sold shares of an investment for $106 million. The sale resulted in a U.S. taxable gain of $105 million, but no current income tax is payable due to the utilization of NOL attributes of $37 million with a valuation allowance release of the same amount.

On July 7, 2015, Holdings completed the Seritage transaction. As part of the transaction, Holdings sold 235 properties to Seritage along with Holdings' 50% interests in the JVs, which hold an additional 31 properties (See Note 11 for additional information and defined terms).

In connection with the Seritage transaction and the JV transactions, the Company realized a tax benefit of $229 million on the deferred taxes related to the indefinite-life assets associated with the property sold. In addition, the Company incurred a taxable gain of approximately $2.2 billion, taking into account any related party loss disallowance, on these transactions. There was no federal income tax payable resulting from the taxable gain due to the utilization of NOL tax attributes of approximately $856 million with a valuation allowance release of the same amount. However, there was a minor amount of state and city income tax payable of $4 million after the utilization of state and city tax attributes. As a result of all the effects from the Seritage transaction and the JV transactions in 2015, the impact to the net valuation allowance was a release of approximately $500 million.

106

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Accounting for Uncertainties in Income Taxes

We are present in a large number of taxable jurisdictions, and at any point in time, can have audits underway at various stages of completion in any of these jurisdictions. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by federal, foreign and/or local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closing of statute of limitations. Such adjustments are reflected in the tax provision as appropriate. While we do not expect material changes, it is possible that the amount of unrecognized benefit with respect to our uncertain tax positions will significantly increase or decrease within the next 12 months related to the audits described above. At this time, our estimated range of impact on the balance of unrecognized tax benefits for 2018 is a change of $1 million to $14 million, which would impact the effective tax rate by $1 million to $11 million. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits ("UTB") is as follows:

	Federal, State and Foreign Tax
millions	February 3, 2018			January 28, 2017			January 30, 2016
Gross UTB Balance at Beginning of Period	$	142		$	137		$	131
Tax positions related to the current period:
Gross increases	20			12			14
Gross decreases	—			—			—
Tax positions related to prior periods:
Gross increases	—			—			—
Gross decreases	(26		)	—			—
Settlements	(1		)	—			—
Lapse of statute of limitations	(5		)	(7		)	(8		)
Gross UTB Balance at End of Period	$	130		$	142		$	137

At the end of 2017, we had gross unrecognized tax benefits of $130 million. Of this amount, $103 million would, if recognized, impact our effective tax rate, with the remaining amount being comprised of unrecognized tax benefits related to indirect tax benefits. During 2017 and 2016, the gross unrecognized tax benefits increased by $20 million and $12 million, respectively, due to current year accruals for existing tax positions. We expect that our unrecognized tax benefits could decrease up to $10 million over the next 12 months for tax audit settlements and the expiration of the statute of limitations for certain jurisdictions.

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. At February 3, 2018 and January 28, 2017, the total amount of interest and penalties recognized within the related tax liability in our Consolidated Balance Sheet was $51 million ($40 million net of federal benefit) and $61 million ($40 million net of federal benefit), respectively. The total amount of net interest benefit recognized in our Consolidated Statements of Operations was $6 million in 2017. The total amount of net interest expense recognized in our Consolidated Statements of Operations was $3 million and $4 million in 2016 and 2015, respectively.

We file income tax returns in both the United States and various foreign jurisdictions. The U.S. Internal Revenue Service ("IRS") has completed its examination of all federal tax returns of Holdings through the 2009 return, and all matters arising from such examinations have been resolved. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2003 through 2016, and Kmart is under examination by such jurisdictions for the years 2006 through 2016.

107

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

NOTE 11—REAL ESTATE TRANSACTIONS

Gain on Sales of Assets

We recognized $1.6 billion, $247 million and $743 million in gains on sales of assets during 2017, 2016 and 2015, respectively. These gains were primarily a result of several real estate transactions. Real estate transactions in 2017 included properties that served as collateral for our real estate facilities for which proceeds of $250 million, $116 million and $55 million were used to pay interest and a portion of the 2016 Secured Loan Facility, 2017 Secured Loan Facility and Incremental Loans, respectively. Gains in 2017 also included a gain of $492 million in connection with the Craftsman Sale, which is further described in Note 1.

Seritage transaction and JV transactions

On April 1, 2015, April 13, 2015, and April 30, 2015, Holdings and General Growth Properties, Inc. ("GGP"), Simon Property Group, Inc. ("Simon") and The Macerich Company ("Macerich"), respectively, announced that they entered into three distinct real estate joint ventures (collectively, the "JVs"). Holdings contributed 31 properties to the JVs where Holdings currently operates stores (the "JV properties"), in exchange for a 50% interest in the JVs and $429 million in cash ($426 million, net of closing costs) (the "JV transactions"). The JV transactions valued the JV properties at $858 million in the aggregate.

On July 7, 2015, Holdings completed its rights offering and sale-leaseback transaction (the "Seritage transaction") with Seritage Growth Properties ("Seritage"), an independent publicly traded real estate investment trust ("REIT"). As part of the Seritage transaction, Holdings sold 235 properties to Seritage (the "REIT properties") along with Holdings' 50% interest in the JVs. Holdings received aggregate gross proceeds from the Seritage transaction of $2.7 billion ($2.6 billion, net of closing costs). The Seritage transaction was partially financed through the sale of common shares and limited partnership units, totaling $1.6 billion, including $745 million received from ESL and its affiliates and $297 million received from Fairholme and its affiliates as further described in Note 15. The Seritage transaction valued the REIT properties at $2.3 billion in the aggregate.

In connection with the Seritage transaction and JV transactions, Holdings entered into agreements with Seritage and the JVs under which Holdings initially leased 255 of the properties (the "Master Leases"), with the remaining properties being leased by Seritage to third parties. Holdings has closed 19 stores pursuant to recapture notices from Seritage or the JVs and 56 stores pursuant to lease terminations. An additional 11 stores will close in 2018 pursuant to recapture notices from Seritage or the JVs. Also, in July 2017, Seritage sold a 50% joint venture interest in five of the properties and Holdings will pay rent to the new landlord.

We accounted for the Seritage transaction and JV transactions in accordance with accounting standards applicable to real estate sales and sale-leaseback transactions. We determined that the Seritage transaction qualifies for sales recognition and sale-leaseback accounting. Because of our initial ownership interest in the JVs and continuing involvement in the properties, we determined that the JV transactions, which occurred in the first quarter of 2015, did not initially qualify for sale-leaseback accounting and, therefore, accounted for the JV transactions as financing transactions and, accordingly, recorded a sale-leaseback financing obligation of $426 million and continued to report the real property assets on our Condensed Consolidated Balance Sheets at May 2, 2015. Upon the sale of our 50% interest in the JVs to Seritage, the continuing involvement through an ownership interest in the buyer-lessor no longer existed, and Holdings determined that the JV transactions then qualified for sales recognition and sale-leaseback accounting, with the exception of four properties for which we had continuing involvement as a result of an obligation to redevelop the stores for a third-party tenant and pay rent on behalf of the third-party tenant until it commences rent payments to the JVs.

With the exception of the four properties that had continuing involvement, in accordance with accounting standards related to sale-leaseback transactions, Holdings recognized any loss on sale immediately, any gain on sale in excess of the present value of minimum lease payments immediately, and any remaining gain was deferred and will be recognized in proportion to the related rent expense over the lease term. Holdings received aggregate net proceeds of $3.1 billion for the Seritage transaction and JV transactions. The carrying amount of property and equipment, net and lease balances related to third-party leases that were assigned to Seritage and the JVs was $1.5 billion at July 7, 2015, of which $1.3 billion was recorded in our Sears Domestic segment and $175 million in our Kmart segment. Accordingly, during the second quarter of 2015, Holdings recognized an immediate net gain of $508

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million within gain on sales of assets in the Consolidated Statements of Operations for 2015, comprised of a gain for the amount of gain on sale in excess of the present value of minimum lease payments, offset by a loss for properties where the fair value was less than the carrying value and the write-off of lease balances related to third-party leases that were assigned to Seritage and the JVs, as shown in the table below.

	2015
millions	Kmart			Sears Domestic			Sears Holdings
Gain	$	154		$	471		$	625
Loss	(17		)	(100		)	(117		)
Immediate Net Gain	$	137		$	371		$	508

The remaining gain of $894 million was deferred and will be recognized in proportion to the related rent expense, which is a component of cost of sales, buying and occupancy, in the Consolidated Statements of Operations, over the lease term.

During 2017 and 2016, respectively, Holdings recorded gains of $253 million and $72 million related to recapture and termination activity in connection with REIT properties and JV properties. The Master Leases provide Seritage and the JVs rights to recapture 100% of certain stores. The Master Leases also provide Seritage and the JVs a recapture right with respect to approximately 50% of the space within the stores at the REIT properties and JV properties (subject to certain exceptions), in addition to all of the automotive care centers, all outparcels or outlots, and certain portions of parking areas and common areas, except as set forth in the Master Leases, for no additional consideration. As space is recaptured pursuant to the recapture right, Holdings' obligation to pay rent is reduced proportionately. Accordingly, Holdings recognizes gains equal to the unamortized portion of the gain that had previously been deferred which exceeds the present value of minimum lease payments, as reduced due to recapture activity. The Master Leases also provide Holdings certain rights to terminate the Master Leases with respect to REIT properties or JV properties that cease to be profitable for operation. In order to terminate the Master Lease for a certain property, Holdings must make a payment to Seritage or the JV of an amount equal to one year of rent (together with taxes and other expenses) with respect to such property. The Company recognizes the corresponding expenses for termination payments to Seritage when we notify Seritage of our intention to terminate the leases and the stores are announced for closure. We recorded expense of $24 million and $21 million for termination payments to Seritage in 2017 and 2016, respectively, of which $11 million was reported as an amount payable to Seritage at January 28, 2017.

Holdings also recorded immediate gains of $40 million during the 2017, for the amount of gains on sale in excess of the present value of minimum lease payments for two of the properties that were previously accounted for as financing transactions. As the redevelopment at the stores had been completed and the third-party tenant had commenced rent payments to the JVs, the Company determined that the continuing involvement no longer existed and that the properties qualified for sales recognition and sale-leaseback accounting.

Sale-leaseback financing transactions

Holdings received cash proceeds for sale-leaseback financing transactions of $106 million, $71 million and $508 million in 2017, 2016 and 2015, respectively, including the Seritage transaction and JV transactions in 2015, as further described above. We accounted for the other transactions as financing transactions in accordance with accounting standards applicable to sale-leaseback transactions as a result of other forms of continuing involvement, including an earn-out provision and the requirement to prepay rent for one year. Accordingly, Holdings recorded a sale-leaseback financing obligation of $247 million and $235 million, at February 3, 2018 and January 28, 2017, respectively, which is classified as a long-term sale-leaseback financing obligation in the Consolidated Balance Sheets. The sale-leaseback financing obligation related to the four properties that had continuing involvement decreased to $70 million at February 3, 2018 as two of the properties qualified for sales recognition and sale-leaseback accounting as further described above. We continued to report real property assets of $66 million and $96 million at February 3, 2018 and January 28, 2017, respectively, in our Consolidated Balance Sheets, which are included in our Sears Domestic segment. The obligation for future minimum lease payments at February 3, 2018 is $59 million over the lease terms, and $6 million in 2018, $11 million in 2019, $9 million in 2020, $6 million in

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2021, $6 million in 2022 and $21 million thereafter, excluding $6 million was that was prepaid upon closing the transactions.

Other real estate transactions

In addition to the Seritage transaction, JV transactions and other sale-leaseback financing transactions described above, we recorded gains on the sales of assets for other items described as follows.

During 2017, we recorded gains on the sales of assets of $544 million recognized on the sale or amendment and lease termination of 48 Sears Full-line stores and four non-retail locations in our Sears Domestic segment for which we received $711 million cash proceeds. During 2017, we also recorded gains on the sales of assets of $164 million recognized on the sale or amendment and lease termination of 41 Kmart stores and two non-retail locations in our Kmart segment for which we received $190 million cash proceeds.

During 2016, we recorded gains on the sales of assets of $15 million recognized on the sale of two Sears Full-line stores for which we received $27 million of cash proceeds, $12 million recognized on the sale of one distribution center for which we received $23 million of cash proceeds and $10 million on the sale of one Kmart store for which we received $10 million of cash proceeds.

During 2015, we recorded gains on the sales of assets of $83 million recognized on the sale of one Sears Full-line store for which we received $102 million of cash proceeds, $90 million of which was received during the third quarter of 2014. As the leaseback ended and the remaining cash proceeds of $12 million were received during 2015, we recognized the gain that had previously been deferred. We also recorded gains on the sales of assets of $86 million recognized on the sale of two Sears Full-line stores for which we received $96 million of cash proceeds, and $10 million recognized on the surrender and early termination of one Kmart store lease.

Certain sales of our properties had leaseback arrangements. We determined that the transactions with leaseback arrangements qualify for sales recognition and sale-leaseback accounting. In accordance with accounting standards related to sale-leaseback transactions, Holdings recognized any loss on sale immediately, any gain on sale in excess of the present value of minimum lease payments immediately, and any remaining gain was deferred and will be recognized in proportion to the related rent expense over the lease term. At February 3, 2018 and January 28, 2017, respectively, $138 million and $132 million of the deferred gain on sale-leaseback is classified as current within other current liabilities, and $362 million and $563 million is classified as long-term deferred gain on sale-leaseback in the Consolidated Balance Sheets. For the other transactions, we determined that we have surrendered substantially all of our rights and obligations, and, therefore, immediate gain recognition is appropriate.

Holdings recorded rent expense in connection with sale-lease back transactions with gains that were initially deferred and are being recognized in proportion to the related rent expense over the lease term of $82 million, $96 million and $68 million in 2017, 2016 and 2015, respectively, in cost of sales, buying and occupancy in the Consolidated Statements of Operations. Rent expense consisted of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback, as shown in the table below.

	2017									2016									2015
millions	Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Holdings
Straight-line rent expense	$	20		$	140		$	160		$	32		$	152		$	184		$	20		$	100		$	120
Amortization of deferred gain on sale-leaseback	(11		)	(67		)	(78		)	(17		)	(71		)	(88		)	(11		)	(41		)	(52		)
Rent expense	$	9		$	73		$	82		$	15		$	81		$	96		$	9		$	59		$	68

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NOTE 12—GOODWILL AND INTANGIBLE ASSETS

The following summarizes our intangible assets at February 3, 2018 and January 28, 2017, respectively, the amortization expenses recorded for the years then ended, as well as our estimated amortization expense for the next five years and thereafter.

	February 3, 2018				January 28, 2017
millions	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets:
Favorable lease rights	$	121	$	44	$	143	$	52
Non-amortizing intangible assets:
Trade names	1,091		—		1,430		—
Total	$	1,212	$	44	$	1,573	$	52

Annual Amortization Expense
2017	$	4
2016	5
2015	7

Estimated Amortization
2018	$	3
2019	3
2020	3
2021	3
2022	3
Thereafter	56

Goodwill is the excess of the purchase price over the fair value of the net assets acquired in business combinations accounted for under the purchase method. Goodwill is recorded at Sears Domestic and had a balance of $269 million at both February 3, 2018 and January 28, 2017.

As described in Summary of Significant Accounting Policies in Note 1, goodwill and indefinite-lived intangible assets are not amortized but require testing for potential impairment, at a minimum on an annual basis, or when indications of potential impairment exist. As a result of our annual testing of indefinite-lived intangible assets, we recorded impairment related to the Sears trade name of $72 million, $381 million and $180 million in 2017, 2016 and 2015, respectively, which reduced the carrying value to $359 million at February 3, 2018 and $431 million at January 28, 2017. The impairment is recorded at Sears Domestic and included within impairment charges on our Consolidated Statements of Operations.

NOTE 13—STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS

Store Closings and Severance

During 2017, 2016 and 2015, respectively, we closed 303, 206 and 38 stores in our Kmart segment and 123, 37 and 12 stores in our Sears Domestic segment. An additional 66 stores in our Kmart segment and 40 stores in our Sears Domestic segment will close during the first quarter of 2018 that we previously announced would close. We also made the decision to close one domestic supply chain distribution center in our Sears Domestic segment during 2016.

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In accordance with accounting standards governing costs associated with exit or disposal activities, expenses related to future rent payments for which we no longer intend to receive any economic benefit are accrued for when we cease to use the leased space and have been reduced for any estimated sublease income. We expect to record additional charges of approximately $55 million during 2018 related to stores we had previously made the decision to close, but have not yet closed.

Store closing costs and severance recorded for 2017, 2016 and 2015 were as follows:

millions	Markdowns(1)		Severance Costs(2)		Lease Termination Costs(2)			Other Charges(2)		Impairment and Accelerated Depreciation(3)		Total Store Closing Costs
Kmart	$	154	$	25	$	80		$	22	$	19	$	300
Sears Domestic	73		58		40			10		21		202
Total 2017 costs	$	227	$	83	$	120		$	32	$	40	$	502
Kmart	$	187	$	28	$	71		$	32	$	13	$	331
Sears Domestic	39		13		5			9		7		73
Total 2016 costs	$	226	$	41	$	76		$	41	$	20	$	404
Kmart	$	39	$	16	$	21		$	10	$	1	$	87
Sears Domestic	5		21		(15		)	1		2		14
Total 2015 costs	$	44	$	37	$	6		$	11	$	3	$	101

_____________

⁽¹⁾  Recorded within cost of sales, buying and occupancy in the Consolidated Statements of Operations.

⁽²⁾  Recorded within selling and administrative in the Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

⁽³⁾  2017, 2016 and 2015 costs are recorded within depreciation and amortization on the Consolidated Statements of Operations.

Store closing cost accruals of $261 million, $216 million and $180 million at February 3, 2018, January 28, 2017 and January 30, 2016, respectively, were as shown in the table below. Store closing accruals included $126 million, $122 million and $81 million within other current liabilities and $135 million, $94 million and $99 million within other long-term liabilities in the Consolidated Balance Sheets at February 3, 2018, January 28, 2017 and January 30, 2016, respectively.

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at January 30, 2016	$	58		$	114		$	8		$	180
Store closing costs	41			85			41			167
Payments/utilizations/other	(45		)	(55		)	(31		)	(131		)
Balance at January 28, 2017	54			144			18			216
Store closing costs	83			162			32			277
Store closing capital lease obligations	—			33			—			33
Payments/utilizations/other	(88		)	(139		)	(38		)	(265		)
Balance at February 3, 2018	$	49		$	200		$	12		$	261

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Notes to Consolidated Financial Statements—(Continued)

Impairment of Long-Lived Assets

As described in the Summary of Significant Accounting Policies in Note 1, we performed impairment tests of certain of our long-lived assets during 2017, 2016 and 2015 (principally the value of land, buildings and other fixed assets associated with our stores). As a result of this impairment testing, the Company recorded impairment charges as shown in the table below.

millions	2017		2016		2015
Kmart	$	16	$	22	$	14
Sears Domestic	54		24		80
Sears Holdings	$	70	$	46	$	94

NOTE 14—LEASES

We lease certain stores, office facilities, warehouses, computers and transportation equipment.

Operating and capital lease obligations are based upon contractual minimum rents and, for certain stores, amounts in excess of these minimum rents are payable based upon specified percentages of sales. Contingent rent is accrued over the lease term, provided that the achievement of the specified sales level that triggers the contingent rental is probable. Certain leases include renewal or purchase options.

Rental expense for operating leases was as follows:

millions	2017			2016			2015
Minimum rentals	$	666		$	739		$	713
Percentage rentals	5			7			8
Less-Sublease rentals	(43		)	(51		)	(46		)
Less-Amortization of deferred gain on sale-leaseback	(78		)	(88		)	(52		)
Total	$	550		$	607		$	623

Minimum lease obligations, excluding taxes, insurance and other expenses payable directly by us, for leases in effect at February 3, 2018, were as follows:

	Minimum Lease Commitments
millions	Capital			Operating
2018	$	28		$	537
2019	15			439
2020	6			368
2021	4			297
2022	4			237
Later years	58			961
Total minimum lease payments	115			2,839
Less minimum sublease income				(92		)
Net minimum lease payments				$	2,747
Less:
Estimated executory costs	(4		)
Interest at a weighted average rate of 4.9%	(39		)
Capital lease obligations	72
Less current portion of capital lease obligations	(22		)
Long-term capital lease obligations	$	50

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NOTE 15—RELATED PARTY DISCLOSURE

Mr. Lampert is our Chief Executive Officer and Chairman of our Board of Directors. Mr. Lampert is also the Chairman and Chief Executive Officer of ESL. ESL owned approximately 49% of our outstanding common stock at February 3, 2018 (excluding shares of common stock that ESL may acquire within 60 days upon the exercise of warrants to purchase shares of our common stock).

Bruce R. Berkowitz was a member of our Board of Directors from February 2016 through October 2017. Mr. Berkowitz serves as the Chief Investment Officer of Fairholme Capital Management, LLC, an investment adviser registered with the SEC, and is the President and a Director of Fairholme Funds, Inc., a SEC-registered investment company providing investment management services to three mutual funds (together with Fairholme Capital Management, LLC and other affiliates, "Fairholme"). Fairholme owned approximately 18% of our outstanding common stock at February 3, 2018 (excluding shares of common stock that Fairholme may acquire within 60 days upon the exercise of warrants to purchase shares of our common stock).

Thomas J. Tisch has been an independent member of our Board of Directors since 2005. Mr. Tisch owned approximately 3% of our outstanding common stock at February 3, 2018.

Unsecured Commercial Paper

During 2017 and 2016, ESL and its affiliates held unsecured commercial paper issued by SRAC, an indirect wholly-owned subsidiary of Holdings. For the commercial paper outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding for this commercial paper was 8 days, 8.22% and $28 million and 21 days, 7.87% and $100 million, respectively, in 2017 and 2016. The largest aggregate amount of principal outstanding to ESL at any time since the beginning of 2017 was $160 million and $3 million of interest was paid by SRAC to ESL during 2017.

During 2016, Fairholme and its affiliates held unsecured commercial paper issued by SRAC. For the commercial paper outstanding to Fairholme, the weighted average of each of maturity, annual interest rate, and principal amount outstanding for this commercial paper was 63 days, 7.42% and $1 million in 2016.

The commercial paper purchases were made in the ordinary course of business on substantially the same terms, including interest rates, as terms prevailing for comparable transactions with other persons, and did not present features unfavorable to the Company.

Secured Short-Term Loan

In September 2014, the Company, through the Short-Term Borrowers, entities wholly-owned and controlled, directly or indirectly by the Company, entered into the $400 million Short-Term Loan with the Short-Term Lender, entities affiliated with ESL and Fairholme. The Company repaid the Short-Term Loan during 2015, resulting in no balance outstanding at February 3, 2018 or January 28, 2017. See Note 3 for additional information regarding the Short-Term Loan.

LC Facility

On December 28, 2016, the Company, through the Borrowers, entered into the LC Facility, which was subsequently amended in August 2017, and which provides for the amended LC Facility. At February 3, 2018, and January 28, 2017, we had $271 million and $200 million, respectively, of letters of credit outstanding under the LC Facility, which amounts were initially committed by entities affiliated with ESL, and the Lenders under the LC Facility maintain cash collateral on deposit with the Issuing Bank of $133 million and $204 million at February 3, 2018 and January 28, 2017, respectively. As of February 3, 2018, $138 million of the amount originally committed by entities affiliated with ESL under the LC Facility has been syndicated to unaffiliated third party lenders. See Note 3 for additional information regarding the LC Facility, as amended.

Term Loan Facility

On January 4, 2018, the Company, through the Borrowers, obtained a $300 million loan facility from the Lenders, entities affiliated with ESL. At February 3, 2018, JPP LLC and JPP II, LLC, entities affiliated with ESL,

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held $151 million of principal amount of the Term Loan Facility. See Note 3 for additional information regarding the Term Loan Facility.

2017 Secured Loan Facility

On January 3, 2017, the Company, through the 2017 Secured Loan Borrowers, obtained a $500 million real estate loan facility from the Lenders, entities affiliated with ESL. At February 3, 2018 and January 28, 2017, JPP LLC and JPP II, LLC, entities affiliated with ESL, held $384 million and $500 million of principal amount of the 2017 Secured Loan Facility, respectively. Approximately $116 million of proceeds received from real estate transactions were used to reduce outstanding borrowings under the 2017 Secured Loan Facility, all of which were repaid to entities affiliated with ESL. During October 2017, the Company, through the Incremental Loan Borrowers, obtained Incremental Loans totaling $200 million from the Lenders. At February 3, 2018, JPP LLC and JPP II, LLC, held $145 million of principal amount of the Incremental Loans. Approximately $55 million of proceeds received from real estate transactions were used to reduce outstanding borrowings under the Incremental Loans, all of which were repaid to entities affiliated with ESL. See Note 3 for additional information regarding the 2017 Secured Loan Facility and Incremental Loans.

2016 Secured Loan Facility

In April 2016, the Company, through the 2016 Secured Loan Borrowers, obtained a $500 million real estate loan facility from the 2016 Secured Loan Lenders, some of which are entities affiliated with ESL. At February 3, 2018 and January 28, 2017, entities affiliated with ESL held $126 million and $216 million, respectively, of principal amount of the 2016 Secured Loan Facility. Proceeds received from real estate transactions were used to reduce outstanding borrowings under the 2016 Secured Loan Facility, of which $89 million was repaid to entities affiliated with ESL. See Note 3 for additional information regarding the 2016 Secured Loan Facility, as amended.

2016 Term Loan

In April 2016, the Company, through the ABL Borrowers, obtained a $750 million senior secured term loan under the Amended Domestic Credit Agreement with a syndicate of lenders, including $146 million (net of original issue discount) from JPP, LLC and JPP II, LLC, entities affiliated with ESL, and $100 million from the Company's domestic pension plans. At February 3, 2018, JPP LLC and JPP II, LLC, and the Company's domestic pension plans held $38 million and $77 million, respectively, of principal amount of the 2016 Term Loan. At January 28, 2017, JPP LLC and JPP II, LLC, and the Company's domestic pension plans held $150 million and $100 million, respectively, of principal amount of the 2016 Term Loan. As disclosed in Note 3, a portion of the proceeds received from the Craftsman Sale were used to reduce outstanding borrowings under the 2016 Term Loan, of which $36 million and $24 million was repaid to JPP LLC and JPP II, LLC, and the Company's domestic pension plans, respectively. See Note 3 for additional information regarding the 2016 Term Loan.

Second Lien Credit Agreement

In September 2016, the Company, through the ABL Borrowers, obtained a $300 million Second Lien Term Loan from the Lenders, entities affiliated with ESL. At both February 3, 2018 and January 28, 2017, JPP LLC and JPP II, LLC, held $300 million of principal amount of the Second Lien Term Loan.

Additionally, as further discussed in Note 3, in July 2017, the Company amended its Second Lien Credit Agreement to create an additional Line of Credit Facility. The Company received $610 million in net proceeds from Line of Credit Loans during 2017, including $480 million, $25 million and $20 million from ESL and its affiliates, Mr. Berkowitz and his affiliates, and Mr. Tisch and his affiliates, respectively, which also represents the principal amount of Line of Credit Loans held by ESL and its affiliates and Mr. Tisch and his affiliates at February 3, 2018. The Company made repayments of $25 million during 2017 to Mr. Berkowitz and his affiliates. See Note 3 for additional information regarding the Second Lien Credit Agreement, as amended.

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Old Senior Secured Notes

At February 3, 2018 and January 28, 2017, Mr. Lampert and ESL held an aggregate of approximately $20 million and $11 million, respectively, of principal amount of the Company's Old Senior Secured Notes. Mr. Lampert and ESL tendered approximately $165 million of the Company's Old Senior Secured Notes in the Offer, which is further discussed in Note 3.

At January 28, 2017, Fairholme held an aggregate of approximately $46 million of principal amount of the Company's Old Senior Secured Notes, respectively. Fairholme tendered approximately $207 million of the Company's Old Senior Secured Notes in the Tender Offer, which is further discussed in Note 3.

Subsidiary Notes

At January 28, 2017, Mr. Lampert and ESL held an aggregate of $3 million of principal amount of unsecured notes issued by SRAC (the "Subsidiary Notes").

At February 3, 2018 and January 28, 2017, Fairholme held an aggregate of $9 million and $14 million, respectively, of principal amount of the Subsidiary Notes.

Old Senior Unsecured Notes and Warrants

At both February 3, 2018 and January 28, 2017, Mr. Lampert and ESL held an aggregate of approximately $188 million of principal amount of the Company's Old Senior Unsecured Notes, and 10,033,472 warrants to purchase shares of Holdings' common stock at both February 3, 2018 and January 28, 2017.

At February 3, 2018 and January 28, 2017, respectively, Fairholme held an aggregate of approximately $336 million and $357 million of principal amount of the Company's Old Senior Unsecured Notes, and 5,768,185 and 6,713,725 warrants to purchase shares of Holdings' common stock.

At both February 3, 2018 and January 28, 2017, Mr. Tisch held an aggregate of approximately $10 million of principal amount of the Company's Old Senior Unsecured Notes, and 136,272 warrants to purchase shares of Holdings' common stock.

Sears Canada

ESL owns approximately 45% of the outstanding common shares of Sears Canada (based on publicly available information as of July 27, 2017).

Lands' End

ESL owns approximately 67% of the outstanding common stock of Lands' End (based on publicly available information as of January 24, 2018). Holdings and certain of its subsidiaries entered into a transition services agreement in connection with the spin-off pursuant to which Lands' End and Holdings agreed to provide, on an interim, transitional basis, various services, including but not limited to, tax services, logistics services, auditing and compliance services, inventory management services, information technology services and continued participation in certain contracts shared with Holdings and its subsidiaries, as well as agreements related to Lands' End Shops at Sears and participation in the Shop Your Way program. The majority of the services under the transition services agreement with Lands' End have expired or been terminated. In July 2016, the Company and Lands' End executed an agreement pursuant to which the Company will provide foreign buying office support and sourcing services to Lands' End. The agreement expires on June 30, 2020.

Amounts due to or from Lands' End are non-interest bearing, and generally settled on a net basis. Holdings invoices Lands' End on at least a monthly basis. At February 3, 2018, Holdings reported a net amount receivable from Lands' End of $1 million within accounts receivable in the Consolidated Balance Sheets. At January 28, 2017, Holdings reported a net amount payable to Lands' End of $1 million within other current liabilities in the Consolidated Balance Sheets. Amounts related to revenue from retail services and rent for Lands' End Shops at Sears, participation in the Shop Your Way program and corporate shared services were $60 million, $65 million and $69 million, respectively, during 2017, 2016 and 2015. The amounts Lands' End earned related to call center services and commissions were $2 million, $10 million and $10 million, respectively, during 2017, 2016 and 2015.

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SHO

ESL owns approximately 58% of the outstanding common stock of SHO (based on publicly available information as of November 8, 2017). Holdings and certain of its subsidiaries engage in transactions with SHO pursuant to various agreements with SHO which, among other things: (1) govern the principal transactions relating to the rights offering and certain aspects of our relationship with SHO following the separation; (2) establish terms under which Holdings and certain of its subsidiaries will provide SHO with services; and (3) establish terms pursuant to which Holdings and certain of its subsidiaries will obtain merchandise for SHO.

These agreements were originally made in the context of a parent-subsidiary relationship and were negotiated in the overall context of the separation. In May 2016, the Company and SHO agreed to changes to a number of their related agreements, including extending the merchandise and services agreement until February 1, 2020.

A summary of the nature of related party transactions involving SHO is as follows:

• SHO obtains a significant amount of its merchandise from the Company. We have also entered into certain agreements with SHO to provide logistics, handling, warehouse and transportation services. SHO also pays a royalty related to the sale of Kenmore, Craftsman and DieHard products and fees for participation in the Shop Your Way program.

• SHO receives commissions from the Company for the sale of merchandise made through www.sears.com, extended service agreements, delivery and handling services and credit revenues.

• The Company provides SHO with shared corporate services. These services include accounting and finance, human resources and information technology.

Amounts due to or from SHO are non-interest bearing, settled on a net basis, and have payment terms of 10 days after the invoice date. The Company invoices SHO on a weekly basis. At February 3, 2018 and January 28, 2017, Holdings reported a net amount receivable from SHO of $28 million and $81 million, respectively, within accounts receivable in the Consolidated Balance Sheets. Amounts related to the sale of inventory and related services, royalties, and corporate shared services were $1.0 billion, $1.2 billion and $1.5 billion, respectively, during 2017, 2016 and 2015. The net amounts SHO earned related to commissions were $66 million, $82 million and $91 million, respectively, during 2017, 2016 and 2015. Additionally, the Company has guaranteed lease obligations for certain SHO store leases that were assigned as a result of the separation. See Note 4 for further information related to these guarantees.

Also in connection with the separation, the Company entered into an agreement with SHO and the agent under SHO's secured credit facility, whereby the Company committed to continue to provide services to SHO in connection with a realization on the lender's collateral after default under the secured credit facility, notwithstanding SHO's default under the underlying agreement with us, and to provide certain notices and services to the agent, for so long as any obligations remain outstanding under the secured credit facility.

Seritage

ESL owns approximately 7.2% of the total voting power of Seritage, and approximately 43.5% of the limited partnership units of Seritage Growth Properties, L.P. (the "Operating Partnership"), the entity that now owns the properties sold by the Company in the Seritage transaction and through which Seritage conducts its operations (based on publicly available information as of December 27, 2017). Mr. Lampert is also currently the Chairman of the Board of Trustees of Seritage. Fairholme owns approximately 11% of the outstanding Class A common shares of Seritage and 100% of the outstanding Class C non-voting common shares of Seritage (based on publicly available information as of February 14, 2018).

In connection with the Seritage transaction as described in Note 11, Holdings entered into the Master Leases with Seritage. The initial amount of aggregate annual base rent under the Master Leases is $134 million for the REIT properties, with increases of 2% per year beginning in the second lease year. At February 3, 2018, Holdings reported prepaid rent of $6 million within prepaid expenses and other current assets in the Consolidated Balance Sheets. Holdings recorded rent expense of $70 million, $83 million and $49 million in cost of sales, buying and occupancy for 2017, 2016 and 2015, respectively. Rent expense consists of straight-line rent expense of $117 million, $142

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million and $84 million, offset by amortization of a deferred gain recognized pursuant to the sale and leaseback of properties from Seritage of $47 million, $59 million and $35 million for 2017, 2016 and 2015, respectively.

In addition to base rent under the Master Leases, Holdings pays monthly installment expenses for property taxes and insurance at all REIT properties where Holdings is a tenant and installment expenses for common area maintenance, utilities and other operating expenses at REIT properties that are multi-tenant locations where Holdings and other third parties are tenants. The initial amount of aggregate installment expenses under the Master Leases was $70 million, based on estimated installment expenses, and currently is $41 million as a result of recapture activity and reconciling actual installment expenses. Holdings paid $43 million, $64 million and $40 million for 2017, 2016 and 2015, respectively, recorded in cost of sales, buying and occupancy.

At February 3, 2018 and January 28, 2017, respectively, Holdings reported an amount receivable from Seritage of $1 million and $14 million within accounts receivable in the Consolidated Balance Sheets. Holdings reported an amount payable to Seritage of $11 million within other current liabilities in the Consolidated Balance Sheets at January 28, 2017.

NOTE 16—SUPPLEMENTAL FINANCIAL INFORMATION

Other long-term liabilities at February 3, 2018 and January 28, 2017 consisted of the following:

millions	February 3, 2018		January 28, 2017
Unearned revenues	$	539	$	639
Self-insurance reserves	491		535
Other	437		467
Total	$	1,467	$	1,641

The Company sells service contracts that provide for preventative maintenance and repair/replacement coverage on consumer products over periods of time ranging from 12 to 144 months. Revenues from the sale of service contracts, and the related direct acquisition costs, are deferred and amortized on a straight-line basis over the lives of the associated contracts, while the associated service costs are expensed as incurred. The table below shows activity related to unearned revenues for service contracts, which are recorded within unearned revenues and other long-term liabilities in the Consolidated Balance Sheets.

millions	Unearned Revenues
Balance at January 30, 2016	$	1,405
Sales of service contracts	855
Revenue recognized on existing service contracts	(961		)
Balance at January 28, 2017	1,299
Sales of service contracts	691
Revenue recognized on existing service contracts	(876		)
Balance at February 3, 2018	$	1,114

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NOTE 17—SUMMARY OF SEGMENT DATA

These reportable segment classifications are based on our business formats, as described in Note 1. The Kmart format represents both an operating and reportable segment. The Sears Domestic reportable segment consists of the aggregation of several business formats. These formats are evaluated by our Chief Operating Decision Maker ("CODM") to make decisions about resource allocation and to assess performance.

Each of these segments derives its revenues from the sale of merchandise and related services to customers, primarily in the United States. The merchandise and service categories are as follows:

(i) Hardlines—consists of home appliances, consumer electronics, lawn & garden, tools & hardware, automotive parts, household goods, toys, housewares and sporting goods;

(ii) Apparel and Soft Home—includes women's, men's, kids', footwear, jewelry, accessories and soft home;

(iii) Food and Drug—consists of grocery & household, pharmacy and drugstore;

(iv) Service—includes repair, installation and automotive service and extended contract revenue; and

(v) Other—includes revenues earned in connection with our agreements with SHO and Lands' End, as well as online commissions, licensed business revenues, wholesale revenues, rental income and credit revenues.

	2017
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales
Hardlines	$	1,550		$	5,656		$	7,206
Apparel and Soft Home	2,096			2,182			4,278
Food and Drug	1,918			7			1,925
Total merchandise sales	5,564			7,845			13,409
Services and other
Services	4			1,811			1,815
Other	50			1,428			1,478
Total services and other	54			3,239			3,293
Total revenues	5,618			11,084			16,702
Costs and expenses:
Cost of sales, buying and occupancy - merchandise sales	4,592			6,757			11,349
Cost of sales and occupancy - services and other	9			1,817			1,826
Total cost of sales, buying and occupancy	4,601			8,574			13,175
Selling and administrative	1,455			3,676			5,131
Depreciation and amortization	60			272			332
Impairment charges	16			126			142
Gain on sales of assets	(881		)	(767		)	(1,648		)
Total costs and expenses	5,251			11,881			17,132
Operating income (loss)	$	367		$	(797	)	$	(430	)
Total assets	$	1,576		$	5,686		$	7,262
Capital expenditures	$	18		$	62		$	80

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	2016
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales
Hardlines	$	2,445		$	7,126		$	9,571
Apparel and Soft Home	3,044			2,522			5,566
Food and Drug	3,088			11			3,099
Total merchandise sales	8,577			9,659			18,236
Services and other
Services	9			2,101			2,110
Other	64			1,728			1,792
Total services and other	73			3,829			3,902
Total revenues	8,650			13,488			22,138
Costs and expenses:
Cost of sales, buying and occupancy - merchandise sales	7,075			8,109			15,184
Cost of sales and occupancy - services and other	18			2,250			2,268
Total cost of sales, buying and occupancy	7,093			10,359			17,452
Selling and administrative	2,175			3,934			6,109
Depreciation and amortization	71			304			375
Impairment charges	22			405			427
Gain on sales of assets	(181		)	(66		)	(247		)
Total costs and expenses	9,180			14,936			24,116
Operating loss	$	(530	)	$	(1,448	)	$	(1,978	)
Total assets	$	2,134		$	7,228		$	9,362
Capital expenditures	$	43		$	99		$	142

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	2015
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales
Hardlines	$	2,936		$	7,915		$	10,851
Apparel and Soft Home	3,434			2,907			6,341
Food and Drug	3,735			9			3,744
Total merchandise sales	10,105			10,831			20,936
Services and other
Services	13			2,127			2,140
Other	70			2,000			2,070
Total services and other	83			4,127			4,210
Total revenues	10,188			14,958			25,146
Costs and expenses:
Cost of sales, buying and occupancy - merchandise sales	8,023			8,794			16,817
Cost of sales and occupancy - services and other	19			2,500			2,519
Total cost of sales, buying and occupancy	8,042			11,294			19,336
Selling and administrative	2,537			4,320			6,857
Depreciation and amortization	72			350			422
Impairment charges	14			260			274
Gain on sales of assets	(185		)	(558		)	(743		)
Total costs and expenses	10,480			15,666			26,146
Operating loss	$	(292	)	$	(708	)	$	(1,000	)
Total assets	$	3,059		$	8,278		$	11,337
Capital expenditures	$	42		$	169		$	211

NOTE 18—LEGAL PROCEEDINGS

We are a defendant in several lawsuits containing class or collective action allegations in which the plaintiffs are current and former hourly and salaried associates who allege violations of various wage and hour laws, rules and regulations pertaining to alleged misclassification of certain of our employees, the failure to pay overtime, and/or the failure to pay for missed meal and rest periods, and other payroll violations. The complaints generally seek unspecified monetary damages, injunctive relief, or both. Further, certain of these proceedings are in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. We also are a defendant in putative class action or representative lawsuits in California relating to alleged failure to comply with California laws pertaining to certain operational, marketing, and pricing practices. The California laws alleged to have been violated in each of these lawsuits provide the potential for significant statutory penalties. At this time, the Company is not able to either predict the outcome of these lawsuits or reasonably estimate a potential range of loss with respect to the lawsuits.

We are subject to various other legal and governmental proceedings and investigations, including some involving the practices and procedures in our more highly regulated businesses. Some matters contain class action allegations, environmental and asbestos exposure allegations and other consumer-based, regulatory claims, each of which may seek compensatory, punitive or treble damage claims (potentially in large amounts), as well as other types of relief. At this time, the Company is not able to either predict the outcome of these lawsuits or reasonably estimate a potential range of loss with respect to these lawsuits.

In accordance with accounting standards regarding loss contingencies, we accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and we

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disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. We do not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote.

Because litigation outcomes are inherently unpredictable, our evaluation of legal proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to any one of our financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then we disclose the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such loss is not reasonably estimable. While the consequences of certain unresolved proceedings are not presently determinable, and an estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material effect on our earnings in any given reporting period. However, in the opinion of our management, after consulting with legal counsel, and taking into account insurance and reserves, the ultimate liability related to current outstanding matters is not expected to have a material effect on our financial position, liquidity or capital resources.

NOTE 19—QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

	2017
millions, except per share data	First Quarter		Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	4,301	$	4,365		$	3,660		$	4,376
Cost of sales, buying and occupancy	3,371		3,394			2,958			3,452
Selling and administrative	1,267		1,369			1,339			1,156
Net income (loss) attributable to Holdings' shareholders	244		(251		)	(558		)	182
Basic net income (loss) per share attributable to Holdings' shareholders	2.28		(2.34		)	(5.19		)	1.69
Diluted net income (loss) per share attributable to Holdings' shareholders	2.28		(2.34		)	(5.19		)	1.69

	2016
millions, except per share data	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	5,394		$	5,663		$	5,029		$	6,052
Cost of sales, buying and occupancy	4,217			4,403			4,067			4,765
Selling and administrative	1,503			1,484			1,543			1,579
Net loss attributable to Holdings' shareholders	(471		)	(395		)	(748		)	(607		)
Basic net loss per share attributable to Holdings' shareholders	(4.41		)	(3.70		)	(6.99		)	(5.67		)
Diluted net loss per share attributable to Holdings' shareholders	(4.41		)	(3.70		)	(6.99		)	(5.67		)

Per share amounts for each quarter are required to be computed independently and may not equal the amount computed for the total year. In the first quarter of 2017, we recorded a gain on the Craftsman Sale of $492 million. Refer to Note 1 for more information related to the Craftsman Sale. In addition, in the fourth quarter of 2017, the income tax benefit included a tax benefit of approximately $470 million related to the impacts of the Tax Act. Refer to Note 10 for more information. In the fourth quarter of 2017 and 2016, we recorded impairment related to the Sears trade name of $72 million and $381 million, respectively. Refer to Note 12 for more information related to these impairment charges.

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NOTE 20—GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At February 3, 2018, the principal amount outstanding of the Company’s 65/8% senior secured notes due 2018 was $303 million. These notes were issued in 2010 by Sears Holdings Corporation ("Parent"). The Old Senior Secured Notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the Senior Secured Notes, as well as by Sears Holdings Management Corporation and SRAC (the "guarantor subsidiaries"). The following condensed consolidated financial information presents the Condensed Consolidating Balance Sheets at February 3, 2018 and January 28, 2017, and the Condensed Consolidating Statements of Operations, the Consolidating Statements of Comprehensive Income (Loss) and the Condensed Consolidating Statements of Cash flows for 2017, 2016 and 2015 of (i) Parent; (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; (iv) eliminations and (v) the Company on a consolidated basis.

The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions including transactions with our wholly-owned non-guarantor insurance subsidiary. The Company has accounted for investments in subsidiaries under the equity method. The guarantor subsidiaries are 100% owned directly or indirectly by the Parent and all guarantees are joint, several and unconditional. Additionally, the notes are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables of the guarantor subsidiaries, and consequently may not be available to satisfy the claims of the Company’s general creditors. Certain investments primarily held by non-guarantor subsidiaries are recorded by the issuers at historical cost and are recorded at fair value by the holder.

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Condensed Consolidating Balance Sheet

February 3, 2018

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	152	$	30	$	—		$	182
Restricted cash	154			—		—		—			154
Intercompany receivables	—			—		27,993		(27,993		)	—
Accounts receivable	—			322		21		—			343
Merchandise inventories	—			2,798		—		—			2,798
Prepaid expenses and other current assets	309			899		478		(1,351		)	335
Total current assets	463			4,171		28,522		(29,344		)	3,812
Total property and equipment, net	—			1,043		686		—			1,729
Goodwill and intangible assets	—			346		1,189		(98		)	1,437
Other assets	179			1,331		1,159		(2,385		)	284
Investment in subsidiaries	8,790			27,752		—		(36,542		)	—
TOTAL ASSETS	$	9,432		$	34,643	$	31,556	$	(68,369	)	$	7,262
Current liabilities
Short-term borrowings	$	144		$	937	$	—	$	(166	)	$	915
Current portion of long-term debt and capitalized lease obligations	303			897		—		(232		)	968
Merchandise payables	—			576		—		—			576
Intercompany payables	11,099			16,894		—		(27,993		)	—
Other current liabilities	16			1,941		1,448		(949		)	2,456
Total current liabilities	11,562			21,245		1,448		(29,340		)	4,915
Long-term debt and capitalized lease obligations	1,991			2,734		—		(2,476		)	2,249
Pension and postretirement benefits	—			1,616		3		—			1,619
Deferred gain on sale-leaseback	—			360		2		—			362
Sale-leaseback financing obligation	—			158		89		—			247
Long-term deferred tax liabilities	—			—		349		(223		)	126
Other long-term liabilities	—			1,131		514		(178		)	1,467
Total Liabilities	13,553			27,244		2,405		(32,217		)	10,985
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(4,121		)	7,399		29,151		(36,152		)	(3,723		)
Total Equity (Deficit)	(4,121		)	7,399		29,151		(36,152		)	(3,723		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	9,432		$	34,643	$	31,556	$	(68,369	)	$	7,262

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Condensed Consolidating Balance Sheet

January 28, 2017

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	260	$	26	$	—		$	286
Intercompany receivables	—			—		27,415		(27,415		)	—
Accounts receivable	—			441		25					466
Merchandise inventories	—			3,959		—		—			3,959
Prepaid expenses and other current assets	23			692		856		(1,286		)	285
Total current assets	23			5,352		28,322		(28,701		)	4,996
Total property and equipment, net	—			1,504		736		—			2,240
Goodwill and intangible assets	—			360		1,528		(98		)	1,790
Other assets	4			285		931		(884		)	336
Investment in subsidiaries	9,110			26,703		—		(35,813		)	—
TOTAL ASSETS	$	9,137		$	34,204	$	31,517	$	(65,496	)	$	9,362
Current liabilities
Short-term borrowings	$	—		$	108	$	—	$	(108	)	$	—
Current portion of long-term debt and capitalized lease obligations	—			1,189		—		(599		)	590
Merchandise payables	—			1,048		—		—			1,048
Intercompany payables	11,830			15,585		—		(27,415		)	—
Other current liabilities	17			2,479		1,219		(672		)	3,043
Total current liabilities	11,847			20,409		1,219		(28,794		)	4,681
Long-term debt and capitalized lease obligations	1,215			3,160		—		(802		)	3,573
Pension and postretirement benefits	—			1,746		4		—			1,750
Deferred gain on sale-leaseback	—			563		—		—			563
Sale-leaseback financing obligation	—			235		—		—			235
Long-term deferred tax liabilities	48			—		724		(29		)	743
Other long-term liabilities	—			808		1,038		(205		)	1,641
Total Liabilities	13,110			26,921		2,985		(29,830		)	13,186
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(3,973		)	7,283		28,532		(35,666		)	(3,824		)
Total Equity (Deficit)	(3,973		)	7,283		28,532		(35,666		)	(3,824		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	9,137		$	34,204	$	31,517	$	(65,496	)	$	9,362

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Condensed Consolidating Statement of Operations

For the Year Ended February 3, 2018

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	13,375		$	—		$	34		$	13,409
Services and other	—			3,303			2,283			(2,293		)	3,293
Total revenues	—			16,678			2,283			(2,259		)	16,702
Cost of sales, buying and occupancy - merchandise sales	1			11,237			—			111			11,349
Cost of sales and occupancy - services and other	—			2,228			876			(1,278		)	1,826
Total cost of sales, buying and occupancy	1			13,465			876			(1,167		)	13,175
Selling and administrative	(27		)	5,409			841			(1,092		)	5,131
Depreciation and amortization	—			270			62			—			332
Impairment charges	—			70			72			—			142
Gain on sales of assets	(486		)	(1,142		)	(20		)	—			(1,648		)
Total costs and expenses	(512		)	18,072			1,831			(2,259		)	17,132
Operating income (loss)	512			(1,394		)	452			—			(430		)
Interest expense	(600		)	(994		)	(19		)	1,074			(539		)
Interest and investment income (loss)	45			195			412			(664		)	(12		)
Income (loss) before income taxes	(43		)	(2,193		)	845			410			(981		)
Income tax (expense) benefit	232			765			(399		)	—			598
Equity (deficit) in earnings in subsidiaries	(982		)	460			—			522			—
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(793	)	$	(968	)	$	446		$	932		$	(383	)

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Condensed Consolidating Statement of Operations

For the Year Ended January 28, 2017

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	18,218		$	—		$	18		$	18,236
Services and other	—			3,985			2,796			(2,879		)	3,902
Total revenues	—			22,203			2,796			(2,861		)	22,138
Cost of sales, buying and occupancy - merchandise sales	—			15,104			—			80			15,184
Cost of sales and occupancy - services and other	—			2,824			1,056			(1,612		)	2,268
Total cost of sales, buying and occupancy	—			17,928			1,056			(1,532		)	17,452
Selling and administrative	6			6,506			926			(1,329		)	6,109
Depreciation and amortization	—			303			72			—			375
Impairment charges	—			46			381			—			427
Gain on sales of assets	—			(343		)	(2		)	98			(247		)
Total costs and expenses	6			24,440			2,433			(2,763		)	24,116
Operating income (loss)	(6		)	(2,237		)	363			(98		)	(1,978		)
Interest expense	(385		)	(645		)	(13		)	639			(404		)
Interest and investment income (loss)	20			152			441			(639		)	(26		)
Other income (loss)	13			—			(217		)	217			13
Income (loss) before income taxes	(358		)	(2,730		)	574			119			(2,395		)
Income tax (expense) benefit	28			529			(383		)	—			174
Equity (deficit) in earnings in subsidiaries	(2,010		)	5			—			2,005			—
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(2,340	)	$	(2,196	)	$	191		$	2,124		$	(2,221	)

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Condensed Consolidating Statement of Operations

For the Year Ended January 30, 2016

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	20,925		$	—		$	11		$	20,936
Services and other	—			4,339			2,861			(2,990		)	4,210
Total revenues	—			25,264			2,861			(2,979		)	25,146
Cost of sales, buying and occupancy - merchandise sales	—			16,749			—			68			16,817
Cost of sales and occupancy - services and other	—			3,070			1,131			(1,682		)	2,519
Total cost of sales, buying and occupancy	—			19,819			1,131			(1,614		)	19,336
Selling and administrative	3			7,322			897			(1,365		)	6,857
Depreciation and amortization	—			350			72			—			422
Impairment charges	—			94			180			—			274
Gain on sales of assets	—			(735		)	(8		)	—			(743		)
Total costs and expenses	3			26,850			2,272			(2,979		)	26,146
Operating income (loss)	(3		)	(1,586		)	589			—			(1,000		)
Interest expense	(265		)	(481		)	(83		)	506			(323		)
Interest and investment income (loss)	(19		)	44			419			(506		)	(62		)
Income (loss) before income taxes	(287		)	(2,023		)	925			—			(1,385		)
Income tax (expense) benefit	115			480			(338		)	—			257
Equity (deficit) in earnings in subsidiaries	(956		)	158			—			798			—
Net income (loss)	(1,128		)	(1,385		)	587			798			(1,128		)
Income attributable to noncontrolling interests	—			—			—			(1		)	(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(1,128	)	$	(1,385	)	$	587		$	797		$	(1,129	)

128

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended February 3, 2018

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(793	)	$	(968	)	$	446	$	932		$	(383	)
Other comprehensive income:
Pension and postretirement adjustments, net of tax	—			478			—		—			478
Unrealized net gain, net of tax	6			—			45		(51		)	—
Currency translation adjustments, net of tax	—			—			2		—			2
Total other comprehensive income	6			478			47		(51		)	480
Comprehensive income (loss) attributable to Holdings' shareholders	$	(787	)	$	(490	)	$	493	$	881		$	97

129

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 28, 2017

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(2,340	)	$	(2,196	)	$	191		$	2,124		$	(2,221	)
Other comprehensive income:
Pension and postretirement adjustments, net of tax	—			366			—			—			366
Dissolution of noncontrolling interest	—			—			(7		)	—			(7		)
Unrealized net gain, net of tax	—			—			122			(122		)	—
Total other comprehensive income	—			366			115			(122		)	359
Comprehensive income (loss)	(2,340		)	(1,830		)	306			2,002			(1,862		)
Comprehensive income attributable to noncontrolling interest	—			—			—			7			7
Comprehensive income (loss) attributable to Holdings' shareholders	$	(2,340	)	$	(1,830	)	$	306		$	2,009		$	(1,855	)

130

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 30, 2016

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(1,128	)	$	(1,385	)	$	587		$	798		$	(1,128	)
Other comprehensive income (loss):
Pension and postretirement adjustments, net of tax	—			113			—			—			113
Currency translation adjustments, net of tax	—			—			(1		)	—			(1		)
Unrealized net loss, net of tax	—			(3		)	(65		)	68			—
Total other comprehensive income (loss)	—			110			(66		)	68			112
Comprehensive income (loss)	(1,128		)	(1,275		)	521			866			(1,016		)
Comprehensive loss attributable to noncontrolling interest	—			—			—			(1		)	(1		)
Comprehensive income (loss) attributable to Holdings' shareholders	$	(1,128	)	$	(1,275	)	$	521		$	865		$	(1,017	)

131

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Condensed Consolidating Statement of Cash Flows

For the Year Ended February 3, 2018

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	1		$	(2,404	)	$	682		$	(121	)	$	(1,842	)
Proceeds from sales of property and investments	—			1,093			16			—			1,109
Proceeds from Craftsman Sale	572			—			—			—			572
Proceeds from sales of receivables	293			—			—			—			293
Purchases of property and equipment	—			(70		)	(10		)	—			(80		)
Net investing with Affiliates	(934		)	—			(563		)	1,497			—
Net cash provided by (used in) investing activities	(69		)	1,023			(557		)	1,497			1,894
Proceeds from debt issuances	410			610			—			—			1,020
Repayments of long-term debt	(171		)	(1,185		)	—			—			(1,356		)
Increase in short-term borrowings, primarily 90 days or less	—			271			—			—			271
Proceeds from sale-leaseback financing	—			106			—			—			106
Debt issuance costs	(17		)	(26		)	—			—			(43		)
Intercompany dividend	—			—			(121		)	121			—
Net borrowing with Affiliates	—			1,497			—			(1,497		)	—
Net cash provided by (used in) financing activities	222			1,273			(121		)	(1,376		)	(2		)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	154			(108		)	4			—			50
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			260			26			—			286
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR	$	154		$	152		$	30		$	—		$	336

132

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 28, 2017

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	244		$	(2,137	)	$	820		$	(308	)	$	(1,381	)
Proceeds from sales of property and investments	—			273			113			—			386
Purchases of property and equipment	—			(133		)	(9		)	—			(142		)
Net investing with Affiliates	(239		)	—			(627		)	866			—
Net cash provided by (used in) investing activities	(239		)	140			(523		)	866			244
Proceeds from debt issuances	—			2,028			—			—			2,028
Repayments of long-term debt	—			(65		)	(1		)	—			(66		)
Decrease in short-term borrowings, primarily 90 days or less	—			(797		)	—			—			(797		)
Proceeds from sale-leaseback financing	—			71			—			—			71
Debt issuance costs	(5		)	(46		)	—			—			(51		)
Intercompany dividend	—			—			(308		)	308			—
Net borrowing with Affiliates	—			866			—			(866		)	—
Net cash provided by (used in) financing activities	(5		)	2,057			(309		)	(558		)	1,185
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	—			60			(12		)	—			48
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			200			38			—			238
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR	$	—		$	260		$	26		$	—		$	286

133

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 30, 2016

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	395		$	(3,021	)	$	938		$	(479	)	$	(2,167	)
Proceeds from sales of property and investments	—			2,725			5			—			2,730
Purchases of property and equipment	—			(202		)	(9		)	—			(211		)
Net investing with Affiliates	(395		)	—			(446		)	841			—
Net cash provided by (used in) investing activities	(395		)	2,523			(450		)	841			2,519
Repayments of long-term debt	—			(1,403		)	(2		)	—			(1,405		)
Increase in short-term borrowings, primarily 90 days or less	—			583			—			—			583
Proceeds from sale-leaseback financing	—			508			—			—			508
Debt issuance costs	—			(50		)	—			—			(50		)
Intercompany dividend	—						(479		)	479			—
Net borrowing with Affiliates	—			841			—			(841		)	—
Net cash provided by (used in) financing activities	—			479			(481		)	(362		)	(364		)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	—			(19		)	7			—			(12		)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			219			31			—			250
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR	$	—		$	200		$	38		$	—		$	238

134

Sears Holdings Corporation

Schedule II-Valuation and Qualifying Accounts

Years 2017, 2016 and 2015

millions	Balance at beginning of period		Additions charged to costs and expenses		(Deductions)			Balance at end of period
Allowance for Doubtful Accounts(1):
2017	$	37	$	7	$	(9	)	$	35
2016	34		9		(6		)	37
2015	25		10		(1		)	34
Allowance for Deferred Tax Assets(2):
2017	$	5,519	$	86	$	(1,418	)	$	4,187
2016	4,757		1,000		(238		)	5,519
2015	4,478		603		(324		)	4,757

__________________

⁽¹⁾  Charges to the account are for the purposes for which the reserves were created.

⁽²⁾  In 2017, the deferred tax assets and liabilities, along with the valuation allowance, decreased due to the reduction in the corporate income tax rate from 35% to 21% pursuant to the Tax Act. In addition, the pension liability and other federal and state deferred tax assets decreased during the year.

135

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Sears Holdings Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Company's Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting at February 3, 2018. In making its assessment, management used the criteria set forth in the Internal Control -Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). The assessment included the documentation and understanding of the Company's internal control over financial reporting. Management evaluated the design effectiveness and tested the operating effectiveness of internal controls over financial reporting to form its conclusion.

Based on this evaluation, management concluded that, at February 3, 2018, the Company's internal control over financial reporting is effective to provide reasonable assurance that the Company's financial statements are fairly presented in conformity with generally accepted accounting principles.

Deloitte & Touche LLP, independent registered public accounting firm, has reported on the effectiveness of the Company's internal control over financial reporting at February 3, 2018, as stated in their report included herein.

136

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Sears Holdings Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Sears Holdings Corporation and subsidiaries (the "Company") as of February 3, 2018 and January 28, 2017, the related consolidated statements of operations, comprehensive income (loss), deficit, and cash flows, for each of the three years in the period ended February 3, 2018, and the related notes and the schedule listed in the Index at Item 8 (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of February 3, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 3, 2018 and January 28, 2017, and the results of its operations and its cash flows for each of the three years in the period ended February 3, 2018, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 3, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made

137

only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP 

Deloitte & Touche LLP

Chicago, Illinois

March 23, 2018

We have served as the Company's auditor since 2005.

138

SEARS HOLDINGS CORPORATION

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Our management, with the participation of our principal executive and principal financial officers, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period covered by this Annual Report on Form 10-K (the "Evaluation Date"). Based on this evaluation, the principal executive and principal financial officers concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

In addition, based on that evaluation, no changes in our internal control over financial reporting have occurred during our last quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management's annual report on internal control over financial reporting and the report of our independent registered public accounting firm appears in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Item  9B. Other Information

Not applicable.

139

PART III

Item  10. Directors, Executive Officers and Corporate Governance

Information required by this Item 10 with respect to members of our Board of Directors and our Audit Committee will be included under the headings "Election of Directors," "Election of Directors - Committees of the Board of Directors," and "Corporate Governance - Director Independence" of our definitive proxy statement for our annual meeting of stockholders to be held on May 9, 2018 (the "2018 Proxy Statement") and is incorporated herein by reference. Information required by this Item 10 with respect to Section 16(a) beneficial ownership reporting compliance will be included under the heading "Other Information - Section 16(a) Beneficial Ownership Reporting Compliance" of the 2018 Proxy Statement and is incorporated herein by reference.

The information required by this Item 10 regarding the Company's executive officers is set forth under the heading Executive Officers of the Registrant in Part I of this Annual Report on Form 10-K and is incorporated herein by reference.

Holdings has adopted a Code of Conduct, which applies to all employees, including our principal executive officer, principal financial officer and principal accounting officer, and a Code of Conduct for its Board of Directors. Directors who are also officers of Holdings are subject to both codes of conduct. Each code of conduct is a code of ethics as defined in Item 406 of SEC Regulation S-K. The codes of conduct are available in the "Investors - Corporate Governance" section of our website at www.searsholdings.com. Any amendment to, or waiver from, a provision of the codes of conduct will be posted to the above-referenced website.

There were no material changes to the process by which stockholders may recommend nominees to the Board of Directors during the last year.

Item  11. Executive Compensation

Information regarding named executive officer and director compensation will be included under the headings "Executive Compensation," "Compensation of Directors," and "Compensation Committee Report" of the 2018 Proxy Statement and is incorporated herein by reference.

Item  12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding security ownership of certain beneficial owners and management will be included under the heading "Amount and Nature of Beneficial Ownership" of the 2018 Proxy Statement and is incorporated herein by reference.

See also Equity Compensation Plan Information in Item 5 of this Report for a discussion of securities authorized for issuance under equity compensation plans.

Item  13. Certain Relationships and Related Transactions, and Director Independence

Information regarding certain relationships and related transactions and director independence will be included under the headings "Certain Relationships and Transactions," "Review and Approval of Transactions with Related Persons" and "Corporate Governance" of the 2018 Proxy Statement and is incorporated herein by reference.

Item  14. Principal Accounting Fees and Services

Information regarding principal accountant fees and services will be included under the heading "Independent Registered Public Accounting Firm Fees" of the 2018 Proxy Statement and is incorporated herein by reference.

140

PART IV

Item  15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this report:

1. Financial Statements

Financial statements filed as part of this Annual Report on Form 10-K are listed under Item 8.

2. Financial Statement Schedule

The financial statement schedule filed as part of this Annual Report on Form 10-K is listed under Item 8.

The separate financial statements and summarized financial information of majority-owned subsidiaries not consolidated and of 50% or less owned persons have been omitted because they are not required pursuant to conditions set forth in Rules 3-09 and 1-02(w) of Regulation S-X.

All other schedules have been omitted because they are not required under the instructions contained in Regulation S-X because the information called for is contained in the financial statements and notes thereto.

(b) Exhibits

An "Exhibit Index" has been filed as part of this Report beginning on Page E-1 and is incorporated herein by this reference.

Certain of the agreements incorporated by reference into this report contain representations and warranties and other agreements and undertakings by us and third parties. These representations and warranties, agreements and undertakings have been made as of specific dates, may be subject to important qualifications and limitations agreed to by the parties to the agreement in connection with negotiating the terms of the agreement, and have been included in the agreement for the purpose of allocating risk between the parties to the agreement rather than to establish matters as facts. Any such representations and warranties, agreements, and undertakings have been made solely for the benefit of the parties to the agreement and should not be relied upon by any other person.

Item  16. Form 10-K Summary

None.

141

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SEARS HOLDINGS CORPORATION
By:	/S/    ROBERT A. RIECKER
Name:	Robert A. Riecker
Title:	Chief Financial Officer
Date: March 23, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities stated and on the dates indicated.

/S/ EDWARD S. LAMPERT	Director, Chairman of the Board of Directors, and Chief Executive Officer (principal executive officer)	March 23, 2018
Edward S. Lampert
/S/ ROBERT A. RIECKER	Chief Financial Officer (principal financial officer and principal accounting officer)	March 23, 2018
Robert A. Riecker
/S/ PAUL G. DEPODESTA	Director	March 23, 2018
Paul G. DePodesta
/S/ KUNAL S. KAMLANI	Director	March 23, 2018
Kunal S. Kamlani
/S/ WILLIAM C. KUNKLER, III	Director	March 23, 2018
William C. Kunkler, III
/S/ ANN N. REESE	Director	March 23, 2018
Ann N. Reese
/S/ THOMAS J. TISCH	Director	March 23, 2018
Thomas J. Tisch

142

EXHIBIT INDEX

2.1	Purchase and Sale Agreement, dated as of January 5, 2017, by and between Sears Holdings Corporation and Stanley Black & Decker, Inc. (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K, dated January 5, 2017, filed on January 10, 2017 (File No. 001-36693)).
2.2	First Amendment to Purchase and Sale Agreement, dated April 13, 2017, by and between Sears Holdings Corporation and Stanley Black & Decker, Inc. (incorporated by reference to Exhibit 10.6 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2017 (File No. 001-36693)).
2.3	Second Amendment to Purchase and Sale Agreement, dated July 28, 2017, by and between Sears Holdings Corporation and Stanley Black & Decker (incorporated by reference to Exhibit 2.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 29, 2017 (File No. 001-36693)).
3.1	Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K, dated March 24, 2005, filed on March 24, 2005 (File No. 000-51217)).
3.2	Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2 to Registrant's Current Report on Form 8-K, dated January 22, 2014, filed on January 24, 2014 (File No. 000-51217)).
4.1	Registrant hereby agrees to furnish to the Commission, upon request, the instruments defining the rights of holders of each issue of long-term debt of Registrant and its consolidated subsidiaries.
4.2	Indenture, dated as of October 12, 2010, among Sears Holdings Corporation, the guarantors party thereto and Wells Fargo Bank, National Association, as Trustee and Collateral Agent (incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K, dated October 12, 2010, filed on October 15, 2010 (File No. 000-51217)).
4.3	Fourth Supplemental Indenture, dated as of January 9, 2018, among Sears Holdings Corporation, the guarantors party thereto and Wilmington Trust, National Association, as successor trustee and collateral agent (incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K, dated January 4, 2018, filed January 10, 2018 (File No. 001-36693)).
4.4	Fifth Supplemental Indenture, dated as of March 20, 2018, among Sears Holdings Corporation, the guarantors party thereto and Wilmington Trust, National Association, as successor trustee and collateral agent (incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K, dated March 20, 2018, filed March 23, 2018 (File No. 001-36693))
4.5	Indenture, dated as of March 20, 2018, by and among Sears Holdings Corporation, the guarantors party thereto and Computershare Trust Company, N.A. (including form of note) (incorporated by reference to Exhibit 4.2 to Registrant's Current Report on Form 8-K, dated March 20, 2018, filed March 23, 2018 (File No. 001-36693)).
4.6	Amended and Restated Security Agreement, dated as of March 20, 2018, among Sears Holdings Corporation, the guarantors party thereto and National Association, as Collateral Agent (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K, dated March 20, 2018, filed on March 23, 2018 (File No. 001-36693)).
4.7	Second Amended and Restated Intercreditor Agreement, dated as of March 20, 2018, by and among Bank of America, N.A. and Wells Fargo Bank, National Association as ABL Agents, and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K, dated March 20, 2018, filed on March 23, 2018 (File No. 001-36693)).
4.8	Registration Rights Agreement, dated as of October 12, 2010, by and among Sears Holdings Corporation and the guarantors party thereto and Banc of America Securities LLC (incorporated by reference to Exhibit 4.4 to Registrant's Current Report on Form 8-K, dated October 12, 2010, filed on October 15, 2010 (File No. 000-51217)).
4.90	Indenture, dated as of November 21, 2014, by and between Sears Holdings Corporation and Computershare Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated November 21, 2014, filed on November 21, 2014 (File No. 001-36693)).

E-1

4.10	First Supplemental Indenture, dated as of November 21, 2014, by and between Sears Holdings Corporation and Computershare Trust Company, N.A., as Trustee (including form of note) (incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K, dated November 21, 2014, filed on November 21, 2014 (File No. 001-36693)).
4.11	Second Supplemental Indenture, dated as of March 20, 2018, by and by and between Sears Holdings Corporation and Computershare Trust Company, N.A., as Trustee (including form of note) (incorporated by reference to Exhibit 4.4 to Registrant’s Current Report on Form 8-K, dated March 20, 2018, filed on March 23, 2018 (File No. 001-36693)).
4.12	Warrant Agreement, dated as of November 21, 2014, by and between Sears Holdings Corporation, Computershare Inc. and Computershare Trust Company, N.A., as Warrant Agent (including form of warrant certificate) (incorporated by reference to Exhibit 4.3 to Registrant’s Current Report on Form 8-K, dated November 21, 2014, filed on November 21, 2014 (File No. 001-36693)).
10.1	Guarantee executed by Sears, Roebuck and Co. under the Indenture, dated as of May 15, 1995, between Sears Roebuck Acceptance Corp. and JP Morgan Chase Bank (successor to The Chase Manhattan Bank, N.A.), as supplemented by the First Supplemental Indenture, dated as of November 3, 2003 (incorporated by reference to Exhibit 4(g) to Sears Roebuck Acceptance Corp.'s Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2003 (File No. 001-04040)).
10.2	Guarantee executed by Sears, Roebuck and Co. under the Indenture, dated as of October 1, 2002, between Sears Roebuck Acceptance Corp. and BNY Midwest Trust Company, as supplemented by the First Supplemental Indenture, dated as of November 3, 2003 (incorporated by reference to Exhibit 4(h) to Sears Roebuck Acceptance Corp.'s Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2003 (File No. 001-04040)).
10.3	Guarantee, dated as of November 3, 2003, by Sears, Roebuck and Co. of the commercial paper master notes of Sears Roebuck Acceptance Corp. (incorporated by reference to Exhibit 10.38 to Sears, Roebuck and Co.'s Annual Report on Form 10-K for the fiscal year ended January 3, 2004 (File No. 001-00416)).
10.4	Third Amended and Restated Credit Agreement, dated as of July 21, 2015, between Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, the lenders party thereto, and Bank of America, N.A., as agent (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 1, 2015 (File No. 001-36693))(1).
10.5	First Amendment to Third Amended and Restated Credit Agreement, dated April 8, 2016, by and among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, the lenders party thereto and Bank of America, N.A., as agent (incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K, dated April 8, 2016, filed on April 12, 2016 (File No. 001-36693)).
10.6	Second Amendment to Third Amended and Restated Credit Agreement, dated February 10, 2017, by and among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, the lenders party thereto and Bank of America, N.A., as agent (incorporated by reference to Exhibit 10.6 to Registrant’s Annual Report on Form 10-K for the fiscal year ended January 28, 2017 (File No. 001-36693)).
10.7	Third Amendment to Third Amended and Restated Credit Agreement, dated as of December 12, 2017, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, the lenders party thereto and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated December 12, 2017, filed December 12, 2017 (File No. 001-36693)).
10.8	Fourth Amendment to Third Amended and Restated Credit Agreement, dated as of February 7, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, as borrowers, the lenders party thereto, the issuing lenders party thereto, Bank of America, N.A., as administrative agent and collateral agent, and Wells Fargo Bank, National Association, as co-collateral agent (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated February 7, 2018, filed February 13, 2018 (File No. 001-36693)).

E-2

10.9	Confirmation, Ratification and Amendment of Ancillary Loan Documents, dated April 8, 2016, by and among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, certain of their respective subsidiaries and Bank of America, N.A., as administrative agent for its own benefit and the benefit of the other Credit Parties (as defined in the amendment to the Credit Agreement) (incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K, dated April 8, 2016, filed on April 12, 2016 (File No. 001-36693)).
10.10	Third Amended and Restated Guarantee and Collateral Agreement, dated as of July 21, 2015, among Sears Holdings Corporation, Sears, Roebuck and Co., Sears Roebuck Acceptance Corp., Kmart Holding Corporation, Kmart Corporation and certain of their respective subsidiaries, as Grantors, and Bank of America, N.A., Wells Fargo Bank, National Association and General Electric Capital Corporation, as Co-Collateral Agents (incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 1, 2015 (File No. 001-36693)).
10.11	Loan Agreement, dated as of September 15, 2014, by and between Sears, Roebuck and Co., Sears Development Co., Kmart Corporation, JPP II, LLC and JPP, LLC (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 1, 2014 (File No. 001-36693)).
10.12	Guaranty, dated as of September 15, 2014, by and between Sears Holdings Corporation, JPP II, LLC and JPP, LLC (incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 1, 2014 (File No. 001-36693)).
10.13	Amendment to Loan Agreement, dated as of February 25, 2015, by and between JPP II, LLC, JPP, LLC, Sears Roebuck and Co., Sears Development Co. and Kmart Corporation (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated February 26, 2015, filed on February 26, 2015 (File No. 001-36693)).
10.14	Amended and Restated Program Agreement, dated as of July 15, 2003, amended and restated as of November 3, 2003, by and between Sears, Roebuck and Co., Sears Intellectual Property Management Company and Citibank (USA) N.A. (incorporated by reference to Exhibit 10(a) to Sears, Roebuck and Co.'s Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2003 (File No. 001-00416)).
10.15	Terms Sheet For Revision of Program Agreement Between Sears, Roebuck and Co. and Citibank USA, N.A., dated April 29, 2005 (incorporated by reference to Exhibit 10.40 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2005 (File No. 000-51217)).
10.16	Sears Holdings Corporation Director Compensation Program, as amended (incorporated by reference to Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 2010 (File No. 000-51217)).**
10.17	Sears Holdings Corporation 2013 Stock Plan (incorporated by reference to Appendix A to Registrant's Proxy Statement dated March 28, 2013 (File No. 000-51217)).**
10.18	Sears Holdings Corporation Amended and Restated Umbrella Incentive Program (incorporated by reference to Appendix C to Registrant's Proxy Statement dated March 28, 2013 (File No. 000-51217)).**
10.19	Amendment to the Performance Measures under the Amended and Restated Sears Holdings Corporation Umbrella Incentive Program (incorporated by reference to Appendix B to Registrant's Proxy Statement dated March 28, 2013 (File No. 000-51217)).**
10.20	Form of Sears Holdings Corporation Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 2011 (File No. 000-51217)).**
10.21	Form of Sears Holdings Corporation Restricted Stock Award Agreement: Terms and Conditions (incorporated by reference to Exhibit 10.17 to Registrant’s Annual Report on Form 10-K for the fiscal year ended February 1, 2014 (File No. 000-51217)).**
10.22	Form of Sears Holdings Corporation Restricted Stock Unit Award Agreement: Terms and Conditions (incorporated by reference to Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for the fiscal year ended February 1, 2014 (File No. 000-51217)).**

E-3

10.23	Form of Cash Right - Addendum to Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.17 to Registrant's Annual Report on Form 10-K for the fiscal year ended January 28, 2012 (File No. 000-51217)).**
10.24	Form of Cash Award - Addendum to Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated September 28, 2012, filed on September 28, 2012 (File No. 000-51217)).**
10.25	Form of Cash Award - Addendum to Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated November 30, 2012, filed on November 30, 2012 (File No. 000-51217)).**
10.26	Sears Holdings Corporation Long-Term Incentive Program, effective April 27, 2011 (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2011 (File No. 000-51217)).**
10.27	Sears Holdings Corporation Cash Long-Term Incentive Plan (Amended and Restated Effective April 10, 2015) (incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2015 (File No. 001-36693)).**
10.28	Sears Holdings Corporation Annual Incentive Plan (Amended and Restated Effective April 10, 2015) (incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2015 (File No. 001-36693)).**
10.29	2015 Additional Definitions under Sears Holdings Corporation Annual Incentive Plan (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2015 (File No. 001-36693)).**
10.30	2013 Additional Definitions under Sears Holdings Corporation Long-Term Incentive Program (incorporated by reference to Exhibit 10.3 to Registrant's Current Report on Form 8-K, dated February 12, 2013, filed on February 19, 2013 (File No. 000-51217)).**
10.31	2014 Additional Definitions under Sears Holdings Corporation Long-Term Incentive Program (incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2014 (File No. 000-51217)).**
10.32	2015 Additional Definitions under Sears Holdings Corporation Long-Term Incentive Program (incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2015 (File No. 001-36693)).**
10.33	Form of LTIP Award Agreement (incorporated by reference to Exhibit 10.32 to Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2015 (File No. 001-36693).**
10.34	Form of Cash Award - Addendum to Restricted Stock Award(s) (Lands’ End Make-Whole) (incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2014 (File No. 000-51217)).**
10.35	Form of Cash Award - Addendum to Restricted Stock Unit Award(s) (Lands’ End Make-Whole) (incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2014 (File No. 000-51217)).**
10.36	Form of Cash Award - Addendum to Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated October 22, 2014, filed on October 22, 2014 (File No. 001-36693)).**
10.37	Form of Cash Right - Addendum to Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated November 7, 2014, filed on November 7, 2014 (File No. 001-36693)).**
10.38	Form of Cash Right - Addendum to Restricted Stock Award(s) and Restricted Stock Unit Awards (Seritage Make-Whole) (incorporated by reference to Exhibit 10.36 to Registrant’s Annual Report on Form 10-K for the fiscal year ended January 30, 2016 (File No. 001-36693).**

E-4

10.39	Form of Executive Severance Agreement (incorporated by reference to Exhibit 10.29 to Registrant’s Annual Report on Form 10-K for the fiscal year ended February 1, 2014 (File No. 000-51217)).**
10.40	Form of letter from Registrant to Edward S. Lampert relating to employment dated March 18, 2013 (incorporated by reference to Exhibit 10.30 to Registrant's Annual Report on Form 10-K for the fiscal year ended February 2, 2013 (File No. 000-51217)).**
10.41	Addendum, dated as of April 21, 2014, to letter from Registrant to Edward S. Lampert relating to employment dated March 18, 2013 (Lands’ End Make-Whole) (incorporated by reference to Exhibit 10.6 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2014 (File No. 000-51217)).**
10.42	Letter Agreement, dated January 28, 2016, by and between the Company and Edward S. Lampert (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated January 28, 2016, filed on February 3, 2016 (File No. 001-36693)).**
10.44	Letter from Registrant to Girish Lakshman relating to employment dated June 11, 2015 (incorporated by reference to Exhibit 10.42 to Registrant’s Annual Report on Form 10-K for the fiscal year ended January 30, 2016 (File No. 001-36693)).**
10.45	Letter from Registrant to Stephan Zoll relating to employment dated March 23, 2016 (incorporated by reference to Exhibit 10.46 to Registrant’s Annual Report on Form 10-K for the fiscal year ended January 28, 2017 (File No. 001-36693)).**
10.46	Executive Severance Agreement, dated March 24, 2016, by and between the Company and Stephan Zoll (incorporated by reference to Exhibit 10.47 to Registrant’s Annual Report on Form 10-K for the fiscal year ended January 28, 2017 (File No. 001-36693)).**
10.47	Letter from Registrant to Jason M. Hollar relating to employment dated as of September 18, 2014 (incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 2016 (File No. 001-36693)).**
10.48	Letter from Registrant to Jason M. Hollar relating to employment dated as of October 13, 2016 (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated October 13, 2016, filed on October 14, 2016 (File No. 001-36693)).**
10.49	Letter from Registrant to Robert A. Riecker, dated as of August 27, 2015 (incorporated by reference to Exhibit 10.12 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2017 (File No. 001-36693)).**
10.50	Special Retention Award Agreement, dated August 27, 2015, by and between Sears Holdings Corporation and Robert A. Riecker (incorporated by reference to Exhibit 10.13 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2017 (File No. 001-36693)).**
10.51	Letter from Registrant to Robert A. Riecker, dated as of August 15, 2016 (incorporated by reference to Exhibit 10.14 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2017 (File No. 001-36693)).**
10.52	Letter from Registrant to Robert A. Riecker, dated as of October 13, 2016 (incorporated by reference to Exhibit 10.15 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2017 (File No. 001-36693)).**
10.53	Letter from Registrant to Robert A. Riecker, dated as of April 21, 2017 (incorporated by reference to Exhibit 10.16 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2017 (File No. 001-36693)).**
*10.54	Letter from Registrant to Perry D. Schwartz, dated as of August 15, 2016.**
*10.55	Letter from Registrant to Perry D. Schwartz, dated as of January 31, 2017. **
*10.56	Letter from Registrant to Perry D. Schwartz, dated as of June 21, 2017. **
*10.57	Letter from Registrant to Robert Naedele, dated as of January 19, 2017.**

E-5

*10.58	Letter from Registrant to Leena Munjal, dated as of January 29, 2014.**
*10.59	Letter from Registrant to Leena Munjal, dated as of January 8, 2018.**
*10.60	Special Retention Award Agreement, dated January 8, 2018, by and between Sears Holdings Corporation and Leena Munjal.**
10.61	Master Lease by and among Seritage SRC Finance LLC, Seritage KMT Finance LLC, Kmart Operations, LLC, and Sears Operations, LLC, dated as of July 7, 2015 (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated July 7, 2015, filed on July 13, 2015 (File No. 001-36693)).
10.62	Pension Plan Protection and Forbearance Agreement, dated as of March 18, 2016, by and between Sears Holdings Corporation, certain of its subsidiaries and Pension Benefit Guaranty Corporation (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated March 18, 2016, filed on March 24, 2016 (File No. 001-36693).(1)
10.63	Consent, Waiver and Amendment, dated as of March 8, 2017, by and between Sears Holdings Corporation, certain of its subsidiaries and Pension Benefit Guaranty Corporation (incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K, dated March 8, 2017, filed March 9, 2017 (File No. 001-36693)).
10.64	Amendment No. 1 to Consent, Waiver and Amendment, dated as of June 29, 2017, among Sears Holdings Corporation, the subsidiaries of Sears Holdings Corporation party thereto and Pension Benefit Guaranty Corporation (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 29, 2017 (File No. 001-36693)).
10.65	REMIC Amendment to PPPFA, Craftsman Consent and Other Transaction Documents, dated as of November 7, 2017, by and among Sears Holdings Corporation, certain of its subsidiaries and Pension Benefit Guaranty Corporation (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated November 7, 2017, filed November 14, 2017 (File No. 001-36693)).
10.66	Loan Agreement, dated April 8, 2016, by and among JPP, LLC, JPP II, LLC, Cascade Investment, L.L.C., Sears, Roebuck and Co., Sears Development Co., Innovel Solutions, Inc., Big Beaver of Florida Development, LLC and Kmart Corporation (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated April 8, 2016, filed on April 12, 2016 (File No. 001-36693)).
10.67	Amended and Restated Loan Agreement, dated as of May 22, 2017, between Sears, Roebuck and Co., Innovel Solutions, Inc., Big Beaver of Florida Development, LLC and Kmart Corporation, as Borrowers, and JPP, LLC, JPP II, LLC and Cascade Investment, L.L.C., as Initial Lenders (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated May 22, 2017, filed on May 24, 2017 (File No. 001-36693)).
10.68	Amendment, dated July 3, 2017, to Amended and Restated Loan Agreement, dated as of May 22, 2017, between Sears, Roebuck and Co., Innovel Solutions, Inc., Big Beaver of Florida Development, LLC and Kmart Corporation, as Borrowers, and JPP, LLC, JPP II, LLC and Cascade Investment, L.L.C., as Initial Lenders (incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 29, 2017 (File No. 001-36693)).
10.69	Second Amendment to Amended and Restated Loan Agreement, dated as of October 25, 2017, among Sears Roebuck and Co., Sears Development Co., Innovel Solutions Inc., Big Beaver of Florida Development, LLC and Kmart Corporation, collectively as borrower, and JPP, LLC, JPP II, LLC and Cascade Investment, L.L.C. collectively as initial lenders (incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K, dated October 25, 2017, filed on October 30, 2017 (File No. 001-36693)).
10.70	Second Lien Credit Agreement, dated as of September 1, 2016, between Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, the lenders party thereto, and JPP, LLC, as administrative agent and collateral administrator (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated September 1, 2016, filed on September 2, 2016 (File No. 001-36693)).

E-6

10.71	First Amendment to Second Lien Credit Agreement, dated as of July 7, 2017, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, the lenders party thereto, and JPP, LLC, as administrative agent and collateral administrator (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated July 7, 2017, filed on July 7, 2017 (File No. 001-36693)).
10.72	Second Amendment to Second Lien Credit Agreement, dated as of January 9, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, the guarantors party thereto, the lenders party thereto, and JPP, LLC, as administrative agent and collateral administrator (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K, dated January 4, 2018, filed January 10, 2018 (File No. 001-36693)).
10.73	Third Amendment to Second Lien Credit Agreement, dated as of February 7, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, as borrowers, the subsidiaries of Sears Holdings Corporation party thereto, the lenders party thereto, and JPP, LLC, as administrative and collateral administrator (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K, dated February 7, 2018, filed February 13, 2018 (File No. 001-36693)).
10.74	Fourth Amendment to Second Lien Credit Agreement, dated as of March 20, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, as borrowers, the subsidiaries of Sears Holdings Corporation party thereto, the lenders party thereto, and JPP, LLC, as administrative and collateral administrator (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated March 20, 2018, filed on March 23, 2018 (File No. 001-36693)).
10.75	Letter of Credit and Reimbursement Agreement, dated as of December 28, 2016, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, the financial institutions party thereto from time to time as L/C Lenders, and Citibank, N.A., as Administrative Agent and Issuing Bank (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated December 28, 2016, filed on December 30, 2016 (File No. 001-36693)).
10.76	First Amendment dated March 2, 2017, to Letter of Credit and Reimbursement Agreement, dated as of December 28, 2016, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, the financial institutions party thereto from time to time as L/C Lenders, and Citibank, N.A., as Administrative Agent and Issuing Bank (incorporated by reference to Exhibit 10.60 to Registrant’s Annual Report on Form 10-K for the fiscal year ended January 28, 2017 (File No. 001-36693)).
10.77	Second Amendment, dated August 1, 2017, to Letter of Credit and Reimbursement Agreement, dated as of December 28, 2016, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, the financial institutions party thereto from time to time as L/C Lenders, and Citibank, N.A., as Administrative Agent and Issuing Bank (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated August 1, 2017, filed on August 3, 2017 (File No. 001-36693)).
10.78	Third Amendment, dated August 9, 2017, to Letter of Credit and Reimbursement Agreement, dated as of December 28, 2016, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, the financial institutions party thereto from time to time as L/C Lenders, and Citibank, N.A., as Administrative Agent and Issuing Bank (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated August 9, 2017, filed on August 10, 2017 (File No. 001-36693)).
*10.79	Fourth Amendment, dated December 13, 2017, to Letter of Credit and Reimbursement Agreement, dated as of December 28, 2016, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, the financial institutions party thereto from time to time as L/C Lenders, and Citibank, N.A., as Administrative Agent and Issuing Bank.
10.80	Loan Agreement, dated as of January 3, 2017, among Sears Roebuck and Co., Kmart Stores of Illinois LLC, Kmart of Washington LLC and Kmart Corporation, collectively as borrower, and JPP, LLC and JPP II, LLC, collectively as initial lender (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated January 3, 2017, filed on January 4, 2017 (File No. 001-36693)).

E-7

10.81	Omnibus Amendment, dated as of January 12, 2017, to Loan Documents and Request for Advance to Loan Agreement, dated as of January 3, 2017 among Sears Roebuck and Co., Kmart Stores of Illinois LLC, Kmart of Washington LLC and Kmart Corporation, collectively as borrower, and JPP, LLC and JPP II, LLC, collectively as initial lender (incorporated by reference to Exhibit 10.59 to Registrant’s Annual Report on Form 10-K for the fiscal year ended January 28, 2017 (File No. 001-36693)).
10.82	Amended and Restated Loan Agreement, dated as of October 4, 2017, among 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 as borrower, and JPP, LLC and JPP II, LLC, collectively as initial lender (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated October 4, 2017, filed on October 5, 2017 (File No. 001-36693)).
10.83	Second Amended and Restated Loan Agreement, dated as of October 18, 2017, among 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 as borrower, and JPP, LLC and JPP II, LLC, collectively as initial lender (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated October 18, 2017, filed on October 19, 2017 (File No. 001-36693)).
10.84	Amendment to Second Amended and Restated Loan Agreement, dated as of October 25, 2017, among 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 as borrower, and JPP, LLC and JPP II, LLC, collectively as initial lender (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated October 25, 2017, filed on October 30, 2017 (File No. 001-36693)).
10.85	Second Amendment to Second Amended and Restated Loan Agreement, dated as of March 8, 2018, among 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 as borrower, and JPP, LLC and JPP II, LLC, collectively as initial lender (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated March 8, 2018, filed on March 14, 2018 (File No. 001-36693)).
10.86	Term Loan Credit Agreement, dated as of January 4, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, as borrowers, the subsidiaries of Sears Holdings Corporation party thereto, the lenders party thereto from time to time, and JPP, LLC, as administrative and collateral agent (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated January 4, 2018, filed January 10, 2018 (File No. 001-36693)).
*10.87	Term Increase Amendment No. 1 to the Term Loan Credit Agreement, dated as of January 19, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, as borrowers, the subsidiaries of Sears Holdings Corporation party thereto, the lenders party thereto from time to time, and JPP, LLC, as administrative and collateral agent, each term increase lender and each of the other loan parties party thereto.
10.88	Amendment to Term Loan Credit Agreement, dated as of January 29, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, as borrowers, the subsidiaries of Sears Holdings Corporation party thereto, the lenders and other entities party thereto, and JPP, LLC, as administrative and collateral agent (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated January 29, 2018, filed February 1, 2018 (File No. 001-36693)).
10.89	Third Amendment to Term Loan Credit Agreement, dated as of February 7, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, as borrowers, the subsidiaries of Sears Holdings Corporation party thereto, the lenders party thereto, and JPP, LLC, as administrative agent and collateral administrator (incorporated by reference to Exhibit 10.3 to Registrant's Current Report on Form 8-K, dated February 7, 2018, filed February 13, 2018 (File No. 001-36693)).

E-8

*10.90	Fourth Amendment to Term Loan Credit Agreement dated as of February 26, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, as borrowers, the subsidiaries of Sears Holdings Corporation party thereto, the lenders party thereto from time to time, and JPP, LLC, as administrative agent and collateral administrator.
*10.91	Credit Agreement, dated as of March 14, 2018, among SRC O.P. LLC, SRC Facilities LLC and SR Real Estate (TX), LLC, as the borrowers, the lenders party thereto, UBS AG, Stamford Branch, LLC, as administrative agent, and UBS Securities LLC, as lead arranger and bookrunner.
*10.92	Mezzanine Loan Agreement, dated as of March 14, 2018, among SRC Sparrow 2 LLC, as borrower, JPP, LLC and JPP II, LLC, as lenders, and JPP, LLC, as administrative agent.
10.93	Acquired IP License Agreement, dated as of March 8, 2017, by and between Sears Holdings Corporation and Stanley Black & Decker, Inc. (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated March 8, 2017, filed March 9, 2017 (File No. 001-36693)).
10.94	Letter, dated April 6, 2017, amending Acquired IP License Agreement, dated as of March 8, 2017, by and between Sears Holdings Corporation and Stanley Black & Decker, Inc. (incorporated by reference to Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2017 (File No. 001-36693)).
10.95	Fifth Amendment to Third Amended and Restated Credit Agreement, dated as of March 21, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, as borrowers, the lenders party thereto, Bank of America, N.A., as administrative agent, and the other parties thereto (incorporated by reference to Exhibit 10.4 to Registrant's Current Report on Form 8-K, dated March 20, 2018, filed March 23, 2018 (File No. 001-36693)).
10.96	Sixth Amendment to Third Amended and Restated Credit Agreement, dated as of March 21, 2018, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp. and Kmart Corporation, as borrowers, the lenders party thereto, Bank of America, N.A., as administrative agent, and the other parties thereto (incorporated by reference to Exhibit 10.5 to Registrant's Current Report on Form 8-K, dated March 20, 2018, filed March 23, 2018 (File No. 001-36693)).
*12	Computation of ratio of earnings to fixed charges for Registrant and consolidated subsidiaries.
*21	Subsidiaries of the Registrant.
*23	Consent of Deloitte & Touche LLP.
*31.1	Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial information from the Annual Report on Form 10-K for the fiscal year ended February 3, 2018, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Statements of Operations for the fiscal years ended February 3, 2018, January 28, 2017 and January 30, 2016; (ii) the Consolidated Statements of Comprehensive Loss for the fiscal years ended February 3, 2018, January 28, 2017 and January 30, 2016; (iii) the Consolidated Balance Sheets at February 3, 2018 and January 28, 2017; (iv) the Consolidated Statements of Cash Flows for the fiscal years ended February 3, 2018, January 28, 2017 and January 30, 2016; (v) the Consolidated Statements of Equity (Deficit) for the fiscal years ended February 3, 2018, January 28, 2017 and January 30, 2016; and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

__________________

E-9

* Filed herewith

** A management contract or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 15(b) of Form 10-K.

(1) Confidential treatment was granted as to omitted portions of this Exhibit. The omitted material has been filed separately with the Securities and Exchange Commission.

E-10

EX-10.54

Exhibit 10.54

[LETTERHEAD OF SEARS HOLDINGS CORPORATION]

August 15, 2016

Perry Schwartz

Vice President, Tools and Lawn & Garden

Dear Dean,

In recognition of your past and future contributions to the Company, and as a critical member of the Tools Business Unit, we are pleased to provide you with the following changes to your compensation. Effective August 1, 2016, the key elements to your compensation will be:

• Annual base salary will increase to $350,000;

• Annual incentive opportunity under SHC’s Annual Incentive Plan will increase to 75% of your base salary;

• Participation under SHC’s Long Term Incentive Program will increase to 75% of your base salary.

Additionally, the enclosed Executive Severance Agreement (“Agreement”), the Agreement provides consideration of twelve (12) months of salary continuation, subject to mitigation, upon, for example, involuntary termination without Cause as defined therein. In addition, the Agreement includes non-disclosure, non-solicitation and a limited non-compete that apply following termination of employment and regardless of whether you receive severance benefits under this Agreement. These provisions are detailed in the Agreement, which you should review thoroughly. This Agreement would supersede your current Agreement which provides for six (6) months of salary continuation.

To acknowledge and accept these changes, please sign and date below and return this letter and the Agreement to your manager.

Accepted:

___/s/ Perry Schwartz________________        _10_/_17_/_16_

Perry Schwartz                                              Date

Business Unit Leader:

__/s/ Tiffany Morris__________________        _8_/_17_/_16_

Tiffany Morris                                             Date

Enclosures

EX-10.55

Exhibit 10.55

[LETTERHEAD OF SEARS HOLDINGS CORPORATION]

January 31, 2017

Perry D. Schwartz

Vice President, Tools and Lawn & Garden

Dear Dean,

We are pleased to offer you the opportunity to serve as President, Tools, Lawn & Garden, Fitness, Sports, and Children’s Entertainment, effective January 29, 2017 (“Effective Date”). As of the Effective Date your annual base salary will be increased to $400,000, subject to the approval of the Compensation Committee (“Compensation Committee”) of SHC’s Board of Directors.

Your Target opportunity under SHC’s Annual Incentive Plan (“AIP”) and Long-Term Incentive Program will be 75% of your base salary.

Notwithstanding the foregoing, provided you fulfill the duties and responsibilities of your position for SHC’s 2017 fiscal year (as determined by SHC) and are actively employed on April 15, 2018, your AIP bonus for the 2017 fiscal year will be no less than $100,000. Payment of the foregoing guaranteed amount is subject to offset for amounts you may owe to the Company to the maximum extent permitted by law and is also subject to applicable tax withholding requirements.

To acknowledge and accept this offer, please sign and date below and return this letter to me.

Accepted:

___/s/ Perry D. Schwartz______________        __2__/__1__/_17_

Perry D. Schwartz                                        Date

Business Unit Leader:

___/s/ Tiffany Morris_________________        _2_/__1__/__17_

Tiffany Morris                                            Date

EX-10.56

Exhibit 10.56

[LETTERHEAD OF SEARS HOLDINGS CORPORATION]

June 21, 2017

Perry D. Schwartz

President, Tools, Lawn & Garden, Fitness, Sporting Goods, and Children’s Entertainment

Dear Dean,

We are pleased to offer you the opportunity to expand your role and serve as President, Hardlines, effective April 25, 2017 (“Effective Date”). Subject to the approval of the Compensation Committee (“Compensation Committee”) of SHC’s board of Directors Upon your acceptance of this offer, as of the Effective Date you will be provided with the following compensation package:

• Your annual base salary rate will be increased to $425,000.

• A Special Performance Bonus with a target payment opportunity of $200,000 (“SPB Target”). Any payout would be based upon the combined Home Appliances cumulative BOP and Consumer Electronics cumulative BOP for the 2^nd, 3^rd and 4^th quarters of fiscal year 2017 (“Q2-Q4FY2017”) relative to the combined Home Appliances cumulative BOP and Consumer Electronics cumulative BOP for the 2^nd, 3^rd and 4^th quarters of fiscal year 2016 (“Q2-Q4FY2016”). Payout would be determined as follows:

o Q2-Q4FY2017 is equal to Q2-Q4FY2016 (“Threshold”) – Payout at Threshold equals fifty percent (50%) of SPB Target, or $100,000.

o Q2-Q4FY2017 is 10% greater than Q2-Q4FY2016 (“Target”) – Payout at Target equals one hundred percent (100%) of SPB Target, or $200,000.

No payment would be earned if Threshold is not achieved. Payout between Threshold and Target would be determined by straight line interpolation.

Any payout earned under this Special Performance Bonus would become payable within thirty (30) days following the end of FY2017 (after February 3, 2018), providing you remain actively employed through that date.

Dean, we look forward to your acceptance of this offer and to your continued contributions to SHC. To accept, please sign below and return this letter to me. If you need additional information or clarification, please let me know.

Accepted:

__/s/ Perry D. Schwartz______________        __6__/_25_/__17_

Perry D. Schwartz                                            Date

Business Unit Leader:

___/s/ Julie A. Ainsworth_____________        __6__/__28_/_17_

Julie A. Ainsworth                                            Date

EX-10.57

Exhibit 10.57

[LETTERHEAD OF SEARS HOLDINGS CORPORATION]

January 19, 2017

Robert J. Naedele Jr.

11740 SW Breyman Ave

Portland, OR 97219

Dear B.J.,

We are pleased to extend to you our offer to join Sears Holdings Corporation (“SHC”) as Chief Commercial Officer, Shop Your Way, reporting to Edward Lampert, Chief Executive Officer. Your start date is to be determined and you will be employed by Sears Holdings Management Corporation (together with SHC, “the Company”). Your work location will be the Company’s Corporate Headquarters located in Hoffman Estates, IL. This letter serves as confirmation of our offer, subject to all of the contingencies listed below and subject to the approval of the Compensation Committee (“Compensation Committee”) of SHC’s Board of Directors.

The key elements of your compensation package and the other conditions of your employment are as follows:

• Annual base salary at a rate of $550,000.

• You will receive a one-time sign-on bonus of $180,000. This sign-on bonus will be payable within thirty (30) days following your start date. In the event you voluntarily terminate your employment with the Company or are terminated by the Company for misconduct or integrity issues within twenty-four (24) months of your start date, you will be required to repay the full amount of the payment paid to you, including any taxes withheld, unless prohibited by law, to the Company within thirty (30) days of your last day worked.

• Participation in the Sears Holdings Corporation Annual Incentive Plan (“AIP”) with an annual target incentive opportunity of 100% of your base salary. Your first year target annual incentive opportunity under the AIP will be prorated based on the period of time from your start date until the last day of such fiscal year. Any payment under the AIP will be paid by April 15^th of the following fiscal year, provided that you fulfill the duties and responsibilities of your position for the applicable fiscal year (as determined by the Company) and are actively employed as of the payment date. Further details regarding your AIP target award will be provided to you following your start date.

• Notwithstanding the foregoing, provided you fulfill the duties and responsibilities of your position for the applicable fiscal year (as determined by the Company) and are actively employed on the AIP payment date for the applicable fiscal year’s AIP, for the following fiscal years, your AIP bonus will be no less than the minimum amount indicated below:

Fiscal Year	Minimum Amount
2017	100% of your pro-rated target incentive opportunity under the 2017 AIP.
2018	100% of your target incentive opportunity under the 2018 AIP less the actual 2017 AIP paid to you on or about April 15, 2018.

Mr. Robert J. Naedele Jr.

1/19/2017Page 2

• You will be eligible to receive a Special Incentive Award (“SIA”) with respect to each of SHC’s fiscal years stated in the chart below. Any SIA amount payable with respect to a fiscal year will be paid by April 15^th of the following fiscal year provided that you are actively employed at the applicable payment date. The following is a summary of the target amounts per fiscal year under your SIA. The performance criteria and metrics detailing the payout of your SIA will be determined by the company and provided to you at a later date.

Fiscal Year	Target Amount
2017	$300,000 prorated from your start date through February 3, 2018, the last day of SHC’s 2017 fiscal year
2018	$400,000
2019	$500,000

• Participation in the SHC long-term incentive programs (“LTI”): Your target incentive opportunity under the SHC LTI will be 100% of your base salary. However, your 2017 LTI target opportunity will be prorated based on the period of time from your start date through February 1, 2020, the last day of SHC’s 2019 fiscal year and the last day of the 2017 - 2019 LTI performance period. SHC’s LTI is comprised of two separate programs: (i) Cash Long-Term Incentive Plan (“Cash LTI”), a time-based vesting program; and (ii) Long-Term Incentive Program (“LTIP”), a performance-based program. For the 2017 LTI , Cash LTI is 25% of your total LTI target opportunity, and LTIP is 75% of the total. Further details regarding your SHC LTI target award and both programs will be provided to you following your start date.

• A special cash award of $450,000 (“Special Cash Award”). This award will be earned progressively as of your first (1^st), second (2^nd) and third (3^rd) anniversaries of your start date as follows:

Anniversary of Start Date	Amount
1st	$100,000
2nd	$175,000
3rd	$175,000

Payment under the Special Cash Award will be made within thirty (30) days after the applicable anniversary, in all events, provided you have fulfilled the duties and responsibilities of your position, as determined by the Company and are actively employed on the applicable anniversary date. In the event that your employment with the Company terminates for any reason prior to an applicable anniversary date, you will not be entitled to receive any unpaid portion of the Special Cash Award. Further, if you are terminated by the Company for misconduct or integrity issues within twelve (12) months of a payment date, you will be required to repay the Company any portion of the Special Cash Award paid to you within such twelve (12) month period, which repayment will be due within thirty (30) days of your last day worked.

• You represent and warrant to the Company that:

(a) as of your start date with the Company, you are not subject to any obligation, written or oral, containing any non-competition provision or any other restriction (including, without limitation, any confidentiality provision) that would result in any restriction on your ability to accept and perform this or any other position with the Company or any of its affiliates; and,

Mr. Robert J. Naedele Jr.

1/19/2017Page 3

(b) you are not (i) a member of any board of directors, board of trustees or similar governing body of any for-profit, non-profit or not-for-profit entity, or (ii) a party to any agreement, written or oral, with any entity under which you would receive remuneration for your services, except as disclosed to and approved by the Company in advance of your start date.

In addition, you agree that you will not (1) become a member of any board or body described in clause (b)(i) above, or (2) become a party to any agreement described in clause (b)(ii), above, in each case without the prior written consent of the Company, such consent not to be unreasonably withheld. Further, you agree you will not disclose or use, in violation of an obligation of confidentiality, any information that you acquired as a result of any previous employment or otherwise.

• You will be required to sign an Executive Severance Agreement (“Agreement”), the Agreement provides consideration of twelve (12) months of salary continuation, subject to mitigation, upon, for example, involuntary termination without Cause as defined therein. In addition, the Agreement includes non-disclosure, non-solicitation and a limited non-compete that apply following termination of employment and regardless of whether you receive severance benefits under this Agreement. These provisions are detailed in the Agreement, which you should review thoroughly.

• You will be provided commuter benefits from your start date through August 31, 2017 or until completion of your relocation to the greater Chicago metropolitan area, whichever occurs first. These commuter benefits will be:

• Weekly round trip commercial air transportation between your home in Portland, OR and the greater Chicago metropolitan area, subject to the procedures and guidelines set forth in SHC’s Corporate Travel and Entertainment Policy (“T&E Policy”); and

• A monthly cash commuter allowance of $5,000. This cash allowance is intended to assist you with all other commuter related expenses including but not limited to hotel or rent (including security deposit), utilities, meals, ground transportation including car rental, fuel and tolls, as applicable. This payment will be processed with the last paycheck of each month and is subject to applicable tax withholding.

You will be provided with a corporate Commuter Credit Card that should be used to purchase only the round trip commercial air transportation described above. A separate corporate Travel Credit Card will be provided to you to be used for eligible business expenses. You will be required to track your commuter expenses separate from your business expenses. On a monthly basis, after you submit your expense report(s), the Company will pay the commuter air transportation and business expenses in accordance with the Company’s Travel and Entertainment Policy. Commuter benefits will be treated as taxable imputed income to you and will be included in your W-2 wages. the Company will add to your pay a cash gross-up equal to 35% of the imputed income related to the commuter air transportation to defray a portion of the taxes due on these expenses.

• You will be eligible for relocation assistance in accordance with the Company’s standard relocation policy. To receive relocation assistance, you must sign a Relocation Repayment Agreement which will be included in the Relocation Benefits package that will be sent to you from the company’s relocation vendor. A sample copy of the Relocation Repayment Agreement is enclosed for your information. Your relocation package will include:

Mr. Robert J. Naedele Jr.

1/19/2017Page 4

• Home sale assistance and moving and storage of household goods (includes shipment of up to two (2) automobiles); and

• A one-time relocation lump sum payment of $30,000 (net)

The relocation lump sum payment will be made as soon as administratively possible once your commuting period concludes, but if for any reason, you do not complete your relocation by the first anniversary of your start date, you will be required to repay the Company any portion of the relocation lump sum already paid to you, including any taxes withheld, unless prohibited by law within thirty (30) days of your last day worked or first anniversary of your start date, whichever occurs first.

Once you have received your relocation lump sum payment, your commuter benefits will cease.

• You will be covered under and subject to the terms and conditions of the Non-Accrual Vacation Policy.

• You will be eligible to participate in all retirement, health and welfare programs on a basis no less favorable than other executives at your level, in accordance with the applicable terms, conditions and availability of those programs.

• This offer also is contingent upon satisfactory completion of a background reference check, employment authorization verification and pre-employment drug test.

All payments in this letter will be subject to applicable tax withholding requirements (except the one-time relocation lump sum payment referenced above). Additionally, all payments are also subject to offset any amounts you may owe the company to the maximum extent permitted by law.

B.J., we are looking forward to you joining Sears Holdings Corporation. We are excited about the important contributions you will make to the company and look forward to your acceptance of our offer. If you need additional information or clarification, please call.

This offer will expire if not accepted within one week from the date of this letter. To accept, sign below and return this letter along with your signed Executive Severance Agreement to my attention.

Sincerely,

/s/ Tiffany Morris

Tiffany Morris

Enclosures

Accepted:

__/s/ Robert J. Naedele Jr.__________________         __1__/_20_/_17_

Robert J. Naedele Jr.                                         Date

Mr. Robert J. Naedele Jr.

1/19/2017Page 5

RELOCATION REPAYMENT AGREEMENT

In consideration for the relocation expenses associated with my relocation that are paid by Sears Holdings Corporation (the “Company”) and/or it’s relocation services provider (“Consultant”) either directly to me, or on my behalf, I acknowledge and agree to the following:

1. The Company will withhold and report on Form W-2 all taxes applicable to relocation benefits and payments for relocation services. It is my responsibility to maintain all receipts for and documentation of my relocation expenses.

2. If I do not complete my relocation by the first anniversary of my start date with the Company, I will repay all relocation benefits and reimbursements, with taxes, to the Company within thirty (30) days of request and will forfeit any and all rights, claims or interest in or to any future benefits and/or payments.

3. If I withdraw from the offered relocation, voluntarily terminate my employment with the Company or be involuntarily terminated from employment by the Company for misconduct or integrity, I will reimburse the Company, as specified below, for relocation benefits and payments provided to me or paid on my behalf including any taxes withheld and any tax gross-up,unless prohibited by law:

100% reimbursement - if within the first 24 months of employment

4. I authorize the Company to make deductions from my final paycheck and any form of compensation paid to me following my termination to satisfy any reimbursement obligation under this Agreement except if and to the extent prohibited by law. If such deductions are not sufficient to reimburse the Company, I will pay the Company the remaining balance on my last day of employment. If I fail to fulfill the reimbursement obligation, I will be liable for all costs and attorney fees incurred by the Company in connection with the collection of my relocation expenses.

5. My relocation expenses will not be processed unless I sign this Agreement.

6. This Agreement will be governed by the laws of the State of Illinois without regard to its choice of law provisions.    

Sears Holdings Corporation and its subsidiary companies reserve the right to interpret, change, or terminate compensation programs at its sole discretion and at any time. This Agreement is not intended to be a contract of employment. Employment with the Company is at-will, which means I have the right to leave employment at any time and for any reason and the Company reserves the right to terminate associates on the same basis, with or without cause and with or without notice.

ACKNOWLEDGMENT

I acknowledge that I have read and understand, and I affirm my agreement to comply with, this Relocation Repayment Agreement.

Acknowledged and Agreed by:

EX-10.58

Exhibit 10.58

[LETTERHEAD OF SEARS HOLDINGS CORPORATION]

January 29, 2014

Ms. Leena Munjal

Dear Leena,

As you continue in the role of Senior Vice President, Customer Experience and Integrated Retail, we are pleased to provide you with the following compensation changes effective February 2, 2014, subject to approval by the Compensation Committee of the Sears Holdings Corporation Board of Directors (the “Compensation Committee”).

The changes to your compensation package are as follows:

• Annual base salary at a rate of $475,000.

• You will be eligible to receive a long-term incentive cash award of $350,000 (gross). The grant date of this award is February 2, 2014, subject to Compensation Committee approval. This award will be scheduled to vest on a graded basis, with $50,000 of the award vesting on the first anniversary of the grant date and $150,000 of the award vesting on each of the second and third anniversaries of the grant date, provided you are actively employed on the applicable vesting date, and will be payable as soon as administratively possible following the applicable vesting date. This award is separate from and not in the place of your participation under the Sears Holdings long-term incentive programs. Once approved by the Compensation Committee, this award will be documented by a Sears Holdings Corporation Executive LTI Cash Award Agreement (“Award Agreement”). Enclosed for your information is a draft of the Award Agreement, which includes the specific terms of the award.

Leena, we are excited about the important contributions you will continue to make to the company as a member of the Executive Leadership Team. I look forward to your acceptance of our offer. If you need additional information or clarification, please call.

To accept, sign and date this letter and the Agreement and return both documents to me.

Sincerely,

Dean Carter

Accepted:

____/s/ Leena Munjal_________________     _2_/_4_/_14_

Leena Munjal                                             Date

EX-10.59

Exhibit 10.59

[LETTERHEAD OF SEARS HOLDINGS CORPORATION]

January 8, 2018

Leena Munjal

SVP, Customer Experience and Integrated Retail

Dear Leena,

We are pleased to offer you the position of Chief Digital Officer.In addition to your current responsibilities, in this new role your additional responsibilities will include leadership over: Data Analytics, Online and the Marketing Business Units (“BU”). In addition, you will provide leadership oversight to MT until a new leader is found, including working with that team to identify SG&A savings of $100 million. As a result of these additional responsibilities, we are very pleased to offer you a special retention award and an increase in your annual base salary. Both the retention award and base salary increase are subject to approval of the Compensation Committee of the Board of Director (the “Committee”) of Sears Holdings Corporation (the “Company”) and your written acceptance of our offer. Upon your written acceptance, effective May 1, 2017, your annual base salary will be increased to $700,000. Your annual base salary will be reviewed again by December 1, 2018.

We are also pleased to offer you a special retention award totaling $400,000. The total award is contingent upon you signing the enclosed Special Retention Award Agreement (“Agreement”) and all of the terms of the Agreement.

NOTE: The terms of this letter and the enclosed Special Retention Award Agreement do not replace, change or nullify the terms of the Executive Severance Agreement you executed on October 29, 2012. Copy attached as Exhibit A.

Upon acceptance, please sign this letter and the Agreement, and return both documents to me. IMPORTANT: If you do not sign, date and return this letter, the change to your annual base salary will not take effect. Similarly, you will not be entitled to any of the retention award unless you sign, date and return the Agreement.

If you need additional information or clarification, please contact me.

____/s/ Leena Munjal_________________    __1__/__8__/__18__

Leena Munjal                                                 Date

Business Unit Leader:

___/s/ Julie Ainsworth_________________    _1___/__10__/__18__

Julie A. Ainsworth                                            Date

Enclosure

EX-10.60

Exhibit 10.60

SPECIAL RETENTION AWARD AGREEMENT

Subject to approval bythe Compensation Committee of the Board of Directions (the “Committee”) of Sears Holdings Corporation (the “Company”), this Special Retention Award Agreement (“Agreement”) is made as of January 8, 2018 (“Effective Date”) between Leena Munjal (“Executive”) and Sears Holdings Corporation and its affiliates and subsidiaries (“Sears”) (collectively referred to as the “Parties”).

Background

A.    Executive is employed by Sears and Sears desires to provide additional financial incentives to Executive on the terms and conditions of this Agreement, which incentives, terms and conditions Executive desires to accept.

B.    Executive is willing to agree to the foregoing and acknowledges that this Agreement provides for additional consideration beyond employment itself and beyond what Sears is otherwise required to provide.

Now, therefore, the Parties intending to be legally bound, and for good and valuable consideration, agree as follows:

1. Retention Award. Subject to the terms and conditions of this Agreement:

a.Retention Periods and Retention Awards. Provided (1) Executive enters into this Agreement within twenty-one (21) days following the Effective Date, and (2) Executive has not (A) been involuntarily terminated by Sears for Cause (as defined in Section 1(d)(2) below) as of the last day of each Retention Period or (B) voluntarily terminated her employment as of the last day of each Retention Period, then Sears will pay Executive the Retention Award for the applicable Retention Period in accordance with the payment terms in subsection (b) below and this Agreement. For the purposes of this Agreement, the Retention Periods and Retention Awards are as indicated in the following table:

Retention Periods	Start/End of Retention Period	Retention Awards
1st Retention Period	Date Agreement signed by Executive until January 31, 2018	$100,000
2nd Retention Period	Last day of 1st Retention Period until April 30, 2018	$100,000
3rd Retention Period	Last day of 2nd Retention Period until July 31, 2018	$100,000
4th Retention Period	Last day of 3rd Retention Period until October 31, 2018	$100,000

Special Retention Award Agreement

Leena Munjal

January 8, 2018

b.    Payment Terms. If all of the requirements stated in subsection (a), above, are met and a Retention Award becomes payable, payment shall be:

1. made within thirty (30) days after the end of the applicable Retention Period;

2. subject to applicable withholding in accordance with Section 2(g) below;

3. a special bonus and shall not be eligible compensation for purposes of any qualified or nonqualified retirement plan maintained by Sears.

c.    Repayment. In the event Executive voluntarily terminates SHC employment for any reason (including due to death or disability) within three (3) months following the end of a Retention Period, Executive or Executive’s representative shall repay the total of the Retention Award paid to Executive within such three (3) month period, including any taxes withheld, unless prohibited by law. Such repayment shall be made within thirty (30) days of the termination date. Executive hereby authorizes Sears to withhold from Executive’s final pay and/or any other compensation owed to Executive, to the extent permitted by applicable law.

d.    Termination During a Retention Period.

1.If Executive’s employment is involuntarily terminated by Sears other than for Cause, as defined below, prior to October 31, 2018, Sears will pay any unpaid Retention Award for any subsequent Retention Period following Executive’s termination date. Notwithstanding Section 1(b)(1), above, the payment will be paid as soon as administratively feasible following such termination.

2.If during a Retention Period, either Executive’s employment is terminated by Sears for Cause, or Executive voluntarily terminates employment for any reason (including due to death or disability), Executive shall forfeit any and all rights, claims or interest in any Retention Award that has not become payable as of such termination; the payment described in subsection (d)(1), above, will not be owed or made.

3.For the purposes of this Agreement, the term “Cause” shall mean (A) a material breach by Executive (other than a breach resulting from Executive’s incapacity due to a disability) of Executive’s duties and responsibilities which breach is demonstrably willful and deliberate on Executive’s part, is committed in bad faith or without reasonable belief that such breach is in the best interests of Sears or Sears affiliates and is not remedied in a reasonable period of time after receipt of written notice from Sears specifying such breach; (B) the commission by Executive of a felony; or (C) dishonesty or willful misconduct in connection with Executive’s employment.

2.    Miscellaneous.

a.General Release and Waiver. Upon Executive’s date of termination, Executive will execute a binding general release and waiver of claims in a form to be provided by Sears (“General Release and Waiver”), which is incorporated by reference under this Agreement. This General Release and Waiver will be in a form substantially similar to the attached sample.

2

Special Retention Award Agreement

Leena Munjal

January 8, 2018

b.Confidentiality. The contents of this Agreement and any information made available to Executive in the course of entering into this Agreement shall be considered Sears Confidential Information and subject to this subsection 2(b) except that Executive may disclose and communicate this Agreement to Executive’s spouse, domestic partner, or financial/legal advisors, all of whom shall agree to keep such information confidential; whether this Agreement is ultimately agreed to or not by Executive. Executive agrees that breach of this confidentiality obligation is cause for discipline, up to and including termination as well as reimbursement to Sears for any amounts paid to Executive pursuant to this Agreement.

c.Employment-at-Will. This Agreement does not constitute a contract of employment, and Executive acknowledges that his employment with Sears is terminable “at-will” by either Party with or without cause and with or without notice.

d.Severability. The provisions of this Agreement are severable. If any provision of this Agreement shall be found invalid, illegal, or unenforceable, in whole or in part, then such provision shall be modified or restricted so as to effectuate as nearly as possible in a valid and enforceable way the provisions hereof, or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent permitted by law, as if such provision(s) had been originally incorporated herein as so modified or restricted or as if such provision(s) had not been originally incorporated herein, as the case may be.

e.Future Enforcement or Remedy. Any waiver, or failure to seek enforcement or remedy for any breach or suspected breach, of any provision of this Agreement by Sears or Executive in any instance shall not be deemed a waiver of such provision in the future.

f.Entire Agreement. This Agreement contains and comprises the entire understanding and agreement between Executive and Sears and fully supersedes any and all other agreements or understandings between Executive and Sears with respect to the subject matter contained herein. Hereinafter, this Agreement may not be modified except by a written agreement between the Parties.

g.Tax Withholding. All amounts payable to Executive under this Agreement shall be subject to any applicable federal, state or local income and employment tax withholding requirements.

h.Assignment. Sears may assign its rights under this Agreement to any successor in interest, whether by merger, consolidation, sale of assets, or otherwise. This Agreement shall be binding whether it is between Sears and Executive or between any successor or assignee of Sears or affiliate thereof and Executive.

i.Governing Law. This Agreement will be governed under the internal laws of the state of Illinois without regard to principles of conflicts of laws. Executive agrees that the state and federal courts located in the state of Illinois shall have exclusive jurisdiction in any action, lawsuit or proceeding based on or arising out of this Agreement, and Executive hereby: (1) submits to the personal jurisdiction of such courts; (2) consents to the service of process in connection with any action, suit, or proceeding against Executive; and (3) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction, venue or service of process.

3

Special Retention Award Agreement

Leena Munjal

January 8, 2018

j.Counterparts. This Agreement may be executed in one or more counterparts, which together shall constitute a valid and binding agreement.

EXECUTIVE EXPRESSLY ACKNOWLEDGES THAT EXECUTIVE HAS BEEN ADVISED TO SEEK LEGAL COUNSEL, HAS HAD THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL REGARDING THE ADVISABILITY OF ENTERING INTO THIS AGREEMENT, HAS CAREFULLY READ THIS AGREEMENT, FULLY UNDERSTANDS ITS FINAL AND BINDING EFFECT, AND IS EXECUTING THIS AGREEMENT VOLUNTARILY.

IN WITNESS WHEREOF, Executive and Sears, by its duly authorized representative, have executed this Agreement on the dates stated below, effective as of the date first set forth below.

EXECUTIVE	SEARS HOLDINGS CORPORATION
/s/ Leena Munjal	/s/ Julie Ainsworth
Leena Munjal	Julie Ainsworth
1/8/2018	1/10/2018
Date	Date

4

EX-10.79

Exhibit 10.79

Execution Version

FOURTH AMENDMENT TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT

FOURTH AMENDMENT TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT (this “Amendment”) dated as of December 13, 2017 among

SEARS HOLDINGS CORPORATION, a Delaware corporation (“Holdings”),

SEARS ROEBUCK ACCEPTANCE CORP., a Delaware corporation, and KMART CORPORATION, a Michigan corporation (the “Borrowers”),

JPP, LLC and JPP II, LLC, as L/C Lenders, and

CITIBANK, N.A., as Administrative Agent (the “Agent”) and Issuing Bank (the “Issuing Bank”),

in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

WITNESSETH:

WHEREAS, Holdings, the Borrowers, the L/C Lenders party thereto, the Agent and the Issuing Bank, are party to that certain Letter of Credit and Reimbursement Agreement (as amended pursuant to that certain First Amendment to Letter of Credit and Reimbursement Agreement dated as of March 2, 2017, that certain Second Amendment to Letter of Credit and Reimbursement Agreement dated as of August 1, 2017 and that certain Third Amendment to Letter of Credit and Reimbursement Agreement dated as of August 9, 2017, the “Existing LC Facility Agreement”; the Existing LC Facility Agreement as amended hereby, the “Amended LC Facility Agreement”); and

WHEREAS, Holdings, the Borrowers, the Required L/C Lenders, the Issuing Bank and the Agent have agreed to amend the Existing LC Facility Agreement.

NOW THEREFORE, in consideration of the mutual promises and agreements herein contained, the parties hereto hereby agree as follows:

1. Incorporation of Terms. All capitalized terms not otherwise defined herein shall have the same meaning as in the Existing LC Facility Agreement.

2. Amendments to Existing LC Facility Agreement. Each of the parties hereto agrees that, effective as of the Amendment Effective Date (as defined below), Section 2.05(e) of the Existing LC Facility Agreement shall be amended and restated as follows:

“(e) Default Rate. At any time after the occurrence and during the continuance of an Event of Default, all fees and interest due and payable by the Borrowers pursuant to Section 2.05(a) and Section 3.05 of this Agreement shall be increased by 2% per annum above the applicable rate and shall be payable upon demand by the L/C Lenders.”

3. Conditions to Effectiveness. This Amendment shall become effective on the date (the “Amendment Effective Date”) that this Amendment shall have been duly executed and delivered by Holdings, the Borrowers, the Required L/C Lenders, the Agent and the Issuing Bank, and the Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.

4. Binding Effect. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto, the L/C Lenders, the Issuing Bank and their respective successors and assigns.

5. Multiple Counterparts. This Amendment may be executed in multiple counterparts, each of which shall constitute an original and together which shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (i.e. “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement.

6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

7. Jurisdiction. Section 9.11 of the Existing LC Facility Agreement is hereby incorporated by reference, mutatis mutandis, as if it were fully set forth in this Amendment.

8. WAIVER OF JURY TRIAL. EACH OF HOLDINGS, THE BORROWERS, THE AGENT, THE ISSUING BANK AND THE L/C LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE OTHER LOAN DOCUMENTS OR THE ACTIONS OF THE AGENT, THE ISSUING BANK OR ANY L/C LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF.

[Remainder of page intentionally left blank; Signature pages follow.]

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IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by each of the parties hereto as of the date first above written.

HOLDINGS:

SEARS HOLDINGS CORPORATION

By: /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Controller and Head of Capital Markets Activities              

BORROWERS:

SEARS ROEBUCK ACCEPTANCE CORP.

By: /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Vice President, Finance

KMART CORPORATION

By: /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Controller and Head of Capital Markets Activities            

[Signature page to LC and Reimbursement Agreement Amendment]

Citibank, N.A., as Agent and as Issuing Bank

By: _/s/ David L. Smith______________________

Name: _David L. Smith________________

Title: ___Vice President and Director_____

[Signature page to LC and Reimbursement Agreement Amendment]

JPP, LLC, as an L/C Lender

By:    /s/ Edward S. Lampert_________________

Name: Edward S. Lampert

Title: Member

JPP II, LLC, as an L/C Lender

By: RBS Partners, L.P., as Manager

By: ESL Investments, Inc., as General Partner

By:    ___/s/ Edward S. Lampert______________

Name: Edward S. Lampert

Title: Chairman and Chief Executive Officer

[Signature page to LC and Reimbursement Agreement Amendment]

EX-10.87

Exhibit 10.87

Execution Version

TERM INCREASE AMENDMENT NO. 1 TO THE TERM LOAN CREDIT AGREEMENT

TERM INCREASE AMENDMENT NO. 1 TO THE TERM LOAN CREDIT AGREEMENT dated as of January 19, 2018 (this “Term Increase Amendment”), by and among SEARS HOLDINGS CORPORATION, a Delaware Corporation (the “Holdings”), SEARS ROEBUCK ACCEPTANCE CORP., a Delaware corporation and KMART CORPORATION, a Michigan corporation (together, the “Borrowers”), JPP, LLC, as administrative agent and collateral administrator (the “Agent”) under the Credit Agreement (as defined below), each TERM INCREASE LENDER (as defined below), each Required Lender party hereto and each of the other LOAN PARTIES party hereto.

