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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

JOHN SOLAK, on Behalf of Himself and All Others Similarly Situated and Derivatively on Behalf of SEARS HOLDINGS CORPORATION,

Plaintiff, v.

EDWARD S. LAMPERT, STEVEN T. MNUCHIN, THOMAS J. TISCH, ANN N. REESE, WILLIAM C. KUNKLER, III, PAUL G. DEPODESTA, CESAR L. ALVAREZ, KUNAL S. KAMLANI, ESL INVESTMENTS, INC., and SERITAGE GROWTH PROPERTIES,

Defendants, -and-

SEARS HOLDINGS CORPORATION, a Delaware corporation,

Nominal Defendant.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

C.A. No.

VERIFIED STOCKHOLDER CLASS ACTION

AND DERIVATIVE COMPLAINT

Plaintiff John Solak ("Plaintiff") in this Verified Stockholder Class Action

and Derivative Complaint, alleges the following on information and belief, except

as to the allegations specifically pertaining to Plaintiff which are based on personal

knowledge:

EFiled: May 29 2015 05:10PM EDT Transaction ID 57311891

Case No. 11081-

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NATURE AND SUMMARY OF THE ACTION

1. Plaintiff brings this action as a stockholder of Sears Holdings

Corporation ("Sears" or the "Company") on behalf of himself and all other

similarly situated public stockholders of Sears (the "Class") as defined herein, and

derivatively on behalf of Sears. Plaintiff seeks to prevent the Company's

Chairman, Chief Executive Officer ("CEO"), and controlling stockholder,

defendant Edward S. Lampert ("Lampert"),1 from siphoning off one of Sears' last

remaining valuable assets, its real estate portfolio, through an unfair process.

2. In particular, Sears is selling its prime real estate assets to Seritage

Growth Properties ("Seritage"), a newly formed real estate investment trust

("REIT") (the "Proposed Transaction"), which defendant Lampert also controls. In

order to retain their investment in Sears' real estate, the Company's current

stockholders will have to buy into the Proposed Transaction or otherwise lose their

ownership interests.2 Unfortunately, for all of Sears' stockholders, the Company's

Board of Directors (the "Board") has refused to provide them with enough

information to adequately decide whether or not to invest in the Rights Offering.

Moreover, it appears that Defendant Seritage is paying an amount that is unfair to

1 Lampert controls Sears through his investment vehicle, defendant ESL

Investments, Inc. ("ESL").

2 As part of the Proposed Transaction, the Company's stockholders will receive the

right to purchase a share of Seritage (the "Rights Offering").

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Sears and it is readily apparent that the Board did not follow a fair process in

agreeing to the Proposed Transaction. Accordingly, Plaintiff brings a direct action

on behalf of all Sears stockholders against the Board for its failure to provide them

with full and fair disclosures while forcing stockholders to act and on behalf of

those Sears stockholders who are unable or unwilling to participate in the Rights

Offering. Plaintiff also brings this action derivatively on behalf of the Company to

prevent the loss of its valuable properties for an unfair amount as a result of an

unfair process.

3. Defendant Lampert has controlled Sears since 2005. That year,

defendant Lampert combined Sears, Roebuck and Co. ("Sears Roebuck") with

Kmart Holding Corporation ("Kmart"), touted even at the time as a shrewd real

estate deal. Defendant Lampert's control of Sears has been a disaster for the

Company. Under defendant Lampert's stewardship, Sears has gone from a proud

but struggling retailer, with plenty of capital and time to effect a turnaround, to a

loss-making, cash-burning enterprise, growing ever nearer to insolvency. With

Defendant Lampert as Chairman, the Company has gone through four CEOs,

severely underinvested in its stores, experienced same-store sales declines for six

straight years, and, by 2012, saw annual losses near $1 billion and cash reserves

dwindle to their lowest levels ever.

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4. In February 2013, as Sears became increasingly burdened with debt

and mounting losses, it appointed defendant Lampert CEO of the Company.

Needing liquidity to cover Sears' accelerating losses, defendant Lampert began

exploring ways to monetize the Company's remaining assets and deepen cost-

cutting measures. In April 2014, Sears was forced to spin off Lands' End, Inc.

("Land's End"), its most profitable division, for about $500 million in proceeds.

Shortly thereafter, in November 2014, the Company also divested Sears Canada

Inc. ("Sears Canada"), raising another $380 million. To help cut costs, Sears

announced the planned closures of 235 stores.

5. None of defendant Lampert's moves have arrested Sears' monumental

fall. Since defendant Lampert has assumed the CEO post, annual revenues have

fallen by an additional 20%, and proceeds from the Company's massive asset sales

have served only to fund annual losses that have increased by 80% to nearly $1.7

billion in 2014. The Company's capital position has been further strained by its

need to take on additional debt to cover operating losses. In 2014, Sears added

over $1 billion to its debt load, including $625 million in unsecured notes and a

$400 million loan from defendant Lampert's investment fund, defendant ESL. The

Company has since paid off half of its loan from defendant ESL, with the

remaining half secured by some of Sears' most valuable properties.

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6. Faced with dwindling options to keep the failing retailer afloat,

defendant Lampert is now taking steps to protect his own investment, at the

expense of Sears and its outside stockholders. Defendant Lampert has structured

the Proposed Transaction to transfer the bulk of Sears' valuable real estate to an

entity he will control, defendant Seritage, while leaving Sears saddled with debt,

few valuable assets, and renting the space it formerly owned.

7. In particular, the Proposed Transaction will result in the sale of 235 of

the Company's best properties, along with Sears' joint venture interests in an

additional thirty-one prime properties (the "JV Properties") to defendant Seritage.

Defendant Lampert, who will possess absolute control over defendant Seritage,

will make off with the Company's valuable real estate assets, while Sears will

receive in exchange a paltry cash payment of approximately $2.5 billion, along

with a new obligation to pay approximately $150 million per year in rent.

8. Sears' non-controlling stockholders are therefore left with a stark

choice: to participate in the opaque Rights Offering and pay more to retain an

interest in assets they already own, or to not participate in the Rights Offering and

lose ownership of the Company's last remaining large, monetizable asset in the

unfair Proposed Transaction. Unfortunately, the Board has failed to provide

stockholders with enough information to even make this decision. The Board has

refused to take a position on whether stockholders should participate in the Rights

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Offering. Worse, the Board has not received a fairness opinion and neither the

Registration Statement (as defined herein) nor any materials provided by the Board

contain any kind of financial analysis, property market value or rent appraisals,

projections, or fairness opinions, completely preventing Sears' stockholders from

knowing whether the Company is getting a fair deal as it sells its last remaining

valuable assets. Since they will lose their interests in Sears' most valuable interests

without participating in the Rights Offering, Sears' stockholders with sufficient

means are being effectively forced to buy into a transaction blindfolded. Those

without the means (or desire to pour even more money into the defendant Lampert-

controlled entity) are getting short-changed for Sears' best properties.

9. In short, the Proposed Transaction is designed to unlawfully divest

Sears and its non-controlling stockholders of the Company's valuable real estate

assets pursuant to an unfair and non-transparent process for grossly inadequate

consideration. To remedy defendants' breaches of fiduciary duties and other

misconduct, Plaintiff seeks injunctive relief preventing execution of the Proposed

Transaction, unless and until the Company adopts and implements a procedure or

process to obtain a transaction that provides the best possible terms for Sears and

its non-controlling stockholders.

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PARTIES

Plaintiff

10. Plaintiff was a stockholder of Sears at the time of the wrongdoing

complained of, has continuously been a stockholder since that time, and is a

current Sears' stockholder.

Nominal Defendant

11. Nominal defendant Sears is a Delaware corporation with principal

executive offices located at 3333 Beverly Road, Hoffman Estates, Illinois. Sears is

the parent company Kmart and Sears Roebuck. The Company operates a national

network of stores with 1,725 full-line and specialty retail stores in the United

States operating through Kmart and Sears Roebuck. Sears also operates a number

of websites under the sears.com and kmart.com banners. As of January 31, 2015,

the Company had approximately 196,000 employees in the United States and U.S.

territories.

Defendants

12. Defendant Lampert is the CEO of Sears and has been since February

2013 and Chairman of the Board and a director and has been since March 2005.

Defendant Lampert was also Kmart's Chairman of the board and director from

May 2003 until Kmart's merger with Sears Roebuck in March 2005. Defendant

Lampert is the CEO and Chairman of the board of defendant ESL and has been

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since he founded defendant ESL in April 1988. Through defendant ESL and its

related entities, defendant Lampert owns 62,260,584 shares, or 53.2%, of Sears'

outstanding common stock.

