Sears Holdings Corporation

Headnote

NP 11-203 -- relief from prospectus requirements to allow U.S. parent company to spin off shares of its U.S. subsidiary to investors by way of distribution in specie -- distribution not covered by legislative exemptions -- U.S. parent company is a public company in the U.S. but is not a reporting issuer in Canada -- U.S. parent company has a de minimis presence in Canada. Following distribution, U.S. subsidiary will not be a reporting issuer in Canada -- no investment decision required from Canadian shareholders in order to receive shares from distribution.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c.S.5, as am., ss. 53, 74(1).

September 11, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

SEARS HOLDINGS CORPORATION

(the "Filer" Or "Sears Holdings")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for relief from the prospectus requirements contained in the Legislation (the "Prospectus Requirements") in connection with the proposed distribution by the Filer of transferable subscription rights (the "Subscription Rights") to the Filer's shareholders, including any who are resident in Canada, and the proposed distribution by the Filer of shares of common stock (the "SHO Common Shares") of the Filer's wholly-owned subsidiary Sears Hometown and Outlet Stores, Inc. ("SHO") to occur upon the exercise of the Subscription Rights by a holder thereof, including any holders thereof who are resident in Canada (such requested relief, the "Requested Exemptive Relief"). The Subscription Rights will entitle the holders thereof to purchase a specified number of SHO Common Shares at a specified purchase price per share. The Subscription Rights are being issued and distributed by Sears Holdings in order to effect a planned separation of SHO from Sears Holdings (the "Separation").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for the Application; and

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of the other provinces and territories of Canada.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. Sears Holdings, formed in 2004, is a publicly-traded Delaware corporation. It is a holding company that owns or has interests in various direct and indirect subsidiary entities, including SHO. The principal executive offices of Sears Holdings are located in Hoffman Estates, Illinois.

2. Shares of Sears Holdings' common stock ("Sears Common Shares") are listed and traded on the NASDAQ Global Select Market under the symbol "SHLD". The Sears Common Shares are not listed or traded on any Canadian stock exchange, and Sears Holdings currently has no intention of listing them or having them traded on any Canadian stock exchange.

3. Sears Holdings is not a reporting issuer under the securities laws of any province or territory of Canada, and Sears Holdings currently has no intention of becoming a reporting issuer under such laws.

4. As of July 31, 2012, 15 holders of record of Sears Common Shares were resident in Canada, which constituted in the aggregate approximately 0.001% of the approximately 15,057 holders of record of Sears Common Shares worldwide. As of that date, persons resident in Canada collectively held of record 606 Sears Common Shares, out of over 100 million Sears Common Shares outstanding worldwide.

5. As of March 8, 2012, based on the number of proxy materials mailed for the 2012 annual meeting of holders of Sears Common Shares (collectively, "Sears Shareholders"), Sears Holdings believes that there were, as of such date, approximately 653 beneficial Sears Shareholders in Canada, or approximately 0.01% of the approximately 55,707 beneficial Sears Shareholders worldwide and, as of that date, persons resident in Canada beneficially owned 275,890 Sears Common Shares, out of over 100 million Sears Common Shares outstanding worldwide.

6. As a result, the number and proportion of Sears Common Shares held by both registered and beneficial Sears Shareholders in Canada are de minimis.

7. SHO is a national retailer primarily focused on selling home appliances, hardware, tools and lawn and garden equipment. As of April 28, 2012, SHO and its dealers and franchisees operated 1,238 stores across all 50 states of the United States, as well as in Puerto Rice, Guam and Bermuda. SHO's principal executive offices are located in Hoffman Estates, Illinois.

8. At the time of the Separation the authorized capital stock of SHO will consist of SHO Common Shares, US$0.01 par value per share. The number of SHO Common Shares authorized for issuance will be determined prior to the completion of the Separation.

9. Sears Holdings' board of directors has determined that pursuing a disposition of SHO through a rights offering is in the best interests of Sears Holdings and Sears Shareholders, and that separating SHO from Sears Holdings will provide, among other things, financial and operational benefits to both SHO and Sears Holdings.

10. Sears Holdings intends to accomplish the Separation by means of the distribution of the Subscription Rights to Sears Shareholders. Sears Holdings will distribute the Subscription Rights to the record holders of Sears Common Shares, as of the record date. Each Subscription Right will entitle the holder of the Subscription Right to purchase a number of SHO Common Shares to be determined prior to the Separation, for a price per SHO Common Share to be determined prior to the Separation. Each Sears Shareholder will receive one Subscription Right for each Sears Common Share owned by such Sears Shareholder at the record date.

11. Each Subscription Right also entitles the holder to an over-subscription privilege to purchase a portion of any SHO Common Shares that other holders of Subscription Rights do not purchase through the exercise of their Subscription Rights.

12. In connection with the Separation, SHO filed a registration statement on Form S-1 (the "Registration Statement") with the U.S. Securities and Exchange Commission (the "SEC") on April 30, 2012. The Registration Statement, including the prospectus forming part of it (the "Prospectus"), contains full disclosure of the business and planned operations of SHO following the Separation, including historical audited consolidated financial statements of SHO, and will be sent to all Sears Shareholders. The SEC declared the Registration Statement effective on September 6, 2012.