WHEREAS, reference is hereby made to the Term Loan Credit Agreement, dated as of January 4, 2018 (as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, including by this Term Increase Amendment, the “Credit Agreement”), among the Borrowers, the Agent, Holdings, the other guarantors party thereto and each Lender from time to time party thereto;

WHEREAS, pursuant to Section 2.18 of the Credit Agreement, the Borrowers may obtain additional term loansby, among other things, entering into a Term Increase Amendment in accordance with the terms and conditions of the Credit Agreement;

WHEREAS, the Borrowers have hereby notified the Agent that they are requesting the establishment of a Term Increase in an aggregate principal amount of $30,000,000 (the “Amendment No. 1Term Increase” and the commitments relating thereto, the “Amendment No. 1Term Increase Commitments”) pursuant to Section 2.18(a) of the Credit Agreement;

WHEREAS, the Borrowers have requested that the Required Lenders agree to waive certain condition precedents to the effectiveness of each Term Increase that are required pursuant to the terms of the Credit Agreement; and

WHEREAS, the Persons party to this Term Increase Amendment as lenders with respect to the Amendment No. 1 Term Increase (such Persons and any permitted assignees thereof, the “Term Increase Lenders”) have indicated their willingness to lend such Amendment No. 1 Term Increase on the terms and subject to the conditions herein and the Required Lenders have agreed to make certain waivers as hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and agreements, provisions and covenants herein contained, the parties hereto agree as follows:

Section 1.Defined Terms; References. Capitalized terms used but not defined herein have the meaning provided in the Credit Agreement. Each reference to “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference and each reference to “this Agreement“ and each other similar reference contained in the Credit Agreement shall, after this Term Increase Amendment becomes effective, refer to the Credit Agreement as amended hereby. This Term Increase Amendment is a “Term Increase Amendment” and a “Loan Document”, in each case, as defined under the Credit Agreement.

Section 2.Amendment No. 1 Term Increase.

(a)Subject to the terms and conditions set forth herein, each Term Increase Lender severally agrees to make available its portion of Amendment No. 1 Term Increase to the Borrowers on the Term

Increase Effective Date (as defined below) in the amount of such Term Increase Lender’s Amendment No. 1 Term Increase Commitment as set forth on Schedule A hereto. Pursuant to Section 2.18(b) of the Credit Agreement, the Term Increase shall be “Loans” and “Term Loans” for all purposes under the Credit Agreement and each of the other Loan Documents and shall have terms identical to the Term Loans outstanding under the Credit Agreement immediately prior to the date hereof (the “Existing Term Loans”), except for the initial interest accrual date (which shall be the Term Increase Effective Date, with respect to the Amendment No. 1 Term Increase) and as otherwise set forth in this Term Increase Amendment. For the avoidance of doubt, the Interest Period applicable to the Amendment No. 1 Term Increase shall end on the same date as the current Interest Period applicable to the Term Loans existing prior to this Term Increase Amendment.

(b)Each Incremental Term Lender acknowledges and agrees that upon the Term Increase Effective Date, such Term Increase Lender shall be a “Lender” and “Term Lender” under, and for all purposes of, the Credit Agreement and the other Loan Documents, and shall be subject to and bound by the terms thereof, and shall perform all the obligations of and shall have all rights of a Lender thereunder.

Section 3.Credit Agreement Governs. Except as set forth in this Term Increase Amendment, the Amendment No. 1 Term Increase shall have identical terms as the Existing Term Loans and shall otherwise be subject to the provisions, including any provisions restricting the rights, or regarding the obligations, of the Loan Parties or any provisions regarding the rights of the Term Lenders, of the Credit Agreement and the other Loan Documents, each reference to a “Loan”, “Loans”, “Term Loan” or “Term Loans” in the Credit Agreement shall be deemed to include the Amendment No. 1 Term Increase and other related terms will have correlative meanings mutatis mutandis.

Section 4.Effectiveness. This Term Increase Amendment shall become effective as of the date hereof (the “Term Increase Effective Date”), subject to the satisfaction of the following conditions:

(a)The Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by an Authorized Officer of the signing Loan Party, each dated the Term Increase Effective Date (or, in the case of certificates of governmental officials, a recent date before such date) and each in form and substance satisfactory to the Agent:

(i)this Term Increase Amendment duly executed and delivered by each of the Borrowers, Holdings, the other Loan Parties party hereto, the Agent and each Term Increase Lender party hereto;

(ii)a certificate signed by an Authorized Officer of Holdings and the Borrowers certifying (A) that the conditions specified in Section 4.02 have been satisfied, (B) that the borrowing of the Amendment No. 1 Term Increase on the Term Increase Effective Date does not conflict with the Material Documents, (C) as to matters required under Section 4(b), and (D) that the Term Increase Conditions as defined in the Credit Agreement (other than the conditions described in clauses (c), (d) and (e) of the definition thereof) have been satisfied;

(iii)an opinion of one or more special or local counsel to Holdings, the Borrowers and the other Loan Parties, addressed to the Agent and each Lender as to such matters as the Agent may reasonably request; and

(iv)bring down certificates of good standing (to the extent such concept exists) from the secretary of state of the state of organization of each Loan Party (or any immediate predecessor

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thereof) (to the extent such concept exists in such jurisdiction) and copies of certified resolutions dated after the Effective Date or other appropriate evidence of the authority of each Loan Party to incur such the Amendment No. 1 Term Increase.

(b)There shall have been no event or circumstance since January 30, 2017 that has had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

(c)The Existing Second Lien Credit Agreement and the Existing Second Lien Notes shall have been amended in a manner satisfactory to the Effective Date Term Lenders and Term Increase Lenders, in their sole discretion.

(d)The Additional Term Lenders and other Term Lenders who agree to provide such Term Increase shall have received from the Borrowers reimbursement of all reasonable out-of-pocket fees and expenses.

Section 5.Representations and Warranties. By its execution of this Term Increase Amendment, each Loan Party hereby certifies that:

(a)the execution, delivery and performance by each Loan Party of this Term Increase Amendment and the other documents executed in connection herewith, and the consummation of the transactions contemplated hereby or thereby, are within such Loan Party’s powers, have been duly authorized by all necessary organizational action, and (x) will not result in a breach of any of the terms and provisions of, or constitute a default under the Material Documents, and (y) do not contravene (i) the charter or by-laws or other organizational or governing documents of such Loan Party or (ii) law or any contractual restriction binding on or affecting any Loan Party, except, for purposes of this clause (y)(ii), to the extent such contravention would not reasonably be expected to have a Material Adverse Effect;

(b)no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance of this Term Increase Amendment and the other documents executed in connection herewith, and the consummation of the transactions contemplated hereby or thereby that has not already been obtained if the failure to obtain such authorization, approval or other action could reasonably be expected to result in a Material Adverse Effect; and

(c)this Term Increase Amendment has been duly executed and delivered by each Loan Party party hereto, constitutes the legal, valid and binding obligation of each Loan Party party hereto enforceable against such Loan Party in accordance with its terms subject to the effect of any applicable bankruptcy, insolvency, reorganization or moratorium or similar laws affecting the rights of creditors generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

Section 6.Waiver. The undersigned Lenders, constituting the Required Lenders, hereby waive the Term Increase Conditions described in clauses (d) and (e) of the definition thereof solely with respect to the Amendment No. 1 Term Increase. Except as provided in the prior sentence, the execution, delivery and effectiveness of this Term Increase Amendment shall not operate as a waiver of any right, power or remedy of any Lender or the Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.

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Section 7.Use of Proceeds. The Borrowers may use the proceeds of the Amendment No. 1 Term Increase for any purpose permitted by the Credit Agreement.

Section 8.Request for Term Increase. By their execution of this Term Increase Amendment, the Borrowers hereby deliver and the Agent hereby acknowledges receipt of this Term Increase Amendment as the satisfaction of the requirement to give notice required to the Agent pursuant to Section 2.18(a) of the Credit Agreement.

Section 9.Acknowledgments. Each Loan Party hereby expressly acknowledges the terms of this Term Increase Amendment and reaffirms, as of the date hereof, (i) the covenants and agreements contained in each Loan Document to which it is a party, including, in each case, such covenants and agreements as in effect immediately after giving effect to this Term Increase Amendment and the transactions contemplated hereby, (ii) its guarantee of the Obligations (including, without limitation, the Term Increase) under the Security Documents and (iii) its grant of Liens on the Collateral to secure the Obligations (including, without limitation, the Obligations with respect to the Term Increase) pursuant to the Security Documents.

Section 10.Amendment, Modification and Waiver. This Term Increase Amendment may not be amended, modified or waived except pursuant to a writing signed by each of the parties hereto or as permitted by Section 9.01 of the Credit Agreement.

Section 11. Liens Unimpaired. Neither the modification of the Credit Agreement effected pursuant to this Term Increase Amendment nor the execution, delivery, performance or effectiveness of this Term Increase Amendment:

(a)impairs the validity, effectiveness or priority of the Liens granted pursuant to any Loan Document, and such Liens continue unimpaired with the same priority to secure repayment of all Obligations, whether heretofore or hereafter incurred; or

(b)requires that any new filings be made or other action taken to perfect or to maintain the perfection of such Liens.

Section 12.Entire Agreement. This Term Increase Amendment, the Credit Agreement and the other Loan Documents constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties hereto with respect to the subject matter hereof. Except as expressly set forth herein, this Term Increase Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of any party under, the Credit Agreement, nor alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect. It is understood and agreed that each reference in each Loan Document to the Credit Agreement, whether direct or indirect, shall hereafter be deemed to be a reference to the Credit Agreement as amended hereby and that this Term Increase Amendment is a Loan Document.

Section 13.GOVERNING LAW. THIS TERM INCREASE AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPELS OF CONFLICTS OF LAW BUT

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INCLUDING SECTIONS 5-1401 and 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

Section 14.Severability. If any provision of this Tern Increase Amendment is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Term Increase Amendment shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 15.Counterparts. This Term Increase Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by facsimile or other electronic means of an executed counterpart of a signature page to this Term Increase Amendment shall be effective as delivery of an original executed counterpart of this Term Increase Amendment.

Section 16.Headings. The headings of this Term Increase Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, each of the undersigned has caused its duly authorized officer to execute and deliver this Term Increase Amendment as of the date first written above.

SEARS HOLDINGS CORPORATION

By:     /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Chief Financial Officer

KMART CORPORATION

By:     /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Chief Financial Officer

SEARS ROEBUCK ACCEPTANCE CORP.

By:     /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Vice President, Finance

SEARS, ROEBUCK AND CO.

By:     /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Chief Financial Officer

STI MERCHANDISING, INC.

By:     /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: President

SEARS BRANDS, L.L.C.

By:     /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Vice President

[Signature Page to Term Increase Amendment No. 1 to Term Loan Credit Agreement]

A&E FACTORY SERVICE, LLC

A&E HOME DELIVERY, LLC

A&E LAWN & GARDEN, LLC

A&E SIGNATURE SERVICE, LLC

CALIFORNIA BUILDER APPLIANCES, INC.

FLORIDA BUILDER APPLIANCES, INC.

KMART OF MICHIGAN, INC.

KLC, INC.

PRIVATE BRANDS, LTD.

SEARS BRANDS MANAGEMENT CORPORATION

SEARS PROTECTION COMPANY

SEARS PROTECTION COMPANY (FLORIDA), L.L.C.

SEARS, ROEBUCK DE PUERTO RICO, INC.

SOE, INC.

STARWEST, LLC

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Vice President

SEARS HOME IMPROVEMENT PRODUCTS, INC.

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     President

KMART HOLDING CORPORATION

KMART OPERATIONS LLC

SEARS OPERATIONS LLC

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Chief Financial Officer

KMART OF WASHINGTON LLC

KMART STORES OF ILLINOIS LLC

KMART STORES OF TEXAS LLC

MYGOFER LLC

BY:     Kmart Corporation, its Sole Member

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Chief Financial Officer

[Signature Page to Term Increase Amendment No. 1 to Term Loan Credit Agreement]

SEARS DEVELOPMENT CO.

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Vice President

KMART.COM LLC

By: BlueLight.com, Inc., its Sole Member

By:    /s/ Robert A. Riecker            

Name:     Lawrence J. Meerschaert

Title: Vice President of BlueLight.com, Inc., the Sole Member of Kmart.com LLC

SEARS HOLDINGS MANAGEMENT CORPORATION

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     President

SEARS BRANDS BUSINESS UNIT CORPORATION

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Vice President

[Signature Page to Term Increase Amendment No. 1 to Term Loan Credit Agreement]

JPP, LLC,

as Agent, Term Increase Lender and Lender

By:     /s/ Edward S. Lampert    

Name:     Edward S. Lampert

Title: Member

JPP II, LLC,

as Term Increase Lender and Lender

By: RBS Partners, L.P., as Manager

By: ESL Investments, Inc., as General Partner

By:     /s/ Edward S. Lampert    

Name:     Edward S. Lampert

Title:    Chairman and Chief Executive Officer    

[Signature Page to Term Increase Amendment No. 1 to Term Loan Credit Agreement]

SCHEDULE ATO TERM INCREASE AMENDMENT

Name of Term Increase Lender	Amendment No. 1 Term Increase Commitment
JPP, LLC	$21,698,000
JPP II, LLC	$8,302,000
TOTAL	$30,000,000

EX-10.90

Exhibit 10.90

EXECUTION VERSION

FOURTH AMENDMENT TO
TERM LOAN CREDIT AGREEMENT

FOURTH AMENDMENT TO TERM LOAN CREDIT AGREEMENT (this “Amendment”) dated as of February 26, 2018 (the “Fourth Amendment Effective Date”), among

SEARS HOLDINGS CORPORATION, a Delaware corporation (“Holdings”),

SEARS ROEBUCK ACCEPTANCE CORP., a Delaware corporation, and KMART CORPORATION, a Michigan corporation (the “Borrowers”),

the Guarantors listed on the signature page hereto (the “Guarantors”),

the Lenders party to the Credit Agreement (as defined below), and

JPP, LLC, as Administrative Agent and collateral administrator (the “Agent”),

in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

WITNESSETH:

WHEREAS, Holdings, the Borrowers, the Lenders party thereto, the Guarantors party thereto and the Agent are party to that certain Term Loan Credit Agreement, dated as of January 4, 2018 (as amended by (i) that certain Term Increase Amendment No. 1 to the Term Loan Credit Agreement, dated as of January 19, 2018, (ii) that certain Amendment to Term Loan Credit Agreement, dated as of January 29, 2018, and (iii) that certain Third Amendment to Term Loan Agreement dated as of February 7, 2018, the “Credit Agreement”);

WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, certain loans and other extensions of credit to the Borrowers;

WHEREAS, pursuant to Section 2.18 of the Credit Agreement, the Borrowers may obtain additional term loans by, among other things, entering into a Term Increase Document in accordance with the terms and conditions of the Credit Agreement;

WHEREAS, the Borrowers have hereby notified the Agent that they are requesting the establishment of a Tranche A Term Increase in an aggregate principal amount of $40,000,000 (the “Additional Term Increase” and the commitments related thereto, the “Additional Term Increase Commitments”) pursuant to Section 2.18(a) of the Credit Agreement;

WHEREAS, the Borrowers have requested the Credit Agreement be amended as set forth in this Amendment;

WHEREAS, the Persons party to this Amendment as lenders with respect to the Additional Term Increase (such Persons and any permitted assignees thereof, the “Term Increase Lenders”)

have indicated their willingness to lend such Additional Term Increase on the terms and subject to the conditions herein; and

WHEREAS, each party that executes this Amendment has agreed to the terms of this Amendment.

NOW THEREFORE, in consideration of the mutual promises and agreements herein contained, the parties hereto hereby agree as follows:

Section 1.Defined Terms; References. Capitalized terms used but not defined herein have the meaning provided in the Credit Agreement. Each reference to “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference and each reference to “this Agreement“ and each other similar reference contained in the Credit Agreement shall, after this Amendment becomes effective, refer to the Credit Agreement as amended hereby. This Amendment is a “Term Increase Document” and a “Loan Document”, in each case, as defined under the Credit Agreement.

Section 2.Term Increase.

(a)Subject to the terms and conditions set forth herein, each Term Increase Lender severally agrees to make available its portion of the Additional Term Increase to the Borrowers on the Fourth Amendment Effective Date (as defined below) in the amount of such Term Increase Lender’s Additional Term Increase Commitment as set forth on Schedule A hereto. Pursuant to Section 2.18(b) of the Credit Agreement, the Term Increase shall be “Loans”, “Term Loans”, and “Tranche A Term Loans” for all purposes under the Credit Agreement and each of the other Loan Documents and shall have terms identical to the Tranche A Term Loans outstanding under the Credit Agreement immediately prior to the date hereof (the “Existing Tranche A Term Loans”).

(b)Each Term Increase Lender acknowledges and agrees that upon the Fourth Amendment Effective Date, such Term Increase Lender shall be a “Lender”, “Term Lender” and a “Tranche A Term Lender” under, and for all purposes of, the Credit Agreement and the other Loan Documents, and shall be subject to and bound by the terms thereof, and shall perform all the obligations of and shall have all rights of a Lender and Tranche A Term Lender thereunder.

Section 3.Credit Agreement Governs. Except as set forth in this Amendment, the Additional Term Increase shall have identical terms as the Existing Tranche A Term Loans and shall otherwise be subject to the provisions, including any provisions restricting the rights, or regarding the obligations, of the Loan Parties or any provisions regarding the rights of the Tranche A Term Lenders, of the Credit Agreement and the other Loan Documents, each reference to a “Loan”, “Loans”, “Term Loan”, “Term Loans”, “Tranche A Term Loan” or “Tranche A Term Loans” in the Credit Agreement shall be deemed to include the Additional Term Increase and other related terms will have correlative meanings mutatis mutandis.

Section 4.Amendments & Acknowledgment.

(a)Each of the parties hereto agrees that, as of the Fourth Amendment Effective Date, the Credit Agreement is hereby amended as follows:

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(i) The first sentence of Section 2.18(g) of the Credit Agreement is hereby deleted in its entirety.

(ii) Section 2.07 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“SECTION 2.07. Repayment of Loans. On the Termination Date, each Borrower shall first repay to the Tranche A Term Lenders the aggregate principal amount of the Tranche A Term Loans then outstanding, (which shall include any PIK Interest that may have been added to the principal amount of the Tranche A Loans pursuant to this Agreement) and, after repayment in full in cash of the Tranche A Term Loans, the aggregate principal amount of the Tranche B Term Loans then outstanding (which shall include any PIK Interest that may have been added to the principal amount of the Tranche B Loans pursuant to this Agreement). On the date of any Permitted Disposition under clause (u) of the definition thereof, the Borrowers shall repay to the Agent for the Term Lenders an amount equal to the Net Proceeds of such Disposition, which Net Proceeds shall be applied first to any Tranche A Term Loans on a pro rata basis until repayment in full in cash of all Term Loans of such Class and, thereafter, to any Tranche B Term Loans on a pro rata basis; provided that, notwithstanding anything in this Agreement to the contrary, the Tranche A Lenders that are not Affiliates of JPP, LLC shall be deemed to reject their pro rata share of the first thirty-five million ($35,000,000) of such repayment and such amount shall be applied to repay Tranche A Lenders that are Affiliates of JPP, LLC.”

(b)The undersigned Lenders hereby acknowledge that as of the Fourth Amendment Effective Date the Term Increase Conditions described in clauses (d) and (e) of the definition thereof have been satisfied.

Section 5.Use of Proceeds. The Borrowers may use the proceeds of the Additional Term Increase for any purpose permitted by the Credit Agreement.

Section 6.Request for Term Increase. By their execution of this Amendment, the Borrowers hereby deliver and the Agent hereby acknowledges receipt of this Amendment as the satisfaction of the requirement to give notice required to the Agent pursuant to Section 2.18(a) of the Credit Agreement.

Section 7.Release by Loan Parties. Each Loan Party hereby acknowledges and agrees that it has no actual knowledge of any defenses or claims against any Lender, the Agent, any of their respective Affiliates or any of their respective officers, directors, employees, attorneys, representatives, predecessors, successors, or assigns with respect to the Obligations, and that if such Loan Party now has, or ever did have, any defenses or claims with respect to the Obligations against any Lender, the Agent, any of their respective Affiliates or any of their respective officers, directors, employees, attorneys, representatives, predecessors, successors, or assigns, whether known or unknown, at law or in equity, from the beginning of the world through this date and through the time

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of effectiveness of this Amendment, all of them are hereby expressly WAIVED, and each Loan Party hereby RELEASES each Lender, the Agent, each of their respective Affiliates and their respective officers, directors, employees, attorneys, representatives, predecessors, successors, and assigns from any liability therefor.

Section 8.Effectiveness. This Amendment shall become effective on the date (the “Fourth Amendment Effective Date”) that each of the following conditions precedent has been fulfilled or waived as determined by the Agent:

(a)This Amendment shall have been duly executed and delivered by Holdings, the Borrowers, the Guarantors, each of the Term Increase Lenders, each of the Lenders, and the Agent, and the Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.

(b)The Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by an Authorized Officer of the signing Loan Party, each dated as of the Fourth Amendment Effective Date (or, in the case of certificates of governmental officials, a recent date before the Fourth Amendment Effective Date) and each in form and substance satisfactory to the Agent:

(i) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Authorized Officers of each Loan Party as the Agent may reasonably require evidencing (A) the authority of each Loan Party to enter into this Amendment and the other documents or instruments executed or to be executed in connection with this Amendment to which such Loan Party is a party or is to be a party and (B) the identity, authority and capacity of each Authorized Officer thereof authorized to act as an Authorized Officer in connection with this Amendment and such other documents to which such Loan Party is a party or is to be a party (or, in the case of this clause (B), in the Agent’s discretion “no change” certifications);

(ii) copies of each Loan Party’s organization or other governing documents and such other documents and certifications as the Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Loan Party is validly existing and in good standing in its jurisdiction of organization and, with respect to each Loan Party granting a Mortgage, in good standing in each jurisdiction other than California where any Property owned by such Loan Party is located;

(iii) an opinion of counsel from each of (a) Wachtell, Lipton, Rosen & Katz, as special New York counsel, (b) Morris, Nichols, Arsht & Tunnel LLP, as Delaware local counsel and (c) Dykema Gossett PLLC, as Illinois, Michigan and Texas local counsel, to Holdings, the Borrowers, and the other Loan Parties, or such other firms as may be reasonably acceptable to the Agent;

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(iv) a certificate signed by an Authorized Officer of Holdings and the Borrowers certifying (A) that the conditions specified in Section 4.02 of the Credit Agreement have been satisfied and (B) that the execution and delivery of this Amendment and the incurrence of the Loans, when incurred, will not conflict with, and the Liens on the Collateral granted pursuant to any Loan Document to secure the Loans are permitted by, the Material Documents;

(v) results of searches or other evidence reasonably satisfactory to the Agent (in each case dated as of a date reasonably satisfactory to the Agent) indicating the absence of Liens on the Collateral, except for Liens permitted by Section 6.02(a) of the Credit Agreement; and

(vi) such other customary certificates, documents or consents as the Agent reasonably may require.

(c)The conditions set forth in Section 4.02 of the Credit Agreement shall be satisfied.

(d)Since January 30, 2017, there has been no event or circumstance, either individually or in the aggregate, that has had or would reasonably be expected to have a Material Adverse Effect.

(e)The Borrowers shall have paid all reasonable, documented, out-of-pocket fees and expenses of the Agent and the Lenders that have executed this Amendment.

Section 9.Representations and Warranties. By execution of this Amendment, each Loan Party certifies that:

(a)no Default or Event of Default exists under the Credit Agreement or under any other Loan Document as of the date hereof;

(b)all representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects as of the date hereof, immediately prior and after giving effect to the amendments pursuant to Section 4 hereof, except to the extent that (i) such representations or warranties are qualified by a materiality standard, in which case they are true and correct in all respects, and (ii) such representations or warranties expressly relate to an earlier date (in which case such representations and warranties are true and correct in all material respects as of such earlier date, except to the extent that such representations or warranties are qualified by a materiality standard, in which case they are true and correct in all respects as of such earlier date);

(c)the execution, delivery and performance by each Loan Party of this Amendment and the other documents executed in connection herewith, and the consummation of the transactions contemplated hereby or thereby, are within such Loan Party’s powers, have been duly authorized by all necessary organizational action, and (i) will not result in a breach of any of the terms and provisions of, or constitute a default under the Material Documents, and (ii) do not contravene (A) the charter or by-laws or other organizational or governing documents of such Loan Party or (B) law or any contractual restriction binding on or affecting any Loan Party, except, for purposes of this

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clause (ii)(B), to the extent such contravention would not reasonably be expected to have a Material Adverse Effect;

(d)no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery and performance of this Amendment and the other documents executed in connection herewith, and the consummation of the transactions contemplated hereby or thereby that has not already been obtained if the failure to obtain such authorization, approval or other action could reasonably be expected to result in a Material Adverse Effect; and

(e)this Amendment has been duly executed and delivered by each Loan Party party hereto, constitutes the legal, valid and binding obligation of each Loan Party party hereto enforceable against such Loan Party in accordance with its terms subject to the effect of any applicable bankruptcy, insolvency, reorganization or moratorium or similar laws affecting the rights of creditors generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

Section 10.Acknowledgement and Reaffirmation. This Amendment shall amend the Credit Agreement, but is not intended to, and shall not, constitute a novation thereof or in any way impair or otherwise affect the rights or obligations of the parties thereunder (including with respect to loans and representations and warranties made thereunder) except as such rights or obligations are amended or modified hereby. The Credit Agreement as amended hereby shall be deemed to be a continuing agreement among the parties, and all documents, instruments and agreements delivered, as well as all Liens created, pursuant to or in connection with the Credit Agreement (as amended) shall remain in full force and effect, each in accordance with its terms (as amended). Each Loan Party (a) acknowledges and consents to all of the terms and conditions of this Amendment, (b) affirms as of the date hereof the covenants and agreements contained in this Amendment and each Loan Document to which it is a party, including in each case such covenants and agreements as in effect immediately after giving effect to this Amendment and the transactions contemplated hereby, (c) agrees that this Amendment and all documents executed in connection herewith do no operate to reduce or discharge such Loan Party’s obligations under the Loan Documents, (d) affirms that each of the Liens granted in or pursuant to the Loan Documents are valid and secure the Secured Obligations (as defined under the Security Agreement), including those Obligations arising under the Credit Agreement and (e) agrees that neither this Amendment nor any other document executed in connection herewith shall in no manner impair or otherwise adversely affect any of the Liens granted in or pursuant to the Loan Documents. Each Guarantor hereby confirms that its guarantee under the Credit Agreement remains unaltered and in full force and effect and hereby reaffirms, ratifies and confirms the terms and conditions of such guarantee. Agent hereby acknowledges and agrees that its obligations under each of (a) the Acknowledgement of License Agreement, dated as of the Effective Date, between the Agent the ABL Agent and (b) the Acknowledgement of License Agreement, dated as of the Effective Date, between the Agent and the administrative and collateral agent under the Existing Second Lien Credit Agreement remain in full force and effect.

Section 11.Liens Unimpaired. Neither the modification of the Credit Agreement effected pursuant to this Amendment nor the execution, delivery, performance or effectiveness of this Amendment: (a) impairs the validity, effectiveness or priority of the Liens granted pursuant to any

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Loan Document, and such Liens continue unimpaired with the same priority to secure repayment of all Obligations, whether heretofore or hereafter incurred; or (b) requires that any new filings be made or other action taken to perfect or to maintain the perfection of such Liens other than as contemplated by the Post-Closing Undertakings schedule to the Credit Agreement.

Section 12.Binding Effect. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

Section 13.Expenses. The Borrowers shall reimburse each of the Agent and the Lenders party hereto for all reasonable and documented out-of-pocket expenses incurred in connection herewith, including, without limitation, reasonable attorneys’ fees.

Section 14.Multiple Counterparts. This Amendment may be executed in multiple counterparts, each of which shall constitute an original and together which shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (i.e. “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Amendment.

Section 15.Severability. If any provision of this Amendment is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Amendment shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 16.Entire Agreement. This Amendment, the Credit Agreement and the other Loan Documents constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties hereto with respect to the subject matter hereof. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of any party under, the Credit Agreement, nor alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect.

Section 17.Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

[Remainder of page intentionally left blank; Signature pages follow.]

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IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by each of the parties hereto as of the date first above written.

SEARS HOLDINGS CORPORATION

By: /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Chief Financial Officer

KMART CORPORATION

By: /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Chief Financial Officer

SEARS ROEBUCK ACCEPTANCE CORP.

By: /s/ Robert A. Riecker    

Name: Robert A. Riecker

Title: Vice President, Finance

SEARS, ROEBUCK AND CO.

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Chief Financial Officer

STI MERCHANDISING, INC.

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     President

SEARS BRANDS, L.L.C.

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Vice President

[Signature page to Amendment to Term Loan Credit Agreement]

A&E FACTORY SERVICE, LLC

A&E HOME DELIVERY, LLC

A&E LAWN & GARDEN, LLC

A&E SIGNATURE SERVICE, LLC

KMART OF MICHIGAN, INC.

KLC, INC.

PRIVATE BRANDS, LTD.

SEARS BRANDS MANAGEMENT CORPORATION

SEARS PROTECTION COMPANY

SEARS PROTECTION COMPANY (FLORIDA), L.L.C.

SEARS, ROEBUCK DE PUERTO RICO, INC.

SOE, INC.

STARWEST, LLC

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Vice President

SEARS HOME IMPROVEMENT PRODUCTS, INC.

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     President

KMART HOLDING CORPORATION

KMART OPERATIONS LLC

SEARS OPERATIONS LLC

CALIFORNIA BUILDER APPLIANCES, INC.

FLORIDA BUILDER APPLIANCES, INC.

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Chief Financial Officer

[Signature page to Amendment to Term Loan Credit Agreement]

KMART OF WASHINGTON LLC

KMART STORES OF ILLINOIS LLC

KMART STORES OF TEXAS LLC

MYGOFER LLC

By: Kmart Corporation, as Sole Member

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Chief Financial Officer

SEARS DEVELOPMENT CO.

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Vice President

KMART.COM LLC

By: BlueLight.com, Inc., as Sole Member

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Vice President of BlueLight.com, Inc., the Sole Member of Kmart.com LLC

SEARS HOLDINGS MANAGEMENT CORPORATION

By:    /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     President

SEARS BRANDS BUSINESS UNIT CORPORATION

By:     /s/ Robert A. Riecker            

Name:     Robert A. Riecker

Title:     Vice President

[Signature page to Amendment to Term Loan Credit Agreement]

JPP, LLC, as Agent, as a Term Increase Lender and as a Lender

By:    /s/ Edward S. Lampert            

Name: Edward S. Lampert

Title: Member

JPP II, LLC, as a Term Increase Lender and, as a Lender

By: RBS Partners, L.P., as Manager

By: ESL Investments, Inc., as General Partner

By:    /s/ Edward S. Lampert            

Name: Edward S. Lampert

Title: Chairman and Chief Executive Officer

[Signature page to Amendment to Term Loan Credit Agreement]

Acknowledged and agreed:

CRS MASTER FUND, L.P.

CYRUS SPECIAL STRATEGIES MASTER FUND, LP

CYRUS SELECT OPPORTUNITIES MASTER FUND, LTD.

CYRUS OPPORTUNITIES MASTER FUND II, LTD.

CANARY SC MASTER FUND, L.P.

CRESCENT 1, L.P.

CYRUS 1740 MASTER FUND, LP, each as a Lender

By: Cyrus Capital Partners, L.P., as Investment Manager

By:    /s/ Thomas Stametelos

Name: Thomas Stametelos

Title: Authorized Signatory

[Signature page to Amendment to Term Loan Credit Agreement]

SCHEDULE A TO AMENDMENT

Name of Term Increase Lender	Additional Term Increase Commitment
JPP, LLC	$11,069,000.00
JPP II, LLC	$28,931,000.00
Total	$40,000,000

EX-10.91

Exhibit 10.91

EXECUTION VERSION

CREDIT AGREEMENT

dated as of

March 14, 2018

among

SRC O.P. LLC,
SRC FACILITIES LLC, and
SRC REAL ESTATE (TX), LLC,
as Borrowers,

the Lenders party hereto

and

UBS AG, STAMFORD BRANCH,
as Administrative Agent

and

UBS SECURITIES LLC,
as Lead Arranger and Bookrunner

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS	1
SECTION 1.01.	Defined Terms	1
SECTION 1.02.	Terms Generally	25
SECTION 1.03.	Accounting Terms; GAAP; Pro Forma Calculations	26
SECTION 1.04.	Rounding	27
SECTION 1.05.	Times of Day	27
ARTICLE II	THE TERM LOAN	27
SECTION 2.01.	Commitments	27
SECTION 2.02.	Loans	27
SECTION 2.03.	Request for Loans	27
SECTION 2.04.	Reserved	27
SECTION 2.05.	Reserved	27
SECTION 2.06.	Reserved	27
SECTION 2.07.	Joint and Several Liability	27
SECTION 2.08.	Termination of Commitments	28
SECTION 2.09.	Repayment of Loans; Evidence of Debt	28
SECTION 2.10.	Repayment of Loans	29
SECTION 2.11.	Fees	31
SECTION 2.12.	Interest	31
SECTION 2.13.	Illegality	32
SECTION 2.14.	Alternate Rate of Interest	32
SECTION 2.15.	Increased Costs	33
SECTION 2.16.	Break Funding Payments	34
SECTION 2.17.	Taxes	34
SECTION 2.18.	Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Set-offs	38
SECTION 2.19.	Mitigation Obligations; Replacement of Lenders	39
SECTION 2.20.	Collateral Reserves	40
ARTICLE III	REPRESENTATIONS AND WARRANTIES	41
SECTION 3.01.	Organization; Powers; Single Purpose Entity; Subsidiaries	41
SECTION 3.02.	Authorization; Enforceability	42
SECTION 3.03.	Governmental Approvals; No Conflicts	42
SECTION 3.04.	Financial Condition; No Material Adverse Change	42
SECTION 3.05.	Properties; Title	43
SECTION 3.06.	Litigation, Environmental and Labor Matters	43
SECTION 3.07.	Compliance with Laws and Agreements	43
SECTION 3.08.	Investment Company Status	43
SECTION 3.09.	Taxes	44
SECTION 3.10.	ERISA	44
SECTION 3.11.	Disclosure	44
SECTION 3.12.	Federal Reserve Regulations	44

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TABLE OF CONTENTS
(Continued)

		Page
SECTION 3.13.	Liens	45
SECTION 3.14.	Condemnation	45
SECTION 3.15.	Utilities and Public Access; Zoning	45
SECTION 3.16.	Solvency	45
SECTION 3.17.	Insurance	45
SECTION 3.18.	Security Interest in Collateral	45
SECTION 3.19.	Master Lease; Agreements; Management Agreements	45
SECTION 3.20.	OFAC	45
SECTION 3.21.	Patriot Act	46
SECTION 3.22.	Foreign Corrupt Practices Act; Anti-Corruption Laws	46
SECTION 3.23.	Tax Shelter Regulations	46
SECTION 3.24.	PPPFA	46
SECTION 3.25.	Broker’s Fees	46
SECTION 3.26.	Federal Income Tax Classification	46
SECTION 3.27.	Flood Zone	46
SECTION 3.28.	Physical Condition	47
SECTION 3.29.	Master Lease; Ground Leases; Leases	47
SECTION 3.30.	Boundaries; Separate Lots	48
SECTION 3.31.	Opinion Assumptions	49
SECTION 3.32.	Business Purpose	49
SECTION 3.33.	Certificate of Occupancy; Licenses	49
SECTION 3.34.	Assessments	49
SECTION 3.35.	Filing, Recording and Other Taxes	49
SECTION 3.36.	Casualty	49
SECTION 3.37.	Purchase Options	49
SECTION 3.38.	Underwriting Representations	50
SECTION 3.39.	Sears REMIC	50
ARTICLE IV	CONDITIONS	50
SECTION 4.01.	Effective Date	50
ARTICLE V	AFFIRMATIVE COVENANTS	52
SECTION 5.01.	Financial Statements and Other Information	53
SECTION 5.02.	Notices of Material Events	53
SECTION 5.03.	Existence; Conduct of Business	55
SECTION 5.04.	Payment of Obligations	55
SECTION 5.05.	Maintenance of Properties; Defense of Title; Insurance; Further Assurances	55
SECTION 5.06.	Books and Records; Inspection Rights	56
SECTION 5.07.	Compliance with Laws and Obligations	57
SECTION 5.08.	Use of Proceeds	57

-ii-

TABLE OF CONTENTS
(Continued)

		Page
SECTION 5.09.	Alterations	57
SECTION 5.10.	Handicapped Access	58
SECTION 5.11.	Additional Collateral; Environmental Matters; Further Assurances; Estoppels	58
SECTION 5.12.	Cooperation in Legal Proceedings	60
SECTION 5.13.	Master Lease	60
SECTION 5.14.	Taxes on Security	60
SECTION 5.15.	Interest Rate Protection	60
SECTION 5.16.	Single Purpose Entity	61
SECTION 5.17.	Post-Closing Matters	61
SECTION 5.18.	Ground Lease	61
SECTION 5.19.	REA	64
ARTICLE VI	NEGATIVE COVENANTS	65
SECTION 6.01.	Indebtedness; Swap Agreements	65
SECTION 6.02.	Liens	66
SECTION 6.03.	Transfers	66
SECTION 6.04.	Investments	67
SECTION 6.05.	Reserved	67
SECTION 6.06.	Transactions with Affiliates	67
SECTION 6.07.	REA	67
SECTION 6.08.	Management Agreements	68
SECTION 6.09.	Material Agreements; Master Lease; Organizational Documents	68
SECTION 6.10.	No Joint Assessment	68
SECTION 6.11.	No Plan Assets	68
SECTION 6.12.	Zoning	68
SECTION 6.13.	Use of Properties	68
SECTION 6.14.	Accounting Changes; Fiscal Year	68
SECTION 6.15.	Ground Lease	68
SECTION 6.16.	PPPFA	69
ARTICLE VII	EVENTS OF DEFAULT	69
SECTION 7.01.	Events of Default	69
SECTION 7.02.	Limited Right to Cure	73
ARTICLE VIII	THE ADMINISTRATIVE AGENT	73
SECTION 8.01.	Appointment of Agency	73
SECTION 8.02.	Rights and Powers of Administrative Agent	74
SECTION 8.03.	Resignation and Replacement	75
SECTION 8.04.	No Joint Venture, Etc	75
SECTION 8.05.	Agent as Representative, Etc	76

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TABLE OF CONTENTS
(Continued)

		Page
ARTICLE IX	MISCELLANEOUS	77
SECTION 9.01.	Notices; Effectiveness; Electronic Communication	77
SECTION 9.02.	Waivers; Amendments	79
SECTION 9.03.	Expenses; Indemnity; Damage Waiver	81
SECTION 9.04.	Successors and Assigns	83
SECTION 9.05.	Survival	86
SECTION 9.06.	Counterparts; Integration; Effectiveness	86
SECTION 9.07.	Severability	86
SECTION 9.08.	Right of Setoff	87
SECTION 9.09.	Governing Law; Jurisdiction; Consent to Service of Process	87
SECTION 9.10.	WAIVER OF JURY TRIAL	88
SECTION 9.11.	Headings	88
SECTION 9.12.	Confidentiality	88
SECTION 9.13.	USA Patriot Act	89
SECTION 9.14.	Exculpation	89
SECTION 9.15.	Acknowledgement and Consent to Bail-In of EEA Financial Institutions	93
SECTION 9.16.	Interest Rate Limitation	94
SECTION 9.17.	No Advisory or Fiduciary Responsibility	94
SECTION 9.18.	Independent Effect of Covenants	94
SECTION 9.19.	Inconsistencies with Other Documents	94
SECTION 9.20.	Partial Release	95
SECTION 9.21.	Publicity	95
SECTION 9.22.	Additional Titles	95

-iv-

SCHEDULES:

Schedule 1.01 – Properties

Schedule 1.05 – Insurance Maintenance Requirements

Schedule 1.07 – Single Purpose Entity Requirements

Schedule 1.08 – Other Real Property

Schedule 1.09 – Physical Condition Reports

Schedule 2.01 – Commitments

Schedule 4.01 – Effective Date Mortgage Instruments

EXHIBITS:

Exhibit A – Form of Assignment and Assumption

Exhibit B – Reserved

Exhibit C – Form of Promissory Note

Exhibit D – Form of Compliance Certificate

Exhibit E – Form of Solvency Certificate

-v-

CREDIT AGREEMENT (this “Agreement”) dated as of March 14, 2018 among SRC O.P. LLC, a Delaware limited liability company (“SRC OP”), SRC Facilities LLC, a Delaware limited liability company (“SRC Facilities”), SRC Real Estate (TX), LLC, a Delaware limited liability company (“SRC Real Estate” and, together with SRC OP and SRC Facilities, each a “Borrower” and, collectively, the “Borrowers”), the Lenders from time to time party hereto, UBS AG, Stamford Branch, as administrative agent, and UBS Securities LLC, as Lead Arranger and Bookrunner.

WHEREAS, the Borrowers have requested that the lenders make available to them a term loan facility in an aggregate principal amount equal to $200,000,000, the proceeds of which will be used in accordance with Section 5.08;

WHEREAS, the Lenders have agreed to provide such term loan facility on the terms and subject to the conditions set forth herein, including, without limitation, the requirement that each of the Borrowers be organized or reorganized as a single purpose entity with attendant restrictions, as specifically set forth herein, on the scope of its respective activities and actions and conventional separateness covenants to ensure that it will be treated as a separate legal entity and not substantively consolidated with any Affiliate; and

WHEREAS, in providing the term loan facility, the Lenders are relying heavily on the organization or reorganization of each Borrower as a single purpose entity and on its legal separateness from each of its Affiliates and, without such features, would not have agreed to provide the term loan facility at all.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I
Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“Acceptable Counterparty” means a counterparty to the LIBOR Cap that (a) has and shall maintain, until the expiration of the applicable LIBOR Cap, (i) a long-term unsecured debt rating of not less than “A+” by S&P and a short-term senior unsecured debt rating of at least “A‑1” from S&P and (ii)(x) a long-term unsecured debt rating of not less than “A2” from Moody’s and a short-term senior unsecured debt rating of at least “P1” from Moody’s or (y) if no short-term debt rating exists, a long-term senior unsecured debt rating of at least “A1” from Moody’s or (b) is otherwise acceptable to the Administrative Agent.

“Additional Mezzanine Borrower” means Sparrow One or such other direct or indirect Subsidiary of Roebuck which is a holder of the direct or indirect Equity Interests of the Borrowers and acceptable to the Administrative Agent.

“Additional Mezzanine Loan Agreement” means any loan agreement entered into after the Effective Date by the Additional Mezzanine Borrower relating to the incurrence of Additional Permitted Mezzanine Debt.

“Additional Permitted Mezzanine Debt” means mezzanine debt incurred pursuant to, and subject to the limitations set forth in the definition of “Permitted Mezzanine Debt” and also subject to the following terms and conditions: (a) at all times all such Additional Permitted Mezzanine Debt shall be

subject to the terms of the Intercreditor Agreement or such other intercreditor agreement substantially similar to the terms of the Intercreditor Agreement or otherwise reasonably satisfactory in form and substance to the Administrative Agent; (b) at the time of incurrence of such Additional Permitted Mezzanine Debt, no Default or Event of Default shall have occurred and be continuing; (c) the Borrowers shall have provided the Administrative Agent with at least two Business Days (or one Business Day if the mezzanine lender providing such Additional Permitted Mezzanine Debt is an existing mezzanine lender) prior written notice of the proposed closing date for such Additional Permitted Mezzanine Debt; (d) such Additional Permitted Mezzanine Debt is provided by a Qualified Lender; (e) the only collateral for the obligations under such Additional Permitted Mezzanine Debt is a pledge of the direct Equity Interests in the Mezzanine Borrower or SRC OP; (f) such Additional Permitted Mezzanine Debt shall be non-recourse to the borrower thereunder and to any Affiliate of the Borrowers, except for customary non-recourse carveouts substantially similar to the non-recourse carveouts and environmental indemnifications set forth in this Agreement and the other Loan Documents (and customary changes thereto to reflect risks unique to the mezzanine lender (e.g., transfers of interests in the Equity Interests that are pledged)); (g) the maturity date of such Additional Permitted Mezzanine Debt shall be no earlier than the Maturity Date; (h) such Additional Permitted Mezzanine Debt shall be current pay and shall not be a PIK (payment in-kind) or similar loan; (i) the Administrative Agent must receive evidence satisfactory to it that, on a pro forma basis after incurrence of such Additional Permitted Mezzanine Debt, the aggregate amount of all Loans, all Mezzanine Debt and all Additional Permitted Mezzanine Debt does not exceed 50% loan to value based on the aggregate Appraised Value of the remaining Properties owned by the Borrowers as of such date and (j) such Additional Permitted Mezzanine Debt shall be permitted under the Effective Date Mezzanine Loan Agreement.

“Administrative Agent” means UBS AG, Stamford Branch, in its capacity as administrative agent for the Lenders, together with its successors and assigns.

“Administrative Questionnaire” means an administrative questionnaire of a Lender in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agent Parties” has the meaning assigned to such term in Section 9.01(c).

“Agreement” has the meaning assigned to such term in the introductory paragraph.

“Allocated Loan Amount” means, for each Property, the allocated loan amount for such Property as set forth on Schedule 1.02 of the Property Information Agreement.

“Anti-Money Laundering Laws” means each of (a) the Bank Secrecy Act, (b) the Patriot Act, (c) OFAC and (d) all other applicable foreign or domestic laws, rules, procedures or regulations relating to or concerning money laundering, terrorist financing, securities fraud, market manipulation or the generation of income through illegal actions.

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“Applicable Margin” means, for any period, the rate per annum set forth in the following table:

Date	Applicable Margin for Eurodollar Loans	Applicable Margin for Base Rate Loans
Effective Date through and including June 14, 2018	6.50%	5.50%
June 15, 2018 through and including September 14, 2018	7.50%	6.50%
September 15, 2018 and at all times thereafter	8.50%	7.50%

“Applicable Percentage” means, with respect to any Lender, a percentage equal to a fraction the numerator of which is such Lender’s outstanding principal amount of the Loans and the denominator of which is the aggregate outstanding principal amount of the Loans of all Lenders.

“Appraisals” means those certain appraisals of each Property in its then “as is” condition, prepared by a member of the American Institute of Real Estate Appraisers acceptable to the Administrative Agent, which appraisal (a) shall meet the minimum appraisal standards for national banks promulgated by the Comptroller of the Currency pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (FIRREA) and (b) otherwise shall be in form and substance satisfactory to the Administrative Agent in its sole and absolute discretion.

“Appraised Value” means, with respect to any Property or Properties, the appraised value thereof determined by the Administrative Agent with reference to Appraisals accepted by the Administrative Agent prior to the Effective Date. The Appraised Values are set forth on Schedule 1.03 of the Property Information Agreement.

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Assignment and Assumption” means an assignment and assumption agreement entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form (including electronic documentation generated by use of an electronic platform) approved by the Administrative Agent.

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

“Bankruptcy Code” means Chapter 11 of Title 11 of the United States Code (11 U.S.C. 101 et seq.).

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“Base Rate” means, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate in effect on such day plus ½ of 1.00% (b) the Prime Rate in effect on such day and (c) the Eurodollar Rate for a one month period on such day plus 1.00%. Any change in the Base Rate due to a change in the Federal Funds Rate, the Prime Rate or the Eurodollar Rate shall be effective from and including the effective date of such change in the Federal Funds Rate, the Prime Rate or the Eurodollar Rate, respectively. When used in reference to any Loan “Base Rate” shall refer to a Loan bearing interest at a rate determined by reference to the Base Rate.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” has the meaning assigned to such term in the introductory paragraph.

“Business Day” means any day other than a Saturday, Sunday, legal holiday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, the State of New York and, if such day relates to any Eurodollar Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital lease obligations on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP; provided, that any obligations of any Person to pay rent or other amounts under any lease classified and accounted for as operating lease obligations on the Effective Date, shall continue to be accounted for and classified as operating lease obligations in accordance with GAAP as in effect on the Effective Date notwithstanding any change in GAAP. For the avoidance of doubt, any obligations under a Ground Lease or the Master Lease shall not constitute Capital Lease Obligations notwithstanding any change in GAAP after the Effective Date.

“Casualty Event” means any casualty or other insured damage to, or any Taking of, any Property.

“Change in Control” means (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its Subsidiaries, and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) other than a Permitted Holder becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire (such right, an “option right”), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 35% or more of the equity securities of Holdings entitled to vote for members of the board of directors of Holdings on a fully diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right) and such “person” or “group” shall beneficially own (as such term is used herein) a greater percentage of the Equity Interests of Holdings entitled to vote for members of the board of directors than the Permitted Holders shall, collectively, beneficially own; or (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of Holdings cease to be composed of individuals (x) who were members of that board or equivalent governing body on the first day of such period, (y) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (x) above constituting at the time of such election or nomination at least a majority of that board or equivalent

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governing body or (z) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (x) and (y) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or (c) either Holdings or Roebuck shall cease for any reason to own, directly or indirectly, 100% of the voting stock of the Borrowers; or (d) the occurrence of a change in control under the Holdings Domestic Credit Agreement.

“Change in Law” means the occurrence, after the Effective Date (or with respect to any Lender, if later, the date on which such Lender becomes a Lender), of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority, or (c) the making or issuance of any request, rules, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; providedhowever, that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder, issued in connection therewith or in implementation thereof and (ii) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law” regardless of the date enacted, adopted, issued or implemented.

“Code” means the Internal Revenue Code of 1986.

“Collateral” means any and all property owned, leased or operated by any Borrower covered by the Collateral Documents and any and all other property of the Borrowers, now existing or hereafter acquired, that may at any time be or become subject to a Lien in favor of the Administrative Agent, on behalf of itself and the Secured Parties, to secure the Obligations.

“Collateral Assignment” means that certain Collateral Assignment of Interest Rate Cap Agreement to be entered into after the Effective Date by the Borrowers in favor of the Administrative Agent and acknowledged and agreed by the counterparty under the LIBOR Cap, relating to the LIBOR Cap.

“Collateral Documents” means, collectively, the Mortgages, the Collateral Assignment, the Deposit Account Control Agreement, any other deposit account control agreement entered into pursuant to Section 5.11 and all other agreements, instruments and documents executed in connection with this Agreement that create, or are intended to create, perfect or evidence Liens to secure the Obligations.

“Commitment” means, with respect to each Lender, such Lender’s commitment to make a Loan to the Borrowers on the Effective Date. The initial amount of each Lender’s Commitment is set forth on Schedule 2.01. The aggregate amount of the Commitment of all Lenders on the Effective Date is $200,000,000.

“Compliance Certificate” means a compliance certificate in substantially the form of Exhibit D (or such other form as may be approved by the Administrative Agent).

“Component Note” has the meaning assigned to such term in Section 2.09(f).

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Control” means, with respect to any Person, the possession, directly or indirectly, of the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority

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of the members of the board of directors (or the applicable comparable governing body) of such Person (or, to the extent such Person is a member-managed limited liability company, a direct or indirect parent of such Person that has a board of directors (or the applicable comparable governing body)). The terms “Controlling” and “Controlled” have meanings correlative thereto.

“Controlled Investment Affiliates” means, with respect to any Person, any fund or investment vehicle that (a) is organized by such Person for the purpose of making equity or debt investments in one or more companies and (b) is Controlled by such Person. For the avoidance of doubt, as of the Effective Date, JPP, LLC and JPP II, LLC are each Controlled Investment Affiliates of ESL Investments, Inc.

“Crowd Funded Entity” means a Person that is capitalized by monetary contributions from a large number of people executed through electronic or internet mediated registries or other electronic, mail order or online subscriptions, benefit events and other similar methods.

“Currently Owned Permitted Subsidiaries” means, with respect to each Borrower, the entity or entities listed as such in Table 1 of Schedule 1.07, which are, as of the Effective Date, owned by the applicable Borrower.

“Debtor Relief Laws” means the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.

“Default” means any event or condition which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Default Interest” means interest payable at the rate described in Section 2.12(b).

“Deposit Account Control Agreement” means a Deposit Account Control Agreement in form and substance reasonably satisfactory to the Administrative Agent to be entered into after the Effective Date in accordance with the terms of Section 5.17 by and among SRC OP, the Administrative Agent and Bank of America, N.A. with respect to account number 4451053110 in the name of SRC OP.

“Disqualified Equity Interests” means any Equity Interest that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Equity Interests that are not Disqualified Equity Interests and cash in lieu of fractional shares), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control, asset sale or similar event so long as any rights of the holders thereof upon the occurrence of a change of control, asset sale or similar event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable), (b) is redeemable at the option of the holder thereof (other than (i) solely for Equity Interests that are not Disqualified Equity Interests and cash in lieu of fractional shares or (ii) as a result of a change of control, asset sale or similar event so long as any rights of the holders thereof upon the occurrence of a change of control, asset sale or similar event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable), in whole or in part, (c) requires any scheduled payments of dividends in cash or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 91 days after the Maturity Date at the time of issuance of such Equity Interests.

“Dollar” and “$” mean lawful money of the United States.

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“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied.

“Effective Date Mezzanine Loan Agreement” means that certain Mezzanine Loan Agreement dated as of the Effective Date, by and between the Mezzanine Borrower, the Mezzanine Lenders party thereto and the Mezzanine Agent.

“Eligibility Requirements” means, with respect to any Person, that such Person (a) has total assets (in name or under management or advisement) in excess of $1,000,000,000, and (except with respect to a pension advisory firm, asset manager, registered investment advisor or manager or similar fiduciary) either capital/statutory surplus, shareholder’s equity or market capitalization of at least $500,000,000 and (b) is regularly engaged in the business of making or owning (or, in the case of a pension advisory firm, asset manager, registered investment advisor or manager or similar fiduciary, regularly engaged in managing investments in) commercial real estate mortgage or mezzanine loans or interests therein, originating preferred equity investments, owning or operating commercial properties or making investments in commercial real estate.

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 9.04(b) (subject to such consents, if any, as may be required under Section 9.04(b)).

“Environmental Laws” means “Hazardous Material Laws” as defined in the HazMat Indemnity as in effect on the Effective Date.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of Remediation, fines, penalties or indemnities), of the Borrowers directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or Threatened Release of any Hazardous Materials in, on above, under or from any of the Properties or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Environmental Liability Policy” means an environmental impairment liability insurance policy in the form of an Enviro Covered Location Insurance Policy (Site Environmental) from Beazley (Lloyd’s of London syndicates 623/2623) which (a) lists the Administrative Agent with its successors, assigns and/or affiliates as their interests may appear (ISAOA, ATIMA) and the Borrowers as named insureds, (b) has a policy period of six years, (c) has limits of liability of $20,000,000 per incident and $20,000,000 in

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the aggregate and a self-insured retention or deductible not to exceed $100,000 (as applicable to the Administrative Agent) and (d) has coverage parts which include both existing conditions coverage as well as new conditions coverage for first-party and third-party claims (inclusive of bodily injury and property damage), together with a Mortgagee Insured endorsement for the Administrative Agent to automatically become the First Named Insured upon the occurrence of a Default or Event of Default (not foreclosure trigger) together with non-applicability of exclusionary language to the Administrative Agent upon the occurrence of a Default or Event of Default should the Administrative Agent be required to address pollution conditions.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“Environmental Reports” means those certain reports described on Schedule 3.06 of the Property Information Agreement.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with any Loan Party, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the failure by any Loan Party or ERISA Affiliate to meet all applicable requirements under the Pension Funding Rules, whether or not waived; (c) the filing of an application for a waiver of the minimum funding standards under the Pension Funding Rules; (d) the incurrence by any Loan Party or any ERISA Affiliate of any liability pursuant to Section 4063 or 4064 of ERISA or the occurrence of a substantial cessation with respect to a Plan under Section 4062(e) of ERISA; (e) the filing of a notice of intent to terminate a Plan under, or the treatment of a Plan amendment as a termination under, Section 4041 of ERISA; (f) the institution by the PBGC of proceedings to terminate a Plan; (g) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (h) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan, notification of the imposition of Withdrawal Liability or notification that a Multiemployer Plan is “in reorganization” or “insolvent” (within the meaning of Title IV of ERISA); (i) the determination after the Effective Date that any Plan is in “at-risk status” (within the meaning of Section 430 of the Code or Section 303 of ERISA) or that a Multiemployer Plan is in “endangered status” or “critical status” (within the meaning of Section 432 of the Code or Section 305 of ERISA); (j) the imposition or incurrence of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate; (k) the engagement by any Loan Party or any ERISA Affiliate in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; or (l) the imposition of a lien upon any Loan Party pursuant to Section 430(k) of the Code or Section 303(k) of ERISA.

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“Escrow Letter” means that certain escrow letter dated as of the Effective Date from the Administrative Agent to Chicago Title Insurance Company.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

“Eurodollar”, when used in reference to any Loan, means that such Loan bears interest at a rate determined by reference to the Eurodollar Rate.

“Eurodollar Rate” means, with respect to any Interest Period, the greater of (a) the rate appearing on the applicable Reuters page (or on any successor or substitute page or service providing quotations of interest rates applicable to dollar deposits in the London interbank market comparable to those currently provided on such page, as determined by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period; provided, that (i) if such rate is not available at such time for any reason, then the “Eurodollar Rate” with respect to such Interest Period shall be the Interpolated Rate, and (ii) if the Interpolated Rate is not available, the “Eurodollar Rate” with respect to such Interest Period shall be the offered quotation rate to first class banks in the London interbank market by the Person that is the Administrative Agent for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan of such Person, in its capacity as a Lender (or, if it is not a Lender of such Loan, in such amount determined by the Administrative Agent) for which the Eurodollar Rate is then being determined with maturities comparable to such Interest Period at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period and (b) 0.00%.

“Eurodollar Successor Rate” has the meaning assigned to such term in Section 2.14.

“Eurodollar Successor Rate Conforming Changes” has the meaning assigned to such term in Section 2.14.

“Event of Default” has the meaning assigned to such term in Section 7.01.

“Excluded Ground Leases” means the Ground Leases relating to (a) the Property located at 4000 Merle Hay Road, Des Moines, IA (Store Number 1012), (b) the Property located at 35000 Warren Road, Westland, MI (Store Number 1092) and (c) the Property located at 9 E Valley Mall Blvd, Union Gap, WA (Store Number 2029).

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan (other than pursuant to an assignment request by the Borrowers under Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.17, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes

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attributable to such Recipient’s failure to comply with Section 2.17(g) and (d) any U.S. federal withholding Taxes imposed under FATCA.

“Exculpated Parties” has the meaning assigned to such term in Section 9.14.

“Existing Note” has the meaning assigned to such term in Section 2.09(f).

“FATCA” means Sections 1471 through 1474 of the Code, as of the Effective Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future United States Treasury Regulations promulgated thereunder and published guidance with respect thereto, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any applicable intergovernmental agreements with respect thereto.

“FCPA” has the meaning assigned to such term in Section 3.22.

“Federal Funds Rate” means, for any day, the rate calculated by the NYFRB based on such days’ federal funds transactions by depositary institutions as determined in such manner as the NYFRB shall set forth on its public website from time to time and published on the next succeeding Business Day by the NYFRB as the federal funds effective rate.

“Fee Letter” means that certain fee letter dated as of the Effective Date entered into by and among the Borrowers and the Administrative Agent.

“Financials” means the annual or quarterly financial statements, and accompanying certificates and other documents required to be delivered pursuant to Section 5.01(a) or Section 5.01(b).

“Fiscal Year” means a fiscal year of the Borrowers ending on December 31 of each year.

“Foreign Lender” means a Lender that is not a U.S. Person.

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Ground Lease” means each Lease described on Schedule 3.29 of the Property Information Agreement.

“Ground Lessor” means any lessor under a Ground Lease.

“Ground Rent” means the rent paid under each Ground Lease.

“Group Members” means the Borrowers, the Mezzanine Borrower and any Additional Mezzanine Borrower.

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly,

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and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.

“Guarantor” means each of Roebuck and Holdings.

“Guaranty Agreement” means that certain Limited Guaranty dated as of the Effective Date made by the Guarantor in favor of the Administrative Agent.

“Hazardous Materials” means “Hazardous Materials” as defined in the HazMat Indemnity as in effect on the Effective Date.

“Hazardous Materials Claims” means “Hazardous Materials Claims” as defined in the HazMat Indemnity as in effect on the Effective Date.

“HazMat Indemnity” means that certain Hazardous Materials Indemnity Agreement dated as of the Effective Date made by the Guarantor in favor of the Administrative Agent.

“HazMat Violation” has the meaning assigned to such term in Section 5.02(g).

“Holdings” means Sears Holdings Corporation, a Delaware corporation.

“Holdings Domestic Credit Agreement” means that certain Third Amended and Restated Credit Agreement dated as of July 21, 2015, by and among Holdings, certain Subsidiaries of Holdings party thereto, the lenders party thereto, the issuing lenders party thereto, Bank of America, N.A., as administrative agent and the other agents and financial institutions party thereto.

“Improvements” means, for any Property, “Improvements” as defined in the applicable Mortgage for such Property.

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a)    all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b)    the maximum amount of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial letters of credit), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

(c)    net obligations of such Person under any Swap Agreement;

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(d)    all obligations of such Person to pay the deferred purchase price of property or services (other than any trade accounts payable in the ordinary course of business and not past due for more than ninety (90) days);

(e)    indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(f)    all Capital Lease Obligations of such Person;

(g)    all obligations of such Person in respect of any Disqualified Equity Interest; and

(h)    all Guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

“Indemnitee” has the meaning assigned to such term in Section 9.03(b).

“Insurance Maintenance Requirements” means maintaining (or causing to be maintained under the Master Lease), compliance at all times with the requirements set forth on Schedule 1.05.

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the Effective Date entered into by and between the Administrative Agent and the Mezzanine Agent.

“Interest Payment Date” means the 14^th day of each calendar month, commencing on April 14, 2018 and continuing on each such day through the Maturity Date.

“Interest Period” means the period commencing on the day immediately following an Interest Payment Date and continuing until the next such Interest Payment Date; provided, that the first Interest Period shall commence on the Effective Date and end on the first Interest Payment Date occurring after the Effective Date.

“Interpolated Rate” means, at any time, the rate per annum determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the rate as displayed on the applicable Reuters page (or on any successor or substitute page or service providing quotations of interest rates applicable to dollar deposits in the London interbank market comparable to those currently provided on such page, as determined by the Administrative Agent from time to time; in each case the “Screen Rate”) for the longest period (for which that Screen Rate is available) that is shorter than the Interest Period and (b) the Screen Rate for the shortest period (for which that Screen Rate is available) that exceeds the Interest Period, in each case, at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

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“Investment” has the meaning assigned to such term in Section 6.04.

“IRS” means the United States Internal Revenue Service.

“Kmart” means Kmart Corporation, a Michigan corporation.

“Lead Arranger” means UBS Securities LLC.

“Lease” means, with respect to each Property, any lease, sublease, subsublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in such Property, and every modification, amendment or other agreement relating to such lease, sublease, subsublease, letting, license, concession or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a Lender hereunder pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

“LIBOR Cap” has the meaning assigned to such term in Section 5.15.

“Licenses” has the meaning assigned to such term in Section 3.33.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

“Loan Documents” means this Agreement, any promissory notes issued pursuant to Section 2.09(e), the Guaranty Agreement, the HazMat Indemnity, the Fee Letter, the Property Information Agreement, the Collateral Documents, all Compliance Certificates and each other agreement, instrument, certificate or document executed and delivered to, or in favor of, the Administrative Agent or any Lender by or on behalf of any Loan Party in connection with this Agreement or the Transactions. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.

“Loan Parties” means, collectively, the Borrowers and the Guarantor.

“Loans” means the loans made by the Lenders to the Borrowers pursuant to this Agreement.

“Master Lease” means that certain Master Lease dated as of the Effective Date by and between the Borrowers, as co-lessors, and the Master Lessee, as lessee.

“Master Lease Guaranty” means that certain Guarantee of Lease dated as of the Effective Date made by Holdings in favor of the Borrowers, as lessors under the Master Lease.

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“Master Lessee” means each of Roebuck and Kmart, as lessees under the Master Lease.

“Material Adverse Effect” means a material adverse effect on (a) the Properties, taken as a whole, or the Master Lease or the Master Lease Guaranty, (b) the rights and remedies of the Administrative Agent (with respect to itself and on behalf of the Secured Parties) under the Loan Documents, (c) the enforceability or validity of any Loan Document, the perfection or priority of any Lien created under any Loan Document or the rights, interests and remedies of the Administrative Agent or the other Secured Parties under any Loan Document, (d) the ability of any Borrower, Holdings or the Guarantor to perform its obligations under the Loan Documents, (e) the ability of the Master Lessee to perform its obligations under the Master Lease or the ability of Holdings to perform its obligations under the Master Lease Guaranty, or (f)the value, use or operation of any Property.

“Material Agreement” means any agreement to which a Borrower is a party which is material to the operation of any Property and for which the termination, non-renewal or cancellation thereof, in each case without a replacement reasonably acceptable to the Administrative Agent, could reasonably be expected to result in a Material Adverse Effect. “Material Agreement” shall not include any Lease (other than, for the avoidance of doubt, the Master Lease, which shall be a Material Agreement), any REA or any Multi-Site Agreement.

“Maturity Date” means the earlier of (a) December 14, 2018 and (b) the date of acceleration of the Obligations in accordance with Section 7.01.

“Maximum Legal Rate” means the maximum non-usurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness under the Loans and as provided for herein or in the other Loan Documents, under the laws of such Governmental Authorities whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loans.

“Mezzanine Agent” means JPP, LLC.

“Mezzanine Borrower” means SRC Sparrow 2 LLC, a Delaware limited liability company.

“Mezzanine Debt” means the Indebtedness under the Effective Date Mezzanine Loan Agreement.

“Mezzanine Lender” means any lender under the Effective Date Mezzanine Loan Agreement from time to time as a holder of any portion of the Mezzanine Debt.

“Mezzanine Pledge Agreement” means that certain Pledge and Security Agreement dated as of the Effective Date entered into by the Mezzanine Borrower in favor of the Mezzanine Agent for and on behalf of the Mezzanine Lenders.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage” means each mortgage, deed of trust or other agreement which conveys or evidences a Lien in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Secured Parties, on any Property.

“Mortgage Instruments” means such title reports, ALTA title insurance policies (with endorsements), evidence of zoning compliance, property insurance, flood certifications and flood insurance

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(and, if applicable FEMA form acknowledgements of insurance), opinions of counsel, ALTA surveys, appraisals, environmental assessments and reports, mortgage tax affidavits and declarations and other similar information and related certifications as are requested by, and in form and substance reasonably acceptable to, the Administrative Agent.

“Multiemployer Plan” means an “employee pension benefit plan” (as defined in Section 3(2) of ERISA that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Multi-Site Agreement” means a national, multi-site master lease, license or concession or department agreement, in each case, (a) with tenants or licensees that operate within and as part of the store operated at a Property, or that operate kiosks, ATM or vending machines or drive-through facilities located on a Property, (b) entered into in the ordinary course of business on arm’s length terms, (c) does not result in the Master Lessee being released from its obligations under the Master Lease and (d) to the extent entered into after the Effective Date, (i) shall provide that such agreement is subordinate to the Mortgage encumbering the applicable Property and (ii) does not result in a violation, breach or default under the Master Lease, Ground Lease, any REA or any other Material Agreement.

“Net Cash Proceeds” means, with respect to any Repayment Event, (a) the cash proceeds received in respect of such event, including (i) any cash received in respect of any non-cash proceeds, but only as and when received, and (ii) in the case of a Casualty Event, the insurance proceeds or condemnation awards or similar payments actually received net of (b) the sum of (i) all reasonable out-of-pocket fees and expenses paid to third parties (other than Affiliates) in connection with such event and (ii) the amount of all taxes paid (or reasonably estimated to be payable in the next six months) with respect to such event.

“Non-Consenting Lender” has the meaning assigned to such term in Section 9.02(d).

“Non-Consolidation Opinion” means that certain substantive non-consolidation opinion delivered to the Administrative Agent for the benefit of the Lenders by DLA Piper LLP, counsel to the Borrowers on the Effective Date, as updated pursuant to Schedule 5.17 of the Property Information Agreement.

“November 2017 PPPFA Amendment” means that certain REMIC Amendment to PPPFA, Craftsman Consent and other Transaction Documents, dated as of November 7, 2017, by and among Holdings, certain Subsidiaries of Holdings party thereto and the PBGC.

“NYFRB” means the Federal Reserve Bank of New York.

“Obligations” means all unpaid principal of and accrued and unpaid interest on the Loans, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations, liabilities and indebtedness (including interest and fees accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of any Loan Party to any of the Lenders, the Administrative Agent, any other Secured Party or any indemnified party, individually or collectively, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, in each case, to the extent arising or incurred under this Agreement or any of the other Loan Documents or in respect of any of the Loans.

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

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“Option Holder” means the holder of any purchase option right described in the definition of Purchase Option Exercise Event.

“Option Property Release Amount” means the purchase price paid by the Option Holder in connection with the purchase of the applicable Option Release Property.

“Option Release Property” has the meaning set forth in the definition of Purchase Option Exercise Event.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19).

“Participant” has the meaning assigned to such term in Section 9.04(c).

“Participant Register” has the meaning assigned to such term in Section 9.04(c).

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT ACT) of 2001, Pub. L. 107-56, as it may be amended or otherwise modified from time to time.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Pension Act” means the Pension Protection Act of 2006.

“Pension Contribution” means the contribution or deposit made on the Effective Date in an aggregate amount of at least $406,700,000 to the Sears Pension Plans in accordance with the terms of the November 2017 PPPFA Amendment, a portion of which may be deposited into the escrow account described in the November 2017 PPPFA Amendment in accordance with the November 2017 PPPFA Amendment.

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum funding standards and minimum required contributions (including any installment payment thereof) to Plans and Multiemployer Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

“Permitted Change in Control” means a Change in Control directly arising from the exercise of remedies by (a) the Mezzanine Agent under the Effective Date Mezzanine Loan Agreement or (b) any agent under any Additional Mezzanine Loan Agreement; provided, that any such exercise of remedies must

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be conducted strictly in accordance with the terms and conditions of the Intercreditor Agreement or the applicable intercreditor agreement relating to such Additional Permitted Mezzanine Debt, as the case may be, if the agent or lender exercising such remedies is an Affiliate of any Borrower, a Permitted Holder or an Affiliate of a Permitted Holder.

“Permitted Concept” means retail, office, gaming and family entertainment, restaurants, convenience stores, fast-food establishments, car dealerships, coffee shops, educational and such other uses which are commonly found in retail shopping centers and in each case not in conflict with the REA (including, without limitation, any obnoxious use restrictions in the REA) or such other use as may be approved by the Administrative Agent in its discretion (such consent not to be unreasonably withheld, conditioned or delayed).

“Permitted Encumbrances” means:

(a)    Liens imposed by law for Taxes that are not yet due and payable or are being contested in compliance with Section 5.04;

(b)    carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than thirty (30) days or are being contested in compliance with Section 5.04;

(c)    deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(d)    judgment Liens in respect of judgments that do not constitute an Event of Default under Section 7.01(k);

(e)    [reserved];

(f)    all Liens and other matters affecting any Property disclosed in the title insurance policy for such Property (including any REA) together with such other title and survey exceptions as the Administrative Agent has expressly approved in its sole discretion prior to the Effective Date;

(g)    the Master Lease, Separate and Supplemental Agreements and all other Leases entered into prior to or after the Effective Date;

(h)    easements, licenses, rights of way, covenants, conditions and restrictions, declarations, and similar agreements undertaken in the ordinary course of business with respect to the operation of the Property, including for use, access, ingress, egress, parking, encroachments, or utilities, in each case which could not reasonably be expected to materially detract from the value or use of operation of any Property (after giving effect to any benefit derived therefrom);

(i)    Multi-Site Agreements, and all rights of existing and future occupants under Multi-Site Agreements;

(j)    Permitted Leases and Permitted Liens; and

(k)    such other title and survey exceptions as the Administrative Agent has approved or may approved in writing in the sole discretion of the Administrative Agent.

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provided that, notwithstanding the foregoing, the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

“Permitted Fund Manager” means any Person that on the date of determination is not subject to a proceeding, is not a Sanctioned Person and is (a) a nationally recognized manager of investment funds investing in debt or equity interests relating to commercial real estate, or (b) a Person that is a Qualified Lender pursuant to clause (a) of the definition thereof, in each case that is investing through a fund or funds with aggregate committed capital under management of at least $500,000,000.

“Permitted Holder” means (a) Edward S. Lampert, (b) ESL Partners, L.P., (c) ESL Investments, Inc., (d) any spouse, descendant, heir, legatee, devisee or trust or family limited partnership created for the benefit of any of the foregoing, and (e) any Controlled Investment Affiliate(s) of any of the foregoing.

“Permitted Investments” means:

(a)    direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

(b)    investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, a credit rating of at least P-2 from Moody’s or A-2 from S&P;

(c)    investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

(d)    fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and

(e)    money market funds that (i) comply with the criteria set forth in SEC Rule 2a‑7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.

“Permitted Leases” means any existing or future Lease of all or any portion of any Property provided that (a) such Lease is entered into in the ordinary course of business and on arm’s length terms, (b) the Master Lessee is not released from its obligations under the Master Lease, (c) to the extent entered into after the Effective Date, shall provide that such agreement is subordinate to the Mortgage encumbering the applicable Property, and (d) such Lease does not result in a violation, breach or default under the Master Lease, Ground Lease, any REA or any other Material Agreement.

“Permitted Liens” means Liens permitted under Section 6.02.

“Permitted Mezzanine Debt” means (a) the Mezzanine Debt incurred by the Mezzanine Borrower on the Effective Date under the Effective Date Mezzanine Loan Agreement, in an aggregate amount

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not to exceed $240,000,000 and (b) any Additional Permitted Mezzanine Debt incurred by the Mezzanine Borrower or the Additional Mezzanine Borrower after the Effective Date under either the Effective Date Mezzanine Loan Agreement (as amended) or any Additional Mezzanine Loan Agreement, in an aggregate amount not to exceed the lesser of (i) $200,000,000 (which, when aggregated with the Indebtedness contemplated by clause (a) of this definition, does not exceed $440,000,000) and (ii) the aggregate amount of repayments of the Loans on or prior to the date of incurrence of such additional Indebtedness; provided, that at all times, a Qualified ESL Lender must directly or indirectly control all such Mezzanine Debt and Additional Permitted Mezzanine Debt and own, directly or indirectly, at least 51% of all such mezzanine debt. In connection with any such Additional Permitted Mezzanine Debt, the Borrowers shall (x) execute and deliver such amendments to the Loan Documents and the Effective Date Mezzanine Loan Agreement as are reasonably required by the Administrative Agent to incorporate into the terms of such Loan Documents and the Effective Date Mezzanine Loan Agreement the existence of the Additional Permitted Mezzanine Debt and (y) pay or reimburse to the Administrative Agent all reasonable out-of-pocket costs and expenses incurred by the Administrative Agent, including fees and expenses of the Administrative Agent’s counsel, in connection with the review and documentation concerning the Additional Permitted Mezzanine Debt regardless of whether such Additional Permitted Mezzanine Debt is closed.

“Permitted Sales” means, subject to compliance with the terms and conditions of this Agreement and the other Loan Documents, including, without limitation, Section 2.10, any Sale of any Property (1) to an arms-length third party purchaser or (2) with the prior written consent of the Administrative Agent, in its sole discretion (or, if the consideration for such Sale is equal to the greater of 100% of the Appraised Value of such Property and the fair market value of such Property, as reasonably determined by the Administrative Agent pursuant to a new appraisal for such Property provided to the Administrative Agent as of a date recently prior to the proposed Sale date, in its reasonable discretion) to an Affiliate of the Borrowers; provided, that in all such cases, (a) such Sale is on fair market terms, (b) such Sale is for consideration of 100% in cash, (c) such Sale is for at least the Release Price for such Property (or such other amount as the Administrative Agent may otherwise consent, which consent is not to be unreasonably withheld, conditioned or delayed) and (d) such Sale results in the removal of the applicable Property from the Master Lease.

“Permitted Subsidiaries” means Currently Owned Permitted Subsidiaries and Previously Owned Permitted Subsidiaries, as applicable.

“Permitted Transfers” means each of (a) the pledge by the Mezzanine Borrower of the Equity Interests in SRC OP as security for the obligations under the Effective Date Mezzanine Loan Agreement pursuant to the Mezzanine Pledge Agreement or the foreclosure of such Mezzanine Pledge Agreement to the extent constituting a Permitted Change in Control, (b) the pledge by the Additional Mezzanine Borrower of the Equity Interests in the Mezzanine Borrower or such other Subsidiary of Roebuck as security for the obligations under the Additional Mezzanine Loan Agreement pursuant to the pledge agreement related to such Additional Mezzanine Loan Agreement or the foreclosure of such pledge agreement to the extent constituting a Permitted Change in Control, (c) the pledge by Holdings or Roebuck of any indirect Equity Interest of the Borrowers as security for any Indebtedness of such Person owing to an unaffiliated third party (or owing to an Affiliate, other than a Borrower, subject to receipt by the Administrative Agent of an intercreditor agreement substantially similar to the terms of the Intercreditor Agreement or otherwise satisfactory in form and substance to the Administrative Agent in its sole discretion), provided that no Change in Control occurs or results therefrom, (d) any transfer of the direct or indirect Equity Interests of the Borrowers to another direct or indirect Subsidiary of Holdings or a Permitted Holder subject to (i) no Change in Control shall occur, (ii) the Administrative Agent shall have obtained satisfactory results of KYC searches with respect to the new direct or indirect owners of such Equity Interests and (iii) the Borrowers shall deliver all

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such documents, opinions and other deliverables described under Section 4.01 as the Administrative Agent may request in connection with any such Transfer, (e) subject to no Event of Default then existing or resulting therefrom, the making of cash distributions by any Borrower to the owner of the Equity Interests of such Borrower and (f) direct or indirect transfers and issuances of Equity Interests of Holdings (including, without limitation, of the direct or indirect transfer or issuance of debt or equity securities or other interests convertible or exchangeable into Equity Interests of Holdings) to the extent no Change in Control occurs or results therefrom.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Physical Condition Reports” means those certain physical condition reports with respect to the Properties described on Schedule 1.09.

“Plan” means any “employee pension benefit plan” (as defined in Section 3(2) of ERISA, other than a Multiemployer Plan) that is maintained or is contributed to by a Loan Party or any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 or 430 of the Code or Section 302 or 303 of ERISA.

“Platform” means any electronic system, including Intralinks^®, ClearPar^® and any other internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Administrative Agent, any of its Related Parties or any other Person, providing for access to data protected by passcodes or other security system.

“Policies” means those certain insurance policies required to be maintained from time to time pursuant to the terms of Schedule 1.05.

“PPPFA” means that certain Pension Plan Protection and Forbearance Agreement dated as of March 18, 2016, by and among Holdings, certain Subsidiaries of Holdings party thereto and PBGC, as amended, supplemented or otherwise modified, including, without limitation, by that certain Consent, Waiver and Amendment dated as of March 8, 2017, that certain Amendment No. 1 to Consent, Waiver and Amendment dated as of June 29, 2017, the November 2017 PPPFA Amendment and the PPPFA Waiver.

“PPPFA Waiver” means that certain Conditional REMIC Entity Waiver dated as of the Effective Date, entered into by and among Holdings, certain Subsidiaries of Holdings party thereto and PBGC.

“Previously Owned Permitted Subsidiaries” means, with respect to the applicable Borrower, the entity or entities listed as such on Table 1 of Schedule 1.07, which were previously owned by the applicable Borrower but are no longer owned and shall no longer be owned by any Borrower.

“Prime Rate” means the rate of interest published in The Wall Street Journal from time to time as the “Prime Rate.” If more than one “Prime Rate” is published in The Wall Street Journal for any day, the average of such “Prime Rates” shall be used, and such average shall be rounded up to the nearest 1/100th of one percent (0.01%). If The Wall Street Journal ceases to publish the “Prime Rate,” the Administrative Agent shall select an equivalent publication that publishes such “Prime Rate.”

“Prohibited Person” means any Person (a) listed in the Annex to, or is otherwise subject to the prohibitions of, Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit,

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or Support Terrorism or any other similar prohibitions contained in the rules and regulations of OFAC or in any enabling legislation or other Executive Orders; (b) owned or Controlled by, or acting for or on behalf of, any Person that is listed in the Annex to, or is otherwise subject to the prohibitions of, Executive Order No. 13224; (c) with whom a Person is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering law, including Executive Order No. 13224; (d) who commits, threatens, conspires to commit or supports “terrorism” as defined in Executive Order No. 13224; (e) named as a “specially designated national and blocked person” on the most current list published by OFAC at its official website or at any replacement website or other replacement official publication of such list; (f) that is subject to trade restrictions under United States law, including, without limitation, the Patriot Act, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder; (g) that is a Sanctioned Person; or (h) who is an Affiliate of any Person that is described by or that satisfies any of clauses (a) through (g) above.

“Property” means each real property listed on Schedule 1.01 (together with all Improvements thereon).

“Property Information Agreement” means that certain property information agreement entered into as of the Effective Date by and among the Borrowers and the Administrative Agent.

“Purchase Option Exercise Event” means the exercise by any Option Holder of any purchase right relating to a Property (each, an “Option Release Property”) identified on Schedule 3.37 of the Property Information Agreement.

“Qualified ESL Lender” means (a) Eddie S. Lampert, (b) ESL Partners, L.P., (c) ESL Investments, Inc. and (d) any Controlled Investment Affiliate(s) of any of the foregoing.

“Qualified Lender” means a Qualified ESL Lender or any one or more of the following: (a) any bank, investment bank, insurance company, real estate investment trust, saving and loan association, trust company, commercial credit corporation, pension plan, pension fund, pension advisory firm, mutual fund, government entity or plan, investment company, money management firm, “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, or “institutional accredited investor” within the meaning of Regulation D under the Securities Act of 1933, as amended, and any institution similar to any of the foregoing, provided in each case under this clause (a) that such Person satisfies the Eligibility Requirements; (b) an investment fund, limited liability company, limited partnership or general partnership where (i) a Permitted Fund Manager acts (directly or indirectly) as general partner, managing member or fund manager, and (ii) (x) at least 50% of the equity interests in such investment vehicle are owned, directly or indirectly, by one or more of the following: a Qualified Lender under clause (a) above or (c) below, an institutional “accredited investor”, within the meaning of Regulation D promulgated under the Securities Act of 1933, as amended, and/or a “qualified institutional buyer” or both within the meaning of Rule 144A promulgated under the Securities Exchange Act of 1934, as amended, provided such institutional “accredited investors” or “qualified institutional buyers” that are used to satisfy the 50% test set forth above in this clause (b) satisfy the financial tests in clause (i) of the definition of Eligibility Requirements; (c) any Person 100% owned by and Controlling, Controlled by, or under common Control with any one or more of the Persons described in clauses (a) or (b) of this definition; provided, further, that in no event shall any of the following be a Qualified Lender (i) a Delaware statutory trust, (ii) a tenant in common, (iii) a Crowd Funded Entity, (iv) Sanctioned Person or (v) a Person that is a Prohibited Person.

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“REA” means any recorded “construction, operation and reciprocal easement agreement” or similar agreement (including any “separate agreement” or other agreement between any Borrower and one or more other parties to an REA with respect to such REA) affecting any Property or portion thereof.

“Recipient” means the Administrative Agent or any Lender, as applicable.

“Recourse Liabilities” has the meaning assigned to such term in Section 9.14.

“Register” has the meaning assigned to such term in Section 9.04(b).

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and controlling persons and its or their respective directors, officers, employees, partners, agents, advisors and other representatives thereof.

“Release” means “Release” as defined in the HazMat Indemnity as in effect on the Effective Date.

“Release and Repayment” means, with respect to any Property, that such Property has been released (or the Administrative Agent has acknowledged to the Borrowers in writing that such Property is eligible to be released) from the Lien of the Collateral Documents in accordance with the terms of this Agreement and the Borrowers have made the mandatory repayment due with respect to such Property as required under Section 2.10.

“Release Conditions” means (a) no Event of Default exists and (b) the payment by the Borrowers of the amount required with respect to such Repayment Event in accordance with the terms of Section 2.10.

“Release Price” means, for any Property, an amount equal to 80% of the Appraised Value of such Property if such Property is a portion of the initial $200,000,000 of Appraised Value of Properties sold after the Effective Date and 70% of the Appraised Value of all such other Properties. The Release Price for each Property is set forth on Schedule 1.06 of the Property Information Agreement.

“Remediation” means “Remediation” as defined in the HazMat Indemnity as in effect on the Effective Date.

“REMIC Asset Safe Harbor” means the safe harbor for the asset test of section 860D(a)(4) of the Code provided in United States Treasury Regulation section 1.860D-1(b)(3)(ii).

“Repayment Event” means:

(a)    any Sale;

(b)    any Casualty Event resulting in receipt by any Borrower of Net Cash Proceeds in excess of $500,000 with respect to any individual Property or $1,000,000 in the aggregate for all Properties in any Fiscal Year;

(c)    the incurrence by any Borrower of any Indebtedness, other than Indebtedness permitted under Section 6.01; and

(d)    any Purchase Option Exercise Event.

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“Required Lenders” means, as of any date of determination, Lenders holding more than 50% of the aggregate amount of the Loans outstanding on such date.

“Responsible Officer” means the president, chief financial officer, chief executive officer, any vice president, secretary or treasurer of any Borrower.

“Roebuck” means Sears, Roebuck and Co., a New York corporation.

“S&P” means S&P Global Ratings, a division of S&P Global Inc., and any successor thereto.

“Sale” means any sale, transfer or other disposition of any Property by any Borrower.

“Sanctioned Country” means, at any time, a country, region or territory that is, or whose government is, itself the subject or target of Sanctions (including, without limitation, Crimea, Cuba, Iran, North Korea and Syria).

“Sanctioned Person” means, at any time, any Person that is, or is owned or controlled by Persons that are (a) listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority or are otherwise the target of any Sanctions or (b) located, organized or resident in a Sanctioned Country.

“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority.

“Sears Pension Plans” means each of Sears Holdings Pension Plan 1 and Sears Holdings Pension Plan 2.

“Sears REMIC” means the designated portion of SRC Commercial Mortgage Trust 2003-1 for which an election was made for such portion to be treated as a “real estate mortgage investment conduit” within the meaning of section 860D of the Code.

“SEC” means the United States Securities and Exchange Commission.

“Secured Parties” means the holders of the Obligations from time to time and shall include (a) each Lender in respect of its Loans, (b) the Administrative Agent and the Lenders in respect of all other Obligations of the Loan Parties, (c) each Indemnitee solely in respect of the Obligations of the Loan Parties to such Indemnitee hereunder and under the other Loan Documents, and (d) their respective successors and (in the case of a Lender, permitted) transferees and assigns.

“Separate and Supplemental Agreements” means any agreements to which any Borrower is a party which are off-record private agreements that supplement REAs.

“Single Purpose Entity Requirements” means that, at all times, the Borrowers shall comply with the requirements set forth on Schedule 1.07.

“Solvent” means, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair saleable value of the assets of such Person is greater

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than the amount that is required to pay the probable liability of such Person on its debts as they become absolute and matured in accordance with their terms, (c) the capital of such Person is not unreasonably small in relation to its business currently contemplated to be conducted as of such date of determination and (d) such Person does not intend to incur, or believe that it will incur, debts, including current obligations, beyond its ability to pay such debts as they become absolute and matured. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Sparrow One” means SRC Sparrow 1 LLC, a Delaware limited liability company.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other Equity Interests having ordinary voting power for the election of directors or other governing body (other than securities or other Equity Interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise Controlled by such Person.

“Swap Agreement” means any agreement, contract or transaction, which is (a) an interest rate swap, option, future, or forward agreement, including a rate floor, rate cap, rate collar, cross-currency rate swap, and basis swap, (b) a spot, same day-tomorrow, tomorrow-next, forward, or other foreign exchange, precious metals, or other commodity agreement, (c) a currency swap, option, future, or forward agreement, (d) an equity index or equity swap, option, future, or forward agreement, (e) a debt index or debt swap, option, future, or forward agreement, (f) a total return, credit spread or credit swap, option, future, or forward agreement, (g) a commodity index or a commodity swap, option, future, or forward agreement, (h) a weather swap, option, future, or forward agreement, (i) an emissions swap, option, future, or forward agreement, (j) an inflation swap, option, future, or forward agreement, (k) an energy swap, option, future or forward agreement, (l) a metal swap, option, future or forward agreement, (m) an agricultural swap, option, future or forward agreement, (n) any agreement, contract or transaction that is similar to any other agreement or transaction referred to in the foregoing clauses (a) - (m) and that (x) is of a type that is the subject of recurrent dealings in the swap or other derivatives markets (including terms and conditions incorporated by reference therein), and (y) is a forward, swap, future, option, or spot transaction on one or more rates, currencies, commodities, equity securities, or other equity instruments, debt securities or other debt instruments, quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic or financial risk or value, (o) any combination of agreements, contracts or transactions referred to in the foregoing clauses (a)-(n) or (p) any option to enter into an agreement, contract or transaction referred to in the foregoing clauses (a)-(o).

“Swap Obligations” means any and all obligations of any Borrower, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all Swap Agreements permitted hereunder with a Lender or an Affiliate of a Lender, and (b) any and all cancellations, buy backs, reversals, terminations or assignments of any such Swap Agreement transaction.

“Taking” means a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of any Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting any Property.

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“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Threatened Release” means a substantial likelihood of a Release which could reasonably be expected to require Remediation.

“Transactions” means the execution, delivery and performance by the Loan Parties of this Agreement and the other Loan Documents, the borrowing of Loans and the incurrence by the Mezzanine Borrower of the Indebtedness under the Effective Date Mezzanine Loan Agreement and the use of the proceeds thereof, the execution and delivery of the Master Lease by the parties thereto, the execution and delivery of the PPPFA Waiver and the consummation of the transactions contemplated by this Agreement and the other Loan Documents.

“Transfer” has the meaning assigned to such term in Section 6.03.

“True Lease Opinion” means that certain true lease opinion delivered to the Administrative Agent for the benefit of the Lenders by DLA Piper LLP, counsel to the Borrowers.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York or any other state the laws of which are required to be applied in connection with the issue of perfection or the effect of perfection or of priority of any security interests.

“Unliquidated Obligations” means, at any time, any Obligations (or portion thereof) that are unasserted and contingent in nature or unliquidated at such time.

“U.S. Person” means a “United States person” as defined in Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.17(g)(ii)(B)(3).

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“Withholding Agent” means each Borrower and the Administrative Agent.

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

SECTION 1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The word “law” shall be construed as referring to all statutes, rules, regulations, codes and other laws (including official rulings and interpretations thereunder having the force of law), and all judgments, orders and decrees, of all Governmental Authorities. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other

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document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein), (b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignment set forth herein) and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all functions thereof, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.03. Accounting Terms; GAAP; Pro Forma Calculations.

(a)Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, that if the Borrowers notify the Administrative Agent that the Borrowers request an amendment to any provision hereof to eliminate the effect of any change occurring after the Effective Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrowers that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities at “fair value”, as defined therein and (ii) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.

(b)Except as otherwise expressly provided herein, all pro forma computations required to be made hereunder giving effect to any acquisition or disposition, or issuance, incurrence or assumption of Indebtedness, or other transaction shall in each case be calculated giving pro forma effect thereto (and, in the case of any pro forma computation made hereunder to determine whether such acquisition or disposition, or issuance, incurrence or assumption of Indebtedness, or other transaction is permitted to be consummated hereunder, to any other such transaction consummated since the first day of the period covered by any component of such pro forma computation and on or prior to the date of such computation) as if such transaction had occurred on the first day of the period of four consecutive fiscal quarters ending with the most recent fiscal quarter for which Financials have been delivered. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Swap Agreement applicable to such Indebtedness).

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SECTION 1.04. Rounding. Any financial ratios shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

SECTION 1.05. Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

ARTICLE IIThe Term Loan

SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender severally and not jointly agrees to make a single Loan to the Borrowers in Dollars on the Effective Date in an amount equal to such Lender’s Commitment by making immediately available funds available by wire transfer to the account of the Borrowers or to such other account designated to the Administrative Agent in writing by the Borrowers in the Escrow Letter, not later than the time specified by the Administrative Agent. Amounts repaid or prepaid in respect of the Loans may not be reborrowed.

SECTION 2.02. Loans. The Loans shall be made by the Lenders on the Effective Date in an amount equal to the amount of their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided, that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required hereunder. Subject to Section 2.13 and Section 2.14, each Loan shall be comprised entirely of Eurodollar Loans.

SECTION 2.03. Request for Loans. There shall be a single request for Loans hereunder, which shall be set forth in the Escrow Letter.

SECTION 2.04. Reserved.

SECTION 2.05. Reserved.

SECTION 2.06. Reserved.

SECTION 2.07. Joint and Several Liability. All Loans are jointly funded to and received by all Borrowers. Each Borrower jointly and severally agrees to pay, and shall be jointly and severally liable under this Agreement and the other Loan Documents for, all Obligations, regardless of the manner or amount in which proceeds of the Loans are used, allocated, shared, or disbursed by or among the Borrowers themselves, or the manner in which the Administrative Agent or any Lender accounts for such Loans on its books and records. Each Borrower shall be liable for all amounts due to the Administrative Agent, the Lead Arranger and each Lender under this Agreement and the other Loan Documents, regardless of which Borrower actually receives proceeds of the Loans or the amount of such Loans received or the manner in which the Administrative Agent or any Lender accounts for such Loans on its books and records. Each Borrower’s Obligations with respect to the Loans made to it, and such Borrower’s Obligations arising as a result of the joint and several liability of such Borrower hereunder, with respect to Loans made to the other Borrowers hereunder, shall be separate and distinct obligations, but all such Obligations shall be primary obligations of such Borrower. The Borrowers acknowledge and expressly agree with the Administrative Agent and each Lender that the joint and several liability of each Borrower is required solely as a condition to, and is given solely as inducement for and in consideration of, credit or accommodations extended or to

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be extended under the Loan Documents to any or all of the other Borrowers and is not required or given as a condition of the Loans made to such Borrower. Each Borrower’s obligations under this Agreement and the other Loan Documents shall, to the fullest extent permitted by applicable law, be unconditional irrespective of (i) the validity or enforceability of the Obligations of any other Borrower or Loan Party or of any note or other document evidencing all or any part of the Obligations of any other Loan Party, (ii) the absence of any attempt to collect the Obligations from any other Loan Party, any guarantor or any other security therefor, or the absence of any other action to enforce the same, (iii) the waiver, consent, extension, forbearance, or granting of any indulgence by the Administrative Agent or any Lender with respect to any provision of any instrument evidencing the Obligations of any other Loan Party, or any part thereof, or any other agreement now or hereafter executed by any other Loan Party and delivered to the Administrative Agent or any Lender, (iv) the failure by the Administrative Agent or any Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any Collateral for the Obligations of any other Loan Party, (v) the Administrative Agent’s or any Lender’s election, in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security interest by any other Loan Party, as debtor‑in‑possession, under Section 364 of the Bankruptcy Code, (vii) the disallowance of all or any portion of the Administrative Agent’s or any Lender’s claim(s) for the repayment of the Obligations of any other Loan Party under Section 502 of the Bankruptcy Code, or (viii) any other circumstances which might constitute a legal or equitable discharge or defense of a guarantor or of any other Loan Party. With respect to any Borrower’s Obligations arising as a result of the joint and several liability of the Borrowers hereunder with respect to Loans made to or for the account of any other Borrower hereunder, such Borrower waives, until the Obligations shall have been paid in full any right to enforce any right of subrogation or any remedy which the Administrative Agent or any Lender now has or may hereafter have against any other Borrower, any endorser or any guarantor of all or any part of the Obligations, and any benefit of, and any right to participate in, any security or Collateral given to the Administrative Agent or any Lender to secure payment of the Obligations or any other liability of any Borrower to the Administrative Agent or any Lender. Upon any Event of Default, the Administrative Agent may proceed directly and at once, without notice, against any Borrower to collect and recover the full amount, or any portion of the Obligations, without first proceeding against any other Borrower or any other Person, or against any Collateral or other security for the Obligations. Each Borrower consents and agrees that the Administrative Agent shall be under no obligation to marshal any assets in favor of any Borrower or against or in payment of any or all of the Obligations. Each Borrower further acknowledges that credit extended to each Borrower hereunder will directly or indirectly benefit each other Borrower.

SECTION 2.08. Termination of Commitments. The Commitments shall terminate immediately upon funding the Loans on the Effective Date.

SECTION 2.09. Repayment of Loans; Evidence of Debt.

(a)The Borrowers hereby jointly and severally unconditionally promise to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date. To the extent not previously repaid, all unpaid Loans shall be paid in full in Dollars by the Borrowers on the Maturity Date.

(b)Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrowers to such Lender resulting from the Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

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(c)The Administrative Agent shall maintain accounts in which it shall record (i) the amount of the Loans made hereunder and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrowers to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d)The entries made in the accounts maintained pursuant to Section 2.09(b) or Section 2.09(c) shall be primafacie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Loans in accordance with the terms of this Agreement.

(e)Any Lender may request that Loans made by it be evidenced by one or more promissory notes. In such event, the Borrowers shall prepare, execute and deliver to such Lender a promissory note or notes payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in substantially the form set forth on Exhibit C hereto (or such other form as may be approved by the Administrative Agent and the Borrowers). Thereafter, the Loans evidenced by such promissory note or notes and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the payee named therein (or to such payee and its registered assigns).

(f)Any Lender may, at any time and from time to time, require the Borrowers to execute and deliver new component notes (which may be senior and junior notes but, for the avoidance of doubt, not mezzanine notes) (each, a “Component Note”) to replace any existing promissory note or notes of such Lender (each, an “Existing Note”), or modify any Existing Notes to reflect multiple components of the Loan made by such Lender, which Component Notes may be paid in such order of priority as may be designated by such Lender; provided, that (i) the aggregate principal amount of such Component Notes shall, on the date of issuance, equal the outstanding principal balance of the Loans owing to such Lender immediately prior to the issuance of such Component Notes, (ii) the weighted average interest rate of all such Component Notes shall, on the date created and at all times until the Maturity Date, equal the interest rate which was applicable to the Existing Notes immediately prior to the issuance of such Component Notes, (iii) the scheduled debt service payments on all such Component Notes shall, on the date of issuance, equal the scheduled debt service payments under the Existing Notes immediately prior to the issuance of such Component Notes and (iv) no such Component Note shall increase any Borrower’s obligations, diminish its rights, or otherwise adversely affect any Borrower (in each case, by more than a de minimis amount). The Borrowers shall cooperate with all reasonable requests of any Lender in order to establish the Component Notes and shall execute and deliver, and cause to be executed and delivered, such documents as shall reasonably be requested by any Lender, all in form and substance reasonably satisfactory to the Lender.

SECTION 2.10. Repayment of Loans.

(a)Voluntary Repayments. The Borrowers shall have the right to voluntarily repay the Loans, subject to prior notice in accordance with the provisions of this Section 2.10, at any time in whole, or from time to time, in part. The Borrowers shall notify the Administrative Agent in writing of any repayment under this Section 2.10(a) not later than 11:00 a.m. three Business Days before the date of repayment (or such other time as the Administrative Agent may agree in its sole discretion). Such notice shall be irrevocable and shall specify the repayment date and a calculation of the aggregate amount of the Loans subject to such repayment and all accrued and unpaid interest through such repayment date; provided, that such repayment may be conditioned on the occurrence of any subsequent event, in which case such notice may be (x) revoked

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by the Borrowers (by written notice to the Administrative Agent prior to the specified repayment date) or (y) modified or postponed by the Borrowers as to the Business Day on which such repayment is to be made, in each case, if such event does not occur and subject to the reimbursement of any actual out-of-pocket costs incurred by the Administrative Agent or any Lender as a result of such revocation or modification, including, without limitation, any amounts payable under Section 2.16. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each repayment of the Loans shall be applied in accordance with Section 2.10(f). Repayments under this Section 2.10(a) (but not for any other repayment under this Section 2.10) shall be accompanied by (x) accrued interest to the extent required by Section 2.12 and (y) break funding payments pursuant to Section 2.16. If applicable, the Administrative Agent shall execute and deliver, in accordance with Article VIII or Section 9.20, such documents and agreements as may be reasonably requested by the Borrowers to release or evidence the release of the Lien under the Collateral Documents in connection with any Release and Repayment or any repayment in whole of all Obligations.

(b)Casualty Events.

(i)In the event and on each occasion that any Net Cash Proceeds (other than proceeds of business interruption or rental loss insurance) are received by or on behalf of any Borrower in respect of any Casualty Event that constitutes a Repayment Event, such Borrower shall, within three Business Days after receipt of such Net Cash Proceeds, repay the Obligations in an aggregate amount equal to 100% of such Net Cash Proceeds; provided, that (y) if such Borrower delivers to the Administrative Agent a certificate of a Responsible Officer to the effect that such Borrower desires to apply the Net Cash Proceeds from such event to replace or rebuild such Property and (z) the Administrative Agent consents to such reinvestment (such consent not to be unreasonably withheld if (A) no Default or Event of Default exists and (B) the amount of Net Cash Proceeds subject to such requested reinvestment is less than $500,000), then no repayment shall be required pursuant to this Section 2.10 in respect of the Net Cash Proceeds specified in such certificate; provided, further, that any such reinvestment shall be on terms and subject to conditions (including timing) specified by the Administrative Agent in such consent. To the extent that any such Net Cash Proceeds therefrom have not been so applied by the end of the period to which the Administrative Agent may consent, a repayment shall be made at such time in an amount equal to such Net Cash Proceeds that have not been so applied. Any repayment under this Section 2.10(b) shall cause a dollar for dollar reduction in the Release Price for the affected Property.

(ii)If following any Casualty Event that constitutes a Repayment Event, the Net Cash Proceeds resulting therefrom are not required to be made available to the Borrowers for restoration or repair the affected Property pursuant to Section 2.10(b)(i), the Borrowers shall have the right, to be exercised by the Borrowers, if at all, by written notice (the “Borrower Repayment Notice”) delivered within ten days (which notice shall express the Borrowers’ intention to endeavor in good faith to repay a portion of the Loans as described below) after the date on which Administrative Agent notifies the Borrowers in writing that it is applying, or intends to apply, the Net Cash Proceeds to the Obligations, to prepay a portion of the Loans in accordance with Section 2.10 to cause the release of such Property and obtain the release of such Property from the Lien of the Mortgage thereon and related Loan Documents; provided, that the Borrowers shall have satisfied the release conditions set forth in Section 2.10, Section 6.03(a) and the definition of Permitted Sales, except that (1) the Borrowers shall not be required to convey the Property on fair market terms to an

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arms-length third party purchaser, provided that such Property may not be conveyed to any other Borrower, (2) any such release must be completed by the Borrowers within ninety (90) days Administrative Agent receives the Borrower Repayment Notice, and (3) the Borrowers shall pay the costs and expenses of the Administrative Agent and Lenders in connection with such release (including those under Section 9.20).

(c)Sales. In the event and on each occasion that any Net Cash Proceeds are received by or on behalf of any Borrower in respect of any Sale, such Borrower shall, within three Business Days after receipt of such Net Cash Proceeds, repay the Obligations in an aggregate amount equal to the greater of (i) 100% of such Net Cash Proceeds and (ii) the applicable Release Price for each such Property subject of or to such Sale.

(d)Indebtedness. In the event and on each occasion that any Net Cash Proceeds are received by or on behalf of any Borrower in respect of the incurrence of Indebtedness other than Indebtedness permitted under Section 6.01, such Borrower shall, immediately upon receipt of such Net Cash Proceeds, repay the Obligations in an aggregate amount equal to 100% of such Net Cash Proceeds.

(e)Purchase Option. In the event and on each occasion of any Purchase Option Exercise Event, the Borrowers shall, within three Business Days after receipt of such proceeds from such Purchase Option Exercise Event, repay the Obligations in an aggregate amount equal to the Option Property Release Amount. The Borrowers shall provide the Administrative Agent with thirty (30) days (or such shorter period of time as the Administrative Agent may agree) prior written notice of the proposed date of the transfer of the Option Release Property pursuant to the Purchase Option Exercise Event and, in connection with any such Purchase Option Exercise Event, pay (or cause to be paid) all such recording charges, filing fees, taxes or other expenses payable in connection with the release of the applicable Property from the Lien hereof.

(f)All amounts subject to repayment pursuant to Section 2.10 shall be applied to repay the Loans on a pro rata basis among the Lenders in accordance with the outstanding principal amount of Loans held by such Lenders.

SECTION 2.11. Fees.

(a)The Borrowers jointly and severally agree to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrowers and the Administrative Agent under the Fee Letter.

(b)All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, to the applicable Lenders. Fees paid shall not be refundable under any circumstances.

SECTION 2.12. Interest.

(a)The Loans shall bear interest at an interest rate equal to the Eurodollar Rate plus the Applicable Margin.

(b)Notwithstanding the foregoing, during the occurrence and continuance of an Event of Default, all Loans and other amounts outstanding hereunder and under the other Loan Documents shall bear interest at 2.00% plus the rate otherwise applicable to the Loans as provided in Section 2.12(a).

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(c)Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to Section 2.12(b) shall be payable on demand and (ii) in the event of any repayment of any Loan, accrued interest on the principal amount repaid shall be payable on the date of such repayment.

(d)All interest hereunder shall be computed on the basis of a year of 360 days for the actual number of days elapsed (including the first day but excluding the last day) or, for any Base Rate Loan, on the basis of a year of 365 or 366 days, as applicable, for the actual number of days elapsed. The Eurodollar Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.13. Illegality. If any Lender, acting reasonably, determines that any applicable law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain or fund Eurodollar Loans, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrowers through the Administrative Agent, any obligation of such Lender to maintain Eurodollar Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrowers that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), convert all Eurodollar Loans of such Lender to Base Rate Loans, either on the next Interest Payment Date, if such Lender may lawfully continue to maintain such Eurodollar Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Loans. Upon any such conversion, the Borrowers shall also pay accrued interest on the amount so converted.

SECTION 2.14. Alternate Rate of Interest. If at any point:

(a)the Administrative Agent determines in good faith (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Eurodollar Rate including because the Eurodollar Rate is not available or published on a current basis and such circumstances are unlikely to be temporary;

(b)the administrator of the Eurodollar Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the Eurodollar Rate shall no longer be made available, or used for determining the interest rate of loans (such specific date, the “Scheduled Unavailability Date”);

(c)syndicated loans currently being executed, or that include language similar to that contained in this Section 2.14, are being executed or amended (as applicable) to incorporate or adopt a new benchmark interest rate to replace LIBOR; or

(d)the Administrative Agent is advised by the Required Lenders that the Eurodollar Rate will not adequately and fairly reflect the cost to such Lenders (or Lender) of maintaining their Loans (or its Loan);

then, reasonably promptly after such determination by the Administrative Agent or receipt by the Administrative Agent of such notice, as applicable, at the election of the Administrative Agent, either (x) the Administrative Agent shall give notice thereof to the Borrowers and the Lenders by electronic mail as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrowers and the Lenders that the circumstances giving rise to such notice no longer exist, all Eurodollar Loans shall be automatically

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converted to Base Rate Loans on the next Interest Payment Date and, upon any such conversion, the Borrowers shall also pay accrued interest on the amount so converted, or (y) the Administrative Agent and the Borrowers may amend this Agreement to replace the Eurodollar Rate with an alternate benchmark rate (including any mathematical or other adjustments to the benchmark (if any) incorporated therein) (any such proposed rate, a “Eurodollar Successor Rate”), together with any proposed Eurodollar Successor Rate Conforming Changes (as defined below) and any such amendment shall become effective at 5:00 p.m. (New York time) on the fifth Business Day after the Administrative Agent shall have posted such proposed amendment to all Lenders and the Borrowers unless, prior to such time, Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders do not accept such amendment.

If no Eurodollar Successor Rate has been determined and the circumstances under clause (y) above exist or the Scheduled Unavailability Date has occurred (as applicable), the Administrative Agent will promptly so notify the Borrowers and each Lender. Upon receipt of such notice, (i) all Eurodollar Loans shall be automatically converted to Base Rate Loans on the next Interest Payment Date and (ii) the Eurodollar Rate component shall cease to be utilized in determining the Base Rate. As used herein, “Eurodollar Successor Rate Conforming Changes” means, with respect to any Eurodollar Successor Rate, any conforming changes to the definition of Base Rate, Interest Period, timing and frequency of determining rates and making payments of interest and other administrative matters as may be appropriate, in the discretion of the Administrative Agent, to reflect the adoption of such Eurodollar Successor Rate and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such Eurodollar Successor Rate exists, in such other manner of administration as the Administrative Agent determines in consultation with the Borrowers).

SECTION 2.15. Increased Costs.

(a)If any Change in Law shall:

(i)impose, modify or deem applicable any reserve, special deposit , liquidity or similar requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Eurodollar Rate);

(ii)impose on any Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or participation therein; or

(iii)subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making or maintaining any Loan or to reduce the amount of any sum received or receivable by such Lender or such other Recipient hereunder, whether of principal, interest or otherwise, then the Borrowers will pay, upon written request of such Lender or such other Recipient, to such Lender or such other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

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(b)If any Lender, acting reasonably, determines in good faith that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy and liquidity), then from time to time the Borrowers will pay, upon written request of such Lender, to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction.

(c)A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in Section 2.15(a) or Section 2.15(b) shall be delivered to the Borrowers and shall be conclusive absent manifest error. The Borrowers shall, jointly and severally, pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

(d)Failure or delay on the part of any Lender to demand compensation pursuant to this Section 2.15 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrowers shall not be required to compensate a Lender pursuant to this Section 2.15 for any increased costs or reductions incurred more than nine months prior to the date that such Lender notifies the Borrowers of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine month period referred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Loan other than on an Interest Payment Date (including as a result of an Event of Default or as a result of any repayment pursuant to Section 2.10(a) (but no other subsection of Section 2.10)), (b) the failure to repay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10 and is revoked in accordance therewith) or (c) the assignment of any Loan other than on an Interest Payment Date as a result of a request by the Borrowers pursuant to Section 2.19, then, in any such event, the Borrowers shall compensate each Lender for the loss, cost and expense attributable to such event. Without duplication of any amounts otherwise payable hereunder, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Eurodollar Rate that would have been applicable to such Loan, for the period from the date of such event to the next Interest Payment Date, over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in Dollars of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrowers and shall be conclusive absent manifest error. The Borrowers shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

SECTION 2.17. Taxes.

(a)Defined Terms. For purposes of this Section 2.17, the term “applicable law” includes FATCA.

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(b)Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.17) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(c)Payment of Other Taxes by the Borrowers. The Borrowers shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for, Other Taxes.

(d)Indemnification by the Borrowers. The Borrowers shall, jointly and severally, indemnify each Recipient, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrowers by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(e)Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrowers have not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrowers to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.04(c) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this Section 2.17(e).

(f)Evidence of Payments. As soon as practicable after any payment of Taxes by the Borrowers to a Governmental Authority pursuant to this Section 2.17, the Borrowers shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

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(g)Status of Lenders.

(i)Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrowers and the Administrative Agent, at the time or times reasonably requested by the Borrowers or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrowers or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrowers or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrowers or the Administrative Agent as will enable the Borrowers or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.17(g)(ii)(A), Section 2.17(g)(ii)(B) and Section 2.17(g)(ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii)Without limiting the generality of the foregoing:

(A)any Lender that is a U.S. Person shall deliver to the Borrowers and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrowers or the Administrative Agent), executed copies of IRS Form W‑9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

(B)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrowers and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrowers or the Administrative Agent), whichever of the following is applicable;

(1)in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W‑8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2)executed copies of IRS Form W-8ECI;

(3)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a

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certificate to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrowers within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W‑8BEN or W-8BEN-E; or

(4)to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W‑8IMY, accompanied by IRS Form W‑8ECI, IRS Form W‑8BEN or W-8BEN-E, a U.S. Tax Compliance Certificate, IRS Form W‑9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner;

(C)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrowers and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrowers or the Administrative Agent), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrowers or the Administrative Agent to determine the withholding or deduction required to be made; and

(D)if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrowers and the Administrative Agent at the time or times prescribed by applicable law and at such time or times reasonably requested by the Borrowers or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrowers or the Administrative Agent as may be necessary for the Borrowers and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 2.17(g)(ii)(D), “FATCA” shall include any amendments made to FATCA after the Effective Date.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification, provide such successor form, or promptly notify the Borrowers and the Administrative Agent in writing of its legal inability to do so.

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(h)Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.17 (including by the payment of additional amounts pursuant to this Section 2.17), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.17 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 2.17(h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.17(h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 2.17(h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This Section 2.17(h) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(i)Survival. Each party’s obligations under this Section 2.17 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender and the repayment, satisfaction or discharge of all obligations under any Loan Document.

SECTION 2.18. Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Set-offs.

(a)The Borrowers shall make each payment required to be made by it hereunder (whether of principal, interest, fees, or of amounts payable under Section 2.15, Section 2.16 or Section 2.17, or otherwise) prior to 2:00 p.m., on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices as the Administrative Agent may specify in writing to the Borrowers, except that payments pursuant to Section 2.15, Section 2.16, Section 2.17 and Section 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. Aggregate payments of principal and interest shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to each Lender’s respective pro rata shares. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars.

(b)Any proceeds of Collateral received by the Administrative Agent or any other amounts recovered by the Administrative Agent or any other Secured Party (i) not constituting (A) a specific payment of principal, interest, fees or other sum payable under the Loan Documents (which shall be applied as specified by the Borrowers) or (B) a mandatory repayment (which shall be applied

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in accordance with Section 2.10) or (ii) after an Event of Default has occurred and is continuing and the Administrative Agent so elects or the Required Lenders so direct, toward the payment of any principal and/or interest of the Loan and/or any other amounts due under the Loan Documents in such order, proportion and priority as the Administrative Agent in its sole and absolute discretion shall determine. During the existence of an Event of Default, solely to the extent that an error has occurred in the application thereof or to the extent permitted under Section 9.16, the Administrative Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Obligations.

(c)[Reserved]

(d)If, except as expressly provided herein, any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other similarly situated Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by all such Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this Section 2.18(d) shall not be construed to apply to any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant. The Borrowers consent to the foregoing and agree, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrowers’ rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrowers in the amount of such participation.

(e)Unless the Administrative Agent shall have received notice from the Borrowers prior to the date on which any payment is due to the Administrative Agent for the account of the relevant Lenders hereunder that the Borrowers will not make such payment, the Administrative Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the relevant Lenders the amount due. In such event, if the Borrowers have not in fact made such payment, then each of the relevant Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

SECTION 2.19. Mitigation Obligations; Replacement of Lenders.

(a)If any Lender requests compensation under Section 2.15, or the Borrowers are required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if,

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in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or Section 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b)If (i) any Lender requests compensation under Section 2.15 or (ii) the Borrowers are required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights (other than its existing rights to payments pursuant to Section 2.15 or Section 2.17) and obligations under the Loan Documents to an Eligible Assignee that shall assume such obligations (which Eligible Assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrowers shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the Eligible Assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.

SECTION 2.20. Collateral Reserves.

(a)Commencing on the Interest Payment Date occurring on July 14, 2018 and continuing thereafter on each Interest Payment Date until such time as the amount of Additional Collateral Reserve Funds on deposit in the Additional Collateral Reserve Account is equal to twelve and nine-tenths percent (12.9%) (the “Capped Amount”) of the outstanding principal balance of the Loans, the Borrowers shall deposit with the Administrative Agent an amount equal to two and fifteen-hundredths percent (2.15%) of the principal balance of the Loans outstanding on such Interest Payment Date (each, a “Monthly Deposit”), which sums shall be held by the Administrative Agent for the benefit of the Lenders as additional collateral security for the Obligations. Amounts so deposited shall hereinafter be referred to as the “Additional Collateral Reserve Funds” and the account in which such amounts are held by the Administrative Agent shall hereinafter be referred to as the “Additional Collateral Reserve Account.” Notwithstanding the foregoing, the Borrowers shall not be required to deposit or maintain Additional Collateral Reserve Funds in excess of the Capped Amount. Accordingly, (i) to the extent a Monthly Deposit would result in the aggregate amount of Additional Collateral Reserve Funds in the Additional Collateral Reserve Account to exceed the Capped Amount, such Monthly Deposit shall be decreased by an amount equal to such excess and (ii) so long as no Default or Event of Default then exists, if any repayment of principal amount of the Loans on any date results in the aggregate amount of Additional Collateral Reserve Funds in the Additional Collateral Reserve Account to exceed the Capped Amount on such date, then the Administrative Agent shall return such excess amount to the Borrowers promptly upon the request of the Borrowers (or, if such repayment is made in connection with repayment of Net Cash Proceeds under Section 2.10, at the election of the Borrowers, such excess may be credited against

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any such Net Cash Proceeds required to be delivered to the Administrative Agent pursuant to Section 2.10 on such payment date). Upon payment in full of all Obligations (other than Unliquidated Obligations), the Administrative Agent shall promptly return (or simultaneously credit in connection with such payment) to the Borrowers all Additional Collateral Reserve Funds then remaining in the Additional Collateral Reserve Account.

(b)Security Interest. The Borrowers hereby pledge to the Administrative Agent, and grants a security interest in, any and all monies now or hereafter deposited in the Additional Collateral Reserve Funds as additional security for the performance of the Obligations. The Additional Collateral Reserve Funds shall constitute additional security for the performance of the Obligations. The Administrative Agent shall have no obligation to release any of the Additional Collateral Reserve Funds while any Default or Event of Default has occurred and remains outstanding. Notwithstanding anything to the contrary contained herein or in any other Loan Document, upon the occurrence of an Event of Default, the Administrative Agent may, in addition to any and all other rights and remedies available to the Administrative Agent, apply any sums then present in the Additional Collateral Reserve Account to the payment of the Loans in any order, proportion and priority as the Administrative Agent may determine in its sole and absolute discretion. The Borrowers shall not further pledge, assign or grant any security interest in any Additional Collateral Reserve Funds or permit any Lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 financing statements, except those naming the Administrative Agent as the secured party, to be filed with respect thereto.

(c)Investments; Income Taxes. The Additional Collateral Reserve Funds shall be held in the name of the Administrative Agent and may be commingled with the Administrative Agent’s own funds at financial institutions selected by the Administrative Agent in its sole discretion. The Additional Collateral Reserve Funds shall be held in an account and may be invested in Permitted Investments as directed by the Administrative Agent. The Administrative Agent shall not be liable for any loss sustained on the investment of any funds constituting the Additional Collateral Reserve Funds. The Borrowers shall deposit with the Administrative Agent an amount equal to the actual losses sustained on the investment of any funds constituting the Additional Collateral Reserve Funds in Permitted Investments within one Business Day of the Administrative Agent’s notice. All interest on the Additional Collateral Reserve Funds shall not be added to or become a part thereof and shall be the sole property of and shall be paid to the Administrative Agent.

(d)Indemnity. The Borrowers shall, jointly and severally, indemnify the Administrative Agent and hold the Administrative Agent harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including reasonable attorneys’ fees and expenses) arising from or in any way connected with the Additional Collateral Reserve Funds or the performance of the obligations for which the Additional Collateral Reserve Funds were established.

ARTICLE III
Representations and Warranties

The Borrowers jointly and severally represent and warrant as of the Effective Date to the Administrative Agent and the Lenders that:

SECTION 3.01. Organization; Powers; Single Purpose Entity; Subsidiaries. Each Borrower (a) is duly organized, validly existing and in good standing as a limited liability company under

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the laws of the State of Delaware, (b) has all requisite limited liability company power and authority to (i) carry on its business as now conducted and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party and to consummate the transactions contemplated hereby and thereby and (c) except where the failure could not reasonably be expected to have a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where (i) a Property is located and (ii) such qualification is required. There are no outstanding commitments or other obligations of any Borrower to issue, and no options, warrants or other rights of any Person to acquire, any Equity Interests of any Borrower other than pursuant to the Effective Date Mezzanine Loan Agreement. Each Borrower is in compliance with all Single Purpose Entity Requirements. The Borrowers do not have any Subsidiaries which are not Borrowers. The organizational chart attached as Schedule 3.01 of the Property Information Agreement, relating to the Borrowers and certain Affiliates and other Persons, is true, correct and complete on and as of the Effective Date.

SECTION 3.02. Authorization; Enforceability.

(a)The Transactions are within each Borrower’s powers and have been duly authorized by all necessary limited liability company actions.

(b)The Loan Documents to which each Borrower is a party have been duly executed and delivered by such Borrower and constitute legal, valid and binding obligations of such Borrower, enforceable in accordance with their respective terms, subject to applicable Debtor Relief Laws and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, (ii) for filings necessary to perfect Liens created pursuant to the Loan Documents and (iii) where the failure to obtain and maintain could not reasonably be expected to have a Material Adverse Effect, (b) will not violate any applicable law or regulation applicable to any Borrower except where the failure could not reasonably be expected to have a Material Adverse Effect, (c) will not violate or conflict with the charter or other organizational documents of any Borrower or any order of any Governmental Authority, (d) will not violate or result in a default under any material indenture, agreement or other instrument binding upon any Borrower or its assets, or give rise to a right thereunder to require any payment to be made by any Borrower, (e) will not violate or result in a breach or default under any registration, license, permit, approval or certificate necessary to conduct any business issued by any Governmental Authority and (f) will not result in the creation or imposition of any Lien on any asset of any Borrower, other than Liens created under the Loan Documents or Liens of the type described in clause (f) of the definition of “Permitted Encumbrances”.

SECTION 3.04. Financial Condition; No Material Adverse Change.

(a)All financial data, statements and other information that have been delivered to the Administrative Agent or any Lender in respect of the Properties, the Borrowers and the other Loan Parties (i) are true and correct in all material respects and (ii) fairly represent in all material respects the financial position of the Borrowers, the other Loan Parties, or the Properties, as applicable, as of the date thereof. None of the Borrowers have any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are reasonably likely to have a Material Adverse Effect.

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(b)Since December 31, 2017, no circumstance or event, or series of circumstances or events, has occurred resulting in a Material Adverse Effect.

SECTION 3.05. Properties; Title. Each Borrower has good title to, or valid leasehold interests in, all of its respective Properties and all personal property material to its respective business, in each case, except for Permitted Encumbrances and Liens created pursuant to any Loan Document.

SECTION 3.06. Litigation, Environmental and Labor Matters.

(a)Except as set forth on Schedule 3.06 of the Property Information Agreement, there are no actions, suits, proceedings or investigations by or before any arbitrator or Governmental Authority pending against or threatened in writing against or affecting any Borrower, any Property or any other properties or assets of any Borrower (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement, any other Loan Document or the Transactions.

(b)Except as set forth on Schedule 3.06 of the Property Information Agreement or with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, the Borrowers (i) have not failed to comply with any Environmental Law or to obtain, maintain or comply with any Environmental Permit, (ii) have not become subject to any Environmental Liability, (iii) have not received notice of any claim with respect to any Environmental Liability and (iv) do not know of any basis for any Environmental Liability.

(c)Except as set forth on Schedule 3.06 of the Property Information Agreement or with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, (i) no Loan Party is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any Release or Threatened Release, discharge or disposal of Hazardous Materials at any Property or any other site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law and (ii) all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any Property have been managed and disposed of in a manner not reasonably expected to result in material liability to any Loan Party.

(d)To the knowledge of the Borrowers, there are no underground storage tanks at any Property except as set forth on Schedule 3.06 of the Property Information Agreement.

(e)The Borrowers have no employees.

SECTION 3.07. Compliance with Laws and Agreements. The Borrowers are in compliance with all laws, regulations and orders of any Governmental Authority (including, without limitation, the Americans with Disabilities Act of 1990) applicable to or binding upon it, any Property or any other properties or assets of the Borrowers and all agreements and other instruments, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.08. Investment Company Status. No Borrower is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

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SECTION 3.09. Taxes. The Borrowers have timely filed or caused to be filed all federal, state and other material Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes evidenced as due on such returns and all other material Taxes required to have been paid by them, except Taxes that are being contested in good faith by appropriate proceedings and for which the Borrowers have set aside on their books adequate reserves. No tax Liens have been filed and no claims are being asserted with respect to any such Taxes.

SECTION 3.10. ERISA.

(a)Except as could not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect, each Plan is in compliance with the applicable provisions of ERISA, the Code and other applicable law.

(b)There are no pending or, to the knowledge of any Loan Party, threatened or contemplated claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that, either individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

(c)No ERISA Event has occurred that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect as of the Effective Date. No Loan Party or any ERISA Affiliate is aware of any fact, event or circumstance that, either individually or in the aggregate, could reasonably be expected to continue or result in an ERISA Event with respect to any Plan which ERISA Event could reasonably be expected to have a Material Adverse Effect.

SECTION 3.11. Disclosure. The Borrowers and their Affiliates have disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which any of them are subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of any Borrower or any Affiliate to the Administrative Agent or any Lender in connection with the negotiation of this Agreement, any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; provided, that with respect to projected financial information, each Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time delivered and, if such projected financial information was delivered prior to the Effective Date, as of the Effective Date, it being understood that such projections are not to be viewed as facts and that actual results may differ from projected results and that such differences may be material.

