Document:

exv10w1

 

Exhibit 10.1

LICENSE AGREEMENT

EFFECTIVE AUGUST 1, 2007

NOTE: CERTAIN MATERIAL HAS BEEN OMMITTED FROM THIS AGREEMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT UNDER RULE 24b-2. THE LOCATIONS OF THESE OMISSIONS ARE INDICATED THROUGHOUT THE AGREEMENT
BY THE FOLLOWING MARKINGS: [***].

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	GLOSSARY OF TERMS	 	 	1	 
	1.
	 	GRANT OF LICENSE	 	 	8	 
	1.1
	 	License for Operations	 	 	8	 
	2.
	 	TERM	 	 	9	 
	3.
	 	FEES	 	 	10	 
	3.1
	 	Amount	 	 	10	 
	4.
	 	USE OF MARKS	 	 	10	 
	4.1
	 	Licensed Business Name	 	 	10	 
	4.2
	 	Other Communications	 	 	10	 
	4.3
	 	Use and Registration of Licensed Business Marks	 	 	10	 
	4.4
	 	Prosecution of Claims Relating to Licensed Business Name	 	 	10	 
	4.5
	 	Rights of the Parties	 	 	10	 
	4.6
	 	Injunctive Relief	 	 	11	 
	4.7
	 	Infringing Use	 	 	11	 
	4.8
	 	Good Will	 	 	11	 
	4.9
	 	Survival	 	 	12	 
	5.
	 	OPERATIONAL OBLIGATIONS OF LICENSEE	 	 	12	 
	5.1
	 	Performance Standards	 	 	12	 
	5.2
	 	Business Conduct	 	 	12	 
	5.3
	 	Hours of Operation	 	 	12	 
	5.4
	 	Pricing	 	 	13	 
	5.5
	 	Discount Policy	 	 	13	 
	5.6
	 	Customer Loyalty Programs	 	 	13	 
	5.7
	 	Customer Adjustment/Service	 	 	13	 
	5.8
	 	Employee Standards	 	 	13	 
	5.9
	 	Licensee’s Employees	 	 	13	 
	5.10
	 	Employee Compensation	 	 	14	 
	5.11
	 	Compliance with Labor Laws	 	 	14	 
	5.12
	 	Compliance with Law	 	 	14	 
	5.13
	 	Payment of Obligations	 	 	15	 
	5.14
	 	Licensee’s Obligations	 	 	15	 
	5.15
	 	Liens	 	 	15	 
	5.16
	 	Overseas Labor Sourcing	 	 	15	 
	5.17
	 	Preparer	 	 	15	 
	5.18
	 	Preparer’s Responsibilities	 	 	16	 
	5.19
	 	Licensee’s Guarantee to Customers	 	 	16	 
	5.20
	 	Quotation of Charges	 	 	16	 
	5.21
	 	Copies of Tax Returns; Taxpayers’ Files	 	 	16	 
	6
	 	LICENSED BUSINESS AREA	 	 	16	 
	6.1
	 	Locations	 	 	16	 
	6.2
	 	Existing Locations	 	 	20	 
	6.3
	 	Additional Locations	 	 	20	 
	6.4
	 	Right of First Opportunity for Other Sears Stores	 	 	20	 

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	6.5
	 	Improvements	 	 	20	 
	6.6
	 	Commencement of Operations	 	 	20	 
	6.7
	 	Condition of Licensed Business Area	 	 	21	 
	6.8
	 	Changes of Location/Remodeling	 	 	21	 
	6.9
	 	Electric/HVAC	 	 	22	 
	6.10
	 	Telephone Service	 	 	22	 
	6.11
	 	Telephone Numbers	 	 	23	 
	6.12
	 	Telephone Directory Listings	 	 	23	 
	6.13
	 	Access to Licensed Business Area	 	 	23	 
	6.14
	 	Effect of Store Leases	 	 	23	 
	6.15
	 	Waiver of Property Damages	 	 	23	 
	7
	 	PUBLIC COMMUNICATIONS	 	 	24	 
	7.1
	 	Licensee Advertising	 	 	24	 
	7.2
	 	Other Publicity	 	 	25	 
	7.3
	 	Forms	 	 	26	 
	8
	 	LICENSED BUSINESS EQUIPMENT	 	 	26	 
	8.1
	 	Licensee's Equipment	 	 	26	 
	8.2
	 	Licensee-Provided POS Terminal	 	 	26	 
	9
	 	TRANSACTION AND SETTLEMENT	 	 	26	 
	9.1
	 	Check Cashing	 	 	26	 
	9.2
	 	Charge Cards	 	 	28	 
	9.3
	 	Settlement	 	 	29	 
	9.4
	 	Licensee Reports	 	 	29	 
	9.5
	 	Company Audit Rights	 	 	29	 
	9.6
	 	Licensee Underreporting	 	 	30	 
	9.7
	 	Company Rights of Recoupment and Setoff	 	 	31	 
	10
	 	CONFIDENTIALITY; CUSTOMER INFORMATION	 	 	 	 
	10.1
	 	Confidential Business Information	 	 	31	 
	10.2
	 	Confidential Treatment and Use Restrictions	 	 	31	 
	10.3
	 	Licensee Customer Information	 	 	32	 
	10.4
	 	Company Customer Information	 	 	32	 
	10.5
	 	Equitable Relief	 	 	32	 
	10.6
	 	Post-Termination Obligation	 	 	32	 
	11
	 	RELATIONSHIP OF PARTIES	 	 	32	 
	12
	 	DEFENSE AND INDEMNITY	 	 	33	 
	12.1
	 	Defense	 	 	33	 
	12.2
	 	Indemnity	 	 	34	 
	12.3
	 	Survival	 	 	35	 
	13
	 	INSURANCE	 	 	35	 
	13.1
	 	Types of Insurance	 	 	35	 
	13.2
	 	No Cancellation Without Notice	 	 	37	 
	13.3
	 	Certificates	 	 	37	 
	13.4
	 	Expiration/Non-Renewal	 	 	37	 
	13.5
	 	No Waiver	 	 	37	 
	14
	 	TERMINATION	 	 	37	 
	14.1
	 	Termination of Store Locations	 	 	37	 

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	14.2
	 	Termination of Company on Notice	 	 	37	 
	14.3
	 	Termination by Licensee on Notice	 	 	38	 
	14.4
	 	Termination After Opportunity to Cure	 	 	38	 
	14.5
	 	Termination on Store Closing or Casualty	 	 	39	 
	14.6
	 	Effect on Termination	 	 	39	 
	14.7
	 	Survivability	 	 	39	 
	15
	 	Assignment	 	 	39	 
	15.1
	 	Assignment by Licensee	 	 	39	 
	15.2
	 	Assignment by Company	 	 	39	 
	15.3
	 	Binding Nature	 	 	40	 
	16
	 	MISCELLANEOUS	 	 	40	 
	16.1
	 	Governing Law	 	 	40	 
	16.2
	 	Jurisdiction and Venue	 	 	40	 
	16.3
	 	Notices	 	 	40	 
	16.4
	 	Severability	 	 	41	 
	16.5
	 	No Waiver	 	 	41	 
	16.6
	 	Cumulative Rights	 	 	41	 
	16.7
	 	Construction	 	 	41	 
	16.8
	 	Survival	 	 	41	 
	16.9
	 	Entire Agreement; Modifications	 	 	41	 
	16.10
	 	Separate Counterparts	 	 	41	 
	 
	 	 	 	 	 	 
	Schedule 1.1B	 	 	43	 
	Schedule 3.1	 	 	44	 
	Schedule 4.3A	 	 	45	 
	Schedule 6.1(f)	 	 	47	 
	Schedule 6.2	 	 	48	 
	Schedule 9.2A	 	 	1	 

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GLOSSARY OF TERMS

	1.	 	“Additional Location” means any Designated Company Store added after the Effective Date.
	 
	2.	 	“Authorized Services”

	 	(a)	 	tax preparation and filing services and any service or product related thereto
as offered by Licensee in Sears stores at any time prior to April 17, 2007, including:

	 	(i)	 	processing and financing customer balance due tax payments;
	 
	 	(ii)	 	depositing, financing, transferring or otherwise handling customer
tax refunds,
	 
	 	(iii)	 	establishing or facilitating bank, savings, or investment accounts
that may be set up or funded with a customer’s tax refund or anticipated refund
proceeds (currently H&R Block Easy IRA’s, H&R Block Easy Savings Accounts, and
prepaid debit cards),
	 
	 	(iv)	 	products currently known as refund anticipation loans, refund
anticipation checks, and instant money advance loans (or similar loans which may
be offered under different names); and
	 
	 	(v)	 	any service guarantee or extended warranty related to any of the
foregoing including Licensee’s Peace of Mind service guarantee,

	 	(b)	 	additional services and products not covered by subsection (a) above; provided,
however, that Company may prohibit Licensee from offering such products or services
within Company Stores but only as provided in this subsection (b):

	 	(i)	 	Licensee shall provide Company a written notice of its intent to
offer any additional services and products by August 1 prior to the Tax Season
during which Licensee proposes to offer such services or products, including:

	 	A.	 	a full description of each service or product including
its use, operation, and value proposition to the consumer (sufficient to
enable a person who is knowledgeable in the service or product’s industry
to distinguish it from alternative services or products available in the
industry);
	 
	 	B.	 	the geographic scope of Licensee’s offering;
	 
	 	C.	 	the launch date and expected duration of the offer; and
	 
	 	D.	 	a description of the target market for the service or
product.

	 	(ii)	 	Company may prohibit Licensee from offering such additional
services and products if Company provides Licensee written notice of its reason
for such prohibition within 30 days after its receipt of Licensee’s notice of its
intent to offer such the intended services and products, advising that Licensee’s
offering of such services or products would, in Company’s sole judgment:

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	 	A.	 	cause Company to breach a third-party contract
requirement existing prior to the date of Licensee’s notice (or a similar
contract requirement in a successor contract, enacted after the date of
Licensee’s notice; provided, however, that Company shall not enter into a
successor contract that would prohibit Licensee from offering a service or
product that Licensee has been authorized to offer in Company Stores in any
of the five previous years); or
	 
	 	B.	 	involve the offer or sale of competing merchandise or
services otherwise offered by Company.

	 	(iii)	 	In addition, Company may prohibit Licensee from offering
additional services and products if Company determines in its sole discretion
that such services or products would likely negatively affect the Sears brand, if
Company notifies Licensee in writing within 15 days after its receipt of notice
from Licensee of the intended offering of services and products of the specific
grounds for judging such service or product to have a likely effect of negatively
impacting the Sears brand. Licensee shall then have 15 days to modify such
service or product to address Company’s grounds for concern and if properly
addressed, such service or product may be offered in Company Stores and shall be
deemed an Authorized Service. In the event such concerns cannot be addressed in
Sears’ sole judgment, Licensee may not offer such product or service in Company
Stores. If Company does not prohibit Licensee from offering a service or
product, such service or product shall be deemed an Authorized Service. Company
acknowledges that it may not withhold its approval for the purpose of negotiating
any form of consideration or for any other reason, except as specifically set
forth above.
	 
	 	(iv)	 	This subsection (b) does not affect other provisions of this
Agreement that restrict Licensee’s offering or performance of certain services
and products, e.g., compliance with laws.

	 	(c)	 	Unless otherwise agreed in writing, Company retains the right to offer
additional services that are not related to tax preparation services in any Company
Stores at any time, even if Licensee is offering those same or similar services;
provided, however, that after the Effective Date, Company shall not grant an exclusive
right to any other licensed business to offer such services if Licensee is offering
those same or similar services.
	 
	 	(d)	 	The parties acknowledge that if Licensee is prohibited from offering services
or products pursuant to subsection (b) above, Licensee shall no longer be obligated to
tag its advertisements of such prohibited services or products as provided in
Section 7.1, and Licensee may include a disclaimer in any advertising of the
unavailability of such service or product at the Company Stores as deemed legally
advisable by Licensee in Licensee’s sole discretion.

	3.	 	“Block Plan” means a diagram submitted by Company to Licensee showing the defined area of
space to be provided by Company for the operation of the Licensed Business in a Designated
Company Store.

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	4.	 	“Cardholder” means any person whose name is on the Credit Card or any authorized user of such
Credit Card.
	 
	5.	 	“Change in Control” means an asset sale, merger, consolidation, or any other transaction or
arrangement the effect of which is that more than 50% of the total voting power entitled to
vote in the election of the board of directors of either party’s ultimate parent company is
held by a person or group other than the shareholders of such party, who, individually or as a
group, held at least 50% of such voting power immediately prior to such event. For purposes of
this definition:

	 	(a)	 	A “group” is two or more persons acting in coordination as a
partnership, limited partnership, syndicate, or other group for the purpose of
acquiring, holding, or disposing of securities of an issuer; and
	 
	 	(b)	 	A party’s “ultimate parent company” is that entity that owns, or that
combination of entities that together own, directly or indirectly, at least 50% of
the ownership interest in the party, and that is not owned in turn by persons who
are dedicated jointly for the advancement of the business purposes of the party.

	6.	 	“Check Cashing Fee” means the fee charged by Company for cashing loan checks and refund
anticipation checks bearing the name of Company’s authorized tax preparation licensed business
operator, issued by participating banks.
	 
	7.	 	“Company Advertisements” means the national advertising activities that Licensee shall engage
in from December 1 through April 15 of each year during the Term, using a Company tagline
consistent with the tagline used prior to the date hereof.
	 
	8.	 	“Company Confidential Business Information” means any information, whether disclosed in oral,
written, visual, electronic or other form, that Company discloses or Licensee observes in
connection with Licensee’s performance under this Agreement that is (i) conspicuously marked
or identified at the time of disclosure as “Confidential” or “Proprietary,” (ii) disclosed in
other than written form which is confirmed in writing to Licensee as confidential (with a
description or summary of the information disclosed) within seven days of disclosure, or (iii)
would reasonably be deemed to be confidential based on the facts as circumstances. Company
Confidential Business Information includes Company’s customer lists, business plans,
strategies, forecasts and analyses, financial information, employee and vendor information;
software (including documentation and code), hardware and system designs and protocols,
product and service specifications, purchasing, logistics, sales, marketing and other business
processes, and the terms and conditions of this Agreement.
	 
	9.	 	“Company Customer Information” means all personal and demographic information about
individual Company’s customers gathered by Company in the operation of its business, including
names, addresses, and telephone numbers.
	 
	10.	 	“Company Fees” means the fees Licensee shall pay to Company.
	 
	11.	 	“Company Marks” means trademarks, service marks and trade names and Licensed Business Marks
that are exclusively owned by or licensed to Company or any of its

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	 	 	affiliates, other than the Licensed Business Name and Licensee Marks listed on Schedule
4.3A.
	 
	12.	 	“Company Store” means any traditional Sears brand full-line store locations primarily found
in mall locations and the following Sears Grand stores:

	 	 	 
	Store Number	 	Location
	1802	 	Gurnee, IL

	1813	 	Pittsburgh Mills, PA

	1818	 	Rancho Cucamonga, CA

	1822	 	Cape Girardeau, MO

	1828	 	Las Vegas, NV

	1831	 	Thornton, CO

	1847	 	Austin, TX

	1888	 	West Jordan, UT

	13.	 	“Confidential Business Information” means any information, whether disclosed in oral,
written, visual, electronic or other form, which either party discloses or observes in
connection with any performance under this Agreement.
	 
	14.	 	“Credit Card” means each Sears Card or Third Party Credit Card.
	 
	15.	 	“Customer” means any customer who becomes first known to Licensee as a result of contact made
through Licensee’s operation of the Licensed Business and who subsequently purchases services
from Licensee in the Licensed Business or in another location during the same Tax Season.
	 
	16.	 	“Default” means any circumstance described in Section 14.2 or Section 14.3
(as applicable) that entitles a party to terminate the Agreement immediately upon delivery of
written notice of such termination to the other.
	 
	17.	 	“Designated Company Stores” means the Company Stores listed on Schedule 1.1B, where
Licensee will operate a Licensed Business during the Tax Season.
	 
	18.	 	“Existing Location” means any Designated Company Store where the Licensed Business was in
operation either by Licensee or another vendor prior to the Effective Date.
	 
	19.	 	“Forms” means any or all customer contract forms, warranty or guarantee documentation and
other forms and materials.
	 
	20.	 	“Gross Sales” means fees collected from the Licensed Business for all of Licensee’s Tax
Services and Peace of Mind.
	 
	21.	 	“Labor Laws” means all federal, state and local laws, ordinances rules and regulations which
Licensee shall comply with regarding its employees.
	 
	22.	 	“Licensed Business” means the non-exclusive privilege of conducting and operating a licensed
business under this Agreement.

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	23.	 	“Licensed Business Area” means the location within each Designated Company Store where
Licensee is authorized to operate the Licensed Business and the specific business being
conducted pursuant to the license granted under this Agreement.
	 
	24.	 	“Licensed Business Marks” means the Licensed Business Name and any other trademarks and
service marks used in connection with the Licensed Business that have been approved by both
Company and Licensee.
	 
	25.	 	“Licensed Business Name” means the name “H&R Block at Sears” under which Licensee shall
operate the Licensed Business in Designated Company Stores, excluding mall locations.
	 
	26.	 	“Licensee Confidential Business Information” means any information, whether disclosed in
oral, written, visual, electronic or other form, that Licensee discloses or Company observes
in connection with Company’s performance under this Agreement, that is (i) conspicuously
marked or identified at the time of disclosure as “Confidential” or “Proprietary,” (ii)
disclosed in other than written form which is confirmed in writing to Company as confidential
(with a description or summary of the information disclosed) within seven days of disclosure,
or (iii) would reasonably be deemed to be confidential based on the facts and circumstances.
Licensee Confidential Business Information includes Licensee’s customer lists, business plans,
strategies, forecasts and analyses, financial information, employee and vendor information,
software (including documentation and code), hardware and system designs, and protocols,
product and service specifications, purchasing, logistics, sales, marketing and other business
processes, and the terms and conditions of this Agreement.
	 
	27.	 	“Licensee Customer Information” means all personal and demographic information about
Licensee’s customers gathered by Licensee in the operation of the Licensed Business, including
names, addresses, telephone numbers and tax return information.
	 
	28.	 	“Licensee Marks” means the trademarks, service marks and trade names that are exclusively
owned by or licensed to Licensee or any of its affiliates listed on Schedule 4.3A, and
excluding the Licensed Business Name.
	 
	29.	 	“Licensee Owned Retail Territories” means the areas in which Licensee is the direct provider
of Tax Services under Licensee’s trademarks excluding Licensee’s franchised territories.
	 
	30.	 	“Licensee POS Terminal” means a point of sale terminal for processing credit and debit card
transactions that Licensee shall furnish at its expense.
	 
	31.	 	“Licensee’s Equipment” means all furniture, fixtures and equipment necessary for the
efficient operation of the Licensed Business.
	 
	32.	 	“Marks” means Licensee Marks and Company Marks.
	 
	33.	 	“Net Sales” means Gross sales from operation of the Licensed Business, less taxes, returns,
allowances or adjustments and discounts.

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	34.	 	“New Client” means a paying client who did not have his or her individual tax return prepared
at any H&R Block office (company or franchise), and who was not a user of any H&R Block
digital tax preparation software or online product, during the prior Tax Season.
	 
	35.	 	“Non-Peak Season” means the period from February 16 through March 31 during each Tax Season.
	 
	36.	 	“Other Sears Stores” means retail formats of Sears-branded stores other than Company Stores
and Sears Authorized Retail Dealer Stores that are in existence as of the Effective Date..
	 
	37.	 	“Peace of Mind” means Licensee’s branded Peace of Mind Extended Warranty Service offered to
tax clients.
	 
	38.	 	“Peak Season” means the periods from January 2-February 15 and April 1-April 30 during each
Tax Season.
	 
	39.	 	“RAC” means a refund anticipation check.
	 
	40.	 	“RAL” means a refund anticipation loans.
	 
	41.	 	“Representatives” means each party’s employees, directors, officers, agents and professional
advisers, and each party’s affiliates and their respective employees, directors, officers,
agents and professional advisors.
	 
	42.	 	“Sears Card” means a credit card issued with branding using a Company Mark, such as a
SearsCard®, Sears Premier Card®, Sears MasterCard®, Sears Gold MasterCard®, Sears Premier Gold
MasterCard®, and The Great Indoors® Gold MasterCard®, with which a customer may tender payment
for the Authorized Services.
	 
	43.	 	“Shopping Mall” means a group of stores and businesses facing a central system of walkways
for pedestrians, surrounded by or contiguous with a private, shared parking lot. For purposes
of this Agreement, shopping mall includes both malls where stores surround the central system
of pedestrian walkways, and “strip shopping centers,” where a line of stores faces the parking
areas, with the pedestrian walkway separating the stores and parking areas.
	 
	44.	 	“Tax Classes” means the operation of income tax return preparation training classes that
Licensee has the option to conduct.
	 
	45.	 	“Tax Promotion Period” means the period from December 26 through April 15 of each year during
the Term.
	 
	46.	 	“Tax Season” means the time period of January 2 through April 30 each year during the Term.
If a Tax Season is identified to a particular calendar year (e.g., Tax Season 2008), it means
January 2 through April 30 of that calendar year.
	 
	47.	 	“Tax Services” means the professional tax preparation services provided by Licensee’s
individual tax professionals.

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	48.	 	“Term” means a three year period beginning on the Effective Date and ending at the close of
business on July 31, 2010. “Term” also includes any renewal periods agreed under Section
2.1.

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LICENSE AGREEMENT

THIS LICENSE AGREEMENT (the “Agreement”) is entered into as of August 1, 2007 (the
“Effective Date”), by Sears Holdings Management Corp., a Delaware corporation, as agent for
SEARS, ROEBUCK AND CO., a New York corporation (“Company”), and H&R BLOCK SERVICES, INC., a
Missouri corporation, operating H&R Block offices through its wholly owned subsidiaries
(“Licensee”).

	 	 	Company and Licensee hereby agree as follows:
	 
	1.	 	GRANT OF LICENSE

	 	1.1	 	License for Operations.

	 	(a)	 	License. Company grants Licensee the non-exclusive
privilege of conducting and operating, and Licensee shall conduct and operate a
Licensed Business to offer and sell the Authorized Services only to customers
in the United States and only through Designated Company Stores. Licensee
shall be permitted to conduct the Licensed Business at any time during the Tax
Season or such other times as may be mutually agreed to in writing by the
parties.
	 
	 	(b)	 	Tax Classes. Company additionally grants to Licensee
the right at Licensee’s option to conduct Tax Classes for the general public,
but only in those Designated Company Stores where the Company Store General
Manager from time to time authorizes the conduct of the Tax Classes. The
amount and location of the space to be utilized for the Tax Classes shall be
determined solely by the Company Store General Manager and such space shall be
separate and distinct from the space required under this Agreement for the
operation of the Tax Service. Terms related to the operation of Tax Classes in
each location are to be agreed to between Company Store General Manager and
Block District Manager. The Tax Classes shall be conducted under Licensee’s
own name, and Company’s name will not be used in connection therewith. Each
Tax Class will operate for a period of time determined by Licensee, but such
period shall be completed no later than mid-December of each year in which the
Tax Classes are authorized.
	 
