401(k) Savings Plan. Table of Contents

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1 401(k) Savings Plan Table of Contents About the Savings Plan Recent History How the Savings Plan Works Who is Eligible and When Eligible Pay Your Contributions Under the Savings Plan Pre-Tax Contributions After-Tax Contributions Pre-Tax Versus After-Tax Savings Rollover Contributions Catch-Up Contributions Beneficiary Designation Company Matching Contributions Company Match Eligibility Rules Employee Stock Ownership Plan Accounts Managing Your Accounts Vesting Ownership of Your Accounts Forfeitures Investment Funds Investment Choices The Importance of Diversifying Your Account Institutional Investment Funds Description of Investment Choices Target Retirement Funds Stable Value Fund Restrictions on the Stable Value Fund Bond Fund Large Cap Value Equity Fund S&P 500 Index Fund Large Cap Growth Equity Fund Small-Mid Cap Growth Equity Fund Small-Mid Cap Value Equity Fund International Equity Fund Sears Holdings Corporation Stock Fund Company Match Diversification Tax Considerations Voting Rights for Sears Holdings Stock Self-Managed Brokerage Account Daily Valuation of Your Account(s) Investment Performance Fund Expenses Making Changes Changes to Contributions Throughout the Year Changes to Investment Choices Throughout the Year Default Fund Loans Who Can Request a Loan How Much You Can Borrow Loans Are Taken From What Accounts Term of Loan How Interest is Determined Security For Your Loan How Your Loan is Repaid Failure to Repay Your Loan Applying for a Loan Withdrawals Withdrawals During Employment Sears Holdings Benefits Handbook i 401(k) Savings Plan

2 Withdrawal of Your Accounts After Termination of Employment Form of Payment Deferring Payment Payment Upon Death Tax Considerations Withholding of Income Taxes Ten Percent Additional Tax Effect on Other Benefits Company Match Diversification Tax Considerations Limits on Contributions Pre-Tax Contributions Limit Non-Discrimination Test Compliance With Section 404(c) of ERISA Investment Committee and Advisor Common Shares Where You Can Find More Information Terms to Know This section constitutes part of a prospectus covering securities that have been registered under the Securities Act of The full prospectus includes the section in this handbook entitled Other Information and the Sears Holdings Corporation Form 10-K. Sears Holdings Benefits Handbook ii 401(k) Savings Plan

3 ABOUT THE SAVINGS PLAN The Sears Holdings 401(k) Savings Plan (the Savings Plan ) enables you, as an eligible associate, to save for retirement by deferring a portion of your pay on a pre-tax basis to your Savings Plan accounts, and as a result, deferring federal and (in most cases) state income tax on these contributions. The Savings Plan is sponsored by Sears Roebuck and Company (referred to as the Company) and covers eligible associates of Sears Holdings Corporation ( Sears Holdings ) and its wholly owned subsidiaries that have elected to be participating employers under the Savings Plan (the Employers ). The assets of the Savings Plan are held under the Sears Holdings 401(k) Plan Master Trust ( Master Trust ), along with the assets of the Sears Puerto Rico Savings Plan and the Kmart Retirement Savings Plan for Puerto Rico Employees. These assets are comingled for investment purposes, enabling the Master Trust to negotiate lower fees on behalf of all Savings Plan participants. The trustee of the Master Trust is currently State Street Bank and Trust Company ( Trustee ). With respect to the assets of the Sears Puerto Rico Savings Plan and the Kmart Retirement Savings Plan for Puerto Rico Employees, the Trustee acts as the custodian. The assets of each plan constitute a separate Trust Fund. Information regarding the Savings Plan can be obtained by calling the Financial Benefits Service Center directly at or through sears. You may also access the Web site at RECENT HISTORY Effective April 1, 2006, the Kmart Retirement Savings Plan was merged into the Savings Plan and all eligible associates under the Kmart Retirement Savings Plan became eligible associates under the Savings Plan. Effective January 1, 2007, eligible associates under the Kmart Retirement Savings Plan for Manteno Distribution Center Union Employees became eligible associates under the Savings Plan. The Kmart Retirement Savings Plan for Manteno Distribution Center Union Employees was frozen as of December 31, 2006 and was merged into the Savings Plan as of August 31, HOW THE SAVINGS PLAN WORKS The Savings Plan provides you with an easy and effective way to build savings for your retirement. Generally, you may elect to contribute from 1% to 50% of your eligible pay on a pre-tax basis and/or from 1% to 25% of your eligible pay on an after-tax basis, subject to certain limits. Total combined pre-tax and after-tax contributions cannot exceed 50% of your eligible pay. After one year of service in which you work at least 1,000 hours, you will be eligible for a Company matching contribution, if any. Currently there is no Company matching contribution. The Company matching contribution was suspended in late January You may choose to invest your savings in a variety of investment funds, including a fund invested in common shares of Sears Holdings Corporation ( Sears Holdings stock ). WHO IS ELIGIBLE AND WHEN All regular associates of Sears Holdings (including associates of the Employers that have adopted the Savings Plan as participating employers) who are not covered by a collective bargaining agreement are eligible to participate in the Savings Plan. Individuals who are classified by the Company as temporary, seasonal, peak, on call, interns or independent contractors or who are employees of a leasing organization or agency are not eligible to participate in the Savings Plan. Associates covered by a collective bargaining agreement may only participate in the Savings Plan if the agreement specifically provides for participation in the Savings Plan. Associates of the bargaining units for the Kmart Distribution Centers in Groveport, Ohio and Forest