Form of Merchandising Agreement



 Exhibit 10.6 
 FORM OF 
 MERCHANDISING AGREEMENT 

BETWEEN 

SEARS, ROEBUCK AND CO., 
 KMART CORPORATION, AND 
 SEARS HOLDINGS CORPORATION 

AND 

SEARS HOMETOWN AND OUTLET STORES, INC., 
 SEARS AUTHORIZED HOMETOWN STORES, LLC, 
 AND SEARS OUTLET STORES, L.L.C.,


                    , 2012








 TABLE OF CONTENTS 

 

									
	 1.
	  	ADDITIONAL TERMS AND CONDITIONS.	  	 	1	  
			
	 2.
	  	TERM AND TERMINATION.	  	 	1	  
		  	(a)	  	Initial Term.	  	 	1	  
		  	(b)	  	The Term; Renewal Rights.	  	 	1	  
		  	(c)	  	Termination of the Agreement.	  	 	2	  
		  	(d)	  	Seller’s Right to Terminate Its Section 3 Obligations.	  	 	3	  
		  	(e)	  	Seller’s Termination Rights on Appendix 5(a).	  	 	4	  
		  	(f)	  	Buyer’s Transition and Sell-Off Rights.	  	 	4	  
			
	 3.
	  	HTS PRODUCTS.	  	 	4	  
		  	(a)	  	Seller’s Obligation to Sell.	  	 	4	  
		  	(b)	  	Invoice Prices for HTS Products.	  	 	5	  
		  	(c)	  	Vendor Charges.	  	 	5	  
		  	(d)	  	Retail Pricing.	  	 	5	  
		  	(e)	  	HTS Product Quality, Availability, and Packaging.	  	 	5	  
			
	 4.
	  	OUTLET PRODUCTS.	  	 	6	  
		  	(a)	  	Section 4 Definitions.	  	 	6	  
		  	(b)	  	DRM.	  	 	6	  
		  	(c)	  	MOS.	  	 	8	  
		  	(d)	  	Right of First Offer for Additional Categories.	  	 	10	  
		  	(e)	  	Rights of First Offer.	  	 	10	  
		  	(f)	  	Retail Pricing.	  	 	10	  
		  	(g)	  	Invoice Prices for Outlet Products.	  	 	10	  
		  	(h)	  	Outlet Product Restrictions.	  	 	11	  
			
	 5.
	  	ROYALTIES.	  	 	11	  
		  	(a)	  	Quarterly Royalty Reports; Royalties Payable.	  	 	11	  
		  	(b)	  	Adjustments.	  	 	11	  
		  	(c)	  	Featuring Kenmore-Branded Product.	  	 	11	  
		  	(d)	  	Minimum Commission.	  	 	12	  
		  	(e)	  	Record Retention; Audit Rights.	  	 	12	  
			
	 6.
	  	INVENTORY MANAGEMENT POLICES AND PROCESSES; DELIVERY TERMS.	  	 	12	  
			
	 7.
	  	PAYMENT TERMS FOR INVOICE PRICES AND ROYALTIES.	  	 	12	  
		  	(a)	  	Invoice Prices for Products.	  	 	12	  
		  	(b)	  	Royalties.	  	 	12	  
			
	 8.
	  	SUBSIDIES AND MARKETING/MERCHANDISING SUPPORT.	  	 	13	  
		  	(a)	  	Vendor Subsidies.	  	 	13	  
		  	(b)	  	Product Information Support.	  	 	13	  
		  	(c)	  	Other Support.	  	 	14	  
			
	 9.
	  	CUSTOMERS AND TRADE AREAS.	  	 	14	  


  
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		  	(a)	  	General.	  	 	14	  
		  	(b)	  	Buyer.	  	 	14	  
		  	(c)	  	Seller.	  	 	15	  
		  	(d)	  	Growth.	  	 	15	  
		  	(e)	  	New HTS Stores and Renewals-Exclusivity.	  	 	15	  
			
	 10.
	  	PRODUCT WARRANTIES AND RETURNS.	  	 	16	  
		  	(a)	  	Product Warranties.	  	 	16	  
		  	(b)	  	Product Returns.	  	 	16	  
		  	(c)	  	Product Service Incident and Catastrophic-Failure Payments and Reimbursements; Product Recalls.	  	 	17	  
		  	(d)	  	Disclaimer.	  	 	18	  
			
	 11.
	  	PRODUCT SERVICING.	  	 	18	  
		  	(a)	  	Seller’s Appointment.	  	 	18	  
		  	(b)	  	Other Service Arrangements.	  	 	18	  
		  	(c)	  	Seller’s Obligations.	  	 	18	  
		  	(d)	  	Buyer’s Obligations.	  	 	19	  
		  	(e)	  	Seller’s Charges.	  	 	20	  
		  	(f)	  	Services for Protection Agreements.	  	 	20	  
			
	 12.
	  	INTELLECTUAL PROPERTY.	  	 	20	  
		  	(a)	  	Seller	  	 	20	  
		  	(b)	  	Buyer	  	 	23	  
			
	 13.
	  	CONFIDENTIALITY.	  	 	24	  
		  	(a)	  	Confidential Information.	  	 	24	  
		  	(b)	  	Treatment of Confidential Information.	  	 	24	  
		  	(c)	  	Exceptions to Confidential Treatment.	  	 	25	  
			
	 14.
	  	INDEMNIFICATION.	  	 	25	  
		  	(a)	  	Seller Indemnities.	  	 	25	  
		  	(b)	  	Buyer Indemnities.	  	 	26	  
		  	(c)	  	Defense.	  	 	26	  
		  	(d)	  	Exclusions from Claims; Tender and Cooperation.	  	 	26	  
			
	 15.
	  	INSURANCE.	  	 	27	  
		  	(a)	  	Required Coverage.	  	 	27	  
		  	(b)	  	Proof of Insurance.	  	 	27	  
			
	16.	  	LIMITATION ON LIABILITY.	  	 	27	  
			
	 17.
	  	MINIMUM QUANTITIES.	  	 	27	  
			
	 18.
	  	DISPUTE RESOLUTION.	  	 	27	  
		  	(a)	  	Committees.	  	 	27	  
		  	(b)	  	Dispute Resolution.	  	 	28	  
			
	 19.
	  	SELLER’S CLOSING LOCATIONS.	  	 	29	  


  
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	 20.
	  	GLOSSARY.	  	 	29	  
			
	 21.
	  	SHC’S SOLE OBLIGATION.	  	 	33	  
			
	 22.
	  	GENERAL.	  	 	33	  
		  	(a)	  	Good Faith and Fair Dealing.	  	 	33	  
		  	(b)	  	Assignment.	  	 	33	  
		  	(c)	  	Computer Access.	  	 	33	  
		  	(d)	  	Promotional Calendars.	  	 	34	  
		  	(e)	  	Obligation to Negotiate in Good Faith.	  	 	34	  
		  	(f)	  	Consideration.	  	 	34	  
		  	(g)	  	Construction and Interpretation.	  	 	35	  
		  	(h)	  	Counterparts; Facsimile.	  	 	35	  
		  	(i)	  	Entire Agreement.	  	 	35	  
		  	(j)	  	Injunctive Relief.	  	 	35	  
		  	(k)	  	Notices.	  	 	36	  
		  	(l)	  	No Waiver.	  	 	36	  
		  	(m)	  	Publicity.	  	 	37	  
		  	(n)	  	Relationship of the Parties.	  	 	37	  
		  	(o)	  	Reporting.	  	 	37	  
		  	(p)	  	Representations and Warranties.	  	 	37	  
		  	(q)	  	Survival.	  	 	37	  
		  	(r)	  	Governing Law.	  	 	37	  

 APPENDICES 
  

							
	 Appendix 1
	  	Additional Terms and Conditions	  	 	39	  
	 Appendix 3(a)
	  	HTS Product Categories	  	 	42	  
	 Appendix 3(b)
	  	HTS Invoice Prices	  	 	43	  
	 Appendix 4(b)(i)
	  	DRM Invoice Prices	  	 	44	  
	 Appendix 4(c)(ii)
	  	MOS Categories and Initial MOS Invoice Prices	  	 	46	  
	 Appendix 5(a)
	  	Royalty Rates; Kenmore Royalty Credits	  	 	47	  
	 Appendix 5(d)
	  	Average Aggregate Minimum Commission	  	 	50	  
	 Appendix 6
	  	Inventory Policies and Processes	  	 	51	  
	 Appendix 7(a)
	  	Payment Due Date	  	 	56	  
	 Appendix 9(b)(i)(A)
	  	New HTS Store List	  	 	57	  
	 Appendix 12(a)(iii)
	  	Seller Marks	  	 	60	  
	 Appendix 18(a)
	  	Merchandising Operating Committee	  	 	61	  


  
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 MERCHANDISING AGREEMENT 

                    , 2012

 This MERCHANDISING AGREEMENT (this “Agreement”) is between (1) SEARS, ROEBUCK AND
CO., a New York corporation (“SRC”), KMART CORPORATION, Michigan corporation (“Kmart” and together with SRC, “Seller”), and SEARS HOLDINGS CORPORATION, a Delaware corporation
(“SHC”), and (2) SEARS HOMETOWN AND OUTLET STORES, INC., a Delaware corporation (“SHO”), SEARS AUTHORIZED HOMETOWN STORES, LLC, a Delaware limited liability company (“SAHS”), and
SEARS OUTLET STORES, L.L.C., a Delaware limited liability company (“Outlet Co.” and together with SHO and SAHS, “Buyer”). Other capitalized terms used but not defined in this Agreement are defined in
Section 20, which begins on page 30. 
 TERMS AND CONDITIONS 

For good and valuable consideration, the receipt of which Seller and Buyer acknowledge, Seller and Buyer agree as follows: 

1. ADDITIONAL TERMS AND CONDITIONS. The Additional Terms and Conditions that are attached to this Agreement as
Appendix 1 are incorporated into this Agreement by reference and are binding on Seller and Buyer as if expressly included below. To the extent any provision on Appendix 1 is inconsistent with the body of this Agreement, the
body of this Agreement controls. 
 2. TERM AND TERMINATION. 

(a) Initial Term. The initial term of this Agreement begins on the Effective Date and ends, unless terminated earlier or
extended in accordance with Section 2(c) or Section 2(d), on the fifth anniversary of the Effective Date (the “Initial Term”). “Effective Date” means the first business day following the
Effective Date specified in the Separation Agreement dated as of                     , 2012 between Buyer and SHC (the “Separation
Agreement”). 
 (b) The Term; Renewal Rights. Subject to Section 2(c),
Section 2(d), and the next sentences of this Section 2(b), Buyer may elect to extend for up to two consecutive three-year periods Seller’s obligations in Section 3 to sell KCD-Branded Products to Buyer. Buyer
may not exercise its rights in the preceding sentence if Buyer or any of its Affiliates has failed to comply with any of its material obligations in this Agreement and the failure is continuing. The first renewal period is referred to as the
“First Renewal Period” and its duration may be longer than three years as provided in Section 2(c)(ii)(B) and in Section 2(d)(ii). Buyer will deliver written notice to Seller not later than six months prior
to the end of the Initial Term if Buyer elects to extend the Term for the First Renewal Period. The second renewal period is referred to as the “Second Renewal Period.” Buyer will deliver written notice to Seller not later than six
months prior to the end of the First Renewal Period if Buyer elects to extend the Term for the Second Renewal Period. The Initial Term, the First Renewal Period (if elected), and the Second Renewal Period (if elected) are together referred to as the
“Term” and the last day of the Term is referred to as the “Expiration Date.” During the First Renewal Period and the Second Renewal Period Seller will have (i) no obligation in accordance with Section 3
to sell any HTS Product to Buyer that is not a KCD-Branded Product and (ii) no obligation in accordance with Section 4 to sell any Outlet Product to Buyer. Except as provided in the preceding sentence, all of the terms and
conditions of this Agreement (including the terms and conditions of Section 10) will continue to be in full force and effect during the Term. This Agreement applies to all Products shipped on or after the Effective Date and before the


  
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Expiration Date, regardless of when Buyer placed the order for the Products. “License Agreements” means the following, each dated as of the Effective Date: the Store License
Agreement between SAHS and SRC; the Store License Agreement between Outlet Co. and SRC; the Store License Agreement between Sears Home Appliance Showrooms, LLC and SRC; and the License Agreement between SHO and SRC. “SYW Agreement”
means the Shop Your Way Rewards Retail Establishment Agreement dated                     , 2012 between SHMC and SHO. 

(c) Termination of the Agreement. Neither Party may exercise its rights in this Section 2(c) if the Party or
any of its Affiliates has failed to comply with any of its material obligations in this Agreement and the failure is continuing. 
 (i) Termination for Material Breach. Subject to the next sentence and to Section 18, (A) Seller or Buyer may terminate this Agreement in the event of a material breach of this
Agreement by the other Party, including Seller’s right to terminate this Agreement if Buyer purports to assign any of its rights or delegate any of its obligations under this Agreement in contravention of Section 22(b), if the
breach is curable by the breaching Party and the breaching Party fails to cure the breach within 30 days following its receipt of written notice of the breach from the non-breaching Party. If the breach is not curable by the breaching Party, the
non-breaching Party may immediately terminate this Agreement following the non-breaching Party’s delivery of notice to the breaching Party. 
 (ii) Seller’s Right to Terminate upon a KCD Change in Control. 
 (A) Subject to the following sentences of this Section 2(c)(ii)(A), if a KCD Change in Control occurs during the Initial Term Seller may, by written notice delivered to Buyer on or before the
60th day following the effectiveness of the KCD Change in
Control, terminate this Agreement. The termination will take effect on the date that is the first anniversary (the “Section 2(c)(ii)(A) End Date”) of the date that Seller delivered the written notice to Buyer in accordance with the
preceding sentence. If the Section 2(c)(ii)(A) End Date is a date that is later than five years after the Effective Date, the Initial Term will be extended for all purposes of this Agreement to include the period ending on the 2(c)(ii)(A) End
Date unless Buyer agrees in writing that the extension will not occur. 
 (B) Subject to the following
sentences of this Section 2(c)(ii)(B), if a KCD Change in Control occurs during the First Renewal Period Seller may, by written notice delivered to Buyer on or before the 60th day following the effectiveness of the KCD Change in Control, terminate this Agreement. The termination will take
effect on the date that is the first anniversary (the “Section 2(c)(ii)(B) End Date”) of the date that Seller delivered the written notice to Buyer in accordance with the preceding sentence. If the Section 2(c)(ii)(B) End Date
is a date that is later than three years after the beginning of the First Renewal Period, the First Renewal Period will be extended for all purposes of this Agreement to include the period ending on the 2(c)(ii)(B) End Date unless Buyer agrees in
writing that the extension will not occur. 
 (C) Subject to the following sentence of this
Section 2(c)(ii)(C), if a KCD Change in Control occurs during the Second Renewal Period Seller may, by written notice delivered to Buyer on or before the 60th day following the effectiveness of the KCD Change in Control, terminate this Agreement. The termination will take
effect on the date that is the earlier of (1) the end of the Second Renewal Period and (2) the first anniversary of the date that Seller delivered the written notice to Buyer in accordance with the preceding sentence. 

  
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 (D) Upon Seller’s exercise of its right to terminate this Agreement in accordance with
Section 2(c)(ii)(A) or Section 2(c)(ii)(B) Buyer’s right to extend the Term of this Agreement in accordance with Section 2(b) will immediately terminate. 

(iii) Seller’s Rights to Immediate Termination. Seller may terminate this Agreement effective immediately upon written
notice to Buyer in the event that (A) Buyer purports to assign any of its rights or delegate any of its obligations under this Agreement in contravention of Section 22(b), (B) Buyer is unable to pay its debts as they mature or
enters into a voluntary suspension of payments or voluntary or involuntary bankruptcy, makes an assignment for the benefit of creditors, has a receiver or trustee appointed for it or for any of its property, or adopts a resolution for winding-up,
(C) a SHO Stockholding Change occurs, or (D) Buyer ceases to conduct one or more of its businesses using the “Sears” name. 
 (iv) Termination in Response to Termination of Other Agreements. Seller or Buyer may terminate this Agreement (whichever Party is entitled to terminate, the “Terminating Party”)
effective immediately upon 30-days’ advance written notice to the other Party if (A) the Terminating Party or any of its Affiliates terminates the Separation Agreement, any of the License Agreements, or the SYW Agreement as a result of a
material breach of, or a material default by, the other Party or its Affiliates of their obligations in the Separation Agreement, any of the License Agreements, or the SYW Agreement, or (B) the Terminating Party or any of its Affiliates
terminates any of the License Agreements in accordance with its terms as a result of a material breach of, or a material default by, the other Party or its Affiliates of their obligations in the License Agreement. 

(d) Seller’s Right to Terminate Its Section 3 Obligations. Seller may not exercise its rights in this
Section 2(d) if Seller or any of its Affiliates has failed to comply with any of its material obligations in this Agreement and the failure is continuing. 

(i) Subject to the following sentences of this Section 2(d)(i), if a KCD Mark Acquisition occurs during
the Initial Term Seller may, by written notice delivered to Buyer on or before the 60th day following the effectiveness of the KCD Mark Acquisition, terminate Seller’s obligations in Section 3 to sell all KCD-Branded Products that are branded with a KCD Mark that is the
subject of the KCD Mark Acquisition. The termination will take effect on the date that is the first anniversary (the “Section 2(d)(i) End Date”) of the date that Seller delivered the written notice to Buyer in accordance with the
preceding sentence. If the Section 2(d)(i) End Date is a date that is later than five years after the Effective Date, the Initial Term will be extended for all purposes of this Agreement to include the period ending on the 2(d)(i) End Date

 (ii) Subject to the following sentences of this Section 2(d)(ii), if a KCD Mark Acquisition
occurs during the First Renewal Period Seller may, by written notice delivered to Buyer on or before the 60th day following the effectiveness of the KCD Mark Acquisition, terminate Seller’s obligations in Section 3 to sell all KCD-Branded Products that are branded with a KCD Mark that is the
subject of the KCD Mark Acquisition. The termination will take effect on the date that is the first anniversary (the “Section 2(d)(ii) End Date”) of the date that Seller delivered the written notice to Buyer in accordance with the
preceding sentence. If the Section 2(d)(ii) End Date is a date that is later than three years after the beginning of the First Renewal Period, the First Renewal Period will be extended for all purposes of this Agreement to include the period
ending on the 2(d)(ii) End Date. 
 (iii) Subject to the following sentence of this Section 2(d)(iii), if a KCD
Mark Acquisition occurs during the Second Renewal Period Seller may, by written notice delivered to Buyer on 

  
 3 








 
or before the 60th day following the effectiveness of the KCD Mark Acquisition, terminate Seller’s obligations in Section 3 to sell all KCD-Branded Products that are branded with a KCD Mark that is the
subject of the KCD Mark Acquisition. The termination will take effect on the date that is the earlier of (A) the end of the Second Renewal Period and (B) the first anniversary of the date that Seller delivered the written notice to Buyer
in accordance with the preceding sentence. 
 (iv) When a termination in accordance with this Section 2(d) takes
effect Buyer’s renewal rights in Section 2(b) will immediately terminate with respect to all KCD-Branded Products that are branded with the KCD Mark or KCD Marks that are the subject of the KCD Mark Acquisition. 

(e) Seller’s Termination Rights on Appendix 5(a). Seller has termination rights that are specified on Appendix
5(a). 
 (f) Buyer’s Transition and Sell-Off Rights. Subject to the next sentence,
upon termination of this Agreement for any reason or upon expiration of this Agreement Seller will provide Buyer with all reasonable transition services (“Transition Assistance”) for a period beginning on the date of termination or
expiration and ending on or before the 180th day after
thereafter (the “Transition Period”). This Section 2(f) is not applicable if a termination of this Agreement occurs in accordance with Section 2(c)(i), Section 2(c)(ii),
Section 2(c)(iii), or Section 2(d). The Transition Assistance will include enabling Buyer to transition from the Products to the products of another provider and will include Seller’s continued sale of Products, and
continued provision of services that are necessary to implement the continued sale of Products (including all services to be provided by Seller that are described on Appendix 6), to Buyer in accordance with the terms and conditions of this
Agreement to the extent necessary for an orderly transition. During the Transition Period (i) the HTS Invoice Prices, the Outlet Invoice Prices, and Royalties will be the HTS Invoice Prices, the Outlet Invoice Prices, and the Royalties,
respectively, in effect immediately prior to the termination or expiration of this Agreement and (ii) the prices for services provided by Seller to Buyer in accordance with this Agreement will be the prices for the services in effect
immediately prior to the termination or expiration of this Agreement. For all other Transition Assistance, Seller will not charge Buyer fees that exceed Seller’s then-standard rates (taking into account the average discount Seller provides to
comparable wholesale or licensee customers). During the Transition Period Seller and Buyer will perform all of the terms and conditions of this Agreement to be performed and observed by each of them as if this Agreement were in full force and effect
during the Transition Period. During the Transition Period and thereafter Buyer will use commercially reasonable efforts to sell off all of the Products in Buyer’s inventory in accordance with the terms of this Agreement. 