13. Defendant Steven T. Mnuchin ("Mnuchin") is a Sears director and has

been since March 2005. Defendant Mnuchin was also defendant ESL's Vice

Chairman in 2003 and has been a limited partner in defendant ESL. Defendant

Mnuchin was a director of Kmart from May 2003 until Kmart's merger with Sears

Roebuck in March 2005.

14. Defendant Thomas J. Tisch ("Tisch") is a Sears director and has been

since March 2005. Defendant Tisch has also been a limited partner in defendant

ESL going back to 1992. Defendant Tisch was a director of Kmart from May 2003

until Kmart's merger with Sears Roebuck in March 2005. Defendant Tisch owns

4,533,972 shares, or 4.2%, of Sears' outstanding common stock.

15. Defendant Ann N. Reese ("Reese") is a Sears director and has been

since March 2005. Defendant Reese was also a Kmart director from May 2003

until Kmart's merger with Sears Roebuck in March 2005.

16. Defendant William C. Kunkler, III ("Kunkler") is a Sears director and

has been since September 2009.

17. Defendant Paul G. DePodesta ("DePodesta") is a Sears director and

has been since December 2012.

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18. Defendant Cesar L. Alvarez ("Alvarez") is a Sears director and has

been since December 2013. Defendant Alvarez is also a member of the board of

directors of Fairholme Funds, Inc., an affiliate of Fairholme Capital Management,

L.L.C. ("Fairholme"), a 24.7% stockholder of Sears.

19. Defendant Kunal S. Kamlani ("Kamlani") is a Sears director and has

been since December 2014.

20. Defendant ESL is a Delaware corporation with principal executive

offices located at 1170 Kane Concourse, Suite 200, Bay Harbor Islands, Florida.

Defendant ESL is a private investment management firm founded in April 1988

and operated by defendant Lampert. Defendant ESL and its related entities own

62,260,584 shares, or 53.2%, of Sears' outstanding common stock.

21. Defendant Seritage is a Maryland REIT with principal executive

offices located at 3333 Beverly Road, Hoffman Estates, Illinois. Defendant

Seritage will conduct its operations through Seritage Growth Properties, L.P

("Seritage Growth"), a Delaware limited partnership, and subsidiaries of Seritage

Growth (together with Seritage Growth, the "Operating Partnership"). Upon

completion of the Proposed Transaction, defendant Seritage will be a publicly

traded, self-administered, self-managed REIT primarily engaged in the real

property business with a portfolio consisting of 235 acquired properties and thirty-

one JV Properties previously owned by Sears.

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22. Collectively, the defendants identified in 12-19 are referred to

herein as the "Individual Defendants."

SUBSTANTIVE ALLEGATIONS

Background of Defendant Lampert's Control over Sears

23. Defendant Lampert is a billionaire who has made a fortune through

his private investment fund, defendant ESL. Referred to as the next Warren

Buffett for his similar philosophy of investing in struggling companies that are

reeling from failed strategies or weak management, defendant Lampert had

enjoyed incredible average returns of 29% through the first fifteen years of

defendant ESL's existence.

24. By 2002, defendant Lampert had Kmart in his crosshairs. Due to

concerns that the struggling retailer may file for bankruptcy, defendant ESL was

able to accumulate a significant stake in Kmart's debt at a significant discount.

Even after Kmart's January 2002 Chapter 11 bankruptcy filing, defendant ESL

continued to buy up the company's debt as the prices tumbled even further. When

Kmart emerged from bankruptcy in May 2003, debt holders were converted into

stockholders, and as a result, defendant ESL owned over 50% of the company. By

the time it resumed trading post-bankruptcy, defendant Lampert had acquired

control of Kmart, a retail leader with $23 billion in annual sales, $3 billion in cash,

and a hoard of valuable real estate, and installed himself as Chairman, all for less

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than $1 billion.

25. Analysts expected defendant Lampert to simply milk Kmart for its

cash and keep operations running so he could extract top dollar for its real estate.

And while he did begin to monetize the real estateincluding a sale of sixty-eight

stores to Home Depot Inc. and Sears Roebuck for nearly $850 milliondefendant

Lampert also had early success in improving Kmart's profitability. With the

consult of Gap Inc.'s former CEO and the leadership of a former PepsiCo Inc.

executive who defendant Lampert installed as Kmart's CEO, defendant Lampert

cut inventory, slashed costs, and stopped offering Kmart's traditional deep

discounts, allowing Kmart to earn profits even as same-store sales declined, and

see its stock price soar as a result.

26. Kmart's rising stock would become a valuable resource for defendant

Lampert in making deals, as he could use it as capital to make acquisitions.

Defendant Lampert turned his sights towards Sears Roebuck. Defendant ESL was

already Sears Roebuck's largest stockholder with a 15% stake. In November 2004,

just eighteen months after Kmart's emergence from bankruptcy, the company

announced an $11.5 billion takeover of Sears Roebuck, financed in cash and Kmart

stock. The deal would be the second largest retail merger in history. The

combined company, Sears, would become the third largest retailer in the U.S. with

total annual sales of $55 billion and a massive real estate portfolio via its 3,500

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stores.

27. The combined company would also be controlled by defendant

Lampert. In a November 18, 2004 Wall Street Journal article discussing the deal,

defendant Lampert projected that defendant ESL would emerge owning a

percentage of Sears "in the high-30s to mid-40s." That stake would quickly swell

to over 50%. And Sears, though retaining the target company's name, would be

financially and functionally dominated by defendant Lampert and his loyalists

brought over from Kmart. As described by The New York Times in an article dated

November 18, 2004:

Whenever the deal receives regulatory approval, Mr. Lampert is sure

to dominate the new company, with Kmart having seven board seats

and Kmart's newly minted chief executive, Aylwin B. Lewis, running

both retailers. Sears will name three directors, including its current

chief executive, Alan J. Lacy.

Though Kmart's team will control the finances, the Sears name is

expected to be front and center for consumers.

28. While defendants Lampert and ESL's ownership of Sears' stock has

ebbed and flowed since the combination of Kmart and Sears Roebuck, defendant

Lampert has consolidated his control over the Company, its assets, and operations.3

These holdings provide defendant Lampert with absolute control over any matters

brought to a stockholder vote, as confirmed by Sears' Annual Report on Form 10-K

3 Defendant Lampert's ownership interests have fluctuated from a low of about

40% to a high of nearly 60% of the Company's stock. Currently, defendant

Lampert owns over 53% of Sears' stock.

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for the fiscal year ended January 31, 2015, filed with the U.S. Securities and

Exchange Commission ("SEC") on March 17, 2015, that states, in relevant part:

Affiliates of Edward S. Lampert, our Chairman and Chief Executive

Officer, collectively own approximately 49% 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.

29. Hundreds of millions of dollars in Sears' debt is also held by

defendant Lampert, further tightening his control over the Company. Specifically,

according to the Company's Proxy Statement on Schedule 14A (the "Proxy") filed

with the SEC on March 17, 2015, defendants Lampert and ESL held over $900

million in total between short and long-term debt ($200 million of which has since

been paid back), approximately 30% of Sears' total debt. The Proxy detailed the

following debt obligations that Sears has to defendants Lampert and ESL, which

give defendants Lampert and ESL substantial leverage in potential discussions

over strategic alternatives and capital deployments:

Secured Short-Term Loan

In September 2014, the Company, through Sears, Sears Development

Co., and Kmart Corporation ("Borrowers"), entities wholly-owned

and controlled, directly or indirectly by the Company, entered into a

$400 million secured short-term loan (the "Loan") with JPP II, LLC

and JPP, LLC (together, the "Lender"), entities affiliated with ESL.

* * *

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Senior Secured Notes and Subsidiary Notes

At January 31, 2015, Mr. Lampert and ESL held an aggregate of $205

million of principal amount of the Company's 6 5/8% Senior Secured

Notes due 2018 and an aggregate of $3 million of principal amount of

unsecured notes issued by [Sears Roebuck Acceptance Corp.].

Senior Unsecured Notes and Warrants

At January 31, 2015, Mr. Lampert and ESL held an aggregate of $299

million of principal amount of the Company's 8% Senior Unsecured

Notes due 2019 and 10,530,633 warrants to purchase shares of Sears

Holdings' common stock.