Park, Georgia do not participate in the Savings Plan. Puerto Rico associates are offered, if eligible, participation in the applicable Puerto Rico savings plan sponsored and maintained for Puerto Rico associates. Newly hired associates are eligible to participate in the Savings Plan as of the first day of the third month after date of hire. ELIGIBLE PAY For Savings Plan contribution purposes your eligible pay includes regular pay, which includes (but is not limited to) hourly wages, salary, overtime pay, commission/draw, shift differential, standby pay, paid time off (normal vacation, holiday, personal and illness pay), Sunday premium pay, business training pay, short-term disability pay (other than state disability income) and annual or regular incentive pay. Eligible pay for contribution purposes does not include special pay, which includes (but is not limited to) accrued unused vacation pay issued in a lump sum, salary continuation pay (whether paid in lump sum or installments), taxable moving allowances and any related tax gross-up, merchandise and trip awards, cash prizes, tuition reimbursement, special bonuses which include (but are not limited to) sign-up bonuses, stay bonuses and referral bonuses, and state disability income. YOUR CONTRIBUTIONS UNDER THE SAVINGS PLAN Under the Savings Plan, unless subject to additional limits, you can contribute, in whole percentages, up to 50% of your eligible pay on a pre-tax basis and/or up to 25% of your eligible pay on an after-tax basis. Total combined pre-tax and after-tax contributions cannot exceed 50% of your eligible pay. Prior to the suspension of the Company matching contribution in late January 2009, any pre-tax contributions you made in excess of 5% of your annual eligible pay and any after-tax contributions were not eligible for a share of the Company matching contribution for that year (if any). As a result of the match suspension, no employee contributions will be matched until the suspension is lifted and a new match adopted. Your pre-tax contributions are subject to Internal Revenue Service (IRS) annual contribution limits as described in the Pre-tax Contributions section. In addition, the Company may reduce the amount of pay you are permitted to defer in order to comply with certain rules and limitations imposed by law. Currently, and until further notice, Highly Compensated Employees (HCE s) will be capped at a specific deferral percentage of pay. As of the publication of this Handbook, the HCE contribution limits are 2% on a pre-tax basis and 0% on an after-tax basis. If these limits are changed, affected Sears Holdings Benefits Handbook (k) Savings Plan

4 eligible employees will be notified. For the 2010 plan year, HCE s are those employees who earned at least $110,000 from Sears Holdings (including any related company) in PRE-TAX CONTRIBUTIONS Pre-tax contributions reduce your pay for federal and (in most cases) state income tax purposes (but not for Social Security tax). At your election, they are deposited into your pre-tax contribution account as soon as practicable after the payroll date to which they relate. These contributions are called pre-tax because the contributions are made before income taxes are withheld. Thus, the federal and (in most cases) state income tax you owe on the pre-tax contributions and their investment earnings is postponed until they are withdrawn from the Savings Plan. Pre-tax contributions are limited to a specific dollar amount each calendar year set by the IRS. For 2010 the annual pre-tax contribution limit is $16,500 (excluding catch-up contributions). See also Catch-Up Contributions for additional information. Keep in mind that, although the pre-tax contribution limit under the Savings Plan is 50% of your eligible pay, for 2010 you cannot exceed the IRS annual pre-tax contribution limit of $16,500. And, if you are an HCE, you are subject to the additional limits described above. See also Limits on Contributions for additional information. AFTER-TAX CONTRIBUTIONS After-tax contributions are treated as taxable income when they are deducted from your pay. You may choose to contribute up to 25% of your eligible pay on an after-tax basis; provided that your total pre-tax and after-tax contributions do not exceed 50% of your eligible pay. If you are an HCE, your after-tax contributions are subject to the additional limits described above. At your election, they are deposited in your after-tax contribution account as soon as practicable after they are deducted from your pay. The contributions are not taxed again when you later withdraw them from the Savings Plan. However, earnings on your after-tax contributions are subject to tax upon withdrawal. PRE-TAX VERSUS AFTER-TAX SAVINGS Below is an example that shows the difference between saving on a pre-tax basis and saving on an after-tax basis. The example assumes that you earn $20,000 a year and contribute 6% of your pay to the Savings Plan. Federal income taxes are estimated at 10%. Social Security tax is deducted from your pay in both cases, so it is not included in this example. This example is for illustration only, and does not take into account state and other taxes that might apply. $20,000 Annual Pay Pre-Tax After-Tax Annual Pay $20,000 $20,000 Pre-Tax Contributions (6%) 1,200 N/A Income Subject to Tax 18,800 20,000 Federal Taxes (10%) 1,880 2,000 Net Income 16,920 18,000 After-Tax Contributions (6%) N/A 1,200 Spendable Income $16,920 $16,800 As the example shows, you can save the same amount on a pre-tax basis and still take home more pay. That is money that you can spend or use to increase your contributions to the Savings Plan. Also, once the suspension is lifted, pre-tax contributions are eligible for a share of the Company matching contributions. ROLLOVER CONTRIBUTIONS As a participant, you also can contribute to the Savings Plan through a rollover contribution. A rollover contribution is all or a part of an eligible distribution from a former employer s qualified retirement plan or a rollover Individual Retirement Account (IRA) that you elect to deposit into a