3. HTS PRODUCTS. 
 (a) Seller’s Obligation to Sell. Subject to the other sentences of this Section 3(a), Sections 2(c), 2(d), and 2(e) and in accordance with
Section 6, Buyer may purchase from Seller, and Seller will sell to Buyer, all of the products that Seller from time to time purchases from Vendors that are included in the product categories listed on Appendix 3(a) (the product
categories together the “HTS Product Categories” and the products together the “HTS Products”) other than Customer-Specific Products and Non-Retail Products. A “Customer-Specific Product” is a
product that Seller sells to a customer that is a reseller (other than Buyer and Seller’s Retail Businesses) and the product includes branding, trade dress, or significant features that are unique to the customer. Buyer may purchase a
Channel-Specific Product only for resale through the sales channels that are specified for the Channel-Specific Product. A “Non-Retail Product” is a product that Seller does not sell to end-user consumers. “Seller’s
Retail Businesses” means all retail businesses operated by SHC and its subsidiaries including Sears, Kmart, Sears.com, Kmart.com, and all other retail businesses operated by one or more of them using Digital 

  
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Methods. A “Channel-Specific Product” is a product that Seller sells to all of its customers solely for sale through specified sales channels. Buyer acknowledges that
Seller’s obligations to sell the HTS Products to Buyer in accordance with this Agreement may be subject to Seller’s Vendors agreeing to sell the HTS Products to Seller for resale to Buyer on commercially reasonable terms and conditions,
over which Seller may have little or no control. Subject to Section 3(b), Seller will take all commercially reasonable actions necessary to acquire HTS Products for sale to Buyer at the best prices to Seller or its Affiliates available
from Vendors. Seller will (i) not refuse or otherwise cease to sell to Buyer any HTS Product that is available for purchase on commercially reasonable terms from a Vendor except on 12-months’ prior written notice to Buyer, and
(ii) promptly notify Buyer if a Vendor discontinues an HTS Product. 
 (b) Invoice Prices for HTS Products.
The invoice prices for the HTS Products that Seller will sell to Buyer are described on Appendix 3(b) (the “HTS Invoice Prices”). The HTS Invoice Price of each HTS Product will include (and will not be charged
additionally to Buyer) all costs of manufacturing and delivering the Products to the FOB Point, including (i) all duties and taxes (including excise and withholding taxes) payable in any country where production or delivery takes place,
(ii) all commissions to selling agents, and (iii) other incidental charges. Seller’s invoices will itemize for Buyer each 3(b) Amount described on Appendix 3(b) to the extent Seller’s systems permits itemization. If
after the Effective Date there is imposed a U.S. value-added tax that is applicable to the HTS Products Seller and Buyer will negotiate in Good Faith an amendment to this Agreement the terms of which would adjust the HTS Invoice Prices to reflect
the imposition of the tax. 
 (c) Vendor Charges. With respect to HTS Products sold to Buyer in accordance with
this Agreement, Seller may charge back to Buyer all price adjustments, charges, and penalties that Seller is obligated to pay to its Vendors that occur to the extent due to the direct result of Buyer’s act or omission, including failure to
comply with Vendor policies. 
 (d) Retail Pricing. Buyer will determine advertised prices, promotional prices,
and retail prices for all HTS Products in Buyer’s sole discretion. Any agreement or understanding to the contrary is unauthorized, in conflict with Buyer’s and Seller’s policies, and a violation of the terms and conditions of this
Agreement. Seller retains the right to offer minimum advertised price policies (“MAP”) and unilateral pricing policies (“UPP”) that Seller may apply to Buyer but only if (i) Seller applies each MAP and UPP to
all of Seller’s channels and methods of distribution, including channels and methods owned, operated, or authorized by Seller or its Affiliates, (ii) Seller applies each MAP and UPP to Buyer on a basis that does not unfairly discriminate
against Buyer, and (iii) with respect to Products that are not Seller-Branded Products, the terms and conditions of each MAP and UPP are the same as, and are necessary to enable Seller to comply with, a minimum advertised price policy or
unilateral pricing policy, of a Vendor. Seller may suspend its obligation to sell to Buyer a Product that is not a Seller-Branded Product if the Vendor of the Product suspends sales of the Product to Seller due to Buyer’s failure to comply with
a MAP or a UPP applicable to the Product. 
 (e) HTS Product Quality, Availability, and Packaging.
Subject to Section 3(a), all HTS Products that are sold by Seller or its Affiliates to other customers will be identical in all respects, to the HTS Products sold by Seller or its Affiliates to Buyer except for required changes to
packaging and labeling that are required by Applicable Law or for which Buyer bears the entire cost. Seller will use commercially reasonable efforts to include in HTS Products available to Buyer all new products and product innovations that Seller
purchases from Vendors so that Buyer will have the opportunity to offer HTS Products that are as compelling to Buyer’s end-user consumers as Seller’s comparable product offerings in its full line stores. Seller will obtain Buyer’s
prior written approval for all initial HTS Product packaging specifications and graphic designs and for all changes to them. 

  
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 4. OUTLET PRODUCTS. 

(a) Section 4 Definitions 
 (i) “DRM” means all distressed and refurbished merchandise that from time to time comes into the possession of Seller or one or more of its Affiliates (other than Lands’ End) and
that is included in a DRM Merchandise Category. 
 (ii) “DRM Merchandise Category” means each of the consumer
electronics, home appliances, lawn and garden, mattresses, sporting goods, and tools Product categories. 
 (iii)
“MOS” means marked-out-of stock merchandise described on Appendix 4(c)(ii) that from time to time comes into the possession of Seller or one or more of its Affiliates. 

(iv) “Right of First Offer” means the obligation of Seller to negotiate in Good Faith with Buyer for 20 business days
regarding the price and other material terms and conditions on which Seller would be willing to sell DRM or MOS to Buyer. 

(v) “Right of First Refusal” means Buyer’s exclusive right (but not the obligation) to purchase DRM or MOS from
Seller for the price and on the other material terms and conditions specified in this Section 4. 
 (b)
DRM. 
 (i) Selling and Buying DRM. Subject to the following subsections of this Section 4(b) and to
Section 6, during the Initial Term Seller will sell, and Buyer will purchase, all DRM at the prices listed on Appendix 4(b)(i). Merchandise that is deemed to be DRM for purposes of this Agreement will be determined consistent with
the mutual understandings of Seller and Buyer in effect on the Effective Date. 
 (ii) 175% Limit on Buyer’s DRM
Purchase Obligation. 
 (A) Subject to the next sentence, during each rolling twelve-month period that begins during the
Initial Term (each a “DRM Measurement Period”), Buyer will not be obligated to purchase from Seller more than 175% of the amount of DRM that Buyer purchased from Seller during the 12-month period that immediately preceded the
then-current DRM Measurement Period (the “DRM 175% Limit”). Buyer’s purchases of DRM Excess in accordance with Section 4(b)(ii)(B), purchases of Offered DRM in accordance with Section 4(b)(iii)(A), and
purchases of DRM in accordance with Section 4(b)(iv) will be excluded from Buyer’s purchases of DRM for the purpose of determining Buyer’s purchases of DRM in excess of the DRM 175% Limit. With respect to the first DRM
Measurement Period, which will end on the last day of the fiscal month in which the first anniversary of the Effective Date occurs, and for each of the next eleven consecutive DRM Measurement Periods (each ending on the last day of a fiscal month),
the purchase volumes for the applicable number of months immediately preceding the Effective Date will be used to determine Buyer’s rights in accordance with the first sentence of this Section 4(b)(ii)(A). The amount of DRM in
excess of the DRM 175% Limit is referred to as the “DRM Excess.” Buyer will notify Seller in writing with respect to each exercise by Buyer of its 

  
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rights not to purchase the DRM Excess in accordance with this Section 4(b)(ii)(A) (each a “DRM 175% Notice”). Buyer will deliver the DRM 175% Notice within 10 days
after the date Buyer’s purchases during a DRM Measurement Period equal or first exceed the DRM 175% Limit. 
 (B) Seller will obtain a bona fide offer from an unrelated third party to purchase all, and not less than all, of the DRM Excess (the “DRM Third-Party Offer”), with the unrelated
third-party’s obligation to begin purchasing the DRM Excess to occur not later than the 20th day following Buyer’s delivery of the DRM 175% Notice (the “DRM Excess Purchase Start Date”). Seller will notify Buyer of the price and the other material terms of the DRM
Third-Party Offer (including the frequency of purchases of the DRM Excess) not later than the 15th day prior to the DRM Excess Purchase Start Date. Buyer will have a Right of First Refusal (the “DRM Excess Right of First Refusal”) to purchase all, and not less than all, of the DRM
Excess at a price equal to the price specified in the DRM Third-Party Offer (the “DRM Excess Price”). To exercise the Right of First Refusal Buyer must (1) notify Seller not later than the 10th day prior to the DRM Excess Purchase Start Date that Buyer will
exercise the DRM Excess Right of First Refusal and (2) begin paying the DRM Excess Price, and begin purchasing the DRM Excess, on the DRM Excess Purchase Start Date. If Buyer does not exercise the DRM Excess Right of First Refusal in accordance
with this Section 4(a)(ii)(B) Seller will be free to sell all, and not less than all, of the DRM Excess to the unrelated third party at a price no less than the DRM Excess Price in accordance with a binding agreement between Seller and
the unrelated third party. If Seller does not enter into a binding agreement with the unrelated third party in accordance with the preceding sentence with respect to the DRM Excess or ceases to sell the DRM Excess to the unrelated third party, Buyer
will have a Right of First Offer with respect to the DRM Excess. 
 (iii) Termination of DRM
Selling/Buying obligations. The obligation of Seller to sell and of Buyer to purchase DRM in a DRM Merchandise Category in accordance with Section 4(b)(i) will end on the 111th day following the third anniversary or the fourth anniversary of the Effective Date, whichever is applicable (the
111th day, the “End Date”), but only if
the following two conditions are satisfied: 
 (A) Seller, not earlier than the 60th day and not later than the 90th day following the third anniversary or the fourth anniversary of the
Effective Date, as the case may be, offers by a written notice delivered to Buyer (the date the notice is delivered, “Offered DRM Notice Date”) a Right of First Refusal (the “Offered DRM Right of First Refusal”) to
purchase all identified items comprising one or more of the DRM Merchandise Categories as of the Offered DRM Notice Date (the “Offered DRM”) for the price and on the other material terms and conditions (including completing the purchase
not earlier than 10 days after, and not later than 15 days after, the Offered DRM Notice Date) specified in a bona fide offer to Seller from an unrelated third party for the entire Offered DRM (and the offer has not been withdrawn) (the
“Offered DRM Third-Party Offer”) and 
 (B) Buyer fails to exercise the Offered DRM Right
of First Refusal by (1) delivering written notice to Seller on or before the 5th day following the Offered DRM Notice Date of Seller’s intention to purchase the Offered DRM on the same terms and conditions as the terms and conditions of the Offered DRM Third-Party Offer, and
(2) completing the purchase of the entire Offered DRM on the same terms and conditions as the terms and conditions of the Offered DRM Third-Party Offer. 
 (iv) Failure to Exercise Offered DRM Right of First Refusal. If Buyer fails to exercise in accordance with Section 4(b)(iii)(A) the Offered DRM Right of First Refusal, Seller will be
free to sell all, and not less than all, of the entire Offered DRM to one unrelated third party upon the terms 

  
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and conditions of the Offered DRM Third-Party Offer. If Seller does not sell all, and not less than all, of the Offered DRM to one unrelated third party upon the terms and conditions of the
Offered DRM Third-Party Offer, Buyer will have a Right of First Offer for the remainder of the Term with respect to (1) the Offered DRM, and (2) a continuing Right of First Offer with respect to all additional DRM available in the future
that was in the same DRM Merchandise Category as the Offered DRM. 
 (c) MOS. 

(i) Selling and Buyer MOS. Subject to the following subsections of this Section 4(c) and to Section 6,
during the Initial Term Seller will sell, and Buyer will purchase, all MOS. Merchandise that is deemed to be MOS for purposes of this Agreement will be determined consistent with the mutual understandings of Seller and Buyer in effect on the
Effective Date. 
 (ii) MOS Invoice Prices; Negotiated Price Changes. The invoice prices for MOS for the first three
12-month periods during the Initial Term are reflected on Appendix 4(c)(ii). At the end of the third 12-month period of the Initial Term and the end of the fourth 12-month period of the Initial Term, Seller and Buyer will negotiate in
Good Faith the invoices prices for MOS for each remaining 12-month period of the Initial Term. If the required negotiations at the end of the third 12-month period and the end of the fourth 12-month period of the Initial Term result in agreed-upon
invoice prices for all categories of MOS for the fourth 12-month period and the fifth 12-month period of the Initial Term, as the case may be, those prices will become the invoice prices for all categories of MOS effective for the entire fourth
12-month period and the entire fifth 12-month period, as the case may be. 
 (iii) Price Changes Not Negotiated;
Selling/Buying Obligations End. If Seller and Buyer are unable at the end of the third 12-month period of the Initial Term to negotiate an invoice price for one or more categories of MOS, then for the remainder of the Initial Term
(i) Seller’s obligations to sell, and Buyer’s obligations to purchase, MOS in these categories in accordance with Section 4(c)(i) will end, and (ii) Seller will give Buyer a continuing Right of First Offer with
respect to all MOS in these categories. If the required negotiations at the end of the third 12-month period result in agreed-upon invoice prices for all categories of MOS for the fourth 12-month period but Seller and Buyer are unable at the end of
the fourth 12-month period to negotiate an invoice price for one of more categories of MOS for the fifth 12-month period of the Initial Term, then for the remainder of the Initial Term (y) Seller’s obligations to sell, and Buyer’s
obligations to purchase, MOS in these categories in accordance with Section 4(c)(i) will end, and (z) Seller will give Buyer a continuing Right of First Offer with respect to all MOS in these categories. 

(iv) 175% Limit on Buyer’s MOS (Non-Apparel) Purchase Obligation. 

(A) Subject to the next sentence, during each rolling twelve-month period that begins during the Initial Term (each a “MOS
(Non-Apparel) Measurement Period”), Buyer will not be obligated to purchase from Seller more than 175% of the amount of MOS (non-apparel) that Buyer purchased from Seller during the 12-month period that immediately preceded the then-current
MOS (Non-Apparel) Measurement Period (the “MOS (Non-Apparel) 175% Limit”). Buyer’s purchases of MOS (non-apparel) in accordance with a MOS Right of First Offer and purchases of MOS (Non-Apparel) Excess in accordance with
Section 4(c)(iv)(B) will be excluded from Buyer’s purchases of MOS (non-apparel) for the purpose of determining Buyer’s purchases of MOS (non-Apparel) in excess of the MOS (Non-Apparel) 175% Limit. With respect to the first MOS
(Non-Apparel) Measurement Period, which will end on the last day of the fiscal month in which the first anniversary of the Effective Date occurs, and for each of the next eleven consecutive MOS (Non-Apparel) Measurement Periods (each ending on the


  
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last day of a fiscal month), the purchase volumes for the applicable number of months immediately preceding the Effective Date will be used to determine Buyer’s rights in accordance with the
first sentence of this Section 4(c)(iv)(A). The amount of MOS (non-apparel) in excess of the MOS (Non-Apparel) 175% Limit is referred to as the “MOS (Non-Apparel) Excess.” Buyer will notify Seller in writing with respect
to each exercise by Buyer of its rights not to purchase the MOS (Non-Apparel) Excess in accordance with this Section 4(c)(iv)(A) (each a “MOS (Non-Apparel) 175% Notice”). Buyer will deliver the MOS (Non-Apparel) 175%
Notice within 20 days after the date Buyer’s purchases during a MOS (Non-Apparel) Measurement Period equal or first exceed the MOS (Non-Apparel) 175% Limit. 

(B) Seller will obtain a bona fide offer from an unrelated third party to purchase all, and not less than
all, of the MOS (Non-Apparel) Excess (the “MOS (Non-Apparel) Third-Party Offer”), with the unrelated third-party’s obligation to begin purchasing the MOS (Non-Apparel) Excess to occur not later than the 20th day following Buyer’s delivery of the MOS (Non-Apparel) 175%
Notice (the “MOS (Non-Apparel) Excess Purchase Start Date”). Seller will notify Buyer of the price and the other material terms of the MOS (Non-Apparel) Third-Party Offer (including the frequency of purchases of the MOS
(Non-Apparel) Excess) not later than the 15th day prior to
the MOS (Non-Apparel) Excess Purchase Start Date. Buyer will have a Right of First Refusal (the “MOS (Non-Apparel) Excess Right of First Refusal”) to purchase all, and not less than all, of the MOS (Non-Apparel) Excess at a price
equal to the price specified in the MOS (Non-Apparel) Third-Party Offer (the “MOS (Non-Apparel) Excess Price”). To exercise the Right of First Refusal Buyer must (1) notify Seller not later than the 10th day prior to the MOS (Non-Apparel) Excess Purchase Start Date that
Buyer will exercise the MOS (Non-Apparel) Excess Right of First Refusal and (2) begin paying the MOS (Non-Apparel) Excess Price, and begin purchasing the MOS (Non-Apparel) Excess, on the MOS (Non-Apparel) Excess Purchase Start Date. If Buyer
does not exercise the MOS (Non-Apparel) Excess Right of First Refusal in accordance with this Section 4(c)(iv)(B) Seller will be free to sell all, and not less than all, of the MOS (Non-Apparel) Excess to the unrelated third party at a
price no less than the MOS (Non-Apparel) Excess Price in accordance with a binding agreement between Seller and the unrelated third party. If Seller does not enter into a binding agreement with the unrelated third party in accordance with the
preceding sentence with respect to the MOS (Non-Apparel) Excess or ceases to sell the MOS (Non-Apparel) Excess to the unrelated third party, Buyer will have a Right of First Offer with respect to the to the MOS (Non-Apparel) Excess. 

(v) 175% Limit on Buyer’s MOS (Apparel) Purchase Obligation. 

(A) Subject to the next sentence, during each twelve-month period that begins during the Initial Term and includes Seller’s
Fall-Winter mark-out period and Seller’s Spring-Summer mark-out period (each a “MOS (Apparel) Measurement Period”), Buyer will not be obligated to purchase from Seller more than 175% of the amount of MOS apparel that Buyer
purchased from Seller during the 12-month period that immediately preceded the then-current MOS (Apparel) Measurement Period (the “MOS (Apparel) 175% Limit”). Buyer’s purchases of MOS apparel in accordance with a MOS Right of
First Refusal and purchases of MOS (Apparel) Excess in accordance with Section 4(c)(iv)(B) will be excluded from Buyer’s purchases of MOS (apparel) for the purpose of determining Buyer’s purchases of MOS (apparel) in excess of
the MOS (Non-Apparel) 175% Limit. The first MOS (Apparel) Measurement Period will include Seller’s 2012 Fall-Winter mark-out period and Seller’s 2013 Spring-Summer mark-out period and the purchase volumes for the 12-month period that
included Seller’s 2011 Fall-Winter mark-out Period and Seller’s 2012 Spring-Summer mark-out Period will be used to determine Buyer’s rights in accordance with the first sentence of this Section 4(c)(v)(A). The amount of
MOS (apparel) in excess of the MOS (Apparel) 175% Limit is referred to as the “MOS (Apparel) Excess.” Buyer will notify Seller in writing with respect to each exercise by Buyer of its rights not to


  
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purchase the MOS (Apparel) Excess in accordance with this Section 4(c)(v)(A) (each a “MOS (Apparel) 175% Notice”). Buyer will deliver the MOS (Apparel) 175% Notice
within 20 days after the date Buyer’s purchases during a MOS (Apparel) Measurement Period equal or first exceed the MOS (Apparel) 175% Limit. 
 (B) Seller will obtain a bona fide offer from an unrelated third party to purchase all, and not less than all, of the MOS (Apparel) Excess (the “MOS (Apparel) Third-Party Offer”),
with the unrelated third party’s obligation to begin purchasing the MOS (Apparel) Excess to occur not later than the
20th day following Buyer’s delivery of the MOS
(Apparel) 175% Notice (the “MOS (Apparel) Excess Purchase Start Date”). Seller will notify Buyer of the price and the other material terms of the MOS (Apparel) Third-Party Offer (including the frequency of purchases of the MOS
(Apparel) Excess) not later than the 15th day prior to the
MOS (Apparel) Excess Purchase Start Date. Buyer will have a Right of First Refusal (the “MOS (Apparel) Excess Right of First Refusal”) to purchase all, and not less than all, of the MOS (Apparel) Excess at a price equal to the price
specified in the MOS (Apparel) Third-Party Offer (the “MOS (Apparel) Excess Price”). To exercise the Right of First Refusal Buyer must (1) notify Seller not later than the 10th day prior to the MOS (Apparel) Excess Purchase Start Date that Buyer
will exercise the MOS (Apparel) Excess Right of First Refusal and (2) begin paying the MOS (Apparel) Excess Price, and begin purchasing the MOS (Apparel) Excess, on the MOS (Apparel) Excess Purchase Start Date. If Buyer does not exercise the
MOS (Non-Apparel) Excess Right of First Refusal in accordance with this Section 4(c)(v)(B) Seller will be free to sell all, and not less than all, of the MOS (Apparel) Excess to the unrelated third party at a price no less than the MOS
(Apparel) Excess Price in accordance with a binding agreement between Seller and the unrelated third party. If Seller does not enter into a binding agreement with the unrelated third party in accordance with the preceding sentence with respect to
the MOS (Apparel) Excess or ceases to sell the MOS (Apparel) Excess to the unrelated third party, Buyer will have a Right of First Offer with respect to the to the MOS (Apparel) Excess. 

