Amendment to Cash Incentive Agreement between the registrant and Michael A. Gray dated October 11, 2017

Mr. Michael A. Gray

Senior Vice President, Store Operations

Sears Hometown and Outlet Stores, Inc.

5500 Trillium Boulevard, Suite 501

Hoffman Estates, Illinois 60192

Dear Mike:

I refer to your May 24, 2017 Cash Incentive Agreement. In paragraph 1 of your Cash Incentive Agreement, the references to “January 27, 2018” are hereby amended and changed to “May 5, 2018” and the references to “January Incentive” are hereby amended and changed to “May Incentive.” Except for these amendments, the Cash Incentive Agreement continues in accordance with its May 24, 2017 terms without any waiver or amendment. This Amendment to Cash Incentive Agreement will be construed in accordance with the laws of Illinois for all purposes without regard to conflicts-of-law principles.