rollover account in your name under the Savings Plan. You will be eligible to make a rollover contribution once you are eligible for and have enrolled in the Savings Plan. A rollover is subject to certain conditions, including approval by the Plan Administrator: It may be paid directly to the Savings Plan from your former employer s qualified retirement plan; or It may be made from a traditional or conduit IRA, or by you within 60 days after payment has been made to you from your former employer s qualified retirement plan; and It must be paid in cash (i.e., property such as stock will not be accepted). Any rollover contribution accepted by the Plan Administrator is not considered in determining the maximum amount that you can contribute for that year. Rollover contributions are not eligible for a share of any Company matching contributions. You will be required to complete a rollover form and submit supporting documents (showing that you have received an eligible rollover distribution) before your rollover into the Savings Plan will be approved. If you do not make an investment election on your rollover form, your rollover contribution will be automatically invested in one of the Target Retirement Funds based on the year in which you would attain age 65 (see the Investment Funds section for a description of the available investment funds). CATCH-UP CONTRIBUTIONS Savings Plan participants who are or will be age 50 or older during a plan year are eligible to make an additional pre-tax contribution, known as a catch-up contribution up to 25% of eligible pay. For 2010, the annual catch-up contribution limit is $5,500. The catch-up contribution limit is subject to adjustment by the U.S. Treasury. This limit, however, is subject to the 25% Plan limit. In addition to the age requirement, during the plan year you must also reach one of the following annual pre-tax contribution limits for pre-tax contributions after reaching the applicable limit to continue to be designated as catch-up contributions as of year end: Savings Plan pre-tax contribution limit of 50% of your eligible annual pay; In the case of an HCE, the lower pre-tax contribution limit currently imposed on the HCE; or IRS pre-tax contribution limit of $16,500. If your eligible annual pay is less than $33,000 in 2010, your pre-tax contributions won t exceed the IRS limit of $16,500 for that year even if you contribute 50% of your eligible pay. In this case, the Savings Plan pre-tax contribution limit of 50% would apply. For example, if you are 50 (or will be during the plan year) and earn $28,000 in 2010, once you contribute $14,000 on a pre-tax basis you are eligible to make catch-up contributions (up to an additional $5,500). If instead you earn $33,000 or more in 2010 (but are not an HCE), the Savings Plan pre-tax contribution limit of 50% for that year would not apply because it would cause your pre-tax contributions to exceed the IRS annual pre-tax contribution limit of $16,500. Therefore, your pre-tax contributions are subject to the IRS contribution limit instead. For example, if you are age 50 (or will be during the Plan year) and earn $33,000 in 2010, once you contribute $16,500 on a pre-tax basis, you are eligible for catch-up contributions (up to an additional $5,500). Sears Holdings Benefits Handbook (k) Savings Plan

5 And, if you are an HCE in 2010, the Savings Plan pre-tax limit contribution limit of 50% would not apply to you because you would be subject to the 2% contribution limit. For example, if you are age 50 (or will be during the Plan year) and an HCE, once you contribute up to the 2% limit on a pre-tax basis, you are eligible for catch-up contributions (up to an additional $5,500). After the end of each plan year, testing is performed to ensure all contributions are within Savings Plan and federal limits. If your pre-tax contributions did not reach one of the applicable annual pretax contribution limits described above, some or all of your catch-up contributions will need to be re-classified as regular pre-tax contributions. Your catch-up contributions will be allocated to the same investments you have chosen for your pre-tax contributions. If you live in a state that does not conform to federal tax legislation regarding catch-up contributions, you may have additional state tax obligations. BENEFICIARY DESIGNATION When you join the Savings Plan, you should complete a Designation of Beneficiary Form. Your beneficiary is the person you want to receive the balance in your account(s) in the event of your death. If you are not married, you may name anyone as your beneficiary. If you are married, your primary beneficiary for all of your account(s) is automatically your spouse, unless your spouse consents in writing to your naming someone else as primary beneficiary for all or part of your account(s). Your spouse s signature on the beneficiary designation form must be witnessed by a notary public. You can change your beneficiary designation at any time, but again, notarized spousal consent is required if you are married and wish to name a non-spouse primary beneficiary. You can also designate one or more contingent or secondary beneficiaries to receive your Savings Plan assets if all of your primary beneficiaries die before you. You may change your beneficiary designation(s) at any time by completing a Designation of Beneficiary Form and filing it with the Savings Plan s administration office. (See the Other Information section of this Handbook.) Only a properly completed and filed Designation of Beneficiary Form will supersede an earlier beneficiary designation form. Also, only a Designation of Beneficiary Form signed and dated (or re-signed and re-dated) by you will be considered valid. If you are not married, you can submit a Designation of Beneficiary Form on the Financial Benefits Web site. If you do not designate a beneficiary, then upon your death your benefit will be paid to your legal spouse as of the date of your death. If you re not married as of the date of your death, your benefit is payable to your estate. The Company matching