30. Defendant Lampert also controls any decision made by the Board of

Sears. As the Company's controlling stockholders, defendants Lampert and ESL

can simply vote to remove a director who disagrees with defendant Lampert on any

matter. That is unlikely to be necessary, however, as the Company's Board has

been stacked with defendant Lampert's loyalists since the combination of Kmart

and Sears Roebuck. Defendant Lampert installed four of the eight current

members of the Board, including himself, defendants Mnuchin, Reese, and Tisch,

as Kmart directors in 2003. Further, defendants Mnuchin and Tisch have deep-

seated loyalties to defendant Lampert from their association with defendant ESL.

As a result, although the Board has the right to cancel the Proposed Transaction at

any time if it deems the Proposed Transaction unfair to Sears' stockholders, it will

not do so because it is under the control of defendant Lampert.

31. The defendant Lampert-controlled Board has also repeatedly

abdicated its duties to oversee the Company and instead given defendant Lampert

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total control. For instance, the Board specifically delegated authority over the

Company's cash reserves to defendant Lampert. Specifically, the Company

discloses in its Proxy:

Our Board has delegated authority to direct investment of our surplus

cash to Mr. Lampert, subject to various limitations that have been or

may be from time to time adopted by the Board of Directors and/or

the Finance Committee of the Board of Directors. Mr. Lampert is

Chairman of our Board of Directors and its Finance Committee.

32. Further, the defendant Lampert-controlled Board has agreed to grant

him a renounced interest exception. This agreement essentially concedes to

defendant Lampert the opportunity to pursue investments through and for the

benefit of defendant ESL, instead of Sears, except in narrow and specific

situations. The Proxy provides further detail:

Further, to clarify the expectations that the Board of Directors has

with respect to the investment of our surplus cash, the Board has

renounced, in accordance with Delaware law, any interest or

expectancy of the Company associated with any investment

opportunities in securities that may come to the attention of

Mr. Lampert or any employee, officer, director or advisor to ESL and

its affiliated investment entities (each, a "Covered Party") who also

serves as an officer or director of the Company other than

(a) investment opportunities that come to such Covered Party's

attention directly and exclusively in such Covered Party's capacity as

a director, officer or employee of the Company, (b) control

investments in companies in the mass merchandising, retailing,

commercial appliance distribution, product protection agreements,

residential and commercial product installation and repair services and

automotive repair and maintenance industries and (c) investment

opportunities in companies or assets with a significant role in our

retailing business, including investment in real estate currently leased

by the Company or in suppliers for which the Company is a

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substantial customer representing over 10% of such companies'

revenues, but excluding investments of ESL that were existing as of

May 23, 2005.

33. Defendant Lampert therefore has control over any matter decided by

Sears' stockholders by virtue of his and defendant ESL's stock ownership; control

over any matter decided by the Board by virtue of its unwavering loyalty to him;

control over the Company's deployment of its cash by virtue of the authority

delegated by the Board to him; the ability to pursue valuable investment

opportunities in the interest of defendant ESL instead of Sears; and control over the

Company's day-to-day operations by virtue of his position as CEO. Thus,

defendant Lampert has absolute control over Sears.

The Company's Prospects Diminish Under Defendant Lampert's Control

34. Defendant Lampert has served as the Company's Chairman since the

combination of Kmart and Sears Roebuck in 2005. Though four different

individuals served at the Company's CEO before he officially took the position in

2013, defendant Lampert has been effectively running Sears' day-to-day operations

the entire time. Over those ten years, defendant Lampert has utterly failed to make

promised investments and changes to help turn Sears around, and instead has

presided over one of the greatest destructions of stockholder value in recent

corporate history.

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35. Presiding over the operations of the $55 billion Company from his

mansion in Florida, which the Company admits is his primary place of

employment, defendant Lampert was reputed to visit the Company's Illinois

headquarters only twice per year. Nonetheless, defendant Lampert embarked on an

ambitious but ill-fated plan to turn the Company around, with himself in command.

36. Following his first two full years in charge of Searsyears in which

the Company's revenues declined slightly, but remained above $50 billion in each

of 2006 and 2007, and net income averaged over $1.1 billion per yeardefendant

Lampert instituted a new organizational model that splintered Sears into about

thirty separate businesses. Each business was run autonomously, with its own

leadership that reported to defendant Lampert, and even its own board of directors.

37. In this hedge-fund-style model, the Company's separate businesses

were in effect competing for attention and resources from defendant Lampert, as

opposed to operating collaboratively. The model went so far as to require different

Sears businesses that wanted to cooperate to enter into formal agreements

governing the arrangements. This even included sales departments wanting to

employ the services of Sears' Information Technology or Human Resources, which

were also split into their own independent businesses. Predictably, this

decentralized structure led to infighting, especially as available resources began to

diminish when the Company's profits turned to losses.

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38. Internal chaos ensued, and competition for marketing resources best

illustrated the absurd results of the new organizational structure when the famous

Sears catalog advertised power tools next to apparel, and kids' toys on the cover of

the Mother's Day issuethe outcome of internal auctions for catalog space.

According to a July 11, 2013 article by Bloomberg, defendant Lampert's model has

been described by Gary Schettino, a former Sears Vice President, as

"dysfunctionality at the highest level, because there isn't a retail expert in charge."

Mary Ross Gilbert, a managing director at investment bank Imperial Capital,

echoed the sentiment, telling Bloomberg, "[t]he way it's being managed, it doesn't

work[.] They're going to continue to deteriorate."

39. In addition to instituting a dysfunctional organizational model,

defendant Lampert also severely underinvested in Sears' stores, instead focusing on

technology that supports a tiny fraction of the Company's sales. By 2012,

defendant Lampert's investment in Sears' stores had fallen to barely 25% of its

closest competitor, and less than 15% of Target Corporation, as illustrated in

Bloomberg's following graphic:

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40. Meanwhile, the Company's profits began to turn to losses. In 2011,

after turning out meager profits in the first two full years under defendant

Lampert's new organizational model, Sears reported a net loss of over $3 billion.

From 2011 through the end of 2014, the Company has lost an average of nearly

$1.8 billion per year. In mid-2013, months after defendant Lampert formally took

over as Sears' CEO, cash reserves fell to a ten-year low; today, they stand at just

half that. Annual revenues under defendant Lampert's command have fallen 44%,

from over $55.6 billion down to $31.2 billion.

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41. Sears has been forced to accumulate more debt to address its capital

shortages. Most recently, in 2014, Sears added over $1 billion to its debt load. In

addition to $625 million in long-term unsecured notes, the Company looked in

desperation to defendants Lampert and ESL for short-term funds. The result: a

self-serving $400 million loan from defendant Lampert's investment fund,

defendant ESL, secured by twenty-five of Sears' top properties that, by some

accounts, were actually worth as much as $500 million.

42. In total, defendants Lampert and ESL own approximately 30% of

Sears' debt. The average annual interest rate on this debt is 7%, meaning Sears

pays defendant ESL about $60 million a year just in interest payments. In

addition, some of the Sears notes defendant ESL own also came with warrants to

buy ten million shares of the Company's stock. These warrants are now about

$150 million in the money.

43. To cover and stem the Company's massive and accelerating operating

losses, and to service its debt obligations, defendant Lampert has resorted to

shedding Sears' major assets, accumulating more debt in the Company's name, and

instituting drastic cost-cutting measures. After the April 2014 spin off of Lands'

End, its most profitable division, for about $500 million in proceeds, and the

November 2014 divestiture of Sears Canada to raise another $380 million, the

Company's last major asset is its real estate holdings. To help cut costs, in

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December 2014, Sears also announced the planned closures of 235 stores. In the

face of an operating loss of nearly $1.7 billion in the most recent fiscal year,

however, and with the addition of $1 billion in new debt, the Company's prospects

as a going concern aren't optimistic.

Defendant Lampert Engineers the Proposed Transaction

44. After ten years in command of Sears, defendant Lampert's leadership

has driven the Company to the point of losing an average of over $1.8 billion per

year and selling off assets at fire sale prices just to cover those losses. With few

valuable assets left, Sears has now entered into the Proposed Transaction to sell the

majority of its real estatethe Company's final large monetizable assetto

defendant Lampert-controlled defendant Seritage in a deal where stockholders are

not provided with even basic information on the fairness of the Proposed

Transaction and where the Company (and its stockholders, unless they agree to

turn over more of their money to defendant Lampert's control) will lose the real

estate assets in exchange for inadequate consideration.