(d) Right of First Offer for Additional Categories. Buyer will have a continuing Right of First Offer to purchase all of
Seller’s (i) discontinued and obsolete products, (ii) overstock products and home goods and furniture that were new and still in original packaging, (iii) distressed, refurbished, discontinued, and obsolete home goods and
furniture, and (iv) marked-out-of-stock footwear. 
 (e) Rights of First Offer. Seller may comply with its
obligations with respect to each Right of First Offer provided in this Section 4 by notifying Buyer once during each calendar quarter as to the DRM or MOS, as the case may be, that is subject to the Right of First Offer. If with respect
to a Right of First Offer Buyer fails during any 12-month period to engage in Good Faith negotiations for 50% or more of Seller’s notifications in the preceding sentence for the Right of First Offer, Seller’s obligations, and Buyer’s
rights, with respect to the Right of First Offer will terminate. 
 (f) Retail Pricing. Buyer will determine
advertised prices, promotional prices, and retail prices for DRM, MOS, and all other Products acquired from Seller in accordance with this Section 4 (together, “Outlet Products”) in Buyer’s sole discretion. Any
agreement or understanding to the contrary is unauthorized, in conflict with Buyer’s and Seller’s policies, and a violation of the terms and conditions of this Agreement. 

(g) Invoice Prices for Outlet Products. The invoice prices for the Outlet Products that Seller will sell to Buyer in
accordance with this Section 4 (the “Outlet Invoice Prices”) will include (and will not be charged additionally to Buyer) all costs of manufacturing and delivering the Outlet Products to the FOB Point, including
(i) all duties and taxes (including excise and withholding taxes) payable in any 

  
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country where production or delivery takes place, (ii) all commissions to selling agents, and (iii) other incidental charges. If after the Effective Date there is imposed a U.S.
value-added tax that is applicable to the Outlet Products Seller and Buyer will negotiate in Good Faith an amendment to this Agreement the terms of which would adjust the Outlet Invoice Prices to reflect the imposition of the tax. Buyer will have 20
days from Buyer’s receipt to return to Seller Outlet Products that are not saleable. If with respect to an Outlet Product Buyer does not notify Seller in accordance with the preceding sentence that the Outlet Product is not saleable,
Buyer’s purchase of the Outlet Product will be final 
 (h) Outlet Product Restrictions. Buyer acknowledges
that Seller’s obligations to sell the Outlet Products to Buyer in accordance with this Agreement may be subject to Seller’s Vendors agreeing to permit Seller to sell the Outlet Products to Buyer for resale in accordance with this
Section 4, over which Seller may have little or no control. Seller will take all commercially reasonable actions necessary to be able to sell the Outlet Products to Buyer in accordance with this Section 4. If an agreement
with a Vendor in effect as of the Effective Date includes a provision that requires Seller to return Outlet Products to the Vendor, the provisions of that agreement will prevail over the provisions of this Section 4. On and after the Effective Date
Seller will not enter into an agreement with a Vendor that requires Seller to return Outlet Products to the Vendor absent Buyer’s consent. 
 5. ROYALTIES. 
 (a) Quarterly Royalty Reports; Royalties
Payable. Within 15 days following the end of each of Buyer’s fiscal quarters during the Term and during any sell-off period in accordance with Section 2(f), Buyer will submit to Seller a true and correct report for
the fiscal quarter of Gross Sales, Net Sales, and Royalties for each KCD-Branded Product sold by Buyer to a customer during the fiscal quarter (each a “Royalty Report”). “Gross Sales” means the total
amount of specified merchandise sold, other than among a Party and its Affiliates, without deduction of any kind (including deductions for separately invoiced freight and insurance, bad debts, and uncollectible accounts). “Net
Sales” means Gross Sales less all returns of the specified merchandise and all adjustments to resolve customer complaints and without any other deduction (including deductions for cash discounts, freight discounts, advertising
discounts, and uncollectable amounts). “Royalties” for a Buyer fiscal quarter means the royalties payable by Buyer with respect to its Net Sales of each category of KCD-Branded Products at the Royalty Rates specified on Appendix
5(a), less the Kenmore Royalty Credit for the fiscal quarter determined as specified on Appendix 5(a) but subject to Section 5(c) and Section 5(d). Buyer will pay Royalties at the times specified in
Section 7(b). Buyer will include with each Royalty Report a certificate from a Senior Vice President of Buyer certifying, to the Senior Vice President’s best knowledge after due inquiry, (i) that the contents of the Royal
Report are true and correct and (ii) whether during the fiscal quarter Buyer complied with Section 5(c) and Section 5(d). 
 (b) Adjustments. If Buyer or Seller discover any inconsistencies or mistakes in a Royalty Report, Buyer will deliver an updated Royalty Report within 30 days of such discovery
rectifying the inconsistencies or mistakes and, if Royalties have been under-reported, Buyer will, with delivery of the updated Royal Report, simultaneously tender the under-paid Royalties to Seller. If Buyer has over paid Royalties, Buyer will
identify the amount of the over payment in its updated Royalty Report and Seller will credit the amount of the overpayment against amounts due in subsequent Payment Periods after Seller has confirmed that a credit is due. 

(c) Featuring Kenmore-Branded Product. Subject to the next sentence, to be eligible for the Kenmore Royalty Credit for a
Buyer fiscal quarter Buyer will during the fiscal quarter (i) use commercially reasonable efforts to feature Products sold under the Kenmore Mark (“Kenmore-Branded Products”) in all pre-prints and free-standing inserts created
by Buyer for the Sears Hometown Store, Sears Home Appliance Showroom, and Sears Hardware Store formats, and (ii) use commercially reasonable efforts to feature Kenmore-Branded Products on the cover of all preprints created by Buyer in the Sears
Hometown Store and Sears Home Appliance Showroom formats. In no event during the Buyer fiscal quarter will Buyer feature Kenmore-Branded Products (x) on the cover of less than 95% of all pre-prints and free-standing inserts created by Buyer for
the Sears Hometown Store, Sears Home Appliance Showroom, and Sears Hardware Store formats, (y) on the cover of less than 95% of all preprints created by Buyer in the Sears Hometown Store and Sears Home Appliance Showroom formats, and
(z) on the cover of less than 50% of the preprints created by Buyer in the Sears Hardware Store formats. 

  
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 (d) Minimum Commission. To be eligible for the Kenmore Royalty Credit for a
Buyer fiscal quarter Buyer will during the fiscal quarter pay the Franchisees and the owners of the Sears Hometown Stores the Average Aggregate Minimum Commission specified on Appendix 5(d) on sales of Products. 

(e) Record Retention; Audit Rights. Buyer will keep and preserve accurate records of each transaction relating to
Buyer’s calculations of Royalties, Kenmore Royalty Credit, and Average Aggregate Minimum Commission for the longer of (i) the minimum period required by Applicable Law, and (ii) two years following the applicable transaction. Upon
Seller’s reasonable request Buyer will provide Seller with information that will enable Seller to confirm Buyer’s calculations of Royalties, Kenmore Royalty Credit, and Average Aggregate Minimum Commission. Seller, with reasonable notice
to Buyer, may during normal business hours conduct audits of the books and records of Buyer to confirm Buyer’s calculations of Royalties, Kenmore Royalty Credit, and Average Aggregate Minimum Commission (each an “Audit”).
Subject to the next sentence, Audits may occur no more than twice per calendar year and may be conducted by Seller’s employees, by Seller’s authorized agents, or by a combination of the two, in each case only if each person participating
in an Audit agrees to treat all information with respect to the Audit as confidential in accordance with Section 13(b). If an Audit or other information demonstrates that Buyer under-reported a Royalty or over-reported a Kenmore Royalty
Credit by more than 5% with respect to two or more Buyer fiscal months, or Buyer fiscal quarters, as the case may be, Seller has the right to conduct Audits on a quarterly basis until such time as Buyer has properly reported Royalties and Kenmore
Royalty Credits for three consecutive Audits, after which time Seller’s rights in accordance with this Section 5(e) will revert to conducting Audits no more than twice per calendar year. Seller will pay for all Audits but if an
Audit shows a 5% or greater discrepancy in the amount of the Royalty or Kenmore Royalty Credit calculated by Buyer for a Buyer fiscal month or Buyer fiscal quarter, as the case may be, then Buyer will pay for that Audit and all subsequent Audits for
a period of one year. 
 6. INVENTORY MANAGEMENT POLICES AND PROCESSES; DELIVERY TERMS. With respect to Seller’s
obligations in Section 3(a) and Section 4, Buyer and Seller will comply with the Inventory Management Policies and Processes specified on Appendix 6 (the “Inventory Policies and Processes”). Seller
will deliver all Products to the applicable FOB Point in accordance with the Inventory Policies and Processes. When Seller delivers a Product to the FOB Point in accordance with this Section 6 Seller’s title to, and risk of loss
with respect to, the Product will end. 
 7. PAYMENT TERMS FOR INVOICE PRICES AND ROYALTIES 

(a) Invoice Prices for Products. Seller will invoice Buyer for Products sold to Buyer no earlier than the date the invoiced
Products are delivered to the FOB Point. “FOB Point” means a Sears Hometown Store, a Sears Hardware Store, a Sears Outlet Store, a store operated by a Franchisee, the residence of a customer of any of these stores, or a distribution
facility to which a Product is delivered in accordance with Buyer’s instructions. Not later than the Payment Due Date specified on Appendix 7(a), Buyer will pay for the undisputed portion of each invoice and notify Seller of any disputed
amount and the reason for the dispute,. 
 (b) Royalties. During the period that Buyer’s Stores use
Seller’s point-of-sale system (the “POS”) to record all sales of Products, Buyer will pay to Seller the Royalty due, as determined by the 

  
 12 









 
POS, for each of Buyer’s fiscal weeks not later than the Payment Due Date specified on Appendix 7(a). If Buyer’s Stores cease to use the POS, Buyer will pay to Seller the Royalty
due, as determined from the Royalty Reports in accordance with Section 5, for each Buyer fiscal quarter not later than the Payment Due Date specified on Appendix 7(a). 

8. SUBSIDIES AND MARKETING/MERCHANDISING SUPPORT. 

(a) Vendor Subsidies. Subject to the next sentences of this Section 8(a), Seller
will pay to Buyer the Subsidy Pro Rata Share of each Vendor Subsidy that Seller collects (by actual payment or as a credit against a Seller obligation) with respect to the Product categories sold by Seller to Buyer except to the extent that Seller
is prohibited by the terms of a Vendor contract from paying a Subsidy Pro Rata Share to Buyer and except to the extent that a Vendor refuses to pay to Seller a Vendor Subsidy with respect to Seller’s sales of Products to Buyer. Vendor Subsidies
do not include 10(c)(i) Payments. Vendor Subsidies received for the following will not be allocated between Seller and Buyer on a Subsidy Pro Rata Share basis: (i) “HotBuys/Door Buster” items will be allocated on an actual specific
units sold basis; (ii) training events (such as Home Appliance Roadshow), Hometown Celebration, and Powerama) will be allocated to Buyer to the extent it is incurring the related expense; (iii) new store locations will be allocated to
Buyer with respect to the Buyer Store locations for which the Vendor Subsidy is applicable; (iv) Buyer-specific transition merchandise subsidies will be allocated to Buyer only; (v) Seller-specific transition merchandise subsidies will be
allocated to Seller only; (vi) Buyer-specific fixture subsidies will be allocated to Buyer only; and (vii) Seller-specific fixture subsidies will be allocated to Seller only. Seller will in Good Faith use commercially reasonable efforts to
maximize the Vendor Subsidies and to obtain Vendors’ permission to share all Vendor Subsidies with Buyer in accordance with this Section 8(a). “Subsidy Pro Rata Share” of a Vendor Subsidy paid by the Vendor with
respect to, or in connection with, a Product category means a fraction the numerator of which is Buyer’s total fiscal year-to-date sales of Products in the Product category and the denominator of which is Seller’s total fiscal year-to-date
sales of Products in the Product category. Seller will calculate Subsidy Pro Rata Share on a fiscal monthly basis and pay the Subsidy Pro Rata Share to Buyer by the 15th day of the next fiscal month. “Vendor Subsidy” means support or assistance payments from Vendors
relating to merchandise sold or the Vendor-customer relationship and include (regardless as to how they are entitled) advertising and marketing allowances, brand-building subsidies, display subsidies, electronic efforts subsidies, fixed-percentage
subsidies, fixture subsidies, markdown support, new-outlet subsidies, product-return assistance, quality-assurance subsidies, reset subsidies, signage subsidies, transition-support subsidies, volume incentive discounts, and similar Vendor support
and assistance. 
 (b) Product Information Support. Seller agrees to provide to Buyer the following Product
promotional and information support: 
 (i) Marketing and Promotional Materials. Seller will provide to Buyer a
reasonable supply of customer literature and other marketing and promotional items for the Products, consistent with past practices and conditioned on the provision of marketing materials to Seller by its Vendors. 

(ii) Electronic Efforts. Seller will support Buyer’s electronic marketing, distribution, logistic, accounting and sales
efforts by providing to Buyer in electronic format (or other format reasonably requested by Buyer) such Product descriptions, text, high-resolution Product images (including supplemental feature shots), audio, video and other web content that Seller
has prepared for its own use as Buyer reasonably requests from time to time for any website that is owned or controlled by Buyer (including any product specific site or Micro site) or any other Internet-based application relating to the Products.
Seller and Buyer will negotiate in Good Faith the appropriate pro rata charges that Buyer would pay for these services. 

  
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 (c) Other Support. Periodically during the Term, Buyer and Seller will
negotiate to determine the level of Seller’s support required to successfully implement Product launches and other promotional initiatives as mutually agreed upon by the Parties to support the sale of the Products. Such support will be
determined on a case by case basis in view of competitive conditions in the marketplace and will be documented through a promotional agreement, consistent with past practices and conditioned on the further support of Seller’s Vendors.

 9. CUSTOMERS AND TRADE AREAS. 
 (a) General. Nothing in this Section 9 or elsewhere in this Agreement limits or restricts in any way whatsoever the unrestricted rights of each of Seller and its Affiliates to
market or sell Products, other merchandise, or services by Digital Methods or the unrestricted rights of Buyer and its Affiliates to market or sell Products other than Seller-Branded Products, other merchandise, or services by Digital Methods. The
rights of Buyer and its Affiliates to sell Seller-Branded Products by Digital Methods are subject to Section 12(a)(iii)(B)(z). “Digital Methods” means promoting and selling by all current and future electronic means,
channels, processes, and methods, including via the Internet. In this Section 9 (i) all references to “stores,” “Stores,” and “Showrooms” refer only to “brick and
mortar” physical locations, and (ii) all references to “new” and “New” stores, Stores, or Showrooms refer to stores, Stores or Showrooms that first open for business on or after the Effective Date. 

(b) Buyer. 
 (i) HTS Stores. Buyer and its Affiliates may continue to, and may authorize others to continue to, own, license, franchise, and otherwise operate at all times after the Effective Date the Sears
Hometown Stores, Sears Home Appliance Showrooms, and Sears Hardware Stores owned, licensed, franchised, or otherwise operated on or before the Effective Date (together, the “Existing HTS Stores”). Buyer and its Affiliates may open,
own, license, franchise, and otherwise operate, and may authorize others (except Seller Competitors), to own, license, franchise, and otherwise operate, at all times after the Effective Date new Sears Hometown Stores, new Sears Home Appliance
Showrooms, and new Sears Hardware Stores (“New HTS Stores”) without restriction, except that neither Buyer nor its Affiliates may open, own, license, franchise, or otherwise operate, or authorize others to operate, a New HTS Store
or any other new store in any Metropolitan Statistical Area (as defined by the United States Office of Management and Budget) unless one of the following applies to the New HTS Store or the other new store: 

(A) The New HTS Store or other new store is listed on Appendix 9(b)(i)(A); 

(B) The New HTS Store or other new store is at least eight miles (using the most logical driving route) from all existing Seller-owned
or operated stores branded with the name “Sears” (“Sears Stores”), 
 (C) The New HTS Store or other
new store is between five miles and eight miles (using the most logical driving route) from all existing Sears Stores and Buyer and Seller agree in writing that Buyer will pay Seller annually 30% of the New HTS Store’s or other new store’s
annual EBITDA, if any, for the first five of Buyer’s fiscal years that the New HTS Store or other new store is open for business, or 

  
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 (D) The New HTS Store or other new store distributes products primarily on a rent-to-own
basis. 
 (ii) Sears Outlet Stores. Buyer and its Affiliates may continue to own and operate all Sears Outlet
Stores owned and operated on the Effective Date without restriction. Buyer may open, own, and operate after the Effective Date new Sears Outlet Stores without restriction. 
 (c) Seller. 
 (i) Existing Stores. Seller and its Affiliates
may continue to, and may authorize others to continue to, own and operate after the Effective Date all stores owned and operated by them on the Effective Date. Subject to the next sentence, after the Effective Date Seller and its Affiliates may open
new stores, and authorize Authorized Stores, using store names used by Seller and its Affiliates on the Effective Date without restriction. After the Effective Date Seller and its Affiliates may not do any of the following: 

(A) in any MicroSA open, own, or operate any new store, or authorize in any MicroSA any new Authorized Store, that is (1) branded
with any Mark that includes “Kenmore,” “Craftsman,” or “DieHard,” or (2) a Sears Store; 

(B) open, own, or operate any new store, or authorize any new Authorized Store, that is substantially similar to one or more of the
Sears Hometown Stores, Sears Home Appliance Showrooms, or Sears Outlet Stores formats existing on the Effective Date; or 
 (C)
open, own, or operate any new store, or authorize any new Authorized Store, that markets or sells, or authorizes (via a license agreement, operating agreement, or otherwise) any natural person, business entity, or non-entity business enterprise to
market or sell, any item of Exclusive Merchandise at a store physically located in any Zip Code area with respect to which, and to the extent, Buyer or any Affiliate of Seller has agreed with the owner of an HTS Store to refrain from selling
Exclusive Merchandise in the Zip Code area. 
 (ii) Defined Terms. “Authorized Store” means a store
(A) that is authorized by Seller or its Affiliates pursuant to a license agreement, an operating agreement, or otherwise to market or sell merchandise, or (B) to which Seller or its Affiliates sell merchandise. “Exclusive
Merchandise” means the following merchandise identified by the “Kenmore” name: (U) clothes washers; (W) clothes dryers; (X) dishwashers; (Y) ranges; and (Z) full-size refrigerators.
“MicroSA” means a Micropolitan Statistical Area (as defined by the United States Office of Management and Budget). 
 (d) Growth. Buyer and Seller will negotiate in Good Faith with respect to each request by Buyer to sell Seller-Branded Products to Buyer’s Affiliates, Franchisees, or licensees at
“brick and mortar” physical locations outside the United States of America (including its unincorporated territories Guam, Puerto Rico, and the United States Virgin Islands) and Bermuda (together, the “Territory”).

 (e) New HTS Stores and Renewals-Exclusivity. After the Effective Date SHO will not enter into an Authorizing
Agreement for a new HTS Store that includes, or amend an Authorizing Agreement to add, product-exclusivity rights. If after the Effective Date Buyer in its discretion elects to renew, or permits the assignment of, an Authorizing Agreement for a
Sears Hometown Store that includes product-exclusivity rights, Buyer will use commercially reasonable efforts to seek to renew, or permit the assignment of, the Authorizing Agreement on terms and conditions that eliminate the product-exclusivity


  
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rights effective upon the renewal or the assignment. “Authorizing Agreement” means an agreement authorizing an unrelated third-party owner or Franchisee to operate an HTS Store
and includes Buyer’s franchise agreements and dealer agreements. 
 10. PRODUCT WARRANTIES AND RETURNS. 

(a) Product Warranties. 
 (i) KCD-Branded Products. With each KCD-Branded Product Seller will include Seller’s customer warranty (the “Seller Warranty”). If Seller sells the KCD-Branded Product
through Seller’s Retail Businesses, the duration and coverage of the Seller Warranty will be no less favorable to Buyer’s customers than the duration and coverage of the most-favorable-to-customer warranty provided by Seller for the
KCD-Branded Product when sold by Seller’s Retail Businesses. If Seller does not sell the Product through Seller’s Retail Businesses, the duration and coverage of the Seller Warranty will be no less favorable to Buyer’s customers than
the duration and coverage of the most-favorable-to-customer warranty provided by Seller for a product that is comparable to the Product when sold by Seller’s Retail Businesses. 

