2021 Program Overview

PROGRAM OVERVIEW WHY ACE IS THE PLACE

CONFIDENTIAL

TABL E OF CONT ENTS

MEMBERSHIP REQUIREMENTS . ................... SECTION 1.0 Capital Stock Requirement. ................................................................ Page 6 Total Stock Requirement..................................................................... Page 6 Patronage Dividend Disbursement..................................................... Page 6 Dual Affiliation . .................................................................................... Page 6 General Member Standards................................................................ Page 6 Ace Brand Standards........................................................................... Page 7 Higher Ground...................................................................................... Page 7 WAREHOUSE PROGRAM .................................. SECTION 2.0 Broken Carton Charges....................................................................... Page 8 Freight Charges. .................................................................................. Page 8 Warehouse Purchase Payment Terms............................................... Page 8 Warehouse Deliveries.......................................................................... Page 8 Fill Rates............................................................................................... Page 8 Handled Patronage Rebate History.................................................... Page 8 Drop Ship Program.............................................................................. Page 9 PAINT PROGRAM . .............................................. SECTION 3.0 Paint . ................................................................................................. Page 10 Benjamin Moore ® ............................................................................... Page 10 Volume Discount. .............................................................................. Page 10 Magnolia Home by Joanna Gaines Paint......................................... Page 10 Paint Discovery Orders...................................................................... Page 11 Paint Patronage Rebate History. ...................................................... Page 11 MERCHANDISE CLAIMS ................................... SECTION 4.0 Policy A. ............................................................................................. Page 12 Policy B............................................................................................... Page 12 Policy C. ............................................................................................. Page 12 Low-Volume Service Charge............................................................. Page 12 Current-Year Assessment Listing..................................................... Page 12 Brand Assessment............................................................................ Page 13 DROP SHIP BUILDING MATERIALS (DBM) ... SECTION 5.0 Mission Statement . .......................................................................... Page 14 Value Proposition . ............................................................................ Page 14 CONSUMER MARKETING . ............................... SECTION 6.0 National.............................................................................................. Page 16 Acehardware.com...................................................................... Page 16 Online Marketing........................................................................ Page 16 National Events and Promotions.............................................. Page 17 Mobile App. ................................................................................ Page 18

TABL E OF CONT ENTS

Social Media............................................................................... Page 18 Ace Gift Cards............................................................................ Page 18 Regional. ............................................................................................ Page 18 Group Preprint Program (Major Market). ................................. Page 18 Sign Kit Program........................................................................ Page 18 Matching Funds Program.......................................................... Page 19 Local................................................................................................... Page 20 Ace Branded Co-op Program..................................................... Page 20 Ace Marketing Muscle............................................................... Page 20 SOCi............................................................................................ Page 20 Ace Local Lift. ............................................................................ Page 21 Acehardware.com ..................................................................... Page 22 One to One. ........................................................................................ Page 23 Ace Rewards. ............................................................................. Page 23 P urpose/Objective. ............................................................... Page 23 Instant Savings and National Lookup.................................. Page 23 New Movers Program........................................................... Page 23 Mobile App............................................................................. Page 23 IDENTIFICATION REQUIREMENTS ............... SECTION 7.0 Exterior Store Signage....................................................................... Page 24 Interior Décor..................................................................................... Page 24 Apparel............................................................................................... Page 24 RETAIL PROCUREMENT . ................................. SECTION 8.0 SAVINGSource .................................................................................. Page 25 Preferred Vendors and Categories .................................................. Page 25 STORE SYSTEMS & OPERATIONS .................. SECTION 9.0 Point of Sale – Epicor Eagle™ for Windows (E4W).......................... Page 26 Ace Retailer Mobile Assistant................................................... Page 26 ACENET. ..................................................................................... Page 26 Core Retail Services................................................................... Page 27 Store Operations: People Management........................................... Page 27 Snagajob .................................................................................... Page 27 Paycom ...................................................................................... Page 27 Customer Insights ..................................................................... Page 27 Deputy ........................................................................................ Page 27 ShopperTrak............................................................................... Page 27 Mango Report . .......................................................................... Page 27 Retail Analytics Dashboard....................................................... Page 28 Store Operations: Inventory Management....................................... Page 30 Store Operations: Financial Management. ...................................... Page 30 Store Operations: Marketing and Promotions................................. Page 30 Store Operations: Loss Prevention, Store Environment.................. Page 30

TABL E OF CONT ENTS

CONVENTIONS ................................................. SECTION 10.0 Seasonal Purpose. ............................................................................ Page 31 Overall Purpose. ................................................................................ Page 31 BUSINESS TO BUSINESS (B2B) ..................... SECTION 11.0 Importance of B2B. ........................................................................... Page 32 Value Proposition. ............................................................................. Page 33 Support............................................................................................... Page 33 RETAIL TRAINING ............................................ SECTION 12.0 Learning Experiences ....................................................................... Page 34 Ace Management Academy...................................................... Page 34 Professional Retail Services ..................................................... Page 35 Base Camp New Owner Training...................................................... Page 35