contribution may be made in cash, in Sears Holdings stock, or a combination of the two, at the discretion of the Company. Any match made in cash will be invested according to the investment elections for your pre-tax contributions at the time the match is deposited. Any match made in stock will be automatically invested in the Sears Holdings Corporation Stock Fund. You may diversify your matching contributions into other investment funds within the Savings Plan, once they have been credited to your account. The Company has the authority to approve an additional discretionary matching contribution under the Savings Plan. If such discretionary contributions are made, they will be subject to certain statutory and regulatory limitations applicable to safe harbor 401(k) plans, and will be subject to a 3-year cliff vesting schedule. COMPANY MATCH ELIGIBILITY RULES You meet the eligibility service requirement for the Company matching contribution (if any) on the first anniversary of your hire date, provided you are credited with at least 1,000 hours of service during your first anniversary year. If you do not complete 1,000 hours of service during your first anniversary year, you must complete 1,000 hours of service during the calendar year following your hire date, or in any subsequent calendar year. Hour of Service: In general, an hour of service means any hour for which you are paid by an Employer (or related company) including paid time at work and paid time off, such as vacations and holidays. Your employment with Sears Holdings and any other related company is included in computing your hours of service. Participating Employer: If you complete 1,000 hours of service within your first anniversary year or, alternatively, during any subsequent calendar year, and your employer or business group is not participating in the Savings Plan on your anniversary date or at the end of such subsequent calendar year, you will become a participant on the date your company or business group becomes a participating Employer. Periods of Service Applicable to Eligibility for the Company Match: Generally, all periods of service with Sears Holdings and any of its wholly owned companies are aggregated for purposes of determining your eligibility. Consequently, it is very important that you inform your Employer if you have prior service with the Company or one of its wholly owned companies. However, if you were not a participant when you incurred a termination of employment and are then rehired, your prior service will not be reinstated for eligibility or vesting purposes unless you are rehired before the greater of five years or your number of years of service prior to your termination. If your prior service is not reinstated, you will be treated like a new associate for purposes of the Savings Plan. COMPANY MATCHING CONTRIBUTIONS Please note that the Company matching contribution was suspended effective for payroll periods after January 31, 2009, until further notice. The Company matching contribution, if any, is deposited in your Company contribution account shortly after the end of each quarter for which such a contribution is to be made. EMPLOYEE STOCK OWNERSHIP PLAN On December 20, 1989, an employee stock ownership plan feature (the ESOP ) was added to the Savings Plan. Under the ESOP, in 1990, the Savings Plan purchased 800 million dollars of Sears, Roebuck and Co. stock. The purchase was funded by a loan (ESOP Loan) from Sears, Roebuck and Co. As such, the ESOP portion of the Savings Plan previously included a leveraged employee stock ownership plan (the LESOP ). The loan to the ESOP has been completely paid and all stock previously held under this LESOP has been released from the suspense account Sears Holdings Benefits Handbook (k) Savings Plan

6 and allocated to participant accounts. All employer contributions in stock to the Savings Plan are made to the ESOP portion of the Savings Plan or transferred to the non-esop portion by participant election to invest such amounts in the investment funds held under the non-esop portion of the Savings Plan. ACCOUNTS The following accounts are maintained for you under the Savings Plan: A pre-tax contribution account, which reflects your interest in the total account balances attributable to your pre-tax contributions. An after-tax contribution account, which reflects your interest in the total account balances attributable to your after-tax contributions. A Company contribution account, which reflects your interest in the total account balances attributable to the employer contributions (including matching and discretionary matching contributions), if any, made by the Company and/or the participating Employers. A rollover account, which reflects your interest in the total account balances if you have made a rollover contribution to the Savings Plan. Other If you are a longer service associate or participated in another 401(k) plan that was merged into the Savings Plan, you may also have an account that separately tracks prior employer contributions. MANAGING YOUR ACCOUNTS You can manage your accounts through the Sears Holdings Financial Benefits Web site at or by calling sears and following the prompts to the 401(k) menu. The Plan Administrator ensures that account statements are distributed shortly after the end of each calendar quarter. You may elect to access these statements electronically rather than receiving them in the mail. You can also generate a statement for any time period through the Financial Benefits Web site. If you have any questions about your account statement or if you believe there may be an error, you should contact the Financial Benefits Service Center through sears. VESTING OWNERSHIP OF YOUR ACCOUNTS Vesting refers to your ownership of the balance in your accounts. Effective January 1, 2006, active associates became 100% vested in all of their accounts, except for the portion of the employer contribution account attributable to any additional discretionary matching contributions or to prior 401(k) plans merged into the Savings Plan. Discretionary matching contributions