(ii) All Other Products; Vendor-Warranty Assignment. With each Product other than a KCD-Branded Product (the
“Other Products”) Seller will include the Vendor’s customer warranty (the “Vendor Warranty”). If Seller sells the Other Product through Seller’s Retail Businesses, the duration and coverage of the Vendor
Warranty will be no less favorable to Buyer’s customers than the duration and coverage of the Vendor Warranty that the Vendor includes with the Other Product sold by Seller’s Retail Businesses. If Seller does not sell the Other Product
through Seller’s Retail Businesses, the duration and coverage of the Vendor Warranty will be no less favorable to Buyer’s customers than the duration and coverage of the most-favorable-to-customer warranty provided by Vendor for the Other
Product when sold by Vendor to its other customers. Seller assigns to Buyer all Vendor Warranties and all other assignable warranties, representations, covenants, and indemnities granted to Seller by its Vendors related to Other Products, and all
remedies for breach of the Vendor Warranties and all other warranties, representations, covenants, and indemnities (each a “Right”). To the extent that Seller is not permitted to assign one or more Rights to Buyer, Seller will
use commercially reasonable efforts to enforce the Rights on behalf of Buyer and to cause the Vendor to assume and bear financial responsibility for the Vendor Warranties in accordance with their terms. The Seller Warranty and the Vendor Warranty
are together referred to as the “Warranty.” 
 (iii) Compensation to Seller for Seller Warranty;
Termination. Subject to the following sentences of this Section 10(a)(iii), (A) as Seller’s sole compensation for the Seller Warranty for a KCD-Branded Product that is an HTS Product, the HTS Invoice Price described on Appendix
3(b) includes a charge for the Seller Warranty, and (B) as Seller’s sole compensation for the Seller Warranty for a KCD-Branded Product that is an Outlet Product, Seller’s charge for the Seller Warranty is included in
“Outlet’s Cost” specified in Table B on Appendix 4(b)(i) (the compensation described in clauses (A) and (B), together, “Seller’s Compensation”). Seller will perform its obligations in Section 10(a)(ii)
without any additional compensation payable by Buyer to Seller, in exchange for which Seller will have no responsibility to Buyer or any of its customers with respect to the scope and coverage of the Vendor Warranty. Seller and Buyer will negotiate
in Good Faith Seller’s Compensation for the one-year period beginning on the second anniversary of the Effective Date and thereafter annually for each succeeding one-year period. If at the end of any one-year period Seller and Buyer have been
unable to negotiate Seller’s Compensation for the next one-year period, (i) the warranty, returns, and repair policies and practices for all Products will become the policies and practices between Seller and its Affiliates and the businesses
comprising Buyer’s businesses in effect immediately prior to the Effective Date, and (ii) Seller or Buyer may terminate the applicability of this Section 10 and Section 11, together and not separately, with respect to all Products
upon 60-days’ prior written notice delivered to the other on or before the 30th day following the end of the preceding one-year period. 
 (iv) KCD-Branded Product Registration. Buyer will use commercially reasonable efforts to cause its Franchisees and the owners of the Sears Hometown Stores to display signage in their stores that
reminds customers to register all KCD-Branded Products through the website or toll-free telephone number provided by Seller. 

(b) Product Returns. 
 (i) Repairable Products. For each Product that a customer returns to Buyer for the reason that the Product is defective and the returned Product is covered by a Warranty and is repairable, Buyer
will accept the return of the Product and, subject to Section 11(b), deliver it to Seller in accordance with and subject to Section 11(d). Seller will pay Buyer an amount equal to the sum of (A) Buyer’s costs to
ship the Product to Seller’s designated product-returns center or other destination determined by Seller, and (B) Buyer’s other handling costs including Buyer’s costs of managing returns and exchanges (together, the
“Repair Reimbursement Amount”). Seller will repair, and return to the customer, each repairable returned Product in accordance with Section 11. 
 (ii) Non-Repairable Products. For each Product that a customer returns to Buyer for the reason that the Product is defective and the returned Product is covered by a Warranty and is not repairable,
Buyer will accept the return of the Product and in exchange give to the customer a 

  
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replacement Product. Seller will pay Buyer an amount equal to the sum of (A) the HTS Invoice Price or the Outlet Invoice Price, as the case may be, of the Product, (B) Buyer’s
costs to ship the Product to Buyer’s designated product-returns center or other destination determined by Buyer, and (C) Buyer’s other handling costs including Buyer’s costs of managing returns and exchanges (together, the
“Replacement Reimbursement Amount”). Buyer may dispose of all Products that Buyer replaces in accordance with this Section 10(b)(ii) at Buyer’s discretion and solely for its account, including selling
the Products at the Sears Outlet Stores and, subject to Section 12(a)(iii)(B)(w), selling the Products to liquidators. 
 (iii) Returns Reporting. Not later than the tenth day following the end of each Buyer fiscal quarter Buyer will provide Seller with a written report identifying all Products covered by a Warranty
that were returned during the fiscal quarter to Buyer by customers, the total Repair Reimbursement Amount and the total Replacement Reimbursement Amount, in each case with respect to the Products returned during the fiscal quarter, and all other
additional information reasonably requested by Seller to enable it to determine all amounts it must pay to Buyer in accordance with this Section 10(b). Seller will give Buyer a credit for the total amounts due to Buyer in accordance with
the preceding sentence in Seller’s first Product invoice delivered to Buyer in the following Buyer fiscal quarter. 
 (iv)
Non-Defective Products. Seller will have no obligation to Buyer or any of its customers with respect to Products the customers return to Buyer that are not defective, which Products Buyer may dispose at Buyer’s discretion and solely for
its account, including selling the Products at Buyer’s Stores and, subject to Section 12(a)(iii)(B)(w), selling the Products to liquidators. 
 (v) Returned Products Not Covered by a Warranty. Subject to Section 10(c), Seller will have no obligation to Buyer or any of its customers with respect to Products the customers return
to Buyer that are not covered by a Seller Warranty except to the extent that Buyer requests that Seller repair the Product, in which event Seller will repair the Product in accordance with Section 11. With respect to Products described
in the preceding sentence that are not repairable, Buyer may dispose of the Products at Buyer’s discretion and solely for its account, including selling the Products at Buyer’s Stores and, subject to Section 12(a)(iii)(B)(w),
selling the Products to liquidators. 
 (vi) Warranty Claims for KCD-Branded Merchandise. If Buyer receives a warranty
claim for merchandise that is branded with a KCD Mark but was not purchased from Buyer, Buyer will handle the merchandise in accordance with Section 10(b)(i) as if the merchandise were a KCD-Branded Product. 

(c) Product Service Incident and Catastrophic-Failure Payments and Reimbursements; Product Recalls. 

(i) SIR and Catastrophic-Failure Payments. Subject to the next sentences of this Section 10(c)(i), Seller will pay to
Buyer the 10(c)(i) Pro Rata Share of each (A) service-incident payment and similar payment and reimbursement obligation, and (B) catastrophic-failure payment and similar payment and reimbursement obligation, in each case collected by
Seller from a Vendor with respect to Products and related recoveries from the Vendor (each a “10(c)(i) Payment”) except to the extent that Seller is prohibited by the terms of a contract with the Vendor to pay a
10(c)(i) Pro Rata Share to Buyer. Seller will use commercially reasonable efforts to collect from Vendors all 10(c)(i) Payments and to obtain Vendors’ permission to pay to Buyer all 10(c)(i) Pro Rata Shares in accordance with this
Section 10(c)(i). “10(c)(i) Pro Rata Share” means a fraction the numerator of which is Buyer’s total purchases of a Product from Seller and the denominator of which is Seller’s total purchase of
the Product 

  
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from the Vendor that is the subject of a 10(c)(i) Payment. Within 30 days of Seller’s receipt of each 10(c)(i) Payment Seller will calculate the 10(c)(i) Pro Rata Share and pay it to Buyer
by the 30th day of Seller’s receipt of the 10(c)(i)
Payment. 
 (ii) Product Recalls and Similar Product Issues. If Seller learns that a Product has been recalled by the
U.S. Consumer Product Safety Commission, Seller or a Vendor voluntarily conducts a Product recall, or Seller or a Vendor takes other action with respect to Products that may be defective, Seller will (a) notify Buyer, (b) provide Buyer
with available Seller transaction detail with respect to Buyer’s purchases of the recalled Product; and (c) provide Buyer, at Seller’s sole expense, sufficient replacement Product, correction kits, or other items to enable Buyer to
meet the requirements of the recall or other action. All other costs incurred by Buyer in connection with the recall or other action, including all labor, parts, travel, customer notification, reporting, and legal costs, will be the sole
responsibility of Buyer. Seller will have no obligation to Buyer or any other person for claims, costs, obligations, damages, or expenses arising in connection with the recall or other action, including any extraordinary expenses, lost profits, or
opportunity costs incurred by Buyer or any customer of Buyer with respect to the recall or other action. Seller and Buyer each will cooperate with the other to assert against, and collect from, the Vendor of the affected Product all claims, costs,
obligations, damages, and expenses incurred by each of Seller and Buyer arising in connection with the recall or other action. 

(d) Disclaimer. Except as otherwise provided in this Agreement each Party disclaims all other express or implied
representations, warranties, and covenants (including warranties of non-infringement and title). Seller and Buyer each acknowledges that reliance on any representation, warranty, or covenant not contained in this Agreement is not what Seller and
Buyer intend and would not be reasonable. 
 11. PRODUCT SERVICING. 

(a) Seller’s Appointment. Subject to Section 10(a)(iii), Buyer appoints Seller during the Term as Buyer’s
non-exclusive independent-service contractor to perform on-site and in-shop repair and maintenance service on the Products whether or not they are covered by a Seller Warranty (the “Product Services”). For purposes of this
Section 11, “Products” includes merchandise purchased other than from Seller. Seller will provide the Product Services in accordance with the Seller Warranty. Seller may, in its sole discretion, decline to perform any Product
Service that Seller, using commercially reasonable efforts, is unable to perform. Seller may engage in marketing activities at the customer’s home for any goods and services offered by Seller or its affiliates, including mailing to or leaving
with customers who receive Product Services surveys, brochures, coupons or other advertisements. If requested by Buyer, Seller and Buyer will negotiate in Good Faith the terms and conditions for Seller to include Buyer promotional materials as part
of Seller’s customer-home marketing activities. 
 (b) Other Service Arrangements. Nothing in this
Section 11 or elsewhere in this Agreement obligates Buyer to use Seller to perform the Product Services, and Buyer is free to perform itself, and to use other service contractors to perform, all services constituting the Product Services (the
“Other Service Arrangements”). If Buyer makes Other Service Arrangements, Buyer and Seller will negotiate in Good Faith regarding an amendment to this Agreement that would include the necessary changes to Section 10 and to this
Section 11 to accommodate the Other Service Arrangements. 
 (c) Seller’s Obligations. 

(i) Performance Standards. Seller will perform the Product Services in a workmanlike manner consistent with performance standards
prevailing from time to time in the product-repair industry. Seller will maintain and appropriately staff a toll-free telephone number to be used by Buyer when scheduling 

  
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on-site Product Service. Upon receipt of a call requesting on-site Product Service, Seller will use commercially reasonable efforts to schedule Product Service at a time during Seller’s
normal business hours that is convenient for the customer in accordance with Seller’s scheduling procedures in effect on the Effective Date. Seller will use commercially reasonable efforts to provide and complete all Product Service in
accordance with Seller’s scheduling procedures in effect on the Effective Date. Seller will have the sole and absolute discretion to determine the order for performing Product Services, but Seller may not favor Seller’s other customers
(including the customers of Seller’s Retail Businesses) over Buyer’s customers, except that Seller’s policies may favor “cash” customers. Seller may perform the Product Services utilizing third-party contractors who perform
the Product Services using the “Sears” name and Seller’s Affiliates to the same extent as Seller uses third-party contractors and Seller’s Affiliates to perform services for Seller’s other customers. Seller will be
responsible to Buyer in accordance with the terms and conditions of this Agreement for Product Services performed by all third-party contractors including in accordance with Section 14(a). 

(ii) Warranty. Seller may assume that a valid Warranty is in place on each Product that Buyer submits for Product
Services. For each customer that calls Seller directly seeking Product Service under a Warranty, Seller will use commercially reasonable efforts to determine that the customer’s Product is covered by a valid Warranty. If the Product or required
repair is not covered by a Warranty, in the case of on-site Product Services, Seller may perform the repairs with the customer’s prior approval and collect and retain from the customer Seller’s customary charges for the services and all
applicable sales and use taxes. In the case of in-shop Product Services, Seller will call Buyer for instructions before proceeding with Product Service. If the repairs are approved by Buyer, Seller may perform the repairs and Buyer will pay
Seller’s charges in accordance with Section 11(e). 
 (iii) Inaccessible Products. If Seller schedules
a Product for on-site Product Service and the Product is inaccessible, Seller may with the customer’s prior approval undertake to make the Product accessible and charge the customer Seller’s standard service rates for such work. If the
customer declines to pay and Buyer does not approve, Seller will not be required to make the Product accessible or complete the Product Service. 
 (iv) Products Beyond Repair. If Seller reasonably determines that a Product covered by a Warranty is beyond repair or that it would be uneconomical to repair the Product Seller will notify
Buyer, and Seller will have no obligation to repair the Product. 
 (v) Special Situations. Seller will assist
Buyer with respect to services for special situations involving a large volume of similar repairs or upgrades (such Product recalls or reworks), subject to the Parties’ written agreement regarding the terms, conditions, and pricing, if any, for
these services. 
 (d) Buyer’s Obligations. 

(i) Onsite Product Services. Buyer will take telephone calls from customers, determine whether there is a valid Warranty
in place, and provide those customers that are entitled to Product Service with Seller’s toll-free telephone number (or transfer them to such number) to be provided by Seller. When referring a customer, Buyer will provide Seller with the
information reasonably specified by Seller, including customer name, address and telephone number, email address, Product type and brand, the date the Product was purchased, whether the Product is covered by a Warranty, model and serial number, and
the nature of the problem with the Product (together the “Service Information”). Buyer and Seller are joint owners of the Service Information. Buyer may use the Service Information to operate its businesses and for all other
purposes in accordance with its privacy policy and Applicable Law (including transfer to, and use by, third parties) without restriction. Seller may use the Service Information to complete the Product Services and to engage in the marketing
activities described in Section 11(a) in accordance with Seller’s privacy policy and Applicable Law and for no other purpose of any kind whatsoever. 

  
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 (ii) In-Shop Product Services. Buyer will take possession of the Product,
determine whether there is a valid Warranty in place, and produce a service ticket for those items that are entitled to Product Service in a form to be reasonably specified by Seller (which will include providing the Service Information).
Buyer will arrange for safe shipping of the Product to a facility designated by Seller and, after the Product Service has been completed, from the Seller facility to Buyer, the costs of which shipping will be included in Repair Reimbursement
Amounts. For each Product that is subject to a Warranty, Seller will be responsible for the expense of packing and shipping each Product to and from Seller, and will bear the risk of loss or damage to Products in transit. 

(e) Seller’s Charges. 
 (i) Product Service Provided under a Seller Warranty. For completed Product Services on Products covered by a Seller Warranty, Buyer will not be obligated to pay Seller any charges.

 (ii) Product Service Provided under a Vendor Warranty. For completed Product Services on Other Products covered by a
Vendor Warranty, Buyer will be obligated to pay Seller its charges specified in the Services Agreement dated                     , 2012 between SHO
and SHMC (the “Services Agreement”) but only if (A) the Vendor refuses to reimburse Seller for the Product Services solely on the grounds that the Vendor’s obligations with respect to the Vendor Warranty do not extend to
Other Products purchased from Buyer, and (B) Seller has complied with its obligations in Section 10(a)(ii). 
 (iii)
Product Service Not Provided under a Warranty and Buyer Approves. For completed Product Services on Products that are not covered by a Seller Warranty but the Product Services for the Products are approved in writing by Buyer, Buyer
will pay Seller its charges specified in the Services Agreement. 
 (iv) Product Service Not Provided under a Warranty and
Buyer does Not Approve. If a customer requests Seller to perform, and the customer has agreed to pay Seller’s charges for, repairs or other services on Products that are not covered by a Seller Warranty and the repairs or other
services have not been approved by Buyer, Seller may collect from the customer and retain Seller’s customary charges for such services and all applicable sales and use taxes. 

(f) Services for Protection Agreements. Seller and Buyer will negotiate in Good Faith the terms of an arrangement
pursuant to which Seller would provide on-site and in-shop repair and maintenance service on Products that are covered by protection agreements sold by Buyer. 
 12. INTELLECTUAL PROPERTY. 
 (a) Seller  

(i) Work Product. All marketing materials, advertising materials, promotional materials, point of sale displays,
packaging, customer information and material, warranty card information, software, data, service training materials, parts lists, owner’s manuals, service manuals, web content, performance claims and evaluations, testing protocols and data used
to evaluate performance claims, database formats, methods used to assemble and maintain electronic Seller-Branded Product catalogs, and programming related to Seller or its Affiliates’ web sites and user applications (e.g., mobile applications)
and all files, data, notes, copies, abstracts, copyrights, summaries, and other materials relating to Seller-Branded Products and all copyrights therein, that are prepared, developed or created by or on behalf of Seller or its Affiliates or Buyer or
its Affiliates or any of their respective Personnel (together, “Seller Work Product”), will be owned worldwide by Seller or its Affiliates. All Seller Work Product will be deemed “work made for hire” as that term may be
defined from time to time in Section 101 of the Copyright Act, 17 U.S.C. Section 101 (or any successor). Seller or its Affiliates will be 

  
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deemed the author of the Seller Work Product, and Seller or its Affiliates will be the owner of all right, title and interest, including all copyrights, in and to the Seller Work Product. If for
any reason the Seller Work Product is found not to have been created as work made for hire, Buyer hereby assigns to Seller or its Affiliates without limitation and without additional compensation to Buyer, all right, title and interest, including
the copyrights and any other intellectual property rights embodied in the Seller Work Product. Buyer will (and will cause its Affiliates to) execute and deliver to Seller all further documents deemed by Seller to be useful in documenting,
effectuating or recording the foregoing assignment. Buyer will not, and will not permit its Affiliates or any third party to, disclose or provide any of the Seller Work Product to any person or entity other than Seller or its Affiliates. 

(ii) Ownership of Innovations. Buyer acknowledges (on behalf of itself and its Affiliates) that Seller or its Affiliates
will exclusively own all right, title and interest in and to all cosmetic designs, ornamental appearance and trade dress embodied in Seller-Branded Products (including design patents and pending applications) regardless of whether the cosmetic
design, ornamental appearance or trade dress originated solely with Seller or its Affiliates, solely with Buyer or its Affiliates or jointly with Seller, Buyer, their respective Affiliates and others. All such cosmetic design, ornamental appearance
and trade dress rights and design patents and pending applications will be deemed the intellectual property of Seller or its Affiliates. 
 (iii) Licenses to Use Seller Marks. 
 (A) Subject to the next sentence and
to Section 12(a)(iii)(B), Seller hereby grants to Buyer during the Term and during any sell-off period contemplated under Section 2(f) the following: (1) a nonexclusive, nontransferable, and revocable right and license
to use, in connection with the marketing and selling of the Seller-Branded Products but in no event to alter, the KCD Marks (the Royalties for which are provided in Section 5(a)); and (2) a nonexclusive, nontransferable,
royalty-free, and revocable right and license to use in connection with the marketing and selling of the Seller-Branded Products, but in no event to alter, all Seller Marks other than the KCD Marks, in each case described in clauses (1) and
(2) with respect to the Marks that are affixed to Seller-Branded Products. Buyer may grant sublicenses to Franchisees and the owners of the Sears Hometown Stores to use, in connection with the marketing and selling by them of the Seller-Branded
Products but in no event to alter, the Seller Marks. 
 (B) Subject to the other sentences of this
Section 12(a)(iii)(B), the licenses granted in Section 12(a)(iii)(A) are limited to the following: Buyer may (1) market all Seller-Branded Products by all current and future means, methods, and channels in the Territory
and outside the Territory, and (2) sell all Seller-Branded Products (i) in the Territory at “brick and mortar” physical locations and subject to Section 10(b), and (ii) in the Territory and outside the Territory
in each case by Seller Digital Methods including delivering outside the Territory Seller-Branded Products to end-user consumers who used one or more Digital Methods to purchase the Seller-Branded Products. Buyer may not distribute or sell
(x) Seller-Branded Products to resellers except that Buyer may market and sell Outlet Products to liquidators but only after using commercially reasonable efforts to obtain the agreement of the liquidators to remove or obliterate (where removal
is not possible) all Seller Marks from the Seller-Branded Products and all related labels, tags, and packaging, (y) Products that are Seller-Branded Products by Digital Methods other than Seller Digital Methods and (z) any Product outside
of the Territory if the sale would violate any contractual obligation binding on Seller in effect immediately prior to the Effective Date. Seller may terminate Buyer’s rights to sell Products by Seller Digital Methods upon 24-months’ prior
written notice, in which event Seller will grant Buyer a license to allow Buyer to sell all Products by all Digital Methods. “Seller Digital Methods” means Digital Methods owned or operated by Seller or its Affiliates and includes
the Outlet Stores website operated by Seller’s Affiliates immediately prior to the Effective Date and its successors owned or operated by Seller’s Affiliates. 

  
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 (C) Buyer will use Seller Marks in full compliance with the terms and conditions of this
Agreement and with all commercially reasonable standards, specifications, and operating procedures prescribed by Seller from time to time, including all logo and trademark-usage guidelines. 