TABL E OF CONT ENTS

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MEMBERSHIP REQUIREMENTS

C. PATRONAGE DIVIDEND DISBURSEMENT

Application Fee Change of Ownership, Branch,

$5,000

New Investor/Ground Up

All of the net profit generated from business done with members is distributed back to those members in the form of patronage dividends. Patronage dividends are based on the amount of purchases the member makes from the cooperative. Patronage dividends are paid out annually, generally by the first week in April following the close of the fiscal year. Currently, 40% of the dividend is paid in cash and 60% in a non-cash form. This is subject to change at any time with Board approval. The non-cash distribution is made in the form of Class C shares until the member reaches the minimum stock requirement. Once the minimum stock requirement is met, the non-cash portion of the dividend is issued in the form of five-year interest-bearing patronage refund certificates. For a detailed explanation of stock and note requirements, please refer to the Ace Hardware Retailer Information Memorandum. D. DUAL AFFILIATION Ace does not allow a Member’s business at the licensed location to participate in another major hardware wholesaler’s program. For detailed information, please see a copy of the Ace Hardware Membership Agreement and Member Operational Requirements under the membership agreement. E. GENERAL MEMBER STANDARDS All Members under the 2004 or later Ace Hardware Membership Agreement agree to comply with all the provisions of the General Member Standards.

Change of Ownership (No Cash Out of Stock)

Veterans

A. CAPITAL STOCK REQUIREMENT Each store is required to purchase $5,000 of “initial” capital stock upon joining the cooperative.

INITIAL STOCK Class A $1,000

B. TOTAL STOCK REQUIREMENT Each member has a stock requirement, by location, equal to 20% from the Handled, Paint and S.T.O.P. pools, and 4% from the LTL+ and direct pools. Other than the initial stock purchase described above, all stock purchases are made through the patronage distribution. 60% of the patronage dividend is issued in stock, which is subject to change at any time with Board approval, until the minimum stock requirement is met. Class C $4,000 This initial capital investment is comprised of one share of Class A stock (voting stock) with a par value of $1,000 and 40 shares of Class C stock at $100 par (branch stores would receive 50 shares of C). This amount is billed to the retailer’s statement 30 days after the store has been activated.

Details of the General Member Standards can be found in the Membership Application.

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F. ACE BRAND STANDARDS All Members under the 2004 or later Ace Brand Agreement agree to comply with all the provisions of the Ace Brand Standards. G. HIGHER GROUND Higher Ground is Ace’s five-year retail growth strategy, lasting from 2020–2024 and taking us through our 100th anniversary. Ace’s continued growth for the next 100 years will come from More & Better Stores , improving the performance of those in existence and opening up more stores to serve our communities. More Stores For those who have a vision for opening additional stores, we have the tools and resources to help you grow. Getting Started • Retail investments include inventory incentives and loans to open a new store • Contact your District Manager or Territory Representative about your interest in opening a new location • The Ace corporate support team will assist every step of the way, including application, operational support, marketing and training Better Stores Improve store performance by utilizing prescriptive store-specific growth plans and Higher Ground performance drivers. With a new, stronger playbook and thousands of retailers committed to growth, we can achieve retail revenue of >$20 billion by 2024. Here is how it works…

3 Performance Levels Visionary – A commitment to growth and desire to climb Platinum – Achieving the first-tier store performance level, the climb has begun. Platinum performance is achieved by hitting a minimum of seven of nine Platinum Targets. Pinnacle – The top store performance level. The view

is best from here. Pinnacle performance is achieved by hitting a minimum of seven of nine Pinnacle Targets.

Nine Pinnacle Targets

Quality 1. Discovery Acceptance & Best Brands

2. Ace In-Stock Percentage 3. Consumer-Relevant Store

Service 4. Overall Customer Satisfaction (OSAT) 5. Training Hours (Customer-Facing Associate) 6. Employee Engagement Program

Convenience 7. Business to Business Sales (B2B) 8. Ace Rewards Scan Rate 9. Acehardware.com Fulfillment

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A. BROKEN CARTON CHARGES There are over 140,000 unique items in stock in at least one of our 15 Retail Support Centers. More than 77% of these items can be filled by a warehouse in single selling-unit quantities. Ace does not assess broken carton charges. B. FREIGHT CHARGES Deliveries from the RSCs to Ace stores are made via Ace Hardware’s private fleet. Freight charges are calculated as a fixed percentage of stores’ RSC purchases plus a fuel surcharge. WAREHOUSE PROGRAM

C. WAREHOUSE PURCHASE PAYMENT TERMS

Ace statements are issued on Friday every two weeks: payment terms are Net 10 Days from the statement date.

D. WAREHOUSE DELIVERIES Ace’s distribution network is an industry leader, continually innovating new methods to provide unequaled service, accuracy and cost-saving efficiencies to Ace retailers. All merchandise is scanned on and off the truck, thus assuring near-perfect accuracy. The merchandise is palletized or containerized at no additional charge. Our trucks are equipped with power liftgates and pallet jacks, enabling trucks to be unloaded in a just a few minutes.

