Sears 2007 Annual Report Download - page 10

functions. There can be no assurance that transition of the functions to third party service providers will be
successful. Services provided by third parties as a part of outsourcing initiatives 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
would incur substantial costs, including costs associated with hiring new employees, in order to return these
services in-house.
We might not realize the benefits we are seeking from our new organizational structure.
Our new organizational structure is being built on five types of businesses: operating businesses; support
businesses (e.g., finance, marketing); on-line businesses; real estate businesses, and brand businesses. If this new
organizational structure results in ineffective collaboration among our employees, then our operating results may
be harmed. Additionally, while these changes are designed to provide greater empowerment and accountability to
employees and to enable us to continue to be more effective and efficient in meeting the needs of our customers,
operating in this environment could affect employee morale and retention.
The loss of key personnel may disrupt our business and adversely affect our financial results.
We depend on the contributions of key personnel, including Edward S. Lampert (chairman) and other key
employees, for our future success. Although certain executives have employment agreements with us, changes in
our senior management and any future departures of key employees may disrupt our business and materially
adversely affect our results of operations.
Affiliates of our Chairman, whose interests may be different than your interests, exert substantial
influence over our Company.
Affiliates of Edward S. Lampert, the Chairman of our Board of Directors, beneficially own 49.6% of the
outstanding shares of our common stock. 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, may from time to time diverge
from the interests of our other stockholders, particularly with regard to new investment opportunities. This
substantial influence may 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.
We may be subject to product liability claims if people or properties are harmed by the products we sell or
the services we offer.
Some of the products we sell may expose us to product liability claims relating to personal injury, death, or
property damage caused by such products, and may require us to take actions such as product recalls. We also
provide various services, which could also give rise to such claims. 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.
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. We are impacted by trends in litigation, including class-action allegations brought under
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