SECTION 3.12. Federal Reserve Regulations. No part of the proceeds of any Loan have been used or will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. The Borrowers are not engaged and will not engage, principally or as one of their important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U), or extending credit for the purpose of purchasing or carrying margin stock The Borrowers do not own any margin stock.

SECTION 3.13. Liens. There are no Liens on any of the Properties or any personal property of the Borrowers except for Permitted Liens. None of the Permitted Liens, individually or in the

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aggregate, (a) materially interfere with the benefits of the security intended to be provided by the Collateral Documents and the other Loan Documents, (b) materially and adversely affect the value of any Property, (c) materially and adversely impair the use or operation of any Property or (d) impair any Borrower’s ability to perform its Obligations in a timely manner.

SECTION 3.14. Condemnation. To each Borrower’s knowledge, no Taking is pending or is contemplated with respect to all or any material portion of any Property or for the relocation of roadways providing access to any Property, except as set forth on Schedule 3.14 of the Property Information Agreement.

SECTION 3.15. Utilities and Public Access; Zoning. Each Property has rights of access to one or more public ways, either directly or through a recorded easement or REA. Each Property is served by water, sewer, sanitary sewer and storm drain facilities adequate to service such Property for its intended uses other than to the extent such failure could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. All utilities necessary to the existing use of each Property are located either in the public right-of-way abutting such Property or in recorded easements or REAs serving such Property, other than to the extent such failure could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Except as disclosed in the zoning reports delivered to the Administrative Agent on or prior to the Effective Date, each Property and the present use and occupancy thereof are in compliance in all material respects with all applicable zoning ordinances, building codes, land use laws and other similar legal requirements.

SECTION 3.16. Solvency. Each Borrower is, and the Borrowers taken as a whole, are Solvent as of the Effective Date immediately after the consummation of the Transactions to occur on the Effective Date.

SECTION 3.17. Insurance. The Borrowers maintain (or are causing the Master Lessee pursuant to the Master Lease to maintain) insurance in compliance with the Insurance Maintenance Requirements.

SECTION 3.18. Security Interest in Collateral. The provisions of the Collateral Documents create legal, valid and enforceable Liens on all the Collateral in favor of the Administrative Agent, for the benefit of the Secured Parties, as security for the Obligations, and upon the filing, recording, registering or taking such other actions as may be necessary with the appropriate Governmental Authorities (including payment of applicable filing and recording taxes), such Liens shall be perfected Liens in and to all of the Collateral having priority over all other Liens on the Collateral and subject to no Liens, in each case, other than Permitted Liens.

SECTION 3.19. Master Lease; Agreements; Management Agreements. No Borrower is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (a) the Master Lease or (b) to the knowledge of any Borrower, any Material Agreement to which it is a party which default under such Material Agreement could reasonably be expected to result in a Material Adverse Effect. No Borrower is a party to any management or similar agreement relating to a third party providing management or other services with respect to any of the Properties.

SECTION 3.20. OFAC. The Borrowers, their Subsidiaries, the other Loan Parties and their respective directors, officers, and employees are in compliance with all applicable Sanctions and all applicable Anti-Money Laundering Laws and counter-terrorism financing provisions of the Bank Secrecy Act and all regulations issued pursuant to it. None of the Borrowers, any other Loan Party, any of their

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respective Subsidiaries, or any director, officer, employee, agent, or Affiliate of the Borrowers is a Sanctioned Person.

SECTION 3.21. Patriot Act. The Borrowers and each Person directly or indirectly Controlling any Borrower are in compliance with (a) the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B Chapter V, as amended) and any other enabling legislation or executive order relating thereto, (b) the Patriot Act and (c) other federal or state laws relating to “know your customer” and Anti-Money Laundering Laws.

SECTION 3.22. Foreign Corrupt Practices Act; Anti-Corruption Laws. The Borrowers, their Subsidiaries, the other Loan Parties and their respective directors, officers and employees and, to the knowledge of the Borrowers, the agents of the Borrowers and their Subsidiaries, are in compliance with all applicable Sanctions and with the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”) the UK Bribery Act 2010 and any other applicable anti-corruption laws in all material respects. The Borrowers, their Subsidiaries, the other Loan Parties have instituted and maintain policies and procedures designed to ensure continued compliance with applicable Sanctions, the FCPA the UK Bribery Act 2010 and any other applicable anti-corruption laws.

SECTION 3.23. Tax Shelter Regulations. The Borrowers do not intend to treat the Loans or the related transactions as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4). In the event any Borrower determines to take any action inconsistent with such intention, the Borrowers will promptly notify the Administrative Agent thereof. If the Borrowers so notify the Administrative Agent, the Borrowers acknowledge that one or more of the Lenders may treat its Loans as part of a transaction that is subject to Treasury Regulation Section 301.6112-1, and such Lender or Lenders, as applicable, will maintain the lists and other records required by such Treasury Regulation.

SECTION 3.24. PPPFA. The execution and delivery of the Loan Documents and the consummation of the transactions under this Agreement and the other Loan Documents do not violate, constitute a default under, or constitute a Forbearance Termination Event or Springing Lien Event under (and, in each case, as defined in) the PPPFA. The PPPFA is in full force and effect and the Borrowers have delivered to the Administrative Agent prior to the Effective Date true, correct and complete copies of the PPPFA and all amendments, modifications, supplements and waivers thereto, including the PPPFA Waiver. Pursuant to, and subject to the terms and conditions of, PPPFA Waiver, the PBGC agreed to waive any and all claims past, present or future with respect to the Sears Pension Plans under any of Title IV of ERISA, Sections 302 and 303 of ERISA and Sections 412 and 430 of the Code (including, without limitation, any PBGC UBL Claims and any liens that might arise under 29 U.S.C. § 1368, Section 303(k) of ERISA or Section 430(k) of the Code).

SECTION 3.25. Broker’s Fees. Except for fees payable to the Lead Arranger, the Administrative Agent and the Lenders under the Loan Documents, neither the Borrowers nor any Affiliate has any obligation to any Person in respect of any finder’s, broker’s or investment banker’s fee in connection with the Transactions.

SECTION 3.26. Federal Income Tax Classification. Each Borrower is a “disregarded entity” for federal income tax purposes.

SECTION 3.27. Flood Zone. Except as may be shown on the surveys delivered to the Administrative Agent on or prior to the Effective Date, none of the Improvements on any Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood

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hazards, or if so located, flood insurance required pursuant to Section 5.05 is in full force and effect with respect to such Property.

SECTION 3.28. Physical Condition. To the Borrower’s knowledge and except for matters described in the Environmental Reports and the Physical Condition Reports obtained by the Administrative Agent prior to the Effective Date, (a) each Property, taken as a whole, is in good condition, order and repair in all material respects and (b) there exists no material structural or other material defects or damages in or to any Property, whether latent or otherwise, that could reasonably be expected to adversely affect the operation of any Property.

SECTION 3.29. Master Lease; Ground Leases; Leases.

(a)Except as set forth on Schedule 3.29 of the Property Information Agreement, no Property is subject to any lease other than the Master Lease and no Person has any possessory interest in any Property or right to occupy the same except under and pursuant to the provisions of the Master Lease or any Permitted Encumbrances. There has been no prior sale, transfer or assignment, hypothecation or pledge by the Borrowers or the Master Lessee of the Master Lease or any sublease or of the rents received thereunder. No Person other than the Administrative Agent has any interest in or assignment of the Master Lease or any portion of the rents due and payable or to become due and payable thereunder. Neither the Master Lessee nor other Person (other than pursuant to the options described on Schedule 3.37 of the Property Information Agreement) has an option, right of first refusal or offer or any other preferential right to purchase all or any portion of, or interest in, any Property.

(b)Except as set forth on Schedule 3.29 of the Property Information Agreement, a memorandum of each Ground Lease has been duly recorded. Each Ground Lease, other than the Excluded Ground Leases, permits the interest of the applicable Borrower to be encumbered by a mortgage. There have not been amendments or modifications to the terms of any Ground Lease since the recordation of such Ground Lease or a memorandum thereof, with the exception of written instruments which have been recorded. Set forth on Schedule 3.29 of the Property Information Agreement is a complete list of each Ground Lease in effect on the Effective Date.

(c)Except for Permitted Encumbrances, no Borrower’s interest in any Ground Lease is subject to any Liens superior to, or of equal priority with, the related Collateral Document other than the applicable Ground Lessor’s related fee interest.

(d)Except as set forth on Schedule 3.29 of the Property Information Agreement, each Borrower’s interest in each Ground Lease, other than the Excluded Ground Leases, is assignable without the consent of any Ground Lessor to the Administrative Agent, the purchaser at any foreclosure sale or the transferee under a deed or assignment in lieu of foreclosure in connection with the foreclosure of the Lien of the related Collateral Document or transfer of such Borrower’s leasehold estate by deed or assignment in lieu of foreclosure (or, if any such consent is required, it has been obtained prior to the Effective Date). Thereafter, except as set forth on Schedule 3.29 of the Property Information Agreement, such Ground Lease is further assignable by such transferee and its successors and assigns without the consent of such Ground Lessor.

(e)Except as set forth on Schedule 3.29 of the Property Information Agreement, as of the Effective Date, each Ground Lease is in full force and effect and no default has occurred under such Ground Lease and there is no existing condition which, but for the passage of time or the giving of notice, could result in a default under the terms of such Ground Lease.  All rents, additional rents

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and other sums due and payable under each Ground Lease have been paid in full.  Neither any Borrower nor any Ground Lessor has commenced any action or given or received any notice for the purpose of terminating any Ground Lease.

(f)Except as set forth on Schedule 3.29 of the Property Information Agreement, each Ground Lease requires the applicable Ground Lessor to give notice of any default by a Borrower to the Administrative Agent prior to exercising its remedies thereunder.  Except as set forth on Schedule 3.29 of the Property Information Agreement, each Ground Lease or estoppel letter received by the Administrative Agent from a Ground Lessor further provides that notice of termination given under such Ground Lease is not effective against the Administrative Agent unless a copy of such notice has been delivered to the Administrative Agent in the manner described in such Ground Lease or such estoppel letter.

(g)Except as set forth on Schedule 3.29 of the Property Information Agreement, the Administrative Agent is permitted the opportunity (including, where necessary, sufficient time to gain possession of each Borrower’s interest under each Ground Lease) to cure any default under each Ground Lease which is curable after the receipt of notice of any default before any Ground Lessor may terminate a Ground Lease.

(h)Except as set forth on Schedule 3.29, each Ground Lease has a term which, including unexercised renewal option terms, extends not less than two years beyond the Maturity Date.

(i)Each Ground Lease, other than the Excluded Ground Leases, requires the applicable Ground Lessor to enter into a new lease with the Administrative Agent upon termination of such Ground Lease for any reason, including rejection of the Ground Lease in a bankruptcy proceeding.

(j)Under the terms of each Ground Lease (other than the Excluded Ground Leases) and the related Collateral Document, taken together, any related insurance and condemnation proceeds that are paid or awarded with respect to the leasehold estate under such Ground Lease will be applied either to the repair or restoration of all or part of the Property, with the Administrative Agent having the right to hold and disburse such proceeds as the repair or restoration progresses, or to the payment of the Obligations, together with any accrued interest thereon.

(k)Except as set forth on Schedule 3.29 of the Property Information Agreement, no Ground Lease imposes any restrictions on subleasing.

(l)Neither the fee owner under any Ground Lease, as debtor in possession, nor a trustee for any such fee owner, has given any notice of, and no Borrower has consented to, any attempt to transfer the fee estate subject of any Ground Lease free and clear of the Ground Lease under Section 363(f) of the Bankruptcy Code.

SECTION 3.30. Boundaries; Separate Lots.

(a)To the knowledge of the Borrowers, except as may be shown on the surveys delivered to the Administrative Agent on or prior to the Effective Date and other than de minimis matters that could not reasonably be expected to adversely affect the operation of such Property, (i) all of the Improvements on each Property lie wholly within the boundaries and building restriction lines of such Property, (ii) no improvements on adjoining properties encroach upon any Property and (iii) no easements or other encumbrances upon any Property encroach upon any of the Improvements

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on any Property, so as to affect the value or marketability of the applicable Property except those which are insured against by the applicable title insurance policy.

(b)Each Property is comprised of one or more parcels which constitute a separate tax lot or lots and does not constitute a portion of any other tax lot not a part of such Property.

SECTION 3.31. Opinion Assumptions.

(a)All of the assumptions relating to the Borrowers made in the Non-Consolidation Opinion, including, but not limited to, any exhibits attached thereto, are true and correct in all material respects. The Borrowers have complied in all material respects with all of the assumptions made with respect to it in the Non-Consolidation Opinion.

(b)All of the assumptions made in the True Lease Opinion, including, but not limited to, any exhibits attached thereto, are true and correct in all material respects.

SECTION 3.32. Business Purpose. The Loans are solely for the business purpose of the Borrower, and are not for personal, family, household, or agricultural purposes.

SECTION 3.33. Certificate of Occupancy; Licenses. All material certifications, permits, licenses and approvals required for the legal use, occupancy and operation of each Property for its current use (collectively, the “Licenses”), have been obtained and are in full force and effect, except to the extent any such failure could not reasonably be expected to result in a Material Adverse Effect. The use being made of each Property is in conformity with the certificate of occupancy issued for such Property, except to the extent any such failure could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.34. Assessments. There are no pending or proposed special or other assessments for public improvements or otherwise affecting in any material respect any Property, nor are there any contemplated improvements to any Property that may result in such special or other assessments in each case which could reasonably be expected to result in a Material Adverse Effect.

SECTION 3.35. Filing, Recording and Other Taxes. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid under the applicable legal requirements in connection with the transfer of the Properties to the Borrowers have been paid. All mortgage, mortgage recording, stamp, intangible or other similar taxes required to be paid under the applicable legal requirements in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Collateral Documents, have been paid or are being paid simultaneously herewith. All taxes and governmental assessments due and owing in respect of the Properties have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established under the Loan Documents.

SECTION 3.36. Casualty. Except as set forth on Schedule 3.36 of the Property Information Agreement, no Property has suffered any material Casualty Event which has not been fully repaired and the cost thereof fully paid.

SECTION 3.37. Purchase Options. Except as set forth on Schedule 3.37 of the Property Information Agreement, no Property or any part thereof or any interest therein is subject to any purchase options, rights of first refusal to purchase, rights of first offer to purchase or other similar rights in favor of any Person.

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SECTION 3.38. Underwriting Representations. Except as set forth on Schedule 3.38 of the Property Information Agreement, no Borrower (a) has any judgments or Liens of any nature against it except for tax Liens not yet due and other Permitted Liens, (b) is involved in any dispute with any taxing authority other than ordinary course property tax appeals, (c) is now, or has ever been, a party to any lawsuit, arbitration, summons, or legal proceeding that is still pending or that resulted in a judgment against it or its assets or properties that has not been paid in full or otherwise completely and finally settled and (d) has accomplished each amendment and restatement of its organizational documents in accordance with, and was permitted by, the relevant provisions of said documents prior to such amendment or restatement from time to time.

SECTION 3.39. Sears REMIC.

(a)At all times since its formation, the aggregate adjusted tax bases of all assets of the Sears REMIC that are not qualified mortgages or permitted investments has not exceeded the REMIC Asset Safe Harbor.

(b)Other than with respect to any asset falling within the REMIC Asset Safe Harbor, each loan held by the Sears REMIC has at all times been a “qualified mortgage” within the meaning of section 860G(a)(3) of the Code, and no substitution or release in respect of any loan held by the Sears REMIC resulted in a loan not being principally secured by an interest in real property within the meaning of Treasury regulations section 1.860G-2(b)(7).

(c)Other than any asset or transaction falling within the REMIC Asset Safe Harbor, the Sears REMIC has operated in conformity with its operative documents.

(d)The Sears REMIC has filed all U.S. federal and state tax returns it has been required to file, and all taxes due and payable by the Sears REMIC have been paid.

ARTICLE IVConditions

SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):

(a)The Administrative Agent shall have received (i) from each party hereto either (A) a counterpart of this Agreement signed on behalf of such party or (B) written evidence satisfactory to the Administrative Agent (which may include electronic transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement, (ii) the Escrow Letter and (iii) duly executed copies of the other Loan Documents and such other certificates (including customary secretary’s certificates and evidences of incumbency), documents, instruments and agreements as the Administrative Agent shall reasonably request in connection with the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent.

(b)The Administrative Agent shall have received each of the following, addressed to the Administrative Agent and the Lenders and dated the Effective Date, (i) a favorable written opinion of DLA Piper LLP, counsel for the Loan Parties, as to such matters concerning the Loan Parties and the Loan Documents as the Administrative Agent may reasonably request, (ii) favorable written opinions of local counsel for the Borrower, as to such matters concerning the Borrowers and the

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Loan Documents as the Administrative Agent may reasonably request, (iii) the Non-Consolidation Opinion, (iv) the True Lease Opinion and (v) a favorable written opinion of Wachtell, Lipton, Rosen and Katz, counsel for the Loan Parties, as to such matters concerning the Loan Parties and the Loan Documents as the Administrative Agent may reasonably request.

(c)The Administrative Agent shall have received such customary documents and certificates as the Administrative Agent may reasonably request relating to the organization, existence and good standing of the Loan Parties, the authorization of the Transactions and any other legal matters relating to such Loan Parties, the Loan Documents or the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel.

(d)The Administrative Agent shall have received evidence satisfactory to it that steps to commence the liquidation of the Sears REMIC have been, or concurrently with the Effective Date, will be, taken, and the Administrative Agent shall have received true, correct and complete copies of all documents and agreements relating thereto.

(e)The representations and warranties of the Borrowers set forth in this Agreement and the other Loan Documents shall be true and correct on and as of the Effective Date and no Default or Event of Default shall have occurred and the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrowers certifying as to the same.

(f)The Administrative Agent shall be satisfied that the loan to value ratio based on the aggregate Appraised Value of the Properties of the Borrowers does not exceed 45% based on “lit values” of the Properties as set forth in the Appraisals.

(g)The Master Lease, together with a subordination, non-disturbance and attornment agreement and estoppel relating thereto, and the Master Lease Guaranty, shall have been duly executed and delivered, and each Property has been added and made subject to the Master Lease, and true, correct and complete copies of such documents have been provided to the Administrative Agent.

(h)Since December 31, 2017, there has not been a Material Adverse Effect.

(i)The Lead Arranger and the Administrative Agent shall each have received (i) all fees required to be paid on the Effective Date pursuant to the Fee Letter and (ii) all other amounts due and payable on or prior to the Effective Date, including reimbursement or payment of all reasonable out-of-pocket expenses (including reasonable fees, charges and disbursements of outside counsel to the Lead Arranger, the Administrative Agent and each Lender) required to be reimbursed or paid by the Borrowers hereunder or under any Fee Letter.

(j)The Administrative Agent shall be satisfied that all filings to be made concurrently with the making of the Loans on the Effective Date under the Uniform Commercial Code in all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created under the Collateral Documents shall be in form ready for filing.

(k)The Administrative Agent shall have received at least three Business Days prior to the Effective Date all documentation and other information about the Borrowers and the Guarantor required under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.

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(l)The Administrative Agent shall have received each of the Mortgage Instruments set forth on Schedule 4.01, in each case in form and substance reasonably satisfactory to it and its counsel.

(m)The Administrative Agent shall have received a solvency certificate from a Responsible Officer (immediately after giving effect to the Transactions to occur on the Effective Date) substantially in the form attached hereto as Exhibit E.

(n)The Administrative Agent shall have received a true, correct and complete copy of (i) the PPPFA Waiver (pursuant to which, and subject to the terms and conditions of which, the PBGC agreed to waive any and all claims past, present or future with respect to the Sears Pension Plans under any of Title IV of ERISA, Sections 302 and 303 of ERISA and Sections 412 and 430 of the Code (including, without limitation, any PBGC UBL Claims and any liens that might arise under 29 U.S.C. § 1368, Section 303(k) of ERISA or Section 430(k) of the Code) and (ii) evidence satisfactory to it that the Pension Contribution will be made concurrently with the funding of the Loans on the Effective Date.

(o)The Administrative Agent shall have received the Environmental Liability Policy together with evidence satisfactory to it that the policy premium is paid in full with a 100% minimum earned premium applicable.

(p)The Borrowers shall be in compliance with the Single Purpose Entity Requirements.

(q)The Administrative Agent shall have received evidence reasonably satisfactory to it that all effective financing statements in effect or of record immediately prior to the Effective Date shall be terminated and released or arrangements have been made for such financing statements to be terminated and released concurrently with the funding of the Loans on the Effective Date.

(r)The Administrative Agent shall have received evidence reasonably satisfactory to it of the closing and effectiveness of the Effective Date Mezzanine Loan Agreement and the receipt by the Mezzanine Borrower of at least $240,000,000 of gross proceeds from the Indebtedness incurred thereunder.

The Administrative Agent shall notify the Borrowers and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Without limiting the generality of the provisions of Article VIII, for purposes of determining satisfaction of the conditions precedent specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the proposed Effective Date specifying its objection thereto.

ARTICLE VAffirmative Covenants

Until all Obligations (other than Unliquidated Obligations) have been paid in full, the Borrowers covenant and agree with the Administrative Agent and the Lenders that:

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SECTION 5.01. Financial Statements and Other Information. The Borrowers will furnish to the Administrative Agent (for delivery to the Lenders):

(a)within ninety-five (95) days after the end of each Fiscal Year of the Borrowers, the audited consolidated balance sheet and related statements of income and cash flows for Holdings and its consolidated Subsidiaries, as of the end of and for such Fiscal Year, all reported on by Deloitte or another Board-appointed auditor of national standing or other independent public accountants reasonably acceptable to the Administrative Agent (without a “going concern” or like qualification or exception (except relating to the pending maturity of any Indebtedness (other than the Obligations)) and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial position and results of operations of Holdings and its consolidated Subsidiaries in accordance with GAAP consistently applied;

(b)within fifty (50) days after the end of each fiscal quarter of each Fiscal Year of the Borrowers, the consolidated balance sheet and related statements of income and cash flows for Holdings and its consolidated Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the Fiscal Year, all certified by a Responsible Officer of the Borrowers as presenting fairly in all material respects the financial position and results of operations of Holdings and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

(c)concurrently with any delivery of financial statements under Section 5.01(a) or Section 5.01(b), a Compliance Certificate certifying as to whether, to the knowledge of the Borrowers, a Default or Event of Default has occurred and, if a Default or Event of Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto;

(d)prior to the last day of each calendar month, commencing on the last day of March, 2018, a report of all sales activity relating to the Properties, including status of signed contracts, broken contracts and unsigned contracts actively under negotiation, in substantially the form agreed between the Borrowers and the Administrative Agent prior to the Effective Date or such other form as may be agreed; provided, however, that the failure to timely deliver the same shall not constitute an Event of Default unless the Administrative Agent notifies the Borrowers of such failure such failure continues for 7 Business Days after the date of such notice; and

(e)promptly following any request therefor, such other information regarding the operations, business, affairs or financial position or condition of the Borrowers, or compliance with the terms of this Agreement or the other Loan Documents, as the Administrative Agent or any Lender may reasonably request except to the extent disclosure (i) cannot be made in order to preserve attorney client privilege or (ii) is prohibited by confidentiality obligations owing to third parties.

SECTION 5.02. Notices of Material Events. The Borrowers will furnish to the Administrative Agent (for delivery to the Lenders):

(a)prompt, and in any event within five Business Days, written notice of any Borrower or any Responsible Officer obtaining knowledge, after reasonable due inquiry, of the occurrence of any Default or Event of Default or any default or event of default under the Effective Date Mezzanine Loan Agreement or any Additional Mezzanine Loan Agreement;

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(b)prompt, and in any event within five Business Days, written notice of any Borrower or any Responsible Officer obtaining knowledge, after reasonable due inquiry, of the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting any Borrower or any Property that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

(c)prompt, and in any event within three Business Days, written notice of any Borrower or any Responsible Officer obtaining knowledge, after reasonable due inquiry, of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

(d)prompt, and in any event within three Business Days, written notice of (i) receipt by the Borrowers of any notice or communication from the PBGC which could reasonably be expected to be adverse to the interests of the Borrowers, the Administrative Agent or the Lenders, or (ii) any supplement or modification to or waiver of the PPPFA;

(e)prompt, and in any event within five Business Days, written notice of receipt by any Borrower of any default or other material notices and any amendments, waivers and other modifications, received under or pursuant to the Master Lease;

(f)prompt, and in any event within five Business Days, written notice of any Borrower or any Responsible Officer obtaining knowledge, after reasonable due inquiry, of any Casualty Event to any Property, or other insured damage to any Property or the commencement of any action or proceeding for the Taking with respect to any Property or interest therein;

(g)prompt, and in any event within five Business Days, written notice (i) of the discovery of any Hazardous Materials in violation of Environmental Laws on, under or about any Property not previously disclosed to the Administrative Agent, (ii) of any Borrower or any Responsible Officer obtaining knowledge, after due inquiry, that any Property does not materially comply with any Hazardous Materials Laws, (iii) of any Hazardous Materials Claims, (iv) of any Borrower or any Responsible Officer obtaining knowledge, after due inquiry, of the existence of an environmental Lien on any Property, (v) of any Borrower or any Responsible Officer obtaining knowledge, after due inquiry, of any action or proceeding against or of any noncompliance by any Group Member with any Environmental Law or Environmental Permit that could reasonably be expected to (A) have a Material Adverse Effect, (B) result in material Remediation costs, (C) result in an environmental Lien on any Property or (D) cause any Property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law or (vi) of any Borrower or any Responsible Officer obtaining knowledge, after due inquiry, of the existence of a violation by a Property of Hazardous Materials Laws (a “HazMat Violation”) or that a Release has occurred;

(h)prompt, and in any event within five Business Days, written notice of the receipt of any complaints related to the violation of any Access Laws and of the commencement of any proceedings or investigations which relate to compliance with any Access Laws;

(i)prompt, and in any event within five Business Days, written notice if Holdings, any of its Subsidiaries or the Sears REMIC receives any written correspondence from the IRS requesting any material information regarding the Sears REMIC, its tax status or its federal income tax treatment and, with such notice, deliver a copy of such written correspondence from the IRS and, in connection with any such correspondence, further provide prompt written notice from time to time of all related correspondence and further communication with the IRS;

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(j)prompt, and in any event within three Business Days, written notice of any notice received from a Ground Lessor under a Ground Lease;

(k)prompt, and in any event within five Business Days, written notice of the occurrence of each Purchase Option Exercise Event; and

(l)prompt, and in any event within five Business Days, written notice of any Borrower or any Responsible Officer obtaining knowledge, after reasonable due inquiry, of any other development that results in, or that could reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section 5.02 shall be accompanied by a statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03. Existence; Conduct of Business. The Borrowers will do or cause to be done all things necessary to (a) preserve, renew and keep in full force and effect its legal existence, (b) preserve, renew and keep in full force and effect the rights, qualifications, licenses, permits, privileges, franchises, governmental authorizations and intellectual property rights material to the conduct of its business and for the operation of each Property, except as could not reasonably be expected to have a Material Adverse Effect and (c) maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except as could not reasonably be expected to have a Material Adverse Effect. The Borrowers will (i) solely operate in its current lines of business, which is limited to the ownership, management and operation of the Properties, (ii) maintain the scope and nature of its business objectives, purposes or operations and (iii) undertake or participate in activities solely related to the continuance of its present business, in each case in compliance with the Single Purpose Entity Requirements.

SECTION 5.04. Payment of Obligations. The Borrowers will pay (or cause to be paid) its obligations, including Tax liabilities and mortgage taxes, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrowers have set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) the Borrowers will furnish such cash or other security as may be required in the proceeding or, if such proceeding does not require security, as may be reasonably requested by the Administrative Agent, to ensure the payment of any such Taxes or other amount, together with all interest and penalties thereon and (d) such contest is not in violation of the Master Lease.

SECTION 5.05. Maintenance of Properties; Defense of Title; Insurance; Further Assurances.

(a)General. The Borrowers will, or will cause the Master Lessee pursuant to the Master Lease to, (i) comply with the Insurance Maintenance Requirements and (ii) keep and maintain all Properties and all other property material to the conduct of their businesses in good working order and condition, ordinary wear and tear and condemnation and casualty excepted, and in keeping with the condition and repair of properties of similar use, value, age, nature and construction, all in accordance with the ordinary course of business of the Borrowers. It is acknowledged and agreed that that nothing contained herein shall require the Master Lessee to continue operations of any Property and may discontinue such operations at any time, subject to its continued compliance with all of its obligations under the Master Lease, each Ground Lease and each REA; provided, the same does not (x) result in a default, termination or option to purchase under the Master Lease, any Ground Lease, any REA or other Material Agreement or (y) gives rise to a purchase right in favor of any

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Option Holder (without the prior written consent of the Administrative Agent). The Borrowers will furnish to the Lenders, upon request of the Administrative Agent, information in reasonable detail as to the insurance so maintained. In the event the Borrowers at any time or times hereafter shall fail to timely obtain or maintain (or to cause the Master Lessee to obtain or maintain) any of the policies or insurance required herein or to pay (or to cause the Master Lessee to pay) any premium in whole or in part relating thereto, then the Administrative Agent, without waiving or releasing any obligations or resulting Default or Event of Default hereunder, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which the Administrative Agent deems advisable. All sums so disbursed by the Administrative Agent shall constitute part of the Obligations, payable as provided in this Agreement.

(b)Title to Property. The Borrowers will warrant and defend (a) its title to the each Property, subject only to Permitted Encumbrances and (b) the validity and priority of the Liens of the Collateral Documents on the Properties, subject only to Permitted Encumbrances, in each case against the claims of all Persons whomsoever. The Borrowers will reimburse the Administrative Agent upon demand for any losses, costs, damages or expenses (including reasonable attorneys’ fees and court costs) incurred by the Administrative Agent if an interest in any Property or any part thereof is claimed by any other Person except as expressly permitted hereunder.

(c)Further Assurances. Without limiting the foregoing, each Borrower will execute and deliver, or cause to be executed and delivered, to the Administrative Agent such documents, agreements and instruments, and will take or cause to be taken such further actions, which may be required by law or which the Administrative Agent may, from time to time, reasonably request to carry out the terms and conditions of this Section 5.05, all at the expense of the Borrowers.

SECTION 5.06. Books and Records; Inspection Rights. The Borrowers will keep proper books of record and account (a) in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities, (b) in conformity in all material respects with GAAP consistently applied and (c) in material conformity with all applicable requirements of law or any Governmental Authority having jurisdiction over the Borrowers. The Borrowers will permit any representatives designated by the Administrative Agent or any Lender (including employees of the Administrative Agent, any Lender or any consultants, accountant, lawyers, agents and appraisers retained by the Administrative Agent), upon reasonable prior notice, to visit and inspect the Properties and its properties (provided, that the Borrowers will take all such actions as may be reasonably required to cause the Master Lessee to permit any such visitation or inspection), to examine and make extracts from its books and records, including environmental assessment reports and Phase I or Phase II studies, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested at the expense of the Borrowers with respect to all reasonable out-of-pocket expenses of the Administrative Agent; provided, that the Borrowers shall not be responsible for the costs of more than one such visit or inspection in any Fiscal Year absent the existence of an Event of Default; provided, further, that if an Event of Default then exists, the Administrative Agent and any Lender (or any employees of the Administrative Agent, any Lender or any consultants, accountant, lawyers, agents and appraisers retained by the Administrative Agent or any such Lender) may do any of the foregoing at the expense of the Borrowers at any time during normal business hours and without advance notice. The Borrowers acknowledge that the Administrative Agent, after exercising its rights of inspection, may prepare and distribute to the Lenders certain reports pertaining to the properties of the Borrowers for internal use by the Administrative Agent and the Lenders.

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SECTION 5.07. Compliance with Laws and Obligations. The Borrowers will (and will cause the Master Lessee pursuant to the Master Lease to) (a) comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (including without limitation Environmental Laws), (b) obtain and renew all Environmental Permits necessary for its operations and properties, (c) perform all of its obligations under the Master Lease, in the case of clauses (a) through (c) except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, (d) ensure that no Person who owns a Controlling interest in or otherwise Controls any Borrower is (i) listed on list of the Specially Designated Nationals and Blocked Persons maintained by OFAC and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, executive order, or regulation or (ii) a Person designated under Section 1(b), (c), or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation, or any other similar executive orders and (e) comply with all applicable Bank Secrecy Act laws and regulations and Anti-Money Laundering Laws.

SECTION 5.08. Use of Proceeds. The Borrowers will use the proceeds of the Loans only (a) to consummate, on the Effective Date, the Pension Contribution, (b) to pay a portion of the costs and expenses relating to the Transactions and (c) for working capital and general corporate purposes. The Borrowers will not use any part of the proceeds of any Loan, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. The Borrowers will not, directly or indirectly, use the proceeds of the Loans, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person, (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of the FCPA, the UK Bribery Act 2010 or any other applicable anti-corruption law, (ii) to fund any activities or business of or with any Sanctioned Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, except to the extent permissible for a Person required to comply with Sanctions^, or (iii) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loans, whether as the Administrative Agent, a Lender, advisor, investor, or otherwise).

SECTION 5.09. Alterations. The Administrative Agent’s prior approval (not to be unreasonably withheld, conditioned or delayed (other than in the case of an alteration that is reasonably likely to have a Material Adverse Effect)) shall be required in connection with any alteration to any Property or any Improvement thereon (a) that is reasonably likely to have a Material Adverse Effect, (b) the cost of which (including any related alteration, improvement or replacement) is reasonably anticipated to exceed an amount equal to 10% of the Allocated Loan Amount for such Property (the “Alteration Threshold”) or (c) that is structural in nature (other than, with respect to this clause (c), ordinary course replacements for which such replacement is not reasonably likely to have a Material Adverse Effect, and the Borrowers have adequate funds on hand for such replacement); provided, however, that in no event shall any consent be required in connection with (x) any alterations performed in connection with the restoration of any Property after the occurrence of a Casualty Event or condemnation subject to the terms of Section 2.10, (y) repairs necessary to correct any life safety or emergency conditions (including those described on Schedule 5.17 of the Property Information Agreement) or (z) the alterations described on Schedule 5.09 of the Property Information Agreement. If the total unpaid amounts incurred and to be incurred with respect to such alterations to the Properties in the aggregate shall at any time exceed the Alteration Threshold, the Borrowers shall promptly deliver to the Administrative Agent as security for the payment of such amounts and as additional security for the Obligations any of the following:  (A) cash, (B) letters of credit, (C) U.S. obligations or (D) other securities acceptable to the Administrative Agent.  Such security shall be in an amount equal to the excess of the total unpaid amounts incurred and to be incurred with respect to such alterations to the Improvements (other than such amounts to be paid or reimbursed by tenants under the Leases; provided that the applicable Leases shall be in full force and effect) over the Alteration Threshold, and, at the option of

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the Administrative Agent, the Administrative Agent shall have the right to apply such security from time to time to pay for such alterations.  Upon substantial completion of any alteration to any Property in excess of the lesser of (x) $1,000,000 and (y) the Alteration Threshold, the Borrowers shall provide evidence satisfactory to Administrative Agent that (1) such alteration was constructed in accordance with all applicable legal requirements, (2) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with such alteration have been paid in full and have delivered unconditional releases of liens, and (3) all licenses and permits necessary for the use, operation and occupancy of the Improvements have been issued, provided that, if any such license or permit is temporary in nature, the Borrowers shall diligently pursue procuring a permanent license or permit from the applicable Governmental Authority.

SECTION 5.10. Handicapped Access.

(a)Subject to the timely completion of the required repairs identified on Schedule 5.17 of the Property Information Agreement, the Borrowers will, or will cause the Master Lessee pursuant to the Master Lease, cause the Properties to at all times strictly comply to the extent applicable with the requirements of the Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of 1988, all federal, state and local laws and ordinances related to handicapped access and all rules, regulations, and orders issued pursuant thereto including, without limitation, the Americans with Disabilities Act Accessibility Guidelines for Buildings and Facilities (collectively, the “Access Laws”).

(b)Notwithstanding anything to the contrary set forth herein or in any other Loan Document, the Borrowers will not alter or cause or permit to be altered any Property in any manner which would increase the responsibilities of the Borrowers for compliance with any Access Laws. The foregoing shall apply to tenant improvements constructed by any Borrower or by any tenant.

SECTION 5.11. Additional Collateral; Environmental Matters; Further Assurances; Estoppels.

(a)Each Borrower will cause all of its Property and all of its right, title and interest in and to all other property and assets (whether real, personal, tangible, intangible, or mixed) to be subject at all times to first priority, perfected Liens in favor of the Administrative Agent for the benefit of the Secured Parties to secure the Obligations, to the extent required by and in accordance with, and subject to the terms and conditions and limitations of the Collateral Documents, subject in any case to Permitted Liens.

(b)The Borrowers will (or will cause the Master Lessee pursuant to the Master Lease to) (i) effect any Remediation reasonably requested by the Administrative Agent from time to time in order to comply with all Environmental Laws and (ii) undertake and complete any and all investigations, studies, sampling, testing, abatement, cleanup, removal, remediation or other response actions reasonably necessary to remove, remediate, clean up or abate any Release of Hazardous Materials or HazMat Violation, in each case as and to the extent required under Hazardous Materials Laws.

(c)The Borrowers will promptly, and in any event within sixty (60) days after request by the Administrative Agent (which notice will be delivered only if (i) a Default or Event of Default has occurred and is then continuing or (ii) the Administrative Agent has a reasonable basis to believe that there is a risk that Hazardous Materials are located on a Property in violation of any Environmental Law that could reasonably be expected to result in a Material Adverse Effect), at the

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expense of the Borrowers, deliver or cause to be delivered to the Administrative Agent an environmental site assessment report for any of its properties described in such request, prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent, indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties; without limiting the generality of the foregoing, if the Administrative Agent reasonably determines at any time that a risk exists that any such report will not be provided within the time referred to above, the Administrative Agent may retain an environmental consulting firm to prepare such report at the expense of the Borrowers, and the Borrowers hereby grant the Administrative Agent, the Lenders, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto their respective properties to undertake such an assessment; provided, that in no event shall the Administrative Agent commence, or require the Borrowers to commence, a Phase II environmental site assessment for any Property unless recommended by a Phase I environmental site assessment for such Property.

(d)Without limiting the foregoing, the Borrowers will execute and deliver, or cause to be executed and delivered, to the Administrative Agent such documents, agreements and instruments, and will take or cause to be taken such further actions (including the filing and recording of financing statements, fixture filings, Mortgages and other documents), which may be required by law or which the Administrative Agent may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents and to ensure perfection and priority of the Liens created or intended to be created by the Collateral Documents, all at the expense of the Borrowers.

(e)Estoppel Statements. The Borrowers will deliver to the Administrative Agent:

(i)within ten Business Days after request by the Administrative Agent, a statement, duly acknowledged and certified, setting forth (A) the original principal amount of the Loans, (B) the unpaid principal amount of the Loans, (C) the interest rate of the Loans, (D) the date payments of principal and/or interest were last paid, (E) any offsets or defenses to the payment and performance of the Obligations, if any, and (F) that this Agreement and the other Loan Documents are valid, legal and binding obligations of the Borrowers and the other Loan Parties and have not been modified (or, if modified, giving particulars of such modification);

(ii)within thirty days after request by the Administrative Agent, an estoppel certificate from each tenant under the Master Lease in form and substance reasonably satisfactory to the Administrative Agent; provided that such estoppel certificate may be in the form required under the Master Lease; and

(iii)within thirty days after request by the Administrative Agent, an estoppel certificate from each party under any REA in form and substance reasonably satisfactory to the Administrative Agent; provided that no Default or Event of Default shall result from any failure of the Borrowers to deliver any such estoppel certificate under this Section 5.11(e)(iii) if the Borrowers are exercising commercially reasonable efforts to obtain such estoppel certificate from each party under the applicable REA.

(f)The Borrowers will promptly notify the Administrative Agent if it opens or maintains any deposit account other than the deposit account in existence as of the Effective Date and, within

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thirty days (or such longer period of time as the Administrative Agent may agree) cause such deposit account to be subject to a deposit account control agreement in form and substance reasonably satisfactory to the Administrative Agent.

(g)Each Borrower hereby authorizes the Administrative Agent to file, and if requested will execute and deliver to the Administrative Agent, all financing statements describing the Collateral owned by the Borrower and other documents and take such other actions as may from time to time reasonably be requested by the Administrative Agent in order to maintain a first priority, perfected security interest in the Collateral owned by such Borrower, subject to Permitted Liens; provided, that nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Administrative Agent under the Loan Documents to any Permitted Liens.  Such financing statements may describe the Collateral in the same manner as described in any Loan Document or may contain an indication or description of collateral that describes such property in any other manner as the Administrative Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure that the perfection of the security interest in the Collateral granted to the Administrative Agent herein, including, without limitation, describing such property as “all assets of the debtor wherever located, in which the debtor now has or hereafter acquires any right or interest” or “all personal property of the debtor wherever located, in which the debtor now has or hereafter acquires any right or interest” or may use a similar description.  Each Borrower will take any and all actions necessary to defend title to the Collateral owned by such Borrower against all persons and to defend the security interest of the Administrative Agent in such Collateral and the priority thereof against any Lien other than Permitted Liens.

SECTION 5.12. Cooperation in Legal Proceedings. The Borrowers will cooperate fully with the Administrative Agent with respect to any proceedings before any Governmental Authority which may in any way adversely affect the rights of the Administrative Agent or any Lender, or any rights obtained by the Administrative Agent or any Lender, under any of other Loan Document and, in connection therewith, permit the Administrative Agent, at its election, to participate in any such proceedings (subject to the rights of the Master Lessee under the Master Lease to proceed without such participation, as provided in the Master Lease).

SECTION 5.13. Master Lease. The Borrowers will cause the Master Lease and the Master Lease Guaranty to remain in full force and effect at all times, without modification to, or waiver of, the terms thereof.

SECTION 5.14. Taxes on Security. The Borrowers will pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Loans or the Liens created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on the Administrative Agent or any Lender. If there shall be enacted any law (a) deducting the Loan from the value of any Property for the purpose of taxation, (b) affecting any Lien on any Property, or (c) changing existing laws of taxation of mortgages, deeds of trust, security deeds, or debts secured by real property, or changing the manner of collecting any such taxes, the Borrowers will promptly pay to the Administrative Agent, on demand, all taxes, costs and charges for which the Administrative Agent or any Lender is or may be liable as a result thereof; provided, however, that if such payment would be prohibited by law or would render the Loans usurious, then instead of collecting such payment, the Administrative Agent may declare all amounts owing under the Loan Documents to be immediately due and payable.

SECTION 5.15. Interest Rate Protection. The Borrowers will, no later than September 14, 2018 (or such later date as the Administrative Agent may otherwise agree in its sole discretion),

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obtain a LIBOR cap (the “LIBOR Cap”) for a period from such date through the Maturity Date at a strike rate of 5.00%, (the “Strike Rate”) in the amount equal to the aggregate outstanding amount of the Loans as of the date of execution and delivery of such LIBOR Cap, from an Acceptable Counterparty, together with the Collateral Assignment, in form and substance reasonably acceptable to the Administrative Agent. The Borrowers will, at all times thereafter, replace and extend such LIBOR Cap until all Obligations (other than Unliquidated Obligations) have been paid in full. The LIBOR Cap (i) shall at all times be in form and substance reasonably acceptable to the Administrative Agent, (ii) shall at all times be with an Acceptable Counterparty, (iii) shall direct such Acceptable Counterparty to deposit directly into such account as directed by the Administrative Agent any amounts due to the Borrowers under such LIBOR Cap so long as any portion of the Obligations exists, provided that the Obligations shall be deemed to exist if the Properties are transferred by judicial or non-judicial foreclosure or deed-in-lieu thereof, (iv) shall be for a period through and including the end of the Interest Period in which the Maturity Date occurs, and (v) shall at all times have a notional amount equal to or greater than the principal balance of the Loans and shall at all times provide for the applicable Strike Rate. The Borrowers shall collaterally assign to Lender, pursuant to the Collateral Assignment, in form and substance reasonably acceptable to the Administrative Agent, all of its right, title and interest to receive any and all payments under the LIBOR Cap, and shall deliver to Administrative Agent an executed counterpart of such LIBOR Cap (which shall, by its terms, authorize the assignment to the Administrative Agent for the benefit of the Lenders and require that payments be deposited directly where required by the Administrative Agent) and shall notify the Acceptable Counterparty of such assignment. In the event of any downgrade, withdrawal or qualification of the rating of the Acceptable Counterparty, the Borrowers shall replace the LIBOR Cap with a replacement LIBOR Cap acceptable to the Administrative Agent not later than ten Business Days following receipt of notice from the Administrative Agent of such downgrade, withdrawal or qualification. In the event that the Borrowers fail to purchase and deliver to the Administrative Agent the LIBOR Cap or fail to maintain the LIBOR Cap in accordance with the terms and provisions of this Agreement, the Administrative Agent may purchase the LIBOR Cap and the cost incurred by the Administrative Agent in purchasing such LIBOR Cap shall be paid by the Borrowers to the Administrative Agent with Default Interest from the date such cost was incurred by the Administrative Agent until such cost is reimbursed by the Borrowers to the Administrative Agent. In connection with the LIBOR Cap, the Borrowers shall obtain and deliver to the Administrative Agent (a) a resolution/consent, as applicable, of the Acceptable Counterparty authorizing the delivery of the LIBOR Cap acceptable to Administrative Agent, and (b) an opinion from counsel (which counsel may be in house counsel for the Acceptable Counterparty) for the Acceptable Counterparty (upon which the Administrative Agent and its successors and assigns may rely) in form and substance reasonably acceptable to the Administrative Agent.

SECTION 5.16. Single Purpose Entity. The Borrowers will comply at all times with the Single Purpose Entity Requirements.

SECTION 5.17. Post-Closing Matters. The Borrowers will, within the time periods specified in Schedule 5.17 of the Property Information Agreement complete such undertakings as are set forth therein.

SECTION 5.18. Ground Lease.

(a)The Borrowers will, at their sole cost and expense, promptly and timely perform and observe all terms, covenants and conditions required to be performed and observed by any Borrower as lessee under any Ground Lease (including, without limitation, the payment of all Ground Rent).

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(b)The Borrowers will, at their sole cost and expense, enforce, in a commercially reasonable manner, the terms, covenants and conditions to be performed and observed by each Ground Lessor under each Ground Lease.

(c)The Borrowers shall promptly notify the Administrative Agent of the receipt by any Borrower of any notice (written or otherwise) from any Ground Lessor claiming the occurrence of any default by any Borrower under a Ground Lease or the occurrence of any event that, with the giving of notice or passage of time, or both, would constitute a default by a Borrower under a Ground Lease. Promptly upon its receipt thereof, the Borrowers shall deliver to the Administrative Agent a copy of any such written notice from any Ground Lessor.

(d)The Borrowers shall promptly notify the Administrative Agent of the occurrence of any default by any Ground Lessor under a Ground Lease or the occurrence of any event that, with the giving of notice or passage of time, or both, would constitute a default by a Ground Lessor under any Ground Lease. Concurrently with the giving of any notice to a Ground Lessor claiming the occurrence of such default or event, the Borrowers shall deliver a copy thereof to the Administrative Agent.

(e)If any Borrower is in default under any Ground Lease (other than any Excluded Ground Lease), then, subject to the terms of such Ground Lease, the applicable Borrower shall grant the Administrative Agent the right (but not the obligation) to cause the applicable default under such Ground Lease to be remedied and otherwise exercise any and all rights of such Borrower under such Ground Lease as may be reasonably necessary or desirable to prevent or cure such default; provided that such actions are, in the Administrative Agent’s good faith judgment, reasonably necessary to protect the Administrative Agent’s interest under the Loan Documents. The Administrative Agent shall have the right to enter all or any portion of the Property, at such times and in such manner as the Administrative Agent deems necessary, to prevent or to cure any such default. If a Ground Lessor delivers to the Administrative Agent a copy of any notice of default sent by such Ground Lessor to any Borrower, such notice shall constitute full protection to the Administrative Agent for any action taken or not taken by the Administrative Agent, in good faith, in reliance thereon.

(f)The Borrowers shall promptly execute, acknowledge and deliver to the Administrative Agent such instruments as may reasonably be necessary to permit the Administrative Agent to cure any default under any Ground Lease or permit the Administrative Agent to take such other action required to enable the Administrative Agent to cure or remedy the matter in default and preserve the Administrative Agent’s rights under the Loan Documents with respect to the Property (including, without limitation, the Lien of the applicable Collateral Documents and the other Loan Documents).

(g)The actions or payments of the Administrative Agent to cure any default by any Borrower under a Ground Lease shall not cure or waive, as between the Borrowers and the Administrative Agent, the default that occurred under this Agreement by virtue of such Borrower’s default under a Ground Lease. All costs and expenses incurred by the Administrative Agent to cure or attempt to cure any such default shall be paid, jointly and severally, by the Borrowers to the Administrative Agent, upon demand, with Default Interest from the date such costs and expenses were incurred to and including the date the reimbursement payment is received by the Administrative Agent. All such indebtedness shall be secured by the applicable Collateral Document.

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(h)The Borrowers shall not, without prior consent of the Administrative Agent, subordinate or consent to the subordination of any Ground Lease to any mortgage, security deed, Lease or other interest on or in any Ground Lessor’s interest in all or any part of any Property.

(i)The Borrowers shall exercise each option, if any, to extend or renew the term of each Ground Lease upon demand by the Administrative Agent made at any time within three months prior to the last day upon which any such option may be exercised.

(j)Within ten days after receipt of the Administrative Agent’s request, the Borrowers shall use reasonable efforts to obtain from any Ground Lessor and furnish to the Administrative Agent an estoppel certificate of such Ground Lessor stating the date through which Ground Rent has been paid under such Ground Lease (other than any Excluded Ground Lease), whether or not there are any defaults under such Ground Lease and specifying the nature of such claimed defaults, if any, and such other matters as the Administrative Agent may reasonably request.

(k)Notwithstanding anything to the contrary contained in this Agreement with respect to any Ground Lease, other than any Excluded Ground Lease:

(i)The Lien of the applicable Collateral Document attaches to all of such Borrower’s rights and remedies at any time arising under or pursuant to Section 365(h) of the Bankruptcy Code or any other Debtor Relief Law, including, without limitation, all of such Borrower’s rights, as debtor, to remain in possession of the Property subject to such Ground Lease.

(ii)The Borrowers shall not, without the Administrative Agent’s consent, elect to treat any Ground Lease as terminated under Section 365(h)(l) of the Bankruptcy Code or any other Debtor Relief Law. Any such election made without the Administrative Agent’s prior consent shall be null and void.

(iii)As security for the Obligations, the Borrowers unconditionally assign, transfer and set over to the Administrative Agent all of the rights and claims of the Borrowers to the payment of damages arising from any rejection by such Ground Lessor under any Debtor Relief Law. The Borrowers and the Administrative Agent shall proceed jointly or in the name of the applicable Borrower in respect of any claim, suit, action or proceeding relating to the rejection of such Ground Lease, including, without limitation, the right to file and prosecute any proofs of claim, complaints, motions, applications, notices and other documents in any case in respect of the Ground Lessor under any Debtor Relief Law. This assignment constitutes a present, irrevocable and unconditional assignment of the foregoing rights, claims, and remedies, and shall continue in effect until all of the Obligations shall have been satisfied and discharged in full. Any amounts received by any Borrower or the Administrative Agent as damages arising out of the rejection of such Ground Lease as aforesaid shall be applied to all costs and expenses of the Administrative Agent (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the exercise of any of its rights or remedies in accordance with the applicable provisions of this Agreement.

(iv)If, pursuant to Section 365(h) of the Bankruptcy Code or any other Debtor Relief Law, any Borrower seeks to offset against the Ground Rent the amount of any damages caused by the non-performance by any Ground Lessor of any of its obligations under such Ground Lease after the rejection by such Ground Lessor under any Debtor Relief Law, then

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the Borrowers shall not effect any offset of the amounts objected to by the Administrative Agent. If the Administrative Agent has failed to object as aforesaid within ten days after notice from the Borrowers in accordance with the first sentence of this clause (iv), the Borrowers may proceed to offset the amounts set forth in such Borrower’s notice to the Ground Lessor and the Administrative Agent.

(v)If any action, proceeding, motion or notice shall be commenced or filed in respect of Ground Lessor in connection with any case under any Debtor Relief Law, the Borrowers and the Administrative Agent shall cooperatively conduct and control any such action, proceeding, motion or notice with counsel agreed upon between the Borrowers and the Administrative Agent in connection with such action, proceeding, motion or notice. The Borrowers shall, upon demand, pay to the Administrative Agent all costs and expenses (including reasonable attorneys’ fees and expenses) incurred by the Administrative Agent in connection with the cooperative prosecution or conduct of any such action, proceeding, motion or notice. All such costs and expenses shall be secured by the Lien of the Collateral Documents.

(vi)The Borrowers shall promptly, after obtaining knowledge of such filing, notify the Administrative Agent orally of any filing by or against such Ground Lessor of a petition under any Debtor Relief Law. The Borrowers shall thereafter promptly give written notice of such filing to the Administrative Agent, setting forth any information available to the Borrowers as to the date of such filing, the court in which such petition was filed, and the relief sought in such filing. The Borrowers shall promptly deliver to the Administrative Agent any and all notices, summonses, pleadings, applications and other documents received by any Borrower in connection with any such petition and any proceedings relating to such petition.

(vii)Such Ground Lease may not be canceled, terminated, surrendered or amended without the prior consent of the Administrative Agent, which consent may be withheld in the Administrative Agent’s sole and absolute discretion; provided, that such Ground Lease may be extended on the terms of such Ground Lease without the consent or approval of the Administrative Agent.

SECTION 5.19. REA. With respect to each REA, the Borrowers will:

(a)Pay all charges and other sums to be paid by the Borrowers pursuant to the terms of such REA as the same shall become due and payable and prior to the expiration of any applicable grace period therein provided. After prior notice to the Administrative Agent, any Borrower, at its own cost and expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any charges required to be paid by such Borrower pursuant to any REA; provided that (i) no Default or Event of Default has occurred and remains outstanding; (ii) such Borrower is permitted to do so under the provisions of any mortgage or deed of trust superior in lien to the applicable Collateral Document; (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of such REA and any other instrument to which such Borrower is subject or by which the Property is bound and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable legal requirements; (iv) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (v) such REA will not be in danger of being terminated; (vi) such Borrower shall promptly

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upon final determination thereof pay the amount of any such charges, together with all interest and penalties which may be payable in connection therewith; (vii) such proceeding shall suspend the collection of such charges from the Borrowers and the Property; (viii) the Borrowers shall furnish such cash or other security as may be required in the proceeding or as may be reasonably required by the Administrative Agent to ensure the payment of any such charges, together with all interest and penalties thereon; and (ix) such contest by is not in violation of the Master Lease. The Administrative Agent may pay over, assign or transfer any such security or part thereof to the claimant entitled thereto at any time when, in the reasonable judgment of the Administrative Agent, the entitlement of such claimant is established or the Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, canceled or lost or there shall be any danger of the Lien of any Collateral Document being primed by any related Lien.

(b)Perform and observe in all material respects all of the terms, covenants and conditions required to be performed and observed by the applicable Borrower pursuant to terms of such REA.

(c)Take all actions as may be necessary from time to time to preserve and maintain such REA in accordance with all applicable legal requirements.

(d)Enforce, in a commercially reasonably manner, the terms, covenants and conditions to be performed and observed by the parties to such REA (other than the applicable Borrower).

(e)Promptly furnish to the Administrative Agent any notice of default or other material communication delivered in connection with such REA by any party to such REA or any third party (other than routine correspondences and invoices).

(f)If the Administrative Agent or its nominee, designee, successor, or assignee acquires title and/or rights of any Borrower under an REA by reason of foreclosure of the related Collateral Document, deed‑in‑lieu of foreclosure or otherwise, the Administrative Agent or such other party shall (i) succeed to all of the rights of and benefits accruing to such Borrower under the REA and (ii) be entitled to exercise all of the rights and benefits accruing to such Borrower under the REA. At such time as the Administrative Agent shall request, each Borrower agrees to execute and deliver to the Administrative Agent such documents as the Administrative Agent and its counsel may require in order to ensure that the provisions of this Section 5.19(f) will be validly and legally enforceable and effective against each Borrower and all parties claiming by, through, under or against any Borrower.

ARTICLE VINegative Covenants

Until all Obligations (other than Unliquidated Obligations) have been paid in full, each Borrower covenants and agrees with the Administrative Agent and the Lenders that:

SECTION 6.01. Indebtedness; Swap Agreements.

(a)The Borrowers will not create, incur, assume or permit to exist any Indebtedness owing by any Borrower, except:

(i)the Obligations;

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(ii)unsecured trade payables incurred in the ordinary course of business in an aggregate amount outstanding at any time not to exceed $100,000;

(iii)Indebtedness incurred by the Borrowers in the ordinary course of business in an aggregate amount outstanding at any time not to exceed $1,000,000 in connection with the construction, repair or maintenance of the Properties; and

(iv)Indebtedness under Capital Lease Obligations incurred in the ordinary course of business in an aggregate amount outstanding at any time not to exceed $100,000, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof.

(b)The Borrowers will not enter into any Swap Agreement other than the LIBOR Cap.

SECTION 6.02. Liens. The Borrowers will not create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by any Borrower, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a)Liens created pursuant to any Loan Document;

(b)Permitted Encumbrances;

(c)Liens securing Indebtedness permitted under Section 6.01(a)(iii) provided that such Liens (i) shall not apply to any other property or assets of the Borrowers other than the property or assets subject to such construction, repair or maintenance and (ii) shall not exist for more than thirty days unless fully bonded over on terms reasonably satisfactory to the Administrative Agent; and

(d)Liens securing Indebtedness permitted under Section 6.01(a)(iv), provided that such Liens shall not apply to any other property or assets of the Borrowers other than the property or assets subject to such Capital Lease Obligations.

SECTION 6.03. Transfers. The Borrowers will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or directly or indirectly sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) any of their respective assets, or any part thereof or any interest therein (including, without limitation, (w) any interest in the Master Lease or any rents, issues, deposits or profits from any Property, (x) any right of first offer, right of first refusal, purchase option right, and any similar right to acquire fee or leasehold title to any Property, (y) all amounts payable and all rights and benefits accruing under the Master Lease and (z) any legal, beneficial or economic interest in any Borrower), in each case, whether now owned or hereafter acquired (each, a “Transfer”), or liquidate or dissolve, except that the following Transfers shall be permitted:

(a)if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing or would result therefrom and subject to compliance with the provisions of Section 2.10, Permitted Sales;

(b)Permitted Transfers;

(c)Permitted Leases;

(d)Permitted Encumbrances;

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(e)sales, trade-ins or dispositions of used equipment for value in the ordinary course of business consistent with past practice; and

(f)subject to no Event of Default then existing or resulting therefrom, the making of cash distributions by any Borrower to the owner of the Equity Interests of such Borrower.

The Administrative Agent shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder or under the other Loan Documents in order to declare the Obligations immediately due and payable upon the occurrence of a Transfer (other than a Permitted Transfer or other Transfer expressly permitted under this Section 6.03) without the prior written consent of the Administrative Agent. This provision shall apply to every Transfer regardless of whether voluntary or not, and whether or not the Administrative Agent has consented to any previous Transfer. The Administrative Agent’s consent to one Transfer shall not be deemed to be a waiver of the Administrative Agent’s right to require such consent to any future occurrence of same. Any Transfer made in contravention of this Section 6.03 shall be null and void and of no force and effect.

SECTION 6.04. Investments. The Borrowers will not purchase, hold or acquire (including pursuant to any merger or consolidation with any Person) any Equity Interests, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any Person or any assets of any other Person constituting a business unit (each of the foregoing, an “Investment”), except (a) Permitted Investments and (b) subject to compliance with Schedule 5.17 of the Property Information Agreement, Investments in the form of Equity Interests of Currently Owned Permitted Subsidiaries.

SECTION 6.05. Reserved.

SECTION 6.06. Transactions with Affiliates. The Borrowers will not Transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) under the Master Lease, (b) under any Loan Document, (c) subject to no Event of Default then existing or resulting therefrom, themaking of cash distributions by any Borrower to the owner of the Equity Interests of such Borrower, (d) contributions to a Borrower by the owner of the Equity Interests of such Borrower or (e) subject to any consent of the Administrative Agent that might be required in connection with a Permitted Sale, at prices and on terms and conditions not less favorable to the Borrowers than could be obtained on an arm’s-length basis from unrelated third parties.

SECTION 6.07. REA. Except for the matters set forth on Schedule 6.07 of the Property Information Agreement, the Borrowers shall not (a) modify, amend or supplement, or consent to or suffer any modification, amendment, or supplementation of any REA (other than, so long as no Event of Default exists, any modification, amendment or supplement which could not reasonably be materially adverse to the interests of the Administrative Agent or the Lenders), (b) waive or release any of its rights and remedies under any REA (other than, so long as no Event of Default exists, any waiver or release which could not reasonably be materially adverse to the interests of the Administrative Agent or the Lenders), (c) take any action to surrender, terminate, cancel, or accept any surrender, termination or cancellation of any REA (it being acknowledged that certain REAs may expire by their terms), or (d) assign (other than to the Administrative Agent) or encumber (other than in favor of the Administrative Agent as security for the Obligations) any of its rights under any REA.

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SECTION 6.08. Management Agreements. The Borrowers will not, directly or indirectly, enter into, any management or similar agreement relating to a third party providing management or other services with respect to any of the Properties.

SECTION 6.09. Material Agreements; Master Lease; Organizational Documents. The Borrowers will not (a) agree to any amendment, restatement, supplement or other modification to, or waiver of, any of its organizational documents in a manner adverse to the Administrative Agent or any Lender in any respect (other than in a de minimis manner), (b) enter into, surrender or terminate (without replacement reasonably satisfactory to the Administrative Agent) any Material Agreement to which it is a party or to which any Borrower or any Property is subject (unless the other party thereto is in material default and the termination of such agreement would be commercially reasonable), (c) increase or consent to the increase of the amount of any charges under any Material Agreement to which it is a party or to which any Borrower or any Property is subject, except as provided therein or on an arm’s-length basis and commercially reasonable terms, (d) modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under the Master Lease, (e) modify, change, supplement, alter or amend, or suffer any such modification, change, supplement, alternation or amendment of, the Master Lease Guaranty or (f) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under any Material Agreement or any Ground Lease to which it is a party or to which any Borrower or any Property is subject in any material respect, except on an arm’s-length basis and commercially reasonable terms.

SECTION 6.10. No Joint Assessment. The Borrowers will not suffer, permit or initiate the joint assessment of any Property (a) with any other real property constituting a tax lot separate from such Property, and (b) with any portion of such Property which may be deemed to constitute personal property, or any other action or procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such Property or any portion thereof.

SECTION 6.11. No Plan Assets. The Borrowers will not permit any Property or any other property or asset of the Borrowers to constitute “plan assets” under 29 C.F.R. Section 2510.3-101.

SECTION 6.12. Zoning. The Borrowers shall not initiate or consent to any zoning reclassification of all or any portion of any Property or seek any variance under any existing zoning ordinance or use or permit the use of all or any portion of any Property in any manner that could result in such use becoming a non‑conforming use under any zoning ordinance or any other applicable land use law, rule or regulation.

SECTION 6.13. Use of Properties. The Borrowers will not change or modify in any manner the use of any Property from its current use on the Effective Date; provided, that, subject to compliance with the terms of Section 6.12, the Borrowers may change the current use of any Property after the Effective Date subject to (a) such use must be a Permitted Concept and (b) such change cannot (i) result in a breach of or default under or violation of a Ground Lease or REA, (ii) adversely impact in any material respect or prohibit in any way such Property’s future retail use, or (iii) materially impair the value of such Property.

SECTION 6.14. Accounting Changes; Fiscal Year. The Borrowers will not (a) make any change in any accounting policies or reporting practices, except as required by GAAP or (b) change its Fiscal Year from the basis in effect on the Effective Date.

SECTION 6.15. Ground Lease. The Borrowers will not (a) surrender the leasehold estate created by any Ground Lease or terminate or cancel any Ground Lease or modify, change, supplement, alter or amend any Ground Lease, either orally or in writing or (b) consent to, acquiesce in, or fail to object

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to, any attempt by the fee owner of the Property subject of such Ground Lease, as debtor in possession or by a trustee for such fee owner, to sell or transfer the fee estate free and clear of the Ground Lease under Section 363(f) of the Bankruptcy Code or otherwise. The Borrowers will object to any such attempt by any such fee owner, as debtor in possession or by a trustee for such fee owner, to sell or transfer such fee estate free and clear of the Ground Lease under Section 363(f) of the Bankruptcy Code or otherwise, and in such event shall affirmatively assert and pursue its right to adequate protection under Section 363(e) of the Bankruptcy Code.  The Borrowers hereby assign to the Administrative Agent, for the benefit of the Lenders, all of its rights under Section 363 of the Bankruptcy Code to consent or object to any sale or transfer of such fee estate free and clear of the Ground Lease, and grants to the Administrative Agent, for the benefit of the Lenders, the right to object to any such sale or transfer on behalf of the Borrowers, and the Borrowers shall not contest any pleadings, motions documents or other actions filed or taken on the Administrative Agent’s, any Lender’s or any Borrower’s behalf by the Administrative Agent in the event that the owner, as debtor in possession or by a trustee for the fee owner, attempts to sell or transfer the fee estate free and clear of the Ground Lease under Section 363(f) of the Bankruptcy Code or otherwise.

SECTION 6.16. PPPFA. The Borrowers will not cause, or suffer or permit, any amendment, modification, waiver or supplement to the PPPFA which could reasonably be expected to be adverse in any respect to the Administrative Agent, any Lender or any other Secured Party.

ARTICLE VIIEvents of Default

SECTION 7.01. Events of Default. If any of the following events (each, an “Event of Default”) shall occur:

(a)the Borrowers shall fail to pay (i) any principal on any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for repayment thereof or otherwise or (ii) interest on any Loan when and as the same shall become due and payable, and such failure continues for three (3) days;

(b)the Borrowers shall fail to pay any fee or any other amount (other than an amount referred to in Section 7.01(a)) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) Business Days;

(c)any representation or warranty made or deemed made by or on behalf of any Loan Party in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document prepared or furnished by or on behalf of any Loan Party pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect or misleading in any material respect when made or deemed made;

(d)(i) any Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, Section 5.05(a), Section 5.08, Section 5.11(a), Section 5.11(b), Section 5.11(c), Section 5.11(e), Section 5.11(f), Section 5.13, Section 5.15, Section 5.16, Section 5.17, Section 5.18, Section 5.19 or any covenant contained in Article VI (subject to clause (iv) below), (ii) any Borrower shall fail to observe or perform any other covenant, condition or agreement contained in Section 5.01 and such failure shall continue unremedied for a period of ten (10) Business

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Days after the earlier of (A) notice thereof from the Administrative Agent to the Borrowers (which notice will be given at the request of any Lender) and (B) any Borrower has obtained knowledge thereof, (iii) any Borrower shall fail to observe or perform any other covenant, condition or agreement contained in Section 5.03 (other than clause (a) thereof) and such failure shall continue unremedied for a period of thirty (30) days after the earlier of (A) notice thereof from the Administrative Agent to the Borrowers (which notice will be given at the request of any Lender) and (B) any Borrower has obtained knowledge thereof or (iv) any Borrower shall fail to observe or perform any other covenant, condition or agreement contained in Section 6.01 or Section 6.02 and such failure is immaterial, inadvertent and non-recurring and shall continue unremedied for a period of fifteen (15) Business Days after the earlier of (A) notice thereof from the Administrative Agent to the Borrowers (which notice will be given at the request of any Lender) and (B) any Borrower has obtained knowledge thereof;

(e)(i) any Borrower shall fail to observe or perform any other covenant, condition or agreement contained in this Agreement (other than those specified in Section 7.01(a), Section 7.01(b) or Section 7.01(d)) or (ii) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any other Loan Document, and, in the case of each of clauses (i) and (ii), such failure shall continue unremedied for a period of thirty (30) days after the earlier of (A) notice thereof from the Administrative Agent to the Borrowers (which notice will be given at the request of any Lender) and (B) any Borrower has obtained knowledge thereof; provided, that if such default described in this clause (ii) is capable of cure but cannot reasonably be cured within such thirty (30) day period and provided further that such Borrower (or the Guarantor, if applicable) shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for an additional sixty (60) day period;

(f)any of the factual assumptions contained in the Non-Consolidation Opinion or in the True Lease Opinion (including, without limitation, in any schedules thereto and/or certificates delivered in connection therewith) are untrue in any material respect; provided, however, that such breach shall not constitute an Event of Default if (A) such breach was inadvertent, immaterial and non-recurring, (B) such breach is curable and the Borrowers shall promptly cure such breach within ten (10) Business Days of any Borrower obtaining knowledge of such breach and (C) within ten (10) Business Days of the written request by the Administrative Agent, the Borrowers cause legal counsel to deliver an additional Non-Consolidation Opinion to the effect that such breach shall not impair, negate or amend the opinions rendered in the Non-Consolidation Opinion delivered in connection with the closing of the Loan;

(g)the seizure or sequestration of any material portion of the Collateral by any Governmental Authority which is not dismissed by such Governmental Authority within forty-five (45) days after the date of such seizure or sequestration (for the avoidance of doubt, an ordinary condemnation, eminent domain or taking is not intended to constitute a seizure or sequestration in the context of the foregoing);

(h)an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of any Loan Party or its debts, or of a substantial part of its assets, under any Debtor Relief Law or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered;

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(i)(i) any Loan Party shall voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Debtor Relief Law, (ii) any Loan Party shall consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 7.01(h), (iii) any Loan Party shall apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or for a substantial part of its assets, (iv) any Loan Party shall file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) any Loan Party shall make a general assignment for the benefit of creditors or (vi) any Borrower shall take any action in furtherance of the foregoing;

(j)any Loan Party shall become unable, shall admit in writing its inability (unless such admission was required to be made in a legal proceeding in order to not violate any applicable laws), or shall fail generally, to pay its debts as they become due;

(k)one or more non-appealable judgments for the payment of money in an aggregate amount in excess of $500,000 (net of insurance proceeds) shall be rendered against any Borrower and the same shall remain undischarged for a period of sixty (60) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of any Borrower to enforce any such judgment;

(l)an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

(m)a Change in Control which is not a Permitted Change in Control shall occur;

(n)the occurrence of an uninsured Casualty Event with respect to a material portion of the Collateral, unless the Borrowers deliver sufficient funds to complete the restoration of such Collateral to the Administrative Agent within forty-five (45) days after the occurrence of such Casualty Event;

(o)(i) the occurrence of any breach or default which continues for a period of thirty (30) days under the Master Lease, (ii) the occurrence of a breach or default under the Master Lease caused by or resulting from a breach of the Guarantor’s obligation to pay rent with respect to any Property, (iii) the termination, surrender, cancellation or rejection in bankruptcy of the Master Lease or (iv) the termination, expiration or cancellation of the Master Lease Guaranty;

(p)any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Loan Party shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms); or

(q)the Mezzanine Borrower or the Additional Mezzanine Borrower creates, incurs, assumes or permits to exist any Indebtedness other than Permitted Mezzanine Debt;

(r)(i) any Borrower shall fail to pay any Ground Rent as and when such Ground Rent is due under any Ground Lease (unless such breach is cured within any applicable cure period provided in such Ground Lease or unconditionally waived in writing by the landlord under such Ground Lease), (ii) there shall occur any breach or default by any Borrower, as tenant under any Ground Lease, in the observance or performance of any term, covenant or condition of any Ground

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Lease on the part of any Borrower to be observed or performed (unless such breach or default is cured within any applicable cure period provided in any Ground Lease or unconditionally waived in writing by the landlord under such Ground Lease), (iii) if any event, circumstance or condition shall occur which would cause such Ground Lease to terminate without notice or action by the landlord under such Ground Lease or which would entitle the landlord under such Ground Lease to terminate such Ground Lease by giving notice to the Borrowers, as tenant thereunder (unless such event, circumstance, condition or right to terminate is unconditionally waived in writing by the landlord under any Ground Lease), (iv) if the Borrowers shall fail to exercise any renewal options under any Ground Lease, (v) if the leasehold estate created by any Ground Lease shall be surrendered or any Ground Lease shall be terminated or canceled for any reason or under any circumstances whatsoever, or (vi) if any of the terms, covenants or conditions of any Ground Lease shall in any manner be modified, changed, supplemented, altered, or amended in any material respect which is adverse to the interest of the Administrative Agent or any other Secured Party without the prior written consent of the Administrative Agent;

(s)any Loan Party shall (i) default in any payment of principal of or interest on any Indebtedness under the Holdings Domestic Credit Agreement or any other Indebtedness (other than, in the case of the Borrowers, the Loans or in the case of the Guarantor, its Guarantee under the Loan Documents) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created, if the aggregate amount of the Indebtedness of any Loan Party in respect of which such default or defaults shall have occurred is $50,000,000 or more; (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness (in each case involving the amounts specified in clause (i) above) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit the holder or holders of such Indebtedness or, in the case of any such Indebtedness in the form of a Guarantee, the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries), to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity (other than with respect to Indebtedness that is, by its terms, callable upon demand) or, in the case of Guarantees, to become payable; or (iii) default in the observance or performance of any obligation (payment or otherwise) under a Swap Agreement that would allow the counterparty thereof to exercise a right to terminate its position under such Swap Agreement, if the aggregate net exposure with regard to all such positions is in excess of $50,000,000; or

(t)any Collateral Document shall for any reason, other than due to affirmative acts of the Administrative Agent or any Lender, fail to create a valid and perfected first priority Lien on any portion of the Collateral purported to be covered thereby, except as permitted by the terms of any Loan Document;

then, and in every such event (other than an event with respect to any Loan Party described in Section 7.01(h) or Section 7.01(i)), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrowers, take either or both of the following actions, at the same or different times declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other Obligations of the Loan Parties accrued hereunder and under the other Loan Documents, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Loan Parties; and in case

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of any event with respect to the Loan Parties described in Section 7.01(h) or Section 7.01(i), the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other Obligations accrued hereunder and under the other Loan Documents, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Loan Parties. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, and at the request of the Required Lenders shall, exercise any rights and remedies provided to the Administrative Agent under the Loan Documents or at law or equity, including all remedies provided under the UCC.

SECTION 7.02. Limited Right to Cure. Each Property serves as Collateral for the Loans. If and to the extent a non-monetary Default or Event of Default with respect to any individual Property (but, for the avoidance of doubt, no more than one Property) for which the cure period set forth herein has expired or the Borrowers have determined in the exercise of reasonable, good-faith judgment that it would not be commercially reasonable to cure a non-monetary Default with respect to any Property, in each case due to events or conditions beyond the reasonable control of the Borrowers, then, provided that no other Event of Default then exists, the Borrowers shall have the right to elect (by giving written notice thereof to the Administrative Agent) to request a release of such Property from the Lien of the Mortgage thereon, subject to and in accordance with satisfaction of the other release conditions set forth in Section 2.10, Section 6.03(a) and the definition of Permitted Sales, provided (1) the Borrowers shall not be required to satisfy the requirement that no Event of Default is then occurring and is continuing at the time of the release of the Property if the only Event of Default that exists relates to such Property, (2) unless the Property is being sold and conveyed on fair market terms to an arm’s-length third party purchaser (in which case the amount required to be paid by the Borrowers hereunder shall be the Release Price) the amount required to be paid by the Borrowers towards the Obligations under Section 2.10(c) shall be an amount equal to 100% of the Appraised Value of the applicable Property, (3) the Borrowers shall not be required to convey the Property on fair market terms to an arms-length third party purchaser, provided that such Property may not be conveyed to any other Borrower, (4) any such release must be completed by the Borrowers within ninety (90) days of any Borrower’s knowledge of such Default or Event of Default, as applicable, and (5) in addition to payment of the costs and expenses of the Administrative Agent and the Lenders in connection with such release (including those under Section 9.20), the Borrowers shall pay to the Administrative Agent all costs and expenses incurred by the Administrative Agent and the Lenders in connection with such Default or Event of Default. If the Borrowers exercise their right under this Section 7.02, following the release of the applicable Property, such Default or Event of Default shall be deemed to have been cured thereby for all purposes of this Agreement. For the avoidance of doubt, the foregoing shall not constitute any agreement by the Administrative Agent or any Lender to forbear or standstill in the exercise of any rights and remedies it may have while such Default or Event of Default (or any other Default or Event of Default) continues to exist.

ARTICLE VIIIThe Administrative Agent

SECTION 8.01. Appointment of Agency. Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf, including execution of the other Loan Documents, and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article VIII (other than Section 8.03) are solely for the benefit of the Administrative Agent and the Lenders, and the Loan Parties shall not have rights as a third party beneficiary of any of such provisions.

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SECTION 8.02. Rights and Powers of Administrative Agent.

(a)The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Loan Parties or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

(b)The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (i) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing and (ii) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02); provided, that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any applicable law. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until written notice thereof is given to the Administrative Agent by the Borrowers or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection with any Loan Document, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, (v) the creation, perfection or priority of Liens on the Collateral or the existence of the Collateral or (vi) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

(c)The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for any Loan Party), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

(d)The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent in good faith. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory

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provisions of this Article VIII shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

SECTION 8.03. Resignation and Replacement. The Administrative Agent may resign at any time by providing at least ten days prior written notice to the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrowers, to appoint a successor, which shall, unless an Event of Default has occurred and be continuing, be reasonably acceptable to the Borrowers. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a Person with an office in New York, New York, or an Affiliate of any such Person. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent; provided, that the retiring Administrative Agent shall be discharged from its duties and obligations hereunder immediately upon the effectiveness of its resignation. The fees payable by the Borrowers to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article VIII and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent and such retiring Administrative Agent, its sub-agents and their respective Related Parties shall continue to be subject to the terms and conditions of Section 9.12.

SECTION 8.04. No Joint Venture, Etc.

(a)Each Lender acknowledges and agrees that the extensions of credit made hereunder are commercial loans and not investments in a business enterprise or securities. Each Lender further represents that it is engaged in making, acquiring or holding commercial loans in the ordinary course of its business and has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement as a Lender, and to make, acquire or hold Loans hereunder. Each Lender shall, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information (which may contain material, non-public information within the meaning of the United States securities laws concerning the Borrowers and their Affiliates) as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder and in deciding whether or to the extent to which it will continue as a lender or assign or otherwise transfer its rights, interests and obligations hereunder.

(b)The Lenders are not partners or co‑venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Administrative Agent) authorized to act for, any other Lender. The Administrative Agent shall have the exclusive right on behalf of the Lenders to enforce the payment of the principal of and interest on any Loan after the date such principal or interest has become due and payable pursuant to the terms of this Agreement.

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SECTION 8.05. Agent as Representative, Etc.

(a)In its capacity, the Administrative Agent is a “representative” of the Secured Parties within the meaning of the term “secured party” as defined in the New York Uniform Commercial Code. Each Lender authorizes the Administrative Agent to enter into each of the Collateral Documents to which it is a party and to take all action contemplated by such documents. Each Lender agrees that no Secured Party (other than the Administrative Agent) shall have the right individually to seek to realize upon the security granted by any Collateral Document, it being understood and agreed that such rights and remedies may be exercised solely by the Administrative Agent for the benefit of the Secured Parties upon the terms of the Collateral Documents. In the event that any Collateral is hereafter pledged by any Person as collateral security for the Obligations, the Administrative Agent is hereby authorized, and hereby granted a power of attorney, to execute and deliver on behalf of the Secured Parties any Loan Documents necessary or appropriate to grant and perfect a Lien on such Collateral in favor of the Administrative Agent on behalf of the Secured Parties. The Lenders hereby authorize the Administrative Agent, at its option and in its discretion, to release any Lien granted to or held by the Administrative Agent upon any Collateral (i) as described in Section 9.02(c); (ii) as permitted by, but only in accordance with, the terms of the applicable Loan Document; or (iii) if approved, authorized or ratified in writing by the Required Lenders, unless such release is required to be approved by all of the Lenders hereunder. Upon request by the Administrative Agent at any time, the Lenders will confirm in writing the Administrative Agent’s authority to release particular types or items of Collateral pursuant hereto. The Administrative Agent shall not be required to execute any such document on terms which, in the Administrative Agent’s opinion, would expose the Administrative Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty.

(b)In case of the pendency of any bankruptcy, insolvency, receivership or other similar proceeding or any other judicial proceeding relative to any Borrower or any other Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on any Borrower or any other Loan Party) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise (i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Section 2.11 and Section 9.03) allowed in such judicial proceeding and (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and, in the case of each of clauses (i) and (ii) of this Section 8.05(b), any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 2.11 and Section 9.03.

(c)The Administrative Agent, on behalf of itself and the Secured Parties, shall have the right to credit bid and purchase for the benefit of the Administrative Agent and the other Secured

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Parties all or any portion of the Collateral at any sale thereof conducted by the Administrative Agent under the provisions of the UCC, including pursuant to Sections 9-610 or 9-620 of the UCC, at any sale thereof conducted under the provisions of the Bankruptcy Code, including Section 363 thereof, or a sale under a plan of reorganization, or at any other sale or foreclosure conducted by the Administrative Agent (whether by judicial action or otherwise) in accordance with applicable law. Each Lender hereby agrees that, except as otherwise provided in any Loan Documents or with the written consent of the Administrative Agent and the Required Lenders, it will not take any enforcement action, accelerate obligations under any Loan Documents, or exercise any right that it might otherwise have under applicable law to credit bid at foreclosure sales, UCC sales or other similar dispositions of the Collateral.

(d)No Secured Party that is party to a Swap Agreement that obtains the benefits of Section 2.18(b) or any Collateral with respect to the related Swap Obligations, by virtue of the provisions hereof or of any Collateral Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article VIII to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Swap Agreements unless the Administrative Agent has received written notice of such Swap Agreements together with such supporting documentation as the Administrative Agent may request, from the applicable Secured Party.

ARTICLE IX
Miscellaneous

SECTION 9.01. Notices; Effectiveness; Electronic Communication.

(a)Subject to Section 9.01(b), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, or electronic mail, as follows:

(i)if to the Borrowers, to:

c/o Sears Holdings Corporation
3333 Beverly Road
Hoffman Estates, Illinois 60179
Attention: General Counsel
email: counsel@searshc.com
Fax: (847) 286-2471
with a copy to:
Sears Holdings Corporation
3333 Beverly Road, Dept. 824RE
Hoffman Estates, Illinois 60179
Attention: Vice President Real Estate

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and a copy to:
Sears Holdings Corporation
3333 Beverly Road, Dept. 824RE
Hoffman Estates, Illinois 60179
Attention: Associate General Counsel, Real Estate
and a copy to:
Wachtell, Lipton, Rosen & Katz51 West 52^nd Street
New York, New York 10019
Attention: Scott Charles
email: SKCharles@wlrk.com
and a copy to:
DLA Piper LLP
550 South Hope Street, Suite 2300
Los Angeles, California 90071
Fax: (213) 330-7536
email: michael.hamilton@dlapiper.com

(ii)if to the Administrative Agent, to:

UBS AG, Stamford Branch
600 Washington Boulevard
Stamford, Connecticut 06901
Attention: Agency Group
email: Agency-UBSAmericas@ubs.com
Fax: (203) 719-3888
with a copy to:
Hunton & Williams LLP
200 Park Avenue
New York, New York 10166
Attention: Brett L. Gross
email: bgross@hunton.com
Fax: (212) 954-5103

and

(iii)if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b)Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided, that the foregoing shall not apply to

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notices to any Lender pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrowers may, in its or their discretion, agree to accept notices and other communications to it or them hereunder by electronic communications pursuant to procedures approved by it or them; provided, that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided, that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

(c)The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF ANY MATERIALS OR INFORMATION PROVIDED BY OR ON BEHALF OF THE BORROWERS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM ANY MATERIALS OR INFORMATION PROVIDED BY OR ON BEHALF OF THE BORROWERS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH ANY MATERIALS OR INFORMATION PROVIDED BY OR ON BEHALF OF THE BORROWERS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to any Borrower, any Lender or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of any Borrower’s or the Administrative Agent’s transmission of any materials or information provided by or on behalf of any Borrower through the internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to any Borrower, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

(d)Any party hereto may change its address or other information for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

SECTION 9.02. Waivers; Amendments.

(a)No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise

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of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Borrower therefrom shall in any event be effective unless the same shall be permitted by Section 9.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.

(b)Neither this Agreement, any other Loan Document, nor any provision hereof or thereof, may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders or by the Borrowers and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall:

(i)reduce the principal amount of any Loan or reduce the rate of interest thereon (excluding any waiver of Default Interest), or reduce any fees payable hereunder, without the written consent of each Lender directly affected thereby;

(ii)postpone the scheduled date of payment of the principal amount of any Loan (other than any reduction of the amount of, or any extension of the payment date for, the mandatory repayments required under Section 2.10, in each case which shall only require the approval of the Required Lenders), or any interest or any fees payable hereunder (excluding any waiver of Default Interest), or reduce the amount of, waive or excuse any such payment, without the written consent of each Lender directly affected thereby;

(iii)change any provision of Section 2.18(a) or any other provision of any Loan Document in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender;

(iv)change any of the provisions of this Section 9.02 or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;

(v)release any Borrower or any other Loan Party from its obligations under the Loan Documents without the written consent of each Lender; or

(vi)except as provided in Section 9.02(c) or in any Collateral Document, release all or substantially all of the Collateral, without the written consent of each Lender;

providedfurther that (x) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent and (y) only the consent of the parties to the Fee Letter shall be required to amend, modify or supplement the terms thereof.

(c)The Lenders hereby irrevocably authorize the Administrative Agent, at its option and in its sole discretion, to release any Liens granted to the Administrative Agent by the Loan Parties on any Collateral (i) upon payment and satisfaction in full in cash of all Obligations (other than Unliquidated Obligations), (ii) subject to the terms and conditions of Section 9.20 if the Borrowers

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certify to the Administrative Agent that the sale or disposition is made in compliance with the terms of this Agreement (and the Administrative Agent may rely conclusively on any such certificate, without further inquiry) or (iii) as required to effect any sale or other disposition of such Collateral in connection with any exercise of remedies of the Administrative Agent and the Lenders pursuant to Article VII. Any such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of the Loan Parties in respect of) all interests retained by the Loan Parties, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral.

(d)If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender directly affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then the Borrowers may elect to replace a Non-Consenting Lender as a Lender party to this Agreement; provided, that concurrently with such replacement, (i) another Person reasonably satisfactory to the Borrowers and the Administrative Agent shall agree, as of such date, to purchase for cash the Loans and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of Section 9.04(b), and (ii) the Borrowers shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrowers hereunder to and including the date of termination (or, if such date of termination is not an Interest Payment Date, through and including the next such Interest Payment Date), including without limitation payments due to such Non-Consenting Lender under Section 2.15 and Section 2.17, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 2.16 had the Loans of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender.

(e)Notwithstanding anything to the contrary herein the Administrative Agent may, with the consent of the Borrowers only, amend, modify or supplement this Agreement or any of the other Loan Documents to cure any obvious error or error or omission of a technical and immaterial nature.

SECTION 9.03. Expenses; Indemnity; Damage Waiver.

(a)The Borrowers shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent (including all reasonable and documented out-of-pocket fees, costs and expenses (including, without limitation, due diligence expenses, third party real property diligence, and travel expenses)), in connection with the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonable and documented out‑of‑pocket expenses incurred by the Administrative Agent or any Lender (including the reasonable and documented out-of-pocket fees, charges and disbursements of any counsel for the Administrative Agent or any Lender) in connection with the enforcement or protection of its rights (A) in connection with this Agreement and any other Loan Document, including its rights under this Section 9.03 or (B) in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

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(b)Subject to the terms of Section 9.14, the Borrowers shall jointly and severally indemnify the Administrative Agent (or any sub-agent thereof) and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages and liabilities and the reasonable and documented out-of-pocket expenses (including the reasonable and documented fees, charges and disbursements of any counsel for any Indemnitee), incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by any Borrower, or any Environmental Liability related in any way to any Borrower or any Property, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Loan Party or any of its Subsidiaries, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from (y) the gross negligence or willful misconduct of such Indemnitee or (z) any dispute solely among Indemnitees which does not arise out of any act or omission of the Borrowers or any of their Affiliates (other than any proceeding against the Administrative Agent solely in its capacity as such). This Section 9.03(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims or damages arising from any non-Tax claim.

(c)To the extent that the Borrowers fail to pay any amount required to be paid by it to the Administrative Agent under Section 9.03(a) or Section 9.03(b), each Lender severally agrees to pay to the Administrative Agent such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount (it being understood that the failure of the Borrowers to pay any such amount shall not relieve the Borrowers of any default in the payment thereof or the obligation of the Borrowers to reimburse each Lender for all amounts paid by such Lender in connection with such failure); provided, that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such.

(d)To the extent permitted by applicable law, the Borrowers and their Related Parties shall not assert, and hereby waive, any claim against any Indemnitee (i) for any damages arising from the use by others of information or other materials obtained through telecommunications, electronic or other information transmission systems (including the internet), or (ii) on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with the Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

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(e)To the extent not paid on the Effective Date, all amounts due under this Section 9.03 shall be payable not later than ten days after written demand therefor.

SECTION 9.04. Successors and Assigns.

(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 9.04. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in Section 9.04(c)) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)Required Consents.

(i)Subject to the conditions set forth in Section 9.04(b)(ii), any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of the Loans at the time owing to it) with the prior written consent of:

(A)the Borrowers (provided that the Borrowers shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five (5) Business Days after having received notice thereof), such consent not to be unreasonably withheld or conditioned; provided, further, that no consent of the Borrowers shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee; and

(B)the Administrative Agent.

(ii)Assignments shall be subject to the following additional conditions:

(A)no assignments shall be made to any Borrower or any Affiliate or Subsidiary thereof;

(B)no assignments shall be made to a natural person;

(C)except in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Loans, the amount of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrowers and the Administrative Agent otherwise consent, provided that no such consent of the Borrowers shall be required if an Event of Default has occurred and is continuing; provided, further, that in the case of contemporaneous assignments to any Lender

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and its Affiliates or Approved Funds, such amounts shall be aggregated for purposes of this Section 9.04(b)(ii)(C);

(D)each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement;

(E)the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500 (which fee may be waived or reduced by the Administrative Agent in its sole discretion), such fee to be paid by either the assigning Lender or the assignee Lender or shared between such Lenders; and

(F)the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the assignee designates one or more credit contacts to whom all syndicate-level information will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable laws, including federal and state securities laws.

(iii)[Reserved]

(iv)Subject to acceptance and recording thereof pursuant to Section 9.04(b)(v), from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 2.15, Section 2.16, Section 2.17 and Section 9.03); provided, that any such assigning Lenders shall continue to be subject to the terms and conditions of Section 9.12. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 9.04(c).

(v)The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders and principal amount (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrowers, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement and the other Loan Documents. The Register shall be available for inspection by the Borrowers, the Administrative Agent and its Affiliates, and any Lender (as to its own holdings only), at any reasonable time and from time to time upon reasonable prior notice.

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(vi)Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Eligible Assignee, the Eligible Assignee’s completed Administrative Questionnaire (unless the Eligible Assignee shall already be a Lender hereunder), delivery of any tax deliverables required under Section 2.17, the processing and recordation fee referred to in Section 9.04(b) and any written consent to such assignment required by Section 9.04(b), the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register; provided, that if either the assigning Lender or the Eligible Assignee shall have failed to make any payment required to be made by it pursuant to Section 2.18(e) or Section 9.03(c), the Administrative Agent shall have no obligation to accept such Assignment and Assumption and record the information therein in the Register unless and until such payment shall have been made in full, together with all accrued interest thereon. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this Section 9.04(b)(vi).

(c)Any Lender may, without the consent of the Borrowers or the Administrative Agent, sell participations to one or more banks or other entities (other than a natural person or a Loan Party) (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged; (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; and (C) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided, that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. The Borrowers agree that each Participant shall be entitled to the benefits of Section 2.15, Section 2.16 and Section 2.17 (subject to the requirements and limitations therein, including the requirements under Section 2.17(f) (it being understood that the documentation required under Section 2.17(f) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 9.04(b); provided that such Participant (A) agrees to be subject to the provisions of Section 2.18 and Section 2.19 as if it were an assignee under Section 9.04(b); and (B) shall not be entitled to receive any greater payment under Section 2.15 or Section 2.17, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(d) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided, that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in the Loans or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries

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in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(d)Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section 9.04 shall not apply to any such pledge or assignment of a security interest; provided, that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid. The provisions of Section 2.15, Section 2.16, Section 2.17 and Section 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans or the termination of this Agreement or any other Loan Document or any provision hereof or thereof.

SECTION 9.06. Counterparts; Integration; Effectiveness.

(a)This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

(b)Delivery of an executed counterpart of a signature page of this Agreement by telecopy, e-mailed .pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of

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the remaining provisions thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final and in whatever currency denominated) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrowers or any other Loan Party against any of and all of the Obligations held by such Lender, irrespective of whether or not such Lender shall have made any demand under the Loan Documents and although such obligations may be unmatured. The rights of each Lender under this Section 9.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. Each Lender agrees to notify the Borrowers and the Administrative Agent promptly after any such setoff and application by such Lender; provided, that the failure to give such notice shall not affect the validity of such setoff and application.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.

(a)This Agreement and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of New York, except that at all times the provisions for the creation, perfection, and enforcement of the lien and security interest created pursuant to any Mortgage shall be governed by and construed according to the law of the State in which the Property subject to such Mortgage is located, it being understood that, to the fullest extent permitted by the law of such State, the law of the State of New York shall govern the construction, validity and enforceability of all Loan Documents and all of the obligations arising hereunder or thereunder.

(b)Each Borrower irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Administrative Agent, any Lender or any Related Party of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by Applicable Law, in such federal court.  Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or in any other Loan Document shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Borrower or its respective properties its properties in the courts of any jurisdiction.

(c)Each party hereto hereby irrevocably waives personal service of any and all legal process, summons, notices and other documents and other service of process of any kind and consents to such service in any suit, action or proceeding brought in the United States with respect to or otherwise arising out of or in connection with this Agreement or any other Loan Document by any

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means permitted by applicable law, including by the mailing thereof (by registered or certified mail, postage prepaid) to the address of such party, and in the manner provided for notices, in Section 9.01 (and shall be effective when such mailing shall be effective, as provided therein). Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(d)Nothing contained in this Section 9.09 shall affect the right of the Administrative Agent or any other Secured Party to serve process in any other manner permitted by applicable law or commence legal proceedings or otherwise proceed against any Borrower or any other Loan Party in any other jurisdiction.

(e)Whenever pursuant to this Agreement, the Administrative Agent exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to the Administrative Agent, the decision of the Administrative Agent to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of the Administrative Agent and shall be final and conclusive.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Related Parties on a need to know basis (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential in accordance with this Section 9.12), (b) to the extent requested by any regulatory authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process in which case the Administrative Agent or such Lender, as applicable, shall, to the extent practicable and permitted by applicable law, inform the Borrowers promptly in advance thereof, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies under this Agreement or any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 9.12, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any

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actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to the Borrowers and their obligations, this Agreement or payments hereunder, (g) on a confidential basis to (i) any rating agency in connection with rating any Borrower or the credit facilities evidenced by this Agreement or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to the credit facilities evidenced by this Agreement, (h) with the consent of the Borrowers or (i) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 9.12 or (ii) becomes available to the Administrative Agent, any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than any Borrower. For the purposes of this Section 9.12, “Information” means all information received from any Loan Party or any Affiliate thereof relating to the Loan Parties or their business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by any Loan Party or any Affiliate thereof. Any Person required to maintain the confidentiality of Information as provided in this Section 9.12 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding anything to the contrary herein or in any other agreement, (i) the Borrowers agree that the Information provided regarding the Borrowers and their Affiliates and the Transactions may be disseminated by or on behalf of the Administrative Agent or any Lender to prospective Lenders and other Persons who have agreed to be bound by customary confidentiality undertakings similar to this Section 9.12 (including, “click-through” agreements), all in accordance with the Administrative Agent’s or such Lender’s standard loan syndication practices (whether transmitted electronically by means of a website, e-mail or otherwise, or made available orally or in writing, including at potential lender or other meetings) and (ii) the Borrowers agree that the Administrative Agent and each Lender may share with its respective Affiliates on a confidential basis any information relating to the credit facility under this Agreement, the Transactions or the Borrowers or their Affiliates and, subject to the prior written consent of the Borrowers, after any public announcement of the Transactions, may disclose information relating to the credit facility under this Agreement to publications or for its marketing materials, with such information to consist of deal terms and other information customarily found in such publications or marketing materials and that, after the Effective Date, the Administrative Agent and each Lender may otherwise use the corporate name and logo of the Borrowers and its Affiliates in “tombstones” or other advertisements, marketing materials or public statements.

SECTION 9.13. USA Patriot Act. The Administrative Agent and each Lender that is subject to the requirements of the Patriot Act hereby notifies each Loan Party that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name and address of such Loan Party and other information that will allow the Administrative Agent and such Lender to identify such Loan Party in accordance with the Patriot Act.

SECTION 9.14. Exculpation. Subject to the qualifications below, neither the Administrative Agent nor any Secured Party shall enforce the liability and obligation of any Borrower to perform and observe the obligations contained in this Agreement or any other Loan Documents by any action or proceeding wherein a money judgment shall be sought against a Borrower, except that the Administrative Agent and the other Secured Parties may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable the Administrative Agent or such Secured Party to enforce and realize upon its interest under this Agreement and the other Loan Documents, or in the Properties or any other collateral given to the Administrative Agent and the other Secured Parties pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against the Borrowers only to the extent of such Borrower’s interest in the Properties and in any other collateral given to the Secured Parties, and the Administrative Agent and

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each other Secured Party, by accepting this Agreement and the other Loan Documents, agrees that it shall not sue for, seek or demand any deficiency judgment against the Borrowers in any such action or proceeding under or by reason of or under or in connection with this Agreement or the other Loan Documents. The provisions of this Section 9.14 shall not, however, (a) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (b) impair the right of the Administrative Agent or any other Secured Party to name any Borrower as a party defendant in any action or suit for foreclosure and sale under any of the Collateral Documents; (c) affect the validity or enforceability of any guaranty or indemnity made in connection with the Loans or any of the rights and remedies of the Administrative Agent or any other Secured Party thereunder; (d) impair the right of the Administrative Agent or any other Secured Party to obtain the appointment of a receiver; (e) impair the enforcement of any assignments of leases; (f) constitute a prohibition against the Administrative Agent or any other Secured Party to seek a deficiency judgment against the Borrowers in order to fully realize the security granted by each of the Collateral Documents or to commence any other appropriate action or proceeding in order for the Administrative Agent or any other Secured Party to exercise its rights and remedies against the Properties or any other collateral given to the Administrative Agent or any other Secured Party pursuant to the Loan Documents; or (g) constitute a waiver of the right of the Administrative Agent or any other Secured Party to enforce the liability and obligation of the Borrowers, by money judgment or otherwise, to the extent of any actual out-of-pocket loss, damage, cost, expense, liability, claim or other obligation incurred by the Administrative Agent or any other Secured Party (including attorneys’ fees and costs reasonably incurred but excluding consequential or punitive damages except to the extent Lender is required to make payment therefor to a third party) arising out of or in connection with, and the Borrowers shall be personally liable for, the following (all such liability and obligation of the Borrowers for any or all of the following being referred to herein as the “Recourse Liabilities”):

(A)fraud or intentional or material misrepresentation by any Borrower, any other Loan Party or any Affiliate thereof in connection with the Loans and the other Transactions;

(B)the gross negligence or willful misconduct by or on behalf of any Borrower, any other Loan Party or any Affiliate thereof or any of their respective agents or representatives in connection with the Loans and the other Transactions;

(C)the breach of any representation, warranty, covenant or indemnification provision in the HazMat Indemnity or in any Collateral Document concerning Environmental Laws and Hazardous Materials and any indemnification of the Administrative Agent and the other Secured Parties and other Persons with respect thereto in either document;

(D)the removal or disposal of any portion of any Property after an Event of Default (except to the extent such removal or disposition results from the enforcement by a creditor (with respect to Indebtedness that constitutes permitted Indebtedness under Section 6.01 when it was initially incurred) where the claims of such creditor are attributable to insufficient cash flow from the operations of the Properties to pay amounts owing, or the Borrowers do not otherwise have access to the cash flow from the Properties, in each case to the extent such lack of access was caused by such creditor’s exercise of remedies);

(E)the misappropriation, misapplication or conversion by any Borrower of (1) any insurance proceeds paid by reason of any Casualty Event, (2) any awards or other amounts received in connection with a condemnation of all or a portion of any Property,

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(3) any rents under the Master Lease, (4) any rents under any other Lease during the existence of an Event of Default or (5) any sales proceeds paid to or for the account of any Borrower in connection with any Purchase Option Exercise Event;

(F)any security deposits, advance deposits or any other deposits collected with respect to any Property which are not delivered to the Administrative Agent upon a foreclosure of such Property or action in lieu thereof, except to the extent any such security deposits were applied in accordance with the terms and conditions of the applicable leases prior to the occurrence of the Event of Default that gave rise to such foreclosure or action in lieu thereof;

(G)the failure of any Borrower to obtain and maintain in full force and effect fully paid for Policies as required by this Agreement or to pay any Taxes or assessments affecting any Property (except to the extent there is insufficient cash flow from the operation of the Properties to pay such amounts or the Borrowers do not otherwise have access to the cash flow from the Properties, in each case to the extent such lack of access was caused by the exercise of remedies by the Administrative Agent or any Lender);

(H)failure to pay charges for labor or materials or other charges that can create Liens on any portion of any Property (except to the extent there is insufficient cash flow from the operation of the Properties to pay such amounts or the Borrowers do not otherwise have access to the cash flow from the Properties so long as such charges were permitted under Section 6.02, in each case to the extent such lack of access was caused by the exercise of remedies by the Administrative Agent or any Lender);

(I)any material physical waste at any Property caused by the intentional acts or omissions of any Borrower, any other Loan Party or any Affiliate thereof or any of their principals, officers, agents, employees or contractors (it being agreed that intentional acts do not include waste arising from insufficient cash flow from the operations of the Properties, or the Borrowers’ lack of access to the cash flow from the Properties, in each case to the extent such lack of access was caused by the exercise of remedies by the Administrative Agent or any Lender);

(J)[reserved];

(K)the payment of fees or other amounts by any Borrower to any of its Affiliates in violation of the Loan Documents;

(L)any commission of a criminal act by a Borrower, any other Loan Party or any Affiliate thereof resulting in the seizure, forfeiture or loss of any Property or any portion thereof;

(M)the breach of any representation, warranty or covenant set forth in Section 3.10 or Section 6.11;

(N)except for the Springing Recourse Event described in (1)(B) below, if any Borrower fails to maintain its status as a single purpose entity as required by, and in accordance with, the terms and provisions of this Agreement (except to the extent the same arises from insufficient cash flow from the operation of the Properties to pay such amounts, or the Borrowers’ lack of access to the cash flow from the Properties, in each case to the

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extent such lack of access was caused by the exercise of remedies by the Administrative Agent or any Lender);

(O)the breach of any backward looking representations set forth in Section 3.38;

(P)except for the Springing Recourse Event described in (3) below, if any Borrower fails to obtain the prior written consent of the Administrative Agent or the Required Lenders to any voluntary Transfer of any Property, except to the extent expressly permitted under Section 6.03 (it being agreed that transfers are not voluntary if they arise from insufficient cash flow from the operations of the Properties, or the Borrowers’ lack of access to the cash flow from the Properties as a result of the exercise of remedies by the Administrative Agent or any Lender);

(Q)failure of the Borrowers to obtain and maintain the LIBOR Cap as required pursuant to Section 5.15; or

(R)if any Borrower, any other Loan Party or any Affiliate thereof contests, impedes, delays or opposes the exercise by the Administrative Agent or any other Secured Party of any enforcement actions, remedies or other rights it has under or in connection with this Agreement or the other Loan Documents or objects to any notice of strict foreclosure or similar notice; provided, that neither the Borrowers nor any other Loan Party shall be liable to the extent of any applicable loss, damage, cost, expense, liability, claim or other obligation arising solely from a defense of the Borrowers, or any other Loan Party or any Affiliate thereof raised in good faith.

Notwithstanding anything to the contrary in this Agreement or any of the other Loan Documents, (A) neither the Administrative Agent nor any other Secured Party shall be deemed to have waived any right which such Person may have under Section 506(a), 506(b) or 1111(b) or any other provisions of the Bankruptcy Code or any other Debtor Relief Law to file a claim for the full amount of the Obligations or to require that all Collateral shall continue to secure all of the Obligations in accordance with the Loan Documents, and (B) the Obligations shall be fully recourse to each Borrower in the event that any of the following occurs (each, a “Springing Recourse Event”): (1) any Borrower (A) fails to permit on-site inspections of any Property after five (5) Business Days prior written notice to the Borrowers where the Administrative Agent has a reasonable basis to believe that there is a risk that Hazardous Materials are located on a Property in violation of any Environmental Law as required by, and in accordance with the terms and provisions of, this Agreement and the other Loan Documents or (B) fails to maintain its status as a single purpose entity as required by, and in accordance with, the terms and provisions of this Agreement, which failure is cited as a factor in a substantive consolidation of the assets and liabilities of such Borrower with any other Person in connection with a proceeding under any Debtor Relief Law; (2) any Borrower fails to obtain the prior written consent of the Administrative Agent or the Required Lenders, as the case may be, to any voluntary Indebtedness for borrowed money or voluntary Lien securing borrowed money and encumbering any Property or any part thereof or interest therein except to the extent expressly permitted by this Agreement (it being agreed that Liens or Indebtedness are not voluntary if they arise from insufficient cash flow from the operation of the Properties, or the Borrowers’ lack of access to the cash flow from the Property caused by the Administrative Agent’s exercise of remedies); (3) any Borrower fails to obtain the prior written consent of the Administrative Agent or the Required Lenders to any voluntary Transfer with respect to all, substantially all, or a material portion (it being agreed that material portion shall mean any portion material to and necessary for the operation of such Property) of the real estate comprising any Property,

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except to the extent expressly permitted under Section 6.03 (it being agreed that transfers are not voluntary if they arise from insufficient cash flow from the operations of the Properties, or the Borrowers’ lack of access to the cash flow from the Properties as a result of the exercise of remedies by the Administrative Agent or any Lender); (4) any Borrower files a voluntary petition under any Debtor Relief Law; (5) an Affiliate, officer, director, or representative which controls, directly or indirectly, any Borrower files, or joins in the filing of, an involuntary petition against any Borrower under any Debtor Relief Law, or solicits or causes to be solicited petitioning creditors for any involuntary petition against any Borrower from any Person; (6) any Borrower files an answer consenting to or otherwise acquiescing (i.e., failing to object to such filing to the extent any Loan Party or any Affiliate, officer, director, or representative of the Borrowers has a good faith basis to object) in or joining in any involuntary petition filed against it by any other Person under the any Debtor Relief Law, or solicits or causes to be solicited petitioning creditors for any involuntary petition against any Borrower from any Person; (7) any Affiliate, officer, director, or representative which controls, directly or indirectly, any Borrower consents to or acquiesces (i.e., fails to object to such filing to the extent any Loan Party, or any Affiliate, officer, director, or representative of the Borrowers has a good faith basis to object) in or joins in an application for the appointment of a custodian, receiver, trustee, or examiner for any Borrower or any portion of the Property; (8) any Borrower makes an assignment for the benefit of creditors, or admits, in writing or in any action or proceeding, its insolvency or inability to pay its debts as they become due (unless such admission was made to the Administrative Agent or the Lenders or was required to be made in such legal proceeding in order to not violate any applicable law); (9) the first full monthly payment of interest under this Agreement is not paid when due; (10) the Master Lease or Master Lease Guaranty is amended, modified or terminated without the prior written consent of the Administrative Agent or the Required Lenders, as the case may be, other than as expressly permitted by this Agreement; or (11) any Ground Lease is amended, modified or terminated without the prior written consent of the Administrative Agent or the Required Lenders, as the case may be, other than as expressly permitted by this Agreement.

In addition, notwithstanding anything contained in this Agreement, no direct or indirect principal, director, officer, employee, beneficiary, shareholder, partner, member, trustee, agent, representative or Affiliate of any Loan Party (but specifically excluding Guarantor’s obligations under the Guaranty Agreement and the HazMat Indemnity) or any legal representatives, successors or assigns of any of the foregoing (collectively, the “Exculpated Parties”) (other than pursuant to this Agreement, the Guaranty Agreement or the HazMat Indemnity) shall have any personal liability for, nor be joined as a party to any action with respect to (i) the payment of any sum of money which is or may be payable hereunder or under any other Loan Document (including, but not limited to, the repayment of the Obligations) or (ii) the performance or discharge of any covenants, obligations or undertakings of the Borrowers with respect thereto.

SECTION 9.15. Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a)the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

(b)the effects of any Bail-In Action on any such liability, including, if applicable:

(i)a reduction in full or in part or cancellation of any such liability;

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(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.

SECTION 9.16. Interest Rate Limitation. This Agreement and the other Loan Documents are subject to the express condition that at no time shall the Borrowers be required or obligated to pay interest on the principal balance of the Loans at a rate which could subject any Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan Documents, the Borrowers are at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the rate of interest charged hereunder, including Default Interest, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to the Lenders for the use, forbearance, or detention of the sums due under the Loans shall, to the extent permitted by the applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loans does not exceed the Maximum Legal Rate from time to time in effect and applicable to the Loans for so long as any Loans are outstanding.

SECTION 9.17. No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each Borrower acknowledges and agrees that: (i) (A) the arranging and other services regarding this Agreement provided by the Lenders are arm’s-length commercial transactions between the Borrowers, on the one hand, and the Lenders and their Affiliates, on the other hand, (B) each Borrowers has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) each of the Lenders and their Affiliates is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrowers or any of their Affiliates, or any other Person and (B) no Lender or any of its Affiliates has any obligation to any Borrower or any Affiliate thereof with respect to the transactions contemplated hereby except, in the case of a Lender, those obligations expressly set forth herein and in the other Loan Documents; and (iii) each of the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrowers and their Affiliates, and no Lender or any of its Affiliates has any obligation to disclose any of such interests to any Borrower or any Affiliates thereof. To the fullest extent permitted by law, each Borrower hereby waives and releases any claims that it may have against each of the Lenders and their Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

SECTION 9.18. Independent Effect of Covenants. Each Borrower expressly acknowledges and agrees that each covenant contained in this Agreement and the other Loan Documents shall be given independent effect. Accordingly, the Borrowers shall not engage in any transaction or other act otherwise permitted under any covenant contained in this Agreement or any other Loan Document, if

94

before or after giving effect to such transaction or act, the Borrowers shall or would be in breach of any other covenant contained in this Agreement or any other Loan Document.

SECTION 9.19. Inconsistencies with Other Documents. In the event there is a conflict or inconsistency between this Agreement and any other Loan Document, the terms of this Agreement shall control; provided, that any provision of any Collateral Document which imposes additional burdens on any Borrower or further restricts the rights of any Borrower or gives the Administrative Agent or Lenders additional rights shall not be deemed to be in conflict or inconsistent with this Agreement and shall be given full force and effect.

SECTION 9.20. Partial Release. Subject to the satisfaction of the Release Conditions, the Administrative Agent shall release the Liens granted to the Administrative Agent by the Borrowers on any Property in connection with a Permitted Sale thereof, a Casualty Event with respect thereto or a Purchase Option Exercise Event. In connection with any such release, the Lenders hereby irrevocably authorize the Administrative Agent to enter into any agreement, document or certificate to release or evidence the release of any such Liens granted to the Administrative Agent by the Borrowers on any such Property subject to a release. Any such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of the Borrowers in respect of) all interests retained by the Borrowers, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral. The Borrowers shall pay all expenses incurred by the Administrative Agent, including fees and expenses of the Administrative Agent’s counsel, in connection with each such release.

SECTION 9.21. Publicity. All news releases, publicity or advertising by any Borrower or its Affiliates through any media which refers to the Loan, the Loan Documents, the Administrative Agent, any Lender or any of their respective Affiliates shall be subject to the prior approval of the Administrative Agent or such Lender, as the case may be (such approval not to be unreasonably withheld, conditioned or delayed). The Borrowers authorize the Administrative Agent and each Lender to issue press releases, advertisements and other promotional materials in connection with the Administrative Agent’s or such Lender’s own promotional and marketing activities, and such materials may describe the Loans in general terms or in detail and the Administrative Agent’s or such Lender’s participation therein in the Loans; provided, that absent an Event of Default, the prior written consent of the Borrowers shall be required with respect thereto.

SECTION 9.22. Additional Titles. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Lead Arranger shall not have any duties or responsibilities, nor shall the Lead Arranger have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Lead Arranger.

[remainder of page intentionally blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

BORROWERS:

SRC O.P. LLC, a Delaware limited liability company

By:    /s/ Robert A. Riecker    
Name:    Robert A. Riecker
Title:    Authorized Signatory

SRC FACILITIES LLC, a Delaware limited liability company

By:    /s/ Robert A. Riecker    
Name:    Robert A. Riecker
Title:    Authorized Signatory

SRC REAL ESTATE (TX), LLC, a Delaware limited liability company

By:    /s/ Robert A. Riecker    
Name:    Robert A. Riecker
Title:    Authorized Signatory

ADMINISTRATIVE AGENT:

UBS AG, STAMFORD BRANCH

By:    /s/ Craig Pearson    
Name: Craig Pearson    
Title:    Associate Director    

By:    /s/ Houssem Daly    
Name: Houssem Daly    
Title:    Associate Director    

LENDERS:

UBS AG, STAMFORD BRANCH

By:    /s/ Craig Pearson    
Name:     Craig Pearson    
Title:    Associate Director    

By:    /s/ Houssem Daly    
Name:     Houssem Daly    
Title:    Associate Director    

Schedule 1.01

Properties

Each property listed below is a “Property” for all purposes of the Credit Agreement and the other Loan Documents. Three Properties designated with a ** will not be subject to a Mortgage at closing.

	Store Number	Address	City	County	State
1	2819	3115 Airport Way	Fairbanks	Fairbanks North Star Borough	AK
2	1228	1601 Arden Way	Arden	Sacramento	CA
3	4371	2875 Santa Maria Way	Santa Maria	Santa Barbara	CA
4	1141	14200 E. Alameda Avenue	Aurora	Arapahoe	CO
5	1221	1650 Briargate Blvd	Colorado Springs	El Paso	CO
6	1281	3201 Dillon Dr	Pueblo	Pueblo	CO
7	1831	16395 Washington Street	Thornton	Adams	CO
8	1043	470 Lewis Ave	Meriden	New Haven	CT
9	1263	425 Union St	Waterbury	New Haven	CT
10	7979	3555 St. Johns Bluff Road South	Jacksonville	Duval	FL
11	8065	3301 NW 107th Ave	Doral	Miami-Dade	FL
12	1035	3450 Wrightsboro Road	Augusta	Richmond	GA
13	1095	6580 Douglas Blvd	Douglasville	Douglas	GA
14	1155	400 Ernest W Barrett Pkwy Nw	Kennesaw	Cobb	GA
15	1565	1300 Southlake Mall	Morrow(Southlake)	Clayton	GA
16	1685	2100 Pleasant Hill Road	Duluth	Gwinnett	GA
17	2845	3700 Atlanta Highway	Athens	Clarke	GA
18	8745	4650, 4616 & 4740 Hugh Howell Road; 2301 Mountain Industrial Boulevard	Tucker	DeKalb	GA
19	1012	4000 Merle Hay Road**	Des Moines	Polk	IA
20	2422	4480 Sergeant Road	Sioux City	Woodbury	IA
21	2760	320 W Kimberly Road	Davenport	Scott	IA
22	1172	5 Stratford Square	Bloomingdale	Dupage	IL
23	1321	2200 W War Memorial Dr Ste 998	Peoria	Peoria	IL
24	1570	2 Woodfield Mall	Schaumburg	Cook	IL
25	1780	104 White Oaks Mall	Springfield	Sangamon	IL
26	1820	5000 Spring Hill Mall	West Dundee	Kane	IL
27	1840	6501 95Th Street	Chicago Ridge	Cook	IL
28	2121	1607 36Th Street	Peru	La Salle	IL
29	2360	3400 Quincy Mall	Quincy	Adams	IL
30	1600	6020 E 82Nd St	Indianapolis	Marion	IN
31	1650	2300 Southlake Mall	Merrillville	Lake	IN
32	1680	10202 E Washington Street	Indianapolis	Marion	IN
33	1800	6501 Grape Road	Mishawaka	St. Joseph	IN
34	2290	3901 Franklin Street	Michigan City	Laporte	IN
35	1642	1781 SW Wanamaker Road	Topeka	Shawnee	KS
36	1730	3000 Mall Road	Florence	Boone	KY
37	1077	3601 Southern Ave	Shreveport	Caddo Parish	LA
38	1086	9001 Cortana Place	Baton Rouge	East Baton Rouge Parish	LA
39	1116	4800 Millhaven Road	Monroe	Ouachita Parish	LA
40	1147	6501 Blubonnet Boulevard	Baton Rouge	East Baton Rouge Parish	LA
41	1226	4400 Veterans Memorial Boulevard	Metairie	Jefferson Parish	LA

	Store Number	Address	City	County	State
42	2087	3401 Masonic Dr	Alexandria	Rapides Parish	LA
43	2677	2950 E. Texas Street	Bossier City	Bossier Parish	LA
44	1033	1009 South Washington Street	North Attleboro	Bristol	MA
45	1104	521 Donald Lynch Blvd	Marlborough	Middlesex and Worcester	MA
46	1223	200 Westgate Dr	Brockton-Westgate	Plymouth	MA
47	2934	8 Galleria Mall Drive	Taunton	Bristol	MA
48	1074	11170 Mall Circle	Waldorf	Charles	MD
49	1634	6901 Security Blvd	Baltimore	Baltimore	MD
50	1754	701 Russell Ave	Gaithersburg	Montgomery	MD
51	1854	8200 Perry Hall	Nottingham	Baltimore	MD
52	1011	3622 Rivertown Pkwy Sw	Grandville	Kent	MI
53	1092	35000 Warren Road **	Westland	Wayne	MI
54	1110	6780 S Westnedge Ave	Portage	Kalamazoo	MI
55	1192	5500 Harvey St	Muskegon	Muskegon	MI
56	1700	18900 Michigan Ave	Dearborn	Wayne	MI
57	1720	14100 Lakeside Circle	Sterling Hts	Macomb	MI
58	1760	27600 Novi Road	Novi	Oakland	MI
59	2040	5575 B Drive N	Battle Creek	Calhoun	MI
60	2180	1212 S Airport Road W	Traverse City	Grand Traverse	MI
61	9693	Shortcut Road	Marine City	St Clair	MI
62	8702	2700 Winter St Ne	Minneapolis	Hennepin	MN
63	1042	101 N Rangeline Road	Joplin	Jasper	MO
64	1171	2825 S Glenstone Ave, Suite 500	Springfield	Greene	MO
65	1182	3 Mid Rivers Mall Dr	St. Peters	St. Charles	MO
66	1222	250 S County Center Way	St. Louis	St. Louis County	MO
67	1690	1 Chesterfield Mall	Chesterfield	St. Louis	MO
68	1822	330 Siemers Drive	Cape Girardeau	Cape Girardeau County	MO
69	1166	1740 Bonita Lakes Circle	Meridian	Lauderdale	MS
70	1306	1000 Turtle Creek Dr	Hattiesburg	Lamar	MS
71	1165	1480 Concord Parkway	Concord	Cabarrus	NC
72	1375	3320 Silas Creek Pkwy	Winston Salem	Forsyth	NC
73	1605	7330 Old Wake Forest Road	Raleigh	Wake	NC
74	1805	4601 Glenwood Ave Unit 1	Raleigh	Wake	NC
75	2175	3600 S. Memorial Drive	Greenville	Pitt	NC
76	2515	1940 US Highway 70 SE	Hickory	Catawba	NC
77	7385	819 E Six Forks Road	Raleigh	Wake	NC
78	1712	2800 S Columbia Road	Grand Forks	Grand Forks	ND
79	1022	3420 Oak View Drive	Oakview	Douglas	NE
80	1314	51 Us Hwy #1	New Brunswick	Middlesex	NJ
81	1554	4409 Black Horse Pike	Mays Landing	Atlantic	NJ
82	1614	112 Eisenhower Pkwy Ste 2A	Livingston	Essex	NJ
83	1734	300 Quaker Bridge Mall	Lawrenceville	Mercer	NJ
84	1764	Route 80 & Mt. Hope Avenue	Rockaway	Morris	NJ
85	1874	2501 Mt Holly Road	Burlington	Burlington	NJ
86	1717	10000 Coors Bypass Nw	Albuquerque	Bernalillo	NM
87	2207	1000 S Main St	Roswell	Chaves	NM

	Store Number	Address	City	County	State
88	1504	4475 Transit Road	Clarence	Erie	NY
89	4928	308 Dix Avenue	Queensberry	Warren	NY
90	1051	17271 Southpark Ctr	Strongsville	Cuyahoga	OH
91	1120	5053 Tuttle Crossing Blvd	Columbus	Franklin	OH
92	1210	1400 Polaris Parkway	Columbus	Delaware	OH
93	1710	5000 Great Northern Mall	North Olmsted	Cuyahoga	OH
94	2010	600 Richland Mall	Mansfield	Richland	OH
95	2390	1475 Upper Valley Pike	Springfield	Clark	OH
96	4937	1470 North Bridge Street	Chillicothe	Ross	OH
97	1545	205 W. Blackstock Road	Spartanburg	Spartanburg	SC
98	1595	700 Haywood Road	Greenville	Greenville	SC
99	2305	3101 N. Main Street	Anderson	Anderson	SC
100	2855	2068 Sam Rittenberg Boulevard	Charleston	Charleston	SC
101	1315	401 Northgate Mall	Chattanooga	Hamilton	TN
102	8206	640 Thompson Lane	Nashville	Davidson	TN
103	447	3, 1501 & 1602 Kings Road; 2850 & 3150 Marquis Drive	Garland	Dallas	TX
104	1027	750 Sunland Park Drive	El Paso	El Paso	TX
105	1076	2401 S Stemmons Fwy	Lewisville	Denton	TX
106	1176	999 Pasadena Blvd	Pasadena	Harris	TX
107	1187	3000 Town East Mall	Mesquite	Dallas	TX
108	1217	1305 Airline Road	Corpus Christi	Nueces	TX
109	1267	1800 Green Oaks Road	Fort Worth	Tarrant	TX
110	1297	1101 Melbourne Road	Hurst	Tarrant	TX
111	1307	4310 Buffalo Gap Road	Abilene	Taylor	TX
112	1317	8401 Gateway Blvd W	El Paso	El Paso	TX
113	1327	1000 San Jacinto Mall	Baytown	Harris	TX
114	1337	851 N Central Expwy	Plano	Collin	TX
115	1367	6001 W Waco Dr	Waco	Mclennan	TX
116	1377	7925 Fm 1960 Road W	Houston	Harris	TX
117	1387	7701 Interstate Highway 40 W	Amarillo	Potter	TX
118	1407	6461 Eastex Fwy	Beaumont	Jefferson	TX
119	1417	20131 Highway 59 N	Humble	Harris	TX
120	1427	6909 N Loop 1604 E	San Antonio	Bexar	TX
121	1447	4900 S. Hulen Street	Hulen	Tarrant	TX
122	1487	12701 Ridgeline Boulevard	Austin	Williamson	TX
123	2197	10000 Emmett F Lowry Expy	Texas City	Galveston	TX
124	2247	5300 San Dario Avenue	Laredo	Webb	TX
125	2497	2320 N Expressway	Brownsville	Cameron	TX
126	2547	1502 Harvey Road	College Station	Brazos	TX
127	2557	3510 McCann Road	Longview	Gregg	TX
128	2587	2201 S. Interstate 35 E	Denton	Denton	TX
129	8147	7353 NW Loop 410	San Antonio	Bexar	TX
130	8217	5001 N. Beach Street	Fort Worth	Tarrant	TX
131	8717	5901 Griggs Road	Houston	Harris	TX
132	1029	4700 N Division St	Spokane	Spokane	WA
133	1038	14720 E Indiana Ave	Spokane Valley	Spokane	WA
134	1139	301 Southcenter Mall	Tukwila	King	WA

	Store Number	Address	City	County	State
135	2029	9 E Valley Mall Blvd **	Union Gap	Yakima	WA
136	2219	651 Sleater Kinney Road	Lacey/Olympia	Thurston	WA
137	2309	10315 Silverdale Way Nw, Suite C	Silverdale	Kitsap	WA
138	4147	4110 E Sprague Avenue	Spokane	Spokane	WA

Schedule 1.05

Insurance Maintenance Requirements

PART I

The Borrowers shall obtain and maintain, or cause to be maintained, insurance for Borrowers and the Properties providing at least the following coverages:

1.    Comprehensive all risk insurance (including wind and named storms) on the Improvements at each Property (A) in an amount equal to one hundred percent (100%) of the “full replacement cost” of such Property, which means actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation; (B) containing an agreed amount endorsement with respect to the Improvements at such Property waiving all co-insurance provisions; (C) providing for no deductible in excess of $2,000,000 for all such insurance coverage; and (D) containing “law and ordinance” coverage if any of the Improvements or the use of such Property shall at any time constitute a legal non-conforming structure or use. In addition, the Borrowers shall obtain: (1) if any portion of the Improvements is currently or at any time in the future located in a federally designated “special flood hazard area,” flood hazard insurance in an amount acceptable to the Administrative Agent; and (2) if such Property is located in an area with a high degree of seismic activity, earthquake insurance in amounts and in form and substance satisfactory to the Administrative Agent, provided that the insurance pursuant to clauses (1) and (2) hereof shall be on terms consistent with the comprehensive all risk insurance policy required under this Schedule 1.05. Prior to the delivery of any Mortgage, the Borrowers shall promptly deliver to the Administrative Agent evidence of such flood insurance coverage, including copies of such flood insurance policies, together with such endorsements thereto, in each case, if requested, as the Administrative Agent shall reasonably request.

