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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
October 17, 2002, purchased the 7% notes that SRAC issued on June 21, 2002. Pursuant to a
subsequently filed amended complaint, plaintiffs named as additional defendants certain former Sears
officers not originally named, SRAC and several investment banking firms which had acted as
underwriters for SRAC’s March 18, May 21 and June 21, 2002 notes offerings. The complaint purports
to allege violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, Section 10(b) of the
Exchange Act and Rule 10b-5 promulgated thereunder and, as against the individual defendants,
violations of §20(a) of the Exchange Act. The complaint purports to allege that defendants made a
number of false and misleading statements in one or more prospectuses for debt securities offerings
and in SEC filings and other public statements, concerning the adequacy of reserves for uncollectible
accounts, and the condition of Sears’ former credit business, among other things. Plaintiffs have filed a
motion for class certification. Discovery is underway.
Following the announcement of the Merger on November 17, 2004, several actions have been filed relating
to the transaction. These lawsuits are in their preliminary stages, and defendants have not yet been required to
respond to certain of the complaints. The Company believes that all of these claims lack merit and intends to
defend against them vigorously.
•William Fischer, individually and on behalf of all others similarly situated v. Sears, Roebuck and Co.,
et al.—Three actions were filed and then consolidated in the Circuit Court of Cook County, Illinois.
These actions assert claims on behalf of a purported class of Sears’ stockholders against Sears and
certain of its officers and directors, together with Kmart, Edward S. Lampert, William C. Crowley and
other affiliated entities, alleging breach of fiduciary duty in connection with the Merger and seeking
damages. The plaintiffs allege that the Merger favors interested defendants by awarding them
disproportionate benefits, and that the defendants failed to take appropriate steps to maximize the value
of a merger transaction for Sears’ stockholders. On September 7, 2006, plaintiffs filed a notice of
appeal of the court’s August 8, 2006 order dismissing plaintiffs’ amended complaint. Briefing on the
appeal is underway.
•Maurice Levie, individually and on behalf of all others similarly situated v. Sears, Roebuck & Co., et
al.—One action has been filed in the United States District Court for the Northern District of Illinois.
This action asserts claims under the federal securities laws on behalf of a purported class of Sears’
stockholders against Sears and Alan J. Lacy, for allegedly failing to make timely disclosure of merger
discussions with Kmart during the period September 9 through November 16, 2004, and seeks
damages. The court appointed a lead plaintiff and lead counsel, and an amended complaint was filed on
March 11, 2005. The amended complaint names Edward S. Lampert and ESL Partners, L.P. as
additional defendants, and purports to assert claims on behalf of sellers of Sears stock during the period
September 9 through November 16, 2004. The defendants have answered the amended complaint. On
October 2, 2006, plaintiffs filed their motion for class certification, the briefing on which has been
completed. Meanwhile, the parties have commenced written discovery.
Effective May 11, 2005, Sears terminated for cause its Master Services Agreement (the “Agreement”) with
Computer Sciences Corporation (“CSC”). CSC had been providing information technology infrastructure support
services, including desktops, servers, and systems to support Sears-related websites, voice and data networks and
decision support technology to Sears and its subsidiaries under the 10-year Agreement entered into in June 2004.
CSC is obligated to continue providing these services for an extended period following termination of the
Agreement. CSC disputes Sears’ assertion that grounds for termination for cause existed and claims that, as a
result of terminating this Agreement, Sears is liable to CSC for damages.
CSC filed a lawsuit in the United States District Court for the Northern District of Illinois (the “District
Court”) on March 18, 2005 seeking a declaratory judgment that CSC was not in material breach of the
Agreement and an injunction to prevent Sears from terminating the Agreement for cause. On April 14, 2005, the
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