Document:

Ex. 10.4 - Supplemental Agreement

Exhibit 10.4

Execution Copy

SUPPLEMENTAL AGREEMENT
Dated: December 9, 2013

This Supplemental Agreement (this “Agreement”) between Sears Holdings Corporation, a Delaware corporation (“SHLD”), and Sears Hometown and Outlet Stores, Inc., a Delaware corporation (“SHO”), is retroactive to October 6, 2013 (the “Effective Date”).  

SHLD and SHO each are sometimes referred to as a “Party” and together sometimes are referred to as the “Parties.”    “Affiliates” means (solely for purposes of this Agreement and for no other purpose) (i) with respect to SHO, its subsidiaries, and (ii) with respect to SHLD the subsidiaries of SHLD.

Whereas, the parties have entered into that Separation Agreement dated August 8, 2012 (the “Separation Agreement”).
 
    Whereas, the parties have entered into that Services Agreement dated August 8, 2012 (the “Services Agreement”).

Whereas, the parties have agreed to certain additional terms and conditions as set forth below.

Terms and Conditions

For good and valuable consideration, the receipt of which SHLD and SHO acknowledge, SHLD and SHO agree as follows: 

Article I. 
SUPPLEMENTAL TERMS

1.01    Confidentiality.  This Agreement is ancillary to the Services Agreement between the parties.  Information disclosed by the parties and their Representatives (as that term is defined in the Services Agreement), shall be subject to Section 4.01(a) (Confidential Information) of the Services Agreement.
1.02    Dispute Resolution.  
a.Released Claims.  SHO and its Affiliates on the one hand and SHLD and its Affiliates on the other hand, have made certain claims against each other under the Ancillary Agreements.   SHLD and its affiliates deny each claim made by SHO and its affiliates.  SHO and its affiliates deny each claim made by SHLD’s affiliates.   In order to avoid the risks, burdens and uncertainties of litigation, SHO and SHLD have agreed to resolve certain of the foregoing claims, which resolved claims are set forth on Appendix #1 hereto (the “Released Claims”).  Appendix #2 hereto lists certain matters that are not Released Claims and that SHO and SHLD have reserved for continuing discussions (such matters together 

1
DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

the “Open Issues”); provided that neither party admits that any Open Issues raised by the opposing party have merit.
  
b.SHO Limited Release.  Subject to the terms and conditions of this Agreement, SHO, on behalf of itself and its past and present parents, affiliates, subsidiaries, owners, directors, officers, partners, executives, employees, agents, attorneys, representatives, heirs, successors, predecessors, and assigns, hereby forever acquits, releases, absolves, waives, and discharges SHLD and any and all of its past and present parents, affiliates, subsidiaries, and each of the foregoing's owners, directors, officers, partners, executives, employees, agents, attorneys, representatives, heirs, successors, predecessors, and assigns (the “SHLD Releasees”) of, for, and from any and all actions, causes of action, suits, claims, damages, obligations, liabilities, losses, demands, attorneys' fees, costs, sanctions, expenses, sums of money, and accounts of any kind, direct or indirect, actual or potential, foreseen or unforeseen, at law or in equity, in contract or in tort or otherwise, whether known or unknown, liquidated or unliquidated, that it has or has had against them for, upon, by reason of, or arising as a result of or in connection with any matter, cause, transaction, occurrence, or thing whatsoever, from the beginning of the world to the Effective Date; provided, however, that this limited release shall only apply to Released Claims (i.e. all of the claims expressly set forth in the Appendix #1 (Released Claims)) and shall not apply to any other claims.  For the avoidance of doubt, SHO is hereby releasing each of the “Claims Made By SHO” and each SHO defense of the “Claims Made by SHLD” contained in Appendix 1 (but such defenses are only released as to those specific Released Claims).  Moreover, SHO expressly: (a) represents and warrants that it is not aware of any facts giving rise to any actual or potential claim or cause of action (other than the Open Issues) arising from the Released Claims against any of the SHLD Releasees that would not be released as a result of this Agreement; and (b) covenants not to assert in the future any claim or cause of action arising from the Released Claims against any of the SHLD Releasees.

c.SHLD Limited Release.  Subject to the terms and conditions of this Agreement, SHLD, on behalf of itself and its past and present parents, affiliates, subsidiaries, owners, directors, officers, partners, executives, employees, agents, attorneys, representatives, heirs, successors, predecessors, and assigns, hereby forever acquits, releases, absolves, waives, and discharges SHO and any and all of its past and present parents, affiliates, subsidiaries, and each of the foregoing's owners, directors, officers, partners, executives, employees, agents, attorneys, representatives, heirs, successors, predecessors, and assigns (the “SHO Releasees”) of, for, and from any and all actions, causes of action, suits, claims, damages, obligations, liabilities, losses, demands, attorneys' fees, costs, sanctions, expenses, sums of money, and accounts of any kind, direct or indirect, actual or potential, foreseen or unforeseen, at law or in equity, in contract or in tort or otherwise, whether known or unknown, liquidated or unliquidated, that it has or has had against them for, upon, by reason of, or arising as a result of or in connection with any matter, cause, transaction, occurrence, or thing whatsoever, from the beginning of the world to the Effective Date; provided, however, that this limited release shall only apply to Released Claims (i.e., all of the claims expressly set forth in the Appendix #1 (Released Claims)) and shall not apply to any other claims.  For the avoidance of doubt, SHLD is hereby releasing each of the “Claims Made By SHLD” 