	 	(c)	 	Licensee’s Franchisees. Licensee may operate the
Licensed Business hereunder at various Designated Company Stores through
operators franchised by Licensee or Licensee’s affiliates but only after
Licensee has submitted such franchise operated locations to Company for its
approval. Licensee shall make the terms and conditions of this Agreement known
to all such franchise operators and secure such franchise operators’ written
agreement to comply with all the terms and conditions hereof and to assume all
of Licensee’s obligations hereunder in the performance of the Licensed Business
on Company’s premises. Licensee agrees to include in any and all agreements
with its franchisees a provision that Licensee and its franchise operators
acknowledge that Company is a third party

8

 

	 	 	 	beneficiary of all Licensee’s rights and Licensee’s franchise operators’
obligations under the agreement between Licensee and its franchise operators
which directly or indirectly pertains to the control, protection, and
maintenance of Company’s trademarks, service marks, trade names, and the
good will pertaining thereto. Accordingly, Company shall have the right to
require compliance by Licensee’s franchise operators and to enforce directly
against the franchise operators all provisions of the agreement between
Licensee and its franchise operators which directly or indirectly pertain to
Company’s third party beneficiary rights hereunder. Such provisions shall
pertain only to the control, protection and maintenance of Company
trademarks, service marks, trade names, and the good will pertaining
thereto, to the protection of the Designated Company Stores and their
premises, and to the preservation of customer relationships in the
Designated Company Stores, and are not to be construed as granting Company
any right or power to control the details of the daily operation of the
Licensed Business by Licensee’s franchise operators unrelated to the
control, protection and maintenance of Company trademarks, service marks,
and trade names, all of the rights and powers being retained exclusively by
Licensee or its franchise operators, as the case may be.
	 
	 	 	 	     Licensee shall closely monitor the operations of such franchise
operators and take all steps necessary to assure such franchise operators’
compliance with the terms and conditions of this Agreement. If this
Agreement is terminated for any reason as to one or more Designated Company
Store locations, then any agreement between the Licensee and a franchise
operator of Licensee to operate the Licensed Business at such location shall
also terminate simultaneously and neither Licensee nor Licensee’s franchise
operators shall be entitled to damages, if any as a result of such
termination. Notwithstanding the foregoing, Licensee shall at all times
continue to be fully and primarily responsible and liable to Company for the
faithful performance of all the terms and conditions of this Agreement by
Licensee’s franchisees.
	 
	 	(d)	 	No Representations. Neither party makes any promises
or representations whatsoever as to the potential amount of business either
party can expect at any time from the operation of the Licensed Business. Each
party is solely responsible for any expenses it incurs related to this
Agreement, including expenses for hiring additional employees or for acquiring
additional facilities or equipment.

	2.	 	TERM

	 	2.1	 	This Agreement shall be effective throughout the Term unless terminated earlier
under another provision of this Agreement. Following the Expiration Date, this
Agreement may be renewed for successive one year terms upon mutual written agreement of
both parties.

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	3.	 	FEES

	 	3.1	 	Amount. Licensee shall pay Company Fees as described in Schedule
3.1.

	4.	 	USE OF MARKS

	 	4.1	 	Licensed Business Name. Licensee shall operate the Licensed Business
under the Licensed Business Name or such other name as mutually agreed to by the
parties. Licensee shall not use any Company Marks, except Licensee may use “Sears” as
part of the Licensed Business Name, in a manner approved by Sears, in communications to
customers and prospective customers of the Licensed Business, and to identify the
Designated Company Store where the Licensed Business is located. In this regard, any
exterior signage of the Designated Company Stores that identifies the Licensed Business
shall use the Licensed Business Name. Notwithstanding the above, inside each
Designated Company Store, in any mall location, and in the general conduct of the
Licensed Business, Licensee shall be free to use forms, other materials and operations
not referring to or using the Company name.
	 
	 	4.2	 	Other Communications. Except as permitted in Section 4.3 and
for purposes of disclosure to the U.S. Securities and Exchange Commission, or as
otherwise specifically approved by Company, Licensee shall not use the Company Marks
for any other purpose, either orally or in writing, including use on any letterhead,
checks, business cards, or contracts. Licensee will make all communications with
persons or entities other than customers or potential customers of the Licensed
Business only in Licensee’s own name.
	 
	 	4.3	 	Use and Registration of Licensed Business Marks. Both Company and
Licensee may jointly use the Licensed Business Name and Licensed Business Marks, and
each party shall pre-approve any proposed Licensed Business Mark, other than the
Licensed Business Name, which incorporates the Licensee Marks or trademarks, service
marks or trade names owned by or licensed to the other party. Company acknowledges and
will not contest or challenge Licensee’s exclusive ownership of the Licensee Marks and
Licensee acknowledges and will not contest Company’s or its affiliates’ exclusive
ownership of Company Marks. Upon expiration or termination of this Agreement, each
party shall immediately stop using all marks of the other party unless such post
termination use is specifically authorized in this Agreement.
	 
	 	4.4	 	Prosecution of Claims Relating to Licensed Business Name. Neither
party may prosecute or otherwise pursue any claim against any third party for
infringement or misappropriation of the Licensed Business Name without the prior
written consent of the other party, and such other party may withhold or condition its
consent in its reasonable, good faith discretion.
	 
	 	4.5	 	Rights of the Parties. Neither party shall register or attempt to
register any Mark of the other party. Each party shall execute all documents the other
party or its affiliates requests to confirm such party’s or its affiliates’ ownership
interest in any Licensed Business Marks or Marks of that party. Nothing in this
Agreement

10

 

	 	 	 	shall be construed to bar either party or its affiliates from protecting its rights
in its Marks against infringement or misappropriation by any party or parties,
including the other party, or from claiming rights in any intellectual property
other than that as to which ownership is expressly provided for in this Agreement.
	 
	 	4.6	 	Injunctive Relief. Licensee acknowledges that the Company Marks
possess a special, unique and extraordinary character, which makes it difficult to
assess the monetary damage Company or its affiliates would sustain in the event of
unauthorized use, and Licensee agrees that in the event of breach of this Section
4 by Licensee, there would be no adequate remedy at law and preliminary or
permanent injunctive relief would be appropriate.
	 
	 	 	 	     Company acknowledges that the Licensee Marks possess a special, unique and
extraordinary character, which makes it difficult to assess the monetary damage
Licensee or its affiliates would sustain in the event of unauthorized use, and
Company agrees that in the event of breach of this Section 4 by Company,
there would be no adequate remedy at law and preliminary or permanent injunctive
relief would be appropriate.
	 
	 	4.7	 	Infringing Use. Each party shall notify the other party in writing by
certified mail, return receipt requested, within five business days after it has
knowledge of any infringement, misuse, dilution, acts of unfair competition or damaging
acts related to the other party’s Marks or any names, symbols, emblems, designs or
colors which would be confusingly similar in the minds of the public to the other
party’s Marks, as well as any other patent, trademark, trade secret, service mark,
trade name, trade dress, copyright, domain name, right of publicity or other
intellectual property right in any way related to or affecting the Authorized Services.
The other party or its affiliates may, at its sole expense, take such action as it
determines, in its sole discretion, is appropriate. Each party shall cooperate and
assist in such protest or legal action at the affected party’s or its affiliates’
expense. Neither party shall undertake any protest or legal action with respect to any
Mark of the other party without first securing the other party’s written permission to
do so. For the purposes of this section, expenses shall include reasonable attorneys’
fees and costs. All recovery in the form of legal damages or settlement shall belong
to the party bearing the expense of such protest or legal action.
	 
	 	4.8	 	Good Will. Licensee recognizes the substantial good will associated
with any and all Company Marks as described in this Section and acknowledges that all
rights therein, and good will pertaining thereto, belong to Company or its affiliates.
Licensee further acknowledges that all use of the Company Marks by Licensee shall inure
to the benefit of Company and will not impair the validity or good will associated with
the Company Marks.
	 
	 	 	 	     Company recognizes the substantial good will associated with any and all
Licensee Marks as described in this Section and acknowledges that all rights
therein, and good will pertaining thereto, belong to Licensee or its affiliates.
Company further acknowledges that all use of the Licensee Marks by Company

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	 	 	 	shall inure to the benefit of Licensee and will not impair the validity or good will
associated with the Licensee Marks.
	 
	 	4.9	 	Survival. This Section 4, except for Section 4.1 and
the last two sentences of Section 4.3 survives the expiration or termination of
this Agreement.

	5.	 	OPERATIONAL OBLIGATIONS OF LICENSEE

	 	5.1	 	Performance Standards. Licensee acknowledges that it has procedures
and policies setting minimum standards of quality, performance and customer service.
Upon request, Licensee shall provide copies of relevant policies and Licensee shall
immediately advise Company of any proposed changes in its standards that would
reasonably be expected to negatively impact Company. Without limiting Licensee’s
obligations under Section 5.8, Licensee shall observe no less than its minimum
standards of quality, performance and customer service. Company may visit the Licensed
Business area at any reasonable time during business hours to verify Licensee’s
compliance with its standards of quality, performance and customer service.
	 
	 	 	 	     Licensee shall conduct its operations in a courteous and efficient manner and
shall present a neat, business-like appearance, including following Licensee’s dress
code. Licensee and its Franchisees shall abide by all safety and security rules and
regulations of Company in effect from time to time.
	 
	 	5.2	 	Business Conduct. Licensee shall also conduct its operations in an
honest and ethical manner at all times, and in accordance with the level of
professional care customarily observed by highly skilled professionals rendering
services similar to those offered through the Licensed Business. In dealing with
Company associates and Company customers, Licensee shall adhere to the highest ethical
standards.
	 
	 	5.3	 	Hours of Operation. Licensee shall staff and keep the Licensed
Business open for business and operated during the same business hours that the Sears
retail store is open for business during Peak Season. During Non-Peak Season, the
Licensed Business shall be open for business and operated a minimum of 42 hours per
week, except that if Licensee operates a tax office within one mile of a Company Store
with a Licensed Business, the Licensee shall keep the Licensed Business in such Company
Store staffed and open for business and operated at least the same hours as such nearby
Licensee tax office. Furthermore, if at the end of the Tax Season of any year during
the Term, the change in the number of Licensee’s completed and paid tax preparation
returns during the Non-Peak Season in the Licensed Business as compared to the same
period in the preceding year is three percent or more worse than the change in
Licensee’s complete and paid tax preparation returns in the Licensed Business during
the entire Tax Season from the preceding year, Licensee shall resume open hours that
coincide with Company’s store open hours during the Non-Peak Season in all Tax Seasons
remaining in the Term. For example, if Licensee’s completed and paid returns from
locations under this Agreement in Tax Season 2008 rose two percent from Tax Season
2007, but Licensee’s completed and paid returns during the Non-Peak Season in Tax
Season 2008 declined by one percent from the same year earlier

12

 

	 	 	 	period, then Licensee must reinstate full Sears store hours in all Licensee offices
operated under this Agreement in all periods of Tax Seasons 2009 and 2010.
Notwithstanding the foregoing, the Licensed Business shall not be required to be
open for business and operating during any period that the Company Store is closed.
	 
	 	5.4	 	Pricing. Company has no right or power to control the prices at which
Licensee offers Authorized Services in the Licensed Business. Such right and power is
retained by Licensee, but Licensee may, at its option, participate in Company’s
national store-wide sales and merchandise price off events.
	 
	 	5.5	 	Discount Policy. Licensee and Company shall cooperate to offer a
Company employee discount for Authorized Services through Licensee’s Employer Solutions
Program. Company shall also use reasonable business efforts to enable Licensee to
communicate, at Licensee’s expense, the availability of the discount to Sears Holdings
employees and its affiliates through W-2 inserts and messages.
	 
	 	5.6	 	Customer Loyalty Programs. Licensee may, in its discretion, accept
certificates and coupons relating to customer loyalty programs that may from time to
time be operated by Company. Company will provide Licensee with a list of all such
loyalty programs and procedures for handling them. If Licensee agrees to accept any
such certificates, Company shall reimburse Licensee for the face amount of all such
certificates and coupons accepted, if Licensee has followed the prescribed procedures.
	 
	 	5.7	 	Customer Adjustment/Service. Licensee maintains a general policy of
“Satisfaction Guaranteed” and also maintains a “Standard Guarantee” (as described in
Section 5.19) to customers and shall promptly handle all complaints of and
controversies with customers arising out of the Licensed Business in accordance with
Licensee’s policies. Licensee shall maintain files of customer complaints and their
disposition in accordance with its standard procedures and, consistent with applicable
laws and upon reasonable request, make the files available to Company.
	 
	 	5.8	 	Employee Standards. Licensee shall employ all management and other
personnel needed to efficiently operate the Licensed Business and to comply with all
laws and regulations. Licensee shall operate the Licensed Business solely with
Licensee’s employees, and not by using independent contractors, sub-contractors,
sub-licensees or other workers not directly employed by Licensee, except for
Franchisees permitted under Section 1.1(c) and certain temporary workers who
obtained through an agency who are subject to Licensee’s policies.
	 
	 	5.9	 	Licensee’s Employees. Licensee has no authority to employ persons on
behalf of Company. No employees of Licensee will be deemed to be employees of Company.
Licensee has exclusive control over its labor and employee relations policies, and its
policies relating to wages, hours, or working conditions of its employees. Licensee
shall include in its policies all applicable restrictions and requirements of this
Agreement that pertain to Licensee’s operations or the conduct of its personnel.
Licensee has the exclusive right to hire, transfer,

13

 

	 	 	 	suspend, lay off, recall, promote, assign, discipline, adjust grievances and
discharge its employees. But Company may request at any time, subject to applicable
law, that Licensee remove from the Licensed Business any employee of Licensee, any
employee of a Franchisee, or any Franchisee, who is objectionable to Company because
of risk of harm or loss to the health, safety or security of Company’s customers,
employees or merchandise, whose manner impairs Sears’ customer relations, or who
fails to follow Licensee’s employment policies. If Company objects to any of
Licensee’s or any Franchisee’s employees, or any Franchisee, and Licensee decides
not to remove such person, Company may terminate any affected location immediately
upon written notice to Licensee.
	 
	 	 	 	     During the term of this Agreement and for 90 days after termination or
expiration thereof, neither party shall solicit or offer employment (other than
through advertisements of general circulation) to any person who was an employee at
a District Manager level or above of the other party.
	 
	 	5.10	 	Employee Compensation. Each party shall timely pay and is solely
responsible for so paying, for all compensation of its employees and shall make all
necessary deductions and withholdings from its employees’ compensation. Each party
shall timely pay, and is solely responsible for so paying or contesting in good faith
all contributions, taxes and assessments, withholdings and all other requirements of
Federal Social Security, Federal and state unemployment compensation, and Federal,
state and local income tax laws on all compensation of its employees.
	 
	 	5.11	 	Compliance with Labor Laws. Licensee and Company shall comply with any
other contract and all Federal, state and local laws, ordinances, rules and regulations
regarding its employees, including minimum compensation, overtime and equal
opportunities for employment, and specifically including the Federal Civil Rights Acts,
Age Discrimination in Employment Act, Occupational Safety and Health Act, the Federal
Fair Labor Standards Act, and the Americans with Disabilities Act, whether or not
Licensee or Company, as applicable, is otherwise exempt from these acts because of its
size or the nature of its business or other reason.
	 
	 	5.12	 	Compliance with Law.
	 
	 	 	 	(a) Licensee Compliance with Law. Licensee shall obtain all permits and licenses
that are required under any Federal, state, or local law, ordinance, rule or
regulation for Licensee’s operation of the Licensed Business. Licensee shall comply
and bear all costs associated with all applicable Federal, state and local laws,
ordinances, rules and regulations, including rules and regulations of the Federal
Trade Commission and those under the Americans with Disabilities Act in the
operation of the Licensed Business. Licensee represents and warrants that Licensee
and all of its suppliers, subcontractors and agents involved in the production or
delivery of Authorized Services will strictly adhere to all applicable laws,
regulations, and prohibitions of the United States and all countries where the
Authorized Services are performed regarding the operation of their production
facilities and their business and labor practices, including those concerning the

14

 

	 	 	 	working conditions, wages and minimum age of the work force. Licensee further
represents and warrants that the Authorized Services will not be performed, in whole
or in part, by convict or forced labor.
	 
	 	 	 	(b) Company Compliance with Law. Company shall comply with all Federal,
state or local laws, rules, ordinances and regulations and obtain all permits and
licenses that are required under any Federal, state, or local law, ordinance, rule
or regulation, including those under the Americans with Disabilities Act which are
directly related to Licensee’s operation of the Licensed Business in Company’s
stores. Company shall bear all costs associated with all applicable Federal, state
and local laws, ordinances, rules and regulations, including rules and regulations
of the Federal Trade Commission in the operation of its business.
	 
	 	5.13	 	Payment of Obligations. Licensee shall pay all license fees, business,
use, sales, gross receipts, income, property or other applicable taxes or assessments
that are charged or levied due to any act performed in connection with the Licensed
Business, excluding, however, taxes and assessments on Company’s income from Company
Fee or applicable to Company’s property. Licensee shall promptly pay all its
obligations, including those for labor and material, and shall not allow any liens to
attach to Company’s property due to Licensee’s failure to pay such obligations.
	 
	 	5.14	 	Licensee’s Obligations. Neither party shall make any purchase or incur
any obligation or expense in the name of the other party without such party’s prior
written consent.
	 
	 	5.15	 	Liens. Licensee shall not allow any liens, claims or encumbrances to
attach to any Designated Company Stores due to any obligation of Licensee or its
Franchisees. If any lien, claim or encumbrance so attaches or is threatened, Licensee
shall immediately take all necessary action to cause such lien, claim or encumbrance to
be satisfied and released, or Company may either terminate this Agreement or charge
Licensee or withhold from the sales receipts retained under Section 9.3 all
expenses, including attorneys’ fees, incurred by Company in removing or resolving such
liens or claims.
	 
	 	5.16	 	Overseas Labor Sourcing. Licensee shall not engage in the performance
of professional tax preparation services outside of the United States for customers of
the Licensed Business without prior written notice to Company.
	 
	 	5.17	 	Preparer. The name “H&R Block” or the name of the Licensee affiliate
which is the preparer of the tax return, which name shall include “H&R Block,” shall be
placed upon each return prepared by the Licensee as the “preparer” of the return and
the signature line on the return shall be completed in such form as will comply with
Internal Revenue Service rules, instructions and practices. Licensee shall not use the
name “Sears” nor allow it to appear in any manner on any tax returns prepared by
Licensee.

15

 

	 	5.18	 	Preparer’s Responsibilities. Licensee shall advise each of its tax
return preparers of the preparer’s responsibilities under the Internal Revenue Code and
applicable regulations accordingly to standard training methods.
	 
	 	5.19	 	Licensee’s Guarantee to Customers. Licensee shall make available to
each of its customers at the Licensed Business the guarantee that if Licensee makes any
error in preparing a client’s tax return that costs them interest or penalty on
additional taxes due, while Licensee does not assume the liability for the additional
taxes, Licensee will pay the resulting interest and penalty. Under no circumstances
will Sears assume, be liable for or pay any penalties, interest, assessment or claims
of any kind arising out of any actual or alleged error or omission in any tax return
prepared by Licensee.
	 
	 	5.20	 	Quotation of Charges. All charges for the Tax Services will be quoted
to the customer during the interview. Licensee shall not charge customers for estimates
or quotes for tax preparation services. However, Licensee shall not be prevented from
charging customers for selected tax services that require the preparation of estimated
tax return information for the customer or other tax advice.
	 
	 	5.21	 	Copies of Tax Returns; Taxpayers’ Files. Licensee agrees that it will
retain copies of all tax returns prepared by it in such manner and for such period of
time as is consistent with Licensee’s maintenance of tax returns prepared for
Licensee’s retail customers outside of the Licensed Business. Licensee shall at all
times retain sole rights to its customers files.

	6.	 	LICENSED BUSINESS AREA

	 	6.1	 	Locations.

	 	(a)	 	Company grants Licensee a right of first opportunity to operate
a Licensed Business in any Company Store in which Company decides to make space
available for a tax preparation services business. In extending such right to
Licensee, Company shall provide a list to Licensee by June 1 each year during
the Term containing (i) each Company Store and the location of such Company
Store, (ii) whether each Company Store is available for a tax preparation
licensed business, or if not available for a tax preparation licensed business,
the reason for such unavailability, and (iii) the location and area of the
space intended to be made available to Licensee for the Licensed Business.
	 
	 	 	 	Company’s list provided above shall make available to Licensee a right to
operate a Licensed Business in 100% of Company Stores in which Company has
space available, in its sole business judgment, for a tax preparation
services licensed business office. If any Company Store is omitted from
Company’s list due to unavailability of space, Company will, at Licensee’s
request, discuss with Licensee the store’s space constraints and any
alternatives that might enable Company to find space

16

 

	 	 	 	available for the Licensed Business in that store. Except as otherwise
provided herein, Licensee agrees to operate the Licensed Business, during
each Tax Season during the Term, [***] . Licensee shall notify Company of
the Company Stores where Licensee and Licensee’s franchisees shall operate
the Licensed Business during the Tax Season (the Designated Company Stores),
and such Designated Company Stores shall be set forth in a Schedule
1.1B no later than: (i) August 1 prior to the start of the Tax Season,
or (ii) if Company does not provide the list by June 1, the date that is 60
days after the date Licensee receives such list from Company. Licensee and
Licensee’s franchisees must elect to accept such location by August 1 (or
such later date as is 60 days after the date License received such list from
Company), or Company will be free to grant another firm (tax preparation
services or otherwise) the right to operate a Licensed Business in that
store, in lieu of Licensee; provided, however, that in the event such
location is not identified to Licensee as being available by August 1,
Company may not grant another tax preparation firm the right to operate in
that store that Tax Season and such store will be available to Licensee the
subsequent Tax Season. Once declined (except as provided above), the right
of first opportunity is lost to Licensee as to the offered store for the
remainder of the Term. The commitment of Licensee set forth in Section
6.1(a) applies only to Licensee Owned Retail Territories and only to
Company Stores. Licensee shall offer the opportunity to its Franchisees to
offer Authorized Services at Company Stores in such Franchisee’s
territories, but Licensee does not guarantee or warrant that any, or any
certain number of Franchisees, will do so.
	 
	 	(b)	 	Notwithstanding the provisions of Section 6.1(a) of
this Agreement, Licensee shall be obligated to place on the list of Designated
Company Stores any Company Store at which Licensee completed (and received
payment for) [***] during the immediately preceding Tax Season. Company shall
be obligated to place on the list of available Company Stores, any Company
Store at which Licensee completed (and received payment for) at least [***] ,
except Company Stores closed under Section 14.5 and Company Stores that
have been remodeled or reconstructed, with the result that there is not
available space for the Licensed Business (or for any other licensed business
that requires a similar amount of space as the Licensed Business requires).
	 
	 	(c)	 	Notwithstanding the provisions of Section 6.1(a) of
this Agreement, Licensee shall not be required to operate the Licensed Business
at any Company Store at which Licensee did not complete (and receive payment
for) [***] . Such preceding Tax Season must be no earlier than Tax Season 2008.
By way of example, [***] . Locations at which Licensee does not operate the
Licensed Business under this Section 6.1(c) shall nevertheless count
toward the [***] requirement of Section 6.1(a).

17

 

	 	(d)	 	Licensee may decide to open a location offering Authorized
Services in a public concourse of any Shopping Mall where Company operates a
Company Store (a “Mall Location”) only if:

	 	(i)	 	Company has notified Licensee that it cannot
provide Licensee space meeting the requirements of this Agreement; or
	 
	 	(ii)	 	Company has advised Licensee that it has space
meeting the requirements of this Agreement for Licensee, but Licensee
nevertheless decides to open a location offering Authorized Services
in a Mall Location.

	 	 	 	      If either of these events occurs, Licensee shall arrange to lease the
Mall Location for the Tax Season and the Mall Location will be operated by
Licensee within the terms of this Agreement, as applicable, including
receiving Company Fees. If the Mall Location is brought under the terms of
this Agreement, [***] . Company shall notify Licensee in writing within
thirty days after Company receives written notice from Licensee that
Licensee intends to open a Mall Location whether it will bring that location
under the terms of this Agreement. If Company does not notify Licensee in
writing that it will has exercised such option to bring the location under
the terms of this Agreement, Licensee shall be free to provide Authorized
Services from such location without any obligation to Company hereunder. In
addition to the right of Licensee to establish Mall Locations as set forth
herein, the parties will cooperate with one another to transition locations
from inside Company stores to Mall Locations as appropriate and depending on
the availability and suitability of Mall Locations. [***] .
	 
