Sears 2013 Annual Report Download - page 9

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We cannot predict whether our plans to generate liquidity will be successful.
We have plans to generate at least $1.0 billion million of additional liquidity during fiscal year 2014. We
currently anticipate generating approximately $500 million from an exit dividend in connection with the planned
separation of our Lands' End, Inc. subsidiary through a pro rata distribution to our stockholders (the "LE Spin-off"),
we are working with the board and management of Sears Canada to increase the value of our investment in Sears
Canada, and we are evaluating strategic alternatives for our Sears Auto Centers business, subject in each case to
certain conditions, including board approval in the case of possible transactions involving Sears Canada and Sears
Auto Centers. The achievement of these objectives and outcome of these initiatives are subject to risks and
uncertainties with respect to market conditions and other factors that may cause our actual results, performance or
achievements to be materially different from our plans, and there can be no assurance that transactions to monetize
assets or other actions to generate liquidity will become available on terms that are acceptable to us, on intended
timetables or at all. In addition, there can be no assurance that the evaluation and/or completion of any of these
potential transactions will not have a negative impact on our other businesses.
Potential liabilities in connection with the separation of Lands' End, Inc. may arise under fraudulent
conveyance and transfer laws and legal capital requirements.
With respect to the LE Spin-off, if either Holdings or Lands' End 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 LE Spin-off, the entity in
question: (1) was insolvent; (2) was rendered insolvent by reason of the LE Spin-off; (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 LE Spin-off was voidable, in whole or in part. Subject to various
defenses, the court could then require Holdings or Lands' End, or other recipients of value in connection with the LE
Spin-off (potentially including Lands' End stockholders as recipients of shares of Lands' End common stock in
connection with the spin-off), as the case may be, to turn over value to other entities involved in the LE Spin-off 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.
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, security breaches, catastrophic events such as fires,
tornadoes and hurricanes, and usage errors by our employees. Operating legacy systems subject 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. Cyber-
security risks such as malicious software and attempts to gain unauthorized access to data are rapidly evolving.
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, or if our systems are otherwise damaged or cease to
function properly, 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, 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