2.    Broad form commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about each Property, such insurance (A) to be on the so-called “occurrence” form with an occurrence limit of not less than $5,000,000 and an aggregate limit of not less than $5,000,000 with a deductible or self-insured retention not to exceed $5,000,000; (B) to continue at not less than the aforesaid limit until required to be changed by the Administrative Agent by reason of changed economic conditions making such protection inadequate; and (C) to cover at least the following hazards: (i) premises and operations; (ii) products and completed operations on an “if any” basis; (iii) independent contractors; (iv) contractual liability for all insured contracts; and (v) contractual liability covering the Indemnitees to the extent the same is available.

3.    Business income/loss of rents insurance (A) with loss payable to the Administrative Agent; (B) covering all risks required to be covered by insurance pursuant to paragraphs 1, 4, 6 and 12 of Part I of this Schedule 1.05 for a period commencing at the time of loss for such length of time as it takes to repair or replace with the exercise of due diligence and dispatch; (C) in an amount equal to one hundred percent (100%) of the projected gross rental income from each Property for a period from the date of loss to a date (assuming total destruction) which is twelve months from the date that such Property is repaired or replaced and operations are resumed; and (D) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and the personal property at such Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of ninety days from the date that such Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period. The amount of such business income insurance shall be determined prior to the Effective Date and at least once each year thereafter based on the Borrowers’ reasonable estimate of the gross rental income from such Property for the succeeding twelve month period. All proceeds payable to the Administrative Agent pursuant to this paragraph 3 shall be held by the Administrative Agent and shall be applied to the obligations secured by the Loan Documents from time to time when due and payable.

4.    At all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the property and liability coverage forms do not otherwise apply, (A) commercial general liability and umbrella liability insurance covering claims related to construction, repair and alteration at any Property not covered by or under the terms or provisions of the commercial general liability insurance and umbrella liability insurance policies required under this Schedule 1.05; and (B) the insurance provided for in paragraph 1 of Part I of this Schedule 1.05 written in a so-called builder’s risk completed value form in amounts and with deductibles, terms and conditions required by the Administrative Agent (i) on a non-reporting basis, (ii) covering all risks required to be insured against pursuant to paragraphs 1, 3, 6, 11 and 12 of Part I of this Schedule 1.05, (3) including permission to occupy such Property, and (4) with an agreed amount endorsement waiving co-insurance provisions.

5.    Workers’ compensation, subject to the statutory limits of the state in which any Property is located, and employer’s liability insurance with a limit of at least $1,000,000 per accident and per disease per employee, and $1,000,000 for disease aggregate in respect of any work or operations on or about such Property, or in connection with such Property or its operation (if applicable).

6.    Comprehensive boiler and machinery insurance in amounts required by the Administrative Agent and on terms consistent with the insurance required under paragraph 1 of this Schedule 1.05 (if applicable).

7.    Umbrella liability insurance in addition to primary coverage in an amount not less than $75,000,000per occurrence on terms consistent with the insurance required under paragraph 2 of Part I of this Schedule 1.05.

8.    Intentionally omitted.

9.    Intentionally omitted.

10.    Intentionally omitted.

11.    With respect to commercial property, general liability, business income, and umbrella liability insurance required under this Schedule 1.05, insurance for loss resulting from perils and acts of terrorism in amounts and with terms and conditions applicable to commercial property, general liability, business income, and umbrella liability insurance required under this Schedule 1.05. The policy or endorsement providing for such insurance shall be in form and substance satisfactory to the Administrative Agent.

12.    Upon sixty days’ notice, such other insurance and in such amounts as the Administrative Agent may, from time to time, reasonably request against such other insurable hazards which at the time are commonly insured against for properties similar to any Property located in or around the region in which any Property is located.

PART II

1.    All insurance provided for in Part I of this Schedule 1.05 shall be obtained under valid and enforceable policies (each individually, a “Policy” and collectively, the “Policies”) and, to the extent not specified above, shall be subject to the approval of the Administrative Agent as to insurers, amounts, deductibles, loss payees and insureds. Not less than fifteen (15) days prior to the expiration dates of the Policies theretofore furnished to the Administrative Agent, certificates of insurance evidencing the Policies (and, upon the request of the Administrative Agent, certified copies of such Policies) accompanied by evidence satisfactory to the Administrative Agent of payment of the premiums then due thereunder (the “Insurance Premiums”) shall be delivered by the Borrowers to the Administrative Agent. Notwithstanding anything to the contrary, the

Borrowers may finance the payment of Insurance Premiums through a third-party premium financing company under a premium finance agreement so long as (A) the Borrowers submit to the Administrative Agent proof of payment of each and every installment as they become due and payable and (B) the premium financing company shall have agreed to provide the Administrative Agent with notice in the event of cancellation of the Policies that are subject to the premium finance agreement.

2.    Any blanket insurance Policy shall be subject to approval of the Administrative Agent, which approval shall be conditioned upon, among other things, evidence satisfactory to the Administrative Agent that such Policy shall specifically allocate to each Property the amount of coverage from time to time required hereunder and provides the same protection as would separate Policies insuring each Property in compliance with the provisions of Part I of this Schedule 1.05.

3.    All Policies of insurance provided for or contemplated by Part I of this Schedule 1.05 shall be primary coverage and, except for the Policy referenced in paragraph 1 of Part I of this Schedule 1.05, shall name the applicable Borrower as a named insured and the Administrative Agent and its successors and/or assigns as the additional insured, as its interests may appear, and, in the case of property insurance (including, but not limited to, flood, earthquake, boiler and machinery, and terrorism insurance), shall name the Administrative Agent and its successors and/or assigns, as their interests may appear, as mortgagee pursuant to a non‑contributing mortgagee clause (or its equivalent) in favor of the Administrative Agent and its successors and/or assigns providing that the loss thereunder shall be payable to the Administrative Agent and its successors and/or assigns. The Borrowers shall not procure or permit any of its constituent entities to procure any other insurance coverage which would be on the same level of payment as the Policies or would adversely impact in any way the ability of the Borrowers or the Administrative Agent to collect any proceeds under any of the Policies.

4.    All Policies of insurance provided for or contemplated by Part I of this Schedule 1.05, except for the Policies referenced in paragraph 5 thereof, shall contain clauses or endorsements to the effect that:

(i)with respect to the property policies, (1) no act or negligence of any Borrower, or of any other insured under the Policy, or failure to comply with the provisions of any Policy, which might otherwise result in a forfeiture of the insurance or any part thereof, or foreclosure or similar action, shall in any way affect the validity or enforceability of the insurance insofar as the Administrative Agent is concerned, (2) the property policies shall not be cancelled without at least thirty (30) days’ written notice to the Administrative Agent, except ten (10) days’ notice for non-payment of premium and (3) the issuer(s) of the policies shall give written notice to the Administrative Agent if the issuers elect not to renew the policies prior to its expiration;

(ii)with respect to all Policies of liability insurance, if obtainable by the Borrowers using commercially reasonable efforts, (1) the Policy shall not be canceled or permitted to lapse without at least thirty days’ written notice to the Administrative Agent, except ten days’ notice for non-payment of premium and (2) the issuers thereof shall give notice to the Administrative Agent if the issuers elect not to renew such Policies prior to its expiration. If the issuers cannot or will not provide notice, the Borrowers shall be obligated to provide such notice; and

(iii)the Administrative Agent shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder.

5.    If at any time the Administrative Agent is not in receipt of written evidence that all insurance required hereunder is in full force and effect, the Administrative Agent shall have the right, without notice to the Borrowers, to take such action as the Administrative Agent deems necessary to protect its interest in the Properties, including, without limitation, the obtaining of such insurance coverage as the Administrative Agent in its sole discretion deems appropriate and all costs and expenses (including any Insurance Premiums) incurred by the Administrative Agent in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by the Borrowers to the Administrative Agent upon demand with Default Interest from the date such costs and expenses were incurred to and including the date the reimbursement payment is received by the Administrative Agent. All such Indebtedness shall be secured by the Lien under the Collateral Documents.

6.    In the event of foreclosure of the Mortgage Instruments or other transfer of title to the Properties in extinguishment in whole or in part of the Obligations, all right, title and interest of the Borrowers in and to the Policies then in force concerning the Properties and all proceeds payable thereunder shall thereupon vest in the Administrative Agent, the purchaser at such foreclosure or the transferee in the event of such other transfer of title.

PART III

The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the State where the applicable Property is located and having a claims paying ability rating of “A-” or better by S&P or “AX” or better by AM Best.

Schedule 1.07

Single Purpose Entity Provisions

Subject to the matters described on Schedule 1.08, since the date of its formation and at all times on and after the Effective Date and continuing at all times until all Obligations (other than Unliquidated Obligations) have been paid in full:

(a)Each Borrower (i) has been, is, and will be organized solely for the purpose of acquiring, owning, leasing, managing and operating the related Property, entering into and performing its obligations under the Loan Documents, refinancing the related Property in connection with a permitted repayment of the Loans, ownership of the Equity Interests of Permitted Subsidiaries, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing, and (ii) has not owned, does not own, and will not own any asset or property other than (A) the related Property, (B) incidental personal property necessary for the ownership, leasing, management or operation of the related Property, (C) ownership of the Equity Interests of Permitted Subsidiaries and (D) such other real property described on Schedule 1.08.

(b)Each Borrower has not engaged and will not engage in any business or activity other than the ownership, leasing, management and operation of the related Property ownership of the Equity Interests of Permitted Subsidiaries and each Borrower will conduct and operate its business as presently conducted and operated.

(c)Each Borrower has not entered and will not enter into any contract or agreement with any Affiliate of such Borrower, any constituent party of such Borrower or any Affiliate of any constituent party, except upon terms and conditions that are intrinsically fair, commercially reasonable, and no less favorable to it than those that would be available on an arm’s-length basis from an unrelated third party.

(d)Each Borrower has not incurred and will not voluntarily incur any Indebtedness other than (i) the Loans and (ii) other Indebtedness permitted under Section 6.01. For the avoidance of doubt, the inability of any Borrower to pay costs and expenses (e.g. utility bills) as they come due, in each case arising from or attributable to insufficient cash flow from the Properties, or any Borrower’s lack of access thereto (to the extent caused by the Administrative Agent’s or any Lender’s exercise of remedies), shall not be deemed to constitute a voluntary incurrence of Indebtedness for purposes of this clause (d). No Indebtedness, other than the Loans, may be secured by any Property. No Exculpated Party is required to, nor prohibited from, contributing additional capital to the Borrowers for purposes of compliance with this clause (d).

(e)Each Borrower has not made and will not make any loans or advances to any other Person (including any Affiliate of such Borrower, any constituent party of such Borrower or any Affiliate of any constituent party), and has not acquired and shall not acquire obligations or securities of its Affiliates (other than the Equity Interests of Permitted Subsidiaries).

(f)Each Borrower has been, is, and intends to remain solvent and such Borrower has paid its debt and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets as the same became due and will pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets as the same shall become due.

(g)(i) Each Borrower has done or caused to be done, and will do and cause to be done, all things necessary to observe its organizational formalities and preserve its separate existence, (ii) no Borrower has terminated or failed to comply with and no Borrower will terminate or fail to comply with the provisions of its organizational documents, (iii) each Borrower has not amended, modified or otherwise changed its organizational documents except as disclosed to the Administrative Agent prior to the Effective Date and (iv) each Borrower will not amend, modify or otherwise change its organizational documents with

respect to the matters set forth in this Schedule 1.07 or otherwise in any manner that is adverse to the interests of the Administrative Agent or any Lender.

(h)Each Borrower has maintained and will maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates and any other Person. Each Borrower’s assets have not been listed as assets on the financial statement of any other Person; provided, however, that each Borrower’s assets may have been included in a consolidated financial statement of its Affiliates; provided that, if applicable, (i) appropriate notation were made on such consolidated financial statements to indicate the separateness of each Borrower and such Affiliates and to indicate that such Borrower’s assets and credit were not available to satisfy the debts and other obligations of such Affiliates or any other Person, and (ii) such assets were listed on such Borrower’s own separate balance sheet. Each Borrower has filed and shall file its own tax returns (except to the extent that such Borrower was or is treated as a “disregarded entity” for tax purposes and was or is not required to file tax returns under applicable law) and has not filed and shall not file a consolidated federal income tax return with any other Person. Each Borrower has maintained and shall maintain its books, records, resolutions and agreements as official records.

(i)Each Borrower (i) has been, will be, and at all times has held and will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate of such Borrower or any constituent party of such Borrower), (ii) has corrected and shall correct any known misunderstanding regarding its status as a separate entity, (iii) has conducted and shall conduct business in its own name, (iv) has not identified and shall not identify itself or any of its Affiliates as a division or department or part of the other and (v) has maintained and utilized and shall maintain and utilize separate stationery, invoices and checks bearing its own name.

(j)Each Borrower has maintained and will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations.

(k)No Borrower and no constituent party of such Borrower has sought or will seek or effect the liquidation, dissolution, winding up, consolidation or merger, in whole or in part, of such Borrower, any sale or other transfer of all or substantially all of its assets or any sale or other transfer outside the ordinary course of business.

(l)No Borrower has commingled or will commingle funds or other assets of such Borrower with those of any Affiliate or constituent party or any other Person, and each Borrower has held and will hold all of its assets in its own name.

(m)Each Borrower has maintained and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or constituent party or any other Person.

(n)No Borrower has assumed, guaranteed or become obligated for the debts or obligations of any other Person or has held itself out to be responsible for or has had its credit or assets available to satisfy the debts or obligations of any other Person. No Borrower will assume, guarantee or become obligated for the debts or obligations of any other Person or will hold itself out to be responsible for or have its credit or assets available to satisfy the debts or obligations of any other Person.

(o)The organizational documents of each Borrower shall provide that the business and affairs of such Borrower shall be managed by or under the direction of a board of one or more directors or managers designated by the member of such Borrower, and at all times there shall be at least one duly

appointed individuals on the board managers (each, an “Independent Director”) of such Borrower, each of whom (i) has at least three years prior employment experience and continues to be employed as an independent director, independent manager or independent member by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation or, if none of those companies is then providing professional independent directors, independent managers and independent members, another nationally-recognized company that provides such services and which is reasonably approved by the Administrative Agent; (ii) is not on the board of directors or managers of more than two Affiliates of any Borrower; and (iii) is not, and has never been, and will not, while serving as an Independent Director be, any of the following: (A) a stockholder, director, manager, officer, employee, partner, member, attorney or counsel of any Borrower, any Affiliate of any Borrower or any direct or indirect equity holder of any of them, (B) a creditor, customer, supplier, service provider (including provider of professional services) or other Person who derives any of its purchases or revenues from its activities with any Borrower or any Affiliate of any Borrower (other than a nationally-recognized company that routinely provides professional independent directors, independent managers or independent members and other corporate services to a Borrower or any Affiliate of a Borrower in the ordinary course of its business), (C) a member of the immediate family of any such stockholder, director, manager, officer, employee, partner, member, creditor, customer, supplier, service provider or other Person, or (D) a Person controlling or under common control with any of (A), (B) or (C) above. A natural person who satisfies the foregoing definition other than clause (iii) shall not be disqualified as a result of clause (iii)(A) by reason of (I) being, having been or becoming an Independent Director of an Affiliate of any Borrower that is not in the direct chain of ownership of a Borrower and that is required by a creditor to be a “single purpose entity”; provided that such Independent Director is, was or will be employed by a company that routinely provides professional independent directors, independent managers or independent members, or (II) being, having been or becoming a member of any Borrower pursuant to an express provision in such Borrower’s operating agreement providing for the appointment of such Independent Director as a member of such Borrower upon the occurrence of any event pursuant to which the sole member of such Borrower ceases to be a member of such Borrower (including the withdrawal or dissolution of the sole member). A natural person who satisfies the foregoing definition other than clause (iii) shall not be disqualified as a result of clause (iii)(A) or (iii)(B) by reason of being, having been or becoming an Independent Director of a “single purpose entity” affiliated with any Borrower; provided that the fees or other compensation that such individual earns by serving as an Independent Director of one or more Affiliates of any Borrower in any given year constitute, in the aggregate, less than five percent (5%) of such individual’s income for such year. The organizational documents of each Borrower shall provide that no Independent Director of any Borrower may be removed or replaced without Cause, and unless such Borrower provides the Administrative Agent with not less than three Business Days’ prior notice of (1) any proposed removal of any Independent Director, together with a statement as to the reasons for such removal, and (2) the identity of the proposed replacement Independent Director, together with a certification that such replacement satisfies the requirements set forth in the organizational documents of such Borrower relating to an Independent Director. In addition, the organizational documents of such Borrower shall provide an express acknowledgment that Lender is an intended third-party beneficiary of the “special purpose” and “separateness” provisions of such organizational documents (it being agreed that the sole remedy of the Administrative Agent in such instance is equitable relief to ensure compliance herewith). As used in this paragraph, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of such Person, whether through ownership of voting securities, by contract or otherwise and the terms “controlled” and “controlling” shall have correlative meanings. As used in this paragraph, the term “single purpose entity” shall mean a Person whose organizational documents contain, and who covenants that such Person shall comply or cause compliance with, provisions substantially similar to those set forth in this Schedule 1.07. “Cause” shall mean, with respect to an Independent Director, (i) any acts or omissions by such Independent Director that constitute systematic, persistent or willful disregard of such Independent

Director’s duties, or (ii) such Independent Director has been indicted or convicted for any crime or crimes of moral turpitude or dishonesty or for any violation of any legal requirements.

(p)The organizational documents of each Borrower shall provide that the board of directors or managers of such Borrower shall not take any action which, under the terms of any organizational documents (including, if applicable, any voting trust agreement with respect to any common stock), requires a unanimous vote of the board of directors or managers of such Borrower unless, at the time of such action, there shall be at least one member of the board of directors or managers who is an Independent Director (and such Independent Director has participated in such vote). The organizational documents of such Borrower shall provide that such Borrower will not (and such Borrower agrees that it will not), without the unanimous consent of its board of directors or managers, including the consent of the Independent Director, (i) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any applicable insolvency, bankruptcy, liquidation or reorganization statute, (ii) seek or consent to the appointment of a receiver, liquidator or any similar official for such Borrower or a substantial portion of its assets or properties, (iii) take any action that might cause such Borrower to become insolvent, (iv) make an assignment for the benefit of creditors, (v) admit in writing such Borrower’s inability to pay its debts generally as they become due (unless such admission was required to be made in a legal proceeding in order to not violate any applicable laws), (vi) declare or effectuate a moratorium on the payment of any obligations, or (vii) take any action in furtherance of any of the foregoing. In addition, the organizational documents of such Borrower shall provide that, when voting with respect to any of the matters set forth in the immediately preceding sentence of this paragraph (p), the Independent Directors shall consider only the interests of such Borrower, including its creditors.

(q)The organizational documents of each Borrower shall provide that, as long as any portion of the Loans remains outstanding, upon the occurrence of any event that causes the sole member of such Borrower (“Sole Member”) to cease to be a member of such Borrower (other than (i) upon an assignment by Sole Member of all of its limited liability company interests in such Borrower and the admission of the transferee, if permitted pursuant to the organizational documents of such Borrower and the Loan Documents, or (ii) the resignation of the Sole Member and the admission of an additional member of such Borrower, if permitted pursuant to the organizational documents of such Borrower and the Loan Documents), each of the persons acting as an Independent Director of such Borrower shall, without any action of any Person and simultaneously with Sole Member ceasing to be a member of such Borrower, automatically be admitted as a member of such Borrower (a “Special Member”) and shall preserve and continue the existence of such Borrower without dissolution. The organizational documents of such Borrower shall further provide that for so long as any portion of the Loans is outstanding, no Special Member may resign or transfer its rights as a Special Member unless (A) a successor Special Member has been admitted to such Borrower as a Special Member, and (B) such successor Special Member has also accepted its appointment as an Independent Director of such Borrower.

(r)The organizational documents of each Borrower shall provide that, as long as any portion of the Loans remains outstanding, except as expressly permitted pursuant to the terms of the Loan Documents, (i) the Sole Member may not resign, and (ii) no additional member shall be admitted to such Borrower.

(s)The organizational documents of each Borrower shall provide that, as long as any portion of the Loans remains outstanding: (i) such Borrower shall be dissolved, and its affairs shall be wound up, only upon the first to occur of the following: (A) the termination of the legal existence of the last remaining member of such Borrower or the occurrence of any other event which terminates the continued membership of the last remaining member of such Borrower in such Borrower unless the business of such Borrower is

continued in a manner permitted by its operating agreement or the Delaware Limited Liability Company Act (the “Act”), or (B) the entry of a decree of judicial dissolution under Section 18-802 of the Act; (ii) upon the occurrence of any event that causes the last remaining member of such Borrower to cease to be a member of such Borrower or that causes Sole Member to cease to be a member of such Borrower (other than (A) upon an assignment by Sole Member of all of its limited liability company interests in such Borrower and the admission of the transferee, if permitted pursuant to the organizational documents of such Borrower and the Loan Documents, or (B) the resignation of the Sole Member and the admission of an additional member of such Borrower, if permitted pursuant to the organizational documents of such Borrower and the Loan Documents), to the fullest extent permitted by law, the personal representative of such last remaining member shall be authorized to, and shall, within ninety days after the occurrence of the event that terminated the continued membership of such member in such Borrower, agree in writing (1) to continue the existence of such Borrower, and (2) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of such Borrower, effective as of the occurrence of the event that terminated the continued membership of such member in such Borrower; (iii) the bankruptcy of Sole Member or a Special Member shall not cause such Sole Member or Special Member to cease to be a member of any Borrower and upon the occurrence of such event, the business of such Borrower shall continue without dissolution; (iv) in the event of the dissolution of any Borrower, such Borrower shall conduct only such activities as are necessary to wind up its affairs (including the sale of its assets and properties in an orderly manner), and its assets and properties shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act; and (v) to the fullest extent permitted by applicable law, each of Sole Member and Special Members shall irrevocably waive any right or power that they might have to cause any Borrower or any of its assets or properties to be partitioned, to cause the appointment of a receiver for all or any portion of the assets or properties of such Borrower, to compel any sale of all or any portion of the assets or properties of such Borrower pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of such Borrower.

(t)Each Borrower shall conduct its business so that the assumptions made with respect to such Borrower in the Non-Consolidation Opinion shall be true and correct in all respects. In connection with the foregoing, each Borrower hereby covenants and agrees that it will comply with or cause the compliance with, (i) all of the facts and assumptions (whether regarding such Borrower or any other Person) set forth in the Non-Consolidation Opinion, (ii) all of the representations, warranties and covenants in this Schedule 1.07, and (iii) all of the organizational documents of Borrower.

(u)[reserved].

(v)Each Borrower has paid and shall pay its own liabilities and expenses, including the salaries of its own employees (if any) from its own funds, and has maintained and shall maintain a sufficient number of employees (if any) in light of its contemplated business operations.

(w)Each Borrower has compensated and shall compensate each of its consultants and agents from its funds for services provided to it. Each Borrower has paid and shall pay from its assets all obligations of any kind incurred.

(x)No Borrower has (i) filed a bankruptcy, insolvency or reorganization petition or otherwise instituted insolvency proceedings or otherwise sought any relief under any laws relating to the relief from debts or the protection of debtors generally, (ii) sought or consented to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for such Borrower or for all or any portion of such Borrower’s assets or properties or (iii) made any assignment for the benefit of such Borrower’s creditors. Without the unanimous consent of all of its directors or managers (including each

Independent Director), as applicable, will not (A) file a bankruptcy, insolvency or reorganization petition or otherwise institute insolvency proceedings or otherwise seek any relief under any laws relating to the relief from debts or the protection of debtors generally, (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for such Borrower or for all or any portion of such Borrower’s assets or properties or (C) make any assignment for the benefit of such Borrower’s creditors.

(y)Each Borrower has maintained and will maintain an arm’s-length relationship with its Affiliates.

(z)Each Borrower has allocated and will allocate fairly and reasonably any overhead expenses that are shared with any Affiliate, including shared office space.

(aa)Except in connection with the Loans, no Borrower has pledged or will pledge its assets or properties for the benefit of, or to secure the obligations of, any other Person.

(bb)No Borrower has had, has or will have any obligation to indemnify its directors, managers, officers, members or Special Members, as the case may be, or, if applicable, has such an obligation that is fully subordinated to the Loans and that will not constitute a claim against such Borrower if cash flow in excess of the amount required to pay the Obligations is insufficient to pay such obligation.

(cc)The organizational documents of each Borrower shall provide that such Borrower will not: (i) dissolve, merge, liquidate, consolidate; (ii) sell, transfer, dispose, or encumber (except in accordance with the Loan Documents) all or substantially all of its assets or properties or acquire all or substantially all of the assets or properties of any other Person; or (iii) engage in any other business activity, or amend its organizational documents with respect to any of the matters set forth in this Schedule 1.07, without the prior consent of the Administrative Agent in its sole discretion.

(dd)Each Borrower and Independent Directors will consider the interests of such Borrower’s creditors in connection with all actions.

(ee)No Borrower has had and, except in connection with the Loan, has or will have any of its obligations guaranteed by any Affiliate.

(ff)No Borrower has owned or acquired or will own or acquire any stock or securities of any Person (except Equity Interests of Permitted Subsidiaries and except to the extent expressly permitted under the Loan Documents).

(gg)No Borrower has bought or held or will buy or hold evidence of Indebtedness issued by any other Person (other than cash or investment-grade securities).

Notwithstanding the foregoing, it is agreed that any failure to comply with clauses (f), (j), (v) and (w) arising from or attributable to insufficient cash flow from the Property, or any Borrower’s lack of access thereto (to the extent caused by the Administrative Agent’s or any Lender’s exercise of remedies) is not a default. In addition, with respect to such provisions, no Exculpated Party is required to, nor prohibited from, contributing additional capital to the Borrowers for purposes of compliance with these provisions.

Table 1 to Schedule 1.07

Borrower	Currently Owned Permitted Subsidiaries	Previously Owned Permitted Subsidiaries
SRC O.P. LLC	SRC Facilities LLC (formerly known as SRC Facilities Statutory Trust No. 2003-A)	None
SRC Facilities LLC	SRC Real Estate (TX), LLC	SRC Real Estate Holdings (TX), LLC
SRC Real Estate (TX), LLC	None	None

Schedule 1.08

Other Real Property

Store	Location	Notes
1012	Des Moines, IA	SRC Facilities LLC owns the leasehold interest
1092	Westland, MI	SRC Facilities LLC owns the leasehold interest
2017	Gastonia, NC	SRC Facilities LLC (formerly known as SRC Facilities Statutory Trust No. 2003-A) used to own
2029	Union Gap, WA	SRC Facilities LLC owns the leasehold interest
8745	Tucker, GA	SRC Facilities LLC used to own parcel 1 and a portion of parcel 2
1080	Frisco, TX	Borrower previously owned; removed from REMIC
1099	Federal Way, WA	Borrower previously owned; removed from REMIC
1109	Lynnwood, WA	Borrower previously owned; removed from REMIC
1204	Freehold, NJ	Borrower previously owned; removed from REMIC
1271	Littleton, CO	Borrower previously owned; removed from REMIC
1286	Gretna, NA	Borrower previously owned; removed from REMIC
1343	Cambridge, MA	Borrower previously owned; removed from REMIC
1357	Austin, TX	Borrower previously owned; removed from REMIC
1390	Ann Arbor, MI	Borrower previously owned; removed from REMIC
1403	Natick, MA	Borrower previously owned; removed from REMIC
1405	Fayetteville, NC	Borrower previously owned; removed from REMIC
1424	Bethesda, MD	Borrower previously owned; removed from REMIC
1435	Macon, GA	Borrower previously owned; removed from REMIC
1437	Arlington, TX	Borrower previously owned; removed from REMIC
1455	Wilmington, NC	Borrower previously owned; removed from REMIC
1457	The Woodlands, TX	Borrower previously owned; removed from REMIC
1464	Deptford, NJ	Borrower previously owned; removed from REMIC
1475	Durham, NC	Borrower previously owned; removed from REMIC
1664	Paramus, NJ	Borrower previously owned; removed from REMIC
1750	Orland Park, IL	Borrower previously owned; removed from REMIC
1790	Louisville, KY	Borrower previously owned; removed from REMIC
1810	Cincinnati, OH	Borrower previously owned; removed from REMIC
1985	High Point, NC	Borrower previously owned; removed from REMIC
2060	Forsyth, IL	Borrower previously owned; removed from REMIC
2115	Waycross, GA	Borrower previously owned; removed from REMIC
2161	Coralville, IA	Borrower previously owned; removed from REMIC
2250	Crystal Lake, IL	Borrower previously owned; removed from REMIC
2271	Fort Collins, CO	Borrower previously owned; removed from REMIC
2507	McAllen, TX	Borrower previously owned; removed from REMIC
2524	Toms River, NJ	Borrower previously owned; removed from REMIC
2865	Union City, GA	Borrower previously owned; removed from REMIC

Schedule 1.09

Physical Condition Reports

EMG Project #	Service	Store #	Report Date
129620.17R000-058.042	Property Condition Assessment	1011	12/28/2017
129620.17R000-019.042	Property Condition Assessment	1012	12/27/2017
129620.17R000-078.042	Property Condition Assessment	1022	01/12/2018
129620.17R000-127.042	Property Condition Assessment	1027	01/12/2018
129620.17R000-136.042	Property Condition Assessment	1029	01/13/2018
129620.17R000-046.042	Property Condition Assessment	1033	12/28/2017
129620.17R000-018.042	Property Condition Assessment	1035	12/29/2017
129620.17R000-137.042	Property Condition Assessment	1038	01/12/2018
129620.17R000-066.042	Property Condition Assessment	1042	01/09/2018
129620.17R000-008.042	Property Condition Assessment	1043	01/12/2018
129620.17R000-092.042	Property Condition Assessment	1051	01/09/2018
129620.17R000-048.042	Property Condition Assessment	1074	12/22/2017
129620.17R000-102.042	Property Condition Assessment	1076	01/12/2018
129620.17R000-040.042	Property Condition Assessment	1077	01/11/2018
129620.17R000-038.042	Property Condition Assessment	1086	01/12/2018
129620.17R000-053.042	Property Condition Assessment	1092	01/12/2018
129620.17R000-014.042	Property Condition Assessment	1095	12/27/2017
129620.17R000-044.042	Property Condition Assessment	1104	12/28/2017
129620.17R000-057.042	Property Condition Assessment	1110	12/28/2017
129620.17R000-042.042	Property Condition Assessment	1116	01/08/2018
129620.17R000-089.042	Property Condition Assessment	1120	12/28/2017
129620.17R000-131.042	Property Condition Assessment	1139	12/29/2017
129620.17R000-004.042	Property Condition Assessment	1141	12/27/2017
129620.17R000-039.042	Property Condition Assessment	1147	12/27/2017
129620.17R000-015.042	Property Condition Assessment	1155	12/27/2017
129620.17R000-075.042	Property Condition Assessment	1165	01/10/2018
129620.17R000-068.042	Property Condition Assessment	1166	01/13/2018
129620.17R000-067.042	Property Condition Assessment	1171	12/28/2017
129620.17R000-022.042	Property Condition Assessment	1172	01/13/2018
129620.17R000-115.042	Property Condition Assessment	1176	01/12/2018
129620.17R000-064.042	Property Condition Assessment	1182	12/28/2017
129620.17R000-104.042	Property Condition Assessment	1187	12/28/2017
129620.17R000-059.042	Property Condition Assessment	1192	12/28/2017
129620.17R000-090.042	Property Condition Assessment	1210	12/28/2017
129620.17R000-122.042	Property Condition Assessment	1217	01/12/2018
129620.17R000-006.042	Property Condition Assessment	1221	12/29/2017
129620.17R000-063.042	Property Condition Assessment	1222	01/12/2018
129620.17R000-045.042	Property Condition Assessment	1223	12/28/2017
129620.17R000-037.042	Property Condition Assessment	1226	12/27/2017
129620.17R000-003.042	Property Condition Assessment	1228	12/27/2017
129620.17R000-009.042	Property Condition Assessment	1263	01/08/2018
129620.17R000-108.042	Property Condition Assessment	1267	01/15/2018
129620.17R000-007.042	Property Condition Assessment	1281	01/08/2018

EMG Project #	Service	Store #	Report Date
129620.17R000-107.042	Property Condition Assessment	1297	12/28/2017
129620.17R000-069.042	Property Condition Assessment	1306	01/12/2018
129620.17R000-126.042	Property Condition Assessment	1307	01/10/2018
129620.17R000-084.042	Property Condition Assessment	1314	12/28/2017
129620.17R000-100.042	Property Condition Assessment	1315	01/08/2018
129620.17R000-128.042	Property Condition Assessment	1317	12/28/2017
129620.17R000-027.042	Property Condition Assessment	1321	12/27/2017
129620.17R000-116.042	Property Condition Assessment	1327	01/08/2018
129620.17R000-103.042	Property Condition Assessment	1337	01/12/2018
129620.17R000-112.042	Property Condition Assessment	1367	01/15/2018
129620.17R000-070.042	Property Condition Assessment	1375	12/28/2017
129620.17R000-113.042	Property Condition Assessment	1377	12/28/2017
129620.17R000-125.042	Property Condition Assessment	1387	01/11/2018
129620.17R000-118.042	Property Condition Assessment	1407	01/15/2018
129620.17R000-114.042	Property Condition Assessment	1417	12/28/2017
129620.17R000-121.042	Property Condition Assessment	1427	12/28/2017
129620.17R000-109.042	Property Condition Assessment	1447	12/28/2017
129620.17R000-124.042	Property Condition Assessment	1487	12/28/2017
129620.17R000-088.042	Property Condition Assessment	1504	01/12/2018
129620.17R000-096.042	Property Condition Assessment	1545	01/08/2018
129620.17R000-082.042	Property Condition Assessment	1554	12/28/2017
129620.17R000-016.042	Property Condition Assessment	1565	01/12/2018
129620.17R000-024.042	Property Condition Assessment	1570	12/28/2017
129620.17R000-098.042	Property Condition Assessment	1595	12/28/2017
129620.17R000-031.042	Property Condition Assessment	1600	12/28/2017
129620.17R000-073.042	Property Condition Assessment	1605	12/28/2017
129620.17R000-079.042	Property Condition Assessment	1614	12/28/2017
129620.17R000-051.042	Property Condition Assessment	1634	12/28/2017
129620.17R000-035.042	Property Condition Assessment	1642	01/08/2018
129620.17R000-033.042	Property Condition Assessment	1650	12/27/2017
129620.17R000-030.042	Property Condition Assessment	1680	01/15/2018
129620.17R000-013.042	Property Condition Assessment	1685	01/12/2018
129620.17R000-062.042	Property Condition Assessment	1690	12/28/2017
129620.17R000-052.042	Property Condition Assessment	1700	12/28/2017
129620.17R000-091.042	Property Condition Assessment	1710	12/28/2017
129620.17R000-077.042	Property Condition Assessment	1712	01/08/2018
129620.17R000-085.042	Property Condition Assessment	1717	01/12/2018
129620.17R000-054.042	Property Condition Assessment	1720	12/28/2017
129620.17R000-036.042	Property Condition Assessment	1730	12/28/2017
129620.17R000-083.042	Property Condition Assessment	1734	12/28/2017
129620.17R000-049.042	Property Condition Assessment	1754	12/28/2017
129620.17R000-055.042	Property Condition Assessment	1760	12/27/2017
129620.17R000-080.042	Property Condition Assessment	1764	12/28/2017
129620.17R000-029.042	Property Condition Assessment	1780	01/09/2018
129620.17R000-034.042	Property Condition Assessment	1800	12/27/2017

EMG Project #	Service	Store #	Report Date
129620.17R000-072.042	Property Condition Assessment	1805	12/28/2017
129620.17R000-023.042	Property Condition Assessment	1820	01/12/2018
129620.17R000-065.042	Property Condition Assessment	1822	12/28/2017
129620.17R000-005.042	Property Condition Assessment	1831	12/29/2017
129620.17R000-025.042	Property Condition Assessment	1840	12/28/2017
129620.17R000-050.042	Property Condition Assessment	1854	12/28/2017
129620.17R000-081.042	Property Condition Assessment	1874	01/08/2018
129620.17R000-093.042	Property Condition Assessment	2010	01/10/2018
129620.17R000-134.042	Property Condition Assessment	2029	12/28/2017
129620.17R000-056.042	Property Condition Assessment	2040	01/12/2018
129620.17R000-043.042	Property Condition Assessment	2087	01/11/2018
129620.17R000-026.042	Property Condition Assessment	2121	01/08/2018
129620.17R000-074.042	Property Condition Assessment	2175	01/08/2018
129620.17R000-060.042	Property Condition Assessment	2180	01/11/2018
129620.17R000-117.042	Property Condition Assessment	2197	01/12/2018
129620.17R000-086.042	Property Condition Assessment	2207	01/12/2018
129620.17R000-133.042	Property Condition Assessment	2219	12/28/2017
129620.17R000-120.042	Property Condition Assessment	2247	12/28/2017
129620.17R000-032.042	Property Condition Assessment	2290	01/15/2018
129620.17R000-099.042	Property Condition Assessment	2305	01/08/2018
129620.17R000-132.042	Property Condition Assessment	2309	12/28/2017
129620.17R000-028.042	Property Condition Assessment	2360	01/08/2018
129620.17R000-094.042	Property Condition Assessment	2390	01/09/2018
129620.17R000-020.042	Property Condition Assessment	2422	01/09/2018
129620.17R000-123.042	Property Condition Assessment	2497	01/09/2018
129620.17R000-076.042	Property Condition Assessment	2515	12/28/2017
129620.17R000-119.042	Property Condition Assessment	2547	01/12/2018
129620.17R000-106.042	Property Condition Assessment	2557	01/12/2018
129620.17R000-111.042	Property Condition Assessment	2587	01/13/2018
129620.17R000-041.042	Property Condition Assessment	2677	01/09/2018
129620.17R000-021.042	Property Condition Assessment	2760	01/12/2018
129620.17R000-001.042	Property Condition Assessment	2819	01/15/2018
129620.17R000-017.042	Property Condition Assessment	2845	01/12/2018
129620.17R000-097.042	Property Condition Assessment	2855	12/28/2017
129620.17R000-047.042	Property Condition Assessment	2934	01/12/2018
129620.17R000-135.042	Property Condition Assessment	4147	12/28/2017
129620.17R000-002.042	Property Condition Assessment	4371	12/28/2017
129620.17R000-087.042	Property Condition Assessment	4928	12/28/2017
129620.17R000-095.042	Property Condition Assessment	4937	01/09/2018
129620.17R000-071.042	Property Condition Assessment	7385	01/09/2018
129620.17R000-010.042	Property Condition Assessment	7979	01/13/2018
129620.17R000-011.042	Property Condition Assessment	8065	12/24/2017
129620.17R000-130.042	Property Condition Assessment	8147	01/13/2018
129620.17R000-101.042	Property Condition Assessment	8206	12/29/2017
129620.17R000-110.042	Property Condition Assessment	8217	01/08/2018

EMG Project #	Service	Store #	Report Date
129620.17R000-061.042	Property Condition Assessment	8702	12/28/2017
129620.17R000-129.042	Property Condition Assessment	8717	01/08/2018
129620.17R000-012.042	Property Condition Assessment	8745	12/27/2017
129620.17R000-105.042	Property Condition Assessment	477	12/28/2017
129620.17R000-065.066	Seismic Risk Analysis	1822	12/28/2017
129620.17R000-131.316	Seismic Risk Study	1139	12/28/2017
129620.17R000-003.316	Seismic Risk Study	1228	12/28/2017
129620.17R000-133.316	Seismic Risk Study	2219	12/28/2017
129620.17R000-132.316	Seismic Risk Study	2309	12/28/2017
129620.17R000-001.316	Seismic Risk Study	2819	01/11/2018
129620.17R000-002.316	Seismic Risk Study	4371	12/28/2017

Schedule 2.01

Commitments

LENDER	COMMITMENT
UBS AG, Stamford Branch	$200,000,000
AGGREGATE COMMITMENTS	$200,000,000

Schedule 4.01

Effective Date Mortgage Instruments

1.Store 2819 - Deed of Trust, Security Agreement, Assignment of Rents, and Fixture Filing, executed and delivered by SRC Facilities LLC to Fidelity Title Agency of Alaska, LLC, as trustee, for the benefit of the Administrative Agent;

2.Store 4371 - Deed of Trust and Security Agreement, executed and delivered by SRC Facilities LLC to Chicago Title Insurance Company (“CTT”), as trustee for the benefit of the Administrative Agent;

3.Store 1228 - Deed of Trust and Security Agreement, executed and delivered by SRC Facilities LLC to CTT, as trustee, for the benefit of the Administrative Agent;

4.Store 1281 - Deed of Trust, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to PUBLIC TRUSTEE OF PUEBLO COUNTY, COLORADO, as trustee, for the benefit of the Administrative Agent;

5.Store 1141 - Deed of Trust, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to PUBLIC TRUSTEE OF ARAPAHOE COUNTY, COLORADO, as trustee, for the benefit of the Administrative Agent;

6.Store 1221 - Deed of Trust, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to PUBLIC TRUSTEE OF EL PASO COUNTY, COLORADO, as trustee, for the benefit of the Administrative Agent;

7.Store 1831 - Deed of Trust, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to PUBLIC TRUSTEE OF ADAMS COUNTY, COLORADO, as trustee, for the benefit of the Administrative Agent;

8.Store 1043 - Open-End Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

9.Store 1263 - Open-End Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

10.Store 8065 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

11.Store 7979 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative the Administrative Agent;

12.Store 1035 - Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

13.Store 1155 - Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

14.Store 1565 - Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

15.Store 1685 - Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

16.Store 2845 - Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

17.Store 8745 - Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

18.Store 1095 - Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

19.Store 2422 - Mortgage, Assignment of Leases and Rents, and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

20.Store 2760 - Mortgage, Assignment of Leases and Rents, and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

21.Store 1172 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

22.Store 1321 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

23.Store 1570 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

24.Store 1780 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

25.Store 1820 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

26.Store 1840 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

27.Store 2360 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

28.Store 2121 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

29.Store 1600 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

30.Store 1680 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

31.Store 1800 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

32.Store 2290 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

33.Store 1650 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

34.Store 1642 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

35.Store 1730 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

36.Store 1077 - Mortgage, Pledge of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

37.Store 1086 - Mortgage, Pledge of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

38.Store 1116 - Mortgage, Pledge of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

39.Store 1147 - Mortgage, Pledge of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

40.Store 1226 - Mortgage, Pledge of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

41.Store 2087 - Mortgage, Pledge of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

42.Store 2677 - Mortgage, Pledge of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

43.Store 1104 - Mortgage and Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

44.Store 1033 - Mortgage and Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

45.Store 2934 - Mortgage and Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

46.Store 1074 –Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC O.P. LLC to LAWYERS TITLE REALTY SERVICES, INC., as trustee, for the benefit of the Administrative Agent;

47.Store 1634 –Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC O.P. LLC to LAWYERS TITLE REALTY SERVICES, INC., as trustee, for the benefit of the Administrative Agent;

48.Store 1754 –Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC O.P. LLC to LAWYERS TITLE REALTY SERVICES, INC., as trustee, for the benefit of the Administrative Agent;

49.Store 1854 - Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC O.P. LLC to LAWYERS TITLE REALTY SERVICES, INC., as trustee, for the benefit of the Administrative Agent;

50.Store 1223 – Leasehold Mortgage and Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC to the Administrative Agent;

51.Store 1192 – Mortgage, executed and delivered by SRC Facilities LLC to the Administrative Agent;

52.Store 1011 - Mortgage, executed and delivered by SRC Facilities LLC to the Administrative Agent;

53.Store 1110 - Mortgage, executed and delivered by SRC Facilities LLC to the Administrative Agent;

54.Store 1700 - Mortgage, executed and delivered by SRC Facilities LLC to the Administrative Agent;

55.Store 1720 - Mortgage, executed and delivered by SRC Facilities LLC to the Administrative Agent;

56.Store 1760 - Mortgage, executed and delivered by SRC Facilities LLC to the Administrative Agent;

57.Store 2040 - Mortgage, executed and delivered by SRC Facilities LLC to the Administrative Agent;

58.Store 2180 - Mortgage, executed and delivered by SRC Facilities LLC to the Administrative Agent;

59.Store 9693 - Mortgage, executed and delivered by SRC Facilities LLC to the Administrative Agent;

60.Store 8702 - Mortgage, Assignment of Leases and Rents, and Security Agreement, executed and delivered by SRC Facilities LLC to the Administrative Agent;

61.Store 1182 - Deed of Trust and Security Agreement, executed and delivered by SRC Facilities LLC to MARTIN LEIGH ATTORNEYS PC, as trustee, for the benefit of the Administrative Agent;

62.Store 1690 - Deed of Trust and Security Agreement, executed and delivered by SRC Facilities LLC to MARTIN LEIGH ATTORNEYS PC, as trustee, for the benefit of the Administrative Agent;

63.Store 1822 - Deed of Trust and Security Agreement, executed and delivered by SRC Facilities LLC to MARTIN LEIGH ATTORNEYS PC, as trustee, for the benefit of the Administrative Agent;

64.Store 1171 - Deed of Trust and Security Agreement, executed and delivered by and among SRC Facilities LLC to MARTIN LEIGH ATTORNEYS PC, as trustee, for the benefit of the Administrative Agent;

65.Store 1042 – Leasehold Deed of Trust and Security Agreement, executed and delivered by SRC Facilities LLC to MARTIN LEIGH ATTORNEYS PC, as trustee, for the benefit of the Administrative Agent;

66.Store 1222 – Leasehold Deed of Trust and Security Agreement, executed and delivered by SRC Facilities LLC to MARTIN LEIGH ATTORNEYS PC, as trustee, for the benefit of the Administrative Agent;

67.Store 1306 - Deed of Trust, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to R. PAUL RANDALL, JR., as trustee, for the benefit of the Administrative Agent;

68.Store 1166 – Leasehold Deed of Trust, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC to R. PAUL RANDALL, JR., as trustee, for the benefit of the Administrative Agent;

69.Store 1165 - Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to CTT, as trustee for the benefit of the Administrative Agent;

70.Store 1375 - Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to CTT, as trustee for the benefit of the Administrative Agent;

71.Store 1605 - Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to CTT, as trustee for the benefit of the Administrative Agent;

72.Store 1805 - Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to CTT, as trustee for the benefit of the Administrative Agent;

73.Store 2175 - Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to CTT, as trustee for the benefit of the Administrative Agent;

74.Store 2515 - Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to CTT, as trustee for the benefit of the Administrative Agent;

75.Store 7385 - Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to CTT, as trustee for the benefit of the Administrative Agent;

76.Store 1712 - Mortgage and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

77.Store 1022 - Deed of Trust, Security Agreement and Assignment of Leases and Rents, executed and delivered by SRC Facilities LLC, as borrower, to CTT, as trustee for the benefit of the Administrative Agent;

78.Store 1734 - Mortgage and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

79.Store 1614 - Mortgage and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

80.Store 1314 - Mortgage and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

81.Store 1764 - Mortgage and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

82.Store 1874 - Mortgage and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

83.Store 1554 – Leasehold Mortgage and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

84.Store 2207 - Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to Fidelity National Title of New Mexico Inc. (“Fidelity”) as trustee, for the benefit of the Administrative Agent;

85.Store 1717 - Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to Fidelity, as trustee, for the benefit of the Administrative Agent;

86.Store 1504 – Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

87.Store 4928 - Mortgage, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

88.Store 1051 - Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

89.Store 1120 - Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

90.Store 1210 - Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

91.Store 1710 - Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

92.Store 2010 - Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

93.Store 2390 - Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

94.Store 4937 - Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

95.Store 1545 - Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

96.Store 1595 – Fee and Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

97.Store 2305 - Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

98.Store 2855 –Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed and delivered by SRC Facilities LLC, as borrower, to the Administrative Agent;

99.Store 1315 - Deed of Trust, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to Stuart Jones (“Stuart”), as trustee for the benefit of the Administrative Agent;

100.Store 8206 - Deed of Trust, Assignment of Leases and Rents and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to Stuart, as trustee for the benefit of the Administrative Agent;

101.Store 447 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower, to Rebecca S. Conrad (“Rebecca”), as trustee for the benefit of the Administrative Agent;

102.Store 1407 – Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower, to Rebecca, as trustee for the benefit of the Administrative Agent;

103.Store 1417 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

104.Store 1427 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

105.Store 1267 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

106.Store 1297 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

107.Store 1307 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

108.Store 1327 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

109.Store 1337 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

110.Store 1377 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

111.Store 1387 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

112.Store 1447 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

113.Store 1487 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

114.Store 2247 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

115.Store 2497 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

116.Store 1027 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

117.Store 1076 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

118.Store 1187 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

119.Store 1217 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

120.Store 1367 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

121.Store 2197 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

122.Store 2547 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

123.Store 2557 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

124.Store 2587 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

125.Store 8147 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

126.Store 8217 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

127.Store 8717 - Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

128.Store 1176 – Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

129.Store 1317 – Leasehold Deed of Trust, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, executed and delivered by SRC Real Estate (TX), LLC, as borrower to Rebecca, as trustee for the benefit of the Administrative Agent;

130.Store 1029 - Deed of Trust, Assignment of Leases and Rents, Fixture Filing, and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to Chicago Title Company of Washington (“CTCW”), as trustee for the benefit of the Administrative Agent;

131.Store 1038 - Deed of Trust, Assignment of Leases and Rents, Fixture Filing, and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to CTCW, as trustee for the benefit of the Administrative Agent;

132.Store 2219 - Deed of Trust, Assignment of Leases and Rents, Fixture Filing, and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to CTCW, as trustee for the benefit of the Administrative Agent;

133.Store 2309 - Deed of Trust, Assignment of Leases and Rents, Fixture Filing, and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to CTCW, as trustee for the benefit of the Administrative Agent;

134.Store 4147 -Deed of Trust, Assignment of Leases and Rents, Fixture Filing, and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to CTCW, as trustee for the benefit of the Administrative Agent;

135.Store 1139 – Leasehold Deed of Trust, Assignment of Leases and Rents, Fixture Filing, and Security Agreement, executed and delivered by SRC Facilities LLC, as borrower, to CTCW, as trustee for the benefit of the Administrative Agent

EXHIBIT A

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [the][each]¹ Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each]² Assignee identified in item 2 below ([the][each, an] “Assignee”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]³ hereunder are several and not joint.]⁴ Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by [the][each] Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below (including without limitation any letters of credit, guarantees, and swingline loans included in such facilities), and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.

1.    Assignor[s]:        ______________________________

______________________________

2. Assignee[s]:        ______________________________

______________________________    

¹ For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.

² For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.

³ Select as appropriate.

⁴ Include bracketed language if there are either multiple Assignors or multiple Assignees.

Exhibit A-1

______________________________

[Assignee is an [Affiliate][Approved Fund] of [identify Lender]

3. Borrowers:         SRC O.P. LLC, a Delaware limited liability company, SRC Facilities LLC,

a Delaware limited liability company, and SRC Real Estate (TX), LLC, a Delaware limited liability company

4. Administrative Agent:    UBS AG, Stamford Branch, in its capacity as Administrative Agent under the Credit Agreement, together with its successors and assigns

5. Credit Agreement:    The Credit Agreement dated as of March 14, 2018 among the Borrowers, the Lenders parties thereto, the Administrative Agent and UBS Securities LLC, as Lead Arranger and Bookrunner

6. Assigned Interest[s]:

Assignor[s]5	Assignee[s]6	Aggregate Amount of Loans for all Lenders	Amount of Loans Assigned8	Percentage Assigned of Loans7
		$	$	%
		$	$	%
		$	$	%

[7.    Trade Date:        ______________]⁸ 

[Page break]

___________________________

⁵ List each Assignor, as appropriate.

⁶ List each Assignee, as appropriate.

⁷ Set forth, to at least 9 decimals, as a percentage of the Loans of all Lenders thereunder.

⁸ To be completed if the Assignor(s) and the Assignee(s) intend that the minimum assignment amount is to be determined as of the Trade Date.

Exhibit A-2

Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR[S]⁹ 

[NAME OF ASSIGNOR]

By:______________________________

Title:

[NAME OF ASSIGNOR]

By:______________________________

Title:

ASSIGNEE[S]¹⁰ 

[NAME OF ASSIGNEE]

By:______________________________

Title:

[NAME OF ASSIGNEE]

By:______________________________

Title:

[Consented to and]¹¹ Accepted:

UBS AG, Stamford Branch, as

Administrative Agent

By: _________________________________

Title:

___________________________

⁹ Add additional signature blocks as needed. Include both Fund/Pension Fund and manager making the trade (if applicable).

¹⁰ Add additional signature blocks as needed. Include both Fund/Pension Fund and manager making the trade (if applicable).

¹¹To be added only if the consent of the Administrative agent is required by the terms of the Credit Agreement.

Exhibit A-3

[Consented to:] ¹² 

SRC REAL ESTATE (TX), LLC

By:    
Name:    
Title:    

SRC FACILITIES LLC

By:    
Name:    
Title:    

SRC O.P. LLC

By:    
Name:    
Title:    

___________________________

¹² To be added only if the consent of the Borrowers is required by the terms of the Credit Agreement.

Exhibit A-4

ANNEX 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1.    Representations and Warranties.

1.1    Assignor[s]. [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim, (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and (iv) it is not a Defaulting Lender; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document, or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2.    Assignee[s]. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under Section 9.04 of the Credit Agreement (subject to such consents, if any, as may be required thereunder), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2.    Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignee whether such amounts have accrued prior to, on or after the Effective Date. The Assignor[s] and the Assignee[s] shall make all appropriate adjustments in payments by

Annex 1-1

the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.

3.    General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

EXHIBIT B

Annex 1-2

EXHIBIT B

[Reserved]

EXHIBIT C

FORM OF PROMISSORY NOTE

[DATE]

FOR VALUE RECEIVED, each of the undersigned, SRC REAL ESTATE (TX), LLC, a Delaware limited liability company (“SRC Real Estate”), SRC FACILITIES LLC, a Delaware limited liability company (“SRC Facilities”), and SRC O.P. LLC, a Delaware limited liability company (“SRC OP” and, together with SRC Real Estate and SRC Facilities, collectively, the “Borrower”), HEREBY UNCONDITIONALLY PROMISES TO PAY to [INSERT NAME OF LENDER] (together with its successors and permitted assigns, the “Lender”) the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to the Credit Agreement (as defined below) on the Maturity Date or on such earlier date as may be required by the terms of the Credit Agreement. Capitalized terms used herein and not otherwise defined herein are as defined in the Credit Agreement.

The undersigned Borrower promises to pay interest on the unpaid principal amount of the Loans made to it from the date of such Loan until such principal amount is paid in full at a rate or rates per annum determined in accordance with the terms of the Credit Agreement. Such interest is due and payable at such times and on such dates as set forth in the Credit Agreement.

This Note is one of the notes referred to in, and is entitled to the benefits of, that certain Credit Agreement, dated as of March 14, 2018, by and among the Borrower, the financial institutions from time to time party thereto, as lenders, and UBS AG, Stamford Branch, as Administrative Agent (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). The Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for repayments of the principal hereof prior to the maturity hereof upon the terms and conditions therein specified.

This Note is secured by, among other things, the Mortgages.

Demand, presentment, protest and notice of nonpayment and protest with respect to this Note are hereby waived by the Borrower. Whenever in this Note reference is made to the Administrative Agent, the Lender or the Borrower, such reference shall be deemed to include, as applicable, a reference to their respective successors and permitted assigns. The provisions of this Note shall be binding upon and shall inure to the benefit of said successors and assigns. The Borrower’s successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for the Borrower and an assignee of the Borrower’s obligations under the Credit Agreement as permitted by Section 9.04 thereof. This Note may not be assigned by the Lender except as permitted by Section 9.04 of the Credit Agreement.

This Note shall be construed in accordance with and governed by the law of the State of New York.

If more than one Person has executed this Note as “Borrower”, the obligations of all such Persons hereunder shall be joint and several.

The terms and provisions ofSection 9.14 of the Credit Agreement are incorporated herein by reference and shall apply to the obligations of the Borrower hereunder with the same force and effect as if fully set forth herein.

[remainder of page intentionally blank]

IN WITNESS WHEREOF, the Borrower has duly executed this Note as of the day and year first above written.

SRC REAL ESTATE (TX), LLC

By:    
Name:    
Title:    

SRC FACILITIES LLC

By:    
Name:    
Title:    

SRC O.P. LLC

By:    
Name:    
Title:    

Exhibit C-2

EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

The undersigned, [__________], hereby certifies that such Person is a Responsible Officer of each of SRC O.P. LLC, a Delaware limited liability company (“SRC OP”), SRC Facilities LLC, a Delaware limited liability company (“SRC Facilities”), SRC Real Estate (TX), LLC, a Delaware limited liability company (“SRC Real Estate” and, together with SRC OP and SRC Facilities, each a “Borrower” and, collectively, the “Borrowers”). This Compliance Certificate is being delivered pursuant to Section 5.01(c) of that certain Credit Agreement dated as of March 14, 2018 among the Borrowers, the Lenders from time to time party thereto and UBS AG, Stamford Branch, as Administrative Agent (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used in this Compliance Certificate have the meanings set forth in the Credit Agreement unless specifically defined herein. This Compliance Certificate is being delivered in connection with the Financials for the Fiscal [Quarter] [Year] ended [__________], 20[__]. The undersigned does hereby certify, as of the date hereof, solely in such Person’s capacity as a Responsible Officer and not in such Person’s individual capacity, for and on behalf of the Borrowers and the other Loan Parties, that:

1.    I have reviewed the terms of the Credit Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Borrowers, the other Loan Parties and the Subsidiaries during the accounting period covered by the attached Financials [and such Financials delivered with this Compliance Certificate in accordance with Section 5.01(b) of the Credit Agreement present fairly in all material respects the financial position and results of operations of Holdings and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes].¹³ 

2.    No Default has occurred[, except for such events or conditions listed on Schedule 1 attached hereto].¹⁴ 

The terms and provisions ofSection 9.14 of the Credit Agreement are incorporated herein by reference and shall apply to the certifications and obligations of the Borrowers hereunder with the same force and effect as if fully set forth herein.

[remainder of page intentionally blank]

___________________________

¹³ Insert bracketed language if the Borrower is delivering financial statements pursuant to Section 5.01(b) of the Credit Agreement.

¹³ Insert bracketed language only if a Default has occurred. The details of any Default and any action taken or proposed to be taken with respect to such Default should be specified on the Schedule.

Exhibit D-1

The foregoing certifications are made and delivered this [___] day of [__________], 20[__].

SRC REAL ESTATE (TX), LLC

By:    
Name:    
Title:    

SRC FACILITIES LLC

By:    
Name:    
Title:    

SRC O.P. LLC

By:    
Name:    
Title:    

Exhibit D-2

Schedule 1
to Compliance Certificate

Defaults

Exhibit D-3

EXHIBIT E

FORM OF SOLVENCY CERTIFICATE

March 14, 2018

This Solvency Certificate (this “Certificate”) is delivered pursuant to Section 4.01(m) of the Credit Agreement, dated as of the date hereof (as amended, supplemented, restated, replaced or otherwise modified from time to time, the “Credit Agreement”), among SRC O.P. LLC, a Delaware limited liability company (“SRC OP”), SRC Facilities LLC, a Delaware limited liability company (“SRC Facilities”), SRC Real Estate (TX), LLC, a Delaware limited liability company (“SRC Real Estate” and, together with SRC OP and SRC Facilities, each a “Borrower” and, collectively, the “Borrowers”), UBS AG, Stamford Branch, as Administrative Agent, and each lender from time to time party thereto (collectively, the “Lenders” and individually, a “Lender”). Capitalized terms used herein without definition have the same meanings as in the Credit Agreement.

The undersigned, solely in such person’s capacity as a Responsible Officer of each Borrower, and not in such person’s individual capacity, DOES HEREBY CERTIFY to the Administrative Agent and the Lenders as of the date hereof, as follows:

1.    I am knowledgeable of the financial and accounting matters of the Borrowers, the Credit Agreement and the covenants and representations (financial or otherwise) contained therein.

2.    Immediately after giving effect to the Transactions on the Effective Date:

a.    the fair value of the property of each Borrower is greater than the total amount of liabilities, including contingent liabilities, of such Borrower;

b.    the present fair saleable value of the assets of each Borrower is greater than the amount that is required to pay the probable liability of such Borrower on its debts as they become absolute and matured in accordance with their terms;

c.    the capital of each Borrower is not unreasonably small in relation to its business currently contemplated to be conducted as of such date of determination; and

d.    no Borrower intends to incur, or believe that it will incur, debts, including current obligations, beyond its ability to pay such debts as they become absolute and matured.

For the purposes of this Certificate, the amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

The terms and provisions ofSection 9.14 of the Credit Agreement are incorporated herein by reference and shall apply to the certifications and obligations of the Borrowers hereunder with the same force and effect as if fully set forth herein.

[remainder of page intentionally blank]

IN WITNESS WHEREOF, I have hereunto set my hand as of the date first written above.

SRC REAL ESTATE (TX), LLC

By:    

Name:    

Title:    

SRC FACILITIES LLC

By:    
Name:    
Title:    

SRC O.P. LLC

By:    
Name:    
Title:    

EX-10.92

Exhibit 10.92

MEZZANINE LOAN AGREEMENT

dated as of

March 14, 2018

among

SRC SPARROW 2 LLC,
as Borrower,

the Lenders party hereto

and

JPP, LLC,
as Administrative Agent

TABLE OF CONTENTS

ARTICLE I		Page
	DEFINITIONS	1
SECTION 1.01.	Defined Terms	1
SECTION 1.02.	Reserved	20
SECTION 1.03.	Terms Generally	20
SECTION 1.04.	Accounting Terms; GAAP; Pro Forma Calculations	20
SECTION 1.05.	Rounding	21
SECTION 1.06.	Times of Day	21
ARTICLE II
	THE LOAN	21
SECTION 2.01.	Commitments	21
SECTION 2.02.	Loans	21
SECTION 2.03.	Request for Loans	21
SECTION 2.04.	Reserved	21
SECTION 2.05.	Reserved	21
SECTION 2.06.	Reserved	22
SECTION 2.07.	Reserved	22
SECTION 2.08.	Termination of Commitments. The Commitments shall terminate immediately upon funding the Loans on the Effective Date	22
SECTION 2.09.	Repayment of Loans; Evidence of Debt	22
SECTION 2.10.	Repayment of Loans	23
SECTION 2.11.	Fees	24
SECTION 2.12.	Interest	24
SECTION 2.13.	Illegality	24
SECTION 2.14.	Alternate Rate of Interest. If at any point:	25
SECTION 2.15.	Increased Costs	26
SECTION 2.16.	Break Funding Payments	27
SECTION 2.17.	Taxes	27
SECTION 2.18.	Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Set-offs	31
SECTION 2.19.	Mitigation Obligations; Replacement of Lenders	32
SECTION 2.20.	Reserved	33
ARTICLE III
	REPRESENTATIONS AND WARRANTIES	33
SECTION 3.01.	Organization; Powers; Single Purpose Entity; Subsidiaries	33
SECTION 3.02.	Authorization; Enforceability	33
SECTION 3.03.	Governmental Approvals; No Conflicts	33
SECTION 3.04.	Financial Condition; No Material Adverse Change	34
SECTION 3.05.	Properties; Title	34
SECTION 3.06.	Litigation, Environmental and Labor Matters	34
SECTION 3.07.	Compliance with Laws and Agreements	35

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TABLE OF CONTENTS
(Continued)

		Page
SECTION 3.08.	Investment Company Status	35
SECTION 3.09.	Taxes	35
SECTION 3.10.	ERISA	35
SECTION 3.11.	Disclosure	35
SECTION 3.12.	Federal Reserve Regulations	35
SECTION 3.13.	Liens	36
SECTION 3.14.	Reserved	36
SECTION 3.15.	Reserved	36
SECTION 3.16.	Solvency	36
SECTION 3.17.	Reserved	36
SECTION 3.18.	Security Interest in Collateral	36
SECTION 3.19.	Reserved	36
SECTION 3.20.	OFAC	36
SECTION 3.21.	Patriot Act	36
SECTION 3.22.	Foreign Corrupt Practices Act; Anti-Corruption Laws	36
SECTION 3.23.	Tax Shelter Regulations	37
SECTION 3.24.	PPPFA	37
SECTION 3.25.	Broker’s Fees	37
SECTION 3.26.	Federal Income Tax Classification	37
SECTION 3.27.	Reserved	37
SECTION 3.28.	Reserved	37
SECTION 3.29.	Reserved	38
SECTION 3.30.	Reserved	38
SECTION 3.31.	Opinion Assumptions	38
SECTION 3.32.	Business Purpose	38
SECTION 3.33.	Reserved	38
SECTION 3.34.	Reserved	38
SECTION 3.35.	Filing, Recording and Other Taxes	38
SECTION 3.36.	Reserved	38
SECTION 3.37.	Reserved	38
SECTION 3.38.	Underwriting Representations	38
ARTICLE IV
	Reserved	39
ARTICLE V
	Affirmative Covenants	39
SECTION 5.01.	Financial Statements and Other Information	39
SECTION 5.02.	Notices of Material Events	40
SECTION 5.03.	Existence; Conduct of Business	41
SECTION 5.04.	Payment of Obligations	42
SECTION 5.05.	Maintenance of Properties; Defense of Title; Insurance; Further Assurances	42

-ii-

TABLE OF CONTENTS
(Continued)

		Page
SECTION 5.06.	Books and Records; Inspection Rights	43
SECTION 5.07.	Compliance with Laws and Obligations	43
SECTION 5.08.	Use of Proceeds	43
SECTION 5.09.	Alterations	43
SECTION 5.10.	Handicapped Access	44
SECTION 5.11.	Additional Collateral; Environmental Matters; Further Assurances; Estoppels	44
SECTION 5.12.	Cooperation in Legal Proceedings	45
SECTION 5.13.	Master Lease	45
SECTION 5.14.	Taxes on Security	45
SECTION 5.15.	Interest Rate Protection	45
SECTION 5.16.	Single Purpose Entity	45
SECTION 5.17.	Post-Closing Matters	45
SECTION 5.18.	Ground Lease	46
SECTION 5.19.	REA	46
SECTION 5.20.	Title Policy	46
ARTICLE VI
	NEGATIVE COVENANTS	46
SECTION 6.01.	Indebtedness; Swap Agreements.\	46
SECTION 6.02.	Liens	47
SECTION 6.03.	Transfers	47
SECTION 6.04.	Investments	47
SECTION 6.05.	Reserved	48
SECTION 6.06.	Transactions with Affiliates	48
SECTION 6.07.	REA	48
SECTION 6.08.	Management Agreements	48
SECTION 6.09.	Organizational Documents	48
SECTION 6.10.	No Joint Assessment	48
SECTION 6.11.	No Plan Assets	48
SECTION 6.12.	Zoning	48
SECTION 6.13.	Use of Properties	48
SECTION 6.14.	Accounting Changes; Fiscal Year	49
SECTION 6.15.	Ground Lease	49
SECTION 6.16.	PPPFA	49
SECTION 6.17.	No Dividends	49
ARTICLE VII
	EVENTS OF DEFAULT	49
SECTION 7.01.	Events of Default	49

-iii-

TABLE OF CONTENTS
(Continued)

		Page
ARTICLE VIII
	THE ADMINISTRATIVE AGENT	53
SECTION 8.01.	Appointment of Agency	53
SECTION 8.02.	Rights and Powers of Administrative Agent	53
SECTION 8.03.	Resignation and Replacement	54
SECTION 8.04.	No Joint Venture, Etc	55
SECTION 8.05.	Agent as Representative, Etc	55
ARTICLE IX
	MISCELLANEOUS	57
SECTION 9.01.	Notices; Effectiveness; Electronic Communication	57
SECTION 9.02.	Waivers; Amendments	59
SECTION 9.03.	Expenses; Indemnity; Damage Waiver.\	61
SECTION 9.04.	Successors and Assigns	62
SECTION 9.05.	Survival	65
SECTION 9.06.	Counterparts; Integration; Effectiveness	65
SECTION 9.07.	Severability	66
SECTION 9.08.	Reserved	66
SECTION 9.09.	Governing Law; Jurisdiction; Consent to Service of Process	67
SECTION 9.10.	WAIVER OF JURY TRIAL	67
SECTION 9.11.	Headings	67
SECTION 9.12.	Confidentiality	67
SECTION 9.13.	USA Patriot Act	68
SECTION 9.14.	Exculpation	68
SECTION 9.15.	Acknowledgement and Consent to Bail-In of EEA Financial Institutions	72
SECTION 9.16.	Interest Rate Limitation	72
SECTION 9.17.	No Advisory or Fiduciary Responsibility	72
SECTION 9.18.	Independent Effect of Covenants	73
SECTION 9.19.	Inconsistencies with Other Documents	73
SECTION 9.20.	Reserved	73
SECTION 9.21.	Publicity	73
SECTION 9.22.	Mortgage Loan	73

-iv-

SCHEDULES:

Schedule 1.01 – Properties

Schedule 1.02 – Appraised Values

Schedule 1.03 – Single Purpose Entity Requirements

Schedule 1.04 – Purchase Options

Schedule 1.05 – Release Prices

Schedule 2.01 – Commitments

Schedule 3.01 – Organizational Chart

Schedule 3.06 – Litigation, Environmental and Labor Matters; Environmental Reports

Schedule 3.38 – Underwriting Representations

Schedule 5.17 – Post-Closing Matters

EXHIBITS:

Exhibit A – Form of Assignment and Assumption

Exhibit B – Reserved

Exhibit C – Reserved

Exhibit D – Form of Compliance Certificate

-v-

MEZZANINE LOAN AGREEMENT

MEZZANINE LOAN AGREEMENT (this “Agreement”) dated as of March 14, 2018 among SRC SPARROW 2 LLC (“Borrower”), the Lenders from time to time party hereto and JPP, LLC, as administrative agent.

WHEREAS, Borrower has requested, and the Lenders have agreed to provide, a mezzanine loan in an aggregate principal amount equal to $240,000,000, the proceeds of which will be used in accordance with Section 5.08.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I
Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“Acceptable Counterparty” means a counterparty to the LIBOR Cap that (a) has and shall maintain, until the expiration of the applicable LIBOR Cap, (i) a long-term unsecured debt rating of not less than “A+” by S&P and a short-term senior unsecured debt rating of at least “A‑1” from S&P and (ii)(x) a long-term unsecured debt rating of not less than “A2” from Moody’s and a short-term senior unsecured debt rating of at least “P1” from Moody’s or (y) if no short-term debt rating exists, a long-term senior unsecured debt rating of at least “A1” from Moody’s or (b) is otherwise acceptable to the Administrative Agent.

“Additional Mezzanine Borrower” means Sparrow One or such other direct or indirect Subsidiary of Roebuck which is a holder of the direct or indirect Equity Interests of the Borrowers and acceptable to the Administrative Agent.

“Additional Mezzanine Loan Agreement” means any loan agreement entered into after the Effective Date by the Additional Mezzanine Borrower relating to the incurrence of Additional Permitted Mezzanine Debt.

“Additional Permitted Mezzanine Debt” means additional mezzanine Indebtedness incurred by Borrower or the Additional Mezzanine Borrower after the Effective Date as a Loan under this Agreement or a loan under any Additional Mezzanine Loan Agreement in an aggregate amount not to exceed the lesser of (i) $200,000,000 (which, when aggregated with the Indebtedness under the Loans as of the Effective Date, does not exceed $440,000,000) and (ii) the aggregate amount of repayments of the Mortgage Loan on or prior to the date of incurrence of such additional Indebtedness; provided, that (a) the lender providing any such additional mezzanine Indebtedness shall execute a joinder to the Intercreditor Agreement agreeing to be bound by the terms thereof and (b) Borrower shall (x) execute and deliver such amendments to the Loan Documents and the Effective Date Mezzanine Loan Agreement as are reasonably required by the Administrative Agent to incorporate into the terms of such Loan Documents and the Effective Date Mezzanine Loan Agreement the existence of the Additional Permitted Mezzanine Debt and (y) pay or reimburse to the Administrative Agent all reasonable out-of-pocket costs and expenses incurred by the Administrative Agent in connection with any such Indebtedness.

“Administrative Agent” means JPP, LLC, in its capacity as administrative agent for the Lenders, together with its successors and assigns.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agent Parties” has the meaning assigned to such term in Section 9.01(c).

“Agreement” has the meaning assigned to such term in the introductory paragraph.

“Anti-Money Laundering Laws” means each of (a) the Bank Secrecy Act, (b) the Patriot Act, (c) OFAC and (d) all other applicable foreign or domestic laws, rules, procedures or regulations relating to or concerning money laundering, terrorist financing, securities fraud, market manipulation or the generation of income through illegal actions.

“Applicable Margin” means 11.00%

“Applicable Percentage” means, with respect to any Lender, a percentage equal to a fraction the numerator of which is such Lender’s outstanding principal amount of the Loans and the denominator of which is the aggregate outstanding principal amount of the Loans of all Lenders.

“Appraisals” means those certain appraisals of each Property in its then “as is” condition, prepared by a member of the American Institute of Real Estate Appraisers acceptable to the Administrative Agent, which appraisal (i) shall meet the minimum appraisal standards for national banks promulgated by the Comptroller of the Currency pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (FIRREA) and (ii) otherwise shall be in form and substance satisfactory to the Administrative Agent in its sole and absolute discretion.

“Appraised Value” means, with respect to each Property, the amount set forth for such Property on Schedule 1.02.

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Assignment and Assumption” means an assignment and assumption agreement entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form (including electronic documentation generated by use of an electronic platform) approved by the Administrative Agent.

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

2

“Bankruptcy Code” means Chapter 11 of Title 11 of the United States Code (11 U.S.C. 101 et seq.).

“Base Rate” means, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate in effect on such day plus ½ of 1.00% (b) the Prime Rate in effect on such day and (c) the Eurodollar Rate for a one month period on such day plus 1.00%. Any change in the Base Rate due to a change in the Federal Funds Rate, the Prime Rate or the Eurodollar Rate shall be effective from and including the effective date of such change in the Federal Funds Rate, the Prime Rate or the Eurodollar Rate, respectively. When used in reference to any Loan “Base Rate” shall refer to a Loan bearing interest at a rate determined by reference to the Base Rate.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” has the meaning assigned to such term in the introductory paragraph.

“Business Day” means any day other than a Saturday, Sunday, legal holiday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, the State of New York and, if such day relates to any Eurodollar Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

“Capital Expenditures” means, for any period, the amounts expended for items required to be capitalized under GAAP (including expenditures for replacements, building improvements, major repairs, alterations, tenant improvements and leasing commissions).

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital lease obligations on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP; provided, that any obligations of any Person to pay rent or other amounts under any lease classified and accounted for as operating lease obligations on the Effective Date, shall continue to be accounted for and classified as operating lease obligations in accordance with GAAP as in effect on the Effective Date notwithstanding any change in GAAP. For the avoidance of doubt, any obligations under a Ground Lease or the Master Lease shall not constitute Capital Lease Obligations notwithstanding any change in GAAP after the Effective Date.

“Casualty Event” has the meaning set forth in the Mortgage Loan Agreement.

“Change in Control” means (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its Subsidiaries, and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) other than a Permitted Holder becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire (such right, an “option right”), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 35% or more of the equity securities of Holdings entitled to vote for members of the board of directors of Holdings on a fully diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right) and such “person” or “group” shall beneficially own (as such term is used herein) a greater percentage of the Equity Interests of Holdings entitled to vote for members of the board of directors than the Permitted Holders shall, collectively,

3

beneficially own; or (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of Holdings cease to be composed of individuals (x) who were members of that board or equivalent governing body on the first day of such period, (y) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (x) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (z) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (x) and (y) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or (c) either Holdings or Roebuck shall cease for any reason to own, directly or indirectly, 100% of the voting stock of the Borrowers; or (d) the occurrence of a change in control under the Holdings Domestic Credit Agreement.

“Change in Law” means the occurrence, after the Effective Date (or with respect to any Lender, if later, the date on which such Lender becomes a Lender), of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority, or (c) the making or issuance of any request, rules, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; providedhowever, that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder, issued in connection therewith or in implementation thereof and (ii) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law” regardless of the date enacted, adopted, issued or implemented.

“Closing Date Officer’s Certificate” means the officer’s certificate of Borrower delivered to Lender as of the Closing Date certifying certain schedules incorporated herein by reference.

“Code” means the Internal Revenue Code of 1986.

“Collateral” means all assets owned from time to time by Borrower, including (i) 100% of the issued and outstanding limited liability company interests in SRC O.P. LLC, (ii) 100% of the indirect ownership interests and rights to distributions from SRC Facilities LLC, and
SRC Real Estate (TX), LLC, (iii) all other collateral pledged under the Pledge Agreement, and (iv) all other tangible and intangible property in respect of which Lender is granted a Lien under this Agreement and the other Loan Documents, and all proceeds thereof.

“Collateral Documents” means, collectively, the Pledge Agreement and all other agreements, instruments and documents executed in connection with this Agreement that create, or are intended to create, perfect or evidence Liens to secure the Obligations.

“Commitment” means, with respect to each Lender, such Lender’s commitment to make a Loan to Borrower on the Effective Date. The initial amount of each Lender’s Commitment is set forth on Schedule 2.01. The aggregate amount of the Commitment of all Lenders on the Effective Date is $240,000,000.

“Compliance Certificate” means a compliance certificate in substantially the form of Exhibit D (or such other form as may be approved by the Administrative Agent).

“Component Note” has the meaning assigned to such term in Section 2.09(f).

4

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Control” means, with respect to any Person, the possession, directly or indirectly, of the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority of the members of the board of directors (or the applicable comparable governing body) of such Person (or, to the extent such Person is a member-managed limited liability company, a direct or indirect parent of such Person that has a board of directors (or the applicable comparable governing body)). The terms “Controlling” and “Controlled” have meanings correlative thereto.

“Controlled Investment Affiliates” means, with respect to any Person, any fund or investment vehicle that (a) is organized by such Person for the purpose of making equity or debt investments in one or more companies and (b) is Controlled by such Person. For the avoidance of doubt, JPP, LLC and JPP II, LLC are each Controlled Investment Affiliates of ESL Investments, Inc.

“Debtor Relief Laws” means the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.

“Default” means any event or condition which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Default Interest” means interest payable at the rate described in Section 2.12(b).

“Disqualified Equity Interests” means any Equity Interest that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Equity Interests that are not Disqualified Equity Interests and cash in lieu of fractional shares), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control, asset sale or similar event so long as any rights of the holders thereof upon the occurrence of a change of control, asset sale or similar event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable), (b) is redeemable at the option of the holder thereof (other than (i) solely for Equity Interests that are not Disqualified Equity Interests and cash in lieu of fractional shares or (ii) as a result of a change of control, asset sale or similar event so long as any rights of the holders thereof upon the occurrence of a change of control, asset sale or similar event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable), in whole or in part, (c) requires any scheduled payments of dividends in cash or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 91 days after the Maturity Date at the time of issuance of such Equity Interests.

“Dollar” and “$” mean lawful money of the United States.

“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

5

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

“Effective Date” means the date of this Agreement.

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 9.04(b) (subject to such consents, if any, as may be required under Section 9.04(b)).

“Environmental Laws” means “Hazardous Material Laws” as defined in the HazMat Indemnity as in effect on the Effective Date.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of Remediation, fines, penalties or indemnities), of Borrower or Mortgage Borrower directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or Threatened Release of any Hazardous Materials in, on above, under or from any of the Properties or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with any Loan Party, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the failure by any Loan Party or ERISA Affiliate to meet all applicable requirements under the Pension Funding Rules, whether or not waived; (c) the filing of an application for a waiver of the minimum funding standards under the Pension Funding Rules; (d) the incurrence by any Loan Party or any ERISA Affiliate of any liability pursuant to Section 4063 or 4064 of ERISA or the occurrence of a substantial cessation with respect to a Plan under Section 4062(e) of ERISA; (e) the filing of a notice of intent to terminate a Plan under, or the treatment of a Plan amendment as a termination under, Section 4041 of ERISA; (f) the institution by the PBGC of proceedings to terminate a Plan; (g) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (h) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer

6

Plan, notification of the imposition of Withdrawal Liability or notification that a Multiemployer Plan is “in reorganization” or “insolvent” (within the meaning of Title IV of ERISA); (i) the determination after the Effective Date that any Plan is in “at-risk status” (within the meaning of Section 430 of the Code or Section 303 of ERISA) or that a Multiemployer Plan is in “endangered status” or “critical status” (within the meaning of Section 432 of the Code or Section 305 of ERISA); (j) the imposition or incurrence of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate; (k) the engagement by any Loan Party or any ERISA Affiliate in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; or (l) the imposition of a lien upon any Loan Party pursuant to Section 430(k) of the Code or Section 303(k) of ERISA.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

“Eurodollar”, when used in reference to any Loan, means that such Loan bears interest at a rate determined by reference to the Eurodollar Rate.

“Eurodollar Rate” means, with respect to any Interest Period, the greater of (a) the rate appearing on the applicable Reuters page (or on any successor or substitute page or service providing quotations of interest rates applicable to dollar deposits in the London interbank market comparable to those currently provided on such page, as determined by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period; provided, that (i) if such rate is not available at such time for any reason, then the “Eurodollar Rate” with respect to such Interest Period shall be the Interpolated Rate, and (ii) if the Interpolated Rate is not available, the “Eurodollar Rate” with respect to such Interest Period shall be the offered quotation rate to first class banks in the London interbank market by the Person that is the Administrative Agent for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan of such Person, in its capacity as a Lender (or, if it is not a Lender of such Loan, in such amount determined by the Administrative Agent) for which the Eurodollar Rate is then being determined with maturities comparable to such Interest Period at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period and (b) 0.00%.

“Eurodollar Successor Rate” has the meaning assigned to such term in Section 2.14.

“Eurodollar Successor Rate Conforming Changes” has the meaning assigned to such term in Section 2.14.

“Event of Default” has the meaning assigned to such term in Section 7.01.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan (other than pursuant to an assignment request by Borrower under Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.17, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such

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Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.17(g) and (d) any U.S. federal withholding Taxes imposed under FATCA.

“Exculpated Parties” has the meaning set forth in Section 9.14.

“Existing Note” has the meaning assigned to such term in Section 2.09(f).

“FATCA” means Sections 1471 through 1474 of the Code, as of the Effective Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future United States Treasury Regulations promulgated thereunder and published guidance with respect thereto, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any applicable intergovernmental agreements with respect thereto.

“FCPA” has the meaning assigned to such term in Section 3.22.

“Federal Funds Rate” means, for any day, the rate calculated by the NYFRB based on such days’ federal funds transactions by depositary institutions as determined in such manner as the NYFRB shall set forth on its public website from time to time and published on the next succeeding Business Day by the NYFRB as the federal funds effective rate.

“Financials” means the annual or quarterly financial statements, and accompanying certificates and other documents required to be delivered pursuant to Section 5.01(a) or Section 5.01(b).

“Fiscal Year” means a fiscal year of Borrower ending on December 31 of each year.

“Foreign Lender” means a Lender that is not a U.S. Person.

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Ground Lease” has the meaning set forth in the Mortgage Loan Agreement.

“Ground Lessor” means any lessor under a Ground Lease.

“Ground Rent” means the rent paid under each Ground Lease.

“Group Members” means the Borrower, Mortgage Borrower and any Additional Mezzanine Borrower.

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property,

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securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.

“Guarantor” means each of Roebuck and Holdings.

“Guaranty Agreement” means that certain Limited Guaranty dated as of the Effective Date made by the Guarantor in favor of the Administrative Agent.

“Hazardous Materials” means “Hazardous Materials” as defined in the HazMat Indemnity as in effect on the Effective Date.

“Hazardous Materials Claims” means “Hazardous Materials Claims” as defined in the HazMat Indemnity as in effect on the Effective Date.

“HazMat Indemnity” means that certain Hazardous Materials Indemnity Agreement dated as of the Effective Date made by the Guarantor in favor of the Administrative Agent.

“HazMat Violation” has the meaning assigned to such term in Section 5.02(g).

“Holdings” means Sears Holdings Corporation, a Delaware corporation.

“Holdings Domestic Credit Agreement” means that certain Third Amended and Restated Credit Agreement dated as of July 21, 2015, by and among Holdings, certain Subsidiaries of Holdings party thereto, the lenders party thereto, the issuing lenders party thereto, Bank of America, N.A., as administrative agent and the other agents and financial institutions party thereto.

“Improvements” has the meaning set forth in the Mortgage Loan Agreement.

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a)    all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b)    the maximum amount of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial letters of credit), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

(c)    net obligations of such Person under any Swap Agreement;

(d)    all obligations of such Person to pay the deferred purchase price of property or services (other than any trade accounts payable in the ordinary course of business and not past due for more than ninety (90) days);

(e)    indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales

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or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(f)    all Capital Lease Obligations of such Person;

(g)    all obligations of such Person in respect of any Disqualified Equity Interest; and

(h)    all Guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

“Indemnitee” has the meaning assigned to such term in Section 9.03(b).

“Insurance Maintenance Requirements” means maintaining (or causing to be maintained under the Master Lease), compliance at all times with the requirements set forth on Schedule 1.05 of the Mortgage Loan Agreement.

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of the Effective Date entered into by and between the Administrative Agent and the administrative agent for the Mortgage Loan.

“Interest Payment Date” means the 14th day of each calendar month, commencing on April 14, 2018 and continuing on each such day through the Maturity Date.

“Interest Period” means the period commencing on the day immediately following an Interest Payment Date and continuing until the next such Interest Payment Date; provided, that the first Interest Period shall commence on the Effective Date and end on the first Interest Payment Date occurring after the Effective Date.

“Interpolated Rate” means, at any time, the rate per annum determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the rate as displayed on the applicable Reuters page (or on any successor or substitute page or service providing quotations of interest rates applicable to dollar deposits in the London interbank market comparable to those currently provided on such page, as determined by the Administrative Agent from time to time; in each case the “Screen Rate”) for the longest period (for which that Screen Rate is available) that is shorter than the Interest Period and (b) the Screen Rate for the shortest period (for which that Screen Rate is available) that exceeds the Interest Period, in each case, at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

“Investment” has the meaning assigned to such term in Section 6.04.

“IRS” means the United States Internal Revenue Service.

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“Kmart” means Kmart Corporation, a Michigan corporation.

“Lease” means, with respect to each Property, any lease, sublease, subsublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in such Property, and every modification, amendment or other agreement relating to such lease, sublease, subsublease, letting, license, concession or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a Lender hereunder pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

“LIBOR Cap” has the meaning assigned to such term in Section 5.15.

“Licenses” has the meaning assigned to such term in the Mortgage Loan Agreement.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

“Loan Documents” means this Agreement, the Note, the Guaranty Agreement, the HazMat Indemnity, the Collateral Documents, all Compliance Certificates and each other agreement, instrument, certificate or document executed and delivered to, or in favor of, the Administrative Agent or any Lender by or on behalf of any Loan Party in connection with this Agreement or the Transactions. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.

“Loan Parties” means, collectively, Borrower and the Guarantor.

“Loans” means the loans made by the Lenders to Borrower pursuant to this Agreement.

“Master Lease” means that certain Master Lease dated as of the Effective Date by and between Mortgage Borrowers, as co-lessors, and the Master Lessee, as lessee.

“Master Lease Guaranty” means that certain Guarantee of Lease dated as of the Effective Date made by Holdings in favor of the Borrowers, as lessors under the Master Lease.

“Master Lessee” means each of Roebuck and Kmart, as lessees under the Master Lease.

“Material Adverse Effect” means a material adverse effect on (a) the Collateral, (b) the Properties, taken as a whole, or the Master Lease or the Master Lease Guaranty, (c) Mortgage Borrower’s title to the Properties or Borrower’s title to the Collateral, (d) the rights and remedies of the Administrative Agent (with respect to itself and on behalf of the Secured Parties) under the Loan Documents, (e) the enforceability or validity of any Loan Document, the perfection or priority of any Lien created under any

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Loan Document or the rights, interests and remedies of the Administrative Agent or the other Secured Parties under any Loan Document, (f) the ability of Borrower or the Guarantor to perform its obligations under the Loan Documents, (g) the ability of the Master Lessee to perform its obligations under the Master Lease or the ability of Holdings to perform its obligations under the Master Lease Guaranty, or (g) the value of the Collateral or the value, use or operation of any Property.

“Material Agreement” means any agreement to which Mortgage Borrower is a party which is material to the operation of any Property and for which the termination, non-renewal or cancellation thereof, in each case without a replacement reasonably acceptable to the Administrative Agent, could reasonably be expected to result in a Material Adverse Effect. Material Agreement shall not include Leases (other than the Master Lease), REAs, or Multi-Site Agreements.

“Maturity Date” means the earlier of (a) July 20, 2020 and (b) the date of acceleration of the Obligations in accordance with Section 7.01.

“Maximum Legal Rate” means the maximum non-usurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness under the Loans and as provided for herein or in the other Loan Documents, under the laws of such Governmental Authorities whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loans.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage Borrower” means, collectively, SRC O.P. LLC, SRC Facilities LLC, and SRC Real Estate (TX), LLC, each a Delaware limited liability company.

“Mortgage Lender” means, collectively, the “Lenders” under and as defined in the Mortgage Loan Agreement or, if the context requires, the administrative agent under the Mortgage Loan action on behalf of such “Lenders”.

“Mortgage Loan Agreement” means that certain Loan Agreement dated as of the Effective Date, by and between the Mortgage Borrower and Mortgage Lender.

“Mortgage Loan Documents” means the “Loan Documents” under and as defined in the Mortgage Loan Agreement.

“Multiemployer Plan” means an “employee pension benefit plan” (as defined in Section 3(2) of ERISA that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Multi-Site Agreement” means a national, multi-site master lease, license or concession or department agreement, in each case, (a) with tenants or licensees that operate within and as part of the store operated at a Property, or that operate kiosks, ATM or vending machines or drive-through facilities located on a Property, and (b) entered into in the ordinary course and on arm’s length terms.

“Net Cash Proceeds” means, with respect to any Repayment Event, (a) the cash proceeds received in respect of such event, including (i) any cash received in respect of any non-cash proceeds, but only as and when received, and (ii) in the case of a Casualty Event, the insurance proceeds or condemnation awards or similar payments actually received net of (b) the sum of (i) all reasonable out-of-pocket fees and expenses paid to third parties (other than Affiliates) in connection with such event and (ii) the amount of all taxes paid (or reasonably estimated to be payable in the next six months) with respect to such event.

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“Non-Consenting Lender” has the meaning assigned to such term in Section 9.02(d).

“November 2017 PPPFA Amendment” means that certain REMIC Amendment to PPPFA, Craftsman Consent and other Transaction Documents, dated as of November 7, 2017, by and among Holdings, certain Subsidiaries of Holdings party thereto and the PBGC.

“Note” means, collectively, (i) that certain Promissory Note A-1, dated as of the Effective Date, in the original principal amount of $228,000,000, made by Borrower to JPP, LLC, (ii) that certain Promissory Note A-2, dated as of the Effective Date, in the original principal amount of $12,000,000, made by Borrower to JPP II, LLC and (iii) each other note delivered by Borrower pursuant to Section 2.09(f), in each case, as such note may be replaced by multiple Notes in accordance with Section 2.09(f) and as otherwise assigned (in whole or in part), amended, restated, replaced, supplemented or otherwise modified in accordance herewith

“NYFRB” means the Federal Reserve Bank of New York.

“Obligations” means all unpaid principal of and accrued and unpaid interest on the Loans, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations, liabilities and indebtedness (including interest and fees accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of any Loan Party to any of the Lenders, the Administrative Agent, any other Secured Party or any indemnified party, individually or collectively, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, in each case, to the extent arising or incurred under this Agreement or any of the other Loan Documents or in respect of any of the Loans.

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

“Option Holder” means the holder of any purchase option right described in the definition of Purchase Option Exercise Event.

“Option Property Release Amount” means the purchase price paid by the Option Holder in connection with the purchase of the applicable Option Release Property.

“Option Release Property” has the meaning set forth in the definition of Purchase Option Exercise Event.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19).

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“Participant” has the meaning assigned to such term in Section 9.04(c).

“Participant Register” has the meaning assigned to such term in Section 9.04(c).

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT ACT) of 2001, Pub. L. 107-56, as it may be amended or otherwise modified from time to time.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Pension Act” means the Pension Protection Act of 2006.

“Pension Contribution” means the contribution or deposit made on the Effective Date in an aggregate amount of at least $406,700,000 to the Sears Pension Plans in accordance with the terms of the November 2017 PPPFA Amendment, a portion of which may be deposited into the escrow account described in the November 2017 PPPFA Amendment in accordance with the November 2017 PPPFA Amendment.

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum funding standards and minimum required contributions (including any installment payment thereof) to Plans and Multiemployer Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

“Permitted Change in Control” means a Change in Control directly arising from the exercise of remedies by any agent under any Additional Mezzanine Loan Agreement relating to such Additional Permitted Mezzanine Debt.

“Permitted Encumbrances” means with respect to the Collateral, the Liens created by the Loan Documents, and with respect to the Mortgage Borrowers and the Properties, the “Permitted Encumbrances” under and as defined in the Mortgage Loan Agreement.

“Permitted Holder” means (a) Edward S. Lampert, (b) ESL Partners, L.P., (c) ESL Investments, Inc., (d) any spouse, descendant, heir, legatee, devisee or trust or family limited partnership created for the benefit of any of the foregoing, and (e) any Controlled Investment Affiliate(s) of any of the foregoing.

“Permitted Investments” means:

(a)    direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

(b)    investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, a credit rating of at least P-2 from Moody’s or A-2 from S&P;

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(c)    investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

(d)    fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and

(e)    money market funds that (i) comply with the criteria set forth in SEC Rule 2a‑7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.

“Permitted Leases” means any existing or future Lease of all or any portion of any Property, provided that Master Lessee is not released from its obligations under the Master Lease.

“Permitted Liens” means Liens permitted under Section 6.02.

“Permitted Sales” means, subject to compliance with the terms and conditions of this Agreement and the other Loan Documents, including, without limitation, Section 2.10, any Sale of any Property; provided, that (a) such Sale is on arm’s-length fair market terms, (b) such Sale is for consideration of 100% in cash, (c) such Sale is for a minimum sale price of at least the Release Price for such Property, and (d) such Sale results in the removal of the applicable Property from the Master Lease.

“Permitted Transfers” means each of (a) the pledge by the Additional Mezzanine Borrower of the Equity Interests in the Mezzanine Borrower or such other Subsidiary of Roebuck as security for the obligations under the Additional Mezzanine Loan Agreement pursuant to the pledge agreement related to such loan agreement or the foreclosure of such pledge agreement, (b) distributions to the owners of Equity Interests in Borrower, so long as no Event of Default is continuing and doesn’t result therefrom, (c) any transfer of the direct or indirect Equity Interests of Borrower subject to (i) no Change in Control shall occur, (ii) the Administrative Agent shall have obtained satisfactory results of KYC searches with respect to the new direct or indirect owners of such Equity Interests, where such new owner owns more than 20% of the beneficial interests in Borrower (direct or indirect) and did not own 20% prior thereto and (iii) Borrower shall deliver all such documents, opinions and other deliverables described under Section 4.01 as the Administrative Agent may request in connection with any such Transfer, and (d) transfers of shares or other beneficial interests which are listed on a national or international exchange.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any “employee pension benefit plan” (as defined in Section 3(2) of ERISA, other than a Multiemployer Plan) that is maintained or is contributed to by a Loan Party or any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 or 430 of the Code or Section 302 or 303 of ERISA.

“Platform” means any electronic system, including Intralinks^®, ClearPar^® and any other internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Administrative Agent, any of its Related Parties or any other Person, providing for access to data protected by passcodes or other security system.

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“Pledge Agreement” means that certain Pledge and Security Agreement, dated as of the Effective Date, executed by Borrower for the benefit of Lender.

“Policies” means those certain insurance policies required to be maintained from time to time pursuant to the terms of Schedule 1.05 of the Mortgage Loan Agreement.

“PPPFA” means that certain Pension Plan Protection and Forbearance Agreement dated as of March 18, 2016, by and among Holdings, certain Subsidiaries of Holdings party thereto and PBGC, as amended, supplemented or otherwise modified, including, without limitation, by that certain Consent, Waiver and Amendment dated as of March 8, 2017, that certain Amendment No. 1 to Consent, Waiver and Amendment dated as of June 29, 2017, the November 2017 PPPFA Amendment and the PPPFA Waiver.

“PPPFA Waiver” means that certain Conditional REMIC Entity Waiver dated as of the Effective Date, entered into by and among Holdings, certain Subsidiaries of Holdings party thereto and PBGC.

“Prime Rate” means the rate of interest published in The Wall Street Journal from time to time as the “Prime Rate.” If more than one “Prime Rate” is published in The Wall Street Journal for any day, the average of such “Prime Rates” shall be used, and such average shall be rounded up to the nearest 1/100th of one percent (0.01%). If The Wall Street Journal ceases to publish the “Prime Rate,” the Administrative Agent shall select an equivalent publication that publishes such “Prime Rate.”

“Property” means each real property listed on Schedule 1.01 (together with all Improvements thereon).

“Purchase Option Exercise Event” means the exercise by any Option Holder of any purchase right relating to a Property (each, an “Option Release Property”) identified on Schedule 1.04.

“Purchase Option Transfer Date” means the date upon which any Property is transferred to an Option Holder pursuant to a Purchase Option Exercise Event.

“REA” has the meaning set forth in the Mortgage Loan Agreement.

“Recipient” means the Administrative Agent or any Lender, as applicable.

“Recourse Liabilities” has the meaning assigned to such term in Section 9.14.

“Register” has the meaning assigned to such term in Section 9.04(b).

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and controlling persons and its or their respective directors, officers, employees, partners, agents, advisors and other representatives thereof.

“Release” means “Release” as defined in the HazMat Indemnity as in effect on the Effective Date.

“Release Price” means, with respect to each Property, an amount equal to 80% of the Appraised Value of the such Property on the first $200,000,000 of Appraised Value of Properties if such Property is a portion of the initial $200,000,000 of Appraised Value of Properties sold after the Effective Date and 70% of the Appraised Value of the applicable Property thereafter (or such other amount as the

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Administrative Agent may otherwise consent, which consent is not to be unreasonably withheld, conditioned or delayed). The Release Price for each Property is set forth on Schedule 1.06.

“Remediation” means “Remediation” as defined in the HazMat Indemnity as in effect on the Effective Date.

REMIC Asset Safe Harbor means the safe harbor for the asset test of §860D(a)(4) of the Internal Revenue Code provided in United States Treasury Regulation §1.860D-1(b)(3)(ii).

“Repayment Event” means:

(a)    any Sale;

(b)    any Casualty Event resulting in the receipt by Borrower or Mortgage Borrower of Net Cash Proceeds in excess of $500,000 with respect to any individual Property or $1,000,000 in the aggregate for all Properties in a Fiscal Year;

(c)    the incurrence by any Borrower of any Indebtedness, other than Indebtedness permitted under Section 6.01; and

(d)    any Purchase Option Exercise Event.

“Required Lenders” means, as of any date of determination, Lenders holding more than 50% of the aggregate amount of the Loans outstanding on such date.

“Responsible Officer” means the president, chief financial officer, chief executive officer, any vice president, secretary or treasurer of Borrower.

“Roebuck” means Sears, Roebuck and Co., a New York corporation.

“S&P” means S&P Global Ratings, a division of S&P Global Inc., and any successor thereto.

“Sale” means any sale, transfer or other disposition of any Property by Mortgage Borrower to an arms-length third party purchaser.

“Sanctioned Country” means, at any time, a country, region or territory that is, or whose government is, itself the subject or target of Sanctions (including, without limitation, Crimea, Cuba, Iran, North Korea and Syria).

“Sanctioned Person” means, at any time, any Person that is, or is owned or controlled by Persons that are (a) listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority or are otherwise the target of any Sanctions or (b) located, organized or resident in a Sanctioned Country.

“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority.

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“Sears Pension Plans” means each of Sears Holdings Pension Plan 1 and Sears Holdings Pension Plan 2.

“Sears REMIC” means the designated portion of SRC Commercial Mortgage Trust 2003-1 for which an election was made for such portion to be treated as a “real estate mortgage investment conduit” within the meaning of section 860D of the Code.

“SEC” means the United States Securities and Exchange Commission.

“Secured Parties” means the holders of the Obligations from time to time and shall include (i) each Lender in respect of its Loans, (ii) the Administrative Agent and the Lenders in respect of all other Obligations of the Loan Parties, (iii) each Indemnitee solely in respect of the Obligations of the Loan Parties to such Indemnitee hereunder and under the other Loan Documents, and (iv) their respective successors and (in the case of a Lender, permitted) transferees and assigns.

“Single Purpose Entity Requirements” means that, at all times, Borrower shall comply with the requirements set forth on Schedule 1.03.

“Solvent” means, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair saleable value of the assets of such Person is greater than the amount that is required to pay the probable liability of such Person on its debts as they become absolute and matured in accordance with their terms, (c) the capital of such Person is not unreasonably small in relation to its business currently contemplated to be conducted as of such date of determination and (d) such Person does not intend to incur, or believe that it will incur, debts, including current obligations, beyond its ability to pay such debts as they become absolute and matured. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Sparrow One” means SRC Sparrow 1 LLC, a Delaware limited liability company.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other Equity Interests having ordinary voting power for the election of directors or other governing body (other than securities or other Equity Interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise Controlled by such Person.

“Swap Agreement” means any agreement, contract or transaction, which is (a) an interest rate swap, option, future, or forward agreement, including a rate floor, rate cap, rate collar, cross-currency rate swap, and basis swap, (b) a spot, same day-tomorrow, tomorrow-next, forward, or other foreign exchange, precious metals, or other commodity agreement, (c) a currency swap, option, future, or forward agreement, (d) an equity index or equity swap, option, future, or forward agreement, (e) a debt index or debt swap, option, future, or forward agreement, (f) a total return, credit spread or credit swap, option, future, or forward agreement, (g) a commodity index or a commodity swap, option, future, or forward agreement, (h) a weather swap, option, future, or forward agreement, (i) an emissions swap, option, future, or forward agreement, (j) an inflation swap, option, future, or forward agreement, (k) an energy swap, option, future or forward agreement, (l) a metal swap, option, future or forward agreement, (m) an agricultural swap, option, future or forward agreement, (n) any agreement, contract or transaction that is similar to any other agreement or transaction referred to in the foregoing clauses (a) - (m) and that (x) is of a type that is the subject of recurrent dealings in the swap or other derivatives markets (including terms and conditions incorporated by reference

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therein), and (y) is a forward, swap, future, option, or spot transaction on one or more rates, currencies, commodities, equity securities, or other equity instruments, debt securities or other debt instruments, quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic or financial risk or value, (o) any combination of agreements, contracts or transactions referred to in the foregoing clauses (a)-(n) or (p) any option to enter into an agreement, contract or transaction referred to in the foregoing clauses (a)-(o).

“Swap Obligations” means any and all obligations of Borrower, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all Swap Agreements permitted hereunder with a Lender or an Affiliate of a Lender, and (b) any and all cancellations, buy backs, reversals, terminations or assignments of any such Swap Agreement transaction.

“Taking” means a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of any Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting any Property.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Threatened Release” means a substantial likelihood of a Release which could reasonably be expected to require Remediation.

“Transactions” means the execution, delivery and performance by the Loan Parties of this Agreement and the other Loan Documents, the borrowing of Loans and the incurrence by Mortgage Borrower of the Indebtedness under the Mortgage Loan Agreement and the use of the proceeds thereof, the execution and delivery of the Master Lease by the parties thereto, the execution and delivery of the PPPFA Waiver and the consummation of the transactions contemplated by this Agreement and the other Loan Documents.

“Transfer” has the meaning assigned to such term in Section 6.03.

“True Lease Opinion” means that certain true lease opinion delivered to Administrative Agent for the benefit of Lenders by DLA Piper LLP, counsel to Borrower.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York or any other state the laws of which are required to be applied in connection with the issue of perfection or the effect of perfection or of priority of any security interests.

“Unliquidated Obligations” means, at any time, any Obligations (or portion thereof) that are unasserted and contingent in nature or unliquidated at such time.

“U.S. Person” means a “United States person” as defined in Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.17(g)(ii)(B)(3).

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“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“Withholding Agent” means Borrower and the Administrative Agent.

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

SECTION 1.02. Reserved.

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The word “law” shall be construed as referring to all statutes, rules, regulations, codes and other laws (including official rulings and interpretations thereunder having the force of law), and all judgments, orders and decrees, of all Governmental Authorities. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein); provided, however, that (i) any reference herein to the Mortgage Loan Agreement, any definition therein and/or any representation, warranty, covenant, condition or other provision thereof shall mean the Mortgage Loan Agreement in effect as of the date hereof and the definitions, representations, warranties, covenants, conditions or other provisions contained therein, and shall not take into account any amendment, restatement, supplement or modification thereof, unless Administrative Agent has provided its prior written consent with respect thereto (and all such references shall remain unaltered and in full force and effect, notwithstanding the repayment of the Mortgage Loan in full or any termination of the Mortgage Loan Agreement or other Mortgage Loan Documents) and (ii) with respect to any cross-reference herein to a definition in the Mortgage Loan Agreement, if the definition set forth therein contains any requirement that a matter be approved or consented to by Mortgage Lender then for purposes hereof the consent of Lender shall also be required, (b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignment set forth herein) and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all functions thereof, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Any provision contained in this Agreement or in any of the other Loan Documents to the effect that Borrower shall cause, permit or allow Mortgage Borrower to act or to refrain from acting in any manner, or to the effect that Borrower shall itself act or refrain from acting in any manner with respect to any Property, or Borrower represents or warrants on behalf or, or covenants on behalf of, Mortgage Borrower, or with respect to the Properties, shall be construed as meaning that Borrower shall do so in

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Borrower’s capacity as the owner of the equity interests in Mortgage Borrower in accordance with Legal Requirements and applicable organizational documents and not directly with respect to the Mortgage Borrower or the Property in any other matter that would violate any covenant contained in this Agreement, the Borrower’s or Mortgage Borrower’s organizational documents, or the Mortgage Loan Documents.

SECTION 1.04. Accounting Terms; GAAP; Pro Forma Calculations.

(a)Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, that if Borrower notifies the Administrative Agent that Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Effective Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities at “fair value”, as defined therein and (ii) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.

(b)Except as otherwise expressly provided herein, all pro forma computations required to be made hereunder giving effect to any acquisition or disposition, or issuance, incurrence or assumption of Indebtedness, or other transaction shall in each case be calculated giving pro forma effect thereto (and, in the case of any pro forma computation made hereunder to determine whether such acquisition or disposition, or issuance, incurrence or assumption of Indebtedness, or other transaction is permitted to be consummated hereunder, to any other such transaction consummated since the first day of the period covered by any component of such pro forma computation and on or prior to the date of such computation) as if such transaction had occurred on the first day of the period of four consecutive fiscal quarters ending with the most recent fiscal quarter for which Financials have been delivered. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Swap Agreement applicable to such Indebtedness).

SECTION 1.05. Rounding. Any financial ratios shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

SECTION 1.06. Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

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ARTICLE IIThe Loan

SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender severally and not jointly agrees to make a single Loan to Borrower in Dollars on the Effective Date in an amount equal to such Lender’s Commitment by making immediately available funds available by wire transfer to the account of Borrower or to such other account designated to the Administrative Agent in writing by Borrower. Amounts repaid or prepaid in respect of the Loans may not be re-borrowed.

SECTION 2.02. Loans. The Loans shall be made by the Lenders on the Effective Date in an amount equal to the amount of their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided, that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required hereunder. Subject to Section 2.13 and Section 2.14, each Loan shall be comprised entirely of Eurodollar Loans.

SECTION 2.03. Request for Loans. There shall be a single request for Loans hereunder, which shall be deemed to have been made as of the Effective Date upon execution and delivery of this Agreement. Borrower is not entitled to any advances with respect to the Loan, except for the advance made on the Effective Date

SECTION 2.04. Reserved.

SECTION 2.05. Reserved.

SECTION 2.06. Reserved.

SECTION 2.07. Reserved.

SECTION 2.08. Termination of Commitments. The Commitments shall terminate immediately upon funding the Loans on the Effective Date.

SECTION 2.09. Repayment of Loans; Evidence of Debt.

(a)Borrower hereby promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date. To the extent not previously repaid, all unpaid Loans shall be paid in full in Dollars by Borrower on the Maturity Date.

(b)Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of Borrower to such Lender resulting from the Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c)The Administrative Agent shall maintain accounts in which it shall record (i) the amount of the Loans made hereunder and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

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(d)The entries made in the accounts maintained pursuant to Section 2.09(b) or Section 2.09(c) shall be primafacie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of Borrower to repay the Loans in accordance with the terms of this Agreement.

(e)Each Lender (including any Person that is a Lender hereunder by virtue of assignment) shall be entitled to a promissory note in the form of the Note evidencing the Loan made by such Lender hereunder.

(f)Any Lender may, at any time and from time to time, require Borrower to execute and deliver new component notes (which may be senior and junior notes) (each, a “Component Note”) to replace any existing Note(s) of such Lender (each, an “Existing Note”), or modify any Existing Notes to reflect multiple components of the Loan made by such Lender, which Component Notes may be paid in such order of priority as may be designated by such Lender; provided, that (i) the aggregate principal amount of such Component Notes shall, on the date of issuance, equal the outstanding principal balance of the Loans owing to such Lender immediately prior to the issuance of such Component Notes, (ii) the weighted average interest rate of all such Component Notes shall, on the date created and until the Maturity Date, equal the interest rate which was applicable to the Existing Notes immediately prior to the issuance of such Component Notes, (iii) the scheduled debt service payments on all such Component Notes shall, on the date of issuance and until the Maturity Date, equal the scheduled debt service payments under the Existing Notes immediately prior to the issuance of such Component Notes and (iv) no such Component Note shall increase any Borrower’s obligations, diminish its rights, or otherwise adversely affect any Borrower (in each case, by more than a de minimis amount). Borrower shall cooperate with all reasonable requests of any Lender in order to establish the Component Notes and shall execute and deliver, and cause to be executed and delivered, such documents as shall reasonably be requested by any Lender, all in form and substance reasonably satisfactory to the Lender.

SECTION 2.10. Repayment of Loans.

(a)Repayments Generally. Borrower shall have the right to repay the Loans, subject to prior notice in accordance with the provisions of this Section 2.10, at any time, in whole or from time to time, in part. Borrower shall notify the Administrative Agent in writing of any repayment under this Section 2.10(a) not later than 11:00 a.m. three Business Days before the date of repayment (or such other time as the Administrative Agent may agree in its sole discretion). Such notice shall specify the repayment date and a calculation of the aggregate amount of the Loans subject to such repayment and all accrued and unpaid interest through such repayment date; provided, that such repayment may be revoked or postponed by written notice to the Administrative Agent prior to the specified repayment date, subject to the reimbursement of any actual out-of-pocket costs incurred by the Administrative Agent or any Lender as a result of such revocation or postponement, including, without limitation, any amounts payable under Section 2.16. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each repayment of the Loans shall be applied in accordance with Section 2.10(f). Repayments under this Section 2.10(a) (but not for any other repayment under this Section 2.10) shall be accompanied by (x) accrued interest to the extent required by Section 2.12 and (y) break funding payments pursuant to Section 2.16.

(b)Casualty Events. If the Mortgage Loan has been repaid in full, in the event and on each occasion that any Net Cash Proceeds (other than rental loss and/or business interruption proceeds) are received by or on behalf of Borrower or Mortgage Borrower in respect of any Casualty Event, Borrower

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shall, within three Business Days after Borrower’s or Mortgage Borrower’s receipt of such Net Cash Proceeds repay the Obligations in an aggregate amount equal to 100% of such Net Cash Proceeds; provided, that (y) if Borrower delivers to the Administrative Agent a certificate of a Responsible Officer to the effect that Mortgage Borrower desires to apply the Net Cash Proceeds from such event to replace or rebuild such Property and (z) the Administrative Agent consents to such reinvestment (such consent not to be unreasonably withheld if (A) no Default or Event of Default exists and (B) the amount of Net Cash Proceeds subject to such requested reinvestment is less than $500,000), then no repayment shall be required pursuant to this Section 2.10 in respect of the Net Cash Proceeds specified in such certificate; provided, further, that any such reinvestment shall be on terms and subject to conditions (including timing) specified by the Administrative Agent in such consent. To the extent that any such Net Cash Proceeds therefrom have not been so applied by the end of the period to which the Administrative Agent may consent, a repayment shall be made at such time in an amount equal to such Net Cash Proceeds that have not been so applied. Any repayment under this Section 2.10(b) shall cause a dollar for dollar reduction in the Release Price for the affected Property

(c)Sales. If the Mortgage Loan has been repaid in full, in the event and on each occasion that any Net Cash Proceeds are received by or on behalf of Mortgage Borrower in respect of any Sale (or foreclosure sale), Borrower shall, within three Business Days after Mortgage Borrower’s receipt of such Net Cash Proceeds, repay the Obligations in an aggregate amount equal to 100% of such Net Cash Proceeds or, if greater, the applicable Release Price for each such Property subject of or to such Sale.

(d)Indebtedness. If the Mortgage Loan has been repaid in full, in the event and on each occasion that any Net Cash Proceeds are received by or on behalf of Borrower or Mortgage Borrower in respect of the incurrence of Indebtedness other than Indebtedness permitted under Section 6.01, Borrower shall, immediately upon receipt of such Net Cash Proceeds, repay the Obligations in an aggregate amount equal to 100% of such Net Cash Proceeds.

(e)Purchase Option. If the Mortgage Loan has been repaid in full, in the event and on each occasion of any Purchase Option Exercise Event, Borrowers shall, within three Business Days after its or Mortgage Borrower’s receipt of such proceeds from such Purchase Option Exercise Event, repay the Obligations in an aggregate amount equal to the Option Property Release Amount. Borrower shall provide the Administrative Agent with thirty (30) days (or such shorter period of time as the Administrative Agent may agree) prior written notice of the proposed date of the transfer of the Option Release Property pursuant to the Purchase Option Exercise Event.

(f)In the event that proceeds are realized by Borrower, Mortgage or any of their respective Affiliates under Mortgage Borrower’s policy of title insurance with respect to a claim made thereunder, then Borrower shall cause to be paid to Lender, as a mandatory repayment of the Loan, the amount of such proceeds, less any amount required to cure the applicable title defect and Borrower’s or Property Owner’s reasonable out-of-pocket expenses incurred in connection with effectuating such claim and curing such title defect.

(g)All amounts subject to repayment pursuant to Section 2.10 shall be applied to repay the Loans on a pro rata basis among the Lenders in accordance with the outstanding principal amount of Loans held by such Lenders.

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SECTION 2.11. Fees.

(a)On the Effective Date, Borrower agrees to pay to the Administrative Agent out of the proceeds of the Loan an origination fee in an amount equal to 1.80% of the gross amount funded by the Lenders on the Effective Date.

(b)Reserved.

(c)All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution to the applicable Lenders. Fees paid shall not be refundable under any circumstances.

SECTION 2.12. Interest.

(a)The Loans shall bear interest at an interest rate equal to the Eurodollar Rate plus the Applicable Margin.

(b)Notwithstanding the foregoing, during the occurrence and continuance of an Event of Default, all Loans and other amounts outstanding hereunder and under the other Loan Documents shall bear interest at 2.00% plus the rate otherwise applicable to the Loans as provided in Section 2.12(a).

(c)Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to Section 2.12(b) shall be payable on demand and (ii) in the event of any repayment of any Loan, accrued interest on the principal amount repaid shall be payable on the date of such repayment.

(d)All interest hereunder shall be computed on the basis of a year of 360 days for the actual number of days elapsed (including the first day but excluding the last day) or, for any Base Rate Loan, on the basis of a year of 365 or 366 days, as applicable, for the actual number of days elapsed. The Eurodollar Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.13. Illegality. If any Lender, acting reasonably, determines that any applicable law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain or fund Eurodollar Loans, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to Borrower through the Administrative Agent, any obligation of such Lender to maintain Eurodollar Loans shall be suspended until such Lender notifies the Administrative Agent and Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), convert all Eurodollar Loans of such Lender to Base Rate Loans, either on the next Interest Payment Date, if such Lender may lawfully continue to maintain such Eurodollar Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Loans. Upon any such conversion, Borrower shall also pay accrued interest on the amount so converted.

SECTION 2.14. Alternate Rate of Interest. If at any point:

(a)the Administrative Agent determines in good faith (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the

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Eurodollar Rate including because the Eurodollar Rate is not available or published on a current basis and such circumstances are unlikely to be temporary; or

(b)the administrator of the Eurodollar Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the Eurodollar Rate shall no longer be made available, or used for determining the interest rate of loans (such specific date, the “Scheduled Unavailability Date”);

(c)syndicated loans currently being executed, or that include language similar to that contained in this Section 2.14, are being executed or amended (as applicable) to incorporate or adopt a new benchmark interest rate to replace LIBOR; or

(d)the Administrative Agent is advised by the Required Lenders that the Eurodollar Rate will not adequately and fairly reflect the cost to such Lenders (or Lender) of maintaining their Loans (or its Loan);

then, reasonably promptly after such determination by the Administrative Agent or receipt by the Administrative Agent of such notice, as applicable, at the election of the Administrative Agent, either (x) the Administrative Agent shall give notice thereof to Borrower and the Lenders by electronic mail as promptly as practicable thereafter and, until the Administrative Agent notifies Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, all Eurodollar Loans shall be automatically converted to Base Rate Loans on the next Interest Payment Date and, upon any such conversion, Borrower shall also pay accrued interest on the amount so converted, or (y) the Administrative Agent and Borrower may amend this Agreement to replace the Eurodollar Rate with an alternate benchmark rate (including any mathematical or other adjustments to the benchmark (if any) incorporated therein) (any such proposed rate, a “Eurodollar Successor Rate”), together with any proposed Eurodollar Successor Rate Conforming Changes (as defined below) and any such amendment shall become effective at 5:00 p.m. (New York time) on the fifth Business Day after the Administrative Agent shall have posted such proposed amendment to all Lenders and Borrower unless, prior to such time, Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders do not accept such amendment.

If no Eurodollar Successor Rate has been determined and the circumstances under clause (y) above exist or the Scheduled Unavailability Date has occurred (as applicable), the Administrative Agent will promptly so notify Borrower and each Lender. Upon receipt of such notice, (i) all Eurodollar Loans shall be automatically converted to Base Rate Loans on the next Interest Payment Date and (ii) the Eurodollar Rate component shall cease to be utilized in determining the Base Rate. As used herein, “Eurodollar Successor Rate Conforming Changes” means, with respect to any Eurodollar Successor Rate, any conforming changes to the definition of Base Rate, Interest Period, timing and frequency of determining rates and making payments of interest and other administrative matters as may be appropriate, in the discretion of the Administrative Agent, to reflect the adoption of such Eurodollar Successor Rate and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such Eurodollar Successor Rate exists, in such other manner of administration as the Administrative Agent determines in consultation with Borrower).

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SECTION 2.15. Increased Costs.

(a)If any Change in Law shall:

(i)impose, modify or deem applicable any reserve, special deposit , liquidity or similar requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Eurodollar Rate);

(ii)impose on any Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or participation therein; or

(iii)subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making or maintaining any Loan or to reduce the amount of any sum received or receivable by such Lender or such other Recipient hereunder, whether of principal, interest or otherwise, then Borrower will pay, upon written request of such Lender or such other Recipient, to such Lender or such other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

(b)If any Lender, acting reasonably, determines in good faith that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy and liquidity), then from time to time Borrower will pay, upon written request of such Lender, to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction.

(c)A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in Section 2.15(a) or Section 2.15(b) shall be delivered to Borrower and shall be conclusive absent manifest error. Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

(d)Failure or delay on the part of any Lender to demand compensation pursuant to this Section 2.15 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that Borrower shall not be required to compensate a Lender pursuant to this Section 2.15 for any increased costs or reductions incurred more than nine months prior to the date that such Lender notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine month period referred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Loan other than on an Interest Payment Date (including as a result of an Event of Default

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but excluding as a result of any repayment pursuant to Section 2.10 except Section 2.10(a)), (b) the failure to repay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10 and is revoked in accordance therewith) or (c) the assignment of any Loan other than on an Interest Payment Date as a result of a request by Borrower pursuant to Section 2.19, then, in any such event, Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. Without duplication of any amounts otherwise payable hereunder, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Eurodollar Rate that would have been applicable to such Loan, for the period from the date of such event to the next Interest Payment Date, over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in Dollars of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to Borrower and shall be conclusive absent manifest error. Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

SECTION 2.17. Taxes.

(a)Defined Terms. For purposes of this Section 2.17, the term “applicable law” includes FATCA.

(b)Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.17) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(c)Payment of Other Taxes by Borrower. Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for, Other Taxes.

(d)Indemnification by Borrower. Borrower shall indemnify each Recipient, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

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(e)Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.04(c) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this Section 2.17(e).

(f)Evidence of Payments. As soon as practicable after any payment of Taxes by Borrower to a Governmental Authority pursuant to this Section 2.17, Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(g)Status of Lenders.

(i)Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to Borrower and the Administrative Agent, at the time or times reasonably requested by Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by Borrower or the Administrative Agent as will enable Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.17(g)(ii)(A), Section 2.17(g)(ii)(B) and Section 2.17(g)(ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii)Without limiting the generality of the foregoing:

(A)any Lender that is a U.S. Person shall deliver to Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or the Administrative Agent), executed copies of IRS Form W‑9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

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(B)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or the Administrative Agent), whichever of the following is applicable;

(1)in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W‑8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2)executed copies of IRS Form W-8ECI;

(3)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W‑8BEN or W-8BEN-E; or

(4)to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W‑8IMY, accompanied by IRS Form W‑8ECI, IRS Form W‑8BEN or W-8BEN-E, a U.S. Tax Compliance Certificate, IRS Form W‑9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner;

(C)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or the Administrative Agent), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

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(D)if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrower and the Administrative Agent at the time or times prescribed by applicable law and at such time or times reasonably requested by Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower or the Administrative Agent as may be necessary for Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 2.17(g)(ii)(D), “FATCA” shall include any amendments made to FATCA after the Effective Date.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification, provide such successor form, or promptly notify Borrower and the Administrative Agent in writing of its legal inability to do so.

(h)Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.17 (including by the payment of additional amounts pursuant to this Section 2.17), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.17 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 2.17(h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.17(h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 2.17(h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This Section 2.17(h) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(i)Survival. Each party’s obligations under this Section 2.17 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender and the repayment, satisfaction or discharge of all obligations under any Loan Document.

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SECTION 2.18. Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Set-offs.

(a)Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees, or of amounts payable under Section 2.15, Section 2.16 or Section 2.17, or otherwise) prior to 2:00 p.m., on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices as the Administrative Agent may specify in writing to Borrower, except that payments pursuant to Section 2.15, Section 2.16, Section 2.17 and Section 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. Aggregate payments of principal and interest shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to each Lender’s respective pro rata shares. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars.

(b)Any proceeds of Collateral received by the Administrative Agent or any other amounts recovered by the Administrative Agent or any other Secured Party (i) not constituting (A) a specific payment of principal, interest, fees or other sum payable under the Loan Documents (which shall be applied as specified by Borrower) or (B) a mandatory repayment (which shall be applied in accordance with Section 2.10) or (ii) after an Event of Default has occurred and is continuing and the Administrative Agent so elects or the Required Lenders so direct, toward the payment of any principal and/or interest under the Loan and/or any other amounts due under the Loan Documents in such order, proportion and priority as the Administrative Agent in its sole and absolute discretion shall determine. During the existence of an Event of Default, solely to the extent that an error has occurred in the application thereof or to the extent permitted under Section 9.16, the Administrative Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Obligations.

(c)[Reserved]

(d)If, except as expressly provided herein, any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other similarly situated Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by all such Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this Section 2.18(d) shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant. Borrower consents to the foregoing and agree, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation

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pursuant to the foregoing arrangements may exercise against Borrower’s rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of Borrower in the amount of such participation.

(e)Unless the Administrative Agent shall have received notice from Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the relevant Lenders hereunder that Borrower will not make such payment, the Administrative Agent may assume that Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the relevant Lenders the amount due. In such event, if Borrower has not in fact made such payment, then each of the relevant Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

SECTION 2.19. Mitigation Obligations; Replacement of Lenders.

(a)If any Lender requests compensation under Section 2.15, or Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or Section 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b)If (i) any Lender requests compensation under Section 2.15 or (ii) Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then Borrower may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights (other than its existing rights to payments pursuant to Section 2.15 or Section 2.17) and obligations under the Loan Documents to an Eligible Assignee that shall assume such obligations (which Eligible Assignee may be another Lender, if a Lender accepts such assignment); provided that (i) Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the Eligible Assignee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling Borrower to require such assignment and delegation cease to apply.

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SECTION 2.20. Reserved.

ARTICLE III
Representations and Warranties

Each and every representation and warranty made by Mortgage Borrower in the Mortgage Loan Agreement (the “Mortgage Loan Representations”) is hereby made by Borrower to the Administrative Agent and the Lenders and each such representation and warranty is incorporated into this Agreement and shall remain incorporated herein without regard to any waiver, amendment, modification or termination of the Mortgage Loan Agreement or any other Mortgage Loan Document by Mortgage Lender or to whether the Mortgage Loan has been repaid or prepaid in full. Borrower hereby warrants and represents that each Mortgage Loan Representation is true, complete and correct as of the Effective Date,. In addition, Borrower represents and warrants as of the Effective Date to the Administrative Agent and the Lenders that:

SECTION 3.01. Organization; Powers; Single Purpose Entity; Subsidiaries. Borrower (a) is duly organized, validly existing and in good standing as a limited liability company under the laws of the State of Delaware and (b) has all requisite limited liability company power and authority to (i) carry on its business as now conducted and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. There are no outstanding commitments or other obligations of Borrower to issue, and no options, warrants or other rights of any Person to acquire, any Equity Interests of Borrower. Borrower is in compliance with all Single Purpose Entity Requirements. Borrower does not have any Subsidiaries that are not Mortgage Borrowers. The organizational chart on Schedule 3.01, relating to Borrower and certain Affiliate and other Persons, is true, correct and complete on and as of the Effective Date.

