-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MaoWZ9vdKxwkbl01JKeCZIL3vXWYflkRYSGwkCIXsGV829vDygMNHkD5izVRr2qn psSFFknxvyIORxeUIpmlFQ== 0000916641-97-000649.txt : 19970701 0000916641-97-000649.hdr.sgml : 19970701 ACCESSION NUMBER: 0000916641-97-000649 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19970630 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACKSON HEWITT INC CENTRAL INDEX KEY: 0000840346 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 541349705 STATE OF INCORPORATION: VA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-30439 FILM NUMBER: 97633458 BUSINESS ADDRESS: STREET 1: 4575 BONNEY RD CITY: VIRGINIA BEACH STATE: VA ZIP: 23462 BUSINESS PHONE: 804-423-3300 MAIL ADDRESS: STREET 1: 4575 BONNEY ROAD CITY: VIRGINA BEACH STATE: VA ZIP: 23462 S-1 1 JACKSON HEWITT, INC. S-1 As filed with the Securities and Exchange Commission on June 30, 1997 Registration No. 333-_____ =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------------- JACKSON HEWITT INC. (Exact Name of Registrant as Specified in Its Charter) Virginia 7291 54-1349705 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification No.) 4575 Bonney Road Virginia Beach, Virginia 23462 (757) 473-3300 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) --------------------- KEITH E. ALESSI Chairman, President and Chief Executive Officer Jackson Hewitt Inc. 4575 Bonney Road Virginia Beach, Virginia 23462 (757) 473-3300 (Names, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) ------------------------- With Copies to: JOHN M. PARIS, JR., ESQ. BARRY H. GENKIN, ESQ. Kaufman & Canoles Blank Rome Comisky & McCauley P.O. Box 3037 1200 Four Penn Center Plaza Norfolk, Virginia 23514-3037 Philadelphia, Pennsylvania 19103 (757) 624-3181 (215) 569-5514 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.[ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.[ ]
CALCULATION OF REGISTRATION FEE ================================================================================================================= Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Aggregate Amount of Registration Securities to be Registered Registered Offering Price Per Offering Price(1)(2) Fee Share ================================================================================================================= Common Stock, par value 1,130,790 $11.38 $12,868,390 $3,899.51 $0.02 per share =================================================================================================================
(1) Includes shares subject to the Underwriters' over-allotment option. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c). ---------------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE. SUBJECT TO COMPLETION, DATED JUNE 30, 1997 1,130,790 Shares JACKSON HEWITT INC. Common Stock --------------------------- Of the 1,130,790 shares of common stock, $0.02 par value per share (the "Common Stock"), offered hereby (the "Offering") 1,000,000 shares are being offered by Jackson Hewitt Inc., a Virginia corporation (the "Company") and 130,790 shares are being offered by the Selling Shareholders. The Company will not receive any of the proceeds from the sale of shares by the Selling Shareholders. See "Principal and Selling Shareholders." The Common Stock is traded on the Nasdaq Stock Market's National Market System (the "Nasdaq National Market") under the symbol "JTAX." As of June 27, 1997, the last reported sale price of the Common Stock was $11.75 per share. See "Price Range of Common Stock." --------------------------- Prospective Investors should carefully consider "Risk Factors" beginning on page 6. --------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ------------------------------------------------------------------------------- Underwriting Discounts and Proceeds to Proceeds to Selling Price to Public Commission(1) Company(2) Shareholders - ------------------------------------------------------------------------------- Per Share... $ $ $ $ - ------------------------------------------------------------------------------- Total(3).... $ $ $ $ - ------------------------------------------------------------------------------- - ------------------------------ (1) The Company and the Selling Shareholders have agreed to indemnify the Underwriters against certain liabilities including certain liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deducting expenses and other fees payable by the Company estimated at $400,000. (3) The Company and the Selling Shareholders have granted the Underwriters a 30-day option to purchase up to 169,619 additional shares of Common Stock on the same terms and conditions as set forth above, solely to cover over-allotments, if any. If all such shares are purchased, the total Price to Public, Underwriting Discount, Proceeds to Company, and Proceeds to Selling Shareholders will be $___________, $___________ , $_______________, and $___________, respectively. See "Underwriting." --------------------------- The shares of the Common Stock are offered by the several Underwriters, subject to prior sale, receipt and acceptance by them and subject to their right to reject orders in whole or in part. It is expected that delivery of the certificates for the shares of Common Stock will be made against payment therefor on or about ___________ __, 1997, at the office of Janney Montgomery Scott Inc., Philadelphia, Pennsylvania. --------------------------- Janney Montgomery Scott Inc. Scott & Stringfellow, Inc. The date of this Prospectus is ________________, 1997 [LEGEND] [MAP OF JACKSON HEWITT OFFICE NETWORK] CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS, IF ANY, MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING." PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements of the Company, including the notes thereto, appearing elsewhere herein. Unless indicated otherwise, the information in this Prospectus assumes no exercise of the Underwriters' over-allotment option and the closing of the transaction described in "Recent Developments". References in this Prospectus to the "Company" refer to Jackson Hewitt Inc. and its subsidiaries and references to "Jackson Hewitt" refer to the Company and the Company's system of franchised offices. Yearly references throughout this Prospectus refer to the Company's fiscal year ending on April 30. References to the term "tax season" throughout this Prospectus refer to the period from January through April of each fiscal year. For a discussion of certain matters that should be considered by prospective purchasers of the Common Stock offered hereby, see "Risk Factors." The Company Jackson Hewitt is the second largest tax preparation service in the United States, with a 41 state network comprised of 1,296 franchised and 76 Company-owned offices operating under the trade name "Jackson Hewitt Tax Service." Office locations range from stand-alone store front offices to offices within Wal-Mart Stores, Inc. ("Wal-Mart") and Montgomery Ward & Co., Inc. ("Montgomery Ward"). Through the use of proprietary interactive tax preparation software, the Company is engaged in the preparation and electronic filing of federal and state individual income tax returns (collectively referred to in this Prospectus as "tax returns"). During 1997, Jackson Hewitt prepared approximately 875,000 tax returns, which represented an increase of 21.2% from the approximately 722,000 tax returns it prepared during 1996. To complement its tax preparation services, the Company also offers accelerated check requests ("ACRs") and refund anticipation loans ("RALs") (ACRs and RALs, collectively, "Bank Products") to its tax preparation customers. In 1997, Jackson Hewitt customers purchased approximately 472,000 Bank Products, an increase of 20.1% over the approximately 393,000 Bank Products purchased in 1996. In 1997, the Company had total revenues of $31.4 million and net income of $5.0 million, or $0.95 per share, an increase of 25.6%, 107.5%, and 137.5%, respectively, over 1996. Through the innovative use of computers, the Company believes it provides consistent, high quality tax preparation services at prices that allow the Company to compete successfully with other businesses offering similar services. While the quality of service provided by other tax preparers depends largely on the individual preparer's knowledge of tax laws, Jackson Hewitt's service does not depend solely upon the preparer's tax expertise. Jackson Hewitt's proprietary interactive tax software, Hewtax, automatically prompts the preparer with the relevant questions required to accurately complete a tax return. By computerizing the tax preparation process, Jackson Hewitt is able to rapidly and efficiently prepare and file a customer's tax return electronically. Since electronic filings are generally processed by the Internal Revenue Service ("IRS") on a priority basis, customers who file in this manner typically receive refunds more quickly than those who file their tax returns manually. Jackson Hewitt's customer base currently consists primarily of low to middle income taxpayers who typically are entitled to tax refunds and want to receive their refund checks as quickly as possible. During the 1997 tax season, approximately 80% of Jackson Hewitt's customers had annual gross wages under $30,000 and over 62% had annual gross wages under $19,000. Many customers also qualify for an increased refund as a result of the Earned Income Credit ("EIC"), an income tax credit that can generate significant refunds for lower income taxpayers. These customers typically file their tax returns early in the tax season in order to receive their tax refund as quickly as possible. The Company believes that customers are attracted to Jackson Hewitt's services because they prefer not to prepare their own tax returns, are unwilling to pay the fees charged by most accountants and tax attorneys, or wish to purchase a Bank Product. As part of its electronic filing service, Jackson Hewitt offers its customers Bank Products in cooperation with selected commercial banks. Bank Products enable Jackson Hewitt customers to receive their tax refunds faster than if they filed their tax returns by mail and to defer the payment of the tax preparation and other fees until their tax refunds are actually received. Through the ACR program, Jackson Hewitt customers are offered the opportunity to have their tax refunds deposited directly into bank accounts established for this purpose. Through the RAL program, Jackson Hewitt customers may apply for loans in an amount up to their anticipated federal income tax refunds. The borrowed funds are generally disbursed to customers within one to three days from the time their tax returns are filed with the IRS. To obtain funds associated with tax refunds processed through the ACR or RAL programs, customers must return to the Jackson Hewitt office when notified that such funds are available. Bank Products have become an increasingly important source of revenue for the Company, accounting for 29.8% of total revenues in 1997, compared to 10.0% in 1993. During the 1997 tax season approximately 54.0% of Jackson Hewitt customers purchased Bank Products. The Company's growth has benefited from its ability to sell relatively inexpensive franchises. The purchase price for a new Jackson Hewitt franchise is currently $20,000. The franchisee receives the right to operate Jackson Hewitt offices within a geographic territory having a population of approximately 50,000. The Company sold 166 new territories during 1997, an increase of 46.9% over the 113 territories sold in 1996. Franchisees are permitted to operate as many offices within a territory as they choose. The net number of franchised offices has increased from 546 in 1993 to 1,296 in 1997. Net fees associated with the sale of franchises in 1997 totaled $3.2 million, or 10.2% of total revenues. Franchisees are required to pay royalties and advertising fees to the Company equal to 18% of revenues generated by the franchised offices. Such fees totaled $13.2 million in 1997, or 42.1% of total revenues. Through the expansion of its franchise operations, the Company has established a national presence, with a primary concentration in the Mid-Atlantic region of the United States. The Company also operates 76 Company-owned offices in selected territories throughout the United States. Historically, the Company-owned offices were located in territories reacquired from franchisees and thereafter were operated on a temporary basis by the Company pending their resale as a franchised territory. Recently, the Company re-evaluated its practice of reselling Company-owned offices and currently plans to operate Company-owned offices as an integral part of its business strategy. Beginning in 1997, the Company began closely reviewing the operations of these stores and intends to close unprofitable offices and improve operating procedures at the remaining offices. Company-owned offices generated tax return preparation fees, net, of $3.3 million in 1997, or 10.5% of total revenues. The Company's objective is to enhance market share through the continued geographic expansion of its system of tax preparation offices. The Company's management team has developed the following key strategic elements to achieve this objective: o Expand the Franchise Network. The Company intends to capitalize on the recent financial performance of its franchise network by selling additional territories to existing franchisees, as well as marketing territories to new franchisees with a focus on those who are financially capable of purchasing and operating multiple territories. The Company also intends to open offices in certain territories that will be available for purchase by franchisees who may be interested in purchasing existing businesses rather than undeveloped territories. o Expand the Corporate Office Program. Based upon initial test results in two markets, the Company intends to enter new markets by opening multiple Company-owned offices in selected territories. Recognizing the potential profitability of Company-owned offices, the Company believes it can maximize the effectiveness of its marketing campaigns and achieve certain economies of scale by operating clusters of Company-owned offices in target areas. o Improve Efficiency of Operations. The Company plans to continue to increase the efficiency and consistency of its Company-owned and franchised offices through its integrated computer systems and emphasis on standardization of operating practices. o Promote the Jackson Hewitt Brand Name. To increase market share, the Company intends to focus its marketing efforts on improving the recognition of the Jackson Hewitt brand name. Through its advertising campaigns, the Company intends to expand its existing customer base to include a greater percentage of middle to upper income taxpayers who, the Company's marketing research indicates, tend to file their tax returns late in the tax season. The Company believes that the successful implementation of these initiatives, coupled with the strength of its existing franchised network, will enable it to continue increasing its market share. The Offering Common Stock offered by the Company.................. 1,000,000 shares Common Stock offered by the Selling Shareholders..... 130,790 shares Total Offering....................................... 1,130,790 shares Common Stock to be outstanding after the Offering.... 6,336,620 shares(1) Use of Proceeds ..................................... To reduce the Company's dependence on its credit facility, and for working capital, general corporate purposes, and possible acquisitions of complementary businesses or product lines. See "Use of Proceeds." Nasdaq National Market symbol........................ JTAX - ---------------- (1) Does not include 468,944 shares issuable upon the exercise of outstanding options as of June 23, 1997, at a weighted average exercise price of $5.56 per share. See "Shares Eligible for Future Sale." Summary Financial Information
Years Ended April 30, --------------------------------------------------------------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- (in thousands, except per share, office and fee data) CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Total revenues $ 10,841 $ 18,640 $ 18,215 $ 25,016 $ 31,432 Income (loss) from operations 1,046 1,430 (1,078) 5,278 11,768 Income before extraordinary item 677 923 840 2,402 6,232 Net income 677 923 840 2,402 4,984 Income per common share: Primary: Income before extraordinary item $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 1.22 Net income $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 0.95 Fully diluted: Income before extraordinary item $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 1.18 Net income $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 0.91 Weighted average shares outstanding 3,701 4,069 4,252 4,354 4,520 SUPPLEMENTAL PRO FORMA INCOME PER COMMON SHARE (1): Primary: Income before extraordinary item $ 1.06 Net income $ 0.83 Fully diluted: Income before extraordinary item $ 1.03 Net income $ 0.80 OTHER OPERATING DATA: Tax returns prepared 404 570 618 722 875 Refund anticipation loans (RALs) provided 246 331 108 102 142 Accelerated check requests (ACRs) provided 15 22 192 291 330 Franchised offices 546 742 1,087 1,246 1,296 Company-owned offices 68 136 135 96 76 Average tax preparation fees per return $ 67 $ 69 $ 80 $ 92 $ 99 As of April 30, 1997 --------------------------- Actual As Adjusted(2) ----------- -------------- CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents $ 6,324 $ 16,940 Working capital 5,983 16,593 Total assets 28,160 38,776 Long-term debt 1,262 1,262 Redeemable convertible preferred stock 3,236 - Shareholders' equity 14,740 28,592
--------------------------------------- (1) Assumes the Company's exchange of 699,707 shares of Common Stock for 504,950 shares of Series A Convertible Preferred Stock had occurred on May 1, 1996. See "Recent Developments" and Note 16 of the Notes to the Consolidated Financial Statements. (2) Assumes (i) the sale of the 1,000,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $11.75 per share, (ii) the application of the estimated net proceeds thereof as described under the "Use of Proceeds", and (iii) the Company's exchange of 699,707 shares of Common Stock for 504,950 shares of Series A Convertible Preferred Stock had occurred on April 30, 1997. See "Capitalization", "Recent Developments", and Note 16 of the Notes to the Consolidated Financial Statements. RISK FACTORS Prospective investors should consider carefully the specific factors set forth below as well as the other information included in this Prospectus before deciding to invest in the Common Stock offered hereby. All statements and information herein, other than statements of historical fact, are forward-looking statements that are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. These forward looking statements may be identified by the use of words such as "believe," "anticipate," and "expect," and concern, among other things, the Company's expansion plans with respect to franchised offices; the Company's ability to expand its network of Company-owned offices profitably; the Company's intention to improve operating efficiencies; the Company's intention to improve Jackson Hewitt's brand name identity; the Company's plans to expand its existing customer base and market share; the Company's expectations regarding future demand for electronic filing services and Bank Products; the Company's ability to adapt its business to changes in IRS policies; and the Company's ability to offer Bank Products under programs that adequately protect the Company from undue risk. Many phases of the Company's operations are subject to influences outside its control. Any one or any combination of factors could have a material adverse effect on the Company's business, financial condition, and results of operations. These factors include: competitive pressures, economic conditions, governmental regulation and policies, changes in consumer spending, and other conditions affecting capital markets. The following factors should be carefully considered, in addition to other information contained in this document. Adverse Impact of IRS Policies From time to time, the United States Department of the Treasury (the "Treasury Department") and the IRS initiate policy and rule changes and other initiatives related to the electronic filing of tax returns, the treatment of the EIC, and the methods of providing refunds to taxpayers. Since the vast majority of the Company's revenues are derived, directly or indirectly, from the preparation of tax returns and the sale of associated Bank Products, these changes and initiatives can significantly impact the demand for tax return preparation and electronic filing services, and the sale, pricing, risk of collectibility, and profitability of Bank Products. For example, in 1995 the IRS introduced multiple initiatives that changed the way in which tax preparers were notified of tax refunds and the way in which EIC recipients were paid their refunds. These changes dramatically disrupted the entire tax preparation industry by reducing the number of electronic filings and causing unanticipated losses on the part of RAL lenders who had relied upon former IRS practices to assess underwriting risk. The Company and its franchisees were adversely impacted and experienced a decrease in fee income and increased costs associated with the Bank Product programs. The Company is unable to predict the timing or nature of policies which may be implemented by the Treasury Department and the IRS in the future. Any such policy changes could have a material adverse impact on the Company's business, financial condition, and results of operations. See "Business - The Tax Preparation Business - Bank Products." Dependence on Banks for RALs and ACRs; Underwriting Risks A substantial portion of the Company's profitability is dependent upon its ability to sell Bank Products to its customers. During 1997, fees associated with Bank Products totaled $9.4 million, or 29.8% of the Company's total revenues. The Company is currently providing Bank Products under risk sharing and limited risk arrangements with three commercial banks. Given the uncertainties associated with IRS policies, including those affecting Bank Products, no assurance can be given as to how these fee arrangements will be structured in the future, whether the Company will be able to continue to negotiate acceptable fee arrangements with these or other banks, or that the Company will continue to be able to otherwise offer Bank Products to Jackson Hewitt's customers. If for any reason the Company were unable to enter into acceptable Bank Product agreements with banks, its business, financial condition, and results of operations would be materially adversely affected. In addition, in those Bank Product programs in which the Company shares the risks and benefits associated with making RALs, the Company's operations could be materially and adversely affected if the applicable underwriting criteria prove to be insufficient and result in a higher than anticipated level of losses associated with RALs. See " - Adverse Impact of IRS Policies" and "Business - The Tax Preparation Business - Bank Products." Ability of the Company to Implement its Growth Strategy and Manage Expansion The Company's growth strategy is dependent upon its ability to increase market share through geographic expansion. Implementation of this strategy will depend in large part on the Company's ability to: (i) expand in profitable markets; (ii) obtain adequate financing on favorable terms to fund its growth strategy; (iii) locate acceptable franchisees; (iv) hire, train, and retain skilled and seasonal employees; (v) successfully implement its marketing campaigns; and (vi) continue to expand given the significant competition in the tax preparation industry. Difficulties in connection with any or all of these factors could impair the Company's ability to successfully implement its growth strategy, which in turn could have a material adverse effect on the Company's business, financial condition, and results of operations. See "Business - Business Strategy." The opening and success of new offices will depend on various factors, including the availability of suitable sites, the negotiation of acceptable lease or purchase terms for new locations, the obtaining of applicable permits and regulatory approvals, the ability to meet construction schedules, the financial and other abilities of the Company's franchisees, and general economic and business conditions. Many of the foregoing factors are outside the control of the Company and its franchisees. The Company's ability to manage future growth effectively will require it to expand and continue to improve its operations and systems, and to attract, retain, motivate, and manage its employees. There can be no assurance that the Company will do so successfully. The Company's inability to manage such growth effectively could have a material adverse effect on the Company's business, financial condition, and results of operations. Potential Congressional Tax Initiatives The United States Congress regularly considers a wide array of income tax proposals. These proposals have ranged from minor revisions in the tax laws to the adoption of a non-progressive income tax, or "flat tax." A congressional commission has also announced proposals to overhaul the structure and organization of the IRS, and to extend the filing deadlines for tax returns. The most significant risk to the Company's business operations would be the passage of any initiative, such as a national sales tax, that eliminates the requirement to file tax returns. Although the Company is not able to predict when or if such proposals will become law, should any of such proposals become law, it would likely have a material adverse effect on the Company's business, financial condition, and results of operations. In addition, since the Company's profitability is dependent upon fees obtained from the preparation and filing of tax returns as well as fees associated with Bank Products, the adoption of legislation that would significantly reduce or eliminate electronic filings, the number of tax returns filed by Jackson Hewitt's customer base of lower income taxpayers, or the availability of accelerated refunds or EICs, would materially adversely affect the Company's business, financial condition, and results of operations. Risks Associated with Franchising A significant portion of the Company's total revenues are derived from its franchise operations. During 1997, the Company derived 10.2% of its revenues from the sale of new franchises and 42.1% of its revenues from the receipt of franchise royalties and advertising fees, which are based upon the total revenues generated by franchised offices. There can be no assurance that the Company will be able to continue its historical level of franchise sales. Any material decrease in franchise sales in the future would materially adversely affect the Company's business, financial condition, and results of operations. The Company's financial success is also dependent upon its employees and franchisees and the manner in which they operate and develop their offices to promote and develop the Jackson Hewitt name and its reputation for quality. There can be no assurance that franchisees will have the business abilities or access to the financial resources necessary to operate their offices in a manner consistent with the Company's philosophy and standards or to achieve or increase the level of revenues generated in prior tax seasons. See "Business - Franchise Operations." The Company's current policy is to provide financing to franchisees in connection with the purchase of franchises. At April 30, 1997, the Company's franchisees owed the Company $13.3 million under notes bearing interest between 10% and 12%. The terms on these notes generally range between two to five years. The franchisees' ability to repay these loans is dependent upon franchise performance, as well as matters affecting the Company and the tax preparation industry. As a result of the negative impact of IRS actions in 1995, a substantial number of these notes became delinquent and as such, resulted in either termination of the franchisee or restructuring of the terms of the notes. Although management believes that its recorded allowance is adequate, any adverse changes experienced by specific franchises or the Company, or the tax preparation industry in general, would have a material adverse effect on the Company's business, financial condition, and results of operations. See Note 4 of the Notes to the Consolidated Financial Statements. As a franchiser, the Company grants to its franchisees a limited license to use the Company's registered service marks. The general public could incorrectly identify the Company's franchisees as controlled by the Company. In the event that a court determines the franchisee is not adequately identified as a franchisee, the Company could be held liable for the debts and obligations of the franchisee so misidentified. Government Regulation The Company's future results of operations will depend upon its continued ability to comply with federal and state regulations affecting tax return preparers and the Company's ability to continue offering Bank Products to its customers on the same or similar terms and under similar fee arrangements as currently utilized by the Company. Certain state and city governments have adopted specific disclosure requirements related to RALs and others may consider enacting similar requirements. In addition, some state governments have implemented, or are considering implementing, laws or regulations governing proprietary schools, which may include the tax seminars offered by the Company and its franchisees. The Company is unable to predict whether certain state and local governments will adopt regulations or whether changes will occur in such existing laws and regulations, and if so, the business or economic effect of such changes. Any significant changes in existing laws or the adoption of laws in jurisdictions not having such laws that alter the Company's current operations would have an adverse effect on the Company's business, financial condition, and results of operations. See "Business - Personnel/Training." Federal law requires tax return preparers, among other things, to identify themselves as paid preparers on all tax returns which they prepare, to provide customers with copies of their tax returns, and to retain copies of the tax returns they prepare for three years. Failure to comply with these requirements may result in penalties to the preparer. Federal law provides for assessing penalties against a tax return preparer who (i) negligently or intentionally disregards federal tax rules or regulations, (ii) takes a position on a tax return which does not have a realistic possibility of being sustained on its merits, (iii) willfully attempts to understate a taxpayer's tax liability, or (iv) aids or abets in the understatement of such tax liability. In addition, several state governments have enacted or are considering legislation which would regulate state tax return preparers. These types of laws could have an adverse effect on the Company's business, financial condition, and results of operations. In 1996, the Manhattan regional office of the IRS notified the Company that it could not operate Company-owned offices in New York City during the 1997 and 1998 tax seasons due to certain violations identified regarding the Company's adherence to the IRS' electronic filing identification number regulations during the 1996 tax season. This restriction does not apply to any of the Company's franchised offices in this, or any other area, and management does not believe the operating exclusion will have a material adverse effect on the Company's business, financial condition, or results of operations. See "Business - Legal Proceedings." Seasonality and Disaster Recover Risks The Company's business is highly seasonal. Historically, the Company has generated substantially all of its revenues during the tax season, with the majority of tax preparation revenues generated during late January and early February. During 1997, the Company generated 89% of its revenues during the tax season. The Company generally operates at a loss through the first three quarters of each fiscal year, during which periods it incurs costs of preparing for the upcoming tax season. If for any reason the Company's revenues fall below those normally expected during its fourth quarter, the Company's business, financial condition, and results of operations would be adversely affected. The Company's financial success depends in large part on the efficient and uninterrupted operation of its processing center during the tax season. All of the Company's critical processing operations are currently conducted in Virginia Beach, Virginia and the Company maintains a non-exclusive right to use a site in Ohio. The Company intends to open a site in North Carolina prior to the 1998 tax season that would be able to duplicate the Company's processing systems in the event a natural disaster or other unforeseen occurrence compromised the Company's primary processing center. Notwithstanding the availability of such alternative locations, if a disaster or other event were to disrupt operations at the primary processing center, particularly during the peak period of the tax season, the Company's operations could be materially adversely effected. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Seasonality and Quarterly Results of Operations" and " - Liquidity and Capital Resources." Fluctuations in Quarterly Operating Results The Company has experienced, and is expected to continue experiencing, quarterly variations in revenues and operating income as a result of many factors, including the highly seasonal nature of the tax preparation business, the timing of off-season activities, and the hiring of personnel. Due to the foregoing factors, it is possible that the Company's results of operations, including quarter to quarter results, will be below the expectations of public market analysts and investors. In addition, the Company must plan its operating expenditures based on revenue forecasts, and a revenue shortfall below such forecasts in any quarter would likely adversely affect the Company's business, financial condition, and results of operations for the year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Seasonality and Quarterly Results of Operations" and " - Liquidity and Capital Resources." Dependence Upon Debt Financing To fund its off-season activities, the Company has historically been dependent upon borrowings under the Company's credit facilities. The Company's off-season activities generally require the Company to draw most heavily on these facilities from July through February of each year and then repay this debt entirely by the end of each tax season. For example, during the 1997 tax season, the Company had $6.6 million of indebtedness under a credit facility with its primary lender outstanding at January 31, 1997, which was repaid by April 30, 1997. To the extent that the Company is not successful in maintaining or replacing existing financing in the future, it would have to curtail essential off-season activities, thereby having a material adverse effect on the Company's business, financial condition, and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." Dependence on Key Personnel The Company's future success will depend to a significant extent on senior management, particularly Keith E. Alessi, the Chairman, President, and Chief Executive Officer. The loss of the services of Mr. Alessi or certain other executive officers, or the inability to attract and retain other qualified employees, could have a material adverse effect on the Company's business, financial condition, and results of operations. The Company has entered into a two-year employment agreement with Mr. Alessi that contains, among other provisions, a covenant not to compete, a non-solicitation of employees covenant, and confidentiality provisions. The Company does not, however, typically enter into employment or non-compete agreements with its executive officers. The Company does not maintain a key-man life insurance policy on Mr. Alessi. See "Business - Employees," "Management Directors and Executive Officers" and "Management - Employment Agreement." Dependence on Retail Outlets During the 1997 tax season, Jackson Hewitt had 208 and 167 offices located in Wal-Mart and Montgomery Ward stores, respectively. The Company's ability to continue to operate in these stores is dependent on its ability to negotiate acceptable master agreements with these retailers and the continued operation of the particular retail stores in which the Jackson Hewitt offices are located. In the event the Company were unable to negotiate acceptable master agreements with these retailers, or in the event these retailers closed a significant number of stores in which Jackson Hewitt offices were located, the Company would lose a substantial number of its offices in potentially a very short period of time. Such an occurrence, especially immediately prior to or during the tax season, would have a material adverse impact on the Company's business, financial condition, and results of operations. See "Business - Retail Outlets." Competition The low-cost tax return preparation business is highly competitive. The Company competes with nationally franchised tax preparation services, regional tax preparation businesses, regional and national accounting firms, and financial service institutions that prepare tax returns as part of their businesses. The Company also competes with individuals who prepare their own tax returns either manually or in connection with commercially packaged tax preparation software. The IRS has also recently introduced a method by which qualifying taxpayers can file their tax returns with the IRS by telephone. The Company is not able to predict the extent to which its potential customers will utilize this filing service in the future. See "Business - The Tax Preparation Business - Electronic Filing of Tax Returns." Of the Company's competitors, H&R Block, Inc. ("H&R Block") dominates the low-cost tax preparation business. H&R Block is substantially larger than the Company and has significantly greater financial and other resources. Based on information released by H&R Block in May 1997, H&R Block currently operates an international tax preparation system through approximately 10,000 company operated and franchised offices. H&R Block has also been in business much longer than the Company and has significantly greater name recognition throughout the United States, including the geographic areas in which the Company currently operates and in which it intends to expand. The ability of the Company to successfully compete with H&R Block and other tax preparation businesses is dependent in large part on the geographic area, specific site location, local economic conditions, and quality of on-site office management. There can be no assurance that the Company will be able to compete successfully with these competitors. In addition, to the extent the Company is required to reduce the fee charged per tax return prepared for competitive reasons, its business, financial condition, and results of operations could be materially adversely affected. See "Business- Competition." Dependence on Availability of Large Pool of Trained Seasonal Employees In conducting its business operations, both the Company and its franchisees depend on the availability of employees willing to work for a period of approximately three months for relatively low hourly wages, and minimal benefits. The Company's success in managing the expansion of its business will depend in large part upon its and its franchisees' ability to hire, train, and supervise seasonal personnel. If this labor pool is reduced in the future or if the Company is required to provide its employees higher wages or more extensive and costly benefits, either for competitive reasons or as a result of changes in governmental regulation, the expenses associated with the Company's operations could be substantially increased without the Company receiving offsetting increases in revenues. There can be no assurance that the Company or its franchisees will be able to hire, train, and supervise an adequate number of such seasonal personnel. See "Business - Franchise Operations." Dependence on Intellectual Property Rights; Risks of Infringement Although the Company believes its proprietary interactive tax software constitutes a "trade secret," the Company has not filed for copyright registration for its software programs. Unauthorized parties may attempt to copy aspects of the Company's software or to obtain and use information that the Company regards as proprietary. Policing the unauthorized use of the Company's software is difficult. The Company generally controls the access to and the distribution of its software, documentation, and other proprietary information, but has not entered into confidentiality agreements with any of its executive officers other than Mr. Alessi. It may be possible for a third party to copy or otherwise obtain and use the Company's services or technology without authorization, or to develop similar services or technology independently. There can be no assurance that the legal remedies available to the Company will effectively prevent disclosure of, or provide meaningful protection for, its confidential information or that the Company's trade secrets or proprietary information will not be developed independently by the Company's competitors. Litigation may be necessary for the Company to defend itself against claims of infringement, or to protect trade secrets and could result in substantial costs to, and diversion of management efforts by, the Company. There can be no assurance that the Company would prevail in any such litigation, should it occur. The Company is not aware that any of its software, trademarks, or other proprietary rights infringe on the proprietary rights of third parties. However, there can be no assurance that third parties will not assert infringement claims against the Company in the future. Any such claims, with or without merit, can be time consuming and expensive to defend and may require the Company to enter into royalty or licensing agreements or cease the alleged infringing activities. The failure to obtain such royalty agreements, if required, and the Company's involvement in such litigation could have a material adverse effect on the Company's business, financial condition, and results of operations. See "Business - Proprietary Information and Computer Technology." Broad Management Discretion as to Use of Proceeds. The net proceeds of the Offering will be used to reduce the Company's dependence on its credit facility to fund off-season operations, and for working capital, general corporate purposes, and possible acquisitions of complementary businesses or product lines. If the Company were to make any such acquisition, it might use a significant portion of the net proceeds in connection with such acquisition. Although the Company has from time to time considered various acquisition opportunities, currently it has no specific agreements or plans with respect to such acquisitions. Accordingly, there can be no assurance the Company will consummate any acquisitions. Consequently, there can be no assurance as to when or how the net proceeds from the Offering will be used, and the Company's management will retain broad discretion as to the allocation of a significant portion of the net proceeds from the Offering. If the Company is unable to invest such proceeds in operating and expanding its current business or acquisitions of similar or related businesses, the returns realized from holding such proceeds may be substantially less than the returns that could be realized if the proceeds were invested successfully in the Company's business. See "Use of Proceeds" and "Business - Business Strategy." Technological Change The Company's future success will depend significantly on its ability to enhance its proprietary interactive tax preparation and processing software, as well as to respond to changes in customers' technological needs. There can be no assurance that the Company will be successful in developing or acquiring technologically advanced product enhancements or new products to address changing technologies and customer requirements. See "Business - Proprietary Information and Computer Technology." Absence of Payment of Cash Dividends The Company has never declared a cash dividend on its Common Stock. The Company intends to retain any future earnings for the operation and expansion of its business and does not currently anticipate declaring or paying any cash dividends on the Common Stock. The payment of future dividends will be at the discretion of the Board of Directors and will depend, among other things, on the earnings, capital requirements, and financial condition of the Company. No assurance can be given that the Company's results of operations will ever permit the payment of such dividends. In addition, future borrowings or issuances of preferred stock may prohibit or restrict the Company's ability to pay or declare dividends. In addition, the Company's credit facility with its primary lender prohibits the payment of any dividends without the lender's consent. See "Dividend Policy." Limited Public Market for the Common Stock; Possible Volatility of Stock Price The average daily trading volume of the Common Stock generally has been limited. As a result, historical market prices may not be indicative of market prices in a more liquid market in which a greater number of shares are publicly traded. Although it is anticipated that an increase in the number of publicly traded shares will improve the liquidity of the Common Stock, there can be no assurance that an active trading market for the Common Stock will develop as a result of the Offering or be sustained in the future. In addition, the stock market has from time to time experienced extreme price and volume fluctuations that often have been unrelated to the operating performance of particular companies. Changes in earnings estimates by analysts and economic and other external factors, as well as the highly seasonal nature of the Company's business and period-to-period fluctuations in financial results of the Company, may have a significant impact on the market price of the Common Stock. Fluctuations or decreases in the trading price of the Common Stock may adversely affect the liquidity of the trading market for the Common Stock and the Company's ability to raise capital through future equity financing. See "Price Range of Common Stock." Effect on Share Price of Shares Eligible for Future Sale Upon the completion of the Offering, the 1,130,790 shares offered hereby (1,300,409 shares if the over-allotment option is exercised in full) will be eligible for immediate sale in the public market without restriction unless they are held by affiliates of the Company. Approximately 152,777 of the remaining shares of outstanding Common Stock are "restricted securities" within the meaning of Rule 144 ("Rule 144") promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, such as Rule 144. Approximately 4,921,832 shares of Common Stock are currently eligible for sale under Rule 144, of which 4,369,403 are subject to no restrictions and can be freely sold upon the removal of a restrictive legend from the share certificates. In addition, as of June 23, 1997, there were outstanding options to purchase 468,944 shares of Common Stock, of which options to purchase 67,850 shares are currently exercisable, and options to purchase an additional 379,056 shares of Common Stock may be granted. All of the shares underlying the options are covered by effective registration statements. In addition, the Company has outstanding certain convertible notes and warrants that are currently convertible into an aggregate of 58,672 shares of Common Stock. All of such shares are eligible for sale under Rule 144. The Company, its directors and executive officers, the Selling Shareholders and certain other shareholders of the Company beneficially holding (upon the completion of the Offering) an aggregate of approximately 1,790,870 shares, have agreed not to sell or otherwise dispose of any such shares for at least 150 days after the effective date of the registration statement relating to the Offering without the prior written consent of the Underwriters. No prediction can be made as to the effect, if any, that public sales of shares or the availability of shares for sale will have on the market price of the Common Stock prevailing from time to time. Nevertheless, sales of substantial amounts of the Common Stock in the public market, particularly by directors and officers of the Company, or the perception that such sales could occur, could have an adverse impact on the market price of the Common Stock. See "Description of Capital Stock" and "Shares Eligible for Future Sale." Possible Issuance of Preferred Shares; Anti-Takeover Provisions The Company's Articles of Incorporation authorize the Board of Directors to issue, without shareholder approval, 1,000,000 shares of preferred stock with voting, conversion, and other rights and preferences that could materially and adversely affect the voting power or other rights of the holders of the Common Stock. The Company presently has no plans or commitments to issue any shares of preferred stock. The issuance of preferred stock or of rights to purchase preferred stock, as well as certain provisions of the Company's Articles of Incorporation and Virginia law, could delay, discourage, hinder, or preclude an unsolicited acquisition of the Company, make it less likely that shareholders receive a premium for their shares as a result of any such attempt and adversely affect the market price of, and voting and other rights of, the holders of the Common Stock. See "Description of Capital Stock." THE COMPANY The Company, which was incorporated under the laws of the Commonwealth of Virginia in 1985, is engaged in the business of computerized preparation of tax returns under the name Jackson Hewitt Tax Service. The Company's founders began operating tax preparation offices in Virginia Beach, Virginia in 1982. By the 1986 tax season, the Company operated 25 offices in Virginia under the service mark "Mel Jackson Income Tax Service." During 1986, the Company began its franchise program by selling 22 territories to franchisees. After operating 49 offices during the 1988 tax season, the Company changed its name to Jackson Hewitt Inc. and all franchisees began using the "Jackson Hewitt Tax Service" service mark. During 1989, the Company acquired the right to operate 102 tax preparation offices within Montgomery Ward stores, and in 1995, the Company entered into an agreement with Wal-Mart to operate Jackson Hewitt offices in certain Wal-Mart stores. The Company has increased the total number of its Company-owned and franchised offices from 614 in 1993 to 1,372 in 1997, including 208 offices in Wal-Mart stores and 167 offices in Montgomery Ward stores in 1997. From 1993 to 1997, the Company's total revenues increased from $10.8 million to $31.4 million. The address of the Company's principal executive office is 4575 Bonney Road, Virginia Beach, Virginia 23462 and its telephone number is (757) 473-3300. The Company's Internet e-mail address is info@jtax.com and its World Wide Web site is http://www.jtax.com. USE OF PROCEEDS The net proceeds to the Company from the sale of the 1,000,000 shares of Common Stock offered hereby are estimated to be approximately $10.6 million based upon an assumed Offering price of $11.75 per share and after deducting underwriting discounts and estimated Offering expenses payable by the Company ($12.3 million if the Underwriters' over-allotment option is exercised in full). Shares purchased pursuant to the exercise of the Underwriters' over-allotment option will be sold by the Company and the Selling Shareholders. The Company will not receive any proceeds from the sale of Common Stock by the Selling Shareholders. The net proceeds of the Offering will be used to reduce the Company's dependence on its credit facility, and for working capital, general corporate purposes, including possible expansion of Company-owned offices, and possible acquisitions of complementary businesses or product lines, although the Company has no specific agreements or plans with respect to such acquisitions. Pending such uses, the Company intends to invest the balance of the net proceeds in short-term investment grade securities. See "Risk Factors - Dependence Upon Debt Financing" and " - Broad Management Discretion as to Use of Proceeds." PRICE RANGE OF COMMON STOCK The Company's Common Stock has been listed on the Nasdaq National Market under the symbol "JTAX" since January 24, 1994. Prior to such time there was no public market for the Common Stock. The following table sets forth certain high and low sales prices of the Common Stock. Stock Price High Low Fiscal 1996 First quarter $5.25 $2.75 Second quarter 4.00 2.75 Third quarter 3.75 2.25 Fourth quarter 3.75 2.75 Fiscal 1997 First quarter 6.50 3.25 Second quarter 5.50 3.50 Third quarter 7.75 3.75 Fourth quarter 11.25 6.50 Fiscal 1998 First quarter (through June 27, 1997) 12.88 9.50 As of June 27, 1997, the last reported sale price of the Company's Common Stock, as reported by the Nasdaq National Market, was $11.75. On May 27, 1997, there were 636 holders of record of the Common Stock. See "Risk Factors - Limited Public Market for the Common Stock; Possible Volatility of Stock Price." DIVIDEND POLICY The Company has never paid a cash dividend on its Common Stock. The Company intends to retain any future earnings for the operation and expansion of its business and does not currently anticipate declaring or paying any cash dividends on the Common Stock. The declaration and payment of cash dividends on the Common Stock in the future will be subject to the discretion of the Company's Board of Directors and will depend on, among other things, the earnings, capital requirements and financial condition of the Company, and general business conditions. In addition, the Company's credit facility with its primary lender prohibits the payment of any dividends without the lender's consent. Future borrowings or issuances of preferred stock also may prohibit or restrict the Company's ability to pay or declare dividends. See "Risk Factors - Absence of Payment of Cash Dividends" and "Description of Capital Stock." CAPITALIZATION The following table sets forth, at April 30, 1997, the debt and capitalization of the Company on an actual basis, pro forma to reflect the exchange of 699,707 shares of Common Stock for 504,950 shares of Series A Convertible Preferred Stock as provided in the Agreement and Plan of Recapitalization effective as of June 18, 1997 (the "Recapitalization Agreement") and as adjusted to give effect to (i) the sale of the 1,000,000 shares of Common Stock offered by the Company hereby at an assumed public offering price of $11.75 per share based on the closing price of the Common Stock on the Nasdaq National Market on June 27, 1997, (ii) the application of the estimated net proceeds thereof as described under "Use of Proceeds" and (iii) the exchange of the Preferred Stock as described above. This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the Company's Consolidated Financial Statements and the Notes thereto, included elsewhere in this Prospectus.
As of April 30, 1997 --------------------------------------------------------- Actual Pro forma(1) As Adjusted ------ ------------ ----------- (in thousands) Revolving credit facility (2)............................. $ -- $ -- $ -- Notes payable, including current installments............. 1,635 1,635 1,635 Capital leases, including current installments............ 852 852 852 6% convertible notes...................................... 763 763 763 Series A redeemable convertible preferred stock, no par value; 1,000,000 shares authorized 504,950 shares issued and outstanding................ 3,236 -- -- Shareholders' equity: Common stock; $.02 par value; 10,000,000 shares authorized; 4,589,647 shares actual, 5,289,354 shares pro forma, and 6,289,354 shares as adjusted, issued and outstanding (3)................................. 92 106 126 Additional capital................................... 7,799 12,920 23,516 Stock subscription receivable........................ (1,276) (1,276) (1,276) Retained earnings.................................... 8,125 6,226 6,226 ------- ------- -------- Total shareholders' equity...................... 14,740 17,976 28,592 ------- ------- -------- Total capitalization............................ $21,226 $21,226 $ 31,842 ======= ======= ========
- ------------------------ (1) Assumes the Company's exchange of 699,707 shares of Common Stock for 504,950 shares of Series A Convertible Preferred Stock as provided in the Recapitalization Agreement had occurred on April 30, 1997. See "Recent Developments" and Note 16 of the Notes to the Consolidated Financial Statements. (2) For a description of the Company's credit facilities, see "Management's Discussion and Analysis of Financial Condition and Result of Operations - Liquidity and Capital Resources" and Notes 5, 6 and 16 of the Notes to the Consolidated Financial Statements. (3) Does not include 446,085 shares subject to options outstanding as of April 30, 1997, currently exercisable at a weighted average exercise price of $4.71 per share. See "Shares Eligible For Future Sale" and Note 11 of the Notes to the Consolidated Financial Statements. RECENT DEVELOPMENTS On June 27, 1997, the Company entered into a Recapitalization Agreement ("Recapitalization Agreement") with the holders ("Preferred Shareholders") of the 504,950 outstanding shares of the Company's Series A Convertible Preferred Stock ("Series A Stock"). The Recapitalization Agreement provides that the Preferred Shareholders will exchange all of their Series A Stock for 699,707 shares of Common Stock in a transaction structured as a tax-free recapitalization. Pursuant to the terms of the Recapitalization Agreement, upon the completion of the transaction, the Preferred Shareholders will retain their contractual right to cause the Company's Board of Directors to recommend at least one nominee of the Preferred Shareholders as a director of the Company and the registration rights provided them upon the purchase of the Series A Stock. The closing of the transaction is anticipated to occur on July 3, 1997, with an effective date of June 18, 1997. The Series A Stock had been sold to three private investors in August 1993. See "Capitalization", "Management-Directors and Executive Officers", "Description of Capital Stock - Preferred Stock", "Shares Eligible for Future Sale", and Notes 5 and 16 of the Notes to the Consolidated Financial Statements. SELECTED CONSOLIDATED FINANCIAL DATA The following table sets forth selected consolidated financial data of the Company as of and for each of the years in the five-year period ended April 30, 1997. The Consolidated Statement of Operations Data and Consolidated Balance Sheet Data as of and for the five years ended April 30, 1997 have been derived from the Company's audited Consolidated Financial Statements. The Company's Consolidated Financial Statements as of April 30, 1996 and April 30, 1997 and for each of the years in the three-year period ended April 30, 1997 and KPMG Peat Marwick LLP's audit report with respect thereto have been included elsewhere in this Prospectus. The information below is qualified in its entirety by the detailed information included elsewhere herein and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and the Consolidated Financial Statements and the Notes thereto included elsewhere in this Prospectus.
Years Ended April 30, --------------------------------------------------------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- (in thousands, except per share, office and fee data) CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Franchise revenue $ 7,351 $10,502 $ 13,372 $ 14,128 $ 18,380 Bank product fees 1,080 3,954 2,037 6,858 9,363 Tax return preparation fees, net 2,283 3,928 2,727 3,196 3,298 Miscellaneous income 127 256 79 834 391 ------------ --------- ----------- ---------- ---------- Total revenues 10,841 18,640 18,215 25,016 31,432 Selling, general and administrative expenses, including depreciation and amortization 9,795 17,210 19,293 19,738 19,664 ------------ --------- ----------- ---------- ---------- Income (loss) from operations 1,046 1,430 (1,078) 5,278 11,768 Other income, net 335 677 2,469 543 861 Provision for income taxes 494 680 539 1,525 4,210 Minority interest share of earnings 210 504 12 1,894 2,187 ------------ --------- ----------- ---------- ---------- Income before extraordinary item 677 923 840 2,402 6,232 Extraordinary item - - - - (1,248) ------------ --------- ----------- ---------- ---------- Net income 677 923 840 2,402 4,984 Dividends and accretion on Series A redeemable convertible preferred stock - (265) (376) (401) (624) ------------ --------- ----------- ---------- ---------- Net income attributable to common shareholders $ 677 $ 658 $ 464 2,001 $ 4,360 ============ ========= =========== ========== ========== Income per common share: Primary: Income before extraordinary item $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 1.22 ============ ========= ========== ========== ========= Net income $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 0.95 ============ ========= ========== ========== ========= Fully diluted: Income before extraordinary item $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 1.18 ============ ========= ========== ========== ========= Net income $ 0.18 $ 0.16 $ 0.11 $ 0.40 $ 0.91 ============ ========= ========== ========== ========= Weighted average shares outstanding 3,701 4,069 4,252 4,354 4,520 ============ ========= ========== ========== ========= SUPPLEMENTAL PRO FORMA INCOME PER COMMON SHARE (a): Primary: Income before extraordinary item $ 1.06 ========== Net income $ 0.83 ========== Fully diluted: Income before extraordinary item $ 1.03 ========== Net income $ 0.80 ========== OTHER OPERATING DATA: Tax returns prepared 404 570 618 722 875 Refund anticipation loans (RALs) provided 246 331 108 102 142 Accelerated check requests (ACRs) provided 15 22 192 291 330 Franchised offices 546 742 1,087 1,246 1,296 Company-owned offices 68 136 135 96 76 Average tax preparation fees per return $ 67 $ 69 $ 80 $ 92 $ 99
As of April 30, ------------------------------------------------------------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- (in thousands) CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents $ 2,033 $ 3,204 $ 1,416 $ 3,558 $ 6,324 Working capital 1,841 3,691 2,682 4,719 5,983 Total assets 8,915 14,991 24,892 25,956 28,160 Long-term debt 1,703 1,518 4,882 2,843 1,262 Redeemable convertible preferred stock - 2,783 2,876 3,278 3,236 Shareholders' equity 4,916 6,087 7,534 9,829 14,740
-------------------------------------------------------------------- a) Assumes the Company's exchange of 699,707 shares of Common Stock for 504,950 shares of Series A Convertible Preferred Stock had occurred on May 1, 1996. See "Recent Developments" and Note 16 of the Notes to the Consolidated Financial Statements. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussions of the Company's results of operations and liquidity and capital resources should be read in conjunction with the Selected Consolidated Financial Data and the Consolidated Financial Statements of the Company and related Notes thereto appearing elsewhere in this Prospectus. Yearly references contained throughout this Prospectus refer to the Company's fiscal year ending on April 30. Overview The Company is the second largest income tax preparation service in the United States with a 41 state network of 1,296 franchised and 76 Company-owned offices. Through the use of computers and proprietary interactive tax software, the Company is engaged in the business of computerized preparation and electronic filing of tax returns for a customer base comprised primarily of low to middle income individuals. The Company also offers Bank Products to customers through arrangements with several commercial banks. The Company operates in one industry segment with two lines of business: franchised and Company-owned offices. The Company derives revenues from franchise operations, Bank Product fees, and tax preparation fees generated by Company-owned offices. During 1997, the revenue mix was 58.5% franchise revenue, 29.8% Bank Product fees, and 10.5% Company-owned offices tax preparation fees. The Company's revenues are primarily dependent upon the successful operations of its franchise network. Franchise revenue is comprised of royalties and advertising fees, franchise fees, electronic filing fees, and other fees paid by franchisees. Pursuant to the Company's agreements with its franchisees, the Company receives royalties of 12% and advertising fees of 6% of revenues generated by the 1,296 franchised offices. The Company is required to utilize all advertising fees received from its franchisees on advertising programs. As a result, the Company's Consolidated Financial Statements reflect a corresponding expense related to these advertising costs, which is higher than the advertising fees received from franchisees due to additional Company marketing efforts. Franchise fees, net, and royalties and advertising fees generated from franchise operations represented 52.3% and 50.1% of the Company's total revenues during 1997 and 1996, respectively. Franchise fees presently consist of a one-time payment of $20,000 received from each franchisee upon the purchase of a Jackson Hewitt territory. Franchise fees received are reduced by the Company's accrual of 12% of such fees to the allowance for franchise fee refunds established by the Company to provide for terminations and rescissions of agreements with franchisees. Electronic filing fees represent fees received from franchisees in connection with the electronic filing of tax returns with the IRS. The Company currently charges a fee of $2.00 per return electronically filed by its franchised offices. Other revenues generated from the Company's franchise operations include supplemental income from the sale of computers, tax school manuals, and other supplies to franchisees. Revenues generated from Bank Products by the Company-owned and franchised offices have become an increasingly significant component of the Company's total revenues. Bank Product fees are generated when Jackson Hewitt customers purchase Bank Products from either Company-owned or franchised offices. During the 1997 tax season, Jackson Hewitt customers paid a $24 application fee ("Application Fee") and a document processing fee of approximately $25 ("Processing Fee") for each Bank Product purchased. In addition, customers who purchased a RAL also paid a fee equal to approximately 4% of the amount of the RAL (the "RAL Fee"). A portion of the royalties received from franchisees is attributable to Processing Fees associated with the sale of Bank Products by franchised offices. In addition, depending upon the Company's arrangement with the commercial bank processing the Bank Products, the Company may receive a portion of the Application Fee paid to the bank by the customer in connection with the purchase of a Bank Product. Under the Company's fee agreements with certain commercial banks involved in the processing of Bank Products, the Company and the processing banks share the risks associated with such products through the establishment of the reserve for uncollectible funds from the fees generated by the sale of Bank Products To the extent funds remain in the reserve, the portion of the reserve represented by the RAL Fees is subsequently distributed to franchisees. Funds remaining in the reserve after the distribution to franchisees are divided pursuant to the Company's fee sharing agreements with the processing banks. As a result, Bank Product fees reflected on the Company's Consolidated Statements of Operations are reduced by the minority interest share of earnings which is paid to the Company's commercial bank partner. The Company provided approximately 421,000 Bank Products pursuant to this program in 1997. Under an alternative fee arrangement with a different bank, the Company does not assume any risk associated with the Bank Products and is paid a referral fee by this bank. The Company provided approximately 51,000 Bank Products pursuant to this program in 1997. See "Business - The Tax Preparation Business - Bank Products" and "- Results of Operations - 1997 Compared to 1996." Results of Operations The following table sets forth certain information regarding the Company's consolidated statement of operations as a percentage of total revenues:
Years Ended April 30, ---------------------------------------- 1995 1996 1997 ---- ---- ---- Franchise revenues 73.4% 56.5% 58.5% Bank product fees 11.2 27.4 29.8 Tax return preparation fees, net 15.0 12.8 10.5 Miscellaneous income 0.4 3.3 1.2 ----- ------ ----- Total revenues 100.0 100.0 100.0 Selling, general and administrative expenses 100.8 73.8 58.1 Depreciation and amortization 5.1 5.1 4.4 ----- ------ ----- Income (loss) from operations (5.9) 21.1 37.5 Other income, net 13.6 2.2 2.7 Provision for income taxes (3.0) (6.1) (13.4) Minority interest share of earnings (0.1) (7.6) (7.0) ----- ------ ----- Income before extraordinary item 4.6 9.6 19.8 Extraordinary item -- -- (4.0) ----- ------ ----- Net income 4.6% 9.6% 15.8% ===== ====== =====
1997 Compared to 1996 Revenues. The Company's total revenues were $31.4 million for 1997 compared to $25.0 million for 1996, an increase of $6.4 million or 25.6%. This increase was primarily attributable to an increase of $4.3 million in revenues generated by the Company's franchise operations and, to a lesser extent, as a result of an increase of $2.2 million in other sources of revenues as described below. Franchise revenues were $18.4 million for 1997 compared to $14.1 million for 1996, an increase of $4.3 million or 30.1%. This increase was primarily attributable to an increase of $3.4 million or 34.4% in royalties and advertising fees to $13.2 million in 1997 from $9.9 million in 1996. Royalties and advertising fees increased due to an increase in the number of tax returns prepared by franchised offices and an increase in the average tax preparation fee charged per customer to $99 in 1997 from $92 in 1996. The number of tax returns prepared by franchised offices was approximately 830,000 for 1997 compared to approximately 680,000 for 1996, an increase of approximately 150,000 or 22.1%. Franchise fees, net of the allowance for franchise fee refunds established by the Company to provide for terminations and rescissions of agreements with franchisees, were $3.2 million for 1997 compared to $2.7 million for 1996, an increase of $0.5 million or 19.5%. This increase was a result of increased franchise territory sales and the general financial success of the Company's franchisees which resulted in reduced anticipated franchisee terminations and rescissions. Electronic filing fees were $1.4 million for 1997 compared to $1.1 million for 1996, an increase of $0.3 million or 23.7%. This increase was the result of the Company's electronic filing of approximately 135,000 additional tax returns for franchisees during 1997. Bank Product fees were $9.4 million for 1997 compared to $6.9 million for 1996, an increase of $2.5 million or 36.5%. This increase was a result of the sale of approximately 137,000 additional Bank Products in 1997. Tax return preparation fees generated by Company-owned offices were $3.3 million for 1997 compared to $3.2 million for 1996, an increase of $0.1 million or 3.2%. This increase was primarily attributable to an increase in the number of tax returns prepared by these offices. The number of tax returns prepared by Company-owned offices was approximately 46,000 for 1997 compared to approximately 42,000 for 1996, an increase of approximately 4,000 or 9.5%. Miscellaneous income was $0.4 million for 1997 compared to $0.8 million for 1996, a decrease of $0.4 million or 53.2%. This decrease was primarily due to the Company's decision to terminate its unprofitable Copy, Pack and Ship operations during 1997. Selling, General and Administrative Expenses. Selling, general and administrative ("SG&A") expenses were $18.3 million for 1997 compared to $18.5 million for 1996, a decrease of $0.2 million or 1.1%. SG&A expenses related to corporate administrative functions increased $2.1 million primarily due to increased advertising expenses in conjunction with the Company's revised marketing strategy and increased payroll expenses. These increases were partially offset by a decrease in bad debt and legal costs of $0.9 million due to the improved financial performance of the Company's franchised offices. Field operation expenses decreased $2.2 million in 1997 as a result of the Company's decision to focus its resources on the geographic expansion of its tax preparation business and terminate its Copy, Pack & Ship operations during 1997. Other Income and Expenses, Net. Other income and expenses, net were $0.9 million for 1997 compared to $0.5 million for 1996, an increase of $0.3 million or 58.5%. Other income and expense fluctuations resulted from reductions in interest expense of $0.9 million primarily due to the elimination of the impact of warrants issued in 1996, a reduction in interest rates on the Company's credit facility, and reduced borrowings. This reduction in expenses was partially offset by a loss on the disposal of intangible assets and property and equipment of $0.1 million in 1997 compared to a gain of $0.6 million in 1996. These sales were part of the Company's efforts to restructure its offices. Minority Interest Share of Earnings. The Company's wholly owned subsidiary, Hewfant Inc., owns a 65% interest in Refant Partnership L.P. ("Refant"). Refant processes Bank Products through agreements with two commercial banks, including First Republic Bank. First Republic Bank is a 35% partner in Refant. The minority interest share of earnings primarily consists of First Republic Bank's share of the earnings of Refant. For 1997, the minority interest share of earnings amounted to $2.2 million compared to $1.9 million in 1996, an increase of $0.3 million or 15.5%. The increase is primarily a result of Refant's sale of approximately 137,000 additional Bank Products in 1997. Extraordinary Item. The 1997 results include a charge of $1.2 million (or $0.27 per share) in the first quarter for an extraordinary item related to the Company's retirement of a stock purchase warrant obligation to its primary lender. In conjunction with the renewal of the Company's credit facility, on June 7, 1996, the Company agreed to repurchase the put option on all of the then outstanding stock purchase warrants held by the lender and redeem 572,549 of the 582,549 outstanding warrants for approximately $1.9 million. The Company financed this transaction using funds available under its credit facility. Provision for Income Taxes. The provision for income taxes was $4.2 million for 1997 compared to $1.5 million for 1996, an increase of $2.7 million. The Company's effective tax rate was 40.3% for 1997 compared to 38.8% for 1996. Net Income. Net income was $5.0 million (or $0.95 per share) for 1997 compared to $2.4 million (or $0.40 per share) for 1996, an increase of $2.6 million or 107.5%. 1996 Compared to 1995 Revenues. The Company's total revenues were $25.0 million for 1996 compared to $18.2 million for 1995, an increase of $6.8 million or 37.3%. This increase was primarily attributable to an increase of $0.7 million in revenues generated by the Company's franchise operations and as a result of an increase of $6.1 million in other sources of revenues as described below. Franchise revenues were $14.1 million for 1996 compared to $13.4 million in 1995, an increase of $0.7 million or 5.7%. This increase was primarily attributable to an increase of $2.9 million or 42.5% in royalties and advertising fees to $9.9 million in 1996 from $6.9 million in 1995. Royalties and advertising fees increased due to increases in the number of tax returns prepared by franchised offices and increases in the average tax preparation fee charged per customer to $92 in 1996 from $80 in 1995. The number of tax returns prepared by franchised offices was approximately 680,000 for 1996 compared to approximately 569,000 for 1995, an increase of approximately 111,000 or 19.5%. Franchise fees, net of the allowance for franchise fee refunds, were $2.7 million in 1996 compared to $4.8 million in 1995, a decrease of $2.1 million or 43.7%. This decrease was primarily a result of the difficulty in attracting new franchisees following the 1995 tax season, during which changes in IRS policies adversely impacted the entire tax preparation industry, including the Company and its franchisees. In addition, the Company increased its allowance to cover anticipated franchisee terminations and rescissions. Electronic filing fees were $1.1 million for 1996 compared to $0.9 million in 1995, an increase of $0.2 million or 20.0%. This increase was a result of the Company's electronic filing of approximately 96,000 additional tax returns for franchisees during 1996. Bank Product fees were $6.9 million for 1996 compared to $2.0 million in 1995, an increase of $4.9 million or 236.7%. This increase was a result of the sale of approximately 131,000 additional Bank Products in 1996, which was primarily attributable to the Company's ability to provide Bank Products throughout the tax season as compared to the 1995 tax season when the Company's Bank Product program was terminated early in the tax season primarily due to a change in IRS policies regarding the payment of refunds attributable to the EIC. In addition, the Company restructured its Bank Product programs in 1996, which resulted in a higher percentage of fees charged to customers to reflect increased collection risks associated with the sale of Bank Products and higher fees received by the Company. See "Risk Factors - Adverse Impact of IRS Policies." Tax return preparation fees from Company-owned offices were $3.2 million for 1996 compared to $2.7 million for 1995, an increase of $0.5 million or 17.2%. This increase was primarily attributable to an increase in the average tax return preparation fee to $92 in 1996 from $80 in 1995. The number of tax returns prepared by those offices was approximately 42,000 for 1996 compared to approximately 45,000 for 1995, a decrease of approximately 3,000 or 6.7%. Miscellaneous income was $0.8 million for 1996 compared to $0.1 million for 1995, an increase of $0.7 million or 951.6%. This increase was primarily due to the operation of additional Copy, Pack and Ship stores in 1996 that had been opened at the end of the 1995 tax season. Selling, General, and Administrative Expenses. SG&A expenses were $18.5 million for 1996 compared to $18.4 million for 1995, an increase of $0.1 million or 0.6%. SG&A expenses related to corporate administrative functions decreased $0.7 million primarily due to reduced advertising expenses. These decreases were offset by an increase of $1.1 million related to increased costs associated with field offices due to the opening of the Copy, Pack and Ship stores in 1996. The Company began reducing its Copy, Pack and Ship operations in April 1996 in an effort to reduce the losses associated with these stores. Other Income and Expenses, Net. Other income and expenses, net, were $0.5 million for 1996 compared to $2.5 million for 1995, a decrease of $2.0 million or 78.0%. This decrease was primarily attributable to a decrease in the gain on sales of intangible assets and property and equipment of $1.2 million resulting from the sale of 87 Company-owned offices in 1995 compared to 35 Company-owned offices that were sold in 1996. Interest expense increased $1.3 million due to increased borrowings to finance the Company's seasonal needs, an increase of two percentage points in the interest rate paid to the Company's principal lender on amounts advanced under the credit facility, and the impact of the issuance of warrants to the Company's principal lender. This increase was partially offset by interest income which increased $0.5 million primarily resulting from interest earned on notes to franchisees. Minority Interest Share of Earnings. The minority partner's share of the earnings of Refant was $1.9 million for 1996 compared to no earnings for 1995. During 1995, the Company did not offer any Bank Products through Refant due to the minority partner's decision not to assume the risk of nonpayment associated with RALs because of the change in policies announced by the IRS just prior to the beginning of the 1995 tax season. See "Risk Factors - Adverse Impact of IRS Policies." Provision for Income Taxes. The provision for income taxes was $1.5 million for 1996 compared to $0.5 million for 1995, an increase of $1.0 million. The Company's effective tax rate was 38.8% for 1996 compared to 39.1% for 1995. Net Income. Net income was $2.4 million (or $0.40 per share) for 1996 compared to $0.8 million (or $0.11 per share) for 1995, an increase of $1.6 million or 186.0%. Seasonality and Quarterly Results of Operations Given the seasonal nature of the tax preparation business, the Company has generated and expects to continue to generate substantially all of its revenues during January through April of each year. During 1997, the Company generated approximately 89% of its revenues during this period. The Company generally operates at a loss through the first three quarters of each fiscal year, during which it incurs costs associated with preparing for the upcoming tax season. During these quarters, the Company relies on revenues generated during the prior tax season and its credit facility to finance its operations. See "- Liquidity and Capital Resources" and "Risk Factors - Seasonality and Disaster Recovery Risks." See Note 15 of the Notes to the Consolidated Financial Statements. The following table presents certain unaudited quarterly consolidated statements of operations data for each of the Company's last eight fiscal quarters. In the opinion of the Company's management, this quarterly information has been prepared on the same basis as the Consolidated Financial Statements appearing elsewhere in this Prospectus and includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the unaudited quarterly results set forth herein. The Company's quarterly results have in the past been subject to fluctuations, and thus, the operating results for any quarter are not necessarily indicative of results for a full year.
