Proceedings

Notice from the
Office of the Secretary

Ontario

Ontario Securities
Commission


20 Queen St. W.
Box 55, Suite 1900
Toronto, ON M5H 3S8
Commission des valeurs mobilières de l'Ontario

FOR IMMEDIATE RELEASE

August 8, 2006


IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED

- AND -

IN THE MATTER OF
SEARS CANADA INC.,
SEARS HOLDINGS CORPORATION,
AND SHLD ACQUISITION CORP.

- AND -

IN THE MATTER OF
HAWKEYE CAPITAL MANAGEMENT, LLC,
KNOTT PARTNERS MANAGEMENT, LLC, and
PERSHING SQUARE CAPITAL MANAGEMENT, L.P.

TORONTO – Following a hearing held on July 4, 5, and 6, 2006, to consider the Application of Hawkeye Capital Management, LLC, Knott Partners Management, LLC, and Pershing Square Capital Management, L.P. (collectively the Pershing Group), and the Application of Sears Holdings Corporation and SHLD Acquisition Corp. for orders pursuant to subsections 104(1) and 127(1) of the Securities Act, the Commission issued its Reasons and Decision, and Order against Sears Holdings Corporation and SHLD (together Sears Holdings).

In its Reasons, the Commission found that certain aspects of the conduct of Sears Holdings, in pursuing its offer to acquire all of the outstanding common shares of Sears Canada Inc. not owned by it or by its affiliates (the Offer), violated Ontario securities law. The Commission issued an Order under subsections 104(1) and 127(1) of the Act.

The Commission found that Sears Holdings fell short of its disclosure obligations in pursuing its Offer; entered into Support Agreements with Scotia Capital Inc., The Bank of Nova Scotia, and The Royal Bank of Canada, and into a Deposit Agreement with Vornado Realty Ltd., which had the effect of providing collateral benefits in violation of subsection 97(2) of the Act; and acted in a manner contrary to the policy and principles underlying Rule 61-501 of the Act and the Companion Policy, which collectively govern related party transactions including insider bids.

The Commission has therefore issued an Order which provides that:

- Sears Holdings has not complied with Ontario securities law in respect of the Offer for shares of Sears Canada;

- Sears Holdings is directed to comply with Ontario securities law in respect of the Offer and any other offer made for shares of Sears Canada;

- the Offer and any other offer made or to be made for shares of Sears Canada by Sears Holdings or any affiliate thereof is cease traded until the take-over bid circular in respect of the Offer or any other offer is amended to disclose:

(a) that Sears Holdings will exclude from the calculation of the required majority of the minority approval, on the anticipated second step subsequent acquisition transaction or any other offer and subsequent acquisition transaction in the future, the votes attached to the shares of Sears Canada held by or acquired from Scotia Capital Inc., The Bank of Nova Scotia and The Royal Bank of Canada which are the subject of the Support Agreements; and

(b) the identities and interests of the parties to the Support Agreements and a description of the material terms of the Support Agreements;

- the Offer for shares of Sears Canada by Sears Holdings and its affiliate SHLD is cease traded until the Take-Over Bid Circular in respect of the Offer is amended to disclose:

(a) the existence and terms of the release granted to Vornado pursuant to the Vornado Deposit Agreement;

(b) the grant by Sears Holdings of an identical release to all shareholders of Sears Canada who have tendered or will tender to the Offer or whose shares are acquired under the second step subsequent acquisition transaction; and

(c) that Sears Holdings will exclude from the calculation of the required majority of the minority approval, on the anticipated second step subsequent acquisition transaction, the votes attached to the shares of Sears Canada held by or acquired by Sears Holdings from Vornado pursuant to the Vornado Deposit Agreement.

The Commission dismissed in its entirety the Application filed by Sears Holdings in respect of the conduct of the Pershing Group in connection with the Offer.

A copy of the Reasons and Decision as well as the Order, are available at www.osc.gov.on.ca

OFFICE OF THE SECRETARY
JOHN P. STEVENSON
SECRETARY

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