are subject to a 3-year vesting schedule. One year of vesting service is credited for each plan year in which you work 1,000 hours. Associate account balances that were transferred from the Kmart Retirement Savings Plan to this Savings Plan April 1, 2006 continue to be subject to the applicable vesting requirements of the prior Kmart Retirement Savings Plan. Associate account balances that were transferred from the Kmart Retirement Savings Plan for Manteno Distribution Center Union Employees on August 31, 2007 will continue to be subject to the applicable vesting requirements of the prior Kmart Retirement Savings Plan for Manteno Distribution Center Union Employees. FORFEITURES Notwithstanding the above, if the Plan Administrator has to return any of your pre-tax contributions to you because you have contributed more than the IRS or Savings Plan annual pre-tax contribution limits, or you were not eligible to make the contribution, any Company matching contribution or discretionary matching contributions attributable to those pre-tax contributions will be forfeited. The Plan Administrator monitors the contribution amounts to try to prevent the annual pre-tax contribution limits from being exceeded and to avoid, as much as reasonably possible, the need for forfeitures. If the Savings Plan does not pass certain annual nondiscrimination tests, refunds will need to be made to certain HCE s. The reason for the additional contribution limits on HCE s (as described above) is to avoid or at least minimize the refunds that need to be made to certain HCE s to pass these tests. Forfeited amounts may be used to offset future Company contributions, offset reasonable administrative expenses or reinstate forfeitures for associates who return and become fully vested in amounts they had not been vested in when they terminated. INVESTMENT FUNDS INVESTMENT CHOICES Your contributions and Company contributions to the Savings Plan, and earnings and losses from all contributions, less payments made by the Trustee, are held in the Trust Fund. (See the Other Information section in this Handbook for more information.) The Trust Fund may be used only for the exclusive benefit of participants and their beneficiaries, and for the payment of reasonable expenses of administering the Savings Plan and the Trust Fund. The Investment Committee for the Savings Plan selects the investment funds offered under the Savings Plan, based on the recommendation of the investment advisor to the Savings Plan and Master Trust ( Advisor ). The current Advisor is Towers Watson Investment Consulting (formerly known as Watson Wyatt Investment Consulting). The Trustee keeps your contributions invested in one or more of the offered investment funds according to your instructions. The Savings Plan is a participant-directed investment plan that is intended to be a plan described in Section 404(c) of ERISA and the applicable Department of Labor regulations. (See the Compliance with Section 404(c) of ERISA section in this Handbook). This means that you have the choice of separately investing your contributions in any combination of the available investment funds in one-percent increments. The recordkeeper and Trustee only change your interests in the investment funds according to your instructions. Investment changes can be made effective each day of the year that the New York Stock Exchange is open, unless one of the exceptions described below applies. You can also transfer funds from any investment fund offered (after the initial allocation of your contributions) to a Self-Managed Brokerage Account. Note: No contributions may be invested directly in a Self-Managed Brokerage Account. Instead, your contributions must first go into any of the investment funds (except the Stable Value Fund) from which they can then be transferred to your Self-Managed Brokerage Account. See the Making Changes section for how to change your investment elections. The available investment fund options are subject to change or elimination by the Investment Committee at any time without prior notice. However, the Plan Administrator and the Investment Committee make every effort to provide prior notice of such changes. Sears Holdings Benefits Handbook (k) Savings Plan

7 THE IMPORTANCE OF DIVERSIFYING YOUR ACCOUNT To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced and diversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rate of return, while minimizing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, your savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk. In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savings outside of the Savings Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerances for risk. It is also important to periodically review your investment portfolio, your investment objectives, and the investment options under the Savings Plan to help ensure that your retirement savings will meet your retirement goals. Visit the Financial Benefits Web site or for more information on individual investing and diversification. INSTITUTIONAL INVESTMENT FUNDS All of the investment options, except the Sears Holdings Corporation Stock Fund and the Self-Managed Brokerage Account, are institutional funds. This means the funds are specifically designed for large institutional investors, such as a 401(k) savings plan, versus a retail mutual fund that is open to individual investors. The advantage of institutional funds is lower management fees. Investment returns for institutional investments are not published on a regular basis. To access fund performance information, you can visit the Savings Plan s Web site 24 hours a day through DESCRIPTION OF INVESTMENT CHOICES The following descriptions of the investment funds available under the Savings Plan are provided to help you make your investment decisions. Among the investment funds, the Sears Holdings Corporation Stock Fund has the greatest degree of investment risk and the Stable Value Fund has the least amount of investment risk. Through a Self-Managed Brokerage Account, which is also described here, you are also