Fiscal 1996 Fiscal 1997 Quarter Ended Quarter Ended --------------------------------------------- ---------------------------------------------- July 31, Oct. 31, Jan. 31, April 30, July 31, Oct. 31, Jan. 31, April 30, 1995 1995 1996 1996 1996 1996 1997 1997 (in thousands, except per share data) (in thousands, except per share data) Net revenues................ $823 $1,318 $5,219 $17,656 $980 $1,216 $7,805 $21,431 Income (loss) before extraordinary item....... (1,326) (1,599) (475) 5,802 (1,322) (1,008) 1,184 7,378 Net income (loss)........... (1,326) (1,599) (475) 5,802 (2,570) (1,008) 1,184 7,378 Earnings per common share: Income (loss) before extraordinary item..... ($.33) ($.32) ($.11) $1.16 ($.32) ($.24) $.24 $1.54 Net income (loss)........ (.33) (.32) (.11) 1.16 (.59) (.24) .24 1.54
The Company experiences significant quarterly fluctuations in its results of operations. Such fluctuations may result in volatility in the price of the Common Stock. Results of operations may fluctuate as a result of a variety of factors, including the highly seasonal nature of the Company's business, competitive conditions in the industry, and general economic conditions. As a result, the Company's revenues are difficult to forecast, and the Company believes that quarter to quarter comparisons of results of operations are not necessarily meaningful and should not be relied upon as an indication of future results of operations. Due to the foregoing factors, it is possible that the Company's results of operations, including quarter to quarter results, will be below the expectations of public market analysts and investors. Such an event could have a material adverse effect on the price of the Common Stock. See "Risk Factors - Fluctuations in Quarterly Operating Results." Liquidity and Capital Resources The Company's revenues have been, and are expected to continue to be, highly seasonal. As a result, the Company must generate sufficient cash during the tax season, in addition to its available bank credit facility, to fund its operations in the following off-season. Operations in the off-season are primarily focused on the sale of franchises and preparation for the upcoming tax season. In May 1997, the Company's primary lender renewed the Company's credit facility through June 30, 1999. Under terms of the amended credit agreement (the "Credit Agreement"), amounts available under the facility vary from $2.0 million to $8.0 million. The amount available is $2.0 million until July 1, 1997, after which the amount available increases in successive $1.0 million increments over one and two month periods until the maximum of $8.0 million is reached for the peak tax season months of January and February 1998. The amount available under the Credit Agreement then falls to $2.0 million for the period March 1998 through June 1998 before again increasing in $1.0 million increments until the maximum available of $8.0 million is reached in January and February 1999. In addition, the Company is required to have a zero balance for a 30 day period between March 1, 1998 and July 31, 1998 and between March 1, 1999 and June 30, 1999. Borrowings under the credit facility bear interest at the 30 day LIBOR rate plus 2.5%. The Company's obligations under the Credit Agreement are collateralized by substantially all of the Company's assets. The Credit Agreement also requires the Company to meet certain financial ratios and contains certain restrictive covenants, including covenants limiting transactions with affiliates, the incurrence of additional debt, and the payment of dividends on the Company's Common Stock. The Credit Agreement is renewable upon expiration of the initial term on an annual basis for one year terms. The Credit Agreement also includes a $975,000 term loan made in connection with a mortgage held by the lender on the Company's corporate headquarters. See Notes 5 and 6 of the Notes to the Consolidated Financial Statements. Cash flows from the Company's operating, investing, and financing activities for 1997 and 1996 are disclosed in the Company's Consolidated Statements of Cash Flows included in the Consolidated Financial Statements included elsewhere herein. In 1997, the Company generated $9.2 million in its operating activities as compared to the $5.9 million generated in 1996. This change was attributable to the increase in income before extraordinary item in 1997 as compared to 1996. The Company generated $2.0 million from its investing activities in 1997 as compared to $1.1 million in 1996. This increase was primarily attributable to an approximately $0.3 million increase in franchise note collections, an approximately $0.3 million decrease in notes receivable financing of franchisees, and a net decrease of approximately $0.3 million in purchases of property and equipment and intangible assets. The Company's financing activities for 1997 utilized $8.4 million in cash as compared to the $4.8 million utilized in 1996. This difference was primarily attributable to a distribution to the minority interest partner in a consolidated partnership of $4.0 million. This distribution related to amounts owed to the minority partner for both the 1996 and 1997 tax seasons, which were both paid during 1997. The remainder of the increase was attributable to a decrease in net repayments of indebtedness of $2.8 million, which were partially offset by the payment of preferred stock dividends of $0.7 million and the repurchase of stock purchase warrants totaling $1.9 million. Working capital at April 30, 1997, was $6.0 million as compared to $4.7 million at April 30, 1996. The increase in working capital was attributable to the increase in current assets partially offset by the increase in taxes payable on the Company's improved earnings in 1997. The Company's total current assets at April 30, 1997 were $13.9 million as compared to $11.2 million at April 30, 1996. the increase resulted primarily from an increase in cash of $2.7 million. Total receivables decreased $0.9 million due to repayments of notes receivables from franchisees and the implementation of more stringent credit guidelines regarding the extension of credit to franchisees. The notes receivable from franchisees are generally two to five years in duration and are due in annual installments of principal and interest on February 28 of each year. These notes generally bear interest at rates between 10% and 12%, are secured by the underlying franchise and are personally guaranteed by the individual owners of each franchise. During 1997, the Company acquired customer lists and other assets from 31 franchisees for a total purchase price of $2.4 million. As consideration for these acquisitions, the Company paid the franchisees cash of $0.3 million and issued notes payable of $0.3 million while canceling notes receivable of $1.8 million. Based on the Company's ability to generate working capital through its operations, net proceeds from the Offering, and the amount available under its credit facility, the Company believes these sources will provide sufficient liquidity and financial resources to meet the Company's obligations for 1998. Management estimates it will require approximately $8.0 million to fund its off-season capital needs in 1998. To the extent the Company completes any acquisitions, it may require additional debt or equity financing to meet its capital needs. New Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share (Statement 128). Statement 128 supersedes APB Opinion No. 15, Earnings Per Share, and specifies the computation, presentation, and disclosure requirements for earnings per share ("EPS") for entities with publicly held common stock or potential common stock. Statement 128 was issued to simplify the computation of EPS and to make the United States standard more compatible with the EPS standards of other countries and that of the International Accounting Standards Committee (IASC). It replaces primary EPS and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the Basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS, unlike primary EPS, excludes all dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS, similar to fully diluted EPS, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Statement 128 is effected for financial statements for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted. After adoption, all prior period EPS data presented shall be restated to conform with Statement 128. See Note 17 of the Notes to the Company's Consolidated Financial Statements for further discussion of the impact of implementation of this standard. BUSINESS General Jackson Hewitt is the second largest tax preparation service in the United States, with a 41 state network comprised of 1,296 franchised and 76 Company-owned offices operating under the trade name "Jackson Hewitt Tax Service." Office locations range from stand-alone store front offices to offices within Wal-Mart and Montgomery Ward. Through the use of proprietary interactive tax preparation software, the Company is engaged in the preparation and electronic filing of tax returns. During 1997, Jackson Hewitt prepared approximately 875,000 tax returns, which represented an increase of 21.2% from the approximately 722,000 tax returns it prepared during 1996. To complement its tax preparation services, the Company also offers Bank Products to its tax preparation customers. In 1997, Jackson Hewitt customers purchased approximately 472,000 Bank Products, an increase of 20.1% over the approximately 393,000 Bank Products purchased in 1996. In 1997, the Company had total revenues of $31.4 million and net income of $5.0 million, or $0.95 per share, an increase of 25.6%, 107.5% and 137.5%, respectively, over 1996. . Through the innovative use of computers, the Company believes it provides consistent, high quality tax preparation services at prices that allow the Company to compete successfully with other businesses offering similar services. While the quality of service provided by other tax preparers depends largely on the individual preparer's knowledge of tax laws, Jackson Hewitt's service does not depend solely upon the preparer's tax expertise. Jackson Hewitt's proprietary interactive tax software, Hewtax, automatically prompts the preparer with the relevant questions required to accurately complete a tax return. By computerizing the tax preparation process, Jackson Hewitt is able to rapidly and efficiently prepare and file a customer's tax return electronically. Since electronic filings are generally processed by the IRS on a priority basis, customers who file in this manner typically receive refunds more quickly than those who file their tax returns manually. Industry Overview The IRS reported that 114.5 million individual federal income tax returns were filed in the United States in 1997. According to the IRS, approximately one-half of the tax returns filed in the United States each year are completed by a paid preparer. Among paid preparers, H&R Block dominates the low-cost tax preparation business in the United States with approximately 10,000 offices worldwide. According to information released by H&R Block in May 1997, H&R Block prepared approximately 14.2 million United States tax returns during the 1997 tax season, which represented approximately 12.4% of all tax returns filed in the United States. Other than H&R Block and the Company, the tax preparation industry is highly fragmented and includes regional tax preparation services, accountants, attorneys, small independently owned companies, and financial service institutions that prepare tax returns as ancillary parts of their businesses. The ability to compete in this market depends in large part on the geographical area, specific location of the tax preparation office, local economic conditions, quality of on-site office management, the ability to file tax returns electronically with the IRS, and the ability to offer Bank Products to customers. See " - Competition" and "Risk Factors - Competition." The IRS' administrative costs are reduced significantly when a tax return is filed electronically rather than by mail. The IRS, therefore, has announced its intention to increase the number of tax returns filed electronically and is currently reviewing various proposals to encourage the growth of its electronic filing program. Tax preparation companies and their principals are subject to background and credit checks by the IRS and must qualify with the IRS to participate in the electronic filing program. The Company believes that taxpayers will continue to utilize electronic filings as long as the IRS handles electronically filed tax returns on a priority basis and refunds are received more quickly than those associated with manually filed tax returns. In addition, electronic filing makes it possible for the Company to offer Bank Products to its customers. For these reasons, the Company believes electronic filing is becoming an increasingly important factor in the tax preparation business. The Company also believes that its proprietary interactive software facilitates efficient electronic filing of tax returns with the IRS. See " - The Tax Preparation Business - Electronic Filing of Tax Returns." Business Strategy The Company's objective is to expand its system of tax preparation offices in new and existing geographic markets. The Company's management team has developed the following business strategy to achieve this objective: Expand the Franchise Network. The Company intends to increase market share by continuing to expand its franchise network in regions of the country where people have a tendency to use electronic filing services, as well as in existing markets that will support additional Jackson Hewitt offices. The franchise sales campaign effort begins each year upon completion of the tax season and typically extends through the first half of the subsequent fiscal year. The Company intends to capitalize on the recent financial performance of its franchise network by seeking to sell adjacent and nearby franchise territories to existing franchisees. In addition, the Company intends to market franchise territories to new franchisees throughout the year, with a primary emphasis on potential franchisees who the Company believes have the financial resources to purchase multiple territories. The Company also believes it can further expand its franchise network and accelerate market penetration in areas where its franchisees currently operate by opening Company-owned offices in selected undeveloped territories for resale to franchisees. This initiative is designed to develop territories the Company believes will be more attractive to potential franchisees as existing businesses than as undeveloped territories. The Company expects that by opening and developing Company-owned offices within selected territories, it can demonstrate to existing franchisees the economic attractiveness of those and other nearby territories. The Company also believes that many potential franchisees are more willing to purchase an operating business with a developed customer list for a higher price than an undeveloped territory that will require additional effort to open. The number of Jackson Hewitt franchised offices has grown from 546 in 1993 to 1,296 in 1997. Expand the Corporate Office Program. The Company intends to increase the relative mix of its Company-owned offices through its corporate office program. The Company believes it can supplement its franchise expansion program and efficiently and profitably expand the Jackson Hewitt system by operating Company-owned offices in new and existing markets. Historically, Company-owned offices were typically located in territories reacquired from franchisees and were operated by the Company on a temporary basis pending their resale. After reviewing the economic opportunities potentially afforded by properly supported Company-owned offices, the Company developed and implemented the corporate office program during the 1997 tax season in two test markets. Under this new program, the Company plans to open concentrated groups of Company-owned offices in selected geographic markets. The Company believes it can maximize the effectiveness of its marketing campaigns and achieve certain economies of scale by opening clusters of Company-owned offices in targeted areas. During the 1997 tax season, 5.5% of the Jackson Hewitt offices were owned by the Company and 94.5% were owned by franchisees. Improve Efficiency of Operations. The Company intends to continue to improve its system-wide controls and compliance programs to increase operating efficiencies. The Company believes that its integrated computer systems and policy of monitoring franchisee operating obligations allow it to better promote communications, increase efficiencies in the filing of electronic tax returns, improve coordination, and reduce administrative overhead throughout its Company-owned and franchised office system. To promote compliance with Company operating policies and procedures, management initiated an internal auditing program during the 1997 tax season. The Company emphasizes compliance by its franchisees with the terms and conditions of their franchise agreements, including obtaining the Company's approval for office site selection, conducting and attending training seminars, complying with the Company's standards and policies, meeting acceptable customer service requirements, maintaining the appearance of its sites, obtaining adequate insurance coverage, honoring a covenant not to compete with the Company, and maintaining proper records and reports. The Company also specifies certain computer hardware that franchisees must purchase for use in their offices. Over the past year management has also strived to strengthen and improve its relationships with its franchisees on a system-wide basis. Promote the Jackson Hewitt Brand Name. The Company intends to increase promotion of the Jackson Hewitt brand name to increase market share. During the 1997 tax season, the Company focused its advertising campaign on creating and improving Jackson Hewitt's brand name identity. The Company's advertisements consistently showcased the Company's name and "A.S.A.P." logo. The Company also intends to use advertising to expand its customer base to include a greater percentage of middle to upper income customers who tend to file their tax returns later in the tax season as compared to low to middle income taxpayers who tend to file their returns earlier in the season. During the 1997 tax season, the Company began to position a portion of its advertising to reach these types of customers, who the Company's market research indicates are interested in an expertly prepared, reasonably priced tax return, although less interested in obtaining Bank Products. Based upon the results of the 1997 tax season, the Company intends to increase the focus of its advertising on this type of customer during the 1998 tax season. The Tax Preparation Business Customers. Jackson Hewitt's customer base currently consists primarily of low to middle income taxpayers who typically are entitled to tax refunds and desire to receive their refund checks as quickly as possible. During the 1997 tax season, approximately 80% of Jackson Hewitt's customers had annual gross wages under $30,000 and over 62% had annual gross wages under $19,000. Many of these individuals qualify for an increased refund as a result of the EIC. These customers typically file their tax return early in the tax season. The Company believes that customers are attracted to Jackson Hewitt's services because they prefer not to prepare their own tax returns, are unwilling to pay the fees charged by most accountants and tax attorneys, or wish to purchase a Bank Product. Fees. Jackson Hewitt earns fees for preparing tax returns and electronically filing tax returns for individuals whose tax returns were not prepared by Jackson Hewitt. The amount of a tax preparation fee is based upon the quantity and type of the schedules that are attached to the tax return. Jackson Hewitt also earns fees related to the sale of Bank Products, including Application Fees, Processing Fees, and RAL Fees. The aggregate average gross fee for Jackson Hewitt prepared tax returns, including tax preparation, electronic filing, and Bank Product fees has increased from $67 in 1993 to $99 in 1997. See " - Bank Products." Electronic Filing of Tax Returns. During 1986, the IRS began testing "electronic filing," which at that time was a new method of filing tax returns by computer. Since 1990, the IRS has made electronic filing available throughout the United States. The IRS' administrative costs are reduced when a tax return is filed electronically, rather than by mail. The IRS therefore has announced its intention to increase the number of tax returns filed electronically and is currently reviewing various proposals to encourage the growth of its electronic filing program. Tax preparation companies must qualify with the IRS to participate in the electronic filing program. The Company believes that taxpayers prefer to utilize electronic filing as long as the IRS handles electronic tax returns on a priority basis and refunds are received in shorter time frames than those associated with manually filed tax returns. The Company believes that Jackson Hewitt customers will continue to utilize electronic filing services because those services make it possible for customers to purchase Bank Products. For these reasons, the Company believes electronic filing is becoming an increasingly important factor in the tax preparation business. More than 84% of the tax returns prepared by Jackson Hewitt during the 1997 tax season were filed electronically. In addition, the Company believes that its proprietary interactive tax software facilitates the efficient electronic filing of tax returns with the IRS. Although Jackson Hewitt does not charge customers an additional fee for the electronic filing of their tax returns if Jackson Hewitt prepares the tax return, during the 1997 tax season, Jackson Hewitt received fees for filing tax returns electronically for approximately 124,000 customers who prepared their own tax returns or had them prepared elsewhere. The following table shows the growth in the number of tax returns filed electronically by computer since the inception of the electronic filing program, as reported by the IRS, as well as the number of tax returns filed electronically by computer by Jackson Hewitt. During the 1997 tax season, Jackson Hewitt filed 5.1% of the 14.4 million tax returns filed electronically by computer in the United States. Total No. of Tax Returns Filed No. of Tax Returns Filed Electronically by Computer with Electronically by Computer by Year the IRS Jackson Hewitt - ---- ------- -------------- 1987 78,000 5,200 1988 583,000 15,900 1989 1,200,000 36,400 1990 4,204,000 86,400 1991 7,567,000 199,000 1992 10,919,000 290,000 1993 12,334,000 358,000 1994 13,502,000 503,000 1995 11,127,000 522,000 1996 12,129,000(1) 615,000 1997 14,383,000(1)(2) 735,000 - ----------------------------- (1) The IRS recently introduced a method by which qualifying taxpayers can file their tax returns electronically with the IRS by telephone. The figures set forth above do not include the 2.8 million and 4.7 million tax returns that were filed electronically by telephone with the IRS in 1996 and 1997, respectively. (2) Based on IRS filing statistics through June 6, 1997. Bank Products. The Company has implemented the Bank Product programs as part of its electronic filing service. These programs enable customers to receive their tax refunds faster than if they filed their tax return by mail. Through the ACR program, the Company enables customers to have their refund deposited directly into a bank account within two to three weeks of the filing of the tax return, and to defer the payment of the tax preparation and Bank Product fees until the refund is actually paid. Through the RAL program, customers apply for the right to receive all, or a portion, of their refund less the tax preparation and Bank Product fees, within one to three days of the filing of the tax return. RALs are recourse loans secured by the taxpayer's refund. During 1997, Jackson Hewitt customers received approximately 330,000 ACRs and approximately 42,000 RALs. Bank Product fees for 1997 totaled $9.4 million, or 29.8% of total revenues, of which $2.2 million represented the minority interest which was paid to the minority partner in the Refant Partnership. Each Jackson Hewitt customer pays an Application Fee and a Processing Fee as well as the tax preparation fee upon the purchase of a Bank Product. To obtain an ACR or a RAL during the 1997 tax season, each Jackson Hewitt customer paid an Application Fee of approximately $24 to the processing bank and a Processing Fee of approximately $25 to the Jackson Hewitt office that prepared the return. To obtain a RAL during the 1997 tax season, each Jackson Hewitt customer paid a RAL Fee equal to 4% of the amount of the RAL. When a customer receives a Bank Product, but the IRS does not deposit the expected refund into the bank account established for its receipt because, among other reasons, the customer owes back taxes or is delinquent on child care obligations, the deferred tax preparation fee, Application Fee, Processing Fee, and amounts due under a RAL normally will not be paid without the lender instituting individual collection actions against the customer. The Company's Bank Product fee arrangements apportion this risk of nonpayment among the affected Jackson Hewitt office, the Company, and the processing banks under two different risk-sharing arrangements. Under one Bank Product fee sharing arrangement with a processing bank, the Company accepts a lower profit margin in exchange for assuming less risk. Under this fee arrangement, the Company is paid a set fee by the processing bank for each Bank Product provided to Jackson Hewitt customers, but does not share in the profitability of the program. In the case of an ACR, no money is paid to the customer unless the IRS deposits the customer's tax refund with the bank that processed the ACR. As a result, the Jackson Hewitt office that prepared the tax return bears the risk that it will not receive the tax preparation fee and the Processing Fee if the tax refund is not deposited electronically into the customer's account. Under this processing bank's RAL program, the risk associated with nonpayment of the tax preparation fee, the Application Fee, and the Processing Fee is borne by the bank since those fees are paid to the Jackson Hewitt office that prepared the tax return when the RAL funds are disbursed by the processing bank. If no tax refund is received by the customer from the IRS, the bank making the RAL is forced to attempt to recover the loan balance directly from the customer. During 1997, approximately 10.8% of the Bank Products provided to Jackson Hewitt customers were through this arrangement. Under the Company's other Bank Product fee arrangement, the Company can earn a higher profit margin in exchange for its assumption of additional risk. Under this fee arrangement, the Jackson Hewitt office which prepares the tax return assumes the risk of nonpayment of the Processing Fee and the tax preparation fee and the Company and the processing bank share the risk of nonpayment of the Application Fee associated with an ACR or a RAL. The Company and the processing bank also share the risks associated with nonpayment of funds advanced to the customer in connection with a RAL. The Company and the processing banks have attempted to reduce these risks through the establishment of a reserve for uncollectable funds from the Application Fees and the RAL fees collected from all Jackson Hewitt customers who receive a RAL. Reserve funds associated with RAL fees are utilized to cover losses associated with the nonpayment of RALs before funds related to Application Fees are used for this purpose. To the extent losses associated with unpaid RALs exceed the funds maintained in this reserve, such losses are divided between the Company and the processing bank on a 65% and 35% basis, respectively. To the extent funds remain in the reserve, the portion of the reserve represented by RAL fees is distributed to franchisees at the end of the tax season in the form of performance incentives. To the extent funds remain in the reserve following the distributions to franchisees, 65% and 35% of such funds are distributed to the Company and the processing bank, respectively. Provided the loan underwriting criteria are sufficient to accurately anticipate delinquencies in connection with the RALs, this arrangement is potentially more profitable for the Company than the alternative Bank Product fee arrangement discussed above which provides that the Company receives a fee and does not share the risk associated with nonpayment of the Bank Products. Accordingly, the Company intends to increase the relative share of Bank Products made under this type of arrangement in the 1998 tax season. During 1997, approximately 89.2% of the Bank Products sold to Jackson Hewitt's customers were under this arrangement. See "Risk Factors Dependence on Bank for RALs and ACRs; Underwriting Risks." The Treasury Department and the IRS periodically initiate policy changes related to electronic filing of tax returns and the treatment of the EIC. The Company's Bank Product programs were adversely affected during the 1995 tax season by IRS and Treasury Department policy changes that subsequently caused the Company and its processing banks to modify the pricing of the Bank Products to more accurately reflect the risks associated with these products. In 1995, the IRS introduced multiple initiatives simultaneously that changed the way in which tax preparers were notified of tax refunds and the way in which EIC recipients were paid their refunds. These changes affected RALs far more than ACRs. In particular, the IRS stopped providing a notification which informed RAL lenders in advance of making RALs whether there was any reason to expect a refund would not be paid. In addition, during the 1995 tax season, the IRS divided federal income tax refunds owed to taxpayers who qualified for EIC into a non-EIC refund portion, which was paid electronically to the RAL lender, and an EIC portion, which was delivered via a check directly to the taxpayer rather than electronically to the RAL lender. As RAL lenders had already loaned against the entire amount of the refund, taxpayers were, in effect, paid the EIC refund portion twice-once by the RAL lender and again by the IRS. These changes disrupted the entire tax preparation industry by dramatically reducing the number of electronic filings and causing significant losses on the part of RAL lenders who had relied upon prior IRS policies to assess underwriting risk. The Company and its franchisees were adversely impacted due to the reduction in the number of RALs resulting from this IRS change of policy. Following the 1995 tax season, RAL lenders adopted much more stringent underwriting standards, adopted independent credit checks, set loan limits based upon past history, and increased pricing to more appropriately reflect the risk of the Bank Product program. As a result, from 1995 to 1997, the Company has seen a major shift from RALs to the less risky, but nearly as profitable ACRs. While the Company believes that its current policies give it the flexibility to react to IRS changes, no assurance can be given that the IRS will not adopt policies in the future that could materially adversely affect the Company's business, financial condition, and results of operations. See "Risk Factors - Adverse Impact of IRS Policies" and " - Dependence on Bank for RALs and ACRs; Underwriting Risks." To recover the money that had been loaned against the EIC portion in the 1995 tax season, the banks that made RALs available to Jackson Hewitt and its competitors agreed to cross-check subsequent tax season customers against the list of customers who had received double payments of the EIC in the 1995 tax season, as well as other customers who had received RALs in prior seasons but had not repaid such loans. Under these arrangements, the banks share information regarding the identity of, and amounts payable by, these customers. By sharing this information, the banks are able to identify these individuals in later tax seasons should they purchase a Bank Product from a tax preparation company. Customers are advised in advance that should they become identified as a customer who owes any portion of a RAL from a prior tax season, any tax refunds attributable to such customer will be offset first against the prior debt. Tax preparation companies receive a commission for each customer identified in this manner. Franchise Sales Activities and Company-owned Office Development; 1997 Office Operating Results The Company owned or franchised 1,372 offices in approximately 900 territories during the 1997 tax season. Approximately 53% of the Company-owned and franchised offices are no more than three years old. The Company typically concentrates its franchise sales and development activities during the period of March through December of each year. The following table sets forth information regarding the Company's office development as of April 30 of each year since 1993. Summary of Office Development At April 30, --------------------------------------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- Franchised Offices Stand-Alone................... 402 596 828 806 929 Montgomery Ward............... 144 141 191 176 149 Wal-Mart...................... 0 5 36 218 196 Other......................... 0 0 32 46 22 --- --- ----- ----- ----- Total Franchised Offices 546 737 1,087 1,246 1,296 Company-Owned Offices Stand-Alone.................... 41 84 58 37 46 Montgomery Ward................ 27 51 28 13 18 Wal-Mart....................... 0 1 27 46 12 Other.......................... 0 0 22 0 0 --- --- ----- ----- ----- Total Company-Owned Offices 68 136 135 96 76 TOTAL OFFICES 614 878 1,222 1,342 1,372 === === ===== ===== ===== The Company's experience indicates that mature Jackson Hewitt offices generally outperform newer offices. The following chart identifies the average number of tax returns prepared by Jackson Hewitt offices at varying maturity levels. Number of Tax Number of Jackson Hewitt Average Number of Tax Seasons Open Offices Returns Prepared ------------ ------- ---------------- 1 318 278 2 198 443 3 214 665 4 188 880 5 and above 454 862 Franchise Operations Historical Growth. The Company's growth has been largely attributable to the expansion of its franchise operations. The Company has expanded its franchise network from 49 offices in 1988 to 1,296 in 1997. During the 1997 tax season, 5.5% of Jackson Hewitt offices were owned by the Company and 94.5% were owned by franchisees. In 1997, the Company sold 166 new franchise territories and increased the net number of its franchised offices by 50. The Company believes that franchise growth has resulted from its ability to sell relatively inexpensive franchises to franchisees. The current franchise fee for a new Jackson Hewitt franchise is $20,000, a portion of which may be financed over a three-year period. The Company attempts to sell franchise territories on a geographically concentrated basis so that it can more effectively and efficiently target customers through its mass media advertising campaigns. Through the expansion of its franchise operations, the Company has established a national presence while enhancing its position in the Mid-Atlantic region of the United States. The Franchise Agreement. Under the terms of the Company's franchise agreement ("Franchise Agreement"), each franchisee receives the right to operate Jackson Hewitt offices within a specific geographic territory with a population of approximately 50,000. Franchisees are permitted to operate as many offices within a specified territory as they choose. Currently there are approximately 4,600 territories in the United States, 1,000 of which are currently served by Jackson Hewitt offices. Unlike many other franchise concepts where the franchisee pays fees according to how many office locations the franchisee operates, Jackson Hewitt franchisees pay one fee for each territory they purchase. Historically, franchisees have been able to maximize their profit potential by operating between one to four offices in a territory, with the particular number depending largely on local economics and the population dispersion of the region. In some instances, the opening of a second or third office within a territory may decrease the revenues and profitability of existing Jackson Hewitt offices, but may also increase the overall market share, revenues, and profitability of the territory. The initial term of the Franchise Agreement is five years, with successive renewals exercisable at the option of the franchisee for additional five-year periods as long as the terms of the Franchise Agreement have been met. In addition, franchisees are required to keep at least one office location open throughout the year in each territory in which the franchisee operates unless the franchisee owns contiguous territories, in which case only one office must be open during the off-season for at least one day per week within those territories. This policy is designed to ensure that customers in each territory have access to a Jackson Hewitt tax preparer for assistance in matters relating to late filings or previously filed or future tax returns. Each franchisee is also required to conduct tax seminars, which are offered to the general public to attract prospective seasonal tax preparers in order to maintain a staff of quality tax preparation professionals and to enhance name recognition. Franchise Development. The Company has historically expanded its franchise office operations through the selective recruitment of new franchisees as well as the sale of new territories to existing franchisees with successful operating histories. The Company intends to emphasize selling franchise territories to existing Company franchisees and potential franchisees capable of purchasing and operating multiple territories. Sales of franchises to new franchisees originate through referrals from existing franchisees, direct mail campaigns, newspaper advertisements, and numerous franchise trade shows in which the Company participates. Prior to entering into the Franchise Agreement with a potential franchisee, a credit check is performed and an interview is conducted by a Company regional director. The regional director, who oversees between 150 and 200 franchisees, focuses on the qualities generally found in a successful Company franchisee: customer service values, ability to follow recommended procedure, and a strong work ethic. Since the Company's proprietary interactive tax software greatly facilitates the tax preparation process, tax or accounting knowledge and experience are not prerequisites. If the applicant successfully completes the interview process, the applicant is required to complete a five-day training program during which the Company provides information on staffing requirements, operating procedures, and other matters necessary to properly manage a franchise. The following chart summarizes the number of new Company franchisees for each fiscal year since 1993. Number of Franchisees Previous Fiscal Fiscal Year Year Total Left System(1) New Franchisees Total Franchisees ----------- --------------- -------------- --------------- ----------------- 1993 198 24 63 237 1994 237 34 135 338 1995 338 52 189 475 1996 475 82 98 491 1997 491 67 112 536 - --------------------------------------- (1) These franchisees either sold their franchise, had it terminated by the Company, or otherwise left the Jackson Hewitt system. Start-Up Costs and Franchise Fees. Upon executing the Franchise Agreement, the franchisee is required to pay the initial franchise fee of $20,000, a portion of which may be financed over a three year period. The initial franchise fee has increased from $15,000 in March 1993 to $20,000. Other necessary start-up costs for a new territory budgeted to prepare 500 or fewer tax returns for the first tax season include capital expenses, such as equipment, signs, and leasehold improvements, which, along with the franchise fee, typically amount to $30,700 to $34,300. Start-up costs relating to annual operating expenses such as travel, training, rent, insurance, utilities, advertising, and payroll typically range from $19,500 to $29,800 for a total initial investment ranging from approximately $50,700 to $64,100. Royalties and Advertising Fees. In addition to the initial franchise fee and other start-up expenses, franchisees are required to pay recurring royalties equal to 12% of franchise territory revenues and an advertising and marketing fee equal to 6% of franchise territory revenues. The Company also charges franchisees a $2.00 fee for each tax return that is electronically filed with the IRS. In return, the Company provides the following products and services to its franchisees: (i) a minimum of five days of initial training in business operations, (ii) the use of proprietary interactive tax software that aids the franchisee in preparing tax returns, (iii) a joint advertising program that is funded through contributions made by both franchised and Company-owned offices, (iv) annual tax training programs that assist franchisees in hiring and training seasonal tax preparation employees, (v) standardized operating manuals that assist franchisees in the operation of their businesses, (vi) support in the areas of management, systems, and software, (vii) access to Bank Products that are not generally available to many small tax preparation businesses, and (viii) access to electronic filing services. The following table summarizes total royalties, advertising fees and franchise fees, net, for each fiscal year since 1993. Fiscal Year Royalties Advertising Fees Franchise Fees, Net(1) (in thousands) 1993 $2,619 $1,593 $2,066 1994 3,485 2,192 3,449 1995 4,609 2,305 4,765 1996 6,572 3,284 2,682 1997 8,832 4,416 3,204 - --------------------------------------- (1) Represents franchise fees for new territories less an accrual of 12% of these fees to provide for terminations and rescissions of franchised territories. Franchisee Support. To assist franchisees in their efforts to serve their customers, the Company's field consultants, regional directors, and home office field support staff are available for support in areas such as management, computer systems, and hiring. The Company provides three levels of tax courses that franchisees can use to recruit and train seasonal employees. In addition, a team of Company tax and software specialists is available for assistance regarding tax law interpretations and software usage. The Company believes that the franchisees' access to these products and services enables them to provide a quality of services that would not otherwise be attainable on an economical basis, and is an important element in differentiating the Company from smaller tax preparation businesses. Administrative Supervision. The Company monitors the quality of service, office appearance, accuracy of tax returns and training of personnel for all Jackson Hewitt offices, through its staff of five regional directors and by sampling tax returns. To promote compliance with the Company's operating standards, the Company began an internal audit program during the 1997 tax season. Under this program, the Company audits franchisees on a random basis to assure compliance with the Company's operating manuals. Individual Franchise Agreements permit the Company to enforce operating standards through termination of the Franchise Agreement after various warning periods. Regulation of Franchise Sales. The Company's franchising activities are subject both to federal and state laws and regulations. Franchising is regulated on the federal level by the Trade Regulation Rule, 16 C.F.R. 436 (the "Franchise Rule"). The Franchise Rule requires a franchiser to give any prospective franchisee specified information about the nature of the franchise investment on the earlier of (i) the first personal meeting, (ii) 10 business days before any binding agreement is signed, or (iii) 10 business days before any consideration is paid. In addition, the franchiser must provide the prospective franchisee with a franchise agreement that reflects the specific terms on which the franchisee will be licensed to do business at least five business days before signing any binding agreement. There is no private right of action available to franchisees and prospective franchisees under the Franchise Rule. Franchisees who claim violations must bring their complaints to the Federal Trade Commission. Violators are subject to civil penalties of up to $10,000 per violation. The Franchise Rule requires a franchiser to provide information in specific areas in a specific format. This information is contained in an "offering circular." The Franchise Rule also permits a franchiser to prepare an offering circular in accordance with the format designed by the North American Securities Administrators Association, called the Uniform Franchise Offering Circular ("UFOC"). The Company has selected the UFOC format for its franchise offering circular because it is accepted in all states with franchise laws, thus avoiding the need to prepare multiple offering circulars. The Franchise Rule governs franchiser conduct in all states. However, California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin have enacted state franchise laws. The Franchise Rule permits state laws to govern franchising if they provide protection that is equal to or greater than that provided by the Franchise Rule. Most of these state laws require franchisers to provide specific information to franchisees, generally in the UFOC format. As a general rule, these formats track the UFOC closely and impose no significant additional requirements on franchisers. Most state laws provide a franchisee with a private right of action to seek direct recourse against a franchiser, in addition to administrative penalties, if a franchiser fails to comply with a state's franchising laws. Moreover, some states, like California, have laws that govern the relationship between franchiser and franchisee after the franchise agreement is signed, such as laws that (i) mandate "notice" and "cure" periods before termination, (ii) restrict the grounds for termination without the opportunity to "cure" a default, or (iii) restrict the franchiser's ability to enforce a post-term competition covenant. Both the Franchise Rule and the UFOC format require a franchiser to update its offering circular to include new financial statements. The Franchise Rule and the UFOC format also require a franchiser to update its offering circular in the event of material changes, such as significant changes in financial condition, changes to major fee structures, or changes in business opportunities being offered. See "Risk Factors - Risks Associated with Franchising." Company Store Operations The Company operates 76 Company-owned offices in selected territories throughout the United States. Historically, the Company-owned offices were typically located in territories reacquired from franchisees and were operated on a temporary basis pending their sale to new franchisees. The Company intends to open and operate additional Company-owned offices in designated territories without any anticipated sale to franchisees. The Company believes it can maximize the effectiveness of its marketing campaigns and achieve certain economies of scale by operating multiple Company-owned offices in targeted areas. The Company also intends to continue to evaluate and close unprofitable offices and improve operating procedures at the remaining offices. Company-owned offices generated tax preparation revenues of $3.3 million in 1997, or 10.5% of total revenues. The Company manages its Company-owned offices through a staff of office managers, market managers, district managers, and sectional managers. An office manager is usually a tax preparer who has demonstrated the ability to manage the activities of other tax preparers and who has at least one year of experience in the Jackson Hewitt system. The office manager is responsible for operations and customer service within the office. The office manager reports to either a market manager or a district manager. Market managers supervise between five and 10 offices within a specific geographic region, normally in a metropolitan area. The market manager is responsible for coordinating the operational and marketing activities for offices within this specific area. A district manager is responsible for the supervision of between 10 and 20 offices, which are more geographically dispersed than those for which a market manager is responsible. Due to the complexities of overseeing a large geographic area, district managers are generally required to have more experience than market managers. Otherwise, the responsibilities of the two positions are comparable. Market managers and district managers report to one of three sectional managers, who in turn report to the Company's Vice President of Franchise Sales and Corporate Offices. The sectional managers coordinate the activities of two to four market managers or district managers. This management structure has been implemented so that the Company can operate the 150 Company-owned offices anticipated to be open during the 1998 tax season. Office Site Selection Jackson Hewitt offices are typically 600 to 1,000 square feet in size and are able to accommodate anywhere from three to 10 work stations. As with any retail operation, the location of a tax preparation office is vital to its success. For this reason, the Company maintains the right to approve the site selection of all offices, including franchised offices, and utilizes specific criteria to evaluate potential office locations. In particular, the Company expects its offices (i) to be highly visible from a major intersection or busy street, or be located within a Wal-Mart, Montgomery Ward or other large retailer, (ii) to have high levels of automobile or foot traffic, and (iii) to be in close proximity to shopping malls or other major food or clothing retailers, preferably discounters. All franchise locations are approved by a Company regional director and the locations of Company-owned offices are approved by a district director. Retail Outlets Jackson Hewitt's office expansion and profitability have benefitted from the Company's relationships with two large retailers. During the 1997 tax season, Jackson Hewitt operated 208 offices within Wal-Mart stores and 167 offices within Montgomery Ward stores. Under the Company's master license agreement with Wal-Mart, which was entered into in September 1994, all of Jackson Hewitt's Wal-Mart locations are operated only on a seasonal basis. In October 1988, Montgomery Ward and the Company entered into a master license agreement granting Jackson Hewitt the right to operate offices on a seasonal basis as well. The Company is currently negotiating with Wal-Mart and Montgomery Ward regarding the number of stores, if any, in which Jackson Hewitt offices will be operated during the 1998 tax season. If the Company's arrangements with Montgomery Ward, Wal-Mart or both are terminated for any reason, the franchisee or the Company operating from the retail location would be forced to find another location. This could be disruptive to the business of the Company or the franchisee, especially if the dislocation were to occur before or during the tax season. See "Risk Factors - Dependence on Retail Outlets." Sales and Marketing The Company has two distinct marketing programs, one of which is designed to attract franchisees and one of which targets potential customers. The franchisee marketing program is designed to solicit sales leads from prospective franchisees. The Company places advertisements in national magazines as well as local publications throughout the year, but primarily between the months of March and October. The advertisements describe the Jackson Hewitt franchise opportunity and encourage prospective franchisees to contact the Company by phone, mail, or electronic mail. The retail marketing program is directed towards the taxpaying public. During 1997, the Company engaged an outside market research company to conduct independent research on various aspects of tax preparation and tax preparer advertising. Based upon this research and input from the Company's advertising agency, the Company's current advertising campaign was designed and implemented for the first time during the 1997 tax season. The campaign, entitled "Jackson Hewitt A.S.A.P." encourages customers to utilize Jackson Hewitt's services so that their tax returns can be prepared "A.S.A.P." and their refunds can be received "A.S.A.P." The campaign includes 15 and 30 second television spots featuring various situations in which taxpayers want their tax returns prepared so that they can receive their tax refunds as quickly as possible. Early tax season advertising primarily targets those individuals who desire tax refunds quickly. Later in the tax season, the advertising message shifts to issues of accuracy and convenience, attributes which the Company believes are more appealing to customers who wait until later in the tax season to have their tax returns prepared. The Company's advertising budget is funded through a combination of franchisee and Company contributions. Pursuant to the terms of the Franchise Agreement, franchisees are required to remit 6% of their revenues to the Company to fund the Company's advertising campaigns. The Company contributes a comparable percentage or more for advertising for all Company-owned offices. The Franchise Agreement permits the Company to advertise at its discretion on a national, regional, and local basis. To date, the Company has elected to utilize television advertisements in regional markets, as well as radio commercials, direct mail and other advertisements. The Company believes that the 6% advertising assessment is sufficient to support a competitive advertising program in mature, developed markets. However, during the developmental stages of a new market area, it has been the Company's general practice to supplement the regular contributions to the advertising program with additional contributions from the Company in order to enhance initial exposure and awareness of the Company's services and to sell additional franchises in the area. See " - Competition." Proprietary Information and Computer Technology The Company owns and retains all rights to the Company's proprietary interactive tax preparation software, Hewtax, which allows a tax preparer to conduct a comprehensive customer interview and complete tax calculations using a personal computer. The Company also owns and maintains state income tax computer programs for all states that have income tax requirements and the District of Columbia. The Company employs tax and software experts to update the software programs as necessary. By computerizing, and thereby standardizing, the information gathering process, a tax return can be prepared in a Jackson Hewitt office while the customer waits. Hewtax prompts the tax preparer to ask questions based upon each customer's personal and financial situation. On average, Jackson Hewitt customers are asked approximately 100 questions. Once the customer answers the necessary questions, the tax return is automatically prepared. The entire interview process generally takes approximately 50 minutes. Although the Company believes its proprietary interactive tax software constitutes a "trade secret," the Company has not filed for copyright registration for its software programs. The Company is aware of the risk that its competitors could recreate, or "reverse engineer" its tax preparation software and begin offering similar computerized and standardized services. If this were to occur, the Company would likely investigate the circumstances under which the competitor created the software. However, the Company may find that it has no legal recourse to prevent the competitor from using the "reverse engineered" software to compete with the Company. Because Jackson Hewitt's federal and state tax preparation software must be updated at least annually to reflect changes in the tax law, the Company believes that it would be difficult for any unauthorized party to effectively misappropriate its software programs in a timely and profitable manner. See "Risk Factors - Dependence on Intellectual Property Rights; Risks of Infringement." The Company protects its intellectual, trade and operational property through the use of trademarks and by inserting contractual restrictions in its franchise agreements, licenses, and other consensual arrangements. The Company owns the following service marks: "Jackson Hewitt Tax Service" service mark registered on the Principal Register of the United States Patent and Trademark Office ("USPTO"), August 23, 1988; and "Superfast Refund" service mark registered on the Principal Register of the USPTO May 15, 1990. All Jackson Hewitt offices, as well as the Company's corporate headquarters, are outfitted with the computer hardware and software that is required to file tax returns electronically with the IRS. Jackson Hewitt's field offices are outfitted with IBM-compatible personal computers and modems, while the Company's headquarters utilize a Unix mini-computer with multiple high speed modems to interface with satellite offices, the IRS and the banks that participate in the Bank Product programs. The equipment maintained at the Company's headquarters for electronic filing and the Bank Product programs are continually updated by the Company. The Company believes that its computer system and centralized control of customer services enhances the Company's operational and financial control over its office network. Personnel/Training The Company employed 204 year-round employees as of April 30, 1997, 126 of which were located in the Company's Virginia Beach corporate headquarters. In addition, the Company employed approximately 1,000 seasonal employees during the 1997 tax season, at both the corporate headquarters and in Company-owned offices. The Company and its franchisees solicit, train, and hire seasonal personnel by offering tax preparation seminars during the fall of each year. Jackson Hewitt tax seminars include 24 three-hour lectures over a 12-week period. Course materials are prepared and updated by the Company at least annually, or more often if necessary. Instructor salaries are paid by the Company or franchisees, as applicable. The Company and its franchisees recruit many of their tax preparers from the students who attend these tax preparation seminars. In the past, the Company and its franchisees generally have offered seasonal jobs as tax preparers to approximately the top 25% of such classes. The Company estimates that approximately 7,000 students were trained during 1997 at no cost to the students in some instances and for fees ranging from $59 to $99 per person in most instances. The tax seminars are normally advertised in regional newspapers. The cost of such advertising is shared by the Company and franchisees. Because of the extent to which the Company relies upon seasonal employees who are paid relatively modest wages and are given minimal benefits, any legislative or regulatory changes that require the Company to pay employees higher wages or provide more benefits could materially adversely effect the Company's results of operations. See "Risk Factors - Dependence on Availability of Large Pool of Trained Seasonal Employees." The United States Congress has enacted legislation that requires tax preparers, among other things, to identify themselves as paid preparers on all tax returns which they prepare, to provide customers with copies of their tax returns, and to retain copies of the tax returns they prepare for three years. Failure to comply with these requirements may result in penalties. In addition, any tax preparer that desires to file tax returns electronically, must qualify with the IRS. The legislation also provides for assessing penalties against a preparer which (i) negligently or intentionally disregards federal tax rules or regulations, (ii) takes a position on a tax return which does not have a realistic possibility of being sustained on its merits, (iii) willfully attempts to understate a taxpayer's tax liability, or (iv) aids or abets in the understatement of such tax liability. In addition, several state governments have enacted or are considering legislation which would regulate tax return preparers. See "Risk Factors - Government Regulation" and "-Legal Proceedings." Competition Jackson Hewitt competes primarily with other businesses offering similar services, including nationally franchised tax preparation services, accountants, attorneys, and small independently owned companies and financial service institutions that prepare tax returns as ancillary parts of their businesses. In addition, the Company competes with individuals who prepares their own returns either manually or using tax preparation software. According to the IRS, approximately one-half of the tax returns filed in the United States each year are completed by paid preparers. Jackson Hewitt's ability to compete in this market depends on the geographical area, specific site location, local economic conditions, quality of on-site office management, the ability to file tax returns electronically with the IRS, and the ability to offer Bank Products to customers. H&R Block dominates the low cost tax preparation business in the United States with approximately 10,000 offices worldwide. No assurance can be given that new competitors with substantially greater resources will not enter this industry and materially adversely effect the Company's business, financial condition, and results of operations. See "Risk Factors-Competition." Tax Return Preparation Errors If a Jackson Hewitt tax return preparer makes an error that results in the assessment of any interest or penalties on additional taxes due, the Company, in the case of Company-owned offices, or the applicable franchisee, in the case of franchised offices, reimburses the customer for the interest and penalties, although it assumes no liability for any taxes that are owed. There are no limitations on the amount of interest and penalties that the Company or a franchisee would be required to reimburse customers in the event the IRS determines that a Jackson Hewitt tax preparer made an error which resulted in a tax deficiency. While the Company itself is not responsible for reimbursing customers for tax returns completed at franchised offices, the Company could become responsible for reimbursing customers for errors resulting in a tax deficiency in the event a franchisee ceases operations or files for bankruptcy. To date such payments by the Company have not been material. Facilities The Company leases or occupies pursuant to licensing agreements all of its offices. Approximately 76% of these leases are full-year leases, which typically extend over 24 months to cover two tax seasons, and 24% are for four months and cover one tax season only. Company-owned offices occupy leased premises ranging from 600 to 1,500 square feet at annual rental rates which range from $6 to $35 per square foot. The Company has typically negotiated lease terms of less than three years, with a termination date of April 30. All of the Company's current leases expire on or before April 30, 2000. The Company also leases offices for two of its regional directors at an average monthly lease cost of approximately $400. Additionally, the Company leases office equipment for itself and guarantees the leases of certain franchisees under both capital and operating lease agreements. The terms of these leases range from 36 to 39 months. In 1995, the Company purchased its 24,000 square foot headquarters facility at 4575 Bonney Road, Virginia Beach, Virginia. Legal Proceedings From time to time, the Company is involved in litigation arising out of normal business operations. The Manhattan regional office of the IRS notified the Company following the completion of the 1996 tax season that it could not operate Company-owned offices in New York City during the 1997 and 1998 tax seasons due to certain violations related to the Company's compliance with the IRS' electronic filing identification number regulations during the 1996 tax season. The Company has adopted procedures to prevent these types of alleged violations from occurring in the future. This notification does not apply to any of the Company's franchised offices in this, or any other area. On May 29, 1997, the Company filed suit in the Circuit Court for the City of Norfolk against a former executive officer who is also a current franchisee seeking a declaratory judgment and injunctive relief arising out of alleged breaches of the former executive's severance agreement and the current franchisee's franchise agreements. On June 18, 1997, the former executive and current franchisee filed cross claims in the Circuit Court for the City of Norfolk against both the Company and Keith Alessi, the President and Chief Executive Officer of the Company, individually. The cross claims involve allegations of intentional interference with prospective business advantage, fraud, breach of contract and various statutory and other violations. Each cross claim contains several counts and seeks unspecified compensatory damages in excess of $1.0 million punitive damages in the maximum amount allowed by law, and costs and attorneys' fees. The Company believes that none of these legal proceedings will have a material adverse effect on the Company's business, financial condition, or results of operations. MANAGEMENT Directors and Executive Officers The following table sets forth certain information concerning the Company's directors and executive officers.
Name Age Position Director Since Keith E. Alessi 42 Director, Chairman, President, and Chief 1996 Executive Officer Harry W. Buckley(1)(2) 52 Director 1997 Harry S. Gruner(1)(2) 38 Director 1995 Michael E. Julian, Jr. (1)(2) 46 Director 1997 William P. Veillette (1)(2) 37 Director 1993 Christopher Drake 48 Secretary, Treasurer, and Chief Financial Officer Martin B. Mazer 35 Vice President of Franchise Development and Corporate Stores Leslie A. Wood 32 Vice President of Technology
- --------------------------------------- (1) Member of Audit Committee. (2) Member of Compensation Committee. Keith E. Alessi is President and Chief Executive Officer of the Company, a position he has held since June 1996. Mr. Alessi was elected to the Board of Directors in January 1996 and was elected Chairman of the Board in September 1996. Prior to that time, Mr. Alessi served Farm Fresh, Inc. ("Farm Fresh"), a leading Virginia supermarket chain, as its Vice Chairman, Secretary, Treasurer, and Chief Financial Officer from 1994 to 1996. Mr. Alessi is still a director of Farm Fresh, and is also a director of FF Holdings Corporation ("FF Holdings"), Farm Fresh's parent company. From 1992 until 1994, Mr. Alessi was Chairman and Chief Executive Officer of Virginia Supermarkets, Inc. From 1988 through 1992, Mr. Alessi was employed by Farm Fresh and served as President and Chief Operating Officer at the time he left the company. Mr. Alessi is also a director of Cort Business Services, Inc., Town Sports International, Inc., and Shoppers Food Warehouse Corp. Harry W. Buckley was President and Chief Executive Officer of H&R Block Tax Service, Inc., a subsidiary of H&R Block, from 1988 until 1995, at which time he resigned. Mr. Buckley served H&R Block in various capacities for 28 years. Harry S. Gruner is a General Partner of JMI Equity Fund, a private equity investment partnership, a position he has held since November 1992. From August 1986 to October 1992, Mr. Gruner was employed by Alex.Brown & Sons Incorporated and was a principal at the time of his departure. Mr. Gruner is also a director of Brock International, Inc., a developer, marketer, and supporter of software systems, The META Group, Inc., a syndicated information technology research company, Hyperion Software, Inc., a financial software company, V-One Corporation, a security software company, Optika Imaging, Inc., an imaging software company and numerous privately held companies. Michael E. Julian, Jr. is the President and Chief Executive Officer of Jitney-Jungle Stores of America, Inc., a regional supermarket chain in Mississippi, a position he has held since March 1997. Prior to that time, Mr. Julian was employed by Farm Fresh and FF Holdings, serving as Executive Vice President and Chief Operating Officer in 1987, as Chief Executive Officer from 1988 until 1997 and as President from 1992 until 1997. Mr. Julian continues to serve as a director and Chairman of the Board of Farm Fresh and FF Holdings. William P. Veillette is a District Manager for Otis Elevator Company, a position he has held since 1992. From 1990 until 1992, he was an Account Manager for Otis Elevator Company and from 1988 until 1990 he was a Development Associate for the Trammell Crow Company. Christopher Drake is Secretary, Treasurer, and Chief Financial Officer of the Company, a position he has held since May 1997. From July 1994 to May 1997, he was Controller and Chief Financial Officer. Mr. Drake joined the Company in January 1992 as Controller. Mr. Drake is also a franchisee of the Company. During 1991, Mr. Drake was Senior Vice-President and Chief Financial officer of Mulberry Phosphates, Inc. of Norfolk, Virginia f/k/a Royster Company, when that company filed for protection under Chapter 11 of the United States Bankruptcy Code. The case was filed on April 8, 1991 in the Southern District of New York, Case No. 91-07012-Pi. The reorganization was completed, and the company emerged from bankruptcy on January 5, 1993. Martin B. Mazer is Vice President of Franchise Development and Corporate Stores, a position he has held since May 1997. From May 1996 to May 1997, Mr. Mazer was Director of Franchise Development. From May 1995 until May 1996, Mr. Mazer served as Divisional Director in charge of Company-owned offices and from December 1993 to April 1995, Mr. Mazer served as Regional Director of the Company's Southeast Region. Mr. Mazer joined the Company in August 1993 as a franchise sales representative. Before joining the Company, Mr. Mazer was an area supervisor with Bally's Health and Tennis, where he had worked since 1981. Leslie A. Wood is Vice President of Technology, a position she has held since March 1997. From April 1995 until March 1997, she served as Director of Technology. From September 1994 to March 1995, she was Director of Field Automation, and from July 1992 until August 1994, she served as Director of Office Systems. From September 1990 to July 1992, she was a Systems Analyst for Computer Data Systems, Inc. Special Contractual Right to Nominate Director Pursuant to the Recapitalization Agreement, the Company is obligated to use its best efforts to fix the number of directors of the Company at between five and seven and to cause at least one nominee of the Preferred Shareholders to be recommended to the shareholders eligible to vote thereon for election as a director at all meetings of shareholders, or consents in lieu thereof, for such purpose. Committees of the Board of Directors The Board of Directors has established Audit and Compensation Committees. The Audit Committee is empowered by the Board of Directors to, among other things, recommend the firm to be employed by the Company as its independent auditor and to consult with such auditor regarding audits and the adequacy of internal accounting controls. The Compensation Committee makes recommendations to the Board of Directors as to, among other things, the compensation of the Chief Executive Officer and designated other members of senior management, as well as new compensation and awards under the Company's 1994 Long-Term Incentive Plan. Directors' Compensation The Company pays outside directors $6,000 per year and reimburses all of the directors' expenses relating to their activities as directors. Outside directors also receive automatic annual option grants under the Company's Non-Employee Director Stock Option Plan pursuant to a pre-determined formula. Employee directors do not receive additional compensation for service on the Board of Directors or its committees. See "Stock Option Plans." Compensation Committee Interlocks and Insider Participation The Compensation Committee consists of Mr. Buckley, Mr. Gruner, Mr. Julian, and Mr. Veillette, none of whom are current or former officers or employees of the Company or any of its subsidiaries. There are no compensation committee interlocks. Executive Compensation The following table sets forth certain information with respect to the compensation paid by the Company for services rendered during the years ended April 30, 1997, 1996, and 1995, to its current Chairman, President, and Chief Executive Officer, its former President and Chief Executive Officer, and other current and former executive officers of the Company whose combined salary and bonus exceeded $100,000 in 1997 (collectively, the "Named Executive Officers").
Summary Compensation Table Long-Term All Other Annual Compensation(1) Compensation Compensation($) Number of Securities Underlying Name and Principal Position Year Salary($) Bonus ($) Options (#)(2) --------------------------- ---- --------- --------- -------------- Keith E. Alessi 1997 153,461 130,000 268,065(4) -- Chairman, President, and Chief 1996 -- -- 10,000(5) 3,500(6) Executive Officer(3) Martin B. Mazer 1997 73,425 41,250 4,000 650(7) Vice President of Franchise 1996 71,134 3,912 2,000 -- Development and Corporate 1995 67,191 -- 1,000 -- Stores John T. Hewitt 1997 75,932 -- -- 227,514(9) Former President and 1996 107,858 115,000 20,000 -- Chief Executive Officer(8) 1995 200,299 -- 13,000 -- Thomas P. Czaplicki 1997 66,501 41,250 6,500 1,565(7) Former Vice President 1996 39,316 15,000 -- -- of Corporate Development(10)
- -------------------------------- (1) Does not include perquisites and other personal benefits that do not exceed the lesser of $50,000 or 10% of the total annual salary and bonus reported for the Named Executive Officers. (2) Granted pursuant to the Company's 1994 Long-Term Incentive Plan unless otherwise indicated. (3) Mr. Alessi became President and Chief Executive Officer in June 1996. He was appointed to the Board of Directors in January 1996. (4) Mr. Alessi exercised 46,226 of these options in June 1997 at an exercise price of $4.81 per share. See " - Employment Agreement." (5) Granted pursuant to the Non-Employee Director Stock Option Plan when Mr. Alessi was a non-employee director. (6) Represents director fees paid prior to Mr. Alessi's employment with the Company. (7) Represents matching contributions made by the Company pursuant to its 401(k) Plan. (8) Mr. Hewitt resigned as President and Chief Executive Officer of the Company in September 1996. (9) Represents cancellation of indebtedness to the Company in the amount of $115,827 and non-competition payments in the amount of $111,687 in connection with Mr. Hewitt's resignation from the Company See "Certain Transactions." (10) Mr. Czaplicki joined the Company in June 1995 and resigned in March 1997. The following table provides a summary of compensation related stock options granted to the Named Executive Officers during 1997.
Stock Option Grants in the Last Fiscal Year Number of Percent of Securities Total Options Underlying Granted to Exercise or Options Employees in Base Price Grant Date Name Granted Fiscal Year ($/sh) Expiration Date Value(1) ---- ------- ----------- ------ --------------- -------- Keith E. Alessi 268,065 69.0% $4.81 June 17, 2006(2) $1,065,140 Martin B. Mazer 4,000 1.0 5.75 May 1, 2006(3) 15,217 Thomas P. Czaplicki 6,500 1.7 5.75 May 1, 2006(3) 24,728
- -------------------------------- (1) Value determined using the Black Scholes Option-Pricing Model with the following weighted average assumptions: no dividend yield, expected volatility of 73%, risk free interest rate of 6.69% and expected life of 10 years in the case of Mr. Alessi's options and six years in the case of Messrs. Mazer's and Czaplicki's options. The actual value, if any, that may be realized on the options will depend on the excess of the stock price over the exercise price on the date the option is exercised. Accordingly, there can be no assurance that the value realized on the options will be at or near the value estimated by the Black-Scholes Model. (2) The options vest in four equal, annual increments commencing June 18, 1997 and ending June 18, 2000. Each increment expires June 17, 2006. (3) The options vest in five equal, annual increments commencing May 1, 1997 and ending May 1, 2001. Each increment expires five years after vesting. The following table sets forth information for the Named Executive Officers concerning stock option exercises during 1997 and unexercised options held as of April 30, 1997.
Option Exercises and Fiscal Year-End Option Values Number of Securities Underlying Value of Unexercised in the Unexercised Options at Money Options at Fiscal Fiscal Year-End($)(1) Year-End(#) Shares Acquired Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable - ---- ----------- -------------- ----------- ------------- ----------- ------------- Keith E. Alessi 4,000 $5,560(2) 0 274,065 0 $1,468,355(3) Martin B. Mazer -- -- 400 5,600 2,650(4) 28,100(5) Thomas P. Czaplicki -- -- 6,500(6) 0 28,438(7) 0
- ---------------------------- (1) The closing sale price of the Company's Common Stock on the Nasdaq National Market on April 30, 1997 was $10.125 per share. (2) Represents difference between exercise price of $2.86 per share and closing sale price of Company's Common Stock on the Nasdaq National Market on date of exercise. (3) Represents 6,000 options exercisable at $2.86 per share and 268,065 options exercisable at $4.81 per share. (4) Exercisable at $3.50 per share. (5) Represents 1,600 options exercisable at $3.50 per share and 4,000 options exercisable at $5.75 per share. (6) Pursuant to Mr. Czaplicki's severance arrangement with the Company, all stock options previously granted to Mr. Czaplicki vested upon the termination of his employment and are fully exercisable. (7) All 6,500 options are exercisable at $5.75 per share. Employment Agreement Mr. Alessi is employed as the Company's President and Chief Executive Officer under an employment agreement dated May 29, 1997 ("Alessi Employment Agreement"). The Alessi Employment Agreement expires on June 18, 1999. Mr. Alessi is paid an annual salary of $250,000 and is eligible to receive a bonus of up to $137,500 per year if certain Board established performance objectives are met. The Alessi Employment Agreement includes a covenant not to compete with the Company throughout the United States or solicit customers, franchisees, and employees of the Company for a period of two years following termination of such agreement, and imposes certain non-disclosure obligations on Mr. Alessi with respect to the Company's confidential and proprietary information. The Company may terminate the Alessi Employment Agreement at any time, without cause, upon 30 days' notice to Mr. Alessi. Upon such termination, the Company is required to pay Mr. Alessi $250,000 over a one-year period. In addition, in the event of Mr. Alessi's termination without cause, any unvested increment of Mr. Alessi's option shares that would have vested on the succeeding June 18 will be deemed to have vested and be available for exercise, along with all other then vested options in accordance with the post-termination provisions of the Company's 1994 Long Term Incentive Plan described below. In addition, upon being named President and Chief Executive Officer, Mr. Alessi received an option to purchase 268,065 shares of Common Stock, which on the grant date represented 5% of the fully diluted Common Stock of the Company ("Alessi Option"). The exercise price for the Alessi Option is $4.81, which was the average closing sale price of the Company's Common Stock over the 20 trading days preceding the grant date. The Alessi Option consists of 83,160 incentive stock options and 184,905 non-qualified stock options, which become exercisable in four equal, annual increments commencing June 18, 1997. Stock Option Plans In 1994, the Board of Directors of the Company adopted, and shareholders approved, the 1994 Long-Term Incentive Plan (the "Incentive Plan") pursuant to which officers and other key employees of the Company are eligible to receive options to purchase Common Stock and other awards as described below. The maximum number of shares of Common Stock that may be issued pursuant to awards under the Incentive Plan is 698,000 (subject to anti-dilution adjustments). The Incentive Plan is administered by the Compensation Committee. The Compensation Committee has the discretion to select the individuals to receive awards and to grant such awards and has a wide degree of flexibility in determining the terms and conditions of awards. Subject to limitations imposed by applicable law, the Board of Directors of the Company may amend or terminate the Incentive Plan at any time and in any manner. However, no such amendment or termination may affect a participant's rights under an award previously granted under the Incentive Plan without his or her consent. Awards under the Incentive Plan may be in the form of stock options (both nonqualified stock options and incentive stock options), stock appreciation rights, performance shares and restricted stock, either separately or in such combination as the Compensation Committee may in its discretion deem appropriate. Under the terms of the Incentive Plan, subject to certain conditions, all outstanding awards vest and become exercisable immediately prior to a "change of control" of the Company. A change of control is defined to encompass different types of significant corporate transactions, including reorganizations and mergers, acquisitions of 20% of the Company's Common Stock or a change in the composition of at least two-thirds of the membership of the Company's Board of Directors over a two year period other than by reason of death or the acquisition of at least 5% of the Company's Common Stock if such acquisition is not approved by the Board of Directors. The Incentive Plan remains in effect until all awards under the Incentive Plan have been satisfied by the issuance of shares of Common Stock or the payment of cash. As of June 27, 1997, options to purchase up to 426,544 shares of Common Stock were outstanding under the Incentive Plan. In 1996, the Board of Directors of the Company adopted, and shareholders approved, the Non-Employee Director Stock Option Plan ("Director Plan") pursuant to which non-employee directors of the Company are eligible to receive non-qualified stock options pursuant to a formula that grants any new directors options to purchase 10,000 shares and existing directors 2,000 shares upon their re-election each year. Each of these awards vests in increments over five years. Option awards granted pursuant to the Director Plan vest automatically in the event of death, permanent and total disability, or retirement (as defined in the Director Plan) of the director or a change in control or potential change in control of the Company, as defined in such plan. The terms change in control and potential change in control have the meaning similar to those discussed above with respect to the Incentive Plan. As of June 27, 1997, options to purchase up to 42,400 shares of Common Stock were outstanding under the Director Plan. Pursuant to Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), directors, executive officers and 10% shareholders of the Company are generally liable to the Company for repayment of any profits realized from any non-exempt purchase and sale of Common Stock occurring within a six-month period. Rule 16b-3 promulgated under the Exchange Act provides an exemption from Section 16(b) liability for certain transactions by officers or directors that comply with such rule. CERTAIN TRANSACTIONS On July 11, 1994, the Company sold certain assets related to its operation of a Company-owned office in Chesapeake, Virginia to Chestax Company, 50% of which is owned by Christopher Drake, the Company's Secretary, Treasurer and Chief Financial Officer. The purchase price of $272,764 was equal to approximately 120% of the gross revenues of the Jackson Hewitt office as of April 30, 1994, was paid for by Mr. Drake's delivery of an 11%, 5-year promissory recourse note to the Company, and was calculated on terms comparable to those of similar transactions with non-affiliates. The Company's gain on the sale of these assets was $89,490. As of April 30, 1997, the unpaid balance of the promissory note was $109,106. The Company believes that the foregoing transaction was consummated on terms consistent with those that would apply to transactions with non-affiliates in similar circumstances. The Company's Consolidated Financial Statements reflect a $1.3 million stock subscription receivable which is due from the Company's former Chairman of the Board of Directors, John T. Hewitt. On September 9, 1996, Mr. Hewitt resigned his position with the Company effective immediately. Mr. Hewitt resigned from the Company's Board of Directors in December 1996. On December 12, 1996, Mr. Hewitt executed a $1.3 million promissory note, which represented all amounts then due the Company, including accrued interest, other than the $99,000 obligation referred to below. This recourse note bears interest at 6.9% per year. Mr. Hewitt is required to make monthly interest payments and to repay the principal amount in one lump sum on April 30, 1999. To secure this note, Mr. Hewitt pledged 145,050 shares of the Company's Common Stock to the Company, and granted the Company a proxy to vote this stock until his obligation is repaid in full. In return for 29 monthly payments of $23,165 each by the Company to Mr. Hewitt, Mr. Hewitt also executed a covenant not to compete with the Company in the United States through April 30, 1999, and agreed not to solicit Company employees, conduct a solicitation of proxies or disparage the Company or its officers and directors during the same period. In addition, the Company forgave a $99,000 (plus accrued interest) obligation of Mr. Hewitt to the Company, which would have been due and payable on April 30, 1997. In December 1996, the Company entered into a binding letter of intent with Susan Ventresca, a former franchisee and director of the Company, to purchase her franchised territories and all related assets (the "Territories") at the end of the 1997 tax season. Ms. Ventresca resigned from the Board of Directors in December 1996 and the transaction closed in June 1997. The terms of the agreement allowed the Company to audit Ms. Ventresca's franchise operations for the one-year period ended April 30, 1997, to determine the purchase price of the Territories. The purchase price was determined based on a formula equal to the lesser of (i) six times the cash flow (defined as earnings before interest, taxes, depreciation and amortization) of the Territories or (ii) 120% of the gross revenues of the Territories, plus $40,000 (which represents the value of two additional territories held by Ms. Ventresca) minus all outstanding debt to the Company. All payments on Ms. Ventresca's outstanding notes receivable due to the Company on February 28, 1997 were deferred until the closing of the transaction. This formula resulted in a net payment to Ms. Ventresca of $235,000. The Company believes that the foregoing transactions with Ms. Ventresca were consummated on terms consistent with those that would apply to transactions with non-affiliates in similar circumstances. On June 27, 1997, the Company entered into the Recapitalization Agreement with the Preferred Shareholders, pursuant to which the Company will exchange 699,707 shares of Common Stock for the 504,950 outstanding Shares of Series A Stock in a tax-free recapitalization. See "Recent Developments." The Preferred Shareholders include Geocapital II, L.P. and Geocapital III, L.P., two affiliated partnerships which collectively own in excess of 5% of the Company's issued and outstanding stock, and JMI Equity Fund, L.P., of which Harry Gruner, a director of the Company, is a general partner. See "Principal and Selling Shareholders." PRINCIPAL AND SELLING SHAREHOLDERS The following table sets forth certain information regarding the beneficial ownership of the Company's Common Stock as of June 27, 1997, and after giving effect to the sale of shares of Common Stock in the Offering, by (i) each person who is known by the Company to own beneficially more than 5% of the Company's Common Stock, (ii) each of the Company's directors, (iii) each Named Executive Officer, (iv) all directors and executive officers as a group, and (v) each Selling Shareholder. The number of shares beneficially owned by each person shown in the table below is determined under the rules of the Securities and Exchange Commission (the "Commission"), and such information is not necessarily indicative of beneficial ownership for any other purpose.
Ownership After Offering and Shares Beneficially Owned Shares Being Exercise of Over-allotment Prior to Offering(1) Offered Option(2) ------------------------- ------------ ---------------------------- Name of Beneficial Owner(3) Number Percent Number Percent ------------------- ------ ------- ------ ------- Keith E. Alessi 96,016(4) 1.8 -- 96,016 1.5 Harry W. Buckley 2,000(5) * -- 2,000 * Harry S. Gruner(6) 243,702(7) 4.6 -- 243,702 3.9 Michael E. Julian, Jr. 12,000(8) * -- 12,000 * William P. Veillette 138,562(9) 2.6 -- 138,562 2.2 Paul Grunberg(10) 413,382(11) 7.8 20,000 393,382 6.2 Geocapital Partners(12) 455,306(13) 8.5 -- 455,306 7.2 Martin B. Mazer 2,050(14) * -- 2,050 * John T. Hewitt(15) 111,711(16) 2.1 -- 111,711 1.8 Thomas P. Czaplicki(17) 31,000(18) * -- 31,000 * Jackson Hewitt Inc. 401(k) Plan (19) 24,054 * 24,054 -- -- Linda Hewitt (20) 134,000 2.5 70,790 63,210 1.0 Susan E. Ventresca (21) 125,945 2.4 20,000 105,945 1.7 Paul Littman (22) 58,781 1.1 15,000 43,781 * Arline S. Littman (22) 67,174 1.3 5,000 62,174 1.0 All directors and executive officers as a group (8 persons) 501,730 9.4 -- 501,730 7.9
- -------------- *Indicates ownership of less than one percent. (1) Unless otherwise noted, sole voting and dispositive power is possessed with respect to all shares of Common Stock shown. (2) The ownership figures for the Selling Shareholders assume that the Underwriters' over-allotment option is not exercised. In the event the Underwriters' over-allotment option is exercised in full, the Company and the Selling Shareholders will sell an aggregate of 169,606 shares allocated among them in the same proportion as the relative number of shares being offered by each of them. (3) Unless otherwise noted, the address of each of the foregoing is c/o the Company at 4575 Bonney Road, Virginia Beach, Virginia 23462. (4) Includes options to purchase 20,790 shares of Common Stock that were granted pursuant to the Incentive Plan. (5) Represents options to purchase 2,000 shares of Common Stock that were granted pursuant to the Company's Director Plan. (6) Mr. Gruner's address is 1119 St. Paul's Street, Baltimore, Maryland 21202. (7) Includes 233,202 shares owned by JMI Equity Fund, L.P. ("JMI Equity"). Mr. Gruner is a general partner of JMI Equity, and he has shared power to direct the voting of and to direct the investment of such shares. (8) Includes options to purchase 2,000 shares of Common Stock granted pursuant to the Director Plan. (9) Includes (i) 29,300 shares owned jointly by Mr. William Veillette and his wife, Tracy Veillette; (ii) 12,310 shares owned jointly by Mr. William Veillette and his sister, Sally Veillette; (iii) 12,310 shares owned jointly by Mr. William Veillette and his sister, Jeanne Bowerman; (iv) 50,000 shares owned by the Veillette Family Trust, of which Mr. William Veillette shares voting and investment powers; and (v) 265 shares owned jointly by Mr. William Veillette and his son, Peter J. Veillette. Also includes options to purchase 4,400 shares of Common Stock granted pursuant to the Director Plan. Does not include (i) 3,487 shares owned individually by Mr. Veillette's wife, Tracy Veillette, or (ii) 5,000 shares owned jointly by Tracy Veillette and Susan Veillette. (10) Mr. Grunberg's address is Route #2, Box 171, Valatie, New York 12184. (11) Does not include 105,273 shares owned individually by Mr. Grunberg's wife. Mr. Grunberg disclaims beneficial ownership of these shares. (12) Geocapital Partners' address is 2115 Linwood Street, Fort Lee, New Jersey 07024. (13) Consists of 222,103 shares held of record by Geocapital II, L.P. and 233,203 shares held of record by Geocapital III, L.P. The sole general partner of Geocapital II, L.P., Softven Management, L.P., of which Stephen J. Clearman, Irwin Lieber, James Harrison and BVA Associates are general partners, exercises voting and investment power with respect to the shares held by Geocapital II, L.P. The sole general partner of Geocapital III, L.P., Geocapital Management, L.P., of which Stephen J. Clearman, Lawrence W. Lepard, Richard A. Vines and BVA Associates III are general partners, exercises voting and investment power with respect to the shares held by Geocapital III, L.P. (14) Includes options to purchase 1,600 shares of Common Stock that were granted pursuant to the Incentive Plan. (15) Mr. Hewitt's address is 2532 San Marco Court, Virginia Beach, Virginia 23456. (16) Does not include 145,050 of Mr. Hewitt's shares that have been pledged to the Company to secure certain debt and are voted by the Company. See "Certain Transactions." (17) Mr. Czaplicki's address is 4907 Rambling Rose Place, Tampa, Florida 33624. (18) Includes options to purchase 1,300 shares of Common Stock granted pursuant to the Incentive Plan. (19) The trustees of the Company's 401(k) Plan ("Plan") recently increased the number of investment options available under the Plan, which had formerly invested solely in the Company's Common Stock. As a result of the new investment options available to Plan participants, which no longer include the Company's Common Stock, the trustees have elected to liquidate the Plan's holdings of the Company's Common Stock. (20) Ms. Hewitt's address is 5504 Larry Avenue, Virginia Beach, Virginia 23462. (21) Ms. Ventresca's address is 3008 Dawn Drive, Niagara Falls, New York 14304. Ms. Ventresca is a former director of the Company. See "Certain Transactions." (22) Mr. and Ms. Littman's address is 657 Riverview, Rexford, New York 12148. DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company consists of 10,000,000 shares of Common Stock, $0.02 par value ("Common Stock") and 1,000,000 shares of preferred stock, no par value ("Preferred Stock"). Of the Common Stock, 5,336,620 shares are currently issued and outstanding and held of record by 636 shareholders. No shares of Preferred Stock are currently outstanding. The following summary of certain provisions of the Common Stock and Preferred Stock does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the Company's Articles of Incorporation that are included as an exhibit to the Registration Statement of which this Prospectus is a part, and by the provisions of applicable law. See "Additional Information." Common Stock Each holder of Common Stock is entitled to one vote for each share held of record on each matter submitted to a vote of shareholders. Subject to preferences that may be granted to the holders of Preferred Stock, each holder of Common Stock is entitled to share ratably in distributions to shareholders and to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available therefor, and, in the event of the liquidation or dissolution of the Company, is entitled to share ratably in all assets of the Company remaining after payment of liabilities. Holders of Common Stock have no conversion, preemptive or other subscription rights and there are no redemption rights or sinking fund provisions with respect to the Common Stock. The outstanding Common Stock is validly issued, fully paid and non-assessable. Certain provisions of the Company's Articles of Incorporation ("Articles") affect the rights of holders of Common Stock and may have the effect of delaying, deferring or preventing a change of control of the Company. Preferred Stock The Board of Directors, without further action by the holders of Common Stock, may issue shares of Preferred Stock. The Board of Directors is vested with authority to fix by resolution the designations and the powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including, without limitation, the dividend rate, conversion or exchange rights, redemption price and liquidation preference of any series of shares of Preferred Stock, and to fix the number of shares constituting any such series. In June 1997, the Company agreed to exchange 699,707 shares of its Common Stock for all of the then outstanding shares of the Company's Series A Stock in a tax-free recapitalization. The Company had issued the shares of Series A Stock to three private investors in August 1993. The former holders of the Series A Stock retained registration rights granted them at the time they purchased their Series A Stock. See "Recent Developments." The authority possessed by the Board of Directors to issue Preferred Stock could potentially be used to discourage attempts by others to obtain control of the Company through a merger, tender offer, proxy contest or otherwise by making such attempts more difficult to achieve or more costly. The Board of Directors may issue Preferred Stock with voting and conversion rights that could adversely affect the voting power of the holders of Common Stock. There are no current agreements or understandings for the issuance of Preferred Stock and the Board of Directors has no present intention to issue any shares of Preferred Stock. Convertible Notes From November 1992 through February 1993, the Company raised $778,750 in a private placement of 6% convertible notes ("Convertible Notes"). The Convertible Notes bear an interest rate of 6% and are due March 1, 1998. Upon certain events of default by the Company, the holders of not less than 25% of the Convertible Notes may declare the principal of all Convertible Notes due and payable immediately. The Convertible Notes are not subject to redemption by the Company or at the option of the holders, nor are the Convertible Notes entitled to the benefit of any sinking fund. Holders of Convertible Notes may convert their investment into shares of the Company's Common Stock at any time prior to March 1, 1998 at a conversion rate of one share of Common Stock for each $16.00 principal amount of the Convertible Notes. The conversion rate for the Convertible Notes is subject to adjustment upon the occurrence of certain events, including the declaration by the Company of a stock dividend or stock split. Warrants The Company's primary lender currently holds warrants ("Warrants") to purchase 10,000 shares of Common Stock for $.01 per share. The Warrants were granted to the lender in 1995 in connection with a credit facility made available to the Company. A total of 999,372 Warrants were originally granted, but all but 10,000 of such Warrants were repurchased by the Company in 1996. Anti-Takeover Statutes Affiliated Transactions. The Virginia Stock Corporation Act ("Virginia Act") contains provisions governing "Affiliated Transactions." Affiliated Transactions include certain mergers and share exchanges, certain material dispositions of corporate assets not in the ordinary course of business, any dissolution of a corporation proposed by or on behalf of an Interested Shareholder (as defined below), and reclassifications, including reverse stock splits, recapitalizations or mergers of a corporation with its subsidiaries, or distributions or other transactions which have the effect of increasing the percentage of voting shares beneficially owned by an Interested Shareholder by more than 5%. For purposes of the Virginia Act, an Interested Shareholder is defined as any beneficial owner of more than 10% of any class of the voting securities of a Virginia corporation. Subject to certain exceptions discussed below, the provisions governing Affiliated Transactions require that, for three years following the date upon which any shareholder becomes an Interested Shareholder, any Affiliated Transaction must be approved by the affirmative vote of holders of two-thirds of the outstanding shares of the corporation entitled to vote, other than the shares beneficially owned by the Interested Shareholder, and by a majority (but not less than two) of the Disinterested Directors (as defined below). A Disinterested Director is defined in the Virginia Act as a member of a corporation's board of directors who (i) was a member before the later of January 1, 1998 or the date on which an Interested Shareholder became an Interested Shareholder and (ii) was recommended for election by, or was elected to fill a vacancy and received the affirmative vote of, a majority of the Disinterested Directors then on the corporation's board of directors. At the expiration of the three year period after a shareholder becomes an Interested Shareholder, these provisions require approval of the Affiliated Transaction by the affirmative vote of the holders of two-thirds of the outstanding shares of the corporation entitled to vote, other than those beneficially owned by the Interested Shareholder. The principal exceptions to the special voting requirement apply to Affiliated Transactions occurring after the three year period has expired and require either that the transaction be approved by a majority of the corporation's Disinterested Directors or that the transaction satisfy certain fair price requirements of the statute. In general, the fair price requirements provide that the shareholders must receive the higher of: the highest per share price for their shares as was paid by the Interested Shareholder for his or its shares, or the fair market value of the shares. The fair price requirements also require that, during the three years preceding the announcement of the proposed Affiliated Transaction, all required dividends have been paid and no special financial accommodations have been accorded the Interested Shareholder, unless approved by a majority of the Disinterested Directors. None of the foregoing limitations and special voting requirements applies to a transaction with an Interested Shareholder who has been an Interested Shareholder continuously since the effective date of the statute (January 26, 1988) or who became an Interested Shareholder by gift or inheritance from such a person or whose acquisition of shares making such person an Interested Shareholder was approved by a majority of the Disinterested Directors of the corporation. These provisions are designed to deter certain takeovers of Virginia corporations. In addition, the Virginia Act provides that, by affirmative vote of a majority of the voting shares other than shares owned by any Interested Shareholder, a corporation may adopt, by meeting certain voting requirements, an amendment to its articles of incorporation or bylaws providing that the Affiliated Transaction provisions shall not apply to the corporation. The Company has not adopted such an amendment. Control Share Acquisitions. The Virginia Control Share Acquisitions statute also is designed to afford shareholders of a public company incorporated in Virginia protection against certain types of non-negotiated acquisitions in which a person, entity or group ("Acquiring Person") seeks to gain voting control of that corporation. With certain enumerated exceptions, the statute applies to acquisitions of shares of a corporation which would result in an Acquiring Person's ownership of the corporation's shares entitled to vote in the election of directors falling within any one of the following ranges: 20% to 33-1/3%, 33-1/3% to 50% or 50% or more (a "Control Share Acquisition"). Shares that are the subject of a Control Share Acquisition ("Control Shares") will not be entitled to voting rights unless the holders of a majority of the "Disinterested Shares" vote at an annual or special meeting of shareholders of the corporation to accord the Control Shares with voting rights. Disinterested Shares do not include shares owned by the Acquiring Person or by officers and inside directors of the target company. Under certain circumstances, the statute permits an Acquiring Person to call a special shareholders' meeting for the purpose of considering granting voting rights to the holders of the Control Shares. As a condition to having this matter considered at either an annual or special meeting, the Acquiring Person must provide shareholders with detailed disclosures about his identity, the method and financing of the Control Share Acquisition and any plans to engage in certain transactions with, or to make fundamental changes to, the corporation, its management or business. Under certain circumstances, the statue grants dissenters' rights to shareholders who vote against granting voting rights to the Control Shares. The Virginia Control Share Acquisitions statute also enables a corporation to make provisions for redemption of Control Shares with no voting rights. A corporation may opt-out of the statute, which the Company has not done, by so providing in its articles of incorporation or bylaws. Among the acquisitions specifically excluded from the statute are acquisitions to which the corporation is a party and which, in the case of mergers or share exchanges, have been approved by the corporation's shareholders under other provisions of the Virginia Act. Limitation of Liability and Indemnification of Directors and Officers As permitted under the Virginia Act, the Company's Articles provide that the Company's officers and directors will not be liable with respect to any proceeding brought by or in the right of the Company or brought by or on behalf of the shareholders of the Company, provided that the officer or director has not engaged in willful misconduct or a knowing violation of the criminal law or of any federal or state securities law. The Company's Articles also provide that the Company will indemnify its directors, officers, employees and agents in the manner provided by the Virginia Act. The Virginia Act sets forth certain provisions regarding the indemnification of directors and officers. Generally, these provisions of the Virginia Act allow a corporation to indemnify directors and officers if: (i) they conducted themselves in good faith; (ii) they believed (a) in the case of conduct in their official capacity, that their conduct was in the corporation's best interest, and (b) in all other cases, that their conduct was at least not opposed to its best interest; and (iii) in the case of any criminal proceeding, that they had no reasonable cause to believe their conduct was unlawful. Under the Virginia Act, a corporation may not indemnify directors or officers (i) in connection with a proceeding by or in the right of the corporation in which the directors or officers are adjudged liable to the corporation; or (ii) in any other proceeding charging improper personal benefit, in which they are adjudged liable on the basis that personal benefit was improperly received. Transfer Agent and Registrar The Transfer Agent and Registrar for the Company's Common Stock is First Union National Bank of North Carolina, 230 South Tryon Street, Charlotte, North Carolina 28288. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Offering, the Company will have 6,289,354 shares of Common Stock outstanding (assuming no exercise of the Underwriters' over-allotment option to purchase up to an additional 150,000 shares). The 1,130,790 shares sold in the Offering (1,130,409 shares if the Underwriters' over-allotment option is exercised in full) and 143,955 of the shares of Common Stock currently outstanding are freely tradable without restriction under the Securities Act, except for any such shares held at any time by an "affiliate" of the Company, as such term is defined under Rule 144 promulgated under the Securities Act ("Affiliate"). The remaining 4,921,832 shares were issued and sold by the Company in private transactions and may be publicly sold only if registered under the Securities Act or sold in accordance with an applicable exemption from registration, such as Rule 144. Of these shares, 4,369,403 are subject to no restrictions other than the removal of a restrictive legend from the share certificates. In general, under Rule 144, as currently in effect, a person who has beneficially owned shares for at least one year, including an Affiliate, is entitled to sell, within any three-month period, a number of "restricted" shares that does not exceed the greater of one percent (1%) of the then outstanding shares of Common Stock (62,894 shares immediately after the Offering) or the average weekly trading volume in the Common Stock during the four calendar weeks preceding the date on which notice of such sale was filed under Rule 144. Sales under Rule 144 are also subject to certain manner of sale limitations, notice requirements and the availability of current public information about the Company. Rule 144(k) provides that a person who is not deemed an Affiliate and who has beneficially owned shares for at least two years is entitled to sell such shares at any time under Rule 144 without regard to the limitations described above. Of the 4,921,832 remaining shares outstanding, Affiliates hold approximately 487,530 shares. In addition, as of June 27, 1997, there were outstanding options to purchase 462,144 shares of Common Stock, of which options to purchase 67,850 shares granted pursuant to the Company's stock option plans are currently exercisable. In addition, as of June 27, 1997, there were 394,294 shares of Common Stock subject to options which are not currently exercisable and 385,856 shares available for issuance under the Company's stock option plans. All of the shares underlying the options granted under the Company's stock option plans are covered by effective registration statements. See "Management - Stock Option Plans." In addition, the Convertible Notes and Warrants are currently convertible into an aggregate of 58,672 shares of Common Stock. See "Description of Capital Stock." All of such shares are eligible for sale under Rule 144. The Company, all of the Company's executive officers and directors, the Selling Shareholders, and certain other shareholders of the Company who will be deemed to beneficially own 1,790,870 shares of Common Stock (1,774,251 shares of Common Stock if the Underwriters' over-allotment option exercised in full) upon consummation of this Offering have agreed with the Underwriters not to, directly or indirectly, offer, sell, contract to sell, make any short sale, grant any option to purchase, pledge, establish an open "put equivalent position" within the meaning of Rule 16a-7(h) under the Exchange Act, or otherwise dispose of or transfer any shares of Common Stock or any interest therein, options to acquire shares of Common Stock or securities exchangeable for or convertible into shares of Common Stock for a period of 180 days from the effective date of the registration statement relating to the Offering without the prior written consent of the Underwriters. The Company is unable to estimate the number of shares that may be sold in the future by its existing stockholders or the effect, if any, that sales of shares by such stockholders will have on the market price of the Common Stock prevailing from time to time. Sales of substantial amounts of Common Stock by existing stockholders could adversely affect prevailing market prices. UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement, the Company and the Selling Shareholders have agreed to sell to the Underwriters named below, for whom Janney Montgomery Scott Inc. and Scott & Stringfellow, Inc. are acting as the representatives (the "Representatives"), and the Underwriters have severally agreed to purchase, the number of shares of Common Stock set forth opposite their respective names in the table below at the public offering price less the underwriting discount set forth on the cover page of the Prospectus: Underwriters Number of Shares - ------------ ---------------- Janney Montgomery Scott Inc.................... __________ Scott & Stringfellow, Inc...................... __________ Total................................. 1,130,790 ========== The Underwriting Agreement provides that the obligation of the Underwriters to purchase the shares of the Common Stock is subject to certain conditions. The Underwriters are committed to purchase all of the shares of the Common Stock (other than those covered by the over-allotment option described below), if any are purchased. The Underwriters propose to offer the Common Stock to the public at the public offering price set forth on the cover page of the Prospectus, and to certain dealers at such price less a concession not in excess of $____ per share. The Underwriters may allow, and such dealers may reallow to certain dealers a discount, not in excess of $____ per share. After the Offering, the public offering price, the concession to selected dealers and the reallowance to other dealers may be changed by the Representatives. The Company and the Selling Shareholders have granted to the Underwriters an option, exercisable for 30 days from the date of the Prospectus, to purchase up to 169,619 additional shares of the Common Stock, at the public offering price less the underwriting discount. To the extent such option is exercised, each Underwriter will become obligated, subject to certain conditions, to purchase additional shares of Common Stock proportionate to such Underwriter's initial commitment as indicated in the preceding table. The Underwriters may exercise such right of purchase only for the purpose of covering over-allotments, if any, made in connection with the sale of the shares of Common Stock. If purchased, the Underwriters will offer such additional shares on the same terms as those on which the 1,130,790 shares are being offered. The Company and the Selling Shareholders have agreed to indemnify the several Underwriters or contribute to losses arising out of certain liabilities, including liabilities under the Securities Act of 1933. As of the date of this Prospectus, the Company, its officers and directors, the Selling Shareholders and certain other shareholders of the Company holding 1,790,870 shares of Common Stock upon completion of the Offering (assuming no exercise of the underwriters' over-allotment option), have agreed that they will not, directly or indirectly, offer, sell, offer to sell, contract to sell, grant any option to purchase or otherwise dispose or transfer (or announce any offer, sale, offer of sale, contract of sale or grant of any options to purchase or other disposition or transfer) of any shares of Common Stock or similar securities of the Company or any securities convertible into, or exercisable or exchangeable for, any shares of Common Stock of the Company without the prior written consent of the Representatives, for a period of 150 days from the date of this Prospectus. See "Shares Eligible for Future Sale." The Representatives have informed the Company that the Underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority. In connection with the Offering, certain Underwriters and selling group members and their respective affiliates may engage in transactions that stabilize, maintain or otherwise affect the market price of the Common Stock. Such transactions may include stabilization transactions effected in accordance with Rule 104 of Regulation M, pursuant to which such persons may bid for or purchase Common Stock for the purpose of stabilizing its market price. The Underwriters also may create a short position for the account of the Underwriters by selling more Common Stock in connection with the Offering than they are committed to purchase from the Company and the Selling Stockholders, and in such case may purchase Common Stock in the open market following completion of the Offering to cover all or a portion of such short position. The Underwriters may also cover all or a portion of such short position, up to ______________ shares, by exercising the Underwriters' over-allotment option referred to above. In addition, the Underwriters may impose "penalty bids" under contractual arrangements with the Underwriters whereby they may reclaim from an Underwriter (or dealer participating in the Offering), for the account of the other Underwriters, the selling concession with respect to Common Stock that is distributed in the Offering but subsequently purchased for the account of the Underwriters in the open market. Any of the transactions described in this paragraph may result in the maintenance of the price of the Common Stock at a level above that which might otherwise prevail in the open market. None of the transactions described in this paragraph is required, and, if they are undertaken, they may be discontinued at any time. In connection with the Offering, the Underwriters and other selling group members may engage in passive market making transactions in the Common Stock on the Nasdaq National Market in accordance with Rule 103 of Regulation M under the Exchange Act. Passive market making consists of displaying bids on the Nasdaq National Market limited by the prices of independent market makers and effecting purchases limited by such prices and in response to order flow. Net purchases by a passive market maker on each day are limited to a specified percentage of the passive market maker's average daily trading volume in the Common Stock during a specified prior time period and must be discontinued when such limit is reached. Passive market making may stabilize the market price of the Common Stock at a level above that which might otherwise prevail and, if commenced, may be discontinued at any time. LEGAL MATTERS The validity of the issuance of the shares of Common Stock offered hereby will be passed upon for the Company by Kaufman & Canoles, a professional corporation, Norfolk, Virginia. Blank Rome Comisky & McCauley, Philadelphia, Pennsylvania will pass upon certain legal matters for the Underwriters. EXPERTS The Consolidated Financial Statements and schedule of the Company as of April 30, 1997 and 1996, and for each of the years in the three-year period ended April 30, 1997, have been included herein and in the registration statement in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP covering the Consolidated Financial Statements refers to the adoption of Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and SFAS No. 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosure, in 1996. ADDITIONAL INFORMATION The Company has filed with the Commission a registration statement (the "Registration Statement") under the Securities Act of 1933, as amended, with respect to the Common Stock offered hereby. This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain items of which are omitted as permitted by the rules and regulations of the Commission. Statements made in this Prospectus as to the contents of any agreement or other document referred to herein are not necessarily complete, and reference is made to the copy of such agreement or other document filed as an exhibit or schedule to the Registration Statement and each such statement shall be deemed qualified in its entirety by such reference. For further information, reference is made to the Registration Statement and to the exhibits and schedules filed therewith, which are available for inspection without charge at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the material containing this information may be obtained from the Commission upon payment of the prescribed fees. The Commission also maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such Web site is http://www.sec.gov. The Company is subject to the periodic reporting and other information requirements of the Exchange Act. Such reports may be inspected at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material may be obtained by mail from the Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's Common Stock is traded on the Nasdaq National Market, and such material is also available for inspection and copying at the Nasdaq National Market's Listings Department, 1735 K Street, N.W., Washington, D.C. 20006. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS JACKSON HEWITT INC. Independent Auditors' Report F - 2 Consolidated Balance Sheets as of April 30, 1996 and 1997 F - 3 Consolidated Statements of Operations for the years ended April 30, 1995, 1996 and 1997 F - 5 Consolidated Statements of Shareholders' Equity for the years ended April 30, 1995, 1996 and 1997 F - 6 Consolidated Statements of Cash Flows for the years ended April 30, 1995, 1996 and 1997 F - 7 Notes to Consolidated Financial Statements F - 9 F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Jackson Hewitt Inc.: We have audited the consolidated balance sheets of Jackson Hewitt Inc. and subsidiaries as of April 30, 1996 and 1997, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended April 30, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Jackson Hewitt Inc. and subsidiaries as of April 30, 1996 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended April 30, 1997, in conformity with generally accepted accounting principles. As discussed in note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF and SFAS No. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN, as amended by SFAS No. 118, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE, in 1996. KPMG PEAT MARWICK LLP Norfolk, Virginia June 9, 1997, except as to note 16, which is as of June 27, 1997. F-2 CONSOLIDATED BALANCE SHEETS - ---------------------------- Jackson Hewitt Inc. April 30, 1996 and 1997