(D) Subject to the following sentences of this subsection, Buyer will submit to Seller for its review and approval, prior to
publication, all Non-Guideline Advertising created by Buyer for Seller-Branded Products that incorporate one or more Seller Marks, including newspaper, magazine and website advertising, television and radio tapes, store signage, display billboards
and any and all other materials on which a Seller Mark appears. Buyer will submit all Non-Guideline Advertising to Seller’s designated marketing associate by email or overnight courier so that the designated marketing associate receives the
materials at least seven business days before Buyer intends to use them. If Seller does not notify Buyer of Seller’s disapproval of these materials within five business days after Seller’s designated marketing associate actually received
them, the materials will be deemed approved. Seller’s approval of Non-Guideline Advertising is limited to the use of Seller Marks in connection with the advertising and will not be deemed to constitute approval of the appropriateness or
compliance with Applicable Laws of the advertising. “Non-Guideline Advertising” means all advertising that deviates in any material respect from Seller’s logo and trademark-usage guidelines in effect from time to time and
delivered to Buyer, but no change that is applicable to Buyer will take effect upon less than 60-days’ advance written notice to Buyer. 
 (iv) Ownership; Display and Notices; Goodwill. Buyer acknowledges that (i) Seller or its Affiliates own all the proprietary rights to Seller Marks and (ii) Buyer gains no ownership
rights to Seller Marks licensed under this Agreement and gains only the limited right to use Seller Marks subject to the terms of this Agreement. Seller and its Affiliates reserve the unrestricted right to use, and to grant others the right to use,
Seller Marks. Buyer will display the trademark and service mark notices for Seller Marks that Seller requests. Buyer’s use of Seller Marks and any goodwill generated from their use inures only to the benefit of Seller or its Affiliates. Buyer
will not directly or indirectly contest or challenge the validity of Seller Marks or the rights of Seller and its Affiliates in Seller Marks. Buyer will not register or attempt to register any Mark that is confusingly similar to the Seller Marks or
which dilutes any of the Seller Marks, including any domain name or URL containing or otherwise identifying any Seller Mark. Any content displayed on any website containing any Seller Mark must be pre-approved by Seller. 

(v) Other Obligations. Buyer will not use, advertise, promote or register any trademark, service mark, design mark
or logo that is similar to any of Seller Marks. Buyer will not engage any act which would disparage or dilute the distinctiveness of any of Seller Marks, and Buyer will use its best efforts to support the premium nature of the brands represented by
Seller Marks. Buyer acknowledges that Buyer will not have any right, title or interest in or to any intellectual-property right in any Seller-Branded Products. Buyer will not have any right to alter any Seller-Branded Product or Seller-Branded
Product packaging or repair, duplicate, translate, decompile, reverse engineer or adapt any Seller-Branded Product without Seller’s prior written consent. Buyer will not use any trademark, trade name, brand name or identifying mark of its own
or any third party, alone or in combination with Seller Marks in connection with the sale of the Seller-Branded Products, if such use would create a combination mark. 

  
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 (vi) Notice of Infringement or Claim. Buyer will promptly
notify Seller if Buyer learns of any challenge to its use, or any apparent infringement, of any Mark or any claim by any person to rights in any Mark that are inconsistent with Seller’s rights to Seller Marks as described in this
Section 12(a). Seller and its Affiliates retain the right to control exclusively all settlements, litigation, and Patent and Trademark Office proceedings and other proceedings arising out of each such infringement or claim. Buyer will
execute all documents and provide, at Seller’s expense, all assistance that Seller reasonably requests to protect Seller’s interests in Seller Marks and to protect Seller’s interests in all litigation and proceedings concerning Seller
Marks. Seller will indemnify Buyer and hold it harmless from any third party claims of trademark infringement arising from Buyer’s use of any Seller Mark if Buyer has consistently used such Mark in accordance with the terms of this Agreement.

 (vii) Retention of Rights. Nothing in this Agreement limits in any way the rights of Seller and its Affiliates
in and to Seller Marks, including without limitation (A) all rights of ownership in and to Seller Marks, including the right to license or transfer the same, and, (B) the unimpaired right to use and to license others to use Seller Marks in
connection with manufacturing, marketing, distribution, sale, service, maintenance, repair, or provision of any products or services whether within or without the Territory. 
 (b) Buyer  
 (i) License to Use Buyer Marks. 

(A) Buyer hereby grants to Seller, during the Term and during any sell-off period contemplated under Section 2(f), a
nonexclusive, nontransferable, revocable, royalty-free right to use, but in no event to alter, Buyer Marks that are necessary for Seller to use to perform its obligations in accordance with the terms and conditions of this Agreement. 

(B) Seller will use Buyer Marks in full compliance with the terms and conditions of this Agreement and with all standards,
specifications, and operating procedures prescribed by Buyer from time to time, including any logo and trademark usage guidelines. 
 (ii) Ownership; Display and Notices; Goodwill. Seller acknowledges that (i) Buyer or its Affiliates own all the proprietary rights to Buyer Marks and (ii) Seller gains no ownership
rights to Buyer Marks licensed under this Agreement and gains only the limited right to use Buyer Marks subject to the terms of this Agreement. Buyer and its Affiliates reserve the unrestricted right to use, and to grant others the right to use,
Buyer Marks. Seller will display the trademark and service mark notices for Buyer Marks that Buyer requests. Seller’s use of Buyer Marks and any goodwill generated from their use inures only to the benefit of Buyer or its Affiliates. Seller
will not directly or indirectly contest or challenge the validity of Buyer Marks or the rights of Buyer and its Affiliates in Buyer Marks. Seller will not register or attempt to register any Mark that is confusingly similar to the buyer Marks or
which dilutes any of the Buyer Marks, including any domain name or URL containing or otherwise identifying any Buyer Mark. Any content displayed on any website containing any Buyer Mark must be pre-approved by Buyer. 

(iii) Other Obligations. Seller will not use, advertise, promote or register any trademark, service mark, design
mark or logo that is similar to any of Buyer Marks. Seller will not engage any act which would disparage or dilute the distinctiveness of any of Buyer Marks, and Seller will use its best efforts to support the premium nature of the brands
represented by Buyer Marks. 

  
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 (iv) Notice of Infringement or Claim. Seller will promptly notify Buyer if
Seller learns of any challenge to its use, or any apparent infringement, of any Mark or any claim by any person to rights in any Mark that are inconsistent with Buyer’s rights to Buyer Marks as described in this Section 12(b). Buyer
and its Affiliates retain the right to control exclusively all settlements, litigation, and Patent and Trademark Office proceedings and other proceedings arising out of each such infringement or claim. Seller will execute all documents and provide,
at Buyer’s expense, all assistance that Buyer reasonably requests to protect Buyer’s interests in Buyer Marks and to protect Buyer’s interests in all litigation and proceedings concerning Buyer Marks. Buyer will indemnify Seller and
hold it harmless from any third party claims of trademark infringement arising from Seller’s use of any Mark if Seller has consistently used such Mark in accordance with the terms of this Agreement. 

(v) Retention of Rights. Nothing in this Agreement limits in any way the rights of Buyer and its Affiliates in and to
Buyer Marks, including without limitation (A) all rights of ownership in and to Buyer Marks, including the right to license or transfer the same, and, (B) the unimpaired right to use and to license others to use Buyer Marks in connection
with manufacturing, marketing, distribution, sale, service, maintenance, repair, or provision of any products or services whether within or without the Territory. 
 13. CONFIDENTIALITY. 
 (a) Confidential Information.
“Confidential Information” means all information, whether disclosed in oral, written, visual, electronic or other form, that (i) one Party (the “Disclosing Party”) discloses to the other Party (the
“Receiving Party”), (ii) relates to or is disclosed in connection with this Agreement or a Party’s business, and (iii) if not designated as “confidential” (in which event the information is deemed to be
Confidential Information), is or reasonably should be understood by the Receiving Party to be confidential or proprietary to the Disclosing Party. The Disclosing Party’s sales, pricing, costs, inventory, operations, employees, current and
potential customers, financial performance and forecasts, and business plans, strategies, forecasts and analyses, as well as the terms of this Agreement, are Confidential Information. 

(b) Treatment of Confidential Information. The Receiving Party will use Confidential Information only in accordance
with this Agreement and, except as expressly permitted by this Agreement, will not disclose any Confidential Information for three years from the date of receipt of the Confidential Information. 

(i) Limitations. The Receiving Party will (A) restrict disclosure of the Confidential Information to its and its
Affiliates’ Personnel (“Representatives”) with a need to know the Confidential Information for purposes of performing the Receiving Party’s responsibilities or exercising the Receiving Party’s rights under this
Agreement, (B) advise those Representatives of the obligation not to disclose the Confidential Information, (C) copy the Confidential Information only as necessary for those Representatives who need it for performing the Receiving
Party’s responsibilities under this Agreement, and ensure that confidentiality is maintained in the copying process; and (D) protect the Confidential Information, and require those Representatives to protect it, using the same degree of
care as the Receiving Party uses with its own Confidential Information, but no less than reasonable care. 
 (ii) Permitted
Disclosure. Either Party may disclose the Confidential Information to any of its Affiliates but only if the Affiliate’s use of such Confidential Information will be subject to the terms and conditions of this Agreement and the
disclosing Party will remain responsible for disclosures by its Affiliates and their Personnel in violation of this Agreement. Buyer may disclose (A)

  
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the existence and contents of this Agreement in connection with Buyer’s filings with the Securities and Exchange Commission and with federal and state franchise regulatory authorities
(including filing this Agreement as an exhibit to Buyer’s filings), and (B) Seller’s Confidential Information related to Products to Franchisees and their Personnel in connection with the sale of Products but the use of the
Confidential Information in accordance with this clause (B) will be subject to the terms and conditions of this Agreement and Buyer will remain responsible for disclosures made by Franchisees and their Personnel in violation of this Agreement.

 (iii) Liability for Unauthorized Use. The Receiving Party will be liable to the Disclosing Party for any
unauthorized disclosure or use of Confidential Information by any of its and its Affiliates or current or former Personnel. 

(iv) Destruction. Within ten days after receiving the Disclosing Party’s written request, the Receiving Party will
destroy or return (as instructed by the Disclosing Party) any materials containing Confidential Information, and certify to the Disclosing Party that it has satisfied its obligations under this Section 13(b). 

(c) Exceptions to Confidential Treatment. 
 (i) Exceptions. The obligations under this Section 12(b) do not apply to any Confidential Information that the Receiving Party can demonstrate (A) was previously
known to the Receiving Party without any obligation to hold it in confidence, (B) is disclosed to third parties by the Disclosing Party without an obligation of confidentiality to the Disclosing Party, (C) is or becomes available to any
member of the public other than by unauthorized disclosure, (D) was or is independently developed by the Receiving Party without use of the Confidential Information, (E) legal counsel’s advice is that the Confidential Information is
required to be disclosed by Applicable Law or the rules and regulations of any applicable regulatory authority, or (F) legal counsel’s advice is that the Confidential Information is required to be disclosed in response to a valid subpoena
or order of a court or other governmental body of competent jurisdiction or other valid legal process. 
 (ii)
Notification. In the case of any disclosure under clause (E) and (F) above, the Receiving Party must notify the Disclosing Party prior to disclosure and use reasonable efforts to cooperate with the Disclosing Party so
that the Disclosing Party may take legally available steps to resist or narrow the requested disclosure and obtain an appropriate protective order or other assurance that confidential treatment will be accorded the Confidential Information.

 14. INDEMNIFICATION. 
 (a) Seller Indemnities. Subject to Section 14(d) and to the fullest extent permitted by Applicable Law, Seller will defend, indemnify, and hold harmless Buyer, its Affiliates,
and their respective present, former, and future directors, officers, other employees, agents, and each of the heirs, executors, administrators, successors, and assigns of any of the foregoing (together, the “Buyer Indemnified
Persons”), against all damages, losses, costs, expenses (including attorneys’ fees, costs and expenses), and other liabilities arising out of or in connection with all Seller Claims. “Seller Claims” means claims,
demands, suits, and causes of action by third parties (other than Buyer and its Affiliates) arising out of or in connection with this Agreement (including claims of negligence by Personnel of Seller or its Affiliates) that result, or are claimed to
result, in whole or in part, from (i) the violation by Seller, its Affiliates, or any of their Personnel of any intellectual property right of another, (ii) the failure by Seller or its Affiliates to perform their obligations in this
Agreement in accordance with their terms, or (iii) any other act or omission of Seller or its Affiliates but subject to the terms and conditions of the Separation Agreement that require a sharing of liability, to the extent applicable.


  
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 (b) Buyer Indemnities. Subject to Section 14(d) and to the
fullest extent permitted by Applicable Law, Buyer will defend, indemnify and hold harmless Seller, its Affiliates, and their respective present, former, and future directors, officers, other employees, agents, and each of the heirs, executors,
administrators, successors, and assigns of any of the foregoing (together, the “Seller Indemnified Persons”), against all damages, losses, costs, expenses (including attorneys’ fees, costs and expenses) and other liabilities
arising out of or in connection with all Buyer Claims. “Buyer Claims” means all claims, demands, suits, and causes of action by third parties (other than Seller and its Affiliates) arising out of or in connection with this Agreement
(including claims of negligence by the Personnel of Buyer or its Affiliates) that result, or are claimed to result, from (i) the use of any Seller Mark by Buyer, its Affiliates, or its Franchisees that is not accordance with the terms of this
Agreement, (ii) Buyer’s display, sale, assembly, installation, service, or repair, or installation of any Product (excluding claims, demands, suits, and causes of action arising out of or in connection with services to be performed by
Seller for Buyer in accordance with the terms and conditions of the Services Agreement and all other services that are performed for Buyer by Seller or its Affiliates), (iii) the failure by Buyer or its Affiliates to perform their obligations
in this Agreement in accordance with their terms, or (iv) any other act or omission of Buyer or its Affiliates but subject to the terms and conditions of the Separation Agreement that require a sharing of liability, to the extent applicable.
“Claims” means, together, the Seller Claims and the Buyer Claims. 
 (c) Defense. The
Party that is obligated to provide defense and indemnity to the other Party with respect to a Claim in accordance with this Section 14 (the “Indemnifying Party”) has the right to control the defense of the Claim, but the
other Party (the “Indemnified Party”) has the right to participate in the defense. Upon the Indemnifying Party’s request, the Indemnified Party will reasonably cooperate in the defense, and the Indemnifying Party must reimburse
the Indemnified Party for its reasonable out-of-pocket expenses in providing the requested cooperation. The Indemnified Party will provide prompt notification to the Indemnifying Party of each Claim to which it is entitled to be indemnified, but any
delay by the Indemnified Party in giving notice will not relieve the Indemnifying Party of its obligations pursuant to this Section 14 except to the extent that the Indemnifying Party demonstrates actual damage caused by such delay. The
obligations of Seller and Buyer to defend, indemnify and hold harmless, respectively, the Buyer Indemnified Parties and the Seller Indemnified Parties under this Section 14 are independent of each other and any other obligation of the
Parties under this Agreement. 
 (d) Exclusions from Claims; Tender and Cooperation. Excluded from Claims
are claims, actions, liabilities, proceedings, losses, and expenses (including attorneys’ fees) arising out of or with respect to the death of or injury to any person or damage to any property, by whomsoever suffered, to the extent resulting or
claimed to result from a latent or patent defect in a Product (each a “Product Liability Claim”). Buyer and Seller each will take all commercially reasonable actions, and cooperate with the other Party, as may be necessary to
(i) tender each Product Liability Claim to the Vendor or manufacturer of the applicable Product and (ii) cause the Vendor or manufacturer to assume and bear financial responsibility for, and hold Buyer and Seller harmless from, the Product
Liability Claim to the fullest extent permitted by Applicable Law, including the legal defense of the Product Liability Claim. 

  
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 15. INSURANCE. 

(a) Required Coverage. Buyer will obtain and maintain at its own cost occurrence-based Commercial General Liability
Insurance, including but not limited to products, completed operations and contractual liability, in amounts not less than $5,000,000.00 per occurrence, naming the Seller and Buyer (together the “Insured Parties”) as additional
insureds. This insurance must be primary to any of Seller’s coverage. Buyer will furnish certificate(s) of insurance upon execution of this Agreement, and within 15 days of any insurance renewals. All of the insurance policies specified in this
Section 15(a) must contain a provision that such policies may not be cancelled or materially altered without 30 days prior written notice to Seller. All insurance carriers for the insurance coverage referred to in this
Section 15(a) must be listed in the current Best’s Insurance Guide as possessing a minimum policyholders rating of “A” and a financial category of “VI” ($25,000,000 to $50,000,000). 

(b) Proof of Insurance. Buyer will once each year, and, upon request by Seller, promptly furnish or cause to be
furnished to Seller, a copy of the insurance certificate and premium receipt for the most recent payment. 
 16. LIMITATION
ON LIABILITY. Neither Party will be liable to the other Party for any consequential, incidental, indirect, exemplary or punitive damages (including lost profits) arising in connection with any Claim or the failure to perform, or termination of,
this Agreement regardless of the nature of the claim even if a Party has been advised of the possibility of such damages. 

17. MINIMUM QUANTITIES. Buyer will purchase at least $100 of Products during the Term. If at the expiration of the Term Buyer has
ordered less than $100 of Products, Buyer will pay Seller (upon request) the difference between the amount ordered and $100. Seller acknowledges that except as set forth in this Section 17, Buyer is not obligated or committed to purchase
any quantities of Products except as expressly ordered by Buyer according to the Inventory Policies and Processes. 
 18.
DISPUTE RESOLUTION. 
 (a) Committees. 

(i) Merchandise Operating Committee. Buyer and Seller will form a committee (the “Merchandising Operating
Committee”) that will address all day-to-day operational, financial, and other issues that may arise with respect to this Agreement, including its interpretation, the Parties intent reflected in this Agreement, and the policies and
practices between Seller and its Affiliates and the businesses comprising Buyer’s businesses in effect immediately prior to the Effective Date. The Merchandising Operating Committee will discuss all of these issues and will attempt to resolve
informally all Disputes in accordance with Section 18(b)(i). The Merchandising Operating Committee will consist of three employees of each Party or of an Affiliate of the Party, in all cases as designated by the Party. The initial
employee designees are listed on Appendix 18(a). Each Party may replace one or more of its designees at any time upon notice to the other Party. Each Party will promptly fill all of its Merchandising Operating Committee vacancies as they
arise by notice to the other Party. Unless the members of the Merchandising Operating Committee unanimously agree otherwise, the Merchandising Operating Committee will meet at least once every calendar month during the Term on the dates determined
by the members of the Merchandising Operating Committee. If the members of the Merchandise Operating Committee cannot agree on a date or a time for a particular monthly meeting the meeting will occur at 1:00 p.m. Central Time on the second Thursday
of the month at the offices of SHC, 3333 Beverly Road, Hoffman Estates, IL 60179 B6-D. At all times one of the members of the 

  
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Merchandising Operating Committee will serve as the Merchandising Operating Committee’s Chairperson. The initial Chairperson is listed on Appendix 18(a) and the other
Merchandising Operating Committee members each will serve thereafter as Chairperson, on a monthly basis, rotating between Seller’s designees and Buyer’s designees. The Chairperson (i) will request that Merchandising Operating
Committee members provide meeting agenda items and (ii) will distribute to members, at least two business days in advance of each Merchandising Operating Committee meeting, an agenda for the meeting. 

(ii) Executive Committee. Buyer and Seller will form a committee (the “Executive
Committee”) that will attempt to resolve all Disputes that the Merchandising Operating Committee has been unable to resolve in accordance with Section 18(b) and that the Merchandising Operating Committee has referred to
the Executive Committee. The Executive Committee will consist of the Chief Financial Officer, the General Counsel (or other chief legal officer), and the chief merchandising officer of each Party. 

(b) Dispute Resolution. 
 (i) Merchandising Operating Committee’s Attempt to Resolve Dispute. If a Dispute arises, neither Party may cease to perform any of its obligations in this Agreement in accordance with their
terms or take any formal legal action (such as seeking to terminate this Agreement, seeking mediation in accordance with Section 18(b)(iv), or instituting or seeking any judicial or other legal action, relief, or remedy with respect to
or arising out of this Agreement) unless the Party has first (1) delivered a notice of dispute (the “Dispute Notice”) to all of the members of the Merchandising Operating Committee and (2) complied with the other terms and
conditions of this Section 18. At the first monthly meeting of the Merchandising Operating Committee following the delivery of the Dispute Notice the Merchandising Operating Committee will attempt to resolve all of the Disputes that are
the subject of the Dispute Notice. Each Party will cause its designees on the Merchandising Operating Committee to negotiate in Good Faith to resolve all Disputes in a timely manner. 

(ii) Executive Committee’s Attempt to Resolve Dispute. If the Merchandising Operating Committee is
unable to resolve all of the Disputes included in the Dispute Notice by the end of the Merchandising Operating Committee meeting following the delivery of the Dispute Notice, the Chairperson for the next Merchandising Operating Committee meeting
will notify each member of the Executive Committee of each unresolved Dispute that is listed on the notification. The Executive Committee will meet not later than the 10th day following delivery of the notification by the Merchandising Operating Committee’s Chairperson (the
“Dispute Meeting”) and attempt to resolve each Dispute that is listed on the notification. Each Party will cause its designees on the Executive Committee to negotiate in Good Faith to resolve all Disputes in a timely manner. If by
the 10th day following the Dispute Meeting the Executive
Committee has not resolved all of the Disputes (the “Resolution Failure Date”) the Parties will proceed to mediate the unresolved Disputes (“Unresolved Disputes”) in accordance with Section 18(b)(iv).