2
DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

and each SHLD defense of the “Claims Made by SHO” contained in Appendix 1 (but such defenses are only released as to those specific Released Claims).  Moreover, SHLD expressly: (a) represents and warrants that it is not aware of any facts giving rise to any actual or potential claim or cause of action (other than the Open Issues) arising from the Released Claims against any of the SHO Releasees that would not be released as a result of this Agreement; and (b) covenants not to assert in the future any claim or cause of action arising from the Released Claims against any of the SHO Releasees.

d.Unreleased Claims.    The parties acknowledge that this Agreement does not release any claims the parties may have that do not arise from the Released Claims.

e.No Admission of Liability.  Neither this Agreement, the Related Amendments nor anything contained in this Agreement or the Related Amendments are to be construed or considered an admission of wrongdoing or liability by any person or party.
ARTICLE II.     
MISCELLANEOUS
2.01    Expenses.   Except as otherwise provided herein, in the Separation Agreement or the Ancillary Agreements, in connection with the provision of this Agreement, each Party will bear its own expenses.
2.02    Waiver of Compliance.   Any failure of a Party to comply with any obligation, covenant, agreement or condition in this Agreement may be waived in writing by the other Party, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
2.03    Amendment.   This Agreement may not be amended except by a written amendment signed by each Party.  
2.04    Assignment.   SHO may not assign its rights or obligations under this Agreement without the prior written consent of SHLD, to be withheld in SHLD’s absolute discretion.  SHLD may freely assign its rights and obligations under this Agreement to any of its Affiliates without the prior consent of SHO; provided that any such assignment will not relieve SHLD of its obligations hereunder.  This Agreement will be binding on, and will inure to the benefit of, the successors and assigns of the Parties. 
2.05    Notices.   All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement must be in writing and will be deemed to have been duly given (i) when delivered by hand, (ii) three business days after it is mailed, certified or registered mail, return receipt requested, with postage prepaid, (iii) on the same business day when sent by facsimile if the transmission is completed before 5:00 p.m. recipient’s time, or one business day after the facsimile is sent, if the transmission is completed on or after 5:00 p.m. recipient’s time or (iv) one business day after it is sent by Express Mail, Federal Express or other courier service, as follows:

3
DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

(a)    if to SHLD:
Sears Holdings Management Corporation
3333 Beverly Road B5-119A
Hoffman Estates, Illinois 60179
Attention:  Senior Vice President-Finance
Telephone: (847) 286-8991
Facsimile: (847) 286-1699
with a copy to:
Sears Holdings Management Corporation 
3333 Beverly Road, B6-210B
Hoffman Estates, Illinois 60179
Attention: General Counsel
Telephone: (847) 286-5933  
Facsimile: (847) 286-2471

(b)    if to SHO:
Sears Hometown and Outlet Stores, Inc.
3333 Beverly Road B4-150A
Hoffman Estates, Illinois 60179
Attention:  Senior Vice President and Chief Operating Officer
Telephone: (847) 286-9741
Facsimile: (847) 286-7838

with a copy to:
Sears Hometown and Outlet Stores, Inc.
3333 Beverly Road 
Hoffman Estates, Illinois 60179
Attention: General Counsel

or such other address as the person to whom notice is to be given has furnished in writing to the other Parties.  A notice of change in address will not be deemed to have been given until received by the addressee.
2.06    Survival.   The provisions of Articles I (Supplemental Terms) and II (Miscellaneous) will survive any termination or expiration of this Agreement.
2.07    Headings.   The article and section headings contained in this Agreement are inserted for reference purposes only and will not affect the meaning or interpretation of this Agreement.

4
DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

2.08    No Third Party Rights.   Except for the releases in this Agreement of any SHLD Releasees or any SHO Releasees in their respective capacities as such, this Agreement is intended to be solely for the benefit of the Parties and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the Parties.
2.09    Counterparts.   This Agreement may be executed by facsimile and in any number of counterparts, each of which will be deemed to be an original, and all of which together will be deemed to be one and the same instrument.
2.10    Severability.   If any provision of this Agreement is declared by any court of competent jurisdiction to be illegal, invalid, void or unenforceable, such provision will (to the extent permitted under applicable law) be construed by modifying or limiting it so as to be legal, valid and enforceable to the maximum extent compatible with, and possibly under, applicable law, and all other provisions of this Agreement will not be affected and will remain in full force and effect.
2.11    Entire Agreement.   This Agreement (including the Appendixes hereto) constitutes the entire agreement between the parties hereto and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof.
2.12    Fair Construction.   This Agreement will be deemed to be the joint work product of the Parties without regard to the identity of the draftsperson, and any rule of construction that a document will be interpreted or construed against the drafting Party will not be applicable.
2.13    No Agency.   Nothing in this Agreement creates a relationship of agency, partnership, or employer/employee between SHLD and SHO and it is the intent and desire of the Parties that the relationship be and be construed as that of independent contracting parties and not as agents, partners, joint venturers or a relationship of employer/employee.
2.14    Governing Law; Jurisdiction; Waiver of Jury Trial. 