1996 1997 ------------- -------------- ASSETS (Note 5) Current assets: Cash and cash equivalents $3,557,861 $6,323,586 Receivables: Trade accounts (note 2) 3,171,035 2,861,567 Notes receivable (notes 2, 3, 4 and 6): Franchisees, current portion 3,081,201 2,789,029 Sales of franchise territories, current portion 985,692 1,744,424 Related parties, current portion 309,445 54,553 Interest 328,049 412,064 Allowance for doubtful accounts (1,366,250) (1,203,599) ------------- -------------- Total receivables, net 6,509,172 6,658,038 ------------- -------------- Prepaid expenses and supplies 259,591 247,778 Deferred income taxes (note 9) 828,000 644,000 ------------- -------------- Total current assets 11,154,624 13,873,402 ------------- -------------- Property and equipment, at cost (notes 3, 6, 8 and 13): Land 445,731 445,731 Building and building improvements 813,022 813,022 Office furniture, fixtures and equipment 2,566,672 2,994,125 Computer software 877,139 917,119 Leasehold improvements 131,050 77,592 ------------- -------------- 4,833,614 5,247,589 Less accumulated depreciation and amortization 1,802,689 2,572,084 ------------- -------------- 3,030,925 2,675,505 ------------- -------------- Intangible assets, net (notes 3 and 13): Customer lists, net 1,366,409 2,006,820 Other, net 162,215 444,102 ------------- -------------- 1,528,624 2,450,922 ------------- -------------- Notes receivable (notes 2, 3, 4 and 6): Franchisees, excluding current portion 7,409,971 6,782,358 Sales of franchise territories, excluding current portion 2,060,917 1,922,868 Related parties, excluding current portion 326,370 54,553 ------------- -------------- Total notes receivable, excluding current portion 9,797,258 8,759,779 ------------- -------------- Assets held for sale 32,022 54,408 Assets held under contractual agreements 174,979 313,849 Other assets 237,429 31,912 ------------- -------------- $25,955,861 $28,159,777 ============= ==============
F-3 CONSOLIDATED BALANCE SHEETS (CONTINUED) - --------------------------------------------------------------------------- Jackson Hewitt Inc. April 30, 1996 and 1997
1996 1997 ------------- ----------- LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of notes payable (note 6) $462,166 $606,465 Current installments of capital lease obligations (note 8) 582,645 618,385 Convertible notes (note 7) - 762,750 Accounts payable 3,043,019 1,924,580 Accrued payroll and related liabilities 1,001,709 879,996 Income taxes payable 1,138,202 2,793,027 Deferred franchise fees 207,500 305,370 ------------ ------------ Total current liabilities 6,435,241 7,890,573 Notes payable, excluding current installments (note 6) 1,480,873 1,028,106 Capital lease obligations, excluding current installments (note 8) 599,044 233,819 Convertible notes (note 7) 762,750 - Stock purchase warrants (note 5) 609,492 - Deferred credits: Income taxes (note 9) 1,059,000 893,000 Minority interest 1,902,420 137,690 ------------ ------------ Total liabilities 12,848,820 10,183,188 ------------ ------------ Series A redeemable convertible preferred stock, no par value; 1,000,000 shares authorized; 504,950 shares issued and outstanding (notes 12 and 16) 3,277,792 3,236,443 Shareholders' equity (notes 5, 7, 11, 12 and 16): Common stock, $.02 par value; 10,000,000 shares authorized; 4,589,647 shares in 1997 and 4,408,056 shares in 1996, issued and outstanding 88,161 91,793 Additional capital 7,180,038 7,798,996 Retained earnings 3,765,025 8,125,414 Stock subscription receivable (note 2) (1,203,975) (1,276,057) ------------ ------------ Shareholders' equity 9,829,249 14,740,146 Commitments, contingencies and subsequent events (notes 2, 4, 8, 10, 11, 12 and 16) ------------ ------------ $25,955,861 $28,159,777 ============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-4
CONSOLIDATED STATEMENTS OF OPERATIONS - ------------------------------------- Jackson Hewitt Inc. For the years ended April 30, 1995, 1996 and 1997 1995 1996 1997 ------------------------------------------- REVENUES: Franchise revenues: Royalties and advertising fees (note 2) $6,913,636 $9,855,299 $13,248,002 Franchise fees 5,270,895 3,536,730 3,692,739 Allowance for franchise fee refunds (506,392) (854,613) (488,356) Electronic transfer fees 950,993 1,141,024 1,411,097 Other franchise revenues 743,226 449,742 516,620 ------------------------------------------- 13,372,358 14,128,182 18,380,102 ------------------------------------------- Bank product fees 2,037,161 6,857,843 9,363,380 Tax return preparation fees, net of discounts 2,726,512 3,195,941 3,297,729 Miscellaneous income 79,318 834,107 390,460 ------------------------------------------- Total revenues 18,215,349 25,016,073 31,431,671 Selling, general and administrative expenses 18,360,040 18,469,321 18,273,614 Depreciation and amortization 932,941 1,269,143 1,390,190 ------------------------------------------- Income (loss) from operations (1,077,632) 5,277,609 11,767,867 Other income (expenses): Interest income (note 2) 1,294,636 1,797,128 1,978,014 Interest expense (603,222) (1,853,942) (998,216) Gain (loss) on disposals of intangible assets and property and equipment 1,777,826 600,209 (118,661) ------------------------------------------- Income before provision for income taxes and minority interest 1,391,608 5,821,004 12,629,004 Provision for income taxes (note 9) 539,470 1,525,000 4,210,000 Minority interest share of earnings 12,253 1,893,739 2,186,848 ------------------------------------------- Income before extraordinary item 839,885 2,402,265 6,232,156 Extraordinary item (note 5) - - (1,248,388) ------------------------------------------- Net income 839,885 2,402,265 4,983,768 Dividends accrued on Series A redeemable convertible preferred stock (note 12) (297,921) (321,236) (322,219) Accretion of preferred stock to estimated liquidation value (note 12) (78,013) (80,382) (301,160) ------------------------------------------- Net income attributable to common shareholders $463,951 $2,000,647 $4,360,389 =========================================== Net income per common share (note 11): Primary: Income before extraordinary item $0.11 $0.40 $1.22 =========================================== Net income $0.11 $0.40 $0.95 =========================================== Fully diluted: Income before extraordinary item $0.11 $0.40 $1.18 =========================================== Net income $0.11 $0.40 $0.91 =========================================== Weighted average shares outstanding 4,251,580 4,354,018 4,520,347 ===========================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-5 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - ----------------------------------------------------------------------- Jackson Hewitt Inc. For the years ended April 30, 1995, 1996 and 1997
COMMON STOCK STOCK ------------------------ ADDITIONAL RETAINED SUBSCRIPTION SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE -------------------------------------------------------------------------- Balance at April 30, 1994 4,119,240 $ 82,385 $5,359,806 $1,300,427 ($655,426) Shares issued (note 3) 127,674 2,553 1,498,424 - - Exercise of stock options (note 11) 99,285 1,986 405,331 - (392,389) Dividends accrued on redeemable convertible preferred stock (note 12) - - - (297,921) - Accretion of preferred stock to estimated liquidation value (note 12) - - - (78,013) - Accrual of interest on stock subscription receivable (note 2) - - - - (75,072) Common stock repurchased (45,835) (917) (457,433) - - Net income - - - 839,885 - -------------------------------------------------------------------- Balance at April 30, 1995 4,300,364 86,007 6,806,128 1,764,378 (1,122,887) -------------------------------------------------------------------- Shares issued (note 3) 111,125 2,222 386,715 - - Dividends accrued on redeemable convertible preferred stock (note 12) - - - (321,236) - Accretion of preferred stock to estimated liquidation value (note 12) - - - (80,382) - Accrual of interest on stock subscription receivable (note 2) - - - - (81,088) Common stock redeemed in rescission of franchisee (note 3) (3,433) (68) (12,805) - - Net income - - - 2,402,265 - -------------------------------------------------------------------- Balance at April 30, 1996 4,408,056 88,161 7,180,038 3,765,025 (1,203,975) -------------------------------------------------------------------- Exercise of stock options (note 11) 75,090 1,502 133,313 - - Dividends accrued on redeemable convertible preferred stock (note 12) - - - (322,219) - Accretion of preferred stock to estimated liquidation value (note 12) - - - (301,160) - Stock purchase warrants (note 5) - - 7,400 - - Net shares issued in acquisition of franchisee (note 13) 106,501 2,130 478,245 - - Accrual of interest on stock subscription receivable (note 2) - - - - (72,082) Net income - - - 4,983,768 - -------------------------------------------------------------------- Balance at April 30, 1997 4,589,647 $91,793 $7,798,996 $8,125,414 ($1,276,057) ====================================================================
TOTAL SHAREHOLDERS' EQUITY ---------------------- Balance at April 30, 1994 $6,087,192 Shares issued (note 3) 1,500,977 Exercise of stock options (note 2) 14,928 Dividends accrued on redeemable convertible preferred stock (note 12) (297,921) Accretion of preferred stock to estimated liquidation value (note 12) (78,013) Accrual of interest on stock subscription receivable (note 2) (75,072) Common stock repurchased (458,350) Net income 839,885 --------------- Balance at April 30, 1995 7,533,626 --------------- Shares issued (note 3) 388,937 Dividends accrued on redeemable convertible preferred stock (note 12) (321,236) Accretion of preferred stock to estimated liquidation value (note 12) (80,382) Accrual of interest on stock subscription receivable (note 2) (81,088) Common stock redeemed in rescission of franchisee (note 3) (12,873) Net income 2,402,265 --------------- Balance at April 30, 1996 9,829,249 --------------- Exercise of stock options (note 11 134,815 Dividends accrued on redeemable convertible preferred stock (note 12 (322,219) Accretion of preferred stock to estimated liquidation value (note 12 (301,160) Stock purchase warrants (note 5) 7,400 Net shares issued in acquisition of franchisee (note 13) 480,375 Accrual of interest on stock subscription receivable (note 2) (72,082) Net income 4,983,768 --------------- Balance at April 30, 1997 $14,740,146 ===============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-6 CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------- Jackson Hewitt Inc. For the years ended April 30, 1995, 1996 and 1997
1995 1996 1997 ------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Income before extraordinary item $839,885 $2,402,265 $6,232,156 ------------------------------------------ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 932,941 1,269,143 1,390,190 Allowance for doubtful accounts 905,141 331,904 72,682 Write down of impaired assets - 270,115 183,525 Amortization of original issue discount - 287,391 143,694 Accretion of stock purchase warrants - 178,406 25,487 Earnings attributable to minority interest 12,253 1,893,739 2,186,848 Loss (gain) on sales of intangible assets and property and equipment (1,777,826) (600,209) 118,661 Deferred tax expense (benefit) 283,322 173,398 (162,000) Changes in assets and liabilities that increase (decrease) cash flow from operations: Trade accounts receivable (1,872,209) 32,382 (417,872) Notes receivable (2,360,663) (543,528) (723,772) Interest receivable (298,175) (182,156) (291,349) Prepaid expenses and supplies (217,720) 328,840 28,293 Accounts payable 1,640,441 (485,047) (1,265,007) Accrued payroll and related liabilities (218,720) 57,734 (90,197) Income taxes payable (476,705) 807,864 1,654,825 Deferred franchise fees 372,280 (319,538) 97,870 Other, net 6,791 (19,858) 48,453 ------------------------------------------ Total adjustments (3,068,849) 3,480,580 3,000,331 ------------------------------------------ Net cash provided by (used in) operating activities (2,228,964) 5,882,845 9,232,487 ------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Notes receivable financing of franchisees (3,083,139) (419,785) (108,779) Issuance of equipment notes (975,524) - - Payments received from franchisees 1,996,212 1,876,961 2,191,401 Cash acquired in Oden acquisition - - 5,195 Purchases of customer lists and other assets (523,963) (16,917) (340,507) Proceeds from disposal of property and equipment 16,890 8,723 - Proceeds from sales of customer lists and other assets 569,145 299,388 295,377 Purchases of property and equipment (1,448,925) (674,245) (75,225) ------------------------------------------ Net cash provided by (used in) investing activities (3,449,304) 1,074,125 1,967,462 ------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings under lines of credit 3,500,000 (3,500,000) - Repayments of long-term debt (717,521) (1,180,639) (1,826,260) Proceeds from long-term debt 1,974,654 386,885 452,500 Repayments of obligations under capital leases (151,662) (521,504) (663,006) Issuance of common stock 72,000 - 134,815 Distribution to minority interest in consolidated partnership (45,501) - (3,991,578) Payment of preferred stock dividends (283,229) - (664,728) Purchase of stock purchase warrants - - (1,875,967) Purchase of common stock (458,350) - - ------------------------------------------ Net cash provided by (used in) financing activities 3,890,391 (4,815,258) (8,434,224) ------------------------------------------ Net increase (decrease) in cash and cash equivalents (1,787,877) 2,141,712 2,765,725 Cash and cash equivalents at beginning of year 3,204,026 1,416,149 3,557,861 ------------------------------------------ Cash and cash equivalents at end of year $1,416,149 $3,557,861 $6,323,586 ==========================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-7 CONSOLIDATED STATEMENTS OF CASH FLOWS - ------------------------------------- ----------------------------------- Jackson Hewitt Inc. For the years ended April 30, 1995, 1996 and 1997 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
1995 1996 1997 ------------------------------------------------- Cash paid during the year for: Interest $553,104 $1,852,576 $998,612 Income taxes $728,628 $540,188 $2,695,762 SUPPLEMENTAL INFORMATION ON NONCASH INVESTING AND FINANCING ACTIVITIES: During the years ended April 30, 1995, 1996 and 1997, the Company acquired certain assets from franchisees as follows (note 3): 1995 1996 1997 ------------------------------------------------- Fair value of assets purchased $3,608,702 $2,370,522 $2,418,287 Receivables forgiven (1,155,261) (2,267,697) (1,768,022) Notes payable issued (410,501) (80,462) (273,195) Deferred revenue reversed - 370,618 - Common stock issued (1,518,977) (376,064) - Lease obligations assumed - - (36,563) -------------------------------------------------- Cash paid to seller $523,963 $16,917 $340,507 ================================================== During the years ended April 30, 1995, 1996 and 1997, the Company sold certain assets to franchisees as follows: 1995 1996 1997 ------------------------------------------------- Book value of assets sold $7,391,513 $1,331,510 $1,738,211 Franchise fee revenue 1,295,000 577,500 - Gain on sale 1,751,791 561,685 40,720 Deferred gain on sale (2,694,557) (51,901) - Notes issued (7,174,602) (2,119,406) (1,483,554) -------------------------------------------------- Cash received $569,145 $299,388 $295,377 ==================================================
During the years ended April 30, 1995, 1996 and 1997, the Company entered into capital lease obligations of $922,260, $874,845 and $333,521, respectively. During the years ended April 30, 1995, 1996 and 1997, the stock subscription receivable increased $75,072, $81,088 and $72,082, respectively, for the accrual of interest. In July 1997, the Company acquired all of the outstanding stock of Oden, Inc., a franchisee, in exchange for 106,501 shares, net of shares retired, of Jackson Hewitt common stock (note 13). F-8 JACKSON HEWITT INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Jackson Hewitt Inc. (the "Company") operates and acts as the franchiser and operator of a system of offices engaged in computerized preparation of federal and state personal income tax returns. The Company receives a fee for preparing returns at Company-owned locations and receives royalties and other fees from franchisees. The Company also purchases and sells existing and new franchise territories and receives commissions and fees related to processing refund anticipation loans and accelerated check requests through arrangements with several financial institutions. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Jackson Hewitt Inc. and its wholly owned subsidiary, Hewfant, Inc. and its 60% owned subsidiary, JH of Memphis, LLC. Hewfant Inc. is a 65% partner in Refant Partnership (Refant). During fiscal 1997, Refant provided processing services for refund anticipation loans with County Bank and First Republic Bank. First Republic Bank is a 35% partner in Refant. All intercompany accounts and transactions have been eliminated. The minority interest reflected on the balance sheet and the minority interest share of earnings reflected on the statement of operations reflect the proportionate share of equity and earnings, respectively, held by the other owners of JH of Memphis, LLC and Refant. CASH EQUIVALENTS The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company had $772,051 and $5,922,224 invested in repurchase agreements and thirty day commercial paper at April 30, 1996 and 1997, respectively. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. Depreciation and amortization is provided by the straight-line method over the estimated useful lives of the assets as follows: Building and building improvements 40 years Office furniture, fixtures and equipment 7-10 years Computer software 5-7 years Leasehold improvements 7-10 years Computer software costs include the initial development costs of the computer software and the cost of all purchased software. F-9 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INTANGIBLE ASSETS Intangible assets primarily relate to the value assigned to customer lists of Company-owned stores. The value of the customer lists is determined at the time of acquisition based upon a formula applied to the tax preparation fees generated by the underlying store or stores during the most recently completed tax season. The Company believes this formula represents an appropriate estimate of the fair value of the assets. Amortization is computed using the straight-line method over five years. Accumulated amortization was $565,802 and $948,568 at April 30, 1996 and 1997, respectively. REVENUE RECOGNITION Franchise fee revenue, net of allowance for franchise fee refunds of 12%, is recognized when obligations of the Company to prepare the franchisee for operation have been substantially completed. Franchise fees that are financed by the Company are recorded as deferred franchise fees until such time as the franchisee has made a significant financial commitment (20%). Royalties and advertising fees are assessed based upon 18% of territory revenues and are recognized currently as the franchised territory generates sales. Electronic transfer fees, tax return preparation fees and bank product fees are recognized as revenue in the period the related tax return is filed or prepared for the customer. Discounts are recorded for promotional programs at the time the return is prepared. Sales of Company-owned stores which are financed by the Company, and related gains, are not recorded until the franchisee has made a significant financial commitment (20%). The carrying value of customer lists and other intangibles which have been sold to franchisees that have not paid at least 20% of the sales price are classified as assets held under contractual agreements in the accompanying consolidated balance sheets. The Company ceases the accrual of interest income on notes receivable which have been past due for more than six months. On past due notes which have been past due less than six months, an allowance for doubtful accounts is recognized for 50% of the interest income due. NOTES RECEIVABLE Notes receivable are recorded at cost, less the related allowance for doubtful accounts. The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 114, "ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN," as amended by SFAS No. 118, "ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE" (the Statements), on May 1, 1995. Under the provisions of the Statements, a loan is impaired when it is probable that a creditor will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement. When a loan is impaired, a creditor has a choice of methods to measure impairment, including the present value of future cash flows, the observable market price of the impaired loan or the fair value of the underlying collateral. In most cases, the creditor can select the measurement method on a loan by loan basis. Management estimates the amount of the allowance for doubtful accounts based on a comparison of amounts due to the estimated fair value of the underlying franchise, which collateralizes the note. Impairment losses are included in the allowance for doubtful accounts through a charge to bad debt expense. The cumulative effect as of May 1, 1995 of implementing the Statements was immaterial to the Company's financial position and results of operations. F-10 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) IMPAIRMENT OF LONG-LIVED ASSETS The Company implemented Statement of Financial Accounting Standards 121,"ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF," (Statement 121) in the fourth quarter of fiscal 1996. In implementing Statement 121, the Company changed its accounting method to establish a threshold for determining impairment based on undiscounted cash flows of the underlying store. The measurement of the amount of impairment for assets which the threshold indicates recognition of an impairment is required, is based upon the estimated value of the asset, computed based on a formula applied to the tax preparation fees generated by the underlying store or stores during the most recently completed tax season. The impact of adopting Statement 121 for the fiscal year ended April 30, 1996 included charges of $67,508 relating to long-lived assets associated with existing Company-owned stores and a charge of $202,607 to write off long-lived assets associated with closed locations. For the year ended April 30, 1997, the Company recognized an impairment loss of $183,525 related to Company-owned stores. These charges have been included in selling, general and administrative expenses in the accompanying 1996 and 1997 consolidated statements of operations. STOCK-BASED COMPENSATION Prior to May 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES," and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On May 1, 1996, the Company adopted SFAS No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION," which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in fiscal 1996 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. INCOME TAXES The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are measured based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rate expected to be in effect when the differences are expected to reverse. The effect of a change in tax rates is recognized in income in the period that includes the enactment date. NET INCOME PER COMMON SHARE Net income per common share is based on the weighted average number of shares of common stock outstanding during the period, including the dilutive effects of stock options and stock purchase warrants. Net income is adjusted for dividends accrued on Series A Redeemable Convertible Preferred Stock and accretion of preferred stock issuance costs to arrive at net income per common share. The Company's convertible notes and redeemable convertible preferred stock are excluded from the calculation of primary net income per common share because they do not qualify as common stock equivalents. F-11 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ADVERTISING EXPENSES Advertising costs, which are included in selling, general and administrative expenses in the accompanying consolidated statements of operations, are expensed as incurred. Advertising expenses for 1995, 1996 and 1997 were $4,347,730, $3,677,629 and $5,080,056, respectively. USE OF ESTIMATES Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. These significant estimates include the adequacy of the allowance for doubtful accounts and notes receivable, the recoverability of intangible assets, the fair value of franchised stores and the liability under refund anticipation loan programs. RECLASSIFICATIONS Certain reclassifications have been made to the 1995 and 1996 financial statements to conform with the 1997 financial statement presentation. 2. RELATED PARTY TRANSACTIONS The following summarizes the Company's related party transactions: PURCHASES AND SALES OF CUSTOMER LISTS AND OTHER ASSETS During 1995, the Company purchased customer lists and other assets related to three territories from a related party in exchange for 112,575 shares of the Company's common stock. The customer lists and other assets were simultaneously sold to three parties, two of which were related parties, for $1,463,470 in notes receivable. The purchase of the customer lists and other assets was valued at $11.80 per share, the average trading price of the Company's stock during the period of negotiation relating to the purchase. The gain of $135,085 associated with the subsequent sale was deferred due to the value of the underlying collateral and the related party nature of the transaction. In addition to the above, in 1995, customer lists and other assets were sold to three other related parties for $60,876 in cash and $676,712 in notes receivable. A gain of $89,847 was recognized on these sales. NOTES AND ACCOUNTS RECEIVABLE At April 30, 1996 and 1997, related parties owed the Company $635,815 and $109,106, respectively, under notes receivable (note 4) and $224,203 and $936, respectively, under accounts receivable. Repayments of notes receivable from these parties during the years ended April 30, 1996 and 1997 were $340,606 and $54,553, respectively. F-12 2. RELATED PARTY TRANSACTIONS (CONTINUED) STOCK SUBSCRIPTION RECEIVABLE The stock subscription receivable reflected in the accompanying consolidated balance sheets is due from the Company's former Chairman of the Board of Directors, John Hewitt. On September 9, 1996, Mr. Hewitt resigned from the Company. On December 12, 1996, Mr. Hewitt executed a $1,276,057 promissory note, which represents all amounts then due the Company, including accrued interest, other than the $99,000 obligation referred to below. This recourse note bears interest at 6.9% per year. Mr. Hewitt is required to make monthly interest payments and to repay the principal amount in one lump sum on April 30, 1999. To secure this recourse note, Mr. Hewitt pledged 145,050 shares of Company stock to the Company, and granted the Company a proxy to vote this stock until his obligation is repaid in full. In return for a monthly payment by the Company to Mr. Hewitt of approximately $23,000, Mr. Hewitt also executed a covenant not to compete with the Company in the United States through April 30, 1999, and agreed not to solicit Company employees, conduct a solicitation of proxies or disparage the Company or its officers and directors during the same period. In addition, the Company forgave a $99,000 (plus accrued interest) obligation of Mr. Hewitt to the Company, which would have been due and payable on April 30, 1997. As a part of this transaction, the Company and Mr. Hewitt executed mutual releases. OTHER The Company recognized $295,266, $325,530 and $52,361, respectively, in royalty and advertising revenue from franchises owned by related parties for the years ended April 30, 1995, 1996 and 1997. 3. ACQUISITION OF FRANCHISE ASSETS During the year ended April 30, 1997, the Company acquired certain assets from 31 Jackson Hewitt franchisees for a total purchase price of $2,418,287. The Company gave the franchise owners cash of $340,507, canceled notes and accounts receivable of $1,768,022, gave the previous owners notes totaling $273,195, and assumed lease obligations totaling $36,563 to complete these transactions. During the year ended April 30, 1996, the Company acquired certain assets from 36 Jackson Hewitt franchisees for a total purchase price of $2,370,522. The Company gave the franchise owners cash of $16,917, canceled notes receivable from franchisees of $2,267,697, gave the previous franchise owners notes totaling $80,462, reversed deferred revenue of $370,618, redeemed 3,433 shares and issued 111,125 shares of Jackson Hewitt common stock for a net value of $376,064 based on the average over the counter trading value of the shares around the time of redemption and issuance. During the year ended April 30, 1995, the Company acquired certain assets from 33 Jackson Hewitt franchisees for a total purchase price of $3,608,702. The Company gave the franchise owners cash of $523,963, canceled notes receivable from franchisees of $1,155,261, gave the previous franchise owners notes totaling $410,501, and issued 127,674 shares of Jackson Hewitt common stock valued at $1,518,977 based on the average over the counter trading value of the shares around the time issuance. The purchase price is allocated among the assets acquired based on the estimated relative fair value of the underlying assets. The portion allocated to customer lists is generally based on a percentage of gross revenue generated by the respective franchises. The purchase price was allocated among the assets purchased as follows: F-13 3. ACQUISITION OF FRANCHISE ASSETS (CONTINUED)
1995 1996 1997 ------------- ------------- ------------- Customer lists $3,296,097 $2,136,156 $2,240,152 Other intangible assets, primarily goodwill 95,972 162,699 141,135 Property and equipment 54,918 71,667 22,000 Other 161,715 - 15,000 ------------- ------------- ------------- Total $3,608,702 $2,370,522 $2,418,287 ============= ============= =============
The Company purchased certain of the aforementioned franchise assets from related parties as disclosed in note 2. A summary of franchise office activity follows: FRANCHISEE OFFICES ------------------
Beginning Closed or Purchased End of Period Opened by the Company of Period ------------ -------- ------------------- -------------- 1995 742 381 (36) 1087 1996 1087 336 (177) 1246 1997 1246 318 (288) 1296
4. NOTES RECEIVABLE Notes receivable are issued to business partners to finance the purchase of franchises and/or for working capital and equipment needs. The notes generally are due in two to five years and bear interest at rates between 10% and 12%. Transactions for 1996 and 1997 follow:
1996 1997 ----------- ------------ Balance at beginning of year $14,864,696 $14,173,596 Notes issued: Sales of customer lists 2,509,590 2,536,500 Loans to business partners 419,785 108,799 Refinancing of existing notes 387,787 314,551 Sales of franchise territories 1,546,205 2,463,100 Notes canceled (2,556,042) (2,642,254) Oden notes eliminated in consolidation - (168,095) Repayment of notes (2,998,425) (3,438,412) =============== ============= Balance at end of year $14,173,596 $13,347,785 =============== =============
Notes receivable, franchisees, reflected on the accompanying balance sheets, include notes related to the sale of customer lists as well as loans to franchisees for working capital and equipment. Most of the notes receivable reflected on the accompanying balance sheets are due from the Company's franchisees. The notes are collateralized by the underlying franchise, are guaranteed by the franchisees and are generally five years in length at inception. The franchisees' ability to repay the notes is dependent upon the performance of the tax preparation industry as a whole and the Company in particular. As a result of certain IRS actions, fiscal 1995 was a difficult year for the Company's franchisees, resulting in a number of the Company's receivables being past due at April 30, 1995 and 1996. In fiscal 1996 and early F-14 4. NOTES RECEIVABLE (CONTINUED) 1997, the Company restructured a number of notes receivable and terminated a number of franchisees with whom a satisfactory payment plan was not reached. In many cases, the Company included the business partners' accounts receivable and interest receivable balances in the restructured notes. At April 30, 1996 and April 30, 1997, notes receivable installments of approximately $1,800,000 and $570,000 are past due, respectively. Management believes that the recorded allowance is adequate based upon its consideration of the estimated value of the franchises supporting the receivables. Any adverse change in the tax preparation industry could affect the Company's estimate of the allowance. At April 30, 1997 the Company had an investment in impaired notes and related interest receivable of approximately $806,000 which had recorded values that exceeded the fair value of the underlying collateral by approximately $73,000. In addition, the Company had trade accounts receivable due from these business partners of approximately $94,000 at April 30, 1997. The Company has reflected an allowance of $167,000 for this impairment in the accompanying consolidated balance sheet. Activity in the allowance for doubtful accounts for the years ended April 30, 1996 and 1997 is summarized as follows: 1996 1997 ------------ ---------- Beginning balance $ 1,226,724 $1,366,250 Additions charged to expense 2,316,595 991,715 Write-offs (2,177,069) (1,154,366) ----------- ----------- Ending balance $ 1,366,250 $1,203,599 =========== =========== The Company's average investment in impaired notes receivable during the years ended April 30, 1996 and 1997 was approximately $3,900,000 and $1,750,000, respectively. Interest income related to these notes of approximately $240,000 and $216,000 has been included in the accompanying consolidated statements of operations for the years ended April 30, 1996 and 1997, respectively. 5. LINE OF CREDIT AND EXTRAORDINARY ITEM Throughout fiscal 1997 the Company had a line of credit facility (the Facility) with a commercial lender, under which the Company could borrow from $2,000,000 to $7,900,000 throughout the year. Interest was payable monthly at prime plus 0.5% on the first $5,500,000 of the borrowings and prime plus 1.25% for amounts borrowed in excess of $5,500,000. The Facility contained certain maintenance and restrictive covenants, including but not limited to a total liabilities to tangible net worth and debt service coverage ratio. The Facility was collateralized by accounts and notes receivable, inventory, furniture, fixtures, equipment, contract rights and general intangibles as well as a deed of trust on the Company's headquarters. Under the terms of the Facility, the Company was required to repay all borrowings under the Facility and maintain a zero balance for a period of thirty days prior to its expiration. No amounts were outstanding on the line of credit facility as of April 30, 1997. As discussed in note 16, the Company renewed the Facility in May 1997 through June 30, 1999. During 1996 and 1995, the Company had two facilities available (the Old Facilities) with the lender. The Old Facilities provided the Company with a $4,500,000 line of credit facility and a $3,500,000 facility available to finance franchise expansions and new franchise sales. The Old Facilities bore interest at prime plus 0.5% through July 1995. From July 1995 to June 1996, the interest rate on the Old Facilities was increased to prime plus 2.5%. In addition, in August 1995, the lender provided an additional $3,000,000 short-term facility to provide additional working capital. This line expired on F-15 5. LINE OF CREDIT AND EXTRAORDINARY ITEM (CONTINUED) April 30, 1996 and also bore interest at prime plus 2.5%. The Old Facilities were replaced in fiscal 1997 with the Facility discussed above. There were no amounts outstanding under the Old Facilities on April 30, 1996. In conjunction with the Old Facilities, the Company's lender was also granted warrants to obtain up to 999,327 shares, or 19.9% of the then fully diluted common stock of the Company, exercisable at $0.01 per share. Based upon independent appraisal, the Company valued the warrants at $0.74 per warrant at the date of issuance. As a result, an original issue discount of $739,502, representing the initial value of the warrants, was recorded against the borrowings under the Old Facilities and was amortized over the terms of the Old Facilities. The agreement governing the warrants provided the holder with additional rights, such as a put option, piggyback registration and other rights. As a result of the existence of the put option, the Company recorded accretion to the estimated ultimate redemption amount as interest expense for the period the warrants were outstanding. The agreement also included a clawback provision under which the Company could earn back warrants based upon a formula applied to its repayment of amounts outstanding under the Old Facilities. In April 1996, the Company exercised the clawback rights under the agreement and reduced the number of warrants to 582,549. As a result, the value of the warrants, discount amortization and accretion to the put price were reduced proportionately. In June 1996, the Company agreed to purchase the put option on all warrants and to purchase 572,549 of the outstanding warrants held by the lender for $1,875,967. The Company financed the purchase using amounts available under the Facility. A loss of $1,248,388 associated with the early extinguishment of the put warrant liability is reflected as an extraordinary item in the accompanying consolidated statement of operations for the year ended April 30, 1997. The remaining outstanding warrants have been included in additional capital in the accompanying April 30, 1997 consolidated balance sheet. 6. LONG-TERM DEBT Long-term debt at April 30, 1996 and 1997 consists of the following:
1996 1997 --------- --------- Note payable to bank; monthly installments of $10,995 including interest at 10.87%; due February 2009; collateralized by land and building $938,810 $908,912 Note payable to bank; interest paid monthly at prime plus 1%; repaid in full in 1997. 556,142 - Note payable to former franchisee; annual installments of $41,040 on April 30, plus interest at 7.00%; due April 1998 82,080 41,040 Non-interest bearing note payable to former franchisee, monthly installments of $2,166; interest imputed at 55,319 11.00%; due March 1999 55,319 34,333 F-16 6. LONG-TERM DEBT (CONTINUED) 1996 1997 --------- --------- Note payable to financing company; interest at 9.75%; repaid in full in 1997 15,320 - Non-interest bearing note payable to former franchisee, annual installments of $27,500, interest imputed at 11.00%; due March 2000 76,862 54,542 Non-interest bearing note payable to former franchisee; interest imputed at 9%; due in full in February 1998 - 182,860 Notes payable to former Oden stockholders; due in various installments between July 1997 and February 1998; interest payable annually at 9% - 244,596 Other notes payable 218,506 168,288 ----------- ----------- Total long-term debt 1,943,039 1,634,571 Less current installments 462,166 606,465 ----------- ----------- Total long-term debt, less current installments $1,480,873 $1,028,106 ============ ===========
Aggregate maturities of long-term debt as of April 30, 1997 are as follows: 1998 $606,465 1999 109,586 2000 84,737 2001 58,196 2002 62,482 Thereafter 713,105 ------------ Total $1,634,571 ============ 7. CONVERTIBLE NOTES The Company has $762,750 of convertible notes outstanding at April 30, 1997 which bear interest at 6% payable semiannually and are due in full March 1, 1998. Upon the occurrence of certain events of default, the holders of not less than 25% of the convertible notes may demand repayment of the notes in their entirety. The convertible notes are convertible into one share of common stock per $16 of principal (47,671 shares of common stock), anytime on or prior to maturity. The conversion rate of the notes is subject to change upon the occurrence of certain events. No conversions occurred in 1995, 1996 or 1997. F-17 8. LEASE OBLIGATIONS The Company leases office space and equipment for its operations under leases expiring through 2002. Rent expense totaled $1,424,587, $1,328,334 and $1,149,872 for the years ended April 30, 1995, 1996 and 1997, respectively. Annual office rents for tax preparation offices are based on minimum rentals plus a percentage of gross receipts in excess of minimum revenues. Rent expense calculated as a percentage of gross receipts totaled $92,962, $184,472 and $69,671 for the years ended April 30, 1995, 1996 and 1997, respectively. Included in property and equipment are the following amounts applicable to capital leases at April 30, 1996 and 1997:
1996 1997 ---------- ----------- Office furniture, fixtures and equipment $1,799,779 $2,133,299 Less accumulated amortization (657,056) (1,294,869) ========== =========== $1,142,723 $838,430 ========== ===========
Total amortization expense charged under capital leases was $167,002, $476,228 and $637,812 for the years ended April 30, 1995, 1996 and 1997, respectively. F-18 8. LEASE OBLIGATIONS (CONTINUED) Future minimum lease payments under noncancelable operating leases and the present value of future minimum capital lease payments as of April 30, 1997 are as follows:
CAPITAL LEASES OPERATING LEASES - ------------------------------------------------------------ -------------------- 1998 $712,320 $300,426 1999 322,216 109,794 2000 33,911 97,277 2001 - 33,200 2002 28,000 - -------------------- -------------------- Total minimum lease payments 1,068,447 $568,697 ==================== Amount representing interest 216,243 -------------------- Present value of future minimum lease payments 852,204 Less current installments of obligations under capital leases 618,385 -------------------- Obligations under capital leases, excluding current installments $233,819 ====================
9. INCOME TAXES The provision for income taxes for the years ended April 30, 1995, 1996 and 1997 is comprised of the following: 1995 1996 1997 ----------- ------------- ----------- Current: Federal $193,552 $1,210,602 $3,693,000 State 62,596 141,000 679,000 ----------- ------------- ----------- 256,148 1,351,602 4,372,000 Deferred: Federal 239,322 146,398 (136,000) State 44,000 27,000 (26,000) ----------- ------------- ----------- 283,322 173,398 (162,000) ----------- ------------- ----------- $539,470 $1,525,000 $4,210,000 =========== ============= =========== The Company's effective tax rate differs from the U.S. Federal statutory tax rate for the years ended April 30, 1995, 1996 and 1997 as follows: 1995 1996 1997 --------- --------- --------- Statutory rate 34.0% 34.0% 34.0% Increases in income taxes resulting from: State income taxes, net of Federal income tax benefit 5.1% 4.0% 4.1% Accretion of stock purchase warrants - 1.7% - Disposal of Oden territories - - 1.0% Other - (0.9%) 1.2% --------- --------- --------- Effective rate 39.1% 38.8% 40.3% ========= ========= ========= F-19 9. INCOME TAXES (CONTINUED) Significant components of the Company's deferred tax assets and liabilities at April 30, 1996 and 1997 are as follows:
1996 1997 ---------- ---------- Deferred tax assets: Deferred revenue for financial statement purposes recognized currently for tax purposes $100,000 $122,000 Bad debt allowance, deductible when related receivables are written off 518,000 457,000 Accrued vacation, deductible as paid for tax purposes 37,000 51,000 Property, equipment and intangible assets, due to differing depreciation and amortization methods 58,000 - Capital leases, deductible as paid for tax purposes 15,000 5,000 Other accounts payable, deductible as paid for tax purposes 84,000 - Amortization of loan discount, due to different amortization methods 78,000 - Inventory related costs capitalized for tax purposes 11,000 14,000 ----------- ----------- 901,000 649,000 Deferred tax liabilities: ----------- ----------- Installment sales, recognized for tax (1,132,000) (861,000) purposes as cash is received Property, equipment and intangible assets, due to differing depreciation and amortization methods - (37,000) ----------- ----------- (1,132,000) (898,000) ----------- ----------- Net deferred tax liabilities $(231,000) $(249,000) =========== ===========
F-20 10. COMMITMENTS AND CONTINGENCIES GUARANTEES The Company guarantees to reimburse customers for penalties and interest in the case of errors it makes in preparing tax returns in Company operated offices. Experience has shown that actual penalties paid have been negligible. The Company has guaranteed operating leases for office equipment of certain franchises. The total obligations under these leases are $873,940 and have remaining terms of up to thirty-nine months. The Company has guaranteed bank loans of certain franchisees. The guarantee obligations total approximately $137,000 at April 30, 1997. EMPLOYMENT AGREEMENT The Company has an employment agreement with its President and Chief Executive Officer which expires in June 1999. The agreement provides for an annual salary and a bonus if certain performance objectives are met. The Company may terminate the employment agreement at any time without cause. Upon such termination, the Company is required to pay the employee $250,000 over a one-year period and vest all options granted to the employee in full. LITIGATION The Company is a defendant in certain lawsuits and is aware of other threatened claims generally incidental to its business as a franchiser. Management is of the opinion that the accompanying financial statements will not be materially affected by the ultimate resolution of litigation pending or threatened at April 30, 1997. 11. EMPLOYEE BENEFITS 401(K) PLAN Jackson Hewitt Inc. 401(k) Plan (the Plan) is a defined contribution plan sponsored by the Company. The Plan provides for employee salary deferral and matching employer contributions. Employees of the Company are eligible to participate in the Plan when they attain age twenty-one and have completed one year of service. The Company began contributing to the Plan during 1997. Participants vest in the Company's contributions based upon years of service. The Company's contribution for the year ended April 30, 1997 was $26,519. STOCK COMPENSATION PLANS At April 30, 1997, the Company has two stock-based compensation plans. Under the 1994 Long-Term Incentive Plan, the Company may grant options to its employees for up to 698,000 shares of common stock. Under the 1996 Non-Employee Director Stock Option Plan, the Company may grant options to its non-employee directors for up to 150,000 shares of common stock. Under both plans, the exercise price of each option equals the market price of the Company's stock on the date of grant, and the option's maximum term is ten years. Options vest over five years under the 1994 Plan and over four years under the 1996 Plan. The Company applies APB Opinion No. 25 and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its fixed stock options, which were granted with an exercise price at least equal to the stock's fair market value at the date of grant. Had compensation cost for the Company's two stock-based compensation plans been determined consistent with FASB Statement No. 123, the Company's net income and net income per share would have been reduced to the pro forma amounts indicated below: F-21 11. EMPLOYEE BENEFITS (CONTINUED) STOCK COMPENSATION PLANS (CONTINUED) 1996 1997 ---- ---- Net income As Reported $2,402,265 $4,983,768 Pro Forma $2,386,714 $4,732,577 Primary net income per As Reported $.40 $.95 share Pro Forma $.40 $.89 Fully diluted net income As Reported $.40 $.91 per share Pro Forma $.40 $.86 The full impart of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma and net income per share amounts presented above because compensation cost is reflected over the options vesting periods and compensation cost for options granted prior to May 1, 1995 is not considered. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 1996 and 1997, respectively: dividend yield of 0 percent for both years; expected volatility of 73% for both years; risk-free interest rates of 5.9% and 6.7% for the 1994 Plan options and 5.4% and 6.3% for the 1996 Plan options; and expected lives of six and ten years for the 1994 Plan options and ten years for the 1996 Plan options. A summary of the status of the Company's two fixed stock option plans as of April 30, 1996 and 1997 and changes during the years ended on those dates is presented below:
1996 1997 ---------------------------------------------------------- Weighted- Weighted- Number of Average Number of Average Options Exercise Price Options Exercise Price ----------- --------------- ----------- ------------------ Outstanding at beginning of year 174,590 $6.65 235,590 $4.38 Granted 126,700 $3.35 388,765 $5.01 Exercised - - 75,090 $1.80 Expired 37,000 $10.00 54,000 $10.00 Forfeited 28,700 $6.40 49,180 $3.96 ----------- --------------- ----------- ------------------ Outstanding at end of year 235,590 $4.38 446,085 $4.71 =========== =============== =========== ================== Options exercisable at year-end 70,790 $1.73 28,660 $3.45 Weighted-average fair value of 126,700 $0.82 388,765 $3.62 options granted during the year
F-22 At April 30, 1997, the range of exercise prices and weighted-average remaining contractual life of outstanding options was $2.86-$5.75 and eight years, respectively. 12. REDEEMABLE CONVERTIBLE PREFERRED STOCK In fiscal 1994, 504,950 shares of Series A Redeemable Convertible Preferred Stock ("Preferred Stock") were sold in a private placement to three private investors. The Company received net proceeds (after payment of placement fees and expenses) of $2,518,046. The excess of the redemption value over the carrying value is being accreted by periodic charges to retained earnings over the life of the issue. The holders of the Preferred Stock are entitled to 10% cumulative annual dividends due in August of each year and a liquidation preference upon the liquidation or dissolution of the Company. Additional dividends accrue on unpaid dividends. The Company accrued dividends of $297,921, $321,236 and $322,219 for the years ended April 30, 1995, 1996 and 1997, respectively. At any time, upon occurrence of certain events, the holders of the 504,950 shares of issued and outstanding shares of Preferred Stock may convert their shares to 504,950 shares of common stock. If any of the Preferred Stock has not been converted to common stock by August 31, 1998, the Company must redeem from each holder of Preferred Stock 1/3, 1/2 and all of the remaining shares, respectively, of the Preferred Stock held by such holder on August 31, 1998, August 31, 1999 and August 31, 2000, respectively. The redemption price to be paid by the Company is equal to the greater of (i) the liquidation preference payment for the Preferred Stock, which is equal to $3,000,000 plus any accrued, but unpaid dividends or (ii) the fair market value of the shares of Preferred Stock on such date. The fair market value of the Preferred Stock will be determined in good faith by the Board of Directors of the Company, subject to the right of the holders of the Preferred Stock to select an independent appraiser that is agreeable to the Company to determine such price. The Company is accreting the Preferred Stock to the estimated redemption value over the period through which redemption is required. The holders of the Preferred Stock, voting as a separate series, may elect one director of the Company until such time as all of the Preferred Stock is converted to common stock. Holders of the Preferred Stock have the right to vote on all matters properly before the shareholders of the Company. The number of votes to which the holders of the Preferred Stock are entitled is the same number of votes to which such holders would be entitled if the Preferred Stock were converted to common stock. In addition to certain dividend, liquidation, conversion, registration, and redemption rights, the holders of the Preferred Stock have certain rights in the event of an offering of the Company's common stock. As discussed in note 16, in June 1997 the Company and the preferred shareholders agreed to settle the mandatory redemption feature and convert the preferred shares to common shares. 13. ACQUISITION On July 31, 1996, the Company completed an exchange of 106,501 shares of the Company's common stock, net of shares retired, for all of the outstanding stock of Oden Inc., a franchisee. The total purchase price, based upon the market value of the Company's stock at July 31, 1996, was $480,375. The transaction was accounted for as a purchase and the resulting goodwill, which is included in other intangible assets in the accompanying balance sheet, will be amortized over 5 years. Assets acquired and liabilities assumed in the purchase are as follows: F-23 13. ACQUISITION (CONTINUED) Assets acquired: Cash $5,195 Accounts receivable 55,587 Notes and interest receivable 645,693 Prepaid expenses 1,480 Fixed assets 22,295 Customer lists 837,911 Goodwill 575,785 Other assets 9,016 -------------- Total assets 2,152,962 -------------- Liabilities assumed: Accounts payable 483,556 Notes and interest payable 1,009,031 Deferred income taxes 180,000 -------------- Total liabilities 1,672,587 -------------- Purchase price $480,375 ============== Included in accounts payable and notes and interest payable are amounts due to the Company of $464,821 and $182,970, respectively, which were eliminated in consolidation upon the closing of the acquisition. The remaining notes payable are due to former Oden shareholders in varying installments through February 1998. The following unaudited pro forma financial information for the years ended April 30, 1996 and 1997 combines the results of operations of the Company and Oden as if the acquisition occurred at the beginning of fiscal 1996, after giving effect to certain adjustments, including the depreciation and amortization of assets based on their fair values and intercompany eliminations. The unaudited pro forma information does not purport to represent what the results of operations of the Company would have been if such transaction had in fact occurred on such date or to project the Company's results of operations for any future period.
1996 1997 ----------- ----------- Revenue $25,723,168 $31,403,599 Income before extraordinary item 2,308,500 6,365,749 Net income $2,308,500 $5,117,361 Net income per common share: Income before extraordinary item $.38 $1.25 Net income $.38 $0.98
F-24 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The following summarizes disclosure regarding the estimated fair value of the Company's financial instruments at April 30, 1996 and 1997: 1996 ------------------------------- Carrying Amount Fair Value ----------------- ------------- Cash and cash equivalents $3,557,861 $3,557,861 Trade accounts receivable 3,171,035 3,171,035 Notes receivable 14,173,596 14,173,596 Notes payable 1,943,039 2,042,866 Convertible notes 762,750 733,926 Accounts payable 3,043,019 3,043,019 Accrued payroll and related liabilities 1,001,709 1,001,709 Stock purchase warrants 609,492 1,875,967 Series A redeemable convertible preferred stock 3,277,792 3,277,792 Financial guarantees, for which it is not practicable to estimate fair value - - 1997 ------------------------------- Carrying Amount Fair Value -------------- ------------ Cash and cash equivalents $6,323,586 $6,323,586 Trade accounts receivable 2,861,567 2,861,567 Notes receivable 13,347,785 13,347,785 Notes payable 1,634,571 1,731,433 Convertible notes 762,750 750,290 Accounts payable 1,924,580 1,924,580 Accrued payroll and related liabilities 879,996 879,996 Series A redeemable convertible preferred stock 3,236,443 7,084,534 Financial guarantees, for which it is not practicable to estimate fair value - - (A) CASH AND CASH EQUIVALENTS, TRADE ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED PAYROLL AND RELATED LIABILITIES The carrying amount approximates fair value because of the short maturity of these instruments. (B) NOTES RECEIVABLE The carrying amount approximates fair value, because the rates of interest on these notes approximate rates currently offered by lending institutions for loans of similar terms to individuals or companies with comparable credit risk. However the Company has not sold any of these notes and thus actual rates have not been established. There can be no assurance that the Company would obtain these rates if the notes were sold. F-25 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) (C) NOTES PAYABLE AND CONVERTIBLE NOTES The fair value of the Company's notes payable and convertible notes is estimated based on the present value of future cash flows discounted using the Company's recently negotiated line of credit borrowing rate of LIBOR plus 2.5% at April 30, 1997. (D) SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK In 1996 the Company estimated that the fair value approximated the carrying value since the carrying amount reflects accretion to the redemption price based upon the fair value of the common stock, and the preferred stock dividend rate approximates what the Company could expect to pay for funds financed under similar terms. For 1997, the fair value has been estimated based upon the trading value of the common stock at April 30, 1997 using the 699,707 shares to be issued upon conversion as described in note 16. (E) STOCK PURCHASE WARRANTS The fair value at April 30, 1996 represents the amount paid by the Company in July 1996 (note 5) to repurchase substantially all of the stock purchase warrants. (F) FINANCIAL GUARANTEES A reasonable estimate of the fair value of the Company's guarantees of long-term debt and lease obligations of others, more fully described in note 10, could not be made without incurring excessive costs. 15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following table presents selected quarterly financial data for the Company:
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- (dollars in thousands except per share data) Year Ended April 30, 1996: Revenue $823 $1,318 $5,219 $17,656 Net income(loss) (1,326) (1,599) (475) 5,802 Net income (loss) per common share ($0.33) ($0.32) ($0.11) $1.16 Year Ended April 30, 1997: Revenue $980 $1,216 $7,805 $21,431 Income (loss) before extraordinary item (1,322) (1,008) 1,184 7,378 Extraordinary item (1,248) - - - Net income (loss) (2,570) (1,008) 1,184 7,378 Net income (loss) per common share: Income (loss) before extraordinary item ($0.32) ($0.24) $0.24 $1.54 Net income (loss) ($0.59) ($0.24) $0.24 $1.54
F-26 16. SUBSEQUENT EVENTS In May 1997, the Company's lender renewed the Company's working capital facility through June 30, 1999. Under the terms of the Amended and Restated Credit Agreement, amounts which can be borrowed under the Facility vary from $2.0 million to $8.0 million throughout the year, subject to certain borrowing base limitations, and bear interest at the 30 day LIBOR rate plus 2.5%. The facility is renewable annually for one additional year at a time. In June 1997, the Company and the preferred shareholders entered into a Recapitalization Agreement under which the preferred shareholders agreed to exchange all of the Preferred Stock for 699,707 shares of common stock. The closing of the transaction is expected to occur on July 3, 1997, with an effective date of June 18, 1997, which was the date the parties reached agreement as to the terms of the transaction. As a result of this transaction, the Company will record a charge to retained earnings and net income to common shareholders of approximately $1.9 million in the first quarter of fiscal 1998, representing the fair value on June 18, 1997 of the incremental shares of common stock issued to induce conversion. 17. EFFECT OF UNADOPTED ACCOUNTING STANDARD In February 1997, the FASB issued SFAS No. 128, "EARNINGS PER SHARE" (Statement 128). Statement 128 supersedes APB Opinion No. 15, "EARNINGS PER SHARE," and specifies the computation, presentation, and disclosure requirements for earnings per share ("EPS") for entities with publicly held common stock or potential common stock. Statement 128 was issued to simplify the computation of EPS and to make the U.S. standard more compatible with the EPS standards of other countries and that of the International Accounting Standards Committee (IASC). It will replace primary EPS and fully diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computations to the numerator and denominator of the diluted EPS computation. Basic EPS, unlike primary EPS, excludes all dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS, similar to fully diluted EPS, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Statement 128 is effective for financial statements for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted. After adoption, all prior period EPS data presented shall be restated to conform with Statement 128. The following table summarizes the pro forma EPS data of the Company as if Statement 128 had been adopted for all periods presented.
Year Ended April 30 1995 1996 1997 -------- -------- --------- Basic EPS Income before extraordinary item $0.11 $0.46 $1.24 Extraordinary Item - - (0.28) -------- -------- --------- Net income $0.11 $0.46 $0.96 ======== ======== ========= Diluted EPS Income before extraordinary item $0.11 $0.41 $1.19 Extraordinary Item - - (0.26) -------- -------- --------- Net income $0.11 $0.41 $0.93 ======== ======== =========
F-27 - -------------------------------------------------------------------------------- No dealer, sales representative or other person has been authorized to give any information or to make any representations in connection with this Offering other than those contained in this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Company, the Selling Shareholders or the Underwriters. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any security other than the shares of Common Stock offered by this Prospectus, nor does it constitute an offer to sell or a solicitation of an offer to buy the shares of Common Stock in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any offer or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company or that the information contained herein is correct as of any time subsequent to the date hereof. -------------------- TABLE OF CONTENTS Page Prospectus Summary................................... Risk Factors......................................... The Company.......................................... Use of Proceeds...................................... Price Range of Common Stock.......................... Dividend Policy...................................... Capitalization....................................... Recent Developments.................................. Selected Consolidated Financial Data................. Management's Discussion and Analysis................. of Financial Condition and Results of.............. Operations......................................... Business............................................. Management........................................... Certain Transactions................................. Principal and Selling Shareholders................... Description of Capital Stock......................... Shares Eligible for Future Sale...................... Underwriting......................................... Legal Matters........................................ Experts.............................................. Additional Information............................... Index to Consolidated Financial Statements........... [INSIDE BACK COVER PAGE] [SCHEMATIC OF TAX RETURN FILING PROCESS] Shares [LOGO] JACKSON HEWITT INC. Common Stock ----------------- PROSPECTUS ----------------- Janney Montgomery Scott Inc. Scott & Stringfellow, Inc. , 1997 - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution. The estimated expenses in connection with the Offering are as follows: Expenses Amount Registration Fee $_________ NASD Fees Nasdaq National Market Fees * Printing Expenses * Legal Fees and Expenses * Transfer Agent and Registrar Fees * Accounting Fees and Expenses * Blue Sky Fees and Expenses * Miscellaneous Expenses * --------- TOTAL $ * ========= * To be filed by amendment. Item 14. Indemnification of Officers and Directors. The Virginia Stock Corporation Act ("Virginia Act") allows a corporation to include a provision in its articles of incorporation or bylaws eliminating liability of directors and officers in proceedings brought by or in the right of a corporation or brought by or on behalf of shareholders, however, such liability may not be eliminated if a director or officer engages in willful misconduct or a knowing violation of the criminal law or of any federal or state securities law. The Company's Articles of Incorporation provide that the Company's officers and directors will not be liable with respect to any proceeding brought by or in the right of the Company or brought by or on behalf of the shareholders of the Company, provided that the officer or director has not engaged in willful misconduct or a knowing violation of the criminal law or of any federal or state securities law. The Company's Articles of Incorporation also provide that the Company will indemnify its directors, officers, employees and agents in the manner provided by the Virginia Act. The Virginia Act sets forth certain provisions regarding the indemnification of directors and officers. Generally, these provisions of the Virginia Act allow a corporation to indemnify directors and officers if: (i) they conducted themselves in good faith; (ii) they believed (a) in the case of conduct in their official capacity, that their conduct was in the corporation's best interest, and (b) in all other cases, that their conduct was at least not opposed to its best interest; and (iii) in the case of any criminal proceeding, that they had no reasonable cause to believe their conduct was unlawful. Under the Virginia Act, a corporation may not indemnify directors and officers (i) in connection with a proceeding by or in the right of the corporation in which the directors or officers are adjudged liable to the corporation; or (ii) in any other proceeding charging improper personal benefit, in which they are adjudged liable on the basis that personal benefit was improperly received. Item 15. Recent Sales of Unregistered Securities. The following information relates to securities of the Company issued or sold within the past three years which were not registered under the Securities Act of 1933, as amended (the "Securities Act"): On June 18, 1997, the Company's President, Chief Executive Officer, and Chairman of the Board exercised an employee stock option to purchase 46,226 shares of Common Stock in a transaction exempt under Section 4(2) of the Securities Act. On March 6, 1997, a former employee who held an option to purchase 70,790 shares of Common Stock exercised the option to purchase 33,000 of these shares in a transaction exempt from registration under Section 4(2) of the Securities Act. The employee had previously exercised the option with respect to 37,790 shares on August 19, 1996. On July 31, 1996, the Company exchanged 106,501 shares of Common Stock for all of the outstanding shares of common stock of Oden, Inc. This privately-negotiated transaction did not involve a public offering and was therefore exempt from registration under Section 4(2) of the Securities Act, as well as Rules 504, 505, and 506 of Regulation D promulgated thereunder ("Regulation D"). On October 31, 1995, the Company repurchased a franchise in exchange for 103,125 shares of Common Stock. This privately-negotiated transaction did not involve a public offering and was therefore exempt from registration under Section 4(2) of the Securities Act, as well as Rule 504 of Regulation D. On September 30, 1995, the Company repurchased two franchises in exchange for 3,000 and 5,000 shares of Common Stock. Neither of these privately negotiated transactions involved a public offering and both were therefore exempt from registration under Section 4(2) of the Securities Act, as well as Rule 504 of Regulation D. In July 1995, the Company issued a warrant to purchase up to 999,327 shares of Common Stock to its principal lender in a transaction exempt under Section 4(2) of the Securities Act. On October 20, 1994, the Company repurchased a franchise for 1,900 shares of Common Stock. This privately-negotiated transaction did not involve a public offering and was therefore exempt from registration under Section 4(2) of the Securities Act, as well as Rule 504 of Regulation D. On June 30, 1994, the Company repurchased two franchises in exchange for 112,574 and 10,892 shares of Common Stock. Neither of these privately negotiated transactions involved a public offering and both were therefore exempt from registration under Section 4(2) of the Securities Act. The transaction involving 10,892 shares of Common Stock was also exempt under Rule 504 of Regulation D. On May 31, 1994, the Company repurchased a franchise for 2,308 shares of Common Stock. This privately-negotiated transaction did not involve a public offering and was therefore exempt from registration under Section 4(2) of the Securities Act, as well as Rule 504 of Regulation D. Item 16. Exhibits and Financial Statement Schedules. (a) Exhibits.
Sequential Exhibit No. Page Number Description **1 Form of Underwriting Agreement. 3.1 Articles of Incorporation of the Company, as amended. (Incorporated by reference * to the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). ***3.2 Amended and Restated Bylaws of the Company. * **4.1 Form of Specimen Common Stock Certificate. 4.2 Terms of the 6% Convertible Notes. (Incorporated by reference to * the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). 4.3 Series A Convertible Preferred Stock Purchase Agreement, dated * August 19, 1993, between the Company, John T. Hewitt and certain Investors. (Incorporated by reference to the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). 4.4 Registration Rights Agreement, dated August 19, 1993, between the Company and * certain Investors. (Incorporated by reference to the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). 4.5 Stockholders Agreement, dated August 19, 1993, between the * Company, John T. Hewitt and certain Investors. (Incorporated by reference to the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). **5 Opinion and Consent of Kaufman & Canoles. 10.1 Master License Agreement, dated October 15, 1988, between the * Company and Montgomery Ward & Co., Incorporated, and extension letter agreement, dated June 8, 1993. (Incorporated by reference to the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). 10.2 Second Amendment to Partnership Agreement of Refant Partners, dated June 30, 1994, * between Republic Service, Inc. and Hewfant, Inc. (Incorporated by reference to the Registrant's Form 10-QSB, Commission File No. 0-22324, previously filed with the Commission on September 13, 1994). 10.3 Loan Agreement, dated November 4, 1994, between the Company and Republic Bank. * (Incorporated by reference to the Registrant's Form SB-2, Commission File No. 0-22324, as amended, previously filed with the Commission on December 5, 1994.) 10.4 1994 Long Term Incentive Plan. (Incorporated by reference to the Registrant's * Form SB-2, Commission File No. 33-94162, previously filed with the Commission on June 30, 1995.) 10.5 Lease dated September 23, 1994, between the Company and Wal-Mart Stores, Inc. * (Incorporated by reference to the Registrant's Form SB-2, Commission File No. 33-94162, previously filed with the Commission on June 30, 1995.) 10.6 First Amendment, dated October 31, 1994, to the Stock Purchase * Agreement, the Registration Rights Agreement and the Stockholders Agreement, each dated August 19, 1993, between the Company, John T. Hewitt, GeoCapital, II, L.P., GeoCapital III, L.P., Stephen J. Bachmann and Charles Federman. (Incorporated by reference to the Registrant's Form SB-2, Commission File No. 33-94162, previously filed with the Commission on June 30, 1995.) 10.7 Warrant Agreement, dated October 17, 1995, between the Company * and NationsBank, N.A. (Incorporated by reference to the Registrant's 10-KSB/A previously filed with the Commission on December 18, 1995.) 10.8 Warrant Certificate, dated October 18, 1995, between the Company and NationsBank, * N.C. (Incorporated by reference to the Registrant's 10-KSB/A previously filed with the Commission on December 18, 1995.) 10.9 First Amendment to Master Shopping Center Lease Agreement, dated January 29, 1996, * between Wal-Mart Stores, Inc. and Jackson Hewitt Inc. (Incorporated by reference to the Registrant's 10-QSB previously filed with the Commission on March 18, 1996.) 10.10 Renewal of Master License Agreement, July 12, 1996, between * Montgomery Ward & Co., Incorporated and Jackson Hewitt Inc. (Incorporated by reference to the Registrant's 10-KSB previously filed with the Commission on July 29, 1996.) 10.11 Second Amendment to Master Shopping Center Lease Agreement, dated May 15, 1996, * between Wal-Mart Stores, Inc. and Jackson Hewitt Inc. (Incorporated by reference to the Registrant's 10-KSB previously filed with the Commission on July 29, 1996.) 10.12 First Amendment to Warrant Agreement, dated June 7, 1996, between Jackson Hewitt * Inc. and NationsBank, N.A. (Incorporated by reference to the Registrant's 10-KSB previously filed with the Commission on July 29, 1996.) 10.13 Agreement of Sale, dated June 10, 1996, between Jackson Hewitt Inc. and Refant * Partners. (Incorporated by reference to the Registrant's 10-KSB previously filed with the Commission on July 29, 1996.) 10.14 Business Loan Agreement, dated June 10, 1996, between Jackson Hewitt Inc. and * Republic Bank. (Incorporated by reference to the Registrant's 10-KSB previously filed with the Commission on July 29, 1996.) 10.15 Release and Settlement Agreement, dated December 9, 1996, by and between Jackson * Hewitt Inc. and John T. Hewitt. (Incorporated by reference to the Registrant's 10-QSB previously filed with the Commission on January 31, 1997) 10.16 John T. Hewitt's Promissory Note for $1,276,057 dated December 1, 1996. * (Incorporated by reference to the Registrant's 10-QSB previously filed with the Commission on January 31, 1997.) 10.17 Stock Pledge Agreement, dated December 1, 1996, by and between Jackson Hewitt Inc. * and John T. Hewitt. (Incorporated by reference to the Registrant's 10-QSB previously filed with the Commission on January 31, 1997.) 10.18 Mutual Release Agreement, dated December 31, 1996, by and between Jackson Hewitt * Inc. and Susan Ventresca. (Incorporated by reference to the Registrant's 10-QSB previously filed with the Commission on January 31, 1997.) ***10.19 Form Franchise Offering Circular, June 1997. ***10.20 Employment Agreement, dated May 29, 1997, between Jackson Hewitt Inc. and Keith E. Alessi. ***10.21 Amended and Restated Credit Agreement dated May 30, 1997, between Jackson Hewitt Inc. and NationsBank, N.A. ***10.22 Recapitalization Agreement, dated as of June 18, 1997, between Jackson Hewitt Inc., Geocapital II, L.P., Geocapital III, L.P., JMI Equity Fund, L.P., Charles Federman, and Stephen Bachman. ***11 Computation of per share earnings. ***21 Subsidiaries of the Registrant. * ***23.1 Consent of KPMG Peat Marwick LLP, Independent Certified Public Accountants. **23.2 Consent of Kaufman & Canoles. 24 Power of Attorney relating to Jackson Hewitt Inc. (appears on the signature page hereto). ***27 Financial Data Schedule. ***99.1 Financial Statement Schedule--Schedule 2, Valuation and Qualifying Accounts
- ------------------------------------------------ * In accordance with Rule 12(b)-32 of the General Rules and Regulations under the Securities Exchange Act of 1934, the exhibit is incorporated by reference. ** To be filed by amendment. *** Filed herewith. (b) Financial Statement Schedules.- Schedule 2, Valuation and Qualifying Accounts Item 17. Undertakings. Insofar as indemnification for liabilities arising out of the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense in any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and authorizes this Registration Statement to be signed on its behalf by the undersigned, in the City of Virginia Beach, Commonwealth of Virginia, on June 30, 1997. JACKSON HEWITT INC. By: /s/ Keith E. Alessi --------------------------------------- Keith E. Alessi, Chairman of the Board, President and Chief Executive Officer POWER OF ATTORNEY In accordance with the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates stated. Each person whose signature appears below constitutes and appoints Keith E. Alessi and Christopher Drake his true and lawful attorney-in-fact and agent, each acting along with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to the Registration Statement on Form S-1, and to any registration statement filed under Securities and Exchange Commission Rule 462, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Witness our hands and common seals on the date set forth below.
Signature Title Date /s/ Keith E. Alessi Director, Chairman of the Board, President and June 30, 1997 - --------------------------- Chief Executive Officer (Principal Executive Keith E. Alessi Officer) /s/ Harry W. Buckley Director June 30, 1997 - --------------------------- Harry W. Buckley /s/ Harry S. Gruner Director June 30, 1997 - --------------------------- Harry S. Gruner /s/ Michael E. Julian, Jr. Director June 30, 1997 - --------------------------- Michael E. Julian, Jr. /s/ William P. Veillette Director June 30, 1997 - --------------------------- William P. Veillette /s/ Christopher Drake Secretary, Treasurer and Chief Financial June 30, 1997 - --------------------------- Officer (Principal Financial Officer and Christopher Drake Principal Accounting Officer)
EXHIBIT INDEX
Sequential Exhibit No. Description Page Number **1 Form of Underwriting Agreement. 3.1 Articles of Incorporation of the Company, as amended. (Incorporated by reference * to the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). ***3.2 Amended and Restated Bylaws of the Company, dated August 1993. * **4.1 Form of Specimen Common Stock Certificate. 4.2 Terms of the 6% Convertible Notes. (Incorporated by reference to * the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). 4.3 Series A Convertible Preferred Stock Purchase Agreement, dated * August 19, 1993, between the Company, John T. Hewitt and certain Investors. (Incorporated by reference to the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). 4.4 Registration Rights Agreement, dated August 19, 1993, between the Company and * certain Investors. (Incorporated by reference to the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). 4.5 Stockholders Agreement, dated August 19, 1993, between the * Company, John T. Hewitt and certain Investors. (Incorporated by reference to the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). **5 Opinion and Consent of Kaufman & Canoles. 10.1 Master License Agreement, dated October 15, 1988, between the * Company and Montgomery Ward & Co., Incorporated, and extension letter agreement, dated June 8, 1993. (Incorporated by reference to the Registrant's Form 10-SB, Commission File No. 0-22324, as amended, previously filed with the Commission on August 31, 1993). 10.2 Second Amendment to Partnership Agreement of Refant Partners, dated June 30, 1994, * between Republic Service, Inc. and Hewfant, Inc. (Incorporated by reference to the Registrant's Form 10-QSB, Commission File No. 0-22324, previously filed with the Commission on September 13, 1994). 10.3 Loan Agreement, dated November 4, 1994, between the Company and Republic Bank. * (Incorporated by reference to the Registrant's Form SB-2, Commission File No. 0-22324, as amended, previously filed with the Commission on December 5, 1994.) 10.4 1994 Long Term Incentive Plan. (Incorporated by reference to the Registrant's * Form SB-2, Commission File No. 33-94162, previously filed with the Commission on June 30, 1995.) 10.5 Lease dated September 23, 1994, between the Company and Wal-Mart Stores, Inc. * (Incorporated by reference to the Registrant's Form SB-2, Commission File No. 33-94162, previously filed with the Commission on June 30, 1995.) 10.6 First Amendment, dated October 31, 1994, to the Stock Purchase * Agreement, the Registration Rights Agreement and the Stockholders Agreement, each dated August 19, 1993, between the Company, John T. Hewitt, GeoCapital, II, L.P., GeoCapital III, L.P., Stephen J. Bachmann and Charles Federman. (Incorporated by reference to the Registrant's Form SB-2, Commission File No. 33-94162, previously filed with the Commission on June 30, 1995.) 10.7 Warrant Agreement, dated October 17, 1995, between the Company * and NationsBank, N.A. (Incorporated by reference to the Registrant's 10-KSB/A previously filed with the Commission on December 18, 1995.) 10.8 Warrant Certificate, dated October 18, 1995, between the Company and NationsBank, * N.C. (Incorporated by reference to the Registrant's 10-KSB/A previously filed with the Commission on December 18, 1995.) 10.9 First Amendment to Master Shopping Center Lease Agreement, dated January 29, 1996, * between Wal-Mart Stores, Inc. and Jackson Hewitt Inc. (Incorporated by reference to the Registrant's 10-QSB previously filed with the Commission on March 18, 1996.) 10.10 Renewal of Master License Agreement, July 12, 1996, between * Montgomery Ward & Co., Incorporated and Jackson Hewitt Inc. (Incorporated by reference to the Registrant's 10-KSB previously filed with the Commission on July 29, 1996.) 10.11 Second Amendment to Master Shopping Center Lease Agreement, dated May 15, 1996, * between Wal-Mart Stores, Inc. and Jackson Hewitt Inc. (Incorporated by reference to the Registrant's 10-KSB previously filed with the Commission on July 29, 1996.) 10.12 First Amendment to Warrant Agreement, dated June 7, 1996, between Jackson Hewitt * Inc. and NationsBank, N.A. (Incorporated by reference to the Registrant's 10-KSB previously filed with the Commission on July 29, 1996.) 10.13 Agreement of Sale, dated June 10, 1996, between Jackson Hewitt Inc. and Refant * Partners. (Incorporated by reference to the Registrant's 10-KSB previously filed with the Commission on July 29, 1996.) 10.14 Business Loan Agreement, dated June 10, 1996, between Jackson Hewitt Inc. and * Republic Bank. (Incorporated by reference to the Registrant's 10-KSB previously filed with the Commission on July 29, 1996.) 10.15 Release and Settlement Agreement, dated December 9, 1996, by and between Jackson * Hewitt Inc. and Jon T. Hewitt. (Incorporated by reference to the Registrant's 10-QSB previously filed with the Commission on January 31, 19967) 10.16 John T. Hewitt's Promissory Note for $1,276,057 dated December 1, 1996. * (Incorporated by reference to the Registrant's 10-QSB previously filed with the Commission on January 31, 1997.) 10.17 Stock Pledge Agreement, dated December 1, 1996, by and between Jackson Hewitt Inc. * and John T. Hewitt. (Incorporated by reference to the Registrant's 10-QSB previously filed with the Commission on January 31, 1997.) 10.18 Mutual Release Agreement, dated December 31, 1996, by and between Jackson Hewitt * Inc. and Susan Ventresca. (Incorporated by reference to the Registrant's 10-QSB previously filed with the Commission on January 31, 1997.) ***10.19 Form Franchise Offering Circular, June 1997. * ***10.20 Employment Agreement, dated May 29, 1997, between Jackson Hewitt Inc. and Keith E. * Alessi ***10.21 Amended and Restated Credit Agreement dated May 30, 1997, between Jackson Hewitt Inc. and NationsBank, N.A. ***10.22 Recapitalization Agreement, dated as of June 18, 1997, between Jackson Hewitt Inc., Geocapital II, L.P., Geocapital III, L.P., JMI Equity Fund, L.P., Charles Federman, and Stephen Bachman. ***11 Computation of per share earnings. ***21 Subsidiaries of the Registrant. * ***23.1 Consent of KPMG Peat Marwick LLP, Independent Certified Public Accountants. **23.2 Consent of Kaufman & Canoles. 24 Power of Attorney relating to Jackson Hewitt Inc. (appears on the signature page hereto). ***27 Financial Data Schedule. ***99.1 Financial Statement Schedule--Schedule 2, Valuation and Qualifying Accounts
- ------------------------------------------------ * In accordance with Rule 12(b)-32 of the General Rules and Regulations under the Securities Exchange Act of 1934, the exhibit is incorporated by reference. ** To be filed by amendment. *** Filed herewith. EX-3.(I) 2 EXHIBIBT 3.2 Exhibit 3.2 AMENDED AND RESTATED (July 25, 1996) BYLAWS OF JACKSON HEWITT INC. TABLE OF CONTENTS
ARTICLE I Meetings of the Shareholders Page Section 1.1 Annual Meetings............................................................. 1 Section 1.2 Special Meetings............................................................ 1 Section 1.3 Place of Meetings........................................................... 1 Section 1.4 Notice of Meetings.......................................................... 1 Section 1.5 Fixing the Record Date...................................................... 2 Section 1.6 Shareholder Lists........................................................... 2 Section 1.7 Quorum...................................................................... 2 Section 1.8 Proxies..................................................................... 3 Section 1.9 Voting of Shares............................................................ 3 Section 1.10 Presiding Officers.......................................................... 3 Section 1.11 Actions Taken by Written Consent of the Shareholders................................................................ 3 ARTICLE II Board of Directors Section 2.1 General Powers.............................................................. 4 Section 2.2 Number of Directors......................................................... 4 Section 2.3 Classified Board of Directors............................................... 4 Section 2.5 Vacancies................................................................... 4 Section 2.6 Nomination of Directors..................................................... 5 Section 2.7 Annual Meetings............................................................. 6 Section 2.8 Regular Meetings............................................................ 6 Section 2.9 Special Meetings............................................................ 6 Section 2.10 Place of Meetings........................................................... 6 Section 2.11 Notice of Meetings.......................................................... 6 Section 2.12 Quorum...................................................................... 6 Section 2.13 Manner of Acting............................................................ 6 Section 2.14 Actions Taken by Written Consent of the Directors................................................................... 6 Section 2.15 Participation in Meetings Through Use of Communication Devices....................................................... 6
TABLE OF CONTENTS
Page Section 3.1 Audit Committee............................................................. 7 Section 3.2 Other Committees............................................................ 7 Section 3.3 Rules of Committee Procedure................................................ 7 ARTICLE IV Officers Section 4.1 Officers.................................................................... 8 Section 4.2 Chairman of the Board of Directors.......................................... 8 Section 4.3 President................................................................... 8 Section 4.4 Vice Presidents............................................................. 8 Section 4.5 Secretary................................................................... 8 Section 4.6 Treasurer................................................................... 8 Section 4.7 Other Officers.............................................................. 9 Section 4.8 Election of Officers........................................................ 9 ARTICLE V Certificates of Stock Section 5.1 Certificates for Shares..................................................... 9 Section 5.2 Transfer of Shares.......................................................... 9 ARTICLE VI Miscellaneous Section 6.1 Waiver of Notice............................................................ 10 Section 6.2 Fiscal Year................................................................. 10 Section 6.3 Voting Shares of Other Corporations......................................... 10 Section 6.4 Seal........................................................................ 10 Section 6.5 Registered Office........................................................... 10 Section 6.6 Other Offices............................................................... 10 Section 6.7 Compensation of Directors, Members of Committees of the Board of Directors and Officers...................................... 10 Section 6.8 Authorized Signatures....................................................... 10 Section 6.9 Amendments to Bylaws........................................................ 11
BYLAWS OF JACKSON HEWITT, INC. (the "Corporation") (as of July 25, 1996) ARTICLE I Meetings of the Shareholders Section 1.1 Annual Meetings.1Annual Meetings. The annual meeting of the Shareholders for the election of Directors and for the transaction of such other business as may come before the annual meeting shall be held at such time on such business day as shall be designated in a writing given to the Secretary by the Chairman of the Board of Directors or the President or designated in a resolution of the Board of Directors. Section 1.2 Special Meetings2Special Meetings. Special meetings of the Shareholders for any purpose or purposes may be called at any time by the Board of Directors on its motion or on the motion of the Chairman of the Board of Directors, the President or such other person or persons authorized to do so by law, and upon such call the Board of Directors shall fix the date of such special meeting. Section 1.3 Place of Meetings3 Place of Meetings. The annual meeting and any special meeting of the Shareholders shall be held at such place, within or without the Commonwealth of Virginia, as shall be designated in a writing given to the Secretary by the Chairman of the Board of Directors or the President, or designated in a resolution of the Board of Directors. Section 1.4 Notice of Meetings4 Notice of Meetings. Written notice stating the place, day and hour of a meeting of the Shareholders, the purpose or purposes for which such meeting is called, shall be given not less than ten (10) nor more than sixty (60) calendar days before the date of such meeting either personally or by mail, by or at the direction of the Chairman of the Board of Directors, the President, the Secretary or the person or persons calling the meeting, to each Shareholder of record entitled to vote at such meeting. Notwithstanding the foregoing, notice of a meeting of the Shareholders to act on an amendment to the Articles of Incorporation, a plan of merger or share exchange, a proposed sale, lease, exchange or disposition of all or substantially all of the Corporation's property or the dissolution of the Corporation shall be given not less than twenty-five (25) calendar days before the date of such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, addressed to the Shareholder at his address as it appears on the stock transfer books of the Corporation at the close of business on the record date established by resolution of the Board of Directors for such meeting pursuant to Section 1.5 of these Bylaws. Section 1.5 Fixing the Record Date5 Fixing the Record Date. For the purpose of determining the Shareholders entitled to notice of or to vote at any meeting of the Shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of the Shareholders for any other proper purpose, the Board of Directors by resolution shall fix in advance a date as the record date for any such determination of the Shareholders, such date in any case to be not more than seventy (70) calendar days prior to the date on which the particular action, requiring such determination of the Shareholders, is to be taken. If no record date is fixed for the determination of the Shareholders entitled to notice of or to vote at a meeting of Shareholders, or the Shareholders entitled to receive payment of a dividend, the close of business on the day before the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of the Shareholders of record. When a determination of the Shareholders entitled to vote at a meeting of the Shareholders has been made as provided herein, such determination shall apply to any adjournment of such meeting. Any determination of the Shareholders of record to be made for any purpose on a certain date shall be made as of the close of business on such date. Section 1.6 Shareholder Lists6 Shareholder Lists. At least ten (10) calendar days before each meeting of the Shareholders, the officer or agent having charge of the share transfer books of the Corporation shall prepare a complete list of the Shareholders entitled to vote at such meeting, with the address and number of shares held by each, which list shall be arranged by voting group, if any, and within each voting group by class or series, if any, of shares. Such Shareholder list shall be kept on file at the principal office of the Corporation or the office of the registrar and transfer agent of the Corporation for a period of ten (10) calendar days prior to such meeting, and shall be subject to inspection at any time during usual business hours by any person who (i) has been a Shareholder of record for at least six (6) months immediately preceding his demand or is the holder of record of at least five percent (5%) of all of the outstanding shares, (ii) makes a demand in good faith and for a proper purpose, (iii) describes with reasonable particularity his purpose and the Shareholder list he desires to inspect and (iv) the Shareholder list is directly connected with his purpose. Such list shall also be produced and kept open at the time and place of such meeting of the Shareholders and shall be subject to inspection by any Shareholder during the whole time of such meeting for the purposes of such meeting. Section 1.7 Quorum7 Quorum. Except as otherwise required by law, a majority of the shares entitled to vote represented in person or by proxy, shall constitute a quorum of such group of Shareholders at a meeting of the Shareholders. If less than a quorum be so represented at a meeting of the Shareholders, then a majority of the shares so represented may adjourn the meeting from time to time without further notice but may take no other action. At such adjourned meeting at which a quorum is present in person or represented by proxy, any business may be transacted which might have been transacted at the meeting originally called. Once a share is represented for any purpose at a meeting of the Shareholders, it shall be deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is, or shall be, set for that adjourned meeting. Section 1.8 Proxies8 Proxies. At each meeting of the Shareholders, a Shareholder entitled to vote may vote in person or by proxy executed in writing by such Shareholder or his attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or other officer or agent authorized to tabulate votes before or at the time of the meeting. No proxy shall be valid after eleven (11) months from its date, unless otherwise expressly provided in the proxy. Section 1.9 Voting of Shares9 Voting of Shares. If a quorum is present at a meeting of the Shareholders, action on a matter other than election of directors shall be approved if the votes cast within the voting group favoring the action exceed the votes cast within the voting group opposing the action unless a vote of a greater number is required by the Corporation's Articles of Incorporation or law. If a quorum is present at a meeting of the Shareholders, directors shall be elected by a plurality of the votes cast by the shares entitled to vote in such election. The attendance at any meeting of the Shareholders by a Shareholder who may theretofore have given a proxy shall not have the effect of revoking the proxy unless such Shareholder shall in writing so notify the Secretary prior to the voting of the proxy. The holders of shares of common stock of the Corporation entitled to vote for the election of directors and for all other purposes shall have one vote for each share of common stock of the Corporation which they hold. Voting on all matters shall be by voice vote or by a show of hands unless the holders of fifteen percent (15%) of the shares represented at a meeting shall, prior to the voting on any particular matter, demand a ballot vote on that particular matter. Section 1.10 Presiding Officers10 Presiding Officers. Meetings of the Shareholders shall be presided over by the Chairman of the Board of Directors unless he is absent or requests the President to preside, in which event the President shall preside. If neither the Chairman of the Board of Directors nor the President is present, a chairman chosen at the meeting shall preside. The Secretary or, in his absence, a person selected at the meeting, shall act as the secretary of the meeting. Section 1.11 Actions Taken by Written Consent of the Shareholders11 Actions Taken by Written Consent of the Shareholders. Any action which may be taken at a meeting of the Shareholders may be taken without a meeting if one or more consents, in writing, setting forth the action so taken, shall be signed by all the Shareholders who would be entitled to vote upon such action at a meeting and delivered to the Secretary for inclusion in the Corporation's minutes or filing with the corporate records. Any action taken by unanimous written consent of the Shareholders shall be effective according to its terms when all consents are in possession of the Corporation. Notwithstanding the foregoing, an action taken by written consent of the Shareholders that specifies an effective date shall be effective as of such date, provided the consent states the date of execution by each Shareholder. A Shareholder may withdraw his written consent only by delivering a written notice of withdrawal to the Corporation prior to the time all consents are in possession of the Corporation. If not otherwise determined by resolution of the Board of Directors, the record date for determining Shareholders entitled to take action without a meeting shall be the date the first Shareholder signs such consent. Any such consent shall have the same force and effect as a unanimous vote of the Shareholders. ARTICLE II Board of Directors Section 2.1 General Powers.1 General Powers. The Board of Directors shall have responsibility for the management of the property, affairs and business of the Corporation, subject to any requirement of actions by the Shareholders made in the Articles of Incorporation of the Corporation or by law. In carrying out its responsibility, the Board of Directors shall elect such officers and appoint, or cause to be appointed, such other agents and hall delegate, or cause to be delegated, to them such authority and duties in the management of the Corporation as is provided in these Bylaws or as may be determined, from time to time, by resolution of the Board of Directors not inconsistent with these Bylaws. Section 2.2 Number of Directors2 Number of Directors. The number of directors shall be between five (5) and seven (7). The actual number of directors may be increased or decreased from time to time within this range by the Board of Directors by resolution of the Board. Only the shareholders may increase or decrease the range in the number of directors. No decrease in number shall have the effect of shortening the term of any incumbent director. Section 2.3 Classified Board of Directors3 Classified Board of Directors. The directors (other than any director designated by the holders of the Corporation's Series A Convertible Preferred Stock) shall be divided into two classes, Class A and Class B, with each class to be as nearly equal in number as reasonably possible, and with the initial term of office of the Class A directors to expire at the 1996 Annual Meeting of Shareholders, and the initial term of office of the Class B directors to expire at the 1997 Annual Meeting of Shareholders. Commencing with the 1996 Annual Meeting of Shareholders, directors elected to succeed those directors whose terms have thereupon expired shall be elected for a term of office to expire at the second succeeding Annual Meeting of Shareholders after their election and upon the election and qualification of their successors. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain or attain, if possible, the number of directors in each class as nearly equal as reasonably possible, but in no case will a decrease in the number of directors shorten the term of any incumbent director. Section 2.4 Resignations. Any director may resign at any time by giving written notice to the Board of Directors, its Chairman, the President or the Secretary. Any resignation shall become effective when the notice is delivered, unless the notice specifies a later effective date. The acceptance of such resignation shall not be necessary to make it effective, unless otherwise specified therein, in which event the resignation shall take effect upon its acceptance by the Board of Directors, unless the notice specifies a later effective date. Section 2.5 Vacancies5 Vacancies. Any vacancy occurring on the Board of Directors, including a vacancy resulting from an increase in number of directors, may be filled by the affirmative vote of a majority of the directors then in office even though the number of directors then in office, may be less than the minimum number of directors stated in the Articles of Incorporation and/or less than a quorum of the Board of Directors. Section 2.6 Nomination of Directors6 Nomination of Directors. a. Eligibility. Only persons who are selected and recommended by the Board of Directors or the committee of the Board of Directors designated to make nominations, or who are nominated by shareholders in accordance with the procedures set forth in this Section 2.6, shall be eligible for election, or qualified to serve, as directors. Nominations of individuals for election to the Board of Directors of the Corporation at any annual meeting or any special meeting of shareholders at which directors are to be elected may be made by any shareholder of the Corporation entitled to vote for the election of directors at that meeting by compliance with the procedures set forth in this Section 2.6. Nominations by shareholders shall be made by written notice (a "Nomination Notice"), which shall set forth the following information: (1) as to each individual nominated, (i) the name, date of birth, business address and residence address of such individual, (ii) the business experience during the past five years of such nominee, including his or her principal occupations and employment during such period, the name and principal business of any corporation or other organization in which such occupations and employment were carried on, and such other information as to the nature of his or her responsibilities and level of professional competence as may be sufficient to permit assessment of his or her prior business experience, (iii) whether the nominee is or has ever been at any time a director, officer or owner of 5% or more of any class of capital stock, partnership interests or other equity interest of any corporation, partnership or other entity, (iv) any directorships held by such nominee in any company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the requirements of Section 15(d) of the Exchange Act or any Company registered as a investment company under the Investment Company Act of 1940, as amended; and (v) whether, in the last five years, such nominee has been convicted in a criminal proceeding or has been subject to a judgment, order, finding or decree of any federal, state or other governmental entity, concerning any violation of federal, state or other law, or any proceeding in bankruptcy, which conviction, order, finding, decree or proceeding may be material to an evaluation of the ability or integrity of the nominee; and (2) as to the person submitting the Nomination Notice and any person acting in concert with such person, (i) the name and business address of such person, (ii) the name and address of such person as they appear on the Corporation's books (if they so appear) and (iii) the class and number of shares of the Corporation that are beneficially owned by such person. A written consent to being named in a proxy statement as a nominee, and to serve as a director if elected, signed by the nominee, shall be filed with any Nomination Notice. If the presiding officer at any shareholders' meeting determines that a nomination was not made in accordance with the procedures prescribed by these Bylaws, he shall so declare to the meeting and the defective nomination shall be disregarded. b. Shareholder Nomination Notice. Nomination Notices shall be delivered to the Secretary at the principal executive office of the Corporation not later than 120 days in advance of the anniversary date of the Corporation's proxy statement for the previous year's annual meeting or, in the case of special meetings, at the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. Section 2.7 Annual Meetings. An annual meeting of the Board of Directors shall be held on the third Saturday in the month of September of each year, if not a legal holiday, and if a legal holiday, then on the following business day, immediately after the regular annual meeting of stockholders and at the same place as said meeting. Section 2.8 Regular Meetings8 Regular Meetings. The Board of Directors may provide, by resolution, for the holding of regular meetings in addition to the annual meetings of the Board Directors. Section 2.9 Special Meetings9 Special Meetings. Special meetings of the Board of Directors shall be held upon the call of the Chairman of the Board of Directors, the President or any three (3) directors. Section 2.10 Place of Meetings10 Place of Meetings. All meetings of the Board of Directors shall be held at the principal office of the Corporation or at such other place, within or without the Commonwealth of Virginia, as designated by the person or persons calling the meeting and specified in the notice thereof, and at such time as the Board of Directors may provide by resolution or as may be designated in a duly executed notice or waiver of notice of such meeting. Section 2.11 Notice of Meetings11 Notice of Meetings. Annual and regular meetings of the Board of Directors may be held without notice. The person or persons calling a special meeting of the Board of Directors shall, at least forty-eight (48) hours before the meeting, give notice thereof by any usual means of communication. Notices of special meetings shall specify the purpose or purposes for which the meeting is called. Section 2.12 Quorum12 Quorum. A majority of number of directors then in office immediately before a meeting begins shall constitute a quorum for the transaction of business at such meeting of the Board of Directors. Section 2.13 Manner of Acting13 Manner of Acting. Except as may be otherwise provided in these Bylaws or by law, the act of the majority of the directors present at the meeting at which a quorum is present shall be the act of the Board of Directors. Section 2.14 Actions Taken by Written Consent of the Directors14 Actions Taken by Written Consent of the Directors. Any action which may be taken at a meeting of the Board of Directors may be taken without a meeting if one or more consents, in writing, setting forth the action so taken, shall be signed by all of the directors, either before or after the action taken, and included in the minutes or filed with the corporate records reflecting the action so taken. Such action shall be effective when the last director signs the consent, unless the consent specifies a different effective date, in which event an action so taken shall be effective on the date specified therein, provided the consent states the date of execution by each director. Any such consent shall have the same force and effect as a unanimous vote of the directors. Section 2.15 Participation in Meetings Through Use of Communication Devices15 Participation in Meetings Through Use of Communication Devices. Any or all directors may participate in a regular or special meeting of the Board of Directors by, or conduct the meeting through, the use of any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by such means shall be deemed to be present in person at the meeting. A written record shall be made of any action taken at a meeting conducted by such means of communication. ARTICLE III Committees Section 3.1 Audit Committee.1 Audit Committee. The Board of Directors, by resolution adopted by a majority of the directors then in office, shall designate an Audit Committee to consist of at least two (2) directors designated in such resolution. The majority of the Board of Directors then in office shall have the power at any time, or from time to time, to change the membership of, and fill vacancies in, the Audit Committee. The Audit Committee shall recommend to the Board of Directors the engagement or discharge of independent auditors, review with the independent auditors the plan and results of the audit engagement, approve services performed for the Corporation by the independent auditors, review the degree of independence of the auditors, consider the range of audit and non-audit fees, review the results of the Corporation's internal audit reports and perform such other tasks as may be specified in a resolution of the Board of Directors. Section 3.2 Other Committees2 Other Committees. The Board of Directors, by resolution adopted by a majority of the directors then in office, may designate such other committees with such authority as may be properly delegated to such committees and as may be specified in such resolution. The number of members of each committee shall be not less than two (2). Section 3.3 Rules of Committee Procedure3 Rules of Committee Procedure. All members of committees shall be members of the Board of Directors and shall serve on the committees at the pleasure of the Board of Directors. The Board of Directors, by resolution adopted by a majority of the directors then in office (excluding the director upon whose removal the Board of Directors is voting), may remove a director from one or more committees. Each committee shall have a chairman who may be designated by the Board of Directors or, if not so designated, who shall be selected from its membership by the members of the committee. Each committee shall have a secretary who shall be elected by the members of the committee and who may or may not be a member of the committee or a director. Except as provided in these Bylaws, the provisions of these Bylaws governing the procedures, meetings, action without meetings, notice and waiver of notice and quorum and voting requirements of the Board of Directors shall apply to committees and their members. To the extent not inconsistent with these Bylaws, each committee shall make its own rules of procedure. ARTICLE IV Officers Section 4.1 Officers.1 Officers. The officers of the Corporation shall be a Chairman of the Board of Directors, a President, a Secretary, a Treasurer, and other officers as may be determined and elected, from time to time, by the Board of Directors, including, perhaps, one or more Vice-Presidents. The same person may hold any two offices, except the offices of President and Secretary. Section 4.2 Chairman of the Board of Directors2 Chairman of the Board of Directors. The Chairman of the Board of Directors shall be a director and shall have the power and responsibility for carrying out the policies of the Board of Directors and shall be the chief executive officer of the Corporation. The Chairman of the Board of Directors shall possess such other powers and perform such other duties as may be incident to the office of Chairman of the Board of Directors or prescribed by resolution of the Board of Directors. Section 4.3 President3 President. The President shall be the chief operating officer of the Corporation and, subject to the direction of the Board of Directors, shall have general supervision over the business and affairs of the Corporation. The President shall possess such other powers and perform such other duties as may be incident to the office of President or prescribed by resolution of the Board of Directors or delegated to him by the Chairman of the Board of Directors. Section 4.4 Vice Presidents4 Vice Presidents. Each of the Vice Presidents, if any, shall possess such powers and perform such duties as may be incident to the office of Vice President or prescribed by resolution of the Board of Directors or delegated to him by the Chairman of the Board of Directors or the President. Section 4.5 Secretary5 Secretary. The Secretary shall be ex officio secretary of the Board of Directors and of all other committees unless the Board of Directors or such committee shall designate some other person to act as its secretary. The Secretary shall keep the minutes of all meetings of the Shareholders, the Board of Directors and all committees of the Board of Directors if he is acting as secretary of the meeting and shall prepare and give, or cause to be prepared and given all notices of the Corporation. The Secretary shall have charge of the corporate seal, the stock certificate books, stock transfer books and such books, records and papers as the Board of Directors by resolution may direct. The Secretary shall also possess such other powers and perform such other duties as may be incident to the office of Secretary or prescribed by resolution of the Board of Directors or delegated to him by the Chairman of the Board of Directors, the President, or any Vice President. The Assistant Secretaries, if any, shall possess such powers and perform such duties as may be incident to the office of Assistant Secretary or prescribed by resolution of the Board of Directors or delegated to him by the Chairman of the Board of Directors, the President, any Vice President or the Secretary. Section 4.6 Treasurer6 Treasurer. The Treasurer shall possess such powers and perform such duties as may be incident to the office of Treasurer or prescribed by resolution of the Board of Directors or delegated to him by the Chairman of the Board of Directors, the President, or any Vice President. The Assistant Treasurer, if any, shall possess such powers and perform such duties as may be incident to the office of Assistant Treasurer or prescribed by resolution of the Board of Directors or delegated to him by the Chairman of the Board of Directors, the President, any Vice President or the Treasurer. Section 4.7 Other Officers7 Other Officers. The other officers, if any, shall be elected by resolution of the Board of Directors, and shall possess such powers and perform such duties as may be prescribed by resolution of the Board of Directors or delegated to them by the Chairman of the Board of Directors, the President, any Vice President or such other officer whom they may be assisting. Section 4.8 Election of Officers8 Election of Officers. The officers of the Corporation shall be elected by the board of directors at their regular annual meeting. If any office becomes vacant or if any new office is created, the board of directors may, at any meeting, elect the person to fill such office until the next regular annual meeting of the board of directors. ARTICLE V Certificates of Stock Section 5.1 Certificates for Shares.1 Certificates for Shares. Certificates evidencing shares of stock of the Corporation shall be in such form as shall be determined by resolution of the Board of Directors. Such certificates shall be signed by the Chairman of the Board of Directors or the President or any Vice President and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer, or by any other officer authorized by resolution of the Board of Directors, and may (but need not) have affixed thereto the seal of the Corporation or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the Corporation or an employee of the Corporation. All certificates for shares of stock shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares of stock represented thereby are issued, with the number of shares and the date of issue, shall be entered on the stock transfer books of the Corporation. Section 5.2 Transfer of Shares2 Transfer of Shares. Transfer of shares of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his duly authorized representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, transfer agent or registrar. All certificates surrendered to the Corporation or its transfer agent for transfer shall be promptly canceled, and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in the case of a lost, destroyed or mutilated certificate, a new certificate may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. The person in whose name shares stand on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes. ARTICLE VI Miscellaneous Section 6.1 Waiver of Notice.1 Waiver of Notice. Unless otherwise provided by law, whenever any notice is required to be given to any Shareholder, director or member of any committee under the provision of these Bylaws or by law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. A Shareholder, director or member of a committee of the Corporation who attends a meeting shall be deemed to have had timely and proper notice of the meeting, unless he attends for the express purpose of objecting to the transaction of any business at such meeting because the meeting is not lawfully called or convened. Section 6.2 Fiscal Year2 Fiscal Year. The fiscal year of the Corporation shall begin on May 1 and shall end on April 30 in each year. Section 6.3 Voting Shares of Other Corporations3 Voting Shares of Other Corporations. The Chairman of the Board of Directors and the President are severally authorized to vote, represent and exercise on behalf of the Corporation ail rights incident to any and all shares of any other corporation owned by the Corporation. The authority granted to the Chairman of the Board of Directors and the President in the preceding sentence may be exercised by them, or either of them, either in person or by any person authorized by them, or either of them, to do so. Notwithstanding the foregoing, the Board of Directors, in its discretion, may designate by resolution any additional or other person to vote or represent said shares of other corporations. Section 6.4 Seal4 Seal. The seal of the Corporation shall be in such form as is approved by the Board of Directors by resolution, and said seal, or a facsimile thereof, may be imprinted or affixed by any process or in any manner reproduced. The Secretary, any Assistant Secretary and any other officers authorized by the Board of Directors by resolution shall be empowered to use and attest the corporate seal on all documents. Section 6.5 Registered Office5 Registered Office. The registered office of the Corporation shall be 20th Floor, Nations Bank Center, One Commercial Place, Norfolk, Virginia 23510, in the City of Norfolk, Virginia, or at such other place within the Commonwealth of Virginia as the Board of Directors shall, from time to time, determine by resolution. Section 6.6 Other Offices6 Other Offices. The Corporation shall have such office or offices at such place or places as the Board of Directors may from time to time determine by resolution or as the business of the Corporation may require. Section 6.7 Compensation of Directors, Members of Committees of the Board of Directors and Officers7 Compensation of Directors, Members of Committees of the Board of Directors and Officers. The compensation of the directors, members of committees of the Board of Directors and officers of the Corporation shall be fixed in such manner and on such basis as the Board of Directors shall, from time to time, determine by resolution. Section 6.8 Authorized Signatures8 Authorized Signatures. Checks, drafts and like instruments drawn on funds belonging to the Corporation, and notes, acceptances and like instruments evidencing the obligation of the Corporation, shall be signed in the name and behalf of the corporation by such officer or officers, agent or agents, as the board of directors shall, by resolution, determine. Section 6.9 Amendments to Bylaws9 Amendments to Bylaws. Except as otherwise provided herein or by law, these Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors by resolution, but Bylaws made by the Board of Directors may be repealed or changed, and new Bylaws made, by the Shareholders, and the Shareholders may prescribe that any Bylaw made by them shall not be altered, amended or repealed by the Board of Directors. 