45. On April 1, 2015, Sears issued a press release announcing the

Proposed Transaction and explaining that defendant Seritage had filed a

Registration Statement on Form S-11 with the SEC disclosing further details about

the Proposed Transaction. The press release stated:

HOFFMAN ESTATES, Ill., April 1, 2015 Sears Holdings Corporation (the "Company") (NASDAQ: SHLD) today announced

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that, in connection with its previously announced exploration of the

formation of a real estate investment trust ("REIT"), Seritage Growth

Properties ("Seritage"), a Maryland trust formed by the Company, has

filed a registration statement on Form S-11 (the "Registration

Statement") with the Securities and Exchange Commission (the

"SEC").

The Registration Statement provides for a rights offering by Seritage

intended to partially finance its purchase of approximately 254 of the

Company's properties, virtually all of which are operated as Sears and

Kmart stores. As of January 31, 2015, Sears Holdings owned or leased

1,725 Kmart and Sears stores combined. Proceeds to the Company of

this sale are expected to exceed $2.5 billion.

The Company would in turn enter into a master lease agreement,

pursuant to which it would lease the Sears and Kmart properties from

Seritage and continue to operate its retail stores in those locations. The

proceeds of the rights offering, together with debt and other financing

which Seritage would obtain, would be used by Seritage to purchase

the properties from the Company. The subscription rights would be

distributed pro rata to all stockholders of record of the Company and

entitle holders to purchase common shares of Seritage. The record

date, subscription price, subscription ratio (the number of rights

needed to acquire a share in Seritage) and other terms of the proposed

rights offering will be announced prior to the commencement of the

rights offering.

Edward S. Lampert, Chairman and Chief Executive Officer of the

Company and Chairman and Chief Executive Officer of ESL

Investments, Inc. ("ESL") and certain investment funds affiliated with

ESL, have advised the Company that they intend to exercise their pro

rata portion of the subscription rights in full, although they have not

entered into any agreement to do so. In addition, Fairholme Capital

Management, L.L.C. has advised the Company that it expects that its

clients will exercise substantially all of the rights they receive, subject

to the REIT ownership limitations imposed by the Company and

regulatory considerations.

The rights offering is currently anticipated to close by the end of the

second quarter of this year, and is subject to the approval of the Board

of Directors of Sears Holdings, market conditions and the satisfaction

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of certain other conditions. Sears Holdings may, at any time prior to

the closing of the REIT transaction, decide to abandon the transaction

or modify its terms.

46. The Registration Statement on Form S-11/A, as amended, and filed

with the SEC on May 26, 2015 (the "Registration Statement"), provided some

further details on the properties and other interests that defendant Seritage will

acquire. Those other interests including Sears' valuable stake in the JV Properties,

which developed out of three separate property-based joint ventures into which the

Company recently entered to raise capital, while also maintaining an interest in the

underlying properties. As the Registration Statement discloses, in relevant part:

Following the Transaction, Seritage Growth will be a publicly traded,

self-administered, self-managed REIT primarily engaged in the real

property business through its investment in Operating Partnership.

Initially, our portfolio will consist of 235 properties (the "Acquired

Properties") that are owned (or, in one case, ground-leased) by Sears

Holdings Corporation (together with its subsidiaries, "Sears Holdings"

or "SHC"), as of the date of this prospectus. In addition, we will own

three 50% joint venture interests in an additional twelve, ten and nine

properties (collectively, the "JV Properties"), respectively, which joint

venture interests are owned by Sears Holdings as of the date of this

prospectus and will be sold to us in the Transaction. We will lease (or

sublease) a substantial majority of the space at all but eleven of the

Acquired Properties (such eleven properties, the "Third Party

Properties") back to Sears Holdings under a master lease agreement

(the "Master Lease"), with the remainder of such space leased to third-

party tenants. The Third Party Properties, which do not currently

contain a Sears Holdings store, will not have any space leased to Sears

Holdings, and will instead be leased solely to third-party tenants. A

substantial majority of the space at the JV Properties is also leased to

Sears Holdings by GS Portfolio Holdings LLC (the "GGP JV"), a

joint venture between Sears Holdings and a subsidiary of General

Growth Properties, Inc. (together with its subsidiaries, "GGP"), SPS

- 24 -

Portfolio Holdings LLC (the "Simon JV"), a joint venture between

Sears Holdings and a subsidiary of Simon Property Group, Inc.

(together with its subsidiaries, "Simon"), or MS Portfolio LLC (the

"Macerich JV" and, together with the GGP JV and the Simon JV,

each, a "JV"), a joint venture between Sears Holdings and a subsidiary

of The Macerich Company (together with its subsidiaries,

"Macerich"), as applicable, in each case under a separate master lease

with each JV (the "JV Master Leases"). We will acquire Sears

Holdings' 50% interest in each of the JVs in the Transaction.

We expect to generate revenues primarily by leasing our properties to

tenants, including both Sears Holdings and third-party tenants, who

will operate retail stores (and potentially other uses) in the leased

premises, a business model common to many publicly traded REITs.

In addition to revenues generated under the Master Lease through rent

payments from Sears Holdings, we expect to generate revenue

through leases to third-party tenants under existing and future leases

for space at our properties, including the Acquired Properties. In

addition, we will have an interest in the JV Properties through our

50% interest in each JV.

47. The result of the Proposed Transaction will see defendant Lampert

abscond with the Company's most valuable remaining assets, while Sears and its

stockholders will be left with inadequate consideration that will quickly be burned

by the Company's massive loss-making operations overseen by defendant Lampert.

Indeed, the Proposed Transaction will see Sears lose, and defendant Seritage gain,

235 of the Company's properties, many of which appear to be its most valuable,

and the Company's interests in the thirty-one JV Properties. Additionally, because

Sears retail stores will continue to operate out of the vast majority of the properties,

the Proposed Transaction will add $150 million per year in rent obligations to

defendant Seritage onto the Company's already crushing debt load.

- 25 -

Defendant Lampert Controls Both Sides of the Proposed Transaction

48. Defendant Lampert is the controlling figure on both sides of the

Proposed Transaction, and once the Proposed Transaction is completed he will

control defendant Seritage in a similar manner and to an extent at least as great as

his control of Sears. Indeed, defendant Lampert has structured defendant Seritage

and the Proposed Transaction such that he will control every aspect of the voting,

decision-making, and operations of the REIT, while also receiving a massive share

of defendant Seritage's monetary distributions.

49. The structure of defendant Seritage flies in the face of the intent with

which vehicles structured as REITs were legalized. REITs were designed to make

large-scale investments in real estate accessible to average investors. To achieve

this, certain limits applicable to REITs like defendant Seritage were adopted,

including a maximum of 50% of a REIT's common stock allowed to be held in

total by the REIT's five largest stockholders, and a traditional maximum of 9.6% of

a REIT's common stock allowed to be held by a single stockholder (a limit

defendant Seritage has adopted). Defendant Seritage's OP Unit and Class B Share

(both defined herein) structure enables defendants Lampert and ESL to flout both

of those regulations for their own benefit.

50. Defendant Lampert is limited under the legal structure of this REIT to

9.6% ownership of defendant Seritage common stock, which would severely

- 26 -

diminish his control of defendant Seritage relative to his control of Sears. To skirt

that rule and retain this control, however, defendant Lampert has created two

additional layers of interests in defendant Seritage that are available only to him.

51. First, the Operating Partnership will issue a special class of voting

shares exclusively to defendants Lampert and ESL (the "Class B Shares") that are

designed to allow them to maintain at least the same proportion of voting power

they currently enjoy at Sears. While the Class B Shares are "non-economic," they

will allow defendant Lampert to get around the 9.6% limit on any single

stockholder's interest in the REIT, giving him control over all voting matters at

defendant Seritage. In essence, instead of being subject to the 9.6% limit, the

voting power in defendant Seritage of defendants Lampert and ESL will be

equivalent to at least their current 53.2% stake in Sears, and potentially larger if

less than 100% of the shares available in the Rights Offering are exercised.

52. Defendants Lampert and ESL will also be allowed to purchase units in

Seritage's Operating Partnership (the "OP Units") in connection with the Proposed

Transaction. Defendants Lampert and ESL will be issued 100% of the OP Units

available in the Rights Offering, and will control all of the OP Units not retained

by defendant Seritage, which will be the sole general partner of the Operating

Partnership. Because defendants Lampert and ESL will control defendant Seritage

with their Class B Shares and defendant Seritage common stock, and defendants

- 27 -

Seritage, Lampert, and ESL will be the only holders of OP Units, defendants

Lampert and ESL will thus control the Operating Partnership. As the Operating

Partnership will control all aspects of defendant Seritage's operations and strategic

decision-making, defendants Lampert and ESL will therefore totally control

defendant Seritage. As a result, the Operating Partnership, and the entirety of

defendant Seritage's operations and strategic decision-making, will be entirely

controlled by defendants Lampert and ESL.