(a)    This Agreement will be governed and construed in accordance with the laws of the State of Illinois, without regard to any choice or conflicts of law provision that would cause the application of the laws of any other jurisdiction.  This Agreement will not be subject to any of the provisions of the United Nations Convention on Contracts for the International Sale of Goods.
(b)    Each of the Parties irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Illinois state court or Federal court of the United States of America, in either case sitting in Cook County, Illinois, and any appellate court to any thereof, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby or for recognition or enforcement of any judgment relating thereto, and each of the Parties irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Illinois state court or, to the extent permitted by law, in such Federal court, (iii) waives, to the fullest extent it may legally and 

5
DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

effectively do so, any objection that it may now or hereafter have to the laying of venue of any such action or proceeding in any such Illinois state or Federal court, and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Illinois state or Federal court.  A final judgment in any such action or proceeding will be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Each Party irrevocably consents to service of process in the manner provided for notices in Section 2.05.  Nothing in this Agreement will affect the right of any Party to serve process in any other manner permitted by law.
(c)    Each Party acknowledges that each controversy that may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, it irrevocably and unconditionally waives all rights it may have to a trial by jury in respect of any litigation directly or indirectly arising out of or relating to this Agreement or the transactions contemplated hereby.  Each Party certifies and acknowledges that (i) it understands and has considered the implications of such waivers, (ii) it makes such waivers voluntarily, and (iii) it has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 2.14.
2.15    Condition Precedent.  It is a condition precedent to the effectiveness of this Agreement that the parties (or their Affiliates, as applicable) also execute (collectively the “Related Amendments”): (a) that certain Amendment #2 to Merchandising Agreement (the “Merchandise Amendment”), (b) that certain Amendment No. 1 to Services Agreement, (c) that certain Amendment No. 1 to Store License Agreement (Outlet), and (d) that certain Amendment No. 1 to the Separation Agreement (the “Separation Amendment”).
Signature Page Follows

6
DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

SEARS HOLDINGS MANAGEMENT CORPORATION

By:    /s/ Ronald Boire
Executive Vice President, Chief Merchandising Officer and President, Sears Full-Line Stores & Kmart Formats
December 9, 2013

SEARS HOMETOWN AND OUTLET STORES, INC. 

By:     /s/ W.BRUCE JOHNSON
W. Bruce Johnson
Chief Executive Officer and President
Date: December 9, 2013

DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

Appendix #1
Released Claims
All references to SHO in this Appendix #1 shall be deemed references to SHO and its Affiliates.  Further, all references to SHLD in this Appendix #1 shall be deemed references to and SHLD and its Affiliates.
	
		
	Issue
	Claims Made By SHO

	1.    Relationship
	Claims that SHO should not expect SHLD to perform as a normal service provider—SHLD has said, and acted in ways that indicate, that it doesn’t want SHO’s services business.  

	2.    Authority to negotiate and enter into agreements
	Claims that SHO has in good faith negotiated agreements with SHLD and then is told that unspecified “others” at SHLD have rejected the negotiated terms for reasons unrelated to the negotiated agreements.  SHO does not understand who is empowered to negotiate the terms of, and enter into, binding agreements on SHLD’s behalf.

	3.    Pricing and promotional information

	Claims that SHLD has refused to deliver the information, has delivered the information late, or has delivered inaccurate information.

	4.    MOS apparel
	•    Claims that SHLD has delayed delivery dates with inadequate notice, resulting in SHO’s inability to efficiently schedule labor, allocate selling-floor space, and plan sales volumes.
•    Claims that SHLD has diverted merchandise to liquidators.

	5.    IBM Charges
	Claims that SHLD has overcharged SHO approximately $2.2M from separation through April 2013, and the overcharges continue.

DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

	
		
	6.    Outlet HA Product 
	Claims that SHLD has prior to the Effective Date refused to sell to SHO at the prices specified in the Merchandising Agreement the following categories of DRM merchandise: (1) transitions (displays); (2) web order cancellations that are not part of SHLD’s Take-It-Home-Today program; and (3) customer returns that are not otherwise subject to the Merchandising Agreement.  

	7.    Clearance centers
	Claims that SHLD prior to the Effective Date aggregated DRM merchandise in SHLD Outlet clearance centers, which violate the Merchandising Agreement.