E. FILL RATES

Ace Fill Rates Averaged:

96.7% 2015 96.3% 2019

96.1% 2014 96.3% 2018

97.1% 2013 96.2% 2017

96.5% 2016 96.9% 2012

71.27% *

2020

*2020 Global Pandemic

F. HANDLED PATRONAGE REBATE HISTORY

Handled Patronage Rebate in:

6.32% 2020 $

4.71% 2014 5.13% 2019

3.83% 2013 4.26% 2018

2.87% 2012 4.99% 2017

5.18% 2016 2.90% 2011

4.89% 2015 2.75% 2010

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G. DROP SHIP PROGRAM The Drop Ship Handling Charge is a flat rate charged on all drop ship billings regardless of the invoice amount. The rate charged is based on the retailers’ prior-year drop ship volume where a handling charge was added. Some vendor drop ship billings are not assessed a handling charge.

Drop Ship Handling Charge

PRIOR-YEAR DROP SHIP VOLUME TIERS CODE

HC RATE

DS HC Sales > $815,000

0.50%

$305,000–$814,999

1.00%

$155,000–$304,999

1.50%

$51,000–$154,999

1.75%

DS HC Sales < $51,000

2.00%

1.01% 2018 1.04% 2014 $ 1.22% 2019 1.04% 2015 Drop Ship Payment Terms Regular drop ship invoices are Net 10 Days from statement date unless the vendor has provided the retailer with special dating. All dating is passed through to the Ace Statement. At-show special dating is also passed through to the retailer’s statement. 1.33% 2020

Drop Ship Patronage Rebates:

1.13% 2017

1.11% 2016 .74% 2012

.98% 2013

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PAINT PROGRAM

A. PAINT Paint is one of the top gross profit and sales departments in Ace stores. Ace has developed a full line of private label paint products to satisfy the DIY consumer. Ace’s premium paint, Clark+Kensington ® , is a paint and primer in one that, since its introduction, has been highly rated by a leading consumer magazine and achieved best buy status in 2017. B. BENJAMIN MOORE ® In July 2019, Ace announced a strategic alliance with Benjamin Moore to redefine Ace paint departments across the country. Benjamin Moore’s ben ® brand is available to all Ace stores, and Benjamin Moore is now one of Ace’s Best Brands! Being famous for paint requires that stores fully leverage each element of the Ace value proposition: 1. Service – Best service guaranteed and backed by the Extra Mile Promise. Ace red-vested heroes engage paint customers on the store floor. Paint is not a self-service business! 2. Convenience – Neighborhood stores with superior geographic proximity and a significantly faster shopping experience. 3. Quality – Offering differentiated, high-quality and locally relevant brands that are not sold in the big-box stores. Recognized and preferred by local professionals and DIY customers alike. This alliance with Benjamin Moore allows Ace to continue down our long-term quest to capture 10% market share in liquid paint. Key Benefits of This Relationship: • Long-term strategic alliance with the BEST BRAND of paint. The Best Brand of paint is available to every Ace store. • Simplified operations with a single colorant system. • Retailer support and distribution excellence. • The Benjamin Moore brand provides significant growth opportunity for Ace retailers by appealing to both DIYers and professional painters. • Further, Benjamin Moore is committed to exclusively

C. VOLUME DISCOUNT Retailers earn a volume discount based on the cumulative purchases of Ace private label paint products during the previous calendar year. These discounts apply to every order, no matter the size. Note that colorant purchases are included in qualified EVD purchases, but colorants are NOT eligible for the discount.

PRIOR-YEAR PURCHASES DISCOUNT Less than $28,500 0.00% $28,500– $42,999 0.50% $43,000–$55,999 1.00% $56,000–$76,999 1.50% $77,000–$99,999 2.00% $100,000–$125,999 2.50% $126,000–$154,999 3.00% $155,000–$197,999 3.50% $198,000–$241,999 4.00% $242,000–$297,999 4.50% $298,000–$354,999 5.00% $355,000–$425,999 5.50% $426,000–$496,999 6.00% $497,000–$568,999 6.50% $569,000 and greater 7.00%

D. MAGNOLIA HOME BY JOANNA GAINES PAINT

supporting independent retail — providing Ace a differentiated Best Brand from the big boxes and e-commerce competition.

Exclusive to Ace in the hardware co-op channel and not available in the big-box stores, Magnolia Home by Joanna Gaines Paint is the perfect complement to Benjamin Moore, with a curated color palette that draws new customers.