53. In addition to control of defendant Seritage, the OP Units are designed

to allow defendants Lampert and ESL to gain financial benefits through dividends

and distributions from defendant Seritage. According to the Registration

Statement, defendant Seritage entered into an exchange agreement with defendant

ESL that will allow defendant ESL to purchase OP Units in exchange for

"subscription rights that, if exercised, would result in ESL receiving in excess of"

the 9.6% ownership limit of defendant Seritage common stock. The Registration

Statement also confirms that holders of OP Units are "entitled to receive

distributions" and that holders of OP Units will be allocated a pro-rata share of the

Operating Partnership's profits. As a result, instead of being subject to the 9.6%

limit, the financial stake in defendant Seritage of defendants Lampert and ESL is

expected to be equivalent to at least their current 53.2% stake in Sears, and

potentially larger if less than 100% of the shares available in the Rights Offering

- 28 -

are exercised.

54. The Class B Shares in defendant Seritage, which will provide

defendant Lampert with voting control over defendant Seritage, are available only

to defendants Lampert and ESL. The OP Units, which confer control of the

Operating Partnership will allow for dividend and distribution payments above

what are normally allowed for the REIT's stockholders, are also available only to

defendants Lampert and ESL. Sears' current stockholders other than defendants

Lampert and ESL will not have any opportunity to participate in defendant

Seritage in the same manner as defendants Lampert and ESL.

55. Defendant Seritage's Registration Statement confirms that the OP

Units will give defendant ESL (and therefore also defendant Lampert) substantial

control over certain transactions involving defendant Seritage or the Operating

Partnership:

Upon completion of this offering, ESL will own a substantial

percentage of the [OP] Units, which may be exchanged for cash or, at

the election of Seritage [], Seritage [] common shares, and which will

result in certain transactions involving Seritage [] or Operating

Partnership requiring the approval of ESL.

56. In the Registration Statement, defendant Seritage admits further that

defendants Lampert and ESL will have significant control over defendant Seritage

and the Operating Partnership, in particular due to their significant ownership and

defendant Lampert's position on the Seritage Growth board of trustees. The

- 29 -

Registration Statement also indicates that defendants Lampert's and ESL's

motivations may be different from those of defendant Seritage's common

stockholders due to defendant Lampert's control over both defendant Seritage and

Sears. According to defendant Seritage's Registration Statement:

In addition, Mr. Lampert, the Chairman of the Board and Chief

Executive Officer of Sears Holdings and Chairman and Chief

Executive Officer of ESL, will serve on the Seritage Growth Board of

Trustees. As a result, ESL and its affiliates will have substantial

influence over us and Sears Holdings. In any matter affecting us,

including our relationship with Sears Holdings, the interests of ESL

may differ from or conflict with the interests of our other

stockholders.

57. In that statement, the Registration Statement confirms what is

evidenced by the structure of defendant Seritage and the Proposed Transaction:

that defendants Lampert and ESL will control defendant Seritage. Upon

consummation of the Proposed Transaction, defendants Lampert and ESL will

control the Operating Partnership, and therefore control the operations and

strategic direction of defendant Seritage. Defendants Lampert and ESL will also

retain a majority of the financial benefits through the OP Units, and control over

any matter brought to a stockholder vote through the Class B Shares. And most

critically, defendants Lampert and ESL will control the valuable real estate assets

of Sears, which will have been unfairly divested from the ownership of Sears and

the Class.

- 30 -

Stockholders Lack Crucial Information About the Unfair Proposed

Transaction

58. While Sears' stockholders are able to participate in the Rights Offering

to acquire a stake in defendant Seritage, the Rights Offering is tantamount to

paying more money to retain ownership in assets they already own now. Those

funds will enable defendant Lampert to gain outright control of Sears' valuable real

estate in exchange for paying an unfair amount to Sears that will simply cover the

Company's enormous operating losses and debt obligations for a short while

longer. Meanwhile, stockholders who subscribe to the Rights Offering, in

exchange for paying themselves an inadequate amount for assets they already own,

will be relegated to a risky even smaller minority stake in another entity controlled

in every way by defendant Lampert.

59. Defendants are coercing the Company's stockholders into making a

decision to pay out of pocket to maintain their current position in Sears' real estate

assets without any recommendation from the Company's Board. According to the

Registration Statement, the Board considered "the fair market value of the

Acquired Properties and the JV Interests purchased in the [Proposed] Transaction"

(though no such data has been provided to the Company's public stockholders).

Despite this apparent consideration, the Board has still refused to take a position on

the Proposed Transaction. As confirmed in the Registration Statement:

- 31 -

Neither Sears [] nor Seritage [], nor their respective boards, is making

any recommendation regarding the exercise of the subscription rights

or the purchase, retention or sale of Sears [] common stock or Seritage

[] common shares.

60. As the Proposed Transaction envisions the sale of the Company's real

estate assets for approximately $2.5 billionmore than 50% of the total market

value of Sears' stockand forces Sears' stockholders to make a major decision

about their holdings (whether or not to buy into the Rights Offering), the Board's

silence is inexcusable. Further, in a financial transaction of this magnitude,

stockholders expect that a prudent board of directors will engage outside advisors

and obtain an independent opinion as to the fairness of the transaction.

61. A fairness opinion is typically ordered by the board of directors of a

company that is party to a transaction, and traditionally involves a total review of a

transaction from a financial point of view. While there are no official guidelines as

to when it is appropriate to obtain a fairness opinion, such an opinion is important

for a board of directors to provide assurances to minority stockholders that it is

operating in a prudent manner that is fair to all stockholders. This is particularly

true when the transaction in question involves self-dealing, as it does here.

62. The Board's approval of the Proposed Transaction is particularly

egregious because its members do not even know the value of the properties that

they are forcing Sears to sell to defendant Seritage. The Registration Statement

merely states that the Company's proceeds in the Proposed Transaction will reflect

- 32 -

"a value, with respect to the Acquired Properties, determined by Sears [] with the

assistance of a third-party appraisal process, taking into account all the terms of the

Master Lease and other relevant factors." Thus, defendants Lampert and ESL,

through their control of Sears and defendant Seritage, will be able to determine the

price of the Proposed Transaction with some minor involvement of an appraiser.

And because there will be no independent fairness opinion, defendants Lampert

and ESL are free to price the Proposed Transaction at a level that will maximize

their benefit, to the detriment of Sears and the Class.

63. The absence of a fairness opinion, the failure to value the properties

underlying the transaction, and the Board's reluctance to take a stance on the

Proposed Transaction raises serious questions about the Board's motives and the

propriety of the Proposed Transaction. Instead of providing their opinion as the

Board of Sears, or ordering independent, expert analysis on the complex Proposed

Transaction, the Board has taken the position that the Company's stockholders

should do their own analysis to decide whether to participate in the Proposed

Transaction. Indeed, in the Registration Statement, defendant Seritage states to the

Company's stockholders: "You should make your decision based on your

assessment of our business and financial condition, our prospects for the future, the

terms of the rights offering and the information contained in this prospectus."

- 33 -

64. Such a suggestion with respect to the Proposed Transaction is absurd

on its face, given the complexity of the Proposed Transaction and the intricacy of

the necessary financial analysis required to make such an assessment. Worse,

defendants have failed to provide Sears' stockholders with anything beyond

minimal financial information to help make their decision.

65. Indeed, the Company's stockholders do not have access to any

independent appraisal of the properties subject to the Proposed Transaction, any

financial analysis of the performance of the Sears outlets that will occupy those

properties, and projections for the future prospects of the properties, any data on

market rents, or any information on applicable capitalization rates. Instead,

defendants are withholding this information, preventing the Company's

stockholders from knowing if Sears is getting a good deal in selling the last of its

valuable assets to defendants Lampert and ESL.

66. Though it provides very little information to help Sears' stockholders

decide whether to participate in the Rights Offering, the Registration Statement

does highlight the stark choice Sears' stockholders are being forced to make.

Those who decide not to participate in the Rights Offering will unfairly be divested

of their stake in the Company's best real estate assets. As the Registration

Statement discloses on page 19:

If you do not exercise your subscription rights to purchase Seritage []

common shares, following the [Proposed] Transaction you will no

- 34 -

longer retain an ownership interest in the assets and liabilities

transferred to [the Operating Partnership], as the common stock of

Sears [] that you hold will no longer reflect the activities, assets or

liabilities transferred to [the Operating Partnership].