 (iii) Dispute Defined. Subject to the next sentence, “Dispute” means each claim, controversy,
dispute, and disagreement between (A) on the one hand, Buyer or any of its Affiliates, or any of their respective shareholders, officers, directors, agents, employees, legal representatives (including attorneys in their representative
capacity), successors and assigns, and (B) on the other hand, Seller or any of its Affiliates, employees, legal representatives (including attorneys in their representative capacity), successors and assigns, in each case arising out of or
relating to a Party’s performance, or failure to perform, one or more of its obligations in this Agreement. Disputes do not include claims, controversies, 

  
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disputes, or disagreements with respect to compliance with Section 13 or payment obligations with respect to amounts due in accordance with the terms and conditions of this Agreement
that are not reasonably in dispute. 
 (iv) Mediation of Unresolved Disputes. Seller and
Buyer will attempt to resolve all Unresolved Disputes by non-binding mediation. Buyer and Seller will negotiate in Good Faith to determine the mediator, the mediator’s compensation and related costs, and the applicable rules for the mediation.
If by the 15th day following the Resolution Failure Date
Seller and Buyer have been unable to settle an Unresolved Dispute the obligations of Seller and Buyer in this Section 18 will terminate with respect to the Unresolved Dispute. 

19. SELLER’S CLOSING LOCATIONS. Seller will notify Buyer of each Sears Store location that Seller or its
Affiliates intend to close. Seller will notify Buyer of the store-closing decision not later than the 10th day following the decision or the day before public disclosure of the decision, whichever occurs first. If Seller notifies Buyer of the decision before Seller publicly discloses the decision it will
constitute Confidential Information until the decision is publicly disclosed. Seller will notify Buyer, not later than the
30th day following the decision, as to whether Seller
intends to continue its retail presence in the trade area that included the closing store. If Seller does not (a) notify Buyer in accordance with the preceding sentence that Seller intends to continue its retail presence in the trade area, or
(b) does not open a new Sears Store in the trade area within 18 months of the notification, Buyer may open one or more New HTS Stores or other new stores in the trade area when the store location closes free of the restrictions, if any, in
Section 9(b)(i) with respect to the closed store. 
 20. GLOSSARY. The following terms have the
meanings given below and include the singular and the plural forms of the terms: 
 “3(b) Amount” is defined on
Appendix 3(b). 
 “10(c)(i) Payments” is defined in Section 10(c)(i). 

“Affiliates” means (solely for purposes of this Agreement and for no other purpose) (i) with respect to Buyer, its
subsidiaries including Outlet Co and SAHS, (ii) with respect to Seller, SHC and its subsidiaries including Sears Holdings Management Corporation (“SHMC”), and (iii) with respect to SHC, its subsidiaries. 

“Applicable Laws” means all applicable laws, ordinances, regulations, rules, and court and administrative orders and
decrees of all national, regional, state, local and other governmental units that have jurisdiction in the given circumstances. 

“Average Aggregate Minimum Commission” is defined on Appendix 5(d). 

“Buyer” is defined in the introductory paragraph of this Agreement. 

“Buyer Marks” means Marks owned by Buyer or its Affiliates. 

“Buyer Stores” means, together, the Sears Hardware Stores, the Sears Hometown Stores, and the Sears Outlet Stores.

 “Confidential Information” is defined in Section 13(a). 

  
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 “Core Cost” is defined on Appendix 3(b). 

“Digital Methods” is defined in Section 9(a). 

“Disclosing Party” is defined in Section 13(a). 

“Dispute” is defined in Section 18(b)(ii). 

“Dispute Resolution Meeting” is defined in Section 18(b)(i). 

“DRM” is defined in Section 4(a)(i). 

“Effective Date” is defined in Section 2(a). 

“First Renewal Period” is defined in Section 2(b). 

“FOB Point” is defined in Section 7(a). 

“Franchisee” means a natural person or entity that has purchased (i) a franchise as described in the Franchise
Disclosure Document of Sears Home Appliance Showrooms, LLC dated May 11, 2012 (with respect to Sears Home Appliance Showrooms), (ii) a franchise as described in the Franchise Disclosure Document of Sears Home Appliance Showrooms, LLC dated
May 11, 2012 (with respect to Sears Hardware Stores), or (iii) any other franchise offered by Buyer from time to time. 
 “Inventory Policies and Processes” is defined in Section 6. 
 “Good Faith” means honesty in fact and the observance of reasonable commercial standards of fair dealing in accordance with Applicable Law. 

“Group” means a “group” as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended. 
 “Home Appliance Category” is defined on Appendix 5(a). 

“HTS Invoice Prices” is defined in Section 3(b). 

“HTS Products” is defined in Section 3(a). 

“Initial Term” is defined in Section 2(a). 

“KCD-Branded Products” means all Seller-Branded Products sold under a KCD Mark. 

“KCD Change in Control” means the occurrence of any transaction or event or series of transactions or events, whether
voluntary or involuntary, that results in an Unaffiliated Person or a Group acquiring directly, or as a consequence of which an Unaffiliated Person or a Group acquires directly, at any time after the date of this Agreement and by whatever means
(including by license), all rights, title and interest in and to all of the KCD Marks. “Unaffiliated Person” means a natural person, entity, or other enterprise other than Seller or Seller’s Affiliate. “Seller’s
Affiliate” means each natural person, entity, and other enterprise that directly or indirectly, and by whatever means, controls, is under common control with, or is controlled by, Seller. 

  
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 “KCD Marks” means Kenmore®, Craftsman®, DieHard®, and the sub-brand
Marks associated with, and the trade dress related to, the Kenmore, the Craftsman, and the DieHard Marks. 
 “KCD Mark
Acquisition” means the occurrence of any transaction or event or series of transactions or events (other than a KCD Change in Control), whether voluntary or involuntary, that results in an Unaffiliated Person or a Group acquiring, or as a
consequence of which an Unaffiliated Person or a Group acquires directly, at any time after the date of this Agreement and by whatever means (including by license), all rights, title and interest in and to one or more but less than all of the KCD
Marks. 
 “Kenmore-Branded Product” is defined in Section 5(c). 

“Kenmore Royalty Credit” is defined on Appendix 5(a). 

“License Agreements” is defined in Section 2(b). 

“Mark” means any name, brand, mark, trademark, service mark, sound mark, trade dress, trade name, business name, slogan,
or other indicia of origin and includes all common law or statutory property rights related to such Mark. 

“MOS” is defined in Section 4(a)(iii). 

“Net Sales” is defined in Section 5(a). 

“Other Products” is defined in Section 10(a)(ii). 

“Outlet Invoice Prices” is defined in Section 4(g). 

“Outlet Products” is defined in Section 4(f). 

“Party” means (1) SRC and Kmart together, on the one hand, and (2) SHO, SAHS, and Outlet together, on the
other hand. Although SHC is a party to this Agreement SHC is not a Party. 
 “Personnel” means the officers,
directors, employees, agents, suppliers, licensors, licensees, contractors, subcontractors, advisors, including attorneys, accountants, technical consultants or investment bankers and other representatives, from time to time, of (i) the
applicable entity, (ii) as to Seller, its Affiliates, and (iii) as to Buyer, its Affiliates. 
 “Product
Services” is defined in Section 11(a). 
 “Products” means, together, HTS Products and
Outlet Products. 
 “Receiving Party” is defined in Section 13(a). 

“Repair Reimbursement Amount” is defined in Section 10(b)(i). 

“Replacement Reimbursement Amount” is defined in Section 10(b)(ii). 

“Representatives” is defined in Section 13(b)(i). 

“Right of First Offer” is defined in Section 4(b)(iv). 

  
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 “Right of First Refusal” is defined in Section 4(b)(v).

 “Royalties” is defined in Section 5(a). 

“Sears Hardware Stores” means all stores that are operated, or authorized to operate, by Buyer or Franchisees and that
are branded with the name “Sears Hardware Stores” or “Sears Appliance & Hardware Stores.” 

“Sears Hometown Stores” means all stores that are operated, or authorized to operate, by Buyer and that are branded with
the name “Sears Hometown Store” or “Sears Authorized Hometown Store.” 
 “Sears Outlet
Stores” means, together, all stores that are operated, or authorized to operate, by Buyer and that are branded with the name “Sears Outlet Store.” 
 “Second Renewal Period” is defined in Section 2(b). 

“Seller” is defined in the introductory paragraph of this Agreement. 

“Seller-Branded Product” means Products sold under a Seller Mark and includes KCD-Branded Products. 

“Seller Competitor” means, solely for purposes of this Agreement and for no other purpose, Amazon.com, Inc., Best Buy
Co., Inc., hhgregg, Inc., The Home Depot, Inc., Lowe’s Companies, Inc., Target Corporation, Tractor Supply Co., Wal-Mart Stores, Inc., each other retailer that competes in any material respect with Seller’s major home appliance business or
Seller’s power lawn and garden business, and the Seller Competitor Affiliates of each of them. “Seller Competitor Affiliates” means each individual or entity that directly or indirectly, and by whatever means, controls, is
under common control with, or is controlled by, a Seller Competitor. 
 “Seller Marks” means Marks owned by
Seller or its Affiliates and includes the KCD Marks. 
 “Seller Warranty” is defined in
Section 10(a)(i). 
 “Seller’s Retail Businesses” is defined in Section 3(a).

 “Separation Agreement” is defined in Section 2(a). 

“Service Information” is defined in Section 11(d)(i). 

“Services Agreement” is defined in Section 11(e)(ii). 

“SHC” is defined in the introductory paragraph of this Agreement. 

“SHO” is defined in the introductory paragraph of this Agreement. 

“SHO Stockholding Change” means the occurrence of any transaction or event, whether voluntary or involuntary, that
results in a Seller Competitor becoming, or as a consequence of which a Seller Competitor becomes, directly or indirectly, at any time after the date of this Agreement and by whatever means, the beneficial owner of more than 50% of the total voting
power of outstanding securities entitled to vote in, or carrying the right to direct the voting with respect to, directly or indirectly and by whatever means the election of the board of directors of SHO or any of its subsidiaries. 

  
 32 









 “Specification” means the detailed description of Products agreed upon by
Seller and Buyer as contained in any Vendor Agreement. 
 “SYW Agreement” is defined in
Section 2(b). 
 “Term” is defined in Section 2(a). 

“Territory” is defined in Section 9(d). 

“Vendor” means any source (other than Seller’s Affiliates) from whom Seller purchases Products. 

“Vendor Agreement” means any Purchase Order or other agreement in writing and executed by Buyer and Seller relating to
Products, including this Agreement, advertising, point of sale, promotional service, promotional funding or other selling assistance agreements, buying or supply agreements, exclusivity agreements, letters of agreement, and any written amendments,
waivers and consents relating to any of the foregoing. 
 “Vendor Warranty” is defined in Section
10(a)(ii). 
 “Warranty” is defined in Section 10(a)(ii). 

21. SHC’S SOLE OBLIGATION. As its sole obligation in this Agreement and unless Buyer has failed to comply with one or more of
its material obligations in this Agreement and the failure is continuing, SHC will cause SRC, Kmart, and the Affiliates of each of them to take all actions that will enable Seller to perform, and not take any action that would disable to any extent
Seller from performing, its obligations in this Agreement in accordance with their terms. 
 22. GENERAL. 

(a) Good Faith and Fair Dealing. SHC and the Parties each will exercise Good Faith in the performance of its obligations in
this Agreement. 
 (b) Assignment. Seller may at any time assign, delegate or subcontract its rights, or
obligations or both, in whole or in part, under this Agreement except to a Seller Competitor, without the consent of Buyer. Subject to the next sentence, Buyer may not assign or otherwise transfer any of its rights or obligations under this
Agreement (except to a wholly owned subsidiary of Buyer), by operation of law or otherwise, without the express prior written consent of Seller, and any attempt to assign or assignment without the express prior written consent of Seller is void.
Buyer may exercise all of its rights, and perform all of its obligations, under this Agreement through its wholly owned subsidiaries. 
 (c) Computer Access. If either Party is given access, whether on-site or through remote facilities, to any communications, computer, or electronic data storage systems of the other Party or
its Affiliates (each an “Electronic Resource”), in connection with this Agreement, then the Party given access will use such access solely to perform, and will not attempt to access any Electronic Resource other than those
specifically required to perform, its obligations under this Agreement. The Party given access will limit such access to those of its Personnel who need to have such access in connection with this Agreement, will advise the other Party in writing of
the name of each of its Personnel who will be granted such access, and will strictly follow all security rules and procedures for use of such Electronic Resources. All user identification numbers and passwords disclosed to a Party given access and
any information obtained by the Party given access as a result of its access to, and use of such Electronic Resources will be deemed to be, and will be treated as, Confidential Information of the other Party. Each Party will cooperate with the other
Party in the investigation of any apparent unauthorized access by the 

  
 33 









 
other Party, its Affiliates, or its Personnel to any Electronic Resources or unauthorized release of Confidential Information. Each Party will promptly notify the other Party of any actual or
suspected unauthorized access or disclosure of any Electronic Resource. 
 (d) Promotional Calendars. To the
extent permitted by Applicable Law and consistent with practices in effect prior to the Effective Date, Seller will deliver to Buyer Seller’s promotional calendars with respect to Products (including for Home Appliances, Tools, Lawn and Garden,
Sporting Goods, Mattresses, and Consumer Electronics) as soon as they have been approved, including all amendments. Also consistent with practices prior to the Effect Date, the promotional calendars will include Seller’s “master price
files” (and substitute information) describing Seller’s retail and promotional pricing, as to which the Parties acknowledge that Section 3(d) and Section 4(f) are and will be applicable. 

(e) Obligation to Negotiate in Good Faith. If a Negotiation Event occurs and thereafter a Party (the “Delivering
Party”) delivers to the other Party (the “Receiving Party”) an Opinion of Counsel that states that, as a consequence of the Negotiation Event the Delivering Party is unable, due to Applicable Law, to continue to perform any
of the obligations to be performed by it in accordance with the terms and conditions of this Agreement (an “Impediment”), Seller and Buyer will negotiate in Good Faith an amendment to this Agreement that would eliminate the
Impediment. “Opinion of Counsel” means a written opinion (which may be reasoned) of a reputable law firm of national stature. The form and substance of the written opinion, and the law firm, will be subject to the approval of the
Receiving Party. “Negotiation Event” means the occurrence of any transaction or event, whether voluntary or involuntary, as a result of which a single shareholder or Group ceases to be the “beneficial owner” (as defined in
Securities and Exchange Commission Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended) of a majority of the total voting power of the then-outstanding voting capital stock of SHC or SHO. 

(f) Consideration. Buyer has given, and Seller has received and accepted, adequate, good, sufficient, and valuable
consideration for this Agreement, and for all purposes of this Agreement this Agreement is fully supported by adequate, good, sufficient, and valuable consideration provided by Buyer and received and accepted by Seller. Buyer’s adequate, good,
sufficient, and valuable consideration includes, without limitation, the mutual covenants, obligations, and promises herein and the following (which separately and together have enabled Seller to execute and deliver this Agreement and have assisted
and will assist Seller’s performance of its obligations under this Agreement): (i) Buyer has at great length discussed and upon reasonable request during the Term will discuss its business needs with Seller for the purpose of enabling
Seller to make compelling business proposals to Buyer; (ii) Buyer has entered into negotiations with Seller that culminated in the execution and delivery of this Agreement, which Agreement gives Seller many advantages over other vendors;
(iii) Buyer has provided and upon reasonable request during the Term will provide information to Seller about Buyer’s operations. Seller has bargained for and, pursuant to this Agreement will receive, material benefits, interests, rights,
and value from Buyer through such consideration and that Seller is not entitled to, and would not have received, such benefits, interests, rights, and value absent this Agreement; and (iv) Buyer is obligated to purchase Products in accordance
with, and subject to the terms and conditions of, Sections 4(b)(i) and 4(c). This Agreement is legally binding; and Seller will not, directly or indirectly, plead or otherwise assert in any manner in any litigation, arbitration, mediation, or
other dispute-resolution proceeding that this Agreement is invalid, void, voidable, revocable, terminable, or otherwise unenforceable for lack, inadequacy, or insufficiency of consideration; and by this Agreement Seller irrevocably waives and will
be estopped from pleading or asserting, directly or indirectly, any cause of action, claim, defense, right, or prayer for relief to such effect. Each of Seller’s waivers in this Section 22(f) is reasonable and made with
Seller’s full knowledge of its significance and consequences. 

  
 34 









 (g) Construction and Interpretation. In this Agreement
(1) “include,” “includes,” and “including” are inclusive and mean, respectively, “include without limitation,” “includes without limitation,” and “including without
limitation,” (2) “or” is disjunctive but not necessarily exclusive, (3) “will” expresses an imperative, an obligation, and a requirement, (4) numbered “Section” references refer
to sections of this Agreement unless otherwise specified, (5) section headings are for convenience only and will have no interpretive value, (6) unless otherwise indicated all references to a number of days will mean calendar (and not
business) days and all references to months or years will mean calendar months or years, (7) references to $ or Dollars will mean U.S. Dollar, and (8) references to a Party’s approval or consent right
include the Party’s obligation not to unreasonably delay or withhold its approval or consent. Seller and Buyer intend that this Agreement be construed without any rule requiring construction or interpretation against Seller, whose
representatives drafted this Agreement. To the extent the Parties intend that a term or condition of this Agreement reflect policies and practices in effect immediately prior to the Effective Date, the Parties will negotiate in Good Faith to
determine the policies and practices. 
 (h) Counterparts; Facsimile. This Agreement may be executed in any number
of separate counterparts, all of which, when taken together, will constitute one and the same instrument, notwithstanding the fact that all Parties did not sign the same counterpart. A signature transmitted to the other Party or its counsel by email
or facsimile transmission will be effective to bind the Party whose signature was transmitted, as a duly executed and delivered original. Each Party will promptly deliver its original signature pages to this Agreement to counsel for the other Party
promptly following execution, but any failure to do so will not affect the binding effect of such signature. 
 (i) Entire
Agreement. This Agreement, which includes each of the attached Appendices, sets forth the entire agreement and understanding between the Parties with respect to the Products except as provided in the Separation Agreement, the Services
Agreement, and the License Agreements. All prior and contemporaneous discussions and negotiations relating to the Products are merged herein. This Agreement will not be supplemented, modified, or amended except by a written instrument signed by a
duly authorized representative of each of Buyer and Seller. In the event of any conflict or inconsistency between this Agreement and the terms and condition of any forecast, purchase order, or other order document, including any inconsistency as to
any Product invoice price, the terms and conditions of this Agreement will control unless such other document constitutes an Amendment and expressly references and supersedes this Agreement. This Agreement will be binding upon and inure to the
benefit of the successors, representatives and permitted assigns of the Parties. The terms and conditions of this Agreement supersede and replace those of any prior negotiations and any documents that the Parties have exchanged in connection
therewith (together, “Negotiation Documents”). Buyer and Seller represent and warrant that they are entering into this Agreement based solely on the provisions set forth herein and not in reliance, in whole or in part, on any claim
or representation contained in any Negotiation Document. 
 (j) Injunctive Relief. Each Party acknowledges that
any breach by a Party of Section 12 or Section 13 of this Agreement may cause the non-breaching Party and its Affiliates irreparable harm for which the non-breaching Party and its Affiliates have no adequate remedies at law.
Accordingly, each Party and its Affiliates are entitled to seek injunctive relief, without complying with Section 18(b)(iii) and regardless of Buyer’s cure rights, if any, for any such breach in any state or federal court in
Chicago, Illinois, USA, and each Party consents to the exclusive jurisdiction and venue in the state and federal courts in Chicago, Illinois, USA for injunctive relief purposes. Each Party waives all claims for damages by reason of the wrongful
issuance of an injunction and acknowledges that its only remedy in that case is the dissolution of that injunction. 

  
 35 









 (k) Notices. Notices under this Agreement are sufficient if given by
nationally recognized overnight courier service, certified mail (return receipt requested), or email or facsimile with electronic confirmation or personal delivery to the other Party at the address below: 

 

			
	 If to either Seller:
	    	Sears, Roebuck and Co.
		    	3333 Beverly Road         
		    	Hoffman Estates, IL 60179
		    	Attn:                            
                                
		    	Facsimile:                           
                         
		    	
	 With a copy to:
	    	Sears, Roebuck and Co.
		    	3333 Beverly Road B6-210B
		    	Hoffman Estates, IL 60179
		    	Attn: General Counsel
		    	Facsimile: (847) 286-2471
		    	
	 If to any Buyer:
	    	Sears Hometown and Outlet Stores, Inc.
		    	3333 Beverly Road         
		    	Hoffman Estates, IL 60179
		    	Attn.:
                                         
                   
		    	Facsimile: (        )
                                         

		    	
	 With a copy to:
	    	Sears Hometown and Outlet Stores, Inc.
		    	3333 Beverly Road         
		    	Hoffman Estates, IL 60179
		    	Attn:
                                        
el
		    	Facsimile: (        )
                                        

		    	
	 If to SHC:
	    	Sears Holdings Corporation
		    	3333 Beverly Road         
		    	Hoffman Estates, IL 60179
		    	Attn.:
                                         
                  
		    	Facsimile: (        )
                                        

		    	
	 With a copy to:
	    	Sears Holdings Corporation
		    	3333 Beverly Road B6-210B
		    	Hoffman Estates, IL 60179
		    	Attn: General Counsel
		    	Facsimile: (847) 286-2471

 Notice is effective: (i) when delivered personally, (ii) three business days after sent by certified mail,
(iii) on the business day after sent by a nationally recognized courier service, or (iv) on the business day after sent by email or facsimile with electronic confirmation to the sender. A Party may change its notice address by giving
notice in accordance with this Section 21(k). 
 (l) No Waiver. The terms, covenants and conditions of
this Agreement may be waived only by a written instrument signed by the Party waiving compliance. Any Party’s failure at any time to require performance of any provision will not affect that Party’s right to enforce that or any other
provision at a later date. No waiver of any condition or breach of any provision, term or covenant contained in this 

  
 36 









 
Agreement, whether by conduct or otherwise, in any one or more instances will be deemed to be or construed as a further or continuing waiver of that or any other condition or of the breach of
that or another provision, term or covenant of this Agreement. 
 (m) Publicity. Each Party will refrain from
making any reference to this Agreement or to the other Party in the solicitation of business, unless the other Party gives its prior written consent to such action and approves any press release or other publicity materials prior to their
dissemination. 
 (n) Relationship of the Parties. The relationship of Seller and Buyer to each other is that of
independent contractors, and neither Party will not represent that the other Party is its partner in any manner. Buyer has no authority to enter into any contract or incur any expense or obligation of any kind in Seller’s name. 