0216944.03 EX-10 3 EXHIBIT 10.19 Exhibit 10.19 [logo] JACKSON HEWITT TAX SERVICE FRANCHISE OFFERING CIRCULAR FOR PROSPECTIVE FRANCHISEES - -------------------------------------------------------------------------------- JACKSON HEWITT INC. A Virginia Corporation 4575 Bonney Road Virginia Beach, VA 23462 (757) 473-3300 - -------------------------------------------------------------------------------- Date of Issuance: June 26, 1997 Information for Prospective Franchisees Required By Federal Trade Commission To protect you, we've required your franchiser to give you this information. We have not checked it, and do not know if it is correct. It should help you make up your mind. Study it carefully. While it includes some information about your contract, do not rely on it alone to understand your contract. Read all of your contract carefully. Buying a franchise is a complicated investment. Take your time to decide. If possible, show your contract and this information to an advisor, like a lawyer or accountant. If you find anything you think may be wrong or anything important that has been left out, you should let us know about it. It may be against the law. There may also be laws on franchising in your state. Ask your state agencies about them. Federal Trade Commission Washington, D.C. [logo] JACKSON HEWITT TAX SERVICE FRANCHISE OFFERING CIRCULAR JACKSON HEWITT INC. A Virginia Corporation 4575 Bonney Road Virginia Beach, VA 23462 (757) 473-3300 We offer a Jackson Hewitt Tax Service franchise to operate a tax return preparation business featuring our proprietary software and electronic filing. Initial Franchise Fee: $20,000.00 Estimated Initial Investment For An Undeveloped Territory-Storefront: $48,100.00 to $60,530.00. RISK FACTORS THE FRANCHISE AGREEMENT PERMITS YOU TO SUE ONLY IN VIRGINIA. OUT OF STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO SUE IN VIRGINIA. EVEN THOUGH THE FRANCHISE AGREEMENT PROVIDES THAT YOU MAY ONLY SUE IN VIRGINIA, LOCAL LAW IN YOUR STATE MAY HOLD OTHERWISE. PLEASE REFER TO ANY STATE-SPECIFIC ADDENDUM ATTACHED TO THIS OFFERING CIRCULAR FOR DETAILS. THE FRANCHISE AGREEMENT STATES THAT VIRGINIA LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS. EVEN THOUGH THE FRANCHISE AGREEMENT PROVIDES THAT VIRGINIA LAW APPLIES, LOCAL LAW MAY SUPERSEDE IT IN YOUR STATE. PLEASE REFER TO ANY STATE-SPECIFIC ADDENDUM THAT MAY BE ATTACHED TO THE OFFERING CIRCULAR FOR DETAILS. THERE ARE OTHER RISKS CONCERNING THIS FRANCHISE. Information comparing franchisers is available. Call the state administrators listed in Exhibit M or your local public library for information. Registration of this franchise by a state does not mean that the state recommends it or has verified the information in this Offering Circular. If you learn that anything in the Offering Circular is untrue, contact the Federal Trade Commission and the state authority. Effective date: June 26, 1997 TABLE OF CONTENTS Item Page 1. The Franchiser, its Predecessors, and Affiliates 1 2. Business Experience 2 3. Litigation 4 4. Bankruptcy 8 5. Initial Franchise Fee 8 6. Other Fees 10 7. Initial Investment 12 8. Restrictions on Sources of Products and Services 13 9. Franchisee's Obligations 16 10. Financing 18 11. Franchiser's Obligations 19 12. Territory 25 13. Trademarks 26 14. Patents, Copyrights and Proprietary Information 27 15. Obligation to Participate in the Actual Operation of the Franchised Business 27 16. Restrictions on What You May Sell 27 17. Renewal, Termination, Transfer and Dispute Resolution 30 18. Public Figures 34 19. Earnings 34 20. List of Outlets 34 21. Financial Statements 38 22. Contracts 38 23. Receipt 38 EXHIBITS Item Letter Franchise Agreement & Schedules A Promissory Note B Security Agreement C Confidential Franchise Application D Exhibit E is Blank E List of Current and Former Franchisees F Earnings G Financial Statements H Estimated Table of Contents for Confidential Operating Manual I Agreement of Joinder for Refund Anticipation Loan J Agreement of Purchase and Sale K Agents for Service of Process L Franchise Administrators M Acknowledgment of Receipt of Completed Franchise Agreement and Related Documents N Receipt of Offering Circular O ITEM I THE FRANCHISER, ITS PREDECESSORS AND AFFILIATES Terms. To simplify the language in this Offering Circular, "we", "us", or "our" means Jackson Hewitt Inc., the franchiser. "You" or "your" means the person, partnership, or corporation who buys this franchise. The Franchiser. Our corporate name is Jackson Hewitt Inc., and we are incorporated in the Commonwealth of Virginia. We have no affiliates. Until May, 1988, our corporate name was Mel Jackson, Inc. We and our franchisees do business under the name of Jackson Hewitt Tax Service. Our home office is located at 4575 Bonney Road, Virginia Beach, Virginia 23462. Our telephone number is 757-473-3300, and our fax number is 757-473-8409. Our agent for service of process is the person or entity listed on Exhibit L. The Franchise. Since 1986, we have offered franchises to operate a tax return preparation business featuring our custom-designed Hewtax software, our registered service marks, "Jackson Hewitt Tax Service" and "Jackson Hewitt" (the "Marks"), electronic filing, Bank Products, specialized equipment, advertising and promotional techniques, and business methods, within a specific geographic area (the "Territory") with a population of approximately 50,000. We also operate company-owned locations offering these same services. Our Hewtax software, along with our processing software, is an integral part of the franchise. It was one of the first computerized tax return preparation programs. Our software permits the user to prepare a federal personal income tax return via computer and file it electronically. In addition, this software prepares state income tax returns for 45 states, 34 of which can be filed electronically. The Franchise System. There were 1,372 Jackson Hewitt locations open for the 1997 tax season, including 76 company stores. We and our franchisees operated approximately 1,342 locations during the 1996 tax season up from 1,222 for the 1995 tax season. The tax business is seasonal. Most sales volume occurs between January 8 and April 15. Customers and Competition. We believe that our franchisees will draw primarily upon middle and low income individual taxpayers. Our competition in the tax return preparation business is primarily from H & R Block, a nationwide tax preparation service with over 8,300 U.S. locations. Other competition comes from local companies, accounting and bookkeeping firms. National Accounts. Montgomery Ward. In 1988, Montgomery Ward granted us the right to operate Jackson Hewitt Tax Service locations in selected Montgomery Ward stores. We intend, although we are not obligated, to grant our franchisees the right to open Jackson Hewitt businesses in these locations. If there is a Montgomery Ward store in the Territory where you plan to locate your Jackson Hewitt business, you are not required to establish your Jackson Hewitt Tax Service business in the Montgomery Ward store, and you are free to open a separate location. If you operate from Montgomery Ward during your first tax season, you must open a storefront tax preparation office within the Territory no later than January 8 of the second tax season following the effective date of the franchise agreement. If you elect to operate from Montgomery Ward, you must sign our Special Stipulation for Montgomery Ward, Schedule E, in addition to the franchise agreement. Through the Special Stipulation, we sublease to you our rights to operate in the Montgomery Ward store. The Special Stipulation also reconciles the inconsistencies between the Montgomery Ward Master License and the franchise agreement. You must also sign any agreements required by Montgomery Ward. Wal-Mart Seasonal Program. We may operate Jackson Hewitt locations in selected Wal-Mart stores during the tax season. We intend, but we are not obligated to, grant our franchisees the right to operate in Wal-Mart. If you elect to operate from a Wal-Mart store, you must sign the Special Stipulation for Wal-Mart Seasonal Site, Schedule F. Our Wal-Mart vendor's agreement doesn't have a specific expiration date, but we can give no assurance that you will be permitted to operate in Wal-Mart. We can also lose this right if we or our franchisees do anything to jeopardize it by, for example, causing customers to complain about Jackson Hewitt to Wal-Mart or failing to pay rent. You must open a storefront if you or we are unable to continue to operate in Wal-Mart for any reason whatsoever, and you have no other location in your Territory than Wal-Mart. You must open a storefront no later than January 8 of your second tax season even if you continue to operate in Wal-Mart. Laws and Regulations. The tax preparation industry is regulated by the Internal Revenue Code and its regulations; the states have similar laws and regulations. The following laws may apply to your Jackson Hewitt business: IRS Laws and Regulations: The tax code and its regulations govern the determination of tax for each customer, the conduct of tax preparers, the offer and advertising of refund anticipation loan services, and eligibility for obtaining and maintaining an Electronic Filing Identification Number ("EFIN"). You must secure and maintain a separate EFIN for each location where you offer income tax return preparation. You cannot file tax returns electronically if you cannot pass "suitability" screening by the IRS. You may not pass this screening if you have an existing dispute with the IRS or any state tax department, you owe back taxes, you are not legally in the United States, you have not filed taxes for your individual income or business income, or you have not paid withholding taxes for any business for which you are or were an owner or officer. See Item 8 of this Offering Circular for further discussion of IRS laws and regulations. State and Municipal Laws and Regulations: The following laws may apply to your franchised business: Tax Preparers: Several states and some cities have regulations that apply to qualifications, licensing, disclosure of experience, and the like. Refund Anticipation Loans: Some states and cities have laws that regulate advertising for refund anticipation loans, or require you to register and/or provide specific disclosure of loan costs and interest rates. Proprietary School Laws: Most states have laws to regulate Tax School. These laws typically require registration, fees, contributions to tuition guaranty funds, prior approval of catalogs, curriculum, contracts and advertising. A few require special safety inspections and on-site inspections by state regulators. Some states exempt Tax School from proprietary school laws. Our Franchising History. We were incorporated as Mel Jackson, Inc. on December 24, 1985. Before November 1, 1987, we were affiliated through common ownership with Gladnor, Inc. ("Gladnor"), a Virginia corporation incorporated July 28, 1982, which shared its principal offices with Mel Jackson at 6513 College Park Square, Virginia Beach, Virginia. During the 1986 tax season, Gladnor operated 25 company-owned tax preparation offices in the Commonwealth of Virginia under the trade name Mel Jackson Income Tax Service. It had no other line of business. During 1986, the assets of 22 of the 25 company owned offices were sold to franchisees to start a franchising program, and, on November 1, 1987, Gladnor merged into Mel Jackson. Gladnor only sold franchises for approximately one year. In May, 1988, the corporate name was changed from Mel Jackson, Inc. to Jackson Hewitt Inc., and the trade name to Jackson Hewitt Tax Service. We have operated company stores offering tax return services since 1986. We have franchised Jackson Hewitt Tax Service businesses since 1986. ITEM 2 BUSINESS EXPERIENCE Keith E. Alessi, Chairman, President, Chief Executive Officer Mr. Alessi was appointed our President and Chief Executive Officer July 1, 1996. He has served as a member of our board since January, 1996, and was elected our Chairman in October, 1996. Before joining us, Mr. Alessi was affiliated with Farm Fresh, Inc. in various capacities since 1988. He served as Vice-Chairman and Chief Financial Officer of Farm Fresh from 1994 through June, 1996, and was its President from 1988 until 1992. From 1992 until 1994, Mr. Alessi was Chairman and Chief Executive Officer of Virginia Supermarkets, Inc. Mr. Alessi remains on the board of Farm Fresh, Inc. and on the board of FF Holdings Corporation, Farm Fresh's parent company. Mr. Alessi also has the following board appointments: Cort Business Services, Inc. of Washington, D.C., a publicly held furniture rental company, Town Sports International, an operator of sports clubs based in New York City, which operates sports clubs in New York, Washington, D.C., Boston and Zurich, SFW Acquisitions, Shoppers Food Warehouse, a subsidiary of Dart Drug, a publicly-traded company based in Washington, DC. Mr. Alessi is a Certified Public Accountant, and earned his MBA from the University of Michigan. Harry W. Buckley, Director Mr. Buckley joined our board in January 1997. From 1988 until December 1995, Mr. Buckley was President and CEO of H & R Block Tax Services, Inc., a nationwide tax return preparation company with over 8300 locations. Mr. Buckley has over 28 years of experience in various positions with H & R Block Tax Services, Inc. Harry Gruner, Director Mr. Gruner was elected to the board in October 1995. Since 1992, Mr. Gruner has been a partner with the firm of JMI, Inc., a venture capital firm located in Baltimore, Maryland. Before joining JMI, Inc., Mr, Gruner was with the investment banking division of Alex Brown & Sons of Baltimore, Maryland from 1986 to 1992. Mr. Gruner is also a director of Brock International, Inc., a developer, marketer and supporter of software systems, the META Group, Inc., a syndicated information technology software research company, Hyperion Software, Inc., a financial software company, Optika Imagery, Inc., an imaging software company, and V-ONE Company, a software security company. Michael E. Julian, Director Mr. Julian joined our board in January 1997. In February, 1997, Mr. Julian was appointed the President and Chief Executive Officer of Jitney Jungle Stores of America, Inc., a regional supermarket chain based in Jackson, Mississippi. From 1987 through February, 1997, Mr. Julian was President, CEO and Chairman of Farm Fresh, Inc., a regional supermarket chain based in Norfolk, Virginia. William Veillette, Director Mr. Veillette was elected to the board in September 1993. He is presently employed by Otis Canada, Inc. as General Manager. From September 1992 until July 1996, Mr. Veillette served as District Manager of Otis Elevator Co., a division of United Technologies Corporation. From 1990 to 1992, Mr. Veillette was an Account Manager with Otis Elevator Company, and from 1988 until 1990, Mr. Veillette worked as a Development Associate for the Trammell Crow Company. Mr. Veillette earned his MBA from the Harvard Business School. Christopher Drake, Secretary, Treasurer and Chief Financial Officer Mr. Drake joined Jackson Hewitt in January 1992 as Chief Financial Officer and Controller. He was elected our Secretary and our Treasurer in May 1997. Mr. Drake and his wife own Chestax Company which operates a Jackson Hewitt franchise serving Chesapeake, Virginia. Before joining Jackson Hewitt, Mr. Drake was with the Royster Company in Norfolk, Virginia from January 1972 until October 1991 where he held various positions including Senior Vice-President, Chief Financial Officer and Senior Vice-President of Administration. Mr. Drake is a Certified Internal Auditor. Marty Mazer, Vice-President of Franchise Development and Corporate Stores Mr. Mazer was appointed our Vice-President of Franchise Development and Corporate Stores in May 1997. From May 1996, Mr. Mazer served as Director of Franchise Development and since October 1996 as Director of Corporate Stores. From May 1, 1995 until May 1, 1996, Mr. Mazer served as our Divisional Director in charge of company stores, and from December 1993 to April 1995, Mr. Mazer was our Regional Director of the Southeast Region. Mr. Mazer joined us in August 1993 as a Franchise Sales Representative. Before joining Jackson Hewitt, Mr. Mazer was an Area Supervisor with Bally's Health and Tennis where he worked since 1981. Kelly Wagner, Vice-President of Operations Ms. Wagner was appointed our Vice-President of Operations in June 1997. She started with us in January 1989 as a Troubleshooter. In May 1989, Ms. Wagner was appointed our Assistant Director of Training. From August 1991 until June 1997, Ms. Wagner served as a Regional Director for several different regions. Leslie Wood, Vice-President of Technology Ms. Wood was appointed our Vice-President of Technology in May 1997. Before that, Ms. Wood was our Director of Technology since March 1995. She previously served as Director of Office Systems from July, 1992 until July, 1994 and as Director of Field Automation from August, 1994 until March, 1995. Ms. Wood was a Systems Analyst for Computer Data Systems, Inc. from September 1990 until July 1992. ITEM 3 LITIGATION Jackson Hewitt Inc. v. John Seal and L.V. Tax, Inc., Chancery No. C97-945 filed May 28, 1997 in the Circuit Court for the City of Norfolk. We filed a Bill of Complaint for Declaratory Relief against John Seal, our former Director of Franchise Operations and L.V. Tax, Inc., our franchisee. We asked the Court to determine whether Mr. Seal and L.V. Tax are violating the in-term covenant not to compete contained in the Franchise Agreement, and whether Mr. Seal is violating the confidentiality covenant contained in his severance agreement, by providing advice and assistance to, and disclosing confidential information to our former CEO and his new venture, which is in the same business as us. In connection with the severance agreement, the court entered an order authorizing us to deposit Mr. Seal's severance payments to the court pending a trial on the merits. As part of his defense to the Bill of Complaint, Mr. Seal filed a cross bill alleging that we and our CEO have interfered with his and his company's prospective economic advantage with the new venture, that we and our CEO interfered with his and his company's economic advantage in Mr. Seal's dealings with a prospective co-tenancy arrangement for a lender to operate in Mr. Seal's locations,that we and our CEO committed fraud in connection with our representations concerning the likelihood of arrangements with the lender tenancy, that we are in breach of the severance agreement by depositing payments with the Court, that we violated the covenant of good faith and fair dealing by failing to settle our dispute with Mr. Seal outside of litigation, that our conduct violated the Virginia Retail Franchising Act, and that we failed to contact the lessor of Mr. Seal's main store to determine whether this lessor would agree to an assignment of the lease to Mr. Seal. Mr. Seal and L.V. Tax, Inc. seek damages of $1,000,000 from their inability to work freely in the new venture, injunctive relief, declaratory relief, compensatory damages, punitive damages, attorneys' fees, and costs. We deny these allegations. No trial date has been set. Dr. Barron H. Harvey v. Jackson Hewitt Inc., (Case No. 1:99CV01203) filed May 28, 1997 in the U.S. District Court for the District of Columbia. The plaintiff, Dr. Barron H. Harvey, purchased options to buy several Jackson Hewitt Tax Service franchises to be located in the District of Columbia. The plaintiff alleges that our sales representative discouraged the plaintiff, an African-American, from purchasing franchises in Springfield, Virginia, a predominantly white area and directed him to franchised locations in Washington, D.C., a predominantly African-American area. The plaintiff further alleges that we ultimately sold the Springfield, Virginia location to a white female. The plaintiff alleges that this conduct constituted fraud, breach of contract, and a violation of 42 U.S.C. 1981 and 1982. The plaintiff seeks rescission, $24,968 in damages, $150,000 for each count for lost business opportunity, $2,000,000 for emotional distress and damages under 42 U.S.C. 1981 and 1982, and reasonable attorneys fees and costs. We deny these allegations. Chuma Nnawulezi v. Jackson Hewitt Inc., (Case No.2:97cv160) filed February 11, 1997 in the United States District Court for the Eastern District of Virginia, Norfolk Division. The plaintiff, our former franchisee, seeks $180,000 plus attorneys' fees, claiming our termination of his franchise for failure to secure an EFIN, without notice or the opportunity to cure, breached the Nebraska Franchise Practices Act and the franchise agreement. We deny these allegations. The court granted our Motion for Summary Judgment on the allegations that the termination violated the Nebraska Franchise Practices Act, but denied summary judgment for the breach of contract allegation. No trial date has been set. Richard M. Farley, CPA, v. Jackson Hewitt Inc., (Case No. L96-1719), filed April 26, 1996 in the Circuit Court for the City of Norfolk. Richard Farley, our former franchisee, alleged that we breached the franchise agreement by failing to provide software, operating systems, support and advertising that would enable him to operate a profitable income tax preparation business; that we fraudulently represented that our advertising funds would not be commingled; that we would provide assistance and support in the operation of the franchised business; that we coerced him into amending his franchise agreement by withholding vital supplies; that we conspired with County Bank to injure him; that we violated the New York Franchise Sales Act by requiring him to execute certain instruments; and that all of the above also violated the Virginia Retail Franchising Act. On August 13, 1996, we filed Complaint against Richard Farley in the U.S. District Court for the Eastern District of Virginia, Norfolk division Jackson Hewitt Inc. v. Richard M. Farley, (Civ. No. 2:96-cv812) seeking $2,000,000 in damages for breach of contract, unpaid debts and libel. The court granted our Motion for Preliminary Injunction in which Mr. Farley was ordered to comply with the post-termination provisions of the Franchise Agreement. On November 15, 1996, Farley agreed to settle by dismissing all claims against us and paying us $10,000.00. Chemical Bank Delaware v. Jackson Hewitt Inc., (Case No. 96 Civ. 0984 (MGC), filed February 27, 1996. Chemical Bank Delaware ("Chemical") had an agreement with us to provide refund anticipation loans to Jackson Hewitt customers ("RALs", loans secured by the taxpayers refund), during the 1995 tax season. During the 1995 tax season, the IRS changed its procedures and instead of depositing the earned income credit portion of the refund with Chemical and our other RAL banks, it sent the money directly to the taxpayer. This led to a higher rate of delinquencies. Under our agreement with Chemical, we were obligated to pay a percentage of the deficiencies. Chemical sought damages of $711,689.68 plus interest under the agreement, an amount reduced by continued collection efforts. On April 1, 1996, we filed a counterclaim seeking $500,000 based on the affirmative defense of Chemical's failure to mitigate the delinquencies by not entering into a collection agreement with Beneficial Bank during the 1996 tax season. The case was resolved when we paid $385,000.00 to Chemical on April 30, 1996 to settle the case. H&R Block Tax Services, Inc., H&R Block Eastern Tax Services, Inc. and HRB Royalty, Inc. v. Jackson Hewitt, Inc., (Case No. 96 Civ. 0984 (MGC) filed February 8, 1996 in the U.S. District Court for the Southern District of New York. H&R Block Tax Services, Inc. ("Block") our largest competitor, brought this action in response to our television advertisement that depicted a Block storefront window sign being first broken, and then replaced with a sign containing our service mark. Block claims that this advertisement disparages and dilutes the value of its service mark and seeks an injunction to stop the advertisement, and damages in excess of $2,000,000 under federal and state trademark laws, and New York common law. We strenuously deny every allegation contained in this case and will fight them vigorously. We carry insurance for risks of this type, and our insurer has appointed counsel to defend. Lewis A. Bird, Illinois Tax Service, Inc. and Redbird Tax Service, Inc. v. Jackson Hewitt, Inc., (Case No. Law 196-299) filed January 29, 1996 in the Circuit Court of the City of Norfolk, Virginia. Illinois Tax Service, Inc. and Redbird Tax Service, Inc., our former franchisees, and Lewis Bird, sole stockholder and director of these franchisees, filed suit against us alleging that our operating system did not perform as represented, that our computerized tax return preparation system did not properly prepare portions of the various tax forms and schedules, that we did not provide the promised support, that our initial advertising did not benefit them, that the operating system did not provide efficient and economical electronic filing of tax returns, and that as a result, the franchisees were unable to operate profitably without the need for an excess commitment of time and monies by Mr. Bird, and that we knew that our operating system could not reasonably support a single franchise operation in Springfield or Bloomington, Illinois. Each plaintiff seeks damages for fraud, breach of contract and breach of warranty in the amount of $85,298, $59,329 and $45,327 per cause of action plus $50,000 for each fraud count and for rescission. We deny these allegations and intend to defend vigorously. No trial date has been set. Elizabeth Adams and Jeffrey Woods v. Jackson Hewitt Inc. and Beneficial National Bank., (Case No. 95CH0011825) filed on December 11, 1995 in the Circuit Court of Cook County, Illinois, Chancery Division. This action was brought by two customers in Chicago. They allege that we acted in concert with Beneficial to defraud consumers who use our SuperFast Refund bank product (RAL). The plaintiffs allege that we and Beneficial engaged in unfair and deceptive practices by failing to disclose that the RAL is actually a loan, and that we failed to accurately disclose material terms of the RAL, such as the finance charge and the annual percentage rate of the loan. The plaintiffs have brought this case seeking class action certification, compensatory damages, interest, statutory penalties, a permanent injunction, and attorneys' fees. We and Beneficial deny these allegations and have filed a motion to dismiss which was granted in part and denied in part. No trial date has been set. Ronna A. Burke v. Jackson Hewitt Tax Service, et al., (Case No. 95-1100) filed on July 14, 1995 in the United States District Court for the Western District of Pennsylvania. Ronna Burke, our former franchisee, filed suit against us and four current or former employees. Ms. Burke joined the Jackson Hewitt system by entering into a partnership agreement with one of our existing franchisees. Ms. Burke alleges that we misrepresented the financial condition of the franchisee, and the nature of support we would provide to the franchise. After Ms. Burke left the partnership and entered into a franchise agreement with us, she alleges that we locked her out of her office, made false representations and caused her to suffer financial damages, breached the franchise agreement, failed to provide updated information and materials, tortiously interfered with her business, and conspired with our employees to damage her business. Ms. Burke sought unspecified compensatory, consequential and punitive damages and attorneys fees. We filed a motion to transfer this case to the U.S. District Court for the Eastern District of Virginia, which was granted, and on February 16, 1996, we filed a counterclaim seeking damages of $200,000 for failure to pay royalties, breach of the covenant not to compete, failure to turn over the telephone number, wrongful abandonment of the franchise, false advertising and slander. Ms. Burke consented to the entry of an order dismissing the conspiracy claims, the breach of the covenant of good faith and fair dealing, attorneys' fees and punitive damages. Claims against all individual defendants were dismissed before trial. As a result of the trial on November 12 and 13, 1996, the court ruled in our favor on all counts. Timothy Hanks v. Jackson Hewitt, et al., (Case No. 810CL95000957) filed on April 6, 1995 in the Circuit Court of the City of Virginia Beach. Mr. Hanks, our former franchisee, filed suit against us and four of our employees alleging that we failed to provide business support; did not provide refund anticipation loans as advertised; we converted funds; we failed to buy back his franchise; failed to approve a prospective purchaser of his franchised business; tortiously interfered with a contract to sell his franchised businesses; made several fraudulent representations in connection with the franchised business; and, committed statutory and common law conspiracy to convert funds. Mr. Hanks sought damages in excess of $8.9 million dollars. We filed a Grounds of Defense denying these allegations. The case was settled on the following terms: Mr. Hanks turned over all client files, databases, and proprietary materials, advertising materials, and any telephone numbers used in the franchised business to us, and we agreed to pay Mr. Hanks 5 annual payments of $27,500, and each party released all claims against the other. Lewis A. Bird, Illinois Tax Service, Inc. and Redbird Tax Service v. Jackson Hewitt Inc., (Case No. 95-L-0087) filed February 14, 1995 in the Circuit Court of the 7th Judicial District for Sangamon County, Illinois. Illinois Tax Service, Inc. and Redbird Tax Service, Inc., our former franchisees, and Lewis Bird, sole stockholder and director of these franchisees, filed suit against us alleging that our operating system did not perform as represented and did not properly prepare portions of various tax returns, we did not provide the promised support, and failed to conduct initial advertising in a way that would benefit the franchised business. Each plaintiff sought damages for fraud, breach of contract, and breach of warranty in the amounts of $85,298, $59,329 and $45,327, respectively, and punitive damages of $50,000 for each count and for rescission. We denied these allegations. The court granted our motion to transfer the case to the U.S. District Court for the Eastern District of Virginia. After the U.S. Circuit Court for the 7th Circuit denied Mr. Bird's appeal of this ruling, Mr. Bird entered a dismissal order filed October 2, 1995 dismissing all claims. Marian K. Kane v. Jackson Hewitt Inc., et al., (Case No. C94-4459) filed December 28, 1994 in the U.S. District Court for the Northern District of California. Marian Kane, our former franchisee, filed suit alleging breach of the franchise agreement, breach of the covenant of good faith and fair dealing, fraud, RICO, negligent misrepresentation, intentional misrepresentation, negligence, negligent and intentional infliction of emotional distress and a violation of California Business and Professions Code section 17200 based on her allegation that in 1992 we used her Electronic Filing Identification Number ("EFIN") to file tax returns not prepared by her, placed a false advertisement in the Yellow Pages, and that we failed to provide an accounting of advertising expenditures. Ms. Kane sought general and special damages including lost profits, a refund of her franchise fees, costs and attorneys' fees, and triple damages under RICO. We denied all these allegations. The Court granted our motion to transfer the case to the U.S. District Court for the Eastern District of Virginia (Civil Action No. 2:95cv295). The plaintiff filed an Amended Complaint alleging breach of the franchise agreement, fraud, conversion and a violation of the California Franchise Investment Law seeking lost profits, unspecified punitive damages and attorneys' fees. On May 18, 1995, we filed a Counterclaim for $100,000.00, including $3,048.62 for failure to pay royalties, advertising fees and supplies. The parties dismissed all claims and counterclaims on August 9, 1995 with no payment by either party. J2 Financial Service, Inc. v. Jackson Hewitt Inc., et al., (Case No. 735779) filed on September 15, 1994 in the Superior Court of the State of California for Orange County. J2 Financial Services, our former franchisee, alleged that: we misrepresented the costs for operating our franchises and failed to offer the advertising and assistance represented by our representatives and the Offering Circular; used J2's EFIN to transmit tax returns; conspired with our officers to defraud J2; breached our franchise agreements in connection with our advertising program; and, fraudulently induced J2 to sign franchise agreements. J2 sought actual damages of not less than $400,000, prejudgment interest, costs, punitive and exemplary damages, attorneys' fees, rescission, and preliminary and permanent injunctive relief. We denied these allegations. The Court granted our motion to transfer the case to the U.S. District Court for the Eastern District of Virginia. On February 23, 1995, we filed a claim, Jackson Hewitt Inc. v. J2 Financial Services, Inc., Joseph Petritsch and Julie Dreibelbis, (shareholders of J2 Financial and guarantors of the franchise agreement) (Civil Action No. 2:95cv197) in the U.S. District Court for the Eastern District of Virginia, for breach of contract. As amended, our claims are based on the following: failure to pay royalty and advertising fees and failure to open a Jackson Hewitt Tax Service in Montgomery Ward. We sought damages totalling $53,050.72. On April 25, 1995, plaintiffs filed a counterclaim alleging breach of contract, fraudulent inducement to purchase a franchise, conversion and violation of the California Franchise Investment Law, claiming that we wrongfully made a profit on electronic filing fees, improperly allowed others to use plaintiffs' EFIN, failed to maintain a separate advertising account, failed to advertise effectively, failed to provide accurate and timely tax preparation and bookkeeping software, failed to provide adequate support and assistance, wrongfully terminated their franchise without good cause, and made false statements to induce them to purchase a franchise. They sought compensatory damages of $250,000.00 and punitive damages. We denied these allegations. Plaintiffs also filed a Motion to Stay the Virginia litigation until their California action is completed. When the Court denied this motion, the case was settled on the following terms: a $30,000.00 cash payment to plaintiffs and a release of all claims by both parties. Alan Greene v. Jackson Hewitt Inc., (Case No. 8935/94) filed on May 24, 1994 in the Supreme Court of the State of New York, County of Westchester. We terminated Mr. Greene's Jackson Hewitt franchise on April 28, 1994 because he underreported his Gross Volume of Business by more than 2% on two or more occasions, failed to pay all royalties and advertising fees required by the franchise agreement, and violated his promise not to give our software to anyone else. Mr. Greene filed suit for injunctive relief, compensatory damages equal to $2,250,000.00, and unspecified punitive damages. He alleged that the termination was improper, that he was improperly denied the right to purchase additional franchise territories, that Jackson Hewitt committed deceptive practices, falsely advertised franchises, committed fraud and deceit, breached a fiduciary duty owed to him, and violated a covenant of good faith and fair dealing. The court granted our motion to remove the matter to the United States District Court for the Eastern District of Virginia, (case 2:94cv 866) where in June, 1994, we filed civil action number 2:94cv665 against Mr. Greene for injunctive relief and damages under the Lanham Act, 15 U.S.C. 1051, to enforce the covenant not to compete and to recover fees owed to us. On October 26, 1994, the court granted our motion for summary judgment and ruled that Mr. Greene's actions constituted three independent violations of the franchise agreement, each sufficient to terminate it without notice to cure. The court ruled that Mr. Greene must cease to be a franchisee in the Jackson Hewitt system, return our confidential Operating Manual and all software, cease use of any of our trademarks, provide us with a list of all our clients, and give his Jackson Hewitt telephone number to us. The court also enforced the post-termination covenant not to compete found in the franchise agreement. The court dismissed all Mr. Greene's fraud claims because he failed to meet his evidentiary burden. In addition, Mr. Greene signed a consent order in which we were awarded attorneys' fees of $50,000.00. The Court published its opinion at 865 F. Supp. 1199. Mel Jackson Tax Service, Inc. v. Mel Jackson, Inc., (Civil Action No. C-87-467-D (D. N.C. Durham Division). In July, 1987, Mel Jackson Tax Service, Inc., an unrelated party, filed a complaint against our predecessor, Mel Jackson, Inc., alleging that our use of the service mark "Mel Jackson" was unfair competition and that our federal service mark registration was fraudulently obtained. The plaintiff wanted damages and cancellation of our registration. Both we and the plaintiff obtained rights in the service mark from the same party through a chain of title dating back to 1947. We changed our trade name to Jackson Hewitt Tax Service. The suit was dismissed with prejudice and neither party paid damages to the other. Rashid Akhtar and Rakhshi R. Akhtar v. Jackson Hewitt Inc., et al., (Civil Action No. H 155370-1). On March 4, 1991, the plaintiffs, our franchisees, filed suit in California Superior Court alleging that we committed fraud, misrepresentation, violated the California Investment Act, by saying our tax interview was more thorough and consistent than the competitors, that the franchise was a year-round business, that we sold franchises using an unregistered advertisement, falsely stated income and expenses, collected a $1,000 deposit before providing the Offering Circular, and breached the franchise agreement. The plaintiffs asked for damages of $182,475 and attorneys' fees. The suit arose when we terminated the plaintiffs' franchise agreement on June 13, 1991 because they did not pay royalties when due, did not submit royalty reports, did not pay a promissory note for $2,500 and did not maintain minimum hours. In September, 1991, we filed an action, Jackson Hewitt Inc. v. Rakhshi Akhtar, (Law No. L91-3008) in the Circuit Court of the City of Norfolk, Virginia for damages of $6,735.28 for payment of fees due under the franchise agreement and a promissory note. On February 3, 1992 the parties agreed to settle their claims. The terms of the settlement were: (1) plaintiffs agreed to return all our confidential material; (2) plaintiffs turned over to us all their client files; (3) we purchased the plaintiffs' tax business for $20,000 representing 108% of the plaintiffs' gross volume of business; (4) we released all claims against the plaintiffs; and, (5) plaintiffs released all claims against us. The plaintiffs' case was dismissed on February, 19, 1992 and our suit was dismissed on February 26, 1992. Debra DeVuyst v. Jackson Hewitt Inc., (Civil Action No. L-12374-92) Superior Court for Middlesex County, New Jersey. On December 4, 1992, plaintiff, our franchisee, filed suit against us alleging that we misrepresented and did not properly disclose the operating requirements and other expenses associated with our franchise agreement, that we violated the New Jersey Franchise Practices Act, the New Jersey Consumer Fraud Act, by misrepresenting that plaintiff could lease space in McCrorys for a percent of revenue when in fact no such arrangement was available, and for failing to disclose that plaintiff had to open a year round location, conduct tax school at her own expense, had to pay additional advertising costs and make additional purchases of supplies and equipment, and breached our franchise agreement, committed common law fraud, and did not act in good faith. We removed this case to the United States District Court for New Jersey, Newark Division, Docket No. 93-121 and moved to dismiss DeVuyst's claims. At the same time, we filed suit against DeVuyst in the Circuit Court of the City of Norfolk, Virginia (Case No. L92-3931) seeking damages for breach of the franchise agreement and payment of fees owed to us. On July 8, 1993, the parties entered into a settlement and release on the following terms: (1) DeVuyst returned all client files to us; (2) DeVuyst released all claims against us and agreed to return to us all of our proprietary, confidential materials; (3) we released all claims against DeVuyst; (4) both parties dismissed their respective suits with prejudice; and (5) we paid $47,378 to DeVuyst. Jackson Hewitt Inc. v. Miriam Sanders, (Civil Case No. 2:92cv241) United States District Court, Eastern District of Virginia. On March 3, 1993, we brought this action against Sanders, our franchisee, for breach of the franchise agreement, fraud, and trademark infringement. In her counterclaim, Sanders asked for a refund of certain royalty payments and electronic filing fees, and an accounting of our expenditures for advertising. Miriam Sanders v. Jackson Hewitt Inc., et. al., (Case No. 534001) California Superior Court, Sacramento Division. On May 24, 1993 Sanders, our franchisee, filed suit against us alleging fraud, conversion and violation of the RICO statute in which our CEO, at the time, John T. Hewitt, used the mail and telephone to defraud plaintiff by causing plaintiff's EFIN to be used by other entities without her permission. On September 21, 1993, both parties entered into a settlement according to the following terms: (1) Sanders paid us $39,012.12 for royalties and advertising fund contributions; (2) we purchased the assets of Sanders' Jackson Hewitt Tax Service businesses for $261,021.21; (3) each party released all claims against the other; and, (4) all suits and counterclaims were dismissed with prejudice. Other than the 22 actions described above, no litigation is required to be disclosed in this Offering Circular. ITEM 4 BANKRUPTCY During 1991, Christopher Drake, our Secretary, Treasurer and Chief Financial Officer was Vice President and Chief Financial Officer of Mulberry Phosphates, Inc. of Norfolk, Virginia f/k/a Royster Company when that company filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The case was filed on April 8, 1991 in the Southern District of New York, Case No. 91-07012-Pi. The reorganization was completed, and the company emerged from bankruptcy on January 5, 1993. Other than this action, no person previously identified in Items 1 or 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item. ITEM 5 INITIAL FRANCHISE FEE Initial Franchise Fee. The initial franchise fee for an undeveloped territory is $20,000.00. Company stores are individually priced and cost more. The initial franchise fee is uniform for all franchisees acquiring franchises at the same time. The initial franchise fee is due when you sign the franchise agreement, unless financing has been arranged as described in Item 10. The initial franchise fee is not refundable. Purchase of Company Locations. The purchase price is set according to various factors, including, but not limited to the following: our then-current franchise fee, store location, store profitability, number of returns, gross volume of business, expenses, available equipment, store location, and the like. The "Gross Volume of Business" means the total amount of all revenues generated from the tax business arising from tax return preparation, including returns for entities other than individual taxpayers, bank products fees, electronic filing, tax school, and tax-related activities (whether in the form of Bank Product fees, performance incentives, past year returns, electronic transmission only returns, national account incentives or cash, check, credit card charges or other consideration) excluding taxes and discounts. The purchase price includes existing furniture and equipment, and customer lists. You must assume any real estate leases, telephone numbers and Yellow Pages advertising and any other ongoing liabilities for the store site. You may use any leased furniture or equipment used at the location that is leased to us, but you must return all these items to us in good working order when our lease expires. If you purchase a company store, you must sign both our franchise agreement and a Purchase and Sale Agreement like the one in Exhibit K. Training. After we have received your signed franchise agreement and the balance of your initial franchise fee, but before we sign the franchise agreement, you must attend and pass our Business Management and Processing Training program. If you demonstrate in Business Management and Processing Training that, in our opinion, you lack the necessary skills or personal characteristics to become a Jackson Hewitt franchisee, we will refund your initial franchise fee in full. If you are accepted as a Jackson Hewitt franchisee, we will sign the franchise agreement within 2 weeks after you have completed our training, if your application and franchise agreements are in order and you have paid your initial franchise fee in full. Your franchise agreement is effective on the date so designated by us on the signature page. ================================================================================ ITEM 6 OTHER FEES ================================================================================
NAME AMOUNT DUE DATE REMARKS Royalty Fee 12% of Gross Volume 1/1 - 4/30: semi-monthly "Gross Volume" is the total revenue from tax on 20th for 1st half of the return preparation, past year returns, electronic month ending on the 15th; transmission only returns, electronic filing, Bank and on the 5th for 2nd half Products fees, Tax School, and tax related of prior month ending on activities. (whether in the form of performance last day. incentives, cash, check, credit card charges or other consideration), excluding only discounts 5/1-12/31: monthly on the you allow and sales taxes you must collect and pay. 5th of each month for immediately prior one month period. Advertising Fee 6% of Gross Volume Same as above Same as above Pre-Existing Tax $5.00 per pre-existing Earlier of: If you have a tax business when you join us and Client Fee tax client On or before December 19 you want to exempt your pre-existing tax clients from the royalty and advertising fees described above, you can do so by signing the appropriate section of Schedule D to the franchise agreement, providing the names and social security numbers of these clients to us on disk in a format we specify, and paying a one-time fee of $5.00 per pre-existing client. Supplemental $5,000 When billed Supplemental Advertising is due from all Advertising franchisees during their first tax season. This Fee fee does not apply to franchisees who purchase a Jackson Hewitt business that has been open for one full tax season. You may place the advertising yourself or ask us to do it. If you place this advertising yourself, you must submit your advertising plans to us no later than December 1. If we do not receive your advertising plan by December 1, we will place this advertising for you, and you must pay the $5,000 when billed. This requirement applies whenever you sign a franchise agreement for a new territory that does not contain an existing Jackson Hewitt office that operated the entire previous tax season. Costs of signage or Yellow Pages advertising do not satisfy your obligation to conduct supplemental advertising. If you change your franchised Territory, with our prior written approval, you will have to incur this obligation in your new Territory even if you already incurred it in your original Territory. Electronic $2.00 per tax return Same as Royalty Fee We may increase this fee on 30 days notice to Filing Fee filed electronically cover increased costs and expenses arising from electronic filing. Transfer Fee 10% of our then-current At time of transfer franchise fee Interest on 18% per year or the On invoice Late Payments highest legal rate allowed in your state Additional Not presently charged When billed Training Fees but may be charged in future to train additional employees or for any new programs we develop. Montgomery Ward 13% of gross income from Deducted by Montgomery If permitted by your Montgomery Ward manager, Seasonal Rent $1 to $50,000 plus 10% of Ward or paid by us. you can have off-floor space for $100 a month gross income of $50,001 to Balance remitted to you. during the off-season and you can conduct tax $100,000 plus 8% of gross school for $250 per season at Montgomery Ward. income over $100,000. In addition to above, you must also pay 3% of all credit card charges. Wal-Mart For Period from January Monthly as incurred, Seasonal Rent through April 15: but rental charges for $5,500 for a SuperCenter; the first half of the tax or $4,350 for a Regular season must be paid Wal-Mart; or $1,500 for a Hometown in advance. Wal-Mart Store. (These are fees charged by Wal-Mart for the 1997 tax season. Fees may change for the 1998 tax season). Amendment Fee $300 (per territory) Before Amendment is started - ------------------------------------------------------------------------------------------------------------------------------------
Note 1: All fees are payable to us. All fees are non-refundable. Note 2: We can apply any payment to any amount you owe us, even if you ask us to apply it to a specific purpose or account. We can withhold any money you owe us or another franchisee from any money we owe you or from any amounts that any third party owes you that come to us first, including, but not limited to, Montgomery Ward fees or bank products incentive payment. We can apply any bank products incentive payment to any outstanding balance you owe us. We can apply any payment from one franchise to another franchise, if you own, or have an interest in, more than one franchise offered by us. If you dispute any fee we charge, you must pay it first and then work out the dispute with us. You are prohibited from offsetting or deducting any fee due under the franchise agreement, and any attempt to do so is a breach of the franchise agreement. Note 3: We can retain your bank payment file if you are in default of any obligation to us, including, but not limited to, promissory notes, royalties and advertising, accounts receivable, or if you are in default of any agreement with a third party that we sponsor or arrange, including any leasing program or if you owe money to another franchisee, e.g., your share of a Yellow Pages advertisement. We may not provide you with the ability to offer Bank Products if you are in default of the franchise agreement. We can also retain monies for amounts not yet due as a condition for any financing. ================================================================================ ITEM 7 ESTIMATED INITIAL INVESTMENT FOR AN UNDEVELOPED STOREFRONT LOCATION BUDGETED TO DO 500 OR FEWER RETURNS ================================================================================
METHOD OF AMOUNT PAYMENT WHEN DUE TO WHOM PAID Initial Franchise Fee $20,000 Check or wire When you sign the Us (Notes 1 & 2) Franchise Agreement unless financing approved. Travel & Living Expenses $850 to As incurred During training Airlines, hotels and While Training $2580 restaurants (Note 3) Real Estate & Improvements $3400 to As incurred Monthly/as incurred Landlords, Contractors $6000 (Note 4) Equipment & Signs $9450 to As incurred When purchased Equipment Vendors $13,050 (Note 5) Insurance $250 to Periodic payments Before and after opening Insurance agents $300 (Note 6) Telephone, $1500 to Lump sum as incurred Your local telephone and Utilities & Deposits $2250 and as incurred power companies (Notes 1 & 7) Supplemental Advertising $5,000 Lump sum When billed by us or by vendors Us or vendors. Additional Funds $6900 to As incurred Before and after opening Employees, suppliers $8600 (Notes 1 & 8) Miscellaneous $750 to As incurred Before opening Us or Vendors $2750 - ------------------------------------------------------------------------------------------------------------------------------------ Total $48,100 - $60,530 (Does not include Royalties, Advertising or Electronic Filing Fees.) Note 1: The above chart provides estimates for the total initial investment for 3 months of operation of a Jackson Hewitt Tax Service location in a storefront location in an undeveloped territory that is projected to do 500 returns or fewer. Your initial investment will vary depending on the time of year that you open your franchised business, and whether you purchase an existing location. The estimates are based on opening on the first day of tax season, but you want to open sooner. The initial phase of the tax return preparation business is approximately one month. The range of expenses listed is not to be construed as a break even point; additional expenses may be incurred. All estimated costs are based on costs as of May 1997. Note 2: None of the initial investment costs are refundable; some part of deposits may be refundable on conditions established by your local utility and telephone company. Note 3: Estimated charges are based on a 5 night stay in Virginia Beach, for meals, lodging and air transportation for one person in a single room. We cannot accurately estimate these charges because they vary considerably according to season, advance planning and distance from Virginia Beach, a seasonal resort city. The higher range reflects more expensive air fare, a rental car and more expensive lodging. Note 4: Our estimate is based on a range of rental rates for approximately 1200 square feet for 3 months in Newport News, Virginia and New York, New York, new carpeting and 3 room panel dividers plus a security deposit. We cannot accurately predict your rental costs because rental costs vary widely depending on the cost of real estate in your area, the neighborhood where you want to relocate your business, the age of the building you are considering, the availability of rental properties, the occupancy rate in your area, and many other factors. Note 5: The estimated cost for equipment and signage for the first 3 months of operation is based on purchasing the following from our May 1997 catalog: 3 desks, 2 tax return preparation computers, 1 tax return processing computer, a modem, 3 monitors, 1 processing printer, 3 tax prep chairs, 12 reception area chairs, 1 front office printing set up, 1 tax preparation printer, 1 exterior sign (not including installation charge), 1 file cabinet, 1 assembly table, 1 interior lighted sign, 1 interior sign package and a 2-line phone. The higher range includes a Konica copier, a copier maintenance plan, 4 desks and 4 tax preparation computers, and installation costs for the exterior sign. Note 6: The estimate is for three months premium for the required coverage offered by our approved supplier. A payment plan is available with a 20% down payment with 8 subsequent instalments. Most franchisees can purchase their annual requirements for between $600 and $1500 a year; franchisees in some states may pay more. Due to changes in the State of Florida, the Smith-Field agency is not able to provide coverage in that state. If you are planning to open the franchised business in Florida, you must contact local insurance suppliers. Note 7: The estimate for telephones and utilities is based on the charges in effect in Virginia Beach, Virginia as of May 1997. These charges vary widely throughout the country. Costs estimated here include: utility deposit, connection fees, average estimated electricity charges for an all electric location for 3 months, one dedicated modem telephone line, 2 telephone lines with rollover capacity, deposit, 3 months estimated fees, set up fee, and interior wiring charges. The higher range includes higher deposits and unlimited call rates. Check with your local utilities and telephone company for more accurate estimates. Note 8: The range is the estimated cost of one tax preparer who works for the entire tax season for $5.75 per hour, and a second employee who works for one month during the peak part of the tax season, plus taxes on the wages. The higher estimate includes a third employee who works for one month during peak part of the tax season. We do not include your labor in this estimate. This estimate of additional funds is based on our experience operating our company stores and directing our franchisees. ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES Bank Products. If you are in full compliance with all terms and conditions of the franchise agreement or any other obligations with us, and we can procure bank products on reasonable terms, we will provide you with the ability to offer accelerated check requests (ACRs) and refund anticipation loans (RALs) (ACRs and RALs are collectively called ("Bank Products") to your customers. If we provide Bank Products, you must offer and promote them. ACRs. An ACR allows a taxpayer to receive his or her refund more quickly using electronic filing and direct deposit into a bank account specially created to receive the ACR proceeds. You earn application fees from this product, which along with your tax return preparation fees, are deducted and paid to you automatically when the taxpayer receives the refund. You do not pay any fees for this service; all fees are borne by the taxpayer. If you elect to offer this service, you may only offer it through the bank or banks we designate and not from any other source. RALs. A RAL is a bank loan to the taxpayer secured by his or her anticipated refund that incorporates the direct deposit, a specially created bank account and the electronic filing features of an ACR. This service is advertised as our "SuperFast Refund Anticipation Loan." These loans are offered by specific banks who agree to provide these services. You do not pay any fees for these services; all costs are borne by the customer. You do not bear any risk of loan default. You earn fees by offering these products, and you may earn other performance incentives. Several banks have agreed to work with our franchisees to offer these loans, and we believe that this service is a distinct benefit to Jackson Hewitt franchisees. When you offer these services, you must use only the Bank Products bank or banks we approve for your area. You may not offer RALs from any other source. We are not obligated to provide Bank Products. We may not provide you with the ability to offer Bank Products if you are in default of the franchise agreement, or if your default ratio from any prior year is unacceptable, as determined by us or our Bank Products provider. When you participate in our Bank Products program, you must sign an agreement in which you agree to terms that we make with the Bank Products bank. See Exhibit J for a sample. We find lenders willing to offer these products, negotiate terms, pay lender's attorneys' fees, write loan processing software, write software to integrate the lender's software with our tax processing system, pay for the printing of the bank product applications, and hire, train and staff a check verification service. For the 1997 tax season, Bank of Santa Barbara and County Bank offered Bank Products through Jackson Hewitt franchised locations. Under the Bank Products program in place during the 1997 Tax Season, we earned $2.50 per ACR to cover our costs and up to $11.38 depending on the overall ACR default ratio, and we earned $4.00 per ACR and up to $10.40 per ACR services for each RAL based on the loan portfolio performance. We cannot predict which banks, if any, will offer Bank Products in your area during any subsequent tax seasons. If you seek financing from us, or you are in default of any financial obligation to us, or any third party for any program we sponsor or arrange, we will retain your Bank Products bank payment file and apply it to any amounts you owe us. We may apply these monies in any way we choose to any amounts owed. We can also retain these monies for amounts not overdue as a condition of financing. See Security Agreement in Exhibit C. We earn revenue from Bank Products from fees that are provided by the agreements we have with banks that provide the Bank Products. During the fiscal year ending April 30, 1997, we earned Bank Product fees of $9,363,380 or 29% of our total revenue of $31,431,670. In addition, we earn royalty and advertising fees on the revenue you earn from the sale of Bank Products. Electronic Filing. If you offer electronic filing of tax returns, you must conduct electronic filing only through us. During fiscal year ending April 30, 1997, we earned $1,411,097 or 4% of our revenue of $31,431,670 from electronic filing fees. Uncertainties Regarding Tax Policies. An essential element of our operating strategy, and our ability to sell Bank Products in particular, is the willingness of the IRS to continue promoting the growth of its electronic filing program. During the period ending May 9, 1997 the IRS received 112.6 million individual tax returns of which 14.3 million were filed electronically. Although the IRS has established a goal of increasing the number of electronic returns to 80 million by the year 2001, the IRS has established various initiatives which serve to reduce the attractiveness of bank products and electronic filing. The IRS's Notification Pullback, in which the IRS no longer notifies electronic filers in advance whether the taxpayer will get a refund; the Social Security Number Initiative conducted in the 1995 tax season, in which the IRS checked all social security numbers on tax returns with its database and rejected any return where the names and numbers did not match; and the EIC Initiative, conducted in the 1995 tax season and in late February during the 1997 tax season, where the IRS split the portion of refund from the earned income credit, (a program for low income wage earners) and sent it directly to the taxpayer instead of depositing it with the Bank Products bank, all serve to reduce the number of tax return filed electronically. The IRS has indicated that it instituted these initiatives to reduce fraud, particularly in electronic filing. We cannot predict with certainty, the types of actions the Treasury Department and the IRS will take in the future as they attempt to balance the IRS's goal of dramatically increasing the number of returns filed electronically, while at the same time reducing the number and percentage of fraudulent tax returns associated with electronic filing. The results of these IRS initiatives has been to reduce the number of RALs requested and increasing the number of ACRs. During the 1997 tax season, the IRS directly deposited the EIC portion of refunds with participating banks, but in late February, began an initiative on all EIC head of household taxpayers who were eligible for the maximum EIC payment. Our participating banks offered Bank Products on the EIC portion. We cannot be certain that the IRS will continue this practice during the 1998 or any subsequent tax season, or that our participating banks will lend on the EIC portion of refunds during any later tax season. If the IRS continues to deposit the EIC portion of the tax refund for the 1998 tax season, we expect that our participating banks will lend against the EIC portion of the refund. Another potential consequence indirectly associated with recent or as yet unannounced tax policies involves the risk facing us in our risk-sharing arrangements with our Bank Products banks. If the banks and we mispriced Bank Products, the potential losses associated with honoring our risk-sharing obligations could materially adversely affect our results. Congressional Tax Initiatives. Congress is currently contemplating a wide array of income tax proposals. No matter what type of legislation, if any, is eventually adopted, the biggest risk to the franchised business operations would be the passage of any initiative, such as a national sales tax, that meant that people would no longer file personal income tax returns. The second biggest risk would be any proposal that resulted in the filing of fewer tax returns by U.S. taxpayers, such as reducing or eliminating the earned income tax credit, because most any such legislation would likely affect Jackson Hewitt's targeted market of lower income taxpayers. Other proposals, such as some of the flat tax proposals, could negatively affect the franchised business operations as well, but it is difficult to assess the impact of any of these varied proposals at this time. Computers and Equipment. You must use computers, modems and printers that meet our specifications. You must purchase your processing computer from us for the 1998 tax season. The computers must be able to support our tax preparation and processing software. If you purchase computers that do not meet our specifications, or your processing computer does not come from our approved supplier, if we have designated a specific supplier for that equipment, we cannot provide technical support in the event of problems. You will get equipment that meets our specifications if you purchase it from us or our suppliers. As our tax preparation and processing software programs become more sophisticated, it is often necessary to upgrade or supplement hardware and related items. You must upgrade your computers, modems and printers, and purchase any additional equipment we specify to accommodate our software, or to improve the overall effectiveness and competitiveness of the franchised business. During our fiscal year ending April 30, 1997, $486,619 or 1.5% of our revenue of $31,431,670 was generated by furniture, equipment and supply purchases from our Supply Department. Insurance. If you operate your franchised business from a storefront location, you must insure your franchised business before you open it with the insurance specified in our Confidential Operating Manual. We may change these requirements from time to time, and you must comply with whatever change we specify. You must also list us as an additional insured. You may not open the franchised business until you have provided us with proof that you have complied with these requirements. Our present insurance requirements are: (i) Employers' liability with a limit of at least $100,000 and workers' compensation as required by law; and, (ii) Comprehensive general liability insurance covering the operation of the franchised business with a limit of at least $1,000,000; and, (iii) Business automobile insurance for both owned and non-owned vehicles with a minimum limit of liability of $500,000 for both bodily injury and property damage; and, (iv) Errors and Omissions. If we become aware of errors and omissions coverage for what, in our opinion, is a reasonable premium, you must purchase it. We have been unable to locate a source for this coverage at reasonable cost. We have arranged for an insurance plan that meets our requirements at what we believe is a reasonable cost. Givens & Williams, Inc. of Fairfax, Virginia provides this coverage through Travelers. We are under no obligation to arrange for this insurance plan, and we may discontinue it at any time. We do not earn revenue as a result of your participation in this insurance program. Furniture and Other Equipment. You must purchase only furniture and equipment that meets our specifications, and complies with our uniform office design. You must purchase this furniture and equipment only from us or from an approved supplier. Signs. Your interior and exterior signs must meet our specifications. We offer pre-approved Jackson Hewitt Tax Service exterior signs from various venders. We do not have to approve vendors, and we may discontinue this without notice at any time. We do not earn revenue from your participation sign vendor program. If you operate in a national account, you must use only the signs and set up package the national account has approved in advance. Site Location. You must lease a site that meets our specifications. Before you sign any lease, we must approve the site. However, our approval of a particular site is not a guaranty or warranty that your location will be successful, or that it complies with the Americans With Disabilities Act, local building codes, fire codes or any other laws. Advertising and Marketing Materials. All your advertising and marketing materials, including stationery and business cards, must meet our specifications, and display only our most current logos, service marks and promotional programs. We offer a wide range of advertising materials, including fliers, coupons, camera-ready Yellow Pages and newspaper formats, television and radio spots and promotional items such as jackets, caps, and T-shirts. We earn revenue when you purchase these items from us. If you purchase advertising or promotional items or anything containing our Marks from an outside supplier or develop them yourself, you must send us specimens of all items and receive our written approval before you use them. Approval of Suppliers. Except for computer hardware, insurance, office furniture, signs, copiers, inventory, and other equipment used in providing the authorized services, we do not have a list of approved suppliers, nor do we have criteria for approving suppliers. If you want us to consider an outside supplier for any item, submit a written request to us with the specifications and a sample. The supplier can do this for you. We have 30 days to respond to your request, and if you receive no response from us, that means we have disapproved your supplier. We negotiate purchase arrangements with suppliers, including price terms, for the benefit of our franchisees. We do not have purchasing cooperatives, but we are free to establish them at any time. Required purchases from us or our approved suppliers will constitute approximately 6% of the initial investment described in Item 7. We do not have a set method of formulating and issuing specifications. The tax return preparation business is highly complex and changes are caused by changes in the tax law, changes to our software caused by tax law changes and changes in the availability of the Bank Products program. Changes in specifications are issued to our franchisees if the changes affect franchisee purchases, e.g., computers. Other changes, e.g., Bank Products program, are imposed on us by banks or the IRS. Need for a Large Pool of Low Cost Labor. In conducting business operations, both we and you depend, in part, on the availability of employees willing to work for little more than minimum hourly wage plus bonus, with minimal or no benefits, for periods of less than a year. Your success in your business will depend a great deal upon your ability to hire, train and supervise additional personnel, taking into account annual turnover rate for lower paid employees. If the supply of this labor pool is reduced in the future for reasons within or outside of your control, or if you are required to provide your employees more extensive and costly benefits, either through competitive reasons or governmental regulation, the expenses associated with operations could be substantially increased without the offsetting increases in revenue. There is no assurance that you will be able to hire, train and supervise an adequate number of such personnel. ITEM 9 FRANCHISEE'S OBLIGATIONS THIS FOLLOWING TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AND OTHER AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR.
===================================================================================================== FRANCHISE AGREEMENT OFFERING CIRCULAR OBLIGATION PARAGRAPH ITEM NUMBER ===================================================================================================== a. Site Selection & 2.3, 14.1 - 14.4 8,11 Acquisition/Lease b. Pre-Opening Purchases/Leases 8, 14.3, 14.8, 14.9, 14.17, 14.18 5,6,7,8,11 c. Site Development & other 14.3 7, 11 Pre-Opening Requirements d. Initial & Ongoing Training 10.3, 12 11 e. Opening 14.6 11 f. Fees 5, 6, 7.1-7.3, 9, 17, 27(f), 28(f), 29(d), Schedules D, E & F 5,6 g. Compliance with Standards & 13 & 14 8,11,16 Policies/Operating Manual h. Trademarks & Proprietary 13.3, 15 & 21 13,14,16 Information i. Restrictions on Products/Services 14.11-14.15, 14.17-14.19, 14.21 8,16 j. Warranty & Customer Service 14.13 16 Requirement k. Territory Development & 11.1 12,17 Sales Quotas l. Ongoing Product & Service 8, 14.3, 14.4, 14.8, 14.9, 14.18, 14.21, Purchases 14.23, 18.1 6,7,8,11 m. Maintenance Appearance & 14.3 11 Remodeling Requirements n. Insurance 18, Schedules E & F 7,8 o. Advertising 7, Schedules E & F 6,7,8,11 p. Indemnification 32 17 q. Owner's Participation/ 14.7, 22 8,11,15 Management/Staffing r. Records/Reports 16 6 s. Inspections & Audits 17 11 t. Transfer 25 - 30 17 u. Renewal 11 17 v. Post-Termination Obligations 24.3 17 w. Non-Competition Covenants 19 - 22 17 x. Dispute Resolution 33.1 through 33.8 17
ITEM 10 FINANCING Franchise Fee Financing Program. Subject to the availability of funds, and at our sole discretion, we offer a financing program for the franchise fee. Your acceptance in this program depends entirely on our evaluation of your creditworthiness and, if applicable, whether you have complied with all obligations in any existing franchise agreement with us. The interest rate and terms we offer in this program are subject to change, however, as of the date of this Offering Circular, we offer financing at the rate of 12% (APR) per annum. The terms of financing depend on the amount financed. Repayment is made in anywhere from 1 to 4 annual instalments of principal and interest due each year on February 28. Occasionally, we may lend smaller amounts for shorter periods. If you operate your business as a corporation, your shareholders must guarantee this financing. The note, found at Exhibit B, contains no prepayment penalty, and is immediately due and payable if: you sell all or any part of your franchised business, you are in default of your obligations under the franchise agreement, you file bankruptcy, an involuntary bankruptcy petition is filed against you, or a receiver is appointed over any portion of your assets. As a condition of any financing program, we can require your Bank Products lender to send your Bank Products fees and tax preparation fees directly to us. (See Security Agreement, Exhibit C). We will apply these monies to any indebtedness or fees and remit the balance to you. Our Financing Program for Company Stores. If you purchase a company store, subject to the availability of funds, and at our sole discretion, we offer a financing program on the following terms: a cash down payment of 20% of the purchase price, and financing of the remaining balance with a note payable in annual instalments of principal and interest at the rate of 12% (APR) per annum, payable on or before February 28. The interest rate and terms are subject to change without notice (See Promissory Note and Security Agreement, Exhibits B and C). The note can be prepaid without penalty. As a condition of any financing program, we can require your Bank Products lender to pay monies directly to us and we can require you to pay royalties, advertising and supply orders to us via ACH. We will apply monies to any indebtedness or fees and remit the balance, if any, to you. All shareholders must guaranty payment of any note and we take a security interest in your accounts receivable. Full payment of any note is due whenever the company store or its franchised territory is sold. Financing Program for Undeveloped Territories For Existing Franchisees Who Have Completed One Tax Season. Subject to availability of funds, and at our sole discretion, we may offer financing to existing franchisees who want to purchase additional franchises. If you complete one tax season, and have complied with all terms and conditions of your existing franchise agreements, including the timely payment of all fees, and with all our recommended policies and procedures, including customer service policies, we offer a financing program to enable you to purchase additional franchise territories. The interest rate and terms are subject to change, but as of the date of this Offering Circular, you may, upon meeting our terms and conditions, purchase additional franchises with a down payment of at least one-fifth of our then-current franchise fee. We will finance the remaining amount with a note payable in annual instalments with interest at the rate of 12% per year. Your annual repayments are due on the last day of February, beginning on the first February after the date you sign the note. If you are a corporation, the shareholders must guarantee repayment. This financing program is available only from February 15, 1998 to March 31, 1998. It may be discontinued at any time without notice, and it is not available to purchasers of company stores. As a condition of any financing program, we can require your Bank Products lender to pay your Bank Products fees and tax preparation fees directly to us, and we can require payment of all amounts due us via ACH from your account to ours. (See Security Agreement, Exhibit C). We will apply monies to any indebtedness or fees and remit the balance, if any, to you. Failure to Pay any Amounts Borrowed from us. If you are in default of any financing from us, we can terminate your franchise agreements, call the entire amount due plus attorney's fees and costs, and, demand that your Bank Products lender or Montgomery Ward or any other entity who collects your fees, pay all fees due you to us, including any performance incentive payment, apply national account monies that come to us first, to any overdue amounts, or require payment of all amounts due us via ACH from your account to ours, or enforce our rights under the Security Agreement. We will apply these fees to any amounts you owe us or owe a third party for any program we arrange, sponsor or guarantee. In addition, if you are in default of any payment to us, we may also not provide you with the ability to offer any Bank Products. You do not waive any defenses in our notes, and there are no prepayment penalties. But the note is due and payable if you default, you sell all or any part of the franchised business or its assets, you breach any franchise agreement with us, or any agreement with any third party for a program we arrange or sponsor, you file bankruptcy or a receiver is appointed over the assets of the franchised business, or a corporate franchisee is involved in a merger or consolidation without our prior knowledge and permission. We have never sold or discounted any note to any third party, but do we are free to do so at any time. We use and intend to continue using franchisee notes as collateral for lines of credit and letters of credit with our current lenders. We are free to assign or discount your notes and security agreements to third parties at any time. ITEM 11 FRANCHISER'S OBLIGATIONS (The numerical references following the paragraphs in the next two sections are the corresponding section numbers in the franchise agreement). Except as listed below, we need not provide any assistance to you. A. PRE-OPENING Site Approval. We do not select the site for your Jackson Hewitt Tax Service business. This is your sole responsibility. We do, however, provide guidelines to direct you to the kind of locations we believe are most suitable for the franchised business. You may not sign a lease for a site that we have not approved in advance. Our approval of any specific site is not a guaranty or warranty that your franchised business will be successful, or that your proposed site complies with the Americans With Disabilities Act, local building or fire codes or any other laws. We recommend that you locate your business in a commercial district with easy access to the street. We recommend that you look for a site that provides at least 400 to 600 square feet for an income tax preparation office, and if you only have one office, another 250 square feet for a tax processing center. We also look for the following: space for adequate signage, direct street frontage, adequate parking, availability of public transportation, sufficient traffic flow, visibility to the street, existence of multi-family housing developments, adequate lease term, and the like. (14.1) Tax Preparation Software. We will provide you with the latest versions of our personal income tax preparation and processing software during the term of the franchise agreement. Because of frequent changes to the tax code, we also will provide you with updates. This software is our property, and you cannot give it or show it to anyone else, and you must return all copies of it whenever the franchise agreement expires or is terminated for any reason whatsoever. (10.1) State Tax Preparation Capability. We provide the capability to file certain state personal income tax returns electronically. Not all states provide for electronic filing, and we do not provide this service for all states that do. We may select the states in which to offer this service. We provided software for state tax return preparation for 45 states for the 1997 tax season. (10.2) Bookkeeping Software. We give you receipt journal software for your franchised businesses. Like the tax preparation software described above, this software is our property and must be returned to us whenever you are no longer our franchisee. (10.1) Supply Sources. We will tell you about possible sources for equipment, inventory and other products and services for use in the franchised business. You may order supplies and equipment from our Supply Department. (10.10) Training. Business Management Training and Processing Training. We provide Business Management and Processing Training, covering all aspects of the tax return preparation business. You must attend and successfully complete our training program before you open your franchised business. This training program is 5 days, including 4 days of Business Management Training and 1 day of Processing Training, but we may increase or decrease the number of days at any time. We presently offer this training at our training facility in Virginia Beach, Virginia, but we may offer it anywhere we choose. Our training staff designs and facilitates Business Management and Processing Training, which is designed to introduce you to all aspects of the Jackson Hewitt Tax Service system and how to process a tax return. The curriculum consists of lectures, group discussion, and practical exercises and computer training. Training is held approximately 2 out of every 4 weeks from mid-May through mid-December, and is developed and facilitated by the following persons: Sandi Clark, Director of Training. Ms. Clark was appointed our Director of Training in May, 1997. Before then, she served as a Trainer. Ms. Clark joined Jackson Hewitt in March, 1994 as our Regional Director for the Northeast Region. Before joining Jackson Hewitt, Ms. Clark was the Manager of Human Resources for Twin "B" Auto Parts, Inc. of Virginia Beach, Virginia Beach, a 32 location retailer where she was responsible for developing all training programs and materials. Bridget Malloy, Trainer. Ms. Malloy has been with Jackson Hewitt since April 1993, and has worked as an Administrative Assistant, Trouble Shooter, and Processing Support Staffer. Bonnie Via, Trainer. Ms. Via joined Jackson Hewitt in December, 1994 as a Trouble Shooter in our Processing Support division. Ms. Via attended Old Dominion University and worked at House of Fabrics, where she managed a 20,000 square foot retail store and was responsible for employee training. Michael Kirby, Trainer. Mr. Kirby joined our Training Department in February 1996. He first joined Jackson Hewitt in December 1995 as a Trouble Shooter. Mr. Kirby has a B.S. in Economics from Texas A&M University, and has worked as a statistician at the Houston law firm of Hutchinson & Grunel. Nancy Nelson, Trainer. Ms. Nelson joined our Training Department in May, 1997. Before that date, she was an Administrative Assistant. We do not charge for this training, but you must pay for your own transportation costs, room and board while attending the training. Your spouse can attend this training program on a space-available basis. You must re-attend Business Management and Processing Training after your first tax season, or whenever we find it necessary. (10.3) SUMMARY OF BUSINESS MANAGEMENT AND PROCESSING TRAINING AGENDA
INSTRUCTIONAL APPROXIMATE SUBJECTS MATERIAL HOURS INSTRUCTORS Day One Opening Session Handbook One hour Training Staff Hewtax Software Software Processing Center Tour New Office Set Up Handbook One Hour Training Staff On Site Visit New Business Start Up Handbook One Hour Training Staff EIN, EFIN, Local Banking Labor Laws Insurance Staffing Handbook One Hour Training Staff Productivity and Peak Handbook One Hour Training Staff Scheduling Handbook One Hour Training Staff Computer Practice Day 2 Tax School Handbook One Hour Training Staff Life of a Tax Return Handbook One Hour Training Staff Policy and Procedures Handbook Three Hours Training Staff Bank Products Banks Handbook One Hour Training Staff Disclosures & Applications Day 3 Review Scheduling Handbook Half Hour Training Staff Internal Accounting Handbook Two Hours Training Staff Computer Practice Budget Handbook Two Hours Training Staff Computer Practice Ordering Supplies Handbook Two Hours Training Staff Computer Practice Day 4 Review Policy and Procedure Handbook Half Hour Training Staff Operating In Retail Locations Handbook One Hour Training Staff Site Criteria, Approvals Handbook Two Hours Training Staff Advertising and Marketing Handbook Two Hours Training Staff Closing and Wrap Up Handbook Two Hours Training Staff Profile of Success To Do List Time Line Answer Final Questions Day 5 Processing Training Processing Training Handbook Entire Day Training Staff How to Print and Transmit Computer Practice Your Tax Returns
Approval and Training of Your Manager. We must approve the person you select as your manager. You must send us all the information we require for us to evaluate your choice. If at any time during the term of the franchise agreement we rescind our approval of your manager, you must select a new manager and submit the required information for our approval. There is no cure period for an unacceptable manager. We provide Business Management Training, Processing Training and Update Training for your management employees. We do not approve any proposed manager who does not successfully complete any of our training programs. We are under no obligation to recruit or hire any of your employees for you. (10.3) (14.7) Confidential Operating Manual. We provide you with access to our Manual for the franchised business via computer, and provide you with updates via downloading or Intranet. Since the Manual is not provided in book form, we are unable to provide an exact number of pages, but an approximate is found in Exhibit I. You use a computer to access the Manual. Our software is not compatible with other software so you should not install it on any existing computer. A list of compatible software is contained in the Manual. You must comply with all terms and provisions found in the latest version of our Confidential Operating Manual, which we may amend. If there is a dispute about the contents of the Manual, the latest version available for downloading governs. (10.4) Assistance with Local Advertising and Marketing. We help you with local advertising and marketing in the manner, form, and frequency we decide appropriate. (10.5) B. AFTER OPENING Advertising and Marketing. We manage and disburse the advertising fees for national, regional or local advertising, public relations, marketing programs and marketing research. (7) Use of Advertising and Marketing Fees. Because of the seasonal nature of the tax preparation business, we pay for advertising in December and early January, before we receive the advertising and marketing payments from our franchisees. Although we are under no obligation to do so, we contribute for the company stores in the Jackson Hewitt system. For the fiscal year that ended April 30, 1997, our advertising expenditures were as follows: Total revenue earned: $4,415,682.00 Total advertising expended: $4,693,990.00 Total expended on direct advertising costs -- television, radio, cable TV, direct mail, transit ads (buses and subway signs) -- and balloons: $4,292,183.00 or 91% of total expenditure Total expended on overhead: $401,807.00 or 9% of total expenditure We administer the advertising and marketing fee and the supplemental advertising fee and use them to prepare, produce -- either in-house -- or through outside suppliers -- and conduct national, regional and local advertising, public relations, market research, and promotional programs in media we select. We also use the advertising money to pay our expenses and salaries for our employees who perform services for advertising. Our advertising program includes television, radio, direct mail, billboards, transit advertising (buses and subways), and cold air balloons. This advertising is both local and national. All costs of development, production and distribution of these programs, such as the proportionate share of our overhead and compensation of our employees who devote time and render services to develop and administer advertising funds, is paid from the advertising and marketing fees. We spend the advertising monies in a way, that in our judgment, benefits the franchised system. We do not promise that you benefit directly or on a pro rata basis from any advertising or marketing. We also do not ensure that any advertising and marketing fee you pay in your geographic area will be proportionate or equivalent to the contributions made from other franchisees in that geographic area. We must place the supplemental advertising described below, in your area. All rights and obligations for the advertising and marketing fee and all related matters are governed solely by the franchise agreement. The franchise agreement and the advertising and marketing fees are not a "trust", and we do hold them as a fiduciary or similar special relationship. All aspects of the advertising and marketing fee and any advertising conducted under the franchise agreement is an ordinary commercial relationship between you and us for our mutual economic benefit. The National Advisory Council receives a statement in August of how the advertising monies are spent overall. You can request a copy from our Advertising Department or the Council. The advertising monies are not audited nor are they segregated or accounted for separately. No monies from the advertising monies were used for advertising that is principally a solicitation for the sale of franchises, but we are free to do so at any time. We do not have any advertising council or advertising cooperatives, but we may establish a council or cooperative, if in our sole judgment, it would benefit our franchisees. (7) If you cannot limit your advertising to your Territory, you must include the addresses and telephone numbers of all the franchised locations within your media market; and, you may never conduct any advertising using our Marks, including any Internet Home Page or Web Site, that we have not approved in advance. (7.4) We do not receive any marketing, advertising, promotional volume or placement allowances from any suppliers of products or services or any advertiser at this time, but in the franchise agreement, you assign any interest in any such payment to us, if we receive any allowance or payments in the future. (7.6) Exemption of Pre-Existing Tax Clients from the Royalty and Advertising Fee. If you own or control a tax preparation business, e.g., accounting practice, and you want to exempt your pre-existing tax clients from the royalty and advertising fees described above, you can do so only if you: (1) complete the appropriate section of Schedule D to the franchise agreement, and send us a disk that includes all the names and social security numbers of your pre-existing clients in the format we require, and complete any other listing or inventory we may require; and, (2) pay us a one-time fee of $5.00 per pre-existing client. This disk and fee is due and payable by December 19 before your first tax season. If we do not receive your disk and fee by the deadline described above, you must pay the royalties and advertising and marketing fees described in paragraphs 6.1 and 7.1 of the franchise agreement, on all your clients. (6.3) Advertising Approval. We must approve in writing all your advertising and marketing materials before you use them. If you develop any advertising program or item, we can use it in any way without paying you any fee. (7.4) Supplemental Advertising During Your First Tax Season. In addition to the advertising and marketing fee, during your first tax season, you must place $5,000 of local advertising that we have approved in advance in your Territory. You do not meet this advertising requirement by placing Yellow Pages advertising or by buying a sign. This requirement does not apply if you buy an existing Jackson Hewitt business that has been open for business for one full tax season in the immediately prior tax season. You may pay the $5,000 to us and have us place this advertising and marketing for you, or you may place it yourself. We encourage you to ask us to place this advertising because of our expertise in this area. If you place this advertising yourself, we must approve all advertising that includes our service marks, and you must send us whatever proof we require that you have placed this advertising. You must submit your advertising plan to us no later than December 1. If we do not receive your advertising plan by December 1, we will place this supplemental advertising for you, and you must pay the $5,000 when billed. This requirement applies whenever you sign a franchise agreement for a new territory that does not contain an existing Jackson Hewitt location that has operated for one full tax season during the immediately prior tax season. (7.3) Advanced Training. We provide Advanced Training to enhance your business skills. You and/or your manager must attend, at our request, our Advanced Training programs. We offer Advanced Training at various sites throughout the country, but we may offer it anywhere in the 48 contiguous states we choose. Sandi Clark, our Director of Training, develops and facilitates our Advanced Training Program, with assistance from our Home Office Training and Field staffs, Advanced Training is conducted at least three times a year at various sites throughout the country from May through October. Advanced Training is a 2 day seminar that changes according to enrollees' needs, but generally focuses on strengthening our brand, pricing for profitability, marketing, management reports, the future of technology for 1998 and a discussion by the CEO on the state of our business. (10.3) Large Entity Training. This is a training program specifically designed for our top 40 volume producing processing centers. Large Entity Training is offered as a third day of selected Advanced Trainings. Large entity training will focus on the issues specific to larger franchises, including, organizational structure, operational financial issues - cash flow, growth opportunities and future growth v. current profits. (10.3) Update Training. We offer annual training in early December to update you about any changes or enhancements to the Jackson Hewitt processing software or updates in our operating system. It is developed and facilitated by our Field and Training Department staffs. You and/or your approved manager must attend this training program held at various locations throughout the country. The agenda changes depending on regulatory changes or changes to our operating system. In preparation for the 1997 tax season, Update Training covered the following areas: Processing Updates, Monitoring Your Business, Bank Changes, IRS Changes, 1996 Tax Changes, Front Office Printing, Delegating Effectively, Downloading Reports, Checklist of To Do Items for the Upcoming Tax Season, and final questions. We may offer this training via computer tutorial on disk, workbook, or bulletin board download or Intranet or CD ROM, or any other way we choose, as our needs require. (10.3) Tax Advice. During our normal business hours, we provide tax advice in conjunction with individual federal and state returns for all states. (10.6) Advertising and Marketing Assistance. We provide periodic assistance in local advertising and marketing. We determine the type and frequency of this assistance. (10.5) Newsletters and Bulletins. We distribute additional information via Intranet, downloading from our bulletin board and via our newsletter, The Winning Edge. We may discontinue or modify any form of newsletter or bulletin at any time at our sole discretion. (10.12) Operating Assistance. We provide additional advice on an "as needed" basis about operating problems we identify on your reports or by our inspections, or about new techniques or processes and improved business methods we develop. (10.8) Group Purchasing Programs. We provide the opportunity to participate in group purchasing programs for products, supplies, insurance and equipment, that we develop or sponsor, on conditions that we alone establish. (10.9) On Site Inspections. We may, but are under no obligation to do so, periodically inspect your site and the quality of the services you offer. We provide advice about any operating problems we discover. (17) Advice about New Techniques and Improvements. We will tell you about any improvements to the franchised business methods, new techniques and improvements to the operating system. (10.8) C. COMPUTER AND CASH REGISTER REQUIREMENTS Software. We will provide you with tax preparation software for individual taxpayers and processing software as well as upgrades at no charge during the term of the franchise agreement. We provide a support line for questions or problems, and we provide maintenance and repairs via new copies which we may distribute in any way we choose. The level of support available depends on whether your computers meet our specifications and whether you purchased your processing computer from us. This is our proprietary software, and you may not use it in any capacity outside the Jackson Hewitt system. If we provide software for tax returns other than individual taxpayers, e.g., partnerships, corporations, estates, trusts, you may purchase it or pay us per use. You owe royalties and advertising fees on all returns for all entities other than individual taxpayers that are prepared at the franchised location. We have developed procedures to audit your business records and client files via our bulletin board or Intranet. Through our tax preparation software, you transmit to us complete tax returns for your customers. The processing system collects data about the number of returns you prepare and the revenue you generate from those tax returns. In addition, you are required by the franchise agreement to send us monthly and annually, via computer, a profit and loss statement. (10.1, 10.2) Hardware. You must purchase only the computers, modems and printers that meet our specifications or from our approved vendors, if we designate approved or required vendors for any piece of equipment, because your hardware must be able to operate our tax preparation and processing software, transmit tax returns, print bank products checks, and meet our customer service standards. If you purchase computers, modems or printers that do not meet our specifications, or were not purchased from approved vendors if we designated vendors for any particular piece of equipment, we cannot provide technical support if you have problems with our software. Your equipment will meet our specifications if you purchase it from us or our approved suppliers. All computers purchased from us or our approved suppliers are guaranteed for 2 tax seasons. As our software programs become more sophisticated, it is often necessary to upgrade or supplement hardware and related items. You must upgrade your computers, modems and printers, and purchase any additional equipment we specify to accommodate our software or improve the overall effectiveness and competitiveness of the franchised business. Maintenance costs range from $200 to $500 per year for processing systems and about $150 per year for tax preparation systems. Upgrade costs vary and range from $400 to $600 per year for the processing system. The tax processing system is generally obsolete after 2 years. Maintenance and upgrade expenses range from 20% to 30% of the original hardware investment. For the 1998 tax season, we require the following equipment, subject to pricing and availability: Required Processing System for all Processing Centers: Oasis Intel Pentium P166 Mhz computer with 32 megs of RAM with floppy drive: 3.5", 1.44 MB, with a 2 GB Hard Disk Drive, a 33.6 bps US Robotics internal fax modem, Keyboard, 8X CD ROM Internal Drive, 16 bit sound card and speakers, a color monitor, with Windows 95 operating system, a Hewlett Packard Laserjet 5 printer and Dexxa serial mouse. Optional equipment is a Zip drive for backups, or a larger monitor. The above-described system is available for purchase from us, and includes the following software already installed: Microsoft Windows 95, Jackson Hewitt Processing Software from 1995 forward, Windows95 Tutorial on CD ROM, Microsoft Powerpoint Viewer, Microsoft Word Viewer. Recommended Tax Preparation System: Intel Pentium or Cyrix Pentium processor, 133 or 166 Mhz computer with 16 MB of RAM (upgradable to 32MB); A: Drive, 3.5" 1.44 MB; 1.2 or 2 GB Hard Disk Drive; color monitor; Windows 95 Operating System and serial mouse. We are not required to provide or acquire any item of equipment for you. (14.9) D. LENGTH OF TIME BEFORE OPENING. The typical length of time between signing the franchise agreement and opening the business to the public varies, but you must be open for business on January 8 next following the Effective Date of the franchise agreement, and on January 8 of every subsequent tax season during the term of the franchise agreement. If you do not open for business by January 8, we can terminate the franchise agreement. (14.6) The factors that affect the length of time before you open for business are: the Effective Date of your franchise agreement, the date you attend our training classes, the time of year (proximity to tax season), the length of time to find suitable premises, negotiate lease terms, order and receive your furniture and equipment, and hire and train your employees. ITEM 12 TERRITORY Exclusive Territory. We give you an exclusive right, subject to the national account requirements described below, to operate, advertise and promote the franchised business within a specific geographic territory that contains a population of approximately 50,000 (the "Territory"). The Territory is determined by mutual agreement from our available, pre-mapped territories before you sign the franchise agreement, and is described on Schedule A. Activity Outside the Territory. You may not set up your franchised business or a tax return processing center outside the Territory. You may offer services in your Territory to any person or firm residing outside your Territory, but you may not travel outside your Territory to perform tax preparation or other services authorized by the franchise agreement. You may never solicit another franchisee's customers. You may advertise or promote your business outside your Territory, but if you do, advertising that cannot be limited to your Territory, e.g., television and radio commercials and newspaper ads, must include the addresses and telephone numbers of all Jackson Hewitt locations located within the media market where you are conducting this advertising or promotion. You do not have to pay any compensation to any other franchisee for services performed at your location for customers who reside outside the Territory. You are solely responsible for selecting a site for your business, but you may not sign a lease for a storefront or for the relocation of your franchised business without our prior approval. We will evaluate any relocation site according to our guidelines. The franchise agreement does not contain the right to acquire additional franchises or any right of first refusal. National Accounts. If we enter a contract to operate the franchised business at sites provided by a nationwide business enterprise, and one of these sites is located in your Territory, and if you are in full compliance with any franchise agreement or collateral agreement with us, you have a right of first refusal to operate a franchised location at this site. You must notify us in a writing received by us no later than 10 days after receiving notice, if you intend to operate at the national account. If we do not receive notice within 10 days after we notified you, that you will open at the national account, we are free to operate a franchised business at this location, or grant a site-specific license to someone else to operate at this location. If we actually operate, or license a third party to operate in any national account in your Territory because you declined to operate in it, or because you lost the right to operate in it, you no longer have the right to operate in that location during any subsequent tax season. This is the only time during the term of your franchise agreement that we may operate or permit someone else to operate a franchised business within the Territory. Other than for national accounts described above, we may not operate or grant within your Territory, franchises for others to operate, any tax return preparation business using the Jackson Hewitt Marks. We do not plan to distribute the services offered by this franchise through other channels of distribution but we are free to do so. As of the date of this Offering Circular, we do not offer any services under any other service marks, but we are free to do so. Continuation of Your Exclusive Territory. You do not have to achieve a specific sales volume, market penetration, or other contingency in order to keep the exclusive right to operate the franchised business in the Territory. However, to execute a new franchise agreement for an additional 5 year term, you must not be in default of any existing franchise agreements, any collateral agreement or note with us, have displayed at your franchised locations, our most current exterior and interior signage and promotional program materials, you must execute a general release of all claims against us, and your Territory must have generated at least 1,000 paid tax returns for the period from January 1 through April 30 in the last year of any existing franchise agreement. ITEM 13 TRADEMARKS We authorize you to operate a tax return preparation business, conduct Tax School, and perform tax-related activities using our Marks. The Marks include those symbols described below, and any others we develop. The following service marks are registered on the Principal Register of the United States Patent and Trademark Office: Mark Registration Date Registration Number Jackson Hewitt Tax Service August 23, 1988 1,501,580 An Affidavit of Continued Use and Affidavits of Incontestability have been filed and accepted for the service marks "Jackson Hewitt Tax Service". We have not registered this service mark in any state. In addition, we have applied to register the following Marks: the words "Jackson Hewitt", application 75/235382 filed February 3, 1997; the words "Jackson Hewitt Tax Service" and design, like that found on the front of this offering circular, application serial number 75/248439 filed February 26, 1997; the Mark "ASAP" with the words "Jackson Hewitt Tax Service", application serial number 75/276674 filed April 18, 1997; the words "ASAP" and "Tax Refunds", application serial number 75/280525 filed April 24, 1997; and the same mark with different colors, application serial number 75/263754 filed March 25, 1997; and the words "Refer A Friend", application serial number 75/293434. The above Marks are our sole property, and you acquire no rights by using them in your franchised business. All goodwill associated with the Marks belongs to us, and when your franchise agreement is terminated or expires, you are not entitled to receive from us, any compensation for goodwill associated with your use of our Marks. There are presently no effective determinations by the United States Patent and Trademark Office, Trademark Trial and Appeal Board, any state trademark administrator or any court, any pending infringement, opposition or cancellation proceeding or any pending material litigation involving our Marks, or any other commercial symbol, which are relevant to their use anywhere in the country. We know of no infringing use which could materially affect our right to license or your right to use the Marks. In addition, there are no agreements which limit our right to use or license the use of any Mark which is material to our franchise system. You must use the Marks in full compliance with rules that we prescribe. You may not use the Marks as part of your corporate name, or with any prefix, suffix or other modifying words, terms, symbols or designs. Our Marks may not be used in conjunction with the sale of any unauthorized product or service. You must notify us immediately of any infringement or challenge to our use of the Marks, and we have the sole right to take whatever action we decide is appropriate. You must assist us, at our expense and request, in taking any action we decide is necessary to stop any infringement. You may not take any action on our behalf without our prior written permission. If we engage in litigation or any action to protect our Marks, you must execute any documents and take any action that we and our attorneys believe is reasonably necessary to protect our rights in the Marks. We do not have to take any action relating to the Marks, or to indemnify you for any costs and expenses you may incur because of your use of the Marks. We may, in our sole discretion, select one or more new or modified Marks for use in the franchised business, which you must adopt and use. Any expenses you incur resulting from such a change, e.g., replacing signs, stationery, or advertising material, are your sole responsibility. ITEM 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION We do not own any patents. We claim a copyright in our customized tax preparation software, processing software, receipt journal software, our Manual, our training scripts, video productions, and radio and television commercials, which you may use during the term of the franchise agreement. We did not file our claim of copyright with the Library of Congress to preserve the confidentiality of these items, especially the source codes for our software. Our tax preparation, processing software, business methods and operating methods are trade secrets. ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISED BUSINESS Your franchised business must be supervised either by you or an "on premises" manager we have approved, and who has completed our required training programs to our satisfaction. We may subsequently disapprove your manager at any time, for reasons that we, in our sole discretion, determine, and you must select another manager for our approval. If you are the designated manager, we may also disapprove you, and you must select another manager for our approval. Before you hire your manager, you must give us a written request for approval that contains all the information we require about the manager's character, financial and business background. Your manager cannot have an interest or business relationship with any of our competitors, and must agree in writing to maintain the confidentiality of our trade secrets, and must agree to be bound by the covenant not to compete found in paragraph 22 of the franchise agreement. ITEM 16 RESTRICTIONS ON WHAT YOU MAY SELL Authorized Services. You may offer at your franchised business, only the services we authorize, and we may add additional authorized services that you must offer, and discontinue any services we presently offer. If you are thinking about offering additional services as part of your franchised business, you must get our prior written approval before doing so. This restriction is for your benefit. We have considerable experience in the tax preparation business, and may have already tested and rejected the idea you propose. Therefore, in addition to being a requirement, getting our prior written approval may save you from unproductive, and possibly harmful activities. Competing Services. While you are our franchisee, or a partner or shareholder of any franchisee, you may not have any interest in any business that is the same as or similar to the franchised business, unless you have made a written disclosure of this interest when you applied for a franchise, we give you written permission to keep this interest, and you acquire no other interest in a competing business. Tax Preparation Software. You may not offer any tax preparation services that do not use our customized tax preparation software, or any other software, unless you get our prior written permission. You may not install any other tax return preparation software on any computer located at the franchised business without our prior written permission. Bank Products. If we provide you with access to Bank Products, you may only offer Bank Products through the Jackson Hewitt system and through the banks we designate. You may not offer Bank Products from any other source. Charges to Persons Who Are Disqualified by IRS for a Bank Product. Some Bank Product customers will not qualify for a loan because they owe past due taxes, child support payments, student loans and other payments collected by the IRS or past due loans collected by the Bank Product lender, via the refund, or denied a Bank Product by the lender for creditworthiness. In these cases, you will not receive your tax preparation fees from the Bank Product proceeds, and any refunded amount will be sent directly to the taxpayer. You may not collect any tax preparation fees and any Bank Product fees from any customer whose request for a Bank Product has been denied; you must provide these customers with a free copy of their tax return. Electronic Filing. Only Through Jackson Hewitt. You must only file returns electronically through the Jackson Hewitt System. You may not provide electronic filing through any other vendor. Returns You Have Prepared. You may not charge an electronic filing fee to any customer for whom you prepared a return; you may only charge and collect the tax preparation fee. We have developed this policy to enhance the reputation of the Jackson Hewitt Tax Service system in the eyes of the public and to exceed our competition. Returns Prepared By Customer or By Another Tax Preparer. If a customer brings you a completed tax return for electronic filing, you must put the tax return through our tax preparation software before you file it. You may not charge these customers for tax preparation, but only for electronic filing. We believe that your business reputation will be enhanced when this customer sees the results of our tax preparation software, particularly if our software detects a mistake, and the customer gets a larger refund than originally expected. Approved Equipment, Supplies, Signage, Advertising. To enhance the uniformity and competitiveness of the franchised system, you may only use the computer hardware, software, furniture, equipment, interior and exterior signs, business stationery, cards, marketing and promotional material that we have approved in advance in writing. You cannot conduct any advertising or use our Marks in any way, including the development of any Internet Web Site or Home Page, that we have not approved in writing in advance. Customer Service. You must follow all the rules, procedures and specifications that are designed to provide our customers with excellent customer service, and maintain the integrity and uniformity of the services offered under the Marks. Minimum Hours. Storefront. A storefront location must be open the following hours: January 8 through April 15. You must be open 9 a.m. to 9 p.m. Monday through Friday, and from 9 a.m. until 5 p.m. on Saturday. You are free to open any additional days or hours as needed. Specific Sundays. In addition to the above, you must also be open from noon until the later of: 5 p.m. or after the last customer has been served, on the last 2 Sundays in January and the first 2 Sundays in February. April 16 through January 7. You must be open at least one day each week for 8 consecutive hours that fall anytime between 9 a.m. and 9 p.m. Montgomery Ward and Wal-Mart or Other National Account. If you operate your franchised business from a Montgomery Ward or Wal-Mart store or in any other national account, you must be open the same number of hours as a storefront unless your store manager requires longer hours. Tax School. After your first tax season, you must conduct annually, a 12-week fall Tax School that meets our specifications using only the materials that we specify. Before your first tax season, you must conduct either a 12-week Tax School or such other Tax School that meets our specifications. Protection of Trade Secrets. Covenant Not to Release Trade Secrets. You must not communicate, directly or indirectly, or otherwise divulge or use our proprietary trade secrets, knowledge or know-how, or use them in any way outside the franchised business. Covenant Not to Solicit. For a period of 24 months after you leave the franchise system for any reason, you must not solicit anyone who was a Jackson Hewitt customer at any location, within the 2 year period before your franchise agreement terminated or expired. Post-Termination Covenant Not to Compete. For a period of 24 months after your franchise agreement terminates or expires for any reason, you may not have any interest in any business that is the same or similar to the franchised business unless you have excluded your pre-existing tax clients from the franchised business by complying with paragraph 6.3 of the franchise agreement. Covenants For Your Employees. To the extent permitted by law, you must secure covenants from your employees in which they agree not to work for a similar business for a period of one year after they stop working for you. You must also secure from your management employees, an agreement in which they promise not to disclose our trade secrets. [Remainder of page is intentionally left blank.]
ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION ==================================================================================================================================== SECTION IN FRANCHISE PROVISION AGREEMENT SUMMARY ==================================================================================================================================== a. Term of the Franchise 3.1 Term is 5 years. b. Renewal or Extension of Term 3.2, 11.1 - 11.3 If you prepared at least 1,000 paid tax returns from January 1 through April 30 in the last year of your existing franchise agreement, and you are in full compliance with all terms and conditions of any franchise agreement and any collateral agreement or note with us, and you are displaying our then-current signage and advertising campaign materials, you may sign our then-current franchise agreement for a 5 year term. You must return your new franchise agreement to us within 30 days of the date we send it to you or your franchise agreement will expire on the expiration date. c. Renewal or Extension Requirement 11.1 - 11.3 Give us notice not more than 12 months or less than 6 months before the expiration date, sign a new agreement, and release all claims against us. d. Termination by You 24.1 You can terminate the franchise if we are in default of a material provision, you give us written notice, and we do not cure this default within 30 days after receiving written notice. e. Termination by Us Without Cause none We can only terminate for cause. f. Termination by Us with Cause 24.2 g. "Cause" Defined - Defaults 24.2(w) - (ee) You do not pay any overdue monies or file missing gross which can be Cured volume reports within 5 days; you do not close a location outside your Territory or cease soliciting another franchisee's customers within 3 days; you commit acts that reflect poorly on the goodwill of our system, and you do not cure this within 5 days; you do not comply with any other provision, specification, standard, law, and you do not cure within 10 days; you do not open for required minimum hours within 1 day during the tax season or within 5 days during the off season; you fail to display our then-current, approved lighted exterior sign within 5 days after notice; you fail to send us receipts for any unreported returns and pay any fees on unreported gross volume within 5 days. h. "Cause" Defined - Defaults 24.2(a) - 24.2(v) Discontinuation of franchised business or the franchise relation for more which cannot be than 2 consecutive days during the tax season or 2 consecutive Cured weeks during the off-season; you underreport your gross volume by more than 2% or 2 or more occasions; failure to open by January 8; failure to cooperate with any audit; insolvency or bankruptcy; a national account asks you to leave their location; abandonment of the franchised business; material misrepresentation on application; unapproved transfer; felony conviction; underreporting of revenue; your telephone number is disconnected more than 48 hours or you fail to have an operating phone on the day specified in paragraph 14.6; bankruptcy; failure to complete training successfully; failure to cooperate fully with an audit; failure to open within required time; you conduct any unapproved advertising in another franchisee's territory; you conduct any unapproved advertising anywhere more than 1 time; you violate any of the covenants in paragraphs 14.20, 21, 22 and 23; uncured or incurable default of ancillary agreement with us or with a third party; failure to file required reports more than 3 times during any 1 year; failure to comply with any one or more provisions of franchise agreement 3 times within one year; breach of agreement related to the franchised business with any third party; violation of covenant to protect our trade secrets; failure to qualify for or retain an EFIN for any of your locations; failure to close any location operated outside your territory within 3 days; failure to pay any promissory note; default of national account agreement, failure to hold Tax School; or, failure to notify us for a new franchise agreement. i. Your Obligations Upon Termination 24.3 Pay all money owed to us and to third parties; return all or Nonrenewal trade secret information; return all client files; remove all signs and anything with our service marks; transfer telephone numbers to us; stop using our Marks; and, comply with all post-term covenants. j. Assignment by Us 26.1 We may freely assign. k. "Transfer" by You Defined 26.2, 27, 28 & 29 Includes transfer of ownership. l. Our Approval of a Transfer by You 25 - 29 We must approve all transfers. m. Conditions for Our Approval of Transfer 25 - 29 We approve transferee. You fully comply with all agreements with us or with any third party for any program we arrange or sponsor. You pay the transfer fee. Transferee signs our then-current franchise agreement and completes training to our satisfaction. You guarantee transferee's obligations, and you sign release. n. Our Right of First Refusal to Acquire 30 We or our designee can match any offer for your business. Your Business o. Our Option to Purchase Your Business none p. Your Death or Disability 31 The franchise agreement terminates 30 days after your death or permanent disability unless within that time we are notified of a proposed transferee. Your guardian or personal representative has 150 days to transfer once we approve the transferee. q. Non-Competition Covenants During the 14.20,23 No interest in a competing business anywhere. You may retain Term of the Franchise an interest in an existing competing business only if you notify us in writing when you first contact us, and we approve it. You may not solicit or hire any of our employees. r. Non-Competition Covenants 19,20,21,22,23 You may not compete or have any interest in a competing business within the Territory or within an area within 10 miles outside the boundary of the Territory for a period of 24 months. We may transfer this covenant to any transferee. You may not solicit any of our customers or solicit or hire any of our employees for a period of 24 months after termination or expiration of the franchise agreement. You may not solicit any of our employees for 24 months after the termination or expiration of the franchise agreement. s. Modification of Agreement 33.11 No modifications generally, but Manual is subject to change. t. Integration/Merge Clause 33.11 Only the terms of the franchise agreement are binding (subject to state law). Any other promises are not enforceable. u. Dispute Resolution by Arbitration 33.3 Required in some cases. or Mediation v. Choice of Forum 33.2 and 33.3 Litigation must be in Virginia. w. Choice of Law 33.1 Virginia law applies.
These states have statutes which may supersede the franchise agreement in your relationship with the franchiser including the areas of termination and renewal of your franchise: ARKANSAS [Stat. Section 70-807], CALIFORNIA [Bus. & Prof. Code Sections 20000-20043], CONNECTICUT [Gen. Stat. Section 42-133e et seq.], DELAWARE [Code, tit.], HAWAII [Rev. Stat. Section 482E-1], ILLINOIS [Rev. Stat. Chapter 121 1/2 par 1719-1720], INDIANA [Stat. Section 23-2-2.7], IOWA [Code Sections 523H.1-523H.17], MICHIGAN [Stat. Section 19.854(27)], MINNESOTA [Stat. Section 80C.14], MISSISSIPPI [Code Section 75-24-51], MISSOURI [Stat. Section 407.400], NEBRASKA [Rev. Stat. Section 87-401], NEW JERSEY [Stat. Section 56:10-1], SOUTH DAKOTA [Codified Laws Section 37-5A-51], VIRGINIA [Code 13.1-557-574-13.1-564], WASHINGTON [Code Section 19.100.180], WISCONSIN [Stat. Section 135.03]. These and other states may have court decisions which may supersede the franchise agreement in your relationship with the franchiser including the areas of termination and renewal of your franchise. ITEM 18 ARRANGEMENTS WITH PUBLIC FIGURES We do not use any public figure to promote our franchises. We may choose a public figure to endorse or promote the franchise, but you may not use any public figure or anyone else to promote or endorse your franchise business without our prior written permission. ITEM 19 EARNINGS We discuss average earnings per store in Exhibit G. ITEM 20 LIST OF OUTLETS Our list of outlets as of Fiscal year end April 30, 1997 is in Exhibit F. Immediately following the list of outlets is a list of the names and last known home addresses and telephone numbers of every franchisee who has had an outlet terminated, cancelled or not renewed or otherwise voluntarily or involuntarily ceased to do business under the franchise agreement during the most recently completed fiscal year or who has not communicated with us within 10 weeks of the application date. [Remainder of page is intentionally left blank.] ================================================================================ FRANCHISED LOCATIONS STORE STATUS SUMMARY FOR YEARS 1997/1996/1995 ================================================================================
UNITS REACQUIRED LEFT THE TOTAL OPERATING CANCELLED OR NOT BY SYSTEM FROM LEFT AT YEAR STATE TRANSFERS TERMINATED RENEWED FRANCHISER OTHER COLUMNS (2) END - ----- --------- ---------- ------- ---------- ----- ----------- --- AL 0/0/0 1/0/0 0/0/0 0/0/0 0/1/1 1/1/1 24/8/7 AK 1/0/0 1/0/0 0/0/0 0/0/1 0/0/0 2/0/1 0/3/0 AR 0/0/0 0/0/0 0/0/0 0/0/0 0/0/2 0/0/2 31/22/5 AZ 2/0/0 6/0/0 0/0/0 0/0/0 0/0/0 8/0/0 18/20/0 CA 9/2/0 0/8/0 0/0/0 0/5/0 0/2/6 9/17/6 46/65/52 CO 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 18/15/14 CT 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 8/3/2 DE 0/2/0 0/0/0 0/0/0 0/0/0 0/0/0 0/2/0 10/12/4 FL 2/2/0 0/2/0 0/0/0 0/3/2 0/0/6 2/7/8 116/100/90 GA 3/0/0 0/3/1 0/0/0 0/3/0 0/0/3 3/6/4 48/26/17 IL 4/2/0 0/8/4 0/0/0 0/8/3 0/0/2 4/18/9 133/120/76 IN 0/4/4 0/1/0 0/0/0 0/1/0 0/1/0 0/7/4 21/27/14 KS 3/0/0 0/0/0 0/0/0 0/0/0 0/0/0 3/0/0 8/6/7 KY 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 7/4/2 LA 0/2/0 0/0/0 0/0/0 0/4/0 0/0/2 0/6/2 55/26/18 ME 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/1 MD 4/2/0 4/0/0 0/0/0 2/0/0 0/0/0 10/2/0 68/67/42 MA 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 4/4/2 MI 0/1/1 0/4/1 0/1/0 0/4/0 0/0/0 0/10/2 35/37/19 MN 0/0/1 0/0/0 0/0/0 0/0/0 0/0/0 0/0/2 11/4/1 MS 0/0/0 0/0/0 0/0/0 0/0/1 0/0/0 0/0/1 15/11/6 MO 1/0/0 0/3/0 0/0/0 0/0/0 0/0/0 1/3/0 24/24/15 NE 0/0/0 0/1/0 0/0/0 0/0/0 0/0/0 0/1/0 1/2/0 NH 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 3/1/1 NJ 3/0/0 0/0/0 0/0/0 0/0/0 0/0/0 3/0/0 17/16/9 NM 2/0/0 0/0/0 0/0/0 0/0/0 0/0/0 2/0/0 6/6/3 NY 4/0/0 0/4/2 0/0/0 0/0/2 0/0/2 4/4/6 83/69/49 NC 2/0/0 0/0/0 0/0/0 0/0/0 0/0/0 2/0/0 59/42/33 NV 0/0/0 4/0/0 0/0/0 0/0/0 0/0/0 4/0/0 9/9/0 OH 0/0/0 0/2/0 0/0/0 0/0/0 0/0/0 0/2/0 26/19/12 OK 0/0/0 0/1/0 0/0/0 0/0/0 0/0/0 0/1/0 12/3/1 OR 1/1/0 8/0/0 0/0/0 0/0/0 0/0/0 9/1/0 7/15/10 PA 0/0/0 0/0/0 0/0/0 0/4/0 0/0/3 0/4/3 53/32/13 RI 0/0/0 1/0/0 0/0/0 0/0/0 0/0/0 1/0/0 0/1/0 SC 1/0/0 1/1/0 0/0/0 0/1/0 0/0/0 2/2/0 29/17/12 SD 0/0/0 1/0/0 0/0/0 0/0/0 0/0/0 1/0/0 0/1/0 TN 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/0/0 9/13/13 TX 13/5/2 0/9/0 0/0/0 0/10/0 0/0/6 13/24/8 126/95/77 UT 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 6/7/7 VA 14/0/3 0/4/0 0/0/0 10/2/1 0/0/0 24/6/4 126/98/84 DC 0/1/0 0/0/0 0/0/0 0/0/0 0/0/0 0/1/0 5/1/0 WA 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 4/1/0 WV 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 3/2/3 WI 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 9/5/4 WY 0/0/0 0/2/0 0/0/0 0/2/0 0/0/0 0/4/0 2/2/0 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL 69/24/11 27/53/8 0/1/0 12/38/10 0/4/33 108/129/63 1296/1062/725
================================================================================ STATUS OF COMPANY OWNED STORES FOR YEARS 1997/1996/1995 ================================================================================
STORES CLOSED STORES OPENED TOTAL STORES STATE DURING YEAR DURING YEAR OPERATING AT YEAR END - ----- ----------- ----------- --------------------- Alaska 2/0/0 0/3/0 0/3/0 Alabama 0/0/0 2/0/0 0/0/0 Arizona 1/0/0 0/0/7 7/0/8 Arkansas 1/5/0 0/0/0 3/5/0 California 16/0/0 0/7/0 8/23/0 Colorado 0/0/0 2/0/0 0/0/1 Connecticut 0/0/0 0/0/0 0/0/0 Delaware 1/0/0 0/0/2 0/1/2 Florida 1/0/0 0/1/4 0/7/4 Georgia 5/0/0 0/1/6 3/7/6 Idaho 1/0/0 0/1/0 0/1/0 Illinois 1/0/0 0/0/9 2/3/13 Indiana 0/0/0 1/3/0 3/3/0 Kansas 2/0/0 0/1/0 0/3/1 Maryland 3/0/0 0/0/0 2/5/5 Massachusetts 2/0/0 0/3/0 4/6/3 Michigan 1/0/0 0/0/0 2/2/5 Minnesota 5/0/0 0/0/3 0/5/7 Mississippi 0/0/0 2/1/0 3/1/0 Missouri 0/0/0 0/0/1 1/1/1 Nevada 0/0/0 5/0/0 0/0/0 New Jersey 2/0/0 0/0/0 0/2/0 New York 6/0/0 0/1/7 1/10/18 North Carolina 0/0/0 0/0/0 1/1/1 Ohio 1/0/0 0/0/0 1/2/2 Oklahoma 0/0/0 3/1/0 0/1/0 Oregon 0/0/0 3/0/0 0/1/4 Pennsylvania 18/0/0 0/0/0 20/0/9 Rhode Island 0/0/0 0/1/0 0/2/0 South Carolina 3/0/0 0/1/0 0/3/0 Texas 4/0/0 0/1/0 14/19/17 Virginia 4/0/0 0/1/0 1/6/10 Washington DC 1/0/0 0/0/0 0/1/1 - ----------------------------------------------------------------------------------------------------- Total 81/15/0 18/27/39 76/145/137
================================================================================ PROJECTED OPENINGS AS OF APRIL 30, 1997 ================================================================================
FRANCHISE PROJECTED PROJECTED AGREEMENTS FRANCHISED COMPANY OWNED SIGNED BUT NEW STORES FOR OPENINGS IN STATE STORE NOT OPEN TAX SEASON 1998 TAX SEASON 1998 - ----- -------------- --------------- --------------- Alabama 0 7 8 Alaska 0 0 0 Arizona 0 9 3 Arkansas 0 8 2 California 3 15 4 Colorado 1 6 0 Connecticut 0 5 0 Delaware 0 0 0 Washington DC 0 2 0 Florida 4 10 10 Georgia 0 15 6 Hawaii 0 0 0 Idaho 0 0 0 Illinois 2 20 0 Indiana 0 5 0 Iowa 0 0 0 Kansas 1 5 4 Kentucky 1 5 0 Louisiana 3 5 2 Maine 0 1 0 Maryland 5 5 0 Massachusetts 0 3 0 Michigan 0 5 3 Minnesota 0 5 0 Mississippi 0 2 4 Missouri 0 6 3 Montana 0 0 0 Nebraska 0 2 0 Nevada 0 2 6 New Hampshire 0 0 0 New Jersey 0 10 0 New Mexico 0 2 0 New York 1 10 0 North Carolina 0 5 3 North Dakota 0 0 0 Ohio 3 7 0 Oklahoma 0 6 0 Oregon 1 4 0 Pennsylvania 0 9 0 Rhode Island 0 2 0 South Carolina 0 3 5 South Dakota 0 5 0 Tennessee 1 10 10 Texas 4 5 8 Utah 0 5 0 Vermont 0 0 0 Virginia 2 6 4 Washington 0 4 0 West Virginia 0 1 0 Wisconsin 0 1 0 Wyoming 0 2 0 - ----------------------------------------------------------------------------------------------------- Total 32 245 85
ITEM 21 FINANCIAL STATEMENTS Exhibit H contains our audited financial statements for the periods ending April 30, 1997 and April 30, 1996. ITEM 22 CONTRACTS Franchise Agreement & Schedules Exhibit A Promissory Note Exhibit B Security Agreement Exhibit C Confidential Application Exhibit D Sample RAL Joinder Exhibit J Sample Purchase and Sale Agreement Exhibit K ITEM 23 RECEIPT Our Acknowledgment of Receipt of a Completed Franchise Agreement and Related Documents is attached as Exhibit N. You must sign it at least 5 business days before you sign any franchise agreement. Our Receipt of Offering Circular is attached as Exhibit O. You must fill it in and sign it at least 10 business days before you sign the franchise agreement, sign any other binding agreement or pay us any money or sign any note. We will not accept your application unless you have provided us the Acknowledgment of Receipt specified in this Item. JACKSON HEWITT TAX SERVICE FRANCHISE AGREEMENT Jackson Hewitt Inc. EXHIBIT A FRANCHISE AGREEMENT TABLE OF CONTENTS Paragraph Heading Page Definitions 1 1. Introduction 2 2. Grant of Franchise 2 3. Term of the Agreement 3 4. Territory 3 5. Initial Franchise Fee 4 6. Royalty Fees 4 7. Advertising and Marketing 4 8. Telephone Numbers and 5 Telephone Book Advertising 9. Other Fees 5 10. Operating Assistance 6 11. New Franchise Agreement 7 12. Training 8 13. Confidential Operating Manual 9 14. Operating Requirements 9 15. Service Marks 12 16. Records and Financial Reports 13 17. Audits and Inspections 13 18. Insurance 13 19. Covenant Not to Compete 14 20. Covenant Not to Solicit Our Customers 14 21. Covenant to Protect Trade Secrets 15 22. Covenants for Your Employees 15 23. Covenant Against Recruiting or Hiring our Employees 15 24. Termination 15 25. Stock Restrictions 18 26. Assignment Generally 18 27. Assignment to a Corporation 18 28. Transfer Without Change of 18 Effective Control 29. Transfer of Effective Control 18 30. Right of First Refusal 19 31. Death or Disability 19 32. Indemnification 20 33. Contract Interpretation and 20 Enforcement Guaranty Schedule A - Territory Schedule B - The Franchisee Schedule C - Special Stipulations Schedule D - Election to Exclude Pre-Existing Clients Schedule E - Special Stipulation - Montgomery Ward Schedule F - Special Stipulation - Wal-Mart Seasonal This Franchise Agreement (the "Agreement") is entered into by Jackson Hewitt Inc. and DEFINITIONS. Words and phrases used frequently in this Agreement will have the meaning indicated: "Accelerated Check Refund" or "ACR" means a faster method of getting a taxpayer's refund without a loan, utilizing direct deposit and electronic filing. "ACH" means Automated Clearinghouse, a means of payment in which you authorize us to debit monies from your account to ours, or you authorize a third party holding monies due you, to send the monies directly to our account instead of yours. "Agreement" or "Franchise Agreement" means this document, all its attachments, exhibits, stipulations and schedules and modifications, whenever made. "Bank Products" means Refund Anticipation Loans or Accelerated Check Refunds. "collateral agreements" means any and all agreements with us, including, but not limited to, any other franchise agreements with us, any notes, or any other agreements with us or with any third party for any program we sponsor or arrange. "competing tax business" means any tax return preparation business that offers services the same as or similar to those offered by us, including but not limited to the following: income tax return preparation, electronic filing, refund anticipation loans, accelerated refunds through electronic filing and direct deposit, tax advice, or Tax School. "Effective Date" means the date inserted by us on the space so designated on the Signature Page of this Agreement. "EFIN" means the Electronic Filing Identification Number required by the IRS for each electronic filer for each separate location. "franchisee" means the individual, partnership or corporation inserted in the space above and on Schedule B. "franchised business" means the tax return preparation business operated under this Agreement. "Gross Volume of Business" means the total amount of all revenues generated from the tax business, as defined in this Agreement, arising from tax return preparation, including returns for entities other than individual taxpayers, Bank Products fees, past year returns, electronic transmission only returns, electronic filing, Tax School and tax-related activities (whether in the form of performance incentives, cash, checks, credit cards, or other consideration) excluding only discounts you allow and taxes you are required by law to collect and pay and whether such business is conducted in compliance with or in violation of the terms of this Agreement. "guarantor" means any person we require to sign the Guaranty of Franchisee's Undertakings found after this Agreement. "location" means the site of your franchised business. "Manual" means our confidential Jackson Hewitt Electronic Manual to which we provide access during the term of this Agreement, that contains the required policies and procedures for the operation of the franchised business, and includes all supplemental bulletins, memoranda and revisions. "Marks" means the words "Jackson Hewitt", "Jackson Hewitt Tax Service", "Superfast Refund Anticipation Loans" and design, "Refer A Friend", and any design incorporating these words, and any other words or symbols currently used, or to be developed in the future by us for use in connection with the Jackson Hewitt Tax Service business. "off season" means the period beginning on April 16 or the next business day if April 15 is a weekend or federal holiday and ending on January 7. "Offering Circular" means the franchise offering circular of which this Agreement is part, and any Exhibits. "pre-existing client" means any clients for whom you prepared tax returns before you joined Jackson Hewitt, and for whom you have paid us a fee of $5.00 per client to exclude from the royalty and advertising fees. "Pre-existing clients" does not include any tax clients you purchase from anyone besides us during the period from when you first considered this investment to the date the client list is submitted to us. Pre-existing clients also do not include any clients purchased from anyone during the term of this Agreement. "processing center" means the site at which you error check, print and transmit tax returns. "Refund Anticipation Loan" or "RAL" means a bank loan secured by a taxpayer's tax refund. "system" means the nationwide network of company-owned and franchised locations that operate tax return preparation offices under the name Jackson Hewitt Tax Service. "tax business" means any existing business which you own or control, and which earns revenue from income tax return preparation, including entities other than individual taxpayers, transmit only services, electronic filing, Bank Products, Tax School and related activities, and/or any Jackson Hewitt business operated according to this Agreement. "tax season" means the period beginning on January 8 and ending on April 15, or the next business day if April 15 is a weekend or federal holiday. "Tax School" means the tax preparation course required to be given each fall by each franchisee, and which complies with all our specifications. "Territory" means the areas listed on Schedule A in which you may operate the franchised business. "we", "us" or "our" means Jackson Hewitt Inc., the franchiser. "you" or "your" means the franchisee named above, its shareholders or partners, and guarantors. 1. INTRODUCTION We have developed a plan and a system for preparing, checking and electronically filing personal income tax returns using our custom-designed Hewtax software, accounting methods, merchandising, equipment selection, advertising, sales and promotional techniques, personnel training and quality standards that prominently feature the Marks. We may offer or license different services, discontinue services, modify or add new services under the Marks, utilize new or modified business methods, and change the Marks or develop new or modified ones. You have applied to us for a franchise to operate an income tax return preparation business using our name, Marks and business methods. We have approved your application in reliance upon all of the representations made in your application, including those about your financial resources and the manner in which you propose to own and operate the franchised business. This Agreement is personal to you and may not be transferred without our prior written approval. You acknowledge that you have read this Agreement and our Offering Circular and that you have been given the opportunity to clarify any provision that you do not understand. The terms, conditions, and promises contained in this Agreement are necessary to maintain our high standards of customer service, and to maintain the uniformity of those standards at all locations. You acknowledge that in the franchised business, complete and detailed uniformity may not be practical, and you agree that, in our sole discretion, and as we may deem in the best interests of all concerned in any specific instance, we may vary standards for any particular franchisee to accommodate the peculiarities of a particular Territory, including, but not limited to, population density, business potential, existing business practices in the community, or any other conditions we decide are important to the successful operation of your business. You have no recourse against us if, because of any of the above-described considerations, we apply different standards to you, or if we do not permit you to follow practices and procedures permitted another franchisee. 2. GRANT OF FRANCHISE 2.1. Grant. Subject to the terms and conditions of this Agreement, we grant to you the exclusive right, subject to paragraph 2.4, below, to operate an income tax return preparation business, and a license to use the Marks and our proprietary business methods and software in the operation of that business within the Territory described on Schedule A. You expressly acknowledge and agree that we may operate or grant to others the right to operate franchised businesses at any location anywhere outside the Territory described in Schedule A. We specifically reserve all rights not expressly granted in this Agreement, including the right to sell our software, or our other products and services through any means of distribution or through different service marks not specifically prohibited by this Agreement. 2.2. Nature of Relationship. You acknowledge that this Agreement grants you a license to use our Marks and our operating system. You acknowledge that we do not have any right to share any of the profits of your business since you are an independent contractor, and you are not our joint venturer, partner, agent or employee. We also do not share in your losses. 2.3. Approval of and Change of Location. You are responsible for selecting a site for the franchised business, but you may only open for business after we have approved your site. Our approval of any location is not a guaranty or warranty that your new location will be profitable. You may not relocate your franchised business to a new address within the Territory without our prior written consent. Our consent will not be withheld unreasonably, but instead will be based on our criteria and guidelines. 2.4. First Refusal - National Accounts. If we secure the right to operate franchised locations in a national account site in the Territory, and you are in full compliance with all franchise agreements, any note, or any collateral agreements with us, or with any program we arrange or sponsor, we will advise you of this opportunity. Only we may establish a national account. Unless otherwise specified in any schedule, or national account agreement, you have 10 days to give us written notice that you will operate in the national account. If we do not receive notice within the time described above, that you will operate the franchised business in the office of any national account that is located within your Territory, we can operate or grant a site-specific license to a third party to operate, the franchised business at that national account. We can also operate or grant a site-specific license to a third party to operate the franchised business in a national account location in the Territory if you are in default of any agreement with us for a national account, or if a national account has asked us to replace you with a different operator because you are not meeting their customer service standards, or because you are in violation of any agreement or Manual provision that provides operating standards for the national account and, as a result, we do not offer you the opportunity to operate the franchised business from a national account location. If under this provision, we actually operate for our own account, or license a third party to operate for their account, the franchised business in any national account location in your Territory, you no longer have the right to operate in that national account location for any subsequent tax season. 3. TERM OF THE AGREEMENT 3.1. Term. The term of this Agreement is five (5) years beginning on the Effective Date. 3.2. New Franchise Agreement. If at the end of the term of this Agreement, you elect to execute a new franchise agreement, and have met the criteria contained in paragraph 11 of this Agreement, we will permit you to execute a new Franchise Agreement for another five (5) year term, without payment of an initial franchise fee. 4. TERRITORY 4.1. Your Territory. The area within which you may operate your franchised business is described on Schedule A to this Agreement. We may operate the franchised business or license third parties to operate the franchised business at any location outside the Territory. We may operate any business similar to the franchised business under different service marks or through any other means of distribution other than the Jackson Hewitt Tax Service system in your Territory. 4.2. Competition. We will not operate or grant a Jackson Hewitt franchise to anyone else within your Territory unless you elect not to participate in any national account program, or you lose the right to operate in the national account as described in paragraph 2.4, above, or you are not given this opportunity because you are not in full compliance with all franchise agreements, or collateral agreements with us, or with any program we arrange or sponsor. We may also operate or permit a third party to operate in your Territory if it is necessary to replace you in any national account as provided in paragraph 2.4, above. 4.3. Business Outside the Territory. You are not permitted to locate your franchised business office or processing center at any location outside the Territory. You may perform the authorized services in your Territory for customers who reside outside the Territory, but you may not travel outside your Territory to perform tax preparation or other services authorized by this Agreement. You may not solicit another franchisee's customers. 4.4. Advertising Outside Your Territory. You may advertise your franchised business in any media of general distribution where such advertising cannot be limited to the Territory. If you advertise or market your franchised business outside your Territory, all such advertising and marketing must contain the addresses and telephone numbers of all franchised offices located, as determined by us, in your media market. You may not solicit another franchisee's customers by telephone or mail. 4.5. Additional Purchases. We are under no obligation to permit you to purchase another Jackson Hewitt franchise for an additional Territory. We can decline to approve your application for an additional territory for any reason, including, but not limited to, your failure to comply with this Agreement, any other franchise agreements, any note or collateral agreement with us, any national account agreement, or with any program with a third party that we arrange or sponsor, or your failure to comply with our policies and procedures, including, customer service policies imposed by us or any national account. We may require you, your shareholders or your guarantors to execute a general release of any and all claims against us in consideration for our grant of an additional Territory. 5. INITIAL FRANCHISE FEE 5.1. Initial Franchise Fee. The initial franchise fee for an undeveloped territory is Twenty Thousand Dollars ($20,000.00). Company stores cost more. 5.2. Refund of Initial Franchise Fee. The initial franchise fee is only refundable if you do not complete our initial training program to our satisfaction, and you return any proprietary materials we have already given you. 6. ROYALTY FEES 6.1. Royalties. During the term of this Agreement, you must pay us a royalty fee equal to twelve percent (12%) of your Gross Volume of Business. 6.2. Royalty Payment Schedule. The royalty fees described above are due and payable according to the following schedule: (a) Semi-Monthly Payments. From January 1 through April 30, you must pay royalties twice a month. The first payment is due on the 20th for the first half of the month ending on the 15th. The second payment is due on the 5th for the second half of the prior month ending on the last day of the month. (b) Monthly Payments. From May 1 through December 31, your royalty payment is due on the 5th of each month for the immediately prior one month period. 6.3. Exclusion of Pre-existing Tax Clients from Royalty Fees. If you own or control an existing tax business, as defined in this Agreement, other than a Jackson Hewitt Tax Service business, you must either: a) pay the royalties, advertising and marketing fees described in paragraphs 6.1 and 7.1 of this Agreement on all revenue generated from tax return preparation, Tax School, or related activities; or, b) exclude pre-existing clients from the royalty, advertising and marketing fees by executing the appropriate section of Schedule D to this Agreement, and providing a list of all the pre-existing clients and their Social Security numbers on our disk format, and paying us a one-time fee of $5.00 per pre-existing client. The disk and fee are due at our Home Office by December 19. If we do not receive your correct fee and properly completed disk by December 19, you must pay the royalties and advertising and marketing fees described in this Agreement on all revenue generated from tax return preparation for any pre-existing clients. We are entitled to audit any computer or records that contain any information concerning the returns of these pre-existing clients under the provisions of paragraph 16. 7. ADVERTISING AND MARKETING 7.1. Advertising and Marketing Fee. During the term of this Agreement, you must pay us an advertising and marketing fee equal to six percent (6%) of your Gross Volume of Business to support national, regional and local advertising. The advertising and marketing fee is due and payable on the same schedule as the royalty fee. We may increase this fee on thirty (30) days notice to you, but only to offset any increased costs or expenditures we incur in connection with our advertising and marketing program. 7.2. Advertising and Marketing Program. We use the advertising and marketing fees to prepare, produce, conduct and place advertising and promotional programs in any media we select, including any Internet-like system or protocol. We may also use ad funds to conduct market research, public relations, and for the costs of accounting for the advertising funds. All costs of the development, production and distribution of these programs, or the conduct of market research, such as the proportionate share of our overhead and compensation of our employees who devote time and render services in the development of advertising or the administration of the monies, will be paid from the advertising and marketing fees. We may hire, and pay from the advertising and marketing fees, an advertising agency, public relations firm or similar source to formulate, develop, produce, conduct or place the advertising and promotional programs or materials. We do not segregate, separately account for, or audit the advertising and marketing fees. We may establish an advertising council or advertising cooperative or cooperatives if in our sole judgment, it will benefit our franchisees. We will spend the advertising monies in the manner, timing and placement that, in our judgment, best benefits the franchised system, including advertising targeted to the sale of franchises. We may spend in any fiscal year, an amount greater or less than the aggregate contributions for that fiscal year. We do not ensure that you will benefit directly or on a pro rata basis from any advertising or marketing or that any advertising will be conducted in your Territory. We also do not ensure that any expenditures made by franchisees in any geographic area will be proportionate or equivalent to the contribution made from franchisees operating in that geographic area. You and we agree that our rights and obligations with respect to the Advertising and Marketing Fees and all related matters are governed solely by this Agreement, and that this Agreement and the Advertising and Marketing Fees are not in the nature of a "trust", "fiduciary relationship" or similar special relationship, and is only an ordinary commercial relationship between independent businesspersons for their independent economic benefit. 7.3. Advertising Required by New Franchisees. Unless you purchase an existing (as determined by us) franchised business that has operated one full tax season during the immediately prior season, in addition to the advertising and marketing fee described above, you are required to spend $5,000 to advertise and market your business in the Territory during your first tax season. You can place this advertising and marketing yourself, or you can give us the money and have us place this advertising for you. If you place the advertising required by this paragraph yourself, you must send all proposed advertising to us for our prior approval, and provide us with whatever proof we require that you have met your obligations under this paragraph. You will not meet your advertising requirements under this paragraph by placing Yellow Page advertising or by purchasing a sign. This requirement applies whenever you sign a franchise agreement for a new Territory. If you plan to place this advertising yourself, you must submit your plans in writing to us no later than December 1. If we do not receive your advertising and marketing plan by that date, we will place this advertising for you, and you must pay the $5,000 cost when billed. If, with our prior written approval, you change your franchised territory from the Territory described on Schedule A, to a Territory that does not contain an existing business (as determined by us), you must spend $5,000 as described above in the new Territory, regardless of whether you previously conducted this advertising in your original Territory. 7.4. Advertising Approval. If you prepare and produce any advertising or promotional item that contains our Marks, including any Internet Web Site, or Home Page, you must get our prior written consent before using it. You must ship us specimens of any such advertising or promotional items, certified mail, return receipt requested, for our review and approval. We have fifteen (15) days to review your materials and notify you of our decision. We have the absolute right to use any advertising or promotional item you develop, in any way we choose for any purpose we determine, without payment to you of any kind. 7.5. Available Advertising Material. We may provide newspaper mats, television and radio commercial tapes, merchandising materials and other items from our supply catalog. 7.6. Promotional Payments. If we receive any promotional allowance or rebate from any provider of goods or services, you hereby assign any interest in any such payment, rebate or promotional allowance to us. 7.7 Internet. You may not establish an Internet Web Site or Home Page for the franchised business without our express, prior approval of its appearance and its content. You may never advertise or promote your franchised business by unsolicited E-Mail advertising. 8. TELEPHONE NUMBERS AND TELEPHONE BOOK ADVERTISING 8.1. Telephone Number. You must obtain a separate telephone number for the franchised business. You must transfer this number to us whenever this Agreement terminates for any reason, whether by you or us, or expires. We have the sole right and interest in all telephone numbers and directory listings used in connection with our Marks. If you leave the franchise system, you must transfer the telephone numbers to us or our designee. You may not transfer or assign any telephone numbers used in connection with the franchised business to any person or entity without our prior written consent. You may not disconnect these numbers without our prior written consent. 8.2. Required Listings. You must obtain both a white and a Yellow Pages listing. Any Yellow Pages display listing must have our prior written approval. 9. OTHER FEES - TERMS OF PAYMENT 9.1. Electronic Filing Fee. You must pay us a fee of Two Dollars ($2.00) for every tax return you file electronically. This fee is due and payable on the same schedule as the royalty fee. We may increase this fee upon thirty (30) days notice to cover increased expenditures or costs arising from, or relating to, electronic filing. 9.2. Transfer Fee. If a transfer (or any transfer when aggregated with all previous transfers) results in the transfer of effective control of the ownership or operation of the franchised business, you must pay us a transfer fee equal to ten percent (10%) of our then-current initial franchise fee. 9.3. Interest on Late Payments. You must pay interest at the compounded daily equivalent of eighteen percent (18%) per year or the highest legal rate of interest permitted by law on any amounts owed to us that are more than five (5) days overdue. 9.4. Amendment Fee. If you want to amend this Agreement, you must pay us an amendment fee of Three Hundred Dollars ($300.00). 9.5. Additional Tax Software. If we offer or make available from outside vendors, software for preparing tax returns other than individual taxpayer returns, you must use the software for those types of returns, and pay any fees we or the vendor imposes. 9.6. Direct Deposit User or License Fees. If the IRS imposes any kind of fee in connection with electronic filing, you must pay all such fees in a timely manner. You must provide us with any proof we require that you are current with any such fees. 9.7. Application of Payments. When we receive any payment from you, we have the right to apply it in any way we choose, to any amounts you owe us or another franchisee, whether for royalties, advertising fees, promissory notes, third party leases, supplies, or interest, or any amounts you owe another franchisee, even if you have designated the payment for another purpose or account. This provision can only be waived by us in a writing that is separate from any payment document. We may apply any payment designated for one franchise to any other franchise you own, if you own, or have an interest in, more than one franchise. We are also entitled to deduct any monies you owe us from any amounts we agree to pay you, or from any monies owed to you which come to us first, e.g., performance incentives, your Bank Products payment file, National Account fees, Montgomery Ward fees, and apply these to any amounts due and owing to us. As a condition of financing, we can require payment of any notes and any fees or amounts which are not yet due under the franchise agreement, directly from your Bank Products payment file or your performance incentive payment, if any. We can also require you to authorize us to debit your account via ACH for royalties, advertising fees and any other amounts you owe us. 9.8. Method of Payment. If during the term of this Agreement, we develop an ACH system for payment, you must pay any fees we designate via ACH, including, but not limited to, fees due under this Agreement, or any collateral agreement with us, e.g., note, lease, or for any program with a third party we arrange or sponsor. 9.9. Fee Disputes. If you dispute any fee or charge we assess, you may not withhold the fee, instead you must first pay the disputed fee and then resolve the dispute with us. 10. OPERATING ASSISTANCE 10.1. Software. During the term of this Agreement, we will provide you with access to our most current individual federal tax return preparation, processing and receipt journal software used in the franchised business. Any software we give you access to must be returned to us and/or deleted from your computers when this Agreement terminates for any reason, whether by you or by us, or expires. We can provide access to this and any other software we develop or adopt, via any means of distribution we choose, e.g., floppy disks, intranet, bulletin board or network downloading. While we strive to develop high quality software, you acknowledge that the software may not complete all schedules and forms, and that software this complex may contain errors or bugs that may affect some portions of the return or its schedules. You further acknowledge that we may beta test our software by releasing it to our franchisees. 10.2. State Tax Software. During the term of this Agreement, we will provide you with any state tax interview or electronic filing programs, that we, in our sole discretion, elect to develop and offer. While we strive to develop high quality software, you acknowledge that the software may not do all forms and schedules, and that software this complex may contain errors or bugs that may affect some state schedules and forms. You further acknowledge that we may beta test our software by releasing it to our franchisees. 10.3. Training. We will offer the Business Management Training, Processing Training, Update Training, Advanced Training and Large Entity Training programs described in this Agreement. 10.4. Manual. We will provide access to our on-line Manual. You must purchase a computer from our approved vendor within the time we specify to access the Manual. The Manual will be supplemented by periodic downloading, operating bulletins, e-mail, and similar memoranda that together, with the Manual, contain the mandatory and suggested procedures, specifications and rules that we prescribe for the franchised business. 10.5. Advertising Assistance. We will provide you with assistance in the development of local sales promotion and advertising programs. This assistance will include advice from us as to the form and content of your advertising programs. We cannot guarantee, and we do not warrant any specific level of success from any particular advertising advice or program. 10.6. Tax Advice and Support. We will provide preparation and processing advice for individual state and federal income tax returns during our normal business hours or as otherwise specified by us. 10.7. Site Selection and Approval. Although the primary responsibility for selecting a site for the franchised business falls on you, we must review and approve your selection before you sign a lease. Our approval of your selection is not a guaranty or warranty of any kind, either express or implied, that your franchised business will be successful or that the site is suitable for the franchised business, or that your proposed location complies with the Americans With Disabilities Act, or local building codes or fire codes or any other law or ordinance applicable to the proposed location. 10.8. Advice and Guidance. We will provide you with reasonable operating assistance and guidance as we determine from time to time to be necessary for the operation of the franchised business, including new developments and improvements in our operating system and business methods. We do not guarantee or warrant any specific level of success from any particular advice or assistance. 10.9. Group Purchasing. We provide you with the opportunity to participate, on the same basis as other franchisees, in group purchasing programs for products, supplies, insurance, equipment, which we may from time to time develop, on terms that we alone determine. 10.10. Supply Sources. We may advise you about possible sources for equipment, inventory and other products and services for use in the franchised business. 10.11. Meetings, Seminars and Conventions. We may provide you with additional group training and communications as we in our sole discretion determine. 10.12. Newsletters, Bulletins. We will provide you with newsletters and bulletins as we develop them from time to time. We may discontinue these items at any time without notice. 10.13. Bank Products. We will provide you with the ability to offer Bank Products if they are available to us, and you are in full compliance with the terms of this Agreement and any notes with us. We are under no obligation to provide Bank Products, but if we provide them, you must offer them. We can also decline to offer you the ability to offer Bank Products if we or your lender determines that your RAL default rate is unacceptable. 11. NEW FRANCHISE AGREEMENT 11.1. New Agreement. Before the expiration of this Agreement, you may request a new franchise agreement with us for an additional five (5) year term without payment of an initial franchise fee if: (a) you are not in default of any existing franchise agreement, or any other agreements, or notes with us, (including, but not limited to, the timely payment of all fees;) or with any third party for any program we arrange or sponsor; and, (b) you prepared at least 1,000 paid tax returns in the Territory from January 1 through April 30 in the last year of your existing franchise agreement; (c) you are displaying our then-current interior and exterior signs and our then-current advertising campaign promotional signs and brochures; and, (d) if permitted by law, you and your guarantors release us from any and all claims you may have against us. 11.2. Notice of New Agreement. You must notify us of your intention to execute a new franchise agreement for an additional five (5) year term by giving us written notice not less than six (6) nor more than twelve (12) months before the expiration of the existing franchise agreement. If you fail to notify us within the time specified in this paragraph, this Agreement will expire automatically, without further notice, five (5) years from the Effective Date. 11.3. Execution and Form of New Agreement. To execute a new franchise agreement, you must sign our then-current form of franchise agreement and all other agreements that we customarily use for the granting of franchises. You must return your fully executed new franchise agreement by the date we specify, which will be a date thirty (30) days from the date in our cover letter that accompanies the new franchise agreement. If we do not receive your new franchise agreement and other required forms within thirty (30) days, your franchise agreement will expire automatically, without further notice or the opportunity to cure, on the expiration date contained on the Signature Page, and we are free to operate, or offer a new franchisee the right to operate, in the Territory formerly licensed to you. Our then-current franchise agreement may provide for higher advertising fees and electronic filing fees, fees not included in this Agreement, and terms and conditions materially different from the terms of this Agreement. You will not be charged an initial franchise fee when you execute a new franchise agreement. 12. TRAINING 12.1. Business Management Training and Processing Training. Once your application has been approved, but before we sign the Franchise Agreement, you must attend our Business Management Training and Processing Training programs by the later of: within thirty (30) days of receiving notice that we have accepted your application, or by the next scheduled training classes, provided that we have received by our enrollment deadline for each class, a correctly completed franchise agreement and related documents, and full payment of your initial franchise fee. You must complete Business Management Training and Processing Training to our satisfaction, and you must re-attend our Business Management Training and Processing Training after your first tax season, or whenever we request it. 12.2. Employee Training. If you hire a manager to run your Jackson Hewitt business, your manager must attend and successfully complete Business Management Training and Processing Training. We may, at our sole option, require any of your initial or subsequent management employees to attend and satisfactorily complete all or part of any of our training programs. 12.3. Location and Format of Business Management and Processing Training. We currently offer Business Management Training and Processing Training at our training facilities in Virginia Beach, Virginia. These programs are designed and presented by our home office training staff. We reserve the right to relocate these training programs to different locations at any time. As of the date of this Offering Circular, our Business Management Training program consists of four (4) full days of classroom instruction, group discussion, and practice exercises and Processing Training consists of one full day of computer learning, but we reserve the right to increase or decrease the number of days for Business Management Training and Processing Training at any time. 12.4. Fees and Costs for Business Management Training and Processing Training. We do not charge any tuition for Business Management Training or Processing Training for you or your initial management employees. We reserve the right to charge tuition for any subsequent management employees, or for any re-training made necessary by your failure to comply with the requirements of the franchised system. You must pay all costs and expenses associated with attending Business Management Training and Processing Training, including, but not limited to, transportation expenses, room and board. 12.5. Advanced Training/Large Entity Training. We may require you to attend one or more of our Advanced Training programs at any time during the term of this Agreement. We may offer Advanced Training anywhere we choose. Advanced Training is a two day seminar designed and facilitated by our home office training staff, but we can lengthen or shorten this training program at any time. We offer one day of Large Entity Training immediately after Advanced Training. We do not charge tuition for Advanced Training or Large Entity Training, but you must pay for all travel and living expenses incurred while attending Advanced Training or Large Entity Training. 12.6. Update Training. You and/or your manager must attend our annual training program that covers the changes and improvements to the processing software, and to our business system. This training is held on a regional basis throughout the country. We do not charge tuition for Update Training, but you must pay all costs of travel, room and board you incur for yourself or your employees while attending. We may offer this training via disk, downloading, video tape or workbook in the future. 12.7. Additional Training. We may, at our sole option, require you to re-attend our existing training classes or to attend any supplemental or additional training programs that we may develop and offer from time to time. You are responsible for all travel and living expenses for yourself and your employees incurred while attending these training programs. 13. CONFIDENTIAL OPERATING MANUAL 13.1. The Manual. We currently provide you with access to our Manual via our bulletin board, but we can provide the Manual in any format we select. You must purchase the required computer to access the Manual. The Manual is our property and all disks and other copies must be returned to us and deleted from your hard drive whenever this Agreement is terminated or expires. The Manual contains the mandatory standards, specifications and requirements of the franchised system that we prescribe from time to time to ensure the quality and uniformity of the services offered under the Marks. The entire contents of the Manual plus our mandatory specifications, procedures and rules prescribed from time to time will constitute provisions of this Agreement just as if they were written on these pages. 13.2. Modifications to Manual. We have the right to modify the Manual to maintain the quality and uniformity of our operating system, change our operating procedures, maintain the goodwill associated with our Marks and to meet competition, even if these changes and improvements require you to incur expenses. You must keep the Manual in current and up-to-date condition by downloading any updates. If there is a dispute about the contents of the Manual, the then-current terms of the master copy available for download or the master copy at our home office will control. 13.3. Trade Secrets and Proprietary Information. The contents of the Manual and all of the operating procedures, standards and rules that we prescribe for the franchised system are confidential. You must maintain, both during and after the term of this Agreement, absolute confidentiality of the Manual, and all other confidential or proprietary information that we disclose to you, including any other written materials, software, goods, specifications, and information created or used by us within the franchised system. You may give this information to your employees only to the extent necessary for the operation of the franchised business in accordance with this Agreement. You shall not use this information in any other business or in any other way not authorized by us in advance in writing. You acknowledge that the unauthorized use or disclosure of our confidential information or trade secrets will cause irreparable injury and that damages are not an adequate remedy. You promise that you will not at any time, without our prior written approval, disclose, use, permit the use of, copy, duplicate, record, transfer, transmit or otherwise reproduce our software or other proprietary materials and information, in any form or by any means, in whole or in part, or otherwise make it available to any unauthorized person, entity or source. 13.4. Customers. You acknowledge that the customers served by your franchised business are our confidential trade secret, and you have no right to retain any customer materials, including, but not limited to, tax return copies (whether on disk or on paper), lists, mailing labels, W2s, 8453s, Bank Applications or other customer items. All these items must be returned to us upon termination or expiration of this Agreement. You further acknowledge that after the termination, for any reason, or expiration of this Agreement, we are free to contact and serve the customers from your former franchised business to offer to sell them tax return preparation, electronic filing or any other services we offer. 14. OPERATING REQUIREMENTS 14.1. Site. You are solely responsible for selecting sites for the franchised business. These sites must comply with our guidelines. You must send us a site description, photos, and a copy of the proposed lease for our approval before you sign it. Our approval or disapproval of your site or lease is not a guaranty or warranty that your site will be successful, or that the site complies with the Americans with Disabilities Act, or any similar state statute, or any laws, including, but not limited to, local building codes or fire codes. You may not operate any other business or any other tax business at the site of your franchised business without our prior, written permission. 14.2. Additional Sites. At our sole discretion and prior approval, you may operate additional offices of the franchised business in the Territory at any time during the term of this Agreement. In evaluating your request for approval of an additional location, we can consider any and all relevant factors, as determined solely by us, including, but not limited to, the performance of your existing location(s) during previous tax seasons, your financial resources, and whether you are in full compliance with this or any other agreement or note with us. 14.3. Build Out and Refurbishing. If your site requires construction to meet our uniform standards for the franchised business, you must arrange and pay for this construction. You are solely responsible for ensuring that any build out or refurbishing complies with the Americans with Disabilities Act, or with any similar state statute, or with any other local law or ordinance that applies to your franchised business location. We have the right to require you to refurbish, refurnish and redecorate your site, at your expense, to insure that it meets our then-current standards for appearance, colors, furnishings and style. We may from time to time establish procedures for compliance in the Manual. 14.4. Permits and Certificates. If we request them, you must send us copies of all the permits and certificates required by law to open and operate the franchised business. 14.5. EFIN. You must apply for an EFIN and be accepted no later than January 8 of your first tax season, by the IRS, and your state, if we offer electronic filing in your state, to file tax returns electronically from every location. You must continuously maintain the right to file tax returns electronically by the IRS and your state at all your locations throughout the term of this Agreement. You must pay all IRS and any state fees if any are imposed in connection with electronic filing. 14.6. Opening. You must open your franchised business on January 8 next following the Effective Date, and be open and fully operational for tax season hours on January 8 of any subsequent tax season. 14.7. Location Supervision. The franchised business must be under your direct, day to day supervision, or under the supervision of a full-time manager: (a) who has been approved by us, and not subsequently disapproved; and, (b) who has successfully completed our required training programs. Before hiring any manager, you must send us in writing, describing in reasonable detail, all information we decide is important about the proposed manager's financial status, and character and business background. You cannot hire anyone who has failed the IRS's suitability screening for an EFIN or whose EFIN was suspended. We can disapprove your manager for any reason, at any time, without notice or an opportunity to cure in order to ensure the quality and uniformity of the services offered under the Marks. If we do not approve you to be the location manager, you must select and submit another person for this position. 14.8. Location Employees. Since you are an independent contractor, you have the sole right to select, hire and discharge your employees. You are responsible for all decisions regarding hiring, firing, training, supervising, disciplining, scheduling and paying (including payment of taxes) your employees. Neither you, nor your manager or your employees shall be considered or represented as our employees or agents. Moreover, neither you, your manager or your employees are authorized to enter into any contract or agreement with any third party on our behalf. 14.9. Furniture, Equipment, Software and Supplies. To maintain uniformity and customer service standards, you must furnish and equip your location in accordance with the rules, specifications, and standards contained in the Manual, or that we develop from time to time, or as requested or required by any national account. If you do not have on site anything required by a national account, we can order this for you and you must pay the cost when billed. You may only use the computer hardware, equipment, software, signage, furniture, stationery, printed materials, and other forms and materials that we have approved. If you purchase any hardware that does not come from our approved vendors, we cannot guarantee that our software will operate on that system, and we are not obligated to provide technical support, if you have problems with any of our software. You must purchase new computers, software, other equipment or signage if at any time, we update our Marks, update our furniture and location appearance requirements, or upgrade our computer requirements to accommodate our software, offer new services, improve efficiency or exceed competition. You may not have computers other than those used in the franchised business at the franchised location. If you have computers other than those used in the franchised business at your location, you must give us full access to those computers if we audit your franchised business as provided for in paragraph 17. You may not install any other tax return preparation software on any computer at the franchised business without our prior, written permission. You should not install any other kind of software, e.g., word processing, spread sheet, accounting software, on any computer that contains our tax return and processing software. Our software may not be compatible with other software, and may cause problems for which we are unable to offer support and solutions. You may only install such other software that we have determined to be compatible with our software. A list of approved compatible software can be found in the Manual. 14.10. Minimum Hours. January 8 through the last day of tax season. You must be open between 9 a.m. and 9 p.m. Monday through Friday, and from 9 a.m. until 5 p.m. on Saturday, and from noon until 5 p.m the last two (2) Sundays in January and the first two (2) Sundays in February, or such hours as we specify in the Manual. If you operate from a national account that requires different or more extensive hours, you must comply with the hours required by the national account. You are free to open for any additional hours or days that your business requires. April 16 through January 7. You must be open at least one (1) day each week for eight (8) consecutive hours anytime between 9 a.m. and 9 p.m., or such hours as we specify in the Manual. If you operate from a national account that requires different or more extensive hours, you must comply with the hours required by the national account. 14.11. Use of Our Marks. Any advertising or other item that contains our Marks must have our prior written approval before you use it. 14.12. Authorized Products and Services. To maintain the uniformity and integrity of the services offered under our Marks, you may only offer those products and services that we authorize. You must prepare, check and electronically file all tax returns using our software and network. You may not offer electronic filing through anyone other than us. You may only offer Bank Products through us from the bank or banks we designate. If you want to offer for sale any additional product or service, you must submit a written request for our approval in accordance with our then-current approval procedures. You may not install any other tax return preparation software other than Jackson Hewitt software on any computer in your franchised location without our prior written permission. You acknowledge that we may introduce new products or services or discontinue existing products and services, without incurring any liability whatsoever to you. 14.13. Customer Service. You must conduct your franchised business in accordance with all rules, procedures and specifications contained in the Manual that are designed to provide our customers with unparalleled customer service and to ensure the quality and uniformity of the services offered under the Marks. These include, but are not limited to, payment of any penalty and interest incurred by a customer that results from any mistake you made (we make this determination), not charging for services rendered to any client whose request for a Bank Product has been denied, and cheerfully providing a refund to any dissatisfied customer. We will not approve any application for a new territory from any existing franchisee who does not comply with our customer service policies and procedures. We may also exclude you from operating the franchise business at any national account in your Territory if you do not follow our customer service policies and procedures. 14.14. Compliance With Our Business Methods and Requirements. To maintain the uniformity and integrity of services offered under our Marks, you must operate your business in compliance with all our rules, specifications, standards and procedures, including, but not limited to, those found in the Manual and any other materials we provide. You agree to make repairs or replacements as we require to conform to our operating system. We will not approve your application to purchase an additional Territory if you do not comply with all our business methods and requirements. 14.15 Downloading/Updating. You must download from our bulletin board system and/or Intranet daily during the tax season and weekly during the off-season. The procedures for each are found in the Manual. 14.16. General Operations. You must conduct your business in a way that reflects favorably on you, us, our system, and our other franchisees. You must protect the good name, goodwill and reputation of the entire system, and avoid all deceptive, misleading and unethical practices. 14.17. Internal Revenue Service Laws, Regulations and Requirements. You must learn about and comply with all the IRS, state and municipal rules and regulations that affect your tax preparation, electronic filing, and Bank Products operations and advertising. 14.18. Signs. You must purchase and display an exterior lighted sign that has been approved by us, and any interior sign that we specify or any signage required by a national account. All signs must be maintained in good, working condition, using only our then-current and approved logo. You may not open or operate your franchised business without signs. 14.19. Assistance to Other Franchisees. You must cooperate with and assist other franchisees when they need assistance. 14.20. Exclusive Dealing. During the term of this Agreement, you may not directly or indirectly, for your own or others' benefit, alone or in conjunction with any other person or entity, own, engage in, be employed by, advise, assist, invest in, lease or sublease to or from, franchise, lend money to, agree to sell or sell all or substantially all the assets of the franchised business to, or have any other interest in, whether financial or otherwise, any other business which is the same or similar to the franchised business or is a competing tax business as defined herein, unless before signing this Agreement, you have disclosed this interest to our Operations Department in writing, and we do not object at the time of disclosure, and you do not acquire any additional interest that would violate the terms of this exclusive dealing covenant. 14.21 Identification. You must post at your site, in a format that we approve, a sign that identifies the name of the legal entity by which you own or operate your franchised business, and that includes the statement that this entity is "an independently owned and operated franchise of Jackson Hewitt Inc.". Your business checks must also comply with this requirement. You must enter into all agreements using your correct legal name. You shall not use the name "Jackson Hewitt Tax Service" Or "Jackson Hewitt Inc." to sign any agreement, including but not limited to, any lease for the franchised business, any telephone services or Yellow Pages advertising, any equipment leases, or bank financing or employment agreements. 14.22. Return of Leased Equipment. Upon termination (for any reason) or expiration of this Agreement, or any default of a leasing program sponsored or arranged by us, you must promptly return to us on demand, any and all leased equipment. 14.23. Tax School. After your first tax season, and every year during the term of this Agreement, you must conduct a 12 week Tax School covering 72 hours of classroom instruction during the fall. Before your first tax season, you must conduct (as specified by us) either a 12 week Tax School or another Tax School that meets our specifications. You must use only the most current books and study materials that we have prepared or that we specify. Your Tax School must meet the specifications that we publish from time to time, and must comply with all state laws and regulations. 14.24. Government Regulations. You must secure and maintain in full force and effect, all government required licenses, permits and certificates, and you must operate your franchised business and Tax School in compliance with all applicable state, federal and local laws and regulations, including, but not limited to, payment of all taxes. 14.25. Payment for Supplies and Equipment. You must pay us for any supplies, equipment and furniture you order from us, including those ordered electronically. 14.26. Public Figures. You may not, without our prior written approval, use or employ any public figure or any other person to represent or advertise your franchised business. 14.27. Disparagement. You and your guarantors agree that you will neither intentionally disparage us, our current or former officers, directors, or employees, nor intentionally provide or withhold information to disparage us, our current or former officers, directors or employees. 14.28. Best Efforts. You must use your best efforts to recommend, promote and encourage the use of all products and services offered by the franchised business, and by all franchised locations throughout the country. 15. SERVICE MARKS 15.1. Ownership and Usage. You acknowledge that we are the sole owner of the names "Jackson Hewitt", "Jackson Hewitt Tax Service", "Superfast Refund Anticipation Loans" and design, and all other Marks that we license to you in this Agreement. Your right to use the Marks arises solely from this Agreement, and you may only use the Marks according to the rules that we prescribe from time to time. Use of our Marks in any way after termination or expiration of this Agreement constitutes infringement. You further acknowledge that all the goodwill associated with our Marks belongs to us, and that when this Agreement is terminated or expires, you will receive no compensation for goodwill. You may not use the Marks as part of any corporate name or trade name, or with any prefix, suffix, or other modifying symbols, other than Marks or logos we have licensed. You may not use the Marks to offer any service or product unless it is authorized by us, or in any other way unless we have given you our prior written permission. You may not use our Marks on any Internet page without our express written consent and approval. We have the right to approve the content of any Web Site you establish that contains our Marks. 15.2. Infringement. You must notify us immediately if you become aware of any infringement of, or challenge to, our rights to the Marks. You will not communicate directly or indirectly concerning any infringement with anyone other than us or our attorneys. We have the sole right to take whatever action we deem appropriate, and we have the exclusive right to control any litigation, any Patent and Trademark Office proceeding, or other administrative proceeding concerning the Marks. You must execute all instruments and documents, render assistance and do all things that, in our or our attorney's opinion, are necessary and advisable to protect and maintain our interests in the Marks. 15.3. Indemnification. We will reimburse you for any expenses you incur to protect the Marks if you act at our direction. We will not reimburse you for any expenses you incur if you act without our prior written approval. We are under no obligation to take any affirmative action in response to infringement of the Marks, or to reimburse you for your own defenses. 15.4. Replacement or New Marks. We may, in our sole discretion, select one or more new or modified or replacement Marks for use in the franchised business, in addition to, or in lieu of, any previously designated marks, which you must adopt and use. Any expenses you incur as a result of any such change, (replacing signs, stationery, advertising brochures, or other material bearing the Marks), are your sole responsibility and you are not entitled to any compensation from us. 16. RECORDS AND FINANCIAL REPORTS 16.1. Forms and Records. You are required to use the forms and reports specified in the Manual in the operation of the franchised business. These forms and reports must be submitted to us in the format and by the means we specify from time to time. 16.2. Financial Reports. Monthly Reports. You must send us, in the manner and form we specify from time to time, an unaudited profit and loss statement covering the franchised business. These reports are due on the fifth of each month for the immediately preceding month. Annual Reports. You must send us, in the manner and form we specify, an unaudited profit and loss statement for the fiscal year end April 30, and a budget for the new fiscal year beginning May 1. These statements are due on or before May 31 of each year. Additional Reports. You and any guarantors must submit financial statements to us within thirty (30) days of our request, in the form we specify, that fairly represent your assets and those of the guarantors. You hereby give us the right to order updated credit reports on you or your guarantors. 16.3. Gross Volume Reports. Along with the royalty fees described in paragraph 6 of this Agreement, and on the same time schedule, you must send us the reports we specify, and in the manner we specify in the Manual, describing the sales volume of the franchised business. 16.4. Record Maintenance. You must maintain for at least four (4) years from the date generated, the original, full and complete records, computer records, bank statements, accounts, books, data, licenses and contracts that reflect all aspects of your franchised business. We may examine and audit your records at all reasonable times, including any time after this Agreement was terminated or expired. 17. AUDITS AND INSPECTIONS We have the right, but not the obligation, during business hours, without prior notice, to inspect your location(s) and your business records, including, but not limited to, computer databases and hard drives, receipts, any records or reports containing information about any pre-existing clients for which you paid the fees described in paragraph 6.3, business tax returns, work in progress, bank statements and deposit records, and to take a physical inventory of your clients, including any pre-existing clients for which you paid the fees described in paragraph 6.3, in order to ensure the quality and uniformity of the services offered under the Marks, and to ensure you have met all obligations contained in this Agreement. You grant us permission to enter, access or electronically enter any computers found in your location to conduct these inspections, and you must assist us in any way we request. You must also comply with our request for a mail audit, and send us all information we require. If we find any deficiencies, you agree to correct them immediately. These inspections will be made at our expense unless they are made necessary by your failure to comply with this Agreement. In this event, we have the right to charge you for the costs of conducting all inspections made necessary because of your failure to comply with this Agreement, including our employees' or agents' travel expenses, room and board and compensation. This right to audit and your obligation to cooperate with any audit does not end with the termination or expiration of this Agreement, but continues until you have met all your obligations under this Agreement. 18. INSURANCE 18.1. Insurance Policies. You must maintain the following insurance coverages or such other insurance specified in the Manual, during the term of this Agreement: Workers' Compensation. Workers' Compensation as required by law. Employers' Liability. Employers' Liability with a minimum limit of at least $100,000.00. Comprehensive General Liability. Comprehensive General Liability with a limit of at least $1,000,000.00. Business Automobile Insurance. A business auto liability policy covering owned and non-owned vehicles with a limit of at least $500,000.00 covering both bodily injury and property damage. Errors and Omissions. If we locate this coverage at what we consider a reasonable rate, you must purchase it in amounts we specify. We can change the amount of insurance and add additional kinds of insurance coverages as we decide are necessary to protect the system. This insurance does not relieve you of any liability to us under the indemnity provision found in this Agreement or in any other agreement with us. 18.2. Proof of Insurance. You must provide us with proof of the insurance coverages required by this Agreement before you open your franchised location. Your policies must name us (and any national account, if your site is in a national account site) as an additional insured and be endorsed to give us (and any national account) thirty (30) days prior written notice of any cancellation, termination or change. 19. COVENANT NOT TO COMPETE For a period of twenty-four (24) months after the effective date of termination (whether by you or by us) for any reason, including a sale to a third party, or expiration of this Agreement, or the date on which you cease to operate the franchised business in the Territory, whichever is later, neither you nor the guarantors will, directly or indirectly, for yourselves or any other person, firm or entity, alone or through or on behalf of others, own, engage in, be employed by, consult for, advise, assist, invest in, franchise, lend money to, lease to or from, sublease to or from, or agree to sell or sell all or substantially all the assets of the franchised business to, or have any other interest in, whether financial or otherwise, any competing tax business which offers services and products similar to those offered by the franchised business, including, but not limited to, income tax return preparation, or tax consulting, refund anticipation loans or accelerated refunds, electronic filing of tax returns with the IRS or any state, within the Territory, or within an area ten (10) miles outside the boundaries of the Territory. This covenant is assignable by us to any transferee. This covenant not to compete does not apply to an income tax preparation business offering the above services to those clients described in Paragraph 6.3 for whom you have paid the required fees. However, this covenant does apply to your involvement in any of the activities described above, with any other business than that consisting of the clients described in Paragraph 6.3. If you violate the covenant not to compete described above, you agree that we are entitled to preliminary and permanent injunctive relief and all monies and other consideration received as a result of any violation of this covenant, as well as all other damages. These provisions are not exclusive remedies, but cumulative to any and all other remedies available to us in law or equity. You acknowledge that the restrictions contained in this covenant are reasonable and necessary to protect us and our franchised system, and that they will not impose any undue hardship on you since you have other skills, experience and education which will afford you the opportunity to derive income from other endeavors. You agree that this covenant, and those imposed in paragraphs 20, 21, 22 and 23 are independent of any other in this Agreement, and that you and your guarantors agree to be bound by an unappealed final decision of any court with jurisdiction upholding any part of these covenants, and that you will not raise as a defense to these covenants, any claim you may have against us. 20. COVENANT NOT TO SOLICIT For a period of twenty-four (24) months after termination for any reason, (whether by you or by us), sale of the assets of the franchised business, or expiration of this Agreement, or the date on which you cease to operate the franchised business, whichever is later, you and the guarantors shall not directly or indirectly solicit any person who is, on the date of expiration or termination of this Agreement, or within two (2) years prior to such date, was a customer of the franchised business, to sell or offer to sell them any product or service offered by the franchised business, including but not limited to, income tax return preparation, tax consulting, electronic filing, or Bank Products. You acknowledge that our customer lists are confidential trade secrets. This covenant does not apply to those pre-existing tax customers for whom a fee was paid according to paragraph 6.3 of this Agreement. 21. COVENANT TO PROTECT TRADE SECRETS Both during and after the term of this Agreement, you and the guarantors shall not, directly or indirectly, communicate or give to any other person or entity, for your own or the benefit of any other person or entity, without our prior written approval, any of our proprietary trade secrets, knowledge or know-how that we consider confidential as provided in paragraph 13.3. You must secure from all your management level employees, their written agreement not to use or disclose to any third party or entity, any of our proprietary trade secrets, knowledge or know-how. This contractual provision is additional to any other protection available to us under any statutory or common law. 22. COVENANTS FOR YOUR EMPLOYEES You must sign agreements in a form that we propose or approve, with all your employees by which they agree not to use or disclose our trade secrets to any other person or entity, as provided in paragraph 13.3, and, to the extent allowed by law in your state, you must secure agreements from your employees that, for a period of one (1) year after the termination of their employment, they will not work for any business which is the same or similar to the franchised business. Any deviation from the requirements of this provision requires our prior written approval. 23. COVENANT AGAINST RECRUITING OR HIRING OUR EMPLOYEES During the term of this Agreement and for a period of twenty-four (24) months after the termination or expiration of this Agreement, or the sale of the franchised business, you may not, for a period of one year after they leave our employment, solicit, recruit, take the solicitation of, or hire, any of our existing home office or field employees. The obligation described in this paragraph is enforceable after the termination or expiration of this Agreement. 24. TERMINATION 24.1. Termination by You. You may terminate this Agreement only if we consent in writing, or if we are in breach of a material provision, and we do not cure this breach within thirty (30) days after receiving written notice from you via certified mail, return receipt requested addressed to our "Legal Department", describing the breach. This termination will not relieve you of any obligation to us, or to any third party for a program we arrange or sponsor, including, but not limited to, payment of royalties and advertising fees due and owing under this Agreement, or any other agreement or note with us or our affiliates, and including, but not limited to, your obligations under the post-termination covenant not to compete, the covenant not to solicit our customers, the covenant to protect our trade secrets and the covenant not to recruit or hire our employees. 