67. Those Sears stockholders who do elect to participate in the Rights

Offering, on the other hand, will be forced to take on additional investment risk to

simply retain a small stake in Sears' real estate. As the Registration Statement

discloses on page 16: "Stockholders who exercise subscription rights will incur

investment risk on new money invested."

68. The Proposed Transaction is an obvious effort by defendant Lampert

to transfer Sears' last large monetizable asset, in exchange for grossly inadequate

compensation, to defendant Seritage, where it will be unencumbered by the

liabilities and losses that have mounted at Sears in a decade under defendant

Lampert's control. Defendant Lampert, who controls both Sears and defendant

Seritage and therefore stands on both sides of the Proposed Transaction, has not,

and cannot, demonstrate that the Proposed Transaction is entirely fair to Sears and

the Class.

The Proposed Transaction Will Severely Damage Sears and Its Stockholders

69. Defendants cannot demonstrate that the Proposed Transaction is

entirely fair because of the failures in the process described above, including the

lack of a fairness opinion and current valuation of the properties that are part of the

Proposed Transaction. What is known is that without its best assets, Sears will

- 35 -

have little hope of survival and still be burning through cash.

70. The Proposed Transaction will unfairly divest Sears and its

stockholders of 235 of the Company's most valuable stores and thirty-one JV

Properties, which are also some of Sears' best. As analysts at Credit Suisse

explained, the REIT would have to include Sears' "best performing stores" in order

to be viable, as the stores defendant Seritage will receive must have enough free

cash flow to cover the additional $150 million in total annual rent for which Sears

will now be on the hook. This is counter-productive to any opportunity Sears has

to turn around its retail operations, as the Company's best chance is through its top

performing stores, which have now been saddled with an additional $150 million

in annual obligations.

71. The Registration Statement also describes certain "recapture rights"

that skew the Proposed Transaction in favor of defendant Seritage. These rights

are also detrimental to Sears' top performing stores, and actually provide the REIT

with an option to terminate the Company's leases and recapture the square footage

to lease out to other tenants. Defendant Seritage can exercise these rights for up to

50% of the square footage in up to fifty Sears stores per year. In exchange for

recapturing the space, defendant Seritage has to pay Sears certain costs and

expenses, which mean it will only exercise the rights on the most valuable

properties. For Sears, giving up half of the retail space in the most valuable and

- 36 -

likely profitable properties would severely hamper any turnaround efforts.

72. Further, defendant Seritage has 100% recapture rights in twenty-one

specific locations, which do not count against the fifty property per year limit.

While these properties have not been specifically identified, it stands to reason that

they include some of Sears' most profitable. Defendant Seritage is responsible for

lease termination payments to Sears if it recaptures properties under this provision,

so it will only recapture the most valuable and Sears' most profitable locations.

73. In addition, the Registration Statement admits that numerous

agreements related to the Proposed Transaction may have terms that would not

have existed had defendants Lampert and ESL not been on both sides of the

negotiating table:

The terms of our agreements with Sears [] have been and will be

established by Sears [] with the intention of producing sustainable and

fair terms consistent with the respective business plans of both Sears

[] and Seritage [] following the Transaction. Because these

agreements will be negotiated in the context of the Transaction, they

necessarily will involve negotiations between affiliated entities.

Accordingly, the terms of these agreements may have different terms

than would have resulted from negotiations with one or more

unrelated third parties.

74. Deals like the Proposed Transaction are typically known as sale-

leaseback transactions, and are often employed by property owning corporations

who want to monetize their real estate and invest the proceeds in the underlying

business. In Sears' case, however, those proceeds are simply destined to cover the

- 37 -

Company's operating losses, which grew to over $1.6 billion in 2014, and adding

an additional $150 million in rent obligations, may only cover Sears for another

year.

75. Additionally, commenting on the sale-leaseback structure of the

Proposed Transaction, analysts at Evercore ISI reported that they "struggled to find

historical examples of sale-leasebacks benefitting the retailer over the long-run." If

defendant Lampert insists on entering the Company into a sale-leaseback

transaction, he should at least distribute the proceeds to Sears' stockholders, rather

than burn through the cash to cover another year of the Company's losses.

Analysts from J.P. Morgan sum it up well: "Ultimately, the liquidity provided by

the REIT capital raise cannot address the underlying poor performance of [the]

retail business."

76. Analysts have also projected that the Proposed Transaction will leave

Sears without any future options to monetize its remaining real estate assets in a

meaningful way. In essence, the real estate assets subject to the Proposed

Transaction are Sears and its stockholders' last opportunity to salvage some value

from the Company's assets. As analysts from Evercore ISI explained:

The income and population density around the average [Sears]

locations in the REIT is materially higher than the company average these stores have HH density 26% higher and income which is 10%

higher. This is likely an indication that the best stores were included

in the REIT, not the 'average' store which would possibly lead to a

REIT version 2.0 at some point.

- 38 -

77. Indeed, if the Proposed Transaction is consummated, Sears and the

Class will not only lose possession of the Company's most valuable real estate for

an unfair price, they will lose their last, best chance to salvage some value from

those assets. Indeed, as analyst Matt McGinley from Evercore ISI told Bloomberg

in an article on April 1, 2015: "This is the last big thing that they can do[.] It

basically takes the assets out of the real estate and separates them from the liability

that is Sears."

78. The "liability that is Sears" includes several billions of dollars in

short- and long-term debt obligations, a substantial portion of which is owned by

defendant ESL. As most recently reported, defendant ESL owned over $700

million of the Company's debt, including Sears' most current obligation, the

remaining $200 million of the short-term loan that the Company secured with

twenty-five of its prime properties. This means that of the new cash raised by

Sears in the Proposed Transaction, $200 million will flow back to defendant

ESL, and defendant Lampert, almost immediately. In total, the portion of Sears'

$2.5 billion cash influx that could be reclaimed by defendant Lampert through

debts the Company owes defendant ESL could reach nearly 30%.

79. Sears without its real estate assets is viewed as a major liability in

U.S. government circles as well. Following announcement of the Proposed

Transaction, the Pension Benefit Guarantee Corporation ("PBGC"), which insures

- 39 -

pension programs, has expressed concerns about the solvency of the Company's

already underfunded pension. As analysts from Morgan Stanley reported:

As the government's guarantor of corporate pensions, the PBGC has a

potential economic interest in any transaction by a company sponsor

that risks a plan's ongoing solvency. The PBGC has limited, but

powerful, authority to seek a court-imposed involuntary termination

of the plan when long-run losses to the agency are expected. In such

event, the PBGC has an immediate joint and several claim against the

company in an amount equal to the asset-obligation funding gap. The

PBGC has a history of wielding this authority to seek funding

concessions prior to significant transactions.

Morgan Stanley believes the PBGC may force Sears to make a substantial

contribution to its pension in order to move forward with the Proposed

Transaction, which would exacerbate the Company's dire financial situation and

further harm Sears and its stockholders.

80. The Proposed Transaction is a financially and structurally unfair deal

that, if consummated, would transfer the Company's last remaining large,

monetizable asset to a REIT controlled by defendants Lampert and ESL. In

exchange, Sears and its stockholders would receive a severely inadequate cash

payment that the defendant Lampert-controlled Company may use to cover

operating losses and debt obligations for another year or so, before stockholders

are left holding the bag in an insolvency widely viewed as inevitable if the

Proposed Transaction occurs.

- 40 -

DERIVATIVE AND DEMAND FUTILITY ALLEGATIONS

81. Plaintiff brings the Third and Fourth Causes of Action derivatively in

the right and for the benefit of Sears to redress injuries suffered, and to be suffered,

by Sears as a direct result of breaches of fiduciary duty, as well as the aiding and

abetting thereof, by the Individual Defendants and defendant Seritage. Sears is

named as a nominal defendant solely in a derivative capacity.

82. Plaintiff will adequately and fairly represent the interests of Sears in

enforcing and prosecuting its rights.

83. Plaintiff was a stockholder of Sears at the time of the wrongdoing

complained of, has continuously been a stockholder since that time, and is a

current Sears stockholder.

84. The current Board of Sears consists of the following eight individuals:

defendants Alvarez, DePodesta, Kamlani, Kunkler, Lampert, Mnuchin, Reese, and

Tisch. Plaintiff has not made any demand on the present Board to institute this

action because such a demand would be a futile, wasteful, and useless act, as set

forth below.