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E. PAINT DISCOVERY ORDERS

Ace Private Label • Credit will be given on Discovery-recommended SKUs and quantities for Ace private label coating products, including but not limited to Clark+Kensington ® , Royal ® and Rust Stop products on an Ace Discovery planogram. • Store-specific credit is based on recommended format by Project Manager. • Discovery order must be placed through the assortment planner. Benjamin Moore ® • Credit will be given on one case per SKU to complete the selected planogram assortment. • Full Line program subject to Benjamin Moore selective distribution. • Regal ® Select & ben ® program requires a $20,000 annual wholesale purchase commitment of Benjamin Moore or INSL-X ® branded products. • Color fixture credits vary based on program selected.

Magnolia Home by Joanna Gaines • Credit will be given on one case per gallon SKU to complete the Discovery planogram assortment.

Please contact the Paint Team or your Project Manager for more information.

$ 20.13% 2020 *

Paint Patronage Rebate in:

10.16% 2015 13.49% 2019

10.18% 2014 11.01% 2018

9.45% 2013 12.99% 2017

13.58% 2016

7.91% 2012

* 2020 saw much higher than usual paint sales across the entire industry, driving unusually high patronage rebates.

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MERCHANDISE CLAIMS

D. LOW-VOLUME SERVICE CHARGE • Stores that do not meet the $200,000 purchase minimum in the previous year will be billed $100 per statement during the following year. • The service charge will be calculated at the end of year based on annual purchases (product and services). • Retailers will be notified at the beginning of the year of any low-volume assessment. • Effective dates for new billing amount are February through January based on prior-year purchases from January through December. For New Stores: • All new stores (including Change of Ownership and Conversions) will be exempt from the assessment until they have a full year of purchases (Jan–Dec).

Ace defective goods claims are handled using one of three separate policies.

2% return goods authorization. If goods are returned, the vendor will issue credit, repair or replace the item. Credit memos issued by the vendors will be processed as drop ship credits with the appropriate handling charge. C. POLICY C 12% of all items stocked in the RSC are Policy C. The claim is filed with the vendor. After an evaluation of the claim, the vendor will issue a credit or A. POLICY A 86% of full items stocked in the RSC, including paint, are Policy A. Claims are filed using ACENET, and credit is immediately issued. Products that fall under the Policy A program are not required to be returned to Ace or the vendor. Defective Policy A items are held at the retailer’s location for inspection for a period of 30 days and then disposed of or destroyed. B. POLICY B 2% of all items stocked in the RSC are Policy B. The product and original claim form should be sent to the vendor. After inspection, the vendor will either issue credit, replace, or repair and return the item. Credit is issued by the vendor and may or may not include freight.

E. CURRENT-YEAR

ASSESSMENT LISTING

The low-volume minimum annual purchase requirement

$200,000

The low-volume service charge

1.00%

Stores not reaching $200,000 in annual sales in the prior year

$100 per statement

1.5% 12% 2% 1% F. BRAND ASSESSMENT BEST BRANDS S E CT I ON 4 . 0 • Based on 2% of the previous year’s RSC purchases, drop ship purchases, and services, brand assessment is billed in 26 equal installments on each statement. • Effective date for new billing amount is February through January based on prior-year purchases from January through December. • Minimum amount of $6,270/year ($241.15/statement). Maximum amount of $13,600/year ($523.08/statement). • New stores (including Change of Ownership and Conversion) activated in the first three quarters of the year will be billed $6,000 on the statement closest to 60 days following the activation date. Stores activated in the fourth quarter will not be charged brand assessment in the current year. However, they will be assessed $12,000 in 26 equal installments in the year following activation. 13

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MISSION STATEMENT: The mission of the Drop Ship Building Materials (DBM) department is to leverage the buying power of our 1,700 in-network lumber dealers to get better terms than you would going directly to the vendor without negatively affecting your price. VALUE PROPOSITION: Because we are structured differently than most buying groups in that we have minimal overhead, we do not charge adders or service fees. This makes us uniquely positioned to create more value in 5 key categories: lumber & building materials distribution, pressure-treated lumber, truckload drywall and insulation. Better Terms : Our goal is to leverage the collective buying power of our lumber dealers as a buying group within the enterprise to get better terms for you. Examples include PrimeSource, U.S. Lumber, Weyerhaeuser, UFP Retail and BlueLinx. DROP SHIP BUILDING MATERIALS (DBM)

Ease of Billing: Moving building material orders over to us means fewer payables to manage and fewer checks to write. Time is money. You will save time. Keep Your Local Rep or Salesperson: If you have an existing account with a DBM vendor, you will still work with your local vendor rep. The only thing that changes is the bill through.

Forwarded Terms : You will always receive the dating and cash discounts.

No Handling Charge or Service Fees : All DBM vendors are “no-adder” vendors.* This means you will not pay a markup on the product or service fees on the invoice. The price quoted by the vendor will be the price invoiced.

Competitive Pricing is Our Priority: You pay lower costs for product because DBM

programs are negotiated with our dealers in mind. We do not collect large rebates from DBM vendors because we do not want to negatively impact retailer cost.

* Unless otherwise noted.

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CONSUMER MARKETING Ace’s branding and promotional strategy has been designed to achieve the maximum name recognition, and drive traffic and profitable transactions to Ace stores based on a fully integrated consumer marketing plan.