24.2. Termination by Us. We may terminate your franchise for good cause. Good cause includes, but is not limited to, the defaults listed below. This Agreement will terminate immediately upon delivery of notice of termination to you if: (a) you discontinue the active conduct of the franchised business for more than two (2) consecutive days during the tax season; or, more than two (2) consecutive weeks during the off season, or more than two (2) consecutive days at any year round location in a national account; or, (b) you abandon the franchised business or the franchise relation; or, (c) you or your shareholders or partners or guarantors make any material misrepresentation on the franchise application; or, (d) you transfer or attempt to transfer your interest in this Agreement, or a controlling interest in a corporate franchisee without our prior written consent, or you fail to comply with our transfer requirements contained in paragraphs 25 through 30 of this Agreement; or, (e) you are asked by any national account to close your franchised location, or we are advised by any national account that you are not meeting their standards for customer service, or we are asked by any national account to replace you, or you have violated any other provision of any national account agreement, or special stipulation applicable to a national account; or, (f) you, any of your guarantors or a person owning a majority interest in the franchisee, is convicted of, or pleaded or pleads guilty or no contest to any past, present or future felony; or, is convicted of, or pleaded or pleads guilty or no contest to, a past or future criminal offense related to the franchised business (or any related business such as an accounting practice), including, but not limited to, tax fraud or tax evasion; or, (g) you or your manager underreports your Gross Volume of Business by two percent (2%) or more, on two (2) or more occasions whether or not you subsequently rectify the deficiency; or, (h) you or any of your guarantors, becomes insolvent, makes an assignment for the benefit of creditors, is unable to pay debts as they come due, or a petition under any bankruptcy law is filed by or against you or them; or, (i) you fail to successfully complete any of our required training programs; or, (j) you do not open a franchised location in the Territory by January 8 next following the Effective Date, or you fail to open any of your franchised location(s) on January 8 of any subsequent tax season during the term of this Agreement; or, (k) you or any of your guarantors violates the covenants found in paragraphs 13.3, 14.20, 21, 22 or 23 of this Agreement; or, (l) you or any of your guarantors fails to cure, within the specified cure period, if any, or if no express cure period is specified, within ten (10) days after receipt of notice, a default of any collateral agreement with us, including, but not limited to, any promissory note, sublease, national account agreement, or any agreement with our affiliates, or with a third party for a program that we arrange or sponsor; or, (m) you fail on three (3) or more occasions during any one (1) year period, to timely file the Gross Volume Report or the monthly or annual Profit and Loss Statement covering the franchised business as required in paragraphs 16.2 and 16.3 of this Agreement, regardless of whether these failures were corrected after notice; or, (n) you fail on three (3) separate occasions during any one (1) year period to comply with any one or more provisions of this Agreement, including, but not limited to, obligations to pay when due, royalties and advertising contributions, lease payments, any promissory notes, supply invoices, or other payments, or any payments owed to a third party under any program we arrange or sponsor, regardless of whether these failures were corrected after notice; or, (o) you breach any agreement related to the franchised business, with us or any third party, including, but not limited to, your landlord or your telecommunications provider, or any equipment lessor, or any lender to the franchised business, and you do not cure these breaches within the cure period specified, or if no cure period is specified, within a reasonable time as determined by us; or, (p) you fail to qualify with the IRS or any state tax authority to file tax returns electronically at all your locations by January 8 of your first tax season, or you lose the right to file tax returns electronically with the IRS or any state for any of your locations at any time thereafter; or, (q) you fail to pay any installment on any note with us, whether or not related to this Agreement, or you breach any other franchise agreement or option agreement with us, and we terminate such franchise agreement or option; (in such event, this Agreement and any other franchise agreements or unexpired options, will be terminated immediately upon the termination of such other agreement, and all notes with us will be immediately due and payable); or, (r) you fail to fully cooperate with the audit described in paragraph 17; or, (s) you fail to hold a fall Tax School that complies with our then-current requirements; or, (t) you fail to notify us within the time and manner provided by this Agreement that you want to sign a new franchise agreement, or you fail to meet the requirements to sign a new franchise agreement, including the requirement to return your signed new franchise agreement within 30 days from the date we mailed it to you for your signature. In such event, this Agreement will terminate immediately, without notice or the opportunity to cure, on its expiration date; or, (u) any telephone number for the franchised business is disconnected for more than 48 hours, or is not operating by the time specified in paragraph 14.6 or as required by a national account; or, (v) you conduct any advertising in another franchisee's territory that does not meet our requirements for such advertising. We have the further right to terminate this Agreement immediately upon expiration of the listed cure period if: (w) you fail to submit within five (5) days after written notice, your gross volume report and/or fail to pay us, any sums due under this or any collateral agreement, any note, or under any agreement with any third party for a program we arrange or sponsor; or, (x) you fail to comply with minimum hours requirements within one (1) day after notice during the tax season, or five (5) days after notice during the off season; or, (y) you fail to close any location you establish outside the Territory and remove all signage from that location within three (3) days after notice; or, (z) you fail, within three (3) days after notice, to cease any activity designed to solicit another franchisee's customers, or you fail to transfer any telephone number used in connection with any location established in another franchisee's Territory, to that franchisee with all fees associated with that number paid up to the date of transfer; or, (aa) you commit any act within or without the franchised business that would tend, in our opinion, to reflect poorly on the goodwill of our name or any of our Marks or the system, and you fail to cease this activity or cure this breach within five (5) days after notice; or, (bb) you fail to send us your receipt copy for any unreported returns and pay any fees on the unreported gross volume within five (5) days after notice; or, (cc) you conduct any unapproved advertising more than one time; or (dd) you fail to comply with any other provision, specification, standard, operating procedure or Manual provision, or any law or regulation applicable to the franchised business, or you operate your franchised business in a manner inconsistent with the Marks and you do not rectify the violation within ten (10) days after written notice is delivered; or, (ee) you fail to display, within five (5) days after notice, our then-current exterior lighted sign that meets our specifications, and our then current and approved interior sign package and promotional materials. 24.3. Obligations After Termination or Expiration. After any termination (for any reason, by you or by us), expiration, cancellation or nonrenewal of this Agreement, you must comply with the following obligations: (a) immediately pay all royalty fees, advertising fees, note payments, supply order bills, equipment leases, and any other money due and owing to us or our affiliates, or for any program we arrange or sponsor; and, (b) immediately pay all money due and owing to third parties in connection with the franchised business, including, but not limited to, rental payments, equipment lessors, lenders, utility charges, phone charges, advertising charges, and Yellow Pages advertising fees; and, (c) return to us, originals and all copies of all trade secret and confidential materials and client files, and also delete any of these from your hard drive. This includes, but is not limited to, the following: the Manual, all telephone numbers used in the franchised business, tax preparation software, training materials, processing software, work in progress, all "books" and "archives" program disks, all paper copies of customer tax returns, W2s, 1099s, 8453s, Bank Products paperwork or any other document related to a tax return, electronic filing or any Bank Product, leased equipment from any program we arrange or sponsor, all lists containing customer names, addresses, Social Security numbers; and, (d) return to us or destroy according to our direction, all literature, sign facings, unused advertising materials bearing the Marks; and, (e) stop all use of our Marks or any colorable imitation of them in any business; and, (f) notify the telephone company and all listing agencies that you no longer have the right to use any telephone numbers used or advertised with the Marks, and authorize, on appropriate documents, their transfer to us or our designee; and, (g) immediately cease identifying yourself, your shareholders or guarantors as a present or former Jackson Hewitt franchisee or franchise owner; and, (h) comply with the post-term covenant not to compete found in paragraph 19 of this Agreement, and with any other covenant that requires your performance after termination of this Agreement, including, but not limited to, the covenant not to solicit our customers, the covenant to protect trade secrets, the covenant not to solicit our employees, the covenant to pay penalty and interest for any return prepared in your franchised business, your agreement to cooperate fully in any audit described in paragraph 17, and any covenants applicable to your employees that you are responsible for enforcing; and, (i) provide us, with a complete listing of all your clients, their addresses, Social Security numbers and telephone numbers, and copies of their tax returns and bookkeeping files, and work in progress, which you acknowledge to be our sole property; and, (j) cancel all assumed or fictitious name registrations; and, (k) return to us all leased equipment from any leasing program we arrange or sponsor. 25. STOCK RESTRICTIONS If you are a corporation, or you assign or transfer your interest in this Agreement or issue or sell any additional stock, as provided for in paragraphs 26, 27, 28, 29 and 30 below, the stock certificates must bear the following legend: The sale, transfer, pledge or hypothecation of this stock is restricted pursuant to a right of first refusal, and restrictions on transfer, the terms of which are found in paragraphs 26, 27, 28, 29 and 30 of a Franchise Agreement dated between Jackson Hewitt Inc. and the issuer of shares in the corporation. 26. ASSIGNMENT GENERALLY 26.1. Assignment by Us. This Agreement is fully assignable by us. 26.2. Assignment by You. This Agreement and the franchise it grants is personal to you, and you may only transfer or assign this Agreement, the franchise, or any stock in a corporate franchise, with our prior written approval, and according to the provisions described in paragraphs 27, 28 and 29, below. We reserve the absolute right to disapprove any proposed transfer, transferee, shareholder or partner, for any reason. 27. ASSIGNMENT TO A CORPORATION If you meet the following conditions, you may assign this Agreement, without payment of an initial franchise fee, to a corporation in which you hold at least 51% of the issued and outstanding voting stock: (a) you actively manage the corporation and the franchised business; and, (b) the corporation is newly organized and its activities are confined exclusively to acting as our franchisee under this Agreement; and, (c) the corporation submits the corporate papers we request, and executes our required documentation and returns it to us within 30 days from the date we mailed it to you, in which the corporation agrees to be a party to and be bound by this Agreement; and, (d) you execute our standard guaranty in which you, and all the other corporate officers, directors and shareholders agree to remain personally liable for all obligations found in this Agreement; and, (e) the stock certificates bear the legend contained in paragraph 25, above; and, (f) you pay an amendment fee of $300.00; and, (g) you, your shareholders and your guarantors execute a general release; and, (h) you are in full compliance with all agreements or notes with us and with any third party for a program we arrange or sponsor. 28. TRANSFER WITHOUT CHANGE OF EFFECTIVE CONTROL Your franchise is personal to you and may not be sold or transferred without our prior written approval, but we will permit a transfer of less than a controlling interest in any franchisee, subject to the following conditions: (a) you provide the transferee with our most current disclosure document; and, (b) you are in full compliance with all agreements or notes with us and with any third party for a program we arrange or sponsor; and, (c) you comply with any of our other transfer requirements; and, (d) you and your existing shareholders and guarantors execute a general release; and, (e) the prospective transferee is not operating any business that competes with the franchised business; and, (f) you pay an amendment fee of $300.00; and, (g) you and your transferee executes our required documentation, and returns it to us within 30 days from the date we mailed it to you. 29. TRANSFER OF EFFECTIVE CONTROL 29.1. Requirements. If we believe that the proposed transfer, when aggregated with all previous transfers, results in the transfer of effective control of the ownership or operation of the franchised business, in addition to the provisions contained in paragraphs 25, 26, 27, and 28, above, you must also comply with the following additional provisions: (a) you notify us in writing of the proposed transfer, and provide us with complete details of all transfer terms, including the proposed transferee's name, address, financial qualifications, and business experience for the last five years; and, (b) the proposed transferee completes our application, meets our then-current standards for franchisees, and agrees to become a franchisee at your location or another approved location within your Territory; and, (c) the proposed transferee executes our then-current franchise agreement for a term equal to the remaining term of this Agreement, and executes all other agreements we customarily require of new franchisees; and, (d) you pay us a transfer fee (we do not charge an initial franchise fee for a transfer) equal to ten percent (10%) of our then-current initial franchise fee; and, (e) the transferee agrees to assume and honor any contractual and legal commitments arising from products and services you provided before the date of the transfer, including bills for the telephone number and Yellow Pages advertising used in the franchised business, and equipment leased through any program we arrange or sponsor; and, (f) the transferee agrees to assume any and all penalties and interest liabilities incurred by your clients resulting (in our opinion) from your preparation of any client's tax returns, up to $150 for any one taxpayer; and, (g) the transferee completes our required training programs to our satisfaction; and, (h) you execute our standard guaranty form guaranteeing the performance of all obligations of this Agreement by the transferee; and, (i) you and your guarantors execute a general release. When we consent to a transfer, we are not waiving any claims we have against you, or your guarantors, or our right to demand that you strictly comply with this Agreement or any post termination covenants in this Agreement. 29.2. Sale of Assets to Competitor Not Permitted. Unless we give you our prior written approval, you may not transfer or sell the franchised business or any portion of it, or substantially all of its assets, directly or indirectly to any competitive tax return preparation business unless at least one (1) year has passed after the termination or expiration of this Agreement, and we have elected not to exercise our right of first refusal. 29.3. Sale of Assets Without Transfer of Franchise Not Permitted. Unless we have given you our prior, written approval, you may not transfer or sell substantially all the assets of the franchised business without also conveying the franchised business. 30. RIGHT OF FIRST REFUSAL If under any of the provisions of paragraph 29, above, you propose to transfer or sell your ownership interest in the franchised business or its assets, you must give us a copy of the offer along with all documents expected to be signed either by you or the transferee. We have thirty (30) days after those documents have been delivered to us to exercise our right to purchase the franchised business on the same terms contained in the offer, except that we do not have to match any non-monetary provision. We may substitute cash for any form of payment, and we may substitute a creditworthy substitute purchaser. If we do not exercise our right of first refusal, you may accept the bona fide offer, subject to our prior approval of the person or entity you propose as a new franchisee as provided in this Agreement, and subject to the prohibitions found in paragraphs 29.2 and 29.3 above. 31. DEATH OR DISABILITY 31.1. Management Pending Transfer or Disability. You authorize us to take any steps that we deem necessary to manage your franchised locations, pending an approved transfer according to this paragraph in the event of your death, or if you are otherwise physically or mentally incapable of running the franchised business. We are entitled to receive reasonable compensation for rendering these services. 31.2. Death or Permanent Disability. You acknowledge that this Agreement is personal to you and was granted solely on your qualifications to become our franchisee. If there has been no prior arrangement for the transfer of the franchised business, or the stock of any person owning a majority interest in the franchisee, in the event of death or permanent disability, this Agreement terminates automatically thirty (30) days after your death or permanent disability. Permanent disability occurs when your usual, active participation in the franchised business has ceased for a period of thirty (30) consecutive days. 31.3. Transfer. You may transfer your interest in this Agreement by will or shareholders' agreement to someone to whom the assets of the business have also been transferred or bequeathed, without payment of an initial franchise fee, or transfer fee, subject to the remaining conditions contained in paragraph 29, above. 31.4. Manner of Effecting the Transfer. This Agreement will terminate thirty (30) days after your death or permanent disability, unless your personal representative or guardian notifies us within that time of: (a) the name of the proposed transferee; and, (b) a willingness of the estate or guardian to continue the business. We will then have 150 additional days to approve the proposed transferee, and the personal representative or guardian shall have a concurrent period of time to effect the transfer. The transfer documents shall be approved by us in advance. 31.5. Further Transfer by Transferee. The new franchise agreement signed by the transferee shall not permit further assignment or transfer without payment of an initial franchise fee or transfer fee. 32. INDEMNIFICATION If we or any of our current or former affiliates, assigns, subsidiaries, officers, directors, employees, agents or successors are subjected to any claim, demand, penalty, or become a party to any suit or other judicial or administrative proceeding or investigation (whether formal or informal), or enter into any settlement, by reason of any claimed act or omission by you, your customers, your current or former employees, your officers or directors, or guarantors, or agents, by reason of any act or omission occurring in the franchised business, or by any act or omission with respect to the franchised business, whether resulting from our negligence, that of our current or former affiliates, officers, directors, employees, agents or successors, you and your guarantors shall indemnify, defend, and hold us, our current or former affiliates, directors, officers, employees, agents or successors harmless against all judgments, pre-suit investigation costs, settlements, penalties and expenses, including attorneys' fees, court costs, and other expenses of litigation, incurred or imposed on us or our current or former affiliates, directors, officers, employees, agents or successors, in connection with the investigation or defense relating to the claim or litigation or administrative proceeding brought by or against us for collection of money judgments arising out of the above-recited actions. This indemnity continues after termination or expiration of this Agreement. You must give us notice of any such action, suit, proceeding, claim, demand, inquiry, or investigation as soon as possible. We may voluntarily, but under no circumstances are we obligated to, assume the defense or settlement of the proceeding or claim. We have the sole discretion to choose our own attorneys, and to consent to judgment or agree to settlement, if there are reasonable grounds. 33. CONTRACT INTERPRETATION AND ENFORCEMENT 33.1. Governing Law. This Agreement is accepted by us in the State of Virginia. In any suit, action, or claim brought by you or your guarantors against us, our present or former agents and employees, in any arbitration, court, or other proceeding, and which in any way arises out of, or relates to, your franchise relation with us, including, but not limited to, any and every aspect of the process of entering into the franchise relation, or any guaranty, our performance in connection with this relation, this Agreement, any collateral agreement with us, or any termination, rescission, cancellation, or nonrenewal of the franchise relation, only Virginia law, including Virginia statutes of limitation and repose, shall apply to all claims asserted, whether sounding in tort, contract or otherwise. However, you and we agree that in any suit pending in any state or county court in Virginia which involves the parties to this Agreement, or our current or former agents or employees, deposition transcripts and affidavits may be used by any party in support of a Motion for Summary Judgment, and that this provision shall survive the termination, cancellation, expiration or revocation or other termination of this Agreement. 33.2. Jurisdiction. You and your guarantors consent to venue and personal jurisdiction in all litigation brought by us against you or your guarantors, which in any way arises out of your franchise relation with us, including, but not limited to, any and every aspect of entering into the franchise relation, this Agreement, any guaranty, any collateral agreement with us, or any termination, rescission, cancellation or nonrenewal of the franchise relation, in the following courts: (a) the state or county court of any city or county where we have our principal place of business, (presently, the City of Virginia Beach, Virginia); and, (b) the United States District Court nearest to our principal place of business, (presently the Eastern District of Virginia, Norfolk Division). 33.3. Venue. You and your guarantors agree that in any suit or action brought against us, or our present or former agents and employees, for any reason, that arises out of, or relates to, your franchise relation with us, including, but not limited to, any and every aspect of the process of entering into the franchise relation, this Agreement, any guaranty, any collateral agreement with us, or any termination, rescission, cancellation or non-renewal of the franchise relation, such action shall be brought and venue shall be proper only in the following courts and no others: (a) for cases where federal jurisdiction would not exist if the case were brought in federal court, the state or county court of any city or county where we have our principal place of business (presently, the City of Virginia Beach, Virginia); and, (b) for all other cases, the United States District Court nearest to our principal place of business, (presently the Eastern District of Virginia, Norfolk Division). If any of these courts are abolished, venue shall be proper only in the state or federal court nearest to our principal place of business, and all cases where federal jurisdiction would exist if such case were brought in federal court, must be brought in federal court. In the event the above forum selection clause is declared void or unenforceable, and any motion we bring to change or transfer venue to a court sitting in Virginia is unsuccessful, then you or your guarantors must submit any and all suits, claims and actions against us, our present or former agents and employees, and including any action contesting the validity of this arbitration provision, as described in the above paragraph, to arbitration in the Cities of Virginia Beach or Norfolk, Virginia, or as near thereto as possible, with the American Arbitration Association, in accordance with its rules and regulations; provided, however, that if the forum selection aspect of this arbitration clause is also declared void or unenforceable, then you and your guarantors must submit all suits, claims or actions against us as described in the above paragraph, to arbitration with the American Arbitration Association at a location nearest you. Each claim or controversy will be arbitrated by you on an individual basis, and shall not be consolidated in any arbitration action with the claim of any other franchisee or former franchisee. In any arbitration proceeding between the parties to this Agreement, the parties shall allow and participate in discovery in accordance with the Federal Rules of Civil Procedure, as then in effect in the Eastern District of Virginia. Unresolved discovery disputes may be brought to the attention of the Chair of the arbitration panel, and disposed of by him or her. 33.4. Agent for Service of Process. We appoint the entities found in Exhibit L as our agents for service of process. You appoint: ======================================== ======================================== as your true and lawful agent, to receive service of process in any litigation arising under this Agreement or any collateral agreement. Service upon your agent has the same force and validity as if personal service had been obtained on you, provided that we send you notice of service and a copy of the matter served, via certified mail, or overnight delivery service, addressed to you at the address specified on the Signature Page of this Agreement or any other address you have given us. If you want to change your agent for service of process after the Effective Date of this Agreement, you must notify us by certified mail, return receipt requested, addressed to our Legal Department. 33.5. Waiver of Jury Trial. In any action or suit brought by or against either party to this Agreement (including any action against our agents or present or former employees), any note, or any guarantee or collateral agreement related to this Agreement, that in any way arises out of, or relates to your franchise relation with us, including but not limited to, any and every aspect of the process of entering into such relation, our performance in connection with the franchise relation, this Agreement, any termination, rescission, cancellation or nonrenewal of the franchise relation, any disputes arising out of this Agreement, or any collateral agreement with us, you and we agree that in the event that such action is resolved through a court proceeding, such action shall be tried to a court without a jury, regardless of the venue of such action. - --------------- initials - --------------- initials 33.6. Waiver of Punitive Damages. You, your guarantors and we shall waive to the fullest extent permitted by law, any right or claim for punitive or exemplary damages against the other party (including any claims against our agents or current or former employees), in the event of any dispute between us, that arises out of or relates to your franchise relation, including, but not limited to, any and every aspect of the process of entering into the franchise relation, this Agreement, any collateral agreement with us, our performance in connection with the franchise relation, or any termination, rescission, nonrenewal or cancellation of this franchise relation. Each party shall be limited to the recovery of only the actual damages each may sustain, except that we are entitled to punitive and exemplary damages and injunctive relief if you or your guarantors infringe on any of our Marks. 33.7. No Class Actions. You agree that for our system to function properly, we cannot be burdened with the costs of litigating system-wide disputes. You agree that any dispute between you and us is unique as to its facts, and you shall not institute, join or participate in any class action against us. 33.8. Costs of Enforcement. If we institute any legal or equitable action or arbitration against you or your guarantors or you, or your guarantors institute any legal or equitable action or arbitration against us or our current or former agents and employees, that in any way arises out of or relates to your franchise relation with us, including but not limited to, any and every aspect of the process of entering into such relation, this Agreement, any collateral agreement with us, or any termination, rescission, cancellation or nonrenewal of such relation, and we are the prevailing party in any such proceeding, as the term "prevailing party" has generally and essentially been interpreted in case decisions construing such term under 42 U.S.C. 1988, we are entitled to recover from you or your guarantors, the actual attorneys' fees we incur, as well as the reasonable value of our in-house counsel time, together with court costs and expenses of suit, such as investigation, arbitration fees, audit, professional and witness fees, and the costs of collection of any money judgment rendered against you or your guarantors. 33.9. Construction and Severability. All references in this Agreement to the singular shall apply to the plural where it applies, and all references to the masculine shall include the feminine. If any part of this Agreement is declared invalid, this decision shall not affect the validity of any other part, which shall remain in full force and effect. 33.10. Notices. All written notices permitted or required to be delivered by the terms of this Agreement or the Manual, shall be deemed so delivered when actually received or delivered by hand, telefax, or three (3) days after having been placed in the U.S. mail or one (1) day after having been left with an overnight delivery service or one (1) day after being sent by E-Mail on the Jackson Hewitt network. Notices to us shall be addressed "Attention: President" at our current home office business address or to you at the most current address of which we have been notified in writing or via E-Mail with any of your 3-letter codes. If you refuse to sign for or accept any notice as provided above, or you have moved without giving us a good address, notice will be effective by any means described above to whatever addresses we have. 33.11. Scope and Modification of this Agreement. This Agreement is the entire agreement between us and supersedes all earlier and contemporaneous oral or written agreements or understandings between you and us about this Agreement, including, but not limited to any and all oral or written representations concerning the cost or profitability of this investment. No modification or change to this Agreement shall have any effect unless it is in writing and signed by you and our authorized agent or employee. If we consent to an amendment made at your request, you must pay our then-current amendment fee, and, we may require you and your guarantors to execute a general release of all claims against us, as a condition of granting the amendment. Any amendment you request must be returned to us within thirty (30) days from the date we send it to you. If it is not returned within such time, we are under no obligation to grant the requested amendment. 33.12. Waiver. No waiver by us of any breach or series of breaches of this Agreement shall constitute a waiver of any additional breach or waiver of the performance of your obligations under this Agreement, and no custom or practice of the parties that varies from this Agreement shall prevent us from demanding strict compliance with any term of this Agreement. Our acceptance of any payment from you or our failure, refusal or neglect to exercise any right under this Agreement to insist upon full compliance with your obligations under this Agreement, or with any specification, standard or operating procedure or rule, will not constitute a waiver of any provision of this Agreement. 33.13. Independent Contractors. You specifically agree that you are an independent contractor and that no principal-agent, partnership, employment, joint venture or fiduciary relation exists between you and us. You are solely liable for any damages to any person or property arising directly or indirectly out of the operation of your franchised business. You are solely liable for any taxes levied on you, or any rental or utility payments, or telephone, or advertising or Yellow Pages charges. You are not authorized to make any contract, warranty or representation, or incur any obligation on our behalf. You must enter into all contracts, agreements, purchase orders, and leases with third parties using the name of the entity that signed this agreement. You may not use "Jackson Hewitt Inc.", "Jackson Hewitt" or "Jackson Hewitt Tax Service" or any similar name to enter into any kind of contract or in any dealings with third parties. This Agreement is solely a license to use the name "Jackson Hewitt Tax Service" in a tax return preparation business using our Marks and our operating system. 33.14. Survival of Obligations. The obligations in this Agreement which by their terms require or may require performance after the expiration or termination of this Agreement, including, but not limited to, any personal guaranty or covenant not to compete, are enforceable notwithstanding the expiration or termination, for any reason whatsoever, of this Agreement. 33.15. Counterparts. This Agreement may be executed in any number of counterparts each of which shall be considered an original. 33.16. Damages for Service Mark Infringement and Other Violations. If you violate our federal or common law trademark or service mark rights, our right to injunctive relief shall not preclude our recovery of money damages from you as provided by federal, state or common law. We or our designee may obtain without bond, temporary and permanent injunctions and orders of specific performance: to enforce our exclusive rights in our Marks, your post-termination or expiration obligations, or to prevent an unauthorized assignment or transfer of your franchise, or the unauthorized disclosure of our trade secrets, or to prohibit any act or omission by you or your employees that constitutes a violation of any law or regulation, is dishonest or misleading to any current or prospective customers of the franchised business, constitutes a danger to any other franchisees, employees, customers, or to the public, or that may impair the goodwill of our Marks. 33.17. Effective Date. This Agreement is effective on the date indicated on the Signature Page, only after acceptance and execution by our authorized representative at our principal place of business. 33.18. Acknowledgment. You acknowledge that we or our agents have not made any warranty, or guaranty, express or implied as to the potential volume, profit, income, success or quality of software, advertising, support, the operating system, the business contemplated by this Agreement, or any other matter. You acknowledge that you have conducted an independent investigation about the franchise described in this Agreement and in the Offering Circular, and you recognize that it involves business risks, and that the success of this venture is largely dependent upon your business ability. You acknowledge that your entire knowledge of our income tax software and operating system was derived from information we provided to you and that such information is proprietary and confidential and our trade secret. You acknowledge that our attorneys, accountants or other advisors have not advised or represented you in connection with this Agreement. You also acknowledge that our sales personnel and officers are not authorized to make any claims or statements as to the prospects or chances of success that you can expect or that other franchisees have had, other than what is contained in the Offering Circular. Our sales representatives, officers and employees are not permitted to make such claims or statements, nor are they authorized to represent or estimate, other than any information contained in the Offering Circular, any dollar figures as to specific franchised businesses owned or franchised by us, and we will not be bound by any such statements or representations. You admit that by voluntarily entering this Agreement with us, you are entering into an agreement that is accepted in the State of Virginia, and that you understand that provisions of this Agreement require you to submit to jurisdiction and venue in Virginia courts for any dispute you have with us arising from this Agreement or the process of entering this Agreement or the termination, cancellation or nonrenewal of this Agreement. You acknowledge that in granting this franchise, we have relied on the representations contained in the Confidential Franchise Application, and that you and all your shareholders and partners represent that all information contained in the application, and in any accompanying materials is true and correct and contains no misleading statements, and does not contain any material omissions. You acknowledge that we have provided you with our franchise Offering Circular not later than the earlier of the first personal meeting held to discuss the sale of this franchise, ten (10) business days before execution of this Agreement, or ten (10) business days before you gave us any money or other consideration. You acknowledge that we provided you with a copy of this Agreement and all related documents, with all material terms filled in, at least five (5) business days before you signed it or paid us any consideration. SIGNATURE PAGE - FRANCHISE AGREEMENT - SOLE PROPRIETOR YOU REPRESENT THAT YOU HAVE READ THIS AGREEMENT AND OUR UNIFORM FRANCHISE OFFERING CIRCULAR IN THEIR ENTIRETY, AND THAT YOU HAVE BEEN GIVEN THE OPPORTUNITY TO CLARIFY ANY PROVISIONS AND INFORMATION THAT YOU DID NOT UNDERSTAND, AND TO CONSULT WITH AN ATTORNEY OR OTHER PROFESSIONAL ADVISER. YOU FURTHER REPRESENT AND WARRANT THAT YOU UNDERSTAND THE TERMS, CONDITIONS, AND OBLIGATIONS OF THIS AGREEMENT AND THE FRANCHISE, AND AGREE TO BE BOUND BY THEM. The parties have signed and sealed this Agreement below. FRANCHISER: JACKSON HEWITT INC. By: SEAL Keith E. Alessi, Chairman, President and CEO FRANCHISEE: /s/ SEAL Signature of Sole Proprietor Print Name of Sole Proprietor Home Address of Sole Proprietor ( ) Home Telephone No. of Sole Proprietor Your Entity No., (if known): The Effective Date of this Agreement is: . This Agreement expires at midnight on: . GUARANTY OF FRANCHISEE'S UNDERTAKINGS In consideration of, and as an inducement to Jackson Hewitt Inc. ("Jackson Hewitt"), to execute the Franchise Agreement dated , between , the franchisee, and Jackson Hewitt, the undersigned Guarantor(s) hereby guarantee(s) that franchisee, will timely and fully perform each and every provision, covenant, payment, agreement and undertaking found in the Franchise Agreement, any note, any other collateral agreement with Jackson Hewitt, and any agreement with a third party for any program arranged or sponsored by Jackson Hewitt (the "liabilities"). The guarantee is absolute and continuing, and covers any and all present or future obligations, including all post-termination obligations. In addition, guarantors agree to comply personally with all the following convenants: paragraphs Exclusive Dealing, paragraph 14.20; Covenant Not to Compete, paragraph 19, Covenant Not to Solicit, paragraph 20, Covenant to Protect our Trade Secrets, paragraph 21, Covenant Against Recruiting or Hiring our Employees, paragraph 23, and any other covenants, which by their terms require performance after the termination of the Franchise Agreement. Guarantor(s) acknowledge(s) that Jackson Hewitt, its successors and assigns, may from time to time, without notice to guarantor(s), do any or all of the following: (a) resort to guarantor(s) for payment of any liabilities, whether or not it or its successors have resorted to any property securing any of the liabilities, or proceed against any of the guarantor(s) or against any party primarily or secondarily liable on any of the liabilities covered by this guaranty; (b) release or compromise any liability of any guarantor(s), or the liability of any party who is primarily or secondarily liable on any of the liabilities covered by this guaranty; (c) extend, renew or credit any of the liabilities for any period (whether or not the original period); (d) alter, amend or exchange any of the liabilities; or, (e) give any other form of indulgence, whether under the Franchise Agreement or not. Guarantor(s) waive(s) presentment, demand, notice of dishonor, protest, nonpayment and all other notices whatsoever, including, but not limited to, notice of acceptance, notice of all contracts and commitment, notice of the existence or creation of any liabilities under the Franchise Agreement, and of the amount and terms thereof, and notices of all defaults, disputes or controversies between it and franchisee resulting from the Franchise Agreement or otherwise, and the settlement, compromise or adjustment of any liabilities. Guarantor(s) agree(s) to pay all expenses Jackson Hewitt incurs in attempting to enforce the Franchise Agreement or this guaranty against the franchisee or the guarantor(s), including reasonable attorney's fees, collection agency fees, court costs, witness fees, filing fees if such are incurred in enforcing this guaranty. Guarantors hereby authorize Franchiser to order updated credit reports on Guarantors at any time without notice. Any waiver, extension of time or other indulgence granted from time to time by Jackson Hewitt or its agents, successors or assigns with respect to the Franchise Agreement or this guaranty shall in no way modify or amend this guaranty, which shall be continuing, absolute, unconditional and irrevocable. Guarantors hereby waive any defense arising by reason of any disability, insolvency, lack of authority or power, death, insanity, minority, dissolution or any other defense of Franchisee, any Guarantor, or any other surety or guarantor of the obligations of the Franchise Agreement. In witness whereof, each guarantor has executed and sealed this guaranty under seal effective on the date of the Franchise Agreement. /s/ SEAL /s/ SEAL Signature of Guarantor Signature of Guarantor Address Address ( ) ( ) Home Telephone No. Home Telephone No. /s/ SEAL /s/ SEAL Signature of Guarantor Signature of Guarantor Address Address ( ) ( ) Home Telephone No. Home Telephone No. SCHEDULE A Your Territory SCHEDULE B The Franchisee List the names and addresses of each person owning an interest in this Agreement and the percentage of each person's interest: Attach certified copies of the Articles of Incorporation, By-laws, Corporate Resolutions electing Board of Directors, Officers, and all corporate documents authorizing franchisee to enter into this Agreement, including any document which contains any reference to the transfer restrictions shown on stock certificates. SCHEDULE C Special Stipulations - Sole Proprietor If there is any conflict between the following and the printed provisions of the Franchise Agreement dated , the following Special Stipulations shall control: JACKSON HEWITT INC. FRANCHISEE: /s/ SEAL By: SEAL Signature of Sole Proprietor Keith E. Alessi Title: Chairman, President and CEO Print Name of Sole Proprietor /s/ SEAL Guarantor's signature
SCHEDULE D ELECTION TO EXCLUDE PRE-EXISTING CLIENTS - Sole Proprietor This election is made by , franchisee, ("you" or "your"), and accepted by Jackson Hewitt Inc., ("we", "us" or "our"), on . Before you entered into the Franchise Agreement dated , for the territory known as zip codes: , you engaged in the business of preparing tax returns. Either: 1) you elect to exclude the revenues generated by these clients ("pre-existing clients") from royalties and advertising as provided for by the Franchise Agreement; or 2) you state that you have no pre-existing clients. If you have pre-existing clients, you agree to provide to us on disk, in the format we require, a list of the names and social security numbers of all your pre-existing clients you wish to include as part of this election. We agree that in consideration of the payment of $5.00 per pre-existing client, the revenue generated by the preparation of income tax returns for the pre-existing clients will be excluded from the royalties and advertising described in the Franchise Agreement. You further agree that if you do not: 1) pay the correct fee; and, 2) provide, in the format we require, this information to us at our home office at the earlier of: the date you open for business; or December 19 immediately after the Effective Date, you will lose the opportunity to exclude pre-existing clients from the royalties and advertising fees provided for in the Franchise Agreement. You agree to provide us with periodic sales reports detailing any revenues derived from the pre-existing clients whenever we request them, and that these reports shall be signed and certified by you as true and correct. ***SELECT ONE OPTION ONLY*** I want to exclude pre-existing clients from royalty and advertising fees by paying $5.00 per pre-existing client. JACKSON HEWITT INC. FRANCHISEE: By: SEAL /s/ SEAL Keith E. Alessi Signature of Sole Proprietor Title: Chairman, President and CEO Print Name of Sole Proprietor OR I have no pre-existing clients to exclude from royalty and advertising fees. JACKSON HEWITT INC. FRANCHISEE: By: SEAL /s/ SEAL Keith E. Alessi Signature of Sole Proprietor Title: Chairman, President and CEO Print Name of Sole Proprietor
SCHEDULE E SPECIAL STIPULATION MONTGOMERY WARD - Sole Proprietor This Special Stipulation is entered into between Jackson Hewitt Inc., the franchiser, ("we" "us" or "our") and franchisee, ("you" or "your") and shall control in the event of any conflict between it and the Franchise Agreement dated . Introduction We have acquired the right to operate Jackson Hewitt Tax Service offices in Montgomery Ward department stores ("leased departments") pursuant to the Master License Agreement ("Master License") which is incorporated by reference into this Special Stipulation. The Master License may be modified or extended from time to time. We offer you the right to operate a Jackson Hewitt Tax Service office in the leased department which is designated on the attached Supplement. You acknowledge that this right is subject to the terms of both the Franchise Agreement and the Master License. Because the Master License may, in certain instances, contradict or supersede the Franchise Agreement, we amend the Franchise Agreement as follows: Grant and Terms 1. You agree to operate a Jackson Hewitt Tax Service office in the leased department designated in the attached Supplement, subject to and subordinate to the Master License. In addition to all the other provisions of the Master License, you agree as follows: a. You will fully and timely perform, comply with, and faithfully discharge all our obligations under the Master License that apply to your operation of the leased department. b. You will not do anything or fail to do anything, or permit anything to occur that would constitute a breach of, or default of, the Master License that would permit Montgomery Ward to terminate the Master License with us or with any of our other franchisees. c. You will immediately notify us by telephone, telefax, overnight mail, telegram or other similar means of communication if you receive any notice of default or other notice from Montgomery Ward, and you will promptly forward to us the original of any communication you receive from Montgomery Ward. d. If requested by Montgomery Ward, you agree to execute such additional Supplements or any other agreements as may be required from time to time in order to document the rights of Montgomery Ward, you or us. 2. This Special Stipulation is a sublicense between us as sublicensor and you as sublicensee, and it is not an assignment of the Master License Agreement. In the event of any inconsistency between the Franchise Agreement and the Master License, to the extent that the Master License imposes lesser obligations upon you, the provisions of the Franchise Agreement shall prevail as to you. However, if you are prohibited by the Master License from performing all the obligations contained in the Franchise Agreement, you are required to perform all the obligations contained in the Franchise Agreement that are not prohibited by the Master License. 3. The Master License has an initial term of one (1) year and is renewable for additional one (1) year terms at the option of us or Montgomery Ward upon thirty (30) days written notice prior to the expiration of any then-current term. We make no representations or promises about renewal or extension of the Master License. 4. You are permitted to open a Jackson Hewitt Tax Service office in the leased department during the first tax season (January 8 through April 15) following the Effective Date of the Franchise Agreement. You must notify us each year in a writing received by us no later than December 1 if you wish to operate a Jackson Hewitt Tax Service office in Montgomery Ward for additional tax seasons. If we do not receive notice from you by December 1, we are free to operate or license a third party to operate a Jackson Hewitt Tax Service office in the leased department pursuant to paragraph 2.4 dealing with national accounts of the Franchise Agreement. If you commit to operate in a specific Montgomery Ward store, and you fail to open in that requested store by January 8, we can terminate the Franchise Agreement. Termination of your right to operate, or your election not to operate, from the leased department shall not constitute a default of the Franchise Agreement unless this termination or election results in any other default of the Franchise Agreement. You are required by the Franchise Agreement to open a storefront Jackson Hewitt Tax Service office in your territory no later than the second tax season following the Effective Date of the Franchise Agreement. 5. You must carry whatever insurance is required by Montgomery Ward. The latest requirements are: Workers' Compensation as required by law, Comprehensive General Liability Insurance (including coverage for contractual liability, product liability, and such hazards as false arrest, detention or imprisonment, malicious prosecution, libel, slander, defamation of character, invasion of privacy, and wrongful entry, naming Montgomery Ward and us as additional insureds, with a combined single limit of liability for bodily injury and property damage of not less than $1,000,000. The policy shall provide for 10 days prior notice of any change in the policy for each additional insured. Send your certificate to: Montgomery Ward & Co., Business Ventures, 5-3, 844 N. Larrabee, Chicago, IL 60671, or such other address we or Montgomery Ward provides. 6. Under the Master License, Montgomery Ward will collect all gross income generated by your Jackson Hewitt Tax Service office, retain the fees described on the Supplement in lieu of rent, and a 3% service fee for any sales made on credit cards issued or approved by Montgomery Ward, and remit the balance to us at the end of each fiscal week of operation. The Gross Volume of Business shall include all gross revenues of the leased department prior to deductions imposed by Montgomery Ward under the Master License. Subject to any offsets or deductions permitted by the Franchise Agreement, we agree to remit to you within a reasonable period of time after we receive them, any amounts received by us from Montgomery Ward on your account, less any amounts you owe us under the Franchise Agreement, or any note or for supplies. You may hold Tax School in Montgomery Ward if permitted by the store manager. You must pay a rental to us of $250.00 for Tax School. If permitted by the Montgomery Ward manager, you may have off-floor space for off season hours for $100.00 per month paid to us in advance. 7. Between January 8 and April 15, your Jackson Hewitt Tax Service office must be open for the hours specified in the Franchise Agreement. If your Montgomery Ward store manager requires longer hours than those specified in the Franchise Agreement, you must comply with those hours. Notwithstanding the provisions the Franchise Agreement, you will not be in default of the Franchise Agreement for failure to maintain minimum hours of operation, if such minimum hours of operation are otherwise prohibited by the terms of the Master License or other policies of Montgomery Ward. The parties have signed and sealed below. JACKSON HEWITT INC. FRANCHISEE /s/ SEAL Signature of Sole Proprietor By: SEAL Keith E. Alessi, Chairman, President and CEO Print Name of Sole Proprietor Your Entity No. (if known): MONTGOMERY WARD SUPPLEMENT - Sole Proprietor This Supplement to the Special Stipulation dated , by and between Jackson Hewitt Inc., the sublicensor, and , sublicensee. 1. Effective Date of Supplement: 2. Type of licensed department to be operated in this location: Income Tax Return Preparation 3. License Fee due under Supplement: Thirteen percent (13%) of the Gross Income from $1 to $50,000.00; plus Ten Percent (10%) of all gross income from $50,001.00 to $100,000.00, plus Eight Percent (8%) of all gross income over $100,000.00, plus 3% of all credit card sales. 4. Address of Montgomery Ward store in which or proximate to which this licensed department will be operated: 5. Sublicensee agrees to be bound by all Merchants' Association Rules, Regulations, and By-laws, if any, which now exist, or hereafter are adopted for this location. You have signed this Supplement on . SUBLICENSEE: FRANCHISEE /s/ SEAL Signature of Sole Proprietor Print Name of Sole Proprietor Your Entity No. (if known): SCHEDULE F SPECIAL STIPULATION WAL-MART SEASONAL LOCATION - Sole Proprietor This Special Stipulation is entered into between Jackson Hewitt Inc., the franchiser, ("we" "us" or "our") and franchisee, ("you" or "your") and shall control in the event of any conflict between it and the Franchise Agreement dated . Introduction We have acquired the right to operate Jackson Hewitt Tax Service offices in selected Wal-Mart stores ("Wal-Mart seasonal sites") pursuant to an agreement with Wal-Mart Stores, Inc. ("Wal-Mart Agreement") which is incorporated by reference into this Special Stipulation. The Wal-Mart Agreement (including rental terms) may be modified from time to time. We offer you the right to operate a Jackson Hewitt Tax Service office in the Wal-Mart seasonal site designated on the attached Supplement. You acknowledge that this right is subject to the terms of both the Franchise Agreement and any Wal-Mart Agreement. Because the Wal-Mart Agreement may, in certain instances, contradict or supersede the Franchise Agreement, we amend the Franchise Agreement as follows: Grant and Terms 1. You agree to operate a Jackson Hewitt Tax Service office in the Wal-Mart seasonal site designated in the attached Supplement, subject to and subordinate to the Wal-Mart Agreement. In addition to all the other provisions of the Wal-Mart Agreement and any requirements imposed by Wal-Mart, you agree as follows: a. You will fully and timely perform, comply with, and faithfully discharge all our obligations under the Wal-Mart Agreement that apply to your operation of the Wal-Mart seasonal site. b. You will not do anything or fail to do anything, or permit anything to occur that would constitute a breach of or default of the Wal-Mart Agreement or any requirement of Wal-Mart, which would permit Wal-Mart to terminate the Wal-Mart Agreement with us or with any of our other franchisees. c. You will immediately notify us by telephone, telefax, overnight mail, telegram or other similar means of communication if you receive any notice of default or other notice from Wal-Mart, and you will promptly forward to us the original of any communication you receive from Wal-Mart. d. If requested by Wal-Mart, you must execute such additional Supplements or any other agreements as may be required from time to time in order to document the rights of Wal-Mart, you or us. 2. This Stipulation is a sublicense between us as sublicensor and you as sublicensee, and it is not an assignment of the Wal-Mart Agreement. In the event of any inconsistency between the Franchise Agreement and the Wal-Mart Agreement, to the extent that the Wal-Mart Agreement imposes lesser obligations upon you, the provisions of the Franchise Agreement shall prevail as to you. However, if you are prohibited by the Wal-Mart Agreement from performing all the obligations contained in the Franchise Agreement, you are required to perform all the obligations contained in the Franchise Agreement that are not prohibited by the Wal-Mart Agreement. 3. The Wal-Mart Agreement between us and Wal-Mart is perpetual but is subject to review and revision by Wal-Mart and may be terminated by Wal-Mart at any time. Your right to operate in Wal-Mart expires at the earlier of: the date Wal-Mart terminates our rights to operate in Wal-Mart; October 1 of any year you fail to notify us that you will operate in Wal-Mart for the immediately following tax season; the date your Franchise Agreement is terminated for any reason or when it expires; the date that we are notified by Wal-Mart that your particular location must be closed; or, the date Wal-Mart requests that you be replaced by a different franchisee or by us. In these events, we have all rights available in paragraph 2.4 of the Franchise Agreement. Termination or expiration of your right to operate, or your election not to operate, from the Wal-Mart seasonal site shall not constitute a default of the Franchise Agreement unless this termination or election results in any other default of the Franchise Agreement. 4. If this is your first tax season, you may operate in exclusively from Wal-Mart if you do not have a storefront, and you must operate in Wal-Mart from January 8 through April 15. If you have a storefront, you may elect to operate in Wal-Mart for the entire tax season or only from January 8 through the last weekend in February. If you elect not to operate in Wal-Mart between the last weekend in February and April 15, you must notify us no later than the second Friday in February of this decision. There is no option to operate in any Wal-Mart only between the last weekend in February through April 15. You must open a storefront location no later than January 8 of your second tax season. 5. You must notify us each year in writing accompanied by prepaid rent as described below, received by us no later than October 1 if you wish to operate a Jackson Hewitt Tax Service office in the Wal-Mart seasonal site for the subsequent tax season. If you request a specific Wal-Mart store, and Wal-Mart approves the store for a Jackson Hewitt location, you must be open for business in the requested Wal-Mart by January 8. If you fail to open in the requested Wal-Mart by January 8, we can terminate your Franchise Agreement. 6. Under the Wal-Mart Agreement you will pay us the following fees or such other fees as established by Wal-Mart: Supercenter Wal-Mart. If you occupy a Wal-Mart Supercenter, your rent is: From January 8 through the last Saturday in February: $3500.00; and, From the last Saturday in February through April 15 or the last day of tax season if April 15 is on a weekend: $2000.00. Regular Wal-Mart. If you occupy a regular Wal-Mart, your rent is: From January 8 through the last Saturday in February: $2750.00; and, From the last Saturday in February through April 15 or the last day of tax season if April 15 is on a weekend: $1600.00. Hometown Wal-Mart. If you occupy a Hometown Wal-Mart, your rent is: From January 8 through the last Saturday in February: $1,000.00; and, From the last Saturday in February through April 15 or the last day of tax season if April 15 is on a weekend: $500.00. You must pay us an amount equal to the full rent for the period from January 8 through the last Saturday in February no later than October 1 of each year in order to use the Wal-Mart site. 7. Between January 8 and April 15, your Jackson Hewitt Tax Service office must be open for the hours specified in the Franchise Agreement. If your Wal-Mart store manager requires longer hours than those specified in the Franchise Agreement, you must comply with those hours. Notwithstanding the provisions of the Franchise Agreement, you will not be in default of the Franchise Agreement for failure to maintain minimum hours of operation, if such minimum hours of operation are otherwise prohibited by the terms of the Wal-Mart Agreement or other policies of Wal-Mart. 8. You acknowledge that the location in Wal-Mart for the franchised business will be selected solely by Wal-Mart. 9. You must have the following insurance to operate in Wal-Mart: Product Liability with limit of $500,000 and General Liability covering both bodily injury and property damage with a limit of $500,000. You must list Wal-Mart as an additional insured and present whatever proof of insurance is required by Wal-Mart. You must send your proof of insurance to us and not to Wal-Mart. 10. You and your employees shall not be considered Wal-Mart employees, and you shall not be eligible for any discounts or other benefits available to Wal-Mart employees. You may never solicit Wal-Mart employees to work for you. 11. You shall maintain a pleasant and courteous attitude toward all customers and you shall comply with all Wal-Mart Rules and Regulations, specifically as they apply to refund policies. The parties have signed and sealed below. SUBLICENSOR SUBLICENSEE JACKSON HEWITT INC. /s/ SEAL Signature of Sole Proprietor SEAL Keith E. Alessi, Chairman, President and CEO Print Name of Sole Proprietor Your Franchise Entity No. (if known): WAL-MART SEASONAL SITE SUPPLEMENT - Sole Proprietor This Supplement to the Wal-Mart Special Stipulation dated , by and between Jackson Hewitt Inc., the sublicensor, and , sublicensee. 1. Effective Date of Supplement: 2. Type of licensed department to be operated in this location: Jackson Hewitt Tax Service 3. License Fee due under Supplement: From January 8, through the last Saturday in February: $3500.00 for Supercenters, $2750.00 for regular Wal-Marts and $1,000.00 for Hometown Wal-Marts; and from the last Saturday in February through April 15, or the last day of tax season if April 15 is on a weekend or holiday: $2000.00 for Supercenters, $1600.00 for regular Wal-Marts and $500.00 for Hometown Wal-Marts. You must pay us the full rent for the period from January 8 through the last weekend in February no later than October 1. We will apply this money to the rent. 4. Address of Wal-Mart store in which or proximate to which this seasonal site will be operated: 5. Sublicensee agrees to be bound by all Merchants' Association Rules, Regulations, and By-laws, if any, which now exist, or hereafter are adopted for this Wal-Mart seasonal site. You have signed and sealed this Supplement on . SUBLICENSEE: FRANCHISEE /s/ SEAL Signature of Sole Proprietor Print Name of Sole Proprietor Your Entity No. (if known): PROMISSORY NOTE - EXHIBIT B - Sole Proprietor City and State Date $ Territory(ies): For value received, the undersigned promises to pay to the order of Jackson Hewitt Inc. at 4575 Bonney Road, Virginia Beach, Virginia 23462, or at the holder's option, at such other place as may be designated from time to time by the holder, the amount of ($ ) with interest at the rate of Twelve Percent (12%) per annum on the unpaid principal computed from the date provided above. This Note shall be payable in ____________ equal annual installment(s) of principal and interest each in the amount of $ plus interest. The first/only installment shall be due and payable on February 28, _______. The final installment shall be due and payable on February 28, ______. This Note may be prepaid without penalty. This Note is due and payable upon the sale of all or any part of the franchised business. The undersigned and any holder hereby waives presentment, demand of payment, notice of nonpayment, notice of protest and does hereby agree to all extensions and renewals of this note, without notice. This Note shall immediately become due and payable, without notice or demand, upon the following: (1) you fail to pay any part of this Note; (2) you are in default of any franchise agreement with Jackson Hewitt; (3) you are in default of any other agreement or note with Jackson Hewitt, or in default of any agreement with any third party for any program sponsored or arranged by Jackson Hewitt; (4) you file bankruptcy or any bankruptcy petition is filed against you, or a receiver is appointed over any portion of your assets; or, (5) there is any reorganization or merger or consolidation of the undersigned (or making any agreement therefor) without holder's prior written consent. Maker has signed and sealed below. /s/ SEAL Maker, Sole Proprietor's Signature Print Name of Sole Proprietor Home Address of Sole Proprietor STATE OF: COUNTY/CITY OF: The foregoing instrument was acknowledged before me this day of , 19 by . SEAL Notary Public My commission expires: SECURITY AGREEMENT - EXHIBIT C - Sole Proprietor This Security Agreement ("Agreement") is between ("Owner") and Jackson Hewitt Inc. ("Jackson Hewitt"). SECURITY INTEREST. As consideration for financing, or refinancing, or restructuring, and for use of the Jackson Hewitt operating system and service marks and for credit extended for payments due under the Franchise Agreement or any ancillary agreement, Owner hereby grants to Jackson Hewitt, a security interest in the following accounts receivable: monies transferred electronically to Jackson Hewitt by any Bank Products provider on behalf of Owner (the "Bank Payment File"), any monies deposited in a Jackson Hewitt bank account by any national account or other entity on behalf of Owner, and all proceeds thereof (the "Collateral"), generated from the Jackson Hewitt Tax Service business operated under any Franchise Agreement with Jackson Hewitt. OBLIGATIONS SECURED. Owner gives Jackson Hewitt a security interest in the Collateral to secure repayment of all loans made by Jackson Hewitt to Owner, both now and at any time in the future, and for all amounts due Jackson Hewitt under any Franchise Agreement for royalties and advertising fees, and for all supply orders, and for all furniture and equipment lease payments on any lease program sponsored by Jackson Hewitt, regardless of amount, whether matured or unmatured, absolute or contingent, and however evidenced. This includes, but is not limited to: (a) future loans and advances made by Jackson Hewitt (even if not currently contemplated and even if made after all current obligations have been repaid); (b) all liabilities to Jackson Hewitt now existing or later incurred, whether owing originally to Jackson Hewitt or purchased by Jackson Hewitt from a third party; (c) the performance of this Agreement; (d) all expenditures by Jackson Hewitt for maintenance and preservation of this and other collateral of Owner, and all costs and expenses incurred by Jackson Hewitt in the collection and enforcement of any obligations of Owner to Jackson Hewitt. OWNERSHIP. Owner is now, or will soon become, the sole owner of the Collateral with good and marketable title to same, and absolute right to grant a security interest in or assign all of the same to Jackson Hewitt. The Collateral is free from any prior lien, security interest, other encumbrances or interest of any other person. NATURE OF THE COLLATERAL AND RESIDENCE. The Collateral will primarily be used to operate a Jackson Hewitt Tax Service location. Owner's principal place of business is: which is located in the City of and County of and State of . FINANCING STATEMENTS AND OTHER DOCUMENTS. No other financing statement covering any of the Collateral or any proceeds thereof, is on file in any public office, except as disclosed to Jackson Hewitt in writing. Owner acknowledges that the Collateral is in the possession of Jackson Hewitt, however to the extent any Financing Statement is required, whenever requested, Owner will execute and deliver to Jackson Hewitt such Financing Statements or other documents which Jackson Hewitt believes are appropriate to create, preserve, perfect, or validate its security interest in the Collateral, or to enable Jackson Hewitt to exercise or enforce its rights with respect to this security interest. Owner will reimburse Jackson Hewitt for all expenses incurred in the filing of any financing statements and other documents and for filing termination statements or other releases. ENCUMBRANCE AND SALE OF COLLATERAL. Until this Agreement is terminated by Jackson Hewitt, except as explicitly authorized elsewhere in this Agreement, Owner will not, without the prior written consent of Jackson Hewitt, sell, lease, give away or otherwise dispose of, transfer, or encumber any of the Collateral. The proceeds of any such disposition shall be given to Jackson Hewitt immediately in the form received; however, doing so will not preclude Jackson Hewitt from exercising any other default rights it deems appropriate under this agreement or any Franchise Agreements. NATURE OF INTANGIBLES. The Collateral is and will continue to be: (a) genuine and legally enforceable, and in compliance with all applicable laws; (b) not subject to any assignment, claim or security interest of a person other than Jackson Hewitt, unless otherwise specified in this Agreement; (c) not in default; and, (d) not subject to any conditions as to performance, setoff, credit, deduction, defense, stay of enforcement, or counterclaim. Owner's interest in the Collateral and in any security for it has been (and will be) properly perfected by the filing or recording of all necessary financing statements, or other documents in the appropriate public offices. If the Collateral arose in connection with the services provided by Owner, the services have been completely performed by Owner. Owner has complied and will comply with all applicable federal and state statutes and regulations. Upon request, Owner will provide Jackson Hewitt with such evidence of performance and of compliance with such laws and regulations as Jackson Hewitt may reasonably request. INSURANCE AND TAXES. Owner will promptly pay when due all taxes, charges, liens and assessments against the Collateral. Upon failure of Owner to do so, Jackson Hewitt, may at its option, pay any of them, and shall be the sole judge of their legality or validity and the amount necessary to discharge them. If Jackson Hewitt makes any such payment on behalf of Owner, Owner shall immediately pay such amounts to Jackson Hewitt on demand. Failure to do is a default of this Agreement and such amounts will be added to the secured debt. MAINTENANCE OF RECORDS. Owner will maintain at its own expense, complete and current records, in such form and detail as Jackson Hewitt may reasonably require, of all Collateral, including, but not limited to, records of all payments received and credits granted. Jackson Hewitt or its agent, may at any reasonable time, inspect the Owner's books and records concerning the Collateral, and Owner, at its own expense, shall deliver any accounts, books and records to Jackson Hewitt or any designated agent of Jackson Hewitt at any time upon request. This covenant is in addition to any similar requirements contained in the Franchise Agreements. ENFORCEMENT, COLLECTION, APPLICATION OF PROCEEDS. Owner shall remain liable to observe and perform all covenants under any agreement relating to the Collateral, and Jackson Hewitt shall under no circumstances, be obligated to perform any of the obligations of Owner related to the Collateral. Owner hereby authorizes Owner's Bank Products provider to transmit Owner's Computer Bank File to Jackson Hewitt. Jackson Hewitt will apply these monies to any amounts overdue or presently due and owing, and/or to the non-overdue indebtedness according to the Schedule found on Exhibit A. The portion of these funds which Jackson Hewitt elects not to retain for application to the secured debt will be paid to Owner. Jackson Hewitt will not pay interest on any monies remitted to Owner. If Owner is in default as described below in this Agreement, Jackson Hewitt, at its sole option, may enforce its remedies listed under "Default Rights" below. PERFORMANCE BY JACKSON HEWITT. If Owner fails to do anything it has agreed to do in this Agreement, or if Jackson Hewitt believes that Collateral or Jackson Hewitt's interest in the Collateral is in jeopardy, Jackson Hewitt may do anything it believes appropriate to remedy Owner's failure, or to protect the Collateral or Jackson Hewitt's interest in the Collateral. All advances, charges, costs, and expenses, including reasonable attorneys' fees, incurred or paid by Jackson Hewitt in exercising or protecting any right, power, or remedy conferred by this Agreement, or by law, or by any Franchise Agreements, or other agreement related to any Franchise Agreements, or the enforcement thereof, shall become part of the secured debt and shall be paid by Owner to Jackson Hewitt immediately and without demand with interest at the highest rate allowed by law. If not immediately paid, Jackson Hewitt may add all such amounts to the outstanding balance of any loan Owner may have with Jackson Hewitt, and Owner will pay Jackson Hewitt interest on such amount at the rate then in effect on the loan. DEFAULT. Each of the following is an event of default: (a) failure to pay when due any portion of the secured debt, or any default under the terms of any agreement with us or our suppliers, including the Franchise Agreements; (b) Owner's failure to perform any promise or other obligation to Jackson Hewitt under this Agreement; (c) death, dissolution, merger or consolidation of the Owner; (d) Owner's failure to pay debts as they generally come due, or the filing of a petition under any provision of the Bankruptcy Code or other insolvency law, or the assignment for the benefit of creditors by or against the Owner; (e) entry of a judgment against Owner or the issuance of any attachment levy or garnishment against Owner or property of Owner; (f) a determination by Jackson Hewitt that any representation made in connection with the Collateral or this agreement or the franchise application by or on behalf of Owner, was false or inaccurate in any material respect; (g) loss or encumbrance of, or attachment against, any of the Collateral; (h) failure to comply with any non-monetary obligation contained in the Franchise Agreement(s); or, (i) a determination by Jackson Hewitt that it is insecure. DEFAULT RIGHTS. Upon the occurrence of any event of default, and at any time thereafter, Jackson Hewitt may, without prior notice, hearing or judicial process; at the same time or different times, and in any order and as frequently as Jackson Hewitt desires: (a) declare all or any portion of the obligation secured by this agreement immediately due and payable and proceed to enforce payment of those obligations; (b) apply any of the Collateral without prior notice to any amounts due and owing under the Franchise Agreements or any collateral agreement, without hearing or judicial notice; (c) cause any Collateral to be transferred to Jackson Hewitt's name or the name of its nominee or to any other person; (d) exercise as to any Collateral all the rights, powers and remedies of any owner; (e) exercise any rights and remedies provided by the Virginia Uniform Commercial Code as well as all other rights or remedies possessed by Jackson Hewitt under this agreement or otherwise. Owner agrees that Jackson Hewitt's right to repossess the Collateral will be a right of possession better than that of any other person in possession of the Collateral. Jackson Hewitt may apply the proceeds of the Collateral to any of the secured debt in any way that Jackson Hewitt sees fit. Jackson Hewitt does not have to take any action against any other person or property before using the Collateral to satisfy the secured debt. If notice is required by law, Owner agrees that reasonable notice is given if mailed to Owner's last known address on Jackson Hewitt's records, or given in any other reasonable manner, three days in advance. Any collection costs, or attorneys' fees actually incurred will become part of the secured debt. MISCELLANEOUS. Jackson Hewitt may make additional loans or increase the credit limit on any line of credit to Owner, or refinance or extend the existing financing, in any amount without notice, without Owner's consent and without releasing or otherwise affecting the security interest given to Jackson Hewitt in the Collateral. Each and every right granted to Jackson Hewitt under this agreement or any other agreement, or allowed to Jackson Hewitt in law or equity, shall be cumulative and may be exercised from time to time, at the same or different times, and in any order Jackson Hewitt desires. No failure of Jackson Hewitt to exercise, and no delay in exercising any right, shall operate as a waiver thereof, nor shall any single or partial exercise by Jackson Hewitt of any right preclude other or future exercise thereof, or the exercise of any other right. The security interest, rights and remedies granted to Jackson Hewitt under this Agreement are in addition to any other rights, collateral, or other remedies which Owner has granted or may in future grant to Jackson Hewitt by any other instrument or through the delivery of any paper, or other collateral. The terms of this agreement shall be binding upon the heirs, personal representatives, successors and assigns of Owner and Jackson Hewitt. No part of this agreement will be affected because any other part is unenforceable. All terms used in this Agreement which are defined in the Virginia Uniform Commercial Code shall have the meaning therein as in such code. This Agreement will be governed by and interpreted according to the law of the Commonwealth of Virginia. Executed and sealed on . /s/ SEAL Owner Print Name Your Entity No.(if known): EXHIBIT A Exhibit D CONFIDENTIAL FRANCHISE APPLICATION 4575 Bonney Road Virginia Beach, VA 23462 (800) 277 - 3278 Fax: (757) 490-7117 Name______________________________________ Address _________________________________________________ City______________________________________ State __________ Zip ______ Marital Status [ ]M [ ]S [ ]D Phone/Work_______________________________________ Phone/Home _______________________________________ Social Security Number _____________________________________________________________________________ Education-Circle Highest Grade Completed: 8 9 10 11 12 College: 1 2 3 4 Adv. Degree Grad. Date _________ School/Major ___________ Employer _________________________ Position ________________________ Supervisor ______________________ Years There __ Prev Emp _________________________ Position ________________________ Supervisor ______________________ Years There __ May We Contact The Employers Listed Above? __________________________ Have You Ever Been Bonded?_______________________ Other Business-Are You The Principal In Any Other Venture? If So, Please Describe_______________________________________ ________________________________________________________________________________________________________________________ Have You Ever Operated A Small Business Before?_________________________________________________________________________ Have You Ever Been Declared Bankrupt? If So, Please Describe____________________________________________________________ ________________________________________________________________________________________________________________________ Are You A Participant In Any Legal Actions? Have You Ever Been Convicted Of A Felony? If So, Please Describe____________ ________________________________________________________________________________________________________________________ Are You Aware Of Any Reason Why The I.R.S. Will Not Approve You To File Tax Returns Electronically? For Example, Have You Filed All Your Personal And Business Tax Returns, Including Withholding Taxes For Your Employees, And Paid All Taxes Due?_____ If Not, Please Provide All Details______________________________________________________________________________________ Personal Financial Statement As Of ____________________ ASSETS Cash On Hand/Account/Money Mkt./CD's _______________ Stocks/Bonds/Securities _______________ Real Estate (Home) _______________ Real Estate (Other) _______________ Notes Receivable _______________ Automobiles _______________ Other Personal Property _______________ Other Assets _______________ Total Assets_______________ LIABILITIES _______________ Notes Payable _______________ Accounts and Bills Due _______________ Mortgages (Home) _______________ Mortgages (Other) _______________ Taxes Payable _______________ Other Debts ______________ _______________ __________________________ _______________ __________________________ _______________ Total Liabilities_______________ Net Worth (Total Assets Minus Total Liabilities) ____________________ Cash Available For Investment In This Business_____________ If You Do Not Have The Cash Now, How Do You Plan To Raise The Capital?_____________________________________________________________________________________________ List Sources Of Income (Annual Amounts) Salary + Bonuses + Int & Div + Rent + Other = Total For Self And Spouse Combined ______ _______ _________ ____ _____ _____ CREDIT REFERENCES Bank _____________________________________ Contact __________________________________ Phone_____________________________ Other _____________________________________ Contact __________________________________ Phone_____________________________ OTHER PERTINENT INFORMATION How Many Hours Will You Have Each Week During Tax Season To Devote To Your Franchise?_____________________________________ Will You Manage This Franchise Yourself? [ ] Y [ ] N ... If No, Give Interested Manager's Name and Phone_________________ __________________________________________________________________________________________________________________________ Are You Interested In Acquiring More Than One Franchise Territory At This Time? [ ] Y [ ] N ... If So, How Many?__________ List Desired Territories In Order Of Preference 1_________________________________ 2_______________________________ 3_________________________________ 4_________________________________ 5_______________________________ What Type Of Entity Will Be Operating Your Franchise? [ ] Sole Proprietorship [ ] Partnership [ ] Corporation If Not A Sole Proprietorship, Provide Name/Address/Phone Of Other Principals: Name______________________________ Address_____________________________________________________ Phone___________________ Name______________________________ Address_____________________________________________________ Phone___________________ Name______________________________ Address_____________________________________________________ Phone___________________ Name And Address Of Lawful Agent_________________________________________________________________________________________ PROCESSING OF APPLICATION This application shall be reviewed by Jackson Hewitt's franchise approval committee within 30 days of receipt of a satisfactorily completed application. At the option of Jackson Hewitt, an interview between the applicant and a committee representative may be required prior to a committee decision. If Jackson Hewitt fails within 30 days to notify applicant in writing that this application is either accepted or rejected, then it shall be deemed rejected. The final completion of the Franchise Agreement along with the payment in full of all initial fees must be made within thirty (30) days of the acceptance date of this application. Jackson Hewitt has the absolute right to approve or disapprove this application and to withdraw approval at any time before it executes the Franchise Agreement. A franchise to operate a Jackson Hewitt location will be granted, if at all, only pursuant to a separate and fully executed and delivered Franchise Agreement. If the approved applicant fails to execute the Franchise Agreement within the agreed time period, then Jackson Hewitt has the right to deem this application cancelled by the applicant. THE UNDERSIGNED hereby authorizes Jackson Hewitt to make inquiries, obtain credit reports, and contact individuals, whether listed or not, for the purpose of evaluating the undersigned's qualifications to own and operate a Jackson Hewitt franchise, and the undersigned further agrees to hold Jackson Hewitt or it agents harmless from any liability in connection with its inquiries. THE UNDERSIGNED hereby warrants that the statements contained in this application are full, true, complete and not misleading, and nothing has been omitted affecting the credit status of the applicant. Agreed To And Accepted This ______________________ Day Of ___________________________ , 19 ______ ________________________________________ _________________________________________ Print Name Signature