	 	(e)	 	Any Mall Location operated under subsection (ii) of Section
6.1(d) which Company elects to bring under the terms of this Agreement that
exceeds [***] shall be handled as follows: [***] . Company shall notify
Licensee in writing within thirty days after Company receives written notice
from Licensee that Licensee intends to open a Mall Location whether it will
bring that location under the terms of this Agreement.
	 
	 	(f)	 	Company shall provide space for the operation during the
Tax Season within each Designated Company Store covered by this Agreement in
accordance with the specifications in Schedule 6(f). Such space
shall be used solely for the conduct of the Licensed Business during the Tax
Season. In the event Company does not provide space meeting the
specifications on Schedule 6.1(f) in all material respects
(including, but not limited to the size of the tax service office), Licensee
shall provide written notice to the Company Store Manager of such
deficiencies. Company shall promptly commence cure of any such deficiencies
and shall thereafter work to cure such completion in as expeditious a manner
as is reasonably possible under the circumstances. In the event that Company
does not correct such failure or promptly commence to cure

18

 

	 	 	 	within a reasonable period of time, then Licensee may withdraw from the
locations at which Company does not comply without further liability by
either party to the other. Any location from which Licensee withdraws
pursuant to this Section shall nevertheless be included in the calculation
required by Section 6.1(a) for the then-occurring (or next
succeeding, if withdrawal occurs outside of a Tax Season) Tax Season as if
such office were still being operated as part of the Licensed Business.
	 
	 	(g)	 	Company shall not at any Designated Company Store provide space
or permit operations or advertising by any other tax preparation services
provider, except as set forth below. This prohibition shall also apply to any
Company Store that is located at or adjacent to any Mall Locations where
Licensee operates the Licensed Business under Sec. 6.1(d). However, if
Licensee terminates a Licensed Business located in a Designated Company Store
or ceases operations at any Mall Location (and does not enter into a Designated
Company Store within such mall), and so long as Licensee’s termination of the
location was not based on Company’s failure or default under Section 14.3
or 14.4, Licensee shall have no further rights with respect to such
location during the Term and Company may offer or contract with any other party
to operate a tax preparation business in that Designated Company Store.
	 
	 	(h)	 	The costs associated with preparing and constructing the
Licensed Business Area shall be divided between the parties as set forth on
Schedule 6.2.

	 	6.2	 	Existing Locations. For any Designated Company Stores listed on
Schedule 1.1B, wherein the Licensed Business was in operation on or before the
Effective Date, the Licensed Business shall continue to be located in the areas where
it is located on the Effective Date, subject to the other terms of this Agreement
(including Section 6.8).
	 
	 	6.3	 	Additional Locations. For any Additional Location, Company shall
submit no later than June 1 to Licensee a Block Plan complying with the specifications
of Section 6.1. The space will be comparable in size to the locations occupied
by Licensee in existing stores in that particular format. Licensee is solely
responsible for providing final plans for the Licensed Business area in the Additional
Locations. The expense of preparing the initial space assigned to the Licensed
Business in the Additional Location will be divided between the parties as described on
Schedule 6.2. All improvements or installations that vary from Company’s
standard specifications will be at Licensee’s sole expense.
	 
	 	6.4	 	Right of First Opportunity for Other Sears Stores. Company shall
grant Licensee a right of first opportunity to operate a Licensed Business in all Other
Sears Stores in which Company decides to make space available for a tax preparation
services business, and Licensee may agree to operate a Licensed Business in any such
Other Sears Stores; provided the parties can successfully negotiate a contract
governing such Licensed Business. If Licensee does not elect to accept such

19

 

	 	 	 	location by August 1 (or such later date as is 60 days after the date License
received the list of Other Sears Stores), Company will be free to grant another firm
(tax preparation services or otherwise) the right to operate a Licensed Business in
that store, in lieu of Licensee; provided, however, that in the event such location
is not provided to Licensee by August 1, Company may not grant another firm the
right to operate in that store and such Other Sears Store will be available to
Licensee the subsequent Tax Season. Once declined, the right of first opportunity
is lost to Licensee as to the offered store for the remainder of the Term, unless
Company failed to provide such location to Licensee by August 1, in which case
Licensee shall have the right of first opportunity the subsequent Tax Season.
	 
	 	6.5	 	Improvements. All permanent improvements to the Licensed Business Area
become the Company’s property at the expiration or termination of this Agreement. At
the expiration or termination of this Agreement, or if Licensee vacates or abandons the
Licensed Business, Licensee shall convey to Company, without charge, good title to such
improvements free from all liens, charges, encumbrances and rights of third parties.
	 
	 	6.6	 	Commencement of Operations. Company shall make the Licensed Business
Area available to Licensee in accordance with the specifications of Schedule
6.1(f) within six days prior to the commencement of Tax Season (or 10 days prior to
commencement of the Tax Season, for Designated Company Stores where the Licensed
Business will be operated in permanent, built-in offices), and Licensee shall have the
Licensed Business fully operational at each Designated Company Store by the start of
the Tax Season provided, however that Company has made the Licensed Business Area ready
for Licensee as provided above. If either party fails to comply with the timeline set
forth above, the other party may, at its option, terminate the location from this
Agreement and have no further obligation to the other party, in which case the party
who failed to comply with the timeline shall reimburse the other party within ten days
after receipt of an invoice for any cost of constructing the Licensed Business Area and
of restoring the space back to its condition immediately before the start of
construction.
	 
	 	6.7	 	Condition of Licensed Business Area. Licensee shall, at its expense,
keep the Licensed Business Area in a thoroughly clean and neat condition and shall
maintain Licensee’s Equipment in good order and repair. Company shall provide routine
janitorial service in the Licensed Business Area, consistent with the janitorial
services regularly performed in the Designated Company Store. Occupying more than the
space allocated by the Block Plan, and failure to withdraw from such additional,
unallocated space within 24 hours after receiving written notice from Company, is
grounds for termination of the Licensed Business at a Designated Company Store, or for
termination of this Agreement if the uncorrected situation exists at multiple
Designated Company Stores.
	 
	 	6.8	 	Changes of Location/Remodeling. Company shall provide the Licensed
Business Area consistent with the specifications set forth in Schedule 6.1(f).
Company has the right, in its sole discretion, to change the location, dimensions and
amount of

20

 

	 	 	 	area of the Licensed Business from time to time during the Term, in accordance with
Company’s judgment as to what best serves the general good of the Designated Company
Stores; provided, however that Licensee may refuse such relocation and such location
shall nevertheless count toward the requirements of Section 6.1(a). The
specifications for any such relocated Licensed Business Area shall be as set forth
in Schedule 6.1(f). However, Company shall use reasonable efforts not to
change the location during Tax Season. If Company changes a location during Tax
Season, Company shall place signage acceptable to Licensee notifying customers of
such change and directing them to the new location. If Company decides to change
the location of the Licensed Business during the Tax Season, Company shall move
Licensee’s Equipment to the new location and prepare the new space for occupancy by
Licensee and the expense will be borne solely by Company. If Company decides to
change the location of the Licensed Business outside of the Tax Season, Company
shall move Licensee’s Equipment to the new location and prepare the new space for
occupancy by Licensee and the expense will be allocated between the parties as
described on Schedule 6.2. If Licensee initiates or requests a change in
location, dimensions or amount of space, Licensee shall bear all expense of moving
Licensee’s Equipment and the parties will share the expense of preparing the new
space for occupancy as described on Schedule 6.2.
	 
	 	 	 	If Licensee agrees that a Licensed Business Area should be remodeled and
subsequently terminates or abandons the Licensed Business Area prior to the date
Company has made such area ready for occupancy by Licensee, Licensee shall reimburse
Company for all Company’s costs incurred in planning, preparing, constructing and
improving the Licensed Business Area, including the cost to restore such area to its
condition immediately prior to the commencement of construction.
	 
	 	6.9	 	Electric/HVAC. Company shall furnish, at reasonable hours, and except
as otherwise provided, without expense to Licensee, reasonable heat, light, air
conditioning and electric power for the Licensed Business as described in more detail
in Schedule 6.1(f), except when prevented by strikes, accidents, breakdowns,
improvements and repairs to the heating, lighting and electric power systems or by
other causes beyond Company’s control. Company will not be liable for any injury or
damage whatsoever that may arise from Company’s failure to furnish such heat, light,
air conditioning and electric power, regardless of the cause of such failure. Licensee
expressly waives all claims for such injury or damage.
	 
	 	6.10	 	Telephone Service. Company shall provide a single Direct Inward Dial
number for the Licensed Business Area in each Designated Company Store and Company
shall bear the cost of outbound local and toll-free calls and compatible phone hardware
for Licensee. Company shall pay the entire cost of the installation of the telephone
equipment necessary to provide such service. If Licensee requires additional phone
lines to be installed in a Licensed Business Area, Licensee shall arrange with the
appropriate telephone company for such installation and all installation costs and
monthly service associated with any such additional phone

21

 

	 	 	 	lines are to be paid by Licensee. Licensee shall arrange with the appropriate
telephone company for direct billing to Licensee of all long distance calls made in
the Licensed Business location. Notwithstanding the foregoing, Licensee may install
and maintain, at its own cost and expense, one or more separate data lines to be
used solely for the purpose of transmitting sales and other data from the Licensed
Business location to Licensee’s own computer data system. Licensee shall arrange
with the appropriate telephone company for such installation, and all installation
costs, local or long distance charges, and monthly service fees associated with any
such additional data lines are to be paid by Licensee. Licensee shall arrange with
the appropriate telephone company for direct billing to Licensee of all charges
associated with the data lines in the Licensed Business locations. The access
numbers for such data lines shall not be advertised, publicized or otherwise
disclosed to customers of the Licensed Business. Upon expiration or termination of
this Agreement, Licensee shall retain ownership of the telephone numbers associated
with the data lines but shall immediately notify the telephone company to terminate
service on the data lines at each Licensed Business location.
	 
	 	 	 	     Licensee has implemented an internal policy to establish the number of
telephone lines required in a tax office based upon the number of returns prepared
in that office in the prior Tax Season. Company agrees to make telephone service
available based upon Licensee’s policy, which is as follows:

	 	 	 
	Number of Tax Returns	 	Number of Lines Needed
	Less than 750

	 	1 main listed line
	 
	 	 
	751 – 1,500

	 	1 main listed line, 1 hunting line
	 
	 	 
	1,501 – 2,250

	 	1 main listed line, 2 hunting lines
	 
	 	 
	2,251 – 3,000

	 	1 main listed line, 3 hunting lines
	 
	 	 
	3, 000 and over

	 	1 main listed line, 3 or more hunting lines

	 	6.11	 	Telephone Numbers. All telephone numbers that Licensee uses in the
Licensed Business are Company’s property and Licensee shall keep those numbers separate
from phone numbers that it uses in its other business operations. Upon expiration or
termination of this Agreement, Licensee shall immediately stop using such numbers and
shall transfer the numbers to Company (or Company’s designee), and Licensee shall
immediately inform the telephone company of the transfer.
	 
	 	6.12	 	Telephone Directory Listings. Licensee shall obtain Company’s approval
before placing any telephone directory listings for the Licensed Business, whether in
the white pages, yellow pages or electronic media, except for listings consisting only
of the Licensed Business Name and its address at the Designated Company Store.
	 
	 	6.13	 	Access to Licensed Business Area. Licensee may access the Licensed
Business area whenever the Designated Company Store is open to customers for business
and at other reasonable times as the Designated Company Store’s General

22

 

	 	 	 	Manager approves. Licensee shall give Company keys to the Licensed Business Area.
Company may access the Licensed Business for legitimate business purposes at any
time following reasonable notice to Licensee and so as to minimize interference with
Licensee’s Licensed Business, except in the case of an emergency.
	 
	 	6.14	 	Effect of Store Leases. If any Designated Company Store is leased to
Company or is the subject of an easement agreement, this Agreement is subject to all of
the terms and conditions of such lease or easement agreement. If any such lease
terminates by expiration of time or otherwise, this Agreement will immediately
terminate with respect to the Licensed Business area, without liability for damages as
a result of such termination.
	 
	 	6.15	 	Waiver of Property Damages. Licensee waives all claims that it may
have or acquire against Company and any other person or entity operating a Designated
Company Store for any property damage occurring at the Designated Company Stores that
results from any of the following:

	 	(a)	 	the actual or alleged negligence, act or omission of any
tenant, licensee or occupant of the premises at which the Licensed Business is
located;
	 
	 	(b)	 	any damage caused by any casualty from any cause whatsoever,
including smoke, fire, water, snow, steam, gas or odors in or from any
Designated Company Store or its premises except to the extent caused by
Company’s negligence;
	 
	 	(c)	 	the leaking of any plumbing, or because of any accident or
event which may occur in any Designated Company Store or on its premises,
except to the extent caused by Company’s negligence;
	 
	 	(d)	 	the actual or alleged acts or omission of any janitors or other
person in or about any Designated Company Store or on its premises, except to
the extent caused by Company’s negligence; or
	 
	 	(e)	 	from any other such cause whatsoever, except for damage caused
by Company or such other operating entity’s negligence.

	7.	 	PUBLIC COMMUNICATIONS

	 	7.1	 	Licensee Advertising. Licensee shall advertise and actively promote
the Licensed Business. Licensee shall at all times adhere to Company Licensed Business
Marketing Manual provided to Licensee, as it may be updated from time to time
(“Marketing Manual”). Prior to use in connection with the Licensed Business,
Licensee shall submit to Company (a) all signs and advertising copy (including sales
brochures, telemarketing scripts, newspaper advertisements, radio and television
commercials, and internet advertising), and (b) all promotional plans and devices
(including coupons, contests, events and giveaways). Licensee shall

23

 

	 	 	 	not use any such advertising material, promotional plan or device without the prior
written approval of Company. Company has the right, in its sole discretion, to
disapprove or require modification of any and all such advertising forms and other
materials containing Company’s Marks. The parties acknowledge that Licensee shall
be permitted to use any ads or materials which do not contain Company’s Marks in its
sole discretion, except that Licensee shall not use or distribute in the Licensed
Business any ads or materials that disparage Company or its services or products, or
that promote Company’s competitors. Company shall have the right to audit at its
expense, Licensee’s advertising and promotional materials and practices at any time
to assess Licensee’s compliance with this Agreement, the Marketing Manual and
applicable legal requirements. Any unauthorized use of the Company Marks by
Licensee, including the unauthorized use by Licensee of any Company Marks as part of
an electronic address, domain name, web site or search engine, shall constitute a
breach of this Agreement and an infringement of the rights of Company in and to the
Company Marks.
	 
	 	 	 	     During the period from December 1 through April 15 of each year during the
Term, Licensee shall engage in Company Advertisements. Specifically, Licensee shall
air Company Advertisements (i) designed to reach [***] or (ii) equal to [***] .
Licensee’s goals for [***] (referenced in (i) above) will be based on the number of
Designated Company Stores with Licensed Business offices each Tax Season, as
follows:

	 	 	 	 	 
	0-599 stores:
	 	 	0	 
	600 - 649 stores:
	 	 	750	 
	650 – 714 stores:
	 	 	1,000	 
	715 + stores:
	 	 	1,200	 

	 	 	 	All costs relative to advertisements will be borne by Licensee. To the extent
complete, before the start of each Tax Season, Licensee shall provide Company with
its marketing and advertising plan (including scheduling, time slots, programs, and
advertisement varieties) for the Tax Season, including the use of Sears taglines.
	 
	 	 	 	Licensee agrees that at Company’s request and at Company’s expense it will at least
once each year undertake a direct mail campaign to customers of the Licensed
Business during the prior Tax Season to encourage such customers to return to the
Licensed Business for personal tax preparation during the pending Tax Season.
Company shall notify Licensee not later than September 1 of its request to undertake
the direct mail campaign. The direct mail campaign shall be mailed to customers
[***] . Licensee may, but shall not be required to, offer such customers a discount
or other promotional offer to such customers as a part of the direct mail campaign.
Licensee shall not be obligated to include in such direct mail campaign any customer
who engaged Licensee at any Company Store in which Licensee will not operate for any
reason during the pending Tax Season. Further, Licensee will not knowingly directly
or through a third party contact any

24

 

	 	 	 	customer of the Licensed Business for the purpose of directing such customer to one
of Licensee’s offices not in a Company Store, unless such customer was a customer of
a Company Store in which Licensee will not operate for any reason during the pending
Tax Season. Licensee shall cross-check each list used for direct mailings against
its list of customers of the Licensed Business, to prevent such prohibited contacts.
Licensee shall also send out an internal message to all its field district managers
each year during the Term to remind them of the prohibition against contacting a
customer of the Licensee Business to direct them to one of Licensee’s offices.
Company acknowledges that unsolicited customer migration between Company Stores and
Licensee’s other offices occurs and is not a violation of this Section 7.1.
	 
	 	7.2	 	Other Publicity. Neither party shall issue any publicity or press
release involving or affecting the other party or the Licensed Business, without the
other party’s prior consent, except as required by law. Neither party shall refer to
this Agreement, the Licensed Business or the other party in any prospectus, annual
report or other filing except to the extent required by Federal or state law or by the
U.S. Securities and Exchange Commission. Licensee shall always follow Company’s
written policies in the Marketing Manual regarding interacting with the media.
	 
	 	7.3	 	Forms. At Company’s request at any time Licensee will provide Company
copies of any or all Forms used in the Licensed Business. Licensee and Company shall
discuss any reasonable business request by Company to modify such Forms within 30 days
after receiving Company’s written request for such modifications. Licensee shall be
solely responsible for the adequacy of such Forms and Company shall have no liability
for any suggested changes proposed by Company which Licensee in its sole discretion
adopts. Company acknowledges that the Forms constitute Licensee’s confidential business
information, and Company agrees that it will not disclose the Forms to any third party
or use for its own benefit or permit others to use any such materials and that it will
return such materials to Licensee immediately upon request.

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	8.	 	LICENSED BUSINESS EQUIPMENT

	 	8.1	 	Licensee’s Equipment. At its own expense, Licensee shall install all
Licensee’s Equipment. Licensee’s Equipment, and its size, design and location, is at
all times subject to Company’s approval.
	 
	 	8.2	 	Licensee-Provided POS Terminal. At its expense, Licensee shall furnish
a Licensee POS Terminal for use in the Licensed Business to accept the Sears Card and
other forms of payment through a third party processor selected by Licensee. Licensee
shall pay for all equipment, including any necessary peripheral equipment (e.g.
terminals, modems and printers) required and for all installation and phone line
charges for such terminal.

	9.	 	TRANSACTIONS AND SETTLEMENT

	 	9.1	 	Check Cashing.

	 	(a)	 	Company may, for a fee to the customer, cash refund
anticipation loan checks and refund anticipation checks bearing the H&R Block
name issued by participating banks. Licensee will post signs in participating
locations disclosing the availability of check cashing services at
participating Company stores. Prior to cashing any such check, Company will
call the number set forth on Schedule 9.1(a) each time. Company shall
not advertise by name check cashing of any competing tax preparation firm’s
checks in Designated Company Stores.
	 
	 	(b)	 	In addition to the posting of signs in participating locations
referred to above, brochures advising taxpayers that refund anticipation loan
checks and refund anticipation checks may be cashed at and by participating
Company locations may be included in the forms packet given by Licensee to each
customer. In response to specific inquiries made by Licensee clients who have
received refund anticipation loan checks or refund anticipation checks,
Licensee will advise such clients that Company offers a check cashing service
accepting refund anticipation loan checks and refund anticipation checks.
	 
	 	(c)	 	Company shall be solely responsible for compliance with any
licensing requirements and regulations that may apply to check cashing
services.
	 
	 	(d)	 	Licensee agrees to review annually with Company those losses,
if any, sustained by Company due to forged or unauthorized endorsements on
refund anticipation loan checks and/or refund anticipation checks. In
addition, Licensee shall notify Company promptly, in the manner set forth
herein, in the event that Licensee experiences any theft, misappropriation or
loss of any type of refund anticipation check and/or refund anticipation check
(a “Fraud Event”). Licensee shall send written notice to Company of
any Fraud Event (“Notice of Fraud”), which shall set forth the specifics of the
Fraud Event. Such Notice of Fraud shall be sent either via facsimile

26

 

	 	 	 	 or email to the individuals identified by Company prior to the start of each
Tax Season.
	 
	 	(e)	 	Notwithstanding anything to the contrary in this Agreement,
Licensee shall indemnify, hold harmless and reimburse Company promptly for all
refund checks paid out by Company that are the subject of any Fraud Event;
provided, however, that Licensee shall not be obligated to reimburse Company
for checks cashed by Company (i) if Company did not verify the check as
provided in Section 9.1(a) or (ii) more than 24 hours after receipt of
the written Notice of Fraud by Company. Company agrees that Company will not
seek recovery related to any Fraud Event from banks participating in Licensee’s
electronic refund and refund anticipation loan programs.
	 
	 	(f)	 	Notwithstanding any obligation of Licensee set forth in
Section 9.1(a), 9.1(b) or otherwise in this Agreement, Licensee
shall not be required to promote the check cashing services of Company in any
location where the following conditions have been met:

	 	(i)	 	Licensee notifies the Company Director of
Business Development in writing that Licensee reasonably believes that
the Check Cashing Fee charged by Company is not competitive with fees
charged by other commercial check cashing services available in the
community served by the Designated Company Store and such belief is
based upon a benchmarking survey conducted by Licensee of at least
three commercial entities that provide a reasonable representation of
check cashing fees charged in the local geographic area; and
	 
	 	(ii)	 	Within five business days from receipt of the
notice by the Store Manager, Company does not change its fee to such
amount as Licensee reasonably believes is competitive with fees charged
by other commercial check cashing services available in the community
served by the Company store.

	 	 	 	      In the event that Licensee ceases promotion of Company check cashing services
pursuant to this Section 9.1, Company shall have the right to post its own
signage regarding the check cashing services provided by Company.
	 
	 	9.2	 	Charge Cards.

	 	(a)	 	Sears Card. Subject to the terms and conditions
outlined on Schedule 9.2A (the “Citibank Merchant Agreement”),
which is attached hereto and incorporated herein, Licensee shall accept the
SearsCard®, Sears Premier Card®, SearsCharge PlusSM, Sears
MasterCard®, Sears Gold MasterCard®, Sears Premier Gold MasterCard® and The
Great Indoors® Gold MasterCard® or any future Sears-branded private label
charge card (each, a “Sears Card”) issued by any bank authorized by
Company to bear the Sears name or a Company affiliate’s name for payment for
Authorized

27

 

	 	 	 	Services. Licensee shall submit all Sears Card transactions processed
through Company’s POS system (and Company’s credit card processor) to
Company, in the manner that Company designates, for settlement with the
issuing bank, under the terms of Schedule 9.2A.
	 
	 	(b)	 	Third Party Credit Cards. Licensee may, in its sole
discretion, also accept credit cards other than Sears Cards (such cards that
Licensee accepts hereinafter referred to as “Third Party Cards”).
Licensee is responsible for all interchange fees due and owing on all Third
Party Card transactions. Licensee shall process all Third Party Card
transactions through Licensee’s POS system, and submit all Third Party Card
charges to Licensee’s credit card processor for settlement with the issuing
bank, under Licensee’s separate Merchant Agreement with the issuing bank. All
losses sustained by Licensee as a result of any non-payment by a Third Party
Card cardholder or chargeback by an issuer of a Third Party Card account shall
be borne solely by Licensee.
	 
	 	(c)	 	Transactions. Subject to all of the terms and
conditions of this Agreement, including Company’s rights under Section
9.7, Company shall pay all sums due Licensee on each sale of Authorized
Services made by Licensee to a cardholder that is charged to a Sears Card or
Third Party Card account (each a “Credit Card Sale”) in accordance with
Section 9.3. Licensee hereby grants Company the right to accept
payments and settlements by issuers for each Credit Card Sale that is processed
through Company’s credit card processor on Licensee’s behalf, as appropriate.
Licensee shall accept the Sears Card and Third Party Cards at all Licensed
Business locations authorized under this Agreement for the purchase of
Authorized Services, and shall require those transactions to be in United
States dollars. Licensee shall not discourage or attempt to suppress or
discriminate against the use of any Third Party Card or the Sears Card by any
person whose name is on the card or any other authorized user of such card.
Licensee may not directly or indirectly distribute or solicit any customer
applications or referrals for any Third Party Cards in or through the Licensed
Business.