National Advertising: Any national advertising effort by Ace, including

One-to-One Advertising: This level builds customer loyalty and sales through the Ace Rewards program (see page 21 for more information), and is an opportunity to communicate directly with the best customers. Local Advertising: Store-specific advertising within the retailers’ local neighborhoods, allowing retailers to build the Ace name in their local market. Ace Marketing Muscle is a local portal that allows retailers to create their own local marketing pieces, access Ace’s social media and reputation management platform, opt in to Ace’s new local paid search program called “Local Lift,” and order advertising supplies and signage. Online Marketing: In order to ensure that Ace is part of the consideration set when consumers start their shopping journey online, Ace is heavily investing in and establishing a strong presence in paid search and shopping ads in search engines such as Google, affiliate sites search engine optimization (SEO), and retargeting and prospecting display ads. • More than half of Ace’s online traffic is driven from the aforementioned online marketing efforts. • To ensure a consistent and accurate presence for all Ace stores online, specific “My Store” information from acehardware.com is fed to over 180 online directories, such as Google, Yahoo! Local and YellowPages.com, to capture consumers searching for your store. • Over 30,000 keywords are managed and maintained in Google, Yahoo! and Bing to ensure Ace is well represented when users are searching for our products and services. • Over 500 affiliate sites are leveraged to raise awareness for the brand and drive traffic and sales.

visual (television), audio (radio), digital and print. The Ace Brand Assessment supports these efforts. Regional Advertising: Market-level advertising efforts with groups of retailers. Regional advertising may include using Matching Funds or pooling co-op dollars in an effort to promote the Ace Brand within various markets. As groups in a market, retailers advertise using monthly preprints, which is called the Group Preprint Program (Major Market).

A. NATIONAL

Acehardware.com Acehardware.com is the online face of our brand and trusted destination for online products and project solutions. The website receives over 100 million visitors per year and offers convenient fulfilment options, including Buy Online, Pick Up In Store; Buy Online, Deliver From Store; Curbside Pickup and Ship to Home from Ace Retail Support Centers. Mission: To strengthen the brand via online marketing, as well as to grow profitable revenue via supporting/enhancing the store product mix and being a trusted resource for DIY projects and solutions. Strategy: Drive traffic to acehardware.com to engage core and new consumers with helpful content and product information that creates brand affinity and profitable transactions for our retailers.

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DIGITAL

NATIONAL EVENTS

NATIONAL PROMOTIONS

National Preprints 8

Famous For Four Events 4

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Mobile App Ace Hardware has developed a mobile app focused on loyalty as an opportunity to better engage with our members to ultimately drive incremental revenue. The mobile app includes key features, such as the ability to earn and redeem rewards, exclusive opportunities to earn additional points, personalized coupons, digital wallet integration and the ability to send push notifications. Social Media The advances in social media present exciting opportunities for Ace. By having a presence on social media, we can respond to customer service issues in real time, build brand loyalty and help discover new customers. Ace is dedicated to growing their national and local social channels by being up to date on all platform innovations and continually developing a strong social marketing strategy. At Ace, we also understand the importance of social media and reputation management. To help our retailers save time and succeed in social media, we have partnered with a social media and reputation management partner called SOCi. More information on SOCi can be found in the Local section on page 18. Currently, Ace Corporate is active on the following social sites: Facebook – With over two billion active users, Facebook is the largest social media site. Instagram – Has over one billion users and has been one of the fastest growing channels. Twitter – With over 330 million active users, Twitter is most commonly used for customer service and news. YouTube – YouTube is the world’s most popular online video community and is the second largest search engine. Pinterest – Pinterest is also used as a search engine and as a place for you to bookmark your ideas.

Ace Gift Cards The Ace Gift Card program offers a retail gift alternative (“the gift of helpful”) that builds the brand and drives retail sales as well as additional consumer exposures through business to business partnerships. The selling and redeeming of the Ace gift card is required for stores to meet the minimum brand standards. B. REGIONAL Group Preprint Program (Major Market) Program Information This program utilizes internal and external resources to offer cost-effective print advertising. By printing in mass quantities, Ace is able to pass the savings along to retailers. In addition, Ace leverages point-of-sale data to develop offers that will optimize promotional unit and dollar sales as well as gross profit. This program is also supported with promotional downloads (streamlining the time it takes to set up sale pricing at retail), store-specific price cards for those participating in the Sign Kit program, and online posting and emailing of your group’s preprints to your Ace Rewards customers at no extra charge. Sign Kit Program Get all of your promotional and temporary branding signage needs met by subscribing to Ace’s monthly Sign Kit program. For only $175 per month, you’ll receive a kit containing all necessary posters, end cap signs, price cards, banners and more to ensure that you’re set to support your monthly promotions. This extremely cost-effective program leverages scale to bring you a comprehensive kit at an incredible value. Mini sign kit is $75 per month.

