AMENDMENT NO. 2 TO MERCHANDISING AGREEMENT Dated: December 9, 2013

THIS AMENDMENT NO. 2 TO MERCHANDISING AGREEMENT (this “Amendment”) between (1) SEARS, ROEBUCK AND CO., a New York corporation (“SRC”), KMART CORPORATION, a Michigan corporation (“Kmart” and together with SRC, “Seller”), 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”), and is retroactive to October 6, 2013 (the “Amendment Date”), and amends that certain Merchandising Agreement between Seller and Buyer dated August 8, 2012 (as amended, the “Agreement”). Capitalized terms used but not otherwise defined herein have the meanings ascribed to such terms in the Agreement.

WHEREAS, the parties have agreed to amend certain provisions of the Agreement as provided for below.

NOW, THEREFORE, in consideration of the above premises and the mutual covenants and other good and valuable consideration contained herein, the parties agree as follows:

a.Invoice Prices for DRM. Appendix 4(b)(i) (Invoice Prices for DRM) to the Agreement is amended and restated as of the Amendment Date as set forth in Attachment #1 hereto. Further, Seller agrees to waive the approximately $4.35 million dollars in warranty charges on DRM and the parties’ dispute of whether the Invoice Price for DRM already excluded freight charges, in each case, contested by SHO prior to the Amendment Date.

b.MOS Sears Apparel.

i.15% Cap On Damaged Sears Apparel. Appendix 4(c)(ii) (MOS Categories and Initial MOS Invoice Prices) of the Agreement is amended and restated as of the Amendment Date as set forth on Attachment #2 hereto. Buyer will, within 5 days of execution of this Amendment, pay Seller $1 million and Seller waives the remaining approximately $1.3 million in charges that Buyer has withheld prior to the Amendment Date related to the disputed damaged (Blue Label) items in Sears MOS (as defined below).

ii.1 Year Extension of Fixed Pricing for Sears MOS (Apparel). Section 4(c)(ii) (MOS Invoice Prices; Negotiated Price Changes) of the Agreement is amended by adding at the end of that Section the following:

“Notwithstanding the above, for Sears MOS the fixed price period is extended for one additional year (for a total of 4 years from the Effective Date) at the invoice prices set forth in Appendix 4(c)(ii).”

c.Modification of Vendor Subsidies. As of the Amendment Date, the parties agree that Section 8(a) (Vendor Subsidies), is amended by adding the following at the end of such Section:

“Notwithstanding the above, for each vendor from whom Seller only purchases products for resale to SHO (each a “SHO Unique Vendor”), then, in each such instance, Seller’s purchases from the SHO Unique Vendor shall be excluded from the calculation (numerator and denominator) of the Subsidy Pro Rata Share.”

d.HTS Store Restrictions.

ii.    Section 9(b)(i)(B) is amended and restated as of the Amendment Date as follows:

“(B)    The New HTS Store or other new store (other than a No-EBITDA Stores) is at least eight miles (using the most logical driving route) from all existing Seller-owned or operated full-line stores branded with the name “Sears” and the New HTS Store or other new store is at least two miles (using the most logical driving route) from the Kmart locations set forth on Appendix #3 (Kmart Locations) (collectively the “Sears Stores”),”

iii.    Section 9(b)(i)(C) is amended and restated as follows:

“(C)    The New HTS Store or other new store (other than a No-EBITDA Stores) is between five miles and eight miles (using the most logical driving route) from all existing Sears Stores (each an “EBITDA Store”) and Buyer has requested (in advance of committing to such location), and received Seller’s prior written approval (which approval will not be unreasonably withheld or delayed). For each EBITDA Store, Buyer will pay Seller annually 30% of the new EBITDA Store’s annual EBITDA, if any, for the first five of Buyer’s fiscal years that the new EBITDA Store is open for business, or”

e.Outlet Store Restrictions. As of the Amendment Date, Section 9(b)(ii) (Sears Outlet Stores) is amended and restated as follows:

“(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, except that on and after October 31, 2013 Buyer and its Affiliates will not sell and Buyer and its Affiliates will not authorize third parties (e.g., dealers, franchisees) to sell “New Products” at any Sears Outlet Store that is: (a) acquired by SHO after October 31, 2013 or subject to a lease executed after October 31, 2013 (other than the renewal or extension of a lease if the lease was executed on or before October 31, 2013 and other than a lease or sublease by SHO to a SHO dealer or franchisee); and (b) within two miles (using the most logical driving route) of an operating Sears Store . “New Products” means home appliance products, patio products and Craftsman lawn and garden products that are, in each case, new and in box and are a current model (not obsolete); however a model designated in writing as discontinued by the manufacturer (or in the case of Kenmore, by SHMC or its Affiliates), shall not be a “New Product”.”

f.Notice Provisions. As of the Amendment Date, a new Section 9(b)(iii) (New SHO Location Notice) is added as follows:

“(iii) Buyer will, within five (5) Business Days of the beginning of each month, notify Seller in writing of any new locations Buyer intends to open during the month. In addition, Buyer will notify Seller in writing (at least 5 days prior to signing a lease for such location) of any: (i) New HTS Store locations that are within 9 miles (using the most logical driving distance) of a Sears Store, and (ii) new Sears Outlet Store locations that are that are within 3 miles of a Sears Store (using the most logical driving distance). ”

g.Craftsman Lifetime Warranty Exchange. The parties agree that:

iv.    Buyer will, within 5 days of execution of this Amendment, pay Seller $1 million with respect to charges that Buyer has withheld prior to the Amendment Date related to the Craftsman lifetime warranty exchange;

v.    Seller waives approximately $2.3 million dollars in charges that Buyer has withheld prior to the Amendment Date related to the Craftsman lifetime warranty exchange;

vi.    as of the Amendment Date, Section 10(b)(ii) is amended and restated in its entirety as follows:

“(ii)    Non-Repairable Products. For each Product that (A) a customer returns to Buyer for the reason that the Product is defective, (B) the returned Product is covered by a Warranty, and (C) Buyer, in Good Faith, determines

is not repairable, Buyer, at its sole expense and using commercially reasonable arrangements determined by Seller, will replace the Product for the customer and dispose of the Product. For each HTS Product that Seller replaces in Good Faith pursuant to and in accordance with Seller’s “Craftsman lifetime warranty exchange” (or any successor lifetime program Seller offers on Craftsman products, each a “CLW Replacement Product”) Buyer will be entitled to a credit equal to the HTS Invoice Price paid by Buyer to Seller for the CLW Replacement Product Buyer provided to its customer. Except for as noted above, the CLW Replacement Product credit does not apply to any Products that is not a CLW Replacement Product; regardless of whether such Product is warranted by Seller or not.”

vii.    effective February 2^nd, 2014, the following language is added at the end of Section 10(b)(ii):

“In addition to all other amounts due under the Agreement, for each HTS Product subject to Seller’s “Craftsman lifetime warranty exchange” (or any successor lifetime program Seller offers on Craftsman products) Buyer will separately pay Seller, via a separate payment at the time of its purchase, an additional *** percent (***%) on top of the invoice price charged to Buyer for such products (the “Lifetime Warranty Charge”). For example, if a particular socket set (which was subject to the Seller’s “Craftsman lifetime warranty exchange,”) was bought by Buyer at an invoice price of $10, then Buyer will pay Seller an additional $*** for such product. Seller will, once per month, rebate to Buyer the Lifetime Warranty Charge paid by Buyer to Seller on the CLW Replacement Product provided by Seller to its customers during the previous month.”

h.Hometown Balance of Sale Rebate. As of the Amendment Date, Section II (KENMORE ROYALTY CREDIT) of Appendix 5(a) (Royalty Rates; Kenmore Royalty Credits) of the Agreement is deleted in its entirety and replaced with the following. For clarity the parties’ note that the revised Kenmore Royalty Credit language below will only be used for the final fiscal quarter of 2013.

i.Average Aggregate Minimum Commission. As of the Amendment Date, the Average Aggregate Minimum Commission section of Appendix 5(d) of the Agreement is deleted in its entirety and replaced with the following:

(c) that certain Amendment No. 1 to Store License Agreement (Outlet), and (d) that certain Supplemental Agreement.

*Commencing October 6, 2013, in the event in a particular month’s deliveries of MOS (Apparel) from Sears, Roebuck and Co. (including Sears.com) (collectively, “Sears MOS”), the amount of damaged/defective (Blue Label) product exceeds 15% of the items delivered in such month (the “Sears MOS Cap”), then Buyer will not be charged anything for each damaged/defective (Blue Label) item in excess of the Sears MOS Cap. Buyer shall be liable for payment for the $***per item charge for each item of damaged/defective (Blue Label) product at or below the monthly Sears MOS Cap threshold. If Buyer identifies that an item is damaged/defective Buyer will use commercially reasonable efforts to ensure that such items are only scraped or recycled; Buyer will use commercially reasonable efforts to ensure that all damaged/defective it identifies are not sold by Buyer (directly or indirectly) to consumers; provided that Buyer may sell such MOS Products to liquidators as long as Buyer complies with Section 12(a)(iii)(B)(5). Seller will include on each invoice for Sears MOS the total number of items in each shipment and the total number of damaged/defective (Blue Label) items. If Buyer disputes the amount of damaged/defective (Blue Label) product, Buyer must promptly notify Seller in writing, and hold the damaged/defective products that Buyer has identified at its location for a minimum of fourteen (14) days after Buyer presents its claims for rejected units to Seller (so that Seller may review such products/claims); after which time the damaged/defective Products shall be scrapped or recycled by Buyer (including selling to liquidators), and Buyer will use commercially reasonable efforts to ensure that none of such damaged/defective (Blue Label) product is sold by Buyer (directly or indirectly) to consumers; provided that Buyer

may sell such MOS Products to liquidators as long as Buyer complies with Section 12(a)(iii)(B)(5). Seller will promptly notify Buyer of any change to which items Seller classifies as damaged/defective (Blue Label) product that Seller is selling to Buyer and Buyer is free to contest any such change which Buyer in Good Faith believes will significantly decrease Buyer’s return on Sears MOS.