	8.    Kenmore Save-A-Sale
	Claims that SHO and KCD agreed post-separation to this promotional initiative to increase Kenmore sales, including royalty rebates and fixture reimbursement.  SHO incurred expense in reliance on the agreement.  SHLD has failed to honor the agreement.

	9.    Subsidy sharing
	Claims that SHLD on numerous occasions has attempted to avoid sharing with SHO subsidies that SHLD is obligated to share in accordance with the Merchandising Agreement.

	10.    Outlet’s costs for Outlet merchandise
	•    Claims that SHLD has overcharged SHO $1.1M through week 10 by calculating pricing to SHO using landed cost rather than core cost and continues to do so.
•    Claims that SHLD has overcharged SHO $1.6M through week 10 by calculating pricing to SHO for KCD products using higher non-KCD-product pricing and continues to do so.

	11.    Trade Area Restriction
	Claims that SHLD recently announced that it is closing its Christianburg, VA, Chicago-79th Street, and Chicago-Western stores.  Claims that SHLD then notified SHO that SHLD intends to continue its retail presence in the trade areas for these stores.  Claims that SHLD’s notification blocks SHO’s opportunity to expand into, and maintain a physical “Sears” presence in, these markets.  

DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

	
		
	12.    Real estate
	•    Claims that Subleases and related documents were withheld until immediately prior to separation; documentation does not include commercially reasonable terms and are not consistent with status quo pre-separation.
•    Claims that SHO had limited time review the leases and subleases between the parties and that such limited review time is a basis for changing what the parties agreed to.
•    Claims that SHLD has demanded charges post-separation that were either not charged pre-separation or the post-separation charges are significantly greater than pre-separation charges.  Most of these charges were not addressed at the Steering Committee, and they were not contemplated when determining the Duff & Phelps valuation.
•    Claims that SHLD’s subleases do not permit subleasing to SHO’s franchisees.  These restrictions, which were not addressed pre-separation at the Steering Committee, restrict SHO’s franchising initiative for more than 60 Outlet Store locations.
•    Claims that SHLD’s claims that SHO is responsible for SHLD’s failures to maintain, prior to the separation, premises that SHLD has subleased to SHO (roof, HVAC, and other major tenant repairs).  
•    Claims that SHLD refuses to acknowledge SHO’s request to extend leases.
•    Claims that SHLD refused to agree to SHO’s requested 60-day extension for the Newark, DE ORDC.
•    Claims that SHLD refuses to negotiate leases extensions for former TGI premises; SHO’s offered renewal terms are the same as the terms approved pre-separation by SHLD’s CAPCON.
•    Claims that SHLD refuses to allow Outlet to temporarily use adjoining unused and unleased space in premises that SHO has leased from SHLD.

	13.    MetaScale agreement
	Claims that SHLD (1) demanded, unreasonably, that SHO provide adequate assurance of SHO’s due performance and (2) suspended contract work.
•    SHLD’s demand is based apparently on SHO’s assertion (made in good faith) that it did not have to pay IBM charges in excess of the $9.6M for IT services specified in the Services Agreement.
•    Charges have been the subject of a good faith dispute, and were paid promptly in full, prior to the delivery of the request for adequate assurance.
Claims that SHLD’s work stoppage has delayed implementation of the contract work.  Claims that SHLD’s unjustified demand raises legitimate SHO concerns about SHLD’s reliability as a service provider.

DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

	
		
	14.    HR training materials
	Claims that SHLD has refused to consistently give to SHO training materials in accordance with the applicable agreements.

	15.    IT services
	Claims that SHLD’s service levels have been substandard.

	16.    Craftsman Lifetime Warranty Exchange

	Claims that SHO was not obligated to perform Craftsman Lifetime Warranty Exchanges and Claims that SHO was entitled to reimbursement for such exchanges prior to October 6, 2013.

	17.    Written Agreement
	Claims by SHO that SHO is able to proceed without Seller’s written agreement when the applicable agreement between the parties state that “and Buyer and Seller agree in writing.” 

	18.    Blue Label MOS Apparel
	Claims that SHLD was improperly sending SHO damaged or defective (Blue Label) goods as part of MOS

	19.    Outlet Warranty Charges
	Claims that SHLD’s charges for Outlet Products improperly included charges for warranty.

    

DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

	
		
	Issue
	Claims Made By Sears Holdings

	1.    Hybrid Delivery Issue
	Claims that SHLD has overpaid SHO for Hybrid Deliveries for orders originating from SHLD’s Affiliates stores.

	2.    Outlet Increased sale of New Products
	Claims that SHO’s increase in the amount of new products sold at Outlets (new products, increased SCIM, etc.) prior to the Effective Date are in violation of the Outlet License Agreement.

	3.    Franchising
	Claims that SHO has been pursuing franchises of Sears Outlet without SHLD’s permission in violation of the Outlet License Agreement.

	4.    2012 IT Service Charges
	Claims that SHO has refused to pay the same rate for project IT Services that SHLD pays.

	5.    Certain Real Estate Leases
	For the properties listed on Schedule 12.2(h) to the Separation Agreement, claims that SHO failed to pay amounts under the leases for those properties which are allocated to SHLD as its responsibility under the Separation Amendment.  