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Matching Funds Program

What is Matching Funds? The Matching Funds Program allows

Ace branded retailers within a defined region to work collaboratively and strategically to have one voice in the market. The goal is to stand for something bigger, create a marketing bridge from national to local and entrench the group’s presence as one Ace voice to the consumer. The Local Marketing Team will help the Matching Funds group with: • Collaboration to define a goal • Strategic planning and campaign development • Integrating a multimedia approach to achieve bigger campaigns • Turnkey recommendations at planning meetings to align with current year’s Consumer Marketing strategy • Diversification using differentiated brands, niches, services, local sponsorships, community outreach and other regional opportunities Eligibility Ace Hardware Corporation (“Ace”) offers the Matching Funds Program (the “Program”) to retailer groups. Eligibility is determined by Ace’s designated Associate Marketing Managers. There is one Matching Funds group per region, and individual retailers or retailer chains are not eligible for Matching Funds on their own. Any new store onboarding will be required to participate with the existing retailer group within the market. Please note: All Matching Funds participants must actively support the Ace National Events via bulletin order, in-store signage, promotion support (traditional print and distribution, digital preprint or in-store copies), and Ace Rewards direct mail and email.

Program Period The Program and campaigns run for one calendar year. Commitment to the Program is for the entire year. It is automatically renewed each year unless your Associate Marketing Managers are notified by December 1 of the current year that the Matching Funds group will not participate in the Program the following year. Leaders for existing Matching Funds groups will receive a rollover form from their Associate Marketing Managers to sign and make any changes to the store participation or group assessment amount. Store Participation Retailers sign an agreement form to initially join the Program, and retailer commitment is for the entire year. Retailers must complete a termination form and submit to their Associate Marketing Managers before December 1 of the current year to drop from the Program for the following year.

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C. LOCAL There are a variety of programs and tools offered by Ace to help retailers market locally in their communities. Localization is one of the most important ways to advertise and develop the business. Ace Branded Co-op Program The co-op program is designed to promote the 1% Ace Brand and 5% Ace Paint sales in your local market to help complement the National Marketing Strategy. These funds are assessed from a percentage of the prior year’s Ace Brand and Ace Paint purchases, which can then be applied toward a variety of marketing tactics.

At its core, SOCi allows you to manage all your social media profiles, such as Facebook, Twitter, Instagram and LinkedIn, in one platform. In addition, SOCi allows retailers to monitor and answer consumer reviews from Google My Business, Facebook and Yelp. As part of this exciting partnership, Ace retailers have been given access to tools and features that will make a huge impact on their business. Plus, there’s no charge to use the platform. To help our retailers succeed in social media, we host a quarterly webinar, offering a solution for each store to manage their social media pages from one location and provide assets for their social channels. Content management is a breeze with a ready-to-use library of Ace-approved copy and imagery. • Schedule, share and track content across multiple profiles and multiple store locations in just a few clicks. • SOCi analyzes your content activity to provide recommendations on peak posting timeframes. • Better visualize your content strategy with an interactive calendar view. Workflow solutions allow you to surface and track the most important local conversations and engage in real time. • Create multi-store and multiuser review and approval processes that enable accountability. • Notifications alert you to comments and messages so that you can respond or delegate in real time. Centralized reporting suite aggregates your data for more meaningful analysis. • Eliminate the guesswork with our easy-to-read dashboard. • Track performance and sentiment analysis on a single-store or multi-store level. • Boost posts and launch ads from the platform.

Ace Marketing Muscle With enhanced search, refreshed dynamic

templates, a streamlined co-op process and various levels of marketing support, Ace Marketing Muscle (AMM) will help you easily activate local marketing like never before. You can access AMM by visiting ACENET and launching Ace Marketing Muscle from the My ACENET tab (on right side of page). Here are some new features that you will be able to execute with Ace Marketing Muscle: • Activate Local Lift, Ace’s NEW Local Paid Search program • Multimedia promotions in one workflow • Automated use of Ace Co-op Funds as part of checkout • Event marketing packages • Marketing consultation • Media buys and placement • Local banner templates for acehardware.com • Social media and reputation management • Order and rent event assets, such as tents, tables and inflatables, to amplify your event

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Program Goals: • Drive incremental sales and transactions to the local Ace stores through online orders and store visits • Diversify the consumer experience with cutting-edge ad types and localized results • Maintain synergy with the Ace national search program • Provide retailer advertising support with proven results The program utilizes Local Text Search Ads and Local Inventory Ads (LIAs), and it’s one of the most impactful local marketing tactics that drives in-store visits and sales. Here are examples of Local Paid Search Ads:e customer relationship management solution for Ace retailers, the program’s mission is to deliver strategic consumer touch points which drive profitable revenue to retailers and leverage the relationship between the customer and your local store. It’s five times more expensive to attract a new customer than to keep an existing customer. Through one-to-one marketing, the Ace Rewards program has proven the ability to increase the frequency and profitable spend of your best customers. Additionally, through personalized and segmented promotional strategies, the program leverages and enhances the relationship customers have with their local Ace. It is $850 to join the program (broken up into three monthly payments) and $75 per month.