SECTION 3.02. Authorization; Enforceability.

(a)The Transactions are within Borrower’s powers and have been duly authorized by all necessary limited liability company actions.

(b)The Loan Documents to which Borrower is a party have been duly executed and delivered by such Borrower and constitute legal, valid and binding obligations of such Borrower, enforceable in accordance with their respective terms, subject to applicable Debtor Relief Laws and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, (ii) for filings necessary to perfect Liens created pursuant to the Loan Documents and (iii) where the failure to obtain and maintain could not reasonably be expected to have a Material Adverse Effect, (b) will not violate any applicable law or regulation applicable to Borrower except where the failure could not reasonably be expected to have a Material Adverse Effect, (c) will not violate or conflict with the charter or other organizational documents of Borrower or any order of any Governmental Authority, (d) will not violate or result in a default under any material indenture, agreement or other instrument binding upon Borrower or its assets, or give rise to a right thereunder to require any payment to be made by Borrower, (e) will not violate or result in a breach or default under any registration, license, permit, approval or certificate necessary to conduct any

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business issued by any Governmental Authority and (f) will not result in the creation or imposition of any Lien on any asset of Borrower, other than Liens created under the Loan Documents.

SECTION 3.04. Financial Condition; No Material Adverse Change.

(a)All financial data, statements and other information that have been delivered to the Administrative Agent or any Lender in respect of Borrower, Mortgage Borrower and the Properties (i) are true and correct in all material respects and (ii) fairly represent in all material respects the financial position of Borrower, Mortgage Borrower or the Properties, as applicable, as of the date thereof. Borrower does not have any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are reasonably likely to have a Material Adverse Effect.

(b)Since December 31, 2017, no circumstance or event, or series of circumstances or events, has occurred resulting in a Material Adverse Effect.

SECTION 3.05. Properties; Title. Borrower has good and indefeasible title to the Collateral, except for Permitted Encumbrances and Liens created pursuant to any Loan Document.

SECTION 3.06. Litigation, Environmental and Labor Matters.

(a)Except as set forth on Schedule 3.06, there are no actions, suits, proceedings or investigations by or before any arbitrator or Governmental Authority pending against or threatened in writing against or affecting Borrower, Mortgage Borrower any Property or any other properties or assets of Borrower or Mortgage Borrower (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement, any other Loan Document or the Transactions.

(b)Except as set forth on Schedule 3.06 or with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, Mortgage Borrower (i) has not failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has not become subject to any Environmental Liability, (iii) has not received notice of any claim with respect to any Environmental Liability and (iv) does not know of any basis for any Environmental Liability.

(c)Except as set forth on Schedule 3.06 or with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, (i) no Loan Party is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any Release or Threatened Release, discharge or disposal of Hazardous Materials at any Property or any other site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law and (ii) all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any Property have been disposed of in a manner not reasonably expected to result in material liability to any Loan Party.

(d)To the knowledge of Borrower, there are no underground storage tanks at any Property except as set forth on Schedule 3.06.

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(e)Borrower has no employees.

SECTION 3.07. Compliance with Laws and Agreements. Borrower is in compliance with all laws, regulations and orders of any Governmental Authority applicable to or binding upon it or its assets, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.08. Investment Company Status. No Borrower is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

SECTION 3.09. Taxes. Borrower has timely filed or caused to be filed all federal, state and other material Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes evidenced as due on such returns and all other material Taxes required to have been paid by them, except Taxes that are being contested in good faith by appropriate proceedings and for which Borrower has set aside on their books adequate reserves. No tax Liens have been filed and no claims are being asserted with respect to any such Taxes.

SECTION 3.10. ERISA.

(a)Except as could not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect, each Plan is in compliance with the applicable provisions of ERISA, the Code and other applicable law.

(b)There are no pending or, to the knowledge of any Loan Party, threatened or contemplated claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that, either individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

(c)No ERISA Event has occurred that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect as of the Effective Date. No Loan Party or any ERISA Affiliate is aware of any fact, event or circumstance that, either individually or in the aggregate, could reasonably be expected to continue or result in an ERISA Event with respect to any Plan which ERISA Event could reasonably be expected to have a Material Adverse Effect.

SECTION 3.11. Disclosure. Borrower and its Affiliates have disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which any of them are subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of Borrower or any Affiliate to the Administrative Agent or any Lender in connection with the negotiation of this Agreement, any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; provided, that with respect to projected financial information, Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time delivered and, if such projected financial information was delivered prior to the Effective Date, as of the Effective Date, it being understood that such projections are not to be viewed as facts and that actual results may differ from projected results and that such differences may be material.

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SECTION 3.12. Federal Reserve Regulations. No part of the proceeds of any Loan have been used or will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. Borrower is not engaged and will not engage, principally or as one of their important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U), or extending credit for the purpose of purchasing or carrying margin stock Borrower does not own any margin stock.

SECTION 3.13. Liens. There are no Liens on the Collateral except for Permitted Liens. None of the Permitted Liens, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Collateral Documents and the other Loan Documents or materially and adversely affect the value of the Collateral.

SECTION 3.14. Reserved.

SECTION 3.15. Reserved.

SECTION 3.16. Solvency. Borrower is Solvent as of the Effective Date immediately after the consummation of the Transactions to occur on the Effective Date.

SECTION 3.17. Reserved.

SECTION 3.18. Security Interest in Collateral. The provisions of the Collateral Documents create legal, valid and enforceable Liens on all the Collateral in favor of the Administrative Agent, for the benefit of the Secured Parties, as security for the Obligations, and upon the filing, recording, registering or taking such other actions as may be necessary with the appropriate Governmental Authorities (including payment of applicable filing and recording taxes), such Liens shall be perfected Liens in and to all of the Collateral having priority over all other Liens on the Collateral and subject to no Liens, in each case, other than Permitted Liens.

SECTION 3.19. Reserved.

SECTION 3.20. OFAC. Borrower, its Subsidiaries, the other Loan Parties and their respective directors, officers, and employees are in compliance with all applicable Sanctions and all applicable Anti-Money Laundering Laws and counter-terrorism financing provisions of the Bank Secrecy Act and all regulations issued pursuant to it. None of Borrower, any other Loan Party, any of their respective Subsidiaries, or any director, officer, employee, agent, or Affiliate of Borrower, any other Loan Party or any of their Subsidiaries is a Sanctioned Person.

SECTION 3.21. Patriot Act. Borrower and each Person directly or indirectly Controlling Borrower are in compliance with (a) the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B Chapter V, as amended) and any other enabling legislation or executive order relating thereto, (b) the Patriot Act and (c) other federal or state laws relating to “know your customer” and Anti-Money Laundering Laws.

SECTION 3.22. Foreign Corrupt Practices Act; Anti-Corruption Laws. Borrower, its Subsidiaries, the other Loan Parties and their respective directors, officers and employees and, to the knowledge of Borrower, the agents of Borrower and their Subsidiaries, are in compliance with all applicable Sanctions and with the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”) the UK Bribery Act 2010 and any other applicable anti-corruption laws in all material respects. Borrower, its Subsidiaries, the other Loan Parties have instituted and maintain policies

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and procedures designed to ensure continued compliance with applicable Sanctions, the FCPA the UK Bribery Act 2010 and any other applicable anti-corruption laws.

SECTION 3.23. Tax Shelter Regulations. Borrower does not intend to treat the Loans or the related transactions as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4). In the event Borrower determines to take any action inconsistent with such intention, Borrower will promptly notify the Administrative Agent thereof. If Borrower so notifies the Administrative Agent, Borrower acknowledges that one or more of the Lenders may treat its Loans as part of a transaction that is subject to Treasury Regulation Section 301.6112-1, and such Lender or Lenders, as applicable, will maintain the lists and other records required by such Treasury Regulation.

SECTION 3.24. PPPFA. The execution and delivery of the Loan Documents and the consummation of the transactions under this Agreement and the other Loan Documents do not violate, constitute a default under, or constitute a Forbearance Termination Event or Springing Lien Event under (and, in each case, as defined in) the PPPFA. The PPPFA is in full force and effect and the Borrowers have delivered to the Administrative Agent prior to the Effective Date true, correct and complete copies of the PPPFA and all amendments, modifications, supplements and waivers thereto, including the PPPFA Waiver. Pursuant to, and subject to the terms and conditions of, PPPFA Waiver, the PBGC agreed to waive any and all claims past, present or future with respect to the Sears Pension Plans under any of Title IV of ERISA, Sections 302 and 303 of ERISA and Sections 412 and 430 of the Code (including, without limitation, any PBGC UBL Claims and any liens that might arise under 29 U.S.C. § 1368, Section 303(k) of ERISA or Section 430(k) of the Code).

SECTION 3.25. Broker’s Fees. Except for fees payable to the Administrative Agent and the Lenders under the Loan Documents, neither Borrower nor any Affiliate has any obligation to any Person in respect of any finder’s, broker’s or investment banker’s fee in connection with the Transactions.

SECTION 3.26. Federal Income Tax Classification. Borrower is a “disregarded entity” for federal income tax purposes.

SECTION 3.27. Reserved.

SECTION 3.28. Reserved.

SECTION 3.29. Reserved.

SECTION 3.30. Reserved.

SECTION 3.31. Opinion Assumptions.

(a)All of the factual assumptions relating to Mortgage Borrower made in the non-consolidation opinion delivered to Mortgage Lender, including, but not limited to, any exhibits attached thereto, are true and correct in all material respects. Mortgage Borrower has complied in all material respects with all of the factual assumptions made with respect to it in such non-consolidation opinion.

(b)All of the assumptions made in the True Lease Opinion, including, but not limited to, any exhibits attached thereto, are true and correct in all material respects.

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SECTION 3.32. Business Purpose. The Loans are solely for the business purpose of Borrower, and are not for personal, family, household, or agricultural purposes.

SECTION 3.33. Reserved.

SECTION 3.34. Reserved.

SECTION 3.35. Filing, Recording and Other Taxes. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid under the applicable legal requirements in connection with the transfer of the Properties to Mortgage Borrower has been paid. All mortgage, mortgage recording, stamp, intangible or other similar taxes required to be paid under the applicable legal requirements in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Collateral Documents, have been paid or are being paid simultaneously herewith. All taxes and governmental assessments due and owing in respect of the Properties have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established under the Loan Documents.

SECTION 3.36. Reserved.

SECTION 3.37. Reserved.

SECTION 3.38. Underwriting Representations. Except as set forth on Schedule 3.38, Borrower (a) has no judgments or liens of any nature against it except for tax liens not yet due and other Permitted Liens, (b) is not involved in any dispute with any taxing authority other than ordinary course property tax appeals, (c) is not now, nor has ever been, a party to any lawsuit, arbitration, summons, or legal proceeding that is still pending or that resulted in a judgment against it or its assets or properties that has not been paid in full or otherwise completely and finally settled and (d) has accomplished each amendment and restatement of its organizational documents in accordance with, and was permitted by, the relevant provisions of said documents prior to such amendment or restatement from time to time.

SECTION 3.39. Sears REMIC.

(a)    At all times since its formation, the aggregate adjusted tax bases of all assets of the Sears REMIC that are not qualified mortgages or permitted investments has not exceed the REMIC Asset Safe Harbor.

(b)    Other than with respect to any asset falling within the REMIC Asset Safe Harbor, each loan held by the Sears REMIC has at all times been a “qualified mortgage” within the meaning of section 860G(a)(3) of the Code, and no substitution or release in respect of any loan held by the Sears REMIC resulted in a loan not being principally secured by real property within the meaning of Treasury regulations section 1.860G-2(b)(7).

(c)    Other than with respect to any REMIC Asset Safe Harbor, the Sears REMIC has operated in conformity with its operative documents.

(d)    The Sears REMIC has filed all U.S. federal and state tax returns it has been required to file, and all taxes due and payable by the Sears REMIC have been paid.

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ARTICLE IVReserved.

ARTICLE VAffirmative Covenants

Until all Obligations (other than Unliquidated Obligations) have been paid in full, Borrower covenants and agrees with the Administrative Agent and the Lenders that:

SECTION 5.01. Financial Statements and Other Information. Borrower will furnish to the Administrative Agent (for delivery to the Lenders):

(a)within ninety-five (95) days after the end of each Fiscal Year of Borrower, the audited consolidated balance sheet and related statements of income and cash flows for Holdings and its consolidated Subsidiaries, as of the end of and for such Fiscal Year, all reported on by Deloitte or another board-appointed auditor of national standing or other independent public accountants reasonably acceptable to the Administrative Agent (without a “going concern” or like qualification or exception (except relating to the pending maturity of any Indebtedness (other than the Obligations)) and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial position and results of operations of Holdings and its consolidated Subsidiaries in accordance with GAAP consistently applied;

(b)within fifty (50) days after the end of each fiscal quarter of each Fiscal Year of Borrower, the consolidated balance sheet and related statements of income and cash flows for Holdings and its consolidated Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the Fiscal Year, all certified by a Responsible Officer of Borrower as presenting fairly in all material respects the financial position and results of operations of Holdings and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

(c)concurrently with any delivery of financial statements under Section 5.01(a) or Section 5.01(b), a Compliance Certificate certifying as to whether, to the knowledge of Borrower, a Default or Event of Default has occurred and, if a Default or Event of Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto; and

(d)promptly following any request therefor, such other information regarding the operations, business, affairs or financial position or condition of Borrower, or compliance with the terms of this Agreement or the other Loan Documents, as the Administrative Agent or any Lender may reasonably request except to the extent disclosure (x) cannot be made in order to preserve attorney client privilege or (y) is prohibited by confidentiality obligations owing to third parties.

(e)Borrower shall (i) cause Mortgage Borrower to comply with Section 5.01 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of

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Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

SECTION 5.02. Notices of Material Events. Borrower will furnish to the Administrative Agent (for delivery to the Lenders):

(a)prompt, and in any event within ten Business Days, written notice of Borrower or any Responsible Officer obtaining knowledge, after reasonable due inquiry, of the occurrence of any Default or Event of Default or any default or event of default under the Mortgage Loan Agreement;

(b)prompt, and in any event within ten Business Days, written notice of Borrower or any Responsible Officer obtaining knowledge, after reasonable due inquiry, of the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting Borrower or any Property that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

(c)prompt, and in any event within ten Business Days, written notice of Borrower or any Responsible Officer obtaining knowledge, after reasonable due inquiry, of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

(d)prompt, and in any event within ten Business Days, written notice of receipt by Borrower of any notice or communication from the PBGC which could reasonably be expected to be adverse to the interests of Borrower, the Administrative Agent or the Lenders;

(e)prompt, and in any event within ten Business Days, written notice of receipt by Borrower of any default or other material notices and any amendments, waivers and other modifications, received under or pursuant to the Master Lease;

(f)prompt, and in any event within ten Business Days, written notice of Borrower or any Responsible Officer obtaining knowledge, after reasonable due inquiry, of any Casualty Event to any Property, or other insured damage to any Property or the commencement of any action or proceeding for the Taking with respect to any Property or interest therein;

(g)prompt, and in any event within ten Business Days, written notice (i) of the discovery of any Hazardous Materials in violation of Environmental Laws on, under or about any Property not previously disclosed to the Administrative Agent, (ii) of Borrower or any Responsible Officer obtaining knowledge, after due inquiry, that any Property does not materially comply with any Hazardous Materials Laws, (iii) of any Hazardous Materials Claims, (iv) of Borrower or any Responsible Officer obtaining knowledge, after due inquiry, of the existence of an environmental Lien on any Property, (v) of Borrower or any Responsible Officer obtaining knowledge, after due inquiry, of any action or proceeding against or of any noncompliance by any Group Member with any Environmental Law or Environmental Permit that could reasonably be expected to (A) have a Material Adverse Effect, (B) result in material Remediation costs, (C) result in an environmental Lien on any Property or (D) cause any Property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law or (vi) of Borrower or any Responsible Officer obtaining knowledge, after due inquiry, of the existence of a violation by a Property of Hazardous Materials Laws (a “HazMat Violation”) or that a Release has occurred;

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(h)prompt, and in any event within ten Business Days, written notice of the receipt of any complaints related to the violation of any Access Laws and of the commencement of any proceedings or investigations which relate to compliance with any Access Laws;

(i)prompt, and in any event within ten Business Days, written notice if Holdings, any of its Subsidiaries or the Sears REMIC receives any written correspondence from the IRS requesting any material information regarding the Sears REMIC, its tax status or its federal income tax treatment and, with such notice, deliver a copy of such written correspondence from the IRS and, in connection with any such correspondence, further provide prompt written notice from time to time of all related correspondence and further communication with the IRS;

(j)    prompt, and in any event within ten Business Days, written notice of any notice received from a Ground Lessor under a Ground Lease;

(k)    prompt, and in any event within ten Business Days, written notice of the occurrence of each Purchase Option Exercise Event; and

(l)    prompt, and in any event within ten Business Days, written notice of any Borrower or any Responsible Officer obtaining knowledge, after reasonable due inquiry, of any other development that results in, or that could reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section 5.02 shall be accompanied by a statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. Borrower shall (i) cause Mortgage Borrower to comply with Section 5.02 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

SECTION 5.03. Existence; Conduct of Business. Borrower will do or cause to be done all things necessary to (a) preserve, renew and keep in full force and effect its legal existence and (b) maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except as could not reasonably be expected to have a Material Adverse Effect. Borrower shall (a) solely operate in its current lines of business, which is limited to the ownership, management and operation of the Mortgage Borrowers and their related Properties, (b) maintain the scope and nature of its business objectives, purposes or operations and (c) undertake or participate in activities solely related to the continuance of its present business, in each case in compliance with the Single Purpose Entity Requirements. Borrower shall cause Mortgage Borrower to comply with Section 5.03 of the Mortgage Loan Agreement.

SECTION 5.04. Payment of Obligations. Borrower will pay (or cause to be paid) its obligations, including Tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Borrower has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) Borrower shall furnish such cash or other security as may be required in the proceeding or, if such proceeding does not require security, as may be reasonably requested by the Administrative Agent, to ensure the payment of

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any such Taxes or other amount, together with all interest and penalties thereon. Borrower shall (i) cause Mortgage Borrower to comply with Section 5.04 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

SECTION 5.05. Maintenance of Properties; Defense of Title; Insurance; Further Assurances.

(a)General. Borrower shall (i) cause Mortgage Borrower to comply with Section 5.05 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval. Borrower shall cause (or shall cause Mortgage Borrower to cause) Lender at all times to be named as an additional insured under all insurance policies required pursuant to the Mortgage Loan Agreement and shall deliver, or cause to be delivered, to Lender evidence, reasonably satisfactory to Lender, of the insurance described in this Section and Section 5.05 of the Mortgage Loan Agreement. No termination of the Mortgage Loan Agreement shall affect the requirements set forth in this Section 5.05. No waiver or amendment of the provisions of Section 5.05 of the Mortgage Loan Agreement shall be effective without the prior written consent of Lender.

(b)Title to Property. Borrower will warrant and defend (a) its title to the Collateral, subject only to Permitted Encumbrances and (b) the validity and priority of the Liens of the Collateral Documents on the Collateral, subject only to Permitted Encumbrances, in each case against the claims of all Persons whomsoever. Borrower will reimburse the Administrative Agent upon demand for any losses, costs, damages or expenses (including reasonable attorneys’ fees and court costs) incurred by the Administrative Agent if an interest in the Collateral or any part thereof is claimed by any other Person except as expressly permitted hereunder.

(c)Further Assurances. Without limiting the foregoing, Borrower will execute and deliver, or cause to be executed and delivered, to the Administrative Agent such documents, agreements and instruments, and will take or cause to be taken such further actions, which may be required by law or which the Administrative Agent may, from time to time, reasonably request to carry out the terms and conditions of this Section 5.05, all at the expense of Borrower.

SECTION 5.06. Books and Records; Inspection Rights. Borrower will keep proper books of record and account (a) in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities, (b) in conformity in all material respects with GAAP consistently applied and (c) in material conformity with all applicable requirements of law or any Governmental Authority having jurisdiction over Borrower. Borrower will cause Mortgage Borrower to permit any representatives

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designated by the Administrative Agent or any Lender (including employees of the Administrative Agent, any Lender or any consultants, accountant, lawyers, agents and appraisers retained by the Administrative Agent), upon reasonable prior notice, to visit and inspect the Properties (provided, that Borrower will take all such actions as may be reasonably required to cause the Mortgage Borrower to cause Master Lessee to permit any such visitation or inspection), to examine and make extracts from its books and records, including environmental assessment reports and Phase I or Phase II studies, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested at the expense of Borrower with respect to all reasonable out-of-pocket expenses of the Administrative Agent; provided, that Borrower shall not be responsible for the costs of more than one such visit or inspection in any Fiscal Year absent the existence of an Event of Default; provided, further, that if an Event of Default then exists, the Administrative Agent and any Lender (or any employees of the Administrative Agent, any Lender or any consultants, accountant, lawyers, agents and appraisers retained by the Administrative Agent or any such Lender) may do any of the foregoing at the expense of Borrower at any time during normal business hours and without advance notice. Borrower acknowledges that the Administrative Agent, after exercising its rights of inspection, may prepare and distribute to the Lenders certain reports pertaining to the properties of Borrower for internal use by the Administrative Agent and the Lenders. Borrower shall (i) cause Mortgage Borrower to comply with Section 5.06 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

SECTION 5.07. Compliance with Laws and Obligations. Borrower will (a) comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect, (b) ensure that no Person who owns a Controlling interest in or otherwise Controls Borrower is (i) listed on list of the Specially Designated Nationals and Blocked Persons maintained by OFAC and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, executive order, or regulation or (ii) a Person designated under Section 1(b), (c), or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation, or any other similar executive orders and (c) comply with all applicable Bank Secrecy Act laws and regulations and Anti-Money Laundering Laws. Borrower shall cause Mortgage Borrower to comply with Section 5.07 of the Mortgage Loan Agreement.

SECTION 5.08. Use of Proceeds. Borrower will use the proceeds of the Loans only (a) to consummate, on the Effective Date, the Pension Contribution, (b) to pay a portion of the costs and expenses of the Transactions, (c) for working capital and general corporate purposes and (d) for distribution to its equityholders, to the extent not prohibited hereunder. Borrower will not use any part of the proceeds of any Loan, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. Borrower will not, directly or indirectly, use the proceeds of the Loans, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person, (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of the FCPA, the UK Bribery Act 2010 or any other applicable anti-corruption law, (ii) to fund any activities or business of or with any Sanctioned Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, except to the extent permissible for a Person required to comply with Sanctions^, or (iii) in any other manner that would result in a violation of Sanctions by any Person (including any Person

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participating in the Loans, whether as the Administrative Agent, a Lender, advisor, investor, or otherwise). Borrower shall cause Mortgage Borrower to comply with Section 5.08 of the Mortgage Loan Agreement.

SECTION 5.09. Alterations. Borrower shall (i) cause Mortgage Borrower to comply with Section 5.09 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

SECTION 5.10. Handicapped Access. Borrower shall (i) cause Mortgage Borrower to comply with Section 5.10 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

SECTION 5.11. Additional Collateral; Environmental Matters; Further Assurances; Estoppels.

(a)Borrower will cause all of the Collateral to be subject at all times to first priority, perfected Liens in favor of the Administrative Agent for the benefit of the Secured Parties to secure the Obligations, to the extent required by and in accordance with, and subject to the terms and conditions and limitations of the Collateral Documents, subject in any case to Permitted Liens.

(b)Borrower shall (i) cause Mortgage Borrower to comply with Section 5.11 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

(c)Borrower hereby authorizes Administrative Agent to file, and if requested will execute and deliver to the Administrative Agent, all financing statements describing the Collateral and take such other actions as may from time to time reasonably be requested by Administrative Agent in order to maintain a first priority, perfected security interest in the Collateral, subject to Permitted Liens; provided, that nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Administrative Agent under the Loan Documents to any Permitted Liens.  Such financing statements may describe the Collateral in the same manner as described in any Loan Document or may contain an indication or description of collateral that describes such

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property in any other manner as the Administrative Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure that the perfection of the security interest in the Collateral granted to the Administrative Agent herein, including, without limitation, describing such property as “all assets of the debtor wherever located, in which the debtor now has or hereafter acquires any right or interest” or “all personal property of the debtor wherever located, in which the debtor now has or hereafter acquires any right or interest” or may use a similar description.  Borrower will take any and all actions necessary to defend title to the Collateral against all persons and to defend the security interest of Administrative Agent in the Collateral and the priority thereof against any Lien other than Permitted Liens.

SECTION 5.12. Cooperation in Legal Proceedings. Borrower will cooperate fully with the Administrative Agent with respect to any proceedings before any Governmental Authority which may in any way adversely affect the rights of the Administrative Agent or any Lender or any rights obtained by the Administrative Agent or any Lender under any of other Loan Document and, in connection therewith, permit the Administrative Agent, at its election, to participate in any such proceedings. Borrower shall cause Mortgage Borrower to comply with Section 5.12 of the Mortgage Loan Agreement.

SECTION 5.13. Master Lease. Borrower shall cause Mortgage Borrower to comply with Section 5.13 of the Mortgage Loan Agreement.

SECTION 5.14. Taxes on Security. Borrower will pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Loans or the Liens created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on Administrative Agent or any Lender. Borrower shall cause Mortgage Borrower to comply with Section 5.14 of the Mortgage Loan Agreement.

SECTION 5.15. Interest Rate Protection. Borrower shall (i) cause Mortgage Borrower to comply with Section 5.15 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

SECTION 5.16. Single Purpose Entity. Borrower will comply at all times with the Single Purpose Entity Requirements. Borrower shall cause Mortgage Borrower to comply with Section 5.16 of the Mortgage Loan Agreement.

SECTION 5.17. Post-Closing Matters. Borrower shall, within the time periods specified in Schedule 5.17 (as each may be extended by the Administrative Agent in its sole discretion writing (which writing may take the form of electronic mail) in its sole discretion) complete such undertakings as are set forth on Schedule 5.17. Borrower shall cause Mortgage Borrower to comply with Section 5.17 of the Mortgage Loan Agreement.

SECTION 5.18. Ground Lease. Borrower shall (i) cause Mortgage Borrower to comply with Section 5.18 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the

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extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

SECTION 5.19. REA. Borrower shall (i) cause Mortgage Borrower to comply with Section 5.19 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

SECTION 5.20. Title Policy. Borrower shall cause Mortgage Borrower to comply with the terms of its owner’s policy of title insurance for each Property for which one was obtianed and following Borrower’s or Mortgage Borrower’s knowledge of a claim or any state of facts which could reasonably give rise to a claim, to promptly file a claim with the applicable title company in accordance with the requirements therein. Borrower shall, or shall cause Mortgage Borrower to, promptly send to Lender copies of all claims filed under such title policy, or any notices, correspondences, or documents whether sent or received with respect to the claim or any related litigation

ARTICLE VINegative Covenants

Until all Obligations (other than Unliquidated Obligations) have been paid in full, Borrower covenants and agrees with the Administrative Agent and the Lenders that:

SECTION 6.01. Indebtedness; Swap Agreements.

(a)Borrower will not create, incur, assume or permit to exist any Indebtedness owing by Borrower, except:

(i)the Obligations; and

(ii)reasonable and customary administrative expenses and state franchise taxes; and

(iii)Additional Permitted Mezzanine Debt

(b)Borrower will not enter into any Swap Agreement other than the LIBOR Cap.

(c)Borrower shall (i) cause Mortgage Borrower to comply with Section 6.01 of the Mortgage Loan Agreement.

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SECTION 6.02. Liens. Borrower will not create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by Borrower, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a)Liens created pursuant to any Loan Document; and

(b)Permitted Encumbrances.

Borrower shall (i) cause Mortgage Borrower to comply with Section 6.02 of the Mortgage Loan Agreement, (ii) deliver to Lender, or cause to be delivered to Lender, all documents, reports, notices and other materials (if any) required to be delivered by Mortgage Borrower to Mortgage Lender pursuant to such section of the Mortgage Loan Agreement and (iii) to the extent Mortgage Lender (or the administrative agent under the Mortgage Loan) has any consent or approval right pursuant to such section, Borrower shall be required to obtain the approval or consent of Administrative Agent with respect thereto, provided that Administrative Agent shall be bound by the same standard of consent or approval as Mortgage Lender or administrative agent under the Mortgage Loan are bound with respect to such consent or approval.

SECTION 6.03. Transfers. Borrower shall not, and shall not permit any other Person to, directly or indirectly sell, pledge, transfer, exchange, assign, encumber (other than pursuant to the Loan Documents) or otherwise dispose of, or grant any option with respect to, all or any portion of the Equity Interests in any Mortgage Borrower or the right to receive distributions from Mortgage Borrower, such that a foreclosure by Administrative Agent under the Pledge Agreement would result in Administrative Agent owning anything less than 100% of the direct (in the case of SRC O.P. LLC) or indirect (in the case of SRC Facilities LLC or SRC Real Estate (TX), LLC) unencumbered Equity Interests in the Persons comprising Mortgage Borrower and the right to 100% of the distributions therefrom. At all times, Borrower shall (i) own 100% of the direct Equity Interests in SRC O.P. LL, (ii) cause SRC O.P. LLC to own 100% of the Equity Interests in SRC Facilities LLC and (iii) cause SRC Facilities LLC to own 100% of the Equity Interests in SRC Real Estate (TX), LLC. Borrower will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, or otherwise dispose of (in one transaction or in a series of transactions) any of its assets, in each case, whether now owned or hereafter acquired (each, a “Transfer”), or liquidate or dissolve. Borrower shall cause Mortgage Borrower to comply with Section 6.03 of the Mortgage Loan Agreement, provided that Borrower shall not permit Mortgage Borrower to engage in any sale, pledge, transfer, exchange, assignment or encumbrance permitted under the Mortgage Loan Documents, to the extent the same would constitute a default under this Agreement.

Administrative Agent shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder or under the other Loan Documents in order to declare the Obligations immediately due and payable upon the occurrence of a Transfer (other than a Permitted Transfer or other Transfer expressly permitted under this Section 6.03) without the prior written consent of the Administrative Agent. This provision shall apply to every Transfer regardless of whether voluntary or not, and whether or not the Administrative Agent has consented to any previous Transfer. The Administrative Agent’s consent to one Transfer shall not be deemed to be a waiver of the Administrative Agent’s right to require such consent to any future occurrence of same. Any Transfer made in contravention of this Section 6.03 shall be null and void and of no force and effect.

SECTION 6.04. Investments. Borrower will not purchase, hold or acquire (including pursuant to any merger or consolidation with any Person) any Equity Interests, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist

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any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any Person or any assets of any other Person constituting a business unit (each of the foregoing, an “Investment”), except Permitted Investments and the Collateral. Borrower shall cause Mortgage Borrower to comply with Section 6.04 of the Mortgage Loan Agreement.

SECTION 6.05. Reserved.

SECTION 6.06. Transactions with Affiliates. Borrower will not Transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) under any Loan Document, (b) the making of distributions by Borrower to the owner of the Equity Interests of Borrower, (c) contributions to Borrower by the owner of the Equity Interests of Borrower or (d) in the ordinary course of business at prices and on terms and conditions not less favorable to Borrower than could be obtained on an arm’s-length basis from unrelated third parties. Borrower shall cause Mortgage Borrower to comply with Section 6.06 of the Mortgage Loan Agreement.

SECTION 6.07. REA. Borrower shall cause Mortgage Borrower to comply with Section 6.07 of the Mortgage Loan Agreement.

SECTION 6.08. Management Agreements. Borrower will not, directly or indirectly, enter into, any management or similar agreement relating to a third party providing management or other services with respect to any of the Properties. Borrower shall cause Mortgage Borrower to comply with Section 6.08 of the Mortgage Loan Agreement.

SECTION 6.09. Organizational Documents. Borrower will not agree to any amendment, restatement, supplement or other modification to, or waiver of, any of its organizational documents in a manner adverse to the Administrative Agent or any Lender in any respect (other than in a de minimis manner). Borrower shall cause Mortgage Borrower to comply with Section 6.09 of the Mortgage Loan Agreement.

SECTION 6.10. No Joint Assessment. Borrower will not suffer, permit or initiate the joint assessment of any Property (a) with any other real property constituting a tax lot separate from such Property, and (b) with any portion of such Property which may be deemed to constitute personal property, or any other action or procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such Property or any portion thereof. Borrower shall cause Mortgage Borrower to comply with Section 6.10 of the Mortgage Loan Agreement.

SECTION 6.11. No Plan Assets. Borrower will not permit any Property or any other property or asset of Borrower to constitute “plan assets” under 29 C.F.R. Section 2510.3-101. Borrower shall cause Mortgage Borrower to comply with Section 6.11 of the Mortgage Loan Agreement.

SECTION 6.12. Zoning. Borrower shall not initiate or consent to any zoning reclassification of any portion of any Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of any Property in any manner that could result in such use becoming a non‑conforming use under any zoning ordinance or any other applicable land use law, rule or regulation. Borrower shall cause Mortgage Borrower to comply with Section 6.12 of the Mortgage Loan Agreement.

SECTION 6.13. Use of Properties. Except to the extent permitted pursuant to Section 13 of the Mortgage Loan Agreement, Borrower will not permit to be changed or modified in any

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manner the use of any Property in such a way as to prohibit its current use on the Effective Date. Borrower shall cause Mortgage Borrower to comply with Section 6.13 of the Mortgage Loan Agreement.

SECTION 6.14. Accounting Changes; Fiscal Year. Borrower will not (a) make any change in any accounting policies or reporting practices, except as required by GAAP or (b) change its Fiscal Year from the basis in effect on the Effective Date. Borrower shall cause Mortgage Borrower to comply with Section 6.14 of the Mortgage Loan Agreement.

SECTION 6.15. Ground Lease. Borrower shall cause Mortgage Borrower to comply with Section 6.15 of the Mortgage Loan Agreement.

SECTION 6.16. PPPFA. Borrower will not cause, or suffer or permit, any amendment, modification, waiver or supplement to the PPPFA which could reasonably be expected to be adverse in any respect to the Administrative Agent, any Lender or any other Secured Party.

SECTION 6.17. No Dividends. During the continuance of an Event of Default, Borrower shall not pay any dividends to any direct or indirect equityholder in Borrower.

ARTICLE VIIEvents of Default

SECTION 7.01. Events of Default. If any of the following events (each, an “Event of Default”) shall occur:

(a)Borrower shall fail to pay any principal of or interest on any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for repayment thereof or otherwise and such failure shall continue for three (3) days;

(b)Borrower shall fail to pay any fee or any other amount (other than an amount referred to in Section 7.01(a)) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) Business Days;

(c)any representation or warranty made or deemed made by or on behalf of any Loan Party in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document prepared or furnished by or on behalf of any Loan Party pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect or misleading in any material respect when made or deemed made;

(d)(i) Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, Section 5.05(a), Section 5.08, Section 5.11(a), Section 5.11(b), Section 5.11(c), Section 5.11(e), Section 5.11(f), Section 5.13, Section 5.15, Section 5.16, Section 5.17, Section 5.18, Section 5.19 or any covenant contained in Article VI (subject to clause (iv) below), (ii) Borrower shall fail to observe or perform any other covenant, condition or agreement contained in Section 5.01 and such failure shall continue unremedied for a period of ten (10) Business Days after the earlier of (A) notice thereof from the Administrative Agent to Borrower (which notice will

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be given at the request of any Lender) and (B) Borrower has obtained knowledge thereof, (iii) Borrower shall fail to observe or perform any other covenant, condition or agreement contained in Section 5.03 (other than clause (a) thereof) and such failure shall continue unremedied for a period of thirty (30) days after the earlier of (A) notice thereof from the Administrative Agent to any Borrower (which notice will be given at the request of any Lender) and (B) Borrower has obtained knowledge thereof or (iv) Borrower shall fail to observe or perform any other covenant, condition or agreement contained in Section 6.01 or Section 6.02 and such failure is immaterial, inadvertent and non-recurring and shall continue unremedied for a period of fifteen (15) Business Days after the earlier of (A) notice thereof from the Administrative Agent to any Borrower (which notice will be given at the request of any Lender) and (B) Borrower has obtained knowledge thereof;

(e)(i) Borrower shall fail to observe or perform any other covenant, condition or agreement contained in this Agreement (other than those specified in Section 7.01(a), Section 7.01(b) or Section 7.01(d)) or (ii) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any other Loan Document, and, in the case of each of clauses (i) and (ii), such failure shall continue unremedied for a period of thirty (30) days after the earlier of (A) notice thereof from the Administrative Agent to Borrower (which notice will be given at the request of any Lender) and (B) Borrower has obtained knowledge thereof; provided, that if such default described in this clause (ii) is capable of cure but cannot reasonably be cured within such thirty (30) day period and provided further that such Borrower (or the Guarantor, if applicable) shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for an additional sixty (60) day period;

(f)any of the factual assumptions contained in the non-consolidation opinion delivered to Mortgage Lender or in the True Lease Opinion (including, without limitation, in any schedules thereto and/or certificates delivered in connection therewith) are untrue in any material respect; provided, however, that such breach shall not constitute an Event of Default if (A) such breach was inadvertent, immaterial and non-recurring, (B) such breach is curable and Borrower shall promptly cure such breach within ten (10) Business Days of any Borrower obtaining knowledge of such breach and (C) within ten (10) Business Days of the written request by the Administrative Agent, the Borrowers cause legal counsel to deliver to Mortgage Lender an additional non-consolidation opinion to the effect that such breach shall not impair, negate or amend the opinions rendered in the non-consolidation opinion delivered to Mortgage Lender in connection with the closing of the Mortgage Loan;

(g)the seizure or sequestration of any material portion of any Property (other than condemnation, eminent domain or taking for which Borrower is, or causing Mortgage Borrower to comply with its obligations herein or under the Mortgage Loan Agreement, as applicable) or the Collateral by any Governmental Authority which is not dismissed by such Governmental Authority within forty-five (45) days after the date of such seizure or sequestration;

(h)an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of any Loan Party or its debts, or of a substantial part of its assets, under any Debtor Relief Law or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered;

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(i)any Loan Party shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Debtor Relief Law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 7.01(h), (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, or (v) make a general assignment for the benefit of creditors;

(j)any Loan Party shall become unable, shall admit in writing its (j) inability (unless such admission was required to be made in a legal proceeding in order to not violate any applicable laws), or shall fail generally, to pay its debts as they become due;

(k)one or more non-appealable judgments for the payment of money in an aggregate amount in excess of $500,000 (net of insurance proceeds) shall be rendered against Borrower and the same shall remain undischarged for a period of sixty (60) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of Borrower to enforce any such judgment;

(l)an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

(m)a breach of Section 6.03 or a Change in Control which is not a Permitted Change in Control shall occur;

(n)the occurrence of an uninsured Casualty Event with respect to a material portion of the Collateral, if the same constitutes an “Event of Default” under the Mortgage Loan Agreement;

(o)(i) the occurrence of any breach or default which continues for a period of thirty (30) days under the Master Lease, (ii) the occurrence of a breach or default under the Master Lease caused by or resulting from a breach of the Guarantor’s obligation to pay rent with respect to any Property, (iii) the termination, surrender, cancellation or rejection in bankruptcy of the Master Lease or (iv) the termination, expiration or cancellation of the Master Lease Guaranty;

(p)any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Loan Party shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms); or

(q)Additional Mezzanine Borrower creates, incurs, assumes or permits to exist any Indebtedness other than Additional Permitted Mezzanine Debt;

(r)(i) Borrower shall fail to pay any Ground Rent as and when such Ground Rent is due under any Ground Lease (unless such breach is cured within any applicable cure period provided in such Ground Lease or unconditionally waived in writing by the landlord under such Ground Lease), (ii) there shall occur any breach or default by Borrower, as tenant under any Ground Lease, in the observance or performance of any term, covenant or condition of any Ground Lease on the part of Borrower to be observed or performed (unless such breach or default is cured within any applicable cure period provided in any Ground Lease or unconditionally waived in writing by the landlord under such Ground Lease), (iii) if any event, circumstance or condition shall occur which

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would cause such Ground Lease to terminate without notice or action by the landlord under such Ground Lease or which would entitle the landlord under such Ground Lease to terminate such Ground Lease by giving notice to Mortgage Borrower, as tenant thereunder (unless such event, circumstance, condition or right to terminate is unconditionally waived in writing by the landlord under any Ground Lease), (iv) if Mortgage Borrower shall fail to exercise any renewal options under any Ground Lease, (v) if the leasehold estate created by any Ground Lease shall be surrendered or any Ground Lease shall be terminated or canceled for any reason or under any circumstances whatsoever, or (vi) if any of the terms, covenants or conditions of any Ground Lease shall in any manner be modified, changed, supplemented, altered, or amended in any material respect which is adverse to the interest of the Administrative Agent or any other Secured Party without the prior written consent of the Administrative Agent;

(s)default in the observance or performance of any obligation (payment or otherwise) by Mortgage Borrower under a Swap Agreement that would allow the counterparty thereof to exercise a right to terminate its position under such Swap Agreement, if the aggregate net exposure with regard to all such positions is in excess of $50,000,000;

(t)any Collateral Document shall for any reason, other than due to affirmative acts of the Administrative Agent or any Lender, fail to create a valid and perfected first priority Lien on any portion of the Collateral purported to be covered thereby, except as permitted by the terms of any Loan Document;

(u)an “Event of Default” under and as defined in the Mortgage Loan Agreement shall have occurred and be continuing; or

(v)the equity interests pledged by Borrower pursuant to the Pledge Agreement are evidenced by new, replacement or additional certificates and Borrower fails to deliver such certificates to Administrative Agent, together with an executed stock, membership or partnership power, as applicable, in blank.

then, and in every such event (other than an event with respect to any Loan Party described in Section 7.01(h) or Section 7.01(i)), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to Borrower, take either or both of the following actions, at the same or different times declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other Obligations of the Loan Parties accrued hereunder and under the other Loan Documents, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Loan Parties; and in case of any event with respect to the Loan Parties described in Section 7.01(h) or Section 7.01(i), the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other Obligations accrued hereunder and under the other Loan Documents, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Loan Parties. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, and at the request of the Required Lenders shall, exercise any rights and remedies provided to the Administrative Agent under the Loan Documents or at law or equity, including all remedies provided under the UCC. Administrative Agent shall not exercise any remedy hereunder, to the extent it contravenes the express provisions of the Intercreditor Agreement, and if determined by a court of competent jurisdiction that any

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remedy hereunder has been exercised in violation of the Intercreditor Agreement, such remedy shall be void ab initio.

ARTICLE VIIIThe Administrative Agent

SECTION 8.01. Appointment of Agency. Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf, including execution of the other Loan Documents, and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article VIII (other than Section 8.03) are solely for the benefit of the Administrative Agent and the Lenders, and the Loan Parties shall not have rights as a third party beneficiary of any of such provisions.

SECTION 8.02. Rights and Powers of Administrative Agent.

(a)The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Loan Parties or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

(b)The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (i) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing and (ii) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02); provided, that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any applicable law. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until written notice thereof is given to the Administrative Agent by Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection with any Loan Document, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, (v) the creation, perfection or priority of Liens on the Collateral or the existence of the Collateral or (vi) the satisfaction of any condition set forth in Article IV or elsewhere

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in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

(c)The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for any Loan Party), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

(d)The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent in good faith. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of this Article VIII shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

(e)Administrative Agent shall be responsible for the administration of the Loan and shall take all actions required to be taken hereunder by Administrative Agent or Lenders, including the granting and withholding of all consents and approvals, in each case in accordance with the terms of this Agreement. Other than as expressly set forth in this Agreement, no Lender shall have any right to approve any matter related to this Agreement or the other Loan Documents, or any action taken by Administrative Agent pursuant to the terms hereof.

(f)Notwithstanding anything to the contrary contained herein or in the Intercreditor Agreement, JPP, LLC, JPP II, LLC and/or any of their respective Affiliates shall have the right to purchase all or any portion of the Mortgage Loan without the consent of Administrative Agent or any Lender.

(g)Without the consent of any Person, JPP, LLC and JPP II, LLC shall have the right (but not the obligation) to advance the Permitted Mezzanine Loan, which Permitted Mezzanine Loan, if made as a Loan hereunder, shall be pari passu with all Loans hereunder.

(h)Borrower shall be required to interact only with the Administrative Agent and may rely on notices, actions and other communications from Administrative Agent,

SECTION 8.03. Resignation and Replacement. The Administrative Agent may resign at any time by providing at least ten days prior written notice to the Lenders and Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with Borrower, to appoint a successor, which shall, unless an Event of Default has occurred and be continuing, be reasonably acceptable to Borrower. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a Person with an office in New York, New York, or an Affiliate of any such Person. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring

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Administrative Agent; provided, that the retiring Administrative Agent shall be discharged from its duties and obligations hereunder immediately upon the effectiveness of its resignation. The fees payable by Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article VIII and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent and such retiring Administrative Agent, its sub-agents and their respective Related Parties shall continue to be subject to the terms and conditions of Section 9.12.

SECTION 8.04. No Joint Venture, Etc.

(a)Each Lender acknowledges and agrees that the extensions of credit made hereunder are commercial loans and not investments in a business enterprise or securities. Each Lender further represents that it is engaged in making, acquiring or holding commercial loans in the ordinary course of its business and has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement as a Lender, and to make, acquire or hold Loans hereunder. Each Lender shall, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information (which may contain material, non-public information within the meaning of the United States securities laws concerning Borrower and their Affiliates) as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder and in deciding whether or to the extent to which it will continue as a lender or assign or otherwise transfer its rights, interests and obligations hereunder.

(b)The Lenders are not partners or co‑venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Administrative Agent) authorized to act for, any other Lender. The Administrative Agent shall have the exclusive right on behalf of the Lenders to enforce the payment of the principal of and interest on any Loan after the date such principal or interest has become due and payable pursuant to the terms of this Agreement.

SECTION 8.05. Agent as Representative, Etc.

(a)In its capacity, the Administrative Agent is a “representative” of the Secured Parties within the meaning of the term “secured party” as defined in the New York Uniform Commercial Code. Each Lender authorizes the Administrative Agent to enter into each of the Collateral Documents to which it is a party and to take all action contemplated by such documents. Each Lender agrees that no Secured Party (other than the Administrative Agent) shall have the right individually to seek to realize upon the security granted by any Collateral Document, it being understood and agreed that such rights and remedies may be exercised solely by the Administrative Agent for the benefit of the Secured Parties upon the terms of the Collateral Documents. In the event that any Collateral is hereafter pledged by any Person as collateral security for the Obligations, the Administrative Agent is hereby authorized, and hereby granted a power of attorney, to execute and deliver on behalf of the Secured Parties any Loan Documents necessary or appropriate to grant and perfect a Lien on such Collateral in favor of the Administrative Agent on behalf of the Secured Parties. The Lenders hereby authorize the Administrative Agent, at its option and in its discretion, to release any Lien granted to or held by the Administrative Agent upon any Collateral (i) as described

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in Section 9.02(c); (ii) as permitted by, but only in accordance with, the terms of the applicable Loan Document; or (iii) if approved, authorized or ratified in writing by the Required Lenders. The Administrative Agent shall not be required to execute any such document on terms which, in the Administrative Agent’s opinion, would expose the Administrative Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty.

(b)In case of the pendency of any bankruptcy, insolvency, receivership or other similar proceeding or any other judicial proceeding relative to Borrower or any other Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on Borrower or any other Loan Party) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise (i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Section 2.11 and Section 9.03) allowed in such judicial proceeding and (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and, in the case of each of clauses (i) and (ii) of this Section 8.05(b), any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 2.11 and Section 9.03.

(c)The Administrative Agent, on behalf of itself and the Secured Parties, shall have the right to credit bid and purchase for the benefit of the Administrative Agent and the other Secured Parties all or any portion of the Collateral at any sale thereof conducted by the Administrative Agent under the provisions of the UCC, including pursuant to Sections 9-610 or 9-620 of the UCC, at any sale thereof conducted under the provisions of the Bankruptcy Code, including Section 363 thereof, or a sale under a plan of reorganization, or at any other sale or foreclosure conducted by the Administrative Agent (whether by judicial action or otherwise) in accordance with applicable law. Each Lender hereby agrees that, except as otherwise provided in any Loan Documents or with the written consent of the Administrative Agent and the Required Lenders, it will not take any enforcement action, accelerate obligations under any Loan Documents, or exercise any right that it might otherwise have under applicable law to credit bid at foreclosure sales, UCC sales or other similar dispositions of the Collateral.

(d)No Secured Party that is party to a Swap Agreement that obtains the benefits of Section 2.18(b) or any Collateral with respect to the related Swap Obligations, by virtue of the provisions hereof or of any Collateral Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article VIII to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been

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made with respect to, Swap Agreements unless the Administrative Agent has received written notice of such Swap Agreements together with such supporting documentation as the Administrative Agent may request, from the applicable Secured Party.

ARTICLE IX
Miscellaneous

SECTION 9.01. Notices; Effectiveness; Electronic Communication.

(a)Subject to Section 9.01(b), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, or electronic mail, as follows:

(i)if to Borrower, to:

c/o Sears Holdings Corporation
3333 Beverly Road
Hoffman Estates, Illinois 60179
Attention: General Counsel
email: counsel@searshc.com
Fax: (847) 286-2471
with a copy to:
Sears Holdings Corporation
3333 Beverly Road, Dept. 824RE
Hoffman Estates, Illinois 60179
Attention: Vice President Real Estate
and a copy to:
Sears Holdings Corporation
3333 Beverly Road, Dept. 824RE
Hoffman Estates, Illinois 60179
Attention: Associate General Counsel, Real Estate
and a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52^nd Street
New York, New York 10019
Attention: Scott Charles
email: SKCharles@wlrk.com
and a copy to:
DLA Piper LLP
550 South Hope Street, Suite 2300

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Los Angeles, California 90071
Fax: (213) 330-7536
email: michael.hamilton@dlapiper.com

(ii)if to the Administrative Agent, to:

c/o ESL Investments, Inc.

1170 Kane Concourse, Suite 200

Bay Harbor Islands, FL 33154

Attention: Edward S. Lampert, CEO

and

ESL Investments, Inc.

1170 Kane Concourse, Suite 200

Bay Harbor Islands, FL 33154

Attention: Harold R. Talisman

with a copy to:

Cleary Gottlieb Steen & Hamilton

One Liberty Plaza

New York, New York 10006

Attention: John V. Harrison, Esq.

(iii)if to any other Lender, to it at its address (or telecopy number) set forth in any notice identifying the existence of such other Lender.

(b)Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided, that the foregoing shall not apply to notices to any Lender pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or Borrower may, in its or their discretion, agree to accept notices and other communications to it or them hereunder by electronic communications pursuant to procedures approved by it or them; provided, that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided, that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

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(c)The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF ANY MATERIALS OR INFORMATION PROVIDED BY OR ON BEHALF OF BORROWER OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM ANY MATERIALS OR INFORMATION PROVIDED BY OR ON BEHALF OF BORROWER. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH ANY MATERIALS OR INFORMATION PROVIDED BY OR ON BEHALF OF BORROWER OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to Borrower, any Lender or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of Borrower’s or the Administrative Agent’s transmission of any materials or information provided by or on behalf of Borrower through the internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to Borrower, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

(d)Any party hereto may change its address or other information for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

SECTION 9.02. Waivers; Amendments.

(a)No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by Borrower therefrom shall in any event be effective unless the same shall be permitted by Section 9.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.

(b)Neither this Agreement, any other Loan Document, nor any provision hereof or thereof, may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by Borrower and the Administrative Agent; provided that, without the prior written consent of the Lenders holding at least 90% of the aggregate amount of the Loans outstanding, no such agreement shall:

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(i)reduce the principal amount of any Loan or reduce the rate of interest thereon (excluding any waiver of Default Interest), or reduce any fees payable hereunder, without the written consent of each Lender directly affected thereby;

(ii)postpone the scheduled date of payment of the principal amount of any Loan (other than any reduction of the amount of, or any extension of the payment date for, the mandatory repayments required under Section 2.10, in each case which shall only require the approval of the Required Lenders), or any interest or any fees payable hereunder (excluding any waiver of Default Interest), or reduce the amount of, waive or excuse any such payment, without the written consent of each Lender directly affected thereby;

(iii)change any provision of Section 2.18(a) or any other provision of any Loan Document in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender;

(iv)change any of the provisions of this Section 9.02 or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;

(v)except upon repayment in full of the Loans, or as otherwise expressly set forth herein, release Borrower or any other Loan Party from its obligations under the Loan Documents without the written consent of each Lender; or

(vi)except as provided in Section 9.02(c) or in any Collateral Document, release all or substantially all of the Collateral, without the written consent of each Lender;

providedfurther that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent.

(c)The Lenders hereby irrevocably authorize the Administrative Agent, at its option and in its sole discretion, to release any Liens granted to the Administrative Agent by the Loan Parties on any Collateral (i) upon payment and satisfaction in full in cash of all Obligations (other than Unliquidated Obligations) or (ii) as required to effect any sale or other disposition of such Collateral in connection with any exercise of remedies of the Administrative Agent and Lenders pursuant to Article VII. Any such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of the Loan Parties in respect of) all interests retained by the Loan Parties, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral.

(d)If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender directly affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then Borrower may elect to replace a Non-Consenting Lender as a Lender party to this Agreement; provided, that concurrently with such replacement, (i) another Person reasonably satisfactory to Borrower and the Administrative Agent shall agree, as of such date, to purchase for cash the Loans and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of

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Section 9.04(b), and (ii) Borrower shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by Borrower hereunder to and including the date of termination (or, if such date of termination is not an Interest Payment Date, through and including the next such Interest Payment Date), including without limitation payments due to such Non-Consenting Lender under Section 2.15 and Section 2.17, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 2.16 had the Loans of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender.

(e)Notwithstanding anything to the contrary herein the Administrative Agent may, with the consent of Borrower only, amend, modify or supplement this Agreement or any of the other Loan Documents to cure any obvious error or error or omission of a technical and immaterial nature.

SECTION 9.03. Expenses; Indemnity; Damage Waiver.

(a)Borrower shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent (including all reasonable and documented out-of-pocket fees, costs and expenses (including, without limitation, due diligence expenses, third party real property diligence, and travel expenses) in connection with the preparation, negotiation, execution, and delivery and administration (where, in the case of administration, it is so expressly provided otherwise herein) of this Agreement and the other Loan Documents, any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonable and documented out‑of‑pocket expenses incurred by the Administrative Agent or any Lender (including the reasonable and documented out-of-pocket fees, charges and disbursements of any counsel for the Administrative Agent or any Lender) in connection with the enforcement or protection of its rights (A) in connection with this Agreement and any other Loan Document, including its rights under this Section 9.03 or (B) in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

(b)Subject to the terms of Section 9.14, Borrower shall indemnify the Administrative Agent (or any sub-agent thereof) and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages and liabilities and the reasonable and documented out-of-pocket expenses (including the reasonable and documented fees, charges and disbursements of any counsel for any Indemnitee), incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by Borrower, or any Environmental Liability related in any way to Borrower or any Property, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Loan Party or any of its Subsidiaries, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from (y) the gross negligence or willful misconduct of such Indemnitee or (z) any dispute solely among Indemnitees which does not

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arise out of any act or omission of Borrower or any of their Affiliates (other than any proceeding against the Administrative Agent solely in its capacity as such). This Section 9.03(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims or damages arising from any non-Tax claim.

(c)To the extent that Borrower fails to pay any amount required to be paid by it to the Administrative Agent under Section 9.03(a) or Section 9.03(b), each Lender severally agrees to pay to the Administrative Agent such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount (it being understood that the failure of Borrower to pay any such amount shall not relieve Borrower of any default in the payment thereof or the obligation of Borrower to reimburse each Lender for all amounts paid by such Lender in connection with such failure); provided, that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such.

(d)To the extent permitted by applicable law, Borrower and their Related Parties shall not assert, and hereby waive, any claim against any Indemnitee (i) for any damages arising from the use by others of information or other materials obtained through telecommunications, electronic or other information transmission systems (including the internet), or (ii) on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with the Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

(e)To the extent not paid on the Effective Date, all amounts due under this Section 9.03 shall be payable not later than ten days after written demand therefor.

SECTION 9.04. Successors and Assigns.

(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i)  Borrower shall not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 9.04. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in Section 9.04(c)) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

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(b)Required Consents.

(i)Subject to the conditions set forth in Section 9.04(b)(ii), any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of the Loans at the time owing to it) with the prior written consent of the Administrative Agent, not to be unreasonably withheld.

(ii)Assignments shall be subject to the following additional conditions:

(A)no assignments shall be made to a natural person;

(B)except in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Loans, the amount of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of Borrower and the Administrative Agent otherwise consent, provided that no such consent of Borrower shall be required if an Event of Default has occurred and is continuing; provided, further, that in the case of contemporaneous assignments to any Lender and its Affiliates or Approved Funds, such amounts shall be aggregated for purposes of this Section 9.04(b)(ii)(C);

(C)each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement;

(D)for so long as no Event of Default is continuing, no Assignment shall be made to any Person that is a competitor or affiliate of a competitor of Borrower, Mortgage Borrower or Guarantor; and

(E)the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500 (which fee may be waived or reduced by the Administrative Agent in its sole discretion), such fee to be paid by either the assigning Lender or the assignee Lender or shared between such Lenders.

(iii) No Lender shall sell any portion of its Loan without first offering the same in writing to JPP, LLC and JPP II, LLC. If JPP, LLC and/or JPP II, LLC shall accept such offer within five Business Days of its receipt thereof, JPP, LLC and/or JPP II, LLC shall have the right to purchase such Loan or portion thereof for an amount equal to the outstanding principal balance thereof, plus all accrued unpaid interest, within five Business Days following such acceptance. If JPP, LLC and/or JPP II, LLC shall fail to accept such offer within five Business Days following their receipt of such written offer, the Lender delivering such offer shall have the right to effectuate the sale of its Loan (or portion thereof) to any Person, subject to the other provisions of this Section 9.04(b).

(iv)Subject to acceptance and recording thereof pursuant to Section 9.04(b)(v), from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such

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Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 2.15, Section 2.16, Section 2.17 and Section 9.03); provided, that any such assigning Lenders shall continue to be subject to the terms and conditions of Section 9.12. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 9.04(c).

(v)The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders and principal amount (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement and the other Loan Documents. The Register shall be available for inspection by Borrower, the Administrative Agent and its Affiliates, and any Lender (as to its own holdings only), at any reasonable time and from time to time upon reasonable prior notice.

(vi)Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Eligible Assignee, delivery of any tax deliverables required under Section 2.17, the processing and recordation fee referred to in Section 9.04(b) and any written consent to such assignment required by Section 9.04(b), the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register; provided, that if either the assigning Lender or the Eligible Assignee shall have failed to make any payment required to be made by it pursuant to Section 2.18(e) or Section 9.03(c), the Administrative Agent shall have no obligation to accept such Assignment and Assumption and record the information therein in the Register unless and until such payment shall have been made in full, together with all accrued interest thereon. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this Section 9.04(b)(vi).

(c)Any Lender may, without the consent of Borrower or the Administrative Agent, sell participations to one or more banks or other entities (other than a natural person or a Loan Party) (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged; (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; and (C) Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided, that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or

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waiver described in the first proviso to Section 9.02(b) that affects such Participant. Borrower agrees that each Participant shall be entitled to the benefits of Section 2.15, Section 2.16 and Section 2.17 (subject to the requirements and limitations therein, including the requirements under Section 2.17(f) (it being understood that the documentation required under Section 2.17(f) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 9.04(b); provided that such Participant (A) agrees to be subject to the provisions of Section 2.18 and Section 2.19 as if it were an assignee under Section 9.04(b); and (B) shall not be entitled to receive any greater payment under Section 2.15 or Section 2.17, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(d) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided, that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in the Loans or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(d)Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section 9.04 shall not apply to any such pledge or assignment of a security interest; provided, that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid. The provisions of Section 2.15, Section 2.16, Section 2.17 and Section 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans or the termination of this Agreement or any other Loan Document or any provision hereof or thereof.

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SECTION 9.06. Counterparts; Integration; Effectiveness.

(a)This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

(b)Delivery of an executed counterpart of a signature page of this Agreement by telecopy, e-mailed .pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08. Reserved.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.

(a)This Agreement and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of New York.

(b)Borrower irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Administrative Agent, any Lender or any Related Party of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by Applicable Law, in such federal court.  Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or in any other Loan Document shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against Borrower or its respective properties its properties in the courts of any jurisdiction.

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(c)Each party hereto hereby irrevocably waives personal service of any and all legal process, summons, notices and other documents and other service of process of any kind and consents to such service in any suit, action or proceeding brought in the United States with respect to or otherwise arising out of or in connection with this Agreement or any other Loan Document by any means permitted by applicable law, including by the mailing thereof (by registered or certified mail, postage prepaid) to the address of such party, and in the manner provided for notices, in Section 9.01 (and shall be effective when such mailing shall be effective, as provided therein). Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(d)Nothing contained in this Section 9.09 shall affect the right of the Administrative Agent or any other Secured Party to serve process in any other manner permitted by applicable law or commence legal proceedings or otherwise proceed against Borrower or any other Loan Party in any other jurisdiction.

(e)Whenever pursuant to this Agreement, the Administrative Agent exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to the Administrative Agent, the decision of the Administrative Agent to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of the Administrative Agent and shall be final and conclusive.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Related Parties on a need to know basis (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential in accordance with this Section 9.12), (b) to the extent requested by any regulatory authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process in which case the Administrative Agent or such Lender, as applicable, shall, to the extent practicable and permitted by applicable law, inform Borrower promptly in advance thereof, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies under this Agreement or any

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other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 9.12, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to Borrower and their obligations, this Agreement or payments hereunder, (g) on a confidential basis to (i) any rating agency in connection with rating Borrower or the credit facilities evidenced by this Agreement or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to the credit facilities evidenced by this Agreement, (h) with the consent of Borrower or (i) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 9.12 or (ii) becomes available to the Administrative Agent, any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than Borrower. For the purposes of this Section 9.12, “Information” means all information received from any Loan Party or any Affiliate thereof relating to the Loan Parties or their business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by any Loan Party or any Affiliate thereof. Any Person required to maintain the confidentiality of Information as provided in this Section 9.12 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding anything to the contrary herein or in any other agreement, (i) Borrower agrees that the Information provided regarding Borrower and its Affiliates and the Transactions may be disseminated by or on behalf of the Administrative Agent or any Lender to prospective Lenders and other Persons who have agreed to be bound by customary confidentiality undertakings similar to this Section 9.12 (including, “click-through” agreements), all in accordance with the Administrative Agent’s or such Lender’s standard loan syndication practices (whether transmitted electronically by means of a website, e-mail or otherwise, or made available orally or in writing, including at potential lender or other meetings) and (ii) Borrower agrees that the Administrative Agent and each Lender may share with its respective Affiliates on a confidential basis any information relating to the credit facility under this Agreement, the Transactions or Borrower or their Affiliates and, subject to the prior written consent of Borrower, after any public announcement of the Transactions, may disclose information relating to the credit facility under this Agreement to publications or for its marketing materials, with such information to consist of deal terms and other information customarily found in such publications or marketing materials and that, after the Effective Date, the Administrative Agent and each Lender may otherwise use the corporate name and logo of Borrower and its Affiliates in “tombstones” or other advertisements, marketing materials or public statements.

SECTION 9.13. USA Patriot Act. The Administrative Agent and each Lender that is subject to the requirements of the Patriot Act hereby notifies each Loan Party that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name and address of such Loan Party and other information that will allow the Administrative Agent and such Lender to identify such Loan Party in accordance with the Patriot Act.

SECTION 9.14. Exculpation. Subject to the qualifications below, neither the Administrative Agent nor any Secured Party shall enforce the liability and obligation of Borrower to perform and observe the obligations contained in this Agreement or any other Loan Documents by any action or proceeding wherein a money judgment shall be sought against a Borrower, except that the Administrative Agent and the other Secured Parties may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable the Administrative Agent or such Secured Party to enforce and realize upon its interest under this Agreement and the other Loan Documents, or in the Collateral

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or any other collateral given to the Administrative Agent and the other Secured Parties pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of such Borrower’s interest in the Collateral and in any other collateral given to the Secured Parties, and the Administrative Agent and each other Secured Party, by accepting this Agreement and the other Loan Documents, agrees that it shall not sue for, seek or demand any deficiency judgment against Borrower in any such action or proceeding under or by reason of or under or in connection with this Agreement or the other Loan Documents. The provisions of this Section 9.14 shall not, however, (a) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (b) impair the right of the Administrative Agent or any other Secured Party to name Borrower as a party defendant in any action or suit for foreclosure and sale under any of the Collateral Documents; (c) affect the validity or enforceability of any guaranty or indemnity made in connection with the Loans or any of the rights and remedies of the Administrative Agent or any other Secured Party thereunder; (d) impair the right of the Administrative Agent or any other Secured Party to obtain the appointment of a receiver; (e) [reserved]; (f) constitute a prohibition against the Administrative Agent or any other Secured Party to seek a deficiency judgment against Borrower in order to fully realize the security granted by each of the Collateral Documents or to commence any other appropriate action or proceeding in order for the Administrative Agent or any other Secured Party to exercise its rights and remedies against the Collateral or any other collateral given to the Administrative Agent or any other Secured Party pursuant to the Loan Documents; or (g) constitute a waiver of the right of the Administrative Agent or any other Secured Party to enforce the liability and obligation of Borrower, by money judgment or otherwise, to the extent of any actual out-of-pocket loss, damage, cost, expense, liability, claim or other obligation incurred by the Administrative Agent or any other Secured Party (including attorneys’ fees and costs reasonably incurred, but excluding consequential or punitive damages except to the extent Lender is required to make payment therefor to a third party) arising out of or in connection with, and Borrower shall be personally liable for, the following (all such liability and obligation of Borrower for any or all of the following being referred to herein as the “Recourse Liabilities”):

(A)Fraud or intentional or material misrepresentation by Borrower, Mortgage Borrower, any other Loan Party or any Affiliate thereof in connection with the Loans and the other Transactions;

(B)the gross negligence or willful misconduct by or on behalf of Borrower, Mortgage Borrower, any other Loan Party or any Affiliate thereof or any of their respective agents or representatives in connection with the Loans and the other Transactions;

(C)the breach of any representation, warranty, covenant or indemnification provision in the HazMat Indemnity or in any Collateral Document concerning Environmental Laws and Hazardous Materials and any indemnification of the Administrative Agent and the other Secured Parties and other Persons with respect thereto in either document;

(D)the removal or disposal of any portion of the Collateral after an Event of Default or the removal or disposal of any portion of any Property after an “Event of Default” under and as defined in the Mortgage Loan Agreement (except to the extent such removal or disposal arises from the enforcement by a creditor where the claims of such creditor are attributable to insufficient cash flow from the operation of the Properties to pay amounts owing, or Borrower or Mortgage Borrower does not otherwise have access to the cash flow from the Property as a result of an exercise of remedies by such creditor);

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(E)the misappropriation, misapplication or conversion by Borrower, Mortgage Borrower or their respective Affiliates of (1) any insurance proceeds paid by reason of any Casualty Event, (2) any awards or other amounts received in connection with a condemnation of all or a portion of any Property, (3) any rents under the Master Lease or (4) any rents under any other Lease during the existence of an Event of Default or (5) any sales proceeds paid to or for the account of Mortgage Borrower in connection with any Purchase Option Exercise Event;

(F)any security deposits, advance deposits or any other deposits collected with respect to any Property which are not delivered to the Administrative Agent upon a foreclosure of such Property or action in lieu thereof, except to the extent any such security deposits were applied in accordance with the terms and conditions of the applicable leases prior to the occurrence of the Event of Default that gave rise to such foreclosure or action in lieu thereof;

(G)the failure of Borrower or Mortgage Borrower to obtain and maintain in full force and effect fully paid for Policies as required by this Agreement and the Mortgage Loan Agreement or the failure of Mortgage Borrower to pay any Taxes or assessments affecting any Property (except to the extent there is insufficient cash flow from the operation of the Properties to pay such amounts, or Borrower or Mortgage Borrower does not otherwise have access to the cash flow from the Property as a result of an exercise of remedies by Administrative Agent or the administrative agent under the Mortgage Loan);

(H)failure to pay charges for labor or materials or other charges that can create Liens on any portion of any Property (except to the extent there is insufficient cash flow from the operation of the Properties to pay such amounts, or Borrower does not otherwise have access to the cash flow from the Property);

(I)any material physical waste at any Property caused by the intentional acts or omissions of Borrower, Mortgage Borrower, any other Loan Party or any Affiliate thereof or any of their principals, officers, agents, employees or contractors (it being agreed that intentional acts do not include waste arising from insufficient cash flow from the operation of the Properties, or Borrower’s or Mortgage Borrower’s lack of access to the cash flow from the Property);

(J)[reserved];

(K)the payment of fees or other amounts by Borrower or Mortgage Borrower to any of its Affiliates in violation of the Loan Documents;

(L)any commission of a criminal act by Borrower ,Mortgage Borrower, any other Loan Party or any Affiliate thereof resulting in the seizure, forfeiture or loss of all or any portion of the Collateral or any Property or any portion thereof;

(M)the breach of any representation, warranty or covenant set forth in Section 3.10 or Section 6.11;

(N)except for the Springing Recourse Event described in (1)(B) below, if Borrower or Mortgage Borrower fail to maintain their status as a single purpose entity as required by, and in accordance with, the terms and provisions of this Agreement and the

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Mortgage Loan Agreement (except to the extent the same arises from insufficient cash flow from the operation of the Properties to pay such amounts, or Borrower’s or Mortgage Borrower’s lack of access to the cash flow from the Property);

(O)the breach of any backward looking representations set forth in Section 3.38 of this Agreement or the Mortgage Loan Agreement;

(P)reserved;

(Q)reserved; or

(R)if Borrower, any other Loan Party or any Affiliate thereof contests, impedes, delays or opposes the exercise by the Administrative Agent or any other Secured Party of any enforcement actions, remedies or other rights it has under or in connection with this Agreement or the other Loan Documents or objects to any notice of strict foreclosure or similar notice; provided, that neither Borrower nor any other Loan Party shall be liable to the extent of any applicable loss, damage, cost, expense, liability, claim or other obligation arising solely from a defense of Borrower, or any other Loan Party or any Affiliate thereof raised in good faith.

Notwithstanding anything to the contrary in this Agreement or any of the other Loan Documents, (A) neither the Administrative Agent nor any other Secured Party shall be deemed to have waived any right which such Person may have under Section 506(a), 506(b) or 1111(b) or any other provisions of the Bankruptcy Code or any other Debtor Relief Law to file a claim for the full amount of the Obligations or to require that all Collateral shall continue to secure all of the Obligations in accordance with the Loan Documents, and (B) the Obligations shall be fully recourse to Borrower in the event that any of the following occurs (each, a “Springing Recourse Event”): (1) Borrower or Mortgage borrower (A) fails to permit on-site inspections of any Property after five (5) Business Days prior written notice to the Borrowers where the Administrative Agent has a reasonable basis to believe that there is a risk that Hazardous Materials are located on a Property in violation of any Environmental Law as required by, and in accordance with the terms and provisions of, this Agreement and the other Loan Documents or (B) fails to maintain its status as a single purpose entity as required by, and in accordance with, the terms and provisions of this Agreement, which failure is cited as a factor in a substantive consolidation of the assets and liabilities of such Borrower with any other Person in connection with a proceeding under any Debtor Relief Law; (2) Borrower fails to obtain the prior written consent of the Administrative Agent or the Required Lenders, as the case may be, to any voluntary Indebtedness for borrowed money or voluntary Lien securing borrowed money and encumbering any Property or any material part thereof or interest therein except to the extent expressly permitted by this Agreement (it being agreed that Liens or indebtedness are not voluntary if they arise from insufficient cash flow from the operation of the Properties, or Borrower’s or Mortgage Borrower’s lack of access to the cash flow from the Property as a result of an exercise of remedies by Administrative Agent or the administrative agent under the Mortgage Loan); (3) a violation of Section 6.03 shall occur, or a voluntary Transfer with respect to all or substantially all of the real estate comprising the properties, except as expressly permitted under the Mortgage Loan Agreement (it being agreed that Transfers are not voluntary if they arise from insufficient cash flow from the operation of the Properties or Mortgage Borrower’s lack of access to cash flow from the Properties as a result of an exercise of remedies by Administrative Agent or the administrative agent under the Mortgage Loan); (4) Borrower files a voluntary petition under any Debtor Relief Law; (5) an Affiliate, officer, director, or representative which controls, directly or indirectly, Borrower files, or joins in the filing of, an involuntary petition against Borrower under any Debtor Relief Law, or solicits or causes to be solicited petitioning creditors for any involuntary petition against Borrower from any Person; (6) Borrower

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files an answer consenting to or otherwise acquiescing (i.e., failing to object to such filing to the extent any Loan Party or any Affiliate, officer, director, or representative of Borrower has a good faith basis to object) in or joining in any involuntary petition filed against it by any other Person under the any Debtor Relief Law, or solicits or causes to be solicited petitioning creditors for any involuntary petition against Borrower from any Person; (7) any Affiliate, officer, director, or representative which controls, directly or indirectly, Borrower consents to or acquiesces (i.e., fails to object to such filing to the extent any Loan Party, or any Affiliate, officer, director, or representative of Borrower has a good faith basis to object) in or joins in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower or any portion of the Property; (8) Borrower makes an assignment for the benefit of creditors, or admits, in writing in any action or proceeding, its insolvency or inability to pay its debts as they become due (unless such admission was made to the Administrative Agent or the Lenders or was required to be made in such legal proceeding in order to not violate any applicable law); (9) the first full monthly payment of interest under this Agreement is not paid when due; (10) the Master Lease or Master Lease Guaranty is amended, modified or terminated without the prior written consent of the Administrative Agent or the Required Lenders, as the case may be, other than as expressly permitted by this Agreement; or (11) any Ground Lease is amended, modified or terminated without the prior written consent of the Administrative Agent or the Required Lenders, as the case may be, other than as expressly permitted by this Agreement.

In addition, notwithstanding anything contained in this Agreement, no direct or indirect partner, member, shareholder, principal, officer, director, employee, agent, representative or Affiliate of any Loan Party (but specifically excluding Guarantor’s obligations under the Guaranty Agreement and the HazMat Indemnity) or any legal representatives, successors or assigns of any of the foregoing (collectively, the “Exculpated Parties”) (other than pursuant to this Agreement, the Guaranty Agreement or the HazMat Indemnity) shall have any personal liability for, nor be joined as a party to any action with respect to (i) the payment of any sum of money which is or may be payable hereunder or under any other Loan Document (including, but not limited to, the repayment of the Obligations) or (ii) the performance or discharge of any covenants, obligations or undertakings of the Borrowers with respect thereto.

SECTION 9.15. Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a)the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

(b)the effects of any Bail-In Action on any such liability, including, if applicable:

(i)a reduction in full or in part or cancellation of any such liability;

(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

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(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.

SECTION 9.16. Interest Rate Limitation. This Agreement and the other Loan Documents are subject to the express condition that at no time shall Borrower be required or obligated to pay interest on the principal balance of the Loans at a rate which could subject any Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the rate of interest charged hereunder, including Default Interest, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to the Lenders for the use, forbearance, or detention of the sums due under the Loans shall, to the extent permitted by the applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loans does not exceed the Maximum Legal Rate from time to time in effect and applicable to the Loans for so long as any Loans are outstanding.

SECTION 9.17. No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), Borrower acknowledges and agrees that: (i) (A) the arranging and other services regarding this Agreement provided by the Lenders are arm’s-length commercial transactions between Borrower, on the one hand, and the Lenders and their Affiliates, on the other hand, (B) Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) each of the Lenders and their Affiliates is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for Borrower or any of their Affiliates, or any other Person and (B) no Lender or any of its Affiliates has any obligation to Borrower or any Affiliate thereof with respect to the transactions contemplated hereby except, in the case of a Lender, those obligations expressly set forth herein and in the other Loan Documents; and (iii) each of the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of Borrower and their Affiliates, and no Lender or any of its Affiliates has any obligation to disclose any of such interests to Borrower or any Affiliates thereof. To the fullest extent permitted by law, Borrower hereby waives and releases any claims that it may have against each of the Lenders and their Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

SECTION 9.18. Independent Effect of Covenants. Borrower expressly acknowledges and agrees that each covenant contained in this Agreement and the other Loan Documents shall be given independent effect. Accordingly, Borrower shall not engage in any transaction or other act otherwise permitted under any covenant contained in this Agreement or any other Loan Document, if before or after giving effect to such transaction or act, Borrower shall or would be in breach of any other covenant contained in this Agreement or any other Loan Document.

SECTION 9.19. Inconsistencies with Other Documents. In the event there is a conflict or inconsistency between this Agreement and any other Loan Document, the terms of this Agreement shall control; provided, that any provision of any Collateral Document which imposes additional burdens on Borrower or further restricts the rights of Borrower or gives the Administrative Agent or Lenders additional

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rights shall not be deemed to be in conflict or inconsistent with this Agreement and shall be given full force and effect.

SECTION 9.20. Reserved.

SECTION 9.21. Publicity. All news releases, publicity or advertising by any Borrower or its Affiliates through any media which refers to the Loan, the Loan Documents, the Administrative Agent, any Lender or any of their respective Affiliates shall be subject to the prior approval of the Administrative Agent or such Lender, as the case may be (such approval not to be unreasonably withheld, conditioned or delayed). The Borrowers authorize the Administrative Agent and each Lender to issue press releases, advertisements and other promotional materials in connection with the Administrative Agent’s or such Lender’s own promotional and marketing activities, and such materials may describe the Loans in general terms or in detail and the Administrative Agent’s or such Lender’s participation therein in the Loans; provided, that absent an Event of Default, the prior written consent of the Borrowers shall be required with respect thereto.

SECTION 9.22. Mortgage Loan.

(a)Administrative Agent shall have the right (but not the obligation) to cure any “Event of Default” under and as defined in the Mortgage Loan Agreement, regardless of whether the same results from the breach of a monetary or non-monetary covenant; and the costs and expenses incurred by Administrative Agent in doing so, including reasonable attorneys' fees, with interest thereon at the rate set forth in Section 2.12(b), shall constitute a portion of the Indebtedness evidenced by the Loans, shall be secured by the Pledge Agreement and other Loan Documents, and shall be due and payable to Administrative Agent within five Business Days following written demand therefor.

(b)JPP, LLC and/or JPP II, LLC, for so long as either or both shall be a Lender hereunder, shall have the right without notice or demand on Borrower or Mortgage Borrower to purchase all or any portion of the Mortgage Loan or any interest therein without notice to or consent of Borrower, in which event such Lender shall have and may exercise all rights of Mortgage Lender thereunder. Borrower hereby expressly agrees that any claims that Mortgage Borrower may have against Mortgage Lender relating to or arising out of the Mortgage Loan shall be the personal obligation of the assigning Mortgage Lender and in no event shall Mortgage Borrower be entitled to bring or pursue such claims against Lender or any Affiliate of Lender or any other Person as the successor holder the Mortgage Loan or any interest therein.

(c)If, on account of the subordination of the Loan to the Mortgage Loan, any Lender is required to remit to Mortgage Lender any amount theretofore paid to such Lender hereunder, then such amount shall continue to be owing pursuant to this Agreement and the other Loan Documents as part of the Indebtedness, notwithstanding the prior receipt of such payment by Lender.

(d)Administrative Agent shall have the right at any time to discuss matters regarding the Property, the Collateral, the Mortgage Loan, the Loan or any other matter directly with Mortgage Lender or its consultants, agents or representatives, without notice to or permission from Borrower, Mortgage Borrower or any of their affiliates. Administrative Agent shall have no obligation to disclose such discussions or the contents thereof with Borrower, Mortgage Borrower or any of their affiliates.

(e)If any action, proposed action or other decision is consented to or approved by Mortgage Lender, such consent or approval shall not be binding or controlling on Administrative

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Agent or any Lender. Borrower hereby acknowledges and agrees that (i) the risks of Mortgage Lender in making the Mortgage Loan are different from the risks of Lender in making the Loan, (ii) in determining whether to grant, deny, withhold or condition any requested consent or approval, Mortgage Lender and Lender may reasonably reach different conclusions, and (iii) Lender has an absolute independent right to grant, deny, withhold or condition any requested consent or approval based on its own point of view, but subject to the standards of consent applicable to Lender in this Agreement and the other Loan Documents. In addition, the denial by Lender of a requested consent or approval shall not result in any liability or other obligation of Lender, if such denial results directly or indirectly in a default under the Mortgage Loan and Borrower hereby waives any claim of liability against Lender arising from any such denial.

(f)Borrower shall cause Mortgage Borrower to (a) pay all principal, interest and other sums required to be paid by Mortgage Borrower under and pursuant to the provisions of the Mortgage Loan Documents unless such performance or observance shall be waived in writing by Mortgage Lender; (b) diligently perform and observe all of the terms, covenants and conditions of the Mortgage Loan Documents on the part of Mortgage Borrower to be performed and observed (including, without limitation, with respect to funding reserves and escrows), notwithstanding repayment in full of the Mortgage Loan or any termination of the Mortgage Loan Agreement or other Mortgage Loan Documents; (c) promptly notify Lender of the giving of any notice of breach or default or any other written notice by Mortgage Lender to Mortgage Borrower or Borrower; (d) deliver a correct and complete copy of each notice, demand, request and correspondence (including electronically transmitted items) that, in each case, are given or received by Mortgage Borrower or Borrower to or from the Mortgage Lender or its administrative agent, and (e) not enter into any material amendment or modification of any Mortgage Loan Document, or any additional Mortgage Loan Documents, without Administrative Agent’s prior written consent, not to be unreasonably withheld

(g)Borrower shall (or shall cause Mortgage Borrower to), from time to time, use commercially reasonable efforts to obtain from Mortgage Lender such certificates of estoppel with respect to compliance by Mortgage Borrower with the terms of the Mortgage Loan Documents as may be reasonably requested by Administrative Agent. In the event or to the extent that Mortgage Lender fails to deliver such estoppel, then Borrower shall not be in breach of this provision so long as Borrower furnishes to Administrative Agent an estoppel executed by Borrower and Mortgage Borrower expressly representing to Administrative Agent (i) to the knowledge of Borrower and Mortgage Borrower, the outstanding principal balance of the Mortgage Loan and (ii) whether Mortgage Lender, Borrower, Mortgage Borrower or Guarantor has sent or received a default notice or Event of Default notice (and if so, attaching a copy of each such notice).

(h)Without the express prior written consent of Administrative Agent, Borrower shall not, and Borrower shall not cause, suffer or permit Mortgage Borrower to, enter into any deed-in-lieu or consensual foreclosure with or for the benefit of Mortgage Lender or any of its affiliates. Without the express prior written consent of Administrative Agent, Borrower shall not, and Borrower shall not cause, suffer or permit Mortgage Borrower to, enter into any consensual sale or other transaction in connection with the Mortgage Loan which could diminish, modify, terminate, impair or otherwise adversely affect the interests of Administrative Agent or Borrower, the Collateral or any portion thereof or any interest therein or of Mortgage Borrower in the Property or portion thereof or any interest therein.

(i)In the event that the Mortgage Loan shall be repaid in full, at the request of Administrative Agent, Borrower shall, and shall cause Mortgage Borrower to, reasonably cooperate

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with Administrative Agent to convert the Loan to a mortgage loan substantially in the form of the Mortgage Loan, such that the Loans hereunder shall be secured by first mortgages on the Properties. In connection with any such conversion, Borrower shall cause the organizational documents of Borrower and Mortgage Borrower to be amended, to the extent necessary to effectuate such conversion, and to deliver such opinions, certificates, documents, mortgages, estoppels, assignments and title insurance policies so as to, as closely as practicable, replicate the structure of the Mortgage Loan made to Mortgage Borrower as of the Effective Date (but taking into account any releases of Properties or repayments of the Loans that has theretofore occurred). Borrower shall pay all of Lender’s reasonable out-of-pocket costs of such conversion. In the event the Mortgage Loan is repaid in full, Borrower shall not permit Mortgage Borrower to incur any Indebtedness secured by any assets of Mortgage Borrower, including the Properties, without the prior written consent of Administrative Agent.

(j)If JPP, LLC and/or JPP II, LLC shall purchase the Mortgage Loan, Administrative Agent shall have the right from time to time, in their sole discretion, to allocate and reallocate any portion of the balance of the Loans hereunder to the Mortgage Loan, and Borrower shall, and shall cause Mortgage Borrower to, execute new Notes hereunder and new notes under the Mortgage Loan Agreement to evidence any such allocation or reallocation; provided, however, that no such reallocation shall result in an increase of the weighted average interest rate of the then-applicable interest rate with respect to the Notes and the then-applicable interest rate with respect to the notes evidencing the Mortgage Loan. In addition, following the acquisition of the Mortgage Loan by JPP, LLC and/or JPP II, LLC, within five Business Days following Administrative Agent’s request therefor, Borrower shall cause Mortgage Borrower to enter into an amendment of the Mortgage Loan pursuant to which the right of Mortgage Borrower to approve any transfer of the Mortgage Loan by Mortgage Lender (or the identity of any new lender thereunder) shall be eliminated.

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77

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

BORROWER:

SRC SPARROW 2 LLC

By:    /s/ Robert A. Riecker
Name:    Robert A. Riecker
Title:    Authorized Signatory

ADMINISTRATIVE AGENT:

JPP, LLC, a Delaware limited liability company

By:    /s/ Edward S. Lampert    
Name:    Edward S. Lampert    
Title:    Member    

LENDERS:

JPP, LLC, a Delaware limited liability company

By:    /s/ Edward S. Lampert    
Name:    Edward S. Lampert    
Title:    Member    

JPP II, LLC, a Delaware limited liability company

By:    /s/ Edward S. Lampert    
Name:    Edward S. Lampert    
Title:    Chairman and CEO of ESL Investments Inc. as GP of RBS Partners LP as Manager of    

Schedule 1.01 – Properties

	Store Number	Address	City	County	State
1	2819	3115 Airport Way	Fairbanks	Fairbanks North Star Borough	AK
2	1228	1601 Arden Way	Arden	Sacramento	CA
3	4371	2875 Santa Maria Way	Santa Maria	Santa Barbara	CA
4	1141	14200 E. Alameda Avenue	Aurora	Arapahoe	CO
5	1221	1650 Briargate Blvd	Colorado Springs	El Paso	CO
6	1281	3201 Dillon Dr	Pueblo	Pueblo	CO
7	1831	16395 Washington Street	Thornton	Adams	CO
8	1043	470 Lewis Ave	Meriden	New Haven	CT
9	1263	425 Union St	Waterbury	New Haven	CT
10	7979	3555 St. Johns Bluff Road South	Jacksonville	Duval	FL
11	8065	3301 NW 107th Ave	Doral	Miami-Dade	FL
12	1035	3450 Wrightsboro Road	Augusta	Richmond	GA
13	1095	6580 Douglas Blvd	Douglasville	Douglas	GA
14	1155	400 Ernest W Barrett Pkwy Nw	Kennesaw	Cobb	GA
15	1565	1300 Southlake Mall	Morrow(Southlake)	Clayton	GA
16	1685	2100 Pleasant Hill Road	Duluth	Gwinnett	GA
17	2845	3700 Atlanta Highway	Athens	Clarke	GA
18	8745	4650, 4616 & 4740 Hugh Howell Road; 2301 Mountain Industrial Boulevard	Tucker	DeKalb	GA
19	1012	4000 Merle Hay Road**	Des Moines	Polk	IA
20	2422	4480 Sergeant Road	Sioux City	Woodbury	IA
21	2760	320 W Kimberly Road	Davenport	Scott	IA
22	1172	5 Stratford Square	Bloomingdale	Dupage	IL
23	1321	2200 W War Memorial Dr Ste 998	Peoria	Peoria	IL
24	1570	2 Woodfield Mall	Schaumburg	Cook	IL
25	1780	104 White Oaks Mall	Springfield	Sangamon	IL
26	1820	5000 Spring Hill Mall	West Dundee	Kane	IL
27	1840	6501 95Th Street	Chicago Ridge	Cook	IL
28	2121	1607 36Th Street	Peru	La Salle	IL
29	2360	3400 Quincy Mall	Quincy	Adams	IL
30	1600	6020 E 82Nd St	Indianapolis	Marion	IN
31	1650	2300 Southlake Mall	Merrillville	Lake	IN
32	1680	10202 E Washington Street	Indianapolis	Marion	IN
33	1800	6501 Grape Road	Mishawaka	St. Joseph	IN
34	2290	3901 Franklin Street	Michigan City	Laporte	IN
35	1642	1781 SW Wanamaker Road	Topeka	Shawnee	KS
36	1730	3000 Mall Road	Florence	Boone	KY
37	1077	3601 Southern Ave	Shreveport	Caddo Parish	LA
38	1086	9001 Cortana Place	Baton Rouge	East Baton Rouge Parish	LA
39	1116	4800 Millhaven Road	Monroe	Ouachita Parish	LA
40	1147	6501 Blubonnet Boulevard	Baton Rouge	East Baton Rouge Parish	LA

	Store Number	Address	City	County	State
41	1226	4400 Veterans Memorial Boulevard	Metairie	Jefferson Parish	LA
42	2087	3401 Masonic Dr	Alexandria	Rapides Parish	LA
43	2677	2950 E. Texas Street	Bossier City	Bossier Parish	LA
44	1033	1009 South Washington Street	North Attleboro	Bristol	MA
45	1104	521 Donald Lynch Blvd	Marlborough	Middlesex and Worcester	MA
46	1223	200 Westgate Dr	Brockton-Westgate	Plymouth	MA
47	2934	8 Galleria Mall Drive	Taunton	Bristol	MA
48	1074	11170 Mall Circle	Waldorf	Charles	MD
49	1634	6901 Security Blvd	Baltimore	Baltimore	MD
50	1754	701 Russell Ave	Gaithersburg	Montgomery	MD
51	1854	8200 Perry Hall	Nottingham	Baltimore	MD
52	1011	3622 Rivertown Pkwy Sw	Grandville	Kent	MI
53	1092	35000 Warren Road **	Westland	Wayne	MI
54	1110	6780 S Westnedge Ave	Portage	Kalamazoo	MI
55	1192	5500 Harvey St	Muskegon	Muskegon	MI
56	1700	18900 Michigan Ave	Dearborn	Wayne	MI
57	1720	14100 Lakeside Circle	Sterling Hts	Macomb	MI
58	1760	27600 Novi Road	Novi	Oakland	MI
59	2040	5575 B Drive N	Battle Creek	Calhoun	MI
60	2180	1212 S Airport Road W	Traverse City	Grand Traverse	MI
61	9693	Shortcut Road	Marine City	St Clair	MI
62	8702	2700 Winter St Ne	Minneapolis	Hennepin	MN
63	1042	101 N Rangeline Road	Joplin	Jasper	MO
64	1171	2825 S Glenstone Ave, Suite 500	Springfield	Greene	MO
65	1182	3 Mid Rivers Mall Dr	St. Peters	St. Charles	MO
66	1222	250 S County Center Way	St. Louis	St. Louis County	MO
67	1690	1 Chesterfield Mall	Chesterfield	St. Louis	MO
68	1822	330 Siemers Drive	Cape Girardeau	Cape Girardeau County	MO
69	1166	1740 Bonita Lakes Circle	Meridian	Lauderdale	MS
70	1306	1000 Turtle Creek Dr	Hattiesburg	Lamar	MS
71	1165	1480 Concord Parkway	Concord	Cabarrus	NC
72	1375	3320 Silas Creek Pkwy	Winston Salem	Forsyth	NC
73	1605	7330 Old Wake Forest Road	Raleigh	Wake	NC
74	1805	4601 Glenwood Ave Unit 1	Raleigh	Wake	NC
75	2175	3600 S. Memorial Drive	Greenville	Pitt	NC
76	2515	1940 US Highway 70 SE	Hickory	Catawba	NC
77	7385	819 E Six Forks Road	Raleigh	Wake	NC
78	1712	2800 S Columbia Road	Grand Forks	Grand Forks	ND
79	1022	3420 Oak View Drive	Oakview	Douglas	NE
80	1314	51 Us Hwy #1	New Brunswick	Middlesex	NJ
81	1554	4409 Black Horse Pike	Mays Landing	Atlantic	NJ
82	1614	112 Eisenhower Pkwy Ste 2A	Livingston	Essex	NJ
83	1734	300 Quaker Bridge Mall	Lawrenceville	Mercer	NJ
84	1764	Route 80 & Mt. Hope Avenue	Rockaway	Morris	NJ
85	1874	2501 Mt Holly Road	Burlington	Burlington	NJ
86	1717	10000 Coors Bypass Nw	Albuquerque	Bernalillo	NM

	Store Number	Address	City	County	State
87	2207	1000 S Main St	Roswell	Chaves	NM
88	1504	4475 Transit Road	Clarence	Erie	NY
89	4928	308 Dix Avenue	Queensberry	Warren	NY
90	1051	17271 Southpark Ctr	Strongsville	Cuyahoga	OH
91	1120	5053 Tuttle Crossing Blvd	Columbus	Franklin	OH
92	1210	1400 Polaris Parkway	Columbus	Delaware	OH
93	1710	5000 Great Northern Mall	North Olmsted	Cuyahoga	OH
94	2010	600 Richland Mall	Mansfield	Richland	OH
95	2390	1475 Upper Valley Pike	Springfield	Clark	OH
96	4937	1470 North Bridge Street	Chillicothe	Ross	OH
97	1545	205 W. Blackstock Road	Spartanburg	Spartanburg	SC
98	1595	700 Haywood Road	Greenville	Greenville	SC
99	2305	3101 N. Main Street	Anderson	Anderson	SC
100	2855	2068 Sam Rittenberg Boulevard	Charleston	Charleston	SC
101	1315	401 Northgate Mall	Chattanooga	Hamilton	TN
102	8206	640 Thompson Lane	Nashville	Davidson	TN
103	447	3, 1501 & 1602 Kings Road; 2850 & 3150 Marquis Drive	Garland	Dallas	TX
104	1027	750 Sunland Park Drive	El Paso	El Paso	TX
105	1076	2401 S Stemmons Fwy	Lewisville	Denton	TX
106	1176	999 Pasadena Blvd	Pasadena	Harris	TX
107	1187	3000 Town East Mall	Mesquite	Dallas	TX
108	1217	1305 Airline Road	Corpus Christi	Nueces	TX
109	1267	1800 Green Oaks Road	Fort Worth	Tarrant	TX
110	1297	1101 Melbourne Road	Hurst	Tarrant	TX
111	1307	4310 Buffalo Gap Road	Abilene	Taylor	TX
112	1317	8401 Gateway Blvd W	El Paso	El Paso	TX
113	1327	1000 San Jacinto Mall	Baytown	Harris	TX
114	1337	851 N Central Expwy	Plano	Collin	TX
115	1367	6001 W Waco Dr	Waco	Mclennan	TX
116	1377	7925 Fm 1960 Road W	Houston	Harris	TX
117	1387	7701 Interstate Highway 40 W	Amarillo	Potter	TX
118	1407	6461 Eastex Fwy	Beaumont	Jefferson	TX
119	1417	20131 Highway 59 N	Humble	Harris	TX
120	1427	6909 N Loop 1604 E	San Antonio	Bexar	TX
121	1447	4900 S. Hulen Street	Hulen	Tarrant	TX
122	1487	12701 Ridgeline Boulevard	Austin	Williamson	TX
123	2197	10000 Emmett F Lowry Expy	Texas City	Galveston	TX
124	2247	5300 San Dario Avenue	Laredo	Webb	TX
125	2497	2320 N Expressway	Brownsville	Cameron	TX
126	2547	1502 Harvey Road	College Station	Brazos	TX
127	2557	3510 McCann Road	Longview	Gregg	TX
128	2587	2201 S. Interstate 35 E	Denton	Denton	TX
129	8147	7353 NW Loop 410	San Antonio	Bexar	TX
130	8217	5001 N. Beach Street	Fort Worth	Tarrant	TX
131	8717	5901 Griggs Road	Houston	Harris	TX
132	1029	4700 N Division St	Spokane	Spokane	WA
133	1038	14720 E Indiana Ave	Spokane Valley	Spokane	WA

	Store Number	Address	City	County	State
134	1139	301 Southcenter Mall	Tukwila	King	WA
135	2029	9 E Valley Mall Blvd **	Union Gap	Yakima	WA
136	2219	651 Sleater Kinney Road	Lacey/Olympia	Thurston	WA
137	2309	10315 Silverdale Way Nw, Suite C	Silverdale	Kitsap	WA
138	4147	4110 E Sprague Avenue	Spokane	Spokane	WA

Schedule 1.02 – Appraised Values

As set forth in the Closing Date Officer’s Certificate

Schedule 1.03 – Single Purpose Entity Requirements

Since the date of its formation and at all times on and after the Effective Date and continuing at all times until all Obligations (other than Unliquidated Obligations) have been paid in full:

(a)Borrower (i) has been, is, and will be organized solely for the purpose of acquiring, and holding the direct and indirect equity interests in Mortgage Borrower, entering into and performing its obligations under the Loan Documents, refinancing the Collateral in connection with a permitted repayment of the Loans, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing, and (ii) has not owned, does not own, and will not own any asset or property other than the Collateral and necessary incidental personal property related thereto.

(b)Borrower has not engaged and will not engage in any business or activity other than the ownership Collateral and Borrower will conduct and operate its business as presently conducted and operated.

(c)Borrower has not entered and will not enter into any contract or agreement with any Affiliate of such Borrower, any constituent party of such Borrower or any Affiliate of any constituent party, except upon terms and conditions that are intrinsically fair, commercially reasonable, and no less favorable to it than those that would be available on an arm’s-length basis from an unrelated third party.

(d)Borrower has not incurred and will not voluntarily incur any Indebtedness other than (i) the Loans and (ii) other Indebtedness permitted under Section 6.01. For the avoidance of doubt, the inability of Borrower or Mortgage Borrower to pay costs and expenses (e.g. utility bills) as they come due, in each case arising from or attributable to insufficient cash flow from the Properties, or Borrower’s or Mortgage Borrower’s lack of access thereto (to the extent caused by the Administrative Agent’s or any Lender’s exercise of remedies or the exercise of remedies under the Mortgage Loan Documents), shall not be deemed to constitute a voluntary incurrence of Indebtedness for purposes of this clause (d)No Indebtedness, other than the Loans, may be secured by any portion of the Collateral. No Exculpated Party is required to, nor prohibited from, contributing additional capital to the Borrowers for purposes of compliance with this clause (d).

(e)Borrower has not made and will not make any loans or advances to any other Person (including any Affiliate of such Borrower, any constituent party of such Borrower or any Affiliate of any constituent party), and has not acquired and shall not acquire obligations or securities of its Affiliates.

(f)Borrower has been, is, and intends to remain solvent and such Borrower has paid its debt and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets as the same became due and will pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets as the same shall become due.

(g)(i) Borrower has done or caused to be done, and will do and cause to be done, all things necessary to observe its organizational formalities and preserve its separate existence, (ii) no Borrower has terminated or failed to comply with and no Borrower will terminate or fail to comply with the provisions of its organizational documents, (iii) Borrower has not amended, modified or otherwise changed its organizational documents except as disclosed to the Administrative Agent prior to the Effective Date and (iv) Borrower will not amend, modify or otherwise change its organizational documents in a manner that is adverse to the Lender.

(h)Borrower has maintained and will maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates and any other Person. Borrower’s assets have not been listed as assets on the financial statement of any other Person; provided, however, that Borrower’s assets may have been included in a consolidated financial statement of its Affiliates; provided that, if applicable, (i) appropriate notation were made on such consolidated financial statements to indicate the separateness of Borrower and such Affiliates and to indicate that such Borrower’s assets and credit were not available to satisfy the debts and other obligations of such Affiliates or any other Person, and (ii) such assets were listed on such Borrower’s own separate balance sheet. Borrower has filed and shall file its own tax returns (except to the extent that such Borrower was or is treated as a “disregarded entity” for tax purposes and was or is not required to file tax returns under applicable law) and has not filed and shall not file a consolidated federal income tax return with any other Person. Borrower has maintained and shall maintain its books, records, resolutions and agreements as official records.

(i)Borrower (i) has been, will be, and at all times has held and will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate of such Borrower or any constituent party of such Borrower), (ii) has corrected and shall correct any known misunderstanding regarding its status as a separate entity, (iii) has conducted and shall conduct business in its own name, (iv) has not identified and shall not identify itself or any of its Affiliates as a division or department or part of the other and (v) has maintained and utilized and shall maintain and utilize separate stationery, invoices and checks bearing its own name.

(j)Borrower has maintained and will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations.

(k)Borrower has not and no constituent party of Borrower has sought or will seek or effect the liquidation, dissolution, winding up, consolidation or merger, in whole or in part, of Borrower, any sale or other transfer of all or substantially all of its assets or any sale or other transfer outside the ordinary course of business.

(l)Borrower has not commingled and will not commingle funds or other assets of Borrower with those of any Affiliate or constituent party or any other Person, and Borrower has held and will hold all of its assets in its own name.

(m)Borrower has maintained and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or constituent party or any other Person.

(n)No Borrower has not assumed, guaranteed or become obligated for the debts or obligations of any other Person or has held itself out to be responsible for and has not had its credit or assets available to satisfy the debts or obligations of any other Person. Borrower will not assume, guarantee or become obligated for the debts or obligations of any other Person or will not hold itself out to be responsible for or have its credit or assets available to satisfy the debts or obligations of any other Person.

(o)The organizational documents of Borrower shall provide that the business and affairs of such Borrower shall be managed by or under the direction of a board of one or more directors or managers designated by the member of such Borrower, and at all times there shall be at least one duly appointed individuals on the board managers (each, an “Independent Director”) of such Borrower, each of whom (i) has at least three years prior employment experience and continues to be employed as an independent director, independent manager or independent member by CT Corporation, Corporation Service Company, National

Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation or, if none of those companies is then providing professional independent directors, independent managers and independent members, another nationally-recognized company that provides such services and which is reasonably approved by the Administrative Agent; (ii) is not on the board of directors or managers of more than two Affiliates of Borrower; and (iii) is not, and has never been, and will not, while serving as an Independent Director be, any of the following: (A) a stockholder, director, manager, officer, employee, partner, member, attorney or counsel of Borrower, any Affiliate of Borrower or any direct or indirect equity holder of any of them, (B) a creditor, customer, supplier, service provider (including provider of professional services) or other Person who derives any of its purchases or revenues from its activities with Borrower or any Affiliate of Borrower (other than a nationally-recognized company that routinely provides professional independent directors, independent managers or independent members and other corporate services to a Borrower or any Affiliate of a Borrower in the ordinary course of its business), (C) a member of the immediate family of any such stockholder, director, manager, officer, employee, partner, member, creditor, customer, supplier, service provider or other Person, or (D) a Person controlling or under common control with any of (A), (B) or (C) above. A natural person who satisfies the foregoing definition other than clause (iii) shall not be disqualified as a result of clause (iii)(A) by reason of (I) being, having been or becoming an Independent Director of an Affiliate of Borrower that is not in the direct chain of ownership of a Borrower and that is required by a creditor to be a “single purpose entity”; provided that such Independent Director is, was or will be employed by a company that routinely provides professional independent directors, independent managers or independent members, or (II) being, having been or becoming a member of Borrower pursuant to an express provision in such Borrower’s operating agreement providing for the appointment of such Independent Director as a member of such Borrower upon the occurrence of any event pursuant to which the sole member of such Borrower ceases to be a member of such Borrower (including the withdrawal or dissolution of the sole member). A natural person who satisfies the foregoing definition other than clause (iii) shall not be disqualified as a result of clause (iii)(A) or (iii)(B) by reason of being, having been or becoming an Independent Director of a “single purpose entity” affiliated with Borrower; provided that the fees or other compensation that such individual earns by serving as an Independent Director of one or more Affiliates of Borrower in any given year constitute, in the aggregate, less than five percent (5%) of such individual’s income for such year. The organizational documents of Borrower shall provide that no Independent Director of Borrower may be removed or replaced without Cause, and unless such Borrower provides the Administrative Agent with not less than three Business Days’ prior notice of (1) any proposed removal of any Independent Director, together with a statement as to the reasons for such removal, and (2) the identity of the proposed replacement Independent Director, together with a certification that such replacement satisfies the requirements set forth in the organizational documents of such Borrower relating to an Independent Director. In addition, the organizational documents of such Borrower shall provide an express acknowledgment that Lender is an intended third-party beneficiary of the “special purpose” and “separateness” provisions of such organizational documents (it being agreed that Lender’s sole remedy in such instance is equitable relief to ensure compliance herewith). As used in this paragraph, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of such Person, whether through ownership of voting securities, by contract or otherwise and the terms “controlled” and “controlling” shall have correlative meanings. As used in this paragraph, the term “single purpose entity” shall mean a Person whose organizational documents contain, and who covenants that such Person shall comply or cause compliance with, provisions substantially similar to those set forth in this Schedule 1.03. “Cause” shall mean, with respect to an Independent Director, (i) any acts or omissions by such Independent Director that constitute systematic, persistent or willful disregard of such Independent Director’s duties, or (ii) such Independent Director has been indicted or convicted for any crime or crimes of moral turpitude or dishonesty or for any violation of any legal requirements.

(p)The organizational documents of Borrower shall provide that the board of directors or managers of such Borrower shall not take any action which, under the terms of any organizational documents (including, if applicable, any voting trust agreement with respect to any common stock), requires a unanimous vote of the board of directors or managers of such Borrower unless, at the time of such action, there shall be at least one member of the board of directors or managers who is an Independent Director (and such Independent Director has participated in such vote). The organizational documents of such Borrower shall provide that such Borrower will not (and such Borrower agrees that it will not), without the unanimous consent of its board of directors or managers, including the consent of the Independent Director, (i) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any applicable insolvency, bankruptcy, liquidation or reorganization statute, (ii) seek or consent to the appointment of a receiver, liquidator or any similar official for such Borrower or a substantial portion of its assets or properties, (iii) make an assignment for the benefit of creditors, (iv) admit in writing in any bankruptcy or insolvency proceeding Borrower’s inability to pay its debts generally as they become due, or (vi) declare or effectuate a moratorium on the payment of any obligations. In addition, the organizational documents of such Borrower shall provide that, when voting with respect to any of the matters set forth in the immediately preceding sentence of this paragraph (p), the Independent Directors shall consider only the interests of such Borrower, including its creditors.

(q)The organizational documents of Borrower shall provide that, as long as any portion of the Loans remains outstanding, upon the occurrence of any event that causes the sole member of such Borrower (“Sole Member”) to cease to be a member of such Borrower (other than (i) upon an assignment by Sole Member of all of its limited liability company interests in such Borrower and the admission of the transferee, if permitted pursuant to the organizational documents of such Borrower and the Loan Documents, or (ii) the resignation of the Sole Member and the admission of an additional member of such Borrower, if permitted pursuant to the organizational documents of such Borrower and the Loan Documents), each of the persons acting as an Independent Director of such Borrower shall, without any action of any Person and simultaneously with Sole Member ceasing to be a member of such Borrower, automatically be admitted as a member of such Borrower (a “Special Member”) and shall preserve and continue the existence of such Borrower without dissolution. The organizational documents of such Borrower shall further provide that for so long as any portion of the Loans is outstanding, no Special Member may resign or transfer its rights as a Special Member unless (A) a successor Special Member has been admitted to such Borrower as a Special Member, and (B) such successor Special Member has also accepted its appointment as an Independent Director of such Borrower.

(r)The organizational documents of Borrower shall provide that, as long as any portion of the Loans remains outstanding, except as expressly permitted pursuant to the terms of the Loan Documents, (i) the Sole Member may not resign, and (ii) no additional member shall be admitted to such Borrower.

(s)The organizational documents of Borrower shall provide that, as long as any portion of the Loans remains outstanding: (i) such Borrower shall be dissolved, and its affairs shall be wound up, only upon the first to occur of the following: (A) the termination of the legal existence of the last remaining member of such Borrower or the occurrence of any other event which terminates the continued membership of the last remaining member of such Borrower in such Borrower unless the business of such Borrower is continued in a manner permitted by its operating agreement or the Delaware Limited Liability Company Act (the “Act”), or (B) the entry of a decree of judicial dissolution under Section 18-802 of the Act; (ii) upon the occurrence of any event that causes the last remaining member of such Borrower to cease to be a member of such Borrower or that causes Sole Member to cease to be a member of such Borrower (other than (A) upon an assignment by Sole Member of all of its limited liability company interests in such Borrower and the admission of the transferee, if permitted pursuant to the organizational documents of such Borrower and

the Loan Documents, or (B) the resignation of the Sole Member and the admission of an additional member of such Borrower, if permitted pursuant to the organizational documents of such Borrower and the Loan Documents), to the fullest extent permitted by law, the personal representative of such last remaining member shall be authorized to, and shall, within ninety days after the occurrence of the event that terminated the continued membership of such member in such Borrower, agree in writing (1) to continue the existence of such Borrower, and (2) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of such Borrower, effective as of the occurrence of the event that terminated the continued membership of such member in such Borrower; (iii) the bankruptcy of Sole Member or a Special Member shall not cause such Sole Member or Special Member to cease to be a member of Borrower and upon the occurrence of such event, the business of such Borrower shall continue without dissolution; (iv) in the event of the dissolution of Borrower, such Borrower shall conduct only such activities as are necessary to wind up its affairs (including the sale of its assets and properties in an orderly manner), and its assets and properties shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act; and (v) to the fullest extent permitted by applicable law, each of Sole Member and Special Members shall irrevocably waive any right or power that they might have to cause Borrower or any of its assets or properties to be partitioned, to cause the appointment of a receiver for all or any portion of the assets or properties of such Borrower, to compel any sale of all or any portion of the assets or properties of such Borrower pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of such Borrower.

(t)[reserved]

(u)[reserved]

(v)Borrower has paid and shall pay its own liabilities and expenses, including the salaries of its own employees (if any) from its own funds, and has maintained and shall maintain a sufficient number of employees (if any) in light of its contemplated business operations.

(w)Borrower has compensated and shall compensate each of its consultants and agents from its funds for services provided to it. Borrower has paid and shall pay from its assets all obligations of any kind incurred.

(x)Borrower has not (i) filed a bankruptcy, insolvency or reorganization petition or otherwise instituted insolvency proceedings or otherwise sought any relief under any laws relating to the relief from debts or the protection of debtors generally, (ii) sought or consented to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for such Borrower or for all or any portion of such Borrower’s assets or properties or (iii) made any assignment for the benefit of such Borrower’s creditors. Without the unanimous consent of all of its directors or managers (including each Independent Director), as applicable, will not (A) file a bankruptcy, insolvency or reorganization petition or otherwise institute insolvency proceedings or otherwise seek any relief under any laws relating to the relief from debts or the protection of debtors generally, (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for such Borrower or for all or any portion of such Borrower’s assets or properties or (C) make any assignment for the benefit of such Borrower’s creditors.

(y)Borrower has maintained and will maintain an arm’s-length relationship with its Affiliates.

(z)Borrower has allocated and will allocate fairly and reasonably any overhead expenses that are shared with any Affiliate, including shared office space.

(aa)Except in connection with the Loans, Borrower has not pledged or will pledge its assets or properties for the benefit of, or to secure the obligations of, any other Person.

(bb)Borrower has not had, has or will have any obligation to indemnify its directors, managers, officers, members or Special Members, as the case may be, or, if applicable, has such an obligation that is fully subordinated to the Loans and that will not constitute a claim against such Borrower if cash flow in excess of the amount required to pay the Obligations is insufficient to pay such obligation.

(cc)The organizational documents of Borrower shall provide that Borrower will not: (i) dissolve, merge, liquidate, consolidate; (ii) sell, transfer, dispose, or encumber (except in accordance with the Loan Documents) all or substantially all of its assets or properties or acquire all or substantially all of the assets or properties of any other Person; or (iii) engage in any other business activity, or amend its organizational documents with respect to any of the matters set forth in this Schedule 1.03, without the prior consent of the Administrative Agent in its sole discretion.

(dd)Borrower and Independent Directors will consider the interests of such Borrower’s creditors in connection with all actions.

(ee)Borrower has not had and, except in connection with the Loan, will not have any of its obligations guaranteed by any Affiliate.

(ff)Borrower has not owned or acquired or will own or acquire any stock or securities of any Person (except to the extent expressly permitted under the Loan Documents).

(gg)Borrower has not bought or held or will not buy or hold evidence of Indebtedness issued by any other Person (other than cash or investment-grade securities).

Notwithstanding the foregoing, it is agreed that any failure to comply with clauses (d), (f), (j), (v), and (w) arising from or attributable to insufficient cash flow from the Property, or Borrower’s or Mortgage Borrower’s lack of access thereto as a result of an exercise of remedies by Administrative Agent or the administrative agent under the Mortgage Loan, is not a default. In addition, with respect to such provisions, no Exculpated Party is required to, nor prohibited from, contributing additional capital to Borrower or Mortgage Borrower for purposes of compliance with these provisions.

Schedule 1.04 – Purchase Options

As set forth in the Closing Date Officer’s Certificate

Schedule 1.05 – Release Prices

As set forth in the Closing Date Officer’s Certificate

Schedule 2.01 – Commitments

LENDER	COMMITMENT
JPP, LLC		$228,000,000
JPP II, LLC		$12,000,000
AGGREGATE COMMITMENTS		$240,000,000

Schedule 3.01 – Organizational Chart

As set forth in the Closing Date Officer’s Certificate

Schedule 3.06 – Litigation, Environmental and Labor Matters; Environmental Reports

As set forth in the Closing Date Officer’s Certificate

Schedule 3.38 – Underwriting Representations

As set forth in the Closing Date Officer’s Certificate

Schedule 5.17 – Post-Closing Matters

As set forth in the Closing Date Officer’s Certificate

EXHIBIT A

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [the][each]¹ Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each]² Assignee identified in item 2 below ([the][each, an] “Assignee”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]³ hereunder are several and not joint.]⁴ Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by [the][each] Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below (including without limitation any letters of credit, guarantees, and swingline loans included in such facilities), and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.

1.    Assignor[s]:        ______________________________

______________________________

2. Assignee[s]:        ______________________________

______________________________

______________________________    

¹ For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.

² For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.

³ Select as appropriate.

⁴ Include bracketed language if there are either multiple Assignors or multiple Assignees.

Exhibit A-1

[Assignee is an [Affiliate][Approved Fund] of [identify Lender]

3. Borrowers:         [BORROWER], a Delaware limited liability company

4. Administrative Agent:    [ADMINISTRATIVE AGENT, in its capacity as Administrative Agent under the Credit Agreement, together with its successors and assigns

5. Credit Agreement:    The Credit Agreement dated as of March 14, 2018 among the Borrower, the Lenders parties thereto and the Administrative Agent

6. Assigned Interest[s]:

Assignor[s]5	Assignee[s]6	Aggregate Amount of Loans for all Lenders	Amount of Loans Assigned8	Percentage Assigned of Loans7
		$	$	%
		$	$	%
		$	$	%

[7.    Trade Date:        ______________]⁸ 

[Page break]

___________________________

⁵ List each Assignor, as appropriate.

⁶ List each Assignee, as appropriate.

⁷ Set forth, to at least 9 decimals, as a percentage of the Loans of all Lenders thereunder.

⁸ To be completed if the Assignor(s) and the Assignee(s) intend that the minimum assignment amount is to be determined as of the Trade Date.

Exhibit A-2

Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR[S]⁹ 

[NAME OF ASSIGNOR]

By:______________________________

Title:

[NAME OF ASSIGNOR]

By:______________________________

Title:

ASSIGNEE[S]¹⁰ 

[NAME OF ASSIGNEE]

By:______________________________

Title:

[NAME OF ASSIGNEE]

By:______________________________

Title:

[Consented to and]¹¹ Accepted:

UBS AG, Stamford Branch, as

Administrative Agent

By: _________________________________

Title:

___________________________

⁹ Add additional signature blocks as needed. Include both Fund/Pension Fund and manager making the trade (if applicable).

¹⁰ Add additional signature blocks as needed. Include both Fund/Pension Fund and manager making the trade (if applicable).

¹¹To be added only if the consent of the Administrative agent is required by the terms of the Credit Agreement.

Exhibit A-3

[Consented to:] ¹² 

SRC REAL ESTATE (TX), LLC

By:    
Name:    
Title:    

SRC FACILITIES LLC

By:    
Name:    
Title:    

SRC O.P. LLC

By:    
Name:    
Title:    

___________________________

¹² To be added only if the consent of the Borrowers is required by the terms of the Credit Agreement.

Exhibit A-4

ANNEX 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1.    Representations and Warranties.

1.1    Assignor[s]. [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim, (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and (iv) it is not a Defaulting Lender; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document, or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2.    Assignee[s]. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under Section 9.04 of the Credit Agreement (subject to such consents, if any, as may be required thereunder), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2.    Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignee whether such amounts have accrued prior to, on or after the

Annex 1-1

Effective Date. The Assignor[s] and the Assignee[s] shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.

3.    General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

Annex 1-2

EXHIBIT B

[Reserved]

EXHIBIT C

[Reserved]

IN WITNESS WHEREOF, the Borrower has duly executed this Note as of the day and year first above written.

SRC REAL ESTATE (TX), LLC

By:    
Name:    
Title:    

SRC FACILITIES LLC

By:    
Name:    
Title:    

SRC O.P. LLC

By:    
Name:    
Title:    

Exhibit C-2

EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

The undersigned, [__________], hereby certifies that such Person is a Responsible Officer of each of [BORROWER], a limited liability company (the “Borrower”). This Compliance Certificate is being delivered pursuant to Section 5.01(c) of that certain Credit Agreement dated as of March 14, 2018 among the Borrower, the Lenders from time to time party thereto and the administrative agent named therein (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used in this Compliance Certificate have the meanings set forth in the Credit Agreement unless specifically defined herein. This Compliance Certificate is being delivered in connection with the Financials for the Fiscal [Quarter] [Year] ended [__________], 20[__]. The undersigned does hereby certify, as of the date hereof, solely in such Person’s capacity as a Responsible Officer and not in such Person’s individual capacity, for and on behalf of the Borrowers and the other Loan Parties, that:

1.    I have reviewed the terms of the Credit Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Borrowers, the other Loan Parties and the Subsidiaries during the accounting period covered by the attached Financials [and such Financials delivered with this Compliance Certificate in accordance with Section 5.01(b) of the Credit Agreement present fairly in all material respects the financial position and results of operations of Holdings and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes].¹³ 

2.    No Default has occurred[, except for such events or conditions listed on Schedule 1 attached hereto].¹⁴ 

The terms and provisions ofSection 9.14 of the Credit Agreement are incorporated herein by reference and shall apply to the certifications and obligations of the Borrowers hereunder with the same force and effect as if fully set forth herein.

[remainder of page intentionally blank]

___________________________

¹³ Insert bracketed language if the Borrower is delivering financial statements pursuant to Section 5.01(b) of the Credit Agreement.

¹³ Insert bracketed language only if a Default has occurred. The details of any Default and any action taken or proposed to be taken with respect to such Default should be specified on the Schedule.

Exhibit D-1

The foregoing certifications are made and delivered this [___] day of [__________], 20[__].

SRC REAL ESTATE (TX), LLC

By:    
Name:    
Title:    

SRC FACILITIES LLC

By:    
Name:    
Title:    

SRC O.P. LLC

By:    
Name:    
Title:    

Exhibit D-2

Schedule 1
to Compliance Certificate

Defaults

Exhibit D-3

EX-12

Exhibit 12

COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED CHARGES

SEARS HOLDINGS CORPORATION AND CONSOLIDATED SUBSIDIARIES

	Year Ended
(millions, except ratios)	2017			2016			2015			2014			2013
Fixed Charges
Interest and amortization of debt discount and expense on all indebtedness		$511			$377			$289			$276			$214
Add interest element implicit in rentals	223			249			240			241			259
	734			626			529			517			473
Interest capitalized	1			—			2			2			2
Total fixed charges		$735			$626			$531			$519			$475
Income
Income before income taxes, noncontrolling interest, and extraordinary loss		($981	)		($2,395	)		($1,385	)		($1,685	)		($972	)
Deduct undistributed net income of unconsolidated companies	—			—			—			37			185
	(981		)	(2,395		)	(1,385		)	(1,722		)	(1,157		)
Add
Fixed charges (excluding interest capitalized)	734			626			529			517			473
Income before fixed charges and income taxes		($247	)		($1,769	)		($856	)		($1,205	)		($684	)
Ratio of income to fixed charges	(0.34		)	(2.83		)	(1.61		)	(2.32		)	(1.44		)

EX-21

EXHIBIT 21

Subsidiaries of the Registrant

The following is a list of subsidiaries of Sears Holdings Corporation and the state or country in which each was organized, as of February 3, 2018. The list does not include subsidiaries which would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary within the meaning of Item 601(b)(21)(ii) of Regulation S-K.

Names					State or Other Jurisdiction of Organization
Consolidated Subsidiaries:
Kmart Holding Corporation*					Delaware
	Kmart Corporation*				Michigan
		KBL Holding Inc.			Delaware
			BlueLight.com, Inc.		Delaware
				Kmart.com LLC*	Delaware
		KLC, Inc.*			Texas
		Kmart of Michigan, Inc.*			Michigan
		Kmart of Washington LLC*			Washington
		Kmart Overseas Corporation			Nevada
			Sears Holdings Global Sourcing Limited		Hong Kong
		Kmart Stores of Illinois LLC*			Illinois
		Kmart Stores of Texas LLC*			Texas
		MyGofer LLC*			Delaware
Kmart Operations LLC*					Delaware
Sears Operations LLC*					Delaware
Sears, Roebuck and Co.*					New York
	A&E Factory Service, LLC*				Delaware
	A&E Home Delivery, LLC*				Delaware
	A&E Lawn & Garden, LLC*				Delaware
	A&E Signature Service, LLC*				Delaware
	FBA Holdings Inc.				Delaware
		California Builder Appliances, Inc.*			Delaware
		Florida Builder Appliances, Inc.*			Delaware
		SOE, Inc.*			Delaware
		StarWest, LLC*			Delaware
	Innovel Solutions, Inc.				Delaware
	Private Brands, Ltd.*				Delaware
	Sears Financial Holding Corporation				Delaware
	Sears Holdings Management Corporation*1				Delaware
		Sears Brands Business Unit Corporation			Illinois
			Sears Brands, L.L.C.		Illinois
				KCD IP, LLC2	Delaware
			Sears Buying Services, Inc.		Delaware
				Sears Brands Management Corporation*	Delaware
	Sears Home Improvement Products, Inc.*				Pennsylvania
	Sears Insurance Services, L.L.C.				Illinois

Names				State or Other Jurisdiction of Organization
	Sears International Holdings Corp.			Delaware
		Sears Canada Holdings Corp.		Delaware
	Sears Protection Company*			Illinois
		Sears Protection Company (Florida), L.L.C.*		Florida
	Sears Roebuck Acceptance Corp.*			Delaware
	Sears, Roebuck de Puerto Rico, Inc.*			Delaware
	SRC Depositor Corporation3			Delaware
	SRC O.P. Corporation3			Delaware
		SRC Facilities Statutory Trust No. 2003-A3		Delaware
			SRC Real Estate Holdings (TX), LLC3	Delaware
SRe Holding Corporation				Delaware
	Sears Reinsurance Company Ltd.			Bermuda

* Loan party under the Registrant's Third Amended and Restated Credit Agreement, dated as of July 21, 2015.

1 Shares are owned by Sears, Roebuck and Co. and Kmart Holding Corporation.

2 Bankruptcy remote, special purpose entity that owns the U.S. rights to the Kenmore, Craftsman and DieHard trademarks and issuer of intercompany securities backed by such trademark rights.

3 REMIC-related subsidiary.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-133247, 333-169747, and 333-188356 on Form S-8 of our report dated March 23, 2018, relating to the consolidated financial statements and consolidated financial statement schedule of Sears Holdings Corporation and subsidiaries, and the effectiveness of Sears Holdings Corporation and subsidiaries' internal control over financial reporting, appearing in this Annual Report on Form 10-K of Sears Holdings Corporation and subsidiaries for the fiscal year ended February 3, 2018.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

Chicago, Illinois

March 23, 2018

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Edward S. Lampert, certify that:

1.	I have reviewed this annual report on Form 10-K of Sears Holdings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 23, 2018

/s/ Edward S. Lampert        
Edward S. Lampert
Chairman of the Board and Chief Executive Officer
Sears Holdings Corporation

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Robert A. Riecker, certify that:

1.	I have reviewed this annual report on Form 10-K of Sears Holdings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 23, 2018

/s/ Robert A. Riecker          

Robert A. Riecker

Chief Financial Officer

Sears Holdings Corporation

EX-32.1

EXHIBIT 32.1

CERTIFICATION

Pursuant to 18 U.S.C. 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

Edward S. Lampert, Chairman of the Board and Chief Executive Officer of Sears Holdings Corporation (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2018 (the “Report”).

The undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 23, 2018

/s/ Edward S. Lampert

Edward S. Lampert

Chairman of the Board and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION

Pursuant to 18 U.S.C. 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

Robert A. Riecker, Chief Financial Officer of Sears Holdings Corporation (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2018 (the “Report”).

The undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 23, 2018

/s/ Robert A. Riecker

Robert A. Riecker

Chief Financial Officer

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Mar. 16, 2018	Jul. 29, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	SEARS HOLDINGS CORP
Entity Central Index Key	0001310067
Current Fiscal Year End Date	--02-03
Entity Filer Category	Accelerated Filer
Document Type	10-K
Document Period End Date	Feb. 03, 2018
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Amendment Flag	false
Trading Symbol	SHLD
Entity Common Stock, Shares Outstanding		107,957,410
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 200

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Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions		3 Months Ended								12 Months Ended
		Feb. 03, 2018	Oct. 28, 2017	Jul. 29, 2017	Apr. 29, 2017	Jan. 28, 2017	Oct. 29, 2016	Jul. 30, 2016	Apr. 30, 2016	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
REVENUES
Merchandise sales										$ 13,409	$ 18,236	$ 20,936
Services and other	[1],[2]									3,293	3,902	4,210
Total revenues		$ 4,376	$ 3,660	$ 4,365	$ 4,301	$ 6,052	$ 5,029	$ 5,663	$ 5,394	16,702	22,138	25,146
COSTS AND EXPENSES
Cost of sales, buying and occupancy - merchandise sales	[3]									11,349	15,184	16,817
Cost of sales and occupancy - services and other	[1]									1,826	2,268	2,519
Total cost of sales, buying and occupancy		3,452	2,958	3,394	3,371	4,765	4,067	4,403	4,217	13,175	17,452	19,336
Selling and administrative		1,156	1,339	1,369	1,267	1,579	1,543	1,484	1,503	5,131	6,109	6,857
Depreciation and amortization										332	375	422
Impairment charges										142	427	274
Gain on sales of assets										(1,648)	(247)	(743)
Total costs and expenses										17,132	24,116	26,146
Operating income (loss)										(430)	(1,978)	(1,000)
Interest expense										(539)	(404)	(323)
Interest and investment loss										(12)	(26)	(62)
Other income										0	13	0
Loss before income taxes										(981)	(2,395)	(1,385)
Income tax benefit										598	174	257
Net loss										(383)	(2,221)	(1,128)
Income attributable to noncontrolling interests										0	0	(1)
NET LOSS ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS		$ 182	$ (558)	$ (251)	$ 244	$ (607)	$ (748)	$ (395)	$ (471)	$ (383)	$ (2,221)	$ (1,129)
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS
Basic loss per share (in USD per share)		$ 1.69	$ (5.19)	$ (2.34)	$ 2.28	$ (5.67)	$ (6.99)	$ (3.70)	$ (4.41)	$ (3.57)	$ (20.78)	$ (10.59)
Diluted loss per share (in USD per share)		$ 1.69	$ (5.19)	$ (2.34)	$ 2.28	$ (5.67)	$ (6.99)	$ (3.70)	$ (4.41)	$ (3.57)	$ (20.78)	$ (10.59)
Basic weighted average common shares outstanding (in shares)										107.4	106.9	106.6
Diluted weighted average common shares outstanding (in shares)										107.4	106.9	106.6

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $918 million, $1.1 billion and $1.3 billion in 2017, 2016 and 2015, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

[2] Includes revenue from Lands' End, Inc. ("Lands' End") for retail services and rent for Lands' End Shops at Sears, participation in the Shop Your Way program and corporate shared services of $47 million, $52 million and $59 million in 2017, 2016 and 2015, respectively.

[3] Includes rent expense (consisting of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback) of $70 million, $83 million and $49 million in 2017, 2016, and 2015, respectively, and installment expenses of $43 million, $64 million and $40 million in 2017, 2016 and 2015, respectively, pursuant to the master lease with Seritage Growth Properties ("Seritage").

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Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Rent expense, net of amortization of deferred gain on sale-leaseback	$ 82	$ 96	$ 68
Sears Hometown and Outlet Stores, Inc.
Proceeds from sale of inventory to affiliate	918	1,100	1,300
Lands' End, Inc.
Revenue from related parties	47	52	59
Seritage Growth Properties
Rent expense, net of amortization of deferred gain on sale-leaseback	70	83	49
Installment expense	$ 43	$ 64	$ 40

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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Statement of Comprehensive Income [Abstract]
Net loss	$ (383)	$ (2,221)	$ (1,128)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	478	366	113
Currency translation adjustments, net of tax	2	0	(1)
Dissolution of noncontrolling interest	0	(7)	0
Total other comprehensive income	480	359	112
Comprehensive income (loss)	97	(1,862)	(1,016)
Comprehensive (income) loss attributable to noncontrolling interests	0	7	(1)
Comprehensive income (loss) attributable to Holdings' shareholders	$ 97	$ (1,855)	$ (1,017)

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Consolidated Balance Sheets - USD ($)		Feb. 03, 2018	Jan. 28, 2017
Current assets
Cash and cash equivalents		$ 182,000,000	$ 286,000,000
Restricted cash		154,000,000	0
Accounts receivable	[1]	343,000,000	466,000,000
Merchandise inventories		2,798,000,000	3,959,000,000
Prepaid expenses and other current assets	[2]	335,000,000	285,000,000
Total current assets		3,812,000,000	4,996,000,000
Property and equipment
Land		659,000,000	770,000,000
Buildings and improvements		2,432,000,000	2,954,000,000
Furniture, fixtures and equipment		868,000,000	1,133,000,000
Capital leases		151,000,000	224,000,000
Gross property and equipment		4,110,000,000	5,081,000,000
Less accumulated depreciation and amortization		(2,381,000,000)	(2,841,000,000)
Total property and equipment, net		1,729,000,000	2,240,000,000
Goodwill		269,000,000	269,000,000
Trade names and other intangible assets		1,168,000,000	1,521,000,000
Other assets		284,000,000	336,000,000
TOTAL ASSETS		7,262,000,000	9,362,000,000
Current liabilities
Short-term borrowings	[3]	915,000,000	0
Current portion of long-term debt and capitalized lease obligations	[4]	968,000,000	590,000,000
Merchandise payables		576,000,000	1,048,000,000
Other current liabilities	[5]	1,568,000,000	1,956,000,000
Unearned revenues		641,000,000	748,000,000
Other taxes		247,000,000	339,000,000
Total current liabilities		4,915,000,000	4,681,000,000
Long-term debt and capitalized lease obligations	[6]	2,249,000,000	3,573,000,000
Pension and postretirement benefits		1,619,000,000	1,750,000,000
Deferred gain on sale-leaseback		362,000,000	563,000,000
Sale-leaseback financing obligation		247,000,000	235,000,000
Other long-term liabilities		1,467,000,000	1,641,000,000
Long-term deferred tax liabilities		126,000,000	743,000,000
Total Liabilities		10,985,000,000	13,186,000,000
Commitments and contingencies
DEFICIT
Preferred stock, 20 shares authorized; no shares outstanding		0	0
Common stock $0.01 par value; 500 shares authorized; 108 and 107 shares outstanding, respectively		1,000,000	1,000,000
Treasury stock—at cost		(5,820,000,000)	(5,891,000,000)
Capital in excess of par value		9,063,000,000	9,130,000,000
Retained deficit		(5,895,000,000)	(5,512,000,000)
Accumulated other comprehensive loss		(1,072,000,000)	(1,552,000,000)
Total Deficit		(3,723,000,000)	(3,824,000,000)
TOTAL LIABILITIES AND DEFICIT		$ 7,262,000,000	$ 9,362,000,000

[1] Includes $28 million and $81 million at February 3, 2018 and January 28, 2017, respectively, of net amounts receivable from SHO, $1 million and $14 million of amounts receivable from Seritage at February 3, 2018 and January 28, 2017, respectively, and $1 million of net amounts receivable from Lands' End at February 3, 2018.

[2] Includes $6 million of prepaid rent to Seritage at February 3, 2018.

[3] Includes balances held by related parties of $645 million at February 3, 2018 related to our Line of Credit Loans and Incremental Loans (each as defined in Note 3). See Notes 3 and 15 for further information.

[4] Includes balances held by related parties of $146 million and $216 million at February 3, 2018 and January 28, 2017, respectively, related to our 2016 Secured Loan Facility for both periods and also related to our Senior Secured Notes at February 3, 2018. See Note 3 for defined terms.

[5] Includes $1 million of net amounts payable to Lands' End and $11 million of amounts payable to Seritage at January 28, 2017.

[6] Includes balances held by related parties of $1.5 billion and $1.7 billion at February 3, 2018 and January 28, 2017, respectively, related to our Subsidiary Notes, Senior Unsecured Notes, Second Lien Term Loan, 2016 Term Loan and 2017 Secured Loan Facility for both periods and also related to our Term Loan Facility at February 3, 2018 and our Senior Secured Notes at January 28, 2017. See Note 3 for defined terms and Notes 3 and 15 for further information.

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions		Feb. 03, 2018	Jan. 28, 2017
Prepaid expenses and other current assets	[1]	$ 335	$ 285
Long-term debt and capitalized lease obligations	[2]	$ 2,249	$ 3,573
Preferred stock, shares authorized		20,000,000	20,000,000
Preferred stock, shares outstanding		0	0
Common stock, par value (in dollars per share)		$ 0.01	$ 0.01
Common stock, shares authorized		500,000,000	500,000,000
Common stock, shares, outstanding		108,000,000	107,000,000
Sears Hometown and Outlet Stores, Inc.
Due from affiliate		$ 28	$ 81
Seritage Growth Properties
Due from affiliate		1	14
Due to related parties	[3]		11
Seritage Growth Properties | Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets		6
Lands' End, Inc.
Due from affiliate	[3]	1
Due to related parties			1
Affiliated Entity
Long-term debt and capitalized lease obligations		1,500	1,700
Affiliated Entity | Line of Credit Loans and Incremental Loans
Principal amount of debt		645
Affiliated Entity | Secured Loan Facility | Loan Facility, Maturity July 2017
Principal amount of debt		$ 146	$ 216

[1] Includes $6 million of prepaid rent to Seritage at February 3, 2018.

[2] Includes balances held by related parties of $1.5 billion and $1.7 billion at February 3, 2018 and January 28, 2017, respectively, related to our Subsidiary Notes, Senior Unsecured Notes, Second Lien Term Loan, 2016 Term Loan and 2017 Secured Loan Facility for both periods and also related to our Term Loan Facility at February 3, 2018 and our Senior Secured Notes at January 28, 2017. See Note 3 for defined terms and Notes 3 and 15 for further information.

[3] Includes $28 million and $81 million at February 3, 2018 and January 28, 2017, respectively, of net amounts receivable from SHO, $1 million and $14 million of amounts receivable from Seritage at February 3, 2018 and January 28, 2017, respectively, and $1 million of net amounts receivable from Lands' End at February 3, 2018.

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Consolidated Statements of Cash Flows - USD ($) $ in Millions		12 Months Ended
		Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$ (383)	$ (2,221)	$ (1,128)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred tax valuation allowance		(1,395)	836	217
Tax benefit resulting from Other Comprehensive Income allocation		0	(71)	0
Depreciation and amortization		332	375	422
Impairment charges		142	427	274
Gain on sales of assets		(1,648)	(247)	(743)
Pension and postretirement plan contributions		(312)	(334)	(311)
Pension plan settlements		479	0	0
Mark-to-market adjustments of financial instruments		17	15	66
Amortization of deferred gain on sale-leaseback		(78)	(88)	(52)
Amortization of debt issuance costs and accretion of debt discount		124	81	60
Other		(36)	0	0
Change in operating assets and liabilities (net of acquisitions and dispositions):
Deferred income taxes		778	(987)	(519)
Merchandise inventories		1,144	1,213	(229)
Merchandise payables		(472)	(526)	(47)
Income and other taxes		(108)	80	(95)
Other operating assets		51	(52)	54
Other operating liabilities		(477)	118	(136)
Net cash used in operating activities		(1,842)	(1,381)	(2,167)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and investments	[1]	1,109	386	2,730
Proceeds from Craftsman Sale		572	0	0
Proceeds from sales of receivables	[2]	293	0	0
Purchases of property and equipment		(80)	(142)	(211)
Net cash provided by investing activities		1,894	244	2,519
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt issuances	[3]	1,020	2,028	0
Repayments of debt	[4]	(1,356)	(66)	(1,405)
Increase (decrease) in short-term borrowings, primarily 90 days or less		271	(797)	583
Proceeds from sale-leaseback financing	[1]	106	71	508
Debt issuance costs(5)	[5]	(43)	(51)	(50)
Net cash provided by (used in) financing activities		(2)	1,185	(364)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		50	48	(12)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR		286	238	250
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR		336	286	238
SUPPLEMENTAL INFORMATION:
Capital lease obligation incurred		0	25	6
Supplemental Cash Flow Data:
Income taxes paid, net of refunds		37	23	45
Cash interest paid	[6]	412	275	252
Unpaid liability to acquire equipment and software		$ 10	$ 18	$ 27

[1] Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction (including $745 million and $297 million, respectively, received from ESL Investments, Inc. and its affiliates ("ESL") and Fairholme Capital Management, LLC and its affiliates ("Fairholme")), and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in proceeds from sales of property and investments ($2.6 billion), and proceeds from sale-leaseback financing ($82 million) for 2015. Proceeds from the JV transactions are included in proceeds from sale-leaseback financing ($426 million) for 2015. See Note 11 for further information and defined terms.

[2] Proceeds in 2017 include $63 million from JPP, LLC and JPP II, LLC, entities affiliated with ESL (as defined in Note 1), for the sale of receivables.

[3] Proceeds in 2017 and 2016, respectively, include amounts from related parties of $876 million in connection with the Term Loan Facility, Line of Credit Loans and Incremental Loans and $1.3 billion received from the 2017 Secured Loan Facility, 2016 Secured Loan Facility, 2016 Term Loan and Second Lien Term Loan. See Notes 3 and 15 for further information and defined terms.

[4] Repayments in 2017 and 2015, respectively, include $345 million to related parties in connection with the 2017 Secured Loan Facility, 2016 Secured Loan Facility, Incremental Loans, 2016 Term Loan and Line of Credit Loans and $400 million of the Secured Short-Term Loan with related parties and $482 million of Senior Secured Notes tendered by related parties, respectively. See Notes 3 and 15 for further information and defined terms.

[5] Includes one-time extension fees equal to $5 million to JPP, LLC and JPP II, LLC, entities affiliated with ESL during 2017. See Note 3 for further information.

[6] Cash interest paid includes $180 million, $94 million and $83 million interest paid to related parties related to our borrowings in 2017, 2016 and 2015, respectively. See Notes 3 and 15 for further information.

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Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Millions		12 Months Ended
		Feb. 03, 2018	Jan. 28, 2017		Jan. 30, 2016
Proceeds from sale-leaseback financing	[1]	$ 106	$ 71		$ 508
Proceeds from sales of receivables	[2]	293	0		0
Proceeds from debt issuances	[3]	1,020	2,028		0
Cash interest paid	[4]	412	275		252
Short-term Debt
Proceeds from debt issuances		876	1,300
2017 Secured Loan Facility, 2016 Secured Loan Facility, 2016 Term Loan, Incremental Loans, and Line of Credit Loans
Repayments of debt		345
Esl Investments Inc | Senior Secured Note
Repayments of debt		165
Fairholme | Senior Secured Note
Repayments of debt					207
Affiliated Entity
Cash interest paid		180	$ 94	[5]	83	[5]
Affiliated Entity | Short-term Debt
Repayments of debt					400
Affiliated Entity | Senior Secured Note
Repayments of debt					482
Corporate Joint Venture
Sale leaseback transaction, gross proceeds, financing activities					429
Proceeds from sale-leaseback financing					426
Seritage Growth Properties
Aggregate proceeds from sale-leaseback transaction and rights offering of common stock and limited partnership units					2,700
Net proceeds from sale-leaseback transaction and rights offering of common stock and limited partnership units					2,600
Proceeds from sale-leaseback financing					82
Seritage Growth Properties | Esl Investments Inc
Proceeds from rights offering of common shares and limited partnership units					745
Seritage Growth Properties | Fairholme
Proceeds from rights offering of common shares and limited partnership units					$ 297
JPP LLC and JPP II, LLC | Affiliated Entity
Proceeds from sales of receivables		63
Payment of debt extension fees		$ 5

[1] Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction (including $745 million and $297 million, respectively, received from ESL Investments, Inc. and its affiliates ("ESL") and Fairholme Capital Management, LLC and its affiliates ("Fairholme")), and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in proceeds from sales of property and investments ($2.6 billion), and proceeds from sale-leaseback financing ($82 million) for 2015. Proceeds from the JV transactions are included in proceeds from sale-leaseback financing ($426 million) for 2015. See Note 11 for further information and defined terms.

[2] Proceeds in 2017 include $63 million from JPP, LLC and JPP II, LLC, entities affiliated with ESL (as defined in Note 1), for the sale of receivables.

[3] Proceeds in 2017 and 2016, respectively, include amounts from related parties of $876 million in connection with the Term Loan Facility, Line of Credit Loans and Incremental Loans and $1.3 billion received from the 2017 Secured Loan Facility, 2016 Secured Loan Facility, 2016 Term Loan and Second Lien Term Loan. See Notes 3 and 15 for further information and defined terms.

[4] Cash interest paid includes $180 million, $94 million and $83 million interest paid to related parties related to our borrowings in 2017, 2016 and 2015, respectively. See Notes 3 and 15 for further information.

[5] Includes one-time extension fees equal to $5 million to JPP, LLC and JPP II, LLC, entities affiliated with ESL during 2017. See Note 3 for further information.

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Consolidated Statements of Deficit - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	$ (3,824)	$ (1,956)	$ (945)
Comprehensive income (loss)
Net loss	(383)	(2,221)	(1,128)
Pension and postretirement adjustments, net of tax	478	366	113
Currency translation adjustments, net of tax	2	0	(1)
Dissolution of noncontrolling interest	0	(7)	0
Comprehensive income (loss)	97	(1,862)	(1,016)
Stock awards	(4)	(1)	0
Reclassification of warrants		(13)
Associate stock purchase	8	8	5
Ending Balance	$ (3,723)	$ (3,824)	$ (1,956)
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance (in shares)	107	107	107
Beginning Balance	$ 1	$ 1	$ 1
Comprehensive income (loss)
Stock awards (in shares)	1	0	0
Ending Balance (in shares)	108	107	107
Ending Balance	$ 1	$ 1	$ 1
Treasury Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	(5,891)	(5,928)	(5,949)
Comprehensive income (loss)
Stock awards	63	29	16
Associate stock purchase	8	8	5
Ending Balance	(5,820)	(5,891)	(5,928)
Capital in Excess of Par Value
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	9,130	9,173	9,189
Comprehensive income (loss)
Stock awards	(67)	(30)	(16)
Reclassification of warrants		(13)
Ending Balance	9,063	9,130	9,173
Retained Deficit
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	(5,512)	(3,291)	(2,162)
Comprehensive income (loss)
Net loss	(383)	(2,221)	(1,129)
Ending Balance	(5,895)	(5,512)	(3,291)
Accumulated Other Comprehensive Income (Loss)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	(1,552)	(1,918)	(2,030)
Comprehensive income (loss)
Pension and postretirement adjustments, net of tax	478	366	113
Currency translation adjustments, net of tax	2		(1)
Ending Balance	(1,072)	(1,552)	(1,918)
Noncontrolling Interests
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning Balance	0	7	6
Comprehensive income (loss)
Net loss			1
Dissolution of noncontrolling interest		(7)
Ending Balance	$ 0	$ 0	$ 7

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Feb. 03, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

SUMMARY OF SIGNFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations, Consolidation and Basis of Presentation

Sears Holdings Corporation ("Holdings") is the parent company of Kmart Holding Corporation ("Kmart") and Sears, Roebuck and Co. ("Sears"). Holdings (together with its subsidiaries, "we," "us," "our," or the "Company") was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the "Merger"), on March 24, 2005. We are an integrated retailer with 1,002 full-line and specialty retail stores in the United States, operating through Kmart and Sears. We operate in two reportable segments: Kmart and Sears Domestic.

The consolidated financial statements include all majority-owned subsidiaries in which Holdings exercises control. Investments in companies in which Holdings exercises significant influence, but which we do not control (generally 20% to 50% ownership interest), are accounted for under the equity method of accounting. Investments in companies in which we have less than a 20% ownership interest and do not exercise significant influence are accounted for at cost. All intercompany transactions and balances have been eliminated.

Fiscal Year

Our fiscal year ends on the Saturday closest to January 31 each year. Fiscal year 2017 consisted of 53 weeks. Fiscal years 2016 and 2015 consisted of 52 weeks. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years.

Pension Benefit Guaranty Corporation Agreement

On March 18, 2016, we entered into a five-year pension plan protection and forbearance agreement (the "PPPFA") with the Pension Benefit Guaranty Corporation ("PBGC"), pursuant to which the Company has agreed to continue to protect, or "ring-fence," pursuant to customary covenants, the assets of certain special purpose subsidiaries (the "Relevant Subsidiaries") holding real estate and/or intellectual property assets. Also under the agreement, the Relevant Subsidiaries granted the PBGC a springing lien on the ring-fenced assets, which lien will be triggered only by (a) failure to make required contributions to the Company's pension plans (the "Plans"), (b) prohibited transfers of ownership interests in the Relevant Subsidiaries, (c) termination events with respect to the Plans, or (d) bankruptcy events with respect to the Company or certain of its material subsidiaries. In November 2017, the Company announced an amendment to the PPPFA which is further described below and in Note 7. Under the PPPFA, the PBGC has agreed to forbear from initiating an involuntary termination of the Plans, except upon the occurrence of specified conditions, one of which is based on the aggregate market value of the Company's issued and outstanding stock. As of the date of this report, the Company's stock price is such that the PBGC would be permitted to cease forbearance. The PBGC has been given notice in accordance with the terms of the PPPFA and has not communicated any intention to cease its forbearance. In November 2017, we entered into an amendment to the PPPFA which provided for the release of 138 of our properties from a ring-fence arrangement, which is further described below and in Note 7. In March 2018, we closed on the $200 million Secured Loan and the $240 million Mezzanine Loan, both as defined in Note 3, in connection with the release of 138 properties from the ring-fence arrangement with the PBGC.

Craftsman Brand Sale

On January 5, 2017, Holdings announced that it had entered into a definitive agreement under which Stanley Black & Decker would purchase the Craftsman brand from Holdings (the "Craftsman Sale"). On March 8, 2017, the Company closed its sale of the Craftsman brand to Stanley Black & Decker. The transaction provides Stanley Black & Decker with the right to develop, manufacture and sell Craftsman-branded products outside of Holdings and Sears Hometown & Outlet Stores, Inc. distribution channels. As part of the agreement, Holdings is permitted to continue to offer Craftsman-branded products, sourced from existing suppliers, through its current retail channels via a perpetual license from Stanley Black & Decker, which will be royalty-free for the first 15 years after closing and royalty-bearing thereafter.

The Company received an initial upfront payment of $525 million, subject to closing costs and an adjustment for working capital changes, at closing. In addition, Stanley Black & Decker will pay a further $250 million in cash in three years (the "Craftsman Receivable") and Holdings will receive payments of between 2.5% and 3.5% on new Stanley Black & Decker sales of Craftsman products made during the 15 year period following the closing. In connection with the Craftsman Sale, we recognized a gain in our Kmart segment of $492 million within gain on sales of assets in the Consolidated Statements of Operations during 2017, and initially established a receivable of $234 million for the net present value of the Craftsman Receivable. During the 13 weeks ended July 29, 2017, we sold the Craftsman Receivable to a third-party purchaser.

In connection with the closing of the Craftsman Sale, Holdings reached an agreement with the PBGC pursuant to which the PBGC consented to the sale of the Craftsman-related assets that had been "ring-fenced" under the PPPFA and certain related transactions. As a condition to obtaining this consent, the Company agreed to grant the PBGC a lien on, and subsequently contribute to the Company's pension plans, the value of the Craftsman Receivable, with such payments being fully credited against certain of the Company's minimum pension funding obligations in 2017, 2018 and 2019.

The Company also granted a lien to the PBGC on the 15-year income stream relating to new Stanley Black & Decker sales of Craftsman products, and agreed to contribute the payments from Stanley Black & Decker under such income stream to the Company's pension plans, with such payments to be credited against the Company's minimum pension funding obligations starting no later than five years from the closing date. The Company also agreed to grant the PBGC a lien on $100 million of real estate assets to secure the Company's minimum pension funding obligations through the end of 2019, and agreed to certain other amendments to the PPPFA.

Uses and Sources of Liquidity

Our primary need for liquidity is to fund working capital requirements of our businesses, capital expenditures and for general corporate purposes, including debt repayments and pension plan contributions. The Company has taken a number of actions to support its ongoing transformation efforts, while continuing to support its operations and meet its obligations in light of the incurred losses and negative cash flows experienced over the past several years. These actions included:

• The completion of various secured and unsecured financing transactions, the extension of the maturity of certain of our indebtedness, and the amendment to other terms of certain of our indebtedness to increase our overall financial flexibility, including:

◦ a $750 million Senior Secured Term Loan (the "2016 Term Loan") under its domestic credit facility maturing in July 2020;

◦ a $500 million real estate loan facility in April 2016 (the "2016 Secured Loan Facility"), initially maturing in July 2017, initially extended to January 2018, subsequently extended to April 2018, and then further extended to July 2018, subject to the payment of an extension fee;

◦ an additional $500 million real estate loan facility in January 2017 (the "2017 Secured Loan Facility"), maturing in July 2020;

◦ a Second Lien Credit Agreement in September 2016, pursuant to which the Company borrowed $300 million under a term loan (the "Second Lien Term Loan"), maturing in July 2020;

◦ an amendment in July 2017 to the Second Lien Credit Agreement to provide for the creation of a $500 million uncommitted second-lien line of credit loan facility under which the Company may borrow line of credit loans (the "Line of Credit Loans"), and a subsequent amendment to that facility to extend the maximum duration of the Line of Credit Loans from 180 days to 270 days and permit total borrowings of up to $600 million;

◦ a Letter of Credit and Reimbursement Agreement in December 2016, originally providing for up to a $500 million secured standby letter of credit facility (the "LC Facility") from certain affiliates of ESL Investments, Inc. ("ESL");

◦ a $200 million real estate loan facility (the "Incremental Loans") in October 2017, with the Incremental Loans maturing in April 2018, with the option to extend to July 2018, subject to the extension of the 2016 Secured Loan Facility;

◦ the extension of the maturity date of the initial $1.0 billion term loan (the "Term Loan") under our Amended Domestic Credit Agreement from June 2018 to January 2019 (with a right of the borrowers thereunder to further extend such maturity, subject to the satisfaction of certain conditions, to July 2019);

◦ amendments to our Amended Domestic Credit Agreement and certain other indebtedness which reduced the aggregate revolver commitments from $1.971 billion to $1.5 billion, but also implemented other modifications to covenants and reserves against the domestic credit facility borrowing base that improved net liquidity, and increased the maximum permissible short-term borrowings of the Company from $750 million to $1.25 billion;

◦ a Term Loan Credit Agreement in January 2018 providing for a secured term loan facility (the "Term Loan Facility"), 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. An aggregate principal amount of $250 million was borrowed with the ability to borrow an additional $50 million against the same collateral;

◦ an amendment to the indenture governing our 6 5/8% Senior Secured Notes due 2018 to increase the maximum permissible borrowings secured by inventory to 75% of book value of such inventory from 65% and defer the collateral coverage test for purposes of the repurchase offer covenant in the indenture to restart it with the second quarter of 2018 (such that no collateral coverage event can occur until the end of the third quarter of 2018);

◦ an amendment to the PPPFA with the PBGC providing for the release of 138 of our properties from a ring-fence arrangement created under our five-year PPPFA in exchange for the payment of approximately $407 million into the Sears pension plans. This agreement provides the Company with financial flexibility through the ability to monetize properties, and, in addition, provides funding relief from contributions to the pension plans for the next two years; and

◦ various commercial paper issuances to meet short-term liquidity needs, with the maximum amount outstanding during fiscal 2017 of $160 million.

• Achievement of $1.25 billion in annualized cost savings in 2017 as part of the restructuring program announced earlier this year. Actions taken to realize the annualized cost savings have included simplification of the organizational structure of Holdings, streamlining of operations, reducing unprofitable categories and the closure of under-performing stores. In 2017, we closed approximately 435 stores, and an additional 103 stores previously announced for closure are expected to be closed by the end of the first quarter of 2018. As a result of these actions, the Company has begun to see improvement in the operations in fiscal 2017, as the restructuring program actions, including the closing of unprofitable stores, have begun to take effect.

• The sale of the Craftsman brand to Stanley Black & Decker for consideration consisting of cash payments and a royalty.

• Sales of properties and investments for proceeds of $1.1 billion and $386 million in 2017 and 2016, respectively.

On March 8, 2018, the Company secured an additional $100 million incremental real estate loan (the "Second Incremental Loan"), pursuant to an amendment to the Second Amended and Restated Loan Agreement, dated as of October 18, 2017, with JPP, LLC and JPP II, LLC, entities affiliated with ESL Investments, Inc. The Second Incremental Loan is secured by the same real estate properties as the 2017 Secured Loan Facility, and certain properties under the previous Incremental Loans outstanding, and matures in July 2020. The Company used the proceeds from the Incremental Loan for general corporate purposes.

In March 2018, the Company also closed on the $200 million Secured Loan and the $240 million Mezzanine Loan, both as defined in Note 3, in connection with the release of 138 of our properties from the ring-fence arrangement with the PBGC as described above. The properties, which have an aggregate appraised value of nearly $980 million, serve as collateral for the Secured Loan, and the Mezzanine Loan is secured by pledge of the equity interests in the direct parent company of the entities that own such properties. The Company contributed approximately $282 million of the proceeds of such loans to our pension plans, and deposited $125 million into an escrow for the benefit of our pension plans. The Mezzanine Loan Agreement, as defined in Note 3, contains an uncommitted accordion feature pursuant to which we may incur additional loans of not more than $200 million in aggregate, subject to certain conditions, including that such additional loans not exceed an amount equal to the principal amount of the Secured Loan repaid. The Company expects to pay down the Secured Loan over the next three to six months using proceeds generated from the sale of the underlying properties.

In February 2018, the Company commenced private exchange offers for its outstanding 8% Senior Unsecured Notes Due 2019 and 6 5/8% Senior Secured Notes Due 2018 (the "Exchange Offers"), pursuant to which it offered to (1) issue in exchange for its outstanding 8% Senior Unsecured Notes Due 2019 (the "Old Senior Unsecured Notes") new 8% Senior Unsecured Notes Due 2019, of a like principal amount, convertible into common stock of the Company, with interest on such notes to be payable in kind at the Company's option (the "New Senior Unsecured Notes"), and (2) issue in exchange for its outstanding 6 5/8% Senior Secured Notes Due 2018 (the "Old Senior Secured Notes") new 6 5/8% Senior Secured Notes Due 2019, of a like principal amount, convertible into common stock of the Company, with interest on such notes to be payable in kind at the Company's option (the "New Senior Secured Notes"). The Exchange Offers expired on March 15, 2018. Approximately $214 million aggregate principal amount of the Old Senior Unsecured Notes and approximately $170 million aggregate principal amount of the Old Senior Secured Notes were validly tendered, accepted and canceled in the Exchange Offers, and the Company issued a like principal amount of New Senior Unsecured Notes and New Senior Secured Notes. The New Senior Unsecured Notes and New Senior Secured Notes are optionally convertible by the holders thereof into shares of the Company’s common stock at conversion prices of $8.33 and $5.00, respectively, per share of common stock, and are mandatorily convertible at the Company's option if the volume weighted average trading price of the common stock on the NASDAQ exceeds $10.00 for a prescribed period. In connection with the closing of the Exchange Offers, the Company also obtained the requisite consent of holders of Old Senior Secured Notes to adopt amendments to the indenture governing those notes to eliminate substantially all of the restrictive covenants and certain events of default in the indenture, and make the liens securing senior second lien obligations, including the new Senior Secured Notes and the Second Lien Term Loan described below, effectively senior to the liens securing junior second lien obligations, including the Old Senior Secured Notes.

Also in connection with the closing of the Exchange Offers, the Company entered into an amendment to its Second Lien Credit Agreement. The amendment provides the Company with the option to pay interest on its outstanding $300 million principal amount Second Lien Term Loan in kind, and also provides that the Company's obligation under the Second Lien Term Loan is convertible into common stock of the Company, on the same conversion terms as the New Senior Secured Notes. Also in connection with the closing of the Exchange Offers, the Company’s subsidiary, Sears Roebuck Acceptance Corp. ("SRAC"), consummated a private exchange with certain third parties of approximately $100 million in principal amount of senior unsecured notes issued by SRAC maturing between 2027 and 2043 and bearing interest at rates between 6.50% and 7.50% per annum, pursuant to which SRAC issued a like principal amount of new unsecured notes (the "SRAC Exchange Notes"). The SRAC Exchange Notes mature in March 2028 and bear interest at a rate of 7.0% per annum, and provide the Company with the option to pay such interest in kind at an interest rate of 12.0% per annum. The SRAC Exchange Notes are also guaranteed by the same subsidiaries of the Company that guarantee the New Senior Secured Notes.

On March 21, 2018, we obtained a $125 million FILO term loan (the "FILO Loan") from JPP, LLC and JPP II, LLC, entities affiliated with ESL, and Benefit Street 2018 LLC, an entity affiliated with Thomas J. Tisch, under our Amended Domestic Credit Agreement. The Company received approximately $122 million in net proceeds from the FILO Loan, which proceeds were using to reduce outstanding borrowings under our revolving credit facility. The FILO Loan has a maturity date of July 20, 2020, which is the same maturity date as the Company's revolving credit facility commitments, and does not amortize.

In addition to pursuing several transactions to adjust our capital structure in order to enhance our liquidity and financial position, the Company is also taking incremental actions to further streamline operations to drive profitability, including cost reductions of $200 million on an annualized basis in 2018 unrelated to store closures.

In addition to the actions taken above, the Company has other resources available to support its operations. Our domestic credit facility permits us up to $2.0 billion of second lien loan capacity (of which $1.1 billion was utilized at February 3, 2018) outside the credit agreement, all depending on the applicable and available borrowing base as defined in our applicable debt agreements, as well as our ability to secure commitments from lenders. We also have the ability to obtain longer-term secured financing maturing outside of the domestic credit facility maturity date which would not be subject to borrowing base limitations (see Note 3 of Notes to Consolidated Financial Statements). Other options available to us, which we will evaluate and execute as appropriate, include refinancing existing debt, borrowing against facilities in place with availability and additional real estate loans against unencumbered properties, which we have successfully executed in the past.

We also continue to explore ways to unlock value across a range of assets, including entering into or renegotiating commercial arrangements, and exploring ways to maximize the value of our Home Services, Innovel and Sears Auto Centers businesses, as well as our Kenmore and DieHard brands, through partnerships, sales or other means of externalization that could expand distribution of our brands and service offerings to realize significant growth. We expect to continue to right-size, redeploy and highlight the value of our assets, including monetizing our real estate portfolio and exploring potential asset sales, in our transition from an asset intensive, historically "store-only" based retailer to a more asset light, integrated membership-focused company.

We expect to continue to face a challenging competitive environment. While we continue to focus on our overall profitability, including managing expenses, we reported a loss in 2017, and were required to fund cash used in operating activities with cash from investing and financing activities. If we continue to experience operating losses, and we are not able to generate additional liquidity through the actions described below or through some combination of other actions, including real estate or other asset sales, while not expected, then our liquidity needs may exceed availability under our Amended Domestic Credit Agreement, our second lien line of credit loan facility and our other existing facilities, and we might need to secure additional sources of funds, which may or may not be available to us. A failure to secure such additional funds could cause us to be in default under the Amended Domestic Credit Agreement. Moreover, if the borrowing base (as calculated pursuant to our outstanding second lien debt) falls below the principal amount of such second lien debt plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for such debt on the last day of any two consecutive quarters, it could trigger an obligation to repurchase our New Senior Secured Notes in an amount equal to such deficiency. As of February 3, 2018, we are in a deferral period of the collateral coverage test and the calculation restarts in the second quarter of 2018 (such that no collateral coverage event can occur until the end of the third quarter of 2018). Additionally, a failure to generate additional liquidity could negatively impact our access to inventory or services that are important to the operation of our business.

We believe the following actions, some of which we expect, subject to our governance processes, to include related party participation and funding, are probable of occurring and will be sufficient to satisfy our liquidity needs for the next twelve months from the issuance of the financial statements:

• Sales of the properties securing the $200 million Secured Loan to fund the repayment of such Secured Loan;

• Additional borrowings under the Mezzanine Loan Agreement and the Term Loan Facility;

• Renegotiation of certain commercial arrangements;

• Monetization of the Kenmore brand;

• Extension of maturities beyond March 2019 of Line of Credit Loans under the Second Lien Credit Agreement, the 2016 Secured Loan Facility, the Incremental Secured Loan Facility, and the LC Facility and the Term Loan under the Amended Domestic Credit Agreement;

• Additional borrowings secured by real estate assets or borrowings under the short-term basket; and

• Further restructurings to help manage expenses and improve profitability.

The PPPFA contains certain limitations on our ability to sell assets, which could impact our ability to complete asset sale transactions or our ability to use proceeds from those transactions to fund our operations. Therefore, the analysis of liquidity needs includes consideration of the applicable restrictions under the PPPFA. We expect that the actions outlined above will further enhance our liquidity and financial flexibility and we expect that these actions will be executed in alignment with the anticipated timing of our liquidity needs.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. The estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances. Adjustments to estimates and assumptions are made when facts and circumstances dictate. As future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying consolidated financial statements. Significant estimates and assumptions are required as part of determining inventory and accounts receivable valuation, estimating depreciation, amortization and recoverability of long-lived assets, establishing self-insurance, warranty, legal and other reserves, performing goodwill and intangible impairment analyses, and in establishing valuation allowances on deferred income tax assets and reserves for tax examination exposures, and calculating retirement benefits.

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with original maturities of three months or less at the date of purchase. The Company classifies cash balances that are legally restricted pursuant to contractual arrangements as restricted cash. The restricted cash balance relates to amounts deposited into an escrow for the benefit of our pension plans. We also include deposits in-transit from banks for payments related to third-party credit card and debit card transactions within cash equivalents. The deposits in-transit balances included within cash equivalents were $65 million and $87 million at February 3, 2018 and January 28, 2017, respectively.

We classify outstanding checks in excess of funds on deposit within other current liabilities and reduce cash and cash equivalents when these checks clear the bank on which they were drawn. Outstanding checks in excess of funds on deposit included in other current liabilities were $74 million and $29 million at February 3, 2018 and January 28, 2017, respectively.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows at February 3, 2018 and January 28, 2017, respectively.

millions	February 3, 2018		January 28, 2017
Cash and equivalents	$	113	$	196
Cash posted as collateral	4		3
Credit card deposits in transit	65		87
Total cash and cash equivalents	182		286
Restricted cash	154		—
Total cash balances	$	336	$	286

Allowance for Doubtful Accounts

We provide an allowance for doubtful accounts based on both historical experience and a specific identification basis. Allowances for doubtful accounts on accounts receivable balances were $35 million and $37 million at February 3, 2018 and January 28, 2017, respectively. Our accounts receivable balance on our Consolidated Balance Sheet is presented net of our allowance for doubtful accounts and is comprised of various vendor-related and customer-related accounts receivable, including receivables related to our pharmacy operations.

Merchandise Inventories

Merchandise inventories are valued at the lower of cost or market. For Kmart and Sears Domestic, cost is primarily determined using the retail inventory method ("RIM"). Kmart merchandise inventories are valued under the RIM using primarily a first-in, first-out ("FIFO") cost flow assumption. Sears Domestic merchandise inventories are valued under the RIM using primarily a last-in, first-out ("LIFO") cost flow assumption.

Inherent in the RIM calculation are certain significant management judgments and estimates including, among others, merchandise markons, markups, markdowns and shrinkage, which significantly impact the ending inventory valuation at cost, as well as resulting gross margins. The methodologies utilized by us in our application of the RIM are consistent for all periods presented. Such methodologies include the development of the cost-to-retail ratios, the groupings of homogenous classes of merchandise, the development of shrinkage and obsolescence reserves, the accounting for price changes and the computations inherent in the LIFO adjustment (where applicable). Management believes that the RIM provides an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market.

Approximately 58% of consolidated merchandise inventories are valued using LIFO. To estimate the effects of inflation on inventories, we utilize external price indices determined by an outside source, the Bureau of Labor Statistics. If the FIFO method of inventory valuation had been used instead of the LIFO method, merchandise inventories would have been $31 million higher at February 3, 2018 and $33 million higher at January 28, 2017. During 2017 and 2016, a reduction in inventory quantities resulted in a liquidation of applicable LIFO inventory quantities carried at lower costs in prior years. This LIFO liquidation resulted in a decrease in cost of sales of approximately $6 million and $12 million in 2017 and 2016, respectively.

Vendor Rebates and Allowances

We receive rebates and allowances from certain vendors through a variety of programs and arrangements intended to offset our costs of promoting and selling certain vendor products. These vendor payments are recognized and recorded as a reduction to the cost of merchandise inventories when earned and, thereafter, as a reduction of cost of sales, buying and occupancy as the merchandise is sold. Upfront consideration received from vendors linked to purchases or other commitments is initially deferred and amortized ratably to cost of sales, buying and occupancy over the life of the contract or as performance of the activities specified by the vendor to earn the fee is completed.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Additions and substantial improvements are capitalized and include expenditures that materially extend the useful lives of existing facilities and equipment. Maintenance and repairs that do not materially improve or extend the lives of the respective assets are expensed as incurred.

Depreciation expense, which includes depreciation on assets under capital leases, is recorded over the estimated useful lives of the respective assets using the straight-line method for financial statement purposes, and accelerated methods for tax purposes. The range of lives are generally 20 to 50 years for buildings, 3 to 10 years for furniture, fixtures and equipment, and 3 to 5 years for computer systems and computer equipment. Leasehold improvements are depreciated over the shorter of the associated lease term or the estimated useful life of the asset. Depreciation expense included within depreciation and amortization expense reported in the Consolidated Statements of Operations was $328 million, $370 million and $415 million for the years ended February 3, 2018, January 28, 2017 and January 30, 2016, respectively.

Primarily as a result of store closing actions, certain property and equipment are considered held for sale. The value of assets held for sale was $70 million and $96 million at February 3, 2018 and January 28, 2017, respectively. These assets were included in prepaid expenses and other current assets in the Consolidated Balance Sheets at February 3, 2018 and January 28, 2017 at the lower of their historical net book value or their estimated fair value, less estimated costs to sell. We expect to sell the properties within a year and we continually remarket them. The majority of assets held for sale are held within the Sears Domestic segment.

Impairment of Long-Lived Assets and Costs Associated with Exit Activities

In accordance with accounting standards governing the impairment or disposal of long-lived assets, the carrying value of long-lived assets, including property and equipment, is evaluated whenever events or changes in circumstances indicate that a potential impairment has occurred relative to a given asset or assets. Factors that could result in an impairment review include, but are not limited to, a current period cash flow loss combined with a history of cash flow losses, current cash flows that may be insufficient to recover the investment in the property over the remaining useful life, or a projection that demonstrates continuing losses associated with the use of a long-lived asset, significant changes in the manner of use of the asset or significant changes in business strategies. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value as determined based on quoted market prices or through the use of other valuation techniques. See Note 13 for further information regarding long-lived asset impairment charges recorded.

We account for costs associated with location closings in accordance with accounting standards pertaining to accounting for costs associated with exit or disposal activities. As such, we record a liability for costs associated with location closings, which includes employee severance and other liquidation fees when management makes the decision to exit a location. We record a liability for future lease costs (net of estimated sublease income) when we cease to use the location.

Goodwill, Trade Names and Related Impairments

Trade names acquired as part of the Merger account for the majority of our intangible assets recognized in the Consolidated Balance Sheet. The majority of these trade name assets, such as Sears and Kenmore, are expected to generate cash flows indefinitely, do not have estimable or finite useful lives and, therefore, are accounted for as indefinite-lived assets not subject to amortization. Certain intangible assets, including favorable lease rights, have estimable, finite useful lives, which are used as the basis for their amortization. The estimated useful lives of such assets are determined using a number of factors, including the demand for the asset, competition and the level of expenditure required to maintain the cash flows associated with the asset.

Our goodwill results from the Merger. We perform an annual goodwill impairment test at the last day of our November accounting period each year and assess the need to update the tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of the reporting unit or an indefinite-lived intangible asset below its carrying amount. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and the testing for recoverability of a significant asset group within the reporting unit. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

Goodwill Impairment Assessments

Our goodwill balance relates to our Home Services business. The goodwill impairment test involves a two-step process. The first step is a comparison of the reporting unit's fair value to its carrying value. We estimate fair value using the best information available, using a discounted cash flow model, commonly referred to as the income approach. The income approach uses the reporting unit's projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate for the reporting unit. The projection uses management's best estimates of economic and market conditions over the projected period, including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. We were unable to use a market approach due to there being no market comparables.

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss, if any. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. See Note 12 for further information.

Intangible Asset Impairment Assessments

We consider the income approach when testing intangible assets with indefinite lives for impairment on an annual basis. We utilize the income approach, specifically the relief from royalty method, for analyzing our indefinite-lived assets. This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates for the assets; and (2) the application of these royalty rates to a net sales stream and discounting the resulting cash flows to determine a value. We multiplied the selected royalty rate by the forecasted net sales stream to calculate the cost savings (relief from royalty payment) associated with the assets. The cash flows are then discounted to present value by the selected discount rate and compared to the carrying value of the assets.

In our quarterly reports on Form 10-Q filed during 2017, the Company disclosed that if its results continued to decline it could result in revisions in management's estimates of the fair value of the Company's trade names and may result in impairment charges. As a result of recently announced store closures and the further decline in revenue experienced in the fourth quarter at Sears Domestic, our analysis indicated that the fair value of the Sears trade name was less than its carrying value. Accordingly, we recorded impairment related to the Sears trade name during 2017 of $72 million, which reduced the carrying value to $359 million at February 3, 2018. We also recorded impairment charges of $381 million and $180 million in 2016 and 2015, respectively. See Note 12 for further information.

Fair Value of Financial Instruments

We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value in GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. We report the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of temporary cash investments and accounts receivable. We place our cash and cash equivalents in investment-grade, short-term instruments with high quality financial institutions and, by policy, limit the amount of credit exposure in any one financial instrument.

Self-insurance Reserves

We are self-insured for certain costs related to workers' compensation, asbestos, environmental, automobile, warranty, product and general liability claims. We obtain third-party insurance coverage to limit our exposure to certain of these self-insured risks. A portion of these self-insured risks is managed through a wholly-owned insurance subsidiary. Our liability reflected in the Consolidated Balance Sheet, classified within other liabilities (current and long-term), represents an estimate of the ultimate cost of claims incurred at the balance sheet date. In estimating this liability, we utilize loss development factors based on Company-specific data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claims settlements and reported claims. The liabilities for self-insured risks are discounted to their net present values using an interest rate which is based upon the expected duration of the liabilities. Expected payments as of February 3, 2018 were as follows:

millions
2018	$	148
2019	100
2020	74
2021	54
2022	42
Later years	311
Total undiscounted obligation	729
Less—discount	(83		)
Net obligation	$	646

Loss Contingencies

Under accounting standards, loss contingency provisions are recorded for probable losses at management's best estimate of a loss, or when a best estimate cannot be made, the minimum amount in the estimated range is recorded. These estimates are often initially developed substantially earlier than the ultimate loss is known, and the estimates are refined each accounting period, as additional information is known.

Revenue Recognition

Revenues include sales of merchandise, services and extended service contracts, net commissions earned from leased departments in retail stores, delivery and handling revenues related to merchandise sold, and fees earned from co-branded credit card programs. We recognize revenues from retail operations at the later of the point of sale or the delivery of goods to the customer. Direct to customer revenues are recognized when the merchandise is delivered to the customer. Revenues from product installation and repair services are recognized at the time the services are provided. Revenues from the sale of service contracts and the related direct acquisition costs are deferred and amortized over the lives of the associated contracts, while the associated service costs are expensed as incurred.

We earn revenues through arrangements with third-party financial institutions that manage and directly extend credit relative to our co-branded credit card programs. The third-party financial institutions pay us for generating new accounts and sales activity on co-branded cards, as well as for selling other financial products to cardholders. We recognize these revenues in the period earned, which is when our related performance obligations have been met. We sell gift cards to customers at our retail stores and through our direct to customer operations. The gift cards generally do not have expiration dates. Revenues from gift cards are recognized when (i) the gift card is redeemed by the customer, or (ii) the likelihood of the gift card being redeemed by the customer is remote (gift card breakage) based on historical redemption patterns and we determine that we do not have a legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions.

Revenues from merchandise sales and services are reported net of estimated returns and allowances and exclude sales taxes. The reserve for returns and allowances is calculated as a percentage of sales based on historical return percentages. Estimated returns are recorded as a reduction of sales and cost of sales. We defer the recognition of layaway sales and profit until the period in which the customer takes possession of the merchandise.

Cost of Sales, Buying and Occupancy

Cost of sales, buying and occupancy are comprised principally of the costs of merchandise, buying, warehousing and distribution (including receiving and store delivery costs), retail store occupancy costs, product repair, and home service and installation costs, customer shipping and handling costs, vendor allowances, markdowns and physical inventory losses.

The Company has a Shop Your Way program in which customers earn points on purchases which may be redeemed to pay for future purchases. The expense for customer points earned is recognized as customers earn them and recorded in cost of sales.

During 2016 and 2015, respectively, the Company received $33 million and $146 million related to one-time credits from vendors associated with prior supply arrangements, which have been reflected as credits within cost of sales, buying and occupancy in the Consolidated Statements of Operations.

Selling and Administrative Expenses

Selling and administrative expenses are comprised principally of payroll and benefits costs for retail and corporate employees, occupancy costs of corporate facilities, advertising, pre-opening costs and other administrative expenses.

Pre-Opening Costs

Pre-opening and start-up activity costs are expensed in the period in which they occur.

Advertising Costs

Advertising costs are expensed as incurred, generally the first time the advertising occurs, and amounted to $415 million, $684 million and $850 million for 2017, 2016 and 2015, respectively. These costs are included within selling and administrative expenses in the Consolidated Statements of Operations.

Income Taxes

We provide deferred income tax assets and liabilities based on the estimated future tax effects of differences between the financial and tax basis of assets and liabilities based on currently enacted tax laws in effect for the year in which the differences are expected to reverse. The tax balances and income tax expense recognized by us are based on management's interpretation of the tax laws of multiple jurisdictions. Income tax expense also reflects our best estimates and assumptions regarding, among other things, the level of future taxable income, tax planning, and any valuation allowance. Future changes in tax laws, changes in projected levels of taxable income, tax planning, and adoption and implementation of new accounting standards could impact the effective tax rate and tax balances recorded by us. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. In evaluating the objective evidence that historical results provide, we consider cumulative operating income (loss) over the past three years. These assumptions require significant judgment about the forecasts of future taxable income.

Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and other comprehensive income ("OCI"). An exception is provided in the authoritative accounting guidance when there is income from categories other than continuing operations and a loss from continuing operations in the current year. In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expense recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets. In instances where a valuation allowance is established against current year losses, income from other sources, including gain from pension and other postretirement benefits recorded as a component of OCI or the creation of a deferred tax liability through additional paid-in capital for the book to tax difference for the original issue discount relating to the $625 million8% senior unsecured notes due 2019, is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets.

Stock-based Compensation

We account for stock-based compensation arrangements in accordance with accounting standards pertaining to share-based payment transactions, which requires us to both recognize as expense the fair value of all stock-based compensation awards (which includes stock options, although there were no options outstanding in 2017) and to classify excess tax benefits associated with share-based compensation deductions as cash from financing activities rather than cash from operating activities. We recognize compensation expense as awards vest on a straight-line basis over the requisite service period of the award.

Earnings Per Common Share

Basic earnings per common share is calculated by dividing net income attributable to Holdings' shareholders by the weighted average number of common shares outstanding for each period. Diluted earnings per common share also includes the dilutive effect of potential common shares, exercise of stock options, warrants and the effect of restricted stock when dilutive.

New Accounting Pronouncements

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the Financial Accounting Standards Board ("FASB") issued an accounting standards update which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The amendments in this update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We are currently evaluating the effect the update will have on our consolidated financial statements.

Compensation - Retirement Benefits

In March 2017, the FASB issued an accounting standards update which requires an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the update must be applied retrospectively. We are currently evaluating the effect the update will have on our consolidated financial statements.

Goodwill

In January 2017, the FASB issued an accounting standards update which simplifies the test for goodwill impairment. To address concerns over the cost and complexity of the two-step goodwill impairment test, the amendments in this update remove the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted the update in the fourth quarter of 2017. The adoption of the new standard did not have an impact on our consolidated financial statements.

Business Combinations

In January 2017, the FASB issued an accounting standards update which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The amendments in this update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this update require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the update must be applied prospectively. We are currently evaluating the effect the updates will have on our consolidated financial statements.

Statement of Cash Flows

In November 2016, the FASB issued accounting standards updates which address diversity in practice in the classification and presentation of changes in restricted cash in the statement of cash flows. The amendments in this update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Therefore, restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. These updates are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the updates must be applied using a retrospective transition method to each period presented. The Company adopted the update in the first quarter of 2017. The adoption of the new standard impacted the presentation of the Condensed Consolidated Statements of Cash Flows.

Consolidation - Interests held through related parties that are under common control

In October 2016, the FASB issued an accounting standards update to amend the accounting standards on how a reporting entity that is the single decision maker of a variable interest entity ("VIE") should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The primary beneficiary of a VIE is the reporting entity that has a controlling financial interest in a VIE and, therefore, consolidates the VIE. A reporting entity has an indirect interest in a VIE if it has a direct interest in a related party that, in turn, has a direct interest in the VIE. Under the amendments, a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. The Company adopted the update in the first quarter of 2017. The adoption of the new standard did not have an impact on the Company's consolidated financial position, results of operations or cash flows.

Income Taxes - Intra-entity transfers of assets other than inventory

In October 2016, the FASB issued an accounting standards update to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current accounting standards prohibit the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice for transfers of certain intangible and tangible assets. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in accounting standards. To more faithfully represent the economics of intra-entity asset transfers, the amendments in this update require that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this update do not change accounting standards for the pre-tax effects of an intra-entity asset transfer under accounting standards applicable to consolidation, or for an intra-entity transfer of inventory. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted as of the beginning of an annual reporting period. The amendments in this update should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating the effect the update will have on our consolidated financial statements.

Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued accounting standards updates which address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, including: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. These updates are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the update must be applied using a retrospective transition method to each period presented. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We are currently evaluating the effect the update will have on our consolidated financial statements.

Leases

In February 2016, the FASB issued an accounting standards update which replaces the current lease accounting standard. The update will require, among other items, lessees to recognize a right-of-use asset and a lease liability for most leases. Extensive quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing contracts. The update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently evaluating the effect the update will have on our consolidated financial statements, and expect the update will have a material impact on our consolidated financial statements.

Fair Value Measurements

In May 2015, the FASB issued an accounting standards update which requires certain investments measured at net asset value to be removed from the fair value hierarchy categorization and presented as a single reconciling line item between the fair value of the pension plans assets and the amounts reported in the fair value hierarchy table. The Company adopted the update in fiscal 2016. The adoption of the new standard did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows.

Presentation of Financial Statements - Going Concern

In August 2014, the FASB issued an accounting standards update which requires management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued. If substantial doubt exists, additional disclosures are required. This update was effective for the Company's annual period ended January 28, 2017. The Company's assessment of our ability to continue as a going concern is further discussed in the "Uses and Sources of Liquidity" paragraph above. The adoption of the new standard did not have a material impact on the Company’s consolidated financial position, results of operations, cash flows or disclosures.

Revenue from Contracts with Customers

In May 2014, the FASB issued an accounting standards update which replaces the current revenue recognition standards. Subsequently, the FASB has also issued accounting standards updates which clarify the guidance. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard was initially released as effective for fiscal years beginning after December 15, 2016; however, the FASB has decided to defer the effective date of this accounting standard update for one year. Early adoption of the update is permitted, but not before the original date for fiscal years beginning after December 15, 2016. The update may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption.

The Company has completed its evaluation of the standard and will apply the update retrospectively for each period presented, beginning in the first quarter of 2018. Based on our assessment, we determined the adoption will impact the accounting for our Shop Your Way program, revenues from gift cards and merchandise returns. The expense for Shop Your Way points is currently recognized as customers earn them and recorded in cost of sales. The new guidance will require the Company to allocate the transaction price to products and points on a relative standalone selling price basis, deferring the portion of revenue allocated to the points and recognizing a contract liability for unredeemed points. The change in the accounting for the Shop Your Way program will reduce revenue by approximately 2.7% and 2.6% in 2017 and 2016, respectively, but will have no impact to gross margin. The new guidance will also change the timing of recognition of the unredeemed portion of our gift cards, which is currently recognized using the remote method. The new guidance will require application of the proportional method. The Company currently reports revenues from merchandise sales net of estimated returns. The new guidance will require the Company to record both an asset and a liability for anticipated customer returns. These changes will not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows, with the exception of the Shop Your Way program described above.

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SEARS CANADA

12 Months Ended

Feb. 03, 2018

Noncontrolling Interest [Abstract]

SEARS CANADA

SEARS CANADA

At both February 3, 2018 and January 28, 2017, the Company was the beneficial holder of approximately 12 million, or 12%, of the common shares of Sears Canada. Sears Canada filed for court protection and in July 2017 trading of its common shares was suspended. Accordingly, we recognized other-than-temporary impairment of $12 million within interest and investment loss in our Consolidated Statements of Operations during 2017. Our equity method investment in Sears Canada was $17 million at January 28, 2017, and was included within other assets in the Consolidated Balance Sheets. The fair value of our equity method investment in Sears Canada was determined based on quoted market prices for its common stock. Our equity method investment in Sears Canada was valued using Level 1 measurements as defined in Note 5.

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BORROWINGS

12 Months Ended

Feb. 03, 2018

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS

Total borrowings outstanding at February 3, 2018 and January 28, 2017 were $4.1 billion and $4.2 billion, respectively. At February 3, 2018, total short-term borrowings were $915 million, consisting of secured borrowings, line of credit loans and incremental loans. At January 28, 2017, we had no short-term borrowings outstanding. The weighted-average annual interest rate paid on short-term borrowings was 8.0% in 2017 and 5.4% in 2016.

Long-term debt was as follows:

ISSUE	February 3, 2018			January 28, 2017
millions
SEARS ROEBUCK ACCEPTANCE CORP.
6.50% to 7.50% Notes, due 2027 to 2043	$	284		$	327
Term Loan (Credit Facility), $1.0B due 2019	391			963
2016 Term Loan (Credit Facility), $750M due 2020	559			726
Second Lien Term Loan (Credit Facility), $300M due 2020	294			292
SEARS HOLDINGS CORP.
8% Secured Loan Facility, due 2018	251			494
6.625% Senior Secured Notes, due 2018	303			303
8% Senior Unsecured Notes, due 2019	483			428
8% Secured Loan Facility, due 2020	374			485
Term Loan Facility (Credit Facility), $300M due 2020	206			—
CAPITALIZED LEASE OBLIGATIONS	72			145
Total long-term borrowings	3,217			4,163
Current maturities	(968		)	(590		)
Long-term debt and capitalized lease obligations	$	2,249		$	3,573
Weighted-average annual interest rate on long-term debt	7.6		%	7.2		%

The fair value of long-term debt, excluding capitalized lease obligations, was $2.8 billion at February 3, 2018 and $4.0 billion at January 28, 2017. The fair value of our debt was estimated based on quoted market prices for the same or similar issues or on current rates offered to us for debt of the same remaining maturities. Our long-term debt instruments are valued using Level 2 measurements as defined in Note 5.

At February 3, 2018, long-term debt maturities for the next five years and thereafter were as follows:

millions
2018	$	979
2019	637
2020	1,471
2021	3
2022	3
Thereafter	312
Total maturities	3,405
Unamortized debt discount	(152		)
Unamortized debt issuance costs	(36		)
Long-term debt, net of discount & debt issuance costs	$	3,217

Interest

Interest expense for years 2017, 2016 and 2015 was as follows:

millions	2017		2016		2015
COMPONENTS OF INTEREST EXPENSE
Interest expense (1)	$	377	$	288	$	223
Amortization of debt issuance costs	58		31		25
Accretion of debt discount	66		50		35
Accretion of self-insurance obligations at net present value	19		16		19
Accretion of lease obligations at net present value	19		19		21
Interest expense	$	539	$	404	$	323

⁽¹⁾ Includes paid-in-kind interest of $1 million for 2017.

Unsecured Commercial Paper

We borrow through the commercial paper markets. At both February 3, 2018 and January 28, 2017, we had no commercial paper borrowings outstanding.

Secured Short-Term Loan

On September 15, 2014, the Company, through Sears, Sears Development Co. and Kmart Corporation ("Short-Term Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a $400 million secured short-term loan (the "Short-Term Loan'") with JPP II, LLC and JPP, LLC (collectively, the "Lenders"), entities affiliated with ESL. Proceeds of the Short-Term Loan were used for general corporate purposes.

The Short-Term Loan was originally scheduled to mature on December 31, 2014, and was subsequently amended and extended. We repaid the Short-Term Loan during 2015, resulting in no balance outstanding at February 3, 2018 or January 28, 2017.

Letter of Credit Facility

On December 28, 2016, the Company, through Sears Roebuck Acceptance Corp. ("SRAC") and Kmart Corporation (together with SRAC, the "Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into the Letter of Credit and Reimbursement Agreement (the "LC Facility") providing for a $500 million secured standby letter of credit facility (of which $271 million was committed at February 3, 2018) from the Lenders, with Citibank, N.A., serving as administrative agent and issuing bank (the "Issuing Bank").

In August 2017, the Company executed amendments to the LC Facility. The amendments, among other things, extended the maturity to December 28, 2018, eliminated the unused portion of the facility and released the real estate collateral that secured the original LC Facility. The amended LC Facility also permits the Lenders to syndicate all or a portion of their commitments under the facility to other lenders, of which $138 million has been syndicated to unaffiliated third party lenders as of February 3, 2018.

The amended LC Facility is guaranteed by the same subsidiaries of the Company that guarantee the obligations under the Amended Domestic Credit Agreement, as defined below. The amended LC Facility is secured by substantially the same collateral as the Amended Domestic Credit Agreement. The amended LC Facility contains a borrowing base calculation, pursuant to which the borrowers are required to cash collateralize the LC Facility if the aggregate obligations under the Amended Domestic Credit Agreement, amended LC Facility and certain other cash management and similar obligations exceed the Modified Borrowing Base, as defined in the amended LC Facility, as of the end of any calendar month.

To secure their obligation to participate in letters of credit issued under the LC Facility, the lenders under the LC Facility are required to maintain cash collateral on deposit with the Issuing Bank in an amount equal to 102% of the commitments under the LC Facility (the "Lender Deposit"). The Borrowers paid the Lenders an upfront fee equal to 1.00% of the aggregate amount of the Lender Deposit. In addition, the Borrowers are required to pay a commitment fee on the average daily amount of the Lender Deposit (as such amount may be increased or decreased from time to time) equal to the Eurodollar Rate (as defined under the Amended Domestic Credit Facility) plus 11.0%, as well as certain other fees. In the event of reductions of the commitments under the LC Facility or a termination of the LC Facility prior to the six month anniversary of the effective date of the amendments, under certain circumstances the Borrowers will be required to pay an early reduction/termination fee equal to the commitment fee that would have accrued with respect to the reduced or terminated commitments from the date of reduction or termination until the six month anniversary.

The LC Facility includes certain representations and warranties, affirmative and negative covenants and other undertakings, which are subject to important qualifications and limitations set forth in the LC Facility. The LC Facility also contains 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 an event of default occurs, the Lenders may terminate all or any portion of the commitments under the LC Facility, require the Borrowers to cash collateralize the LC Facility and/or exercise any rights they might have under any of the related facility documents (including against the collateral), subject to certain limitations. At February 3, 2018 and January 28, 2017, respectively, we had $271 million and $200 million of letters of credit outstanding under the LC Facility.

Secured Loan and Mezzanine Loan

On March 14, 2018, the Company, through SRC O.P. LLC, SRC Facilities LLC and SRC Real Estate (TX), LLC (collectively, the "Secured Loan Borrowers"), entities wholly-owned and controlled indirectly by the Company, entered into a Credit Agreement (the "Credit Agreement") with the lenders party thereto (collectively, the "Secured Lenders"). The Credit Agreement provides for a $200 million term loan (the "Secured Loan") that is secured by the Secured Loan Borrowers' interests in 138 real properties that were released from a ring-fence arrangement with the PBGC. The Secured Loan matures on December 14, 2018. The Company used the proceeds of the Secured Loan to make a contribution to the Company's pension plans and for general corporate purposes.

Also on March 14, 2018, the Company, through SRC Sparrow 2 LLC (the "Mezzanine Loan Borrower"), an entity wholly-owned and controlled indirectly by the Company, entered into a Mezzanine Loan Agreement (the "Mezzanine Loan Agreement") with the Lenders, entities affiliated with ESL. The Mezzanine Loan Agreement provides for a $240 million term loan (the "Mezzanine Loan") that is secured by a pledge of the equity interests in SRC O.P. LLC, the direct parent company of the entities that own the 138 real properties that secure the obligations of the Secured Loan Borrowers under the Credit Agreement. The Mezzanine Loan matures on July 20, 2020. The Company used the proceeds of the Mezzanine Loan to make a contribution to the Company’s pension plans.

The Mezzanine Loan Agreement contains an uncommitted accordion feature pursuant to which the Mezzanine Loan Borrower may incur additional loans ("Additional Mezzanine Loans") of not more than $200 million in aggregate, subject to certain conditions set forth in the Mezzanine Loan Agreement and the Credit Agreement, including that the Additional Mezzanine Loans shall not exceed an amount equal to the principal amount of the Secured Loan repaid by the Secured Loan Borrowers.

The Secured Loan and the Mezzanine Loan are both guaranteed by the Company and certain of its subsidiaries. The Secured Loan bears interest at an annual interest rate of LIBOR plus 6.5% for the first three months the Secured Loan is outstanding, LIBOR plus 7.5% for the fourth through the sixth month the Secured Loan is outstanding and LIBOR plus 8.5% for the seventh through the ninth month the Secured Loan is outstanding. Accrued interest is payable monthly during the term of the Secured Loan. The Mezzanine Loan bears interest at an annual interest rate of LIBOR plus 11.0%, with accrued interest payable monthly during the term of the Mezzanine Loan. The Company paid an upfront commitment fee of 1.5% of the principal amount of the Secured Loan, and paid an arrangement fee. The Mezzanine Borrowers paid an upfront commitment fee equal to 1.8% of the principal amount of the Mezzanine Loan.

To the extent permitted under other debt of the Company or its affiliates, the Secured Loan and the Mezzanine Loan may be prepaid at any time in whole or in part, without penalty or premium. The Secured Loan Borrowers are required to apply the net proceeds of the sale of any real property collateral for the Secured Loan to repay the Secured Loan. Following repayment in full of the Secured Loan, the Mezzanine Loan Borrower is required to apply the net proceeds of the sale of any real property that served as collateral for the Secured Loan to repay the Mezzanine Loan.

The Credit Agreement and the Mezzanine Loan Agreement include certain representations and warranties, indemnities and covenants, including with respect to the condition and maintenance of the real property collateral.The Credit Agreement and the Mezzanine Loan Agreement have 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 Secured Loan Lenders and the Mezzanine 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 Secured Loan Borrowers or Mezzanine Loan Borrower to pay a default interest rate of 2.0% in excess of the base interest rate.

Term Loan Facility

On January 4, 2018, the Borrowers entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) providing for a secured term loan facility (the “Term Loan Facility”) from the Lenders, entities affiliated with ESL. The Term Loan Facility is guaranteed by the Company and certain of its subsidiaries that guarantee the Company’s 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. On January 4, 2018, $100 million was borrowed under the Term Loan Facility. The Term Loan Facility also 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 $200 million to be borrowed from other counterparties and secured by the same collateral as the initial loan under the Term Loan Facility. An additional $30 million was borrowed under the Term Loan Facility on January 19, 2018.

On January 29, 2018, the Company entered into an Amendment to the Term Loan Credit Agreement (the "Amendment"), pursuant to which an additional $20 million was borrowed from the Lenders and a further $60 million was borrowed from certain unaffiliated lenders, bringing the total amount borrowed under the Term Loan Facility to $210 million at February 3, 2018. The Amendment, among other changes, separates the loans under the Term Loan Facility into two tranches. On February 26, 2018, the Company entered into another amendment to the Term Loan Credit Agreement pursuant to which an additional $40 million was borrowed from the Lenders.

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 used the proceeds of the Term Loan Facility for general corporate purposes. 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.

At February 3, 2018, the carrying value of the Term Loan Facility, net of the remaining debt issuance costs, was $206 million. The carrying value includes paid-in-kind interest of $1 million at February 3, 2018.

2017 Secured Loan Facility

On January 3, 2017, the Company, through Sears, Kmart Stores of Illinois LLC, Kmart of Washington LLC and Kmart Corporation (collectively, "2017 Secured Loan Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, obtained a $500 million real estate loan facility (the "2017 Secured Loan Facility") from the Lenders, entities affiliated with ESL. On January 3, 2017, $321 million was funded under the 2017 Secured Loan Facility, and an additional $179 million was drawn by the Company prior to January 28, 2017. The 2017 Secured Loan Facility matures on July 20, 2020. The Company used the proceeds of the 2017 Secured Loan Facility for general corporate purposes.

During October 2017, the Company, through the 2017 Secured Loan Borrowers and 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, "Incremental Loan Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into amended and restated loan agreements (the "Incremental Loans") with the Lenders, entities affiliated with ESL. The Company borrowed $200 million pursuant to the Incremental Loans, and used the proceeds for general corporate purposes. The Incremental Loans mature on April 23, 2018, except that if the maturity date of the 2016 Secured Loan Facility (as defined below) is extended to July 6, 2018, then the Incremental Loans will mature on July 6, 2018.

On March 8, 2018, the Company, through the 2017 Secured Loan Borrowers and SHC Desert Springs, LLC, Innovel Solutions, Inc., Sears Holdings Management Corporation, Maxserv, Inc. and Troy Coolidge No. 13, LLC (collectively, "Second Incremental Loan Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a second amendment to the Incremental Loans (the "Second Amendment") with the Lenders, entities affiliated with ESL. Pursuant to the Second Amendment, the Second Incremental Loan Borrowers borrowed an additional $100 million from the Lenders (the "Second Incremental Loan") and used the proceeds for general corporate purposes. The Second Incremental Loan matures on July 20, 2020.

Initially, the 2017 Secured Loan Facility had an annual base interest rate of 8%, with accrued interest payable monthly during the term of the 2017 Secured Loan Facility. Pursuant to the Second Amendment, the interest rate increased to LIBOR plus 9%. The Borrowers paid an upfront commitment fee equal to 1.0% of the full principal amount of the 2017 Secured Loan Facility and paid a funding fee equal to 1.0% of the amounts drawn under the 2017 Secured Loan Facility at the time such amounts were drawn. The Incremental Loans have an annual interest rate of 11%, with accrued interest payable monthly. The Second Incremental Loan has an annual interest rate of LIBOR plus 9%, with accrued interest payable monthly. No upfront or funding fees were paid in connection with the Incremental Loans or Second Incremental Loan.

The 2017 Secured Loan Facility, Incremental Loans and Second Incremental Loan are guaranteed by the Company and certain of its subsidiaries, and were secured by a first priority lien on 69 real properties owned by the 2017 Secured Loan Borrowers and Incremental Loan Borrowers and guarantors at inception of the 2017 Secured Loan Facility, and an additional 7 real properties owned by the Incremental Loan Borrowers at inception of the Incremental Loans. In certain circumstances, the Lenders and the 2017 Secured Loan Borrowers, Incremental Loan Borrowers and Second Incremental Loan Borrowers may elect to substitute one or more properties as collateral. To the extent permitted under other debt of the Company or its affiliates, the 2017 Secured Loan Facility may be prepaid at any time in whole or in part, without penalty or premium. The 2017 Secured Loan Borrowers are required to apply the net proceeds of the sale of any real property collateral for the 2017 Secured Loan Facility to repay the loan. The Company used proceeds of $116 million to pay interest and a portion of the 2017 Secured Loan Facility and $55 million to pay interest and a portion of the Incremental Loans during 2017.

The 2017 Secured Loan Facility, Incremental Loans and Second Incremental Loan include certain representations and warranties, indemnities and covenants, including with respect to the condition and maintenance of the real property collateral. The 2017 Secured Loan Facility, Incremental Loans and Second Incremental Loan have 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 any of the 2017 Secured Loan Facility, Incremental Loan or Second Incremental Loan documents (including against the collateral), and require the 2017 Secured Loan Borrowers, Incremental Loan Borrowers or Second Incremental Loan 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 carrying value of the 2017 Secured Loan Facility, net of the remaining debt issuance costs, was $374 million and $485 million at February 3, 2018 and January 28, 2017, respectively. The carrying value of the Incremental Loans, net of the remaining debt issuance costs, was $144 million at February 3, 2018. The Incremental Loans are included within short-term borrowings in the Consolidated Balance Sheets for all periods presented.

2016 Secured Loan Facility

On April 8, 2016, the Company, through Sears, Sears Development Co., Innovel, Big Beaver of Florida Development, LLC and Kmart Corporation (collectively, "2016 Secured Loan Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, obtained a $500 million real estate loan facility (the "2016 Secured Loan Facility") from JPP, LLC, JPP II, LLC, and Cascade Investment, LLC (collectively, the "2016 Secured Loan Lenders"). JPP, LLC and JPP II, LLC are entities affiliated with ESL. The first $250 million of the 2016 Secured Loan Facility was funded on April 8, 2016 and the remaining $250 million was funded on April 22, 2016. The funds were used to reduce outstanding borrowings under the Company's asset-based revolving credit facility and for general corporate purposes. The 2016 Secured Loan Facility had an original maturity date of July 7, 2017. In May 2017, the Company reached an agreement to extend the maturity of $400 million of the 2016 Secured Loan Facility to January 2018, with options to further extend the maturity of the loan for up to an additional six months, to July 6, 2018, subject to the satisfaction of certain conditions and the payment of certain fees. On November 21, 2017, the Company notified the 2016 Secured Loan Lenders of its exercise of the first such option to extend the maturity to April 6, 2018, subject to the payment of an extension fee on January 8, 2018, which fee was paid on January 8, 2018. On February 5, 2018, the Company notified the 2016 Secured Loan Lenders of its exercise of the second such option to extend the maturity to July 6, 2018, subject to the payment of an extension fee on April 6, 2018. The 2016 Secured Loan Facility is included within current portion of long-term debt in the Consolidated Balance Sheets for all periods presented. The carrying value of the 2016 Secured Loan Facility, net of the remaining debt issuance costs, was $251 million and $494 million at February 3, 2018 and January 28, 2017, respectively.

The 2016 Secured Loan Facility has an annual base interest rate of 8%, with accrued interest payable monthly during the term of the 2016 Secured Loan Facility. The 2016 Secured Loan Borrowers paid an upfront commitment fee equal to 1.0% of the full principal amount of the 2016 Secured Loan Facility and paid a funding fee equal to 1.0% at the time such amounts were drawn. In connection with the May 2017 maturity extension, the Company paid a one-time extension fee equal to $8 million to the extending lenders.

The 2016 Secured Loan Facility is guaranteed by the Company and was originally secured by a first priority lien on 21 real properties owned by the 2016 Secured Loan Borrowers. The 2016 Secured Loan Facility includes customary representations and warranties, indemnities and covenants, including with respect to the condition and maintenance of the real property collateral.

The 2016 Secured Loan Facility has customary 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 2016 Secured Loan Lenders may declare all or any portion of the outstanding indebtedness to be immediately due and payable, exercise any rights they might have under any of the 2016 Secured Loan Facility documents (including against the collateral), and require the 2016 Secured Loan 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 2016 Secured Loan Facility may be prepaid at any time in whole or in part, without penalty or premium and $250 million of proceeds from real estate transactions was used to pay interest and a portion of the loan during the 2017.

Domestic Credit Agreement

The Borrowers and Holdings are party to an amended and restated credit agreement (the "Amended Domestic Credit Agreement") with a syndicate of lenders. Pursuant to the Amended Domestic Credit Agreement, the Borrowers have borrowed two senior secured term loan facilities having original principal amounts of $1.0 billion and $750 million (the "Term Loan" and "2016 Term Loan," respectively). The Amended Domestic Credit Agreement currently provides for a $1.5 billion asset-based revolving credit facility (the "Revolving Facility") with a $1.0 billion letter of credit sub-facility, which matures on July 20, 2020. The Term Loan had an original maturity of June 30, 2018 and the 2016 Term Loan matures on July 20, 2020. In December 2017, the Company entered into an agreement to extend the maturity of the Term Loan to January 20, 2019, with the option to further extend the maturity to July 20, 2019, subject to certain conditions, including payment of an extension fee equal to 2.0% of the principal amount of the Term Loan outstanding at the time of such extension. The Amended Domestic Credit Agreement includes an accordion feature that allows the Borrowers to use, subject to borrowing base requirements, existing collateral for the facility to obtain up to $1.0 billion of additional borrowing capacity, of which $750 million was utilized for the 2016 Term Loan (described below). The Amended Domestic Credit Agreement also includes a FILO tranche feature that allows up to an additional $500 million of borrowing capacity and allows Holdings and its subsidiaries to undertake short-term borrowings outside the facility up to $1.0 billion. In February 2018, the Borrowers entered into an amendment that increased the size of the general debt basket to $1.25 billion.

Revolving advances under the Amended Domestic Credit Agreement bear interest at a rate equal to, at the election of the Borrowers, either the London Interbank Offered Rate ("LIBOR") or a base rate, in either case plus an applicable margin dependent on Holdings' consolidated leverage ratio (as measured under the Amended Domestic Credit Agreement). The margin with respect to borrowings ranges from 3.50% to 4.00% for LIBOR loans and from 2.50% to 3.00% for base rate loans. The Amended Domestic Credit Agreement also provides for the payment of fees with respect to issued and undrawn letters of credit at a rate equal to the margin applicable to LIBOR loans and a commitment fee with respect to unused amounts of the Revolving Facility at a rate equal to 0.625% per annum.

The Revolving Facility is in place as a funding source for general corporate purposes and is secured by a first lien on substantially all of our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability. The Revolving Facility is guaranteed by all domestic subsidiaries of Holdings that own inventory or credit card or pharmacy receivables. The Revolving Facility also permits aggregate second lien indebtedness of up to $2.0 billion, of which $1.1 billion in second lien notes were outstanding at February 3, 2018, resulting in $896 million of permitted second lien indebtedness, subject to limitations contained in our other outstanding indebtedness. If, through asset sales or other means, the value of the above eligible assets is not sufficient to support borrowings of up to the full amount of the commitments under this facility, we will not have full access to the facility, but rather could have access to a lesser amount determined by the borrowing base. Such a decline in the value of eligible assets also could result in our inability to borrow up to the full amount of second lien indebtedness permitted by the domestic credit facility, but rather we could be limited to borrowing a lesser amount determined by the borrowing base as calculated pursuant to the terms of such indenture.

The Term Loan bears interest at a rate equal to, at the election of the Borrowers, either LIBOR (subject to a 1.00% LIBOR floor) or a base rate, plus an applicable margin for LIBOR loans of 4.50% and for base rate loans of 3.50%. Currently, the Borrowers are required to repay the Term Loan in quarterly installments of $2.5 million, with the remainder of the Term Loan maturing January 20, 2019, subject to the right of the Borrowers to extend the maturity to July 20, 2019. Additionally, the Borrowers are required to make certain mandatory repayments of the Term Loan from excess cash flow (as defined in the Amended Domestic Credit Agreement). The Term Loan may be prepaid in whole or part without penalty. The Term Loan is secured by the same collateral as the Revolving Facility on a pari passu basis with the Revolving Facility, and is guaranteed by the same subsidiaries of the Company that guarantee the Revolving Facility. At February 3, 2018 and January 28, 2017, respectively, we had borrowings of $400 million and $970 million under the Term Loan, and carrying value, net of the remaining discount and debt issuance costs, of $391 million and $963 million. During the fourth quarter, the Company paid down the Term Loan by $325 million, reducing the outstanding balance, and bringing our total Term Loan repayment during 2017 to approximately $570 million. The Company made additional repayments in 2018 of $97 million through the date of this report. A portion of the proceeds received from the Craftsman Sale were also used to reduce outstanding borrowings under the Term Loan.

Amounts borrowed pursuant to the 2016 Term Loan bear interest at a rate equal to LIBOR plus 750 basis points, subject to a 1.00% LIBOR floor. The Company received approximately $722 million in net proceeds from the 2016 Term Loan, which proceeds were used to reduce outstanding borrowings under its asset-based revolving credit facility. The 2016 Term Loan has a maturity date of July 20, 2020, which is the same maturity date as the Company's revolving credit facility commitments, and does not amortize. The 2016 Term Loan is subject to a prepayment premium of 2% of the aggregate principal amount of the 2016 Term Loan prepaid on or prior to April 8, 2017 and 1% of the aggregate principal amount of the 2016 Term Loan prepaid after April 8, 2017 and on or prior to April 8, 2018. The obligations under the Amended Domestic Credit Agreement, including the 2016 Term Loan, are secured by a first lien on substantially all of the domestic inventory and credit card and pharmacy receivables of the Company and its subsidiaries and aggregate advances under the Amended Domestic Credit Agreement are subject to a borrowing base formula. The carrying value of the 2016 Term Loan, net of the remaining discount and debt issuance costs, was $559 million and $726 million at February 3, 2018 and January 28, 2017, respectively. A portion of the proceeds received from the Craftsman Sale were used to reduce outstanding borrowings under the 2016 Term Loan.

The Amended Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, to be at least 15%, exceptions that may be subject to certain maximum amounts and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. Further, the Amended Domestic Credit Agreement includes customary covenants that restrict our ability to make dispositions, prepay debt and make investments, subject, in each case, to various exceptions. The Amended Domestic Credit Agreement also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0. As of February 3, 2018, our fixed charge ratio continues to be less than 1.0 to 1.0, and we are subject to these other requirements based on our availability. If availability under the domestic revolving credit facility were to fall below 10%, the Company would be required to test the fixed charge coverage ratio, and would not comply with the facility, and the lenders under the facility could demand immediate payment in full of all amounts outstanding and terminate their obligations under the facility. In addition, the domestic credit facility provides that in the event we make certain prepayments of indebtedness, for a period of one year thereafter we must maintain availability under the facility of at least 12.5%, and it prohibits certain other prepayments of indebtedness.

At February 3, 2018, we had $271 million of Revolving Facility borrowings, and at January 28, 2017, we had no borrowings outstanding under the Revolving Facility. We had $377 million and $464 million at February 3, 2018 and January 28, 2017, respectively, of letters of credit outstanding under the Revolving Facility. At February 3, 2018 and January 28, 2017, the amount available to borrow under the Revolving Facility was $69 million and $165 million, respectively, which reflects the effect of the springing fixed charge coverage ratio covenant and the borrowing base limitation. The majority of the letters of credit outstanding are used to provide collateral for our insurance programs.

Second Lien Credit Agreement

On September 1, 2016, the Company, SRAC, and Kmart Corporation (together with SRAC, the "ABL Borrowers") entered into a Second Lien Credit Agreement with the Lenders thereunder, entities affiliated with ESL, pursuant to which the ABL Borrowers borrowed $300 million under a term loan (the "Second Lien Term Loan"). The Company received net proceeds of $291 million, which were used for general corporate purposes.

The maturity date for the Second Lien Term Loan is July 20, 2020 and the Second Lien Term Loan will not amortize. The Second Lien Term Loan bears interest at a rate equal to, at the election of the ABL Borrowers, either LIBOR (subject to a 1.00% floor) or a specified prime rate ("Base Rate"), in either case plus an applicable margin. The margin with respect to the Second Lien Term Loan is 7.50% for LIBOR loans and 6.50% for Base Rate loans.

The Second Lien Credit Agreement was amended on July 7, 2017, providing an uncommitted line of credit facility under which subsidiaries of the Company may from time to time borrow line of credit loans ("Line of Credit Loans") with maturities less than 180 days, subject to applicable borrowing base limitations, in an aggregate principal amount not to exceed $500 million at any time outstanding. In February 2018, the Second Lien Credit Agreement was further amended to, among other things, increase the maximum aggregate principal amount of the Line of Credit Loans to $600 million, extend the maximum duration of the Line of Credit Loans to 270 days and increase the size of the general debt basket to $1.25 billion. During 2017, the Company received aggregate proceeds of $610 million from the issuance of Line of Credit Loans from various lenders, some of which are entities affiliated with ESL, Bruce R. Berkowitz, and Thomas J. Tisch. The Company made repayments of $110 million during 2017, some of which were to related parties. See Note 15 for further information. The proceeds were used for the repayment of indebtedness and general corporate purposes.

The Second Lien Credit Agreement was further amended on January 9, 2018. This amendment amended the borrowing base definition in the Second Lien Credit Agreement to increase the advance rate for inventory to 75% from 65% and also deferred the collateral coverage test for purposes of the mandatory repayment covenant in the Second Lien Credit Agreement such that no such mandatory repayment can be required until the end of the third quarter of 2018. In connection with the closing of the Exchange Offers, the Company also entered into an amendment to its Second Lien Credit Agreement. The amendment provides the Company with the option to pay interest on its outstanding $300 million principal amount Second Lien Term Loan in kind, and also provides that the Company's obligation under the term loan is convertible into common stock of the Company, on the same conversion terms as the New Senior Secured Notes.

Following consummation of the Exchange Offers, the Company's obligations under the Second Lien Credit Agreement are secured on a pari passu basis with the Company’s obligations under that certain Indenture, dated as of March 20, 2018, pursuant to which the Company issued its New Senior Secured Notes (defined below). The collateral includes inventory, receivables and other related assets of the Company and its subsidiaries which are obligated on the Second Lien Term Loan and the New Senior Secured Notes. The Second Lien Credit Agreement is guaranteed by all domestic subsidiaries of the Company that guarantee the Company’s obligations under its existing Revolving Facility.

The Second Lien Credit Agreement includes representations and warranties, covenants and other undertakings, and events of default that are substantially similar to those contained in the Amended Domestic Credit Agreement. The Second Lien Credit Agreement requires the ABL Borrowers to prepay amounts outstanding under the Amended Domestic Credit Agreement and/or the Second Lien Credit Agreement in order to avoid a Collateral Coverage Event (as defined below). The carrying value of the Second Lien Term Loan, net of the remaining debt issuance costs, was $294 million and $292 million at February 3, 2018 and January 28, 2017, respectively. The carrying value of the Line of Credit Loans was $500 million at February 3, 2018.

Old Senior Secured Notes and New Senior Secured Notes

In October 2010, we sold $1.0 billion aggregate principal amount of senior secured notes (the "Old Senior Secured Notes"), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Old Senior Secured Notes, the Company sold $250 million aggregate principal amount of Old Senior Secured Notes to the Company's domestic pension plan in a private placement, none of which remain in the domestic pension plan as a result of the Tender Offer discussed below. The Old Senior Secured Notes are guaranteed by certain subsidiaries of the Company and are secured by a security interest in certain assets consisting primarily of domestic inventory and receivables (the "Collateral"). The lien that secures the Old Senior Secured Notes is junior in priority to the liens on such assets that secure obligations under the Amended Domestic Credit Agreement, as well as certain other first priority lien obligations, and, following consummation of the Exchange Offers, obligations under the indenture relating to the New Senior Secured Notes. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for general corporate purposes. Prior to consummation of the Exchange Offers, the indenture under which the Old Senior Secured Notes (the "Old Senior Secured Notes Indenture") were issued contained restrictive covenants that, among other things, (1) limited the ability of the Company and certain of its domestic subsidiaries to create liens and enter into sale and leaseback transactions and (2) limited the ability of the Company to consolidate with or merge into, or sell other than for cash or lease all or substantially all of its assets to, another person. The indenture also provided for certain events of default, which, if any were to occur, would permit or require the principal and accrued and unpaid interest on all the then outstanding Senior Secured Notes to be due and payable immediately. In connection with the consummation of the Exchange Offers, we entered into a supplemental indenture to the Old Senior Secured Notes Indenture that eliminated substantially all of the restrictive covenants and certain events of default in the Old Senior Secured Notes Indenture. The supplemental indenture, among other things, eliminated the obligation of the Company to offer to repurchase all outstanding Old Senior Secured Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if the borrowing base (as calculated pursuant to the indenture) falls below the principal value of the Old Senior Secured Notes plus any other indebtedness for borrowed money that is secured by liens on the Collateral for two consecutive quarters or upon the occurrence of certain change of control triggering events. The Company may call the Old Senior Secured Notes at a premium based on the "Treasury Rate" as defined in the indenture, plus 50 basis points.

On August 3, 2015, the Company commenced a tender offer (the "Tender Offer") to purchase for cash up to $1.0 billion principal amount of its Old Senior Secured Notes, which expired on August 28, 2015. Approximately $936 million principal amount of the Old Senior Secured Notes were validly tendered and not validly withdrawn in the Tender Offer. Holders who validly tendered and did not validly withdraw Old Senior Secured Notes at or prior to the early tender date of August 14, 2015 received total consideration of $990 per $1,000 principal amount of Old Senior Secured Notes that were accepted for purchase, which included an early tender payment of $30 per $1,000 principal amount of Old Senior Secured Notes accepted for purchase, plus accrued and unpaid interest up to, but excluding, the settlement date. Holders who validly tendered and did not validly withdraw Old Senior Secured Notes after the early tender date but at or prior to the expiration date of August 28, 2015 received total consideration of $960 per $1,000 principal amount of Old Senior Secured Notes accepted for purchase, plus accrued and unpaid interest up to, but excluding, the settlement date.

We accounted for the Tender Offer in accordance with accounting standards applicable to extinguishment of liabilities and debt modifications and extinguishments. Accordingly, we de-recognized the net carrying amount of Old Senior Secured Notes of $929 million (comprised of the principal amount of $936 million, offset by unamortized debt issuance costs and discount of $7 million), and the reacquisition cost was $929 million.

On January 9, 2018, the Company and certain of its subsidiaries entered into a Fourth Supplemental Indenture (the "Supplemental Indenture") with Wilmington Trust, National Association, as successor trustee and collateral agent, amending the Old Senior Secured Notes Indenture. The Supplemental Indenture amended the borrowing base definition in the Old Senior Secured Notes Indenture to increase the advance rate for inventory to 75% from 65%. The Supplemental Indenture also defers the collateral coverage test for purposes of the repurchase offer covenant in the Indenture and restarts it with the second quarter of 2018 (such that no collateral coverage event can occur until the end of the third quarter of 2018).

The carrying value of Old Senior Secured Notes, net of the remaining discount and debt issuance costs, was $303 million and $303 million at February 3, 2018 and January 28, 2017, respectively. The carrying value of Old Senior Secured Notes is included within current portion of long-term debt in the Consolidated Balance Sheets at February 3, 2018.

In February 2018, the Company commenced the Exchange Offers pursuant to which it offered to issue in exchange for its outstanding Senior Secured Notes new 6 5/8% Senior Secured Notes Due 2019, of a like principal amount, convertible into common stock of the Company, with interest on such notes to be payable in kind at the Company's option. The Exchange Offers expired on March 15, 2018. Approximately $169.8 million principal amount of the Senior Secured Notes were validly tendered, accepted and canceled, including $20 million principal amount of Old Senior Secured Notes held by ESL, and the Company issued a like principal amount of New Senior Secured Notes. The New Senior Secured Notes are optionally convertible by the holders thereof into shares of the Company’s common stock at a conversion price of $5.00 per share of common stock, and are mandatorily convertible at the Company's option if the volume weighted average trading price of the common stock on the NASDAQ exceeds $10.00 for a prescribed period. The New Senior Unsecured Notes bear interest at a rate of 6.625% per annum and the Company will pay interest semi-annually on April 15 and October 15 of each year, which interest may, at the option of the Company, be paid in kind. The New Senior Secured Notes mature in October 2019.

The New Senior Secured Notes are guaranteed by certain subsidiaries of the Company and are secured by a security interest in the Collateral. The lien that secures the New Senior Secured Notes is junior in priority to the liens on such assets that secure obligations under the Amended Domestic Credit Agreement, as well as certain other first priority lien obligations, and senior to the lien on such assets that secure obligations under the Old Senior Secured Notes Indenture. The indenture under which the New Senior Secured Notes (the "New Senior Secured Notes Indenture") were issued contains restrictive covenants that, among other things, (1) limit the ability of the Company and certain of its domestic subsidiaries to create liens and enter into sale and leaseback transactions and (2) limit the ability of the Company to consolidate with or merge into, or sell other than for cash or lease all or substantially all of its assets to, another person. The New Senior Secured Notes Indenture also provides for certain events of default, which, if any were to occur, would permit or require the principal and accrued and unpaid interest on all the then outstanding New Senior Secured Notes to be due and payable immediately. The New Senior Secured Notes Indenture also requires the Company to offer to repurchase all outstanding New Senior Secured Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if the borrowing base (as calculated pursuant to the indenture) falls below the principal value of the New Senior Secured Notes plus any other indebtedness for borrowed money that is secured by liens on the Collateral for two consecutive quarters or upon the occurrence of certain change of control triggering events.

Old Senior Unsecured Notes and New Senior Unsecured Notes

On October 20, 2014, the Company announced its Board of Directors had approved a rights offering allowing its stockholders to purchase up to $625 million in aggregate principal amount of 8% senior unsecured notes due 2019 and warrants to purchase shares of its common stock. The subscription rights were distributed to all stockholders of the Company as of October 30, 2014, the record date for this rights offering, and every stockholder had the right to participate on the same terms in accordance with its pro rata ownership of the Company's common stock, except that holders of the Company's restricted stock that was unvested as of the record date received cash awards in lieu of subscription rights. This rights offering closed on November 18, 2014 and was oversubscribed.

Accordingly, on November 21, 2014, the Company issued $625 million aggregate original principal amount of 8% senior unsecured notes due 2019 (the "Old Senior Unsecured Notes") and received proceeds of $625 million which were used for general corporate purposes. The Old Senior Unsecured Notes are the unsecured and unsubordinated obligations of the Company and rank equal in right of payment with the existing and future unsecured and unsubordinated indebtedness of the Company. The Old Senior Unsecured Notes bear interest at a rate of 8% per annum and the Company will pay interest semi-annually on June 15 and December 15 of each year. The Old Senior Unsecured Notes are not guaranteed.

We accounted for the Old Senior Unsecured Notes in accordance with accounting standards applicable to distinguishing liabilities from equity and debt with conversion and other options. Accordingly, we allocated the proceeds received for the Senior Unsecured Notes based on the relative fair values of the Old Senior Unsecured Notes and warrants, which resulted in a discount to the notes of approximately $278 million. The fair value of the Old Senior Unsecured Notes and warrants was estimated based on quoted market prices for the same issues using Level 1 measurements as defined in Note 5. The discount is being amortized over the life of the Old Senior Unsecured Notes using the effective interest method with an effective interest rate of 11.55%. Approximately $55 million and $44 million of the discount was amortized during 2017 and 2016, respectively. The remaining discount was approximately $140 million and $195 million at February 3, 2018 and January 28, 2017, respectively. The carrying value of the Old Senior Unsecured Notes net of the remaining discount and debt issuance costs was approximately $483 million and $428 million at February 3, 2018 and January 28, 2017, respectively.

In February 2018, the Company commenced the Exchange Offers, pursuant to which it offered to issue in exchange for its outstanding Senior Unsecured Notes new 8% Senior Unsecured Notes Due 2019, of a like principal amount, convertible into common stock of the Company, with interest on such notes to be payable in kind at the Company's option. The Exchange Offers expired on March 15, 2018. Approximately $214 million principal amount of the Old Senior Unsecured Notes were validly tendered, accepted and canceled, including $187.6 million principal amount of Old Senior Unsecured Notes by ESL, and the Company issued a like principal amount of New Senior Unsecured Notes. The New Senior Unsecured Notes are optionally convertible by the holders thereof into shares of the Company’s common stock at a conversion price of $8.33 per share of common stock, and are mandatorily convertible at the Company's option if the volume weighted average trading price of the common stock on the NASDAQ exceeds $10.00 for a prescribed period. 

The New Senior Unsecured Notes are the unsecured and unsubordinated obligations of the Company and rank equal in right of payment with the existing and future unsecured and unsubordinated indebtedness of the Company. The New Senior Unsecured Notes bear interest at a rate of 8% per annum and the Company will pay interest semi-annually on June 15 and December 15 of each year, which interest may, at the option of the Company, be paid in kind. The Senior Unsecured Notes are not guaranteed.

Cash Collateral

We post cash collateral for certain self-insurance programs. We continue to classify the cash collateral posted for self-insurance programs as cash and cash equivalents due to our ability to substitute letters of credit for the cash at any time at our discretion. At February 3, 2018 and January 28, 2017, $4 million and $3 million of cash, respectively, was posted as collateral for self-insurance programs.

Wholly-owned Insurance Subsidiary and Intercompany Securities

We have numerous types of insurable risks, including workers’ compensation, product and general liability, automobile, warranty, asbestos and environmental claims and the extended service contracts we sell to our customers. Certain of the associated risks are managed through Holdings’ wholly-owned insurance subsidiary, Sears Reinsurance Company Ltd. ("Sears Re"), a Bermuda Class 3 insurer.

In accordance with applicable insurance regulations, Sears Re holds marketable securities to support the insurance coverage it provides. Sears has utilized two securitization structures to issue specific securities in which Sears Re has invested its capital to fund its insurance obligations. In November 2003, Sears formed a Real Estate Mortgage Investment Conduit, or REMIC. The real estate associated with 138 properties was contributed to indirect wholly-owned subsidiaries of Sears, and then leased back to Sears. The contributed stores were mortgaged and the REMIC issued to wholly-owned subsidiaries of Sears (including Sears Re) $1.3 billion (par value) of securities (the "REMIC Securities") that were secured by the mortgages and collateral assignments of the store leases. Payments to the holders on the REMIC Securities were funded by the lease payments. In March 2018, in connection with the Credit Agreement and Mezzanine Loan Agreement described above, the REMIC was unwound and the REMIC Securities were extinguished.

In May 2006, a subsidiary of Holdings contributed the rights to use the Kenmore, Craftsman and DieHard trademarks in the U.S. and its possessions and territories to KCD IP, LLC, an indirect wholly-owned subsidiary of Holdings. KCD IP, LLC has licensed the use of the trademarks to subsidiaries of Holdings, including Sears and Kmart. Asset-backed securities with a par value of $1.8 billion (the "KCD Securities") were issued by KCD IP, LLC and subsequently purchased by Sears Re, the collateral for which includes the trademark rights and royalty income. Payments to the holders on the KCD Securities are funded by the royalty payments. In connection with the Craftsman Sale, KCD Securities with par value of $900 million were redeemed in March 2017.

The issuers of the REMIC Securities and KCD Securities and the owners of these real estate and trademark assets are bankruptcy remote, special purpose entities that are indirect wholly-owned subsidiaries of Holdings. Cash flows received from rental streams and licensing fee streams paid by Sears, Kmart, other affiliates and third parties, are used for the payment of fees and interest on these securities, through the extinguishment of the REMIC Securities in March 2018. Since the inception of the REMIC and KCD IP, LLC, the REMIC Securities and the KCD Securities have been entirely held by our wholly-owned consolidated subsidiaries, through the extinguishment of the REMIC Securities in March 2018. At February 3, 2018 and January 28, 2017, respectively, the net book value of the securitized trademark rights was approximately $0.7 billion and $1.0 billion. The net book value of the securitized real estate assets was approximately $0.5 billion and $0.6 billion at February 3, 2018 and January 28, 2017, respectively.

Trade Creditor Matters

We have ongoing discussions concerning our liquidity and financial position with the vendor community and third parties that offer various credit protection services to our vendors. The topics discussed have included such areas as pricing, payment terms and ongoing business arrangements. As of the date of this report, we have not experienced any significant disruption in our access to merchandise or our operations.

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FINANCIAL GUARANTEES

12 Months Ended

Feb. 03, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FINANCIAL GUARANTEES

FINANCIAL GUARANTEES

Financial Guarantees

We issue various types of guarantees in the normal course of business. We had the following guarantees outstanding at February 3, 2018:

millions	Bank Issued		SRAC Issued		Other		Total
Standby letters of credit	$	647	$	6	$	—	$	653
Commercial letters of credit	—		31		—		31
Secondary lease obligations	—		—		164		164

The secondary lease obligations related to certain store leases that have been assigned and previously divested Sears businesses. The secondary lease obligations represent the maximum potential amount of future payments, including renewal option periods pursuant to the lease agreements. We remain secondarily liable if the primary obligor defaults.

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

12 Months Ended

Feb. 03, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

We determine fair value of financial assets and liabilities based on the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels:

Level 1 inputs – unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.

Level 2 inputs – inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and default rates.

Level 3 inputs – unobservable inputs for the asset or liability.

Cash and cash equivalents, accounts receivable, merchandise payables, short-term borrowings and accrued liabilities are reflected in the Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. The fair value of our equity method investment in Sears Canada is disclosed in Note 2. The fair value of our long-term debt is disclosed in Note 3. The fair value of pension and other postretirement benefit plan assets is disclosed in Note 7.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, we measure the impairment and adjust the carrying value as discussed in Note 1. With the exception of the indefinite-lived intangible asset impairments and fixed asset impairments described in Note 12 and Note 13, respectively, we had no significant remeasurements of such assets or liabilities to fair value during 2017 and 2016.

All of the fair value remeasurements were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived based on discussions with real estate brokers, review of comparable properties, if available, and internal expertise related to the current marketplace conditions. Inputs for the goodwill and intangible asset analyses included discounted cash flow analyses, comparable marketplace fair value data, as well as management's assumptions in valuing significant tangible and intangible assets, as described in Note 1, Summary of Significant Accounting Policies.

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INTEREST AND INVESTMENT LOSS

12 Months Ended

Feb. 03, 2018

Investment Income, Interest and Dividend [Abstract]

INTEREST AND INVESTMENT LOSS

INTEREST AND INVESTMENT LOSS

The following table sets forth the components of interest and investment loss as reported in our Consolidated Statements of Operations:

millions	2017			2016			2015
Interest income on cash and cash equivalents	$	2		$	1		$	1
Other investment loss	(14		)	(27		)	(63		)
Total	$	(12	)	$	(26	)	$	(62	)

Interest Income on Cash and Cash Equivalents

We recorded interest income of $2 million, $1 million and $1 million in 2017, 2016 and 2015, respectively, primarily related to interest earned on cash and cash equivalents. These cash and cash equivalents consist of highly liquid investments with original maturities of three months or less at the date of purchase. Our invested cash may include, from time to time, investments in, but not limited to, commercial paper, federal, state and municipal government securities, floating-rate notes, repurchase agreements and money market funds. All invested cash amounts are readily available to us.

Other Investment Loss

Other investment loss primarily includes income or loss generated by (and sales of investments in) certain real estate joint ventures and other equity investments in which we do not have a controlling interest. During 2017, 2016 and 2015, respectively, the investment loss from equity investments included a loss of $17 million, $35 million and $59 million.

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BENEFIT PLANS

12 Months Ended

Feb. 03, 2018

Retirement Benefits [Abstract]

BENEFIT PLANS

BENEFIT PLANS

We sponsor a number of pension and postretirement benefit plans. We account for our retirement programs in accordance with employers' accounting for defined benefit pension and other postretirement plans under Generally Accepted Accounting Principles ("GAAP"). GAAP requires that amounts recognized in financial statements be determined using an actuarial basis. As a result, our pension benefit programs are based on a number of statistical and judgmental assumptions that attempt to anticipate future events and are used in calculating the expense and liability related to our plans each year at January 31. These assumptions include, but are not limited to, discount rates used to value liabilities, assumed rates of return on plan assets, actuarial assumptions relating to retirement age and participant turnover, and mortality rates. The actuarial assumptions we use may differ significantly from actual results. These differences may result in a material impact to the amount of net periodic benefit cost to be recorded in our consolidated financial statements in the future.

Expenses for retirement and savings-related benefit plans were as follows:

millions	2017		2016		2015
Pension plans	$	657	$	289	$	230
Postretirement benefits	—		28		(2		)
Total	$	657	$	317	$	228

Retirement Savings Plans

Holdings sponsors retirement savings plans for employees meeting service eligibility requirements. The Company does not match employee contributions.

Other Benefit Plans

Certain full-time and part-time employees of Kmart and Sears are eligible to participate in noncontributory defined benefit plans after meeting age and service requirements. Effective January 31, 1996 and January 1, 2006, respectively, the Kmart tax-qualified defined benefit pension plan and the Sears domestic pension plan were frozen and associates no longer earn additional benefits under the plan. The Kmart tax-qualified defined benefit pension plan was merged with and into the Sears domestic pension plan effective as of January 30, 2008. The merged plan was renamed as the Sears Holdings Pension Plan ("SHC Domestic plan") and Holdings accepted sponsorship of the SHC Domestic plan effective as of that date.

Pension benefits are based on length of service, compensation and, in certain plans, social security or other benefits. Funding for the various plans is determined using various actuarial cost methods.

In addition to providing pension benefits, Sears provides employees and retirees certain medical benefits. These benefits provide access to medical plans. Certain Sears retirees are also provided life insurance benefits. To the extent we share the cost of the retiree medical benefits with retirees, such cost sharing is based on years of service and year of retirement. Sears' postretirement benefit plans are not funded. We have the right to modify or terminate these plans. Effective December 31, 2014, the Company amended its retiree medical plan to eliminate Company subsidies to the plan.

Pension Plan Amendment

Effective December 1, 2016, the Sears Holdings Pension Plan was amended to change its plan year from a calendar year end to a November 30th year end, to spin off a new Sears Holdings Pension Plan 2 ("Plan 2") and to rename the Sears Holdings Pension Plan as Sears Holdings Pension Plan 1 ("Plan 1"). In conjunction with these amendments, the Company requested that the Internal Revenue Service ("IRS") approve the foregoing change in plan year and to approve a change in actuarial funding method in connection with the spin-off and change in plan year. The Company has received IRS approval of both changes.

Pension Plan Settlements    

In May 2017, the Company executed an irrevocable agreement to purchase a group annuity contract from Metropolitan Life Insurance Company ("MLIC"), under which MLIC will pay future pension benefit payments to approximately 51,000 retirees from Plan 2. The agreement calls for a transfer of approximately $515 million of Plan 2's benefit obligations to MLIC. This action had an immaterial impact on the funded status of our total pension obligations, but reduced the size of the Company's combined pension plan, reduced future cost volatility, and reduced future plan administrative expenses. Due to the annuity purchase, we were required to remeasure our pension obligations. In connection with the remeasurement, we updated the effective discount rate assumption to 3.85% as of May 31, 2017. The annuity purchase resulted in a non-cash charge of $200 million for losses previously accumulated in other comprehensive income (loss), which were recognized through the statement of operations upon settlement during the 13 week period ending July 29, 2017.

In August 2017, the Company reached another agreement with MLIC to annuitize an additional $512 million of its pension liability, under which MLIC will pay future pension benefit payments to an additional approximately 20,000 retirees from Plan 2. This action had an immaterial impact on the funded status of our total pension obligations, but reduced the size of the Company's combined pension plan, reduced future cost volatility, and reduced future plan administrative expenses. Due to the annuity purchase, we were required to remeasure our pension obligations. In connection with the remeasurement, we updated the effective discount rate assumption to 3.75% as of August 31, 2017. This annuity purchase resulted in a non-cash charge of $203 million for losses previously accumulated in other comprehensive income (loss), which were recognized through the statement of operations immediately upon settlement during the 13 week period ending October 28, 2017.

Effective August 25, 2017, the Company amended Plan 2, primarily related to lump sum benefit eligibility, and began notifying certain former employees of the Company of its offer to pay those employees' pension benefit in lump sum. Former employees eligible for the voluntary lump sum payment option are generally those who are vested traditional formula participants of Plan 2 who terminated employment prior to January 1, 2017 and who have not yet started receiving monthly payments of their pension benefits. The Company offered the one-time voluntary lump sum window in an effort to reduce its long-term pension obligations and ongoing annual pension expense. This voluntary offer was made to approximately 20,000 eligible terminated vested participants representing approximately $300 million of the Company's total qualified pension plan liabilities. Eligible participants had until November 1, 2017 to make their election. The Company made payments of approximately $209 million to employees who made the election and funded the payments from existing assets of Plan 2. This lump sum offer resulted in a non-cash charge of $76 million for losses previously accumulated in other comprehensive income (loss), which were recognized through the statement of operations immediately upon settlement during the 14 week period ending February 3, 2018.

Pension Plans

millions	2017			2016
Change in projected benefit obligation:
Beginning balance	$	5,165		$	5,265
Interest cost	180			227
Actuarial loss	227			108
Benefits paid	(316		)	(435		)
Settlements	(1,249		)	—
Other	(4		)	—
Balance at the measurement date	$	4,003		$	5,165
Change in assets at fair value:
Beginning balance	$	3,567		$	3,189
Actual return on plan assets	231			499
Company contributions	295			314
Benefits paid	(316		)	(435		)
Settlements	(1,249		)	—
Balance at the measurement date	$	2,528		$	3,567
Net amount recognized	$	(1,475	)	$	(1,598	)

The accumulated benefit obligation for the SHC Domestic plan was $4.0 billion at February 3, 2018 and $5.2 billion at January 28, 2017.

Postretirement Benefit Obligations

millions	2017			2016
Change in accumulated postretirement benefit obligation:
Beginning balance	$	168		$	143
Interest cost	6			5
Plan participants' contributions	—			—
Benefits paid	(17		)	(19		)
Actuarial loss	1			9
Other	—			30
Balance at the measurement date	$	158		$	168
Change in plan assets at fair value:
Beginning of year balance	$	—		$	—
Company contributions	17			19
Plan participants' contributions	—			—
Benefits paid	(17		)	(19		)
Balance at the measurement date	$	—		$	—
Funded status	$	(158	)	$	(168	)

The current portion of our liability for postretirement benefit obligations is $16 million, which we expect to pay during fiscal 2018.

Weighted-average assumptions used to determine plan obligations were as follows:

	2017	2016	2015
Pension benefits:
Discount rate	3.75%	4.15%	4.50%
Postretirement benefits:
Discount rate	3.60%	3.85%	4.00%

The decrease in the discount rate in 2017 resulted in an increase in the 2017 year-end pension obligation of approximately $229 million.

Net Periodic Benefit Cost

The components of net periodic benefit cost were as follows:

millions	2017			2016			2015
Pension benefits:
Interest cost	$	180		$	227		$	211
Expected return on plan assets	(190		)	(202		)	(249		)
Settlements	479			—			—
Recognized net loss and other	188			264			268
Net periodic benefit cost	$	657		$	289		$	230
Postretirement benefits:
Interest cost	$	6		$	5		$	5
Recognized net loss and other	(6		)	23			(7		)
Net periodic benefit cost	$	—		$	28		$	(2	)

Weighted-average assumptions used to determine net cost were as follows:

	2017	2016	2015
Pension benefits:
Discount Rate(1)	4.15%	4.50%	3.70%
Return of plan assets	6.50%	6.50%	7.00%
Postretirement benefits:
Discount Rate	3.85%	4.00%	3.30%

⁽¹⁾ In connection with the annuitizations noted above, we updated the effective discount rate assumption to 3.85% as of May 31, 2017 and to 3.75% as of August 31, 2017 for Plan 2.

For purposes of determining the periodic expense of our defined benefit plans, we use the fair value of plan assets as the market-related value. A one-percentage-point change in the assumed discount rate would have the following effects on the pension liability:

millions	1 percentage-point Increase			1 percentage-point Decrease
Effect on interest cost component	$	20		$	(26	)
Effect on pension benefit obligation	$	(384	)	$	460

Approximately $146 million of the unrecognized net losses in accumulated other comprehensive income are expected to be amortized as a component of net periodic benefit cost during 2018.

Investment Strategy

The Investment Committee, made up of select members of senior management, has delegated to a non-affiliated third party professional, as a limited-purpose named fiduciary, the authority to provide certain investment-related services with respect to the assets of Holdings' domestic pension plans. The plans' overall investment objective is to provide a long-term return that, along with Company contributions, is expected to meet future benefit payment requirements. A long-term horizon has been adopted in establishing investment policy such that the likelihood and duration of investment losses are carefully weighed against the long-term potential for appreciation of assets. The plans' investment policy requires investments to be diversified across individual securities, industries, market capitalization and valuation characteristics. In addition, various techniques are utilized to monitor, measure and manage risk.

Domestic plan assets were invested in the following classes of securities:

	Plan Assets at
	February 3, 2018		January 28, 2017
Equity securities	36	%	35	%
Fixed income and other debt securities	63		63
Other	1		2
Total	100	%	100	%

The domestic plans' target allocation is determined by taking into consideration the amounts and timing of projected liabilities, our funding policies and expected returns on various asset classes. At February 3, 2018, the plans' target asset allocation was 35% equity and 65% fixed income. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.

Future Cash Flows of Benefit Plans

Information regarding expected future cash flows for the SHC Domestic plan is as follows:

millions
Pension benefits:
Employer contributions:
2018 (expected)	$	280
Expected benefit payments:
2018	$	334
2019	308
2020	298
2021	291
2022	283
2023-2027	1,289
Postretirement benefits:
Employer contributions:
2018 (expected)	$	16
Expected employer contribution for benefit payments:
2018	$	16
2019	17
2020	17
2021	16
2022	15
2023-2027	58

Domestic Pension Plans Funding

Contributions to our pension plans remain a significant use of our cash on an annual basis. While the Company's pension plan is frozen, and thus associates do not currently earn pension benefits, the Company has a legacy pension obligation for past service performed by Kmart and Sears associates. During 2017, we contributed $295 million to our domestic pension plans, including amounts contributed from the escrow created pursuant to the PPPFA. We estimate that our minimum pension funding obligations will be $280 million in 2018 (excluding the $20 million supplemental payment described below) and approximately $276 million in 2019. As discussed in Note 1, the Company agreed to grant the PBGC a lien on, and subsequently contribute to the Company's pension plans, the Craftsman Receivable. During the second quarter of 2017, we sold the Craftsman Receivable to a third-party purchaser, and deposited the proceeds into an escrow for the benefit of our pension plans. We subsequently contributed a portion of the proceeds received from the sale of the Craftsman Receivable to our pension plans, which contribution was credited against the Company's minimum pension funding obligations in 2017. Under our agreement with the PBGC, the remaining proceeds will also be contributed to our pension plans, and when so contributed, will be fully credited against the Company's minimum pension funding obligations in 2018 and 2019.

The Company also agreed to grant a lien to the PBGC on the 15-year income stream relating to new Stanley Black & Decker sales of Craftsman products, and agreed to contribute the payments from Stanley Black & Decker under such income stream to the Company's pension plans, with such payments to be credited against the Company's minimum pension funding obligations starting no later than five years from the closing date. The Company also agreed to grant the PBGC a lien on $100 million of real estate assets to secure the Company's minimum pension obligations through the end of 2019.

In November 2017, the Company announced an amendment to the PPPFA that allowed the Company to pursue the monetization of 138 of our properties that were subject to a ring-fence arrangement created under the PPPFA. In March 2018, the Company closed on the Secured Loan and the Mezzanine Loan, which transactions released the properties from the ring-fence arrangement. The Company contributed approximately $282 million of the proceeds of such loans to our pension plans, and deposited $125 million into an escrow for the benefit of our pension plans. Under our agreement with the PBGC, the escrowed amount will also be contributed to our pension plans and, when so contributed, will be fully credited against the Company’s minimum pension funding obligations in 2018 and 2019 described above. Following such transactions, the Company has been relieved of contributions to our pension plans for approximately two years (other than the contributions from escrow described above and a $20 million supplemental payment due in the second quarter of 2018). The ultimate amount of pension contributions could be affected by factors such as changes in applicable laws, as well as financial market and investment performance and demographic changes.

Fair Value of Pension Plan Assets

The following table presents our plan assets using the fair value hierarchy at February 3, 2018 and January 28, 2017:

	Investment Assets at Fair Value at
	February 3, 2018
millions	Total			Level 1		Level 2			Level 3
Equity securities:
U.S. companies	$	727		$	720	$	—		$	7
International companies	164			164		—			—
U.S. registered investment companies	6			6		—			—
Fixed income securities:
Corporate bonds and notes	1,423			—		1,423			—
Sears Holdings Corporation 2016 Term Loan	77			—		77			—
Mortgage-backed and asset-backed	9			—		6			3
Other	(3		)	—		(3		)	—
Total investment assets at fair value	$	2,403		$	890	$	1,503		$	10
Cash	4
Accounts receivable	39
Accounts payable	(28		)
Investments measured at NAV:
Cash equivalents and short-term investments	110
Net assets available for plan benefits	$	2,528

	Investment Assets at Fair Value at
	January 28, 2017
millions	Total			Level 1		Level 2		Level 3
Equity securities:
U.S. companies	$	980		$	978	$	—	$	2
International companies	224			224		—		—
U.S. registered investment companies	3			3		—		—
Fixed income securities:
Corporate bonds and notes	1,994			—		1,994		—
Sears Holdings Corporation 2016 Term Loan	100			—		100		—
Mortgage-backed and asset-backed	3			—		1		2
Other	1			—		1		—
Ventures and partnerships	1			—		—		1
Total investment assets at fair value	$	3,306		$	1,205	$	2,096	$	5
Cash	8
Accounts receivable	65
Accounts payable	(69		)
Investments measured at NAV:
Cash equivalents and short-term investments	257
Net assets available for plan benefits	$	3,567

Equity securities, which include common and preferred stocks, are actively traded and valued at the closing price reported in the active market in which the security is traded and are assigned to Level 1.

Fixed income securities are assigned to Level 2 as they are primarily valued by institutional bid evaluation, which determines the estimated price a dealer would pay for a security and which is developed using proprietary models established by the pricing vendors for this purpose.

Certain mortgage-backed and other asset-backed debt securities are assigned to Level 3 based on the relatively low position in the preferred hierarchy of the pricing source. Valuation of the Plan's non-public limited partnerships requires significant judgment by the general partners due to the absence of quoted market value, inherent lack of liquidity, and the long-term nature of the assets, and may result in fair value measurements that are not indicative of ultimate realizable value. Our Level 3 assets, including activity related to our Level 3 assets, are immaterial.

Collective short-term investment funds are stated at net asset value (NAV) as determined by the investment managers and have not been classified in the fair value hierarchy. Investment managers value the underlying investments of the funds at amortized cost, which approximates fair value.

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EARNINGS PER SHARE

12 Months Ended

Feb. 03, 2018

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

The following table sets forth the components used to calculate basic and diluted loss per share attributable to Holdings' shareholders. Warrants, restricted stock awards and restricted stock units, totaling 2 thousand shares in 2016 and 5 million shares in 2015 were not included in the computation of diluted loss per share attributable to Holdings' shareholders because the effect of their inclusion would have been anti-dilutive.

millions, except earnings per share	2017			2016			2015
Basic weighted average shares	107.4			106.9			106.6
Dilutive effect of restricted stock awards, restricted stock units and warrants	—			—			—
Diluted weighted average shares	107.4			106.9			106.6
Net loss attributable to Holdings' shareholders	$	(383	)	$	(2,221	)	$	(1,129	)
Loss per share attributable to Holdings' shareholders:
Basic	$	(3.57	)	$	(20.78	)	$	(10.59	)
Diluted	$	(3.57	)	$	(20.78	)	$	(10.59	)

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EQUITY

12 Months Ended

Feb. 03, 2018

Stockholders' Equity Note [Abstract]

EQUITY

EQUITY

Stock-based Compensation

We account for stock-based compensation using the fair value method in accordance with accounting standards regarding share-based payment transactions. We do not currently have an employee stock option plan and at February 3, 2018, there are no outstanding options. Compensation expense related to stock-based compensation arrangements was immaterial during 2017, 2016 and 2015.

We granted restricted stock awards and restricted stock units to certain associates. These restricted stock awards and restricted stock units typically vest in zero to three years from the date of grant, provided the grantee remains employed by us at the vesting date. The fair value of these awards and units is equal to the market price of our common stock on the date of grant. We do not currently have a broad-based program that provides for restricted stock awards or restricted stock units on an annual basis. Changes in restricted stock awards and restricted stock units for 2017, 2016 and 2015 were as follows:

	2017				2016				2015
(Shares in thousands)	Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant
Beginning of year balance	151		$	28.89	60		$	42.88	73		$	45.82
Granted	606		7.15		384		16.87		198		31.26
Vested	(623	)	8.10		(293	)	16.00		(200	)	32.01
Forfeited	(119	)	25.27		—		—		(11	)	51.39
End of year balance	15		$	42.09	151		$	28.89	60		$	42.88

millions	2017		2016		2015
Aggregate fair value of shares granted based on weighted average fair value at date of grant	$	4	$	6	$	6
Aggregate fair value of shares vesting during period	4		4		6
Aggregate fair value of shares forfeited during period	1		—		—

Approximately 15,000 shares of the 15,000 shares of unvested restricted stock and restricted stock units outstanding at February 3, 2018 are scheduled to vest during 2018, subject to satisfaction of applicable vesting conditions.

Common Share Repurchase Program

From time to time, we repurchase shares of our common stock under a common share repurchase program authorized by our Board of Directors. The common share repurchase program was initially announced in 2005 with a total authorization since inception of the program of $6.5 billion. During 2017, 2016 and 2015, we repurchased no shares of our common stock under our common share repurchase program. At February 3, 2018, we had approximately $504 million of remaining authorization under our common share repurchase program.

The share repurchase program has no stated expiration date and share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods.

Accumulated Other Comprehensive Loss

The following table displays the components of accumulated other comprehensive loss:

millions	February 3, 2018			January 28, 2017			January 30, 2016
Pension and postretirement adjustments (net of tax of $(225), $(225) and $(296), respectively)	$	(1,071	)	$	(1,549	)	$	(1,915	)
Currency translation adjustments (net of tax of $0 for all periods presented)	(1		)	(3		)	(3		)
Accumulated other comprehensive loss	$	(1,072	)	$	(1,552	)	$	(1,918	)

Pension and postretirement adjustments relate to the net actuarial loss on our pension and postretirement plans recognized as a component of accumulated other comprehensive loss.

Income Tax Expense Allocated to Each Component of Other Comprehensive Income (Loss)

Income tax expense allocated to each component of other comprehensive income (loss) was as follows:

	2017
millions	Before Tax Amount			Tax Expense		Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience loss	$	(182	)	$	—	$	(182	)
Less: cost of settlements	479			—		479
Less: recognized net loss and other included in net periodic benefit cost(1)	181			—		181
Pension and postretirement adjustments, net of tax	478			—		478
Currency translation adjustments	2			—		2
Total other comprehensive income	$	480		$	—	$	480

	2016
millions	Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience gain	$	181		$	(71	)	$	110
Less: recognized net loss and other included in net periodic benefit cost(1)	256			—			256
Pension and postretirement adjustments, net of tax	437			(71		)	366
Dissolution of noncontrolling interest	(7		)	—			(7		)
Total other comprehensive income	$	430		$	(71	)	$	359

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 7 to the Consolidated Financial Statements.

	2015
millions	Before Tax Amount			Tax Expense		Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience loss	$	(148	)	$	—	$	(148	)
Less: recognized net loss and other included in net periodic benefit cost(1)	261			—		261
Pension and postretirement adjustments, net of tax	113			—		113
Currency translation adjustments	(1		)	—		(1		)
Total other comprehensive income	$	112		$	—	$	112

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 7 to the Consolidated Financial Statements.

Issuance of Warrants to Purchase Common Stock

On November 21, 2014, the Company issued an aggregate of approximately 22 million warrants pursuant to the exercise of rights in the rights offering for $625 million in aggregate principal amount of 8% Senior Unsecured Notes due 2019 and warrants to purchase shares of its common stock. The exercise price and the number of shares of common stock issuable upon exercise of a warrant are both subject to adjustment in certain circumstances. As of October 31, 2015, each warrant, when exercised, will entitle the holder thereof to purchase 1.11 shares of the Company's common stock at an exercise price of $25.686 per share under the terms of the warrant agreement, adjusted from the previously disclosed one share of the Company's common stock at an exercise price of $28.41 per share. The exercise price is payable in cash or by surrendering Old Senior Unsecured Notes or New Senior Unsecured Notes, in each case with a principal amount at least equal to the exercise price. The warrants may be exercised at any time after November 24, 2014. Unless earlier exercised, the warrants will expire on December 15, 2019.

We accounted for the warrants in accordance with accounting standards applicable to distinguishing liabilities from equity and debt with conversion and other options. Accordingly, the warrants have been classified as additional paid-in capital in the Consolidated Balance Sheets based on the relative fair value of the warrants and the related 8% Senior Unsecured Notes due 2019 at the time of issuance. We monitor changes in circumstances that could cause the classification of the warrants to change. The fair value of the warrants and the related 8% Senior Unsecured Notes due 2019 was estimated based on quoted market prices for the same issues using Level 1 measurements as defined in Note 5.

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INCOME TAXES

12 Months Ended

Feb. 03, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

millions	2017			2016			2015
Loss before income taxes:
U.S.	$	(1,012	)	$	(2,429	)	$	(1,420	)
Foreign	31			34			35
Total	$	(981	)	$	(2,395	)	$	(1,385	)
Income tax benefit:
Current:
Federal	$	9		$	13		$	11
State and local	(3		)	16			20
Foreign	13			18			17
Total current	19			47			48
Deferred:
Federal	(429		)	(87		)	(239		)
State and local	(187		)	(134		)	(66		)
Foreign	(1		)	—			—
Total deferred	(617		)	(221		)	(305		)
Total	$	(598	)	$	(174	)	$	(257	)

	2017		2016		2015
Effective tax rate reconciliation:
Federal income tax rate (benefit rate)	(33.7	)%	(35.0	)%	(35.0	)%
State and local tax (benefit) net of federal tax benefit	(11.8	)	(3.0	)	(1.8	)
Federal tax rate change	(22.6	)	—		—
Federal and state valuation allowance	21.2		41.1		37.4
Land and indefinite-lived intangibles	(12.1	)	(0.2	)	(16.9	)
Impairment of indefinite-lived trade names	(1.8	)	(6.0	)	(4.9	)
Loss disallowance	—		—		3.5
Tax credits	(0.4	)	(0.3	)	(0.7	)
Resolution of income tax matters	(0.8	)	—		(0.3	)
Adjust foreign statutory rates	(1.0	)	0.1		(0.3	)
Repatriation toll charge	1.8		—		—
Tax benefit resulting from other comprehensive income allocation	—		(2.9	)	—
Other	0.2		(1.1	)	0.4
	(61.0	)%	(7.3	)%	(18.6	)%

millions	February 3, 2018			January 28, 2017
Deferred tax assets and liabilities:
Deferred tax assets:
Federal benefit for state and foreign taxes	$	117		$	148
Accruals and other liabilities	142			135
Net operating loss carryforwards	1,736			2,255
Pension and postretirement benefit plans	972			1,244
Property and equipment	139			231
Deferred income	266			479
Credit carryforwards	899			875
Other	208			218
Total deferred tax assets	4,479			5,585
Valuation allowance	(4,187		)	(5,519		)
Net deferred tax assets	292			66
Deferred tax liabilities:
Trade names/Intangibles	285			573
Inventory	105			193
Other	28			43
Total deferred tax liabilities	418			809
Net deferred tax liability	$	(126	)	$	(743	)

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code that will affect our fiscal year ended February 3, 2018, including, but not limited to, (1) reducing the U.S. federal corporate tax rate to 21%, (2) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years and (3) various other miscellaneous changes that are effective in fiscal 2017. With the lower U.S. federal corporate rate effective beginning January 1, 2018, our U.S. federal corporate tax rate for 2017 is a blended rate of 33.717%.