	6.    New HTS Stores within 5-8 miles
	Claims that SHO opened the specific stores listed in Section 1.(d)(i) to the Merchandise Amendment in violation of Section 9(b)(i)(C) of the Merchandise Agreement.

 

DMLIB-#442086-v5-SHLD_SHO_Supplemental_Agreement.DOCX

Exhibit 10.4

Execution Copy

Appendix #2
Open Issues

	
		
	Issue
	Open Issues

	1.    Excess Inventory and Storage Fees

	Claims that SHO is not properly incented to control its demand forecast to SHC because SHC bears the carrying costs on DC inventory for SHO.

	2.    Clearance centers
	Claims that SHLD is not permitted to open “Clearance Centers.”

	3.    Outlet Products
	All Claims related to SHLD’s on-going investigation into how SHO was charged for Outlet Products; except those claims expressly included in the Released Claims.  For example, SHLD has notified SHO that SHLD has determined: (1) that in some instances, the DRM discount was applied more than once to an Outlet Product (2) SHO received a credit for DRM products not sold to SHO), and (3) SHO received excess credits when products were returned.

	4.    CRC Pick-Up Timeframes
	Claims that SHO has not been picking up freight from the CRC in a timely manner.

	5.    Selective Acceptance by SHO of DRM From CRC   

	Claims that SHO has been selectively rejecting certain goods from the CRC (e.g., Tempur-Pedic)

	6.    Damaged Goods
	Claims that SHO been unilaterally taking markdowns for damaged DRM.

	7.    W2S Expansion (All Formats)
	Claims that SHC has refused to provide W2S services for SHO’s Outlet Store and Home Appliance Showroom locations, including SHLD’s proposals for altering the economics between the parties related for all Web 2 Store transactions, including hybrid deliveries which originate online.

	8.    Outlet HA Product
	Claims after the Effective Date that SHLD is obligated to sell SHO the following categories of DRM merchandise: (1) transitions (displays); (2) web order cancellations that are not part of SHLD’s Take-It-Home-Today program; and (3) customer returns that are not otherwise subject to the Merchandising Agreement.

1ex105administrativeservi

Exhibit 10.5      Execution Copy         DMLIB-#429909-v6-HR_SHO_Adminstrative_Services_SOW schedule 10 5   1   Administrative Services SOW    STATEMENT OF WORK # 1      Dated: December 9, 2013      This Statement of Work # 1 (“SOW”) is made retroactive to July 1, 2013 (“Effective Date”) between Sears Holdings   Management Corporation (“SHMC”) and Sears Hometown and Outlet Stores, Inc. (“SHO”), Sears Authorized   Hometown Stores, LLC (“Hometown”), and Sears Outlet Stores, L.L.C. (“Outlet” and together with SHO and   Hometown, collectively the “SHO Group”). This SOW is incorporated as part of, and is governed by the terms and   conditions of, that certain Employee Transition and Administrative Services Agreement between SHMC and the SHO   Group dated as of August 31, 2012 (the “Agreement”).  All terms capitalized herein, but not defined herein, shall have   the meanings ascribed to them in the Agreement.         Sears Holdings Management Corporation      By:  /s/ RONALD BOIRE   Ronald Boire   Executive Vice President, Chief Merchandising   Officer and President, Sears Full-Line Stores &   Kmart Formats   December 9, 2013      Sears Hometown and Outlet Stores, Inc.      By:  /s/ W.BRUCE JOHNSON   W. Bruce Johnson   Chief Executive Officer and President   December 9, 2013          Sears Authorized Hometown Stores, LLC      By:  /s/ W.BRUCE JOHNSON   W. Bruce Johnson   President   December 9, 2013       Sears Outlet Stores, L.L.C.      By:  /s/ W.BRUCE JOHNSON   W. Bruce Johnson   President   December 9, 2013         End of Cover Page        

 

Exhibit 10.5      Execution Copy         DMLIB-#429909-v6-HR_SHO_Adminstrative_Services_SOW schedule 10 5   2   1. Services.  Pursuant to Article 4.1 of the Agreement, this SOW (in Appendix A) describes the Administrative   Services that SHMC shall provide to the SHO Group under the terms of the Agreement.          2. Governing Law.   Article 9.17 of the Agreement is specifically restated herein by reference.   3. Not an Offer.  This SOW shall only be binding if it is signed by SHMC and each member of the SHO Group.            End of SOW        

 