Defendant Lampert Dominates and Controls the Company and Board

85. It is highly unlikely that the Board will pursue an action against

defendant Lampert, who faces a substantial likelihood of liability here. Defendant

Lampert has concentrated the control of the Company in his hands. He created

- 41 -

Sears in its current form, and is the Chairman and CEO of the Company. Further,

as Sears discloses in its financial filings, defendant Lampert and his firm,

defendant ESL, beneficially own of approximately 53% of the Company's

outstanding shares. Accordingly, defendant Lampert can vote out any director that

opposes him. Indeed, the Company disclosed in its Annual Report on Form 10-K

filed with the SEC on March 17, 2015, that defendants Lampert and ESL "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."

86. As CEO, defendant Lampert has control over the day-to-day

operations of Sears. Beyond that, further demonstrating defendant Lampert's

control of the Board, the Board has granted him full authority over the deployment

of the Company's cash reserves. The Board has also entered into the renounced

interest agreement with defendant Lampert, which enables him to pursue valuable

investments on behalf of himself and defendant ESL, and not for the benefit of

Sears, with only a few exceptions.

87. Defendant Lampert has assured that the Board would not question his

decision by stacking it with individuals that have a long history of working loyally

with him. In particular, defendants Mnuchin and Tisch have long had personal and

business affiliations with defendant Lampert, as well as with one-another, that

- 42 -

underlie their loyalty to each other and to defendant Lampert.

88. Defendant Mnuchin has shared a long-term friendship with defendant

Lampert. After living together as roommates at Yale University, defendants

Mnuchin and Lampert went to work at Goldman Sachs together. The year after

defendant Mnuchin decided to leave Goldman Sachs, in 2003, defendant Lampert

brought him over to work at defendant ESL as Vice-Chairman of defendant

Lampert's investment firm, where defendant Mnuchin was also an investor. That

same year, defendant Lampert chose defendant Mnuchin to join him on the board

of Kmart; and then again in 2005 when Kmart merged with Sears Roebuck,

defendant Lampert brought along the loyal defendant Mnuchin to join the Board of

Sears, where he continues to serve now ten years later.

89. Defendant Tisch has also shared a long-term relationship with

defendant Lampert. Defendant Tisch became a client and limited partner of

defendant ESL in 1992. Defendant Tisch and his family became some of the

largest investors in defendant ESL and were enormously enriched by their

investments with defendant Lampert. Defendants Tisch and Lampert have also

engaged in business of a more personal nature, such as when defendant Tisch sold

a Greenwich, Connecticut, property to defendant Lampert in 1993.

90. Defendant Tisch has made no secret of his admiration of and loyalty

to defendant Lampert, stating in a November 21, 2004 Bloomberg article, that

- 43 -

"Eddie [Lampert] is one of the extraordinary investors of our age, if not the most

extraordinary," and "[b]ased on the way he thinks about investments, I trust Eddie

[Lampert]." To reward his loyalist, defendant Lampert chose defendant Tisch to

join him on the board of Kmart in 2003. When defendant Lampert merged Kmart

with Sears Roebuck, he brought along the loyal defendant Tisch to join the Board

of Sears. A decade later, defendant Tisch remained a Sears director.

91. Defendant Reese, like defendants Mnuchin and Tisch, has been a

long-time loyal member of the defendant Lampert-controlled boards. Defendant

Reese was also appointed to the board of Kmart when it emerged from bankruptcy

in 2003, and when Kmart combined with Sears Roebuck to form Sears in 2005,

defendant Reese was brought along by defendant Lampert to serve on the

Company's Board.

92. Defendants Mnuchin, Tisch, and Reese have all served on the Board

of Sears and its predecessor for over twelve years, a tenure that respected corporate

governance advisor Institutional Shareholder Services, Inc. ("ISS") defines as

"excessive." ISS, in fact, opines in its Governance Quick Score 2.0, published

January 2014, that anything beyond nine years should be considered excessive,

because "tenure of more than nine years is considered to potentially compromise a

director's independence." Excessive tenure is even more problematic for

companies like Sears where the long-tenured directors have served under the

- 44 -

constant leadership of a well-known and dominating CEO, such as defendant

Lampert. According to ISS, "directors who have sat on the board in conjunction

with the same management team may reasonably be expected to support that

management team's decisions more willingly."

93. While it can be argued that excessive tenures have value in the

directors' knowledge of the business, that rationale is not applicable here.

Defendant Lampert's total control over the Company's direction and operations

completely nullify a need for directors who are deeply knowledgeable in Sears'

business. Given the absolute control over Sears that defendants Mnuchin, Tisch,

and Reese have ceded to defendant Lampert, it is apparent that ISS's concerns on

board tenure are indeed applicable to the service of defendants Mnuchin, Tisch,

and Reese. Accordingly, defendants Mnuchin, Tisch, and Reese's long tenure on

the Board further support that they are not independent of defendant Lampert.

94. Simply put, defendant Lampert has absolute control overs Sears and

the Board. He possesses control over any matter decided by Sears' stockholders by

virtue of his and defendant ESL's stock ownership, and control over any matter

decided by the Board by virtue of its unwavering loyalty to him. Thus, the Board

will not take any action that is contrary to the interests of defendants Lampert or

ESL.

- 45 -

The Board Faces a Substantial Likelihood of Liability for Entering into the

Unfair Proposed Transaction

95. As explained herein, the members of the Board disloyally placed

defendant Lampert's interests ahead of the interests of the Company. Further, the

members of the Board have abdicated their duties and placed defendant Lampert in

complete control of the Company. Finally, the members of the Board knowingly

undertook an inadequate process in agreeing to the Proposed Transaction. As a

result, the Board breached its duty of loyalty and therefore faces a substantial

likelihood of liability, excusing demand.

The Decision to Enter into the Proposed Transaction Is Not a Protected

Business Decision

96. In addition to acting disloyally, the Board failed to consider all

reasonably available information in agreeing to the Proposed Transaction. In

addition to not receiving a fairness opinion of the actual Proposed Transaction, the

Board did not receive any valuations of the property being included in the

Proposed Transaction, such as an appraisal. According, the Board's failure to

consider all reasonably available information is a breach of its members fiduciary

duty of care, at a minimum. Because the members of the Board breached their

duty of care in entering into the Proposed Transaction, it does not receive the

benefit of the business judgment rule and demand is excused.

- 46 -

CLASS ACTION ALLEGATIONS

97. Plaintiff brings the First and Second Causes of Action on behalf of

himself and the Class who have been or will be harmed by the conduct described

herein. Excluded from the Class are the defendants and any individual or entity

affiliated with any defendant.

98. This action, as it applies to the First and Second Causes of Action, is

properly maintainable as a class action.

99. The Class is so numerous that joinder of all members is impracticable.

According to the Company's SEC filings, there were more than 106 million shares

of Sears common stock outstanding as of March 9, 2015.

100. There are questions of law and fact which are common to the Class

and which predominate over questions affecting any individual Class member.

The common questions include, inter alia, the following:

(a) whether the Individual Defendants and defendant ESL have

breached their fiduciary duties of undivided loyalty, independence, or due care

with respect to Plaintiff and the other members of the Class in connection with the

Proposed Transaction;

(b) whether the Individual Defendants and defendant ESL are

engaging in self-dealing in connection with the Proposed Transaction;

(c) whether the Proposed Transaction is entirely fair to Plaintiff

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and the Class;

(d) whether the Individual Defendants and defendant ESL have

breached any of their other fiduciary duties owed to Plaintiff and the other

members of the Class in connection with the Proposed Transaction, including the

duties of good faith, diligence, and fair dealing;

(e) whether the Individual Defendants disclosed all material

information when asking Plaintiff and members of the Class to act;

(f) whether defendant Seritage aided and abetted the Individual

Defendants' breaches of fiduciary duties; and

(g) whether Plaintiff and the other members of the Class would

suffer irreparable injury were the transactions complained of herein consummated.

101. Plaintiff's claims are typical of the claims of the other members of the

Class and Plaintiff does not have any interests adverse to the Class.

102. Plaintiff has retained competent counsel experienced in litigation of

this nature and will fairly and adequately represent and protect the interests of the

Class.

103. The prosecution of separate actions on behalf of the First and Second

Causes of Action by individual members of the Class would create a risk of

inconsistent or varying adjudications with respect to individual members of the

Class which would establish incompatible standards of conduct for the party

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opposing the Class.