(o) Reporting. For purpose of this Agreement, unless otherwise indicated herein, all calculations and measurements with
respect to Buyer’s purchases, sale of Products, average retail selling prices, and similar information will be measured in units or dollars, as the context requires, and determined by reference to Seller’s information reporting systems.

 (p) Representations and Warranties. Each Party represents that it has the right, power and authority to grant
to the other Party the rights provided under this Agreement and to perform its obligations under this Agreement, and that such Party’s execution, delivery and performance of this Agreement have been duly authorized and will not violate any
other agreement, restriction, or applicable law to which such Party is a party or by which such Party is bound. 
 (q)
Survival. Each term of this Agreement that would, by its nature, survive the termination or expiration of this Agreement will so survive, including the obligation of either Party to pay all amounts accrued hereunder and including
Section 7 (PAYMENT TERMS), Section 12 (INTELLECTUAL PROPERTY.), Section 13 (CONFIDENTIALITY), Section 14 (INDEMNIFICATION), Section 21 (SHC’S SOLE OBLIGATION), and this
Section 22 (GENERAL). 
 (r) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Illinois without reference or regard to conflict of law provisions or other laws of any jurisdiction that would cause the application of the laws of any jurisdiction other than the State of Illinois. Subject
to Section 18, the Parties irrevocably submit to venue and exclusive personal jurisdiction in the federal and state courts in Cook County, Illinois for all disputes arising out of this Agreement and waive all objections to jurisdiction
and venue of such courts. 
 (SIGNATURE PAGE FOLLOWS) 

  
 37 










									
	 SEARS, ROEBUCK AND CO.
 KMART CORPORATION
	  		  	SEARS HOMETOWN AND OUTLET STORES, INC.
				
	 By: Sears Holdings Management Corporation, their agent
	  		  	By:	 	  

		 		  		  	Name:	 	  

	 By:
	 	  
	  		  	Its:	 	  

	 Name:
	 	  
	  		  		 	
	 Its:
	 	  
	  		  		 	
			
	SEARS HOLDINGS CORPORATION	  		  	SEARS AUTHORIZED HOMETOWN STORES, LLC
					
	 By:
	 	  
	  		  	By:	 	  

	 Name:
	 	  
	  		  	Name:	 	  

	 Its:
	 	  
	  		  	Its:	 	  

				
		 		  		  	SEARS OUTLET STORES, L.L.C.
					
		 		  		  	By:	 	  

		 		  		  	Name:	 	  

		 		  		  	Its:	 	  



  
 38 









 Appendix 1 

Additional Terms and Conditions 
 1. VENDOR AGREEMENTS. 
 1.1. Purchase Orders. The execution of the
Merchandising Agreement to which this Appendix 1 is attached (the “Merchandising Agreement”) does not give rise to any commitment on the part of Buyer to purchase any Product. A commitment to purchase Product arises only at
such time as Buyer issues a Purchase Order or enters into a separate Vendor Agreement for specific quantities of Product and Buyer’s obligation to purchase Product is limited to the quantities in that Purchase Order or Vendor Agreement. When
issued by Buyer and accepted by Seller, all Purchase Orders become part of and will be subject to the terms of the Merchandising Agreement. All estimates or forecasts of Buyer’s future needs for Products which may be provided to Seller by Buyer
are for planning purposes only and do not in any way represent a commitment by Buyer nor give rise to any obligation or liability of Buyer. Buyer has no responsibility for any actions taken by Seller based on such estimates or forecasts. 

1.2. Waiver. No right of either Party under any Vendor Agreement may be waived except as expressly set forth in writing signed by
an authorized representative of the Party waiving such right. No waiver of any provision will be implied by a Party’s failure to enforce any of its rights or remedies herein provided, and no express waiver will affect any provision other than
that to which the waiver is applicable and only for that occurrence. 
 2. CODES OF CONDUCT. Buyer acknowledges that it has been
furnished a copy of the Sears Holdings Corporation Code of Conduct (the “Code of Conduct”) and that Seller employees are required to follow the Code of Conduct. Buyer will support the Code of Conduct and will not directly or
indirectly take any action that may cause a Seller employee to violate any law or the Code of Conduct. Without limiting the foregoing, Buyer will not directly or indirectly offer or give any personal benefit (other than infrequent, non-cash gifts of
nominal value consistent with the Code of Conduct), including commissions, kickbacks, payments, loans, gratuities (including travel and entertainment), bribes, gifts, samples, services, promises of future employment or personal considerations (each
a “Benefit”) to any Personnel of Seller and Seller’s Affiliates or to any person that Buyer knows is a member of such Personnel’s family, or to any entity in which Buyer knows such Personnel or a member of such
Personnel’s family owns a direct or indirect interest. Buyer will notify the Sears Holdings Corporation Office of Compliance within five business days after it has knowledge of any violation or attempted violation of the Code of Conduct or this
Section 4. Any such notice is deemed to have been given when delivered by certified mail, return receipt requested, by email at compliance@searshc.com or to such other email address as may be provided in the Code of Conduct. Buyer will
cooperate with any request by Seller to provide information and documentation regarding any communication or transaction with Seller or its Personnel. If Buyer adopts a code of conduct with respect to its Personnel and delivers that code of conduct
to Seller, Seller will support that code of conduct and will not directly or indirectly take any action that may cause any of Buyer’s Personnel to violate the code of conduct or any Applicable Law. 

  
 39 









 3. PACKAGING, LABELING, SHIPPING AND BILLING. Seller will be responsible for providing
adequate packaging, tagging, labeling, packing, shipping and billing. Seller will comply with all packaging, tagging, labeling, packing, shipping and billing requirements reasonably requested by Buyer as well as any and all requirements established
by applicable laws, regulations, carrier tariffs and product classifications. For Products to be shipped to Buyer from a point of origin within the United States, Seller will deliver Products to the designated carrier on or before the ship date
specified in the applicable Vendor Agreement. For Products to be shipped to Buyer or a Buyer-branded outlet from a point of origin outside the United States. Seller will deliver Products in accordance with the delivery terms specified in the
applicable Vendor Agreement and such delivery will be made on or before the ready date specified in such Vendor Agreement. Delivery dates specified will be of the essence of the Vendor Agreement. Seller will ship all Products in full packs and full
shipments in accordance with Buyer’s requirements as set forth in the Vendor Guide or any Vendor Agreement. 
 4.
REPRESENTATIONS AND WARRANTIES. 
 4.1 Products. Without in any way disclaiming implied remedies or limiting remedies for
breach thereof, Seller represents and warrants that all Products will: (a) conform to the Specification for such Products; (b) be fit and sufficient for the ordinary purpose for which Products is used; (c) be free from defects in
workmanship, materials and packaging; (d) be free from defects in construction and design; (e) be fit and sufficient for the purpose stated on any packaging, labeling or advertising; and (f) be equivalent in materials, quality, fit,
finish, workmanship, performance and design to any samples submitted to and approved by Buyer. 
 4.2 Advertising. Seller
represents and warrants that all claims made by Seller in any packaging, labeling, advertising, or other consumer material in connection with any Products or Seller brand relating to Products will be true and will have been substantiated and at the
time such claims are made. 
 4.3 Intellectual Property. Seller represents and warrants that: (a) all patents,
trademarks, trade names, trade dress, copyrights, trade secrets, rights of publicity and other intellectual property rights (other than those intellectual property rights owned by or licensed to Buyer) used by Seller in connection with Products or
in the development or manufacture of Products are either owned by Seller or Seller has been and is properly authorized by the owner of such rights to use such intellectual property rights in connection with such Products and to sell such Products
incorporating such intellectual property rights to Buyer for use or further resale and (b) Products will not, at the time that it is delivered, offered for sale or sold by Buyer, infringe any patent, trademark, service mark, trade name, trade
dress, copyright, trade secret, domain name, right of publicity or other intellectual property right of any person, corporation or other entity. Seller will notify Buyer’s chief legal officer in writing by certified mail, return receipt
requested, within five business days after it has knowledge of any claim or allegation of infringement, misuse, dilution, misappropriation or other violation of any patent, trademark, service mark, trade name, trade dress, copyright, trade secret,
domain name, right of publicity or other intellectual property right in any way related to or affecting Products. 
 4.4
Compliance with Law. Seller represents and warrants that: (a) all Products have been or will be produced, assembled packaged, tagged, labeled, packed, shipped and invoiced (“Products Production”) in compliance with the
applicable requirements of federal, state and local laws, regulations, ordinances and administrative orders and rules of the United States and its territories and those of all other countries in which such Products Production or delivery of Products
takes place; (b) Seller, its affiliates, 

  
 40 









 
and the Personnel of each of them who are involved in the Products Production or delivery of Products each will during the term of each Vendor Agreement strictly comply with all applicable
federal, state and local laws, regulations, and prohibitions of the United States and its territories, and the laws, regulations, and prohibitions of all countries in which any Products Production or delivery of Products occurs including all laws,
regulations and prohibitions governing the working conditions, wages, hours and minimum age of the work force; and (c) Products Production has not and will not involve at any time, in whole or in part, any use of child, convict or forced labor.
Seller will provide Buyer with any guaranty of compliance with the foregoing in such form as Buyer may designate with respect to any Products. 
 4.5 Antidumping. Seller represents and warrants that all sales of Products to Buyer will be made at no less than fair value under the United States antidumping law and that no government has
provided a countervailable subsidy for Products actionable under U.S. law. Seller will indemnify Buyer for (i) all antidumping and countervailing duties imposed on all Products that is sold prior to the date of publication of the International
Trade Administration’s preliminary determination of sales at less than fair value or prior to the date of publication of the existence of countervailable subsidies and exported before the date of publication of the International Trade
Administration’s final determination of sales at less than fair value or the existence of countervailable subsidies and (ii) any expenses (including reasonable attorneys’ fees) and administrative costs incurred by Buyer, its
Authorized Resellers, and Buyer-Branded Outlets in their participation in any United States antidumping or countervailable duty proceeding involving any warranted Products. 
 5. PURCHASE ORDER PROCESSING. Purchase Orders and each invoice (or ship notice, in the absence of an invoice) will contain an appropriate, agreed upon code, symbol or statement affirming Seller’s
compliance with all applicable requirements of the Fair Labor Standards Act (as amended), the regulations and orders of the United States Department of Labor issued pursuant thereto and of any similar state laws and regulations. All electronic fund
transfers and wire transactions will be in accordance with National Automated Clearing House Association (NACHA) rules and in accordance with any instructions and procedures which Buyer may from time to time supply. Neither Party will be liable to
the other Party for any indirect, special, incidental, exemplary or consequential damages arising from or as a result of any delay, omission or error in the electronic transmission or receipt of any documents, even if the other Party has been
advised of the possibility of such damages. 

  
 41 









 Appendix 3(a) 

HTS Product Categories 

Division Description and Number 

			
		
	1.	  	HOME OFFICE—3
	2.	  	SPORTING GOODS—6
	3.	  	HOUSEWARES—8
	4.	  	TOOLS—9
	5.	  	NURSERY—12
	6.	  	HEALTH AND BEAUTY—13
	7.	  	LUGGAGE—14
	8.	  	FLOORCARE/SEWING—20
	9.	  	COOKING & CLEANUP—22
	10.	  	WINDOW SHOP—24
	11.	  	LAUNDRY—26
	12.	  	SCAN BASED TRADING—27
	13.	  	AUTOMOTIVE—28
	14.	  	PAINT—30
	15.	  	HOME ENVIRONMENT—32
	16.	  	ELECTRICAL—34
	17.	  	FLOOR COVERING—37
	18.	  	AIR & WATER APPLIANCES—42
	19.	  	FOOD STORAGE—46
	20.	  	LANDS’ END CHILDREN’S APP—48
	21.	  	GENERAL MERCHANDISE—50
	22.	  	TOYS—52
	23.	  	HOME ELECTRONICS—57
	24.	  	ENTERTAINMENT SOFTWARE—58
	25.	  	LAWN, GARDEN, PATIO—71
	26.	  	OUTLET BUDGET SHOP—80
	27.	  	BEDDING—82
	28.	  	BATHROOM FIXTURES/PLUMBING—83
	29.	  	PANTRY AND HOUSEHOLD—87
	30.	  	BED AND BATH—96
	31.	  	PARTS OTHER-COUNTER—98


  
 42 









 Appendix 3(b) 

HTS Invoice Prices 
 The
HTS Invoice Prices will be the sum of (1) [***] plus (2) the net amount of the following charges and credits without duplication (each a “3(b) Amount”): 

 

	 	1.	Audit recoveries 

  

	 	2.	Carriage costs from the Vendor’s delivery point to the FOB Point; 


 

	 	3.	Cash discounts; 

  

	 	4.	Distribution-center markdowns; 

  

	 	5.	Distribution-center shrink; 

  

	 	6.	Other logistics expense; 

  

	 	7.	Charge for Seller Warranty for KCD-Branded Products that are HTS Products: [***] of Core Cost (“Core Cost” means costs reflected in the Sears Corporate
Repository of Referential Information or successor system); 

  

	 	8.	Source penalties; 

  

	 	9.	Packaging costs requested by Buyer; 

  

	 	10.	Vendor-compliance income; and 

  

	 	11.	All other charges and expenses consistent with practices in effect for Buyer and Seller immediately prior to the Effective Date. 


  
 43 









 Appendix 4(b)(i) 

Invoice Prices for DRM 
 The invoice prices for DRM are described on the following tables. Buyer is responsible for carriage only from Seller’s MDOs to the Sears Outlet Stores. 

Table A—For All Outlet Products that are KCD-Branded Products: 

 

			
	 Description and Seller Division
	  	Percentage
Off Seller’s
Core Cost
(“Outlet’s
Cost”)
	 Furniture-In Store (Div 001)
	  	[***]
	 Sporting Goods (Div 006)
	  	[***]
	 Housewares (Div 008)
	  	[***]
	 Tools (Div 009)
	  	[***]
	 Floorcare, Sewing (Div 020)
	  	[***]
	 Cooking And Cleanup (Div 022)
	  	[***]
	 Laundry (Div 026)
	  	[***]
	 Plumbing & Heating (Div 042)
	  	[***]
	 Food Storage (Div 046)
	  	[***]
	 Baby Furniture—Children’s Hardlines
	  	[***]
	 Audio/Visual (Div 057)
	  	[***]
	 Lawn, Garden, Patio (Div 071)
	  	[***]
	 Mattresses (Div 082)
	  	[***]

 Table B—For Outlet Products that are Other Products: 

 

			
	 Description and Seller Division
	  	Percentage
Off Seller’s
Core Cost
	 Furniture-In Store (Div 001)
	  	[***]
	 Sporting Goods (Div 006)
	  	[***]
	 Housewares (Div 008)
	  	[***]
	 Tools (Div 009)
	  	[***]
	 Floorcare, Sewing (Div 020)
	  	[***]
	 Cooking And Cleanup (Div 022)
	  	[***]
	 Laundry (Div 026)
	  	[***]
	 Plumbing & Heating (Div 042)
	  	[***]
	 Food Storage (Div 046)
	  	[***]
	 Baby Furniture—Children’s Hardlines
	  	[***]


  
 44 










			
	 Audio/Visual (Div 057)
	  	[***]
	 Lawn, Garden, Patio (Div 071)
	  	[***]
	 Mattresses (Div 082)
	  	[***]


  
 45 









 Appendix 4(c)(ii) 

MOS Categories and Initial MOS Invoice Prices 

The categories of MOS that Seller will sell, and Buyer will purchase, in accordance with, and subject to,
Section 4(b) of the Merchandising Agreement to which this Appendix 4(c)(ii) is attached are described in the table below in the column labeled “Source and Merchandise Description.” The invoice prices for MOS for the first three
12-month periods during the Initial Term will be the sum of (1) the applicable amounts listed in the following table in the column labeled “Base Price” plus (2) at the end of each of the first three years of the Term, an
additional amount equal to [***] of Buyer’s annual EBITDA, if any, with respect to MOS sold by Buyer, which amount (if any) Buyer will pay on or before the 45th day after the end of Buyer’s fiscal year. Buyer is responsible for carriage only from Seller’s CRC’s to
Sears Outlet Stores. 
  

			
	 Source and Merchandise Description
	  	 Base Price

	 Kmart (including Kmart.com)—all items in all categories of MOS
	  	Per pallet [***]
		
	 Lands’ End (including Lands’ End.com)—

all items in all categories of MOS apparel

all items in all categories of MOS shoes
	  	 Per item [***]
 Per item [***]

		
	 Sears, Roebuck and Co. (including Sears.com)—all items in all categories of MOS apparel
	  	Per item [***]


  
 46 









 Appendix 5(a) 

Royalty Rates; Kenmore Royalty Credits 
  

	I.	ROYALTY RATES 

 Royalty Rates
during the Initial Term: 
  

			
	 KCD-Branded Product
	  	Royalty Rate before
Deduction of
the
Kenmore Royalty Credit
	 Kenmore-branded
	  	[***]
	 Craftsman-branded—Lawn & Garden
	  	[***]
	 Craftsman-branded—all other
	  	[***]
	 DieHard-branded
	  	[***]

 Royalty Rates during the First Renewal Period and the Second Renewal Period: 

The Royalty Rates for KCD-Branded Product that are major home appliances (divisions 022, 026, and 046 as described on Appendix 3(a)), lawn mowers,
and tractors will be the rates specified above in the column labeled “Royalty Rate before Deduction of the Kenmore Royalty Credit” (the “Initial-Term Rate”). 
 The Royalty Rates for all other KCD-Branded Products will be determined in accordance with the following: 
  

	1.	First Renewal Period. 

 [***] 
  

	2.	Second Renewal Period. 

 [***] 
  

  
 47 










	3.	Terms Defined for the Purposes of this Appendix 5(a). 

 [***] 
 “KCD Product Category” means each of the following
categories: 
 Kenmore: 
  

	 	1.	Home Environment (includes Floorcare, Air & Water, among others) 

  


	 	2.	Small Kitchen Appliances & Housewares 

  

	 	3.	Other Kenmore 

 Craftsman

  

	 	4.	Handtools & Mechanics Tools 

  

	 	5.	Power Tools 

  

	 	6.	Garage & Storage 

  

	 	7.	Tool Accessories 

  

	 	8.	Spec & Other Powered Equipment 

  

	 	9.	Non-Powered & Watering Equipment 

  

	 	10.	L&G Accessories & Attachments 

  

	 	11.	Other Craftsman (includes Apparel, Toys, Grilling Accessories, among others) 

 DieHard 
  

	 	12.	Batteries (includes Automotive, Sport & Marine, Alkaline) 

  

	 	13.	Power Accessories 

  

	 	14.	Apparel 

  

	 	15.	Other DieHard 

 [***] 


  
 48 










	II.	KENMORE ROYALTY CREDIT 

 The
“Kenmore Royalty Credit” will be determined by Buyer in accordance with the following: 
 [***] 

“Buyer’s Balance of Sales in the Home Appliance Category” means a fraction, expressed as a decimal, (i) the numerator of which
is Buyer’s Net Sales during a Buyer fiscal quarter of HTS Products in the Home Appliance Category branded with Seller’s Kenmore brand, and the denominator of which is Buyer’s Net Sales during the fiscal quarter of HTS Products in the
Home Appliance Category (regardless of brand). The “Home Appliance Category” means the following product categories: 
 Cooking &
Cleanup—Division 22 
 Laundry—Division 26 
 Air & Water Appliances—Division 42 
 Food Storage—Division 46 

Floorcare/Sewing—Division 20 
 Home
Environment—Division 32 

  
 49 









 Appendix 5(d) 
 Average Aggregate Minimum Commission 
 The “Aggregate Average Minimum
Commission” on Kenmore-Branded Products in the Home Appliance Category will not be less than [***] basis points higher than the average aggregate merchandise commissions paid by Buyer to owners of Sears Hometown Stores and Franchisees
with respect to sales of non-Kenmore-Branded Products in the Home Appliance Category calculated based on Buyer’s customary methods of calculating commissions payable to owners of Sears Hometown Stores and Franchisees. 

  
 50 









 Appendix 6 

Inventory Management Policies and Processes 
 Definitions used in this Appendix 6 
 “Buyer IM Team” means
Seller’s IM employees who are identified by Seller (subject to the approval of Buyer) to provide the IM services described in this Appendix 6. 
 “DOS” means Seller’s Distribution Operation System 

“Format” means a Party. 