Exhibit 10.5      Execution Copy         DMLIB-#429909-v6-HR_SHO_Adminstrative_Services_SOW schedule 10 5   1   APPENDIX A   Administrative Services Provided by SHMC to the SHO Group      1.  SHMC will provide administrative services to the SHO Group as described in the following table   and in accordance with the terms of the Agreement:         HUMAN RESOURCES SERVICES   Support   Center    Provide 88SEARS online and call center access and support to SHO employees in English and   Spanish, generally including answering SHO employee questions, providing scenario specific   information based on inquiries made and forwarding calls to more appropriate resources, as   needed.     Key HR transactions for the purposes of transfers, promotions, terminations and general   employee data changes per the standard SHMC process; provide PeopleSoft support to SHO   HR as necessary to complete transactions if SHO is unable to process  due to system issues not   caused by SHO.    Assemble Transitional Pay Packages (TPPs) if developed by SHO based on data provided by   SHO legal team, send out TPPs to respective locations and, after the package is covered with   the employee by SHO and signed, process documents that are returned to the HR Support   Center and enter into PeopleSoft per the standard SHMC TPP Process.    Note: Data entry services for new hire files from external service providers are not included.    These must be paid for directly based on SHMC costs plus a 30% mark up (currently equal to   $30/Hour).      Payroll  Process payroll according to ongoing SHMC payroll cycles (Silver, Weekly, Semi Monthly   and Monthly); process incentive and bonus payments in the same manner.  Provide wage   and/or employment verification services for active and terminated SHO associates through   SHMC standard processes.    Process manual paychecks (out of cycle) when necessary and on the same basis as SHMC   currently employs.    Perform U.S. and Puerto Rico payroll and employee withholding tax remittances to local, state   and federal agencies and filing of corresponding tax returns with respect to employee   withholding and payroll taxes for SHO Group employees including Puerto Rico.    Maintain employee direct deposit records and voluntary deduction records for SHO Group   employees.    Issue termination payments via “on demand” checks for SHO Group employees.    Process direct deposit recall, stop payment orders with appropriate bank confirmation and   check reissue, where applicable, for SHO Group employees - charge a per transaction fee as   currently done in SHMC;  This does not include using the SHMC overpayment process to seek   reimbursement of funds from employees overpaid as a result of any error or omission by SHO.    If an overpayment is the result of any error or omission by SHMC, SHMC will take action it   deems appropriate and reasonable under the circumstances, which may include using the   SHMC overpayment process at its expense to promptly seek reimbursement of funds from   employees.      Process garnishments, deductions and remittances to third parties with respect to SHO Group   employees - this will be handled in the same manner as the current SHMC process; SHO must   provide adequate lead time, for example, in instances where vendor changes occur, resulting   in IT and HR project work that will need to be estimated before work can commence or when   SHO receives documents that require action.      Perform accounting accruals and reconciliations related to payroll that mirrors SHMC process.    Process and distribute SHO Group employee W-2 statements according to SHMC standard   process on behalf of SHO.         Time and   Attendance    Provide the system and punch technology / software within the point-of-sale system linked to   payroll to enable capture of hours and time off for hourly associates in the same manner        

 

Exhibit 10.5      Execution Copy         DMLIB-#429909-v6-HR_SHO_Adminstrative_Services_SOW schedule 10 5   2   SHMC provides for its employees.    Provide time and attendance reporting according to SHMC standard process.    Scheduling is not included in services provided as these reside in retail operations.    Note: It is the sole responsibility of SHO to commit payroll data (e.g., number of hours   worked, correct hourly rate/salary, commissions, etc.) to SHMC by the standard SHMC   established deadlines to ensure timely processing.  SHO acknowledges that processing delays   caused by SHO’s failure to meet the established cycle cutoffs may result in delayed payments   to SHO’s employees.  In the event that errors in payroll data are caused by SHMC, SHMC will   promptly reperform the services.    HR   Reporting &   Analytics    Provide ongoing access to WFA for SHO Group HR Reporting needs, and, if applicable,   provide access to upgrades that SHMC has implemented in its sole discretion.     Support HR reporting requests for special reports using the standard request process found at   http://support.searshc.com/wfi/SiteAdmin/WFIReportRequestForm/tabid/4372/Default.aspx    Note: Standard turnaround times that are published by the HRIS reporting team will apply to   SHO.  Upon request by SHO, SHMC may, at its sole discretion, provide expedited requests.    Expedited requests will be considered incremental and result in a fee based on the effort   involved in fulfilling the request (and the hourly rate charged will correspond to the   incremental project rate in this SOW), provided the reporting team has the capacity to expedite   the request as determined by SHMC.  If SHO has a regulatory or litigation related request for   information, SHO will make that request of the SHMC law department.  Sharing of   information for litigation purposes will be subject to the parties’ Separation Agreement.      Note:  If the volume of requests increases by more than 10% over the prior year, SHMC   reserves the right to charge for additional requests.  Once these thresholds are met, the cost for   additional reports will be charged at the incremental project rate in this SOW.      Unemployme   nt    Equifax will continue to provide unemployment hearing representation for SHO Group   unemployment claims according to SHMC standard process, Equifax will continue to provide   standard reports as needed, provided that Equifax, if it is willing to do so, works directly with   SHO Group HR.         Compliance  Provide access to the SHC handbooks and policies listed below for SHO’s use and reference in   developing SHO policies as SHO deems appropriate for its associates for one (1) year after the   spin date. The parties agree that because SHC’s policies have been customized for SHC   associates, SHO must modify the listed policies to remove all references to SHC, Sears, Kmart   and other SHC affiliates/subsidiaries as appropriate prior to incorporating these materials into   SHO’s policies. Upon request (one-time), SHC will provide editable versions of such SHC   handbooks and policies if SHC determines that such editable versions are readily available.       Employee discount policy    Credit (WOTC)       Employment Poster Requirements    FMLA Leave Policy and Extended Care Leave    I-9 and WOTC Process    Pay for Work    Policy Resources    Return to Work    Short-Term Disability Guide    Welfare to Work (WTW) and Work Opportunity Tax    Youth Compliance     Anti-Harassment & EEO policy           FULL TIME CERTIFICATIONS        FT Commitment for Employee         