able to create your own individual investment fund portfolio, with investments that are not available through the Savings Plan. The Trustee or any of the investment managers have the authority to maintain a cash balance or short-term income securities, including a commingled fund of the trustee, pending the selection and purchase of permanent investments or for liquidity purposes. The Trustee, in its discretion, or as directed by any investment manager, may limit the daily volume of its purchases or sales of securities, and as a result, may limit the Savings Plan s transactions in any or all of the investment funds. The Trustee may not complete Savings Plan transactions on a particular day for a number of reasons, including, but not limited to, suspension of trading in an asset important to one of the investment funds, insufficient liquidity within any investment fund to process transactions or a major market disruption. As a result, there may be a delay in accepting and/or execution of participants transactions for one or more days. Because the performance and investment holdings of each fund change frequently, a fund overview is available via the Financial Benefits Web site at or you can request a copy by phone at sears (choose the 401(k) option). The Savings Plan offers the following investment options. Tier I: Target Retirement Funds Income Fund 2010 Fund 2020 Fund 2030 Fund 2040 Fund Tier II: Core Funds Stable Value Fund Bond Fund Large Cap Value Equity Fund S&P 500 Index Fund Large Cap Growth Equity Fund Small-Mid Cap Growth Equity Fund Small-Mid Cap Value Equity Fund International Equity Fund Tier III: Company Stock and Brokerage Options Sears Holdings Corporation Stock Fund Self-Managed Brokerage Account A detailed description of each investment option is provided below. TARGET RETIREMENT FUNDS Target Retirement Funds are designed to simplify the investment selection process, and it makes it easier to manage and adjust your strategy through different stages of your life. A Target Retirement Fund may be an appropriate option if you do not have the time to choose and manage a mix of individual funds yourself or are uncomfortable doing so. You can simply select the Target Retirement Fund with the year that most closely matches your expected retirement year and direct all or a portion of your contributions into that one fund. For example, if you are currently age 40 and plan on retiring at age 60, you may want to consider investing in the 2030 Target Retirement Fund. Target Retirement Funds are designed to adjust their asset mix between stocks and bond investments and become more conservative over time, just as most investors tend to focus less on growth and more on preserving principal as they get closer to retirement. Each of the five Target Retirement Funds is a complete, diversified investment program made up of a mix of stock investments and bond investments appropriate for specific retirement time frames. Funds with retirement years furthest into the future start out with a more aggressive, long-term growth strategy that favors stock investments. Funds with retirement years closer to the present date start out with a more conservative strategy that favors more bond investments. Sears Holdings Benefits Handbook (k) Savings Plan

8 Income Fund seeks to provide current income from fixed income securities while maintaining some exposure to equity investments for capital appreciation. The Fund invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash. The Fund emphasizes fixed income investment over stocks. The fixed income exposure emphasizes short-term bonds to reduce interest rate risk. The Fund maintains a small allocation to US and non-us stocks to provide moderate capital appreciation and diversification. The Income Fund has an asset allocation target of 25% equities and 75% fixed income securities Fund seeks to provide moderate capital appreciation and some stability of principal for investors planning to retire in approximately the year The Fund invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash, and allocates its assets among these funds according to a predetermined asset allocation strategy. On an annual basis, the Fund automatically rebalances to a more conservative strategy as the year 2010 gets closer. Over time, the stock allocation decreases and the bond allocation increases. By the year 2010 the Fund will be invested in its most conservative mix of cash, bond and stock investment and will be mapped to the Income Fund Fund seeks to provide long term capital appreciation and some stability of principal for investors planning to retire in approximately the year The Fund invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash, and allocates its assets among these funds according to a predetermined asset allocation strategy. On an annual basis, the Fund automatically rebalances to a more conservative strategy as the year 2020 gets closer. Over time, the stock allocation decreases and the bond allocation increases. By the year 2020 the Fund will be invested in its most conservative mix of cash, bond and stock investment and will be mapped to the Income Fund Fund seeks to provide long-term capital appreciation for investors planning to retire in approximately the year 2030 and is comprised mainly of stocks for maximum growth potential. The Fund invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash, and allocates its assets among these funds according to a predetermined asset allocation strategy. On an annual basis, the Fund automatically rebalances to a more conservative strategy as the year 2030 gets closer. Over time, the stock allocation decreases and the bond allocation increases. By the year 2030 the Fund will be invested in its most conservative mix of cash, bond and stock investment and will be mapped to the Income Fund Fund seeks to provide long-term capital appreciation for investors planning to retire in approximately the year 2040 and is comprised mainly of stocks for maximum growth potential. The Fund invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash, and