EXHIBIT E - Exhibit E is Blank EXHIBIT F -PRESENT & FORMER FRANCHISEES This Exhibit provides the names, addresses and telephone numbers to all locations by media market or Designated Market Area (DMA) that operated during the most recent tax season. Line 1: Designated Market Area, e.g., Albany-Schenectady-Troy. Line 2: 1st Entry: Entity Number, e.g., 5000 or 0784. All company stores are 5000 and each franchisee has its own Entity number. All of a particular franchisee's locations are contained under one Entity Number, even if the franchisee has more than one franchise agreement or more than one location. 2nd Entry: Entity's Name. Jackson Hewitt Inc. in this space means it is a company location. Some of our officers own franchises. Chestax, Inc. is owned by Christopher Drake, our Controller; P.T. Tax is owned by Patricia Robertson, one of our Regional Directors. Line 3: 1st Entry: Territory Designation, e.g., NY126. If an Entity has more than one Territory designation, that indicates that it has more than one franchise agreement. 2nd Entry: Kind of location, e.g., Montgomery Ward, Wal-Mart. 3rd Entry: Telephone number and address of each location. A * means it is a year-round location. A list of franchisees who left the system from May 1996 through May 1997, and those who have not communicated with us within the 10 week period before the application date is found at the end of this Exhibit. We have also included a list of those who purchased a franchise but who have not yet opened for business. All franchisees are required by the franchise agreement to offer customers the services that we require. All franchisee services must meet our quality standards and specifications. Therefore, all of the offices listed offered substantially the same services to the public. Jackson Hewitt Tax Service 05/01/96 04/30/97 Office Locations Report ALBANY-SCHENECTADY-TROY 0784 Lcb Tax Associates, Inc. NY126 Storefront (518)869-8427 1 Crossgates Mall Road, Albany, NY 12203 NY131 Storefront (518)785-1195 Latham Circle Mall 800-51 New Loudo, Latham, NY 12110 NY131 Storefront (518)371-1312 1718 Route 9, Clifton Park, NY 12065 NY784 Storefront *(518)452-1284 1843 Central Ave., Albany, NY 12205 NY784 Storefront (518)434-0478 265 Central Ave, Albany, NY 12206 NY902 Storefront (518)266-9800 120 Hoosick St., Troy, NY 12180 NY902 Wal-Mart (518)286-2530 279 Troy Rd, Rensselaer, NY 12144 NY928 Storefront (518)370-3979 Rotterdam Square Mall, Rotterdam, NY 12303 NY928 Montgomery Ward (518)382-7234 Mohawk Mall Avenue, Schenectady, NY 12304 NY934 Storefront (518)372-4941 1100 State Street, Schenectady, NY 12307 0809 Chatham Tax Service NY901 Storefront *(518)392-6420 9 Railroad Ave., Chatham, NY 12037 NY901 Wal-Mart (518)828-8477 351 Fairview Ave, Hudson, NY 12534 1276 Diane Wood NY048 Storefront *(518)725-6999 42 North Main Street, Gloversville, NY 12078 ALBUQUERQUE-SANTA FE 1184 The Gato Negro Co. NM021 Storefront *(505)473-4484 2446 Cerrillos Road, Santa Fe, NM 87505 1273 Kathy Kege NM029 Storefront *(505)275-0362 11247 Menaul Blvd. NE, Albuquerque, NM 87112 1606 Anderson Tullie AZ305 Storefront *(520)871-4203 264 Junction Hwy 264 & Rt 12, Window Rock, AZ 86515 1793 Ronald & Claudia Weber NM000 Storefront *(505)875-1040 6615 Menaul Blvd NE, Albuquerque, NM 87110 NM000 Montgomery Ward (505)884-3799 90 Winrock Center, Albuquerque, NM 87110 NM008 Storefront *(505)891-4221 1463 Rio Rancho Blvd SE Suite D-1, Rio Rancho, NM 87124 NM008 Storefront *(505)891-4221 2501 Southern Blvd S.E., Rio Rancho, NM 87124 ALEXANDRIA, LA 1671 Hughes Investments, Inc. LA218 Storefront *(318)484-6128 217 Macarthur Drive, Alexandria, LA 71302 LA218 Wal-Mart (318)484-6128 2601 S. McArthur Dr., Alexandria, LA 71301 ATLANTA 0795 IBL, Inc. GA265 Storefront *(770)435-6195 3260-E South Cobb Drive SE, Smyrna, GA 30080 GA265 Check Cashers (770)435-6195 2435 Martin Luther King Drive, Atlanta, GA 30311 GA265 Check Cashers (770)435-6195 2100 Campbellton Road SW, Atlanta, GA 30311 GA265 Check Cashers (770)435-6195 2620 Cobb Parkway, Smyrna, GA 30080 GA267 Storefront *(404)351-6195 2555 Bolton Rd. #11, Atlanta, GA 30318 GA267 Check Cashers (404)799-9070 801 James Jackson Pwy, Atlanta, GA 30318 0855 Lillie Fuller GA524 Storefront *(706)845-8574 900-A Hogansville Rd., Lagrange, GA 30241 0856 Leslie Knight GA102 Storefront *(770)446-6644 2040 Beaver Ruin Road Ste 6, Norcross, GA 30071 0864 Tax Doctor, Inc. GA006 Storefront *(770)454-6005 5855 Buford Hwy., Doraville, GA 30340 GA006 Storefront (770)454-6005 5271 Jimmy Carter Blvd, Norcross, GA 30093 0946 Tax Advantage, Inc. GA224 Storefront *(404)528-9893 1151 Powder Springs St. SW, Marietta, GA 30064 0950 Robert W. Duvall GA207 Check Cashers *(770)947-1815 6239 Fairburn Rd, Douglasville, GA 30134 GA253 Storefront *(770)948-4550 901 Bankhead Hwy. S.W., Mableton, GA 30059 0953 FDC, Inc. GA205 Storefront *(404)292-0250 5895 Memorial Dr. Suite C, Stone Mountain, GA 30083 1111 Dupree, Phillips, Maynard GA551 Storefront *(770)471-1144 8554 Tara Boulevard, Jonesboro, GA 30236 1185 Robert Lipscomb GA233 Storefront (404)633-1069 3267 Buford Hwy #730b, Atlanta, GA 30329 GA550 Storefront (770)786-9808 3158 Highway 278, Covington, GA 30209 GA552 Wal-Mart (770)506-8070 Hwy 138 31 Mays Cros. Shp. Ctr., Stockbridge, GA 30281 1186 Susan Wickham GA004 Check Cashers (404)363-4300 20 Forsyth, Atlanta, GA 30303 GA008 Storefront (404)767-6647 2791 Main Street, Eastpoint, GA 30344 GA008 Check Cashers (404)363-4300 3123 Main Street, Eastpoint, GA 30344 GA009 Storefront *(404)363-4300 4861 Jonesboro Rd, Forest Park, GA 30050 GA009 Storefront (404)361-8500 3852 Jonesboro Rd, Atlanta, GA 30050 1334 Todd Ivory GA299 Storefront *(404)994-6680 5685-C Riverdale Rd,, College Park, GA 30349 GA299 Check Cashers (770)994-6680 4780 Jonesboro Rd., Union City, GA 30291 GA299 Wal-Mart (770)964-6921 4700 Jonesboro Rd., Union City, GA 30291 1520 Louis Pierce GA015 Wal-Mart (770)994-1966 7055 Hwy. 85, Riverdale, GA 30274 GA297 Storefront *(770)487-0018 255 Hwy 74 N Suite #3, Peachtree City, GA 30269 GA298 Storefront *(770)502-0026 261 Temple Ave., Newnan, GA 30263 1549 Herbert Bearden DBA Sage Commu GA200 Storefront *(404)286-4656 1781 Candler Rd., Decatur, GA 30032 GA200 Check Cashers (404)286-4656 4496 Glenwood Road, Decatur, GA 30032 GA200 Check Cashers (404)286-4656 4735 Memorial Drive, Decatur, GA 30032 GA200 Check Cashers (404)286-4656 2032 Candler Road, Decatur, GA 30032 1778 William J. Ayers GA296 Storefront *(770)258-4330 111 Wedowee Street, Bowdon, GA 30108 GA296 Wal-Mart (770)214-8700 1301-A South Park St., Carrolton, GA 30117 1817 James J. Meme, Sr. and Regina GA286 Storefront (706)632-1249 3700 East First, Blue Ridge, GA 30513 ATLANTA 1826 Sherman P. Hardy GA011 Storefront (404)691-7900 3581 Mlk Jr. Dr. Sw., Atlanta, GA 30331 5000 Jackson Hewitt Inc. GA106 Storefront *(706)546-1200 191 Alps Road, Athens, GA 30606 AUGUSTA 1555 Mona Martin SC002 Copy, Pack, & Ship *(803)642-9933 2035 Whiskey Rd, Aiken, SC 29803 1613 Douglas R. Duncan, Jr. GA535 Storefront *(706)855-6726 4115 Columbia Drive Suite 10 B, Martinez, GA 30907 GA535 Montgomery Ward (706)855-6726 Regency Mall 1700 Gordon Highway, Augusta, GA 30904 GA562 Wal-Mart (706)855-6726 2205 Harrison Rd., Thomson, GA 30824 GA567 Storefront (706)855-6726 564 Broad Street, Augusta, GA 30901 GA568 Wal-Mart (706)855-6726 3209 Deans Bridge Road, Augusta, GA 30906 SC236 Storefront (706)819-1336 115 Edgewood Drive, North Agusta, SC 29841 AUSTIN 0954 Roger F. Fleshman TX157 Storefront *(512)443-8503 6800 Westgate Blvd, Austin, TX 78745 1293 Checkmark, Inc. TX156 Storefront (512)478-6324 2514 B East 7th Street, Austin, TX 78702 TX156 Copy, Pack, & Ship *(512)926-3278 1144 Airport Blvd. #640, Austin, TX 78702 TX160 Wal-Mart *(512)255-2679 2701 S. Ih35, Round Rock, TX 78664 TX169 Copy, Pack, & Ship *(512)444-7225 516 E. Oltorf, Austin, TX 78704 TX170 Wal-Mart (512)926-3278 5015 I-35 So., Austin, TX 78744 1389 Alexis L. Wright TX449 Storefront *(512)392-0207 200 Springtown Way #433, San Marcus, TX 78666 1458 Mickey P. & Diane Jordan TX075 Storefront *(512)451-3278 5203 Cameron Rd., Austin, TX 78723 TX151 Storefront (512)219-0718 13492 Research Blvd, Austin, TX 78750 TX151 Storefront *(512)302-1047 6401 Burnet, Austin, TX 78757 TX167 Storefront (512)832-5656 9515 N. Lamar Ste #114, Austin, TX 78753 BALTIMORE 0664 Mid-Atlantic Tax Service MD004 Storefront (410)233-8299 2499 Frederick Ave Westside Shop Ct, Baltimore, MD 21223 MD007 Storefront *(410)276-1991 3404 Eastern Ave., Baltimore, MD 21224 MD016 Montgomery Ward (410)337-4652 Towson Marketplace 1238 Putty Hill, Towson, MD 21204 MD018 Storefront (410)332-8057 704 Merritt Blvd, Baltimore, MD 21222 MD021 Storefront (410)675-1991 2337 E. Monument St., Baltimore, MD 21205 MD021 Montgomery Ward (410)780-5092 Golden Ring Mall 6400 Rossville Blv, Rosedale, MD 21237 0693 Maryland Samco, Inc. MD005 Storefront *(410)392-6232 224a S. Bridge St., Elkton, MD 21921 0742 Joseph Mitzel Company, Inc. MD017 Storefront (410)273-7740 1010 East Beards Hill Rd., Ste. 'E', Aberdeen, MD 21001 MD017 Wal-Mart ( )pen-ding 401 Constant Friendship Blvd., Abingdon, MD 21009 MD109 Storefront (410)671-6364 1831 Pulaski Hwy, Edgewood, MD 21040 MD500 Storefront *(410)569-1937 5 Bel Air S Parkway Suite 1213l, Bel Air, MD 21015 MD500 Montgomery Ward (410)836-6070 658 Belair Road, Belair, MD 21014 0750 Bayside Tax Service, Inc. MD014 Storefront *(410)573-0700 1948 West Street, Annapolis, MD 21401 MD014 Montgomery Ward (410)266-1206 Annapolis Mall Montgomery Wards, Annapolis, MD 21401 MD263 Storefront (410)956-1040 117-C Mayo Road, Edgewater, MD 21037 0774 V.R. Rawley Company MD001 Storefront (410)581-2375 10201 Reisterstown Road, Baltimore, MD 21117 MD010 Storefront (410)728-9008 2401 Liberty Heights Ave McCrory'S, Baltimore, MD 21215 MD022 Storefront *(410)764-0727 6618 C. Reisterstown Rd Reisterstow, Baltimore, MD 21215 MD204 Storefront *(410)532-0122 5421 York Road, Baltimore, MD 21212 0804 VTR Services, Inc. MD003 Montgomery Ward (410)766-3264 6721 Governor Ritchie Hwy 6721 Gove, Glen Burnie, MD 21061 MD026 Storefront (410)719-6606 5748 Baltimore Natl Pike, Baltimore, MD 20707 MD026 Montgomery Ward *(301)317-1040 14700 Baltimore Avenue, Laurel, MD 20707 MD043 Storefront *(410)788-1040 1101 N. Rolling Road, Catonsville, MD 21228 MD043 Storefront (410)788-1040 5225 Baltimore National Pike, Baltimore, MD 21228 MD043 Montgomery Ward (410)298-4057 6901 Security Blvd., Baltimore, MD 21244 MD304 Copy, Pack, & Ship *(301)317-9199 3549 Russett Green East, Laurel, MD 20724 MD307 Storefront (410)551-1300 2622-G Annapolis Road, Odenton, MD 21113 1031 Donald L. Short MD900 Storefront (410)819-6990 107 North Washington Street, Easton, MD 21601 1083 William & Barbara Larrimore MD305 Storefront (301)352-9400 13600 Annapolis Road, Bowie, MD 20720 1192 BCG Enterprises, Inc. MD047 Storefront *(410)325-2445 5500 Sinclair Lane, Baltimore, MD 21206 1238 Eugene A. & Augustine McGill MD049 Storefront (410)667-8297 2145 York Rd., Timonium, MD 21093 MD222 Storefront *(410)636-8297 18 Hammonds Lane, Brooklyn Park, MD 21225 1297 Dwight T. Windsor MD101 Montgomery Ward (410)857-8500 817 Western Chapel Rd, Westminster, MD 21157 1647 Robert R. Rill MD107 Storefront *(410)374-9440 1150 South Main Street, Hampstead, MD 21074 1723 Joseph A. Tyson, Jr. MD041 Storefront *(410)384-9600 8147-A Ritchie Hwy. Unit B-04, Pasadena, MD 21122 BATON ROUGE 0732 T.L.L., Inc. LA131 Storefront *(504)356-6090 5952 Airline Highway, Baton Rouge, LA 70805 LA132 Storefront (504)924-1450 9930 Florida Blvd. Suite B, Baton Rouge, LA 70815 LA132 Montgomery Ward (504)924-1450 Bon Marche Mall 7401 Florida Blvd., Baton Rouge, LA 70806 BATON ROUGE LA150 Storefront (504)778-1040 1162 Main Street, Baker, LA 70714 0876 McCumsey Group, Inc. LA202 Storefront (504)665-8494 2315 S. Range Ave., Denham Springs, LA 70726 LA203 Storefront *(504)926-1080 3154 College Drive, Baton Rouge, LA 70808 LA203 Wal-Mart (504)926-1080 3535 Perkins Rd., Baton Rouge, LA 70808 LA206 Wal-Mart (504)647-7305 308 N. Airline Hwy., Gonzalez, LA 70737 LA208 Wal-Mart (504)687-6080 La Hwy. 75, Plaquemine, LA 70764 1385 C. Lirette & F. Simon LA201 Storefront *(504)385-1300 1540 Sandra, Morgan City, LA 70380 LA201 Wal-Mart (504)385-1300 973 Hwy 90 E., Bayou Vista, LA 70380 BEAUMONT-PORT ARTHUR 0822 Billy W. Cagle TX105 Storefront *(409)833-2480 1610 Washington Blvd, Beaumont, TX 77701 TX105 Montgomery Ward (409)899-5786 6175 East Tex Freeway, Beaumont, TX 77706 1551 Charlotte Jean Reeves TX274 Copy, Pack, & Ship (409)883-6910 3115 Edgar Brown Drive, West Orange, TX 77630 BILOXI-GULFPORT 0848 Linda Hallum & William Hallum MS132 Storefront (601)895-9626 8819 Goodman Rd., Olive Branch, MS 38654 1141 William & Cathleen Walter MS004 Storefront *(601)388-8210 2600 Beach Blvd., Biloxi, MS 39531 1707 Paul E. Long & Richard Smith MS003 Storefront *(601)896-4460 729 East Pass Rd. Suite B, Gulfport, MS 39507 MS108 Wal-Mart (601)896-4460 10514 US Hwy 49 North, Gulfport, MS 39503 BINGHAMTON 1749 McKinley Corp. NY903 Montgomery Ward (607)770-5682 Oakdale Mall, Johnson City, NY 13790 NY904 Storefront *(607)748-1400 7 Washington Ave, Endicott, NY 13760 NY906 Storefront (607)722-7328 Colonial Plaza 30 State Street, Binghamton, NY 13901 5000 Jackson Hewitt Inc. PA645 Storefront *(717)268-1053 714 Main Street, Towanda, PA 18848 PA645 Storefront *(717)888-9292 226 Desmond St., Sayre, PA 18840 BOSTON 0827 Angle Enterprises NH827 Storefront *(603)382-4444 95 Plaistow Rd., Plaistow, NH 03865 0838 Sharon McManus MA001 Storefront *(617)596-3656 219 Lewis Street, Lynn, MA 01902 1680 K.K. Thompson & J. Olsen * NH010 Storefront *(603)742-6800 474 Central Ave, Dover, NH 03820 NH010 Wal-Mart (603)742-6800 430 High St., Somersworth, NH 03878 1700 Kevin Doherty MA023 Wal-Mart (508)858-0200 333 Main St., Tewksbury, MA 01876 1762 Linton Blake MA117 Storefront *(617)364-0969 79 Fiarmount Ave., Hyde Park, MA 02136 5000 Jackson Hewitt Inc. MA004 Storefront (617)322-4766 42 Bromfield Street, Boston, MA 02108 MA008 Storefront (617)322-4766 207 A Centre St.(Rt. 60), Malden, MA 02148 MA085 Storefront *(508)752-2349 1 Stafford St., Worcester, MA 01603 MA113 Storefront (617)825-1040 1502 Dorchester Avenue, Dorchester, MA 02122 BOWLING GREEN 1500 Debi D. Kirsch KY047 Storefront (502)782-6829 2625 Scottville Rd, Bowling Green, KY 42104 KY048 Storefront *(502)651-1040 621 1/2 Happy Valley Rd, Glasgow, KY 42141 KY048 Wal-Mart (502)651-7829 100 Barren River Plaza, Glasgow, KY 42141 1722 John E. Walden KY044 Storefront (502)843-3353 Russellville Road, Bowling Green, KY 42101 BUFFALO 0615 Crimmen & Semlitsch, Inc. NY018 Storefront *(716)823-7600 1968 South Park Avenue, Buffalo, NY 14220 0949 Peter Adragna NY007 Storefront *(716)646-1040 1 Main Street, Hamburg, NY 14075 NY013 Storefront *(716)832-7666 3149 Bailey Ave., Buffalo, NY 14215 NY014 Storefront (716)832-2781 2631 Main Street, Buffalo, NY 14214 NY016 Storefront (716)893-7034 1196 Walden Ave., Cheektowaga, NY 14225 NY016 Montgomery Ward (716)685-2983 9 Walden Galleria Road, Buffalo, NY 14225 NY518 Storefront (716)827-1040 McKinley Mall, Blasdell, NY 14219 1052 Susan E. Ventresca NY015 Storefront *(716)832-7628 Northtown Plaza - 3071 Sheridan Dr, Amherst, NY 14226 NY021 Storefront *(716)284-0002 1621 Pine Avenue, Niagara Falls, NY 14301 NY202 Storefront (716)871-9685 Delaware-Hertel Plaza, buffalo, NY 14216 NY550 Storefront (716)297-0007 Summit Park Mall - 6929 Williams Rd, Niagara Falls, NY 14304 1537 Farideh Chubineh NY017 Storefront (716)439-1825 5714 S Transit, Lockport, NY 14094 5000 Jackson Hewitt Inc. NY127 Storefront *(716)895-6436 999 Broadway, Buffalo, NY 14212 NY615 Storefront *(716)855-0591 255 Delaware Avenue, Buffalo, NY 14202 CHAMPAIGN&SPRNGFLD-DECATUR 1032 Yolanda Gayle Starks IL140 Storefront *(217)355-8200 1704 W Bradley, Champaign, IL 61821 1091 Wayne Ballard IL109 Storefront *(217)698-1088 1913 W. Monroe, Suite J, Springfield, IL 62704 IL109 Check Cashers (217)522-3244 2800 S Macarthur Blvd., Springfield, IL 62704 IL109 Montgomery Ward (217)787-9152 White Oaks Mall, Springfield, IL 62704 1240 Ronald L. Brown IL141 Storefront *(217)328-3278 405 N. Broadway, Urbana, IL 61801 CHARLESTON, SC 0609 Thomas and Joan Fagan SC829 Storefront *(803)824-6777 119 Goose Creek Blvd, Goose Creek, SC 29445 1156 Danny Weaver SC107 Storefront *(803)745-0056 3927-B Rivers Avenue, N. Charleston, SC 29405 SC107 Storefront *(803)552-3435 4131 Dorchester, North Charleston, SC 29405 SC107 Wal-Mart (803)572-9660 7400 Rivers Ave, N. Charleston, SC 29406 1562 Mark Bailey SC102 Check Cashers (803)871-6720 1024 N Main Street, Summerville, SC 29483 SC108 Check Cashers (803)763-1834 2276 Savannah Hwy, Charleston, SC 29414 SC108 Wal-Mart (803)873-1425 9880 Dorchester Rd, Summerville, SC 29485 SC108 Wal-Mart (803)769-0245 2245a Ashley Crossing Dr, Charleston, SC 29414 CHARLOTTE 0644 J. H. Tax Service NC039 Storefront (704)531-6565 6016 The Plaza, Charlotte, NC 28215 NC100 Storefront (704)551-6300 7501 S. Blvd, Charlotte, NC 28273 NC101 Storefront (704)599-6558 6507f North Tryon Street, Charlotte, NC 28213 NC121 Storefront (704)531-6841 5606-105 E. Independence Blvd., Charlotte, NC 28212 NC123 Storefront *(704)537-7283 4405-C Central Ave., Charlotte, NC 28222 0806 Jann Totherow Birt NC127 Storefront *(704)825-4118 6434 Wilkinson Blvd, Belmont, NC 28012 NC127 Storefront (704)853-8030 705 Union Road, Gastonia, NC 28054 NC303 Storefront (704)853-1244 2595 W. Franklin Blvd, Gastonia, NC 28052 0895 P & E Enterprises Inc. NC013 Storefront *(704)433-9383 209 North Green Street, Morganton, NC 28655 NC302 Storefront *(704)345-1420 761 4th Street S.W., Hickory, NC 28602 1658 Gail C. McDonald NC084 Storefront *(704)730-0772 144 West Mountain Street, Kings Mountain, NC 28086 1711 Dick Rasnick SC211 Storefront (803)628-0516 416 E Liberty St., York, SC 29745 SC234 Storefront *(803)366-4202 2425 Cherry Road,, Rock Hill, SC 29730 1741 Clayton I. Thomas NC064 Wal-Mart (704)935-4400 2865 N Cannon Blvd, Kannapolis, NC 28083 5000 Jackson Hewitt Inc. NC029 Storefront *(704)599-9590 5304-H Sunset Road, Charlotte, NC 28269 CHARLOTTESVILLE 1311 J. Stephen Lowder VA142 Wal-Mart (540)885-1400 226 Water Street, Stauton, VA 24401 1407 James D. Landes, Jr. VA141 Storefront *(540)943-3278 141b E. Broad St, Waynesboro, VA 22980 CHATTANOOGA 1592 Jim Lovain GA287 Storefront *(706)278-8293 3001 C East Waltnut Ave, Dalton, GA 30721 5000 Jackson Hewitt Inc. GA291 Wal-Mart (706)279-2544 2545 Walnut Ave, Dalton, GA 30720 CHEYENNE-SCOTTSBLUF-STRLNG 1138 Edward & Alixe Fiedor WY006 Montgomery Ward *(307)778-3930 1510 E Pershing Blvd, Cheyenne, WY 82001 CHICAGO 0547 John Riordan IL022 Storefront *(815)722-0395 452 W. Ruby St, Joliet, IL 60435 IL022 Montgomery Ward (815)729-6690 Jefferson Sq Mall 2500 W. Jefferson, Joliet, IL 60435 0561 Chicago Management Consultants IL049 Storefront *(708)345-7554 501-B W. Lake St., Maywood, IL 60153 IL049 Storefront (708)338-9365 8343 W North Ave, Melrose Park, IL 60160 IL051 Storefront *(708)524-5200 42 Lake Street, Oak Park, IL 60302 IL051 Storefront (708)386-6459 212 S Marion Suite 11, Oak Park, IL 60302 IL177 Montgomery Ward (708)442-1896 North Riverside Plaza 7503 West Cer, North Riverside, IL 60546 0562 Star Consultants, Inc. IL021 Montgomery Ward (708)474-5800 500 Lincoln Mall Rte. 30 And Cicero, Matteson, IL 60443 IL053 Storefront (708)206-6500 18234 N Kedzie Ave, Hazelcrest, IL 60429 IL054 Storefront *(708)489-1500 11930 S. Western, Blue Island, IL 60406 0603 John Milazzo & Robert A. Ferro IL038 Storefront *(847)882-9967 Hoffman Plaza 1015 Roselle Rd, Hoffman Estates, IL 60195 IL038 Wal-Mart 801 Meacham Road, Elk Grove Village, IL 60007 0638 Tax Q, Inc. IL174 Storefront (773)622-3125 5601 W. Madison, Chicago, IL 60644 IL638 Storefront *(773)622-3125 5433 W. Diversey, Chicago, IL 60639 IL638 Storefront (773)622-3125 2054 N. Cicero Avenue, Chicago, IL 60639 IL638 Storefront (773)637-6898 5200 W. North Avenue, Chicago, IL 60639 0679 WMW, Inc. IL019 Storefront (708)598-1099 8749 S. Harlem Avenue, Bridgeview, IL 60455 IL060 Storefront *(708)598-3278 6056 W. 95th St., Oak Lawn, IL 60453 0680 Megme, Inc. IL064 Storefront *(312)723-1000 221 E. 79th St., Chicago, IL 60619 IL068 Storefront *(312)723-6958 8638 S. Cottage Grove, Chicago, IL 60619 IL068 Storefront (312)723-1000 7538 S. Stoney Island, Chicago, IL 60619 IL068 Storefront (773)723-1000 125 W 87th Street, Chicago, IL 60620 IL175 Storefront (312)734-6899 3022 E. 92nd Street, Chicago, IL 60617 IL175 Storefront (312)955-7733 1931 E. 71st St., Chicago, IL 60649 IL175 Storefront *(773)734-3602 9525 S. Jeffrey, Chicago, IL 60617 0710 J/R Kuchler Ltd. IL059 Storefront *(773)238-5900 2224 W. 95th St., Chicago, IL 60643 IL059 Storefront *(773)238-6527 2353 W. 111th St., Chicago, IL 60643 IL061 Montgomery Ward (708)422-1278 Evergreen Park Plaza 9600 S.Campbel, Evergreen Park, IL 60642 IL207 Storefront (773)995-6040 11049 S. Halsted St, Chicago, IL 60628 IL207 Storefront (773)264-2638 11055 S. Michigan Ave, Chicago, IL 60628 0716 The Tax Place IL056 Storefront (708)754-1040 1130 Halsted St, Chicago Heights, IL 60411 IL056 Storefront (708)891-0040 403 W 14th St, Chicago Heights, IL 60411 IL056 Montgomery Ward (708)730-3381 The Landing 16771 Torrance Avenue, Lansing, IL 60438 IL208 Storefront (708)891-0040 1856 Sibley Blvd., Calumet City, IL 60409 0723 Marc L. Gilbert IL057 Storefront *(312)247-8585 4858 South Ashland Ave., Chicago, IL 60609 IL057 Storefront (312)548-5555 5401 S. Wentworth Avenue, Chicago, IL 60609 IL304 Check Cashers (312)247-8585 148 W. 55th St., Chicago, IL 60609 0736 Mahendra Virani IL012 Storefront *(847)360-1099 336 South Greenbay Rd., Waukegan, IL 60085 IL012 Storefront (847)360-1099 2856 Belvidere Road, Waukegan, IL 60085 IL012 Montgomery Ward (847)473-0700 221 Lakehurst Mall, Waukegan, IL 60085 IL035 Storefront (847)746-1099 2250 Sheridan Road, Zion, IL 60099 IL074 Wal-Mart (847)855-1230 6590 Grand Ave, Gurnee, IL 60031 0745 Ber-Tax, Inc. IL006 Storefront *(773)282-9501 4865 W. Irving Park Rd., Chicago, IL 60641 IL023 Storefront (708)652-3700 4801 W. Cermak Rd., Cicero, IL 60804 IL024 Storefront (773)767-1799 5308 S. Pulaski Rd, Chicago, IL 60632 IL180 Storefront (773)254-6666 2301 West Cermak Rd., Chicago, IL 60608 IL181 Storefront (773)277-6000 4004 West 26th St., Chicago, IL 60623 IL745 Storefront (773)227-2298 1335 N. Ashland Ave., Chicago, IL 60622 IL745 Storefront (773)395-1250 1209 N. Milwaukee Ave., Chicago, IL 60622 0749 Super - Tax, Inc. IL058 Storefront (773)624-3278 213 E. 47th St, Chicago, IL 60615 IL058 Storefront *(773)288-3278 825 E. 63rd St, Chicago, IL 60637 0773 John Vander Mey IL189 Storefront *(815)932-1038 996 N. 5th Ave, Kankakee, IL 60901 0793 Fastax Services, Inc. IL044 Storefront (847)733-0373 311 Howard, Evanston, IL 60202 IL044 Storefront (847)424-0322 830 1/2 Davis Street, Evanston, IL 60201 IL168 Storefront *(773)262-1099 6759 N. Clark, Chicago, IL 60626 IL168 Storefront (773)274-0404 6169 N. Broadway, Chicago, IL 60660 IL186 Storefront (773)769-9100 4755 North Sheridan Rd., Chicago, IL 60640 0808 C.V.G., Inc. IL014 Storefront (630)834-1040 150 E St Charles Rd, Villa Park, IL 60181 IL017 Montgomery Ward (630)980-2852 Stratford Square Mall 3 Stratford S, Bloomingdale, IL 60108 IL210 Storefront *(630)238-8696 1047d S. York Road, Bensonville, IL 60106 0824 Lillian A. Bell IL052 Storefront *(708)371-5375 14430 S. Pulaski, Midlothian, IL 60445 IL055 Storefront (708)201-7496 205 W 144th St, Riverdale, IL 60627 0874 Janice Rice IN005 Storefront *(219)878-1040 348 US Hwy 20 W Dunes Plaza, Michigan City, IN 46360 IN005 Wal-Mart (219)879-6426 4301 S. Franklin St., Michigan City, IN 46360 0945 Martin Egan IN100 Storefront *(219)844-6610 6826 Indianapolis Blvd, Hammond, IN 46324 0956 Khatib Financial Services IL102 Storefront (773)292-0288 801 N. Western Avenue, Chicago, IL 60622 IL102 Storefront *(773)292-1040 4322 W. Grand Avenue, Chicago, IL 60651 IL102 Storefront (773)292-1040 801 N Pulaski, Chicago, IL 60651 IL194 Check Cashers (773)292-1040 3938 N Madison Ave, Chicago, IL 60624 IL205 Storefront *(773)637-7717 6114 W. North Avenue, Chicago, IL 60639 IL205 Montgomery Ward (773)637-7717 Brickyard Mall 6525 W. Diversy Aven, Chicago, IL 60635 1077 George Valek IL027 Storefront (708)425-1040 4846 W. 79th Street, Burbank, IL 60459 IL030 Storefront *(773)838-1040 6457 W. Archer Avenue, Chicago, IL 60638 1079 Maray, Inc. IL075 Storefront *(630)851-0600 1012 N. Farnsworth, Aurora, IL 60505 IL201 Storefront (630)264-1040 923 North Lake St. A, Aurora, IL 60506 IL203 Storefront (630)876-1099 543 Main Street ., West Chicago, IL 60185 IL206 Montgomery Ward (630)851-0600 540 S. Randall Road, St. Charles, IL 60174 1136 J. Ruffin IN062 Montgomery Ward (219)794-0111 8203 Broadway, Merriville, IN 46410 1159 Anthony P. Nuzzo, Jr. IL007 Storefront *(847)358-1040 144a W Northwest Highway, Palatine, IL 60067 IL032 Storefront *(847)740-7500 23 W. Rollins Rd., Round Lake Beach, IL 60073 IL033 Storefront *(847)973-1099 23 S Rt.12, Fox Lake, IL 60020 IL034 Storefront *(847)776-4711 1713 N. Rand Rd., Palatine, IL 60074 IL172 Storefront (847)808-9900 747 W. Dundee Rd, Wheeling, IL 60090 IL172 Storefront *(847)537-5677 630 Milwaukee Rd, Prospect Heights, IL 60070 1199 David Young IL265 Storefront *(708)748-5596 810 Norwood Blvd., Park Ridge, IL 60466 1226 Joseph Rihani IL197 Storefront (773)277-7800 2136 S Pulaski Road, Chicago, IL 60623 IL301 Storefront (773)776-2100 743 W. 63rd Street, Chicago, IL 60621 IL301 Storefront *(773)776-2100 1548 W. 63rd Street, Chicago, IL 60636 IL301 Storefront (773)776-2100 6858 S Ashland, Chicago, IL 60636 IL301 Storefront (773)776-2100 6301 S Morgan, Chicago, IL 60621 1228 Thomas E. Rickey IL219 Storefront (312)640-1040 110 W. Chicago Avenue, Chicago, IL 60610 1229 Llewellyn Nash IL048 Montgomery Ward *(312)284-4877 Ford City S/C 7601 South Cicero Ave, Chicago, IL 60652 1253 Nancy Hughes IL204 Storefront *(773)348-7748 3342 N Western Ave, Chicago, IL 60618 IL204 Check Cashers (773)348-7748 3605 N. Western, Chicago, IL 60618 IL204 Montgomery Ward (312)588-5003 2939 W. Addison, Chicago, IL 60618 IL255 Check Cashers (773)348-7758 3162 N. Broadway, Chicago, IL 60657 1270 Olufemi Dosunmu IL295 Storefront (312)918-1099 6255 S. Western Avenue, Chicago, IL 60636 IL904 Storefront (312)994-3278 7918 South Ashland Ave., Chicago, IL 60620 1280 Haitham Abuzir IL176 Storefront *(312)778-1040 3103 W. 63rd Street, Chicago, IL 60629 IL176 Storefront (773)436-4043 2405 W. 71st St., Chicago, IL 60629 1299 Isiah Gipson IL016 Storefront *(708)544-2010 4213 St. Charles Road, Bellwood, IL 60104 1303 Ronald Tutt IL009 Montgomery Ward (708)325-2900 Randhurst Shopping Center, Mount Prospect, IL 60056 IL010 Storefront *(847)670-1040 2228 Algonquin Road, Rolling Meadows, IL 60008 1336 Julian C. Williams IL182 Storefront *(773)874-1040 455 W. 79th Street, Chicago, IL 60620 1338 Alex Rico IL028 Storefront (708)430-0010 8648 S. Roberts Road, Justice, IL 60458 1440 Balwinder Chhokar IL316 Wal-Mart (630)837-9592 850 S Barrington Rd, Streamwood, IL 60107 1532 Bryce and Carrie, Inc. IL290 Wal-Mart *(708)771-0193 1300 South Desplaines Ave., Forest Park, IL 60130 IL711 Storefront (773)227-8900 2627 N. Kedzie, Chicago, IL 60647 1539 Edward C. Gueroult, Jr. IL011 Storefront *(815)363-1040 1007 N. Front Street, McHenry, IL 60050 IL011 Wal-Mart (815)363-9260 2019 N Richmond Road, McHenry, IL 60050 IL013 Montgomery Ward (815)477-3579 105 Northwest Highway, Crystal Lake, IL 60014 1571 Patricia A. Leonard IL225 Storefront *(847)949-8426 621 N Midlothian Rd, Mundelein, IL 60060 1670 Naresh Kumar IL254 Storefront *(773)334-1455 1530 Montrose Ave, Chicago, IL 60613 1716 Estelle & Harold Larkin IL020 Montgomery Ward *(708)466-8100 Orland Park Mall, Orland Park, IL 60462 IL258 Wal-Mart 305 South Larkin, Joliet, IL 60436 1738 G & K Tax Service, Inc. IL037 Storefront *(847)928-2024 9276 W. Irving Park Rd., Schiller Park, IL 60176 IL037 Storefront (847)928-2024 4104 N. Harlem Ave, Norridge, IL 60634 1772 Joseph John IL214 Storefront (773)561-4067 5131 North Damen Ave, Chicago, IL 60625 IL216 Storefront *(773)761-6500 7446 North Western Ave, Chicago, IL 60645 1790 Elizabeth Shukas IL008 Storefront (847)676-1042 236 N. Milwaukee Ave., Niles, IL 60714 IL167 Storefront *(773)774-4063 5538 N. Milwaukee Ave., Chicago, IL 60631 IL167 Montgomery Ward (847)676-1042 5601 W Touhy Av, Skokie, IL 60714 5000 Jackson Hewitt Inc. IL031 Storefront (847)836-1099 1a Lakewood Plaza, Carpentersville, IL 60110 IL200 Storefront *(630)972-1099 7526 Janes Ave, Woodridge, IL 60517 IN009 Storefront *(219)924-1114 9515 Indianapolis Blvd. #3 Po Box 1, Highland, IN 46322 IN009 Montgomery Ward (219)836-5950 8005 Calumet Avenue, Munster, IN 46321 CINCINNATI 1249 Majdi G. Swaiss OH101 Storefront (513)241-1040 1504 Linn Street, Cinncinati, OH 45214 OH102 Storefront (513)861-3278 965 E. McMillan, Cincinnati, OH 45206 1641 Jennifer & Kenneth R.Ward OH092 Wal-Mart (513)887-8299 1505 Main St, Hamilton, OH 45013 1699 She Ming & Associates, Inc. OH106 Wal-Mart (513)245-1099 10240 Colerain Ave, Cincinnati, OH 45251 CLEVELAND 0778 James J. Greiner OH019 Storefront *(330)456-8181 2321 W. Tuscarawas Street, Canton, OH 44708 OH019 Montgomery Ward (330)477-9561 4004 W. Tuscarawas St, Canton, OH 44708 0779 Harper-DeWitte, Inc. OH196 Storefront *(330)825-1717 3200 Greenwich Rd #79, Norton, OH 44203 OH202 Storefront (330)940-3278 2675a State Road, Cuyahoga Falls, OH 44223 OH205 Storefront (330)867-3278 1601 Plaza Blvd., Akron, OH 44320 1055 Robert Steward OH074 Storefront (419)589-4200 885 Ashland Road, Mansfield, OH 44905 OH077 Storefront *(419)747-4200 2080 Ferguson Rd, Mansfield, OH 44906 1101 Richard & Rosalyn Engel OH216 Storefront *(216)944-2122 30517 Euclid Ave, Willowick, OH 44092 1519 Alyce L. Searcey OH228 Storefront *(330)336-1023 154 Main Street, Wadsworth, OH 44281 1769 Lawrence R. Custer & Gilbert OH039 Storefront *(216)251-1900 10413 Lorain Road, Cleveland, OH 44111 5000 Jackson Hewitt Inc. OH204 Storefront *(330)784-8111 696 Canton Rd., Akron, OH 44312 COLORADO SPRINGS-PUEBLO 1059 Thomas & Handan Baltuskonis CO101 Storefront *(719)528-1669 4146 Austin Bluffs Parkway, Colorado Springs, CO 80918 CO108 Storefront *(719)392-6111 224 Main Street, Security, CO 80911 1397 Michael Wesley Doyle CO102 Storefront *(719)575-0535 3016 N Nevada Ave, colorado springs, CO 80907 CO102 Montgomery Ward (719)634-7622 2420 E. Pikes Peak Ave., Colorado Springs, CO 80909 COLUMBIA, SC 0609 Thomas and Joan Fagan SC005 Storefront *(803)563-4020 325 Parlar Avenue, St. George, SC 29477 SC244 Storefront *(803)794-3999 2410 Augusta Hwy, Columbia, SC 29169 SC979 Storefront (803)535-4472 1550 Wingate Street, Orangeburg, SC 29115 SC979 Storefront *(803)535-4472 261 John C. Calhoun Drive, Orangeburg, SC 29115 SC979 Wal-Mart (803)535-4472 2390 Chestnut NE, Orangeburg, SC 29115 0925 William L. Ross SC200 Storefront *(803)865-0760 6908 Two Notch Road, Columbia, SC 29223 SC200 Wal-Mart (803)736-4608 9710 Two Notch Rd, Columbia, SC 29223 SC200 Wal-Mart (803)787-9727 5420 Forest Drive, Columbia, SC 29206 COLUMBUS, GA 1493 Brent McSpadden AL052 Wal-Mart (334)749-8033 2500 Pepperrell Pky., Opelika, AL 36801 COLUMBUS-TUPELO-WEST POINT 0981 Brenda Yarber MS103 Storefront *(601)844-9259 208 South Gloster, Tupelo, MS 38801 CORPUS CHRISTI 5000 Jackson Hewitt Inc. TX005 Wal-Mart (512)937-6829 10241 S. Padre Island Dr., Corpus Christi, TX 78418 TX005 Montgomery Ward (512)994-3410 5858 Spid Sunrise Mall, Corpus Christi, TX 78412 TX006 Wal-Mart (512)387-0842 3829 US Hwy 77, Corpus Christi, TX 78410 TX014 Wal-Mart (512)387-0842 1821 S. Padre Island Dr, Corpus Christi, TX 78415 TX467 Storefront *(512)814-1040 3819 S. Staples Hamlin Center, Corpus Christi, TX 78411 TX467 Storefront (512)980-8829 1212 Padre Staples Mall, Corpus Christi, TX 78413 DALLAS-FT. WORTH 0697 AIT Services, Inc. TX054 Storefront *(214)636-3278 426 E. Main Street, Royse City, TX 75189 0727 Linda G. Whittington TX046 Storefront (972)370-3278 6874 Main, Frisco, TX 75034 TX046 Wal-Mart (972)377-3118 5000 Main, The Colony, TX 75056 TX048 Storefront *(214)548-1084 1330 N. McDonald Ste 202, Mckinney, TX 75069 0730 Templeton and Associates TX028 Storefront *(972)228-3278 The Crossing Shopping Center 1001 N, Desoto, TX 75115 TX028 Storefront (972)224-3278 1130 W. Camp Wisdom Rd, Dallas, TX 75232 TX029 Storefront (972)296-3278 Red Bird Mall 3662 W Camp Wisdom Rd, Dallas, TX 75237 TX029 Montgomery Ward (972)780-1400 Mw Red Bird Mall, Dallas, TX 75237 0733 Charles Irvine Corporation TX369 Storefront *(903)874-3278 1730 W 7th Ave, Corsicana, TX 75110 TX369 Storefront (972)875-5400 304c E. Ennis Ave., Ennis, TX 75119 0738 JMW Enterprises TX024 Storefront (214)423-6668 2400 Ave. K, Suite B, Plano, TX 75074 0974 Robert Stan Black TX023 Storefront *(972)317-3555 1301 W. Highway 407, Lewisville, TX 75067 TX044 Montgomery Ward *(817)566-0681 2201 E. I-35 South Loop 288, Denton, TX 76201 0999 Lorjust Bayne III/Ricky Brown TX039 Storefront *(817)274-0223 1504 New York, Arlington, TX 76010 TX039 Montgomery Ward (817)649-3888 Forum 303 2700 E. Pioneer Highway, Arlington, TX 76010 1080 Stella McAnally TX027 Montgomery Ward (972)509-9228 900 W 15th, Plano, TX 75075 TX031 Montgomery Ward (972)680-3278 603 Plano Rd., Richardson Sq. Mall, Richardson, TX 75081 TX057 Storefront *(972)416-8343 Carrollton Park Ii Ctr. 1235 S Jose, Carrollton, TX 75006 TX057 Storefront (972)490-1040 2086 Valley View Center, Dallas, TX 75240 TX120 Storefront *(214)391-9881 8106 Lake June Rd., Dallas, TX 75217 TX601 Storefront (214)324-9300 2309 Gus Thomasson, Dallas, TX 75228 1388 Terry Trevino TX080 Montgomery Ward (817)338-3033 2600 W. Seventh St., Fort Worth, TX 76107 TX502 Storefront (817)924-3278 908c W Berry, Fort Worth, TX 76110 TX506 Storefront *(817)626-8444 2901 North Main, Ft Worth, TX 76106 1402 Sherrie Boyd & Debbie Jackson TX106 Storefront (214)946-7167 227 West 10th, Dallas, TX 75208 TX604 Storefront *(214)388-7144 2244 South Buckner Ste C, Dallas, TX 75227 1528 Maltby Enterprises, INC. TX376 Wal-Mart *(817)965-8648 2765 W. Washington, Stephenville, TX 76401 1590 J. T. Pryor & Associates, Inc. TX020 Storefront (972)484-6619 2932 Valley View Lane, Farmers Branch, TX 75234 TX020 Montgomery Ward (972)484-7405 100 Northtown Mall, Dallas, TX 75234 TX051 Storefront *(972)278-FAST 1020 W. Centerville Ste. 1020, Garland, TX 75041 TX051 Wal-Mart (972)271-5000 3159 Garland Ave(Walmart), Garland, TX 75041 TX052 Storefront (972)278-3278 418 Big Town Mall, Mesquite, TX 75149 TX052 Montgomery Ward (214)327-3936 Big Town Mall 500 Pike Ave, Mesquite, TX 75149 TX114 Storefront (972)278-3278 6303 Forrest Park Blvd, Dallas, TX 75235 1596 Michael R. Daugherty TX001 Storefront *(972)937-1040 401 Highway 77, Ste 12, Waxahachie, TX 75165 1619 John M. Carpenter TX041 Storefront *(972)257-1040 1111 W. Airport Fwy Suite 135, Irving, TX 75062 TX041 Montgomery Ward (972)790-0653 2802 W. Irving Blvd., Irving, TX 75061 1715 James L. Fullerton & Jean E. TX083 Montgomery Ward (817)595-7813 200 Northeast Mall State Hwy. 121a, Hurst, TX 76053 TX501 Storefront *(817)581-2001 5142 Rufe Snow Drive #116, North Richland H, TX 76180 1730 Ken McPeak TX004 Storefront *(972)840-3278 1916 1st Street, Garland, TX 75040 1786 T.G.W. Corporation TX242 Storefront *(903)455-3800 6834 Wesley S-50, Greenville, TX 75402 TX424 Storefront *(903)583-6968 508 N. Center St., Bonham, TX 75418 TX424 Wal-Mart (903)737-0811 3855 Lamar, Paris, TX 75460 1811 Robert D. Williams TX605 Storefront *(214)503-1180 9310 Forest Lane, Suite 352, Dallas, TX 75243 TX605 Wal-Mart (214)231-1185 13739 N Central Expy., Dallas, TX 75243 5000 Jackson Hewitt Inc. TX034 Montgomery Ward (817)294-6413 Hulen Mall 4900 South Hulen Street, Fort Worth, TX 76132 TX036 Storefront *(817)468-9344 3701 S Cooper S-195, Arlington, TX 76015 TX090 Storefront (214)467-8033 2513 S.Hampton Road, Dallas, TX 75224 TX090 Montgomery Ward (214)941-6976 800 Wynnewood Village, Dallas, TX 75224 TX416 Wal-Mart (817)596-5125 1836 South Main, Weatherford, TX 76086 TX421 Wal-Mart (817)465-8097 4801 S Cooper St (Walmart), Arlington, TX 76017 TX503 Storefront *(817)535-4000 4222 E Lancaster, Fort Worth, TX 76103 DAYTON 0695 Christian Financial Services OH198 Storefront *(937)236-0999 6070 Chambersburg Rd., Huber Heights, OH 45424 0854 Sharon Brockman OH199 Storefront *(937)253-2223 2931 Linden Avenue, Dayton, OH 45410 1117 David Stickel OH147 Wal-Mart (937)325-1078 1600 Bechtle Ave, Springfield, OH 45504 OH178 Storefront *(937)325-1078 2158 East Main Street, Springfield, OH 45503 1393 T. Adegboruwa & E. Umoren OH130 Storefront *(513)278-8909 4215 North Main Street, Dayton, OH 45405 DENVER 0776 Mountain-Bay Corporation CO626 Storefront *(970)668-1480 699 N. Summit Blvd P. O. Box 2847, Frisco, CO 80443 0812 Warren Wielandt/Joyanne Gunder CO021 Wal-Mart (303)683-7998 6675 Business Center Drive, Highlands Ranch, CO 80126 CO306 Storefront *(303)394-1040 343a S. Colorado Blvd, Denver, CO 80222 CO309 Wal-Mart (303)932-7829 7900 W. Quincy Ave., Littleton, CO 80123 CO309 Montgomery Ward (303)972-5240 8501 West Bowles Ave, Littleton, CO 80123 CO312 Storefront *(303)781-2622 3704 S Broadway, Englewood, CO 80110 0994 Accounting Concepts, Inc. WY003 Storefront *(307)687-7788 110 W. Lakeway Suite 1000, Gillette, WY 82718 1491 Albert Thum CO011 Montgomery Ward *(303)412-1606 5451 W 88 Avenue, Westminster, CO 80030 1608 Larry W. Cox CO303 Montgomery Ward (303)696-3090 Buckingham Sq 1400 So Havana, Aurora, CO 80010 CO304 Montgomery Ward (303)937-6482 Villa Italia S/C 7200 W. Alemeda Av, Lakewood, CO 80226 CO308 Storefront *(303)233-3151 6905 W. Colfax, Lakewood, CO 80215 CO310 Montgomery Ward (303)480-6622 Lakeside Mall 5891 West 44th 5801 W, Denver, CO 80212 CO871 Wal-Mart (303)450-0047 550 E. 102nd Ave., Thornton, CO 80229 1705 Daniel L.& Juanita Rivers CO155 Wal-Mart (303)526-1706 952 Swede Gultch Rd, Golden, CO 80401 DETROIT 0642 Frank J. Dick MI942 Storefront *(313)513-9150 33724 Ford Rd., Westland, MI 48185 0660 John R. McClaskey MI037 Storefront (810)744-1440 25223bb Gratiot Ave, Roseville, MI 48066 MI560 Storefront *(810)558-0111 29700 Dequindre Rd., Warren, MI 48092 MI560 Montgomery Ward (810)751-7500 28800 Dequindre Road, Warren, MI 48092 MI569 Storefront (313)521-0600 20044 Kelly Rd., Harper Woods, MI 48225 MI569 Montgomery Ward (313)521-2040 18000 Vernoir Road, Harper Woods, MI 48225 MI660 Montgomery Ward (810)791-2000 35151 S. Gratiot Ave., Mt. Clemens, MI 48043 0674 Charles J. Brattain MI302 Wal-Mart (810)674-1173 300 N. Opdyke Rd, Auburn Hills, MI 48326 MI313 Storefront *(810)674-1177 4250 Dixie Highway, Waterford, MI 48329 MI313 Montgomery Ward (810)334-1112 Sumitt Place Mall 409 N. Telegraph, Waterford, MI 48328 0743 Linda J. Gensbechler MI005 Storefront (313)241-4930 107 S Monroe Street, Monroe, MI 48161 1155 Iona Ivery MI104 Storefront (810)968-6899 14500 W. 8 Mile Road, Oak Park, MI 48237 MI106 Storefront (810)545-6360 310 W. 9 Mile Rd, Ferndale, MI 48220 MI108 Montgomery Ward (810)569-1474 Northland Mall 21500 John C. Lodge, Southfield, MI 48075 MI108 Montgomery Ward (810)358-1200 Tel 12 Mall 28500 Telegraph Road, Southfield, MI 48034 1264 Gail Martin & Joyce Martin MI035 Storefront (313)864-4530 14422 W. 6 Mile Rd, Detroit, MI 48235 MI040 Storefront *(313)865-3535 13928 Woodward Avenue, Highland Park, MI 48203 1277 T. Forester & Theresa Jean MI001 Montgomery Ward *(313)422-3994 29501 Plymouth Rd., Livonia, MI 48150 MI054 Storefront *(313)584-3037 13252 Michigan Ave, Dearborn, MI 48126 MI054 Montgomery Ward (313)943-4389 13551 Michigan Ave., Dearborn, MI 48120 5000 Jackson Hewitt Inc. MI064 Storefront (313)281-2500 18625 Eureka Rd, Southgate, MI 48195 MI064 Montgomery Ward (313)281-2500 Southgate Mall 13665 Eureka Road, Southgate, MI 48195 DULUTH-SUPERIOR 1486 Joseph F. & Lynn E. Jacob WI120 Storefront *(715)682-6840 618 Main Street West, Ashland, WI 54806 EL PASO 0628 Hughes-Schulz Corp. TX071 Storefront *(915)757-3278 4727 B. Hondo Pass, El Paso, TX 79924 TX071 Wal-Mart (915)757-3278 4534 Transmountain Rd, El Paso, TX 79924 TX628 Storefront (915)591-3278 3333 Yarbrough, El Paso, TX 79925 TX628 Wal-Mart (915)757-3278 1144 N Yarbrough, El Paso, TX 79935 TX628 Montgomery Ward (915)755-3278 8401 Gateway West, El Paso, TX 79925 TX670 Montgomery Ward (915)755-4275 Montgomery Ward, El Paso, TX 79912 0654 Robert Frost Nickerson NM654 Storefront *(505)525-1414 2136 N.Main, Las Cruces, NM 88001 NM654 Storefront (505)526-9015 1300 El Paseo, Ste. F, Las Cruces, NM 88001 TX611 Storefront *(915)590-6565 3012-A Lee Trevino Drive, El Paso, TX 79936 TX654 Storefront (915)778-1260 7677 North Loop Dr. Suite B, El Paso, TX 79915 ELMIRA 0511 L and W Partnership NY038 Storefront (607)732-6871 1018a Laurel Street, Elmira, NY 14904 NY038 Storefront (607)732-7897 416 N. Main St., Elmira, NY 14901 NY170 Storefront (607)937-8177 42 Bridge St., Corning, NY 14830 NY179 Storefront *(607)732-3346 132 W. 14th Street, Elmira Heights, NY 14903 NY179 Storefront (607)739-0166 Arnot Mall, Horseheads, NY 14845 NY179 Storefront (607)735-0508 3078 Lake Road, Horseheads, NY 14845 NY179 Wal-Mart (607)739-2279 830 County Rt 64 / Bldg #3, Big Flats/Elmira, NY 14903 ERIE 1815 Jo-El E. Thompson PA038 Storefront *(814)898-1040 3018 Buffalo Road, Erie, PA 16510 5000 Jackson Hewitt Inc. PA766 Wal-Mart (814)868-3220 1930 Keystone Dr Ste 30, Erie, PA 16509 EUREKA 0576 Charles C. Williams CA010 Storefront *(707)443-2021 309 West Harris Street, Eureka, CA 95503 CA010 Montgomery Ward *(707)443-6614 2525 4th St., Eureka, CA 95501 EVANSVILLE 1350 Michael & Sandra Titzer IN432 Storefront *(812)428-3278 201 E. Eichel, Evansville, IN 47710 FLINT-SAGINAW-BAY CITY 0754 James R. Greve MI651 Storefront *(517)743-5464 1053 North Shiawassee, Corunna, MI 48817 MI651 Wal-Mart (810)720-0080 4313 Corunna Rd, Flint, MI 48532 FRESNO-VISALIA 1142 Muriel Anderson CA504 Montgomery Ward (209)261-0344 5740 North Blackstone, Fresno, CA 93710 FT. MYERS-NAPLES 0647 Robert J. Jolicoeur FL001 Storefront (941)275-8555 4125 Cleveland Ave., Fort Meyers, FL 33901 FL001 Wal-Mart (941)997-3278 13550 Cleveland Ave. N., North Ft. Myers, FL 33903 FL001 Wal-Mart (941)437-2874 7101 Cypress Lake Dr., Fort Myers, FL 33907 FL002 Storefront *(941)482-6116 17195 San Carlos Blvd., Ft. Myers Beach, FL 33931 1394 Gregory Egolf FL003 Storefront *(941)549-4522 3013 Del Prado Blvd. #6, Cape Coral, FL 33904 FL159 Wal-Mart (941)549-4522 1619 Del Pardo Blvd. S., Cape Coral, FL 33990 1754 Thomas T. Murphy FL050 Storefront *(941)592-9823 2095 Pine Ridge Road, Naples, FL 34109 FL172 Wal-Mart (941)592-9823 3451 Tamiami Trail E., Naples, FL 33962 1809 Louise Hicks FL171 Storefront *(941)369-1746 2523 Lee Blvd., Lehigh Acres, FL 33971 FT. SMITH 1645 Loretta Hornsby AR110 Storefront *(501)484-9399 5709 Rogers Ave Unit A, Fort Smith, AR 72903 AR111 Wal-Mart (501)484-9399 2600 Midland Blvd & Birnie Ave., Fort Smith, AR 72904 5000 Jackson Hewitt Inc. AR109 Wal-Mart (501)631-2060 2874 W. 6th St, Fayetteville, AR 72701 AR842 Wal-Mart (501)631-7013 2110 W. Walnut, Rogers, AR 72756 GAINESVILLE 1692 Ken Kraus & Beverly Kraus FL049 Wal-Mart (352)379-1040 3750 SW Archer Rd., Gainesville, FL 32608 GRAND JUNCTION-MONTROSE 1726 George Smith CO113 Storefront *(970)625-9140 216 West 3rd Street, Rifle, CO 81650 GRAND RAPIDS-KALMZOO-B.CRK 0985 Henry Perri MI215 Storefront (616)759-3411 1635 W. Sherman Blvd., Muskegon, MI 49441 MI215 Storefront (616)759-8116 161 Muskegon Mall Ste. 201, Muskegon, MI 49440 1005 CD Investments, Inc. MI253 Storefront *(616)532-4981 736 36th Street S.W., Grand Rapids, MI 49509 MI256 Montgomery Ward (616)538-1000 1100 28th St. S.W., Grand Rapids, MI 49509 1329 Alan M. Becke MI261 Storefront (616)342-8005 5050 W. Main Street, Kalamazoo, MI 49009 MI277 Storefront (616)327-6079 6650 S. Westnedge, Portage, MI 49002 GREENSBORO-H.POINT-W.SALEM 0760 G. Grey And Sara B. Macy NC026 Wal-Mart (910)377-3286 284 Summit Sq Blvd, Winston-Salem, NC 27105 NC119 Storefront *(910)724-1242 Parkway Plaza Shopping Center 1195, Winston-Salem, NC 27127 0935 Lacy E. Tinnen NC204 Storefront *(910)222-8299 529 North Graham-Hopedale Road, Burlington, NC 27217 NC204 Storefront (910)222-0015 1766 West Webb Ave, Burlington, NC 27217 1720 Thomas Victor Thomas NC023 Storefront *(910)767-9600 5053 University Parkway, Winston-Salem, NC 27106 1732 Hege H. Russ NC049 Storefront (910)854-5526 Four Seasons Town Centre, Greensboro, NC 27407 NC050 Storefront (910)621-6337 Carolina Circle Mall, Greensboro, NC 27405 NC050 Storefront *(910)275-8744 2908 Randleman Road, Greensboro, NC 27406 GREENVILLE-N.BERN-WASHNGTN 0685 Irene Odebralski NC114 Storefront *(919)447-3401 327 West Main Street, Havelock, NC 28532 0857 Modern Tax Service, Inc. NC110 Storefront *(910)353-8363 343-C Western Blvd, Jacksonville, NC 28546 NC110 Wal-Mart (910)353-8363 100 Western Plaza, Jacksonville, NC 28546 0898 Manning, Daughtry, & Johnson NC006 Storefront *(919)355-8204 310-E E. Arlington, Greenville, NC 27858 1026 Carole M. Sykes NC251 Storefront *(919)514-9877 1908 C South Glenburnie Dr, New Bern, NC 28560 NC251 Montgomery Ward (919)638-5181 2101 Neuse Blvd., New Bern, NC 28560 GREENVLL-SPART-ASHEVLL-AND 0853 Charles L. Christie SC221 Storefront (864)598-9807 701 N. Church Street, Spartanburg, SC 29303 SC538 Storefront *(864)848-2121 1326 West Wade Hampton Boulevard, Greer, SC 29650 1626 Union Tire & Appliance Co. Inc SC213 Storefront *(864)429-4249 408 Duncan Bypass, Suite 10, Union, SC 29379 SC224 Check Cashers (864)461-5340 112 W. Cherokee Street, Chesnee, SC 29323 SC224 Wal-Mart (864)582-1099 2081 E. Main St, Spartanburg, SC 29307 SC225 Storefront (864)576-1099 205 W. Blackstock Highway #290, Spartanburg, SC 29301 SC226 Storefront *(864)585-1099 482 West Main Street, Spartanburg, SC 29301 SC226 Wal-Mart (864)683-4578 917 E Main St, Laurens, SC 29360 1763 Multitax Services, Inc. SC215 Storefront *(864)294-1040 6300 White Horse Road Unit # 101, Greenville, SC 29611 1784 Michael E.Curry NC102 Storefront *(704)452-9393 107 Gudger Street, Waynesville, NC 28786 NC102 Wal-Mart (704)421-7501 201 Paragon Pky, Clyde, NC 28786 GREENWOOD-GREENVILLE 1568 Dorothy M. Crane MS012 Copy, Pack, & Ship *(601)229-0702 1300 Sunset Dr., Grenada, MS 38901 HARRISBURG-LNCSTR-LEB-YORK 1088 Scott E. Enterprises, Inc PA072 Storefront *(717)232-2688 670 Division St., Harrisburg, PA 17101 PA072 Storefront *(717)234-4399 6 N. Cameron, Harrisburg, PA 17101 PA074 Storefront (717)944-6420 Rt 230 & Rosedale Avenue, Middletown, PA 17057 PA074 Storefront (717)564-2001 3200-C Paxton Street, Harrisburg, PA 17111 1169 Schissler and Kint, Inc. PA130 Storefront *(717)633-5280 48 Frederick St., Hanover, PA 17331 1297 Dwight T. Windsor PA096 Storefront *(717)338-9191 436 York St., Gettysburg, PA 17325 1321 Paul L. Hoffman PA090 Montgomery Ward (717)249-5655 N. Hanover & Rte 91, Carlisle, PA 17013 1450 Robert B. Nunemacher PA082 Storefront (717)290-8297 13 North Queen St., Lancaster, PA 17602 1685 Andre & Allana Hills PA078 Wal-Mart (717)840-9698 2801 E Market Bldg "b", York, PA 17402 HARTFORD & NEW HAVEN 1651 Carl C. Reidemeister CT145 Storefront *(860)445-5018 40 Plaza Court, Groton, CT 06340 1714 Sherry Accounting Services CT130 Storefront *(860)350-3278 49 Bank Street, New Milford, CT 06776 1779 William A. Neathery CT112 Storefront *(203)787-3023 379 Whalley Avenue, New Haven, CT 06511 HATTIESBURG-LAUREL 0899 Gale York MS304 Storefront *(601)582-2324 404 Broadway Dr., Hattiesburg, MS 39401 MS304 Check Cashers (601)584-9585 821 Edwards Street, Hattiesburg, MS 39401 MS308 Storefront (601)649-1040 910 Sawmill Road, Laurel, MS 39440 MS308 Wal-Mart (601)582-2324 2260 Hwy. 15 N., Laurel, MS 39440 HOUSTON 0969 Jeffrey S. Dusza TX217 Storefront *(713)699-1291 9225 Jensen Drive, Houston, TX 77093 TX229 Storefront *(713)694-3278 107 Northline Mall, Houston, TX 77022 TX229 Storefront (713)694-3278 Kiosk Northline Mall, Houston, TX 77022 TX229 Montgomery Ward (713)694-3278 Northline Mall 500 Northline Mall, Houston, TX 77022 0972 Marlene T. Franklin TX237 Storefront *(281)820-3279 318 West Little York, Houston, TX 77037 TX237 Storefront (281)447-3278 13634 Fm 249, Houston, TX 77086 TX237 Wal-Mart (281)820-3144 10411 N Freeway 45, Houston, TX 77037 0993 Diana Malone TX201 Storefront (713)641-2626 8201 Broadway, Houston, TX 77061 TX201 Storefront (713)649-0223 7718 Bellfort, Houston, TX 77061 TX214 Storefront *(713)947-1056 11043 Fuqua Rd. Suite B, Houston, TX 77089 1064 Kathy Burton TX203 Storefront *(713)741-1040 4706 Griggs Rd., Houston, TX 77021 TX212 Storefront *(713)649-3278 500 Gulfgate Mall, Houston, TX 77087 1071 Rita Metoyer TX235 Storefront (281)319-4075 20131 Hwy 59 North, Humble, TX 77338 TX235 Storefront *(281)548-3278 1034 First Street Suite 2, Humble, TX 77338 1119 Harold L. Emmons TX239 Montgomery Ward (281)897-9829 7925 Fm 1960 Rd West, Houston, TX 77070 1135 Bettye Isham TX251 Storefront *(281)364-1776 27714 I-45 North, Conroe, TX 77385 1265 Ron E. Tull TX250 Storefront *(281)583-1606 5020 Fm 1960 West, Houston, TX 77069 TX250 Storefront (281)583-1606 910 W Main, Tomball, TX 77375 TX250 Wal-Mart (281)583-1606 7075 Fm1960 West, Houston, TX 77069 1318 John L. Lynch TX236 Storefront (713)876-3278 303 Greenspoint Mall(Near Oshmans), Houston, TX 77060 TX236 Storefront (713)987-1040 11711 Eastex Freeway, Houston, TX 77039 TX236 Montgomery Ward *(713)875-3278 600 Greenspoint Mall, Houston, TX 77060 1465 B. Ali Rashid TX209 Storefront *(713)477-2579 1215 South Main, Pasadena, TX 77506 TX210 Montgomery Ward (713)943-6860 2222 Spencer, Pasadena, TX 77504 TX213 Storefront *(713)453-7894 816 Uvalde, Houston, TX 77015 TX213 Wal-Mart (281)477-9526 13750 I-10 E, Houston, TX 77015 TX276 Montgomery Ward *(713)421-3117 San Jacinto Mall I10 And Garth Road, Baytown, TX 77520 1600 Waldean Buloth-Hazen TX089 Storefront (409)986-9040 2437 Palmer Hwy, Texas City, TX 77590 TX089 Storefront (409)986-9040 805 21st Street North, Texas City, TX 77590 TX089 Storefront (409)986-9040 2327 Broadway Blvd, Galveston, TX 77590 TX096 Storefront (409)986-9040 6735 Main St & Hwy 6, Hitchcock, TX 77563 TX096 Storefront (409)986-9040 12494 Hwy 6, Santa Fe, TX 77510 TX125 Wal-Mart (409)740-3414 6702 Seawall Blvd., Galveston, TX 77550 TX125 Wal-Mart (409)986-9040 9300 Emmett F Lowry Expy, Texas City, TX 77551 TX278 Montgomery Ward (409)986-9040 100 Baybrook Mall, Friendswood, TX 77546 1643 Doris M. Dupree-Roberts TX228 Storefront *(713)797-6449 8240 West Bellfort Road, Houston, TX 77071 1674 Faye Wigley TX262 Wal-Mart 1716 Hwy I-45, Huntsville, TX 77340 TX267 Storefront *(409)760-1040 1505 North Frazier Ste 103, Conroe, TX 77301 1712 Bestway Tax Services, Inc TX226 Storefront *(713)984-0404 8788 Hammerly @ Hallister, Houston, TX 77080 1798 Carol Wyatt Myers TX218 Storefront 7500 Bellaire Boulevard No 150, Houston, TX 77036 TX218 Montgomery Ward (713)771-3278 7500 Bellaire Blvd., Houston, TX 77036 TX219 Montgomery Ward (713)932-3152 Memorial City Mall 970 Gessner, Houston, TX 77024 1799 Ankit K Patel & Rajula A Patel TX208 Storefront *(713)631-8588 9421 G Mesa Drive, Houston, TX 77028 1802 Ivy Investment, Inc. TX202 Storefront (713)290-1747 734 Northwest Mall, Houston, TX 77092 TX238 Wal-Mart (281)586-9100 3275 Fm 1960 W, Houston, TX 77068 INDIANAPOLIS 0976 C. Dexter Stapleton IN020 Storefront *(812)339-3334 3850 West 3rd, Bloomington, IN 47404 1074 Winifred Sweigart IN038 Storefront *(317)462-9956 734 N State Road, Greenfield, IN 46140 1103 Wilburn Enterprises, Inc. IN027 Storefront *(317)841-1133 5937 E 86th St, Indianapolis, IN 46250 IN411 Storefront (317)231-0090 2807 E Michigan St, Indianapolis, IN 46201 1108 Linda D. Kohlenberg IN034 Storefront *(317)687-1377 3647 W. 16th Street, Indianapolis, IN 46222 IN410 Storefront (317)356-0169 6040 E Washington St, Indianapolis, IN 46219 IN410 Montgomery Ward (317)687-1377 10202 E. Washington St, Wash Square, Indianapolis, IN 46229 IN413 Montgomery Ward (317)452-3278 3919 Lafayette Rd, Indianapolis, IN 46254 1417 Four Ayes Investment Group LLC IN068 Storefront *(317)282-3278 2815 N. Wheeling Ave., Muncie, IN 47304 1523 Raymond G. Smith IN402 Montgomery Ward (317)887-5362 1251 US 31 North, Greenwood, IN 46142 1540 Tom Shakespeare IN035 Storefront (317)272-3080 188 North State Road Suite 107, Avon, IN 46168 JACKSON, MS 1689 Jeffrey & Karen Davidson MS021 Storefront (601)924-2040 103 Highway 80 E, Suite B, Clinton, MS 39056 MS407 Storefront *(601)353-1998 1400 Ellis Avenue, Suite 5, Jackson, MS 39204 1704 Joseph R. Fontaine, Jr. MS406 Storefront *(601)352-5829 989 Ellis Ave., Jackson, MS 39209 JACKSON, TN 0791 Tax Professionals of America TN781 Storefront *(901)427-7478 1298 North Highland Ave, Jackson, TN 38305 TN781 Storefront *(901)968-8500 272 West Church, Lexington, TN 38351 JACKSONVILLE, BRUNSWICK 1310 Stephen R. Burnett FL009 Storefront *(904)751-9600 1680 Dunn Ave. Suite 3, Jacksonville, FL 32218 FL010 Storefront *(904)225-8500 548 Hwy 17, Yulee, FL 32097 GA501 Storefront *(912)882-8587 2502 Osborne Rd, St. Mary's, GA 31558 GA501 Storefront (912)882-8588 101 South Lee Street, Kingsland, GA 31548 GA501 Wal-Mart (912)882-8587 2603 Cc Osborne Rd., St. Marys, GA 31558 GA502 Storefront (912)261-0098 100 Mall Blvd, Brunswick, GA 31525 1361 Visalli Enterprises FL086 Storefront (904)720-2110 6630 Beach Blvd, Jacksonville, FL 32216 FL087 Montgomery Ward (904)724-1894 Montgomery Ward Regency Mall, Jacksonville, FL 32225 FL090 Storefront (904)768-7881 2310 Edgewood Ave. W., Jacksonville, FL 32209 FL090 Storefront (904)693-9005 1020-10 North Edgewood Ave, Jacksonville, FL 32254 FL094 Storefront *(904)695-2070 7200-6 Normandy Blvd, Jacksonville, FL 32205 FL097 Storefront (904)779-7600 7900-29 103rd Street, Jacksonville, FL 32210 FL909 Storefront (904)246-3131 2294-20 Mayport Road, Atlantic Beach, FL 32233 1607 Taxco, Inc. FL007 Storefront *(904)634-0543 17 East 43rd Street, Unit 2, Jacksonville, FL 32208 JOHNSTOWN-ALTOONA 0663 Jeffrey L. McClarren PA463 Storefront *(814)231-3287 1786 N. Atherton St., State College, PA 16803 PA565 Storefront (814)231-0575 Nittany Mall 7517 E College Ave, State College, PA 16801 PA565 Storefront (814)235-7257 2121 South Atherton Street, State College, PA 16801 0724 Jennie Jacobs, Inc. PA524 Storefront *(814)941-1040 120 Hollidaysburg Plaza, Duncansville, PA 16635 PA525 Storefront (814)941-1040 Station Mall 9th Ave. & 17th Street, Altoona, PA 16602 PA525 Storefront (814)941-1040 Kiosk Station Mall, Altoona, PA 16602 PA525 Wal-Mart (814)695-2520 2600 Plank Rd Commons, Altoona, PA 16602 1076 Larry Hess PA140 Storefront *(814)266-1808 Po Box 3960, Johnstown, PA 15904 1090 Ron Kimberly PA164 Storefront (814)768-1040 West Market Street, Clearfield, PA 16830 PA164 Wal-Mart 100 Supercenter Dr, Clearfield, PA 16830 JONESBORO 1504 Lana Coons & Larry Brantley AR014 Storefront *(501)930-9442 124 State Street, Jonesboro, AR 72401 AR016 Storefront *(501)239-3130 1510 Kingshighway Suite 2, Paragould, AR 72450 JOPLIN-PITTSBURG 1794 Judy A. Smith MO072 Storefront *(417)659-9155 1425 E 32nd St, Joplin, MO 64804 KANSAS CITY 0713 Stephen Ray Lyddon MO001 Montgomery Ward (816)822-1996 8627 State Line Road, Kansas City, MO 64114 MO527 Montgomery Ward (816)454-1992 400 West Barry Road 169, Kansas City, MO 64155 MO728 Storefront *(816)756-1993 3903 Main Street, Kansas City, MO 64111 1037 Thomas K. Nance MO523 Storefront *(816)254-6735 3519 S. Noland, Independence, MO 64055 MO523 Storefront (816)358-9004 4200 Blue Ridge Blvd., Kansas City, MO 64133 1588 Customers First!, Inc. KS008 Storefront (913)299-2400 6529 State Ave., Kansas City, KS 66102 KS008 Montgomery Ward (913)596-7363 4601 State Ave., Kansas City, KS 66102 KS011 Storefront *(913)383-2311 9930 W. 87th St., Overland Park, KS 66212 KS011 Montgomery Ward *(913)383-2311 Oak Park Shpg Center 11201 West 95t, Overland Park, KS 66214 MO722 Storefront *(816)763-1312 12121 Blue Ridge Extension, Grandview, MO 64030 KNOXVILLE 0926 Kenneth F. Roberts TN100 Storefront *(615)971-1829 2115 East Magnolia Street, Knoxville, TN 37917 LAFAYETTE, IN 1279 Jeffrey Brand & Jerry Brand IN026 Storefront *(317)449-4818 600 Sagamore Pkwy. N., Lafayette, IN 47904 LAFAYETTE, LA 0873 Barbara C. Spraggins LA105 Storefront (318)828-1400 1803 W Main #1a, Franklin, LA 70538 LA106 Storefront (318)892-1040 2670 Veterans Memorial Drive, Abbeville, LA 70510 LA107 Storefront *(318)367-1040 903 E.Admiral Doyle Dr., New Iberia, LA 70560 LA107 Wal-Mart (318)394-5950 2310 N. Main, St. Martinville, LA 70582 1183 Hawley J. Gary LA123 Wal-Mart (318)237-5188 1229 Evangeline Thruway, Lafayette, LA 70501 LA123 Montgomery Ward (318)237-5188 1700 N.E. Evangeline Thrwy., Lafayette, LA 70501 1681 Mary Ann Bennett LA136 Wal-Mart (318)948-7555 1997 I-49 Service Rd., Opelousas, LA 70570 LAKE CHARLES 1551 Charlotte Jean Reeves LA249 Wal-Mart (318)478-4829 I-10/Cities Service Rd., Sulphur, LA 70663 LA256 Storefront *(318)478-4829 3309 Ryan St., Lake Charles, LA 70601 LA256 Wal-Mart (318)478-4829 3415 US 14, Lake Charles, LA 70601 1820 Jeannette Matney & Chris Jopli LA251 Storefront *(318)460-1041 1118 North Pine, DeRidder, LA 70634 LANSING 0941 Ray Easton MI201 Storefront (517)485-0709 2622 North East St, Lansing, MI 48906 MI203 Montgomery Ward (517)323-1652 5220 W. Saginaw Hwy., Lansing, MI 48917 MI204 Storefront *(517)882-6740 1122 W. Holmes Ste. 9, Lansing, MI 48910 1005 CD Investments, Inc. MI205 Montgomery Ward (517)787-3000 1700 W. Michigan Ave., Jackson, MI 49202 MI211 Storefront *(517)694-8058 2375 N. Cedar St., Holt, MI 48842 LAREDO 1093 Mario Tenore TX058 Storefront *(210)722-1040 3600 San Bernardo Ave., Laredo, TX 78041 LAS VEGAS 1046 Craig Kobylasz NV014 Storefront *(702)454-2998 4558 E Tropicana Avenue, Las Vegas, NV 89121 1756 L.V. Tax, Inc. NV002 Montgomery Ward (702)385-6673 2875 E. Charleston, Las Vegas, NV 89104 NV827 Storefront (702)258-1237 4300 Meadows Lane Suite 233, Las Vegas, NV 89107 NV827 Storefront *(702)648-9881 6122 West Lake Mead Blvd, Las Vegas, NV 89108 NV828 Wal-Mart (702)238-2136 3625 S. Rainbow Blvd., Las Vegas, NV 89103 NV871 Montgomery Ward (702)367-3177 2120 South Decatur Blvd, Las Vegas, NV 89102 LITTLE ROCK-PINE BLUFF 0843 Mary Harris and George Harris AR000 Storefront (501)945-7888 4503 East Broadway, North Little Rock, AR 72117 AR000 Storefront (501)791-3232 5000 Jfk, North Little Rock, AR 72116 AR000 Wal-Mart (501)791-3232 3801 Camp Robinson Rd., North Little Rock, AR 72116 AR000 Wal-Mart (501)945-3535 5450 Landers Rd., Sherwood, AR 72117 AR006 Storefront (501)375-5151 1509 W. 14th St., Little Rock, AR 72202 AR121 Wal-Mart (501)224-4323 700 South Bowman, Little Rock, AR 72211 AR125 Storefront (501)847-3300 2203 Reynolds Rd, Bryant, AR 72022 AR125 Storefront (501)860-8686 2202 Military Rd., Benton, AR 72015 AR125 Wal-Mart (501)776-0606 17309 I-30, Benton, AR 72015 LITTLE ROCK-PINE BLUFF AR823 Storefront *(501)568-2828 8414 Geyer Springs, LITTLE ROCK, AR 72209 AR823 Wal-Mart (501)565-2525 8801 Baseline Rd., Little Rock, AR 72209 AR833 Storefront *(501)336-8686 690 South Salem Rd. Ste 301, Conway, AR 72032 AR833 Wal-Mart (501)470-1515 1155 Hwy 65 N, Conway, AR 72032 AR847 Storefront (501)664-3636 4421 W. 12th Street, Little Rock, AR 72205 AR847 Wal-Mart (501)565-4242 6420 Asher Ave., Little Rock, AR 72204 AR847 Montgomery Ward (501)661-7275 300 S.University, Little Rock, AR 72205 0845 Milton Bratton AR851 Storefront *(501)982-9151 2027 N. First, JACKSONVILLE, AR 72076 AR851 Storefront (501)941-1131 918 W. Main St Ste 5, Cabotcabot, AR 72023 AR851 Wal-Mart (501)982-9300 612 Loop Rd., Jacksonville, AR 72076 1664 Rosie M. & Morris Conrad AR825 Storefront *(870)541-9090 2518 East Harding, Pine Bluff, AR 71601 AR825 Wal-Mart (501)879-6868 4030 West 25th, Pine Bluff, AR 71603 LOS ANGELES 0565 Leena Parekh CA034 Wal-Mart (714)773-5005 440 N. Euclid, Anaheim, CA 92801 CA034 Montgomery Ward *(714)999-1611 1331 S. Harbor Blvd, Fullerton, CA 92632 CA047 Montgomery Ward (562)929-8640 12051 Imperial Hwy., Norwalk, CA 90650 0841 Elizabeth Monteiro CA002 Storefront *(805)947-2028 2551 E Avenue S, Ste A, Palmdale, CA 93550 CA110 Wal-Mart (805)947-2028 320 W. Ave. P., Palmdale, CA 93551 1212 Joseph Irlanda CA754 Storefront *(818)963-7790 326 E. Alosta Ave., Glendora, CA 91740 1230 Mary Crockett CA053 Storefront (818)897-1100 13439 Osborne St. Unit 3, Arleta, CA 91331 1340 Robert Smith CA025 Montgomery Ward *(714)891-9224 7777 Edinger Blvd, Huntington Beach, CA 92647 1409 Deborah L. Armijo CA650 Storefront *(714)670-0214 7903 A Knott Ave, Buena Park, CA 90620 1425 C. Bauman & K. Ekstand CA055 Storefront (310)787-8186 2515 West Carson St Unit A, Torrance, CA 90503 CA055 Montgomery Ward (310)214-4717 21405 S Madrona Avenue, Torrance, CA 90503 1428 Mudaliar Eknath CA045 Montgomery Ward (310)531-3034 141 Lakewood Center Mall, Lakewood, CA 90712 1522 Braulio P. Oro, Jr. CA180 Montgomery Ward *848 S Barranca Street, Covina, CA 91723 1697 Kay Greenspon CA654 Storefront *(562)908-1977 11805 East Whittier Blvd., Whittier, CA 90601 CA700 Montgomery Ward (310)942-1009 8800 Whittier Rd, Pico Rivera, CA 90660 1713 Clara Lanigan CA521 Storefront *(619)245-5200 14592 Palmdale Road, Victorville, CA 92392 1739 Steven S. Christian CA528 Wal-Mart (909)882-2995 17251 Foothills Blvd., Fontana, CA 92335 CA528 Wal-Mart (909)882-1635 1610 S. Riverside Ave., Rialto, CA 92376 1782 H Randhawa & A Randhawa CA059 Montgomery Ward (818)609-9740 14665 Roscoe Blvd, Panorama City, CA 91402 5000 Jackson Hewitt Inc. CA044 Storefront (310)677-9815 1275 S. Labrea #114, Inglewood, CA 90301 CA048 Montgomery Ward (310)679-7366 12000 Hawthorne Blvd., Hawthorne, CA 90250 LOUISVILLE 0817 Darrell R. Barrow IN087 Storefront (812)338-2806 Hwy 64, English, IN 47118 IN103 Storefront (812)280-9395 2948 Hwy 62, Suite C, Jeffersonville, IN 47130 IN421 Storefront *(812)949-0751 2631 Charlestown Rd, New Albany, IN 47150 1766 James Michael Jones KY012 Storefront *(502)543-6400 167 S. Buckman, Shepherdsville, KY 40165 KY104 Storefront *(502)352-5255 476 W. Lincoln Trail Blvd., Radcliff, KY 40160 5000 Jackson Hewitt Inc. IN407 Wal-Mart (812)523-3350 1600 East Tipton, Seymour, IN 47274 LUBBOCK 1758 David L. Hoblit, Jason Bullard TX396 Storefront *(806)791-4433 4433 34th, Lubbock, TX 79410 TX396 Wal-Mart (806)793-3008 4215 South 289 Loop, Lubbock, TX 79423 TX398 Wal-Mart (806)793-3733 702 West Loop 289, Lubbock, TX 79416 MANKATO 0799 Paul Haukoos & Edwin Rundell MN064 Storefront *(507)388-9394 1400 Madison Ave., Mankato, MN 56001 MEMPHIS 0791 Tax Professionals of America TN891 Storefront (901)286-0678 620-E Mall Boulevard, Dyersberg, TN 38024 TN891 Copy, Pack, & Ship *(901)286-6799 2650 Lake Road, Dyersberg, TN 38024 0848 Linda Hallum & William Hallum MS131 Storefront *(601)393-4557 521 Stateline Road, Southhaven,, MS 38671 0940 Frances Lynn Phelps TN225 Storefront *(901)658-1549 419 Tennessee Street, Hwy 18 South, Bolivar, TN 38008 TN225 Storefront *(901)645-9919 109 Court Avenue, Selmer,, TN 38375 0981 Brenda Yarber MS001 Storefront *(601)286-1040 2011 Hwy. 72 E. Easttown Shpng Ctr., Corinth, MS 38834 MS001 Storefront *(601)287-2299 2411 Proper Street., Corinth,, MS 38834 MS001 Storefront (601)728-1080 118 W. College Street, Booneville, MS 38829 MS001 Wal-Mart (601)287-1481 2301 Golding Dr., Corinth, MS 38834 1309 Barbara A. Walker AR009 Storefront *(501)238-1040 509 North Falls, Wynne,, AR 72396 AR009 Wal-Mart (870)630-1040 205 Dead Rick Rd., Forrest City, AR 72335 1526 John Medeiros AR012 Storefront *(501)483-7658 1108 Hwy 69 West, Trumann, AR 72472 AR012 Wal-Mart (501)563-2294 Hwy. 140 West, Osceola, AR 72370 AR012 Wal-Mart (501)483-6981 U.S. Hwy. 63 North, Trumann, AR 72472 1535 Roger & Delores Sumpter AR010 Wal-Mart *(501)735-4428 798 West Service Road, W Memphis, AR 72301 5000 Jackson Hewitt Inc. TN109 Storefront *(901)360-8955 4045 American Way, #9, Memphis, TN 38118 TN796 Storefront (901)344-7700 1221 Southland Mall., Memphis,, TN 38116 MERIDIAN 5000 Jackson Hewitt Inc. MS202 Storefront *(601)485-6699 826 Hwy. 19 North Ste. 460, Meridian, MS 39307 MIAMI-FT. LAUDERDALE 0507 J and O FL221 Wal-Mart (305)499-9993 8651 Northwest 13 Terrace, Miami, FL 33126 FL900 Storefront *(305)227-4100 9465 West Flagler Street, Miami, FL 33174 0839 Donna Hengber FL034 Storefront *(954)977-8500 346 South State Road 7, Margate, FL 33068 FL205 Storefront *(954)923-6328 348 E Dania Beach Blvd, Dania, FL 33004 FL911 Wal-Mart (954)942-1080 300 W. Copans Rd., Pompano Beach, FL 33064 1017 J & E Tax Service, Inc. FL255 Storefront *(305)541-9333 3809 West Flagler Street, Miami, FL 33134 1105 Tronic Tax Corp. FL197 Storefront *(954)785-8079 741 E. Atlantic Blvd., Pampano Beach, FL 33060 1650 Mark Daily and Carmen Daily FL230 Wal-Mart (305)387-6377 15885 SW 88th Street, Miami, FL 33193 1682 Matt Gribble FL902 Storefront *(305)512-4974 4200 W 12th Ave., Hialeah, FL 33012 1718 Labib Baltagi FL005 Storefront *(305)895-3011 705 NE 125th Street, North Miami Beach, FL 33015 FL005 Wal-Mart (305)770-4595 17250 NW 57th Ave., Hialeah, FL 33015 1753 Marcia Grayson, CPA FL227 Storefront *(305)386-7277 SW 13th Ave & 96th Street, Miami, FL 33186 MILWAUKEE 0897 Shelly Pijpaert WI203 Storefront (414)344-4043 3428 W. Vliet, Milwaukee, WI 53208 WI203 Storefront (414)513-5600 1560 E. Moreland, Waukesha, WI 53186 WI204 Storefront (414)513-0174 6404 N 76th, Milwaukee, WI 53223 WI205 Storefront (414)265-6661 2400 N. Dr. Martin Luther King Dr, Milwaukee, WI 53212 WI207 Storefront (414)463-8065 65th & Capitol Drive, Milwaukee, WI 53216 WI897 Storefront *(414)672-8900 826 N. Mitchell St, Milwaukee, WI 53204 MINNEAPOLIS-ST. PAUL 0761 Edward D. Bator MN038 Storefront (507)451-5927 131 West Bridge St, Owatonna, MN 55060 1096 Duane E. & Paula J. Johnson MN030 Storefront *(612)788-7880 2213 1/2 Central Ave., Minneapolis, MN 55418 MN040 Montgomery Ward (612)647-2152 1400 University Ave., St. Paul, MN 55103 1181 John P. Simms MN026 Storefront *(612)825-4743 712 1/2 East Lake St., Minneapolis, MN 55407 1203 D. Marchand & G. Stadler MN021 Montgomery Ward (612)631-6840 Rosedale Shopping Ctr 600 Rosedale, Roseville, MN 55113 1447 Paul R. Hahn MN048 Storefront *(612)881-4331 7852 Portland Ave S., Bloomington, MN 55420 MN049 Storefront *(612)861-5226 58 W. 66th St., Richfield, MN 55423 1735 Edward William Bobb MN059 Storefront (612)441-7007 Elk Park Center, Elk River, MN 55330 MN078 Montgomery Ward (612)754-1243 Northtown Shopping Center 99 Northt, Blaine, MN 55434 MOBILE-PENSACOLA 0734 Charles C. Brumley FL146 Storefront (904)484-7060 312 E. 9 Mile Rd, Suite 21, Pensacola, FL 32514 FL146 Storefront *(904)476-3523 8102 North Davis Highway, Pensacola, FL 32514 FL734 Storefront *(904)434-9364 15 Brent Lane, Ste 6-118, Pensacola, FL 32504 FL734 Wal-Mart (904)476-8838 6241 N. Davis Hwy., Pensacola, FL 32504 FL734 Montgomery Ward (904)857-0541 Cordova Mall, Pensacola, FL 32504 0859 Edgar J. Huite AL801 Storefront *(334)943-6601 1111a N. McKinzie, Foley, AL 36535 AL801 Storefront (334)943-6601 4098 Orange Beach Blvd, Orange Beach, AL 36561 AL801 Storefront (334)943-6601 22378 Hwy 59, Robertsdale, AL 36567 AL803 Storefront (334)937-6574 615 D'Olive, Bay Minette, AL 36507 AL803 Wal-Mart (334)621-0804 27955 Hwy. 98, Daphne\ Lake Forest, AL 36526 0877 Elton Jenkins FL038 Storefront *(904)626-4000 6494 Highway 90, Milton, FL 32570 FL038 Wal-Mart (904)626-4000 913 Hwy. 90 W., Milton, FL 32570 FL147 Storefront *(904)455-8666 4905 Mobile Highway, Pensacola, FL 32506 FL147 Wal-Mart (904)474-9992 8970 Pensacola Blvd., Pensacola, FL 32534 0881 Satish Vasant Mulekar AL005 Wal-Mart (334)476-2216 1095 Industrial Parkway, Saraland, AL 36571 AL500 Storefront *(334)476-2216 3083 Dauphin Street Mid-Town Mart, Mobile, AL 36606 AL500 Storefront (334)476-2216 822 Holcombe Ave, Mobile, AL 36606 AL500 Montgomery Ward (334)473-9877 Springdale Mall, Mobile, AL 36606 1745 Shirley & Percy Ethridge AL004 Storefront *(334)661-1991 4055 Cottage Hill Rd, Mobile, AL 36609 AL004 Wal-Mart (334)661-1991 7797 Airport Blvd., Mobile, AL 36608 1822 BTD Ventures, Inc. FL006 Storefront *(904)864-0944 296 Eglin Parkway N.E., Fort Walton Beach, FL 32547 FL006 Storefront *(904)830-9756 1401 Greenbriar Pkwy #2, Gulf Breeze, FL 32561 FL006 Storefront (904)830-9756 323 Page Bacon Rd. #11, Mary Esther, FL 32566 FL028 Storefront (904)678-3990 438 John Sims Parkway, Niceville, FL 32578 FL144 Wal-Mart (904)682-0299 3351 S Ferdon Blvd, Crestview, FL 32536 MONROE-EL DORADO 0636 Ethridge Tax Service LA224 Storefront *(318)322-4838 2820 Louisville Avenue Suite 103, Monroe, LA 71201 LA224 Wal-Mart (318)325-4705 1025 Glenwood Dr., West Monroe, LA 71291 LA224 Wal-Mart (318)361-0188 2701 Louisville Ave., Monroe, LA 71201 NASHVILLE 0687 Sipra Banerjee TN127 Storefront *(615)354-0004 6690 Charlotte Pike, Nashville, TN 37209 1727 Linda O. Peck TN129 Storefront *(615)758-6636 15305 Lebanon Rd., Old Hickory, TN 37138 1775 Mark A. & Debbie Hill TN896 Wal-Mart (615)393-0453 2111 N Jackson St., Tullahoma, TN 37388 TN896 Wal-Mart (615)962-9036 2629 Decherd Blvd, Winchester, TN 37398 5000 Jackson Hewitt Inc. TN699 Storefront (615)331-3674 4050 Nolensville Road, Suite N4, Nashville, TN 37211 TN715 Storefront (615)352-1721 5517 Charlotte Pike, Nashville, TN 37209 NEW ORLEANS 0668 Max M. Hirsch LA001 Storefront (504)288-6700 4335 Chef Menteur Hwy, New Orleans, LA 70126 LA003 Storefront (504)368-9487 964 Manhattan Blvd. #3, Harvey, LA 70058 LA003 Wal-Mart (504)347-0300 2100 Alex Korman, Harvey, LA 70058 LA007 Storefront (504)483-9020 3844 Dublin St, New Orleans, LA 70118 LA007 Wal-Mart (504)734-3030 800 Clearview Pky., Harahan, LA 70123 LA114 Storefront (504)286-1040 2091 Caton Street, New Orleans, LA 70122 LA121 Wal-Mart (504)394-0480 925 Behrman Hwy., Gretna, LA 70056 LA623 Storefront *(504)243-1040 9701 I-10 Service Rd. St. #a6, New Orleans, LA 70127 LA623 Storefront (504)243-0035 5700 Read Blvd., New Orleans, LA 70127 0732 T.L.L., Inc. LA211 Wal-Mart (504)336-1040 2808 Court St., Port Allen, LA 70767 0851 Accounting Associates, Inc. LA004 Storefront *(504)340-2727 1985 Barateria Blvd., Marerro, LA 70072 1065 LIN-DAR, Inc. LA122 Storefront *(504)271-8297 3201 E. Judge Perez Dr., Meraux, LA 70075 1092 Carolyn Vortisch LA115 Storefront *(504)737-1040 6626 Jefferson Hwy, Harrahan, LA 70123 LA117 Storefront *(504)832-1099 3213 17th Ste A, Metairie, LA 70002 LA213 Storefront *(504)467-1040 3130 Loyola Dr. #5, Kenner, LA 70065 1141 William & Cathleen Walter LA005 Storefront (504)899-0509 2428 S. Clairborne Ave., New Orleans, LA 70125 LA113 Storefront (504)821-0300 1048 North Broad, New Orleans, LA 70119 LA113 Storefront *(504)822-7538 3235 Tulane Ave., New Orleans, LA 70119 1237 B & F Associates LA108 Storefront *(504)853-1040 1605 C. Grand Caillou Rd., Houma, LA 70363 LA108 Copy, Pack, & Ship (504)851-1040 1633 Martin Luther King Blvd, Houma, LA 70360 1436 Barbara B. McDonald LA103 Storefront *(504)735-8080 429 Columbia Street, Bogalusa, LA 70427 LA128 Storefront *(504)429-1800 808 Venice St, Hammond, LA 70403 LA210 Storefront *(504)839-6898 704 Washington Street, Franklinton, LA 70438 LA306 Wal-Mart (504)429-1800 1707 W. Thomas St., Hammond, LA 70401 1630 1040, Inc. LA102 Storefront *(504)641-1021 128 Gause Blvd West, Slidell, LA 70460 LA304 Storefront (504)898-0950 1200 Business 190 Bay 20, Covington, LA 70433 1728 Gloria Frith LA112 Storefront *(504)944-1040 2025 St. Claude Ave., New Orleans, LA 70116 5000 Jackson Hewitt Inc. LA111 Storefront *(504)891-8008 1031 9th Street Suite A, New Orleans, LA NEW YORK 0596 TDM, Inc NJ984 Storefront (201)977-9114 444 Madison Ave., Paterson, NJ 07501 NJ984 Storefront *(201)977-9115 191 Lafayette Street, Patterson, NJ 07501 NJ984 Storefront *(201)785-9845 103 Main Street, Little Falls, NJ 07424 0893 M. Jeffrey Madan NJ048 Storefront (908)828-5330 574 Milltown Rd, North Brunswick, NJ 08902 NJ048 Wal-Mart (908)448-1040 979 Route #1 S., North Brunswick, NJ 08902 NJ050 Storefront *(908)238-1040 607a Highway 18, East Brunswick, NJ 08816 0914 Hector L. Sanchez NJ102 Storefront *(201)413-1040 308 Grove Street, Jersey City, NJ 07302 0920 Robert E. Williams CT120 Storefront *(203)778-4829 183 Main Street, Danbury, CT 06810 CT120 Storefront (203)778-3983 Danbury Fair Mall 7 Backus Ave, Danbury, CT 06810 0959 Anthony & Carol A. Manousos CT104 Storefront (203)353-0132 12 Belden Ave, Norwalk, CT 06850 CT104 Storefront *(203)866-1099 12 Belden Ave., Norwalk, CT 06850 0998 William Goldstein NY056 Storefront *(516)292-3330 66 North Franklin Street, Hempstead, NY 11550 NY071 Storefront (516)377-0794 10 East Sunrise Hwy., Freeport, NY 11520 1004 Grand Income Tax, Inc. NY105 Storefront (718)729-7007 29-13 36th Ave, Long Island City, NY 11106 NY106 Storefront *(718)932-4000 28-17 Steinway Street, Astoria, NY 11103 NY107 Storefront (718)457-4206 84-30 Roosevelt Ave., Jackson Heights, NY 11372 1035 Anjeet Sobti NY052 Storefront (914)699-5418 One South Fourth Avenue, Mount Vernon, NY 10550 NY053 Storefront (914)632-5789 485 A Main Street, New Rochelle, NY 10801 NY112 Storefront (718)625-6009 38 Nevins, Brooklyn, NY 11211 NY207 Storefront *(718)665-4448 88 East 161 St, Bronx, NY 10451 NY299 Storefront (718)515-7628 3548 White Plains Rd., Bronx, NY 10467 1062 J.C.B.C., Inc. NY103 Storefront *(718)721-4888 33-02 Ditmars Blvd, Astoria, NY 11105 NY309 Storefront *(718)459-6498 98-87 Queens Blvd, Rego Park, NY 11374 NY325 Storefront *(718)628-6632 60-50 Myrtle Avenue, Ridgewood, NY 11385 NY325 Storefront *(718)456-1917 68-29 Myrtle Ave, Glendale, NY 11385 1137 Henry Johnson NJ051 Storefront *(908)342-9866 2 Monument Square, New Brunswick, NJ 08901 1215 Jam Millennium, Inc. NY308 Storefront *(718)457-3361 103-07 Roosevelt Ave, Corona, NY 11368 1554 Edward Solomon NY138 Storefront *(516)471-7483 429 Hawkins Ave, Lake Ronkonkoma, NY 11779 NY176 Wal-Mart (516)471-7483 161 Centereach Mall, Centereach, NY 11720 1579 Robert J. Heagen NJ022 Storefront *(908)920-2990 249 Chambersbridge Rd., Brick, NJ 08723 1666 Anthony J. Coppola CT101 Storefront *(203)353-0132 513 Summer Street, Stamford, CT 06901 1701 Jennifer L. Ficuciello NY054 Storefront *497-B South Broadway, Yonkers, NY 10705 1702 Jay Sankaran NY313 Storefront *(718)658-3825 153-38 Hillside Ave., Jamaica, NY 11432 1788 Scan Systems, Inc. NY136 Storefront *(516)582-8822 31 Wheeler Roadg, Central Islip, NY 11722 NY331 Storefront (718)398-8989 551 Nostrand Avenue, Brooklyn, NY 11216 1803 Melissa A. Hill NY257 Storefront *(718)904-0404 75 Westchester Square, Bronx, NY 10461 1813 Joseph Yeadon NJ074 Storefront *(201)923-2323 366-368 Clinton Place, Newark, NJ 07112 NORFOLK-PORTSMTH-NEWPT NWS 0501 Employees Inc. VA037 Storefront *(804)925-0536 914 N. Main Street, Suffolk, VA 23434 VA038 Storefront (804)562-3025 1339 Armory Dr., Suite 12, Franklin, VA 23851 VA038 Storefront *(804)365-0500 1254 Smithfield Plaza, Smithfield, VA 23430 VA040 Storefront (804)488-0411 4214 Portsmouth Blvd., Portsmouth, VA 23701 VA040 Storefront (804)484-8688 3115 Western Branch Blvd. Suite 105, Chesapeake, VA 23321 VA040 Storefront (804)487-8789 4536 Geo. Washington Hwy., Portsmouth, VA 23702 VA040 Storefront *(804)488-2962 3916 Portsmouth Blvd., Chesapeake, VA 23321 VA040 Wal-Mart (804)488-0411 4107 Portsmouth Blvd, Chesapeake, VA 23321 VA040 Montgomery Ward (804)488-0374 4000 Victory Blvd, Portsmouth, VA 23701 VA040 Montgomery Ward (804)465-4581 4200 Portsmouth Blvd 4200 Portsmout, Cheasapeake, VA 23321 VA041 Storefront *(804)397-1405 1008 Frederick Boulevard, Portsmouth, VA 23707 0503 Josh Enterprises, Inc. VA051 Storefront *(757)431-0460 2728 N Mall Drive #110, Virginia Beach, VA 23452 VA051 Storefront (757)431-0326 3601 Holland Rd. Ste. 829, Virginia Beach, VA 23452 VA051 Storefront (757)471-9158 3813 Princess Anne Rd. Ste 128, Virginia Beach, VA 23456 VA051 Montgomery Ward (804)463-4560 701 Lynnhaven Pkwy, Virginia Beach, VA 23452 0506 M And M VA056 Storefront *(804)473-9366 4848-7 Virginia Beach Blvd., Virginia Beach, VA 23462 VA056 Storefront *(804)671-1614 800 Baker Rd #112, Virginia Beach, VA 23462 VA056 Storefront (804)363-9319 5393 Wesleyan Dr #102, Virginia Beach, VA 23455 VA056 Storefront (804)499-8007 4575 Bonney Road, Virginia Beach, VA 23462 0508 Vickie Lemon VA027 Storefront *(804)694-5082 6583 Market Drive, Gloucester, VA 23061 0513 Ivy Enterprises, Inc. VA045 Storefront *(757)428-8176 629 First Colonial Road, Virginia Beach, VA 23451 VA045 Storefront *(757)481-0494 1328 N. Great Neck Rd, Virginia Beach, VA 23451 VA045 Storefront *(757)422-1181 527 N. Birdneck Rd, Unit 13, Va Beach, VA 23451 0528 Brits, Inc. VA058 Storefront (757)474-1040 5302 Fairfield Shopping Center, Virginia Beach, VA 23464 VA058 Storefront (757)467-9429 4221 Pleasant Valley Road, Virginia Beach, VA 23464 VA058 Storefront (757)479-4998 1920 Centerville Turnpike, Virginia Beach, VA 23464 VA058 Storefront *(757)424-1040 6509 College Park Square, Virginia Beach, VA 23464 VA058 Storefront (757)424-1040 1501 20th Street, Chesapeake, VA 23324 VA059 Storefront (757)494-1040 1951 S. Military Highway, Chesapeake, VA 23320 0719 Margaret Harrison Suppler NC105 Storefront *(919)473-9818 202 Sir Walter Raleigh St., Manteo, NC 27954 0746 P T Tax VA054 Storefront (804)466-9224 1126 North Military Highway, Norfolk, VA 23502 VA054 Wal-Mart (804)466-0641 1170 N.Military Hwy, Norfolk, VA 23502 VA054 Montgomery Ward (804)627-4998 Montgomery Ward 5802 Va Beach Blvd, Norfolk, VA 23502 VA746 Storefront (804)625-3310 243 Granby Street, Norfolk, VA 23510 VA746 Storefront *(804)627-4998 1016 Park Ave, Norfolk, VA 23510 1097 CAMA Enterprises, Inc. VA505 Storefront *(757)587-1100 152 E. Little Creek Rd, Norfolk, VA 23505 VA505 Storefront (757)587-5621 9604 Granby Street, Norfolk, VA 23503 VA505 Storefront *(757)489-3161 8208-A Hampton Blvd, Norfolk, VA 23503 VA802 Storefront (757)587-3816 2366 E. Little Creek Rd., Norfolk, VA 23518 VA802 Storefront (757)362-8409 9549 Shore Drive Plaza, Norfolk, VA 23518 VA802 Storefront (757)853-5114 6204 G Military Highway, Norfolk,, VA 23518 VA802 Storefront (757)855-2261 6970 N. Military Hwy., Norfolk, VA 23518 1114 CHESTAX Company VA039 Storefront *(804)547-7762 1128 N. Battlefield Blvd., Chesapeake, VA 23320 VA039 Storefront *(804)548-4594 Greenbrier S 801 Volvo Pky Unit 128, Chesapeake, VA 23320 VA039 Storefront *(804)546-9161 237 S. Battlefield Blvd. Unit 25, Chesapeake, VA 23320 1243 Susan Harmon VA032 Storefront (804)930-9505 Stoney Brook Shpg. Ctr. 15425-G War, Newport News, VA 23608 VA032 Storefront (757)930-9505 14346 Old Courthouse Way, Newport News, VA 23602 VA032 Montgomery Ward (804)874-0100 Denbigh Mall, 354 Denbigh Blvd, Newport News, VA 23602 1543 Gunwant S. Rekhi VA023 Storefront *(804)843-4546 1714 Main Street, West Point, VA 23181 VA031 Storefront *(757)898-1755 Washington Squ. Shpg.Ctr. 5338 Geo., Grafton, VA 23692 VA031 Storefront (757)220-3747 455 Merrimac Trail, Williamsburg, VA 23185 1547 Damar Corporation VA035 Storefront *(757)596-6123 10153c Jefferson Ave., Newport News, VA 23605 1559 Vine Enterprises, Inc. NC002 Storefront *(919)335-0307 123 Jordan Plaza, Elizabeth City, NC 27909 NC002 Storefront (919)426-1191 Hwy 17, Ward Shopping Center, Hertford, NC 27944 VA502 Storefront *(757)425-8353 1581 General Booth Blvd., Virginia Beach, VA 23454 1563 Lindsey Enterprises, Inc. VA034 Storefront *(757)827-6191 3001 W. Mercury Blvd., Hampton, VA 23666 VA034 Storefront (757)727-7750 1111 N. King Street, Hampton, VA 23669 VA034 Wal-Mart (757)827-6191 1900 Cunningham Dr, Hampton, VA 23666 VA034 Montgomery Ward (757)838-3000 Coliseum Mall 1800 West Mercury Blv, Hampton, VA 23666 1581 Bhupindar Rekhi & MandeepSobti VA033 Storefront (757)851-6878 227 Fox Hill Rd Unit C-2, Hampton, VA 23669 VA033 Storefront (757)727-0997 1946 E Pembroke Ave., Hampton, VA 23663 VA036 Storefront (757)245-5964 2703 Jefferson Ave., Newport News, VA 23607 VA036 Storefront *(757)245-6150 2219 Kecoughtan Rd, Hampton, VA 23661 VA036 Storefront (757)838-9799 605-13 New Market Dr., Newport News, VA 23605 1774 Brenda J. Anderson VA028 Storefront *(757)331-2222 21069 Bayside Rd. P.O. Box 207, Cheriton, VA 23316 5000 Jackson Hewitt Inc. VA047 Storefront *(757)498-9387 3742 Virginia Beach Blvd., Virginia Beach, VA 23452 VA047 Storefront (757)463-7913 340 London Bridge Sch Center, Virginia Beach, VA 23454 OKLAHOMA CITY 1355 Melvin W. Decker OK134 Storefront *(405)799-7100 837 NW 12th St., Moore, OK 73160 1518 Northern Oklahoma Tax & Busin* OK010 Storefront *(405)762-0644 2128 N 14th St. Suite 8, Ponca City, OK 74601 OK010 Wal-Mart (405)762-0655 1101 E. Prospect, Ponca City, OK 74601 ORLANDO-DAYTONA BCH-MELBRN 0656 Mary D., Inc. FL021 Storefront *(407)895-6011 2122 E. Colonial Dr., Orlando, FL 32803 FL022 Wal-Mart (407)249-2242 10749 E. Colonial Dr., Orlando, FL 32817 0659 R. Wayne Sheffield FL604 Wal-Mart (407)728-7114 3990 Babcock St., Melbourne, FL 32901 FL605 Storefront *(407)722-9020 820 Palm Bay Road NE #112, Palm Bay, FL 32905 0673 Wire Fox, Inc. FL601 Storefront *(407)253-5756 1865 N. Wickham Rd., Melbourne, FL 32935 FL601 Wal-Mart (407)752-0082 1000 N. Wickham Rd., Melbourne, FL 32935 0810 Robert B. Turnage & Associates FL029 Storefront *(407)869-7277 851 West State Highway 436 Ste 1011, Altamonte Springs, FL 32714 FL030 Storefront *(407)299-7746 5052 West Colonial Drive, Orlando, FL 32808 FL030 Storefront (407)291-2939 2735 N. Hiawassee Rd, Orlando, FL 32818 FL344 Montgomery Ward (407)831-9960 130 East Altamonte Drive, Altamonte Springs, FL 32701 FL353 Storefront (407)298-4418 5779 Edgwater Drive, Orlando, FL 32810 0813 Philip H. Welch FL602 Storefront *(407)783-3999 365 N. Orlando Ave., Cocoa Beach, FL 32931 FL602 Storefront (407)453-1555 215 Crockett Boulevard, Merritt Island, FL 32953 FL602 Wal-Mart (407)783-7398 323 E Merritt Isl Causway, Merritt Island, FL 32952 0878 Brilliant Deductions, Inc. FL062 Montgomery Ward (407)420-2413 2500 W. Colonial Dr., Orlando, FL 32804 FL358 Storefront *(407)933-1551 1506 West Vine Street, Kissimmee, FL 34741 0884 Jeanette Stiers FL054 Storefront *(407)631-8297 1036 Clearlake Road, Cocoa, FL 32922 1107 Minerva Chalwell FL394 Storefront *(904)736-4755 1101c S Woodland Blvd Towers Center, Deland, FL 32724 1475 C. Shew and N. Seiffert FL051 Storefront *(407)268-8095 2910 Garden Street, Titusville, FL 32796 FL051 Wal-Mart (407)268-8095 3175 Cheney Highway, Titusville, FL 32780 FL346 Storefront (904)423-3278 699 N. Dixie Freeway, New Smyrna Beach, FL 32168 1604 Rick C. Bourn FL354 Storefront *(407)880-3453 67 West Main St., Apopka, FL 32703 1675 Race Coast Ent.of Daytona, Inc FL025 Storefront *(904)248-3278 1571 N. Nova Road, Holly Hill, FL 32117 FL025 Storefront *(904)258-3278 132 North Nova Rd, Daytona Beach, FL 32114 1770 H & W Services, Inc. FL347 Storefront *(407)323-4415 1806 French Avenue, Sanford, FL 32771 1824 A. William Forness, Jr. FL023 Storefront *(407)894-6556 2804 Curry Ford Rd., Orlando, FL 32806 FL023 Storefront (407)894-6556 400 East Compton Street, Orlando, FL 32806 FL023 Montgomery Ward (407)438-6875 7531 S. Orange Blossom Trail, Orlando, FL 32809 FL024 Storefront (407)282-1040 4310 South Semoran Blvd., Orlando, FL 32822 PADUCAH-C.GIRD-HARBG-MT VN 0791 Tax Professionals of America TN005 Wal-Mart 1700 W. Reelfoot Ave, Union City, TN 38261 1320 Steve Reece MO101 Storefront *(314)888-1040 129 Bootheel Plaza, Kennett, MO 63857 1507 Karen Lance MO102 Storefront *(573)778-1040 200 South Westwood, Poplar Bluff, MO 63901 1767 Royce Robin Bruce KY040 Wal-Mart (502)251-2303 3220 Irvin Cobb, Paducah, KY 42001 1771 Advanced Tax Services, Inc. MO046 Wal-Mart (573)243-2623 Hwy. 61 E., Jackson, MO 63755 MO046 Wal-Mart (573)334-6595 3439 Williams St., Cape Girardeau, MO 63701 1806 Vienna Tax Services, Ltd. IL106 Storefront *(618)658-3278 114 North 4th Street, Vienna, IL 62995 IL106 Wal-Mart (618)549-9110 1450 East Main, Carbondale, IL 62901 IL106 Wal-Mart (618)993-1911 2705 Walton Way, Marion, IL 62959 PANAMA CITY 1134 Susan Rose and Mary Bonnin FL145 Copy, Pack, & Ship (904)233-9400 10270 Front Beach Road, Panama City Beach, FL 32407 FL201 Storefront *(904)914-2400 745 Harrison Ave, Panama City, FL 32401 PEORIA-BLOOMINGTON 1421 Allen S. Ware IL036 Storefront *(309)827-0440 512 E. Locust Street, Bloomington, IL 61701 IL152 Montgomery Ward (309)888-4040 301 S Veteran Pkwy(College Hills M), Normal, IL 61761 IL160 Montgomery Ward (309)688-3390 4501 N War Memorial Dr., Peoria, IL 61614 PHILADELPHIA 0693 Maryland Samco, Inc. DE010 Storefront *(302)368-7040 14a Marrows Rd., Newark, DE 19713 DE012 Storefront *(302)322-8111 1416 N. Dupont Highway, New Castle, DE 19720 0880 Technosoft, Inc. PA044 Storefront *(610)327-8754 429 High Street, Pottstown, PA 19464 PA880 Storefront *(610)279-1860 307 East Main Street, Norristown, PA 19401 0912 Renee' A. Messina NJ004 Storefront (609)692-9699 75 Landis Ave., Vineland, NJ 08360 NJ101 Storefront *(609)344-7444 2414 Atlantic Ave., Atlantic City, NJ 08401 NJ101 Storefront (609)348-0953 1600 Atlantic Ave., Atlantic City, NJ 08401 0919 Tax, Facts, and Figures DE014 Storefront *(302)655-3900 200 No. Union, Wilmington, DE 19805 DE015 Storefront *(302)764-8280 1 East Lea Blvd, Wilmington, DE 19802 0933 Michael McGrath DE016 Storefront *(302)998-7670 4565 Kirkwood Highway Millcreek Sc, Wilmington, DE 19808 DE017 Storefront *(302)798-1430 3203 Philadelphia Pk, Claymont, DE 19703 DE019 Storefront (302)737-9488 602 Newark Shopping Ctr., Newark, DE 19711 1315 The Tax Authority, Inc. NJ085 Storefront *(609)665-1040 919 Cherry Hill Mall, Cherry Hill, NJ 08002 NJ089 Storefront (609)387-1000 287 Burlington Center - Upper Level, Burlington, NJ 08016 NJ089 Copy, Pack, & Ship *(609)387-3690 2106 Mt. Holly Road, Burlington, NJ 08016 NJ097 Storefront (609)265-9000 1710 Rt 38, Lumberton, NJ 08060 1445 Integrity Financial Services, NJ003 Storefront *(609)927-1300 Store #2-B, Somers Point Plaza, Somers Point, NJ 08244 NJ003 Storefront (609)927-1300 5301 Atlantic Ave, Ventnor, NJ 08406 1503 Red Cent East PA001 Storefront *(215)765-5539 680 N. Broad St., Philadelphia, PA 19130 PA002 Storefront (215)229-1040 1001 Market St, Philadelphia, PA 19107 PA016 Storefront *(215)229-1040 3750 Germantown Ave, Philadelphia, PA 19140 PA018 Storefront *(215)843-9979 5612 Greene Street, Philadelphia, PA 19144 PA086 Check Cashers (610)490-1133 3302 Edgemont Avenue, Brookhaven, PA 19015 PA136 Storefront (215)338-8220 7331 Frankford Avenue, Philadelphia, PA 19136 PA148 Storefront *(215)471-9606 5137 Chestnut Street, Philadelphia, PA 19139 PA620 Storefront (610)583-1740 413 Macdade Blvd, Glen Olden, PA 19036 1709 McWilliam Colon, Sr. & Milo A. PA015 Storefront (215)424-3737 5607 N. 5th Street, Philadelphia, PA 19120 1740 Larry W. Farmbry and Associa* PA143 Storefront *(215)877-4181 2841 West Girard Avenue, Philadelphia, PA 19121 1743 Wanda W. Pierce DE013 Storefront *(302)993-0525 2421 Kirkwood Highway, Wilmington, DE 19805 1759 Eric A. Hicklen PA091 Storefront *(610)380-1991 210 East Lincolon Highway, Coastville, PA 19320 5000 Jackson Hewitt Inc. DE101 Storefront (302)735-8778 57 Greentree Dr., Dover, DE 19904 PHOENIX 0922 Elle, Inc. AZ005 Montgomery Ward (602)230-0033 1751 West Bethany Home Road, Phoenix, AZ 85015 AZ123 Storefront *(602)864-6538 8026 N 19th Avenue, Phoenix, AZ 85021 AZ124 Montgomery Ward (602)569-0033 4469 East Thomas Rd, Phoenix, AZ 85008 AZ128 Storefront *(602)788-3022 16874 North Cave Creek Road, Phoenix, AZ 85032 1089 Valerie Lee AZ302 Storefront *(520)704-1040 1071 Hancock Road #2, Bullhead City, AZ 86442 AZ302 Wal-Mart (520)704-1040 2350 Miracle Mile Rd., Bullhead City, AZ 86442 1104 Scott Rulon AZ046 Check Cashers (602)863-9300 19th Ave & Bell, Phoenix, AZ 85023 AZ046 Montgomery Ward (602)412-4100 7780 Arrowhead Town Center, Glendale, AZ 85308 1294 Taxing Times, Inc. AZ002 Storefront *(602)849-4480 6544 West Thomas Road Ste 32, Phoenix, AZ 85033 1358 Red Cent, Inc. AZ003 Storefront (602)268-9323 7227 S. Central Unit 1020, Phoenix, AZ 85040 AZ040 Storefront (602)827-8100 420 East Southern Ave. B-9, Mesa, AZ 85210 AZ222 Storefront *(602)784-1601 3124 S. Mill Ave., Tempe, AZ 85282 1439 Shelly DeJean AZ050 Storefront *(520)532-0247 4461 S. White Mountain Road, Show Low, AZ 85901 AZ050 Storefront (520)532-0247 Hwy 73, White River, AZ 85541 AZ050 Wal-Mart (520)537-4287 4421 S. White Mountain Rd., Show Low, AZ 85901 1655 James E. Areghini AZ309 Storefront *(602)964-8637 230 E. Hwy 89a, Suite A, Cottonwood, AZ 86326 1783 Raul Franco AZ783 Storefront *(602)668-1040 1911 W. Main St., Mesa, AZ 85202 AZ783 Montgomery Ward (602)833-4799 1625 W. Southern Ave., Mesa, AZ 85202 5000 Jackson Hewitt Inc. AZ001 Montgomery Ward (602)842-5924 Valley West Mall 5849 W Northern Av, Glendale, AZ 85301 AZ007 Storefront *(602)956-3135 2335 E. Indian School Rd., Phoenix, AZ 85016 AZ038 Montgomery Ward (602)842-5937 7835 W. Thomas Rd, Phoenix, AZ 85035 PITTSBURGH 0737 Aquarian Ventures PA901 Storefront *(412)733-1090 1910 Rt. 286, Pittsburgh, PA 15239 PA901 Storefront (412)373-4775 3983 Wm. Penn Hwy, Monroeville, PA 15146 0757 Joseph P. O'Rourke PA101 Storefront (412)431-5331 234 Brownsville Rd, Pittsburgh, PA 15210 PA114 Storefront (412)281-3455 819 Liberty Ave, Pittsburgh, PA 15219 PA115 Storefront (412)361-6255 6508 Frankstown Ave., Pittsburgh, PA 15206 PA357 Storefront *(412)571-1470 2883 West Liberty, Pittsburgh, PA 15216 1180 Peter Winkler PA146 Storefront *(814)437-1223 319 13th Street, Franklin, PA 16323 1251 Susan & Joseph Nolan PA109 Storefront *(412)734-9596 