SHOS Sears Hometown and Outlet Stores Inc

On October 23, 2019 (the “Closing Date”), in connection with the closing of the Merger (as defined below), Sears Hometown Stores, Inc. (the “Company”), certain of its subsidiaries and Transform Merger Corporation (“Merger Sub”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association, as Agent, and the lenders from time to time party thereto. The Credit Agreement provides for an $80 million senior secured revolving credit facility (the “Credit Facility”) available to be used by the Company and certain of its domestic subsidiaries for general corporate purposes, including to finance the merger consideration that was paid in connection with the acquisition of the Company in accordance with the terms of the previously announced Agreement and Plan of Merger, dated as of June 1, 2019, among the Company, Transform Holdco LLC (“Transform Holdco”) and Merger Sub (as amended and supplemented by the terms of the previously announced letter agreement, dated as of August 27, 2019, among the Company, Transform Holdco and Merger Sub, the “Merger Agreement” and the transactions contemplated thereby, the “Merger”). The Company and each of its material subsidiaries is a borrower, and jointly and severally liable, under the Credit Facility. The Credit Facility matures on October 23, 2024.

Under the Credit Facility, the Company will pay quarterly fees of 0.50% per annum on the unused portion of the facility. Loans under the facility will bear interest at a floating rate based, at the Company’s election, on either a customary base rate or a customary LIBOR rate, in each case plus an applicable margin based on availability under the Credit Facility.

The Credit Agreement requires the Company to comply with a minimum excess availability covenant. In addition, the Credit Agreement contains other standard affirmative and negative covenants, such as those which (subject to certain thresholds) limit the ability of the Company and its subsidiaries to, among other things, incur debt, incur liens, engage in mergers, consolidations or acquisitions, make certain investments, make distributions on or repurchase its equity securities, or engage in transactions with affiliates. Events of default under the Credit Agreement include, among other things, payment defaults, breaches of representations, warranties or covenants, defaults under material indebtedness, certain events of bankruptcy or insolvency, judgment defaults, certain defaults or events relating to employee benefit plans or a change in control of the Company. The events of default would permit the lenders to terminate commitments and accelerate the maturity of borrowings under the Credit Facility if not cured within applicable grace periods.