allocates its assets among these funds according to a predetermined asset allocation strategy. On an annual basis, the Fund automatically rebalances to a more conservative strategy as the year 2040 gets closer. Over time, the stock allocation decreases and the bond allocation increases. By the year 2040 the Fund will be invested in its most conservative mix of cash, bond and stock investment and will be mapped to the Income Fund. State Street Global Advisors (SSgA) currently manages the Target Retirement Funds. STABLE VALUE FUND The Stable Value Fund seeks to provide stability of principal and an attractive rate of return by investing in a variety of high-quality interest-paying investments, which may include synthetic guaranteed investment contracts with a special feature called a benefit responsive wrap, bank investment contracts and money market-type investments. The Fund s investments are structured both to provide more attractive long-term returns than a money market fund and to smooth out the investment returns associated with fixed income portfolios when the overall markets are volatile. The Stable Value Fund is currently managed by Dwight Asset Management, who will, as directed by the Company, direct a portion of the fund to be managed by one or more sub-advisors, including Blackrock, SEI Dwight and Pacific Investment Management Company, LLC. Pacific Investment Management Company, LLC replaced Western Asset Management Company in October Restrictions on the Stable Value Fund The Stable Value Fund is subject to an equity wash provision. This means that transfers out of the Stable Value Fund cannot be made directly to a competing fund. Currently, the only investment option that is considered a competing fund is the Self-Managed Brokerage Account. If you want to transfer money from the Stable Value Fund to the Self-Managed Brokerage Account, you will first need to transfer it to a non-competing fund. The money transferred must remain in the non-competing fund for at least 90 days. After 90 days, you may then transfer it to the competing fund, e.g. the Self-Managed Brokerage Account. There are no restrictions for transferring money into the Stable Value Fund. BOND FUND The Bond Fund is designed to provide a high level of income that exceeds general bond market indices. As a result, the Fund invests primarily in U.S. dollar denominated fixed income securities and other debt instruments of domestic and foreign entities, including corporate bonds, securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, mortgage-backed securities and money-market instruments. The Fund may also invest in non-u.s. dollar, high yield and emerging market securities to enhance portfolio returns and lower risk. Pacific Investment Management Company, LLC, currently manages the Bond Fund. Pacific Investment Management Company, LLC replaced Western Asset Management Company in October LARGE CAP VALUE EQUITY FUND The Large Cap Value Equity Fund seeks to achieve capital growth and dividend income by investing in a diversified portfolio of stocks of U.S. companies. The average market capitalization of companies included in the Fund is normally greater than $5 billion. The Fund invests in those companies it considers to provide value; in other words, it invests in good stocks at attractive prices. Generally, the price earnings ratio of these stocks will be less than that of the overall market. Dodge & Co. currently manages the Large Cap Value Equity Food. S&P 500 INDEX FUND The S&P 500 Index Fund seeks to match the performance of the Standard & Poor s 500 Index prior to expenses. The S&P 500 Index is a widely used barometer of the performance of largecapitalization U.S. stocks. The fund invests proportionately in all 500 stocks in the S&P 500 Index. The strategy minimizes the need for trading and therefore results in lower expenses. The fund may Sears Holdings Benefits Handbook (k) Savings Plan

9 also hold 2% 5% of its value in futures contracts (an agreement to buy or sell a specific security by a specific date at an agreed-upon price). This fund may be appropriate for you if you are willing to tolerate stock market fluctuations in exchange for the potential for high returns. State Street Global Advisors (SSgA) currently manages the S&P 500 Index Fund. LARGE CAP GROWTH EQUITY FUND The Large Cap Growth Equity Fund seeks to provide long-term capital appreciation through investments in common stocks of growth companies. The Fund focuses on companies that demonstrate high-quality earnings, strong free cash flow growth, and shareholder-oriented management. The portfolio is typically comprised of stocks of companies that can support sustainable double-digit earnings growth. Generally, the price earnings ratio of these companies will be higher than that of the overall market. T. Rowe Price currently manages the Large Growth Equity Fund. SMALL-MID CAP GROWTH EQUITY FUND The Small-Mid Cap Growth Equity Fund seeks long term capital growth through a diversified portfolio of equity securities of small to mid-sized growth companies. This Fund is managed by two investment managers. Half of the Fund is managed by Columbus Circle Investors, which invests primarily in small, rapidly growing companies with market capitalizations of $2.0 billion or less. The other half of the Fund is managed by William Blair & Company, which seeks to build a diversified portfolio of small to mid capitalized quality growth companies. Generally, the portfolio tends to hold companies that have proven business models and sustainable competitive advantages. The Fund also favors companies that have underestimated growth potential and whose price has been discounted due to a reaction to negative news in the market. William Blair & Company and Columbus Circle Investors currently manage the Small-Mid Cap Growth Equity Fund. William Blair & Company replaced Evergreen Investments in June 2008 and Columbus Circle Investors replaced RS Investments in June SMALL-MID CAP VALUE EQUITY FUND The Small-Mid Cap Value Equity Fund seeks to achieve capital growth and dividend income through investment