104. Plaintiff anticipates that there will be no difficulty in the management

of this litigation. A class action for the First and Second Causes of Action is

superior to other available methods for the fair and efficient adjudication of this

controversy.

105. Defendants have acted on grounds generally applicable to the Class

with respect to the matters complained of in the First and Second Causes of Action,

thereby making appropriate the relief sought herein with respect to the Class as a

whole.

FIRST CAUSE OF ACTION

(Class Claim Against the Individual Defendants and

Defendant ESL for Breach of Fiduciary Duty)

106. Plaintiff incorporates by reference and realleges each and every

allegation contained above, as though fully set forth herein, except for the

allegations related solely to the derivative claims.

107. The Individual Defendants, as directors of Sears, and defendant ESL,

as controlling stockholder of the Company, owe Plaintiff and the Class fiduciary

duties of care, loyalty, and good faith. The Individual Defendants and defendant

ESL have violated these duties, and have acted to put their own interests ahead of

the interests of Plaintiff and the Class.

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108. By the acts, transactions, and course of conduct alleged herein,

defendants, individually and acting as a part of a common plan, are attempting to

unfairly deprive Plaintiff and the other members of the Class of the true value of

Sears' real estate assets that will be sold in the Proposed Transaction.

109. The Individual Defendants and defendant ESL have violated their

fiduciary duties to Plaintiff and the Class by entering Sears into a Proposed

Transaction that is not entirely fair.

110. As demonstrated by the allegations above, the Individual Defendants

and defendant ESL failed to exercise the care required and breached their duty of

loyalty owed to Plaintiff and the Class because, among other reasons:

(a) they agreed to sell the Company's most valuable real estate

assets in a Proposed Transaction that is not entirely fair;

(b) they failed to disclosure all material information; and

(c) they ignored or did not protect against the numerous conflicts

of interests resulting from the Individual Defendants' and defendant ESL's own

financial stakes in the Proposed Transaction.

111. Because the Individual Defendants and defendant ESL control the

business and corporate affairs of Sears, and have access to private corporate

information concerning Sears' assets, business, and future prospects, there exists an

imbalance and disparity of knowledge and economic power between them and

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Plaintiff and the Class that makes it inherently unfair for them to agree to the

Proposed Transaction wherein they will reap disproportionate benefits to the

exclusion of reaching an agreement that is entirely fair.

112. By reason of the foregoing acts, practices, and course of conduct, the

Individual Defendants and defendant ESL have failed to exercise ordinary care and

diligence in the exercise of their fiduciary duties toward Plaintiff and the other

members of the Class.

113. The Individual Defendants and defendant ESL are engaging in self-

dealing, are not acting in good faith toward Plaintiff and the other members of the

Class, and have breached and are breaching their fiduciary duties to the Class.

114. As a result of the Individual Defendants' and defendant ESL's

unlawful actions, Plaintiff and the other members of the Class will be irreparably

harmed in that they will not receive their fair portion of the value of Sears' real

estate assets that will be sold in the Proposed Transaction. Unless the Proposed

Transaction is enjoined by the Court, the Individual Defendants and defendant ESL

will continue to breach their fiduciary duties owed to Plaintiff and the members of

the Class, and may consummate the Proposed Transaction, all to the irreparable

harm of the members of the Class.

115. Plaintiff and the Class have no adequate remedy at law. Only through

the exercise of this Court's equitable powers can Plaintiff and the Class be fully

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protected from the immediate and irreparable injury that defendants' actions

threaten to inflict.

SECOND CAUSE OF ACTION

(Class Claim Against Defendant Seritage for Aiding and Abetting

Breaches of Fiduciary Duty)

116. Plaintiff incorporates by reference and realleges each and every

allegation contained above, as though fully set forth herein, except for the

allegations related solely to the derivative claims.

117. Defendant Seritage knowingly assisted the Individual Defendants' and

defendant ESL's breaches of fiduciary duties against Plaintiff and the Class in

connection with the Proposed Transaction, which, without such aid, would not

have occurred. In connection with discussions regarding the Proposed

Transaction, Sears provided, and defendant Seritage obtained, sensitive, non-public

information concerning Sears' real estate portfolio and, thus, had unfair advantages

that are enabling defendant Seritage to acquire the Company's real estate assets at

an unfair and inadequate price.

118. As a result of this conduct, Plaintiff and the other members of the

Class have been and will be damaged in that they have been and will be prevented

from obtaining a fair value for Sears' real estate assets that will be sold in the

Proposed Transaction.

119. As a result, Plaintiff and the Class members are being irreparably

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harmed.

120. Plaintiff and the Class have no adequate remedy at law.

THIRD CAUSE OF ACTION

(Derivative Claim Against All Individual Defendants

and Defendant ESL for Breaches of Fiduciary Duty)

121. Plaintiff incorporates by reference and realleges each and every

allegation contained above, as though fully set forth herein, except for the

allegations related solely to the class claims.

122. The Individual Defendants, as directors of Sears, and defendant ESL,

as controlling stockholder of the Company, owe Sears fiduciary duties of care and

loyalty. The Individual Defendants and defendant ESL, aided and abetted by

defendant Seritage, have violated these duties, and have acted to put their own

interests ahead of the interests of the Company.

123. By the acts, transactions, and course of conduct alleged herein,

defendants, individually and acting as a part of a common plan, are attempting to

unfairly deprive Sears of the true value of the Company's real estate assets that will

be sold in the Proposed Transaction.

124. The Individual Defendants and defendant ESL have violated their

fiduciary duties to Sears by entering Sears into a Proposed Transaction that is not

entirely fair. Defendant Seritage has aided and abetted the Individual Defendants'

and defendant ESL's breaches of duty to Sears.

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125. As demonstrated by the allegations above, the Individual Defendants

and defendant ESL failed to exercise the care required and breached their duty of

loyalty owed to Sears because, among other reasons:

(a) they agreed to sell the Company's most valuable real estate

assets in a Proposed Transaction that is not entirely fair; and

(b) they ignored or did not protect against the numerous conflicts

of interests resulting from the Individual Defendants' and defendant ESL's own

financial stakes in the Proposed Transaction.

126. By reason of the foregoing acts, practices, and course of conduct, the

Individual Defendants and defendant ESL have failed to exercise ordinary care and

diligence in the exercise of their fiduciary duties toward Sears.

127. The Individual Defendants and defendant ESL are engaging in self-

dealing and are not acting in good faith toward Sears.

128. As a result of the Individual Defendants' and defendant ESL's

unlawful actions, the Company will be irreparably harmed in that it will not

receive its fair portion of the value of its real estate assets that will be sold in the

Proposed Transaction. Unless the Proposed Transaction is enjoined by the Court,

the Individual Defendants and defendant ESL will continue to breach their

fiduciary duties owed to Sears and may consummate the Proposed Transaction, all

to the irreparable harm of the Company.

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129. The Company has no adequate remedy at law. Only through the

exercise of this Court's equitable powers can Sears be fully protected from the

immediate and irreparable injury that defendants' actions threaten to inflict.

FOURTH CAUSE OF ACTION

(Derivative Claim Against Defendant Seritage for Aiding and Abetting

Breaches of Fiduciary Duty)

130. Plaintiff incorporates by reference and realleges each and every

allegation contained above, as though fully set forth herein, except for the

allegations related solely to the derivative claims.

131. The Individual Defendants, aided and abetted by defendant Seritage,

have violated their fiduciary duties of care, loyalty, good faith, and independence

owed to the Company and its public stockholders and have acted to put their

personal interests ahead of the interests of the Company.

132. Sears provided, and defendant Seritage obtained, sensitive, non-public

information concerning Sears' real estate portfolio and, thus, had unfair advantages

that are enabling defendant Seritage to acquire the Company's real estate assets at

an unfair and inadequate price. Defendant Seritage aided and abetted the

Individual Defendants' breaches of fiduciary duties owed to the Company and its

stockholders.

133. As a result of defendants' unlawful actions, the Company will be

irreparably harmed in that it will not receive its fair portion of the value of its real

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estate assets that will be sold in the Proposed Transaction. Unless the Proposed

Transaction is enjoined by the Court, the Individual Defendants and defendant ESL

will continue to breach their fiduciary duties owed to Sears and may consummate

the Proposed Transaction, all to the irreparable harm of the Company.

134. The Company has no adequate remedy at law. Only through the

exercise of this Court's equitable powers can Sears be fully protected from the

immediate and irreparable injury that defendants' actions