	 	9.3	 	Settlement. A settlement between the parties will be made monthly for
all Licensed Business transactions during such period, in accordance with Company’s
customary accounting procedures. For Licensed Business transactions that are processed
with a Sears Card through Company’s POS system, Company will make payments weekly for
receipts processed in the prior week period. The month-end settlement will include the
weekly payment for Sears Card transactions in the last week of the fiscal month, along
with other month-end deductions and reconciliations. Company shall use good faith
efforts to move toward reporting (in addition to paying) on a weekly basis Licensee’s
transactions processed with a Sears Card through Company’s POS system.
	 
	 	9.4	 	Licensee Reports. At Company’s request, Licensee shall provide Company

28

 

	 	 	 	reports of sales by the Licensed Business and Company Fees paid, together with any
other information Company may reasonably require, in the manner and form reasonably
requested by Company (so long as such format is necessary and not overly burdensome
to Licensee) and prepared in accordance with generally accepted accounting
principles, excluding, however, Licensee Customer Information that cannot lawfully
be disclosed. If requested by Company, Licensee shall provide a copy of Licensee’s
parent company’s Annual Report or Form 10-K, or if that is not available, Licensee’s
other annual financial report audited by a Certified Public Accountant, including
consolidated Income Statement and Balance Sheet. Company shall not disclose to any
third parties any such information that is not available to the public without
Licensee’s prior written consent. Licensee’s preliminary reporting will include
weekly returns by store and bi-weekly (once every two weeks) reports of New Clients
by store; however, the parties acknowledge that final reports may vary slightly
based on end of season reporting information.
	 
	 	9.5	 	Company Audit Rights. Licensee shall keep and maintain, in accordance
with generally accepted accounting principles, books and records that accurately
reflect the Gross Sales and Net Sales of the Licensed Business, the expenses that
Licensee incurs in performing under this Agreement and payment of Company Fees Company
may at any reasonable time audit such books and records at its expense (subject to
Section 9.6(b)). Licensee shall, at its expense, make all such books and
records available for Company’s audit. Licensee shall not invoice Company for
Licensee’s labor costs associated with such audit. In the event Company receives
information providing reasonable cause for inquiry to whether Licensee has migrated
customers in violation of Section 7.1,, Company may audit Licensee’s records
related to its direct mail marketing programs for the sole purpose of verifying
compliance with Licensee’s obligation not to directly and knowingly migrate customers
as set forth in Section 7.1, but only to the extent mutually agreed by both
parties to be permissible by applicable laws and regulations and not more than once per
fiscal year. If Company cannot access information that is necessary for the audit due
to legal restrictions on disclosure of such information, yet such information can be
legally disclosed to a qualified third party, then Company may use the services of such
a qualified third party, selected by mutual agreement of the parties, to perform those
audit activities, and Company shall bear all of that third party’s fees and expenses.
Each determination in this Section 9.5 of whether Licensee is legally permitted to
disclose information will be made by mutual agreement.
	 
	 	9.6	 	Licensee Underreporting. If an audit reveals that Gross Sales were
under-reported by more than three percent of the total Gross Sales reported by
Licensee, then Licensee shall reimburse Company for all costs incurred in performing
such audit, and Licensee shall, at its option:

	 	(a)	 	pay:

29

 

	 	(i)	 	Company Fees on all estimated unreported Gross
Sales for each year, as calculated by annualizing the rate by which
Gross Sales were under-reported in the audit sample, and
	 
	 	(ii)	 	an administrative fee calculated by multiplying
the annualized underpaid Company Fees by the percentage of
under-reported Gross Sales; or

	 	(b)	 	pay:

	 	(i)	 	for a complete audit by Company or its designee
of Licensee’s books and records relating to Gross Sales for the audit
sample year and any other years under this Agreement,
	 
	 	(ii)	 	Company Fees on all actual unreported Gross
Sales as revealed through the audit, and
	 
	 	(iii)	 	an administrative fee for each year audited,
calculated by multiplying the amount of unpaid Company Fees for such
year by the percentage by which Gross Sales were under-reported in the
audit sample year.

	 	 	 	      If an audit reveals under-reported Gross Sales, Licensee’s sales will be
subject to a subsequent audit (at Licensee’s expense) approximately one year after
the initial audit. If the subsequent audit reveals that Gross Sales were
under-reported by more than three percent of reported Gross Sales, Licensee shall
pay Company Fees on such Gross Sales as per the above except that, due to the
increased expenses incurred by Company in continuing to monitor Licensee’s future
sales reports, the administrative fee will be doubled.
	 
	 	 	 	      All under-reported sales equal to or less than three percent of reported Gross
Sales will be reimbursed to Company, as appropriate, based on the actual amounts of
such under-reports. Further, Company may also collect from Licensee interest on all
unpaid Company Fees for the period from the close of the year in which the
corresponding sales were made until the date of payment of such Company Fees.
Interest will be at the prime rate (as published in the Wall Street Journal as of
the date of the completion of the audit) plus two percent. This Section 9.6 will
survive termination or expiration of this Agreement.
	 
	 	9.7	 	Company Rights of Recoupment and Setoff. Company may setoff against
any payments due Licensee under this Agreement any liability or obligation that
Licensee may have to Company. Licensee must object to such setoff in writing within 15
days of written notice of Company’s setoff. Licensee shall pay Company any Licensee
liabilities or obligations that remain unpaid after Company’s setoff promptly upon
demand. This Section 9.7 will survive expiration or termination of this
Agreement.

30

 

	10.	 	CONFIDENTIALITY; CUSTOMER INFORMATION

	 	10.1	 	Confidential Business Information.

	 	(a)	 	Company Confidential Business Information. All Company
Confidential Business Information is the sole property of Company. Licensee
will claim no rights in any Company Confidential Business Information. Nothing
in this Agreement bars Company from preventing any misappropriation of any
Company Confidential Business Information, including by Licensee.
	 
	 	(b)	 	Licensee Confidential Business Information. All
Licensee Confidential Business Information is the sole property of Licensee.
Company shall claim no rights in any Licensee Confidential Business
Information. Nothing in this Agreement bars Licensee from preventing any
misappropriation of any Licensee Confidential Business Information, including
by Company.

	 	10.2	 	Confidential Treatment and Use Restrictions. Company Confidential
Business Information and Licensee Confidential Business Information are referred to
collectively as “Proprietary Information”. The party receiving Proprietary
Information (the “Recipient”) from the other party (the “Disclosing
Party”) shall hold the Proprietary Information of the Disclosing Party in utmost
confidence and shall not disclose it to any third party. Proprietary Information may
be disclosed only to Representatives of the Recipient who have a need to know that
Proprietary Information for performing their duties in connection with this Agreement.
The Recipient shall use and reproduce such Proprietary Information only as necessary
for performing its obligations under this Agreement. But Proprietary Information is
not subject to confidential treatment if it:

	 	(a)	 	is known by the Recipient, before the first disclosure by the
Disclosing Party, without any obligation to hold it in confidence;
	 
	 	(b)	 	is or becomes available to the public without breach of this
Section 10; or
	 
	 	(c)	 	is independently developed by the Recipient without use of the
Disclosing Party’s Proprietary Information.

	 	 	 	      If, in the reasonable opinion of its legal counsel, a Recipient is required to
disclose any Proprietary Information of the Disclosing Party in response to a valid
subpoena or order of a court or other government agency of competent jurisdiction or
other valid legal process, the Recipient shall notify the Disclosing Party in
writing a reasonable time prior to each disclosure and shall use reasonable efforts
to cooperate with the Disclosing Party to enable it to obtain an appropriate
protective order or other restrictions on disclosure.
	 
	 	10.3	 	Licensee Customer Information. Licensee Customer Information is
confidential and owned exclusively by Licensee. Licensee shall use and protect
Licensee

31

 

	 	 	 	Customer Information in accordance with Licensee’s privacy policies and applicable
law. Licensee shall not disclose any Licensee Customer Information to Company,
except as permitted by law. In the event of any inadvertent receipt of Licensee
Customer Information by Company under this Agreement, Company shall immediately
return such information to Licensee.
	 
	 	10.4	 	Company Customer Information. Company Customer Information is
confidential and owned exclusively by Company or Citibank (or any other bank issuing a
Sears-branded credit card). Company shall use and protect Company Customer Information
in accordance with Company’s privacy policies and applicable law. Company shall not
disclose any Company Customer Information to Licensee except as permitted by law. In
the event of any inadvertent receipt of Company Customer Information by Licensee under
this Agreement, Licensee shall immediately return such information to Company.
	 
	 	10.5	 	Equitable Relief. In addition to any other rights either party may
have under this Agreement or in law, since unauthorized use, access, or disclosure of
the Proprietary Information may result in immediate and irreparable injury to the other
party for which monetary damages may not be adequate, if either party or any their
officers, directors, employees, agents or subcontractors uses or discloses or in the
other party’s sole opinion, any such party is likely to use or disclose the Proprietary
Information in breach of such party’s obligations under this Agreement or, in one
party’s sole opinion there has been a breach to the security, confidentiality, or
integrity of the Proprietary Information, the other party will be entitled to equitable
relief, including temporary and permanent injunctive relief and specific performance.
The affected party will also be entitled to recover any pecuniary gain realized by the
other party from the unauthorized use or disclosure of the Proprietary Information.
	 
	 	10.6	 	Post-Termination Obligation. This Section 10 will survive the
expiration or termination of this Agreement.

	11.	 	RELATIONSHIP OF PARTIES.
	 
	 	 	      Licensee is an independent contractor. Neither this Agreement nor the parties’ actions
under this Agreement will be construed as creating a partnership, agency or joint venture;
and neither party will become bound by any representation, act or omission of the other
party. Licensee shall not file suit using name of any Company entity.
	 
	12.	 	DEFENSE AND INDEMNITY

	 	12.1	 	Defense.

	 	(a)	 	Licensee’s Defense Obligations. Licensee shall defend,
at its own expense, all allegations of whatever nature asserted in any third
party claim, action, lawsuit or proceeding (even though such allegations may be
false, fraudulent or groundless) against Company, its affiliates and
subsidiaries and/or their respective directors, officers, employees, agents and
independent contractors (collectively, the “Company Indemnified

32

 

	 	 	 	Parties”) actually or allegedly resulting from, arising out of,
connected with or incidental to the establishment, construction or operation
of the Licensed Business, errors in tax preparation services, breach of
clients’ fiduciary duty, or violations of laws or applicable professional
standards, expressly and specifically including any of the following:
unauthorized representation, misrepresentation, claims for benefits under
any workers’ compensation law, injury to or death of persons, unlawful
trade practices, the infringement, misuse, dilution, misappropriation, or
other violation of any patent, trademark, service mark, trade name, trade
dress, copyright, trade secret, domain name, right of publicity or other
intellectual property right, damage to property allegedly or actually
suffered by any person or persons, or the commission or omission of any act,
lawful or unlawful, by Licensee, its affiliates and subsidiaries and/or
their respective directors, officers, employees, agents or independent
contractors, whether or not such act is within the scope of the authority or
employment of such persons and whether or not Licensee’s indemnity
obligations under Section 12.2 apply (collectively, the “Company
Claims”).
	 
	 	 	 	      Licensee shall use counsel satisfactory to Company in the defense of
all Company Claims. Company may, at its election, take control of the
defense and investigation of any Company Claims and may employ and engage
attorneys of its own choice to manage and defend such Company Claims, at
Company’s risk and expense. If Licensee negotiates a settlement of any such
Company Claim, such settlement shall be subject to Company’s prior written
approval.
	 
	 	(b)	 	Company’s Defense Obligations. Company shall defend,
at its own expense, all allegations of whatever nature asserted in any third
party claim, action, lawsuit or proceeding (even though such allegations may be
false, fraudulent or groundless) against Licensee, its affiliates and
subsidiaries and/or their respective directors, officers, employees, agents and
independent contractors (collectively, the “Licensee Indemnified
Parties”) actually or allegedly resulting from, arising out of, connected
with or incidental to the operation of a Designated Company Store or violations
of laws expressly and specifically including any of the following: unauthorized
representation, misrepresentation, injury to or death of persons, unlawful
trade practices, the infringement, misuse, dilution, misappropriation, or other
violation of any patent, trademark, service mark, trade name, trade dress,
copyright, trade secret, domain name, right of publicity or other intellectual
property right, damage to property allegedly or actually suffered by any person
or persons, or the commission or omission of any act, lawful or unlawful, by
Company, its affiliates and subsidiaries and/or their respective directors,
officers, employees, agents or independent contractors, whether or not such act
is within the scope of the authority or employment of such persons and whether
or not Company’s indemnity obligations under Section 12.2 apply
(collectively, the “Licensee Claims”).

33

 

	 	 	 	      Company shall use counsel satisfactory to Licensee in the defense of
all Licensee Claims. Licensee may, at its election, take control of the
defense and investigation of any Licensee Claims and may employ and engage
attorneys of its own choice to manage and defend such Licensee Claims, at
Licensee’s risk and expense. If Company negotiates a settlement of any such
Licensee Claim, such settlement shall be subject to Licensee’s prior written
approval.

	 	12.2	 	Indemnity.

	 	(a)	 	Licensee’s Indemnity Obligations. Licensee shall hold
harmless and indemnify the Company Indemnified Parties from and against any and
all claims, damages, demands, actions, lawsuits, proceedings, liabilities,
losses, costs and expenses (including fees and disbursements of counsel)
resulting from, arising out of, connected with or incidental to the
establishment, construction or operation of the Licensed Business, expressly
and specifically including any of the following: unauthorized representation,
misrepresentation, claims for benefits under any workers’ compensation law,
injury to or death of persons, unlawful trade practices, the infringement,
misuse, dilution, misappropriation, or other violation of any patent,
trademark, service mark, trade name, trade dress, copyright, trade secret,
domain name, right of publicity or other intellectual property right, damage to
property allegedly or actually suffered by any person or persons, or the
commission or omission of any act, lawful or unlawful, by Licensee, its
affiliates and subsidiaries and/or their respective directors, officers,
employees, agents or independent contractors, whether or not such act is within
the scope of the authority or employment of such persons. The provisions of
this Section 12.2 shall not apply to the extent any injury or damage is
determined to have been caused solely by Company’s gross negligence or willful
misconduct.
	 
	 	 	 	      Licensee agrees to protect, defend, hold harmless and indemnify Company
from and against any and all claims, demands, damages, expenses (including
reasonable attorney’s fees), losses, actions, causes of action, judgments,
fines, penalties, fees, suits and proceedings of any kind whatsoever
actually or allegedly resulting from or connected with any dispute between
Licensee and its franchise operators in connection with the conduct and
operation of said Licensed Business hereunder or arising out of agreements
between Licensee and such franchise operators. Notwithstanding anything
contained in the foregoing, Licensee shall not be required to indemnify
Company for any claims, demands, damages, expenses (including attorney’s
fees), losses, actions, causes of action, judgments, fines, penalties, fees,
suits and proceedings which are caused by the gross negligence of Company,
its agents or employees.
	 
	 	(b)	 	Company’s Indemnity Obligations. Company shall hold
harmless and indemnify the Licensee Indemnified Parties from and against any
and all claims, damages, demands, actions, lawsuits, proceedings, liabilities,

34

 

	 	 	 	losses, costs and expenses (including fees and disbursements of counsel)
resulting from, arising out of, connected with or incidental to the
establishment, construction or operation of a Designated Company Store,
expressly and specifically including any of the following: unauthorized
representation, misrepresentation, injury to or death of persons, unlawful
trade practices, the infringement, misuse, dilution, misappropriation, or
other violation of any patent, trademark, service mark, trade name, trade
dress, copyright, trade secret, domain name, right of publicity or other
intellectual property right, damage to property allegedly or actually
suffered by any person or persons, or the commission or omission of any act,
lawful or unlawful, by Company, its affiliates and subsidiaries and/or their
respective directors, officers, employees, agents or independent
contractors, whether or not such act is within the scope of the authority or
employment of such persons. The provisions of this Section 12.2
shall not apply to the extent any injury or damage is determined to have
been caused solely by Licensee’s gross negligence or willful misconduct.

	 	12.3	 	Survival. This Section 12 will survive the expiration or
termination of this Agreement.

	13.	 	INSURANCE

	 	13.1	 	Types of Insurance. Licensee shall carry the following insurance:

	 	(a)	 	Commercial General Liability, including premises/operations,
contractual, personal and advertising injury, and products/completed operations
liabilities, with limits of at least $3,000,000 per occurrence for bodily
injury and property damage combined. Company’s entities and associates must be
named as additional insureds. Licensee may satisfy the limits of liability
requirements by a combination of Commercial General Liability and Umbrella
Excess Liability policies.
	 
	 	(b)	 	Business Automobile Liability insurance for owned, non-owned
and hired vehicles, with limits of at least $1,000,000 per occurrence for
bodily injury and property damage combined, if Licensee uses automobiles in the
operation of the Licensed Business. If no vehicles are owned or leased, then
Licensee may extend its Commercial General Liability insurance to provide
insurance for non-owned and hired automobiles. Licensee may satisfy the limits
of liability requirements by a combination of Business Automobile Liability and
Umbrella Excess Liability policies.
	 
	 	(c)	 	Workers’ Compensation insurance, including coverage for all
costs, benefits, and liabilities under Workers’ Compensation and similar laws,
for all states in which the Licensed Business is located, and Employer’s
Liability insurance with limits of liability of at least $100,000 per accident
or disease and $500,000 aggregate by disease. Such insurance must contain a
waiver of subrogation in favor of Company where permitted by law. Licensee
warrants that if its Franchisees hire any employees or uninsured independent
contractors at any time during the Term,

35

 

	 	 	 	Franchisees will carry Workers’ Compensation and Employer’s Liability
insurance, and Licensee shall indemnify Company for any loss, cost,
liability, expense or damage suffered by Company as a result of any
Franchisees’ failure to maintain such insurance.
	 
	 	(d)	 	“All Risk” Property Insurance on Licensee’s and Franchisee’s
furniture, fixtures and merchandise in the Designated Company Stores, including
perils generally covered on a “Cause of Loss – Special Form”, including fire,
extended coverage, windstorm, vandalism, malicious mischief, sprinkler leakage,
water damage, and accidental collapse and flood, at not less than 90% of the
full replacement cost, including a waiver of subrogation in favor of Company.
	 
	 	(e)	 	Errors and Omissions or Professional Liability insurance, with
limits of at least $3,000,000 aggregate per policy year .
	 
	 	(f)	 	Bailee’s insurance for customer property in Licensee’s care,
custody or control, in an amount equal to the maximum value, at any one time,
of such property.
	 
	 	(g)	 	Licensee shall carry its insurance with companies rated A-/VII
or better in the current Best’s Insurance Reports published by A.M. Best
Company.
	 
	 	(h)	 	Company consents to Licensee self-insuring certain risks as
stated in the Self-Insurance Addendum attached to this Agreement, contingent
upon Licensee’s continuing cooperation with and satisfaction of, Company’s
self-insuring guidelines, unless and until Company revokes this consent, which
it may do at any time in its sole discretion. As part of Licensee’s cooperation
with Company’s self-insuring guidelines, Licensee shall provide financial
information as reasonable requested from time to time by Company’s Risk
Management Department in support of its self-insurance position.
	 
	 	(i)	 	For each of Licensee’s policies for which Company is an
additional insured (by endorsement, terms of policy, or otherwise), Licensee’s
coverage is primary to any valid and collectible insurance of Company. Licensee
warrants that its franchisees and other contractors performing in connection
with the Licensed Business will carry the insurance described in Sec. 13.1(a)
through (f), inclusive, and Licensee shall indemnify Company for any loss,
cost, liability, expense or damage suffered by Company as a result of any
Franchisee’s or contractor’s failure to maintain such insurance.

	 	13.2	 	No Cancellation Without Notice. Licensee’s policies of insurance will
provide that they will not be canceled or materially changed without at least 30 days’
prior written notice to Company, Certificate Management Services, c/o Insurance Data
Services, P.O. Box 12010, Hemet, California 92546, or other address notified by
Company.

36

 

	 	13.3	 	Certificates. Licensee shall furnish Company with certificates of
insurance before execution of this Agreement and upon each policy renewal during the
Term. If Licensee does not provide Company with such certificates of insurance,
Company will so advise Licensee, and if Licensee does not furnish evidence of
acceptable coverage within five days, Company may immediately terminate this Agreement.
	 
	 	13.4	 	Expiration/Non-Renewal. Licensee shall promptly notify Company if any
of Licensee’s insurance policies expire, are canceled, or are materially modified
during the Term. If Licensee’s insurance policies are materially modified such that,
in Company’s opinion, those policies do not afford adequate protection to Company,
Company will so advise Licensee. If Licensee does not furnish evidence of acceptable
replacement coverage within 30 days after the expiration or cancellation of coverage or
Company’s notification that modified policies are not sufficient, Company shall may
immediately terminate this Agreement.
	 
	 	13.5	 	No Waiver. Company’s approval of any of Licensee’s insurance coverage
will not relieve Licensee of any responsibility under this Agreement, including
liability for claims in excess of described limits or liabilities and any costs or
injuries not covered by such insurance.

	14.	 	TERMINATION

	 	14.1	 	Termination of Store Locations. Neither party shall terminate a
Designated Company Store location without cause during the Tax Season. Termination
without cause of Designated Company Store locations outside of the Tax Season shall be
addressed as part of the annual August 1 mutually agreed listing of Designated Company
Store locations.
	 
	 	14.2	 	Termination by Company on Notice. Company may terminate this Agreement
effective upon written notice to Licensee if any of the following defaults occurs:

	 	(a)	 	Licensee has experienced a Change in Control to which Company
has not consented;
	 
	 	(b)	 	a petition is filed either by or against Licensee in any
bankruptcy or insolvency proceeding, or any property of Licensee passes into
the hands of any receiver, assignee, officer of the law or creditor;
	 
	 	(c)	 	Licensee materially misuses or makes a material unauthorized
use of any Company Mark;
	 
	 	(d)	 	Licensee makes any unauthorized use, duplication or disclosure
of Confidential Business Information or Customer Information.

	 	 	 	      Company may also terminate any Licensed Business location effective upon
delivery of written notice to Licensee if Licensee abandons, fails to actively
operate or fails to commence operation of the License Business at a Designated
Company Store as required by Section 6.6.

37

 

	 	14.3	 	Termination by Licensee on Notice. Licensee may terminate this
Agreement effective upon written notice to Company if any of the following defaults
occurs:

	 	(a)	 	Company has experienced a Change in Control to which Licensee
has not consented;
	 
	 	(b)	 	a petition is filed either by or against Company in any
bankruptcy or insolvency proceeding, or any property of Company passes into the
hands of any receiver, assignee, officer of the law or creditor;
	 
	 	(c)	 	Company materially misuses or makes a material unauthorized use
of any Licensee Mark; or
	 
	 	(d)	 	Company makes any unauthorized use, duplication or disclosure
of Confidential Business Information or Customer Information.

	 	14.4	 	Termination After Opportunity to Cure. Either party may terminate
this Agreement or any affected location of the Licensed Business immediately upon
giving written notice to the other party if such party:

	 	(a)	 	fails to pay any Company Fees or any other amounts due Company,
and does not correct that failure within ten days after receipt of written
notice of the failure;
	 
	 	(b)	 	fails to comply with any other provision of this Agreement or
any mandatory specification, standard or operating procedures prescribed by
Company and does not correct such failure within 30 days after receipt of
written notice of the failure;
	 
	 	(c)	 	fails to carry insurance coverage as required in Section
13 and does not correct such failure (with no gap in coverage) within ten
days after receipt of written notice of such failure.

