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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
NOTE 20—LEGAL PROCEEDINGS
Pending against Sears and certain of its officers and directors are a number of lawsuits, described below,
that relate to Sears’ former credit card business and public statements about it. The Company believes that all of
these claims lack merit and, except as noted below, is defending against them vigorously.
•In re: Sears, Roebuck and Co. Securities Litigation—On and after October 18, 2002, several actions
were filed in the United States District Court for the Northern District of Illinois against Sears and
certain former officers alleging that certain public announcements by Sears concerning its credit card
business violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder. The Court consolidated the actions and certified the consolidated action as a
class action. On January 18, 2007, Sears made a payment to plaintiffs of approximately $215 million
pursuant to the terms of a settlement dated September 14, 2006. Sears received proceeds totaling $125
million from claims made under relevant insurance policies and thus the cash payment for settlement
by Sears was approximately $90 million on a pre-tax basis. On January 10, 2007, the Court entered an
Order and Final Judgment as to the consolidated action and, with the time for appeal of such Order and
Final Judgment having expired without any appeal having been filed, this matter is concluded. In
agreeing to the settlement, defendants did not admit any wrongdoing and deny committing any
violation of law. Defendants agreed to the settlement solely to eliminate the uncertainties, burden and
expense of further protracted litigation.
•In re: Sears, Roebuck and Co. ERISA Litigation—On and after November 15, 2002, several actions
were filed in the United States District Court for the Northern District of Illinois against Sears, certain
officers and directors, and alleged fiduciaries of Sears’ 401(k) Savings Plan (the “Plan”), seeking
damages and equitable relief under the Employee Retirement Income Security Act of 1974 (“ERISA”).
The plaintiffs purport to represent participants in the Plan, and allege breaches of fiduciary duties under
ERISA in connection with the Plan’s investment in Sears’ common shares and alleged communications
made to Plan participants regarding Sears’ financial condition. The Court has consolidated these
actions and certified the consolidated action as a class action. Pursuant to an agreement dated
February 13, 2007, defendants have agreed to settle the matter. Defendants do not admit any
wrongdoing and deny any committing any violation of law. Defendants agreed to the settlement solely
to eliminate the uncertainties, burden and expense of further protracted litigation. The settlement is not
expected to have a material adverse effect on annual results of operations, financial position, liquidity
or capital resources of the Company.
•Marilyn Clark, derivatively on behalf of Sears, Roebuck and Co. v. Alan J. Lacy, et al.—On
October 23, 2002, a purported derivative suit was filed in the Supreme Court of the State of New York
(the “New York Court”) against Sears (as a nominal defendant) and certain current and former
directors seeking damages on behalf of Sears. The complaint purports to allege a breach of fiduciary
duty by the directors with respect to Sears’ management of its credit business. Two similar suits were
subsequently filed in the Circuit Court of Cook County, Illinois (the “Illinois State Court”), and a third
was filed in the United States District Court for the Northern District of Illinois. The New York Court
derivative suit was dismissed on June 21, 2004. A New York appellate court affirmed the dismissal on
December 6, 2005, and the time for further appeal has expired. The two Illinois State Court derivative
suits were dismissed on September 30, 2004. The order of dismissal became final on December 1,
2004, and the time to appeal has expired. The defendant directors filed a motion to dismiss the Illinois
federal court action on May 22, 2006. Briefing on defendants’ motion has been stayed.
•Thomas G. Ong for Thomas G. Ong IRA, et al. v. Sears, Roebuck & Co., et al.—On June 17, 2003, an
action was filed in the United States District Court for the Northern District of Illinois against Sears
and certain officers, purportedly on behalf of a class of all persons who, between June 21, 2002 and
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