“IDRP” means Seller’s Demand Planning System. 
 “IM” means Inventory Management. 
 “RIM” means Store
Replenishment System 
 “Seller IM” means Seller’s Inventory Management function. 

Charges and Fees 
 Charges and
fees for Seller’s services described in this Appendix 6 are reflected on Appendix A to the Services Agreement. 
  

	1.	Separation of Inventory 

  

	 	(a)	Regarding the Logical Separation of DC inventory for Seller and Buyer 


 

	 	(i)	Logical Separation is an Operational Separation 

  

	 	(A)	Seller and Buyer will each have a Logical Separation of DC inventory 

  

	 	(ii)	Calculating Logical Separation of DC inventory for each format to draw from is a function of Relative Demand Forecasts entered into IDRP based upon


  

	 	•	 	 Using Relative Demand Forecasts to determine IDRP stocking targets in accordance with Order Feasibility Logic by each format



  

	 	•	 	 Entering Relative Demand Forecasts by Item, by Week and by DC by each format 



 

	 	•	 	 Establishing how much time is required to fulfill demand is a function of Order Feasibility logic parameters within IDRP: 



 

	 	•	 	 Varies by Vendor Production Point of Origin 


  

	 	•	 	 Determined by Vendor Production Planning cycle and Total Lead-times 



 

	 	•	 	 Calculating Demand Forecasts is a function within IDRP generated by: 



 

	 	•	 	 Establishing each Store Reorder Points by users 


  

	 	•	 	 Downloading Store On Hand and Store On Order from RIM 



 

	 	•	 	 Entering Sales Forecasts by users 


  

	 	•	 	 Entering Floor Set Quantities by users 


  

	 	•	 	 Allocating DC On Hand Inventory and Inbound PO’s is performed between IDRP and DOS for the following functions: 



 

	 	•	 	 Store Replenishment 



  
 51 










	 	•	 	 Customer Orders 


  

	 	•	 	 Flooring of Newly Assorted Items 


  

	 	(iii)	Supplying and/or reviewing all demand forecast data is the responsibility of Buyer 


 

	 	(A)	IDRP will continue to provide baseline sales forecast for Buyer. Buyer IM team will review and modify forecasts where appropriate in collaboration with Buyer.


  

	 	(B)	Entering forecasts into IDRP will be performed by the IDRP Certified Buyer IM team under Order Feasibility parameters based upon IDRP forecasting logic


  

	 	(C)	Collaborating on forecasts will be performed between Buyer IM teams and Buyer 


 

	 	(D)	Altering forecasts to change prevailing logic of similar item history as the default for IDRP demand forecasts in DC Logical Separation of Inventory calculations will
be completed by Buyer IM team. 

  

	 	(1)	Submitting store demand and sales forecasts via IDRP is the responsibility of Buyer 


 

	 	(2)	Communicating demand/sales changes where the Buyer default demand forecast is deemed too high/low is the responsibility of Buyer 


 

	 	(E)	Forecasting Store Reorder Point Increases and Decreases must occur within IDRP along with all other demand factors such as resets, seasonal buys, and promotions by
Buyer IM team 

  

	 	(F)	Planning demand where IDRP is not used within Seller, must be communicated to Seller IM teams based on order feasibility by Buyer 


 

	 	(G)	Execution of Inbound DC PO’s is a function of the Seller IM teams 

  

	 	(H)	Supplying plans for Buyer Demand that exceeds prior Buyer forecasts where typical Order Feasibility logic does not supply Vendors ample time to produce larger than
normal volumes of product is also required 

  

	 	(I)	Forecasting the demand impacts of New Store Openings and Store Closings must be completed within order feasibility parameters by Buyer or prior demand forecast will
dictate logical separation of inventory for Buyer 

  

	 	(iv)	Format Ordering Logic applicable to either format at the item level: 

  

	 	(A)	Customer Order Parameters 

  

	 	(1)	Filling orders from the DC for customer orders will default to orders being filled from either formats specific separation of inventory. 


 

	 	(2)	Filling orders from the DC for customer orders will have an exception process to allow orders from each format to only draw from a format specific logically separated
DC inventory 

  

	 	(i)	Exception process to be agreed-upon between both Buyer and Seller IM teams 


 

	 	(B)	Store Replenishment Parameters 

  

	 	(1)	Filling orders from the DC for store replenishment orders will default to orders being filled from either formats specific separation of inventory


  

	 	(2)	Filling orders from the DC for store replenishment will have an exception process to allow orders from each format to only draw from a format specific logically
separated DC inventory. 

  

	 	(i)	Exception process to be agreed-upon between both Buyer and Seller IM teams 


 

	 	(C)	Alteration of default format ordering logic will be performed by Seller IM teams 


 

	 	(1)	Exception process to be agreed-upon between both Buyer and Seller IM teams 


 

	 	(D)	Communication of adjustments by either format to default format ordering logic will be performed by Seller IM teams where: 


 

	 	(1)	Occurrences where Vendor supply interruptions are uncovered 

  

	 	(2)	Availability of items at any Vendor becomes constrained 


  
 52 










	 	(3)	Requirements by law for minimum availability per marketing of promotions where the demand was planned according to Order Feasibility Logic 


 

	 	(4)	Overselling forecasts by either format where the other format’s ability to fulfill Demand Forecasts are at risk 


 

	2.	Transition and Assortment Inventory Planning 

  

	 	(i)	Supplying annual calendars with estimated due dates to Buyer is the responsibility of Seller IM teams 


 

	 	(ii)	Establishing forecasts for ROIC, Seasonal and/or Annual demand according to Vendor Production Planning Lead-times including Vendor/manufacturer preseason part
procurement planning according to planning calendars will be performed by Buyer. 

  

	 	(A)	Determination of specific timelines and due dates for calendars will be performed by each BU Seller IM Team and communicated to the Buyer IM team as additional
information of Vendor requirements for production planning becomes available, impacting future order feasibility. 

  

	 	(1)	Each Seller SHC IM Team will ensure that the calendar incorporates lead times for above mentioned forecasts allow Buyer to review assortments, complete modeling and
submit a forecast. 

  

	 	(B)	Common Seasonal areas to note but not exclusive to: 

  

	 	(1)	Annual Power LandG estimates due in early Fall prior to next Spring Season 


 

	 	(2)	Initial Birding set up quantity due Late Spring prior to next Spring Season 


 

	 	(3)	Air Conditioners due Early Fall prior to next Spring Season – 

  

	 	(4)	Outdoor Living annual estimates and floor set quantities due mid-Summer prior to next Spring Season 


 

	 	(5)	Seasonal Christmas estimates early Spring (Trees, Lights, etc) 

  

	 	(6)	Planning for all products is due at the same time as Seller plans for Buyer inclusion in buy plans with Vendors and according to predetermined planning calendars with
store flooring needs, replenishment points and sales forecasts established. 

  

	 	(iii)	Documentation of items and programs requiring CAPCON or ROIC approval where Buyer provides requests will be included in total Seller buy review are to be supplied by
Buyer – 

  

	 	(A)	Requesting product where Buyer forecasts are not within +/- 10% tolerance of 3 year average historical Buyer sales 


 

	 	(1)	Negotiation of separate exit strategies is required of Buyer prior to confirmation of approvals to minimize negative impact to DC inventory levels including but not
limited to: 

  

	 	(i)	Absorbing excess quantities into Buyer store locations determined by item by DC Logical Separation of Inventory 


 

	 	(B)	Exercising one of the following options is required of Buyer where requested product based on Buyer forecasts are within +/- 10% tolerance and where excess inventory
remains in DC’s Logically Separated for Buyer 

  

	 	(1)	Receiving all excess quantities at store level 

  

	 	(2)	Complying with Seller Merchandise Control Policies and submit appropriate Pack Away forms for approval 


 

	 	(i)	Upon Approval, Pack Away items will be held in DCs until the next season (handling, storage, etc. will be billed to Buyer) 


  
 53 










	 	(ii)	Upon Denial, excess quantities will be receipted at Buyer store level and executed by the Buyer IM team 


 

	 	(iv)	New Product Assortment/Floor Sets 

  

	 	(A)	Adherence to the same lead-times as other formats is required by Buyer regarding initial Flooring Inventory Demand, as this demand has order feasibility requirements


  

	 	(B)	Leveraging Logical Separation of DC Inventory will protect flooring quantities by being segregated in the DC’s to ensure flooring needs are filled regardless of
New Product Assortment Planning Timeline differences between formats 

  

	 	(v)	Following the Seller new Vendor and new item processes is required of Buyer for Buyer exclusive Products by Buyer Merchant and Buyer IM teams 


 

	 	(A)	All aforementioned demand forecast parameters apply to Buyer exclusive items 


 

	 	(vi)	Performance of Record Creation activities for Buyer-unique items will be completed by Buyer’s RIM Certified IM team. Seller Seller’s will continue to use
existing Record Creation processes for shared items. 

  

	3.	Emergency/Disaster Orders: 

  

	 	(i)	Unpredictable catastrophic event impacting localized emergency demand 

  

	 	•	 	 Forecasting is the responsibility of both Seller and Buyer and include Emergency/Disaster quantities based on a 4 year average; said forecast is the
basis for allocation to each format. 


  

	 	•	 	 Committing to Vendor held stock is the responsibility of the Seller IM team inclusive of aforementioned forecasting for demand for each format.



  

	 	•	 	 Where availability is constrained, allocation will be based upon collaboration between selected delegates from Seller IM team and Buyer.



  

	 	•	 	 Forecasting when and where an Emergency/Disaster will occur is not feasible; therefore, demand will vary based upon where emergency/disasters occur



  

	 	•	 	 Planning and executing Emergency/Disaster Response is the responsibility of Seller according to the Disaster Program; this includes:



  

	 	•	 	 Disaster Program Procedures: 


  

	 	•	 	 Notification of District Managers Responsible for each District to the Disaster Program Coordinator is the responsibility of the Field Leadership team
for each format 


  

	 	•	 	 Notifications of Changes to District Managers Responsible is the responsibility of the Field Leadership team for each format



  

	 	•	 	 Notification of local demand for emergency/disasters is the responsibility of the format field District Managers via the Disaster Hotline



  

	 	•	 	 Handling inbound Disaster Hotline calls is the responsibility of Seller IM team 



 

	 	•	 	 Allocation of Disaster Merchandise both in DC’s and Vendor Held Stock is the responsibility of the Seller IM team based on requests from format
District Managers 


  

	 	•	 	 Where availability is constrained, allocation will be based upon collaboration between selected delegates from Seller IM team and Buyer



  

	 	•	 	 Event examples 


  

	 	•	 	 Hurricane 



  
 54 










	 	•	 	 Tornado 


  

	 	•	 	 Flooding 


  

	 	•	 	 Excessive Snowfall 


  

	 	•	 	 Infrastructure disruption 


  

	 	•	 	 Items Included 


  

	 	•	 	 Wet/dry Vacuums 


  

	 	•	 	 Sump Pumps 


  

	 	•	 	 Snow Throwers 


  

	 	•	 	 Ice Melt 


  

	 	•	 	 Gas Cans 


  

	 	•	 	 Generators 


  

	 	•	 	 Chainsaws 


  

	 	•	 	 AA, AAA, C and D Cell Batteries 


  

	 	•	 	 Flashlights 


  

	4.	Puerto Rico and Guam: Seller’s Affiliates will provide IM services for Buyer Stores in Puerto Rico and Guam that are substantially the same in all
material respects as the IM services provided by Seller’s Affiliates for Buyer Stores in Puerto Rico and Guam as of the Effective Date. 


  
 55 









 Appendix 7(a) 
 Payment Due Date 
 For the first 12 months of the Term: 

 

	 	1.	 Invoices for Products: the Payment Due Date is the 30th day following Buyer’s receipt of the invoice. 



 

	 	2.	 Royalties: the Payment Due Date is the 30th day following the end of Buyer’s fiscal week or Buyer’s fiscal quarter, as the case may be in accordance
with Section 7(b) of the Merchandising Agreement to which this Appendix 7(a) is attached and forms a part. 


  

	 	3.	 If the 30th day is a Saturday, Sunday, or bank holiday, Buyer will initiate payment on the next banking day, which will become the Payment Due Date. Electronic fund transfers initiated on the Payment Due Date will
be timely made for purposes of the Merchandising Agreement. 


 For the remainder of the Term: Seller and Buyer will
negotiate in Good Faith to determine the Payment Due Dates, which negotiations will take into account, among other things, then-current market conditions. 

  
 56 









 Appendix 9(b)(i)(A) 

New HTS Store List 
  

					
	 City Name
	  	 State
	  	 MSA

	   1. Surprise
	  	AZ	  	Phoenix-Mesa-Scottsdale AZ
	   2. Tempe
	  	AZ	  	Phoenix-Mesa-Scottsdale AZ
	   3. Culver City
	  	CA	  	Los Angeles-Long Beach-Santa Ana, CA
	   4. Danville
	  	CA	  	San Francisco-Oakland-Fremont, CA
	   5. Hollywood CA
	  	CA	  	Los Angeles-Long Beach-Santa Ana, CA
	   6. Irvine CA
	  	CA	  	Los Angeles-Long Beach-Santa Ana, CA
	   7. Lancaster
	  	CA	  	Los Angeles-Long Beach-Santa Ana, CA
	   8. Los Angeles
	  	CA	  	Los Angeles-Long Beach-Santa Ana, CA
	   9. Oxnard
	  	CA	  	Los Angeles-Long Beach-Santa Ana, CA
	 10. Pacoima
	  	CA	  	Los Angeles-Long Beach-Santa Ana, CA
	 11. San Jose
	  	CA	  	San Francisco-Oakland-Fremont, CA
	 12. Tustin
	  	CA	  	Los Angeles-Long Beach-Santa Ana, CA
	 13. Van Nuys
	  	CA	  	Los Angeles-Long Beach-Santa Ana, CA
	 14. Westwood
	  	CA	  	Los Angeles-Long Beach-Santa Ana, CA
	 15. Aurora
	  	CO	  	Denver-Aurora, CO
	 16. Lone Tree
	  	CO	  	Denver-Aurora, CO
	 17. Newington
	  	CT	  	Hartford-W Hartford-E Hartford, CT
	 18. Christiana
	  	DE	  	Philadelphia-Camden-Wilmington PA-NJ-DE-
	 19. Cocoa Beach
	  	FL	  	Palm Bay-Melbourne-Titusville, FL
	 20. Delray Beach (east)
	  	FL	  	Miami-Ft Lauderdale-Pompano Bch FL
	 21. Jupiter
	  	FL	  	Miami-Fort Lauderdale-Miami Beach, FL
	 22. Leesburg
	  	FL	  	Orlando-Kissimmee, FL
	 23. Ormond Beach
	  	FL	  	Deltona-Daytona Beach-Ormond Beach, FL
	 24. Tallahassee
	  	FL	  	Tallahassee, FL
	 25. Savannah
	  	GA	  	Savannah, GA
	 26. Ankeny
	  	IA	  	Des Moines-West Des Moines, IA
	 27. Post Falls
	  	ID	  	Coeur d’Alene, ID
	 28. Huntley
	  	IL	  	Chicago-Naperville-Joliet, IL-IN-WI
	 29. Savoy
	  	IL	  	Champaign-Urbana, IL
	 30. Springfield
	  	IL	  	Springfield, IL
	 31. Fort Wayne
	  	IN	  	Fort Wayne, IN
	 32. Shawnee
	  	KS	  	Kansas City, MO-KS
	 33. Topeka
	  	KS	  	Topeka, KS
	 34. Ashland
	  	KY	  	Huntington-Ashland, WV-KY-OH


  
 57 










					
	 City Name
	  	State	  	 MSA

	 35. Nicholasville
	  	KY	  	Lexington-Fayette, KY
	 36. Westfield
	  	MA	  	Springfield, MA
	 37. Worcester/Shrewsbury
	  	MA	  	Worcester, MA
	 38. Davie
	  	MD	  	Miami-Ft Lauderdale-Pompano Bch FL
	 39. Edgewood
	  	MD	  	Baltimore-Towson, MD
	 40. Towson
	  	MD	  	Baltimore-Towson, MD
	 41. Wheaton
	  	MD	  	Washington-Arlington-Alexandria, DC-VA-MD-WV
	 42. Ann Arbor
	  	MI	  	Ann Arbor, MI
	 43. Franklin
	  	MI	  	Detroit-Warren-Livonia, MI
	 44. Lake Orion
	  	MI	  	Detroit-Warren-Livonia, MI
	 45. Washington
	  	MI	  	Detroit-Warren-Livonia, MI
	 46. Liberty
	  	MO	  	Kansas City, MO-KS
	 47. Southpark
	  	NC	  	Charlotte-Gastonia-Concord NC-SC
	 48. Cherry Hill
	  	NJ	  	Philadelphia-Camden-Wilmington PA-NJ-DE-
	 49. Manchester Township
	  	NJ	  	New York-Northern New Jersey-Long Island, NY-NJ-PA
	 50. Marlton
	  	NJ	  	Philadelphia-Camden-Wilmington PA-NJ-DE-
	 51. Morganville
	  	NJ	  	New York-Northern NJ-Long Is NY-NJ-PA
	 52. Sewell
	  	NJ	  	Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
	 53. South Plainfield
	  	NJ	  	New York-Northern New Jersey-Long Island, NY-NJ-PA
	 54. Succasunna
	  	NJ	  	New York-Northern New Jersey-Long Island, NY-NJ-PA
	 55. Rio Rancho
	  	NM	  	Albuquerque, NM
	 56. Las Vegas
	  	NV	  	Las Vegas-Paradise, NV
	 57. Reno
	  	NV	  	Reno-Sparks, NV
	 58. Delmar
	  	NY	  	Albany-Schenectady-Troy, NY
	 59. Highland
	  	NY	  	Kingston, NY
	 60. New Rochelle
	  	NY	  	New York-Northern NJ-Long Is NY-NJ-PA
	 61. Port Chester
	  	NY	  	New York-Northern NJ-Long Is NY-NJ-PA
	 62. Staten Island north
	  	NY	  	New York-Northern NJ-Long Is NY-NJ-PA
	 63. Troy
	  	NY	  	Albany-Schenectady-Troy, NY
	 64. Bellbrook
	  	OH	  	Dayton, OH
	 65. Columbus
	  	OH	  	Columbus, OH
	 66. Broken Arrow
	  	OK	  	Tulsa, OK
	 67. Oklahoma City
	  	OK	  	Oklahoma City, OK
	 68. Homestead
	  	PA	  	Pittsburgh, PA
	 69. Shrewsbury
	  	PA	  	Baltimore-Towson, MD
	 70. York
	  	PA	  	York-Hanover, PA
	 71. Greer/Taylors
	  	SC	  	Greenville, SC
	 72. Sioux Falls
	  	SD	  	Sioux Falls, SD
	 73. Cordova
	  	TN	  	Memphis, TN-MS-AR
	 74. Elizabethton
	  	TN	  	Johnson City, TN


  
 58 










					
	 City Name
	  	State	  	 MSA

	 75. Knoxville
	  	TN	  	Knoxville, TN
	 76. Allen
	  	TX	  	Dallas-Fort Worth-Arlington TX
	 77. Frisco
	  	TX	  	Dallas-Fort Worth-Arlington TX
	 78. Mission
	  	TX	  	McAllen-Edinburg-Mission, TX
	 79. Murphy
	  	TX	  	Dallas-Fort Worth-Arlington TX
	 80. San Antonio 16
	  	TX	  	San Antonio TX
	 81. San Antonio east
	  	TX	  	San Antonio TX
	 82. San Antonio north
	  	TX	  	San Antonio TX
	 83. SW Houston
	  	TX	  	Houston-Sugar Land-Baytown TX
	 84. West Plano
	  	TX	  	Dallas-Fort Worth-Arlington TX
	 85. Alexandria
	  	VA	  	Washington-Arlington-Alexandria, DC-VA-MD-WV
	 86. Arlington
	  	VA	  	Washington-Arlington-Alexandria, DC-VA-MD-WV
	 87. Herndon
	  	VA	  	Washington-Arlington-Alexandria, DC-VA-MD-WV
	 88. Leesburg
	  	VA	  	Washington-Arlington-Alexandria, DC-VA-MD-WV
	 89. Merrifield
	  	VA	  	Washington-Arlington-Alexandria, DC-VA-MD-WV
	 90. Roanoke
	  	VA	  	Roanoke, VA
	 91. Salem
	  	VA	  	Roanoke, VA
	 92. Bothell
	  	WA	  	Seattle-Tacoma-Bellevue, WA
	 93. Issaquah
	  	WA	  	Seattle-Tacoma-Bellevue, WA
	 94. Appleton
	  	WI	  	Appleton, WI
	 95. Green Bay
	  	WI	  	Green Bay, WI
	 96. Madison
	  	WI	  	Madison, WI
	 97. S Milwaukee
	  	WI	  	Milwaukee-Waukesha-West Allis, WI


  
 59 









 Appendix 12(a)(iii) 

Seller Marks 
  

	1.	The KCD Marks 


	2.	The feature Marks and sub-brand Marks associated with the Seller-Branded Products 


	3.	The trade dress related to the above Marks 


  
 60 









 Appendix 18(a) 

Merchandising Operating Committee 
 Designated by Buyer: Michael Gray; Susan Hilsenbeck; JJ Ethridge 
 Designated by
Seller: Michael Burti; Dean Schwartz; Adam Whitney 
 Initial Chairperson: Michael Burti 

  
 61