	 	14.5	 	Termination on Store Closing or Casualty. Company may, in its sole
discretion, terminate this Agreement as to any affected Licensed Business location due
to the closing of the Designated Company Store. Licensee is not entitled to any notice
of such store closing before a public announcement of the closing. Licensee waives any
claim against Company for damages, if any, resulting from the closing. If Company
rebrands a Designated Company Store from a Sears brand, Licensee shall have the option,
but not the obligation to continue to operate the Licensed Business in such location.
Licensee must exercise its option within 14 days of written notice from Company of the
rebranding of the store, or its option is lost forever.
	 
	 	 	 	      If any Designated Company Store is damaged by fire or any other casualty that
renders the Licensed Business area untenantable, either party may terminate this
Agreement as to that Licensed Business location, without penalty and without
liability for any damages as a result of such termination, effective as of the date
of the casualty, by giving written notice of termination within 20 days after the
casualty. If such notice is not given, then this Agreement will not terminate, but

38

 

	 	 	 	will remain in full force and effect and the parties shall cooperate with each other
so that Licensee can resume operating the Licensed Business as soon as possible.
	 
	 	14.6	 	Effect of Termination. Upon expiration or termination of this Agreement,

	 	(a)	 	each party shall pay all amounts owed to the other party in
accordance with the terms of this Agreement;
	 
	 	(b)	 	each party shall cease use of all Marks and Proprietary
Information of the other party;
	 
	 	(c)	 	License shall, in accordance with the terms of this Agreement,
remove all of Licensee’s Equipment from Company’s premises and promptly repair
any damage to Company’s premises caused by such removal; and
	 
	 	(d)	 	the expense to return the Licensed Business area to its
condition when Company made it ready for use by Licensee will be allocated as
stated in Schedule 6.1.

	 	14.7	 	Survivability. No expiration or termination of this Agreement will
relieve the parties of obligations arising before expiration or termination or of any
obligations that survive expiration or termination of this Agreement.

	15.	 	ASSIGNMENT.

	 	15.1	 	Assignment by Licensee. Regardless of any other provision in this
Agreement, Licensee may not assign, transfer, sublicense or convey any of its rights or
obligations under this Agreement in whole or in part, without Company’s prior written
consent. For this purpose, assignment includes a Change in Control in Licensee. Any
attempted assignment, transfer, sublicense, conveyance or Change in Control without
Company’s prior written consent is void.
	 
	 	15.2	 	Assignment by Company. Regardless of any other provision in this
Agreement, Company may not assign, transfer, sublicense or convey any of its rights or
obligations under this Agreement in whole or in part, without Licensee’s prior written
consent. For this purpose, assignment includes a Change in Control in Company. Any
attempted assignment, transfer, sublicense, conveyance or Change in Control without
Licensee’s prior written consent is void.
	 
	 	15.3	 	Binding Nature. This Agreement is binding upon Licensee and Company
their successors and permitted assigns and will bind and inure to the benefit of
Company and Licensee and their successors and assigns as applicable. Licensee is
directly and primarily liable to Company for the performance or non-performance of this
Agreement by its subsidiaries through which it operates in performing this Agreement.

	16.	 	MISCELLANEOUS.

	 	16.1	 	Governing Law. This Agreement is governed by Illinois law, excluding
its conflicts of law rules.

39

 

	 	16.2	 	Jurisdiction and Venue. Licensee irrevocably submits to venue and
exclusive personal jurisdiction in the federal and state courts in Cook County,
Illinois for any dispute arising out of this Agreement, and waives all objections to
jurisdiction and venue of such courts.
	 
	 	16.3	 	Notices. Notices under this Agreement must be in writing and are
sufficient if given by nationally recognized overnight courier service, certified mail
(return receipt requested), facsimile with electronic confirmation or personal delivery
to the other party at the address below:

	 	 	 
	If to Company:

	 	Sears Holdings Management Corp.
	 

	 	3333 Beverly Road, Mail Station: A2-374B
	 

	 	Hoffman Estates, Illinois 60179
	 

	 	Attn.: Business Development Director
	 

	 	Facsimile: (847) 286-0224
	 
	 	 
	With a copy to:

	 	Sears Holdings Management Corp.
	 

	 	3333 Beverly Road, Mail Station: B6-350A
	 

	 	Hoffman Estates, Illinois 60179
	 

	 	Attn.: Senior Counsel, Licensed Businesses
	 

	 	Facsimile: (847) 286-3368
	 
	 	 
	If to Licensee:

	 	H&R Block
	 

	 	One H&R Block Way
	 

	 	Kansas City, MO 64105
	 

	 	Attn: President – U.S. Tax
	 

	 	Facsimile: (816) 854-8500
	 
	 	 
	With a copy to:

	 	H&R Block
	 

	 	One H&R Block Way
	 

	 	Kansas City, MO 64105
	 

	 	Attn: Legal Department

	 	 	 	      Notice is effective: (i) when delivered personally, (ii) three business days
after being sent by certified mail, (iii) on the business day after being sent by a
nationally recognized courier service, or (iv) on the next business day after it is
sent by facsimile with electronic confirmation to the sender. A party may change
its notice address by giving notice in accordance with this Section 16.3.
	 
	 	16.4	 	Severability. If any provision of this Agreement is determined to be
unenforceable, the parties intend that this Agreement be enforced as if the
unenforceable provisions were not present and that any partially valid and enforceable
provisions be enforced to the extent that they are enforceable.
	 
	 	16.5	 	No Waiver. A party does not waive any right under this Agreement by
failing to insist on compliance with any of the terms of this Agreement or by failing
to exercise any right hereunder. Any waivers granted under this Agreement are
effective only if recorded in a writing signed by the party granting the waiver.

40

 

	 	16.6	 	Cumulative Rights. The rights and remedies of the parties under this
Agreement are cumulative, and either party may enforce any of its rights or remedies
under this Agreement or other rights and remedies available to it at law or in equity.
	 
	 	16.7	 	Construction. The Section headings of this Agreement are for
convenience only and have no interpretive value. This Agreement may be executed in
counterparts, which together will constitute one and the same agreement. In this
Agreement, “including” and similar words (e.g., “to include”) means “including but not
limited to”.
	 
	 	16.8	 	Survival. In addition to all other provisions expressly providing that
they survive any expiration or termination of this Agreement, this Section 16
will survive any expiration or termination of this Agreement.
	 
	 	16.9	 	Entire Agreement; Modifications. This Agreement, together with all
Schedules referred to herein, which are incorporated by this reference, constitute the
complete and final agreement of the parties pertaining to the Licensed Business and
supersede all of the parties’ prior agreements, understandings and discussions relating
to the Licensed Business. No modification or amendment of this Agreement is binding
unless it is in writing and signed by Company and Licensee.
	 
	 	16.10	 	Separate Counterparts. This Agreement may be signed in separate
counterparts, which, when taken together, will constitute one and the same agreement.
Each party may rely on the facsimile signature of this Agreement by the other. If a
party sends a signed copy of this Agreement via facsimile, it will, upon the other
party’s request, provide an originally signed copy of this Agreement.

[Execution of this document on following page]

Signed, by the parties’ duly authorized representatives as of the Effective Date.

	 	 	 	 	 	 	 
	 	 	SEARS, ROEBUCK AND CO.

By its agent, Sears Holdings Management Corp.

For itself and as agent for

Citibank South Dakota, N.A.,

for purposes of Schedule 9.2A	 	 

41

 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David L. Schuvie
 

	 	 
	 

	 	Its:
	 	Vice President and General Manager,
Licensed Businesses	 	 
	 
	 	 	 	 	 	 
	 	 	H&R BLOCK SERVICES, INC.

As Licensee and as Merchant under Schedule 9.2A	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Its:
	 	/s/ Brian N. Schell
 

Chief Financial Officer, Tax Services
	 	 

42

 

SCHEDULE 1.1B

DESIGNATED COMPANY STORES

	 	 	 
	Store #/Location	 	Sublicense Allowed
	 
	 	 
	[Company to provide list.]
	 	 

Sears-H&R Block Lic Agr 6-01-07

43

 

SCHEDULE 3.1

COMPANY FEES

	1.	 	Tax Services. The Company Fees for Tax Services shall be calculated per store as
follows:

	 	a.	 	Standard Fees:

	 	 	 	 	 
	Number of Returns in a Tax Season	 	Percentage of Net Sales paid to Company
	[***]
	 	 	[***] 	%
	[***]
	 	 	[***] 	%
	[***]
	 	 	[***] 	%
	[***]
	 	 	[***] 	%

	 	 	 	Each store’s commission rate will be paid monthly, based on its prior year tax returns sales
performance. The parties will make appropriate adjustments at the end of each Tax Season, if
the store’s actual sales in the current Tax Season indicate a different commission rate than
what was paid during the Tax Season. New locations will be paid initially at a rate of [***]
% during the first year of operation, subject to the year-end adjustment.
	 
	 	2.	 	New Client Incentive. Licensee shall pay Company $ [***] for each New Client served
at a Designate Company Store during the Tax Season at the end of each month.
	 
	 	3.	 	Peace of Mind. The Company Fees for Peace of Mind shall be calculated as follows:
	 
	 	 	 	[***] % of Peace of Mind Fees collected by Licensee in the Licensed Business.
	 
	 	4.	 	Tax Classes. Fees for Tax Classes shall be based upon $ [***] , prorated for the
time Licensee occupies such space.
	 
	 	5.	 	Check Cashing. Company shall receive 100% of the Check Cashing Fee; Licensee will
receive no portion of Company’s Check Cashing Fee.

Sears-H&R Block Lic Agr 6-01-07

44

 

SCHEDULE 4.3A

LICENSEE MARKS

Licensee claims ownership rights in the following trademarks and/or service marks for the following
classes of goods or services:

	 	 	 
	Mark	 	Goods or Services
	Double-Check Challenge
	 	Preparation including re-examination of tax returns

	 	 	 

	H&R Block & design
	 	Preparation of tax returns, financial planning
services, mortgage services, tax advice and planning
services for others

	 	 	 

	H&R Block Advantage
	 	Tax advice and planning services

	 	 	 

	H&R Block DeductionPro
	 	Computer software for valuing charitable donations

	 	 	 

	H&R Block Premium
	 	Preparation of tax returns

	 	 	 

	H&R Block rapid refund & design
	 	Electronic transmission of income tax information

	 	 	 

	H&R Block Small Business Resources
	 	Tax preparation, bookkeeping, accounting and payroll
preparation and administration of business payroll
for others

	 	 	 

	H&R Block TaxCut
	 	Computer programs for use in the preparation of tax
returns

	 	 	 

	Just Plain Smart
	 	Financial planning services, Mortgage banking, 

mortgage lending, mortgage brokering

	 	 	 

	Peace of Mind
	 	Providing extended warranties on tax preparation

	 	 	 

	Rapid Refund H&R Block & design
	 	Electronic transmission of tax return information

	 	 	 

	Smart Solutions
	 	Providing information and advice relating to
financial investments

	 	 	 

	Tax Cut
	 	Computer programs for tax preparation

	 	 	 

	Tax Man
	 	Consulting and preparation of income tax returns

	 	 	 

	Tax Man & Design
	 	Consulting and preparation of income tax returns

	 	 	 

	TaxNet
	 	Computer programs, consultation and temporary use of
on-line non-downloadable software for tax return
preparation

	 	 	 

	The Easy Way to Financial Success
	 	Computer software for financial planning

	 	 	 

	The Fastest and Easiest Way to Do Your Taxes
	 	Computer software for use in the preparation of taxes

	 	 	 

	Willpower
	 	Computer software for estate planning for individual 

consumers

	 	 	 

	Your Complete Personal Legal Resource
	 	Computer software for educating consumers about
legal documents and procedures

	 	 	 

	Your Taxes. Our Expertise.
	 	Computer software tax return preparation program

	 	 	 

	Business Organizer
	 	Bookkeeping and bookkeeping services provided in
connection with a bookkeeping software program

	 	 	 

	Express IRA
	 	Offering an IRA

	 	 	 

	Express Savings
	 	Arranging for an FDIC-insured savings account

	 	 	 

	EZ W-2
	 	Obtaining a W-2 over the Internet

Sears-H&R Block Lic Agr 6-01-07

45

 

	 	 	 
	Mark	 	Goods or Services
	Fast Money
	 	RAL’s and RAC’s

	 	 	 

	Fast Money Options
	 	RAL’s and RAC’s

	 	 	 

	H&R Block Bank
	 	Banking

	 	 	 

	H&R Block Cash Control
	 	Computer Software

	 	 	 

	H&R Block TaxCut
	 	Computer programs for use inn the preparation of tax
returns

	 	 	 

	He’s Got People
	 	Tax preparation services for others

	 	 	 

	I Got People
	 	Tax preparation services for others

	 	 	 

	In Your Corner
	 	Preparation of tax returns, mortgage lending
services and financial planning services

	 	 	 

	Instant Money
	 	Tax refund anticipation loans

	 	 	 

	Opciones de Dinero Rapido
	 	RAL’s and RAC’s

	 	 	 

	Organizit
	 	Organizit for tax preparation software and website

	 	 	 

	Refund Card
	 	Magnetically encoded debit, credit and prepaid cards
and debit and credit card services

	 	 	 

	Second Look
	 	Reviewing, amending and providing advice on an
existing tax return

	 	 	 

	Second Look Certification
	 	Warranting review of a tax return and providing
audit assistance

	 	 	 

	She’s Got People
	 	Tax preparation services for others

	 	 	 

	Tango
	 	Online tax preparation product

	 	 	 

	That’s the Commitment of the Green Square.
	 	Preparation of tax returns, guarantees on tax return
preparation, financial loans and re-examination of
tax returns for others

	 	 	 

	They Got People
	 	Tax preparation services for others

	 	 	 

	We Got People
	 	Tax preparation services for others

	 	 	 

	Worry- Free Audit Support
	 	Tax and taxation planning, advice, information and
consultancy services and income tax consultation and
preparation services featuring tax audit
representation services

	 	 	 

	You Got People
	 	Tax preparation services for others

Sears-H&R Block Lic Agr 6-01-07

46

 

SCHEDULE 6.1(f)

FACILITY SPECIFICATIONS

	1.	 	See attached “Office Layout Guidelines” that show the general layout and space requirements
of average Company office locations.
	 
	2.	 	The size of a tax service office shall be calculated as follows:

	 	a.	 	One work station per 300 returns produced.
	 
	 	b.	 	Company shall use reasonable efforts to provide 125 square feet of space per
work station (this includes space for storage and reception).

	3.	 	Company shall provide routine janitorial services in the Licensed Business Area consistent
with the janitorial services regularly performed in the Designated Company Store.
	 
	4.	 	Company shall provide appropriate heating, ventilation and air conditioning to Licensee’s
offices. Reasonable office temperatures (typically between 64°F and 78°F) shall be maintained
on average during normal business hours, except during circumstances beyond Company’s
reasonable control, including power outages, brown-outs, electrical or mechanical failures,
and extreme weather circumstances.
	 
	5.	 	Licensee may update and revise these specifications from time to time as necessary, but such
changes must be agreed and approved in writing by Company.

Sears-H&R Block Lic Agr 6-01-07

47

 

SCHEDULE 6.2

NEW LICENSED BUSINESS LOCATION AT DESIGNATED COMPANY STORE

Company shall be responsible for the following in the construction of a Licensed Business Area,
including Additional Locations, at a Designated Company Store:

	 	a.	 	If required by Company, perimeter walls, painted standard store colors (or
other colors as mutually agreed by the parties);
	 
	 	b.	 	Floor covered by standard store carpet/tile;
	 
	 	c.	 	Ceiling containing standard store lighting; and
	 
	 	d.	 	Standard electrical outlets

Licensee shall be responsible for all other costs and expenses, including furniture, fixtures,
equipment, displays, cabinets, counters, shelving, sinks and other such items. Licensee shall also
be responsible for any non-standard walls, wall coverings, floor coverings, ceilings, lighting,
electrical and data lines within the Licensed Business Area.

EXPIRED, TERMINATED, VACATED, OR ABANDONED LICENSED BUSINESS LOCATION

     If a Licensed Business location expires or is terminated, vacated or abandoned for any reason
except for breach of this Agreement by Company, Licensee shall at its expense remove all Licensee’s
Equipment, signs and non-permanent fixtures. Licensee shall cap all gas, electrical and plumbing
lines and disconnect all telephones. Licensee shall repair and repaint all walls and ceiling areas
affected by such removal of its signs, fixtures, wall art, etc. The Licensed Business Area shall
be vacated in a “broom-clean” condition. If a Licensed Business location is terminated, vacated or
abandoned for reason of breach of this Agreement by Company, Company shall be responsible to the
costs associated with removing Licensee’s Equipment, signs and non-permanent fixtures, and for
capping all gas, electrical and plumbing lines, disconnecting all telephones, and for repairing and
repainting all walls and ceiling areas affected by such removal of its signs, fixtures, wall art,
etc., except that Licensee shall remain responsible for damage caused to the store premises caused
by Licensee’s removal of any equipment or fixtures.

Sears-H&R Block Lic Agr 6-01-07

48

 

SCHEDULE 9.2A

CITIBANK MERCHANT AGREEMENT

SEARS CARD CONDITIONS

Dated June 7 , 2007

H&R Block Services, Inc. (“Merchant”) with a place of business at One H&R Block Way, Kansas
City, MO 64105, and CITIBANK SOUTH DAKOTA, N.A. (“Citibank”), in consideration of their
respective covenants, agree that Merchant will honor certain Sears branded consumer cards (“Sears
Cards”) in connection with its sales and leases of goods and services, Citibank will render
services and extend credit to Merchant in connection with such Sears Card transactions and the
proceeds thereof, and Merchant will compensate Citibank therefor, all in accordance with the terms
and conditions set forth below and in the annexed Exhibits, Citibank’s Rules (as defined below) in
effect from time to time, the other related documents referred to herein and any amendments or
supplements hereto or thereto (collectively “this Agreement”).

1. Honoring and Advertising Certain Sears Cards.

     (a) Merchant undertakes to honor valid Sears Cards issued by Citibank and its affiliates, in
accordance with the other provisions of this Agreement and the Sears Merchant Operating Rules and
Regulations (“Rules”) as outlined in Exhibit A. Merchant may honor cards of other issuers
in accordance with its agreements with the relevant issuer or the issuer’s association not in
conflict with this Agreement. In honoring cards, Merchant will not discriminate against Sears
Cards and will not charge its customers using a Sears Card a surcharge over its regular price for
the goods or service (unless a surcharge is specifically authorized by law).

     (b) If Merchant has physical sales locations where Merchant accepts Sears Cards in payment of
purchases, Merchant will display at each sales register as directed by Sears the logo of Sears
Cards and promotional materials related to the Sears Cards provided by Citibank or Sears, Roebuck
and Co. (“Sears”), or by others with the approval of Citibank or Sears, indicating that such Sears
Cards will be honored. Merchant will also inform the customers, as directed by Sears, that such
Sears Cards will be honored in connection with all mail, electronic or telephone sales, by
including the logos of the Sears Cards in all catalogues, direct mail solicitations and internet
sites, or orally in the case of telephone sales. Merchant will also display logos and materials
for Sears Cards at each other place in its premises at which the logos or materials of any other
card are displayed. Merchant will include the name or logo of the Sears Cards in all advertising
in any media in which the names or logos of other credit or debit cards are mentioned. In all of
the above situations each such Sears Card logos will be given at least equal prominence with any
other card honored, provided that in advertising for which another card issuer pays a
substantial portion of the cost, such card issuer may be given greater prominence so long as the
above Sears Cards are not excluded. Merchant’s advertising will not indicate or imply that any of
the above card associations endorses Merchant’s goods or services.

     (c) Merchant authorizes Citibank to include Merchant’s name in any listing or advertising of
merchants which honor the above Sears Cards or which use Citibank’s services, provided that

Citibank Merchant Agreement — Sears Card

- 1 -

 

Merchant shall have the right of prior approval of any advertising that features the name or
trade name of Merchant exclusively or in a limited group of merchants.

2. Citibank Services.

     (a) Subject to Merchant arranging for an acquirer mutually agreeable to the parties
(“Acquirer”), Citibank will provide the following services: Merchant authorization,
transaction submission and settlement services, for customer transactions with Merchant, as
described in this Agreement. If Merchant does use an Acquirer, Merchant agrees it will not change
Acquirers during the term of this Agreement without Citibank’s prior written consent. Unless
otherwise agreed by the parties, Merchant is responsible for all Acquirer service fees.

     (b) Subject to Merchant utilizing an Acquirer, Citibank will also provide authorization and
transaction submission services for transactions involving the use of other cards if the issuer or
its association has consented to such an arrangement in writing and makes available suitable
facilities for obtaining authorizations and the submission and receipt of transaction records
electronically and otherwise and if the costs to Citibank are comparable to its costs for providing
such services for Sears Card transactions.

3. Transactions.

     (a) A transaction or proposed transaction may be submitted to Citibank or Acquirer for
authorization, transmission or settlement only if it is either:

(i) a payment for a bona fide sale or lease of goods or services or both by Merchant to a
customer, which does not involve, directly or indirectly, a cash advance to the customer, or

(ii) a refund or adjustment of such a transaction, which does not involve, directly or
indirectly, a cash payment by the customer to Merchant.

     (b) When entering into each transaction, Merchant shall comply in all respects the Rules then
in effect, including the creation of one or more records (each a “Record”) relating to
customer’s account with Citibank, generally representing either:

(i) an order by the customer to Citibank to make a payment to the Merchant, including an
electronic order (a “Sales Draft”), or (ii) an order by the Merchant to Citibank to
credit the customer’s account with Citibank, including an electronic order (a “Credit
Slip”). Neither the transaction nor the Record shall create or evidence an account between
the customer and the Merchant. Each Record may be in electronic or paper form, or both, but
Merchant shall prepare and deliver to the customer a paper copy or counterpart of each Record
to the extent required by law or good business practice.

4. Authorizations. Prior to concluding each transaction, Merchant will obtain an
authorization for the transaction from Citibank, as provided in the Rules. Merchant will request
such authorizations through Citibank or Acquirer and Citibank will report the authorization or
denial to Merchant using the systems as described in the Rules.

5. Equipment; Software. Merchant will at its own expense supply and utilize at each of
Merchant’s locations equipment for electronically requesting, receiving and recording
authorizations through Citibank or Acquirer and/or creating Records and/or transmitting Records to
Citibank, compatible with Citibank or Acquirer’s equipment and systems. If Citibank or its

Citibank Merchant Agreement — Sears Card

- 2 -

 

agents supply to Merchant software for use in connection with the equipment or services provided
hereunder, to the extent such software is not separately licensed by the manufacturer or
distributor thereof, Citibank hereby grants Merchant a non-exclusive, non-transferable license to
use such software pursuant to this Agreement. Merchant agrees not to reverse-engineer, disassemble
or decompile any such software, and to return to Citibank all copies of such software upon the
termination of this Agreement. The parties will negotiate in good faith any changes in the
equipment or software which may be appropriate to utilize technological advances or accommodate to
legal changes or marketing developments, and the allocation of the cost of making such changes.

6. Presentation and Retention of Records.

     (a) Merchant will present to Citibank or Acquirer a Record of each transaction (e.g. a Sales
Draft or a Credit Slip) at the close of each business day on which the transaction is made, using
the systems described in the Rules. Merchant will or will cause Acquirer to transmit such Record
promptly to the Citibank or its affiliate, at the times and in accordance with the procedures
detailed in the Rules. Merchant will provide a copy of such Record to the customer.

     (b) Merchant will retain the original or Merchant’s copy of the documentation (including but
not limited to the Record, which may be in electronic form if the transaction was effected
electronically via the world wide web or other electronic medium) for each transaction for six
months, and copies thereof for at least three years, and make such available to Citibank on
reasonable notice.