In addition to the 21% reduced federal corporate tax rate, the Tax Act also establishes new tax laws that will affect fiscal 2018, including, but not limited to, (1) the creation of the base erosion anti-abuse tax ("BEAT"), a new minimum tax; (2) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (3) a new provision designed to tax global intangible low-taxed income ("GILTI"); (4) a new limitation on deductible interest expense; (5) limitations on the deductibility of certain executive compensation; (6) limitations on the use of foreign tax credits ("FTCs") to reduce the U.S. income tax liability; and (7) limitations on net operating losses ("NOLs") generated in tax years beginning after December 31, 2017, to 80% of taxable income with indefinite carryovers.

The SEC staff issued Staff Accounting Bulletin ("SAB") 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting in accordance with accounting standards applicable to income taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under accounting standards applicable to income taxes is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply accounting standards applicable to income taxes on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

The income tax benefit for the period ended February 3, 2018 included a tax benefit of approximately $470 million related to the impacts of the Tax Act. The impacts of the Tax Act primarily consist of a net benefit for the corporate rate reduction of $222 million, a net tax benefit for the valuation allowance release of $270 million, and a net expense for the transition tax of $11 million.

For various reasons that are discussed below, our accounting for the following elements of the Tax Act is incomplete. However, we were able to make reasonable estimates of certain effects and, therefore, recorded provisional adjustments as follows:

Reduction of U.S. federal corporate tax rate: As a result of the reduced corporate rate, our deferred tax assets, liabilities and valuation allowance decreased. Further, as we had a net deferred tax liability after valuation allowance, these decreases resulted in a deferred income tax benefit of $222 million for the year ended February 3, 2018. While we were able to make a reasonable estimate of the impact of the reduction in the corporate rate, it may be affected by other analyses related to the Tax Act, including, but not limited to, our calculation of deemed repatriation of deferred foreign income and state tax effect of adjustments made to federal temporary differences.

Deemed Repatriation Transition Tax: The Deemed Repatriation Transition Tax ("Transition Tax") is a tax on previously untaxed accumulated and current earnings and profits ("E&P") of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. We are able to make a reasonable estimate of the Transition Tax and recorded a provisional Transition Tax obligation of $6 million and a provisional withholding tax obligation of $11 million. As a result of our valuation allowance on NOLs, only the $11 million withholding tax obligation resulted in a current tax expense. However, we are continuing to gather additional information to more precisely compute the amount of the Transition Tax.

Valuation Allowances: The Company assessed whether its valuation allowance analyses are affected by various aspects of the Tax Act (e.g., deemed repatriation of deferred foreign income, new categories of FTCs, and other miscellaneous provisions of the Tax Act), any corresponding determination of the need for or change in a valuation allowance is also provisional.

Global Intangible Low Taxes Income (GILTI): The Tax Act creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations ("CFCs") must be included currently in the gross income of the CFC’s U.S. shareholder. GILTI is the excess of the shareholder’s "net CFC tested income" over the net deemed tangible income return, which is currently defined as the excess of (1) 10% of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income.

Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of accounting standards applicable to income taxes. In accordance with accounting standards applicable to income taxes, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the "period cost method") or (2) factoring such amounts into a company’s measurement of its deferred taxes (the "deferred method"). We selected the period cost method.

Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and other comprehensive income ("OCI"). An exception is provided in the authoritative accounting guidance when there is income from categories other than continuing operations and a loss from continuing operations in the current year. In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expense recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets. In instances where a valuation allowance is established against current year losses, income from other sources, including gain from pension and other postretirement benefits recorded as a component of OCI and creation of a deferred tax liability through additional paid in capital, is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets. As a result, for the year ended January 28, 2017, the Company recorded a tax expense of $71 million in OCI related to the net gain on pension and other postretirement benefits, and recorded a corresponding tax benefit of $71 million in continuing operations. The Company did not have this situation for the year ended February 3, 2018.

Accounting standards for income taxes require that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the financial reporting and tax bases of recorded assets and liabilities. Accounting standards also require that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion of or all of the deferred tax asset will not be realized.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year periods ended February 3, 2018, January 28, 2017 and January 30, 2016. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future income.

On the basis of this analysis and the significant negative objective evidence, the Company has a valuation allowance to record only the portion of the deferred tax asset that more likely than not will be realized.For the year ended January 30, 2016, the valuation allowance increased by $279 million of which $63 million was recorded through other comprehensive income. For the year ended January 28, 2017, the valuation allowance increased by $762 million of which $3 million was recorded through other comprehensive income and paid in capital. For the year ended February 3, 2018, the valuation allowance decreased by $1.3 billion, primarily due to the reduction of the U.S. corporate tax rate from 35% to 21% and the re-characterization of future net operating losses to indefinite life resulting in a valuation allowance release of 80% of our remaining indefinite life deferred tax liability. Included within the net decrease in the valuation allowance was an increase of $62 million recorded through other comprehensive income.

At February 3, 2018 and January 28, 2017, we had a valuation allowance of $4.2 billion and $5.5 billion, respectively. The amount of the deferred tax asset considered realizable, however, could be adjusted in the future if estimates of future taxable income during the carryforward period are reduced or increased, or if the objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. We will continue to evaluate our valuation allowance in future years for any change in circumstances that causes a change in judgment about the realizability of the deferred tax asset.

At the end of 2017 and 2016, respectively, we had a federal and state net operating loss ("NOL") deferred tax asset of $1.7 billion and $2.3 billion, which will expire predominately between 2019 and 2037. We have credit carryforwards of $899 million, which will expire between 2018 and 2037.

In connection with the Craftsman Sale in the first quarter of 2017, the Company realized a tax benefit of $101 million on the deferred taxes related to the indefinite-life intangible for the trade name sold to Stanley Black & Decker. In addition, the Company incurred a taxable gain of approximately $963 million. There was no federal income tax payable resulting from the taxable gain due to the utilization of NOL tax attributes of approximately $361 million with a valuation allowance release of the same amount. However, there was state income tax of $4 million payable after the utilization of state tax attributes.

In July, 2016, the Company sold shares of an investment for $106 million. The sale resulted in a U.S. taxable gain of $105 million, but no current income tax is payable due to the utilization of NOL attributes of $37 million with a valuation allowance release of the same amount.

On July 7, 2015, Holdings completed the Seritage transaction. As part of the transaction, Holdings sold 235 properties to Seritage along with Holdings' 50% interests in the JVs, which hold an additional 31 properties (See Note 11 for additional information and defined terms).

In connection with the Seritage transaction and the JV transactions, the Company realized a tax benefit of $229 million on the deferred taxes related to the indefinite-life assets associated with the property sold. In addition, the Company incurred a taxable gain of approximately $2.2 billion, taking into account any related party loss disallowance, on these transactions. There was no federal income tax payable resulting from the taxable gain due to the utilization of NOL tax attributes of approximately $856 million with a valuation allowance release of the same amount. However, there was a minor amount of state and city income tax payable of $4 million after the utilization of state and city tax attributes. As a result of all the effects from the Seritage transaction and the JV transactions in 2015, the impact to the net valuation allowance was a release of approximately $500 million.

Accounting for Uncertainties in Income Taxes

We are present in a large number of taxable jurisdictions, and at any point in time, can have audits underway at various stages of completion in any of these jurisdictions. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by federal, foreign and/or local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closing of statute of limitations. Such adjustments are reflected in the tax provision as appropriate. While we do not expect material changes, it is possible that the amount of unrecognized benefit with respect to our uncertain tax positions will significantly increase or decrease within the next 12 months related to the audits described above. At this time, our estimated range of impact on the balance of unrecognized tax benefits for 2018 is a change of $1 million to $14 million, which would impact the effective tax rate by $1 million to $11 million. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits ("UTB") is as follows:

	Federal, State and Foreign Tax
millions	February 3, 2018			January 28, 2017			January 30, 2016
Gross UTB Balance at Beginning of Period	$	142		$	137		$	131
Tax positions related to the current period:
Gross increases	20			12			14
Gross decreases	—			—			—
Tax positions related to prior periods:
Gross increases	—			—			—
Gross decreases	(26		)	—			—
Settlements	(1		)	—			—
Lapse of statute of limitations	(5		)	(7		)	(8		)
Gross UTB Balance at End of Period	$	130		$	142		$	137

At the end of 2017, we had gross unrecognized tax benefits of $130 million. Of this amount, $103 million would, if recognized, impact our effective tax rate, with the remaining amount being comprised of unrecognized tax benefits related to indirect tax benefits. During 2017 and 2016, the gross unrecognized tax benefits increased by $20 million and $12 million, respectively, due to current year accruals for existing tax positions. We expect that our unrecognized tax benefits could decrease up to $10 million over the next 12 months for tax audit settlements and the expiration of the statute of limitations for certain jurisdictions.

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. At February 3, 2018 and January 28, 2017, the total amount of interest and penalties recognized within the related tax liability in our Consolidated Balance Sheet was $51 million ($40 million net of federal benefit) and $61 million ($40 million net of federal benefit), respectively. The total amount of net interest benefit recognized in our Consolidated Statements of Operations was $6 million in 2017. The total amount of net interest expense recognized in our Consolidated Statements of Operations was $3 million and $4 million in 2016 and 2015, respectively.

We file income tax returns in both the United States and various foreign jurisdictions. The U.S. Internal Revenue Service ("IRS") has completed its examination of all federal tax returns of Holdings through the 2009 return, and all matters arising from such examinations have been resolved. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2003 through 2016, and Kmart is under examination by such jurisdictions for the years 2006 through 2016.

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REAL ESTATE TRANSACTIONS

12 Months Ended

Feb. 03, 2018

Real Estate [Abstract]

REAL ESTATE TRANSACTIONS

REAL ESTATE TRANSACTIONS

Gain on Sales of Assets

We recognized $1.6 billion, $247 million and $743 million in gains on sales of assets during 2017, 2016 and 2015, respectively. These gains were primarily a result of several real estate transactions. Real estate transactions in 2017 included properties that served as collateral for our real estate facilities for which proceeds of $250 million, $116 million and $55 million were used to pay interest and a portion of the 2016 Secured Loan Facility, 2017 Secured Loan Facility and Incremental Loans, respectively. Gains in 2017 also included a gain of $492 million in connection with the Craftsman Sale, which is further described in Note 1.

Seritage transaction and JV transactions

On April 1, 2015, April 13, 2015, and April 30, 2015, Holdings and General Growth Properties, Inc. ("GGP"), Simon Property Group, Inc. ("Simon") and The Macerich Company ("Macerich"), respectively, announced that they entered into three distinct real estate joint ventures (collectively, the "JVs"). Holdings contributed 31 properties to the JVs where Holdings currently operates stores (the "JV properties"), in exchange for a 50% interest in the JVs and $429 million in cash ($426 million, net of closing costs) (the "JV transactions"). The JV transactions valued the JV properties at $858 million in the aggregate.

On July 7, 2015, Holdings completed its rights offering and sale-leaseback transaction (the "Seritage transaction") with Seritage Growth Properties ("Seritage"), an independent publicly traded real estate investment trust ("REIT"). As part of the Seritage transaction, Holdings sold 235 properties to Seritage (the "REIT properties") along with Holdings' 50% interest in the JVs. Holdings received aggregate gross proceeds from the Seritage transaction of $2.7 billion ($2.6 billion, net of closing costs). The Seritage transaction was partially financed through the sale of common shares and limited partnership units, totaling $1.6 billion, including $745 million received from ESL and its affiliates and $297 million received from Fairholme and its affiliates as further described in Note 15. The Seritage transaction valued the REIT properties at $2.3 billion in the aggregate.

In connection with the Seritage transaction and JV transactions, Holdings entered into agreements with Seritage and the JVs under which Holdings initially leased 255 of the properties (the "Master Leases"), with the remaining properties being leased by Seritage to third parties. Holdings has closed 19 stores pursuant to recapture notices from Seritage or the JVs and 56 stores pursuant to lease terminations. An additional 11 stores will close in 2018 pursuant to recapture notices from Seritage or the JVs. Also, in July 2017, Seritage sold a 50% joint venture interest in five of the properties and Holdings will pay rent to the new landlord.

We accounted for the Seritage transaction and JV transactions in accordance with accounting standards applicable to real estate sales and sale-leaseback transactions. We determined that the Seritage transaction qualifies for sales recognition and sale-leaseback accounting. Because of our initial ownership interest in the JVs and continuing involvement in the properties, we determined that the JV transactions, which occurred in the first quarter of 2015, did not initially qualify for sale-leaseback accounting and, therefore, accounted for the JV transactions as financing transactions and, accordingly, recorded a sale-leaseback financing obligation of $426 million and continued to report the real property assets on our Condensed Consolidated Balance Sheets at May 2, 2015. Upon the sale of our 50% interest in the JVs to Seritage, the continuing involvement through an ownership interest in the buyer-lessor no longer existed, and Holdings determined that the JV transactions then qualified for sales recognition and sale-leaseback accounting, with the exception of four properties for which we had continuing involvement as a result of an obligation to redevelop the stores for a third-party tenant and pay rent on behalf of the third-party tenant until it commences rent payments to the JVs.

With the exception of the four properties that had continuing involvement, in accordance with accounting standards related to sale-leaseback transactions, Holdings recognized any loss on sale immediately, any gain on sale in excess of the present value of minimum lease payments immediately, and any remaining gain was deferred and will be recognized in proportion to the related rent expense over the lease term. Holdings received aggregate net proceeds of $3.1 billion for the Seritage transaction and JV transactions. The carrying amount of property and equipment, net and lease balances related to third-party leases that were assigned to Seritage and the JVs was $1.5 billion at July 7, 2015, of which $1.3 billion was recorded in our Sears Domestic segment and $175 million in our Kmart segment. Accordingly, during the second quarter of 2015, Holdings recognized an immediate net gain of $508 million within gain on sales of assets in the Consolidated Statements of Operations for 2015, comprised of a gain for the amount of gain on sale in excess of the present value of minimum lease payments, offset by a loss for properties where the fair value was less than the carrying value and the write-off of lease balances related to third-party leases that were assigned to Seritage and the JVs, as shown in the table below.

	2015
millions	Kmart			Sears Domestic			Sears Holdings
Gain	$	154		$	471		$	625
Loss	(17		)	(100		)	(117		)
Immediate Net Gain	$	137		$	371		$	508

The remaining gain of $894 million was deferred and will be recognized in proportion to the related rent expense, which is a component of cost of sales, buying and occupancy, in the Consolidated Statements of Operations, over the lease term.

During 2017 and 2016, respectively, Holdings recorded gains of $253 million and $72 million related to recapture and termination activity in connection with REIT properties and JV properties. The Master Leases provide Seritage and the JVs rights to recapture 100% of certain stores. The Master Leases also provide Seritage and the JVs a recapture right with respect to approximately 50% of the space within the stores at the REIT properties and JV properties (subject to certain exceptions), in addition to all of the automotive care centers, all outparcels or outlots, and certain portions of parking areas and common areas, except as set forth in the Master Leases, for no additional consideration. As space is recaptured pursuant to the recapture right, Holdings' obligation to pay rent is reduced proportionately. Accordingly, Holdings recognizes gains equal to the unamortized portion of the gain that had previously been deferred which exceeds the present value of minimum lease payments, as reduced due to recapture activity. The Master Leases also provide Holdings certain rights to terminate the Master Leases with respect to REIT properties or JV properties that cease to be profitable for operation. In order to terminate the Master Lease for a certain property, Holdings must make a payment to Seritage or the JV of an amount equal to one year of rent (together with taxes and other expenses) with respect to such property. The Company recognizes the corresponding expenses for termination payments to Seritage when we notify Seritage of our intention to terminate the leases and the stores are announced for closure. We recorded expense of $24 million and $21 million for termination payments to Seritage in 2017 and 2016, respectively, of which $11 million was reported as an amount payable to Seritage at January 28, 2017.

Holdings also recorded immediate gains of $40 million during the 2017, for the amount of gains on sale in excess of the present value of minimum lease payments for two of the properties that were previously accounted for as financing transactions. As the redevelopment at the stores had been completed and the third-party tenant had commenced rent payments to the JVs, the Company determined that the continuing involvement no longer existed and that the properties qualified for sales recognition and sale-leaseback accounting.

Sale-leaseback financing transactions

Holdings received cash proceeds for sale-leaseback financing transactions of $106 million, $71 million and $508 million in 2017, 2016 and 2015, respectively, including the Seritage transaction and JV transactions in 2015, as further described above. We accounted for the other transactions as financing transactions in accordance with accounting standards applicable to sale-leaseback transactions as a result of other forms of continuing involvement, including an earn-out provision and the requirement to prepay rent for one year. Accordingly, Holdings recorded a sale-leaseback financing obligation of $247 million and $235 million, at February 3, 2018 and January 28, 2017, respectively, which is classified as a long-term sale-leaseback financing obligation in the Consolidated Balance Sheets. The sale-leaseback financing obligation related to the four properties that had continuing involvement decreased to $70 million at February 3, 2018 as two of the properties qualified for sales recognition and sale-leaseback accounting as further described above. We continued to report real property assets of $66 million and $96 million at February 3, 2018 and January 28, 2017, respectively, in our Consolidated Balance Sheets, which are included in our Sears Domestic segment. The obligation for future minimum lease payments at February 3, 2018 is $59 million over the lease terms, and $6 million in 2018, $11 million in 2019, $9 million in 2020, $6 million in 2021, $6 million in 2022 and $21 million thereafter, excluding $6 million was that was prepaid upon closing the transactions.

Other real estate transactions

In addition to the Seritage transaction, JV transactions and other sale-leaseback financing transactions described above, we recorded gains on the sales of assets for other items described as follows.

During 2017, we recorded gains on the sales of assets of $544 million recognized on the sale or amendment and lease termination of 48 Sears Full-line stores and four non-retail locations in our Sears Domestic segment for which we received $711 million cash proceeds. During 2017, we also recorded gains on the sales of assets of $164 million recognized on the sale or amendment and lease termination of 41 Kmart stores and two non-retail locations in our Kmart segment for which we received $190 million cash proceeds.

During 2016, we recorded gains on the sales of assets of $15 million recognized on the sale of two Sears Full-line stores for which we received $27 million of cash proceeds, $12 million recognized on the sale of one distribution center for which we received $23 million of cash proceeds and $10 million on the sale of one Kmart store for which we received $10 million of cash proceeds.

During 2015, we recorded gains on the sales of assets of $83 million recognized on the sale of one Sears Full-line store for which we received $102 million of cash proceeds, $90 million of which was received during the third quarter of 2014. As the leaseback ended and the remaining cash proceeds of $12 million were received during 2015, we recognized the gain that had previously been deferred. We also recorded gains on the sales of assets of $86 million recognized on the sale of two Sears Full-line stores for which we received $96 million of cash proceeds, and $10 million recognized on the surrender and early termination of one Kmart store lease.

Certain sales of our properties had leaseback arrangements. We determined that the transactions with leaseback arrangements qualify for sales recognition and sale-leaseback accounting. In accordance with accounting standards related to sale-leaseback transactions, Holdings recognized any loss on sale immediately, any gain on sale in excess of the present value of minimum lease payments immediately, and any remaining gain was deferred and will be recognized in proportion to the related rent expense over the lease term. At February 3, 2018 and January 28, 2017, respectively, $138 million and $132 million of the deferred gain on sale-leaseback is classified as current within other current liabilities, and $362 million and $563 million is classified as long-term deferred gain on sale-leaseback in the Consolidated Balance Sheets. For the other transactions, we determined that we have surrendered substantially all of our rights and obligations, and, therefore, immediate gain recognition is appropriate.

Holdings recorded rent expense in connection with sale-lease back transactions with gains that were initially deferred and are being recognized in proportion to the related rent expense over the lease term of $82 million, $96 million and $68 million in 2017, 2016 and 2015, respectively, in cost of sales, buying and occupancy in the Consolidated Statements of Operations. Rent expense consisted of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback, as shown in the table below.

	2017									2016									2015
millions	Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Holdings
Straight-line rent expense	$	20		$	140		$	160		$	32		$	152		$	184		$	20		$	100		$	120
Amortization of deferred gain on sale-leaseback	(11		)	(67		)	(78		)	(17		)	(71		)	(88		)	(11		)	(41		)	(52		)
Rent expense	$	9		$	73		$	82		$	15		$	81		$	96		$	9		$	59		$	68

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GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Feb. 03, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

The following summarizes our intangible assets at February 3, 2018 and January 28, 2017, respectively, the amortization expenses recorded for the years then ended, as well as our estimated amortization expense for the next five years and thereafter.

	February 3, 2018				January 28, 2017
millions	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets:
Favorable lease rights	$	121	$	44	$	143	$	52
Non-amortizing intangible assets:
Trade names	1,091		—		1,430		—
Total	$	1,212	$	44	$	1,573	$	52

Annual Amortization Expense
2017	$	4
2016	5
2015	7

Estimated Amortization
2018	$	3
2019	3
2020	3
2021	3
2022	3
Thereafter	56

Goodwill is the excess of the purchase price over the fair value of the net assets acquired in business combinations accounted for under the purchase method. Goodwill is recorded at Sears Domestic and had a balance of $269 million at both February 3, 2018 and January 28, 2017.

As described in Summary of Significant Accounting Policies in Note 1, goodwill and indefinite-lived intangible assets are not amortized but require testing for potential impairment, at a minimum on an annual basis, or when indications of potential impairment exist. As a result of our annual testing of indefinite-lived intangible assets, we recorded impairment related to the Sears trade name of $72 million, $381 million and $180 million in 2017, 2016 and 2015, respectively, which reduced the carrying value to $359 million at February 3, 2018 and $431 million at January 28, 2017. The impairment is recorded at Sears Domestic and included within impairment charges on our Consolidated Statements of Operations.

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STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS

12 Months Ended

Feb. 03, 2018

Restructuring and Related Activities [Abstract]

STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS

STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS

Store Closings and Severance

During 2017, 2016 and 2015, respectively, we closed 303, 206 and 38 stores in our Kmart segment and 123, 37 and 12 stores in our Sears Domestic segment. An additional 66 stores in our Kmart segment and 40 stores in our Sears Domestic segment will close during the first quarter of 2018 that we previously announced would close. We also made the decision to close one domestic supply chain distribution center in our Sears Domestic segment during 2016.

In accordance with accounting standards governing costs associated with exit or disposal activities, expenses related to future rent payments for which we no longer intend to receive any economic benefit are accrued for when we cease to use the leased space and have been reduced for any estimated sublease income. We expect to record additional charges of approximately $55 million during 2018 related to stores we had previously made the decision to close, but have not yet closed.

Store closing costs and severance recorded for 2017, 2016 and 2015 were as follows:

millions	Markdowns(1)		Severance Costs(2)		Lease Termination Costs(2)			Other Charges(2)		Impairment and Accelerated Depreciation(3)		Total Store Closing Costs
Kmart	$	154	$	25	$	80		$	22	$	19	$	300
Sears Domestic	73		58		40			10		21		202
Total 2017 costs	$	227	$	83	$	120		$	32	$	40	$	502
Kmart	$	187	$	28	$	71		$	32	$	13	$	331
Sears Domestic	39		13		5			9		7		73
Total 2016 costs	$	226	$	41	$	76		$	41	$	20	$	404
Kmart	$	39	$	16	$	21		$	10	$	1	$	87
Sears Domestic	5		21		(15		)	1		2		14
Total 2015 costs	$	44	$	37	$	6		$	11	$	3	$	101

_____________

⁽¹⁾  Recorded within cost of sales, buying and occupancy in the Consolidated Statements of Operations.

⁽²⁾  Recorded within selling and administrative in the Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

⁽³⁾  2017, 2016 and 2015 costs are recorded within depreciation and amortization on the Consolidated Statements of Operations.

Store closing cost accruals of $261 million, $216 million and $180 million at February 3, 2018, January 28, 2017 and January 30, 2016, respectively, were as shown in the table below. Store closing accruals included $126 million, $122 million and $81 million within other current liabilities and $135 million, $94 million and $99 million within other long-term liabilities in the Consolidated Balance Sheets at February 3, 2018, January 28, 2017 and January 30, 2016, respectively.

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at January 30, 2016	$	58		$	114		$	8		$	180
Store closing costs	41			85			41			167
Payments/utilizations/other	(45		)	(55		)	(31		)	(131		)
Balance at January 28, 2017	54			144			18			216
Store closing costs	83			162			32			277
Store closing capital lease obligations	—			33			—			33
Payments/utilizations/other	(88		)	(139		)	(38		)	(265		)
Balance at February 3, 2018	$	49		$	200		$	12		$	261

Impairment of Long-Lived Assets

As described in the Summary of Significant Accounting Policies in Note 1, we performed impairment tests of certain of our long-lived assets during 2017, 2016 and 2015 (principally the value of land, buildings and other fixed assets associated with our stores). As a result of this impairment testing, the Company recorded impairment charges as shown in the table below.

millions	2017		2016		2015
Kmart	$	16	$	22	$	14
Sears Domestic	54		24		80
Sears Holdings	$	70	$	46	$	94

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LEASES

12 Months Ended

Feb. 03, 2018

Leases [Abstract]

LEASES

LEASES

We lease certain stores, office facilities, warehouses, computers and transportation equipment.

Operating and capital lease obligations are based upon contractual minimum rents and, for certain stores, amounts in excess of these minimum rents are payable based upon specified percentages of sales. Contingent rent is accrued over the lease term, provided that the achievement of the specified sales level that triggers the contingent rental is probable. Certain leases include renewal or purchase options.

Rental expense for operating leases was as follows:

millions	2017			2016			2015
Minimum rentals	$	666		$	739		$	713
Percentage rentals	5			7			8
Less-Sublease rentals	(43		)	(51		)	(46		)
Less-Amortization of deferred gain on sale-leaseback	(78		)	(88		)	(52		)
Total	$	550		$	607		$	623

Minimum lease obligations, excluding taxes, insurance and other expenses payable directly by us, for leases in effect at February 3, 2018, were as follows:

	Minimum Lease Commitments
millions	Capital			Operating
2018	$	28		$	537
2019	15			439
2020	6			368
2021	4			297
2022	4			237
Later years	58			961
Total minimum lease payments	115			2,839
Less minimum sublease income				(92		)
Net minimum lease payments				$	2,747
Less:
Estimated executory costs	(4		)
Interest at a weighted average rate of 4.9%	(39		)
Capital lease obligations	72
Less current portion of capital lease obligations	(22		)
Long-term capital lease obligations	$	50

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RELATED PARTY DISCLOSURE

12 Months Ended

Feb. 03, 2018

Related Party Transactions [Abstract]

RELATED PARTY DISCLOSURE

RELATED PARTY DISCLOSURE

Mr. Lampert is our Chief Executive Officer and Chairman of our Board of Directors. Mr. Lampert is also the Chairman and Chief Executive Officer of ESL. ESL owned approximately 49% of our outstanding common stock at February 3, 2018 (excluding shares of common stock that ESL may acquire within 60 days upon the exercise of warrants to purchase shares of our common stock).

Bruce R. Berkowitz was a member of our Board of Directors from February 2016 through October 2017. Mr. Berkowitz serves as the Chief Investment Officer of Fairholme Capital Management, LLC, an investment adviser registered with the SEC, and is the President and a Director of Fairholme Funds, Inc., a SEC-registered investment company providing investment management services to three mutual funds (together with Fairholme Capital Management, LLC and other affiliates, "Fairholme"). Fairholme owned approximately 18% of our outstanding common stock at February 3, 2018 (excluding shares of common stock that Fairholme may acquire within 60 days upon the exercise of warrants to purchase shares of our common stock).

Thomas J. Tisch has been an independent member of our Board of Directors since 2005. Mr. Tisch owned approximately 3% of our outstanding common stock at February 3, 2018.

Unsecured Commercial Paper

During 2017 and 2016, ESL and its affiliates held unsecured commercial paper issued by SRAC, an indirect wholly-owned subsidiary of Holdings. For the commercial paper outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding for this commercial paper was 8 days, 8.22% and $28 million and 21 days, 7.87% and $100 million, respectively, in 2017 and 2016. The largest aggregate amount of principal outstanding to ESL at any time since the beginning of 2017 was $160 million and $3 million of interest was paid by SRAC to ESL during 2017.

During 2016, Fairholme and its affiliates held unsecured commercial paper issued by SRAC. For the commercial paper outstanding to Fairholme, the weighted average of each of maturity, annual interest rate, and principal amount outstanding for this commercial paper was 63 days, 7.42% and $1 million in 2016.

The commercial paper purchases were made in the ordinary course of business on substantially the same terms, including interest rates, as terms prevailing for comparable transactions with other persons, and did not present features unfavorable to the Company.

Secured Short-Term Loan

In September 2014, the Company, through the Short-Term Borrowers, entities wholly-owned and controlled, directly or indirectly by the Company, entered into the $400 million Short-Term Loan with the Short-Term Lender, entities affiliated with ESL and Fairholme. The Company repaid the Short-Term Loan during 2015, resulting in no balance outstanding at February 3, 2018 or January 28, 2017. See Note 3 for additional information regarding the Short-Term Loan.

LC Facility

On December 28, 2016, the Company, through the Borrowers, entered into the LC Facility, which was subsequently amended in August 2017, and which provides for the amended LC Facility. At February 3, 2018, and January 28, 2017, we had $271 million and $200 million, respectively, of letters of credit outstanding under the LC Facility, which amounts were initially committed by entities affiliated with ESL, and the Lenders under the LC Facility maintain cash collateral on deposit with the Issuing Bank of $133 million and $204 million at February 3, 2018 and January 28, 2017, respectively. As of February 3, 2018, $138 million of the amount originally committed by entities affiliated with ESL under the LC Facility has been syndicated to unaffiliated third party lenders. See Note 3 for additional information regarding the LC Facility, as amended.

Term Loan Facility

On January 4, 2018, the Company, through the Borrowers, obtained a $300 million loan facility from the Lenders, entities affiliated with ESL. At February 3, 2018, JPP LLC and JPP II, LLC, entities affiliated with ESL, held $151 million of principal amount of the Term Loan Facility. See Note 3 for additional information regarding the Term Loan Facility.

2017 Secured Loan Facility

On January 3, 2017, the Company, through the 2017 Secured Loan Borrowers, obtained a $500 million real estate loan facility from the Lenders, entities affiliated with ESL. At February 3, 2018 and January 28, 2017, JPP LLC and JPP II, LLC, entities affiliated with ESL, held $384 million and $500 million of principal amount of the 2017 Secured Loan Facility, respectively. Approximately $116 million of proceeds received from real estate transactions were used to reduce outstanding borrowings under the 2017 Secured Loan Facility, all of which were repaid to entities affiliated with ESL. During October 2017, the Company, through the Incremental Loan Borrowers, obtained Incremental Loans totaling $200 million from the Lenders. At February 3, 2018, JPP LLC and JPP II, LLC, held $145 million of principal amount of the Incremental Loans. Approximately $55 million of proceeds received from real estate transactions were used to reduce outstanding borrowings under the Incremental Loans, all of which were repaid to entities affiliated with ESL. See Note 3 for additional information regarding the 2017 Secured Loan Facility and Incremental Loans.

2016 Secured Loan Facility

In April 2016, the Company, through the 2016 Secured Loan Borrowers, obtained a $500 million real estate loan facility from the 2016 Secured Loan Lenders, some of which are entities affiliated with ESL. At February 3, 2018 and January 28, 2017, entities affiliated with ESL held $126 million and $216 million, respectively, of principal amount of the 2016 Secured Loan Facility. Proceeds received from real estate transactions were used to reduce outstanding borrowings under the 2016 Secured Loan Facility, of which $89 million was repaid to entities affiliated with ESL. See Note 3 for additional information regarding the 2016 Secured Loan Facility, as amended.

2016 Term Loan

In April 2016, the Company, through the ABL Borrowers, obtained a $750 million senior secured term loan under the Amended Domestic Credit Agreement with a syndicate of lenders, including $146 million (net of original issue discount) from JPP, LLC and JPP II, LLC, entities affiliated with ESL, and $100 million from the Company's domestic pension plans. At February 3, 2018, JPP LLC and JPP II, LLC, and the Company's domestic pension plans held $38 million and $77 million, respectively, of principal amount of the 2016 Term Loan. At January 28, 2017, JPP LLC and JPP II, LLC, and the Company's domestic pension plans held $150 million and $100 million, respectively, of principal amount of the 2016 Term Loan. As disclosed in Note 3, a portion of the proceeds received from the Craftsman Sale were used to reduce outstanding borrowings under the 2016 Term Loan, of which $36 million and $24 million was repaid to JPP LLC and JPP II, LLC, and the Company's domestic pension plans, respectively. See Note 3 for additional information regarding the 2016 Term Loan.

Second Lien Credit Agreement

In September 2016, the Company, through the ABL Borrowers, obtained a $300 million Second Lien Term Loan from the Lenders, entities affiliated with ESL. At both February 3, 2018 and January 28, 2017, JPP LLC and JPP II, LLC, held $300 million of principal amount of the Second Lien Term Loan.

Additionally, as further discussed in Note 3, in July 2017, the Company amended its Second Lien Credit Agreement to create an additional Line of Credit Facility. The Company received $610 million in net proceeds from Line of Credit Loans during 2017, including $480 million, $25 million and $20 million from ESL and its affiliates, Mr. Berkowitz and his affiliates, and Mr. Tisch and his affiliates, respectively, which also represents the principal amount of Line of Credit Loans held by ESL and its affiliates and Mr. Tisch and his affiliates at February 3, 2018. The Company made repayments of $25 million during 2017 to Mr. Berkowitz and his affiliates. See Note 3 for additional information regarding the Second Lien Credit Agreement, as amended.

Old Senior Secured Notes

At February 3, 2018 and January 28, 2017, Mr. Lampert and ESL held an aggregate of approximately $20 million and $11 million, respectively, of principal amount of the Company's Old Senior Secured Notes. Mr. Lampert and ESL tendered approximately $165 million of the Company's Old Senior Secured Notes in the Offer, which is further discussed in Note 3.

At January 28, 2017, Fairholme held an aggregate of approximately $46 million of principal amount of the Company's Old Senior Secured Notes, respectively. Fairholme tendered approximately $207 million of the Company's Old Senior Secured Notes in the Tender Offer, which is further discussed in Note 3.

Subsidiary Notes

At January 28, 2017, Mr. Lampert and ESL held an aggregate of $3 million of principal amount of unsecured notes issued by SRAC (the "Subsidiary Notes").

At February 3, 2018 and January 28, 2017, Fairholme held an aggregate of $9 million and $14 million, respectively, of principal amount of the Subsidiary Notes.

Old Senior Unsecured Notes and Warrants

At both February 3, 2018 and January 28, 2017, Mr. Lampert and ESL held an aggregate of approximately $188 million of principal amount of the Company's Old Senior Unsecured Notes, and 10,033,472 warrants to purchase shares of Holdings' common stock at both February 3, 2018 and January 28, 2017.

At February 3, 2018 and January 28, 2017, respectively, Fairholme held an aggregate of approximately $336 million and $357 million of principal amount of the Company's Old Senior Unsecured Notes, and 5,768,185 and 6,713,725 warrants to purchase shares of Holdings' common stock.

At both February 3, 2018 and January 28, 2017, Mr. Tisch held an aggregate of approximately $10 million of principal amount of the Company's Old Senior Unsecured Notes, and 136,272 warrants to purchase shares of Holdings' common stock.

Sears Canada

ESL owns approximately 45% of the outstanding common shares of Sears Canada (based on publicly available information as of July 27, 2017).

Lands' End

ESL owns approximately 67% of the outstanding common stock of Lands' End (based on publicly available information as of January 24, 2018). Holdings and certain of its subsidiaries entered into a transition services agreement in connection with the spin-off pursuant to which Lands' End and Holdings agreed to provide, on an interim, transitional basis, various services, including but not limited to, tax services, logistics services, auditing and compliance services, inventory management services, information technology services and continued participation in certain contracts shared with Holdings and its subsidiaries, as well as agreements related to Lands' End Shops at Sears and participation in the Shop Your Way program. The majority of the services under the transition services agreement with Lands' End have expired or been terminated. In July 2016, the Company and Lands' End executed an agreement pursuant to which the Company will provide foreign buying office support and sourcing services to Lands' End. The agreement expires on June 30, 2020.

Amounts due to or from Lands' End are non-interest bearing, and generally settled on a net basis. Holdings invoices Lands' End on at least a monthly basis. At February 3, 2018, Holdings reported a net amount receivable from Lands' End of $1 million within accounts receivable in the Consolidated Balance Sheets. At January 28, 2017, Holdings reported a net amount payable to Lands' End of $1 million within other current liabilities in the Consolidated Balance Sheets. Amounts related to revenue from retail services and rent for Lands' End Shops at Sears, participation in the Shop Your Way program and corporate shared services were $60 million, $65 million and $69 million, respectively, during 2017, 2016 and 2015. The amounts Lands' End earned related to call center services and commissions were $2 million, $10 million and $10 million, respectively, during 2017, 2016 and 2015.

SHO

ESL owns approximately 58% of the outstanding common stock of SHO (based on publicly available information as of November 8, 2017). Holdings and certain of its subsidiaries engage in transactions with SHO pursuant to various agreements with SHO which, among other things: (1) govern the principal transactions relating to the rights offering and certain aspects of our relationship with SHO following the separation; (2) establish terms under which Holdings and certain of its subsidiaries will provide SHO with services; and (3) establish terms pursuant to which Holdings and certain of its subsidiaries will obtain merchandise for SHO.

These agreements were originally made in the context of a parent-subsidiary relationship and were negotiated in the overall context of the separation. In May 2016, the Company and SHO agreed to changes to a number of their related agreements, including extending the merchandise and services agreement until February 1, 2020.

A summary of the nature of related party transactions involving SHO is as follows:

• SHO obtains a significant amount of its merchandise from the Company. We have also entered into certain agreements with SHO to provide logistics, handling, warehouse and transportation services. SHO also pays a royalty related to the sale of Kenmore, Craftsman and DieHard products and fees for participation in the Shop Your Way program.

• SHO receives commissions from the Company for the sale of merchandise made through www.sears.com, extended service agreements, delivery and handling services and credit revenues.

• The Company provides SHO with shared corporate services. These services include accounting and finance, human resources and information technology.

Amounts due to or from SHO are non-interest bearing, settled on a net basis, and have payment terms of 10 days after the invoice date. The Company invoices SHO on a weekly basis. At February 3, 2018 and January 28, 2017, Holdings reported a net amount receivable from SHO of $28 million and $81 million, respectively, within accounts receivable in the Consolidated Balance Sheets. Amounts related to the sale of inventory and related services, royalties, and corporate shared services were $1.0 billion, $1.2 billion and $1.5 billion, respectively, during 2017, 2016 and 2015. The net amounts SHO earned related to commissions were $66 million, $82 million and $91 million, respectively, during 2017, 2016 and 2015. Additionally, the Company has guaranteed lease obligations for certain SHO store leases that were assigned as a result of the separation. See Note 4 for further information related to these guarantees.

Also in connection with the separation, the Company entered into an agreement with SHO and the agent under SHO's secured credit facility, whereby the Company committed to continue to provide services to SHO in connection with a realization on the lender's collateral after default under the secured credit facility, notwithstanding SHO's default under the underlying agreement with us, and to provide certain notices and services to the agent, for so long as any obligations remain outstanding under the secured credit facility.

Seritage

ESL owns approximately 7.2% of the total voting power of Seritage, and approximately 43.5% of the limited partnership units of Seritage Growth Properties, L.P. (the "Operating Partnership"), the entity that now owns the properties sold by the Company in the Seritage transaction and through which Seritage conducts its operations (based on publicly available information as of December 27, 2017). Mr. Lampert is also currently the Chairman of the Board of Trustees of Seritage. Fairholme owns approximately 11% of the outstanding Class A common shares of Seritage and 100% of the outstanding Class C non-voting common shares of Seritage (based on publicly available information as of February 14, 2018).

In connection with the Seritage transaction as described in Note 11, Holdings entered into the Master Leases with Seritage. The initial amount of aggregate annual base rent under the Master Leases is $134 million for the REIT properties, with increases of 2% per year beginning in the second lease year. At February 3, 2018, Holdings reported prepaid rent of $6 million within prepaid expenses and other current assets in the Consolidated Balance Sheets. Holdings recorded rent expense of $70 million, $83 million and $49 million in cost of sales, buying and occupancy for 2017, 2016 and 2015, respectively. Rent expense consists of straight-line rent expense of $117 million, $142 million and $84 million, offset by amortization of a deferred gain recognized pursuant to the sale and leaseback of properties from Seritage of $47 million, $59 million and $35 million for 2017, 2016 and 2015, respectively.

In addition to base rent under the Master Leases, Holdings pays monthly installment expenses for property taxes and insurance at all REIT properties where Holdings is a tenant and installment expenses for common area maintenance, utilities and other operating expenses at REIT properties that are multi-tenant locations where Holdings and other third parties are tenants. The initial amount of aggregate installment expenses under the Master Leases was $70 million, based on estimated installment expenses, and currently is $41 million as a result of recapture activity and reconciling actual installment expenses. Holdings paid $43 million, $64 million and $40 million for 2017, 2016 and 2015, respectively, recorded in cost of sales, buying and occupancy.

At February 3, 2018 and January 28, 2017, respectively, Holdings reported an amount receivable from Seritage of $1 million and $14 million within accounts receivable in the Consolidated Balance Sheets. Holdings reported an amount payable to Seritage of $11 million within other current liabilities in the Consolidated Balance Sheets at January 28, 2017.

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SUPPLEMENTAL FINANCIAL INFORMATION

12 Months Ended

Feb. 03, 2018

Supplemental Financial Information [Abstract]

SUPPLEMENTAL FINANCIAL INFORMATION

SUPPLEMENTAL FINANCIAL INFORMATION

Other long-term liabilities at February 3, 2018 and January 28, 2017 consisted of the following:

millions	February 3, 2018		January 28, 2017
Unearned revenues	$	539	$	639
Self-insurance reserves	491		535
Other	437		467
Total	$	1,467	$	1,641

The Company sells service contracts that provide for preventative maintenance and repair/replacement coverage on consumer products over periods of time ranging from 12 to 144 months. Revenues from the sale of service contracts, and the related direct acquisition costs, are deferred and amortized on a straight-line basis over the lives of the associated contracts, while the associated service costs are expensed as incurred. The table below shows activity related to unearned revenues for service contracts, which are recorded within unearned revenues and other long-term liabilities in the Consolidated Balance Sheets.

millions	Unearned Revenues
Balance at January 30, 2016	$	1,405
Sales of service contracts	855
Revenue recognized on existing service contracts	(961		)
Balance at January 28, 2017	1,299
Sales of service contracts	691
Revenue recognized on existing service contracts	(876		)
Balance at February 3, 2018	$	1,114

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SUMMARY OF SEGMENT DATA

12 Months Ended

Feb. 03, 2018

Segment Reporting [Abstract]

SUMMARY OF SEGMENT DATA

SUMMARY OF SEGMENT DATA

These reportable segment classifications are based on our business formats, as described in Note 1. The Kmart format represents both an operating and reportable segment. The Sears Domestic reportable segment consists of the aggregation of several business formats. These formats are evaluated by our Chief Operating Decision Maker ("CODM") to make decisions about resource allocation and to assess performance.

Each of these segments derives its revenues from the sale of merchandise and related services to customers, primarily in the United States. The merchandise and service categories are as follows:

(i) Hardlines—consists of home appliances, consumer electronics, lawn & garden, tools & hardware, automotive parts, household goods, toys, housewares and sporting goods;

(ii) Apparel and Soft Home—includes women's, men's, kids', footwear, jewelry, accessories and soft home;

(iii) Food and Drug—consists of grocery & household, pharmacy and drugstore;

(iv) Service—includes repair, installation and automotive service and extended contract revenue; and

(v) Other—includes revenues earned in connection with our agreements with SHO and Lands' End, as well as online commissions, licensed business revenues, wholesale revenues, rental income and credit revenues.

	2017
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales
Hardlines	$	1,550		$	5,656		$	7,206
Apparel and Soft Home	2,096			2,182			4,278
Food and Drug	1,918			7			1,925
Total merchandise sales	5,564			7,845			13,409
Services and other
Services	4			1,811			1,815
Other	50			1,428			1,478
Total services and other	54			3,239			3,293
Total revenues	5,618			11,084			16,702
Costs and expenses:
Cost of sales, buying and occupancy - merchandise sales	4,592			6,757			11,349
Cost of sales and occupancy - services and other	9			1,817			1,826
Total cost of sales, buying and occupancy	4,601			8,574			13,175
Selling and administrative	1,455			3,676			5,131
Depreciation and amortization	60			272			332
Impairment charges	16			126			142
Gain on sales of assets	(881		)	(767		)	(1,648		)
Total costs and expenses	5,251			11,881			17,132
Operating income (loss)	$	367		$	(797	)	$	(430	)
Total assets	$	1,576		$	5,686		$	7,262
Capital expenditures	$	18		$	62		$	80

	2016
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales
Hardlines	$	2,445		$	7,126		$	9,571
Apparel and Soft Home	3,044			2,522			5,566
Food and Drug	3,088			11			3,099
Total merchandise sales	8,577			9,659			18,236
Services and other
Services	9			2,101			2,110
Other	64			1,728			1,792
Total services and other	73			3,829			3,902
Total revenues	8,650			13,488			22,138
Costs and expenses:
Cost of sales, buying and occupancy - merchandise sales	7,075			8,109			15,184
Cost of sales and occupancy - services and other	18			2,250			2,268
Total cost of sales, buying and occupancy	7,093			10,359			17,452
Selling and administrative	2,175			3,934			6,109
Depreciation and amortization	71			304			375
Impairment charges	22			405			427
Gain on sales of assets	(181		)	(66		)	(247		)
Total costs and expenses	9,180			14,936			24,116
Operating loss	$	(530	)	$	(1,448	)	$	(1,978	)
Total assets	$	2,134		$	7,228		$	9,362
Capital expenditures	$	43		$	99		$	142

	2015
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales
Hardlines	$	2,936		$	7,915		$	10,851
Apparel and Soft Home	3,434			2,907			6,341
Food and Drug	3,735			9			3,744
Total merchandise sales	10,105			10,831			20,936
Services and other
Services	13			2,127			2,140
Other	70			2,000			2,070
Total services and other	83			4,127			4,210
Total revenues	10,188			14,958			25,146
Costs and expenses:
Cost of sales, buying and occupancy - merchandise sales	8,023			8,794			16,817
Cost of sales and occupancy - services and other	19			2,500			2,519
Total cost of sales, buying and occupancy	8,042			11,294			19,336
Selling and administrative	2,537			4,320			6,857
Depreciation and amortization	72			350			422
Impairment charges	14			260			274
Gain on sales of assets	(185		)	(558		)	(743		)
Total costs and expenses	10,480			15,666			26,146
Operating loss	$	(292	)	$	(708	)	$	(1,000	)
Total assets	$	3,059		$	8,278		$	11,337
Capital expenditures	$	42		$	169		$	211

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LEGAL PROCEEDINGS

12 Months Ended

Feb. 03, 2018

Commitments and Contingencies Disclosure [Abstract]

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

We are a defendant in several lawsuits containing class or collective action allegations in which the plaintiffs are current and former hourly and salaried associates who allege violations of various wage and hour laws, rules and regulations pertaining to alleged misclassification of certain of our employees, the failure to pay overtime, and/or the failure to pay for missed meal and rest periods, and other payroll violations. The complaints generally seek unspecified monetary damages, injunctive relief, or both. Further, certain of these proceedings are in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. We also are a defendant in putative class action or representative lawsuits in California relating to alleged failure to comply with California laws pertaining to certain operational, marketing, and pricing practices. The California laws alleged to have been violated in each of these lawsuits provide the potential for significant statutory penalties. At this time, the Company is not able to either predict the outcome of these lawsuits or reasonably estimate a potential range of loss with respect to the lawsuits.

We are subject to various other legal and governmental proceedings and investigations, including some involving the practices and procedures in our more highly regulated businesses. Some matters contain class action allegations, environmental and asbestos exposure allegations and other consumer-based, regulatory claims, each of which may seek compensatory, punitive or treble damage claims (potentially in large amounts), as well as other types of relief. At this time, the Company is not able to either predict the outcome of these lawsuits or reasonably estimate a potential range of loss with respect to these lawsuits.

In accordance with accounting standards regarding loss contingencies, we accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. We do not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote.

Because litigation outcomes are inherently unpredictable, our evaluation of legal proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to any one of our financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then we disclose the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such loss is not reasonably estimable. While the consequences of certain unresolved proceedings are not presently determinable, and an estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material effect on our earnings in any given reporting period. However, in the opinion of our management, after consulting with legal counsel, and taking into account insurance and reserves, the ultimate liability related to current outstanding matters is not expected to have a material effect on our financial position, liquidity or capital resources.

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QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

12 Months Ended

Feb. 03, 2018

Quarterly Financial Information Disclosure [Abstract]

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

	2017
millions, except per share data	First Quarter		Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	4,301	$	4,365		$	3,660		$	4,376
Cost of sales, buying and occupancy	3,371		3,394			2,958			3,452
Selling and administrative	1,267		1,369			1,339			1,156
Net income (loss) attributable to Holdings' shareholders	244		(251		)	(558		)	182
Basic net income (loss) per share attributable to Holdings' shareholders	2.28		(2.34		)	(5.19		)	1.69
Diluted net income (loss) per share attributable to Holdings' shareholders	2.28		(2.34		)	(5.19		)	1.69

	2016
millions, except per share data	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	5,394		$	5,663		$	5,029		$	6,052
Cost of sales, buying and occupancy	4,217			4,403			4,067			4,765
Selling and administrative	1,503			1,484			1,543			1,579
Net loss attributable to Holdings' shareholders	(471		)	(395		)	(748		)	(607		)
Basic net loss per share attributable to Holdings' shareholders	(4.41		)	(3.70		)	(6.99		)	(5.67		)
Diluted net loss per share attributable to Holdings' shareholders	(4.41		)	(3.70		)	(6.99		)	(5.67		)

Per share amounts for each quarter are required to be computed independently and may not equal the amount computed for the total year. In the first quarter of 2017, we recorded a gain on the Craftsman Sale of $492 million. Refer to Note 1 for more information related to the Craftsman Sale. In addition, in the fourth quarter of 2017, the income tax benefit included a tax benefit of approximately $470 million related to the impacts of the Tax Act. Refer to Note 10 for more information. In the fourth quarter of 2017 and 2016, we recorded impairment related to the Sears trade name of $72 million and $381 million, respectively. Refer to Note 12 for more information related to these impairment charges.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

12 Months Ended

Feb. 03, 2018

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At February 3, 2018, the principal amount outstanding of the Company’s 65/8% senior secured notes due 2018 was $303 million. These notes were issued in 2010 by Sears Holdings Corporation ("Parent"). The Old Senior Secured Notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the Senior Secured Notes, as well as by Sears Holdings Management Corporation and SRAC (the "guarantor subsidiaries"). The following condensed consolidated financial information presents the Condensed Consolidating Balance Sheets at February 3, 2018 and January 28, 2017, and the Condensed Consolidating Statements of Operations, the Consolidating Statements of Comprehensive Income (Loss) and the Condensed Consolidating Statements of Cash flows for 2017, 2016 and 2015 of (i) Parent; (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; (iv) eliminations and (v) the Company on a consolidated basis.

The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions including transactions with our wholly-owned non-guarantor insurance subsidiary. The Company has accounted for investments in subsidiaries under the equity method. The guarantor subsidiaries are 100% owned directly or indirectly by the Parent and all guarantees are joint, several and unconditional. Additionally, the notes are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables of the guarantor subsidiaries, and consequently may not be available to satisfy the claims of the Company’s general creditors. Certain investments primarily held by non-guarantor subsidiaries are recorded by the issuers at historical cost and are recorded at fair value by the holder.

Condensed Consolidating Balance Sheet

February 3, 2018

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	152	$	30	$	—		$	182
Restricted cash	154			—		—		—			154
Intercompany receivables	—			—		27,993		(27,993		)	—
Accounts receivable	—			322		21		—			343
Merchandise inventories	—			2,798		—		—			2,798
Prepaid expenses and other current assets	309			899		478		(1,351		)	335
Total current assets	463			4,171		28,522		(29,344		)	3,812
Total property and equipment, net	—			1,043		686		—			1,729
Goodwill and intangible assets	—			346		1,189		(98		)	1,437
Other assets	179			1,331		1,159		(2,385		)	284
Investment in subsidiaries	8,790			27,752		—		(36,542		)	—
TOTAL ASSETS	$	9,432		$	34,643	$	31,556	$	(68,369	)	$	7,262
Current liabilities
Short-term borrowings	$	144		$	937	$	—	$	(166	)	$	915
Current portion of long-term debt and capitalized lease obligations	303			897		—		(232		)	968
Merchandise payables	—			576		—		—			576
Intercompany payables	11,099			16,894		—		(27,993		)	—
Other current liabilities	16			1,941		1,448		(949		)	2,456
Total current liabilities	11,562			21,245		1,448		(29,340		)	4,915
Long-term debt and capitalized lease obligations	1,991			2,734		—		(2,476		)	2,249
Pension and postretirement benefits	—			1,616		3		—			1,619
Deferred gain on sale-leaseback	—			360		2		—			362
Sale-leaseback financing obligation	—			158		89		—			247
Long-term deferred tax liabilities	—			—		349		(223		)	126
Other long-term liabilities	—			1,131		514		(178		)	1,467
Total Liabilities	13,553			27,244		2,405		(32,217		)	10,985
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(4,121		)	7,399		29,151		(36,152		)	(3,723		)
Total Equity (Deficit)	(4,121		)	7,399		29,151		(36,152		)	(3,723		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	9,432		$	34,643	$	31,556	$	(68,369	)	$	7,262

Condensed Consolidating Balance Sheet

January 28, 2017

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	260	$	26	$	—		$	286
Intercompany receivables	—			—		27,415		(27,415		)	—
Accounts receivable	—			441		25					466
Merchandise inventories	—			3,959		—		—			3,959
Prepaid expenses and other current assets	23			692		856		(1,286		)	285
Total current assets	23			5,352		28,322		(28,701		)	4,996
Total property and equipment, net	—			1,504		736		—			2,240
Goodwill and intangible assets	—			360		1,528		(98		)	1,790
Other assets	4			285		931		(884		)	336
Investment in subsidiaries	9,110			26,703		—		(35,813		)	—
TOTAL ASSETS	$	9,137		$	34,204	$	31,517	$	(65,496	)	$	9,362
Current liabilities
Short-term borrowings	$	—		$	108	$	—	$	(108	)	$	—
Current portion of long-term debt and capitalized lease obligations	—			1,189		—		(599		)	590
Merchandise payables	—			1,048		—		—			1,048
Intercompany payables	11,830			15,585		—		(27,415		)	—
Other current liabilities	17			2,479		1,219		(672		)	3,043
Total current liabilities	11,847			20,409		1,219		(28,794		)	4,681
Long-term debt and capitalized lease obligations	1,215			3,160		—		(802		)	3,573
Pension and postretirement benefits	—			1,746		4		—			1,750
Deferred gain on sale-leaseback	—			563		—		—			563
Sale-leaseback financing obligation	—			235		—		—			235
Long-term deferred tax liabilities	48			—		724		(29		)	743
Other long-term liabilities	—			808		1,038		(205		)	1,641
Total Liabilities	13,110			26,921		2,985		(29,830		)	13,186
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(3,973		)	7,283		28,532		(35,666		)	(3,824		)
Total Equity (Deficit)	(3,973		)	7,283		28,532		(35,666		)	(3,824		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	9,137		$	34,204	$	31,517	$	(65,496	)	$	9,362

Condensed Consolidating Statement of Operations

For the Year Ended February 3, 2018

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	13,375		$	—		$	34		$	13,409
Services and other	—			3,303			2,283			(2,293		)	3,293
Total revenues	—			16,678			2,283			(2,259		)	16,702
Cost of sales, buying and occupancy - merchandise sales	1			11,237			—			111			11,349
Cost of sales and occupancy - services and other	—			2,228			876			(1,278		)	1,826
Total cost of sales, buying and occupancy	1			13,465			876			(1,167		)	13,175
Selling and administrative	(27		)	5,409			841			(1,092		)	5,131
Depreciation and amortization	—			270			62			—			332
Impairment charges	—			70			72			—			142
Gain on sales of assets	(486		)	(1,142		)	(20		)	—			(1,648		)
Total costs and expenses	(512		)	18,072			1,831			(2,259		)	17,132
Operating income (loss)	512			(1,394		)	452			—			(430		)
Interest expense	(600		)	(994		)	(19		)	1,074			(539		)
Interest and investment income (loss)	45			195			412			(664		)	(12		)
Income (loss) before income taxes	(43		)	(2,193		)	845			410			(981		)
Income tax (expense) benefit	232			765			(399		)	—			598
Equity (deficit) in earnings in subsidiaries	(982		)	460			—			522			—
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(793	)	$	(968	)	$	446		$	932		$	(383	)

Condensed Consolidating Statement of Operations

For the Year Ended January 28, 2017

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	18,218		$	—		$	18		$	18,236
Services and other	—			3,985			2,796			(2,879		)	3,902
Total revenues	—			22,203			2,796			(2,861		)	22,138
Cost of sales, buying and occupancy - merchandise sales	—			15,104			—			80			15,184
Cost of sales and occupancy - services and other	—			2,824			1,056			(1,612		)	2,268
Total cost of sales, buying and occupancy	—			17,928			1,056			(1,532		)	17,452
Selling and administrative	6			6,506			926			(1,329		)	6,109
Depreciation and amortization	—			303			72			—			375
Impairment charges	—			46			381			—			427
Gain on sales of assets	—			(343		)	(2		)	98			(247		)
Total costs and expenses	6			24,440			2,433			(2,763		)	24,116
Operating income (loss)	(6		)	(2,237		)	363			(98		)	(1,978		)
Interest expense	(385		)	(645		)	(13		)	639			(404		)
Interest and investment income (loss)	20			152			441			(639		)	(26		)
Other income (loss)	13			—			(217		)	217			13
Income (loss) before income taxes	(358		)	(2,730		)	574			119			(2,395		)
Income tax (expense) benefit	28			529			(383		)	—			174
Equity (deficit) in earnings in subsidiaries	(2,010		)	5			—			2,005			—
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(2,340	)	$	(2,196	)	$	191		$	2,124		$	(2,221	)

Condensed Consolidating Statement of Operations

For the Year Ended January 30, 2016

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	20,925		$	—		$	11		$	20,936
Services and other	—			4,339			2,861			(2,990		)	4,210
Total revenues	—			25,264			2,861			(2,979		)	25,146
Cost of sales, buying and occupancy - merchandise sales	—			16,749			—			68			16,817
Cost of sales and occupancy - services and other	—			3,070			1,131			(1,682		)	2,519
Total cost of sales, buying and occupancy	—			19,819			1,131			(1,614		)	19,336
Selling and administrative	3			7,322			897			(1,365		)	6,857
Depreciation and amortization	—			350			72			—			422
Impairment charges	—			94			180			—			274
Gain on sales of assets	—			(735		)	(8		)	—			(743		)
Total costs and expenses	3			26,850			2,272			(2,979		)	26,146
Operating income (loss)	(3		)	(1,586		)	589			—			(1,000		)
Interest expense	(265		)	(481		)	(83		)	506			(323		)
Interest and investment income (loss)	(19		)	44			419			(506		)	(62		)
Income (loss) before income taxes	(287		)	(2,023		)	925			—			(1,385		)
Income tax (expense) benefit	115			480			(338		)	—			257
Equity (deficit) in earnings in subsidiaries	(956		)	158			—			798			—
Net income (loss)	(1,128		)	(1,385		)	587			798			(1,128		)
Income attributable to noncontrolling interests	—			—			—			(1		)	(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(1,128	)	$	(1,385	)	$	587		$	797		$	(1,129	)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended February 3, 2018

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(793	)	$	(968	)	$	446	$	932		$	(383	)
Other comprehensive income:
Pension and postretirement adjustments, net of tax	—			478			—		—			478
Unrealized net gain, net of tax	6			—			45		(51		)	—
Currency translation adjustments, net of tax	—			—			2		—			2
Total other comprehensive income	6			478			47		(51		)	480
Comprehensive income (loss) attributable to Holdings' shareholders	$	(787	)	$	(490	)	$	493	$	881		$	97

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 28, 2017

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(2,340	)	$	(2,196	)	$	191		$	2,124		$	(2,221	)
Other comprehensive income:
Pension and postretirement adjustments, net of tax	—			366			—			—			366
Dissolution of noncontrolling interest	—			—			(7		)	—			(7		)
Unrealized net gain, net of tax	—			—			122			(122		)	—
Total other comprehensive income	—			366			115			(122		)	359
Comprehensive income (loss)	(2,340		)	(1,830		)	306			2,002			(1,862		)
Comprehensive income attributable to noncontrolling interest	—			—			—			7			7
Comprehensive income (loss) attributable to Holdings' shareholders	$	(2,340	)	$	(1,830	)	$	306		$	2,009		$	(1,855	)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 30, 2016

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(1,128	)	$	(1,385	)	$	587		$	798		$	(1,128	)
Other comprehensive income (loss):
Pension and postretirement adjustments, net of tax	—			113			—			—			113
Currency translation adjustments, net of tax	—			—			(1		)	—			(1		)
Unrealized net loss, net of tax	—			(3		)	(65		)	68			—
Total other comprehensive income (loss)	—			110			(66		)	68			112
Comprehensive income (loss)	(1,128		)	(1,275		)	521			866			(1,016		)
Comprehensive loss attributable to noncontrolling interest	—			—			—			(1		)	(1		)
Comprehensive income (loss) attributable to Holdings' shareholders	$	(1,128	)	$	(1,275	)	$	521		$	865		$	(1,017	)

Condensed Consolidating Statement of Cash Flows

For the Year Ended February 3, 2018

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	1		$	(2,404	)	$	682		$	(121	)	$	(1,842	)
Proceeds from sales of property and investments	—			1,093			16			—			1,109
Proceeds from Craftsman Sale	572			—			—			—			572
Proceeds from sales of receivables	293			—			—			—			293
Purchases of property and equipment	—			(70		)	(10		)	—			(80		)
Net investing with Affiliates	(934		)	—			(563		)	1,497			—
Net cash provided by (used in) investing activities	(69		)	1,023			(557		)	1,497			1,894
Proceeds from debt issuances	410			610			—			—			1,020
Repayments of long-term debt	(171		)	(1,185		)	—			—			(1,356		)
Increase in short-term borrowings, primarily 90 days or less	—			271			—			—			271
Proceeds from sale-leaseback financing	—			106			—			—			106
Debt issuance costs	(17		)	(26		)	—			—			(43		)
Intercompany dividend	—			—			(121		)	121			—
Net borrowing with Affiliates	—			1,497			—			(1,497		)	—
Net cash provided by (used in) financing activities	222			1,273			(121		)	(1,376		)	(2		)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	154			(108		)	4			—			50
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			260			26			—			286
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR	$	154		$	152		$	30		$	—		$	336

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 28, 2017

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	244		$	(2,137	)	$	820		$	(308	)	$	(1,381	)
Proceeds from sales of property and investments	—			273			113			—			386
Purchases of property and equipment	—			(133		)	(9		)	—			(142		)
Net investing with Affiliates	(239		)	—			(627		)	866			—
Net cash provided by (used in) investing activities	(239		)	140			(523		)	866			244
Proceeds from debt issuances	—			2,028			—			—			2,028
Repayments of long-term debt	—			(65		)	(1		)	—			(66		)
Decrease in short-term borrowings, primarily 90 days or less	—			(797		)	—			—			(797		)
Proceeds from sale-leaseback financing	—			71			—			—			71
Debt issuance costs	(5		)	(46		)	—			—			(51		)
Intercompany dividend	—			—			(308		)	308			—
Net borrowing with Affiliates	—			866			—			(866		)	—
Net cash provided by (used in) financing activities	(5		)	2,057			(309		)	(558		)	1,185
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	—			60			(12		)	—			48
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			200			38			—			238
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR	$	—		$	260		$	26		$	—		$	286

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 30, 2016

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	395		$	(3,021	)	$	938		$	(479	)	$	(2,167	)
Proceeds from sales of property and investments	—			2,725			5			—			2,730
Purchases of property and equipment	—			(202		)	(9		)	—			(211		)
Net investing with Affiliates	(395		)	—			(446		)	841			—
Net cash provided by (used in) investing activities	(395		)	2,523			(450		)	841			2,519
Repayments of long-term debt	—			(1,403		)	(2		)	—			(1,405		)
Increase in short-term borrowings, primarily 90 days or less	—			583			—			—			583
Proceeds from sale-leaseback financing	—			508			—			—			508
Debt issuance costs	—			(50		)	—			—			(50		)
Intercompany dividend	—						(479		)	479			—
Net borrowing with Affiliates	—			841			—			(841		)	—
Net cash provided by (used in) financing activities	—			479			(481		)	(362		)	(364		)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	—			(19		)	7			—			(12		)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			219			31			—			250
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR	$	—		$	200		$	38		$	—		$	238

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Feb. 03, 2018

Valuation and Qualifying Accounts [Abstract]

Schedule of Valuation and Qualifying Accounts

Sears Holdings Corporation

Schedule II-Valuation and Qualifying Accounts

Years 2017, 2016 and 2015

millions	Balance at beginning of period		Additions charged to costs and expenses		(Deductions)			Balance at end of period
Allowance for Doubtful Accounts(1):
2017	$	37	$	7	$	(9	)	$	35
2016	34		9		(6		)	37
2015	25		10		(1		)	34
Allowance for Deferred Tax Assets(2):
2017	$	5,519	$	86	$	(1,418	)	$	4,187
2016	4,757		1,000		(238		)	5,519
2015	4,478		603		(324		)	4,757

__________________

⁽¹⁾  Charges to the account are for the purposes for which the reserves were created.

⁽²⁾  In 2017, the deferred tax assets and liabilities, along with the valuation allowance, decreased due to the reduction in the corporate income tax rate from 35% to 21% pursuant to the Tax Act. In addition, the pension liability and other federal and state deferred tax assets decreased during the year.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Feb. 03, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations, Consolidation and Basis of Presentation

Nature of Operations, Consolidation and Basis of Presentation

Sears Holdings Corporation ("Holdings") is the parent company of Kmart Holding Corporation ("Kmart") and Sears, Roebuck and Co. ("Sears"). Holdings (together with its subsidiaries, "we," "us," "our," or the "Company") was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the "Merger"), on March 24, 2005. We are an integrated retailer with 1,002 full-line and specialty retail stores in the United States, operating through Kmart and Sears. We operate in two reportable segments: Kmart and Sears Domestic.

The consolidated financial statements include all majority-owned subsidiaries in which Holdings exercises control. Investments in companies in which Holdings exercises significant influence, but which we do not control (generally 20% to 50% ownership interest), are accounted for under the equity method of accounting. Investments in companies in which we have less than a 20% ownership interest and do not exercise significant influence are accounted for at cost. All intercompany transactions and balances have been eliminated.

Fiscal Year

Fiscal Year

Our fiscal year ends on the Saturday closest to January 31 each year. Fiscal year 2017 consisted of 53 weeks. Fiscal years 2016 and 2015 consisted of 52 weeks. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. The estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances. Adjustments to estimates and assumptions are made when facts and circumstances dictate. As future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying consolidated financial statements. Significant estimates and assumptions are required as part of determining inventory and accounts receivable valuation, estimating depreciation, amortization and recoverability of long-lived assets, establishing self-insurance, warranty, legal and other reserves, performing goodwill and intangible impairment analyses, and in establishing valuation allowances on deferred income tax assets and reserves for tax examination exposures, and calculating retirement benefits.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with original maturities of three months or less at the date of purchase. The Company classifies cash balances that are legally restricted pursuant to contractual arrangements as restricted cash. The restricted cash balance relates to amounts deposited into an escrow for the benefit of our pension plans. We also include deposits in-transit from banks for payments related to third-party credit card and debit card transactions within cash equivalents. The deposits in-transit balances included within cash equivalents were $65 million and $87 million at February 3, 2018 and January 28, 2017, respectively.

We classify outstanding checks in excess of funds on deposit within other current liabilities and reduce cash and cash equivalents when these checks clear the bank on which they were drawn.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

We provide an allowance for doubtful accounts based on both historical experience and a specific identification basis. Allowances for doubtful accounts on accounts receivable balances were $35 million and $37 million at February 3, 2018 and January 28, 2017, respectively. Our accounts receivable balance on our Consolidated Balance Sheet is presented net of our allowance for doubtful accounts and is comprised of various vendor-related and customer-related accounts receivable, including receivables related to our pharmacy operations.

Merchandise Inventories

Merchandise Inventories

Merchandise inventories are valued at the lower of cost or market. For Kmart and Sears Domestic, cost is primarily determined using the retail inventory method ("RIM"). Kmart merchandise inventories are valued under the RIM using primarily a first-in, first-out ("FIFO") cost flow assumption. Sears Domestic merchandise inventories are valued under the RIM using primarily a last-in, first-out ("LIFO") cost flow assumption.

Inherent in the RIM calculation are certain significant management judgments and estimates including, among others, merchandise markons, markups, markdowns and shrinkage, which significantly impact the ending inventory valuation at cost, as well as resulting gross margins. The methodologies utilized by us in our application of the RIM are consistent for all periods presented. Such methodologies include the development of the cost-to-retail ratios, the groupings of homogenous classes of merchandise, the development of shrinkage and obsolescence reserves, the accounting for price changes and the computations inherent in the LIFO adjustment (where applicable). Management believes that the RIM provides an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market.

Approximately 58% of consolidated merchandise inventories are valued using LIFO. To estimate the effects of inflation on inventories, we utilize external price indices determined by an outside source, the Bureau of Labor Statistics.

Vendor Rebates and Allowances

Vendor Rebates and Allowances

We receive rebates and allowances from certain vendors through a variety of programs and arrangements intended to offset our costs of promoting and selling certain vendor products. These vendor payments are recognized and recorded as a reduction to the cost of merchandise inventories when earned and, thereafter, as a reduction of cost of sales, buying and occupancy as the merchandise is sold. Upfront consideration received from vendors linked to purchases or other commitments is initially deferred and amortized ratably to cost of sales, buying and occupancy over the life of the contract or as performance of the activities specified by the vendor to earn the fee is completed.

Property and Equipment

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Additions and substantial improvements are capitalized and include expenditures that materially extend the useful lives of existing facilities and equipment. Maintenance and repairs that do not materially improve or extend the lives of the respective assets are expensed as incurred.

Depreciation expense, which includes depreciation on assets under capital leases, is recorded over the estimated useful lives of the respective assets using the straight-line method for financial statement purposes, and accelerated methods for tax purposes. The range of lives are generally 20 to 50 years for buildings, 3 to 10 years for furniture, fixtures and equipment, and 3 to 5 years for computer systems and computer equipment. Leasehold improvements are depreciated over the shorter of the associated lease term or the estimated useful life of the asset. Depreciation expense included within depreciation and amortization expense reported in the Consolidated Statements of Operations was $328 million, $370 million and $415 million for the years ended February 3, 2018, January 28, 2017 and January 30, 2016, respectively.

Primarily as a result of store closing actions, certain property and equipment are considered held for sale. The value of assets held for sale was $70 million and $96 million at February 3, 2018 and January 28, 2017, respectively. These assets were included in prepaid expenses and other current assets in the Consolidated Balance Sheets at February 3, 2018 and January 28, 2017 at the lower of their historical net book value or their estimated fair value, less estimated costs to sell. We expect to sell the properties within a year and we continually remarket them. The majority of assets held for sale are held within the Sears Domestic segment.

Impairment of Long-Lived Assets and Costs Associated with Exit Activities

Impairment of Long-Lived Assets and Costs Associated with Exit Activities

In accordance with accounting standards governing the impairment or disposal of long-lived assets, the carrying value of long-lived assets, including property and equipment, is evaluated whenever events or changes in circumstances indicate that a potential impairment has occurred relative to a given asset or assets. Factors that could result in an impairment review include, but are not limited to, a current period cash flow loss combined with a history of cash flow losses, current cash flows that may be insufficient to recover the investment in the property over the remaining useful life, or a projection that demonstrates continuing losses associated with the use of a long-lived asset, significant changes in the manner of use of the asset or significant changes in business strategies. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value as determined based on quoted market prices or through the use of other valuation techniques. See Note 13 for further information regarding long-lived asset impairment charges recorded.

We account for costs associated with location closings in accordance with accounting standards pertaining to accounting for costs associated with exit or disposal activities. As such, we record a liability for costs associated with location closings, which includes employee severance and other liquidation fees when management makes the decision to exit a location. We record a liability for future lease costs (net of estimated sublease income) when we cease to use the location.

Goodwill, Trade Names and Related Impairments

Goodwill, Trade Names and Related Impairments

Trade names acquired as part of the Merger account for the majority of our intangible assets recognized in the Consolidated Balance Sheet. The majority of these trade name assets, such as Sears and Kenmore, are expected to generate cash flows indefinitely, do not have estimable or finite useful lives and, therefore, are accounted for as indefinite-lived assets not subject to amortization. Certain intangible assets, including favorable lease rights, have estimable, finite useful lives, which are used as the basis for their amortization. The estimated useful lives of such assets are determined using a number of factors, including the demand for the asset, competition and the level of expenditure required to maintain the cash flows associated with the asset.

Our goodwill results from the Merger. We perform an annual goodwill impairment test at the last day of our November accounting period each year and assess the need to update the tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of the reporting unit or an indefinite-lived intangible asset below its carrying amount. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and the testing for recoverability of a significant asset group within the reporting unit. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

Goodwill Impairment Assessments

Our goodwill balance relates to our Home Services business. The goodwill impairment test involves a two-step process. The first step is a comparison of the reporting unit's fair value to its carrying value. We estimate fair value using the best information available, using a discounted cash flow model, commonly referred to as the income approach. The income approach uses the reporting unit's projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate for the reporting unit. The projection uses management's best estimates of economic and market conditions over the projected period, including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. We were unable to use a market approach due to there being no market comparables.

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss, if any. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. See Note 12 for further information.

Intangible Asset Impairment Assessments

We consider the income approach when testing intangible assets with indefinite lives for impairment on an annual basis. We utilize the income approach, specifically the relief from royalty method, for analyzing our indefinite-lived assets. This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates for the assets; and (2) the application of these royalty rates to a net sales stream and discounting the resulting cash flows to determine a value. We multiplied the selected royalty rate by the forecasted net sales stream to calculate the cost savings (relief from royalty payment) associated with the assets. The cash flows are then discounted to present value by the selected discount rate and compared to the carrying value of the assets.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value in GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. We report the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of temporary cash investments and accounts receivable. We place our cash and cash equivalents in investment-grade, short-term instruments with high quality financial institutions and, by policy, limit the amount of credit exposure in any one financial instrument.

Self-insurance Reserves

Self-insurance Reserves

We are self-insured for certain costs related to workers' compensation, asbestos, environmental, automobile, warranty, product and general liability claims. We obtain third-party insurance coverage to limit our exposure to certain of these self-insured risks. A portion of these self-insured risks is managed through a wholly-owned insurance subsidiary. Our liability reflected in the Consolidated Balance Sheet, classified within other liabilities (current and long-term), represents an estimate of the ultimate cost of claims incurred at the balance sheet date. In estimating this liability, we utilize loss development factors based on Company-specific data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claims settlements and reported claims. The liabilities for self-insured risks are discounted to their net present values using an interest rate which is based upon the expected duration of the liabilities.

Loss Contingencies

Loss Contingencies

Under accounting standards, loss contingency provisions are recorded for probable losses at management's best estimate of a loss, or when a best estimate cannot be made, the minimum amount in the estimated range is recorded. These estimates are often initially developed substantially earlier than the ultimate loss is known, and the estimates are refined each accounting period, as additional information is known.

Revenue Recognition

Revenue Recognition

Revenues include sales of merchandise, services and extended service contracts, net commissions earned from leased departments in retail stores, delivery and handling revenues related to merchandise sold, and fees earned from co-branded credit card programs. We recognize revenues from retail operations at the later of the point of sale or the delivery of goods to the customer. Direct to customer revenues are recognized when the merchandise is delivered to the customer. Revenues from product installation and repair services are recognized at the time the services are provided. Revenues from the sale of service contracts and the related direct acquisition costs are deferred and amortized over the lives of the associated contracts, while the associated service costs are expensed as incurred.

We earn revenues through arrangements with third-party financial institutions that manage and directly extend credit relative to our co-branded credit card programs. The third-party financial institutions pay us for generating new accounts and sales activity on co-branded cards, as well as for selling other financial products to cardholders. We recognize these revenues in the period earned, which is when our related performance obligations have been met. We sell gift cards to customers at our retail stores and through our direct to customer operations. The gift cards generally do not have expiration dates. Revenues from gift cards are recognized when (i) the gift card is redeemed by the customer, or (ii) the likelihood of the gift card being redeemed by the customer is remote (gift card breakage) based on historical redemption patterns and we determine that we do not have a legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions.

Revenues from merchandise sales and services are reported net of estimated returns and allowances and exclude sales taxes. The reserve for returns and allowances is calculated as a percentage of sales based on historical return percentages. Estimated returns are recorded as a reduction of sales and cost of sales. We defer the recognition of layaway sales and profit until the period in which the customer takes possession of the merchandise.

Cost of Sales, Buying and Occupancy Costs

Cost of Sales, Buying and Occupancy

Cost of sales, buying and occupancy are comprised principally of the costs of merchandise, buying, warehousing and distribution (including receiving and store delivery costs), retail store occupancy costs, product repair, and home service and installation costs, customer shipping and handling costs, vendor allowances, markdowns and physical inventory losses.

The Company has a Shop Your Way program in which customers earn points on purchases which may be redeemed to pay for future purchases. The expense for customer points earned is recognized as customers earn them and recorded in cost of sales.

Selling and Administrative Expenses

Selling and Administrative Expenses

Selling and administrative expenses are comprised principally of payroll and benefits costs for retail and corporate employees, occupancy costs of corporate facilities, advertising, pre-opening costs and other administrative expenses.

Pre-Opening Costs

Pre-Opening Costs

Pre-opening and start-up activity costs are expensed in the period in which they occur.

Advertising Costs

Advertising Costs

Advertising costs are expensed as incurred, generally the first time the advertising occurs, and amounted to $415 million, $684 million and $850 million for 2017, 2016 and 2015, respectively. These costs are included within selling and administrative expenses in the Consolidated Statements of Operations.

Income Taxes

Income Taxes

We provide deferred income tax assets and liabilities based on the estimated future tax effects of differences between the financial and tax basis of assets and liabilities based on currently enacted tax laws in effect for the year in which the differences are expected to reverse. The tax balances and income tax expense recognized by us are based on management's interpretation of the tax laws of multiple jurisdictions. Income tax expense also reflects our best estimates and assumptions regarding, among other things, the level of future taxable income, tax planning, and any valuation allowance. Future changes in tax laws, changes in projected levels of taxable income, tax planning, and adoption and implementation of new accounting standards could impact the effective tax rate and tax balances recorded by us. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. In evaluating the objective evidence that historical results provide, we consider cumulative operating income (loss) over the past three years. These assumptions require significant judgment about the forecasts of future taxable income.

Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and other comprehensive income ("OCI"). An exception is provided in the authoritative accounting guidance when there is income from categories other than continuing operations and a loss from continuing operations in the current year. In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expense recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets. In instances where a valuation allowance is established against current year losses, income from other sources, including gain from pension and other postretirement benefits recorded as a component of OCI or the creation of a deferred tax liability through additional paid-in capital for the book to tax difference for the original issue discount relating to the $625 million8% senior unsecured notes due 2019, is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets.

Stock-based Compensation

Stock-based Compensation

We account for stock-based compensation arrangements in accordance with accounting standards pertaining to share-based payment transactions, which requires us to both recognize as expense the fair value of all stock-based compensation awards (which includes stock options, although there were no options outstanding in 2017) and to classify excess tax benefits associated with share-based compensation deductions as cash from financing activities rather than cash from operating activities. We recognize compensation expense as awards vest on a straight-line basis over the requisite service period of the award.

Earnings Per Common Share

Earnings Per Common Share

Basic earnings per common share is calculated by dividing net income attributable to Holdings' shareholders by the weighted average number of common shares outstanding for each period. Diluted earnings per common share also includes the dilutive effect of potential common shares, exercise of stock options, warrants and the effect of restricted stock when dilutive.

New Accounting Pronouncements

New Accounting Pronouncements

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the Financial Accounting Standards Board ("FASB") issued an accounting standards update which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The amendments in this update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We are currently evaluating the effect the update will have on our consolidated financial statements.

Compensation - Retirement Benefits

In March 2017, the FASB issued an accounting standards update which requires an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the update must be applied retrospectively. We are currently evaluating the effect the update will have on our consolidated financial statements.

Goodwill

In January 2017, the FASB issued an accounting standards update which simplifies the test for goodwill impairment. To address concerns over the cost and complexity of the two-step goodwill impairment test, the amendments in this update remove the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted the update in the fourth quarter of 2017. The adoption of the new standard did not have an impact on our consolidated financial statements.

Business Combinations

In January 2017, the FASB issued an accounting standards update which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The amendments in this update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this update require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. This update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the update must be applied prospectively. We are currently evaluating the effect the updates will have on our consolidated financial statements.

Statement of Cash Flows

In November 2016, the FASB issued accounting standards updates which address diversity in practice in the classification and presentation of changes in restricted cash in the statement of cash flows. The amendments in this update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. Therefore, restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. These updates are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the updates must be applied using a retrospective transition method to each period presented. The Company adopted the update in the first quarter of 2017. The adoption of the new standard impacted the presentation of the Condensed Consolidated Statements of Cash Flows.

Consolidation - Interests held through related parties that are under common control

In October 2016, the FASB issued an accounting standards update to amend the accounting standards on how a reporting entity that is the single decision maker of a variable interest entity ("VIE") should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The primary beneficiary of a VIE is the reporting entity that has a controlling financial interest in a VIE and, therefore, consolidates the VIE. A reporting entity has an indirect interest in a VIE if it has a direct interest in a related party that, in turn, has a direct interest in the VIE. Under the amendments, a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. The Company adopted the update in the first quarter of 2017. The adoption of the new standard did not have an impact on the Company's consolidated financial position, results of operations or cash flows.

Income Taxes - Intra-entity transfers of assets other than inventory

In October 2016, the FASB issued an accounting standards update to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current accounting standards prohibit the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice for transfers of certain intangible and tangible assets. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in accounting standards. To more faithfully represent the economics of intra-entity asset transfers, the amendments in this update require that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this update do not change accounting standards for the pre-tax effects of an intra-entity asset transfer under accounting standards applicable to consolidation, or for an intra-entity transfer of inventory. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted as of the beginning of an annual reporting period. The amendments in this update should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating the effect the update will have on our consolidated financial statements.

Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued accounting standards updates which address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, including: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. These updates are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments in the update must be applied using a retrospective transition method to each period presented. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We are currently evaluating the effect the update will have on our consolidated financial statements.

Leases

In February 2016, the FASB issued an accounting standards update which replaces the current lease accounting standard. The update will require, among other items, lessees to recognize a right-of-use asset and a lease liability for most leases. Extensive quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing contracts. The update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently evaluating the effect the update will have on our consolidated financial statements, and expect the update will have a material impact on our consolidated financial statements.

Fair Value Measurements

In May 2015, the FASB issued an accounting standards update which requires certain investments measured at net asset value to be removed from the fair value hierarchy categorization and presented as a single reconciling line item between the fair value of the pension plans assets and the amounts reported in the fair value hierarchy table. The Company adopted the update in fiscal 2016. The adoption of the new standard did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows.

Presentation of Financial Statements - Going Concern

In August 2014, the FASB issued an accounting standards update which requires management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued. If substantial doubt exists, additional disclosures are required. This update was effective for the Company's annual period ended January 28, 2017. The Company's assessment of our ability to continue as a going concern is further discussed in the "Uses and Sources of Liquidity" paragraph above. The adoption of the new standard did not have a material impact on the Company’s consolidated financial position, results of operations, cash flows or disclosures.

Revenue from Contracts with Customers

In May 2014, the FASB issued an accounting standards update which replaces the current revenue recognition standards. Subsequently, the FASB has also issued accounting standards updates which clarify the guidance. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard was initially released as effective for fiscal years beginning after December 15, 2016; however, the FASB has decided to defer the effective date of this accounting standard update for one year. Early adoption of the update is permitted, but not before the original date for fiscal years beginning after December 15, 2016. The update may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption.

The Company has completed its evaluation of the standard and will apply the update retrospectively for each period presented, beginning in the first quarter of 2018. Based on our assessment, we determined the adoption will impact the accounting for our Shop Your Way program, revenues from gift cards and merchandise returns. The expense for Shop Your Way points is currently recognized as customers earn them and recorded in cost of sales. The new guidance will require the Company to allocate the transaction price to products and points on a relative standalone selling price basis, deferring the portion of revenue allocated to the points and recognizing a contract liability for unredeemed points. The change in the accounting for the Shop Your Way program will reduce revenue by approximately 2.7% and 2.6% in 2017 and 2016, respectively, but will have no impact to gross margin. The new guidance will also change the timing of recognition of the unredeemed portion of our gift cards, which is currently recognized using the remote method. The new guidance will require application of the proportional method. The Company currently reports revenues from merchandise sales net of estimated returns. The new guidance will require the Company to record both an asset and a liability for anticipated customer returns. These changes will not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows, with the exception of the Shop Your Way program described above.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Feb. 03, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Cash and Cash Equivalents

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows at February 3, 2018 and January 28, 2017, respectively.

millions	February 3, 2018		January 28, 2017
Cash and equivalents	$	113	$	196
Cash posted as collateral	4		3
Credit card deposits in transit	65		87
Total cash and cash equivalents	182		286
Restricted cash	154		—
Total cash balances	$	336	$	286

Restrictions on Cash and Cash Equivalents

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows at February 3, 2018 and January 28, 2017, respectively.

millions	February 3, 2018		January 28, 2017
Cash and equivalents	$	113	$	196
Cash posted as collateral	4		3
Credit card deposits in transit	65		87
Total cash and cash equivalents	182		286
Restricted cash	154		—
Total cash balances	$	336	$	286

Schedule of Self-Insurance Reserve

Expected payments as of February 3, 2018 were as follows:

millions
2018	$	148
2019	100
2020	74
2021	54
2022	42
Later years	311
Total undiscounted obligation	729
Less—discount	(83		)
Net obligation	$	646

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BORROWINGS (Tables)

12 Months Ended

Feb. 03, 2018

Debt Disclosure [Abstract]

Total Borrowings

Long-term debt was as follows:

ISSUE	February 3, 2018			January 28, 2017
millions
SEARS ROEBUCK ACCEPTANCE CORP.
6.50% to 7.50% Notes, due 2027 to 2043	$	284		$	327
Term Loan (Credit Facility), $1.0B due 2019	391			963
2016 Term Loan (Credit Facility), $750M due 2020	559			726
Second Lien Term Loan (Credit Facility), $300M due 2020	294			292
SEARS HOLDINGS CORP.
8% Secured Loan Facility, due 2018	251			494
6.625% Senior Secured Notes, due 2018	303			303
8% Senior Unsecured Notes, due 2019	483			428
8% Secured Loan Facility, due 2020	374			485
Term Loan Facility (Credit Facility), $300M due 2020	206			—
CAPITALIZED LEASE OBLIGATIONS	72			145
Total long-term borrowings	3,217			4,163
Current maturities	(968		)	(590		)
Long-term debt and capitalized lease obligations	$	2,249		$	3,573
Weighted-average annual interest rate on long-term debt	7.6		%	7.2		%

Schedule of Maturities of Long-term Debt

At February 3, 2018, long-term debt maturities for the next five years and thereafter were as follows:

millions
2018	$	979
2019	637
2020	1,471
2021	3
2022	3
Thereafter	312
Total maturities	3,405
Unamortized debt discount	(152		)
Unamortized debt issuance costs	(36		)
Long-term debt, net of discount & debt issuance costs	$	3,217

Schedule of Interest Expense on Debt

Interest expense for years 2017, 2016 and 2015 was as follows:

millions	2017		2016		2015
COMPONENTS OF INTEREST EXPENSE
Interest expense (1)	$	377	$	288	$	223
Amortization of debt issuance costs	58		31		25
Accretion of debt discount	66		50		35
Accretion of self-insurance obligations at net present value	19		16		19
Accretion of lease obligations at net present value	19		19		21
Interest expense	$	539	$	404	$	323

⁽¹⁾ Includes paid-in-kind interest of $1 million for 2017.

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FINANCIAL GUARANTEES (Tables)

12 Months Ended

Feb. 03, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Guarantor Obligations

We had the following guarantees outstanding at February 3, 2018:

millions	Bank Issued		SRAC Issued		Other		Total
Standby letters of credit	$	647	$	6	$	—	$	653
Commercial letters of credit	—		31		—		31
Secondary lease obligations	—		—		164		164

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INTEREST AND INVESTMENT LOSS (Tables)

12 Months Ended

Feb. 03, 2018

Investment Income, Interest and Dividend [Abstract]

Schedule of Components of Interest and Investment Loss

The following table sets forth the components of interest and investment loss as reported in our Consolidated Statements of Operations:

millions	2017			2016			2015
Interest income on cash and cash equivalents	$	2		$	1		$	1
Other investment loss	(14		)	(27		)	(63		)
Total	$	(12	)	$	(26	)	$	(62	)

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BENEFIT PLANS (Tables)

12 Months Ended

Feb. 03, 2018

Defined Benefit Plan Disclosure [Line Items]

Expenses for Retirement and Savings Related Benefit Plans

Expenses for retirement and savings-related benefit plans were as follows:

millions	2017		2016		2015
Pension plans	$	657	$	289	$	230
Postretirement benefits	—		28		(2		)
Total	$	657	$	317	$	228

Schedule Of Assumptions Used In Calculating Net Periodic Benefit Cost

Weighted-average assumptions used to determine plan obligations were as follows:

	2017	2016	2015
Pension benefits:
Discount rate	3.75%	4.15%	4.50%
Postretirement benefits:
Discount rate	3.60%	3.85%	4.00%

Weighted-average assumptions used to determine net cost were as follows:

	2017	2016	2015
Pension benefits:
Discount Rate(1)	4.15%	4.50%	3.70%
Return of plan assets	6.50%	6.50%	7.00%
Postretirement benefits:
Discount Rate	3.85%	4.00%	3.30%

⁽¹⁾ In connection with the annuitizations noted above, we updated the effective discount rate assumption to 3.85% as of May 31, 2017 and to 3.75% as of August 31, 2017 for Plan 2.

Schedule of Net Benefit Costs

The components of net periodic benefit cost were as follows:

millions	2017			2016			2015
Pension benefits:
Interest cost	$	180		$	227		$	211
Expected return on plan assets	(190		)	(202		)	(249		)
Settlements	479			—			—
Recognized net loss and other	188			264			268
Net periodic benefit cost	$	657		$	289		$	230
Postretirement benefits:
Interest cost	$	6		$	5		$	5
Recognized net loss and other	(6		)	23			(7		)
Net periodic benefit cost	$	—		$	28		$	(2	)

Effect of One-Percentage-Point Change in Assumed Discount Rate on Pension Liability

A one-percentage-point change in the assumed discount rate would have the following effects on the pension liability:

millions	1 percentage-point Increase			1 percentage-point Decrease
Effect on interest cost component	$	20		$	(26	)
Effect on pension benefit obligation	$	(384	)	$	460

Schedule of Expected Benefit Payments

Information regarding expected future cash flows for the SHC Domestic plan is as follows:

millions
Pension benefits:
Employer contributions:
2018 (expected)	$	280
Expected benefit payments:
2018	$	334
2019	308
2020	298
2021	291
2022	283
2023-2027	1,289
Postretirement benefits:
Employer contributions:
2018 (expected)	$	16
Expected employer contribution for benefit payments:
2018	$	16
2019	17
2020	17
2021	16
2022	15
2023-2027	58

Schedule of Allocation of Plan Assets

The following table presents our plan assets using the fair value hierarchy at February 3, 2018 and January 28, 2017:

	Investment Assets at Fair Value at
	February 3, 2018
millions	Total			Level 1		Level 2			Level 3
Equity securities:
U.S. companies	$	727		$	720	$	—		$	7
International companies	164			164		—			—
U.S. registered investment companies	6			6		—			—
Fixed income securities:
Corporate bonds and notes	1,423			—		1,423			—
Sears Holdings Corporation 2016 Term Loan	77			—		77			—
Mortgage-backed and asset-backed	9			—		6			3
Other	(3		)	—		(3		)	—
Total investment assets at fair value	$	2,403		$	890	$	1,503		$	10
Cash	4
Accounts receivable	39
Accounts payable	(28		)
Investments measured at NAV:
Cash equivalents and short-term investments	110
Net assets available for plan benefits	$	2,528

	Investment Assets at Fair Value at
	January 28, 2017
millions	Total			Level 1		Level 2		Level 3
Equity securities:
U.S. companies	$	980		$	978	$	—	$	2
International companies	224			224		—		—
U.S. registered investment companies	3			3		—		—
Fixed income securities:
Corporate bonds and notes	1,994			—		1,994		—
Sears Holdings Corporation 2016 Term Loan	100			—		100		—
Mortgage-backed and asset-backed	3			—		1		2
Other	1			—		1		—
Ventures and partnerships	1			—		—		1
Total investment assets at fair value	$	3,306		$	1,205	$	2,096	$	5
Cash	8
Accounts receivable	65
Accounts payable	(69		)
Investments measured at NAV:
Cash equivalents and short-term investments	257
Net assets available for plan benefits	$	3,567

Pension Plans

Defined Benefit Plan Disclosure [Line Items]

Pension Plans and Postretirement Benefit Obligations

Pension Plans

millions	2017			2016
Change in projected benefit obligation:
Beginning balance	$	5,165		$	5,265
Interest cost	180			227
Actuarial loss	227			108
Benefits paid	(316		)	(435		)
Settlements	(1,249		)	—
Other	(4		)	—
Balance at the measurement date	$	4,003		$	5,165
Change in assets at fair value:
Beginning balance	$	3,567		$	3,189
Actual return on plan assets	231			499
Company contributions	295			314
Benefits paid	(316		)	(435		)
Settlements	(1,249		)	—
Balance at the measurement date	$	2,528		$	3,567
Net amount recognized	$	(1,475	)	$	(1,598	)

Classes of Securities in Plan Assets Investment

Domestic plan assets were invested in the following classes of securities:

	Plan Assets at
	February 3, 2018		January 28, 2017
Equity securities	36	%	35	%
Fixed income and other debt securities	63		63
Other	1		2
Total	100	%	100	%

Postretirement Benefit Plans

Defined Benefit Plan Disclosure [Line Items]

Pension Plans and Postretirement Benefit Obligations

Postretirement Benefit Obligations

millions	2017			2016
Change in accumulated postretirement benefit obligation:
Beginning balance	$	168		$	143
Interest cost	6			5
Plan participants' contributions	—			—
Benefits paid	(17		)	(19		)
Actuarial loss	1			9
Other	—			30
Balance at the measurement date	$	158		$	168
Change in plan assets at fair value:
Beginning of year balance	$	—		$	—
Company contributions	17			19
Plan participants' contributions	—			—
Benefits paid	(17		)	(19		)
Balance at the measurement date	$	—		$	—
Funded status	$	(158	)	$	(168	)

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EARNINGS PER SHARE (Tables)

12 Months Ended

Feb. 03, 2018

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

millions, except earnings per share	2017			2016			2015
Basic weighted average shares	107.4			106.9			106.6
Dilutive effect of restricted stock awards, restricted stock units and warrants	—			—			—
Diluted weighted average shares	107.4			106.9			106.6
Net loss attributable to Holdings' shareholders	$	(383	)	$	(2,221	)	$	(1,129	)
Loss per share attributable to Holdings' shareholders:
Basic	$	(3.57	)	$	(20.78	)	$	(10.59	)
Diluted	$	(3.57	)	$	(20.78	)	$	(10.59	)

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EQUITY (Tables)

12 Months Ended

Feb. 03, 2018

Stockholders' Equity Note [Abstract]

Changes in Restricted Stock Awards

Changes in restricted stock awards and restricted stock units for 2017, 2016 and 2015 were as follows:

	2017				2016				2015
(Shares in thousands)	Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant
Beginning of year balance	151		$	28.89	60		$	42.88	73		$	45.82
Granted	606		7.15		384		16.87		198		31.26
Vested	(623	)	8.10		(293	)	16.00		(200	)	32.01
Forfeited	(119	)	25.27		—		—		(11	)	51.39
End of year balance	15		$	42.09	151		$	28.89	60		$	42.88

Aggregate Fair Value of Shares Granted Based on Weighted Average Fair Value at Date of Grant

millions	2017		2016		2015
Aggregate fair value of shares granted based on weighted average fair value at date of grant	$	4	$	6	$	6
Aggregate fair value of shares vesting during period	4		4		6
Aggregate fair value of shares forfeited during period	1		—		—

Components of Accumulated Other Comprehensive Loss

The following table displays the components of accumulated other comprehensive loss:

millions	February 3, 2018			January 28, 2017			January 30, 2016
Pension and postretirement adjustments (net of tax of $(225), $(225) and $(296), respectively)	$	(1,071	)	$	(1,549	)	$	(1,915	)
Currency translation adjustments (net of tax of $0 for all periods presented)	(1		)	(3		)	(3		)
Accumulated other comprehensive loss	$	(1,072	)	$	(1,552	)	$	(1,918	)

Income Tax Expense Allocated to Each Component of Other Comprehensive Income (Loss)

Income tax expense allocated to each component of other comprehensive income (loss) was as follows:

	2017
millions	Before Tax Amount			Tax Expense		Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience loss	$	(182	)	$	—	$	(182	)
Less: cost of settlements	479			—		479
Less: recognized net loss and other included in net periodic benefit cost(1)	181			—		181
Pension and postretirement adjustments, net of tax	478			—		478
Currency translation adjustments	2			—		2
Total other comprehensive income	$	480		$	—	$	480

	2016
millions	Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience gain	$	181		$	(71	)	$	110
Less: recognized net loss and other included in net periodic benefit cost(1)	256			—			256
Pension and postretirement adjustments, net of tax	437			(71		)	366
Dissolution of noncontrolling interest	(7		)	—			(7		)
Total other comprehensive income	$	430		$	(71	)	$	359

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 7 to the Consolidated Financial Statements.

	2015
millions	Before Tax Amount			Tax Expense		Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience loss	$	(148	)	$	—	$	(148	)
Less: recognized net loss and other included in net periodic benefit cost(1)	261			—		261
Pension and postretirement adjustments, net of tax	113			—		113
Currency translation adjustments	(1		)	—		(1		)
Total other comprehensive income	$	112		$	—	$	112

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 7 to the Consolidated Financial Statements.

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INCOME TAXES (Tables)

12 Months Ended

Feb. 03, 2018

Income Tax Disclosure [Abstract]

Income Taxes

millions	2017			2016			2015
Loss before income taxes:
U.S.	$	(1,012	)	$	(2,429	)	$	(1,420	)
Foreign	31			34			35
Total	$	(981	)	$	(2,395	)	$	(1,385	)
Income tax benefit:
Current:
Federal	$	9		$	13		$	11
State and local	(3		)	16			20
Foreign	13			18			17
Total current	19			47			48
Deferred:
Federal	(429		)	(87		)	(239		)
State and local	(187		)	(134		)	(66		)
Foreign	(1		)	—			—
Total deferred	(617		)	(221		)	(305		)
Total	$	(598	)	$	(174	)	$	(257	)

Effective Tax Rate Reconciliation

	2017		2016		2015
Effective tax rate reconciliation:
Federal income tax rate (benefit rate)	(33.7	)%	(35.0	)%	(35.0	)%
State and local tax (benefit) net of federal tax benefit	(11.8	)	(3.0	)	(1.8	)
Federal tax rate change	(22.6	)	—		—
Federal and state valuation allowance	21.2		41.1		37.4
Land and indefinite-lived intangibles	(12.1	)	(0.2	)	(16.9	)
Impairment of indefinite-lived trade names	(1.8	)	(6.0	)	(4.9	)
Loss disallowance	—		—		3.5
Tax credits	(0.4	)	(0.3	)	(0.7	)
Resolution of income tax matters	(0.8	)	—		(0.3	)
Adjust foreign statutory rates	(1.0	)	0.1		(0.3	)
Repatriation toll charge	1.8		—		—
Tax benefit resulting from other comprehensive income allocation	—		(2.9	)	—
Other	0.2		(1.1	)	0.4
	(61.0	)%	(7.3	)%	(18.6	)%

Deferred Tax Assets and Liabilities

millions	February 3, 2018			January 28, 2017
Deferred tax assets and liabilities:
Deferred tax assets:
Federal benefit for state and foreign taxes	$	117		$	148
Accruals and other liabilities	142			135
Net operating loss carryforwards	1,736			2,255
Pension and postretirement benefit plans	972			1,244
Property and equipment	139			231
Deferred income	266			479
Credit carryforwards	899			875
Other	208			218
Total deferred tax assets	4,479			5,585
Valuation allowance	(4,187		)	(5,519		)
Net deferred tax assets	292			66
Deferred tax liabilities:
Trade names/Intangibles	285			573
Inventory	105			193
Other	28			43
Total deferred tax liabilities	418			809
Net deferred tax liability	$	(126	)	$	(743	)

Reconciliation of Beginning and Ending Amount of Gross Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits ("UTB") is as follows:

	Federal, State and Foreign Tax
millions	February 3, 2018			January 28, 2017			January 30, 2016
Gross UTB Balance at Beginning of Period	$	142		$	137		$	131
Tax positions related to the current period:
Gross increases	20			12			14
Gross decreases	—			—			—
Tax positions related to prior periods:
Gross increases	—			—			—
Gross decreases	(26		)	—			—
Settlements	(1		)	—			—
Lapse of statute of limitations	(5		)	(7		)	(8		)
Gross UTB Balance at End of Period	$	130		$	142		$	137

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REAL ESTATE TRANSACTIONS (Tables)

12 Months Ended

Feb. 03, 2018

Real Estate [Abstract]

Schedule of Immediate Gain on Sale Leaseback

Accordingly, during the second quarter of 2015, Holdings recognized an immediate net gain of $508 million within gain on sales of assets in the Consolidated Statements of Operations for 2015, comprised of a gain for the amount of gain on sale in excess of the present value of minimum lease payments, offset by a loss for properties where the fair value was less than the carrying value and the write-off of lease balances related to third-party leases that were assigned to Seritage and the JVs, as shown in the table below.

	2015
millions	Kmart			Sears Domestic			Sears Holdings
Gain	$	154		$	471		$	625
Loss	(17		)	(100		)	(117		)
Immediate Net Gain	$	137		$	371		$	508

Schedule of Rent Expense

Rent expense consisted of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback, as shown in the table below.

	2017									2016									2015
millions	Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Holdings
Straight-line rent expense	$	20		$	140		$	160		$	32		$	152		$	184		$	20		$	100		$	120
Amortization of deferred gain on sale-leaseback	(11		)	(67		)	(78		)	(17		)	(71		)	(88		)	(11		)	(41		)	(52		)
Rent expense	$	9		$	73		$	82		$	15		$	81		$	96		$	9		$	59		$	68

Rental expense for operating leases was as follows:

millions	2017			2016			2015
Minimum rentals	$	666		$	739		$	713
Percentage rentals	5			7			8
Less-Sublease rentals	(43		)	(51		)	(46		)
Less-Amortization of deferred gain on sale-leaseback	(78		)	(88		)	(52		)
Total	$	550		$	607		$	623

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GOODWILL AND INTANGIBLE ASSETS (Tables)

12 Months Ended

Feb. 03, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

The following summarizes our intangible assets at February 3, 2018 and January 28, 2017, respectively, the amortization expenses recorded for the years then ended, as well as our estimated amortization expense for the next five years and thereafter.

	February 3, 2018				January 28, 2017
millions	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets:
Favorable lease rights	$	121	$	44	$	143	$	52
Non-amortizing intangible assets:
Trade names	1,091		—		1,430		—
Total	$	1,212	$	44	$	1,573	$	52

Schedule of Future Amortization Expense

Annual Amortization Expense
2017	$	4
2016	5
2015	7

Estimated Amortization
2018	$	3
2019	3
2020	3
2021	3
2022	3
Thereafter	56

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STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS (Tables)

12 Months Ended

Feb. 03, 2018

Restructuring and Related Activities [Abstract]

Store Closing Costs Recorded

Store closing costs and severance recorded for 2017, 2016 and 2015 were as follows:

millions	Markdowns(1)		Severance Costs(2)		Lease Termination Costs(2)			Other Charges(2)		Impairment and Accelerated Depreciation(3)		Total Store Closing Costs
Kmart	$	154	$	25	$	80		$	22	$	19	$	300
Sears Domestic	73		58		40			10		21		202
Total 2017 costs	$	227	$	83	$	120		$	32	$	40	$	502
Kmart	$	187	$	28	$	71		$	32	$	13	$	331
Sears Domestic	39		13		5			9		7		73
Total 2016 costs	$	226	$	41	$	76		$	41	$	20	$	404
Kmart	$	39	$	16	$	21		$	10	$	1	$	87
Sears Domestic	5		21		(15		)	1		2		14
Total 2015 costs	$	44	$	37	$	6		$	11	$	3	$	101

_____________

⁽¹⁾  Recorded within cost of sales, buying and occupancy in the Consolidated Statements of Operations.

⁽²⁾  Recorded within selling and administrative in the Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

⁽³⁾  2017, 2016 and 2015 costs are recorded within depreciation and amortization on the Consolidated Statements of Operations.

Store Closing Cost Accruals

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at January 30, 2016	$	58		$	114		$	8		$	180
Store closing costs	41			85			41			167
Payments/utilizations/other	(45		)	(55		)	(31		)	(131		)
Balance at January 28, 2017	54			144			18			216
Store closing costs	83			162			32			277
Store closing capital lease obligations	—			33			—			33
Payments/utilizations/other	(88		)	(139		)	(38		)	(265		)
Balance at February 3, 2018	$	49		$	200		$	12		$	261

Impairment of Long-Lived Assets

As a result of this impairment testing, the Company recorded impairment charges as shown in the table below.

millions	2017		2016		2015
Kmart	$	16	$	22	$	14
Sears Domestic	54		24		80
Sears Holdings	$	70	$	46	$	94

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LEASES (Tables)

12 Months Ended

Feb. 03, 2018

Leases [Abstract]

Schedule of Rent Expense

Rent expense consisted of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback, as shown in the table below.