 

Exhibit 10.5      Execution Copy         DMLIB-#429909-v6-HR_SHO_Adminstrative_Services_SOW schedule 10 5   3   Full-Time Employee Commitment     Hourly Employee Availability Form     Employee SPIFFs     Commission Tables     Hourly Compensation Guide          ATTENDANCE POLICY - ENGLISH and SPANISH       3 Points - Personnel Interview Record     4 Points - Notice of Corrective Action     5 Points - Notice of Corrective Action     Employee Attendance Record     Attendance Policy     Attendance Policy Poster     Daily Absentee Log     FAQ Attendance and Punctuality Policy     No Call No Show - Notice of Corrective Action             STAFFING        Hourly Interview Guide     Hourly Interview Guide Overview     Hourly Interview Guide Training Aid     Hourly Interview Process FAQs        POLICIES & PROCEDURES        HR Policy and Procedures Manual     Outlet Dress Code     Seasonal Employment Acknowledgment     Social Media Policy        TERMINATIONS         Termination Matrix       ALL POLICIES AND DOCUMENTS ARE PROVIDED FOR REFERENCE AND   INFORMATIONAL PURPOSES ONLY AND NOT FOR THE PURPOSE OF   PROVIDING LEGAL ADVICE.  ALL POLICIES ARE PROVIDED “AS IS” AND SHC   MAKES NO WARRANTIES REGARDING THEIR ACCURACY, COMPLETENESS OR   APPLICABILITY.       Provide centralized Leave of Absence (“LOA”) (CLMT) support including the   administration of existing and new LOA documentation and cases, existing policies,   documents, and administrative services  in order to  administer decisions made by SHO   Group HR relative to Family Medical Leave Act (“FMLA”) and all other Leaves of   Absences (no advice or counseling is provided to SHO Group HR)    Unless already provided, provide a one-time copy of  policies, documents, and   administrative services  relative to ADA accommodations (no advice or counseling is   provided to SHO Group HR)   Employee   Record   Keeping    Maintain standard employee files and documents in accordance with SHMC document   storage practices.     Note: If SHO needs to obtain data dumps or copies of records, the fee will be the standard        

 

Exhibit 10.5      Execution Copy         DMLIB-#429909-v6-HR_SHO_Adminstrative_Services_SOW schedule 10 5   4   cost that is charged to SHMC by Xerox plus a 30% mark up.   Learning  Provide access to electronic copies of  the below listed SHC compliance training materials,   including e-learning courses, policy certifications, job aids and quizzes, for the sole   purpose of SHO’s use and reference in developing compliance training as SHO deems   appropriate for its associates, contractors and vendors until October 13, 2013.     The parties   agree that because SHC’s compliance training has been customized for SHC associates,   SHO shall not utilize those courses in their current form for the purpose of providing   training to SHO associates.  Instead, SHO must modify the aforementioned  compliance   courses at its own cost to remove all references to SHC, Sears, Kmart and other SHC   affiliates/subsidiaries and remove or replace all references to SHC’s policies with   references to SHO policies as appropriate prior to incorporating these materials into SHO’s   training materials.    ALL COMPLIANCE TRAINING MATERIALS ARE PROVIDED   FOR REFERENCE AND INFORMATIONAL PURPOSES ONLY AND NOT FOR THE   PURPOSE OF PROVIDING LEGAL ADVICE.  ALL COMPLIANCE TRAINING   MATERIALS ARE PROVIDED “AS IS” AND SHC MAKES NO WARRANTIES   REGARDING THEIR ACCURACY, COMPLETENESS OR APPLICABILITY.      Ethics and Integrity Spring 2011   Evaluating Employment Accommodations   Monthly Compliance Training Topics   Motorized Materials Handling Equipment (MMHE) Safety & Awareness   Personal Protective Equipment (PPE) Certification   Safe Lifting   OSHA Record Keeping   Lockout/Tagout Awareness   Credit and PCI Compliance   Advanced Environmental Training for Managers   Asbestos Awareness   Environmental Hazardous Waste   Environmental Inspections   Facilities Environmental Management   Pest Control   Bloodborne Pathogens Exposure Control / Awareness   Compactor and Baler Safety   DOT Hazmat   Electrical Safety   Emergency Action Plan   Fire Safety   Gasoline Storage & Handling   Hazard Communication (Right to Know)   Ladder Safety   Managing Business Records   Hourly Wage & Hour Guidelines   Information Security Basics   Sexual Harassment Prevention   Respect in the Workplace   Addressing Leaves and Accommodations   Puerto Rico Domestic Violence Training         Performance   Management   / Talent   Management   / Leadership    Provide access to standard online HRP system used by SHMC for performance   management, succession planning and 9 box grid forms.             