in a diversified portfolio of stocks of small to mid-sized companies. This Fund is managed by two investment managers. Half of the Fund is managed by RS Investments, which invests primarily in equity securities of companies with market capitalizations between $1.5 billion and $3 billion that are believed to be undervalued. In evaluating investments for the Fund, RS employs a value methodology, combining balance sheet and cash flow analysis. The other half of the Fund is managed by Donald Smith & Co., which invests in companies that are out-of-favor and are selling at a discount relative to their book value. Generally, these companies have a positive outlook for earnings potential over the next 2-4 years and low risk characteristics. RS Investments and Donald Smith & Co. currently manage the Small-Mid Cap Value Equity Fund. INTERNATIONAL EQUITY FUND The International Equity Fund seeks long term capital growth by investing in stocks of both value and growth-oriented international companies. The Fund invests primarily in equity securities of established foreign companies comprising the MSCI EAFE Index (Europe, Australia and the Far East), Canada and emerging market countries worldwide. The Fund draws on its current fund manager s unique leadership in both growth and value investing to create a portfolio with high return potential of the two styles, while mitigating the style risk of investing in each individually. Typically, the Fund holds about stocks. Foreign investments, especially those in emerging markets, involve greater risk and may offer greater potential returns than U.S. based investments. This risk includes political and economic uncertainties of foreign countries, as well as the risk of currency fluctuation. AllianceBernstein, a unit of Alliance Capital Management LP currently manages the International Equity Fund. SEARS HOLDINGS CORPORATION STOCK FUND The Sears Holdings Corporation (SHC) Stock Fund seeks to provide participants with the opportunity to share in the investment performance of Sears Holdings Corporation common shares (SHC stock) by investing in shares of Sears Holdings Corporation stock. For liquidity to process participant transactions on a daily basis, the Fund holds an appropriate level of short-term investments. Since the Fund holds a small percentage of investments other than SHC stock, fund performance will not always match the performance of SHC stock. For any given period, the Fund may perform better or worse than SHC stock. The Trustee purchases SHC stock for the Sears Holdings Corporation Stock Fund at fair market value on the open market or directly from Sears Holdings. Pending investment in SHC stock, available amounts may be invested in cash equivalents. The Sears Holdings Corporation Stock Fund s value depends on the market value of SHC stock and on the value of temporary investments in a short-term cash reserve account. This Fund is the least diversified of the investment funds offered. Please see your copy of the Company s annual report for further information on the Company s operations and financial information. This fund may be appropriate for you if you are seeking long-term growth potential and are willing to accept volatility in share price and returns. State Street Global Advisors (SSgA) manages the Sears Holdings Corporation Stock Fund. COMPANY MATCH DIVERSIFICATION TAX CONSIDERATIONS If you transfer the cash value of your company match to one or more of the other investment funds, there may be tax consequences. Taxes will be deferred until you make a withdrawal from the Savings Plan. At that point, you may owe taxes on the increase in the value of the company match while it was in stock in the Savings Plan. Before you decide to transfer your company match to another fund, you should talk to a tax advisor. VOTING RIGHTS FOR SEARS HOLDINGS STOCK You are responsible for directing the Trustee to vote all of the shares of Sears Holdings stock credited to your Savings Plan account(s). The Trustee votes those shares for which inadequate or no voting instructions have been received, or which have not yet been credited to participants accounts, in the same proportions as the shares for which instructions have been received. Before each shareholders meeting, you will receive information on the procedure for voting your Sears Holdings stock as well as a proxy statement in connection with matters to be voted on at such meeting. SELF-MANAGED BROKERAGE ACCOUNT The Self-Managed Brokerage Account, provided by State Street Brokerage, is a brokerage option offered through the Savings Plan. Sears Holdings Benefits Handbook (k) Savings Plan

10 It affords you additional flexibility in choosing your retirement savings investments. You define your own objective by designing your own portfolio of investments. Through the Self-Managed Brokerage Account, you can invest in most stocks listed in the New York Stock Exchange, American Stock Exchange and NASDAQ, including most corporate and government bonds, and mutual funds (all subject to Savings Plan restrictions). You set up the Self- Managed Brokerage Account for yourself as part of your Savings account. Your account is charged a $50 annual fee, which is prorated on a monthly basis. You also are charged the cost of any commissions owed on trades made for your own Self-Managed Brokerage Account. DAILY VALUATION OF YOUR ACCOUNT(S) The assets in your Savings Plan account(s) are valued on a daily basis. Daily valuation generally means that your account(s) will be updated each day the New York Stock Exchange is open. The update will reflect activity for that day, such as new contributions deposited on your behalf, changes in your investment elections and changes in the unit value of your investments under the Savings Plan. For this all to happen as anticipated on any given day, the Savings Plan s recordkeeper must receive complete and accurate information from a variety of different sources. For this reason, there is no guarantee that any given transaction will be processed on the anticipated day. Sears Holdings Benefits Handbook (k) Savings Plan