	2017									2016									2015
millions	Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Holdings
Straight-line rent expense	$	20		$	140		$	160		$	32		$	152		$	184		$	20		$	100		$	120
Amortization of deferred gain on sale-leaseback	(11		)	(67		)	(78		)	(17		)	(71		)	(88		)	(11		)	(41		)	(52		)
Rent expense	$	9		$	73		$	82		$	15		$	81		$	96		$	9		$	59		$	68

Rental expense for operating leases was as follows:

millions	2017			2016			2015
Minimum rentals	$	666		$	739		$	713
Percentage rentals	5			7			8
Less-Sublease rentals	(43		)	(51		)	(46		)
Less-Amortization of deferred gain on sale-leaseback	(78		)	(88		)	(52		)
Total	$	550		$	607		$	623

Schedule of Future Minimum Obligations Under Operating And Capital Lease Commitments

Minimum lease obligations, excluding taxes, insurance and other expenses payable directly by us, for leases in effect at February 3, 2018, were as follows:

	Minimum Lease Commitments
millions	Capital			Operating
2018	$	28		$	537
2019	15			439
2020	6			368
2021	4			297
2022	4			237
Later years	58			961
Total minimum lease payments	115			2,839
Less minimum sublease income				(92		)
Net minimum lease payments				$	2,747
Less:
Estimated executory costs	(4		)
Interest at a weighted average rate of 4.9%	(39		)
Capital lease obligations	72
Less current portion of capital lease obligations	(22		)
Long-term capital lease obligations	$	50

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SUPPLEMENTAL FINANCIAL INFORMATION (Tables)

12 Months Ended

Feb. 03, 2018

Supplemental Financial Information [Abstract]

Other Long-Term Liabilities

Other long-term liabilities at February 3, 2018 and January 28, 2017 consisted of the following:

millions	February 3, 2018		January 28, 2017
Unearned revenues	$	539	$	639
Self-insurance reserves	491		535
Other	437		467
Total	$	1,467	$	1,641

Deferred Revenue, by Arrangement, Disclosure

The table below shows activity related to unearned revenues for service contracts, which are recorded within unearned revenues and other long-term liabilities in the Consolidated Balance Sheets.

millions	Unearned Revenues
Balance at January 30, 2016	$	1,405
Sales of service contracts	855
Revenue recognized on existing service contracts	(961		)
Balance at January 28, 2017	1,299
Sales of service contracts	691
Revenue recognized on existing service contracts	(876		)
Balance at February 3, 2018	$	1,114

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SUMMARY OF SEGMENT DATA (Tables)

12 Months Ended

Feb. 03, 2018

Segment Reporting [Abstract]

Summary of Segment Data

	2017
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales
Hardlines	$	1,550		$	5,656		$	7,206
Apparel and Soft Home	2,096			2,182			4,278
Food and Drug	1,918			7			1,925
Total merchandise sales	5,564			7,845			13,409
Services and other
Services	4			1,811			1,815
Other	50			1,428			1,478
Total services and other	54			3,239			3,293
Total revenues	5,618			11,084			16,702
Costs and expenses:
Cost of sales, buying and occupancy - merchandise sales	4,592			6,757			11,349
Cost of sales and occupancy - services and other	9			1,817			1,826
Total cost of sales, buying and occupancy	4,601			8,574			13,175
Selling and administrative	1,455			3,676			5,131
Depreciation and amortization	60			272			332
Impairment charges	16			126			142
Gain on sales of assets	(881		)	(767		)	(1,648		)
Total costs and expenses	5,251			11,881			17,132
Operating income (loss)	$	367		$	(797	)	$	(430	)
Total assets	$	1,576		$	5,686		$	7,262
Capital expenditures	$	18		$	62		$	80

	2016
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales
Hardlines	$	2,445		$	7,126		$	9,571
Apparel and Soft Home	3,044			2,522			5,566
Food and Drug	3,088			11			3,099
Total merchandise sales	8,577			9,659			18,236
Services and other
Services	9			2,101			2,110
Other	64			1,728			1,792
Total services and other	73			3,829			3,902
Total revenues	8,650			13,488			22,138
Costs and expenses:
Cost of sales, buying and occupancy - merchandise sales	7,075			8,109			15,184
Cost of sales and occupancy - services and other	18			2,250			2,268
Total cost of sales, buying and occupancy	7,093			10,359			17,452
Selling and administrative	2,175			3,934			6,109
Depreciation and amortization	71			304			375
Impairment charges	22			405			427
Gain on sales of assets	(181		)	(66		)	(247		)
Total costs and expenses	9,180			14,936			24,116
Operating loss	$	(530	)	$	(1,448	)	$	(1,978	)
Total assets	$	2,134		$	7,228		$	9,362
Capital expenditures	$	43		$	99		$	142

	2015
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales
Hardlines	$	2,936		$	7,915		$	10,851
Apparel and Soft Home	3,434			2,907			6,341
Food and Drug	3,735			9			3,744
Total merchandise sales	10,105			10,831			20,936
Services and other
Services	13			2,127			2,140
Other	70			2,000			2,070
Total services and other	83			4,127			4,210
Total revenues	10,188			14,958			25,146
Costs and expenses:
Cost of sales, buying and occupancy - merchandise sales	8,023			8,794			16,817
Cost of sales and occupancy - services and other	19			2,500			2,519
Total cost of sales, buying and occupancy	8,042			11,294			19,336
Selling and administrative	2,537			4,320			6,857
Depreciation and amortization	72			350			422
Impairment charges	14			260			274
Gain on sales of assets	(185		)	(558		)	(743		)
Total costs and expenses	10,480			15,666			26,146
Operating loss	$	(292	)	$	(708	)	$	(1,000	)
Total assets	$	3,059		$	8,278		$	11,337
Capital expenditures	$	42		$	169		$	211

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QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (Tables)

12 Months Ended

Feb. 03, 2018

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

	2017
millions, except per share data	First Quarter		Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	4,301	$	4,365		$	3,660		$	4,376
Cost of sales, buying and occupancy	3,371		3,394			2,958			3,452
Selling and administrative	1,267		1,369			1,339			1,156
Net income (loss) attributable to Holdings' shareholders	244		(251		)	(558		)	182
Basic net income (loss) per share attributable to Holdings' shareholders	2.28		(2.34		)	(5.19		)	1.69
Diluted net income (loss) per share attributable to Holdings' shareholders	2.28		(2.34		)	(5.19		)	1.69

	2016
millions, except per share data	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	5,394		$	5,663		$	5,029		$	6,052
Cost of sales, buying and occupancy	4,217			4,403			4,067			4,765
Selling and administrative	1,503			1,484			1,543			1,579
Net loss attributable to Holdings' shareholders	(471		)	(395		)	(748		)	(607		)
Basic net loss per share attributable to Holdings' shareholders	(4.41		)	(3.70		)	(6.99		)	(5.67		)
Diluted net loss per share attributable to Holdings' shareholders	(4.41		)	(3.70		)	(6.99		)	(5.67		)

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION (Tables)

12 Months Ended

Feb. 03, 2018

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet

February 3, 2018

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	152	$	30	$	—		$	182
Restricted cash	154			—		—		—			154
Intercompany receivables	—			—		27,993		(27,993		)	—
Accounts receivable	—			322		21		—			343
Merchandise inventories	—			2,798		—		—			2,798
Prepaid expenses and other current assets	309			899		478		(1,351		)	335
Total current assets	463			4,171		28,522		(29,344		)	3,812
Total property and equipment, net	—			1,043		686		—			1,729
Goodwill and intangible assets	—			346		1,189		(98		)	1,437
Other assets	179			1,331		1,159		(2,385		)	284
Investment in subsidiaries	8,790			27,752		—		(36,542		)	—
TOTAL ASSETS	$	9,432		$	34,643	$	31,556	$	(68,369	)	$	7,262
Current liabilities
Short-term borrowings	$	144		$	937	$	—	$	(166	)	$	915
Current portion of long-term debt and capitalized lease obligations	303			897		—		(232		)	968
Merchandise payables	—			576		—		—			576
Intercompany payables	11,099			16,894		—		(27,993		)	—
Other current liabilities	16			1,941		1,448		(949		)	2,456
Total current liabilities	11,562			21,245		1,448		(29,340		)	4,915
Long-term debt and capitalized lease obligations	1,991			2,734		—		(2,476		)	2,249
Pension and postretirement benefits	—			1,616		3		—			1,619
Deferred gain on sale-leaseback	—			360		2		—			362
Sale-leaseback financing obligation	—			158		89		—			247
Long-term deferred tax liabilities	—			—		349		(223		)	126
Other long-term liabilities	—			1,131		514		(178		)	1,467
Total Liabilities	13,553			27,244		2,405		(32,217		)	10,985
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(4,121		)	7,399		29,151		(36,152		)	(3,723		)
Total Equity (Deficit)	(4,121		)	7,399		29,151		(36,152		)	(3,723		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	9,432		$	34,643	$	31,556	$	(68,369	)	$	7,262

Condensed Consolidating Balance Sheet

January 28, 2017

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	260	$	26	$	—		$	286
Intercompany receivables	—			—		27,415		(27,415		)	—
Accounts receivable	—			441		25					466
Merchandise inventories	—			3,959		—		—			3,959
Prepaid expenses and other current assets	23			692		856		(1,286		)	285
Total current assets	23			5,352		28,322		(28,701		)	4,996
Total property and equipment, net	—			1,504		736		—			2,240
Goodwill and intangible assets	—			360		1,528		(98		)	1,790
Other assets	4			285		931		(884		)	336
Investment in subsidiaries	9,110			26,703		—		(35,813		)	—
TOTAL ASSETS	$	9,137		$	34,204	$	31,517	$	(65,496	)	$	9,362
Current liabilities
Short-term borrowings	$	—		$	108	$	—	$	(108	)	$	—
Current portion of long-term debt and capitalized lease obligations	—			1,189		—		(599		)	590
Merchandise payables	—			1,048		—		—			1,048
Intercompany payables	11,830			15,585		—		(27,415		)	—
Other current liabilities	17			2,479		1,219		(672		)	3,043
Total current liabilities	11,847			20,409		1,219		(28,794		)	4,681
Long-term debt and capitalized lease obligations	1,215			3,160		—		(802		)	3,573
Pension and postretirement benefits	—			1,746		4		—			1,750
Deferred gain on sale-leaseback	—			563		—		—			563
Sale-leaseback financing obligation	—			235		—		—			235
Long-term deferred tax liabilities	48			—		724		(29		)	743
Other long-term liabilities	—			808		1,038		(205		)	1,641
Total Liabilities	13,110			26,921		2,985		(29,830		)	13,186
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(3,973		)	7,283		28,532		(35,666		)	(3,824		)
Total Equity (Deficit)	(3,973		)	7,283		28,532		(35,666		)	(3,824		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	9,137		$	34,204	$	31,517	$	(65,496	)	$	9,362

Condensed Consolidating Statement of Operations

Condensed Consolidating Statement of Operations

For the Year Ended February 3, 2018

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	13,375		$	—		$	34		$	13,409
Services and other	—			3,303			2,283			(2,293		)	3,293
Total revenues	—			16,678			2,283			(2,259		)	16,702
Cost of sales, buying and occupancy - merchandise sales	1			11,237			—			111			11,349
Cost of sales and occupancy - services and other	—			2,228			876			(1,278		)	1,826
Total cost of sales, buying and occupancy	1			13,465			876			(1,167		)	13,175
Selling and administrative	(27		)	5,409			841			(1,092		)	5,131
Depreciation and amortization	—			270			62			—			332
Impairment charges	—			70			72			—			142
Gain on sales of assets	(486		)	(1,142		)	(20		)	—			(1,648		)
Total costs and expenses	(512		)	18,072			1,831			(2,259		)	17,132
Operating income (loss)	512			(1,394		)	452			—			(430		)
Interest expense	(600		)	(994		)	(19		)	1,074			(539		)
Interest and investment income (loss)	45			195			412			(664		)	(12		)
Income (loss) before income taxes	(43		)	(2,193		)	845			410			(981		)
Income tax (expense) benefit	232			765			(399		)	—			598
Equity (deficit) in earnings in subsidiaries	(982		)	460			—			522			—
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(793	)	$	(968	)	$	446		$	932		$	(383	)

Condensed Consolidating Statement of Operations

For the Year Ended January 28, 2017

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	18,218		$	—		$	18		$	18,236
Services and other	—			3,985			2,796			(2,879		)	3,902
Total revenues	—			22,203			2,796			(2,861		)	22,138
Cost of sales, buying and occupancy - merchandise sales	—			15,104			—			80			15,184
Cost of sales and occupancy - services and other	—			2,824			1,056			(1,612		)	2,268
Total cost of sales, buying and occupancy	—			17,928			1,056			(1,532		)	17,452
Selling and administrative	6			6,506			926			(1,329		)	6,109
Depreciation and amortization	—			303			72			—			375
Impairment charges	—			46			381			—			427
Gain on sales of assets	—			(343		)	(2		)	98			(247		)
Total costs and expenses	6			24,440			2,433			(2,763		)	24,116
Operating income (loss)	(6		)	(2,237		)	363			(98		)	(1,978		)
Interest expense	(385		)	(645		)	(13		)	639			(404		)
Interest and investment income (loss)	20			152			441			(639		)	(26		)
Other income (loss)	13			—			(217		)	217			13
Income (loss) before income taxes	(358		)	(2,730		)	574			119			(2,395		)
Income tax (expense) benefit	28			529			(383		)	—			174
Equity (deficit) in earnings in subsidiaries	(2,010		)	5			—			2,005			—
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(2,340	)	$	(2,196	)	$	191		$	2,124		$	(2,221	)

Condensed Consolidating Statement of Operations

For the Year Ended January 30, 2016

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales	$	—		$	20,925		$	—		$	11		$	20,936
Services and other	—			4,339			2,861			(2,990		)	4,210
Total revenues	—			25,264			2,861			(2,979		)	25,146
Cost of sales, buying and occupancy - merchandise sales	—			16,749			—			68			16,817
Cost of sales and occupancy - services and other	—			3,070			1,131			(1,682		)	2,519
Total cost of sales, buying and occupancy	—			19,819			1,131			(1,614		)	19,336
Selling and administrative	3			7,322			897			(1,365		)	6,857
Depreciation and amortization	—			350			72			—			422
Impairment charges	—			94			180			—			274
Gain on sales of assets	—			(735		)	(8		)	—			(743		)
Total costs and expenses	3			26,850			2,272			(2,979		)	26,146
Operating income (loss)	(3		)	(1,586		)	589			—			(1,000		)
Interest expense	(265		)	(481		)	(83		)	506			(323		)
Interest and investment income (loss)	(19		)	44			419			(506		)	(62		)
Income (loss) before income taxes	(287		)	(2,023		)	925			—			(1,385		)
Income tax (expense) benefit	115			480			(338		)	—			257
Equity (deficit) in earnings in subsidiaries	(956		)	158			—			798			—
Net income (loss)	(1,128		)	(1,385		)	587			798			(1,128		)
Income attributable to noncontrolling interests	—			—			—			(1		)	(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(1,128	)	$	(1,385	)	$	587		$	797		$	(1,129	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended February 3, 2018

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(793	)	$	(968	)	$	446	$	932		$	(383	)
Other comprehensive income:
Pension and postretirement adjustments, net of tax	—			478			—		—			478
Unrealized net gain, net of tax	6			—			45		(51		)	—
Currency translation adjustments, net of tax	—			—			2		—			2
Total other comprehensive income	6			478			47		(51		)	480
Comprehensive income (loss) attributable to Holdings' shareholders	$	(787	)	$	(490	)	$	493	$	881		$	97

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 28, 2017

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(2,340	)	$	(2,196	)	$	191		$	2,124		$	(2,221	)
Other comprehensive income:
Pension and postretirement adjustments, net of tax	—			366			—			—			366
Dissolution of noncontrolling interest	—			—			(7		)	—			(7		)
Unrealized net gain, net of tax	—			—			122			(122		)	—
Total other comprehensive income	—			366			115			(122		)	359
Comprehensive income (loss)	(2,340		)	(1,830		)	306			2,002			(1,862		)
Comprehensive income attributable to noncontrolling interest	—			—			—			7			7
Comprehensive income (loss) attributable to Holdings' shareholders	$	(2,340	)	$	(1,830	)	$	306		$	2,009		$	(1,855	)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 30, 2016

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(1,128	)	$	(1,385	)	$	587		$	798		$	(1,128	)
Other comprehensive income (loss):
Pension and postretirement adjustments, net of tax	—			113			—			—			113
Currency translation adjustments, net of tax	—			—			(1		)	—			(1		)
Unrealized net loss, net of tax	—			(3		)	(65		)	68			—
Total other comprehensive income (loss)	—			110			(66		)	68			112
Comprehensive income (loss)	(1,128		)	(1,275		)	521			866			(1,016		)
Comprehensive loss attributable to noncontrolling interest	—			—			—			(1		)	(1		)
Comprehensive income (loss) attributable to Holdings' shareholders	$	(1,128	)	$	(1,275	)	$	521		$	865		$	(1,017	)

Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows

For the Year Ended February 3, 2018

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	1		$	(2,404	)	$	682		$	(121	)	$	(1,842	)
Proceeds from sales of property and investments	—			1,093			16			—			1,109
Proceeds from Craftsman Sale	572			—			—			—			572
Proceeds from sales of receivables	293			—			—			—			293
Purchases of property and equipment	—			(70		)	(10		)	—			(80		)
Net investing with Affiliates	(934		)	—			(563		)	1,497			—
Net cash provided by (used in) investing activities	(69		)	1,023			(557		)	1,497			1,894
Proceeds from debt issuances	410			610			—			—			1,020
Repayments of long-term debt	(171		)	(1,185		)	—			—			(1,356		)
Increase in short-term borrowings, primarily 90 days or less	—			271			—			—			271
Proceeds from sale-leaseback financing	—			106			—			—			106
Debt issuance costs	(17		)	(26		)	—			—			(43		)
Intercompany dividend	—			—			(121		)	121			—
Net borrowing with Affiliates	—			1,497			—			(1,497		)	—
Net cash provided by (used in) financing activities	222			1,273			(121		)	(1,376		)	(2		)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	154			(108		)	4			—			50
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			260			26			—			286
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR	$	154		$	152		$	30		$	—		$	336

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 28, 2017

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	244		$	(2,137	)	$	820		$	(308	)	$	(1,381	)
Proceeds from sales of property and investments	—			273			113			—			386
Purchases of property and equipment	—			(133		)	(9		)	—			(142		)
Net investing with Affiliates	(239		)	—			(627		)	866			—
Net cash provided by (used in) investing activities	(239		)	140			(523		)	866			244
Proceeds from debt issuances	—			2,028			—			—			2,028
Repayments of long-term debt	—			(65		)	(1		)	—			(66		)
Decrease in short-term borrowings, primarily 90 days or less	—			(797		)	—			—			(797		)
Proceeds from sale-leaseback financing	—			71			—			—			71
Debt issuance costs	(5		)	(46		)	—			—			(51		)
Intercompany dividend	—			—			(308		)	308			—
Net borrowing with Affiliates	—			866			—			(866		)	—
Net cash provided by (used in) financing activities	(5		)	2,057			(309		)	(558		)	1,185
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	—			60			(12		)	—			48
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			200			38			—			238
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR	$	—		$	260		$	26		$	—		$	286

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 30, 2016

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	395		$	(3,021	)	$	938		$	(479	)	$	(2,167	)
Proceeds from sales of property and investments	—			2,725			5			—			2,730
Purchases of property and equipment	—			(202		)	(9		)	—			(211		)
Net investing with Affiliates	(395		)	—			(446		)	841			—
Net cash provided by (used in) investing activities	(395		)	2,523			(450		)	841			2,519
Repayments of long-term debt	—			(1,403		)	(2		)	—			(1,405		)
Increase in short-term borrowings, primarily 90 days or less	—			583			—			—			583
Proceeds from sale-leaseback financing	—			508			—			—			508
Debt issuance costs	—			(50		)	—			—			(50		)
Intercompany dividend	—						(479		)	479			—
Net borrowing with Affiliates	—			841			—			(841		)	—
Net cash provided by (used in) financing activities	—			479			(481		)	(362		)	(364		)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	—			(19		)	7			—			(12		)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR	—			219			31			—			250
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR	$	—		$	200		$	38		$	—		$	238

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Narrative (Detail)							1 Months Ended			2 Months Ended	3 Months Ended	12 Months Ended
		Mar. 15, 2018 USD ($) $ / shares	Mar. 14, 2018 USD ($)	Mar. 08, 2017 USD ($)	Mar. 18, 2016	Aug. 03, 2015 USD ($)	Feb. 28, 2018 USD ($)	Nov. 30, 2017 USD ($) property	Jul. 31, 2017 USD ($)	Mar. 23, 2018 USD ($)	Feb. 03, 2018 USD ($) Store	Feb. 03, 2018 USD ($) Store Segment $ / shares	Jan. 28, 2017 USD ($) Store	Jan. 30, 2016 USD ($) Store	Feb. 02, 2019 USD ($)	Mar. 21, 2018 USD ($)	Mar. 08, 2018 USD ($)	Feb. 26, 2018 USD ($)	Jan. 09, 2018	Jan. 08, 2018	Jan. 04, 2018 USD ($)	Oct. 31, 2017 USD ($)	Jan. 31, 2017 USD ($)	Jan. 03, 2017 USD ($)	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($)	Apr. 30, 2016 USD ($)	Apr. 08, 2016 USD ($)	Nov. 21, 2014	Oct. 20, 2014	Oct. 31, 2010
Significant Accounting Policies [Line Items]
Number of reportable segments | Segment												2
Fiscal period (in weeks)												371 days	364 days	364 days
Number of properties released under amendment | property								138
Proceeds from sales of Craftsman Brand												$ 572,000,000	$ 0	$ 0
Gain on sales of assets												1,648,000,000	247,000,000	743,000,000
Additional borrowing capacity under accordion feature											$ 1,000,000,000	1,000,000,000
Credit agreement											1,500,000,000.0	$ 1,500,000,000.0	1,971,000,000.000
Period to contribute to pension plan payments												5 years
Annualized cost savings during year												$ 1,250,000,000
Number of stores closed | Store												435
Number of stores announced for closure | Store												103
Proceeds from sales of property and investments	[1]											$ 1,109,000,000	386,000,000	2,730,000,000
Annualized cost reduction target in 2018												200,000,000
Credit card deposits in transit											65,000,000	65,000,000	87,000,000
Bank checks outstanding											74,000,000	74,000,000	29,000,000
Allowance for doubtful accounts											$ 35,000,000	$ 35,000,000	37,000,000
Percentage of LIFO inventory											58.00%	58.00%
Excess of replacement or current costs over stated LIFO value											$ 31,000,000	$ 31,000,000	33,000,000
Effect of LIFO Inventory Liquidation on Income												6,000,000	12,000,000
Depreciation expense												328,000,000	370,000,000	415,000,000
Assets held-for-sale											70,000,000	70,000,000	96,000,000
Trade names and other intangible assets											$ 1,168,000,000	1,168,000,000	1,521,000,000
Cost of sales, buying and occupancy, one-time credits from vendors													33,000,000	146,000,000
Advertising expense												$ 415,000,000	684,000,000	850,000,000
Building | Minimum
Significant Accounting Policies [Line Items]
Property and equipment, useful life												20 years
Building | Maximum
Significant Accounting Policies [Line Items]
Property and equipment, useful life												50 years
Furniture Fixtures And Equipment | Minimum
Significant Accounting Policies [Line Items]
Property and equipment, useful life												3 years
Furniture Fixtures And Equipment | Maximum
Significant Accounting Policies [Line Items]
Property and equipment, useful life												10 years
Computer Equipment | Minimum
Significant Accounting Policies [Line Items]
Property and equipment, useful life												3 years
Computer Equipment | Maximum
Significant Accounting Policies [Line Items]
Property and equipment, useful life												5 years
Senior Secured Note
Significant Accounting Policies [Line Items]
Principal amount of debt						$ 1,000
Inventory advance rate																			75.00%	65.00%
Stated interest rate on debt instrument											6.625%	6.625%																			6.625%
Repayments of debt						$ 936,000,000
2016 Term Loan | Senior Secured Note
Significant Accounting Policies [Line Items]
Principal amount of debt											$ 750,000,000	$ 750,000,000
Proceeds from debt, net of issuance costs												722,000,000
2016 Term Loan | Domestic Credit Agreement
Significant Accounting Policies [Line Items]
Credit facility, amount outstanding											750,000,000	750,000,000
2016 Secured Loan Facility | Secured Debt
Significant Accounting Policies [Line Items]
Principal amount of debt																											$ 500,000,000	$ 500,000,000
2017 Secured Loan Facility | Secured Debt
Significant Accounting Policies [Line Items]
Principal amount of debt																							$ 500,000,000	$ 500,000,000
Second Lien Term Loan
Significant Accounting Policies [Line Items]
Inventory advance rate																			75.00%	65.00%
Repayments of debt												110,000,000
Second Lien Term Loan | Secured Debt
Significant Accounting Policies [Line Items]
Principal amount of debt											300,000,000	300,000,000														$ 300,000,000
Additional borrowing capacity under accordion feature									$ 500,000,000
Line of Credit Loans | Line of Credit
Significant Accounting Policies [Line Items]
Debt instrument, term									180 days
Sears Holdings Corporation 2016 Term Loan | Secured Debt
Significant Accounting Policies [Line Items]
Principal amount of debt											1,000,000,000.0	1,000,000,000.0
Repayments of debt											325,000,000	570,000,000
Domestic Credit Agreement
Significant Accounting Policies [Line Items]
Credit agreement											750,000,000	750,000,000
Term Loan Facility
Significant Accounting Policies [Line Items]
Principal amount of debt											300,000,000	300,000,000
Additional borrowing capacity under incremental loan feature																					$ 200,000,000
Second Lien | Domestic Credit Agreement
Significant Accounting Policies [Line Items]
Credit agreement											2,000,000,000.0	2,000,000,000.0
Credit facility, amount outstanding											$ 1,100,000,000	$ 1,100,000,000
Old Senior Unsecured Notes
Significant Accounting Policies [Line Items]
Stated interest rate on debt instrument											8.00%	8.00%																	8.00%	8.00%
Senior unsecured notes											$ 625,000,000	$ 625,000,000
New 8% Senior Notes and New 6.625% Senior Secured Notes
Significant Accounting Policies [Line Items]
Volume weighted average trading price threshold (in dollars per share) | $ / shares												$ 10
Second Lien Term Loan (Credit Facility), $300M due 2020 | Secured Debt
Significant Accounting Policies [Line Items]
Principal amount of debt											$ 300,000,000	$ 300,000,000
6.50% to 7.50% Notes, due 2027 to 2043 | Minimum
Significant Accounting Policies [Line Items]
Stated interest rate on debt instrument											6.50%	6.50%
6.50% to 7.50% Notes, due 2027 to 2043 | Maximum
Significant Accounting Policies [Line Items]
Stated interest rate on debt instrument											7.50%	7.50%
SRAC Exchange Notes
Significant Accounting Policies [Line Items]
Stated interest rate on debt instrument											7.00%	7.00%
Payment in kind interest rate on debt instrument											12.00%	12.00%
FILO Loan
Significant Accounting Policies [Line Items]
Proceeds from debt, net of issuance costs												$ 122,000,000
Standby Letters of Credit
Significant Accounting Policies [Line Items]
Credit agreement																									$ 500,000,000
Secured Debt
Significant Accounting Policies [Line Items]
Credit facility, amount outstanding											$ 271,000,000	271,000,000	0
Subsequent Event | Senior Secured Note
Significant Accounting Policies [Line Items]
Repayments of debt		$ 169,800,000
Subsequent Event | Line of Credit Loans | Line of Credit
Significant Accounting Policies [Line Items]
Debt instrument, term							270 days
Credit agreement							$ 600,000,000
Subsequent Event | Sears Holdings Corporation 2016 Term Loan | Secured Debt
Significant Accounting Policies [Line Items]
Repayments of debt										$ 97,000,000
Subsequent Event | New Senior Secured Notes
Significant Accounting Policies [Line Items]
Stated interest rate on debt instrument		6.625%
Conversion price (in dollars per share) | $ / shares		$ 5.00
Volume weighted average trading price threshold (in dollars per share) | $ / shares		$ 10.00
Subsequent Event | Domestic Credit Agreement
Significant Accounting Policies [Line Items]
Credit agreement							$ 1,250,000,000.00
Subsequent Event | Term Loan Facility
Significant Accounting Policies [Line Items]
Principal amount of debt																		$ 250,000,000
Additional borrowing capacity under incremental loan feature																		$ 50,000,000
Subsequent Event | Secured Loan
Significant Accounting Policies [Line Items]
Principal amount of debt			$ 200,000,000
Debt collateral, aggregate appraised value			$ 980,000,000
Subsequent Event | Secured Loan | Minimum
Significant Accounting Policies [Line Items]
Expected loan pay-off period			3 months
Subsequent Event | Secured Loan | Maximum
Significant Accounting Policies [Line Items]
Expected loan pay-off period			6 months
Subsequent Event | Mezzanine Loan
Significant Accounting Policies [Line Items]
Principal amount of debt			$ 240,000,000
Additional borrowing capacity under incremental loan feature			200,000,000
Subsequent Event | Old Senior Unsecured Notes
Significant Accounting Policies [Line Items]
Repayments of debt		$ 214,000,000
Subsequent Event | New Senior Unsecured Notes
Significant Accounting Policies [Line Items]
Stated interest rate on debt instrument		8.00%
Conversion price (in dollars per share) | $ / shares		$ 8.33
Volume weighted average trading price threshold (in dollars per share) | $ / shares		$ 10.00
Subsequent Event | FILO Loan
Significant Accounting Policies [Line Items]
Principal amount of debt																$ 125,000,000
Kmart
Significant Accounting Policies [Line Items]
Gain on sales of assets												$ 881,000,000	$ 181,000,000	$ 185,000,000
Number of stores closed | Store												303	206	38
Number of stores announced for closure | Store												66
Sears Domestic
Significant Accounting Policies [Line Items]
Gain on sales of assets												$ 767,000,000	$ 66,000,000	$ 558,000,000
Number of stores closed | Store												123	37	12
Number of stores announced for closure | Store												40
Impairment of indefinite-lived intangible assets												$ 72,000,000	$ 381,000,000	$ 180,000,000
Trade names and other intangible assets											359,000,000	$ 359,000,000	$ 431,000,000
Craftsman Brand
Significant Accounting Policies [Line Items]
Royalty free period				15 years
Proceeds from sales of Craftsman Brand				$ 525,000,000
Consideration receivable for sale of Craftsman Brand				$ 250,000,000
Income stream related to new Stanley Black and Decker sales												15 years
Real estate pledged as collateral to secure minimum pension funding											$ 100,000,000	$ 100,000,000
Period to contribute to pension plan payments												5 years
Craftsman Brand | Minimum
Significant Accounting Policies [Line Items]
Percentage of future revenue on new Stanley Black and Decker sales				2.50%
Craftsman Brand | Maximum
Significant Accounting Policies [Line Items]
Percentage of future revenue on new Stanley Black and Decker sales				3.50%
UNITED STATES
Significant Accounting Policies [Line Items]
Number of stores | Store											1,002	1,002
Notes Payable, Other Payables | Incremental Loans
Significant Accounting Policies [Line Items]
Principal amount of debt																						$ 200,000,000
Stated interest rate on debt instrument											11.00%	11.00%
Notes Payable, Other Payables | Subsequent Event | Second Incremental Loan
Significant Accounting Policies [Line Items]
Principal amount of debt																	$ 100,000,000
Commercial Paper
Significant Accounting Policies [Line Items]
Short-term debt, maximum amount outstanding during period												$ 160,000,000
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Craftsman Brand
Significant Accounting Policies [Line Items]
Proceeds from sales of business, net cash payment period				3 years
Revenue sharing sales period				15 years
Gain on sales of assets												$ 492,000,000
Net present value of Craftsman Receivable				$ 234,000,000
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Craftsman Brand | Kmart
Significant Accounting Policies [Line Items]
Income stream related to new Stanley Black and Decker sales				15 years
Maximum period for commencement of crediting payments to pension funding obligation				5 years
Real estate pledged as collateral to secure minimum pension funding				$ 100,000,000
PBGC
Significant Accounting Policies [Line Items]
Pension plan protection term					5 years
Noteholders | Scenario, Forecast | 6.50% to 7.50% Notes, due 2027 to 2043
Significant Accounting Policies [Line Items]
Principal amount exchanged															$ 100,000,000
Accounting Standards Update 2014-09 | Pro Forma
Significant Accounting Policies [Line Items]
Reduction in revenue, percentage												2.70%	2.60%
Pension Plans
Significant Accounting Policies [Line Items]
Company contributions								$ 407,000,000				$ 295,000,000	$ 314,000,000
Employer contribution relief period								2 years
Pension Plans | Subsequent Event
Significant Accounting Policies [Line Items]
Company contributions			$ 282,000,000
Employer contribution relief period			2 years
Escrow deposit for pension plans			$ 125,000,000

[1] Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction (including $745 million and $297 million, respectively, received from ESL Investments, Inc. and its affiliates ("ESL") and Fairholme Capital Management, LLC and its affiliates ("Fairholme")), and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in proceeds from sales of property and investments ($2.6 billion), and proceeds from sale-leaseback financing ($82 million) for 2015. Proceeds from the JV transactions are included in proceeds from sale-leaseback financing ($426 million) for 2015. See Note 11 for further information and defined terms.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Millions	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016	Jan. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Cash and equivalents	$ 113	$ 196
Cash posted as collateral	4	3
Credit card deposits in transit	65	87
Total cash and cash equivalents	182	286
Restricted cash	154	0
Total cash balances	$ 336	$ 286	$ 238	$ 250

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Self-insurance Reserves (Details) $ in Millions	Feb. 03, 2018 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
2018	$ 148
2019	100
2020	74
2021	54
2022	42
Later years	311
Total undiscounted obligation	729
Less—discount	(83)
Net obligation	$ 646

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SEARS CANADA (Detail) - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017
Sears Canada
Noncontrolling Interest [Line Items]
Shares of beneficial interest (in shares)	12	12
Ownership interest percentage in equity method investment	12.00%	12.00%
Other-than-temporary impairment	$ 12
Sears Canada
Noncontrolling Interest [Line Items]
Equity method investments balance		$ 17

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BORROWINGS Total Borrowings (Detail) - USD ($)		Feb. 03, 2018	Jan. 28, 2017	Aug. 03, 2015	Nov. 21, 2014	Oct. 20, 2014	Oct. 31, 2010
Debt Instrument [Line Items]
Debt and capital lease obligations		$ 4,100,000,000	$ 4,200,000,000
Short-term borrowings:
Short-term borrowings	[1]	$ 915,000,000	$ 0
Short-term debt, weighted average interest rate		8.00%	5.40%
Long-term debt
Carrying amount, long-term debt		$ 3,217,000,000	$ 4,163,000,000
Capitalized lease obligations		72,000,000	145,000,000
Current maturities		(968,000,000)	(590,000,000)
Long-term debt and capitalized lease obligations	[2]	$ 2,249,000,000	$ 3,573,000,000
Weighted-average annual interest rate on long-term debt		7.60%	7.20%
Fair value of long-term debt		$ 2,800,000,000	$ 4,000,000,000
6.50% to 7.50% Notes, due 2027 to 2043
Long-term debt
Carrying amount, long-term debt		284,000,000	327,000,000
8% Secured Loan Facility, due 2018
Long-term debt
Carrying amount, long-term debt		$ 251,000,000	494,000,000
Stated interest rate on debt instrument		8.00%
6.625% Senior Secured Notes, due 2018
Long-term debt
Carrying amount, long-term debt		$ 303,000,000	303,000,000
Stated interest rate on debt instrument		6.625%					6.625%
Principal amount of debt				$ 1,000
8% Senior Unsecured Notes, due 2019
Long-term debt
Carrying amount, long-term debt		$ 483,000,000	428,000,000
Stated interest rate on debt instrument		8.00%			8.00%	8.00%
8% Secured Loan Facility, due 2020
Long-term debt
Carrying amount, long-term debt		$ 374,000,000	485,000,000
Stated interest rate on debt instrument		8.00%
Term Loan Facility (Credit Facility), $300M due 2020
Long-term debt
Carrying amount, long-term debt		$ 206,000,000	0
Principal amount of debt		300,000,000
Secured Debt | Term Loan (Credit Facility), $1.0B due 2019
Long-term debt
Carrying amount, long-term debt		391,000,000	963,000,000
Principal amount of debt		1,000,000,000
Secured Debt | 2016 Term Loan (Credit Facility), $750M due 2020
Long-term debt
Carrying amount, long-term debt		559,000,000	726,000,000
Principal amount of debt		750,000,000
Secured Debt | Second Lien Term Loan (Credit Facility), $300M due 2020
Long-term debt
Carrying amount, long-term debt		294,000,000	$ 292,000,000
Principal amount of debt		$ 300,000,000
Minimum | 6.50% to 7.50% Notes, due 2027 to 2043
Long-term debt
Stated interest rate on debt instrument		6.50%
Maximum | 6.50% to 7.50% Notes, due 2027 to 2043
Long-term debt
Stated interest rate on debt instrument		7.50%

[1] Includes balances held by related parties of $645 million at February 3, 2018 related to our Line of Credit Loans and Incremental Loans (each as defined in Note 3). See Notes 3 and 15 for further information.

[2] Includes balances held by related parties of $1.5 billion and $1.7 billion at February 3, 2018 and January 28, 2017, respectively, related to our Subsidiary Notes, Senior Unsecured Notes, Second Lien Term Loan, 2016 Term Loan and 2017 Secured Loan Facility for both periods and also related to our Term Loan Facility at February 3, 2018 and our Senior Secured Notes at January 28, 2017. See Note 3 for defined terms and Notes 3 and 15 for further information.

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BORROWINGS Long-term Debt Maturities (Details) - USD ($) $ in Millions	Feb. 03, 2018	Jan. 28, 2017
Debt Disclosure [Abstract]
2018	$ 979
2019	637
2020	1,471
2021	3
2022	3
Thereafter	312
Aggregate original principal amount	3,405
Unamortized debt discount	(152)
Unamortized debt issuance costs	(36)
Carrying amount, long-term debt	$ 3,217	$ 4,163

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BORROWINGS Interest Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Debt Disclosure [Abstract]
Interest expense	$ 377	$ 288	$ 223
Amortization of debt issuance costs	58	31	25
Accretion of debt discount	66	50	35
Accretion of self-insurance obligations at net present value	19	16	19
Accretion of lease obligations at net present value	19	19	21
Interest expense	$ 539	$ 404	$ 323

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BORROWINGS Unsecured Commercial Paper (Details) - USD ($)	Feb. 03, 2018	Jan. 28, 2017
Debt Disclosure [Abstract]
Unsecured commercial paper	$ 0	$ 0

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BORROWINGS Secured Short-Term Loan (Details) - USD ($)		Feb. 03, 2018	Jan. 28, 2017	Sep. 15, 2014
Short-term Debt [Line Items]
Short-term borrowings	[1]	$ 915,000,000	$ 0
Esl Investments Inc
Short-term Debt [Line Items]
Short-term borrowings		$ 0	$ 0	$ 400,000,000

[1] Includes balances held by related parties of $645 million at February 3, 2018 related to our Line of Credit Loans and Incremental Loans (each as defined in Note 3). See Notes 3 and 15 for further information.

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BORROWINGS Letter of Credit Facility (Details) - USD ($)	Dec. 28, 2016	Feb. 03, 2018	Jan. 28, 2017	Dec. 31, 2016
Line of Credit Facility [Line Items]
Credit agreement		$ 1,500,000,000.0	$ 1,971,000,000.000
Standby Letters of Credit
Line of Credit Facility [Line Items]
Credit agreement				$ 500,000,000
Esl Investments Inc | Standby Letters of Credit
Line of Credit Facility [Line Items]
Credit agreement	$ 500,000,000
Letters of credit outstanding amount		271,000,000	$ 200,000,000
Portion syndicated to unaffiliated third party lenders		$ 138,000,000
Cash collateral, percent of commitment	102.00%
Funding fee percentage	1.00%
Eurodollar | Esl Investments Inc | Standby Letters of Credit
Line of Credit Facility [Line Items]
Credit agreement, interest rates margin	11.00%

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BORROWINGS Secured Loan and Mezzanine Loan (Details)	Mar. 14, 2018 USD ($)	Nov. 30, 2017 property
Debt Instrument [Line Items]
Number of properties released under amendment | property		138
Subsequent Event | Secured Loan
Debt Instrument [Line Items]
Principal amount of debt	$ 200,000,000
Subsequent Event | Secured Loan | LIBOR
Debt Instrument [Line Items]
Upfront commitment fee percentage	1.50%
Subsequent Event | Mezzanine Loan
Debt Instrument [Line Items]
Principal amount of debt	$ 240,000,000
Additional borrowing capacity under incremental loan feature	$ 200,000,000
Subsequent Event | Mezzanine Loan | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	11.00%
Upfront commitment fee percentage	1.80%
Subsequent Event | Secured Loan and Mezzanine Loan
Debt Instrument [Line Items]
Default interest rate in excess of the base interest rate	2.00%
LIBOR rate, first three months | Subsequent Event | Secured Loan | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	6.50%
LIBOR rate, fourth through the sixth month | Subsequent Event | Secured Loan | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	7.50%
LIBOR rate, seventh through the ninth month | Subsequent Event | Secured Loan | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	8.50%

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BORROWINGS Term Loan Facility (Details) - USD ($)					1 Months Ended	12 Months Ended
	Feb. 26, 2018	Jan. 29, 2018	Jan. 19, 2018	Jan. 04, 2018	Feb. 03, 2018	Feb. 03, 2018	Jan. 28, 2017
Debt Instrument [Line Items]
Carrying amount, long-term debt					$ 3,217,000,000	$ 3,217,000,000	$ 4,163,000,000
Term Loan Facility
Debt Instrument [Line Items]
Proceeds from long-term debt		$ 20,000,000	$ 30,000,000	$ 100,000,000	210,000,000
Additional borrowing capacity under incremental loan feature				$ 200,000,000
Carrying amount, long-term debt					$ 206,000,000	206,000,000	$ 0
Paid-in-kind interest						$ 1,000,000
Term Loan Facility | LIBOR
Debt Instrument [Line Items]
Credit agreement, interest rates margin						12.50%
Subsequent Event | Term Loan Facility
Debt Instrument [Line Items]
Proceeds from long-term debt	$ 40,000,000
Additional borrowing capacity under incremental loan feature	$ 50,000,000
Unaffiliated Third Party Lenders | Term Loan Facility
Debt Instrument [Line Items]
Proceeds from long-term debt		$ 60,000,000

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BORROWINGS 2017 Secured Loan Facility (Details)				1 Months Ended	12 Months Ended
		Mar. 08, 2018 USD ($)	Jan. 03, 2017 USD ($) Property	Jan. 27, 2017 USD ($)	Feb. 03, 2018 USD ($) property	Jan. 28, 2017 USD ($)	Jan. 30, 2016 USD ($)	Oct. 31, 2017 USD ($)	Jan. 31, 2017 USD ($)
Debt Instrument [Line Items]
Proceeds from debt issuances	[1]				$ 1,020,000,000	$ 2,028,000,000	$ 0
Carrying amount, long-term debt					3,217,000,000	4,163,000,000
2017 Secured Loan Facility
Debt Instrument [Line Items]
Repayments of secured debt					(116,000,000)
Incremental Loans
Debt Instrument [Line Items]
Repayments of secured debt					(55,000,000)
Secured Debt | 2017 Secured Loan Facility
Debt Instrument [Line Items]
Principal amount of debt			$ 500,000,000						$ 500,000,000
Proceeds from debt issuances			$ 321,000,000	$ 179,000,000
Commitment fees			1.00%
Funding fee percentage			1.00%
Number of real estate properties pledged as collateral | Property			69
Repayments of secured debt					(116,000,000)
Default interest rate in excess of the base interest rate			2.50%
Carrying amount, long-term debt					$ 374,000,000	$ 485,000,000
Secured Debt | 2017 Secured Loan Facility | Base Rate
Debt Instrument [Line Items]
Credit agreement, interest rates margin			8.00%
Secured Debt | 2017 Secured Loan Facility | Prime Rate
Debt Instrument [Line Items]
Basis spread on prime rate for debt default interest rate			1.00%
Notes Payable, Other Payables | Incremental Loans
Debt Instrument [Line Items]
Principal amount of debt								$ 200,000,000
Stated interest rate on debt instrument					11.00%
Number of real estate properties pledged as collateral | property					7
Repayments of short-term debt					$ (55,000,000)
Carrying value of Incremental Loans					$ 144,000,000
Subsequent Event | Notes Payable, Other Payables | 2017 Secured Loan Facility | LIBOR
Debt Instrument [Line Items]
Credit agreement, interest rates margin		9.00%
Subsequent Event | Notes Payable, Other Payables | Second Incremental Loan
Debt Instrument [Line Items]
Principal amount of debt		$ 100,000,000

[1] Proceeds in 2017 and 2016, respectively, include amounts from related parties of $876 million in connection with the Term Loan Facility, Line of Credit Loans and Incremental Loans and $1.3 billion received from the 2017 Secured Loan Facility, 2016 Secured Loan Facility, 2016 Term Loan and Second Lien Term Loan. See Notes 3 and 15 for further information and defined terms.

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BORROWINGS 2016 Secured Loan Facility (Details)				1 Months Ended	12 Months Ended
		Apr. 22, 2016 USD ($)	Apr. 08, 2016 USD ($) Property	May 31, 2017 USD ($)	Feb. 03, 2018 USD ($)	Jan. 28, 2017 USD ($)	Jan. 30, 2016 USD ($)	Apr. 30, 2016 USD ($)
Debt Instrument [Line Items]
Proceeds from debt issuances	[1]				$ 1,020,000,000	$ 2,028,000,000	$ 0
Carrying amount, long-term debt					3,217,000,000	4,163,000,000
2016 Secured Loan Facility
Debt Instrument [Line Items]
Repayments of secured debt					(250,000,000)
Secured Debt | 2016 Secured Loan Facility
Debt Instrument [Line Items]
Principal amount of debt			$ 500,000,000					$ 500,000,000
Proceeds from debt issuances		$ 250,000,000	$ 250,000,000
Debt instrument, refinance amount				$ 400,000,000
Carrying amount, long-term debt					251,000,000	$ 494,000,000
Commitment fees			1.00%
Funding fee percentage			1.00%
Number of real estate properties pledged as collateral | Property			21
Default interest rate in excess of the base interest rate			2.50%
Repayments of secured debt					$ (250,000,000)
Secured Debt | 2016 Secured Loan Facility | Base Rate
Debt Instrument [Line Items]
Credit agreement, interest rates margin			8.00%
Extension fee on debt instrument				$ 8,000,000
Secured Debt | 2016 Secured Loan Facility | Prime Rate
Debt Instrument [Line Items]
Basis spread on prime rate for debt default interest rate			1.00%

[1] Proceeds in 2017 and 2016, respectively, include amounts from related parties of $876 million in connection with the Term Loan Facility, Line of Credit Loans and Incremental Loans and $1.3 billion received from the 2017 Secured Loan Facility, 2016 Secured Loan Facility, 2016 Term Loan and Second Lien Term Loan. See Notes 3 and 15 for further information and defined terms.

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BORROWINGS Domestic Credit Agreement (Details)	2 Months Ended	3 Months Ended	12 Months Ended
	Mar. 23, 2018 USD ($)	Feb. 03, 2018 USD ($)	Feb. 03, 2018 USD ($) loan	Feb. 28, 2018 USD ($)	Dec. 31, 2017	Jan. 28, 2017 USD ($)
Debt Instrument [Line Items]
Credit agreement		$ 1,500,000,000.0	$ 1,500,000,000.0			$ 1,971,000,000.000
Additional borrowing capacity under accordion feature		1,000,000,000	1,000,000,000
Aggregate original principal amount		3,405,000,000	3,405,000,000
Carrying amount, long-term debt		$ 3,217,000,000	$ 3,217,000,000			4,163,000,000
Minimum fixed charge coverage ratio		1.0	1.0
Secured Debt
Debt Instrument [Line Items]
Number of secure loan facilities | loan			2
Domestic Credit Agreement
Debt Instrument [Line Items]
Credit Agreement available amount		$ 69,000,000	$ 69,000,000			165,000,000
Covenant term in the event of certain repayment of indebtedness			1 year
Letters of credit outstanding amount		377,000,000	$ 377,000,000			464,000,000
2016 Term Loan | Senior Secured Note
Debt Instrument [Line Items]
Principal amount of debt		750,000,000	750,000,000
Carrying amount, long-term debt		$ 559,000,000	559,000,000			726,000,000
Proceeds from debt, net of issuance costs			$ 722,000,000
Premium percentage prepayment prior to April 8, 2017		2.00%	2.00%
Premium percentage prepayment to prior after April 8, 2017		1.00%	1.00%
2016 Term Loan | Domestic Credit Agreement
Debt Instrument [Line Items]
Extension fee percentage					2.00%
Credit facility, amount outstanding		$ 750,000,000	$ 750,000,000
Domestic Credit Agreement
Debt Instrument [Line Items]
Credit agreement		750,000,000	750,000,000
Additional borrowing capacity under FILO tranche feature		500,000,000	500,000,000
Permitted short-term borrowings under amended agreement		1,000,000,000.0	1,000,000,000.0
Domestic Credit Agreement | Subsequent Event
Debt Instrument [Line Items]
Credit agreement				$ 1,250,000,000.00
Domestic Credit Agreement | Letter of Credit
Debt Instrument [Line Items]
Credit agreement		1,000,000,000.0	$ 1,000,000,000.0
Extended Maturity | Domestic Credit Agreement
Debt Instrument [Line Items]
Commitment fees			0.625%
Second Lien | Domestic Credit Agreement
Debt Instrument [Line Items]
Credit agreement		2,000,000,000.0	$ 2,000,000,000.0
Credit facility, amount outstanding		1,100,000,000	1,100,000,000
Credit Agreement available amount		896,000,000	896,000,000
Sears Holdings Corporation 2016 Term Loan | Secured Debt
Debt Instrument [Line Items]
Principal amount of debt		1,000,000,000.0	1,000,000,000.0
Periodic payment on debt			2,500,000
Aggregate original principal amount		400,000,000	400,000,000			970,000,000
Carrying amount, long-term debt		391,000,000	391,000,000			963,000,000
Repayments of debt		325,000,000	$ 570,000,000
Sears Holdings Corporation 2016 Term Loan | Secured Debt | Subsequent Event
Debt Instrument [Line Items]
Repayments of debt	$ 97,000,000
Minimum | Domestic Credit Agreement
Debt Instrument [Line Items]
Limit of availability under the credit facility to make restricted payments			15.00%
Minimum | Domestic Credit Agreement | Domestic Credit Agreement
Debt Instrument [Line Items]
Limit of availability under the credit facility to make restricted payments			12.50%
Maximum | Domestic Credit Agreement
Debt Instrument [Line Items]
Limit of availability under the credit facility to make restricted payments			10.00%
LIBOR | 2016 Term Loan | Senior Secured Note
Debt Instrument [Line Items]
Credit agreement, interest rates margin			7.50%
Floor rate on variable interest			1.00%
LIBOR | Sears Holdings Corporation 2016 Term Loan | Secured Debt
Debt Instrument [Line Items]
Floor interest rate percentage			1.00%
LIBOR | Minimum | Extended Maturity | Domestic Credit Agreement
Debt Instrument [Line Items]
Credit agreement, interest rates margin			3.50%
LIBOR | Minimum | Sears Holdings Corporation 2016 Term Loan | Secured Debt
Debt Instrument [Line Items]
Applicable margin on variable rate			4.50%
LIBOR | Maximum | Extended Maturity | Domestic Credit Agreement
Debt Instrument [Line Items]
Credit agreement, interest rates margin			4.00%
Base Rate | Minimum | Extended Maturity | Domestic Credit Agreement
Debt Instrument [Line Items]
Credit agreement, interest rates margin			2.50%
Base Rate | Minimum | Sears Holdings Corporation 2016 Term Loan | Secured Debt
Debt Instrument [Line Items]
Applicable margin on variable rate			3.50%
Base Rate | Maximum | Extended Maturity | Domestic Credit Agreement
Debt Instrument [Line Items]
Credit agreement, interest rates margin			3.00%
Secured Debt
Debt Instrument [Line Items]
Credit facility, amount outstanding		271,000,000	$ 271,000,000			$ 0
Affiliated Entity | 2016 Term Loan | Senior Secured Note
Debt Instrument [Line Items]
Principal amount of debt		$ 750,000,000	$ 750,000,000

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BORROWINGS Second Lien Credit Agreement (Details) - USD ($)			1 Months Ended		12 Months Ended
	Jul. 07, 2017	Sep. 01, 2016	Feb. 28, 2018	Jul. 31, 2017	Feb. 03, 2018	Jan. 09, 2018	Jan. 08, 2018	Jan. 28, 2017	Sep. 30, 2016
Debt Instrument [Line Items]
Additional borrowing capacity under accordion feature					$ 1,000,000,000
Maximum borrowing capacity					1,500,000,000.0			$ 1,971,000,000.000
Carrying amount, long-term debt					3,217,000,000			4,163,000,000
Second Lien Term Loan
Debt Instrument [Line Items]
Repayments of debt					110,000,000
Inventory advance rate						75.00%	65.00%
Secured Debt | Second Lien Term Loan
Debt Instrument [Line Items]
Principal amount of debt					300,000,000				$ 300,000,000
Additional borrowing capacity under accordion feature				$ 500,000,000
Line of Credit | Line of Credit Loans
Debt Instrument [Line Items]
Debt instrument, term				180 days
Carrying amount, long-term debt					500,000,000
Esl Investments Inc
Debt Instrument [Line Items]
Proceeds from lines of credit					480,000,000
Esl Investments Inc | Secured Debt | Second Lien Term Loan
Debt Instrument [Line Items]
Principal amount of debt		$ 300,000,000
Proceeds from debt, net of issuance costs		$ 291,000,000
Additional borrowing capacity under accordion feature	$ 500,000,000
Carrying amount, long-term debt					294,000,000			$ 292,000,000
Esl Investments Inc | Secured Debt | Second Lien Term Loan | LIBOR
Debt Instrument [Line Items]
Floor interest rate percentage		1.00%
Credit agreement, interest rates margin		7.50%
Esl Investments Inc | Secured Debt | Second Lien Term Loan | Base Rate
Debt Instrument [Line Items]
Credit agreement, interest rates margin		6.50%
Esl Investments Inc | Line of Credit | Line of Credit Loans
Debt Instrument [Line Items]
Debt instrument, term	180 days
Affiliated Entity
Debt Instrument [Line Items]
Proceeds from lines of credit					$ 610,000,000
Subsequent Event | Second Lien Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 1,250,000,000
Subsequent Event | Line of Credit | Line of Credit Loans
Debt Instrument [Line Items]
Debt instrument, term			270 days
Maximum borrowing capacity			$ 600,000,000
Subsequent Event | Esl Investments Inc | Line of Credit | Line of Credit Loans
Debt Instrument [Line Items]
Debt instrument, term			270 days
Maximum borrowing capacity			$ 600,000,000

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BORROWINGS Old Senior Secured Notes and New Senior Secured Notes (Details) - USD ($)			1 Months Ended	12 Months Ended
	Mar. 15, 2018	Aug. 03, 2015	Oct. 31, 2010	Feb. 03, 2018	Jan. 09, 2018	Jan. 08, 2018	Jan. 28, 2017
Debt Instrument [Line Items]
Long-term debt				$ 3,405,000,000
Debt repurchase authorized amount		$ 1,000,000,000.0
Carrying amount, long-term debt				$ 3,217,000,000			$ 4,163,000,000
Old Senior Secured Notes
Debt Instrument [Line Items]
Long-term debt			$ 1,000,000,000
Percentage of note repurchase price per principal amount			101.00%
Repayments of debt		936,000,000
Early tender repurchase amount per tender offer		990
Principal amount of debt		1,000
Early tender payment per $1000		30
Repurchase amount per tender offer		960
Inventory advance rate					75.00%	65.00%
Stated interest rate on debt instrument			6.625%	6.625%
Repurchase amount on debt instrument		929,000,000
Repurchase on debt		936,000,000
Unamortized debt issue costs and discount		7,000,000
Carrying amount, long-term debt				$ 303,000,000			$ 303,000,000
Domestic Plan | Pension Plans | Old Senior Secured Notes
Debt Instrument [Line Items]
Long-term debt		$ 0	$ 250,000,000
Subsequent Event | Old Senior Secured Notes
Debt Instrument [Line Items]
Repayments of debt	$ 169,800,000
Subsequent Event | New Senior Secured Notes
Debt Instrument [Line Items]
Stated interest rate on debt instrument	6.625%
Conversion price (in dollars per share)	$ 5.00
Volume weighted average trading price threshold (in dollars per share)	$ 10.00
Debt instrument, purchase price, percentage	101.00%
Treasury Rate | Old Senior Secured Notes
Debt Instrument [Line Items]
Basis spread on variable rate			0.50%
Esl Investments Inc | Old Senior Secured Notes
Debt Instrument [Line Items]
Repayments of debt				$ 165,000,000
Esl Investments Inc | Subsequent Event | Old Senior Secured Notes
Debt Instrument [Line Items]
Repayments of debt	$ 20,000,000

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BORROWINGS Old Senior Unsecured Notes and New Senior Unsecured Notes (Details) - USD ($) $ / shares in Units, $ in Millions					12 Months Ended
		Mar. 15, 2018	Nov. 21, 2014	Oct. 20, 2014	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Debt Instrument [Line Items]
Rights offering of units consisting of senior unsecured notes and warrants			$ 625.0
Aggregate original principal amount					$ 3,405.0
Proceeds from debt issuances	[1]				1,020.0	$ 2,028.0	$ 0.0
Unamortized discount on debt instrument					152.0
Accretion of debt discount					66.0	50.0	$ 35.0
Carrying amount, long-term debt					$ 3,217.0	4,163.0
Old Senior Unsecured Notes
Debt Instrument [Line Items]
Rights offering of units consisting of senior unsecured notes and warrants				$ 625.0
Stated interest rate on debt instrument			8.00%	8.00%	8.00%
Aggregate original principal amount			$ 625.0
Proceeds from debt issuances			625.0
Unamortized discount on debt instrument			$ 278.0		$ 140.0	195.0
Effective interest rate on debt instrument			11.55%
Accretion of debt discount					55.0	44.0
Carrying amount, long-term debt					$ 483.0	$ 428.0
Subsequent Event | Old Senior Unsecured Notes
Debt Instrument [Line Items]
Repayments of debt		$ 214.0
Subsequent Event | New Senior Unsecured Notes
Debt Instrument [Line Items]
Stated interest rate on debt instrument		8.00%
Conversion price (in dollars per share)		$ 8.33
Volume weighted average trading price threshold (in dollars per share)		$ 10.00
Esl Investments Inc | Subsequent Event | Old Senior Unsecured Notes
Debt Instrument [Line Items]
Repayments of debt		$ 187.6

[1] Proceeds in 2017 and 2016, respectively, include amounts from related parties of $876 million in connection with the Term Loan Facility, Line of Credit Loans and Incremental Loans and $1.3 billion received from the 2017 Secured Loan Facility, 2016 Secured Loan Facility, 2016 Term Loan and Second Lien Term Loan. See Notes 3 and 15 for further information and defined terms.

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BORROWINGS Cash Collateral (Details) - USD ($) $ in Millions	Feb. 03, 2018	Jan. 28, 2017
Debt Disclosure [Abstract]
Cash posted as collateral	$ 4	$ 3

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BORROWINGS Wholly owned Insurance Subsidiary and Intercompany Securities (Details) $ in Millions	Feb. 03, 2018 USD ($)	Mar. 31, 2017 USD ($)	Jan. 28, 2017 USD ($)	May 31, 2006 USD ($)	Nov. 30, 2003 USD ($) Store
Debt Instrument [Line Items]
Mortgage-backed securities owned					$ 1,300
Asset-backed securities issued				$ 1,800
Asset-backed securities redeemed		$ 900
Subsidiaries
Debt Instrument [Line Items]
Number of stores | Store					138
Securitized trademark rights
Debt Instrument [Line Items]
Carrying amount of asset securitized	$ 700		$ 1,000
Real Estate
Debt Instrument [Line Items]
Carrying amount of asset securitized	$ 500		$ 600

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FINANCIAL GUARANTEES (Detail) $ in Millions	Feb. 03, 2018 USD ($)
Standby letters of credit
Derivative [Line Items]
Guarantor obligations	$ 653
Commercial letters of credit
Derivative [Line Items]
Guarantor obligations	31
Secondary lease obligations
Derivative [Line Items]
Guarantor obligations	164
Bank Issued | Standby letters of credit
Derivative [Line Items]
Guarantor obligations	647
Bank Issued | Commercial letters of credit
Derivative [Line Items]
Guarantor obligations	0
Bank Issued | Secondary lease obligations
Derivative [Line Items]
Guarantor obligations	0
SRAC Issued | Standby letters of credit
Derivative [Line Items]
Guarantor obligations	6
SRAC Issued | Commercial letters of credit
Derivative [Line Items]
Guarantor obligations	31
SRAC Issued | Secondary lease obligations
Derivative [Line Items]
Guarantor obligations	0
Other | Standby letters of credit
Derivative [Line Items]
Guarantor obligations	0
Other | Commercial letters of credit
Derivative [Line Items]
Guarantor obligations	0
Other | Secondary lease obligations
Derivative [Line Items]
Guarantor obligations	$ 164

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INTEREST AND INVESTMENT LOSS (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Investment Income, Interest and Dividend [Abstract]
Interest income on cash and cash equivalents	$ 2	$ 1	$ 1
Other investment loss	(14)	(27)	(63)
Total	(12)	(26)	(62)
Loss from equity method investments	$ 17	$ 35	$ 59

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BENEFIT PLANS Expenses for Retirement Plans (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Retirement Benefits [Abstract]
Pension plans	$ 657	$ 289	$ 230
Postretirement benefits	0	28	(2)
Total	$ 657	$ 317	$ 228

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BENEFIT PLANS Pension Plan Settlements (Details) - Pension Plans retiree in Thousands, participant in Thousands, $ in Millions			1 Months Ended		3 Months Ended			12 Months Ended
	Aug. 31, 2017 retiree	May 31, 2017 retiree	Aug. 31, 2017 USD ($) retiree	May 31, 2017 USD ($) retiree	Feb. 03, 2018 USD ($)	Oct. 28, 2017 USD ($)	Jul. 29, 2017 USD ($)	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016	Aug. 25, 2017 USD ($) participant
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.75%	3.85%						4.15%	4.50%	3.70%
MetLife
Defined Benefit Plan Disclosure [Line Items]
Number of retirees | retiree	20	51	20	51
Pension plan settlements			$ 512	$ (515)
Loss reclassification adjustment from AOCI, pension and other postretirement benefit plans					$ 76	$ 203	$ 200
Number of eligible terminated vested participants | participant											20
Qualified pension plan liabilities, eligible terminated vested participants											$ 300
Payments of pension benefits to terminated vested participants					$ 209

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BENEFIT PLANS Pension and Postretirement Benefit Obligations (Details) - USD ($) $ in Millions	1 Months Ended	12 Months Ended
	Nov. 30, 2017	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Pension Plans
Change in benefit obligation
Beginning balance		$ 5,165	$ 5,265
Interest cost		180	227	$ 211
Actuarial loss		227	108
Benefits paid		(316)	(435)
Settlements		(1,249)	0
Other		(4)	0
Balance at measurment date		4,003	5,165	5,265
Change in Plan Assets at Fair Value
Beginning balance		3,567	3,189
Actual return on plan assets		231	499
Company contributions	$ 407	295	314
Benefits paid		(316)	(435)
Settlements		(1,249)	0
Balance at measurement date		2,528	3,567	$ 3,189
Funded Status		(1,475)	(1,598)
Accumulated benefit obligation		$ 4,000	$ 5,200
Weighted average assumptions used in calculating plan obligations
Discount rate		3.75%	4.15%	4.50%
Pension Plans | Change In Assumptions For Defined Benefit Plans
Change in benefit obligation
Actuarial loss		$ 229
Postretirement Benefit Plans
Change in benefit obligation
Beginning balance		168	$ 143
Interest cost		6	5	$ 5
Plan participants' contributions		0	0
Actuarial loss		1	9
Benefits paid		(17)	(19)
Other		0	30
Balance at measurment date		158	168	143
Change in Plan Assets at Fair Value
Beginning balance		0	0
Company contributions		17	19
Plan participants' contributions		0	0
Benefits paid		(17)	(19)
Balance at measurement date		0	0	$ 0
Funded Status		(158)	$ (168)
Current liabilities for postretirement obligations		$ 16
Weighted average assumptions used in calculating plan obligations
Discount rate		3.60%	3.85%	4.00%

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BENEFIT PLANS Net Periodic Benefit Cost, One Percent Increase (Decrease) and Health Care Rate (Details) - USD ($) $ in Millions			12 Months Ended
	Aug. 31, 2017	May 31, 2017	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Effect of One Percentage Point Increase/Decrease
Unrecognized net losses in accumulated other comprehensive income are expected to be amortized as a component of net periodic benefit cost			$ 146
Pension Plans
Components of Net Periodic Benefit Cost
Interest cost			180	$ 227	$ 211
Expected return on plan assets			(190)	(202)	(249)
Settlements			479	0	0
Recognized net loss and other			188	264	268
Net periodic benefit cost			$ 657	$ 289	$ 230
Weighted Average Assumptions Used in Calculating Net Cost
Discount Rate	3.75%	3.85%	4.15%	4.50%	3.70%
Return of plan assets			6.50%	6.50%	7.00%
Effect of One Percentage Point Increase/Decrease
Effect on interest cost component, increase			$ 20
Effect on interest cost component, decrease			(26)
Effect on pension benefit obligation, increase			(384)
Effect on pension benefit obligation, decrease			460
Postretirement Benefit Plans
Components of Net Periodic Benefit Cost
Interest cost			6	$ 5	$ 5
Recognized net loss and other			(6)	23	(7)
Net periodic benefit cost			$ 0	$ 28	$ (2)
Weighted Average Assumptions Used in Calculating Net Cost
Discount Rate			3.85%	4.00%	3.30%

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BENEFIT PLANS Investment Strategy (Details) - Pension Plans	Feb. 03, 2018	Jan. 28, 2017
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	100.00%	100.00%
Equity securities
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	36.00%	35.00%
Percentage of target plan asset allocations	35.00%
Fixed income and other debt securities
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	63.00%	63.00%
Other
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	1.00%	2.00%
Fixed income securities
Defined Benefit Plan Disclosure [Line Items]
Percentage of target plan asset allocations	65.00%

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BENEFIT PLANS Future Cash Flows of Benefit Plans (Details) $ in Millions	Feb. 03, 2018 USD ($)
Pension Plans
Employer contributions:
2018 (expected)	$ 280
Expected Payments
2018	334
2019	308
2020	298
2021	291
2022	283
2023-2027	1,289
Postretirement Benefit Plans
Employer contributions:
2018 (expected)	16
Expected Payments
2018	16
2019	17
2020	17
2021	16
2022	15
2023-2027	$ 58

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BENEFIT PLANS Domestic Pension Plan Funding (Details) $ in Millions		1 Months Ended	12 Months Ended
	Mar. 14, 2018 USD ($)	Nov. 30, 2017 USD ($) property	Feb. 03, 2018 USD ($)	Jan. 28, 2017 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Period to contribute to pension plan payments			5 years
Number of properties released under amendment | property		138
Craftsman Brand
Defined Benefit Plan Disclosure [Line Items]
Income stream related to new Stanley Black and Decker sales			15 years
Period to contribute to pension plan payments			5 years
Real estate pledged as collateral to secure minimum pension funding			$ 100
Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Company contributions		$ 407	295	$ 314
2018 expected contributions			280
Supplemental payment due in the second quarter of 2018			20
2019 expected contributions			$ 276
Employer contribution relief period		2 years
Subsequent Event | Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Company contributions	$ 282
Escrow deposit for pension plans	$ 125
Employer contribution relief period	2 years

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BENEFIT PLANS Fair Value of Pension and Postretirement Benefit Plan Assets (Details) - Pension Plans - USD ($) $ in Millions	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	$ 2,528	$ 3,567	$ 3,189
U.S. companies
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	727	980
U.S. companies | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	720	978
U.S. companies | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
U.S. companies | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	7	2
International companies
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	164	224
International companies | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	164	224
International companies | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
International companies | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
U.S. registered investment companies
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	6	3
U.S. registered investment companies | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	6	3
U.S. registered investment companies | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
U.S. registered investment companies | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
Corporate bonds and notes
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1,423	1,994
Corporate bonds and notes | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
Corporate bonds and notes | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1,423	1,994
Corporate bonds and notes | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
Sears Holdings Corporation 2016 Term Loan
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	77	100
Sears Holdings Corporation 2016 Term Loan | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
Sears Holdings Corporation 2016 Term Loan | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	77	100
Sears Holdings Corporation 2016 Term Loan | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
Mortgage-backed and asset-backed
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	9	3
Mortgage-backed and asset-backed | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
Mortgage-backed and asset-backed | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	6	1
Mortgage-backed and asset-backed | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	3	2
Other
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	(3)	1
Other | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
Other | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	(3)	1
Other | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0
Ventures and partnerships
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value		1
Ventures and partnerships | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value		0
Ventures and partnerships | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value		0
Ventures and partnerships | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value		1
Total investment assets at fair value
Defined Benefit Plan Disclosure [Line Items]
Total investment assets at fair value	2,403	3,306
Total investment assets at fair value | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	890	1,205
Total investment assets at fair value | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1,503	2,096
Total investment assets at fair value | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	10	5
Cash
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	4	8
Accounts receivable
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	39	65
Accounts payable
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	(28)	(69)
Cash equivalents and short-term investments
Defined Benefit Plan Disclosure [Line Items]
Investments measured at NAV	$ 110	$ 257

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended								12 Months Ended
	Feb. 03, 2018	Oct. 28, 2017	Jul. 29, 2017	Apr. 29, 2017	Jan. 28, 2017	Oct. 29, 2016	Jul. 30, 2016	Apr. 30, 2016	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of EPS amount (in shares)										2	5,000
Basic weighted average shares (in shares)									107,400	106,900	106,600
Dilutive effect of restricted stock awards, restricted stock units and warrants (in shares)									0	0	0
Diluted weighted average shares (in shares)									107,400	106,900	106,600
Net loss attributable to Holdings' shareholders	$ 182	$ (558)	$ (251)	$ 244	$ (607)	$ (748)	$ (395)	$ (471)	$ (383)	$ (2,221)	$ (1,129)
Loss per share attributable to Holdings' shareholders:
Basic (in USD per share)	$ 1.69	$ (5.19)	$ (2.34)	$ 2.28	$ (5.67)	$ (6.99)	$ (3.70)	$ (4.41)	$ (3.57)	$ (20.78)	$ (10.59)
Diluted (in USD per share)	$ 1.69	$ (5.19)	$ (2.34)	$ 2.28	$ (5.67)	$ (6.99)	$ (3.70)	$ (4.41)	$ (3.57)	$ (20.78)	$ (10.59)

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EQUITY Stock-based Compensation (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Aggregate Fair Value
Aggregate fair value of shares granted based on weighted average fair value at date of grant	$ 4	$ 6	$ 6
Aggregate fair value of shares vesting during period	4	4	6
Aggregate fair value of shares forfeited during period	$ 1	$ 0	$ 0
Restricted Stock
Shares
Beginning of year balance (in shares)	151	60	73
Granted (in shares)	606	384	198
Vested (in shares)	(623)	(293)	(200)
Forfeited (in shares)	(119)	0	(11)
Ending of year balance (in shares)	15	151	60
Weighted- Average Fair Value on Date of Grant
Beginning of year balance (in dollars per share)	$ 28.89	$ 42.88	$ 45.82
Granted (in dollars per share)	7.15	16.87	31.26
Vested (in dollars per share)	8.10	16.00	32.01
Forfeited (in dollars per share)	25.27	0.00	51.39
End of year balance (in dollars per share)	$ 42.09	$ 28.89	$ 42.88
Aggregate Fair Value
Expected to vest (in shares)	15
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	0 years
Maximum | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	3 years

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EQUITY Common Share Repurchase Program (Details) - USD ($)	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Stockholders' Equity Note [Abstract]
Stock repurchase program, authorized amount	$ 6,500,000,000.0
Repurchase of common shares (in shares)	0	0	0
Remaining authorization to repurchase common shares under share repurchase program, value	$ 504,000,000

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EQUITY Components of Accumulated Other Comprehensive Loss (Detail) - USD ($)	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016	Jan. 31, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive loss	$ (3,723,000,000)	$ (3,824,000,000)	$ (1,956,000,000)	$ (945,000,000)
Pension and postretirement adjustments (net of tax of $(225), $(225) and $(296), respectively)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive loss	(1,071,000,000)	(1,549,000,000)	(1,915,000,000)
Accumulated other comprehensive loss, tax	(225,000,000)	(225,000,000)	(296,000,000)
Currency translation adjustments (net of tax of $0 for all periods presented)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive loss	(1,000,000)	(3,000,000)	(3,000,000)
Accumulated other comprehensive loss, tax	0	0	0
Accumulated other comprehensive loss
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive loss	$ (1,072,000,000)	$ (1,552,000,000)	$ (1,918,000,000)	$ (2,030,000,000)

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EQUITY Income Tax Expense Allocated to Each Component of Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Before Tax Amount	$ 480	$ 430	$ 112
Tax Expense	0	(71)	0
Total other comprehensive income	480	359	112
Pension and postretirement adjustments, net of tax
Accumulated Other Comprehensive Income (Loss) [Line Items]
Before Tax Amount	478	437	113
Tax Expense	0	(71)	0
Total other comprehensive income	478	366	113
Experience gain (loss)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Before Tax Amount	(182)	181	(148)
Tax Expense	0	(71)	0
Total other comprehensive income	(182)	110	(148)
Less: cost of settlements
Accumulated Other Comprehensive Income (Loss) [Line Items]
Before Tax Amount	479
Tax Expense	0
Total other comprehensive income	479
Less: recognized net loss and other included in net periodic benefit cost
Accumulated Other Comprehensive Income (Loss) [Line Items]
Before Tax Amount	181	256	261
Tax Expense	0	0	0
Total other comprehensive income	181	256	261
Currency translation adjustments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Before Tax Amount	2		(1)
Tax Expense	0		0
Total other comprehensive income	$ 2		$ (1)
Dissolution of noncontrolling interest
Accumulated Other Comprehensive Income (Loss) [Line Items]
Before Tax Amount		(7)
Tax Expense		0
Total other comprehensive income		$ (7)

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EQUITY Issuance of Warrants to Purchase Common Stock (Details) - USD ($) $ / shares in Units, $ in Millions	Nov. 21, 2014	Oct. 20, 2014	Feb. 03, 2018	Oct. 31, 2015	Oct. 30, 2015
Class of Stock [Line Items]
Number of warrants to purchase shares (in shares)	22,000,000
Rights offering of units consisting of senior unsecured notes and warrants	$ 625
Number of securities called by each warrant or right (in shares)				1.11	1
Exercise price of warrants or rights (in dollars per share)				$ 25.686	$ 28.41
Unsecured Senior Notes
Class of Stock [Line Items]
Rights offering of units consisting of senior unsecured notes and warrants		$ 625
Stated interest rate on debt instrument	8.00%	8.00%	8.00%

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INCOME TAXES Income Tax (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Loss before income taxes:
U.S.	$ (1,012)	$ (2,429)	$ (1,420)
Foreign	31	34	35
Loss before income taxes	(981)	(2,395)	(1,385)
Current:
Federal	9	13	11
State and local	(3)	16	20
Foreign	13	18	17
Total current	19	47	48
Deferred:
Federal	(429)	(87)	(239)
State and local	(187)	(134)	(66)
Foreign	(1)	0	0
Total deferred	(617)	(221)	(305)
Income tax expense (benefit)	$ (598)	$ (174)	$ (257)

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INCOME TAXES Effective Tax Rate Reconciliation (Details)	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Income Tax Disclosure [Abstract]
Federal income tax rate (benefit rate)	(33.717%)	(35.00%)	(35.00%)
State and local tax (benefit) net of federal tax benefit	(11.80%)	(3.00%)	(1.80%)
Federal tax rate change	(22.60%)	(0.00%)	(0.00%)
Federal and state valuation allowance	21.20%	41.10%	37.40%
Land and indefinite-lived intangibles	(12.10%)	(0.20%)	(16.90%)
Impairment of indefinite-lived trade names	(1.80%)	(6.00%)	(4.90%)
Loss disallowance	(0.00%)	(0.00%)	3.50%
Tax credits	(0.40%)	(0.30%)	(0.70%)
Resolution of income tax matters	(0.80%)	(0.00%)	(0.30%)
Adjust foreign statutory rates	(1.00%)	0.10%	(0.30%)
Repatriation toll charge	1.80%	(0.00%)	(0.00%)
Tax benefit resulting from other comprehensive income allocation	(0.00%)	(2.90%)	(0.00%)
Other	0.20%	(1.10%)	0.40%
Effective Income Tax Rate, Continuing Operations	(61.00%)	(7.30%)	(18.60%)

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INCOME TAXES Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions	Feb. 03, 2018	Jan. 28, 2017
Deferred tax assets:
Federal benefit for state and foreign taxes	$ 117	$ 148
Accruals and other liabilities	142	135
Net operating loss carryforwards	1,736	2,255
Pension and postretirement benefit plans	972	1,244
Property and equipment	139	231
Deferred income	266	479
Credit carryforwards	899	875
Other	208	218
Total deferred tax assets	4,479	5,585
Valuation allowance	(4,187)	(5,519)
Net deferred tax assets	292	66
Deferred tax liabilities:
Trade names/Intangibles	285	573
Inventory	105	193
Other	28	43
Total deferred tax liabilities	418	809
Total deferred tax liabilities	$ (126)	$ (743)

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INCOME TAXES Narrative (Detail)		1 Months Ended			3 Months Ended		12 Months Ended
	Jul. 07, 2015 USD ($) Property	Jul. 31, 2017 property	Jul. 30, 2016 USD ($)	Apr. 30, 2015 Property	Feb. 03, 2018 USD ($)	Apr. 29, 2017 USD ($)	Feb. 03, 2018 USD ($)	Jan. 28, 2017 USD ($)	Jan. 30, 2016 USD ($)	Jan. 31, 2015 USD ($)
Income Taxes [Line Items]
Blended income tax rate							33.717%	35.00%	35.00%
Net tax benefit, Tax Act					$ 470,000,000		$ 470,000,000
Corporate rate reduction, Tax Act							222,000,000
Valuation allowance release net tax benefit, Tax Act							270,000,000
Transition tax expense, Tax Act							11,000,000
Provisional transition tax obligation, Tax Act					6,000,000		6,000,000
Tax expense resulting from OCI allocation								$ 71,000,000
Tax benefit resulting from OCI allocation							0	71,000,000	$ 0
Increase (decrease) in valuation allowance	$ (500,000,000)						(1,300,000,000)	762,000,000	279,000,000
Valuation allowance increase in other comprehensive income							62,000,000	3,000,000	63,000,000
Valuation allowance					4,187,000,000		4,187,000,000	5,519,000,000
Net operating loss carryforwards					1,736,000,000		1,736,000,000	2,255,000,000
Credit carryforwards					899,000,000		899,000,000
Number of stores sold | property		5
Number of properties contributed to Joint Venture | Property	31			31
Tax benefit realized on deferred taxes related to indefinite-life assets sold to Seritage and JVs	$ 229,000,000
Taxable gain on sales of properties to Seritage and JVs	2,200,000,000
Income taxes payable on sale of properties to Seritage and JVs	0
Utilization of net operating loss attributes and corresponding release of valuation allowance	856,000,000
Taxes payable	$ 4,000,000
Unrecognized tax benefits					130,000,000		130,000,000	142,000,000	137,000,000	$ 131,000,000
Unrecognized tax benefits that would, if recognized, impact effective tax rate					103,000,000		103,000,000
Gross increases							20,000,000	12,000,000	14,000,000
Unrecognized tax benefits decrease resulting from Land's End spin-off and Sears Canada de-consolidation							12,000,000
Expected decrease in unrecognized tax benefits over the next 12 months					10,000,000		10,000,000
Interest and penalties recognized on balance sheet					51,000,000		51,000,000	61,000,000
Interest and penalties recognized, net of federal benefit					40,000,000		40,000,000	40,000,000
Net interest benefit (expense) recognized in statement of income							$ 6,000,000	$ (3,000,000)	$ (4,000,000)
Income tax examination							The U.S. Internal Revenue Service ("IRS") has completed its examination of all federal tax returns of Holdings through the 2009 return, and all matters arising from such examinations have been resolved. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2003 through 2016, and Kmart is under examination by such jurisdictions for the years 2006 through 2016.
Seritage Growth Properties
Income Taxes [Line Items]
Number of stores sold | Property	235
Corporate Joint Venture
Income Taxes [Line Items]
Percentage of ownership interest	50.00%			50.00%
Minimum
Income Taxes [Line Items]
Unrecognized tax benefits					1,000,000		$ 1,000,000
Unrecognized tax benefits that would, if recognized, impact effective tax rate					1,000,000		1,000,000
Maximum
Income Taxes [Line Items]
Unrecognized tax benefits					14,000,000		14,000,000
Unrecognized tax benefits that would, if recognized, impact effective tax rate					$ 11,000,000		$ 11,000,000
Sears Mexico
Income Taxes [Line Items]
Proceeds from divestiture of businesses			$ 106,000,000
Gain on sale of investments			105,000,000
Current taxes payable			0
Valuation Allowance, Operating Loss Carryforwards
Income Taxes [Line Items]
Increase (decrease) in valuation allowance			$ (37,000,000)
Craftsman Brand
Income Taxes [Line Items]
Deferred taxes, business combination, income tax benefit realized						$ 101,000,000
Gain on disposition of business						963,000,000
Operating loss carryforward, amount used						361,000,000
Domestic Tax Authority | Craftsman Brand
Income Taxes [Line Items]
Taxes payable						0
State and Local Jurisdiction | Craftsman Brand
Income Taxes [Line Items]
Taxes payable						$ 4,000,000

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INCOME TAXES Unrecognized Tax Benefits (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Gross UTB Balance at Beginning of Period	$ 142	$ 137	$ 131
Tax positions related to the current period:
Gross increases	20	12	14
Gross decreases	0	0	0
Tax positions related to prior periods:
Gross increases	0	0	0
Gross decreases	(26)	0	0
Settlements	(1)	0	0
Lapse of statute of limitations	(5)	(7)	(8)
Gross UTB Balance at End of Period	$ 130	$ 142	$ 137

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REAL ESTATE TRANSACTIONS (Details) $ in Millions						1 Months Ended		3 Months Ended	12 Months Ended				18 Months Ended
		Jul. 07, 2015 USD ($) property	Jul. 07, 2015 USD ($)	Jul. 07, 2015 USD ($) Property	Jul. 07, 2015 USD ($) store	Jul. 31, 2017 property	Apr. 30, 2015 USD ($) Property Joint_venture	Nov. 01, 2014 USD ($)	Feb. 02, 2019 store	Feb. 03, 2018 USD ($) property Property store	Jan. 28, 2017 USD ($) Property	Jan. 30, 2016 USD ($) Store Property	Jan. 30, 2016 USD ($)	May 02, 2015 USD ($)
Long Lived Assets Held-for-sale
Gain on sales of assets										$ 1,648	$ 247	$ 743
Proceeds from sale-leaseback financing	[1]									106	71	508
Number of distinct real estate joint ventures | Joint_venture							3
Number of properties contributed to Joint Venture | Property				31			31
Real estate investments, joint ventures							$ 858
Number of stores sold | property						5
Leaseback transaction, number of stores | Property				255
Number of stores recaptured | store					19
Number of stores with lease terminated | store					56
Equity method investment, ownership percentage sold						50.00%
Amount due under financial arrangement										247	235
Aggregate net proceeds from sale-leaseback transaction and joint venture agreements												3,100
Net book value of sale leaseback transaction		$ 1,500	$ 1,500	$ 1,500	$ 1,500
Immediate net gain recognized												508
Deferred gain on sale-leaseback										$ 894
Agreement termination, minimum period of rent payment										1 year
Number of properties qualified for sale leaseback accounting | property										2
Future Minimum lease payments, sale leaseback transactions										$ 59
Future minimum lease payments, 2018										6
Future minimum lease payments, 2019										11
Future minimum lease payments, 2020										9
Future minimum lease payments, 2021										6
Future minimum lease payments, 2022										6
Future minimum lease payments, thereafter										21
Lease payment prepaid upon transaction closing										6
Current portion of deferred gain, net										138	132
Long-term portion of deferred gain										362	563
Rent expense										82	96	68
Kmart
Long Lived Assets Held-for-sale
Gain on sales of assets										881	181	185
Net book value of sale leaseback transaction		175	175	175	175
Immediate net gain recognized												137
Rent expense										9	15	9
Sears Domestic
Long Lived Assets Held-for-sale
Gain on sales of assets										767	66	558
Net book value of sale leaseback transaction		$ 1,300	1,300	$ 1,300	$ 1,300
Immediate net gain recognized												371
Real property assets of properties with continuing involvement										66	96
Rent expense										73	81	59
Seritage Growth Properties
Long Lived Assets Held-for-sale
Proceeds from sale-leaseback financing												82
Number of stores sold | Property				235
Aggregate proceeds from sale-leaseback transaction and rights offering of common stock and limited partnership units			2,700									2,700
Net proceeds from sale-leaseback transaction and rights offering of common stock and limited partnership units			2,600									2,600
Proceeds from rights offering of common shares and limited partnership units			1,600
Sale-leaseback transaction, aggregate value			2,300
Amount due under financial arrangement										70
Number of properties with continuing involvement		4		4
Related party transaction, termination payment expenses										24	21
Gain on sale of properties										40
48 Sears Full-line Stores and Two Non-Retail Locations | Sears Domestic
Long Lived Assets Held-for-sale
Gain from sale of real estate										544
Proceed from sale of real estate										$ 711
48 Sears Full-line Stores | Sears Domestic
Long Lived Assets Held-for-sale
Number of properties sold | Property										48
Four Sears Non-Retail Locations | Sears Domestic
Long Lived Assets Held-for-sale
Number of properties sold | store										4
41 Kmart Stores and Two Non-Retail Locations | Kmart
Long Lived Assets Held-for-sale
Gain from sale of real estate										$ 164
Proceed from sale of real estate										$ 190
41 Kmart Stores | Kmart
Long Lived Assets Held-for-sale
Number of properties sold | store										41
Two Kmart Non-Retail Locations | Kmart
Long Lived Assets Held-for-sale
Number of properties sold | store										2
Two Sears Full-line Stores | Sears Domestic
Long Lived Assets Held-for-sale
Gain from sale of real estate											$ 15	$ 86
Number of properties sold | Property											2	2
Proceed from sale of real estate											$ 27	$ 96
Distribution Facility | Sears Domestic
Long Lived Assets Held-for-sale
Gain from sale of real estate											$ 12
Number of properties sold | Property											1
Proceed from sale of real estate											$ 23
One Sears Full-line Store | Sears Domestic
Long Lived Assets Held-for-sale
Gain from sale of real estate												$ 83
Number of properties sold | Store												1
Proceed from sale of real estate												$ 12	$ 102
One Sears Full-line Store | Sale Leaseback Deferred Gain | Sears Domestic
Long Lived Assets Held-for-sale
Proceed from sale of real estate								$ 90
One Kmart Store | Kmart
Long Lived Assets Held-for-sale
Gain from sale of real estate											$ 10	$ 10
Number of properties sold | Property											1	1
Proceed from sale of real estate											$ 10
Esl Investments Inc | Seritage Growth Properties
Long Lived Assets Held-for-sale
Proceeds from rights offering of common shares and limited partnership units			745									$ 745
Fairholme | Seritage Growth Properties
Long Lived Assets Held-for-sale
Proceeds from rights offering of common shares and limited partnership units			$ 297									297
Seritage Growth Properties
Long Lived Assets Held-for-sale
Due to related parties	[2]										11
Rent expense										$ 70	83	49
Corporate Joint Venture
Long Lived Assets Held-for-sale
Proceeds from sale-leaseback financing							$ 426					426
Percentage of ownership interest		50.00%	50.00%	50.00%	50.00%		50.00%
Sale leaseback transaction, gross proceeds, financing activities							$ 429					$ 429
Amount due under financial arrangement														$ 426
Scenario, Forecast
Long Lived Assets Held-for-sale
Number of stores recaptured | store									11
Master Leases
Long Lived Assets Held-for-sale
Gain on sales of assets										$ 253	$ 72
Recapture right, percentage of property area										100.00%
Master Leases | Seritage Growth Properties
Long Lived Assets Held-for-sale
Recapture right, percentage of property area										50.00%
2016 Secured Loan Facility
Long Lived Assets Held-for-sale
Repayments of secured debt										$ 250
2017 Secured Loan Facility
Long Lived Assets Held-for-sale
Repayments of secured debt										116
Incremental Loans
Long Lived Assets Held-for-sale
Repayments of secured debt										55
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Craftsman Brand
Long Lived Assets Held-for-sale
Gain on sales of assets										$ 492

[1] Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction (including $745 million and $297 million, respectively, received from ESL Investments, Inc. and its affiliates ("ESL") and Fairholme Capital Management, LLC and its affiliates ("Fairholme")), and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in proceeds from sales of property and investments ($2.6 billion), and proceeds from sale-leaseback financing ($82 million) for 2015. Proceeds from the JV transactions are included in proceeds from sale-leaseback financing ($426 million) for 2015. See Note 11 for further information and defined terms.

[2] Includes $28 million and $81 million at February 3, 2018 and January 28, 2017, respectively, of net amounts receivable from SHO, $1 million and $14 million of amounts receivable from Seritage at February 3, 2018 and January 28, 2017, respectively, and $1 million of net amounts receivable from Lands' End at February 3, 2018.

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REAL ESTATE TRANSACTIONS Schedule of Gain on Sale Leaseback (Details) $ in Millions	12 Months Ended
	Jan. 30, 2016 USD ($)
Sale Leaseback Transaction [Line Items]
Gain	$ 625
Loss	(117)
Immediate Net Gain	508
Kmart
Sale Leaseback Transaction [Line Items]
Gain	154
Loss	(17)
Immediate Net Gain	137
Sears Domestic
Sale Leaseback Transaction [Line Items]
Gain	471
Loss	(100)
Immediate Net Gain	$ 371

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REAL ESTATE TRANSACTIONS Schedule of Sale-Leaseback Rent Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Sale Leaseback Transaction [Line Items]
Straight-line rent expense	$ 160	$ 184	$ 120
Amortization of deferred gain on sale-leaseback	(78)	(88)	(52)
Rent expense	82	96	68
Kmart
Sale Leaseback Transaction [Line Items]
Straight-line rent expense	20	32	20
Amortization of deferred gain on sale-leaseback	(11)	(17)	(11)
Rent expense	9	15	9
Sears Domestic
Sale Leaseback Transaction [Line Items]
Straight-line rent expense	140	152	100
Amortization of deferred gain on sale-leaseback	(67)	(71)	(41)
Rent expense	$ 73	$ 81	$ 59

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GOODWILL AND INTANGIBLE ASSETS Intangible Assets (Details) - USD ($) $ in Millions	Feb. 03, 2018	Jan. 28, 2017
Schedule of Finite and Indefinite-Lived Assets [Line Items]
Gross Carrying Amount	$ 1,212	$ 1,573
Accumulated Amortization	44	52
Favorable lease rights | Amortizable Intangible Assets
Schedule of Finite and Indefinite-Lived Assets [Line Items]
Gross Carrying Amount	121	143
Accumulated Amortization	44	52
Trade names | Non Amortizable Intangible Assets
Schedule of Finite and Indefinite-Lived Assets [Line Items]
Gross Carrying Amount	$ 1,091	$ 1,430

XML

GOODWILL AND INTANGIBLE ASSETS Amortization Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Annual Amortization Expense	$ 4	$ 5	$ 7
Estimated Amortization
2018	3
2019	3
2020	3
2021	3
2022	3
Thereafter	$ 56

XML

GOODWILL AND INTANGIBLE ASSETS Goodwill (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Goodwill [Line Items]
Goodwill	$ 269	$ 269
Trade names and other intangible assets	1,168	1,521
Sears Domestic
Goodwill [Line Items]
Goodwill	269	269
Impairment of indefinite-lived intangible assets	72	381	$ 180
Trade names and other intangible assets	$ 359	$ 431

XML

STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS Narrative (Detail) $ in Millions	12 Months Ended
	Feb. 03, 2018 USD ($) Store	Jan. 28, 2017 Store	Jan. 30, 2016 Store
Restructuring Cost and Reserve [Line Items]
Number of stores closed	435
Number of stores announced for closure	103
Expected restructuring and related costs | $	$ 55
Kmart
Restructuring Cost and Reserve [Line Items]
Number of stores closed	303	206	38
Number of stores announced for closure	66
Sears Domestic
Restructuring Cost and Reserve [Line Items]
Number of stores closed	123	37	12
Number of stores announced for closure	40
Number of supply chain distribution centers closed		1

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STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS Store Closing Costs Recorded (Detail) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Restructuring Cost and Reserve [Line Items]
Stores closing costs	$ 502	$ 404	$ 101
Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	300	331	87
Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	202	73	14
Markdowns
Restructuring Cost and Reserve [Line Items]
Stores closing costs	227	226	44
Markdowns | Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	154	187	39
Markdowns | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	73	39	5
Severance Costs
Restructuring Cost and Reserve [Line Items]
Stores closing costs	83	41	37
Severance Costs | Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	25	28	16
Severance Costs | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	58	13	21
Lease Termination Costs
Restructuring Cost and Reserve [Line Items]
Stores closing costs	120	76	6
Lease Termination Costs | Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	80	71	21
Lease Termination Costs | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	40	5	(15)
Other Charges
Restructuring Cost and Reserve [Line Items]
Stores closing costs	32	41	11
Other Charges | Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	22	32	10
Other Charges | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	10	9	1
Impairment and Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Stores closing costs	40	20	3
Impairment and Accelerated Depreciation | Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	19	13	1
Impairment and Accelerated Depreciation | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	$ 21	$ 7	$ 2

XML

STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS Store Closing Cost Accruals (Detail) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017
Restructuring Reserve [Roll Forward]
Beginning Balance	$ 216	$ 180
Store closing costs	277	167
Store closing capital lease obligations	33
Payments/utilizations/other	(265)	(131)
Ending Balance	261	216
Severance Costs
Restructuring Reserve [Roll Forward]
Beginning Balance	54	58
Store closing costs	83	41
Store closing capital lease obligations	0
Payments/utilizations/other	(88)	(45)
Ending Balance	49	54
Lease Termination Costs
Restructuring Reserve [Roll Forward]
Beginning Balance	144	114
Store closing costs	162	85
Store closing capital lease obligations	33
Payments/utilizations/other	(139)	(55)
Ending Balance	200	144
Other Charges
Restructuring Reserve [Roll Forward]
Beginning Balance	18	8
Store closing costs	32	41
Store closing capital lease obligations	0
Payments/utilizations/other	(38)	(31)
Ending Balance	12	18
Other Current Liabilities
Restructuring Reserve [Roll Forward]
Beginning Balance	122	81
Ending Balance	126	122
Other Noncurrent Liabilities
Restructuring Reserve [Roll Forward]
Beginning Balance	94	99
Ending Balance	$ 135	$ 94

XML

STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS Long-Lived Assets (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Property, Plant and Equipment [Line Items]
Impairment charges	$ 70	$ 46	$ 94
Kmart
Property, Plant and Equipment [Line Items]
Impairment charges	16	22	14
Sears Domestic
Property, Plant and Equipment [Line Items]
Impairment charges	$ 54	$ 24	$ 80

XML

LEASES Rent Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Leases [Abstract]
Minimum rentals	$ 666	$ 739	$ 713
Percentage rentals	5	7	8
Less-Sublease rentals	(43)	(51)	(46)
Less-Amortization of deferred gain on sale-leaseback	(78)	(88)	(52)
Total	$ 550	$ 607	$ 623

XML

LEASES Minimum Lease Obligations (Details) - USD ($) $ in Millions	Feb. 03, 2018	Jan. 28, 2017
Leases [Abstract]
Weighted average interest rate	4.90%
Capital
2018	$ 28
2019	15
2020	6
2021	4
2022	4
Later years	58
Total minimum lease payments	115
Estimated executory costs	(4)
Interest at a weighted average rate of 4.9%	(39)
Capital lease obligations	72	$ 145
Less current portion of capital lease obligations	(22)
Long-term capital lease obligations	50
Operating
2018	537
2019	439
2020	368
2021	297
2022	237
Later years	961
Total minimum lease payments	2,839
Less minimum sublease income	(92)
Net minimum lease payments	$ 2,747

XML

RELATED PARTY DISCLOSURE (Detail)							1 Months Ended		12 Months Ended
		Jan. 03, 2017 USD ($)	Apr. 22, 2016 USD ($)	Apr. 08, 2016 USD ($)	Aug. 03, 2015 USD ($)	Nov. 21, 2014 USD ($) shares	Jan. 27, 2017 USD ($)	Apr. 30, 2016 USD ($)	Feb. 03, 2018 USD ($) Day mutual_fund shares	Jan. 28, 2017 USD ($) Day shares		Jan. 30, 2016 USD ($)		Jan. 04, 2018 USD ($)	Oct. 31, 2017 USD ($)	Jul. 31, 2017 USD ($)	Jul. 07, 2017 USD ($)	Jan. 31, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 01, 2016 USD ($)	Oct. 20, 2014	Sep. 30, 2014 USD ($)	Oct. 31, 2010
Related Party Transaction
Cash interest paid	[1]								$ 412,000,000	$ 275,000,000		$ 252,000,000
Proceeds from debt issuances	[2]								1,020,000,000	2,028,000,000		0
Additional borrowing capacity under accordion feature									1,000,000,000
Number of warrants to purchase shares (in shares) | shares						22,000,000
Prepaid expenses and other current assets	[3]								335,000,000	285,000,000
Rent expense									82,000,000	96,000,000		68,000,000
Amortization of deferred gain on sale-leaseback									78,000,000	88,000,000		52,000,000
Term Loan Facility
Related Party Transaction
Principal amount of debt									300,000,000
2017 Secured Loan Facility
Related Party Transaction
Repayments of secured debt									116,000,000
Incremental Loans
Related Party Transaction
Repayments of secured debt									55,000,000
2016 Secured Loan Facility
Related Party Transaction
Repayments of secured debt									250,000,000
Second Lien Term Loan
Related Party Transaction
Repayments of debt									$ 110,000,000
Senior Secured Note
Related Party Transaction
Stated interest rate on debt instrument									6.625%														6.625%
Principal amount of debt					$ 1,000
Repayments of debt					$ 936,000,000
Unsecured Senior Notes
Related Party Transaction
Stated interest rate on debt instrument						8.00%			8.00%												8.00%
Proceeds from debt issuances						$ 625,000,000
Senior unsecured notes									$ 625,000,000
Secured Debt | 2017 Secured Loan Facility
Related Party Transaction
Principal amount of debt		$ 500,000,000																$ 500,000,000
Repayments of secured debt									116,000,000
Proceeds from debt issuances		321,000,000					$ 179,000,000
Secured Debt | 2016 Secured Loan Facility
Related Party Transaction
Principal amount of debt				$ 500,000,000				$ 500,000,000
Repayments of secured debt									250,000,000
Proceeds from debt issuances			$ 250,000,000	$ 250,000,000
Secured Debt | Second Lien Term Loan
Related Party Transaction
Principal amount of debt									300,000,000										$ 300,000,000
Additional borrowing capacity under accordion feature																$ 500,000,000
Senior Secured Note | 2016 Term Loan
Related Party Transaction
Principal amount of debt									750,000,000
Esl Investments Inc
Related Party Transaction
Secured short-term loan									0	0												$ 400,000,000
Proceeds from lines of credit									480,000,000
Esl Investments Inc | Term Loan Facility
Related Party Transaction
Principal amount of debt														$ 300,000,000
Esl Investments Inc | Senior Secured Note
Related Party Transaction
Repayments of debt									165,000,000
Senior secured notes									20,000,000	11,000,000
Esl Investments Inc | Unsecured Senior Notes
Related Party Transaction
Subsidiary notes										3,000,000
Senior unsecured notes									$ 188,000,000	$ 188,000,000
Number of warrants to purchase shares (in shares) | shares									10,033,472	10,033,472
Esl Investments Inc | Secured Debt | Second Lien Term Loan
Related Party Transaction
Principal amount of debt																				$ 300,000,000
Additional borrowing capacity under accordion feature																	$ 500,000,000
Fairholme
Related Party Transaction
Number of mutual funds serviced by related party | mutual_fund									3
Fairholme | Senior Secured Note
Related Party Transaction
Repayments of debt												207,000,000
Senior secured notes										$ 46,000,000
Fairholme | Unsecured Senior Notes
Related Party Transaction
Subsidiary notes									$ 9,000,000	14,000,000
Senior unsecured notes									$ 336,000,000	$ 357,000,000
Number of warrants to purchase shares (in shares) | shares									5,768,185	6,713,725
Affiliated Entity
Related Party Transaction
Cash interest paid									$ 180,000,000	$ 94,000,000	[4]	83,000,000	[4]
Proceeds from lines of credit									610,000,000
Affiliated Entity | Senior Secured Note
Related Party Transaction
Repayments of debt												482,000,000
Affiliated Entity | Secured Loan Facility | 2017 Secured Loan Facility
Related Party Transaction
Repayments of secured debt		116,000,000
Affiliated Entity | Secured Loan Facility | 2016 Secured Loan Facility
Related Party Transaction
Principal amount of debt									126,000,000	216,000,000
Repayments of secured debt		$ 89,000,000
Affiliated Entity | Senior Secured Note | 2016 Term Loan
Related Party Transaction
Principal amount of debt									750,000,000
Proceeds from debt issuances								146,000,000
Trust for Benefit of Employees | Senior Secured Note | 2016 Term Loan
Related Party Transaction
Principal amount of debt									77,000,000	100,000,000
Proceeds from debt issuances								$ 100,000,000
Repayments of debt									24,000,000
JPP LLC and JPP II, LLC | Term Loan Facility
Related Party Transaction
Principal amount of debt									151,000,000
JPP LLC and JPP II, LLC | Secured Debt | 2017 Secured Loan Facility
Related Party Transaction
Principal amount of debt									384,000,000	500,000,000
JPP LLC and JPP II, LLC | Secured Debt | Second Lien Term Loan
Related Party Transaction
Principal amount of debt									300,000,000	300,000,000
JPP LLC and JPP II, LLC | Senior Secured Note | 2016 Term Loan
Related Party Transaction
Principal amount of debt									38,000,000	150,000,000
Repayments of debt									36,000,000
Lands' End, Inc.
Related Party Transaction
Net amount receivable due from affiliates	[5]								1,000,000
Due to related parties										(1,000,000)
Revenue from related parties									60,000,000	65,000,000		69,000,000
Call center services and commission expenses with related party									2,000,000	10,000,000		10,000,000
Sears Hometown and Outlet Stores, Inc.
Related Party Transaction
Net amount receivable due from affiliates									$ 28,000,000	81,000,000
Related party receivables, repayment term									10 days
Proceeds from sale of inventory and shared corporate services to affiliate									$ 1,000,000,000	1,200,000,000		1,500,000,000
Payments for commissions to affiliate									66,000,000	82,000,000		91,000,000
Seritage Growth Properties
Related Party Transaction
Net amount receivable due from affiliates									1,000,000	14,000,000
Due to related parties	[5]									(11,000,000)
Annual aggregate base rent under master lease									$ 134,000,000
Sale-leaseback transaction, minimum lease payment annual increase, percentage									2.00%
Rent expense									$ 70,000,000	83,000,000		49,000,000
Straight line rent									117,000,000	142,000,000		84,000,000
Amortization of deferred gain on sale-leaseback									47,000,000	59,000,000		35,000,000
Annual aggregate installment expenses under master lease, initial amount									70,000,000
Reconciled annual aggregate installment rxpenses under master lease									41,000,000
Installment expense									43,000,000	$ 64,000,000		$ 40,000,000
Seritage Growth Properties | Prepaid Expenses and Other Current Assets
Related Party Transaction
Prepaid expenses and other current assets									$ 6,000,000
Sears Hometown and Outlet Stores, Inc. | Esl Investments Inc
Related Party Transaction
Percentage of ownership in outstanding common stock									58.00%
Sears Holdings Corporation | Esl Investments Inc
Related Party Transaction
Percentage of ownership in outstanding common stock									49.00%
Common stock subject to be acquired upon the exercise of warrants, period									60 days
Sears Holdings Corporation | Fairholme
Related Party Transaction
Percentage of ownership in outstanding common stock									18.00%
Common stock subject to be acquired upon the exercise of warrants, period									60 days
SRAC Issued | Esl Investments Inc | Commercial Paper
Related Party Transaction
Weighted average maturity period on debt | Day									8	21
Cash interest paid									$ 3,000,000
Sears Canada | Esl Investments Inc
Related Party Transaction
Percentage of ownership in outstanding common stock									45.00%
Lands' End, Inc. | Esl Investments Inc
Related Party Transaction
Percentage of ownership in outstanding common stock									67.00%
Seritage Growth Properties | Esl Investments Inc
Related Party Transaction
Percentage of ownership in outstanding common stock									7.20%
Limited partnership interest acquired									43.50%
Seritage Growth Properties | Fairholme | Common Class A
Related Party Transaction
Percentage of ownership in outstanding common stock									11.00%
Seritage Growth Properties | Fairholme | Common Class C
Related Party Transaction
Percentage of ownership in outstanding common stock									100.00%
Standby Letters of Credit | Esl Investments Inc
Related Party Transaction
Letters of credit outstanding amount									$ 271,000,000	$ 200,000,000
Line of credit facility, cash collateral required									133,000,000	$ 204,000,000
Portion syndicated to unaffiliated third party lenders									$ 138,000,000
Commercial Paper | SRAC Issued | Esl Investments Inc
Related Party Transaction
Stated interest rate on debt instrument									8.22%	7.87%
Weighted average commercial paper outstanding									$ 28,000,000	$ 100,000,000
Commercial Paper | SRAC Issued | Esl Investments Inc | Maximum
Related Party Transaction
Due from related parties									160,000,000
Commercial Paper | SRAC Issued | Fairholme
Related Party Transaction
Weighted average maturity period on debt | Day										63
Stated interest rate on debt instrument										7.42%
Weighted average commercial paper outstanding										$ 1,000,000
Mr. Berkowitz | Second Lien Term Loan
Related Party Transaction
Repayments of debt									25,000,000
Mr. Berkowitz | Fairholme
Related Party Transaction
Proceeds from lines of credit									25,000,000
Mr. Tisch | Unsecured Senior Notes
Related Party Transaction
Senior unsecured notes									$ 10,000,000	$ 10,000,000
Number of warrants to purchase shares (in shares) | shares									136,272	136,272
Mr. Tisch | Director
Related Party Transaction
Proceeds from lines of credit									$ 20,000,000
Mr. Tisch | Sears Holdings Corporation | Director
Related Party Transaction
Percentage of ownership in outstanding common stock									3.00%
Notes Payable, Other Payables | Incremental Loans
Related Party Transaction
Stated interest rate on debt instrument									11.00%
Principal amount of debt															$ 200,000,000
Repayments of short-term debt									$ 55,000,000
Notes Payable, Other Payables | Affiliated Entity | Incremental Loans
Related Party Transaction
Repayments of short-term debt									55,000,000
Notes Payable, Other Payables | JPP LLC and JPP II, LLC | Incremental Loans
Related Party Transaction
Other short-term borrowings, gross									$ 145,000,000

[1] Cash interest paid includes $180 million, $94 million and $83 million interest paid to related parties related to our borrowings in 2017, 2016 and 2015, respectively. See Notes 3 and 15 for further information.

[2] Proceeds in 2017 and 2016, respectively, include amounts from related parties of $876 million in connection with the Term Loan Facility, Line of Credit Loans and Incremental Loans and $1.3 billion received from the 2017 Secured Loan Facility, 2016 Secured Loan Facility, 2016 Term Loan and Second Lien Term Loan. See Notes 3 and 15 for further information and defined terms.

[3] Includes $6 million of prepaid rent to Seritage at February 3, 2018.

[4] Includes one-time extension fees equal to $5 million to JPP, LLC and JPP II, LLC, entities affiliated with ESL during 2017. See Note 3 for further information.

[5] Includes $28 million and $81 million at February 3, 2018 and January 28, 2017, respectively, of net amounts receivable from SHO, $1 million and $14 million of amounts receivable from Seritage at February 3, 2018 and January 28, 2017, respectively, and $1 million of net amounts receivable from Lands' End at February 3, 2018.

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SUPPLEMENTAL FINANCIAL INFORMATION Other Long-Term Liabilities (Detail) - USD ($) $ in Millions	Feb. 03, 2018	Jan. 28, 2017
Supplemental Financial Information [Abstract]
Unearned revenues	$ 539	$ 639
Self-insurance reserves	491	535
Other	437	467
Total	$ 1,467	$ 1,641

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SUPPLEMENTAL FINANCIAL INFORMATION Activity of Unearned Revenue (Details) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017
Movement in Deferred Revenue [Roll Forward]
Deferred revenue, beginning balance	$ 1,299	$ 1,405
Sales of service contracts	691	855
Revenue recognized on existing service contracts	(876)	(961)
Deferred revenue, ending balance	$ 1,114	$ 1,299
Minimum
Deferred Revenue Arrangement [Line Items]
Maintenance contracts, term	12 months
Maximum
Deferred Revenue Arrangement [Line Items]
Maintenance contracts, term	144 months

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SUMMARY OF SEGMENT DATA Summary of Segment Data (Detail) - USD ($) $ in Millions		3 Months Ended								12 Months Ended
		Feb. 03, 2018	Oct. 28, 2017	Jul. 29, 2017	Apr. 29, 2017	Jan. 28, 2017	Oct. 29, 2016	Jul. 30, 2016	Apr. 30, 2016	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Merchandise sales
Merchandise sales										$ 13,409	$ 18,236	$ 20,936
Services and other
Services and other	[1],[2]									3,293	3,902	4,210
Total revenues		$ 4,376	$ 3,660	$ 4,365	$ 4,301	$ 6,052	$ 5,029	$ 5,663	$ 5,394	16,702	22,138	25,146
COSTS AND EXPENSES
Cost of sales, buying and occupancy - merchandise sales	[3]									11,349	15,184	16,817
Cost of sales and occupancy - services and other	[1]									1,826	2,268	2,519
Total cost of sales, buying and occupancy		3,452	2,958	3,394	3,371	4,765	4,067	4,403	4,217	13,175	17,452	19,336
Selling and administrative		1,156	$ 1,339	$ 1,369	$ 1,267	1,579	$ 1,543	$ 1,484	$ 1,503	5,131	6,109	6,857
Depreciation and amortization										332	375	422
Impairment charges										142	427	274
Gain on sales of assets										(1,648)	(247)	(743)
Total costs and expenses										17,132	24,116	26,146
Operating income (loss)										(430)	(1,978)	(1,000)
Total assets		7,262				9,362				7,262	9,362	11,337
Capital expenditures										80	142	211
Hardlines
Merchandise sales
Merchandise sales										7,206	9,571	10,851
Apparel and Soft Home
Merchandise sales
Merchandise sales										4,278	5,566	6,341
Food and Drug
Merchandise sales
Merchandise sales										1,925	3,099	3,744
Services
Services and other
Services and other										1,815	2,110	2,140
Other
Services and other
Services and other										1,478	1,792	2,070
Kmart
Merchandise sales
Merchandise sales										5,564	8,577	10,105
Services and other
Services and other										54	73	83
Total revenues										5,618	8,650	10,188
COSTS AND EXPENSES
Cost of sales, buying and occupancy - merchandise sales										4,592	7,075	8,023
Cost of sales and occupancy - services and other										9	18	19
Total cost of sales, buying and occupancy										4,601	7,093	8,042
Selling and administrative										1,455	2,175	2,537
Depreciation and amortization										60	71	72
Impairment charges										16	22	14
Gain on sales of assets										(881)	(181)	(185)
Total costs and expenses										5,251	9,180	10,480
Operating income (loss)										367	(530)	(292)
Total assets		1,576				2,134				1,576	2,134	3,059
Capital expenditures										18	43	42
Kmart | Hardlines
Merchandise sales
Merchandise sales										1,550	2,445	2,936
Kmart | Apparel and Soft Home
Merchandise sales
Merchandise sales										2,096	3,044	3,434
Kmart | Food and Drug
Merchandise sales
Merchandise sales										1,918	3,088	3,735
Kmart | Services
Services and other
Services and other										4	9	13
Kmart | Other
Services and other
Services and other										50	64	70
Sears Domestic
Merchandise sales
Merchandise sales										7,845	9,659	10,831
Services and other
Services and other										3,239	3,829	4,127
Total revenues										11,084	13,488	14,958
COSTS AND EXPENSES
Cost of sales, buying and occupancy - merchandise sales										6,757	8,109	8,794
Cost of sales and occupancy - services and other										1,817	2,250	2,500
Total cost of sales, buying and occupancy										8,574	10,359	11,294
Selling and administrative										3,676	3,934	4,320
Depreciation and amortization										272	304	350
Impairment charges										126	405	260
Gain on sales of assets										(767)	(66)	(558)
Total costs and expenses										11,881	14,936	15,666
Operating income (loss)										(797)	(1,448)	(708)
Total assets		$ 5,686				$ 7,228				5,686	7,228	8,278
Capital expenditures										62	99	169
Sears Domestic | Hardlines
Merchandise sales
Merchandise sales										5,656	7,126	7,915
Sears Domestic | Apparel and Soft Home
Merchandise sales
Merchandise sales										2,182	2,522	2,907
Sears Domestic | Food and Drug
Merchandise sales
Merchandise sales										7	11	9
Sears Domestic | Services
Services and other
Services and other										1,811	2,101	2,127
Sears Domestic | Other
Services and other
Services and other										$ 1,428	$ 1,728	$ 2,000

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $918 million, $1.1 billion and $1.3 billion in 2017, 2016 and 2015, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

[2] Includes revenue from Lands' End, Inc. ("Lands' End") for retail services and rent for Lands' End Shops at Sears, participation in the Shop Your Way program and corporate shared services of $47 million, $52 million and $59 million in 2017, 2016 and 2015, respectively.

[3] Includes rent expense (consisting of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback) of $70 million, $83 million and $49 million in 2017, 2016, and 2015, respectively, and installment expenses of $43 million, $64 million and $40 million in 2017, 2016 and 2015, respectively, pursuant to the master lease with Seritage Growth Properties ("Seritage").

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QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended								12 Months Ended
	Feb. 03, 2018	Oct. 28, 2017	Jul. 29, 2017	Apr. 29, 2017	Jan. 28, 2017	Oct. 29, 2016	Jul. 30, 2016	Apr. 30, 2016	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Quarterly Financial Information Disclosure [Abstract]
Revenues	$ 4,376	$ 3,660	$ 4,365	$ 4,301	$ 6,052	$ 5,029	$ 5,663	$ 5,394	$ 16,702	$ 22,138	$ 25,146
Cost of sales, buying and occupancy	3,452	2,958	3,394	3,371	4,765	4,067	4,403	4,217	13,175	17,452	19,336
Selling and administrative	1,156	1,339	1,369	1,267	1,579	1,543	1,484	1,503	5,131	6,109	6,857
Net income (loss) attributable to Holdings' shareholders	$ 182	$ (558)	$ (251)	$ 244	$ (607)	$ (748)	$ (395)	$ (471)	$ (383)	$ (2,221)	$ (1,129)
Basic net income (loss) per share attributable to Holdings' shareholders (in USD per share)	$ 1.69	$ (5.19)	$ (2.34)	$ 2.28	$ (5.67)	$ (6.99)	$ (3.70)	$ (4.41)	$ (3.57)	$ (20.78)	$ (10.59)
Diluted net income (loss) per share attributable to Holdings' shareholders (in USD per share)	$ 1.69	$ (5.19)	$ (2.34)	$ 2.28	$ (5.67)	$ (6.99)	$ (3.70)	$ (4.41)	$ (3.57)	$ (20.78)	$ (10.59)
Segment Reporting Information [Line Items]
Gain on sales of assets									$ 1,648	$ 247	$ 743
Net tax benefit, Tax Act	$ 470								470
Sears Domestic
Quarterly Financial Information Disclosure [Abstract]
Revenues									11,084	13,488	14,958
Cost of sales, buying and occupancy									8,574	10,359	11,294
Selling and administrative									3,676	3,934	4,320
Segment Reporting Information [Line Items]
Gain on sales of assets									767	66	558
Impairment of indefinite-lived intangible assets									72	$ 381	$ 180
Craftsman Brand | Disposal Group, Disposed of by Sale, Not Discontinued Operations
Segment Reporting Information [Line Items]
Gain on sales of assets									$ 492

XML

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION Narrative (Detail) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Oct. 31, 2010
Condensed Financial Statements, Captions [Line Items]
Carrying amount, long-term debt	$ 3,217	$ 4,163
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Percentage of collateralized ownership of domestic subsidiaries	100.00%
Old Senior Secured Notes
Condensed Financial Statements, Captions [Line Items]
Maturity year of debt	2018
Carrying amount, long-term debt	$ 303	$ 303
Stated interest rate on debt instrument	6.625%		6.625%

XML

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION Condensed Consolidating Balance Sheet (Detail) - USD ($)		Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016	Jan. 31, 2015
Current assets
Cash and cash equivalents		$ 182,000,000	$ 286,000,000
Restricted cash		154,000,000	0
Intercompany receivables		0	0
Accounts receivable	[1]	343,000,000	466,000,000
Merchandise inventories		2,798,000,000	3,959,000,000
Prepaid expenses and other current assets	[2]	335,000,000	285,000,000
Total current assets		3,812,000,000	4,996,000,000
Total property and equipment, net		1,729,000,000	2,240,000,000
Goodwill and intangible assets		1,437,000,000	1,790,000,000
Other assets		284,000,000	336,000,000
Investment in subsidiaries		0	0
TOTAL ASSETS		7,262,000,000	9,362,000,000	$ 11,337,000,000
Current liabilities
Short-term borrowings	[3]	915,000,000	0
Current portion of long-term debt and capitalized lease obligations	[4]	968,000,000	590,000,000
Merchandise payables		576,000,000	1,048,000,000
Intercompany payables		0	0
Other current liabilities		2,456,000,000	3,043,000,000
Total current liabilities		4,915,000,000	4,681,000,000
Long-term debt and capitalized lease obligations	[5]	2,249,000,000	3,573,000,000
Pension and postretirement benefits		1,619,000,000	1,750,000,000
Deferred gain on sale-leaseback		362,000,000	563,000,000
Sale-leaseback financing obligation		247,000,000	235,000,000
Long-term deferred tax liabilities		126,000,000	743,000,000
Other long-term liabilities		1,467,000,000	1,641,000,000
Total Liabilities		10,985,000,000	13,186,000,000
EQUITY (DEFICIT)
Shareholder's equity (deficit)		(3,723,000,000)	(3,824,000,000)
Total Deficit		(3,723,000,000)	(3,824,000,000)	$ (1,956,000,000)	$ (945,000,000)
TOTAL LIABILITIES AND DEFICIT		7,262,000,000	9,362,000,000
Eliminations
Current assets
Cash and cash equivalents		0	0
Restricted cash		0
Intercompany receivables		(27,993,000,000)	(27,415,000,000)
Accounts receivable		0
Merchandise inventories		0	0
Prepaid expenses and other current assets		(1,351,000,000)	(1,286,000,000)
Total current assets		(29,344,000,000)	(28,701,000,000)
Total property and equipment, net		0	0
Goodwill and intangible assets		(98,000,000)	(98,000,000)
Other assets		(2,385,000,000)	(884,000,000)
Investment in subsidiaries		(36,542,000,000)	(35,813,000,000)
TOTAL ASSETS		(68,369,000,000)	(65,496,000,000)
Current liabilities
Short-term borrowings		(166,000,000)	(108,000,000)
Current portion of long-term debt and capitalized lease obligations		(232,000,000)	(599,000,000)
Merchandise payables		0	0
Intercompany payables		(27,993,000,000)	(27,415,000,000)
Other current liabilities		(949,000,000)	(672,000,000)
Total current liabilities		(29,340,000,000)	(28,794,000,000)
Long-term debt and capitalized lease obligations		(2,476,000,000)	(802,000,000)
Pension and postretirement benefits		0	0
Deferred gain on sale-leaseback		0	0
Sale-leaseback financing obligation		0	0
Long-term deferred tax liabilities		(223,000,000)	(29,000,000)
Other long-term liabilities		(178,000,000)	(205,000,000)
Total Liabilities		(32,217,000,000)	(29,830,000,000)
EQUITY (DEFICIT)
Shareholder's equity (deficit)		(36,152,000,000)	(35,666,000,000)
Total Deficit		(36,152,000,000)	(35,666,000,000)
TOTAL LIABILITIES AND DEFICIT		(68,369,000,000)	(65,496,000,000)
Parent | Reportable Legal Entities
Current assets
Cash and cash equivalents		0	0
Restricted cash		154,000,000
Intercompany receivables		0	0
Accounts receivable		0	0
Merchandise inventories		0	0
Prepaid expenses and other current assets		309,000,000	23,000,000
Total current assets		463,000,000	23,000,000
Total property and equipment, net		0	0
Goodwill and intangible assets		0	0
Other assets		179,000,000	4,000,000
Investment in subsidiaries		8,790,000,000	9,110,000,000
TOTAL ASSETS		9,432,000,000	9,137,000,000
Current liabilities
Short-term borrowings		144,000,000	0
Current portion of long-term debt and capitalized lease obligations		303,000,000	0
Merchandise payables		0	0
Intercompany payables		11,099,000,000	11,830,000,000
Other current liabilities		16,000,000	17,000,000
Total current liabilities		11,562,000,000	11,847,000,000
Long-term debt and capitalized lease obligations		1,991,000,000	1,215,000,000
Pension and postretirement benefits		0	0
Deferred gain on sale-leaseback		0	0
Sale-leaseback financing obligation		0	0
Long-term deferred tax liabilities		0	48,000,000
Other long-term liabilities		0	0
Total Liabilities		13,553,000,000	13,110,000,000
EQUITY (DEFICIT)
Shareholder's equity (deficit)		(4,121,000,000)	(3,973,000,000)
Total Deficit		(4,121,000,000)	(3,973,000,000)
TOTAL LIABILITIES AND DEFICIT		9,432,000,000	9,137,000,000
Guarantor Subsidiaries | Reportable Legal Entities
Current assets
Cash and cash equivalents		152,000,000	260,000,000
Restricted cash		0
Intercompany receivables		0	0
Accounts receivable		322,000,000	441,000,000
Merchandise inventories		2,798,000,000	3,959,000,000
Prepaid expenses and other current assets		899,000,000	692,000,000
Total current assets		4,171,000,000	5,352,000,000
Total property and equipment, net		1,043,000,000	1,504,000,000
Goodwill and intangible assets		346,000,000	360,000,000
Other assets		1,331,000,000	285,000,000
Investment in subsidiaries		27,752,000,000	26,703,000,000
TOTAL ASSETS		34,643,000,000	34,204,000,000
Current liabilities
Short-term borrowings		937,000,000	108,000,000
Current portion of long-term debt and capitalized lease obligations		897,000,000	1,189,000,000
Merchandise payables		576,000,000	1,048,000,000
Intercompany payables		16,894,000,000	15,585,000,000
Other current liabilities		1,941,000,000	2,479,000,000
Total current liabilities		21,245,000,000	20,409,000,000
Long-term debt and capitalized lease obligations		2,734,000,000	3,160,000,000
Pension and postretirement benefits		1,616,000,000	1,746,000,000
Deferred gain on sale-leaseback		360,000,000	563,000,000
Sale-leaseback financing obligation		158,000,000	235,000,000
Long-term deferred tax liabilities		0	0
Other long-term liabilities		1,131,000,000	808,000,000
Total Liabilities		27,244,000,000	26,921,000,000
EQUITY (DEFICIT)
Shareholder's equity (deficit)		7,399,000,000	7,283,000,000
Total Deficit		7,399,000,000	7,283,000,000
TOTAL LIABILITIES AND DEFICIT		34,643,000,000	34,204,000,000
Non-Guarantor Subsidiaries | Reportable Legal Entities
Current assets
Cash and cash equivalents		30,000,000	26,000,000
Restricted cash		0
Intercompany receivables		27,993,000,000	27,415,000,000
Accounts receivable		21,000,000	25,000,000
Merchandise inventories		0	0
Prepaid expenses and other current assets		478,000,000	856,000,000
Total current assets		28,522,000,000	28,322,000,000
Total property and equipment, net		686,000,000	736,000,000
Goodwill and intangible assets		1,189,000,000	1,528,000,000
Other assets		1,159,000,000	931,000,000
Investment in subsidiaries		0	0
TOTAL ASSETS		31,556,000,000	31,517,000,000
Current liabilities
Short-term borrowings		0	0
Current portion of long-term debt and capitalized lease obligations		0	0
Merchandise payables		0	0
Intercompany payables		0	0
Other current liabilities		1,448,000,000	1,219,000,000
Total current liabilities		1,448,000,000	1,219,000,000
Long-term debt and capitalized lease obligations		0	0
Pension and postretirement benefits		3,000,000	4,000,000
Deferred gain on sale-leaseback		2,000,000	0
Sale-leaseback financing obligation		89,000,000	0
Long-term deferred tax liabilities		349,000,000	724,000,000
Other long-term liabilities		514,000,000	1,038,000,000
Total Liabilities		2,405,000,000	2,985,000,000
EQUITY (DEFICIT)
Shareholder's equity (deficit)		29,151,000,000	28,532,000,000
Total Deficit		29,151,000,000	28,532,000,000
TOTAL LIABILITIES AND DEFICIT		$ 31,556,000,000	$ 31,517,000,000

[1] Includes $28 million and $81 million at February 3, 2018 and January 28, 2017, respectively, of net amounts receivable from SHO, $1 million and $14 million of amounts receivable from Seritage at February 3, 2018 and January 28, 2017, respectively, and $1 million of net amounts receivable from Lands' End at February 3, 2018.

[2] Includes $6 million of prepaid rent to Seritage at February 3, 2018.

[3] Includes balances held by related parties of $645 million at February 3, 2018 related to our Line of Credit Loans and Incremental Loans (each as defined in Note 3). See Notes 3 and 15 for further information.

[4] Includes balances held by related parties of $146 million and $216 million at February 3, 2018 and January 28, 2017, respectively, related to our 2016 Secured Loan Facility for both periods and also related to our Senior Secured Notes at February 3, 2018. See Note 3 for defined terms.

[5] Includes balances held by related parties of $1.5 billion and $1.7 billion at February 3, 2018 and January 28, 2017, respectively, related to our Subsidiary Notes, Senior Unsecured Notes, Second Lien Term Loan, 2016 Term Loan and 2017 Secured Loan Facility for both periods and also related to our Term Loan Facility at February 3, 2018 and our Senior Secured Notes at January 28, 2017. See Note 3 for defined terms and Notes 3 and 15 for further information.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION Condensed Consolidating Statement of Operations (Detail) - USD ($) $ in Millions		3 Months Ended								12 Months Ended
		Feb. 03, 2018	Oct. 28, 2017	Jul. 29, 2017	Apr. 29, 2017	Jan. 28, 2017	Oct. 29, 2016	Jul. 30, 2016	Apr. 30, 2016	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Condensed Financial Statements, Captions [Line Items]
Merchandise sales										$ 13,409	$ 18,236	$ 20,936
Services and other	[1],[2]									3,293	3,902	4,210
Total revenues		$ 4,376	$ 3,660	$ 4,365	$ 4,301	$ 6,052	$ 5,029	$ 5,663	$ 5,394	16,702	22,138	25,146
Cost of sales, buying and occupancy - merchandise sales	[3]									11,349	15,184	16,817
Cost of sales and occupancy - services and other	[1]									1,826	2,268	2,519
Total cost of sales, buying and occupancy		3,452	2,958	3,394	3,371	4,765	4,067	4,403	4,217	13,175	17,452	19,336
Selling and administrative		1,156	1,339	1,369	1,267	1,579	1,543	1,484	1,503	5,131	6,109	6,857
Depreciation and amortization										332	375	422
Impairment charges										142	427	274
Gain on sales of assets										(1,648)	(247)	(743)
Total costs and expenses										17,132	24,116	26,146
Operating income (loss)										(430)	(1,978)	(1,000)
Interest expense										(539)	(404)	(323)
Interest and investment loss										(12)	(26)	(62)
Other income (loss)										0	13	0
Loss before income taxes										(981)	(2,395)	(1,385)
Income tax (expense) benefit										598	174	257
Equity (deficit) in earnings in subsidiaries										0	0	0
Net loss										(383)	(2,221)	(1,128)
(Income) loss attributable to noncontrolling interests										0	0	(1)
NET LOSS ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS		$ 182	$ (558)	$ (251)	$ 244	$ (607)	$ (748)	$ (395)	$ (471)	(383)	(2,221)	(1,129)
Eliminations
Condensed Financial Statements, Captions [Line Items]
Merchandise sales										34	18	11
Services and other										(2,293)	(2,879)	(2,990)
Total revenues										(2,259)	(2,861)	(2,979)
Cost of sales, buying and occupancy - merchandise sales										111	80	68
Cost of sales and occupancy - services and other										(1,278)	(1,612)	(1,682)
Total cost of sales, buying and occupancy										(1,167)	(1,532)	(1,614)
Selling and administrative										(1,092)	(1,329)	(1,365)
Depreciation and amortization										0	0	0
Impairment charges										0	0	0
Gain on sales of assets										0	98	0
Total costs and expenses										(2,259)	(2,763)	(2,979)
Operating income (loss)										0	(98)	0
Interest expense										1,074	639	506
Interest and investment loss										(664)	(639)	(506)
Other income (loss)											217
Loss before income taxes										410	119	0
Income tax (expense) benefit										0	0	0
Equity (deficit) in earnings in subsidiaries										522	2,005	798
Net loss										932	2,124	798
(Income) loss attributable to noncontrolling interests												(1)
NET LOSS ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS										932	2,124	797
Parent | Reportable Legal Entities
Condensed Financial Statements, Captions [Line Items]
Merchandise sales										0	0	0
Services and other										0	0	0
Total revenues										0	0	0
Cost of sales, buying and occupancy - merchandise sales										1	0	0
Cost of sales and occupancy - services and other										0	0	0
Total cost of sales, buying and occupancy										1	0	0
Selling and administrative										(27)	6	3
Depreciation and amortization										0	0	0
Impairment charges										0	0	0
Gain on sales of assets										(486)	0	0
Total costs and expenses										(512)	6	3
Operating income (loss)										512	(6)	(3)
Interest expense										(600)	(385)	(265)
Interest and investment loss										45	20	(19)
Other income (loss)											13
Loss before income taxes										(43)	(358)	(287)
Income tax (expense) benefit										232	28	115
Equity (deficit) in earnings in subsidiaries										(982)	(2,010)	(956)
Net loss										(793)	(2,340)	(1,128)
(Income) loss attributable to noncontrolling interests												0
NET LOSS ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS										(793)	(2,340)	(1,128)
Guarantor Subsidiaries | Reportable Legal Entities
Condensed Financial Statements, Captions [Line Items]
Merchandise sales										13,375	18,218	20,925
Services and other										3,303	3,985	4,339
Total revenues										16,678	22,203	25,264
Cost of sales, buying and occupancy - merchandise sales										11,237	15,104	16,749
Cost of sales and occupancy - services and other										2,228	2,824	3,070
Total cost of sales, buying and occupancy										13,465	17,928	19,819
Selling and administrative										5,409	6,506	7,322
Depreciation and amortization										270	303	350
Impairment charges										70	46	94
Gain on sales of assets										(1,142)	(343)	(735)
Total costs and expenses										18,072	24,440	26,850
Operating income (loss)										(1,394)	(2,237)	(1,586)
Interest expense										(994)	(645)	(481)
Interest and investment loss										195	152	44
Other income (loss)											0
Loss before income taxes										(2,193)	(2,730)	(2,023)
Income tax (expense) benefit										765	529	480
Equity (deficit) in earnings in subsidiaries										460	5	158
Net loss										(968)	(2,196)	(1,385)
(Income) loss attributable to noncontrolling interests												0
NET LOSS ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS										(968)	(2,196)	(1,385)
Non-Guarantor Subsidiaries | Reportable Legal Entities
Condensed Financial Statements, Captions [Line Items]
Merchandise sales										0	0	0
Services and other										2,283	2,796	2,861
Total revenues										2,283	2,796	2,861
Cost of sales, buying and occupancy - merchandise sales										0	0	0
Cost of sales and occupancy - services and other										876	1,056	1,131
Total cost of sales, buying and occupancy										876	1,056	1,131
Selling and administrative										841	926	897
Depreciation and amortization										62	72	72
Impairment charges										72	381	180
Gain on sales of assets										(20)	(2)	(8)
Total costs and expenses										1,831	2,433	2,272
Operating income (loss)										452	363	589
Interest expense										(19)	(13)	(83)
Interest and investment loss										412	441	419
Other income (loss)											(217)
Loss before income taxes										845	574	925
Income tax (expense) benefit										(399)	(383)	(338)
Equity (deficit) in earnings in subsidiaries										0	0	0
Net loss										446	191	587
(Income) loss attributable to noncontrolling interests												0
NET LOSS ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS										$ 446	$ 191	$ 587

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $918 million, $1.1 billion and $1.3 billion in 2017, 2016 and 2015, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

[2] Includes revenue from Lands' End, Inc. ("Lands' End") for retail services and rent for Lands' End Shops at Sears, participation in the Shop Your Way program and corporate shared services of $47 million, $52 million and $59 million in 2017, 2016 and 2015, respectively.

[3] Includes rent expense (consisting of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback) of $70 million, $83 million and $49 million in 2017, 2016, and 2015, respectively, and installment expenses of $43 million, $64 million and $40 million in 2017, 2016 and 2015, respectively, pursuant to the master lease with Seritage Growth Properties ("Seritage").

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION Condensed Consolidating Statement of Comprehensive Income (Loss) (Detail) - USD ($) $ in Millions	12 Months Ended
	Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	$ (383)	$ (2,221)	$ (1,128)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	478	366	113
Dissolution of noncontrolling interest	0	(7)	0
Unrealized net gain, net of tax	0	0	0
Currency translation adjustments, net of tax	2	0	(1)
Total other comprehensive income	480	359	112
Comprehensive income (loss)	97	(1,862)	(1,016)
Comprehensive (income) loss attributable to noncontrolling interests	0	7	(1)
Comprehensive income (loss) attributable to Holdings' shareholders	97	(1,855)	(1,017)
Eliminations
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	932	2,124	798
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	0	0	0
Dissolution of noncontrolling interest		0
Unrealized net gain, net of tax	(51)	(122)	68
Currency translation adjustments, net of tax	0		0
Total other comprehensive income	(51)	(122)	68
Comprehensive income (loss)		2,002	866
Comprehensive (income) loss attributable to noncontrolling interests		7	(1)
Comprehensive income (loss) attributable to Holdings' shareholders	881	2,009	865
Parent | Reportable Legal Entities
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(793)	(2,340)	(1,128)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	0	0	0
Dissolution of noncontrolling interest		0
Unrealized net gain, net of tax	6	0	0
Currency translation adjustments, net of tax	0		0
Total other comprehensive income	6	0	0
Comprehensive income (loss)		(2,340)	(1,128)
Comprehensive (income) loss attributable to noncontrolling interests		0	0
Comprehensive income (loss) attributable to Holdings' shareholders	(787)	(2,340)	(1,128)
Guarantor Subsidiaries | Reportable Legal Entities
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(968)	(2,196)	(1,385)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	478	366	113
Dissolution of noncontrolling interest		0
Unrealized net gain, net of tax	0	0	(3)
Currency translation adjustments, net of tax	0		0
Total other comprehensive income	478	366	110
Comprehensive income (loss)		(1,830)	(1,275)
Comprehensive (income) loss attributable to noncontrolling interests		0	0
Comprehensive income (loss) attributable to Holdings' shareholders	(490)	(1,830)	(1,275)
Non-Guarantor Subsidiaries | Reportable Legal Entities
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	446	191	587
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	0	0	0
Dissolution of noncontrolling interest		(7)
Unrealized net gain, net of tax	45	122	(65)
Currency translation adjustments, net of tax	2		(1)
Total other comprehensive income	47	115	(66)
Comprehensive income (loss)		306	521
Comprehensive (income) loss attributable to noncontrolling interests		0	0
Comprehensive income (loss) attributable to Holdings' shareholders	$ 493	$ 306	$ 521

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION Condensed Consolidating Statement of Cash Flows (Detail) - USD ($) $ in Millions		12 Months Ended
		Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Condensed Financial Statements, Captions [Line Items]
Net cash provided by (used in) operating activities		$ (1,842)	$ (1,381)	$ (2,167)
Proceeds from sales of property and investments	[1]	1,109	386	2,730
Proceeds from Craftsman Sale		572	0	0
Proceeds from sales of receivables	[2]	293	0	0
Purchases of property and equipment		(80)	(142)	(211)
Net investing with Affiliates		0	0	0
Net cash provided by investing activities		1,894	244	2,519
Proceeds from debt issuances	[3]	1,020	2,028	0
Increase in short-term borrowings, primarily 90 days or less	[4]	(1,356)	(66)	(1,405)
Increase in short-term borrowings, primarily 90 days or less		271	(797)	583
Proceeds from sale-leaseback financing	[1]	106	71	508
Debt issuance costs	[5]	(43)	(51)	(50)
Intercompany dividend		0	0	0
Net borrowing with Affiliates		0	0	0
Net cash provided by (used in) financing activities		(2)	1,185	(364)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		50	48	(12)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR		286	238	250
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR		336	286	238
Reportable Legal Entities | Parent
Condensed Financial Statements, Captions [Line Items]
Net cash provided by (used in) operating activities		1	244	395
Proceeds from sales of property and investments		0	0	0
Proceeds from Craftsman Sale		572
Proceeds from sales of receivables		293
Purchases of property and equipment		0	0	0
Net investing with Affiliates		(934)	(239)	(395)
Net cash provided by investing activities		(69)	(239)	(395)
Proceeds from debt issuances		410	0
Increase in short-term borrowings, primarily 90 days or less		(171)	0	0
Increase in short-term borrowings, primarily 90 days or less		0	0	0
Proceeds from sale-leaseback financing		0	0	0
Debt issuance costs		(17)	(5)	0
Intercompany dividend		0	0	0
Net borrowing with Affiliates		0	0	0
Net cash provided by (used in) financing activities		222	(5)	0
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		154	0	0
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR		0	0	0
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR		154	0	0
Reportable Legal Entities | Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net cash provided by (used in) operating activities		(2,404)	(2,137)	(3,021)
Proceeds from sales of property and investments		1,093	273	2,725
Proceeds from Craftsman Sale		0
Proceeds from sales of receivables		0
Purchases of property and equipment		(70)	(133)	(202)
Net investing with Affiliates		0	0	0
Net cash provided by investing activities		1,023	140	2,523
Proceeds from debt issuances		610	2,028
Increase in short-term borrowings, primarily 90 days or less		(1,185)	(65)	(1,403)
Increase in short-term borrowings, primarily 90 days or less		271	(797)	583
Proceeds from sale-leaseback financing		106	71	508
Debt issuance costs		(26)	(46)	(50)
Intercompany dividend		0	0
Net borrowing with Affiliates		1,497	866	841
Net cash provided by (used in) financing activities		1,273	2,057	479
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(108)	60	(19)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR		260	200	219
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR		152	260	200
Reportable Legal Entities | Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net cash provided by (used in) operating activities		682	820	938
Proceeds from sales of property and investments		16	113	5
Proceeds from Craftsman Sale		0
Proceeds from sales of receivables		0
Purchases of property and equipment		(10)	(9)	(9)
Net investing with Affiliates		(563)	(627)	(446)
Net cash provided by investing activities		(557)	(523)	(450)
Proceeds from debt issuances		0	0
Increase in short-term borrowings, primarily 90 days or less		0	(1)	(2)
Increase in short-term borrowings, primarily 90 days or less		0	0	0
Proceeds from sale-leaseback financing		0	0	0
Debt issuance costs		0	0	0
Intercompany dividend		(121)	(308)	(479)
Net borrowing with Affiliates		0	0	0
Net cash provided by (used in) financing activities		(121)	(309)	(481)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		4	(12)	7
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR		26	38	31
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR		30	26	38
Eliminations
Condensed Financial Statements, Captions [Line Items]
Net cash provided by (used in) operating activities		(121)	(308)	(479)
Proceeds from sales of property and investments		0	0	0
Proceeds from Craftsman Sale		0
Proceeds from sales of receivables		0
Purchases of property and equipment		0	0	0
Net investing with Affiliates		1,497	866	841
Net cash provided by investing activities		1,497	866	841
Proceeds from debt issuances		0	0
Increase in short-term borrowings, primarily 90 days or less		0	0	0
Increase in short-term borrowings, primarily 90 days or less		0	0	0
Proceeds from sale-leaseback financing		0	0	0
Debt issuance costs		0	0	0
Intercompany dividend		121	308	479
Net borrowing with Affiliates		(1,497)	(866)	(841)
Net cash provided by (used in) financing activities		(1,376)	(558)	(362)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		0	0	0
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH BEGINNING OF YEAR		0	0	0
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH END OF YEAR		$ 0	$ 0	$ 0

[1] Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction (including $745 million and $297 million, respectively, received from ESL Investments, Inc. and its affiliates ("ESL") and Fairholme Capital Management, LLC and its affiliates ("Fairholme")), and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in proceeds from sales of property and investments ($2.6 billion), and proceeds from sale-leaseback financing ($82 million) for 2015. Proceeds from the JV transactions are included in proceeds from sale-leaseback financing ($426 million) for 2015. See Note 11 for further information and defined terms.

[2] Proceeds in 2017 include $63 million from JPP, LLC and JPP II, LLC, entities affiliated with ESL (as defined in Note 1), for the sale of receivables.

[3] Proceeds in 2017 and 2016, respectively, include amounts from related parties of $876 million in connection with the Term Loan Facility, Line of Credit Loans and Incremental Loans and $1.3 billion received from the 2017 Secured Loan Facility, 2016 Secured Loan Facility, 2016 Term Loan and Second Lien Term Loan. See Notes 3 and 15 for further information and defined terms.

[4] Repayments in 2017 and 2015, respectively, include $345 million to related parties in connection with the 2017 Secured Loan Facility, 2016 Secured Loan Facility, Incremental Loans, 2016 Term Loan and Line of Credit Loans and $400 million of the Secured Short-Term Loan with related parties and $482 million of Senior Secured Notes tendered by related parties, respectively. See Notes 3 and 15 for further information and defined terms.

[5] Includes one-time extension fees equal to $5 million to JPP, LLC and JPP II, LLC, entities affiliated with ESL during 2017. See Note 3 for further information.

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) - USD ($) $ in Millions		12 Months Ended
		Feb. 03, 2018	Jan. 28, 2017	Jan. 30, 2016
Allowance for Doubtful Accounts
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at beginning of period	[1]	$ 37	$ 34	$ 25
Additions charged to costs and expenses	[1]	7	9	10
(Deductions)	[1]	(9)	(6)	(1)
Balance at end of period	[1]	35	37	34
Allowance of Deferred Tax Assets
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at beginning of period	[2]	5,519	4,757	4,478
Additions charged to costs and expenses	[2]	86	1,000	603
(Deductions)	[2]	(1,418)	(238)	(324)
Balance at end of period	[2]	$ 4,187	$ 5,519	$ 4,757

[1] Charges to the account are for the purposes for which the reserves were created.

[2] In 2017, the deferred tax assets and liabilities, along with the valuation allowance, decreased due to the reduction in the corporate income tax rate from 35% to 21% pursuant to the Tax Act. In addition, the pension liability and other federal and state deferred tax assets decreased during the year.