13. The distribution of the Subscription Rights to the Sears Shareholders will be made on a pro rata basis, whereby every Sears Common Share outstanding as at the applicable record date will entitle its holder to receive one Subscription Right. As a result, if all Subscription Rights are exercised following the rights offering, the distribution of SHO Common Shares will also be on a pro rata basis to Sears Shareholders. Fractional SHO Common Shares resulting from the exercise of Subscription Rights will be eliminated by rounding down to the nearest whole share.

14. Non-U.S. Sears Shareholders entitled to receive Subscription Rights may be subject to U.S. federal withholding tax and Sears Holdings may withhold and sell a portion of the Subscription Rights otherwise distributable to such non-U.S. Sears Shareholders in order to realize cash proceeds which will be used to satisfy payment of such withholding tax.

15. Sears Shareholders will not be required to pay for the Subscription Rights received in the Separation, or to surrender or exchange any of their Sears Common Shares in order to receive Subscription Rights. Sears Shareholders' proportionate ownership interests in Sears Holdings will not change as a result of the distribution or exercise of the Subscription Rights.

16. SHO intends to apply to list the Subscription Rights for trading on the NASDAQ Capital Market under the symbol "SHOSR" so that any Sears Shareholders who do not wish to exercise their Subscription Rights will have the alternative option of selling their Subscription Rights (although there can be no assurance that a liquid market for the Subscription Rights will develop). As a result, in addition to Sears Shareholders in Canada, other persons in Canada who are not currently Sears Shareholders may acquire and exercise Subscription Rights through the purchase of Subscription Rights. SHO also intends to apply to list the SHO Common Shares on the NASDAQ Capital Market under the symbol "SHOS", such that following the completion of the Separation SHO will be a publicly-traded company in the United States, independent from Sears Holdings.

17. The Prospectus discloses that the ability to trade in the Subscription Rights and SHO Common Shares on the NASDAQ Capital Market is conditional on their listing on the NASDAQ Capital Market.

18. Assuming the Subscription Rights are exercised in full, Sears Holdings will dispose of all of its SHO Common Shares as a result of the Separation and will cease to be a stockholder of SHO. To the extent that the Subscription Rights are not exercised in full and SHO Common Shares are not purchased through the exercise of the Subscription Rights or pursuant to the over-subscription privilege, Sears Holdings will retain ownership of a portion of the SHO Common Shares. To the extent that Sears Holdings retains ownership of SHO Common Shares after the completion of the Separation, Sears Holdings may in the future dispose of its remaining SHO Common Shares through sales into the public market or otherwise.

19. SHO does not currently intend to list the SHO Common Shares or have them traded on any stock exchange in Canada. SHO is not, and does not currently intend to become, a reporting issuer in any province or territory in Canada.

20. Following the Separation, the Sears Common Shares will continue to be listed and traded on the NASDAQ Global Select Market.

21. The Separation will be effected in compliance with Delaware law and all applicable U.S. federal securities laws, and the Registration Statement has been reviewed and declared effective by the SEC.

22. No shareholder approval of the Separation by Sears Shareholders is required under Delaware law.

23. The Prospectus and any other materials relating to the Separation and the distribution of the Subscription Rights to be sent to Sears Shareholders in the United States will be sent concurrently to Sears Shareholders in Canada.

24. Following the Separation, SHO will concurrently send to its shareholders in Canada the same disclosure materials that it sends to its shareholders in the United States.

25. The Shareholders in Canada who receive Subscription Rights will have the benefit of the same rights and remedies under U.S. federal securities laws in respect of the Registration Statement and the Prospectus provided to them in connection with the Separation that are available to the Sears Shareholders in the United States.

26. The proposed distribution of the Subscription Rights to Sears Shareholders in Canada and the exercise of the Subscription Rights by holders thereof in Canada would be exempt from the Prospectus Requirements in accordance with subsections 2.31(2) and paragraph 2.42(1)(b) of National Instrument 45-106 -- Prospectus Exempt Distributions ("NI 45-106") respectively, but for the fact that SHO is not a reporting issuer in Canada (and subject to compliance with the notice requirements of subsection 2.42(2) of NI 45-106).

27. In the absence of an available exemption under the Legislation, qualification by prospectus of the proposed distribution of the Subscription Rights and the SHO Common Shares issuable on the exercise thereof to persons in Canada in connection with the Separation is not practicable, requiring that Sears Shareholders in Canada be excluded from receiving or exercising Subscription Rights.

Decision

The principal regulator is satisfied that the exemptive relief application meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Requested Exemptive Relief is granted provided that the first trade in Subscription Rights and the SHO Common Shares issued pursuant to exercise of the Subscription Rights will be deemed a distribution unless the conditions in section 2.6 or subsection 2.14(1) of National Instrument 45-102 Resale of Securities are satisfied.