ACE LOCAL LIFT Ace Local Lift (aka Google Local Paid Search) is a hyper-local advertising program that enables stores to connect with searchers actively looking for the products and services from a local store. The program serves ads for the local store’s inventory and pricing. The program empowers stores to compete against the big boxes where online retailers cannot compete (i.e., Amazon).

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ACEHARDWARE.COM

RECORD GROWTH RATES YOY sales increase of 342% JAN–JUNE 2020

OVER 200Million VISITS IN 2020

BODFS ORDER PROFITS ARE 2x higher THAN AVERAGE ACEHARDWARE.COM ORDERS 84% of all orders

placed on acehardware.com ARE PICKED UP curbside or in store

Continuous Enhancements for a Better User Experience:

• Providing self-service options to our customers • Product findability: site search, filtering & personalization • Curbside & BOPIS enhancements • Improved shopping & checkout

• Improved customer communication: product availability and order status • Elevating the Ace Rewards experience through improved program communication and offerings • New and improved retailer reporting

BOPIS + BODFS + Assembly =

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D. ONE TO ONE

Ace Rewards

Purpose/Objective As the one-to-one customer relationship management solution for Ace retailers, the program’s mission is to deliver strategic consumer touchpoints which drive profitable revenue to retailers and leverage the relationship between the customer and your local store. It’s five times more expensive to attract a new customer than to keep an existing customer. Through one-to-one marketing, the Ace Rewards program has proven the ability to increase the frequency and profitable spend of your best customers. Additionally, through personalized and segmented promotional strategies, the program leverages and enhances the relationship customers have with their local Ace. It is $850 to join the program (broken up into three monthly payments) and $75 per month.

New Movers Program Approximately 20% of the United States’ population moves each year, and these movers spend $27 billion in Ace categories within the first three months of their move. New movers typically complete 7.9 home improvement projects and are 10 times more likely to try a new brand of hardware retailer within the first two months of their move. To capitalize on this, for those stores participating in the New Movers Program, a stand-alone direct mail piece will be sent to new movers who live up to three miles from your store. This program strategically targets homeowners at the right time.

Instant Savings and National Lookup Instant Savings is designed to eliminate mail-in rebates and provide customers the savings right at the register by using their Ace Rewards card. Customers can sign up for Ace Rewards at the register or, if the customer forgot their card, Ace has a national lookup feature, which allows any participating Ace Rewards store to look up any of our 50+ million Ace Rewards members!

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IDENTIFICATION REQUIREMENTS

A. EXTERIOR STORE SIGNAGE The store must display current and approved Ace exterior store identification. Ace specifications recommend that the main building signage, “Ace” or “Ace Hardware,” be the maximum size allowed by local code. Approved national and regional sign vendors are recommended. Exterior sign specifications for channel letters and cabinet style signs are available. Please see approved vendors at https://savingsource.com.

The signage in Ace Hardware stores is developed keeping our core competency of “helpful” top of mind. It gets a consumer to where they need to go and helps them find what they need in the event they do not make contact with an associate. The décor gives the store an authentic and local feel. For all the details on how décor and signage are to be used and to learn more about the customer journey, see the Visual Communications Guide.

ACENET > Manage My Store > Store Environment > About Store Environment

ACENET > Manage My Store > Store Environment > Store Specifications > Exterior Signs

C. APPAREL To maintain a consistent image and provide the best possible customer service, retailers agree to have their employees wear consistent and recognizable Ace apparel, including name badges, while working the sales floor. Ace stocks an assortment of approved uniform apparel (red vests, polos, t-shirts, name badges, etc.) in the RSCs, which are available to order on ACENET. Also, Ace has a preferred vendor for those stores looking to localize their apparel.

B. INTERIOR DÉCOR The in-store experience is critical to driving sales and repeat visits. For this reason, an Ace store should display all recommended navigational and product level signage. The cost of Ace Hardware store décor varies by store, ranging from $1.00 to $1.20 per square foot, depending on the store size and ceiling height.

Visit: www.thenewaceplace.com

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RETAIL PROCUREMENT

Ace Hardware has more than 95 years of experience leveraging its wholesale purchasing power to generate significant merchandise savings for its independently owned retail stores. And now, through its SAVINGSource indirect purchasing group, Ace is using the combined purchasing power of Ace Hardware Corporation and all Ace stores to reduce retailer operating expenses. The SAVINGSource Team consists of Ace Hardware employees that are dedicated to lowering Ace retailers’ operating expenses, by leveraging the buying power of Ace retailers and

Ace Hardware Corporate facilities for indirect spend. In addition, Ace Hardware joined a consortium to further drive savings by leveraging other companies’ buying power. Through SAVINGSource, Ace stores have access to negotiated pricing for products and services across many areas of indirect spend. The platform further allows Ace stores to band together for local aggregations, leveraging local and national suppliers.