7. Chargebacks.

     (a) Merchant acknowledges that Citibank and its affiliates have reserved the right to reject,
refuse to pay and/or return and charge back transactions for various reasons including but not
limited to irregularities in the documentation, failure to follow proper procedures for obtaining
authorization or avoiding fraudulent or over-limit transactions, merchant-employee fraud and
merchant/customer disputes, all as set forth in the Rules. Citibank shall have the right to charge
to Merchant immediately the full amount of any transaction (including transactions which Citibank
has previously settled with Merchant) as detailed in the Rules (all such actions being collectively
called “Chargebacks”).

     (b) If Merchant desires to correct any deficiency and resubmit a transaction, or to dispute
any Chargeback with the Citibank, it shall follow the procedures set forth in the Rules.

     (c) Citibank has the final decision regarding those Type Three Chargebacks as described in the
Rules.

8. Settlement. Settlement rules differ by Merchant type as follows:

     (a) For Merchants settling with Citibank or Citibank designate as outlined (“Direct
Merchants”):

(i) Settlement Timing. On the second Business Day after each day on which Citibank
receives from Merchant or Acquirer any Records of transactions on Sears Cards, Citibank
will credit to the Merchant checking account as specified in the merchant application
(the “Account”), the aggregate amount of all Sales Drafts so received and settled by
Citibank since the previous settlement, unless otherwise specified in

Citibank Merchant Agreement — Sears Card

- 3 -

 

Exhibit B. A separate debit will be posted for any Chargebacks or adjustments received.
A separate debit will be posted for all interchange fees charged by Citibank on such
transactions, and any discount, fees and/or service charges due to Citibank under the
Pricing Schedule as outlined in Exhibit B, will be debited on the second Business Day
after month end, if applicable. For purposes of this Agreement, “Business Day” means
the days the Federal Reserve Bank is open.

(ii) Direct Merchant’s Designated Bank Account. Merchant authorizes Citibank and the
Merchant’s depository institution (“the Bank”) to credit to the Account all net
payments to Merchant due from Citibank hereunder, and authorizes Citibank and the Bank
to debit to the Account all net payments due by Merchant to Citibank hereunder, and
instructs the Bank to pay and remit to Citibank all such debits as instructed by
Citibank. Merchant shall give the Bank written notice of Citibank’s rights and
authorities hereunder, with a copy to Citibank and Acquirer.

(iii) Reserve Account. In the event of an occurrence or situation which causes Citibank
to reasonably believe that the amount of Credit Slips, Chargebacks and other charges to
the Merchant’s settlement or Account to be recovered by Citibank during any future
period will exceed the amount of Sales Drafts during the same period, Citibank may
withhold from its payments pursuant to the previous section, as a “Reserve” against
Merchant’s future liabilities to Citibank, an amount equal to such anticipated excess,
as adjusted from time to time, and may charge or set off against such Reserve any
amounts which it is unable to charge against the Account. In lieu of all or any part
of such Reserve, Merchant may supply a Letter of Credit or grant to Citibank a security
interest in types and amounts of property satisfactory to Citibank as agreed to by
Citibank.

(iv) For Citibank’s services hereunder, Direct Merchant will pay compensation to
Citibank at the rates set forth in the Pricing Schedule, Exhibit B, if applicable.

     (b) For Merchants who settle with Sears: If Merchant’s license agreement with Sears
provides for settlement of consumer credit card transactions through Sears, Citibank will calculate
the settlement of Merchant’s transactions each day as set forth in Section 8(a)(i) above, and will
settle such transactions directly with Sears. Merchant agrees that Citibank satisfies its
settlement obligations to Merchant under this agreement by paying Sears, and that Merchant will
hold Citibank harmless from claims, losses or damages of any kind resulting from its payment to
Sears of amounts owed to Merchant under this agreement pursuant to this Section 8(b). If the
settlement of transactions under this Agreement is insufficient to cover amounts owed to Citibank
that day, then Citibank will obtain such amounts from Sears and Sears will be subrogated to
Citibank’s rights to such amounts from Merchant.

9. Title; Security Interest.

     (a) Merchant hereby assigns to Citibank, outright and not for purposes of security, all of
Merchant’s right, title and interest in each Record transmitted or delivered to Citibank under the
Agreement for authorization, submission or settlement, and in the transaction it represents and the
proceeds thereof.

     (b) In addition, Merchant grants to Citibank a security interest in:

(i) any Account, pursuant to Section 8 above; and

Citibank Merchant Agreement — Sears Card

- 4 -

 

(ii) all property or funds in the possession or control of Citibank which is or may be property
of or payable to Merchant (including but not limited to any Reserve established pursuant to
Section 8); and

(iii) the proceeds of all of the above, as security for any and all debts or obligations of
Merchant to Citibank arising under or in connection with this Agreement.

     (c) Merchant will execute and deliver to Citibank:

          (i) such further assurances or instructions as the Bank may require to effect Citibank’s
control over the Account; and

          (ii) such Financing Statements or other documents as Citibank reasonably concludes are
necessary or desirable for the perfection of such security interest in the Account.

     (d) Merchant agrees that this Agreement is a contract to extend financial accommodations, as
that term is used in the U. S. Bankruptcy Code.

10. LIMITATION OF LIABILITY. CITIBANK HEREBY DISCLAIMS ALL WARRANTIES OF ANY KIND WITH
RESPECT TO THE SERVICES OR PRODUCTS PROVIDED UNDER THIS AGREEMENT INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR USE FOR ANY PARTICULAR PURPOSE. CITIBANK WILL CORRECT AT ITS OWN
EXPENSE ANY MISTAKES CAUSED BY CITIBANK OR ITS AGENTS. IN NO EVENT SHALL COMPANY OR ITS AFFILIATES
BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR CLAIMS BY MERCHANT OR ANY THIRD PARTY
RELATING TO CITIBANK’S PERFORMANCE UNDER THIS AGREEMENT.

11. Representations and Warranties of Merchant. Merchant represents and warrants that on
the date hereof and on each date on which it transmits Records to Citibank or Acquirer the
following representations are and will be true:

     (a) If Merchant is not a natural person, that Merchant is a duly organized and validly
existing legal entity under the laws of the jurisdiction in which it is organized; is qualified to
do business in each jurisdiction in which it maintains a place of business; and has the power and
authority to enter into and perform this Agreement.

     (b) The making and performance of this Agreement by Merchant has been duly authorized by all
necessary action, and will not violate any law, regulation, order or award, or any provision of its
charter or by-laws, if applicable, or any agreement to which it is a party.

     (c) This Agreement has been duly executed by Merchant, including by authorized persons where
required, and constitutes its legal, valid and binding obligation, enforceable in accordance with
its terms.

Citibank Merchant Agreement — Sears Card

- 5 -

 

     (d) Merchant operates the locations at which the sales and Sears Card transactions
contemplated by this Agreement are made, and each transaction has been entered into in compliance
with this Agreement including the Rules.

Merchant does not do business under a trade name or style not previously disclosed to Citibank and
there has been no change in the nature of Merchant’s business or the goods and/or services that
Merchant sells not previously disclosed to Citibank. Unless approved to do so in writing by
Citibank, Merchant will only accept the Sears Card in connection with the goods and/or services.

     (e) The most recent audited balance sheets of the Merchant and its subsidiaries, if any, and
related audited statements of income and cash flow for the fiscal period then ended, and the
comparable most recent unaudited financial statements and for the interim period then ended, copies
of which have been furnished to Citibank or will be furnished within 10 days after request by
Citibank, fairly present the financial condition of the Merchant (and its subsidiaries, if any) as
at such dates and the results of operations for the periods then ended, all in accordance with
generally accepted accounting principles consistently applied, and since such latter date there has
been no material adverse change in such condition or operations.

     (f) All information provided by Merchant to Citibank prior to the execution of this Agreement
and while it is in effect with respect to Merchant’s business, operations, condition and results is
and will be true, correct, complete and not misleading as of the date on which it is provided.

12. Representations of Citibank. Citibank represents and warrants that on the date hereof
and on each date on which it receives Records from Merchant hereunder the following representations
are and will be true:

     (a) Citibank is a national banking association duly organized and existing under the laws of
the United States of America; is authorized or qualified to do business in each jurisdiction in
which it maintains a place of business; and has the corporate power and authority to enter into and
perform this Agreement.

     (b) The making and performance of this Agreement by Citibank has been duly authorized by all
necessary corporate action, and will not violate any law, regulation, order or award, or any
provision of its charter or by-laws or agreement to which it is a party.

     (c) This Agreement has been executed by duly authorized officers of Citibank and constitutes
its legal, valid and binding obligation, enforceable in accordance with its terms.

13. Merchant Reporting.

Merchant will keep Citibank informed, in a manner specified by Citibank from time to time in its
sole discretion, currently concerning all material changes or proposed changes in Merchant’s
business and business plans, including but not limited to openings and closings of locations or
other points of sale or operations, addition or elimination of mail, telephone or internet selling,
changes in the type or nature of the products or services sold or leased, and any use of agents,
subsidiaries or leased departments; and also of all material changes in its financial condition or
operations.

     (a) Merchant will furnish to Citibank within 10 days of Citibank’s request (i) copies of its
Annual Report to its shareholders and its annual, periodic and special reports filed with the
Securities and Exchange Commission (if applicable), and (ii) to the extent not so furnished, at

Citibank Merchant Agreement — Sears Card

- 6 -

 

the request of Citibank, copies of its most recent audited balance sheet, income and cash flow
statements and of comparable interim unaudited financial statements for all periods since such
audit, but only where this Agreement includes a Pricing Schedule as outlined in Exhibit B.

I4. Indemnification.

     (a) Merchant will indemnify Citibank and its affiliates and the directors, officers, employees
and agents of any of them (the “Citibank Indemnified Party”) against, and hold them harmless from
any and all claims, damages, liabilities and expenses (including fees and disbursements of counsel)
which arise out of:

(i) any goods or services sold or rendered or purported or promised to be sold or rendered by
Merchant or any of its affiliates or the directors, officers, employees or agents of any of
them, or

(ii) any act or omission of Merchant or any of its affiliates or the directors, officers
employees or agents of any of them which: (x) constitutes a breach of this Agreement, or (y) constitutes a failure to comply with, or causes any Citibank Indemnified Party to fail
to comply with, any law or governmental or association rule or regulation governing the
transactions and operations contemplated hereby, or which violates, or causes any Citibank
Indemnified Party to violate, the personal rights of any third party, except that
this indemnity shall not apply to any failure to perform any duty or function which Citibank
has agreed to perform under this Agreement.

     (b) Citibank will indemnify Merchant and its affiliates and the directors, officers, employees
and agents of any of them (the “Merchant Indemnified Party”) against, and hold them harmless from
any and all claims, damages, liabilities and expenses (including fees and disbursements of counsel)
which arise out of any act or omission of Citibank or any of its affiliates or the directors,
officers, employees or agents of any of them which: (x) constitutes a breach of this Agreement, or
(y) constitutes a failure to comply with, or causes any Merchant Indemnified Party to fail to
comply with, any law or governmental or association rule or regulation governing the transactions
and operations contemplated hereby, or which violates, or causes any Merchant Indemnified Party to
violate, the personal rights of any third party, except that this indemnity shall not apply
to any failure to perform any duty or function which Merchant has agreed to perform under this
Agreement.

     (c) Each indemnified party shall promptly notify the other with respect to any claim, damage,
liability or expense which may be covered by this indemnity and permit the indemnifying party to
participate in the defense thereof, and such indemnified party will not settle the matter without
the approval of the indemnifying party.

15. Term; Termination.

     (a) This Agreement shall be in effect from the date first written above unless terminated by
Citibank on 90 days’ prior written notice. Citibank will consult with Sears prior to giving such
notice of termination. The parties agree that the Rules will continue to apply until all
transactions are resolved or finalized.

     (b) This Agreement shall terminate automatically if any case or proceedings in bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding is commenced by Merchant; or is commenced against Merchant or its property and

Citibank Merchant Agreement — Sears Card

- 7 -

 

not dismissed within 30 days; or if in such a proceeding an order of adjudication is entered
or a receiver, trustee or similar officer is appointed.

     (c) This Agreement may be terminated for default by either party if the other has failed for a
period of 10 days to make any payment required hereunder, or failed for a period of 30 days after
notice to perform any of its other duties or obligations hereunder and to compensate the
non-defaulting party for any losses, costs, liabilities or expenses incurred as a result of such
failure. Notice of failure to perform shall specify the nature of the failure and specify a date,
no less than 30 days after such notice, on which this Agreement will terminate if the default is
not cured. During such 30 day period the parties will negotiate in good faith to define the scope
of such non-performance, the manner in which it may be remedied and the nature and amount of such
compensation, in order to avoid the termination if reasonably possible.

     (d) No failure or delay by either party to terminate the Agreement or take any other action on
account of any default by the other party shall constitute a waiver of such party’s right to
terminate or to recover damages or any other remedy on account of such default or on account of any
other similar or different default hereunder.

     (e) This Agreement shall terminate automatically in the event the License Agreement between
Merchant and Sears, Roebuck and Co. is terminated for any reason.

16. Notices. All notices and other communications pursuant to this Agreement shall be in
writing and sent by hand, courier, priority or first class mail (postage prepaid), or telegraph, to
the following addresses, and shall be effective when delivered, or three days after mailing by
first class mail:

	 	 	 
	If to Citibank, all notices:
	 
	 	 
	 

	 	Citicorp Credit Services, Inc. (USA)

5500 Trillium Boulevard

Hoffman Estates, IL 60192

Attn: Vice President – Business Initiatives
	 
	 	 
	With a copy to the following if notice of default or termination:
	 
	 	 
	 	 	Citibank South Dakota, N.A.
	 

	 	701 East 60th Street North

Sioux Falls, SD 57108

Attn: General Counsel
	 
	 	 
	If to Merchant, at the address listed above.
	 
	 	 
	With a copy to:

	 	Sears Roebuck and Co.
	 

	 	3333 Beverly Road

Hoffman Estates, IL 60179

Attn: General Counsel

Citibank Merchant Agreement — Sears Card

- 8 -

 

Notwithstanding the foregoing, notices may be sent, in the manner described above, to such other
address as either party shall specify in a notice to the other at least 10 days before its
effective date.

17. Amendments.

     (a) The Rules delivered herewith shall remain in effect until amended. Citibank may amend the
Rules by giving written notice thereof at least 90 days prior to the effective date specified in
the notice, provided that an earlier effective date may be chosen if Merchant consents
thereto or if the change is made necessary by a change in any law, rule or regulation, or in the
interpretation thereof, of any government, and provided, further, that if Merchant objects
to the amendment within 15 days after the notice is given, Citibank will discuss with Merchant in
good faith the need for the change or any suggested alternative, giving consideration to the
potential effects on each party’s costs, risks, marketing, volume, etc. If after such discussions
Merchant is unwilling in good faith to accept the change or any alternative acceptable to Citibank,
and if the change is not reasonably required to comply with law, regulation or the rules of
Citibank, Merchant may terminate this Agreement by written notice given no later than the effective
date of the amendment and at least 30 days prior to the effective date of the termination. If
Merchant terminates this Agreement within its rights under this Agreement, it may still be in
breach of separate contract obligations to Sears to accept Sears Cards.

     (b) Merchant recognizes that Citibank may amend or reinterpret the rules or regulations
without the consent of Merchant.

     (c) No other portion of this Agreement may be amended except by written amendment or
supplement signed by authorized officers of both parties, and no provision may be waived or consent
given unless in writing signed by an authorized officer of the party giving the waiver or consent.
No failure to enforce a provision of this Agreement in any instance shall constitute a waiver or
consent applicable to any later instance.

18. Entire Agreement; Assigns. This Agreement is the entire agreement and understanding
between the parties, notwithstanding any prior understanding not expressed therein. This Agreement
is binding on the parties and their respective successors and assigns, and for the benefit of them,
their successors and permitted assigns. Neither party may assign this Agreement without the
written consent of the other, except that Citibank may assign this Agreement to an affiliate of
Citibank, which assumes in writing the obligations of Citibank thereunder.

19. Confidentiality.

     (a) Each party will keep confidential, during the term of this Agreement and thereafter, all
information which is not available to the general public concerning this Agreement and/or the other
party, its plans, operations, systems, programs, software, financial condition and results, both
with respect to its credit and debit card business and its business generally provided,
however, that Citibank may disclose such information to Sears. In addition, each party may
disclose information about this Merchant relationship and operational issues relating to it, to
Sears. Each party may make such information available, to the extent necessary for the performance
of this Agreement, to its directors, officers, employees, agents, auditors, attorneys and business
consultants (who will be required to preserve the confidentiality of such

Citibank Merchant Agreement — Sears Card

- 9 -

 

information) and to any regulatory agency asserting jurisdiction and as otherwise required by
law.

     (b) Merchant shall not, without customer’s consent, reveal customer’s Sears Card or account
number, transaction or other personal information to third parties other than Citibank or as
specifically required by law, provided, however, that Merchant may disclose such
information about card transactions for purposes consistent with its agreement with Sears to
provide goods or services to Sears customers and as allowed by law. Merchant shall take all
appropriate precautions to ensure that all such information shall remain confidential, and that all
records maintained by, or transmitted by or to, Merchant or any service provider utilized by
Merchant, shall not be used by, disclosed to or subject to access by unauthorized third parties.
Merchant shall keep such information in locations and files which are accessible only to selected
personnel. Merchant shall immediately report to Citibank any actual or potential breach of such
confidentiality, and assist in notifying the proper parties as required by law or requested by
Citibank. After the expiration of the required retention period specified by the Rules, Merchant
shall destroy all material containing customer information in a manner that renders the data
unreadable. After a sale has been authorized, Merchant shall not retain or store any data read from
a Sears Card except data required to record the sale.

20. Governing Law. This Agreement shall be governed by federal law and applicable South
Dakota laws, without regard to its principles of conflicts of laws.

21. Attorneys Fees. In any litigation between the parties, the prevailing party shall be
entitled to be reimbursed by the other for the reasonable fees and expenses of its attorneys,
except that if a party prevails as to only a part of its claim, its reimbursement shall be reduced
in proportion.

22. Waiver of Jury Trial. THE PARTIES EACH AGREE THAT IN ANY ACTION BETWEEN THEM WITH
RESPECT TO THIS AGREEMENT OR ANY AMOUNT PAYABLE THEREUNDER THE PARTIES WILL (AND HEREBY DO) WAIVE
ANY RIGHT TO TRIAL BY JURY.

23. Survival of Terms. The following sections will survive termination of this Agreement:
Sections 10, 14, 16, 17, 20, 21 and 22.

	 	 	 	 	 
	Citibank South Dakota, N.A.

By its agent, Sears Holdings

Management Corp.	 	Merchant
	 
	 	 	 	 
	 	 	 
	 	 	 
	Its:

	 	 
	 	Its: Chief Financial Officer, Tax Services
	 

	 	 

	 	 

Citibank Merchant Agreement — Sears Card

- 10 -

 

EXHIBIT A TO SCHEDULE 9.2A

Merchant Operating Rules and Regulations

Sears Card Merchant Operating

Rules and Regulations

     These Rules and Regulations contain procedures that must be followed in connection with the
acceptance of a Sears Card, unless otherwise agreed to in writing by Citibank. These Rules and
Regulations are subject to change by Citibank at any time. Citibank will provide you, your
Processor and/or Financial Institution with a copy of the new rules at least 30 days prior to
implementation. Citibank will assume that Merchant accepts the changed Rules and Regulations by
continuing acceptance of the Sears Card. Citibank reserves the right to suspend acceptance of the
Sears Card at any Merchant location at any time.

 

 

September 2004

Merchant Services

Call your Processor or Financial Institution

Sears Card Authorizations (24 Hours A Day)

1-800-733-2426

Sears Card Customer Service

1-800-917-7700

Table of Contents

	 	 	 	 	 
	1 Identifying Sears Card Products
	 	 	6	 
	1.1.1 Internet, Telephone or Mail Order Merchants
	 	 	6	 
	1.1.2 All Other Merchants
	 	 	6	 
	 
	 	 	 	 
	2 Transactions
	 	 	8	 
	2.1 Obtaining Authorization
	 	 	8	 
	2.1.1 General rules for Authorizations, unless otherwise agreed upon by Citibank in writing:
	 	 	8	 
	2.1.2 Telephone, Internet, or Mail Order Merchants (Card Not Present)
	 	 	8	 
	2.1.3 All Other Merchants
	 	 	9	 
	2.1.4 Authorization Downtime Procedures
	 	 	9	 
	2.1.5 Authorization Formats
	 	 	9	 
	2.2 Returns
	 	 	9	 
	2.3 Refunds, Adjustments and Credit Slips
	 	 	9	 
	2.3.1 Merchant Policy
	 	 	9	 
	2.3.2 Credit Slip
	 	 	10	 
	2.4 Cash Advances
	 	 	10	 
	2.5 Surcharges
	 	 	10	 
	2.6 Split Tickets
	 	 	10	 
	2.7 Minimum/Maximum Dollar Limits
	 	 	10	 
	2.8 Transaction Amount Tolerances
	 	 	10	 
	2.9 Equal Treatment of Sears Card Sales Versus Other Cards
	 	 	10	 
	2.10 Telephone, Internet, or Mail Order Sales
	 	 	10	 
	2.11 Suspicious Situations
	 	 	11	 
	2.12 Prohibited Transactions and Factoring
	 	 	11	 
	 
	 	 	 	 
	3 Applications (where applicable)
	 	 	11	 
	3.1 Applications at Point-of-Sale
	 	 	11	 
	3.2 Telephone Applications
	 	 	12	 
	3.3 Internet Applications
	 	 	12	 
	 
	 	 	 	 
	4 Processing and Settlement
	 	 	12	 
	4.1 Processing and Settlement for Sears Card Transactions
	 	 	12	 
	4.1.1 General Rules for Processing and Settlement
	 	 	12	 
	4.2 Recording A Card Sale
	 	 	13	 
	4.2.1 Completing a Card Sale record
	 	 	13	 

Merchant Operating Rules and Regulations       2

 

 

	 	 	 	 	 
	4.2.2 Obtaining the Cardholders’ Signature
	 	 	13	 
	4.2.3 Delivering Card Sale Records to the Cardholder
	 	 	13	 
	4.3 Submitting Electronic Sales Data
	 	 	13	 
	4.3.1 General Rules
	 	 	13	 
	4.3.2 Cardholder Verification
	 	 	14	 
	4.4 Payments
	 	 	14	 
	4.5 Settlement Downtime Procedures
	 	 	14	 
	 
	 	 	 	 
	5 Special Requirements for Special Services
	 	 	14	 
	5.1 Travel and Entertainment
	 	 	14	 
	5.2 Online/Internet Transactions
	 	 	15	 
	5.3 Retrievals and Chargebacks
	 	 	15	 
	5.3.1 Retrieval Requests
	 	 	15	 
	5.3.2 Chargebacks
	 	 	15	 
	5.3.3 Representment
	 	 	17	 
	5.3.4 Type Three Chargeback
	 	 	17	 
	5.3.5 Immediate Payment for Chargebacks
	 	 	17	 
	 
	 	 	 	 
	6 Business Type
	 	 	17	 
	 
	 	 	 	 
	7 Advertising
	 	 	18	 
	7.1 Telephone, Internet, or Mail Order Merchants
	 	 	18	 
	7.2 All Other Merchants
	 	 	18	 

Merchant Operating Rules and Regulations       3

 

 

Definitions

Agreement means the Merchant Agreement entered into between Merchant and Citibank.

Arbitration is the process used to determine responsibility for a chargeback-related
dispute between Citibank and the processor/merchant.

Authorization(s) means the receipt of a valid authorization code from Citibank when
presenting a Card number with respect to a purchase, which includes the indication (i) of
availability of credit on a Card at the time of inquiry and (ii) that the Card represents a
valid account.

Authorization Center means the Citibank system to be consulted by Merchant for the
purpose of obtaining authorization codes and instructions on handling Cards.