 

Exhibit 10.5      Execution Copy         DMLIB-#429909-v6-HR_SHO_Adminstrative_Services_SOW schedule 10 5   5   Development   Compensa-   tion   Management     Provide administrative support for processing of exempt and non-exempt compensation   programs including Annual Incentive Plans, Long Term Incentive Plans, and ad-hoc bonus   plans as needed.   Implementation of new SHO compensation plans will be incremental   project work that will need to be scoped, estimated and planned before work can   commence.    Unless already shared, share existing compensation policies as of the date of separation,   existing employment related agreements as of the date of separation and other standard   documents that are applicable to SHO employees.         Benefits &   Benefits   Administra-   tion   In accordance with and subject to Section 3.4 and subsection 3.4(f) (including Appendix B):       Eligible employees of SHO Group will continue to participate in the Continuing Plans   during the Benefits Transition Period.   SHO will be required to move the SHO Group   (including post-Separation COBRA continues) to separate SHO-sponsored health and/or   welfare benefit programs administered by its own benefits service provider), effective no   later than January 1, 2014.    With respect to the Continuing Plans, SHMC will continue to select and manage   consultants, brokers, vendors and the like, as necessary to handle:   § Plan design, terms and conditions, including eligibility;   § Day to day operations of the benefit programs, including: the processing of   enrollments, coverage changes and coverage termination; the remittance of   premiums and fees to carriers and third-party administrators; and the handling   of claim process (provided, however, that SHO Group HR may be consulted   with respect to certain benefit claim appeals and COBRA administration to the   extent such processes have not already been delegated or allocated to a service   provider).    § Benchmarking;   § Plan contract performance guarantees; and   § Government required reporting and disclosure (e.g. SPD distribution and Form   5500 and SAR filings.)   § SHMC benefits department will continue to determine cost sharing and P&L   allocations       With respect to the Continuing Plans, SHMC will continue to administer, contract and   negotiate with   service providers/third party administrators/contractor/etc.     SHMC will continue to administer non-contracted benefits (e.g., vacation and personal   days) in effect from time to time for SHO Group employees under standard SHMC   processes.      If a request by SHO for any deviations from the SHMC process with respect to any   Continuing Plan or any other benefit or payroll program or policy, is approved by SHMC   and results in incremental project work, SHO will bear the cost of such incremental work.    SHMC will provide SHO employees with access to participate in the SHMC child   development center pursuant to the terms and conditions of SHMC’s arrangement with the   child development center.         HR Systems  Access to the following systems will be provided – the service provided is limited to the   actual functionality of the system (SHO is responsible for entering information into the   systems and processing transactions to ensure their data is accurate):   a. PeopleSoft   b. TPC   c. MPI   d. WFA   e. HRP     

 

Exhibit 10.5      Execution Copy         DMLIB-#429909-v6-HR_SHO_Adminstrative_Services_SOW schedule 10 5   6   f. Red Prairie    SHO will be able to utilize the existing security profiles/setup established in the systems   above that are used by SHMC.  Creating additional profiles, configurations and rules will   be considered incremental project work.   2. Unless otherwise stated herein, administrative services will be provided with the same level of   effort, timeliness and in the same manner that SHMC provides the same administrative services to   its internal operations.    3. Services not described in this SOW or not covered by this SOW (other than Inherent Services) are   considered incremental services.  All incremental services will be charged at a rate of $112.50/hour   (unless specialty skills are required, in which case the cost would depend on the market rate for the   resources needed to meet the needs).  When possible, an estimate of total cost will be provided prior   to work being initiated.  However, SHO will be charged for actual hours worked by SHMC   resources.   If additional time is required above the estimate, SHMC will inform SHO of the revised   time/cost as soon as practical.  SHMC will disclose to SHO the number of hours worked   by project   for all incremental services.   4. This SOW replaces the Human Resources Section in Appendix 1.01-A (Pages A-1 through A-4) of   the Services Agreement between SHO and SHMC dated August 8, 2012.    It is the intent of the   parties that all human resource services provided by SHMC to SHO as of the Effective Date will be   provided under this SOW and the Agreement, except that all charges and fees described in this SOW   will become payable, if at all, only from and after the date of this SOW, except that all charges and   fees described in this SOW will become payable, if at all, only from and after the Effective Date.    For the avoidance of doubt, nothing stated in this Section 4 shall relieve SHO from any previously   agreed to payment obligations for Services delivered prior to the Effective Date.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00224-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00224-of-00352.parquet"}]]