PREFERRED VENDORS AND CATEGORIES

Buckets of Spend

• Technology and communication • Professional and financial services • Marketing • Facilities services and maintenance • Supplies and replenishment • Store planning and improvement • Equipment and vehicles

Prospective and current retailers can contact SAVINGSource to lower their construction costs. To get started: Email: savingsource@acehardware.com or call 630-990-3360. Visit: savingsource.com

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STORE SYSTEMS & OPERATIONS

Ace Retailer Mobile Assistant The Ace Retailer Mobile Assistant is a mobile app that is available for iOS and Android mobile devices. The Mobile Assistant app allows users to: • Search and order Ace products • Manage all acehardware.com orders to be picked up in store or delivered from the store Ace recommends all hourly associates use a store-owned device during business hours to access the Mobile Assistant app. In addition to the Ace Retailer Mobile Assistant, the Store Systems & Operations team is responsible for recommending and managing other mobile

Store Systems & Operations is responsible for researching, developing, field-testing, marketing and deploying the best practices for the day-to-day tasks associated with operating an Ace store. These best practices, as well as the operational measurements and technology solutions, are delivered through the Ace Way of Retailing and are designed to help our retailers maximize profits, decrease expenses and amaze their customers. Our goal is to create the most operationally efficient convenience hardware stores on the planet. A. POINT OF SALE – EPICOR EAGLE™ FOR WINDOWS (E4W) One common technology platform allows Ace retailers to more seamlessly execute Ace’s tested and documented best practices, provide a positive customer experience and operate efficiently. Epicor Eagle for Windows (E4W) system is the only in-store technology solution currently endorsed by Ace. E4W’s integration with ACENET and other Ace systems provides retailers the tools they need to take care of the customer, run their stores efficiently on a daily basis and do business with Ace. If necessary, your Epicor Customer Account Manager will work with you to create a quote consisting of the necessary upgrades and/or hardware, software, training and support fees. They will also discuss with you and your staff what to expect during the system conversion process, including and the basic training that will take place in your store.

solutions provided by vendors, such as: • Epicor Mobile+ mobile app: used for inventory management

• Vonage for Business: used to receive and make calls on your business line via a mobile device

ACENET ACENET * is the web-based collection of online applications that Ace retailers use to streamline their store operations and gather timely news. The website is a comprehensive suite of tools designed to assist you in performing key store operations. A partial list of applications is listed below: • Product Search and Content • Stock Reserve Ordering • Special Ordering - Ship to Store - Ship to Customer - RSC Pickup • Drop Ship Ordering • Discovery Ordering • Promotional and Convention Ordering • Order Status (for tracking your Ace orders) • Claims Management - RSC and Service Order Claims - Defective Goods Claims • New Item Listings • Quarterly Clearance Items • Online Statement and Invoice Viewing

ACENET > Manage My Store > In-Store Technology > Store Systems

For additional information, contact the Epicor Sales Team:

800-538-8597

* ACENET is part of the bundled core retail services.

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• Online ACH Payment Submission • Online Ace Statement Processing • Online Bankcard Settlement Reconciliation • Retailer Discussion Boards • Electronic Publications of Corporate Communications • Convention Registration • In-Store Services Management

• Paycom – HRIS and Payroll Processing. Paycom is a single-database solution for all HR, Payroll and people-related items that will streamline your operations and manage your workforce more efficiently. • Customer Insights – Customer Engagement, Mystery Shopping and Employee Engagement Surveys. • D eputy – Workforce Management is the process of using your sales, transactions and labor standards to build a day-by-day labor forecast by position, in 15-minute increments, and auto-scheduling the right people in the right amounts and at the right times. • ShopperTrak – ShopperTrak is the industry leader in counting traffic (or footsteps) in your store. You will have access to the dashboard of metrics and reports, including conversion, traffic, average transaction size (ATS), sales per shopper (SPS) and, if uploading sales floor payroll, shoppers to associate rate (STAR).

- Service and Repair - Delivery Scheduling

Core Retail Services Each retailer is billed $168 monthly, and all branch locations are billed $37 monthly, for the following bundled services: • ACENET • Material Safety Data Sheets • Ace Retail Training • NRHA E-Tools • Retail Pricing • Electronic Hotsheets (complete product updates) and Invoices PEOPLE MANAGEMENT The goal of People Management is to assess a store’s needs, as well as recruit and select, train and develop, coach and counsel, and recognize and reward the most helpful store associates on the planet. This is done through our vendor partners below (all of which are optional): B. STORE OPERATIONS: • Snagajob – Snagajob’s PeopleMatter platform is a recruiting, applicant tracking and onboarding tool with access to over 80 million candidates, providing increased applicant volume, higher quality candidates, reduction in time to hire, and store compliance.

• Mango Report – Mango is a program used for inventory accuracy and productivity that

measures and monitors shrinkage, manages and removes obsoletes and overstock items, improves your assortment based on similar stores and recommends smarter buying. Mango is exclusive to Ace Hardware and Epicor Systems.

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