Business Day means the days the Federal Reserve Bank is open. Sales Records submitted
for processing on a holiday, weekend, or after the cut-off time are treated as received the
following Business Day

Card(s) or Sears Card(s) is any Sears brand or Sears owned brand payment instrument
issued by Citibank, excluding the HIPS home improvement product and the Sears Charge Plus
Account product, and including but not limited to the plastic Sears private label or Sears
MasterCard issued to the Cardholder, which Merchant accepts from customers to effect payment
for their purchases from Merchant. Where the context so requires, the term “Card” shall also
include the Cardholder account relating to the Card. Where MasterCard rules conflict with
these rules, MasterCard rules will prevail.

Cardholder is a person to whom a Card is issued or who is authorized by such person to
use the Card.

Card Sale is a sale of Goods or Services by Merchant to a valid Cardholder through the
use of a Card or Cardholder account. A Card Sale will only be deemed to have occurred after
the Merchant has delivered or shipped the Goods and/or performed the Services.

Card Sale Date means the transaction date for any Card Sale.

Chargeback(s) means the reversal of a Card Sale against a sale which Merchant has
previously presented.

Credit Slip means documentation or data for a returned item originally sold via a Sears
Card.

Code 10 is a term used when a merchant is suspicious of a transaction.

Electronic Card Capture Device means a device intended to electronically transmit Sales
Data to Citibank. This can be either a physical or virtual ‘Point of Sale’ device.

Financial Institution means any bank, credit union, or other financial entity providing
Merchant payment transaction processing or services approved by Citibank.

Goods or Services means the goods or services provided by Merchant to a Cardholder.

MasterCard means MasterCard International incorporated (a Delaware corporation).

Merchant/you means an entity that accepts Sears Cards and has been approved by
Citibank.

Merchant Settlement Account means an account designated by Merchant through which
Citibank will process amounts due Merchant.

Mod 10 Validation  means validating that the last position or check digit of an account
number is correct by mathematically calculating that digit via running the first 12 digits
through an algorithm provided by Citibank or a Processor or Financial Institution.

Processor means any organization processing Merchant payment transactions on behalf of
that Merchant and approved to do so by Citibank.

Processing Fees means the fees charged by Citibank for transaction processing connected
with the Cards.

Recurring Card Sale is a sale for goods and/or services that are delivered or
performed periodically and which results in a charge to Cardholder’s account for each
performance or delivery.

Refund means any refund, return, or price adjustment of a transaction made through the
use of a Card or Cardholders account.

Representment(s) means the resubmission of a transaction by a Merchant to Citibank
after a Chargeback.

Return means a Good, which is brought back to the Merchant by a Cardholder for Credit
to the Cardholder’s account.

Sales Data means data representing Card transactions related to Merchant sales by
payment cards, or refunds/credits issued by Merchant.

Sales Record means all documents or data presented to Citibank as evidence of a Card
Sale or Credit.

Citibank, We or Us (for the purposes of this document only) means Citibank as issuing
authority for the Sears Card.

Transaction means any single Card Sale, payment (if applicable) or Chargeback processed
to a Cardholder’s account by a Merchant including, but not limited to, an Authorization and
ticket capture as a single Transaction.

Transaction Processing means all those functions connected to processing Card Sales.

 

			
	*	 	Other capitalized terms used in this document and not otherwise defined shall have the
meaning set forth in the Merchant Agreement.

Merchant Operating Rules and Regulations       4

 

 

\

          Identifying Sears Card Products

Internet, Telephone or Mail Order Merchants

          Merchants who accept the Card who do not require the physical presentment of the Card or who
sell Goods or Services through the Internet, telephone or mail order must perform a Mod 10
Validation.

All Other Merchants

          Merchants who accept the physical card must verify that any Sears Card presented to you is a
valid Card prior to initiating the transaction. You may verify this by examining the card and
confirming that the Card includes the features described below.

                         Sears “Blue” Card:

	 	•	 	13 digit card beginning with any number from 0 – 9.
	 
	 	•	 	Standard mod 10 check.
	 
	 	•	 	Expiration date in mag stripe but not on the plastic.
	 
	 	•	 	Expiration date not required at authorization.
	 
	 	•	 	Rule: POS device should not validate expiration dates on 13 digit cards.

                         

                         Sears Premier Card:

	 	•	 	13 digit card beginning with any number from 0 – 9.
	 
	 	•	 	Standard mod 10 check.
	 
	 	•	 	Valid Expiration date embossed on the card as well as within the mag stripe.
	 
	 	•	 	Expiration date is required at authorization.
	 
	 	•	 	Rule: POS device should not validate expiration dates on 13 digit cards.

                         

                         Sears Gold Card

	 	•	 	Same as Sears Premier Card.

                         

                         Sears Private Label 16 Digit Cards (Sears “Blue” and Premier):

	 	•	 	16 digit ISO standard card.

Merchant Operating Rules and Regulations       5

 

 

	 	•	 	Bin range = 504994.
	 
	 	•	 	Expiration date in mag stripe and embossed on the plastic.
	 
	 	•	 	Expiration date is required at authorization.
	 
	 	•	 	Rule: POS device should validate expiration dates on 16 digit cards.

(photo unavailable at this time: appearance identical to 13 digit cards)

                         Sears MasterCard Products - (Sears Gold MasterCard, Sears Premier MasterCard)

	 	•	 	16 digit ISO standard card.
	 
	 	•	 	Bin range = 512106, 512107, and 512108
	 
	 	•	 	Expiration date in mag stripe and embossed on the plastic.
	 
	 	•	 	Expiration date required.
	 
	 	•	 	Rule: POS device should validate expiration dates on 16 digit cards.

                         

                         HIPS Cards – (If Applicable)

	 	•	 	Home Improvement Accounts, both 13 and 16 Digit will be declined by Citibank for all
external transactions unless you have a specific agreement with Citibank to accept these
cards.

                         13 digit Cards:

	 	•	 	13 digit card beginning with any number from 0 – 9.
	 
	 	•	 	Standard mod 10 check.
	 
	 	•	 	Expiration date in mag stripe but not on the plastic.
	 
	 	•	 	Expiration date not required at authorization.

                         Rule: POS device should not validate expiration dates on 13 digit cards

                         16-digit Cards.

	 	•	 	16-digit ISO standard card.
	 
	 	•	 	Bin range = 504994.
	 
	 	•	 	Expiration date in mag stripe and embossed on the plastic.
	 
	 	•	 	Expiration date is required at authorization.
	 
	 	•	 	Rule: POS device should validate expiration dates on 16 digit cards.

                         

                         Sears Charge Plus Cards – (If Applicable)

	 	•	 	Sears Charge Plus Accounts, both 13 and 16 Digit will be declined by Citibank for all
external transactions unless you have a specific agreement with Citibank to accept these cards.

Merchant Operating Rules and Regulations       6

 

 

                         13 digit Cards:

	 	•	 	13 digit card beginning with any number from 0 – 9.
	 
	 	•	 	Standard mod 10 check.
	 
	 	•	 	Expiration date in mag stripe but not on the plastic.
	 
	 	•	 	Expiration date not required at authorization.

                         Rule: POS device should not validate expiration dates on 13 digit cards

                         16-digit Cards.

	 	•	 	16-digit ISO standard card.
	 
	 	•	 	Bin range = 504994.
	 
	 	•	 	Expiration date in mag stripe and embossed on the plastic.
	 
	 	•	 	Expiration date is required at authorization.
	 
	 	•	 	Rule: POS device should validate expiration dates on 16 digit cards.

                         

                         Sears Commercial One Cards — (See Commercial One Rules & Regulations)

If you have an agreement with Citibank to accept Sears Commercial One Cards

	 	•	 	16 digit ISO standard card.
	 
	 	•	 	Paper or Plastic Card
	 
	 	•	 	Bin range = 504553
	 
	 	•	 	Expiration date in mag stripe and embossed on the plastic.
	 
	 	•	 	Expiration date required.

Rule: POS device should validate expiration dates on 16 digit cards

                         Sears Canada Cards (Not applicable)

                         Citibank will decline Sears Canada Cards for all external transactions.

	 	•	 	16 digit ISO standard card.
	 
	 	•	 	Bin range = 628181

                         Sears Mexico Cards (Not applicable)

                         Citibank will decline Sears Mexico Cards for all external transactions.

	2	 	Transactions

	 	2.1	 	Obtaining Authorization
	 
	 	2.1.1	 	General rules for Authorizations, unless otherwise agreed upon by Citibank in writing:

	 	•	 	before completing the Card Sale, you must obtain Authorization for
the amount of the purchase following Citibank specified procedures, including
obtaining Authorization through electronic processing methods and terminals,
authorized by Citibank.
	 
	 	•	 	you must request Authorization on or before submitting the Card Sale
Date for payment except as permitted by the Merchant Operating Rules and
Regulations for specific types of transactions (such as lodging, when
specifically set forth in your Agreement with Citibank).
	 
	 	•	 	if Authorization is granted, you must provide an Authorization code
on the Sales Record submitted to Citibank for processing.

Merchant Operating Rules and Regulations       7

 

 

	 	•	 	if Authorization is denied, you must not make further attempts to
obtain Authorization with that Card on that day, you must not allow the Card
Sale.
	 
	 	•	 	if the Card Sale involves suspicious or unusual circumstances, you
must request a Code 10 Authorization. You must retain any Card by reasonable
and peaceful means if requested to do so by the Authorization provider. {Please
refer to section 1.11.}

	 	 	 	If you complete a Card Sale without Authorization, you will be responsible for any
Chargeback of the Card Sale. However, obtaining Authorization only means that at
the time Authorization was requested sufficient credit or funds were available from
the Card account and the Card was not on a warning list. Obtaining Authorization
does not assure that the person using the Card is its Cardholder and will not
prevent a Chargeback to the Merchant for a variety of reasons under the Chargeback
Section 3.2.2 including, but not limited to, use of the Card by an unauthorized
user, or a Cardholder claim or defense relating to the Card Sale.
	 
	 	 	 	If you process Sears Cards through Citibank, We will provide an authorization log
upon your request. Otherwise, please contact your processor.
	 
	 	2.1.2	 	Telephone, Internet, or Mail Order Merchants (Card Not Present)
	 
	 	 	 	For Internet, telephone, or mail order Authorization requests, you must
electronically transmit the account number, expiration date (if any), and amount of
the transaction. If a Card is accepted for a sale without proper Authorization,
Citibank is not required to pay for the sale. If We have already paid for the sale,
Citibank can Chargeback the unauthorized sale. A Chargeback can still occur even if
Authorization is obtained for other reasons described in the Chargeback section.
Authorization requests must be presented at a minimum daily, but preferably
real-time.
	 
	 	2.1.3	 	All Other Merchants
	 
	 	 	 	You must obtain Authorization prior to completing a Card sale for any transaction.
You must obtain Authorization from Citibank by an Electronic Card Capture Device.
Unless you have a prior arrangement with Citibank, We will only provide
Authorization over the phone for a device malfunction described in 1.1.4. For Card
present transactions, you must transmit to Citibank the complete contents of the
magnetic stripe. If the magnetic stripe is unreadable, Citibank will accept a
manually entered transaction. Authorization requests must be presented at a minimum
daily, but preferably in real-time.
	 
	 	2.1.4	 	Authorization Downtime Procedures

	 	2.1.4.1	 	Telephone, Internet or Mail Order Merchants
	 
	 	 	 	If the Electronic Card Capture Device is not working you must queue the
Authorization requests and retry them when the Authorization system is
functional, not to exceed 5 days from the return of Authorization system
availability.
	 
	 	2.1.4.2	 	All Other Merchants
	 
	 	 	 	If the Electronic Card Capture Device is not working you must call our
Authorization Center at 1-800-733-2426 for Authorization on each sale. If a
sale is approved you must re-enter the sale in the Electronic Card Capture
Device as soon as the Electronic Card Capture Device is working, not to
exceed 5 days after the Authorization system is functional. You must
provide the following information:

	 	•	 	Card account number
	 
	 	•	 	Unit number assigned by Citibank
	 
	 	•	 	Dollar amount of Sale
	 
	 	•	 	Expiration date (if applicable)

Merchant Operating Rules and Regulations       8

 

 

	 	2.1.5	 	Authorization Formats
	 
	 	 	 	All data transmitted must be in a form and format approved in advance by Citibank
and must be presorted and organized according to Citibank’ acceptance rules.
	 
	 	2.2	 	Returns
	 
	 	 	 	Citibank will honor your return policy as long as it complies with all federal,
state, and local laws and is clearly posted or otherwise made known to the
Cardholder at the time of the sale. If a Cardholder returns merchandise or cancels
the services paid for with a Sears Card you must give credit to that Sears Card.
Returns for sales or cancellation of services not paid for by a Sears Card should
not be credited to the Sears Card. Sales Data from the return should be included in
your daily file.
	 
	 	 	 	All data transmitted must be in a form and format approved in advance by Citibank
and must be presorted and organized according to Citibank’ instructions.
	 
	 	2.3	 	Refunds, Adjustments and Credit Slips
	 
	 	2.3.1	 	Merchant Policy
	 
	 	 	 	You may limit returned merchandise or limit price adjustments, to the same extent as
for sales not involving a Card, provided you properly disclose the policy to the
Cardholder before the sale, the limits are noted on the Card Sale record before the
Cardholder signs it, and the purchased Goods or Services are delivered to the
Cardholder at the time the Card Sale takes place.
	 
	 	2.3.2	 	Credit Slip
	 
	 	 	 	You may not make a refund or adjustment for a Card Sale in cash (except when
required by law), but will deliver to Citibank a Credit Slip for a refund or
adjustment to the Card account within seven (7) days of the refund or adjustment and
deliver to the Cardholder a copy of the Credit Slip at the time the refund or
adjustment is made.
	 
	 	 	 	You must include the refund date and amount and a brief description of the refund or
adjustment on the Credit Slip in sufficient detail to identify the Card used and
original Card Sale.
	 
	 	 	 	You may not deliver a Credit Slip to Citibank for any refund or adjustment of a
purchase not originating as a Card Sale with the same Cardholder requesting the
refund or adjustment, or a Card Sale not made with the Merchant.
	 
	 	 	 	You may not receive money from a Cardholder and subsequently deliver to Citibank a
Credit Slip to make a deposit to the Card account. Citibank may delay, within the
legal limit, processing Credit Slips on any day to the extent the valid Credit Slips
exceed the total of valid Card Sales presented on that day.
	 
	 	 	 	2.4 Cash Advances
	 
	 	 	 	Unless otherwise agreed to in writing by Citibank, you may not issue a cash advance on
any Citibank Card.
	 
	 	 	 	2.5 Surcharges
	 
	 	 	 	Unless otherwise agreed to in writing by Citibank, you may not impose any surcharge,
levy, or fee of any kind for the use of a Sears Card product by the Cardholder.
	 
	 	 	 	2.6 Split Tickets
	 
	 	 	 	You may allow a Cardholder to use the Sears Card to pay for a portion of any service or
merchandise.
	 
	 	 	 	2.7 Minimum/Maximum Dollar Limits
	 
	 	 	 	You may not require that any Cardholder make a minimum purchase in order to use a
Sears Card. You may not set a maximum limit on purchases for a Cardholder using a
Sears Card.

Merchant Operating Rules and Regulations       9

 

 

	 	 	 	2.8 Transaction Amount Tolerances

	 	 	 
	Industry	 	Amount Tolerances
	 	 	 

	Retail
	 	Authorization amount must equal clearing amount

	 	 	 

	Supermarket
	 	Authorization amount must equal clearing amount

	 	 	 

	Restaurant
	 	Clearing amount variance = +/- 20% from original
authorization amount

	 	 	 

	Hotel/Auto Rental
	 	Clearing amount variance = +/- 15 % of the original
authorization amount

	 	 	 

	Airlines
	 	Clearing amount variance = +/- $1.00

	 	 	 

	Card Not Present
	 	Authorization amount must equal clearing amount

	 	 	 	2.9 Equal Treatment of Sears Card Sales Versus Other Cards

You may not have any policy that discriminates against users of a Sears Card versus
any other credit or charge card that you accept.
	 
	 	 	 	2.10 Telephone, Internet, or Mail Order Sales

All telephone, Internet, and mail order sales will need to obtain an electronic
Authorization as set forth above in section 2.1.
	 
	 	2.11	 	Suspicious Situations
	 
	 	 	 	Any Merchant employee who is suspicious of the validity of a Sears Card or the
presenter of the Sears Card for any reason should notify Citibank immediately. The
procedure is as follows:

	 	•	 	Call the Authorization Center at 1-800-733-2426;
	 
	 	•	 	Ask the Account Manager for a Code 10 Authorization;
	 
	 	•	 	The Account Manager will connect you to the Code 10 Authorization Center;
	 
	 	•	 	The Code 10 Authorization Center will ask your employee a series of
questions that will not appear unusual to the customer and will allow them to
process the authorization.

	 	 	 	2.12 Prohibited Transactions and Factoring
	 
	 	 	 	You must not present to Citibank, directly or indirectly, any Sales Record:

	 	•	 	That is not the result of a bona fide Card Sale between the Cardholder and you;
	 
	 	•	 	You knew or should have known to be fraudulent or not authorized by the Cardholder;
	 
	 	•	 	That represents a Card Sale outside your normal course of business;
	 
	 	•	 	Representing the refinancing or transfer of an existing Cardholder obligation;
	 
	 	•	 	Representing a Card Sale arising from the dishonor of a Cardholder’s personal check;
	 
	 	•	 	Representing another Sales Record that has already been presented to Citibank.

	3.	 	Applications (where applicable)

	 	 	 	3.1 Applications at Point-of-Sale
	 
	 	 	 	If applicable, applications for Sears Credit Cards can be completed, whether with or
without an accompanying sale, and forwarded to Purchaser via telephone or by
electronic transmission, inclusive of telephone, terminal or point-of-sale system
devices, will be transmitted to Citibank in a mutually acceptable manner and format.
Merchant shall be responsible for the following:

	 	•	 	Providing all information required on the application furnished by Citibank.
	 
	 	•	 	Obtaining and verifying one form of identification to verify the applicant’s
identity, one of which must consist of a current, official government
identification document, such as a passport or driver’s license, that bears the
applicant’s signature.
	 
	 	•	 	Obtaining the signature on the Application of all persons whose names will
appear on the Account or who will be responsible for the Account.
	 
	 	•	 	Upon either approval or decline, sending the signed disclosures, including
those processed by telephone, to Citibank at the designated address within five
(5) days.

Merchant Operating Rules and Regulations       10

 

 

	 	•	 	Entering the sale into the Electronic Card Capture Device. If requested to
do so by Citibank’s representative, Merchant’s employee shall also enter into
the Electronic Card Capture Device the approval code provided by Citibank
	 
	 	•	 	Providing to each applicant a copy of the initial disclosures Citibank
provides to Merchant expressly for distribution to applicants.

	 	 	 	If approved, Citibank’s representative will provide the Account number, credit limit
and term where applicable to Merchants’ employee or representative. In order to
obtain Authorization for the Card Sale, Merchant’s employee or representative must
enter the Account number and total amount of the Card Sale into the Electronic Card
Capture Device.
	 
	 	 	 	If Citibank declines an application, Citibank will provide Merchant’s employee or
representative with an adverse action reference number that Merchant’s employee or
representative will provide to the applicant and Citibank will send an adverse
action letter to the applicant via mail.
	 
	 	 	 	If Citibank is unable to render an immediate decision, Citibank will provide the
Merchant’s employee or representative with an application pending number with phone
number, and the Merchant employee or representative will call Citibank for a final
approve or decline decision. If Citibank declines the application, Merchant will
then advise the applicant that Citibank will notify the applicant of the final
decision by mail.
	 
	 	 	 	If the application is approved, but the total amount of the Card Sale exceeds the
line of credit offered to the applicant, Citibank’s associate will communicate to
the applicant a counteroffer for a lower line of credit or another Sears Credit
Card. If the applicant declines the counteroffer, Merchant’s employee or
representative must treat the application as if Citibank declined the application.
	 
	 	 	 	3.2 Telephone Applications
	 
	 	 	 	If applicable, applications for the Credit Card received by Merchant by telephone,
whether with or without an accompanying sale, will be processed by Merchant and
forwarded electronically to Citibank in a mutually acceptable manner and format.
Such applications will be immediately available for Card Sales only if the
Cardholder received the required initial disclosures. If the consumer applies for
an Account by telephone and did not receive the initial disclosures, Citibank will
put a tiered watch or block on the Account until a plastic card with disclosures is
received by the customer, and the Merchant’s employee or representative may not
process the Card Sale on the Account until the Cardholder activates the card or uses
the card in the Store.
	 
	 	 	 	3.3 Internet Applications
	 
	 	 	 	Customers of Sears who wish to apply for a Sears Credit Card may do so via Sears’
Internet website. All applications received by Citibank via the Internet will be
processed only if all of the information requested on the website application form
has been completed. For Internet applications, the Citibank Card Agreement shall be
transmitted to the consumer by Citibank through the website. If approved, Accounts
opened via the Internet application process are immediately available for Card
Sales.

	4.	 	Processing and Settlement

	 	 	 	Unless otherwise agreed to with Citibank, all Processing and Settlement for Sears
Card transactions will be accomplished via your agreement with your Processor or
Financial Institution, with and through Citibank.
	 
	 	 	 	4.1 Processing and Settlement for Sears Card Transactions
	 
	 	 	 	General Rules for Processing and Settlement
	 
	 	 	 	Submission of Card Sales for Cardholder Purchases: You must submit to Citibank
Card Sales only if the Card Sale is made or approved by the Cardholder who is
issued, or is authorized to use, the Card used for the Card Sale. Unless otherwise
agreed to in writing by Citibank, you must not submit a Card Sale until you have
performed the services or have shipped the merchandise postage prepaid to the
customer. You will not submit:

	 	•	 	A Card Sale involving solicitations from third parties, for example,
telemarketing by independent contractors, or a Card Sale involving your
franchisees, partners, or joint ventures, except as authorized in writing by
Citibank;
	 
	 	•	 	A Card Sale for a purchase from any entity other than you, or Card
Sales by any of your owners, partners, officers or employees, other than Card
Sales for bona fide purchases from you.

Merchant Operating Rules and Regulations       11

 

 

	 	 	 	You will not directly bill or accept payment from a Cardholder for any Card sales
you submit to Citibank, except that if a Card Sale results in a Chargeback paid by
you, you may proceed to collect from the Cardholder as permitted by law but not by
submitting a new Card Sale to cover the Chargeback.
	 
	 	 	 	Citibank will pay you for each valid Card Sale, which you submit to Citibank by
crediting your Merchant Settlement Account according to the payment schedule and
method agreed to in your Agreement with Citibank. Citibank is not obligated to pay
you for Card Sales submitted that are not valid Card Sales. Each payment from
Citibank to you will be subject to adjustment upon Citibank’s further review and
verification. Payment to you for a Card Sale disputed by a Cardholder for any
reason is not final.
	 
	 	 	 	Citibank may deduct from any payment to you the amount of any Credit Slip, Refund or
Chargeback to you, and any processing fees or Card Sales due from you, as well as
any deductions for a Reserve Account, as provided in your Agreement with Citibank.
You must immediately pay Citibank the amount by which Credit Slips processed on any
day exceed valid Card Sales submitted on that day without limiting Citibank
remedies, Citibank may obtain the amount due by deducting it from the Merchant
Settlement Account, or funds due you.
	 
	 	 	 	You must pay Citibank processing fees and Card Sales in the amount specified in the
pricing Schedule provided by Citibank in the Merchant Agreement.
	 
	 	 	 	You will designate a Merchant Settlement Account in your name at a depository
institution under arrangements acceptable to Citibank. If the Merchant Settlement
Account is closed, Citibank may in its sole discretion either hold funds due to you
or remit funds to you in a manner of Citibank own choosing such as but not limited
to, a check or wire transfer.
	 
	 	 	 	All such debits and credits will be made through the Automated Clearing House
(“ACH”) if possible. Merchant will comply with all ACH and Bank rules
applicable. All such debits and credits are provisional as between the parties and
subject to reversal under your Merchant Agreement with Citibank.
	 
	 	 	 	Merchant shall have the right to replace the Bank and/or the Account upon 10 days
written notice to Citibank or Acquirer designating the successor Bank and Account,
with a copy of its notice to the successor Bank of Citibank or Acquirer’s rights and
authorities hereunder. Merchant shall not close the old Account until the successor
Account has been opened and such a notice has been given.
	 
	 	 	 	Citibank reserves the right, at its sole discretion, to terminate a Merchant as an
acceptor of Cards, including the ability to suspend for any period of time the
ability of Merchant to accept Cards at any of it’s locations (including, but not
limited to, acceptance via the Internet, telephone or other means of communication).
	 
	 	 	 	If you process the Sears Cards with Citibank, We will provide a settlement report
and/or file upon your request. Otherwise, please contact your processor.
	 
	 	4.2	 	Recording A Card Sale
	 
	 	4.2.1	 	Completing a Card Sale record
	 
	 	 	 	You must record each Card Sale and Sales Record by following procedures in a format
and manner specified by Citibank and using records such as sales drafts, sales slips
or electronic processing records and methods, as applicable. You will complete each
sale as a single Card Sale, unless otherwise agreed to in writing by Citibank.
	 
	 	4.2.2	 	Obtaining the Cardholders’ Signature
	 
	 	 	 	You will require Cardholders to sign the Card Sale record but not until the final
transaction amount is entered into the total column of the Card Sale record. You
warrant that the signature on the Card Sale record is that of the Cardholder or a
person authorized by the Cardholder to use the Card. If the signature panel in the
Card is blank or if signature panel has “See ID”, in addition to requesting an
Authorization, you must do all of the following:

Merchant Operating Rules and Regulations       12

 

 

	 	•	 	Review positive identification to determine that the customer is the
Cardholder. The identification must consist of a current, official government
identification document, such as a passport or driver’s license, that bears the
Cardholder’s signature;
	 
	 	•	 	Write the positive identification, including any serial number and
expiration date on the Card Sale record;
	 
	 	•	 	Require the Cardholder to sign the signature panel of the Card before completing the Card Sale.

	 	4.2.3	 	Delivering Card Sale Records to the Cardholder
	 
	 	 	 	You will deliver to the Cardholder an accurate and complete copy of the Card Sale,
no later than the time of delivery of the goods or performance of services, using a
format approved by Citibank. You must provide the following information on the
Cardholder’s copy:

	 	•	 	Card account number
	 
	 	•	 	Merchant name
	 
	 	•	 	Location code or city and state
	 
	 	•	 	Card Sale amount
	 
	 	•	 	Card Sale Date
	 
	 	•	 	Brief description of merchandise or services sold

	 	 	 	4.3 Submitting Electronic Sales Data
	 
	 	4.3.1	 	General Rules
	 
	 	 	 	All Card Sale Data will be submitted to Citibank through an electronic terminal,
unless otherwise agreed to in writing by Citibank.
	 
	 	 	 	You will submit all Card Sales to Citibank using approved Card Sale records, within
five days of the Card Sale unless Citibank grants you a longer time in writing.
Delay in submitting Card Sales may result in Citibank declining to process the Card
Sales, or non-payment of Merchant Card Sales.
	 
	 	 	 	All Card Sale Data must be in US dollars.
	 
	 	4.3.2	 	Cardholder Verification
	 
	 	 	 	You will not complete a Card Sale before the “Valid From” date or after the
expiration date of a Card, where applicable.
	 
	 	 	 	You will complete a Card Sale only if the signature on the sales draft or Card Sale
record is the same as the signature appearing on the Card (which signature may, but
need not be, the name embossed or printed on the Card). If identification is
uncertain or if you otherwise question the validity of the Card, you will contact
Citibank for instructions.
	 
	 	 	 	Nevertheless, conforming to these requirements will not relieve you of your
responsibility to verify that the person using the Card is the Cardholder or a
person authorized by the Cardholder to use the Card.
	 
	 	 	 	Citibank may require you to examine additional Card security features before
completing a Card Sale.
	 
	 	 	 	You must transmit your Sales Data each business day to your Sears Card Processor,
Financial Institution or directly to Citibank (if applicable). If you fail to send
Sales Data to your Processor, Financial Institution, or Citibank on the next
business day, Citibank will not be required to reimburse the transactions, as
outlined in the Chargeback Rules. In the event of system availability problems,
please see section 2.5.
	 
	 	 	 	All data transmitted must be in a form and format approved in advance by Citibank
and must be presorted and organized according to Citibank’ instructions.

Merchant Operating Rules and Regulations       13

 

 

	 	 	 	4.4 Payments
	 
	 	 	 	You may not receive or process any payment intended for a Cardholder’s account. If
you receive a payment from a Cardholder, you must immediately forward it to Citibank
at:

	 	 	 	Citibank Payment Center
	 
	 	 	 	PO Box 182149
	 
	 	 	 	Columbus, OH 43218-2149

	 	4.5	 	Settlement Downtime Procedures
	 
	 	 	 	If the Electronic Card Capture Device is not working you must retain and continue to
retry transmission when the Electronic Card Capture Device is functional. In the
event of a Processor or Financial Institution system failure, Citibank reserves the
right to reject transactions submitted more than 5 days from the date the system
becomes operational. In the event of a Merchant system failure, Citibank reserves
the right to reject transactions submitted more than ten days from the transaction
date. If you surpass the timeframes listed, you must re-authorize the transaction
before the transaction can be submitted for settlement.

	5.	 	Special Requirements for Special Services

	 	 	 	5.1 Travel and Entertainment
	 
	 	 	 	The following sections set forth-additional requirements for travel and
entertainment reservation service.
	 
	 	 	 	If you provide lodging (hotel, motel, resort or inn) you may guarantee a reservation
by obtaining the Card’s embossed name, account number and expiration date and by
completing the following procedures:
	 
	 	 	 	Verbally confirm to the Cardholder the reservation by stating the following information:

	 	•	 	Card’s embossed name, account number and expiration date as provided by the Cardholder;
	 
	 	•	 	Name and exact address, including street, city and state of the lodging check-in location;
	 
	 	•	 	Reservation confirmation code;
	 
	 	•	 	Rate and any other details relating to the reservation;
	 
	 	•	 	Provisions of the guaranteed reservation relating to the
Cardholder’s reservations and any other cancellation details related to the
reservation;
	 
	 	•	 	Inform the Cardholder that lodging accommodations will be held until
check-out time on the day after the scheduled arrival date unless cancelled by
six p.m., local establishment time, on the scheduled arrival date;
	 
	 	•	 	For resort establishments requiring cancellation before six p.m.,
local establishment time, on the scheduled arrival date, the cancellation time
must not exceed 72 hours before the scheduled arrival date. The Cardholder
must be provided with the specific written cancellation policy, including the
date and time the cancellation privileges expire. If a reservation is made
less than 72 hours before the scheduled arrival, the cancellation procedure of
six p.m., local establishment time, on the scheduled arrival date will apply;
	 
	 	•	 	Provide the Cardholder if requested with a written confirmation
including the information specified above;
	 
	 	•	 	Advise the Cardholder of the billing for a no-show Card Sale as
specified below. (A no-show Card Sale is a Card Sale by you resulting from the
Cardholder’s failure to properly cancel the reservation);
	 
	 	•	 	If the Cardholder has not checked in by check-out time the day
following the scheduled arrival date and the reservation was not properly
cancelled, the Cardholder may be Charged for one night’s lodging including tax;
	 
	 	•	 	Accept a cancellation request from a Cardholder provided the
cancellation request is made before the specified cancellation time. Provide
the Cardholder with a cancellation code and advise the Cardholder to retain it
in case of a dispute. If requested, provide the Cardholder with written
confirmation of the cancellation including the Card’s embossed name, the
cancellation code, and the details relating to the cancelled reservation;

Merchant Operating Rules and Regulations       14

 

 

	 	•	 	If the reserved lodging accommodation has not been rented or
cancelled by the specified cancellation time, the lodging accommodations must
be held available in accordance with the reservation;

	 	 	 	5.2 Online/Internet Transactions
	 
	 	 	 	All Internet transactions must have 128-bit Secure Socket Layer (SSL) Web encryption
at a minimum when any sensitive information is entered or transmitted.
	 
	 	 	 	5.3 Retrievals and Chargebacks
	 
	 	 	 	Citibank will chargeback to you and you will pay back Citibank, the amount of each
Card Sale which you submit to Citibank that is charged back for any reason, or to
the extent Citibank has received valid claims regarding the Card Sales from
Cardholders under other provisions of law.
	 
	 	5.3.1	 	Retrieval Requests
	 
	 	 	 	A Cardholder may request information regarding a Transaction made at your
establishment. If Citibank requests documentation or a Retrieval Request from you,
you must provide us with a copy of the Sales Record within 30 business days of our
request. If you do not respond in the allotted time, Citibank may issue a
chargeback, as described in section 5.2.2.
	 
	 	5.3.2	 	Chargebacks
	 
	 	 	 	A Chargeback may occur for any one or more of several reasons, or through operations
of consumer protection laws such as the Truth in Lending Act and the Fair Credit
Billing Act. Chargebacks must be submitted to the Merchant no later than 120 days
after the transaction in question appeared on the customers’ bill or after expected
or actual date of delivery or installation. Citibank may correspond on behalf of
the Cardholder for submission of dispute summaries or chargeback notifications.
Chargeback reasons include, without limitation:

	 	 	 	 	 	 	 
	Definition	 	Explanation	 	Support Chargeback	 	Reverse Chargeback
	Transaction without
Required Authorization

	 	A valid
Authorization was
not obtained.
	 	Authorization Report for
Sales Data and Cardholder
billing statement.
	 	-Within downtime floor limits set forth in
Section 1.1.3 of the Rules, or
-proof of authorized transaction partial/full
.
	 
	 	 	 	 	 	 
	Transaction without
Required Authorization,
where Transaction would
have been declined by
Citibank

	 	A valid
Authorization was
not obtained.
	 	Authorization Report
reflecting that the
transaction would have been
Declined at the time of
sale.
	 	Proof that the transaction was Authorized in
part or in full.
	 
	 	 	 	 	 	 
	Declined Authorization

	 	The Card Sale was
completed after Merchant received a
decline.
	 	Authorization Report
showing Decline and Cardholder billing
statement.
	 	-proof of authorized transaction partial/ full
	 
	 	 	 	 	 	 
	Invalid Cardholder
Account Number

	 	The Card Sale was
submitted using an
Account number for
which no valid
Account exists or
can be located.
	 	Reject-Re-entry Report or
Purged Account Report.
	 	-Provide proof of imprint or swiped card
information, and
-proof of authorized transaction partial/ full
	 
	 	 	 	 	 	 
	Late Presentation of
Transaction

	 	The Card Sale was
presented after the
five-day limit, and
as provided in
Section 1.4.1 of
the Rules.
	 	Sales Record and Cardholder
billing statement with
proof of a negative change
in the Cardholder status at
the time of Chargeback.
	 	-Provide proof that negative change in the
Cardholder status is false or occurred prior
to the additional five day period.
	 
	 	 	 	 	 	 
	Cardholder Disputes
Merchandise/Service

	 	The Cardholder
disputes the
delivery, quality
or performance of
Merchandise/Service
and Merchant has
not resolved such
dispute within 30
days, and
Cardholder claims
to have made a good
faith attempt to
resolve with
Merchant.
	 	Completed written dispute
form from Citibank stating
the claim by the
Cardholder.
	 	Resolution of dispute by Merchant within the
timeframe, provide proof that a partial/full
credit has been posted to the Account, or
prove that written dispute is invalid.
	 
	 	 	 	 	 	 
	Transaction Amount Differs

	 	The Cardholder
claims that the
purchase amount for
which the
Cardholder signed
was altered after
the Cardholder
signed the Sales
Record and without
the Cardholder’s
consent or
direction, with the
exception of travel
and entertainment
transactions. Only
the difference will
be charged back to
Merchant.
	 	Cardholder’s Receipt does
not match copy of Sales
Record received from
Merchant or the Account
Itemization or Statement
	 	- POS Transaction Log proving Cardholder
altered the amount, or
- Merchant Policy at T&E Merchants as
outlined in section 3.1.1 of these Rules.

Merchant Operating Rules and Regulations       15

 

 

	 	 	 	 	 	 	 
	Definition	 	Explanation	 	Support Chargeback	 	Reverse Chargeback
	Duplicate Processing

	 	Cardholder claims
they have been
charged twice for a
Card Sale.
	 	Cardholder billing
statement(s) or itemization
	 	Production of two Sales Records with
different authorization codes or POS
Transaction Log or proof that a credit/refund
was granted.
	 
	 	 	 	 	 	 
	Non-Receipt of Refund or
cancellation of services/
merchandise

	 	Cardholder claims
that a Refund
issued by Merchant
has never been
posted to the
Cardholder’s
Account or
Cardholder received
a cash refund in
connection with a
Card Sale. The
Chargeback is
limited to the
amount of the
Refund.
	 	Cardholder’s Credit Slip or
credit advice, or proof of
return or cancellation.
	 	-Proof that a credit/refund was granted, or
-Provide Store rebuttal if service /merchandise
is not accepted for credit per
the refund/return/cancellation
policy
	 
	 	 	 	 	 	 
	Unauthorized Purchase

	 	The Cardholder
claims that neither
the Cardholder nor
any party
authorized by the
Cardholder participated in the
Card Sale and that
the Cardholder has
no knowledge of the
Card Sale.
	 	Completed written dispute
form from Citibank stating
the claim by the
Cardholder, and copy of
Sales Record and
authorization log. Additional investigation
may also be necessary.

	 	Proof that the Sears Card was present at the
time of the transaction and (i) a valid
Authorization and (ii) consent of Cardholder
or Cardholder’s authorized representative
were obtained.
For Mail Orders/Telephone Orders (MOTO): proof that Cardholder received merchandise
(or signed receipt of delivery by Cardholder
or person to whom shipment was sent in
accordance with Cardholder’s
instructions). Signature and imprinted draft
or proof that card was present.
	 
	Non-Receipt of Merchandise

	 	Merchant submitted
a Card Sale in
which the
Merchandise was not
yet shipped or
otherwise provided
to the Cardholder
or the Cardholder
claims they have
not received the
Merchandise for
which they have
been charged.
	 	Completed written dispute
form from Citibank stating
the claim by the Cardholder
	 	Proof that the cardholder or a person
authorized by the cardholder received the
merchandise.
	 
	 	 	 	 	 	 
	Non-Receipt of Requested
Document

	 	Sales Record or
Refund Record has
not been provided
within 30 days of
request.
	 	None
	 	Provide proof that documentation was sent
within the same 30-day period.
	 
	 	 	 	 	 	 
	Breach of representation
or warranty of Merchant
that relates directly to
the Cardholder’s
complaint, except for
instances of Merchant’
employee fraud.

	 	Citibank to provide
detail to Merchant
with respect to the
specific breach and
amount of
Chargeback.
	 	Proof of breach by Merchant.
	 	Proof of compliance in all material respects
with representation or warranty.

	 	 	 	Citibank may correspond on behalf of the Cardholder for submission of dispute
summaries or Chargeback notifications. Merchant will furnish Citibank with copies
of Card Sales and related information within thirty (30) days of Citibank’s request.
Doing so will not prevent a Chargeback, but failure to respond will significantly
increase the probability of a Chargeback.
	 
	 	5.3.3	 	Representment
	 
	 	 	 	You must submit your request to Citibank within thirty days after receiving notice
of the Chargeback. Your failure to act within that time may not provide Citibank
with a reasonable number of days to evaluate your Representment of the Card Sale.
Citibank will not be obligated to accept Representments of Chargebacks except to the
extent allowed by your timely dispute of other Chargebacks. Citibank’ obligation to
you for a Chargeback is limited to Representment. Citibank will not engage in
direct collection efforts against Cardholders on your behalf.

Merchant Operating Rules and Regulations       16

 

 

	 	5.3.4	 	Type Three Chargeback
	 
	 	 	 	Citibank reserves the right to make a final decision and reverse a Chargeback back
to you that Citibank does not believe you have provided sufficient proof of your
position as outlined in Section 5.2.2 above. Citibank reserves the right to do so
in it’s sole discretion.
	 
	 	5.3.5	 	Immediate Payment for Chargebacks
	 
	 	 	 	Each Chargeback to you is immediately due and payable. Citibank may deduct, debit,
and withhold the amount of the Chargeback or anticipated Chargeback from the
deposits due to you at any time without advance notice. Citibank will notify you as
debits occur.
	 
	 	 	 	In the event Citibank, in its sole discretion, determines that a Merchant, or any of
the Merchants locations are experiencing excessive Chargebacks or fraud, Citibank
reserves the right to suspend acceptance of the Sears Card from any Merchant or
Merchant’s location(s) immediately without further notices.

	6	 	Business Type

	 	 	 	We have agreed to allow you to accept the Sears Card based on the type of business
you currently are in. In the future, if you elect to engage in any new lines or
types of business activities, you must immediately inform us of this by contacting
Citibank. If you fail to notify us, We may terminate acceptance of the Sears Card
immediately and without further notice.
	 
	 	 	 	There are some types of businesses We have determined We will not accept as
Merchants. We may elect not to extend our Merchant acceptance to any new lines or
business activities you might enter in to.
	 
	 	 	 	Because of the irreparable damage to the value of the Sears Card and the Trademarks,
the use of the Sears Card in connection with a going out of business sale,
liquidation sale, insolvency or bankruptcy of Merchant is strictly prohibited. You
agree that Citibank will be entitled to, and hereby consents to the entry without
notice to your place of business or the posting of any bond in respect thereof by
Citibank of, a stay, temporary injunction, and permanent injunctive relief
prohibiting such use.

	7	 	Advertising

	 	7.1	 	Telephone, Internet, or Mail Order Merchants
	 
	 	 	 	You agree that you will offer the Sears Card as a payment option in accordance with
any agreement you have with Citibank, or at least in such a manner and with such
frequency as accorded any other third party credit or charge card with which you do
not have a special marketing agreement.
	 
	 	 	 	7.2 All Other Merchants
	 
	 	 	 	You agree that you will prominently display at each of your locations advertising
and promotional materials relating to the Sears Card in such a manner and with such
frequency as accorded any other third-party credit or charge card. We may, at our
expense or at a mutually agreed upon expense, supply advertising and display
materials necessary to promote the Sears Cards.

Merchant Operating Rules and Regulations       17

 

 

EXHIBIT B TO SCHEDULE 9.2A

Pricing Schedule

For Citibank’s services hereunder, Merchant will pay compensation to Citibank at the rates set
forth in this Pricing Schedule, and reimburse Citibank for certain expenses identified herein.
Such rates are subject to increase by Citibank to reflect any business necessary increase in the
assessments, interchange fees or other charges. In the event of such an increase Citibank will
provide to Merchant as much advance notice as possible and a calculation or good faith estimate of
the effect of such increase on the costs of providing the services hereunder.

If applicable, Citibank will compute such compensation and deliver a statement to Merchant monthly,
and shall, on the first business day following the end of the month, debit the amount from the next
settlement as stated in Section 8 of the Agreement, or if such settlement is insufficient, directly
from the Account. Any compensation not paid by such a debit will be payable in cash on demand.

Merchant agrees that it will pay Citibank a processing fee equal to 0% of the net amount of all
transactions processed under this Agreement.

The net amount shall equal total sales and chargeback reversals minus total credits, returns, and
chargebacks.

The processing fee will be calculated daily and subtracted from the total amount due to the
Merchant as described in the above Agreement.

Merchant Operating Rules and Regulations       18exv10w2

 

Exhibit 10.2

AMENDMENT NUMBER ELEVEN

to the

AMENDED AND RESTATED INDENTURE,

dated as of November 25, 2003,

between

OPTION ONE OWNER TRUST 2001-2

and

WELLS FARGO BANK, N.A.

          This AMENDMENT NUMBER ELEVEN (this “Amendment”) is made and is effective as of this 29th
day of June, 2007, between Option One Owner Trust 2001-2 (the “Issuer”) and Wells Fargo Bank,
N.A., as Indenture Trustee (the “Indenture Trustee”), to the Amended and Restated Indenture, dated
as of November 25, 2003 (the “Indenture”), between the Issuer and the Indenture Trustee.

RECITALS

          WHEREAS, the parties hereto desire to amend the Indenture subject to the terms and conditions
of this Amendment.

          NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and the mutual covenants herein contained, the parties hereto hereby agree as
follows:

          SECTION 1. Defined Terms. Any terms capitalized but not otherwise defined herein shall have
the respective meanings set forth in the Indenture.

          SECTION 2. Amendment. Effective as of June 29, 2007, Section 1.01 of the Indenture is hereby
amended by deleting in its entirety the definition of “Maturity Date” and replacing it with the
following:

          “Maturity Date” means, with respect to the Notes, June 12, 2008.

          SECTION 3. Representations. In order to induce the parties hereto to execute and deliver
this Amendment, the Issuer hereby represents to the Indenture Trustee and the Noteholders that as
of the date hereof, after giving effect to this Amendment, (a) all of its respective
representations and warranties in the Indenture and the other Basic Documents are true and correct,
and (b) it is otherwise in full compliance with all of the terms and conditions of the Indenture
and the other Basic Documents, except to the extent waived by the Amendment and Waiver, dated as of
January 24, 2007 (the “Indenture”), between the Issuer, Option One Mortgage Corporation, Option One
Loan Warehouse Corporation, Option One Mortgage Capital Corporation, the Indenture Trustee and Bank
of America as majority noteholder.

          SECTION 4. Limited Effect. Except as expressly amended and modified by this Amendment, the
Indenture shall continue in full force and effect in accordance with its terms. Reference to this
Amendment need not be made in the Indenture or any other instrument or document executed in
connection therewith or herewith, or in any certificate, letter or

 

 

communication issued or made pursuant to, or with respect to, the Indenture, any reference in any
of such items to the Indenture being sufficient to refer to the Indenture as amended hereby.

          SECTION 5. Fees and Expenses. The Issuer covenants to pay as and when billed by the Initial
Noteholder all of the reasonable out-of-pocket costs and expenses
incurred in connection with the transactions contemplated hereby and in the other Basic
Documents including, without limitation, (i) all reasonable fees, disbursements and expenses of
counsel to the Initial Noteholder and (ii) all reasonable fees and expenses of the Indenture
Trustee and its counsel.

          SECTION 6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS DOCTRINE APPLIED IN
SUCH STATE.

          SECTION 7. Counterparts. This Amendment may be executed by each of the parties hereto on any
number of separate counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument.

          SECTION 8. Limitation on Liability. It is expressly understood and agreed by the parties
hereto that (a) this Amendment is executed and delivered by Wilmington Trust Company, not
individually or personally, but solely as Owner Trustee of Option One Owner Trust 2001-2 in the
exercise of the powers and authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and intended not as
personal representations, undertakings and agreements by Wilmington Trust Company but is made and
intended for the purpose for binding only the Issuer, (c) nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company, individually or personally, to
perform any covenant either expressed or implied contained herein, all such liability, if any,
being expressly waived by the parties hereto and by any Person claiming by, through or under the
parties hereto and (d) under no circumstances shall Wilmington Trust Company be personally liable
for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer
under this Amendment or any other related documents.

[signature page follows]

2

 

          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered
by their duly authorized officers as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	OPTION ONE OWNER TRUST 2001-2
	 
	 	 	 	 	 	 
	 	 	By: Wilmington Trust Company, not in its
	 	 	individual capacity but solely as owner
	 

	 	trustee	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	WELLS FARGO BANK, N.A., as Indenture
	 

	 	Trustee	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	 	 	 
	 

	 	Title:	 	 	 	 

[Signature Page to Amendment Eleven to Amended and Restated Indenture]

3

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