405 Lincoln Ave, Pittsburgh, PA 15202 5000 Jackson Hewitt Inc. PA163 Storefront *(412)657-9995 2807 Wilmington (Fox Chase Plaza), New Castle, PA 16105 PORTLAND, OR 0975 Calvin and Hideko Phillips OR010 Storefront *(503)390-7574 5097 River Rd North (Ltc # 5518), Keizer, OR 97303 OR010 Storefront (503)362-5718 1131 Lancaster Dr. NE (Ltc # 5518), Salem, OR 97301 OR010 Montgomery Ward (503)585-0268 833 Lancaster Dr NE (Ltc # 5518), Salem, OR 97301 OR011 Storefront *(503)585-4663 1940 Commercial St SE (Ltc # 5518), Salem, OR 97302 1085 Emanuel Etuks OR005 Storefront *(503)249-1148 3215 NE Broadway, Portland, OR 97232 OR014 Montgomery Ward *(504)249-1148 Jantzen Beach Shopping Ctr 1400 N H, Portland, OR 97217 WA088 Storefront (360)750-1332 2201 Grand Blvd NE, Vancouver, WA 98661 1194 Daniel & Elaine Exstrom OR009 Montgomery Ward (503)626-3480 4401 SW 110th Ave., Beaverton, OR 97005 OR013 Storefront *(503)691-0922 18773 SW Martin Ave., Tualatin, OR 97062 1377 Deborah A. & Walter D. Renfro OR030 Storefront *(541)917-0474 931 Pacific Blvd SE, Albany, OR 97321 1612 Louise J. Lowes OR008 Storefront *(503)667-4087 4235 SE 182nd Avenue, Gresham, OR 97030 PORTLAND-AUBURN 0942 Ronald A. Chasse ME101 Storefront (207)784-3737 201 Main Street, Lewiston, ME 04240 PROVIDENCE-NEW BEDFORD 1167 P & L Tax Services, Inc. MA053 Storefront *(508)675-0044 1664 South Main Street, Fall River, MA 02724 RALEIGH-DURHAM 0509 T and C Tax Services Inc. NC007 Storefront (919)662-8004 1558 Hwy.70 West Kmart Plaza, Garner, NC 27529 NC009 Storefront *(919)850-0582 3300 Capital Blvd., Raleigh, NC 27604 NC009 Storefront (919)231-4279 2116i New Bern Avenue, Raleigh, NC 27610 NC011 Storefront (919)481-9131 Cary Town Center 1105 Walnut Street, Cary, NC 27511 NC130 Wal-Mart (919)850-0582 6600 Glenwood Ave, Raleigh, NC 27613 NC133 Storefront (919)851-4510 5563-10a Western Blvd., Raleigh, NC 27606 0519 Carolina Tax Service (CARTS) NC501 Storefront (919)490-3196 North Duke Mall 3600 N. Duke Street, Durham, NC 27704 NC502 Storefront *(919)490-3196 4201 University Drive Unit #109, Durham, NC 27707 NC503 Storefront (919)490-3196 1414 Avondale Road, Durham, NC 27701 NC503 Storefront (919)490-3196 1715 Holloway St., Durham, NC 27703 NC503 Wal-Mart (919)490-3196 5450 New Hope Common Dr, Durham, NC 27707 0598 William F. Barton NC113 Storefront *(919)553-0321 11450 Highway 70 West, Clayton, NC 27520 NC113 Wal-Mart (919)989-9400 1231 Brightleaf Blvd, Smithfield, NC 27577 0858 Moore Tax Service, Inc. NC001 Storefront *(919)580-1040 716a East Ash Street, Goldsboro, NC 27530 0988 Glenn Barbour NC028 Storefront *(919)693-1040 111 Littlejohn St., Oxford, NC 27565 NC150 Storefront (919)431-1040 123 So. Garnett Street, Henderson, NC 27536 NC151 Storefront (919)537-2884 312 Roanoke Avenue, Roanoke Rapids, NC 27870 NC151 Wal-Mart (919)535-5360 1350 Weldon Rd., Roanoke Rapids, NC 27870 1070 Mityco, Inc. NC220 Storefront (910)892-1618 1130 W. Broad Street, Dunn, NC 28334 NC220 Storefront *(910)639-7853 P.O. Box 284, Angier, NC 27501 1455 Harvey S. Sapir NC047 Storefront (919)929-7600 104cc Hwy 54, Carrboro, NC 27510 1690 Michelle W. Pollock & Stuart* NC217 Storefront *(910)426-4515 4542 Raeford Road Suite D, Fayetteville, NC 28314 1719 Brenda L. Pullen & John Dan* NC056 Storefront *(919)554-9400 213 South White Street, Wake Forest, NC 27587 1768 Camellia Norton Brown NC008 Storefront *(919)785-0017 4217 Six Forks Road, Raleigh, NC 27609 1787 Lester B. Sumner NC003 Storefront *(910)864-9816 6243 Yadkin Road, Suite 101, Fayetteville, NC 28303 RENO 1162 L Salavarrieta/M Salavarrieta NV761 Storefront *(702)826-1116 314 E. Plumb Lane, Reno, NV 89502 NV761 Montgomery Ward (702)355-3013 1900 Silverada Blvd., Reno, NV 89512 RICHMOND-PETERSBURG 0594 Duck, Inc. VA021 Storefront (804)231-3278 5069 Forrest Hill Ave., Richmond, VA 23225 VA021 Storefront (804)231-3278 7009 Hull Road, Richmond, VA 23224 VA021 Storefront (804)231-3278 1420 Hull Street, Richmond, VA 23224 VA022 Storefront (804)231-3278 617-B McQuire Circle, Richmond, VA 23224 VA022 Storefront *(804)231-3278 4741 Jefferson Davis Hwy, Richmond, VA 23234 VA138 Wal-Mart (804)234-3278 900 Wal-Mart Way, Midlothian, VA 23235 0622 VNE Corporation VA019 Storefront *(804)264-3278 7143 Staples Mill Rd, Richmond, VA 23228 VA019 Storefront (804)264-3278 14 E.Broad St., Richmond, VA 23230 VA020 Storefront (804)264-6838 5206b Azalea Ave, Richmond, VA 23227 0655 J.H. Developers, Inc. VA013 Storefront (804)733-6055 2546 C South Crater Rd., Petersburg, VA 23805 VA014 Storefront *(804)458-9757 329 Cavalier Square Shopping Center, Hopewell, VA 23860 VA014 Wal-Mart (804)768-1040 671 S. Park Blvd, Colonial Heights, VA 23834 VA015 Storefront *(804)768-1040 12710 Jefferson Davis Highway Breck, Chester, VA 23831 VA017 Storefront *(804)648-3278 3277 Mechanicsville Tpke., Richmond, VA 23223 VA124 Storefront *(804)648-3278 2929 Williamsburg Rd, Richmond, VA 23231 0988 Glenn Barbour VA030 Storefront (804)634-4399 321 West Atlantic Street, Emporia, VA 23847 VA030 Storefront *(804)447-4477 110 West Atlantic Street, South Hill, VA 23970 1243 Susan Harmon VA111 Storefront *(804)834-2046 121-123 W. Main Street, Waverly, VA 23890 1386 Hau, Inc. VA112 Storefront *(804)752-2636 537 S. Washington Hwy, Ashland, VA 23005 ROANOKE-LYNCHBURG 0834 Ward, Murphy, & Shumate VA042 Storefront (804)836-2239 115 D Mt Cross Road, Danville, VA 24541 VA043 Storefront *(804)836-2239 255 Nordan Drive, Danville, VA 24540 0988 Glenn Barbour VA029 Storefront (804)572-6930 830 Wilborn Avenue, South Boston, VA 24592 VA029 Storefront (804)372-4533 502 North Main Street, Chase City, VA 23924 1189 Larry G. Puckett, Jr. VA100 Storefront (540)776-3278 1430 Hershburger Rd, Roanake, VA 24012 VA100 Montgomery Ward (540)265-3638 4082 Valley View Blvd, Roanoke, VA 24012 1328 David Lee Henry VA110 Storefront *(703)381-5555 3125 No. Franklin St, Christiansburg, VA 24073 1617 J. Brandon Bell VA103 Storefront (540)772-8190 4280 Electric Road, Roanoke, VA 24014 ROCHESTER, NY 1120 Jo Ann Thompson NY153 Storefront (716)429-7566 Westmar Plaza 2109 A Buffalo Rd., Rochester, NY 14624 NY154 Storefront (716)342-5134 1075 Norton St., Rochester, NY 14621 NY161 Storefront (716)288-8250 1098 Culver Road, Rochester, NY 14609 NY166 Storefront (716)254-0138 1260 Lyell Ave., Rochester, NY 14606 NY592 Storefront (716)423-9344 125 St. Paul Street, Rochester, NY 14604 NY592 Storefront (716)423-9811 Midtown Plaza, Rochester, NY 14604 NY688 Storefront (716)338-1040 Irondequoit Mall, Rochester, NY 14622 NY688 Wal-Mart (716)671-2617 1902 Empire Blvd, Webster, NY 14580 1207 Kathleen Cathy NY089 Storefront *(315)594-6432 Northrup Street, Wolcott, NY 14590 1210 Jamil Al-Khazaali NY156 Storefront *(716)244-7000 686 South Ave., Rochester, NY 14620 NY156 Wal-Mart (716)424-1540 1200 Marketplace Dr, Rochester, NY 14623 1638 Francis A. Antinetto NY004 Storefront *(716)247-2470 2292 Lyell Ave., Rochester, NY 14606 SACRAMNTO-STKTON-MODESTO 0906 John Laven CA175 Storefront *(209)477-1234 3255 W Hammer Lane, Suite, Stockton, CA 95207 CA175 Montgomery Ward (209)473-5397 5400 Pacific Avenue, Stockton, CA 95207 1068 John Hogg CA008 Storefront *(916)483-0100 3510 Auburn Blvd. Ste. 4, Sacramento, CA 95821 CA008 Montgomery Ward (916)978-3393 3460 El Camino Ave., Sacramento, CA 95825 1324 Kathryn Ann Burnes CA009 Montgomery Ward (916)424-7796 5601 Florin Rd., Sacramento, CA 95823 CA336 Storefront *(916)685-8551 9632 Emerald Oak Dr. Ste D, Elk Grove, CA 95624 1360 Ronald Foss & Virginia Walsh CA007 Storefront *(916)721-0200 7979 Greenback Lane, Citrus Heights, CA 95610 CA007 Montgomery Ward (916)721-1796 6199 Sunrise Blvd., Citrus Heights, CA 95610 1534 William Keegan CA014 Wal-Mart (707)428-5409 300 Chadbourne Rd., Fairfield, CA 94533 5000 Jackson Hewitt Inc. CA023 Montgomery Ward (209)523-3930 2001 McHenry Ave., Modesto, CA 95350 SALISBURY 1031 Donald L. Short DE100 Storefront *(302)629-4548 817 Norman Eskridge Highway, Seaford, DE 19973 DE100 Storefront (302)934-9450 328 Dupont Highway - Rt. 113, Millsboro, DE 19966 1781 Jennifer A. Lynch MD135 Storefront *(410)860-1040 901g N. Salisbury Blvd, Salisbury, MD 21801 5000 Jackson Hewitt Inc. DE105 Storefront (302)424-4266 915 N. Dupont Highway Suite 103, Milford, DE 19963 SALT LAKE CITY 0708 Jyl Dodd NV878 Storefront *(702)738-2526 2554 Idaho Street, Elko, NV 89801 0735 Melvin R. Darton UT002 Storefront (801)485-4060 269 E 3300 S, South Salt Lake, UT 84115 UT935 Storefront *(801)963-9695 2228 W 5400 S, Salt Lake City, UT 84118 UT935 Storefront (801)968-6297 3601 S 2700 W, West Valley City, UT 84119 0896 Joe Marcy & Scott Connole UT006 Storefront *(801)264-1113 4667 South 900 East, Salt Lake City, UT 84117 1241 Jams, Inc. UT004 Storefront *(801)262-6666 625 W 5300 Sth, Murray, UT 84123 1748 Paul M. & Lara M. Eves UT005 Storefront *(801)628-5858 29 N Meadow Drive, Pine Valley, UT 84781 SAN ANGELO 0765 David W. Cave TX068 Storefront *(915)942-1040 2745 Southwest Blvd, San Angelo, TX 76904 TX068 Wal-Mart (915)942-1040 5501 Sherwood Way, San Angelo, TX 76904 TX068 Wal-Mart (915)942-1040 3020 N Bryant Blvd, San Angelo, TX 76903 SAN ANTONIO 0870 Leroy Woods TX015 Storefront *(210)545-0351 2830 Thousand Oaks, San Antonio, TX 78232 1687 Jasbir K. Sobti TX061 Montgomery Ward (210)531-2582 McCreless Shpg. Ctr. 600 McCreless, San Antonio, TX 78223 TX064 Montgomery Ward (210)654-2219 Windsor Park Mall 7900 Interstate A, San Antonio, TX 78218 TX065 Montgomery Ward (210)670-1290 Westlakes Mall 1401 S.W 410, San Antonio, TX 78227 TX069 Storefront *(210)922-7679 688 S.W. Military Dr., San Antonio, TX 78221 TX070 Montgomery Ward (210)731-2368 Crossroads 4522 Fredricksburg Road, San Antonio, TX 78201 1736 Karen Roberson & Sharon * TX445 Storefront *(210)379-5829 419-2 N King St., Seguin, TX 78155 SAN DIEGO 1087 Bill W. Prewitt CA573 Storefront *(619)448-9403 9311 B Mission Gorge Road, Santee, CA 92071 CA573 Wal-Mart (619)448-1230 170 Town Ctr. Pky., Santee, CA 92071 1313 Kenneth R. Allen CA039 Storefront *(619)737-0995 1320-F East Valley Parkway, Escondido, CA 92027 1603 C. Bauman & K. Allen CA038 Wal-Mart (619)945-7995 1800 University, Vista, CA 92083 CA040 Storefront *(619)940-6364 475 College Blvd.Ste#j-4, Oceanside, CA 92057 CA040 Wal-Mart (619)940-6364 705 Mission Ave, Oceanside, CA 92057 5000 Jackson Hewitt Inc. CA551 Montgomery Ward (619)479-7605 3050 Plaza Bonita Rd., National City, CA 91950 CA554 Storefront *(619)422-6124 1090 3rd Ave Ste 2, Chula Vista, CA 91911 CA556 Storefront *(619)283-5472 4151 El Cajon Blvd, Suite A, San Diego, CA 92105 SAN FRANCISCO-OAK-SAN JOSE 0787 Richard Acton CA019 Storefront *(707)769-8299 620 East Washington St. Suite 101, Petaluma, CA 94952 0807 Terence K. Brown CA003 Storefront *(707)575-7755 320 W Third St, Ste. D-2, Santa Rosa, CA 95401 0939 Lu-Chien Hartman & Celia Short CA197 Montgomery Ward *(415)997-4842 133 Serromonte Ctr., Daly City, CA 94015 1139 F. Hillary & R. Proctor CA179 Storefront *(510)432-3278 204 Atlantic Avenue, Pittsburg, CA 94565 1176 Robin Swarn CA169 Storefront *(510)843-2428 2605 San Pablo, Berkeley, CA 94702 1514 Melinda Newens Doan CA005 Montgomery Ward (408)224-2375 879 Blossom Hill Rd, San Jose, CA 95123 1534 William Keegan CA013 Storefront *(707)647-3278 1501 Tennessee St., Vallejo, CA 94590 CA107 Wal-Mart (707)647-7491 5180 Sonoma Blvd., Vallejo, CA 94589 1580 Nona Avilez CA017 Montgomery Ward (510)231-9270 4300 Mac Donald Ave., Richmond, CA 94805 5000 Jackson Hewitt Inc. CA022 Storefront (510)895-1188 14818 East 14th Street, San Leandro, CA 94578 CA022 Montgomery Ward (510)481-3234 300 Bayfair Mall-Montgomery Ward, San Leandro, CA 94578 SANTABARBRA-SANMAR-SANLOUB 1428 Mudaliar Eknath CA666 Wal-Mart (310)924-1816 12701 Towne Ctr Dr, Cerritos, CA 90701 SAVANNAH 0769 Gary A. Littlejohn SC697 Storefront *(803)521-0224 1119 Boundary Street, Beaufort, SC 29902 SEATTLE-TACOMA 1272 JH Associates Limited Liabilit WA053 Storefront (360)671-0244 2701a Northwest Avenue, Bellingham, WA 98225 WA053 Wal-Mart (360)671-0244 4420 Meridian St., Bellingham, WA 98226 SHERMAN-ADA 1538 Benita Truckenmiller TX350 Storefront *(903)893-2900 217 N. Sunset Blved, Sherman, TX 75090 SHREVEPORT 1248 Catherine Baity TX355 Copy, Pack, & Ship *(903)838-8644 4000 New Boston Road, Texarkana, TX 75501 1285 Michael G. Leon LA233 Storefront *(318)742-5829 1892a Airline Dr., Bossier City, LA 71112 5000 Jackson Hewitt Inc. LA228 Storefront (318)631-2500 6138 Greenwood Rd Ste 600-700, Shreveport, LA 71119 LA231 Montgomery Ward (318)686-5122 8924 Jewella Avenue, Shreveport, LA 71118 SIOUX CITY 1304 Mark & Mary Middleton NE015 Storefront (402)371-1222 507 S 13th St, Norfolk, NE 68701 SOUTH BEND-ELKHART 0921 Douglas Jorgenson IN002 Storefront (219)293-0605 Pierre Moran Mall Unit 25, Elkhart, IN 46517 1679 Ace Management, Inc. IN018 Storefront *(219)255-2200 3522 Grape Road, Mishawaka, IN 46545 1789 Integrity Accounting Services IN016 Storefront *(219)282-1040 4331 West Western Ave, South Bend, IN 46619 SPRINGFIELD, MO 1191 Illana Anderson-Snelson MO069 Storefront (417)336-3433 1150c W Hwy 76, Branson, MO 65616 MO069 Wal-Mart (417)336-3433 Hwy 13 & 76, Branson West, MO 65616 1640 Simone A. Sanders MO576 Storefront *(417)864-2800 221 E Sunshine Ste A, Springfield, MO 65807 1747 Sharon Fleshman AR134 Storefront (501)365-3230 Highway 62-65 North, Harrison, AR 72601 ST. JOSEPH 1359 John C. Hughes MO014 Storefront *(816)238-2575 6966 King Hill Ave., St Joseph, MO 64504 MO081 Wal-Mart (816)390-9507 4201 North Belt Hwy, St Joseph, MO 64506 ST. LOUIS 0690 Metro East Accounting, Inc. IL004 Storefront (618)235-9249 7 Bellevue Park Plaza, Belleville, IL 62223 IL026 Storefront (618)345-0175 828 South Morrison, Collinsville, IL 62234 IL090 Storefront *(618)233-7610 3701 G Nameoki Road, Granite City, IL 62040 IL107 Storefront (618)482-5213 507a Missouri Ave., East St. Louis, IL 62201 IL108 Storefront *(618)235-8514 Swansea Plaza 2663 N. Illinois Stre, Swansea, IL 62221 1081 Lindastine Moore MO034 Storefront (314)522-9005 9823 W. Florissant, Delwood, MO 63136 1177 Valley Consulting, LLC MO051 Storefront *(314)639-6386 700 Pearce Blvd, Wentzville, MO 63385 MO570 Storefront *(314)946-6740 2021 First Capitol Drive, St. Charles, MO 63301 MO570 Wal-Mart (314)946-9665 2897 South Service Rd, St Charles, MO 63303 MO573 Storefront *(314)279-6386 364 Mid Rivers Mall Drive, St. Peters, MO 63376 1307 Thomas E. Webb MO026 Storefront *(314)638-3303 818-N Lemay Ferry Rd, St Louis, MO 63125 1771 Advanced Tax Services, Inc. MO044 Wal-Mart (573)547-1080 707 Walton Dr., Farmington, MO 63640 MO044 Wal-Mart (573)547-1080 1011 S. Perryville Blvd., Perryville, MO 63775 5000 Jackson Hewitt Inc. MO039 Storefront *(314)442-7435 10518 St. Charles Rock Road, St. Ann, MO 63074 SYRACUSE 0618 Colleen Barth NY041 Storefront (315)446-3911 3060 Erie Blvd East, Dewitt, NY 13214 NY043 Storefront (315)458-6600 East Circle Drive, Cicero, NY 13039 NY524 Storefront (315)652-6029 7787 Oswego Road (Rte. 57), Clay, NY 13090 NY618 Storefront *(315)252-3634 77 Grant Avenue, Auburn, NY 13021 0633 George Scott Leader NY070 Storefront *(315)454-3603 1900 Brewerton Road, Mattydale, NY 13211 NY070 Storefront (315)438-8686 2363 James Street, Syracuse, NY 13206 NY633 Storefront (315)468-4851 Camillus Mall, Camillus, NY 13031 1058 Amy Forrest NY045 Storefront *(315)469-6104 4606 S. Salina Street, Syracuse, NY 13205 NY088 Storefront *(607)753-0190 91 Main Street, Cortland, NY 13045 1653 Harold Jewett NY077 Storefront *(315)342-6262 Oswego Plaza Building 200, Oswego, NY 13126 TALLAHASSEE-THOMASVILLE 1073 Jeffrey A. Nimis FL119 Storefront *(904)386-5706 1241 West Tharpe St. Suite 8, Tallahassee, FL 32303 FL119 Wal-Mart (904)386-5706 1400-1 Village Square Blvd., Tallahassee, FL 32312 TAMPA-ST. PETE,SARASOTA 0505 CFLA Enterprises, Inc. FL018 Storefront (941)666-8340 2434 Hwy 92 E., Lakeland, FL 33801 FL018 Storefront (941)533-7803 125 East Van Fleet Dr., Bartow, FL 33830 FL018 Storefront *(941)680-1355 2017 George Jenkins Blvd, Lakeland, FL 33801 FL089 Storefront (813)291-3202 2852 Recker Hwy, Winter Haven, FL 33880 FL323 Storefront (813)719-7795 314 N Alexander St, Plant City, FL 33566 0763 A And C Tax Services, Inc. FL160 Storefront *(813)943-0822 40944 US 19 North Tarpon Springs, Tarpon Springs, FL 34689 FL160 Storefront (813)781-0303 2675 US Alt 19, Palm Harbor, FL 34683 0768 Marcia Ballard FL017 Wal-Mart (813)845-1044 9650 U.S. Highway 19, Port Richey, FL 34668 FL017 Montgomery Ward (813)842-2949 9409 US 19, Port Richey, FL 34668 FL048 Storefront *(813)845-1044 3517 Universal Plaza, New Port Richey,, FL 34652 0814 West Coat Tax Service Of St. P FL163 Storefront *(813)898-1321 4320 6th St. South, St. Petersburg, FL 33705 FL164 Storefront *(813)321-1091 5002 Gulfport Blvd., Gulfport,, FL 33707 0875 Bill & Libby Quinn FL037 Storefront (813)861-1107 8717 Sr 52, Hudson, FL 34667 FL037 Storefront *(813)842-4407 8647-10 Little Rd., New Port Richey, FL 34654 0892 Simple Financial Solutions Inc FL040 Storefront (941)359-2899 3434 North Tamiami Trail, Sarasota, FL 34234 FL040 Storefront (941)955-1340 3054 17th Street, Sarasota, FL 34234 FL041 Storefront *(941)923-0964 5777 Beneva Road, Sarasota, FL 34233 FL041 Storefront (941)923-0964 4108 Bee Ridge Rd., Sarasota, FL 34233 FL153 Wal-Mart (941)951-8174 4150 South Tamiami Trail, Venice, FL 34293 0911 Accounting to You, Inc. FL121 Storefront *(813)584-3299 2200 East Bay Drive Keene Plaza, Largo, FL 34641 FL121 Montgomery Ward (813)796-2357 140 Clearwater Mall Highway 60 & U., Clearwater, FL 34624 FL127 Storefront *(813)323-3422 3110 1st Ave. N., St.Pete, FL 33713 FL141 Storefront *(813)528-0900 4706 28th St. N., St. Petersburg, FL 33714 FL141 Storefront *(813)526-6119 1994 62nd Avenue N., St. Petersburg, FL 33714 FL154 Storefront *(813)449-8886 1871 N. Highland, Clearwater, FL 34615 FL154 Storefront *(813)448-0961 1671a Gulf To Bay Blvd, Clearwater, FL 34615 1149 James Ernst & Janice Ernst FL162 Storefront *(813)581-2252 11940 Seminole Blvd., Largo, FL 34648 1422 Frances Miller/Grace Gonzalez FL084 Storefront *(813)677-2367 7423 Hiway 301 S (Riverview S/C), Riverview, FL 33569 1433 Ronald G. Whitmore FL082 Storefront *(813)661-7332 1713 Hwy 60 East, Valrico, FL 33594 FL082 Wal-Mart (813)661-7332 11110 Causeway Blvd., Brandon, FL 33511 1478 Lisa Thomas FL091 Storefront *(941)382-1515 340 Sebring Square, Sebring, FL 33870 FL093 Storefront (941)679-9200 451 Eagle Ridge Dr, Lake Wales, FL 33853 1706 JTAX Corporation FL044 Storefront *(941)756-1146 5221 14th Street West, Bradenton, FL 34207 FL044 Storefront (941)765-1146 201 13th Ave E, Bradenton, FL 34206 FL044 Wal-Mart (941)727-3148 815 44th Ave. W., Bradenton, FL 34207 1804 CDA Consulting Inc. FL072 Storefront *(813)733-8577 1381 Main St, Dunedin, FL 34698 FL078 Storefront *(813)791-3561 2576 Sunset Point Rd., Clearwater, FL 34625 FL161 Storefront (813)791-3561 3130 Tampa Road #25 Woodlands Squa, Oldsmar, FL 34677 FL161 Storefront (813)891-6669 3701 Sr 580, Oldsmar, FL 34677 FL161 Storefront (813)791-3561 31400 US Hwy 19 N., Palm Harbor, FL 34684 5000 Jackson Hewitt Inc. FL061 Storefront *(352)563-2911 637 Southeast Highway 19, Crystal River, FL 34429 FL122 Storefront *(813)238-0296 2325 E. Hillsboro, Tampa, FL 33610 FL122 Montgomery Ward (813)621-8911 Eastlake Square Mall 9701 E. Hillsb, Tampa, FL 33610 FL123 Storefront *(813)831-5088 5130 S Dale Mabry #107, Tampa, FL 33611 FL124 Storefront *(813)971-9524 11502 N. Nebraska Ave, Tampa, FL 33612 FL124 Montgomery Ward (813)971-4300 2252 E.Fowler Ave, Tampa, FL 33612 FL126 Montgomery Ward (813)877-6161 Tampa Bay Center 3302 W M.L.K Blvd., Tampa, FL 33607 FL134 Storefront *(813)884-3350 7535 W. Hillsboro, Tampa, FL 33615 FL165 Montgomery Ward (813)547-8745 2170 Tyrone Blvd, St Petersburg, FL 33710 FL169 Storefront *(813)547-8745 5532 66th St. N., St. Petersburg, FL 33709 FL169 Montgomery Ward (813)547-8745 7200 US 19 North Pinellas Square, Pinellas Park, FL 34665 TERRE HAUTE 1163 Marita Harris & Donna Bennett IN057 Storefront *(812)886-1986 #24, One Executive Blvd, Vincennes, IN 47591 IN057 Wal-Mart (812)254-9777 1 Cherry Tree Plaza, Washington, IN 47501 5000 Jackson Hewitt Inc. IN054 Storefront *(812)235-4748 1301 Locust Street, Terre Haute, IN 47807 TOLEDO 0743 Linda J. Gensbechler OH043 Storefront (419)269-1040 5821 West Central Ave., Toledo, OH 43615 OH050 Storefront (419)269-1040 3700 Williston, Northwood, OH 43619 OH193 Storefront *(419)269-1040 1415 Sylvania Ave., Toledo, OH 43612 OH193 Montgomery Ward (419)269-1040 Northtowne Square 343 New Towne Squ, Toledo, OH 43612 OH194 Montgomery Ward (419)269-1040 Southwyck Mall 2040 S. Reynolds Rd., Toledo, OH 43614 TOPEKA 1818 Jerel Crist KS017 Wal-Mart (913)331-4577 3300 Iowa St., Lawrence, KS 66046 TUCSON(NOGALES) 5000 Jackson Hewitt Inc. AZ016 Storefront *(520)294-7334 440 West Valencia, Tucson, AZ 85706 AZ017 Montgomery Ward (520)321-3232 El Con Mall 3601 E. Broadway, Tucson, AZ 85716 AZ204 Storefront (520)722-2829 7221 East Golf Links, Tucson, AZ 85730 TULSA 1464 CK Ventures, Inc. OK018 Storefront *(918)682-6300 1314 South York, Muskogee, OK 74403 OK018 Wal-Mart (918)682-5022 2412 E Shawnee, Muskogee, OK 74403 1558 W. Carl Wing OK014 Wal-Mart (918)834-1040 1500 S. Lynn Riggs Blvd, Claremore, OK 74017 OK101 Storefront *(918)834-1040 8258 E 71st Street, Tulsa, OK 74133 OK104 Wal-Mart (918)834-1040 2019 E 81st St South, Tulsa, OK 74136 OK105 Wal-Mart (918)834-1040 207 S Memorial Dr, Tulsa, OK 74112 OK108 Storefront *(918)834-1040 739a W. New Orleans, Broken Arrow, OK 74011 OK108 Storefront *(918)834-1040 15103 S. Memorial, Bixby, OK 74008 TYLER-LONGVIEW(LFKN&NCGD) 1217 Bill Dipprey TX362 Storefront *(903)595-6656 1323 S. Beckham, Tyler, TX 75701 TX362 Wal-Mart (903)509-3278 3900 Troup Hwy, Tyler, TX 75703 TX362 Montgomery Ward (903)595-1984 1814 Roseland Blvd, Tyler, TX 75701 UTICA 1509 Carl L. Hillyer NY081 Storefront (315)768-4169 214 Oriskany Blvd, Whitesboro, NY 13492 NY101 Storefront *(315)792-6965 1155 Mohawk St., Utica, NY 13501 5000 Jackson Hewitt Inc. NY044 Wal-Mart (315)337-2209 304 N George St, Rome, NY 13440 WACO-TEMPLE-BRYAN 1812 Roger T. Campbell TX430 Wal-Mart *(817)547-8488 2710 East US Hwy 190, Copperas Cove, TX 76522 WASHINGTON, DC 0537 Robert and Rose Marie Schiesel MD012 Storefront (301)620-1828 F. S. Key Mall, 5500 Buckytown Pke, Frederick, MD 21703 MD012 Montgomery Ward (301)696-8275 Frederick Towne Mall, Frederick, MD 21702 MD033 Storefront *(301)739-0055 580 Northern Ave., Suite 101, Hagerstown, MD 21742 MD033 Wal-Mart (301)739-0055 1650 Wesel Blvd., Hagerstown, MD 21740 MD033 Montgomery Ward (301)582-5408 Valley Mall, Hagerstown, MD 21740 PA095 Storefront (717)765-0601 1525 East Main Street, Waynesboro, PA 17268 PA095 Storefront (717)261-1990 Kiosk Chambersburg Mall, Chambersburg, PA 17201 WV203 Storefront (304)267-6647 Martinsburg Mall, Martinsburg, WV 25401 WV203 Wal-Mart (304)267-6647 800 Fox Craft Ave., Martinsburg, WV 25401 0709 Brenda Kay Skidmore MD027 Storefront *(301)729-0315 Country Club Mall, Lavale, MD 21502 MD027 Storefront (301)759-2685 White Oaks Plaza, Cumberland, MD 21502 MD027 Storefront (301)722-4303 Downtown Cumberland Mall, Cumberland, MD 21502 0722 Metro Computax Services, Inc. VA009 Wal-Mart (703)360-2700 7910 Richmond Hwy, Alexandria, VA 22306 VA010 Storefront (703)750-1040 5801 Duke Street Landmark Mall F220, Alexandria, VA 22304 VA011 Storefront *(703)739-3000 3120 Mt. Vernon Ave., Alexandria, VA 22305 0744 Michael & Patricia Jackman MD030 Storefront *(301)977-3278 8035-I Snouffer School Rd, Gaithersburg, MD 20879 MD030 Montgomery Ward (301)977-9610 600 N. Frederick Avenue, Gaithersburg, MD 20877 MD118 Wal-Mart (301)916-5221 20910 Fredrick Road, Germantown, MD 20874 0772 Chesapeake Tax Sevices, Inc. MD028 Storefront *(301)891-2284 6507 New Hampshire Ave., Takoma Park, MD 20912 0802 Inder and Prabha Bhambri MD025 Storefront (301)927-3278 3412 Hamilton Street, Hyattsville, MD 20782 MD025 Storefront (301)699-9050 3207 Rhode Island Ave, Mt. Ranier, MD 20712 MD025 Storefront (301)927-3278 Prince George'S Plaza-Kiosk, Hyattsville, MD 20782 MD031 Storefront (301)927-3278 10121 New Hampshire Ave, Silver Spring, MD 20903 0804 VTR Services, Inc. MD023 Montgomery Ward *(301)773-4393 Capitol Plaza 6200 Annapolis Road, Hyattsville, MD 20784 MD259 Storefront *(301)567-7874 6261 Livingston Road, Oxon Hill, MD 20745 MD259 Montgomery Ward (301)899-7147 Iverson Mall 374 Branch Avenue, Temple Hills, MD 20748 0833 Jack Hardy/Jerry Wilburn/Conni VA077 Storefront (703)486-9090 2508 Columbia Pike, Arlington, VA 22204 0837 The Lyon Group, Inc. MD254 Storefront *(301)787-5487 2 Three Notch Road, Lexington Park, MD 20653 0850 Mark/Thelma/Mark Kenney II VA007 Storefront *(703)221-3278 17477 Jefferson Davis Highway Coach, Dumfries, VA 22026 VA050 Storefront *(703)803-7169 13830-4 Lee Highway, Centreville, VA 22020 VA133 Storefront (703)803-7169 Quantico McB Building 3500, Quantico, VA 22134 0983 Paula E. Better MD121 Storefront *(301)568-0920 5758 Silver Hill Road, Forestville, MD 20747 1072 Ronald K. Middaugh MD255 Storefront (301)735-0011 3390 Donnell Drive Forest Village P, Forestville, MD 20747 MD255 Storefront (301)568-2700 4821 Allentown Road, Morningside, MD 20746 MD262 Storefront (301)772-7732 2343 Brightseat Road, Landover, MD 20785 MD264 Storefront *(301)779-0090 5602 Kenilworth Avenue, Riverdale, MD 20737 1083 William & Barbara Larrimore MD250 Storefront (410)535-4435 Prince Frederick S.C. Unit 70, Prince Frederick, MD 20678 MD258 Storefront (301)574-1800 14624-A Main St, Upper Malboro, MD 20772 1317 MNB Enterprises, Inc. VA004 Wal-Mart (703)281-6338 7412 Stream Walk Ln., Manassas, VA 22110 VA004 Montgomery Ward (703)281-6337 Manassas Mall 8200 Sudley Rd., Manassas, VA 22110 VA005 Montgomery Ward (703)281-6336 6600 Springfield Mall, Springfield, VA 22150 VA075 Storefront (703)448-1100 246 Maple Ave. East Suite 200, Vienna, VA 22180 1381 Charles Patterson DC105 Storefront *(202)722-4760 5427 5th St. NW, Washington, DC 20011 MD029 Storefront (301)942-2844 2519 Ennalls Ave, Wheaton, MD 20902 MD029 Montgomery Ward (301)468-5242 Wheaton Plaza Veirs Mill Road, Wheaton, MD 20902 1395 Iris I. Burnell DC100 Storefront *(202)547-6540 725 8th. Street SE Capitol Hill, Washington, DC 20003 1426 Rosa H. Smallwood MD253 Storefront *(301)248-7275 9400 Livingston Road, Fort Washington, MD 20744 1513 Beverly McKinley DC103 Storefront *(202)581-1220 3849 Pennsylvania Avenue SE, Washington, DC 20020 1530 Titus Simmons VA161 Storefront *(703)680-9453 13738 Smoketown Rd, Woodbrige, VA 22192 VA161 Wal-Mart (703)490-0627 14000 Worth Ave, Woodbridge, VA 22192 1533 George & Majida Eways VA006 Montgomery Ward (703)532-8946 Seven Corners 6100 Arlington Blvd., Falls Church, VA 22044 VA167 Montgomery Ward (703)934-5306 11284 James Swart Cir (Fairfax Ct), Fairfax, VA 22030 1556 Earnest Joiner DC101 Storefront *(202)399-2690 3905 Benning Road, NE, Washington, DC 20019 DC112 Storefront (202)526-6234 514 4th & Rhode Island Ave NE, Washington, DC 20002 MD252 Storefront *(301)645-4200 505 Route 301, Waldorf, MD 20603 MD252 Montgomery Ward (301)645-4200 St. Charles Center 5010 Highway 301, Waldorf, MD 20603 1665 Carey Pfister VA025 Montgomery Ward *(540)786-5238 600 Spotsylvania Mall, Fredericksburg, VA 22407 1764 Fortress Financial Group VA127 Storefront *(540)722-0586 31 South Braddock St., Winchester, VA 22601 5000 Jackson Hewitt Inc. VA149 Wal-Mart (540)825-5091 214 N East St Office 1a, Culpepper, VA 22701 WATERTOWN 0650 Ruco Tax and Consulting Servic NY907 Storefront *(315)782-7979 23861 Nys Rt. 126, Watertown, NY 13601 NY907 Storefront (315)786-8680 Salmon Run Mall 1300 Arsenal Street, Watertown, NY 13601 WEST PALM BEACH-FT. PIERCE 0861 Stephanie Stawara FL036 Storefront *(561)567-1829 907 - 14th Lane, Vero Beach, FL 32960 FL036 Wal-Mart (561)978-0520 5555 20th Street, Vero Beach, FL 32962 1247 Maury C. Dodson FL170 Storefront *(561)468-6487 2057 South US 1, Ft Pierce, FL 34950 WHEELING-STEUBENVILLE 0689 JHL Tax Service, Inc. WV207 Storefront *(304)232-7975 1213 Market Street, Wheeling, WV 26003 1401 Susan Elliott & Susan Elliott OH087 Storefront *(614)439-4131 737 Soutgate Pkwy, Cambridge, OH 43725 WICHITA FALLS & LAWTON 1800 S&L Services TX384 Storefront *(817)495-2918 3115 Kemp Blvd., Wichita Falls, TX 76308 WICHITA-HUTCHINSON PLUS 1013 Patrick & Frances Calligan KS001 Wal-Mart (316)681-3278 501 E. Pawnee, Wichita, KS 67211 KS001 Montgomery Ward (316)681-4726 Wichita Mall 3805 E. Harry, Wichita, KS 67218 KS108 Storefront *(316)681-3278 4822 E Central, Wichita, KS 67208 WILKES BARRE-SCRANTON 0796 BNS Enterprises, Inc. PA145 Storefront (717)347-8897 521 Cedar Ave., Scranton, PA 18505 PA596 Storefront *(717)344-1040 1840 North Main Avenue, Scranton, PA 18508 PA596 Montgomery Ward (717)344-1040 Steam Town Mall, Lackawanna Avenue, Scranton, PA 18508 1050 Sandra Carter PA152 Storefront *(717)341-9131 301 E. Drinker St., Dunmore, PA 18512 1060 Donna Petrosky/Rose Marie Bien PA063 Storefront *(717)455-5565 100 No. Wyoming St., Hazelton, PA 18201 1095 C & C TAX SERVICE PA100 Storefront *(717)283-1088 Westside Mall N Hampton Street, Edwardsville, PA 18704 PA157 Storefront (717)693-1040 908-E Wyoming Ave., Wyoming, PA 18644 PA791 Wal-Mart (717)826-1030 445 Wilkes-Barre Tnsp Blvd, Wilkes-Barre, PA 18702 1113 Maynard Upright PA156 Storefront *(717)278-4788 79 Grow Ave., Montrose, PA 18801 1175 Sandra Drake PA132 Storefront (717)839-9313 Pocono Village Mall, Mt. Pocono, PA 18344 PA134 Storefront *(717)842-1040 105 Np 502 Plaza, Moscow, PA 18444 WILMINGTON 1075 Jan Mar, Inc. NC202 Storefront (910)350-7998 2642 Carolina Beach Rd Ste 14, Wilmington, NC 28405 NC205 Storefront *(910)762-9910 4322 Market Street, Wilmington, NC 28403 NC206 Storefront (910)251-1029 22 S. 17th Street, Wilmington, NC 28401 YAKIMA-PASCO-RCHLND-KNNWCK 1614 William C. Stevens WA037 Storefront *(509)527-8980 1639 Isaacs, Walla Walla, WA 99362 YOUNGSTOWN 1002 Diane E. Wagner PA149 Storefront (412)346-4116 3191 E. State Street, Hermitage, PA 16148 PA149 Storefront *(412)346-4116 3191 E State St., Hermitage, PA 16148 ZANESVILLE 1401 Susan Elliott & Susan Elliott OH090 Storefront (614)455-3443 2209 Maple Ave., Zanesville, OH 43701
* = open all year NEW FRANCHISEES NOT YET OPEN FOR BUSINESS AS OF May 31, 1997 1826 Sherman Hardy 1257 Mt. Pisgah Downs Austell, GA 30001 (770) 732-8119 1833 McWilliam Colon, Sr. 249 W. Wellens Avenue Philadelphia, PA 19120 (215) 457-7060 1834 Joseph Lukaszewski and Linda Lukaszewski 3800 Greenfield Drive Springfield, IL 32704 (217) 546-0577 1835 Michele Wagner 105 Viking Street Victoria, TX 77905 (512) 578-6388 1836 Emil James White 7213 Knollwood Little Rock, AR 7229 (501) 562-2299 1844 Rodney Hill 464 Ridgetop Road Franklin, NC 28744 (704) 524-7679 1848 Jose Valdez 11243 Jade Spring San Antonio, TX 78249 (210) 691-8906 FRANCHISEES NO LONGER WITH JACKSON HEWITT MAY 1996 THROUGH MAY 1997 901 Loyd and Deborah Houlihan 15803 Crystal Grove Houston, TX 77082 Depew, NY 14043 (713) 870-9971 845 Milton Brattan 220 Lewisburg Road Austin, AR 72007 (501) 843-7369 1435 Reva Faulconer 645 D Mountain View Drive Culpepper, VA 22701 (540) 825-7751 1222 Javed Rajabali 2022 Williamsburg Road Apt. D 107 Waukegan, IL (847) 336-0581 (847) 689-3809 1078 Joyce Sanders 11742 Branridge Black Jack, MO 63033 (314) 355-5247 616 Molly Li-Odemar 18334 Sherman Way Reseda, CA 91335 (818) 706-1939 1550 Ray Scheffler P.O. Box 211834 Anchorage, AK 95521 (907) 244-6416 1527 David Heim 627 Spring Hill Drive Woodbury, MN 55125 (612) 578-9514 967 Carol J. Hartman Anthony D. Gutierrez 1618 C Bonforte Boulevard Pueblo, CO 81001 (telephone unknown) 1331 David Unthank Tina Manning 2913 Spencer Road Conover, NC 28613 (912) 922-4114 1333 Argon, Inc. c/o James Fitzgerald 6 Southcliff Drive Plymouth, MA 02360 (508) 833-2965 968 Daryl King 3212 S. 211 E. Avenue Broken Arrow, OK 74017 phone unknown 1033 Glen Condon 503 West 2nd Avenue Brodhead, WI 53520 (608) 897-2943 1472 George Osbaldison Ingrid Timmerman 1630 Greene Street Columbia, SC 29201 (803) 256-0954 938 Larry Evenson Rt 1 Box 71 Garden City, MO 64747 (816) 862-6221 1316 Jim Little, Jr. 163 Pilgrim Drive Hot Springs, AR 71913 (501) 767-8111 1625 Monica Henderson 3000-10 Forest Brook Drive Charlotte, NC 28208 (704) 391-7749 980 Richard Margelefsky Jaylor Tax Service, Inc. 22 Cranford Drive New City, NY 10956 (914) 634-6839 1399 Kathleen Y. Lambert 145 Bedford Court Belle Chasse, LA 70037 (telephone unknown) 645 Richard Farley 307 Poplar Street Towanda, PA 18848 (717) 265-4993 1322 Julie Bradley RR 1, Box 94A Hull, GA 30646 (706) 353-2179 1127 William Bilbo Lawrence Richard Stanley Enterprises, Inc. 4504 Oakmont Boulevard Austin, TX 78731 (512) 454-6869 905 Durwood Bowden 3707 Pooles Mill Road Swansea, SC 29160 (803) 749-7082 1508 Magaret Hawkins 3627 Marlborough Way Paducah, KY 42001 (502) 442-4742 1242 Alvin MacKenzie 1310 Costa Avenue Chula Vista, CA 91911 (619) 585-7177 1609 Richard and Theodora Harmon 190 NE First Linton, IN 47441 (812) 665-3923 1529 Jordan Davis 2146 Seaford Avenue Seaford, NY 11783 (516) 785-6588 811 Donis, Inc. c/o Donna & Curtis Stiles 12124 Cannes Street Jacksonville, FL 32224 (904) 998-0730 1341 M.T. Haymes, Jr. 308 Forest Hill Road Dalton, GA 30720 (706) 277-2371 1145 2Bs, Inc. c/o Lesley D. Morse 10196 Nancy's Blvd, #19 Grosse Ile, MI 48138 (313) 675-1245 c/o Jenny Tizedes 9220 Manor Allen Park, MI 48101 (313) 383-4912 816 Janice Clayton and Bill Wadford 815 Azalea Drive Fayetteville, NC 28301 (910) 323-5173 1239 Robert B. Hancock 3023 Duncan Drive Shreveport, LA 71119 (318) 631-0710 1130 Rebecca Smith Rt 3, Box 562 Heflin, AL 36264 (205) 928-8100 835 Tom Dennis and Robert Jolicoeur 13388 N. Cleveland Street N. Fort Myers, FL 33903 (813) 495-2160 1553 Shirley Flumerfelt David Flumerfelt 2275 St. Marshall Drive Virginia Beach, VA 23454 (804) 469-0378 923 Tawnya Schroeder 5600 South Meridian Road Newtown, Kansas (316) 684-5119 1295 Donna Lord 912 South Birchleaf Drive Anaheim, CA 92804 (714) 827-8121 1646 Bob Zendels 18 Regents Circle Rohnert Park, CA 94928 (707) 795-3714 1007 Michael Goffinet John Dickinson 1408 Old Salem Road Lanesville, IN 46136 (812) 952-3914 1327 Sharon Shear 823 and 1/2 4th Ave. Lake Odessa, MI 48849 (219) 782-2528 1051 Sharon Noble The Estate of Sharon Noble c/o Anker Law Office Dakota Professional Bldg. 2902 West Main St., Suite 1 Rapid City, SD 57702 (605) 343-6336 1677 Sharifa & Rizwan Akhtar, 1677 2410 Radcliffe Drive Sugarland, TX 77478 (713) 277-4858 788 Michael Frost 735 W. 500 South Orem, UT 84058 (801) 225-0102 1441 Mr. Frank Fraschetti RR 6, Box 546A Rt. 422E New Castle, PA 16101 (412) 924-9797 586 Marge Brazas L & B Associates, Inc. 7842 Belmont Avenue Hammond, IN 46324-3313 (312) 545-4255 790 Ray Kostelc 513 Buckingham Place Downes Grove, IL 60516 (708) 964-8405 1261 Bruce D'Errico 17448 Rushing Drive Granada Hills, CA 91344 (818) 368-7469 829 Fred Bobel 126 Royal Grant Way Dover, DE 19901 (302) 697-2168 762 Vicky Fikse 1433 South Dahlia Avenue Ontario, CA 91762 (909) 983-3341 553 William Thatcher 2863 Poplar Drive Orlando, CA 91761 (909) 983-3341 1290 Sandra Zimmerman 830 S. Thyme Pt. Homosassa, FL 34448 (904) 795-6497 1151 Lucili V. Santiago 8780 Burnet Avenue, #9 North Hills, CA 91343 (818) 895-1384 1661 We Cash Checks, Inc. c/o Cindy Acton 2531 San Marco Court Virginia Beach, VA 23456 (telephone unknown) 1583 Suresh Mamtani 42-49 Golden Street, #15-T Flushing, NY 11355 (718) 886-1451 752 Fred Dusza 172 North Gary Avenue Carol Stream,. IL 60188 708-665-9775 1126 Stanley Otis P.O. Box 44054 Rio Rancho, NM 87174-4054 (505) 891-4221 1659 Anthony Ashley 9742 52nd Avenue College Park, MD 20740 (301) 345-1696 Mr. Richard Thomas 9501 Caltor Lane Fort Washington, MD 20744 (301) 248-1886 1828 Anthony Poyner 818 Brook Street Elgin, IL 60120 (847) 608-0908 1578 Karen Adams-Ferguson 6240 Wexford Ct. Maumee, OH 43537 (419) 865-5078 James Adams 4445 Merry Lane Toledo, OH 43615 (419) 534-3959 966 Lois Mesmer 11730 N. Illinois Kansas City, MO 63156 (816) 741-3540 1137 Henry Johnson 40 Holly Lane Piscataway, NJ 08854 (908) 562-1738 1301 Errol S. Pringle 9302 East M.L. King Blvd. #132 Tampa, FL 33610-7462 (813) 621-8707 1611 Kimberly Johnson 4326 Gault Place, NE Washington, DC 20019 (202) 388-4246 Arthur Murray 302 69th St Seat Pleasant, MD 20743 (301) 350-3199 Kelly Porter 730 Booker Drive Seat Pleasant, MD 20743 (301) 336-2158 521 Overton Enterprises, Inc., Ms. Beverly Overton 4111 Kanawha Avenue, S.E. Charleston, WV 25304 (304) 925-2312 969 Jeffrey S. Dusza 2523 Sanderson Lane Virginia Beach, VA 23464 (telephone unknown) 692 Mecklenburg Enterprises, Inc. Eugene & Joanne Mecklenburg 1900 Virginia Avenue, Apt. 1502 Ft. Myers, FL 33901 (telephone unknown) 801 BCH Tax Services, Inc. Alan Cordell 7627 W. Church Street Morton Grove, IL 60053 Larry Holstlaw 6408 Loomes Downers Grove, IL 60516 (telephone unknown) 1206 Theodore Andrews 1206 Dance Street Richmond, VA 23220 (804) 358-3455 #1197 Roxanne Mason 3420 Winter Oak Garland, Texas 75044 (214) 414-4622 #572 Henry Heneghan, Jr. 21149 Bayside Road Post Office Box 297 Cheriton, VA 23316 (804) 331-1545 658 John and Deanna Mohn (Meril Randolph Associates) 4354 Carolwood Street Orlando, FL 32812 (407) 859-7947 1584 Chandra Arthur 3001 Route 130 South Apartment 29K Delran, NJ 08075 (609) 482-1484 EXHIBIT G - EARNINGS This Exhibit provides the average gross volume per location for selected years. The gross volume consists of tax return revenue for all returns reported to us by these locations during the fiscal year that ended April 30, 1997. There is no deduction for the expenses to equip, operate and staff the location, or for payments to us under the Franchise Agreement. The gross volume averages include only total tax return preparation charges. These averages do not include revenue from Tax School or any bank performance incentive payments. These averages do not include any deduction for unpaid returns, refunds, discounts, Refer A Friend payments. There may be more than one location in each franchised territory. Most of these locations are storefronts, the rest are Montgomery Ward, Wal-Mart or other retail locations.
Year Office Open Average # of Returns Average Gross Volume % Exceeded the Average 1997 278 $26,208 41.2% 1996 443 $41,238 39.9% 1995 665 $65,679 43.9% 1994 880 $85,609 46.2% 1993 794 $81,934 43.3% 1992 and earlier 883 $92,091 36.7%
The averages indicated are calculated from information provided by our franchised and company-owned locations. All franchisees and company store managers are required to offer customers the services we require. All locations must meet our quality standards and specifications. The averages are based on information received from the reporting offices using a uniform method and will be substantiated upon request. We have not independently verified this information. We do not require our franchisees to use a uniform accounting method, and therefore, we are unable to confirm whether the reported gross volume were compiled in accordance with generally accepted accounting principles. SUCH AVERAGE RESULTS ARE OF FRANCHISEE-OPERATED AND COMPANY OWNED OFFICES AND SHOULD NOT BE CONSIDERED AS THE ACTUAL OR PROBABLE GROSS SALES THAT WILL BE REALIZED BY ANY FRANCHISEE. INDIVIDUAL RESULTS MAY VARY. THE FRANCHISER DOES NOT REPRESENT THAT ANY FRANCHISEE CAN EXPECT TO ATTAIN SUCH LEVELS OF GROSS SALES. A NEW FRANCHISEE'S INDIVIDUAL FINANCIAL RESULTS ARE LIKELY TO DIFFER FROM THE RESULTS REPORTED ABOVE.
EXHIBIT I TABLE OF CONTENTS OPERATING MANUAL Approx. no. of pages I. How to Use the Manual..................................................................2 II. Intro to Windows.......................................................................3 III. Hewtax - A. General Information .........................................................39 B. Using Hewtax Help ............................................................1 C. Fee Calculation...............................................................2 D. State Tax Assistance Phone Numbers............................................2 E. Using Lines .................................................................11 IV. Retail Operations A. Ames/Hills ...................................................................1 B. McCrory.......................................................................1 C. Check Cashers ................................................................1 D. Montgomery Ward...............................................................4 E. Wal-Mart .....................................................................4 F. Manager Relations ............................................................2 G. Marketing Guide ..............................................................5 H. Kiosk Location Layout and Equipment Requirements .............................1 V. Tax School A. General Information (location, teacher, class size) ..........................8 B. Types (Basic, Intermediate, etc.) ............................................6 C. Recruiting Students .........................................................15 D. Inquiries and Registrations .................................................13 E. Supplies .....................................................................1 F. Converting Students to Employees .............................................4 G. Tax School Reports............................................................5 VI. Personnel A. Employee Job Descriptions ....................................................6 B. Sources of Employees .........................................................2 C. Interviewing .................................................................1 D. Employee Contracts ...........................................................6 E. Hiring Paperwork (I-9, W-4, Availability).....................................8 F. Employee Training ............................................................4 G. Employee Benefits ............................................................1 H. Scheduling ...................................................................5 I. Payroll Projection Program ...................................................6 L. State Wage and Termination Laws ..............................................3 M Federal Labor Law Requirements ...............................................3 VII. Site Selection A. Territory Analysis ...........................................................1 B. Site Selection Criteria ......................................................4 C. Site Approval Packet .........................................................5 D. Lease Negotiation ............................................................4 E. 10% Rent Rule ................................................................1 F. Lease Transfer and Sub-Rental ................................................1 G. Signage ......................................................................4 VIII. Policy and Procedures A. Using the P&P Training Kit ...................................................3 B. Answering the Phone ..........................................................1 C. Scheduling Appointments ......................................................2 D. 8453 ........................................................................12 E. Attestation Sheet ............................................................2 F. Bank Applications ............................................................1 G. Disclaimers ..................................................................4 H. Distributing Returns and Collecting Payments .................................4 I. Customer Data Sheet ..........................................................3 J. Customer Refund Options Sheet ................................................2 K. Drop Off Returns .............................................................2 L. Due Dates ....................................................................2 M. Set Up Packets ...............................................................1 N. Price Estimates ..............................................................1 O. Return Recap Sheet ...........................................................2 P. Tax Return Life Cycle ........................................................7 Q. Telephone Reference Book .....................................................1 R. Preparing a Return for Processing ............................................2 S. Customer Service .............................................................5 IX. Office Set-Up A. Insurance ....................................................................1 B. Office Layout ................................................................2 C. Tax Office Furniture and Equipment ...........................................4 D. Telephones ...................................................................4 E. Tax Office Forms and Paperwork ...............................................1 F. Tax Library ..................................................................1 G. Shut-down Procedures .........................................................2 H. Office Hours .................................................................2 X. Business Start-up A. EIN ..........................................................................5 B. EFIN (8633) ..................................................................5 C. State Information (EF Applications, Mailing Addresses) ......................13 XI. Internal Accounting A. Front Office Procedures (DAS, DPR, Daily Activity, cashbox, receipts) ........8 B. BOOKS Clerk Daily Procedures .................................................6 C. Gross Volume Report ..........................................................6 D. Budget Guidelines ...........................................................12 E. Flash P&L ....................................................................2 F. Monthly P&L ..................................................................2 G. Fiscal P&L ...................................................................2 H. Management Reports ...........................................................4 I. Due Dates ....................................................................2 XII. Bank Relations A. Bank Joinders ................................................................2 B. Bank Relations ...............................................................4 C. 1997 Bank Information ........................................................4 D. Bank Disclosures .............................................................1 E. Bank Decline Codes ...........................................................1 F. Paid by Bank/IRS Report (7/8 Files) ..........................................2 G. Changing Bank Products .......................................................1 H. Check Stock Maintenance (lost, void, reissue, printing, number ranges, etc.) .4 XIII. Supplies A. Ordering Guidelines .........................................................10 B. Tax School Supplies ..........................................................3 C. Tax Season Supplies ..........................................................9 D. Payment ......................................................................1 E. Shipping .....................................................................2 F. BP Account Information .......................................................2 XIV. Advertising and Marketing A. National Advertising .........................................................4 B. Local Advertising ............................................................5 C. Initial Advertising ..........................................................1 C. Logo Usage ...................................................................3 D. Yellow Pages..................................................................3 E. Local Store Marketing .......................................................19 F. Public Relations .............................................................3 XV. Front Office Printing A. General Information .........................................................12 B. FOP Equipment ................................................................2 C. Troubleshooting Guide ........................................................3 D. FOP Document Distribution ....................................................8 XVI. Operating a Processing Center A. Processing Equipment Specifications .........................................11 B. Processing System Flowchart ..................................................3 C. Crate System .................................................................1 C. Scheduling Courier Runs ......................................................2 D. Scheduling Processing Center .................................................4 E. Drain Times ..................................................................1 F. Assembly ....................................................................14 G. Rejects ......................................................................2 H. State Return Mailing Addresses ...............................................6 I. Mailing 8453s ................................................................2 J. Supplies .....................................................................2 K. Backups ......................................................................3 L. Using Processing System Help .................................................2 EXHIBIT J Entity Number Three Letter Code AGREEMENT OF JOINDER Agreement made this ____ day of December, 1995, by and among County Bank, with its principal office at 4575 Bonney Road, Virginia Beach, VA 23462 ("COUNTY BANK"), Jackson Hewitt, a corporation with its principal office at 4575 Bonney Road, Virginia Beach, Virginia 23462 ("JACKSON HEWITT"), the undersigned Franchisee, and the other Franchisees (the "OTHER FRANCHISEES") which are parties to that certain Refund Anticipation Loan Agreement dated December, 1995 (the Agreement). WITNESSETH WHEREAS, COUNTY BANK, Jackson Hewitt and the Other Franchisees have entered into the Agreement to provide for unified procedure from which to implement a program to offer certain of the Other Franchisees' customers who qualify for a Refund Anticipation Loan offered through COUNTY BANK; WHEREAS, the Franchisee desires to become a part to the Agreement; NOW, THEREFORE, in consideration of the mutual promises of the parties, the Franchisee agrees that it shall be bound by, and shall have the benefit of, all the terms and conditions set forth in the Agreement. This Agreement of Joinder shall be attached to and become a part of the Agreement kept in custody by Jackson Hewitt. In addition, the Franchisee acknowledges and agrees that the Franchise Agreement(s), by and between it and Jackson Hewitt, including but not limited to the indemnification provision of such, shall govern and control this Agreement of Joinder. In the event COUNTY BANK requires the original loan application, the Franchisee agrees to send it overnight to the bank. Preparer: By: Telephone Number: Title: FOR ACH TRANSMITTALS: Name of Financial Institution: Address of Financial Institution: Phone Number of Financial Institution: Accout Number: Routing Transit Number: **MUST BE THE RTN FOR ACH RECEIPT, PLEASE VERIFY WITH YOUR BANK Name on Account: **MUST BE THE EXACT ACCOUNT TITLE, PLEASE VERIFY WITH YOUR BANK Account Type: Checking Savings **TO ASSIST IN OUR EFFORT TO ACQUIRE THE MOST ACCURATE INFORMATION POSSIBLE, PLEASE ATTACH A BLANK, VOIDED CHECK OR DEPOSIT SLIP TO THIS FORM. THANK YOU. AGREEMENT OF PURCHASE AND SALE - EXHIBIT K - Sole Proprietor THIS AGREEMENT OF PURCHASE AND SALE is made by and between Jackson Hewitt Inc., a Virginia corporation ("Seller") and ("Purchaser"); WITNESSETH: WHEREAS, Seller owns certain assets described on Exhibit A and has valid leases to assets described on Exhibits B, and C, if any, (the "Assets") and attached hereto and made a part hereof used in connection with the business of preparing income tax returns in the franchise territory known as zip codes: ; and WHEREAS, Seller is also the Franchisor of Jackson Hewitt Tax Service Franchises, and has, pursuant to a Franchise Agreement, granted the Purchaser the right to use the name "Jackson Hewitt Tax Service", along with all trademarks, logos, and service marks attached thereto, in operating a tax preparation business (the "Franchised Business") according to the methods and under the terms and conditions prescribed in said Franchise Agreement; and WHEREAS, Purchaser desires to purchase the Assets from Seller on Exhibit A and have use of the Assets if any, listed on Exhibits B and C in connection with operating the Franchised Business; and NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, Seller and Purchaser agree as follows: 1. On the terms and subject to the conditions set forth in this Agreement, Seller shall sell, permit the use of, transfer and/or convey to Purchaser, and Purchaser shall purchase and acquire from Seller, on ("Closing Date"), the Assets. 2. The aggregate purchase price ("Purchase Price") to be paid by Purchaser to Seller for the Assets shall be $ . This offer expires on . The sum of $ shall be paid in cash at Closing. The remaining amount of $ shall be payable at Closing by the issuance of a promissory note with interest at the rate of 12% per year payable on the following terms: First Payment due February 28, Second Payment due February 28, Third Payment due February 28, Fourth and Final Payment due February 28, 3. Purchaser and Seller have agreed that the Purchase Price shall be allocated as follows: (a) $ to furniture, fixtures, & equipment; --------------- (b) $ to supplies; --------------- (c) $ to a license to use the electronically --------------- provided customer list; (d) $ to franchise fees; --------------- (e) $ to goodwill. --------------- Purchaser agrees to accept all Assets in an "as is" condition. Purchaser also acknowledges that the license to use the electronically provided customer list (the "Electronic Information") shall run simultaneously with the Initial Term of Franchise Agreement or any current renewal term thereof. 4. (a) Seller conveys the Assets, if any, contained on Exhibit A. (b) Purchaser will have use of the leased equipment if any, contained on Exhibit B. Purchaser acknowledges that it has no ownership interest in the leased equipment and promises to return the leased equipment to Seller upon the expiration of the lease term or upon the termination or expiration of the Franchise Agreement, whichever occurs first. (c) Seller will assign its lease for the premises, if any, described on Exhibit C, and Seller agrees to assume the liability therefor, from the date of Closing. 5. Seller warrants and represents to Purchaser, which shall be true and correct in all material respects on the Closing Date, that: (a) Seller is sole owner of, and has good and marketable title to all the furniture, fixtures and equipment, (except the equipment described on Exhibit B), the supplies, and sole licensee for the electronically provided customer list being sold, assigned or otherwise transferred by Seller to Purchaser hereunder. At Closing, there will be no material change from the date hereof, in the supplies and other inventory items being transferred to Purchaser except for such substitutions and replacements as are normally made in the ordinary course of business. (b) Either contemporaneously with the Closing or within thirty (30) days after the Closing, Seller will electronically deliver to Purchaser certain information relating to clients served by the Jackson Hewitt Tax Service for the franchise territory set forth in zip codes described above. Seller makes no representations, warranties or guaranties regarding any continuing relationship with any such client or any anticipated income from any individual client or from the electronically provided customer information as a whole. 6. Purchaser represents and warrants to Seller, which shall be true and correct in all material respects on the Closing Date, that: (a) No default by Purchaser exists or is threatened under the Franchise Agreement; (b) Purchaser has made such evaluations, projections and studies regarding potential income possibilities from last year's Franchised Business revenues to serve its own purposes and hereby acknowledges that Seller has not made and does not make any representations, warranty, or guaranty regarding such evaluations, projections or studies. 7. The Closing shall take place at the office of JACKSON HEWITT INC., 4575 BONNEY ROAD, VIRGINIA BEACH, VIRGINIA 23462 on . At Closing, all rents and utility charges, if any, shall be prorated. 8. Seller has not made and does not make any warranties, representations or guaranties, and Purchaser is not relying on any warranty, representation or guaranty made by any person acting on Seller's behalf, as to the physical condition of any furniture, fixtures and equipment, past or future income, expenses or operation of the business, or any other matter or thing affecting or related thereto, except as specifically set forth herein. 9. Seller is not aware of any liabilities encumbering the Assets being transferred hereunder and except as set forth below hereby assumes any and all liabilities found within one (1) year from the Closing Date to encumber the Assets as a result of their previous ownership. Notwithstanding the foregoing, Purchaser shall assume any Tax School advertising, Yellow Pages display or other listing which has already been ordered or for any supplies previously ordered for the territory. In addition, Purchaser shall assume all charges for any, rent, payroll, telephone service charges, utilities, maintenance agreements, and any other service in place for the site, e.g. trash removal, from the date of Closing, and Purchaser must change these accounts to Purchaser's name immediately after Closing. 10. This Agreement is not assignable by Purchaser in whole or in part without Seller's written consent. 11. This Agreement, together with the exhibits hereto, constitutes the entire agreement between the parties regarding the subject matter of this Agreement, and all prior and contemporaneous agreements, understandings, representation, and statements, oral or written, are hereby merged herein. This Agreement shall be binding upon and inure to the benefit of the parties hereto and, subject to paragraph 10, their successors, assigns, and legal representatives. 12. All legal and other costs and expenses incurred by each party hereto in connection with this Agreement and the transaction contemplated herein shall be paid by the party which incurs such expenses. 13. Any notices given in connection with this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person to the party to whom addressed (or if to a corporation or partnership, to an officer or partner therein) or mailed, certified, or registered mail, postage prepaid or overnight delivery service to the parties as follows: if to Seller: Jackson Hewitt Tax Service 4575 Bonney Road Virginia Beach, VA 23462 or if to Purchaser: Notices shall be deemed given when delivered, if hand delivered, or three (3) days after mailing, if so mailed, or one day after having been left with an overnight delivery service. 14. This Agreement is accepted in the State of Virginia and shall be governed by and interpreted in accordance with Virginia Law. IN WITNESS WHEREOF, the parties to this Agreement have duly executed and sealed it on the day and year first above written.
SELLER: PURCHASER: JACKSON HEWITT INC. By: SEAL /s/ SEAL Keith E. Alessi Signature of Purchaser Chairman, President and CEO Print Name of Purchaser Home Address of Purchaser Home phone number of Purchaser Purchaser's social security/TIN number
EXHIBIT A ASSETS: 1. Furniture, fixtures, & equipment: 2. Electronically provided customer information 3. Goodwill EXHIBIT B Purchaser will have use of the following leased equipment: The above-listed equipment is contained on a lease with and the lease term expires on . Purchaser promises to return the above-described leased equipment to Seller at the earlier of: the expiration of the lease or the termination or expiration of the franchise agreement for the franchised Territory conveyed with this Agreement of Purchase and Sale. EXHIBIT C Seller will assign its lease to the following premises: The lease expires on ________________. The monthly rental is $______. There are additional charges on this lease. AGENT FOR SERVICE OF PROCESS -EXHIBIT L Alabama Secretary of State Alaska CT Corporation Arizona CT Corporation System Arkansas CT Corporation System California California Commissioner of Corporations or any California entity Colorado CT Corporation System Connecticut Connecticut Banking Commissioner Delaware CT Corporation System Idaho CT Corporation Washington, DC CT Corporation System Florida CT Corporation System Georgia CT Corporation System Illinois Illinois Attorney General 500 South Second Street Springfield, IL 62706 Indiana Indiana Secretary of State, 201 State House 200 W. Washington St; Indianapolis, IN 46204 Kansas CT Corporation System Kentucky Secretary of State Louisiana CT Corporation System Maryland Maryland Securities Commissioner Maryland Division of Securities 200 St. Paul Place, 20th Floor Baltimore, Maryland 21202-2020 (410) 576-6360 Massachusetts CT Corporation System Michigan Michigan Department of Commerce, Corporations and Securities Bureau Minnesota Minnesota Commissioner of Commerce Mississippi Secretary of State Missouri CT Corporation System Nebraska CT Corporation System Nevada CT Corporation System New Hampshire CT Corporation System New Jersey CT Corporation System New Mexico CT Corporation System New York Secretary of State of the State of New York 162 Washington Avenue Albany, New York 12231 North Carolina CT Corporation System North Dakota North Dakota Securities Commissioner Ohio CT Corporation System Oklahoma Secretary of State Oregon Theodore R. Kulongoski (Director of Oregon Department of Insurance and Finance) Pennsylvania CT Corporation System Rhode Island Director of Rhode Island Department of Business Regulation South Carolina CT Corporation System South Dakota Director of South Dakota Division of Securities Tennessee CT Corporation System Texas Each company names it's own Registered Agent for Service of Process Utah CT Corporation System Virginia Clerk of the State Corporations Commission Washington Washington Department of Financial Institutions West Virginia CT Corporation System Wisconsin Wisconsin Commissioner of Securities Wyoming CT Corporation System
STATE FRANCHISE ADMINISTRATORS EXHIBIT M California Department of Corporations: Los Angeles Suite 600 3700 Wilshire Boulevard Los Angeles,CA 90010 (213) 736-2741 Sacramento 1115 Eleventh Street Sacramento,CA 95814 (916)445-7205 San Diego 1350 Front Street San Diego,CA 92101 (619) 525-4044 San Francisco 1390 Market Street San Francisco, CA 94102 (415) 557-3787 Illinois Office of Attorney General Franchise Division 500 South Second Street Springfield,IL 62706 (217) 782-4465 Indiana Indiana Securities Division Secretary of State Room E-111 302 West Washington Street Indianapolis,IN 46204 (317) 232-6681 Maryland Office of the Attorney General Maryland Division of Securities 20th Floor 200 St. Paul Place Baltimore, MD 21202-2020 (410) 576-6360 Michigan Marilyn McEwen Franchise Administrator Consumer Protection Division Antitrust and Franchise Unit Michigan Dept. of Attorney General 670 Law Building Lansing, MI 48913 (517) 373-7117 Minnesota Ann Hagestad Franchise Examiner Minnesota Department of Commerce 133 East Seventh Street St. Paul, MN 55101 (612) 296-6328 New York Joseph J. Puntero Assistant Attorney General Bureau of Investor Protection and Securities New York State Department of Law 23rd Floor 120 Broadway New York, NY 10271 (212) 416-8211 FAX:(212) 416-8816 North Dakota Jocelyn Smith-Whittey Franchise Examiner Office of Securities Commissioner Fifth Floor 600 East Boulevard Bismarck, ND 58505 (701) 224-4712 Rhode Island Thomas Corrigan Securities Examiner Division of Securities Suite 232 233 Richmond Street Providence, RI 02903 (401) 277-3048 South Dakota Franchise Administrator Division of Securities c/o 118 West Capitol Pierre, SD 57501 (605) 773-4013 Texas Dorothy Wilson Statutory Document Section Secretary of State P.O. Box 12887 Austin, TX 78711 (512) 475-1769 Virginia Stephen W. Goolsby Chief Examiner State Corporation Commission Ninth Floor 1300 E. Main Street Richmond, VA 23219 (804) 371-9051 Washington Deborah Bortner Acting Administrator Department of Financial Institutions Securities Division P.O. Box 9033 Olympia, WA 98507-9033 (206) 753-6928 Wisconsin James R. Fischer Franchise Administrator Securities and Franchise Registration Wisconsin Securities Commission P.O. Box 1768 Madison, WI 53701 (608) 266-8559 ACKNOWLEDGMENT OF RECEIPT OF COMPLETED FRANCHISE AGREEMENT AND RELATED DOCUMENTS - EXHIBIT N JACKSON HEWITT TAX SERVICE Jackson Hewitt Inc. 4575 Bonney Road Virginia Beach, Virginia 23462 Re: Completed Franchise Agreement and Related Documents I acknowledge that I have received the document(s) set forth opposite my initials from you on the date indicated below: Please initial by each document you received. Initial Franchise Agreement & Schedules Promissory Note Security Agreement Agreement of Purchase and Sale These documents have been completed in all respects, except that they have yet to be executed by the parties. I understand that Jackson Hewitt Inc. will not execute any Franchise Agreement or related agreements with me unless I have had them in my possession at least five (5) business days before I sign them. /S/ Date you received the above Your Signature listed documents for signature Print Your Name Entity No. (if known) RECEIPT FOR JACKSON HEWITT OFFERING CIRCULAR - EXHIBIT O THIS OFFERING CIRCULAR SUMMARIZES PROVISIONS OF THE FRANCHISE AGREEMENT AND OTHER INFORMATION IN PLAIN LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL AGREEMENTS CAREFULLY. IF JACKSON HEWITT OFFERS YOU A FRANCHISE, JACKSON HEWITT MUST PROVIDE THIS OFFERING CIRCULAR TO YOU BY THE EARLIEST OF: (1) THE FIRST PERSONAL MEETING TO DISCUSS THE FRANCHISE; OR (2) TEN BUSINESS DAYS BEFORE SIGNING OF A BINDING AGREEMENT; OR (3) TEN BUSINESS DAYS BEFORE ANY PAYMENT TO JACKSON HEWITT. YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT LEAST FIVE BUSINESS DAYS BEFORE YOU SIGN ANY FRANCHISE AGREEMENT. IF JACKSON HEWITT DOES NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF IT CONTAINS A FALSE OR MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF FEDERAL AND STATE LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL TRADE COMMISSION, WASHINGTON, D.C. 20580 AND THE STATE AGENCY LISTED ON EXHIBIT M. Jackson Hewitt authorizes the person or entity listed on Exhibit L for your state to receive service of process for Jackson Hewitt. I have received a Uniform Franchise Offering Circular dated June 26, 1997. This offering circular included the following Exhibits: A. Franchise Agreement and Schedules B. Promissory Note C. Security Agreement D. Confidential Franchise Application E. Exhibit E is Blank F. List of Franchisees/Former Franchisees G. Earnings H. Financial Statements I. Topic Summary for Confidential Operating Manual J. Sample Agreement of Joinder for Refund Anticipation Loan K. Sample Agreement of Purchase and Sale L. Agents for Service of Process M. Franchise Administrators N. Acknowledgment of Receipt of Completed Franchise Agreement and Related Documents O. Receipt of Offering Circular Date you received this Your Signature Offering Circular Print Your Name Your Home Address City and State Your Home Telephone Number EX-10 4 EXHIBIT 10.20 Exhibit 10.20 EMPLOYMENT AGREEMENT This Employment Agreement is entered into as of the 29th day of May, 1997, by and between Jackson Hewitt Inc. (the "Employer") and Keith E. Alessi (the "Employee"). R E C I T A L S A. The Employer and the Employee desire to enter into an employment relationship in which Employee will serve as Employer's President and Chief Executive Officer. B. The Employer recognizes the unique services that will be provided by Employee to the Employer. C. The Employer possesses and will possess certain confidential information regarding the conduct of its business and the industry in which such business operates, all of which information will provide the Employer certain competitive advantages in the marketplace in which it competes. D. During the course of his employment, Employee will receive access to certain confidential information regarding the conduct of the Employer's business operations. A G R E E M E N T In consideration of the premises and the mutual promises herein made, the parties hereto agree as follows: 1. Definitions. 1.1 "Business" means the business owned and/or operated by the Employer from time to time. 1.2 "Cause" means any of the following: 1.2.1 Employee's willful or negligent failure to perform his duties of employment. 1.2.2 Employee's commission of any acts of willful misconduct or negligence deemed by the Board (or a duly appointed committee thereof) to adversely affect the business of the Employer. 1.2.3 Employee's commission of a felony or crime of moral turpitude. 1.2.4 Employee's breach of any material terms of this Agreement. 1.2.5 Employee's deliberate violation of an Employer's rule, the violation of which is deemed by the Board (or a duly appointed committee thereof) to adversely affect the business of the Employer. 1.2.6 Employee's willful disregard of the duties, interests and obligations of the Employer, the willful disregard of which is deemed by the Board (or a duly appointed committee thereof) to adversely affect the business of the Employer. 1.3 "Company Information" means any and all Confidential Information, Copyrightable Material, Trade Secrets and Proprietary Information of the Employer. 1.4 "Confidential Information" means any and all data and information relating to the operation, production and marketing of the Business which is, has been or will be disclosed to Employee or of which Employee has become or will become aware as a consequence of his relationship with the Employer and which has value to the Employer and is not generally known by its competitors. 1.5 "Copyrightable Material" means any material 1.5.1 developed by the Employer or by the Employee while employed by or working with the Employer; and 1.5.2 that is protected or is protectable by the copyright laws of the United States, including, without limitation, brochures and other printed advertisements, billboard contents, photographs, television advertisements, and recordings, whether on an electronic medium or otherwise. 1.6 "Proprietary Information" means all of the following materials and information, to which Employee receives or has received access or which Employee develops or has developed, in whole or in part, as a direct or indirect result of his employment with the Employer or in the course of his employment with the Employer or through the use of any of the Employer's facilities or resources: 1.6.1 Production processes, marketing techniques, financial information, names, requirements, data and other materials or information relating to the Business and/or the manner in which the Employer does business; 1.6.2 Discoveries, concepts and ideas, and the embodiment thereof, whether or not patentable or subject to protection by a copyright, including, without limitation, the Hewtax interactive software package and other processes, techniques and "know-how." 1.6.3 Any other materials or information related to the Business of the Employer which are not generally known to others engaged in similar activities, including, without limitation, operating principles, documentation, drawings, programs and performance specifications and results. 1.7 "Trade Secrets" means the whole or any portion or phase of any data or information developed, owned or licensed from a third party by the Employer, including any formula, pattern, compilation, program, device, method, technique, improvement, or process that falls within the definition of "Trade Secret" under the laws of the Commonwealth of Virginia. 2. Terms of Engagement; Duties of Employee; Rights of Employer. 2.1 Employer agrees to employ Employee, for the term of this Agreement, as President and Chief Executive Officer. Employee agrees to accept such employment on the terms and conditions set forth in this Agreement. 2.2 Employee recognizes and agrees that he shall during the term of this Agreement: 2.2.1 devote all of his time, energy and skill during regular business hours exclusively to faithfully and industriously performing the duties assigned to him by the Employer (reasonable vacations and reasonable absences due to illness excepted), including, but not limited to, supervising the business and affairs of the Employer; 2.2.2 work exclusively for the Employer except as described and otherwise provided in this Agreement, and accept no other employment for remuneration other than that addressed by this Agreement during its effective term. 2.2.3 diligently follow and implement all management policies and decisions communicated to him by the Board or its designee; 2.2.4 timely prepare and forward to the Board or its designee all reports and accountings as may be requested of Employee so as to protect and enhance the Employer's investments and business; 2.2.5 prepare for and punctually attend all meetings that require Employee's attendance; 2.2.6 refrain from any activity or behavior during or after business hours that is unbecoming to him that could reflect negatively on the Employer; and 2.2.7 promptly notify the Board in the event that Employee joins, is appointed to, or otherwise becomes affiliated with the Board of Directors or Board of Trustees of another corporation or other business entity, excluding those of charitable, not-for-profit entities, or as otherwise provided in this Agreement; Nothing contained in this Section 2 shall be construed to limit Employee's right to hold, make or sell passive investments, and serve as a board member on various corporations' Boards of Directors. 3. Term. Except in the case of early termination, as specifically provided in Section 11 of this Agreement, the term of this Agreement shall run from the date of execution of this Agreement through June 18, 1999, and can be extended by the mutual agreement of Employer and Employee. 4. Compensation. Except as otherwise provided in this Agreement, Employer shall pay to Employee an annual rate of $250,000 for performance of his duties during the term of this Agreement. The salary shall be paid in equal bi-weekly installments. Employer shall deduct from the salary all state and federal income taxes, social security taxes, and such other payroll deductions as the law now or hereafter in force may from time to time require or as Employee may additionally direct in writing. Employee may receive an additional bonus of up to $137,500 on June 18, 1998 (with respect to the 1998 fiscal year) and on June 18, 1999 (with respect to the 1999 fiscal year) in accordance with annual senior management bonus plans that are approved by the disinterested members of the Company's board of directors. Employee shall at all times during this Agreement be eligible to participate in all employee benefit plans offered by Employer to its Executive Officers. 5. Reimbursement for Expenses. The parties recognize that in the course of performing his duties hereunder, Employee may incur expenses in connection with his duties for such items as entertainment, travel, hotels, gifts and similar items. In addition, Employer shall lease, insure, and maintain an automobile that is equivalent in price to a Buick Rivera or Park Avenue on behalf of Employee. Subject to the Employer's expense reimbursement policy, Employee will be entitled to reimbursement for all reasonable expenses, including those related to the automobile referred in the preceding sentence, so incurred by him in the performance of his duties hereunder upon submission of documentation to Employer verifying such expenses. 6. Life Insurance. Employer may, in its discretion, at any time after execution of this Agreement, apply for and procure, as owner and for its own benefit, insurance on the life of Employee, in such amounts and in such form or forms as Employer may choose. Employee shall have no interest whatsoever in such policy or policies, but he shall, at the request of Employer, submit to such medical examinations, supply such information, and execute such documents as may be required by the insurance company or companies to whom Employer has applied for such insurance. 7. Ownership of Company Information. Employee agrees that the Company Information, and all physical embodiments thereof are and shall at all times remain the sole and exclusive property of the Employer and that any of the Company Information produced by him shall be considered work for hire. Employee agrees and acknowledges: 7.1 that all Company Information developed in whole or part by him during his employment with the Employer shall be deemed, immediately upon creation, to be the property of the Employer; 7.2 that he shall, at the request and expense of the Employer, assign to the Employer any right, title or interest he may have in such Company Information; and 7.3 that he shall, at the request and expense of the Employer, do all things and sign all documents or instruments reasonably necessary in the opinion of the Employer to eliminate any ambiguity as to the rights of the Employer in such Company Information, including, without limitation, providing to the Employer his full cooperation in any litigation, registrations or other proceedings to establish, protect or obtain such rights. 8. Non-Disclosure of Trade Secrets and Copyrightable Material. During his employment with the Employer and at any and all times following the termination (for whatever reason) of such employment, Employee agrees not to use, reveal, report, publish, disclose or transfer, directly or indirectly, any Trade Secret or Copyrightable Material for any purpose except in the course of performing duties assigned to him by the Employer. 9. Non-Disclosure of Confidential Information or Proprietary Information. During his employment with the Employer and for a period of three (3) years after the termination of such employment, whenever and however such termination is effected, whether by Employee or Employer, with or without Cause, Employee agrees not to use, reveal, report, publish, disclose or transfer, directly or indirectly, any Confidential Information or Proprietary Information for any purpose except in the course of performing duties specifically assigned to him by the Employer. 10. Ownership of Work Product and Other Tangible Information. All (i) notes, data, reference materials, advertising materials, memoranda and records in any way relating to any of the Company Information and (ii) other physical embodiments of the Company Information shall belong exclusively to the Employer and Employee agrees to turn over to the Employer the originals and all copies of such materials in his possession at the request of the Employer or in the absence of such a request, upon the termination (for whatever reason) of Employee's employment with the Employer. 11. Early Termination and Events Upon Termination. This Agreement may only be terminated upon the following terms and conditions: 11.1 Employer and Employee may mutually terminate this Agreement at any time in writing, the effective date and terms of such termination to be determined and agreed upon by both parties. For purposes of this Section 11.1, however, Employer shall be entitled in its sole and absolute discretion to withhold its consent to any such termination. 11.2 Employer may terminate this Agreement, with or without notice, for Cause. If Employer terminates Employee for Cause, it shall notify Employee of its basis for doing so promptly in writing, but in no event longer than thirty (30) days thereafter. Upon termination for Cause as provided in this Section 11.2, Employee shall not receive further compensation pursuant to this Agreement. In the event of termination pursuant to this Section 11.2, Employee will not be eligible for any bonus. 11.3 Employer may terminate this Agreement at any time, or for any reason and without Cause. Upon termination as provided in this Section 11.3, Employee shall not receive his compensation through the balance of this Agreement, but will receive severance payments equal to one full year's base salary ($250,000), commencing upon termination, to be paid in equal bi-weekly installments for a period of one year, consistent with the withholding provisions of Section 4. Under these circumstances, Employee shall not be entitled to the payment of any bonus. In addition, notwithstanding the terms of Employee's Stock Option Award Agreement dated June 18, 1996, upon a termination without Cause under this Section 11.3, Employee shall be automatically entitled to not only exercise his then-vested options during the post-termination period allowed under the 1994 Long Term Incentive Plan (the "Plan"), but also the tranche of option shares that would vest, but for the not for Cause termination, on the succeeding June 18. By way of example, should Employee be terminated without Cause on July 1, 1997, he would be entitled to exercise the option to purchase 41,580 incentive stock options and 92,452 non-qualified stock options in accordance with the terms of the Plan. 11.4 Notwithstanding any provision in this Agreement to the contrary, including without limitation Section 11.2 or Section 11.3, Employee shall not be entitled to receive any further compensation under this Agreement in the event Employee violates any provision of Section 13 of this Agreement. 11.5 In the event, during the term of this Agreement, Employee dies or is deemed by Employer, in its sole and absolute discretion, to be totally and permanently disabled, Employer shall have the right to terminate this Agreement. 12. No Prior Agreements. Employee represents that he is not a party to, or otherwise subject to or bound by, the terms of any contract, agreement, or understanding which in any manner would limit or otherwise affect his ability to perform his obligations hereunder, including, without limitation, any contract, agreement, or understanding containing any provision limiting Employee's right to compete with a prior employer. Employee further represents and warrants that his employment with Employer will not require the disclosure or use of any confidential information belonging to prior employers or other persons or entities. 13. Covenant not to Compete. Employee acknowledges that during the course of his employment, he will acquire confidential information about Employer's business, including but not limited to, its long and short term goals, marketing strategy, operations, revenues, fees/prices, customer and client lists, and other pertinent information, and that in his capacity as President and Chief Executive Officer, he is uniquely positioned to know or have access to the most sensitive aspects of Employer's totality of operations, including responsibility for contacting and developing relationships with Employer's customers and other relevant Employer contacts. Employee also acknowledges and agrees that his skills used in the operation of Employer's business are personal and unique, and that, except as otherwise provided in his Agreement, he has agreed to provide those unique skills exclusively to Employer during the term of this Agreement. Accordingly: 12.6 Employee agrees that upon the termination of his employment, whenever and however such termination is effected, whether by Employee or Employer, with or without Cause, and for twenty-four (24) months following such termination, he will not, directly or indirectly, compete with Employer (within any city, town, or county in which franchisees or other business entities bearing Employer's trade name are in operation at the time of Employee's separation from employment, or in which Employer has begun plans or preparations to locate such a franchise or entity at the time of Employee's separation from employment) within the geographical limits of the United States of America, its territories and possessions. Employee acknowledges and agrees that the scope of Employer's operations currently includes or exceeds the geographic limitation of this restrictive covenant. 12.7 Employee agrees that competition, as used in this Agreement, shall include, but not be limited to, engaging in competitive activity, either as an individual, partner, joint venturer with any other person or entity, employee, agent, investor (other than in publicly traded stock), consultant or representative of any other person or entity, or otherwise being associated in a competitive capacity with any business entity which directly or indirectly competes with Employer. 12.8 It is the specific intent of the parties that Employee shall be restricted from competing directly or indirectly with any segment of Employer's business in which Employee engaged prior to the termination of employment and from any segment of Employer's business about which Employee acquired proprietary or confidential information during the course of his employment, or relating to Employee's personal and unique skills. Employee acknowledges for these purposes that the scope of his engagement and knowledge includes the entirety of Employer's operations and proprietary or confidential information. Employer's business includes, without limitation: 12.8.1 Advertising and marketing directed to those individuals, corporations, or other entities required to file tax returns with the Internal Revenue Service or relevant state tax collection agency; providing advice and counsel to such entities regarding tax planning, completing and filing all required tax forms for customers; representing or providing testimony or evidentiary support in the event of customer and/or challenges to customer's tax filings. These operations include a mechanism for providing customers, upon the electronic filing of their tax forms, with "Superfast Refunds," in anticipation of their actual tax returns. 12.9 Employer and Employee have examined in detail this Covenant Not to Compete and agree that the restraint imposed upon Employee is reasonable in light of the legitimate interests of Employer, and it is not unduly harsh upon Employee's ability to earn a livelihood. 13. Non-Solicitation of Customers and Franchisees. Employee agrees that during his employment with Employer, he shall not, directly or indirectly, solicit or attempt to solicit the trade of, or trade with, any customer or prospective customer, or existing or prospective franchisee, including an entity or person known by Employee to have received and not acted upon a proposal by Employer to become a customer or franchisee of Employer, of Employer for any business purpose other than for the benefit of Employer. Employee further agrees that for twenty-four (24) months following the termination of this Agreement, and without regard to how termination of such Agreement is effected, whether by himself or Employer, with or without cause, Employee shall not, directly or indirectly, solicit or attempt to solicit the trade of, or trade with, any customer or previously identified prospective customers, or existing or previously identified prospective franchisee, with whom Employee had contact, conducted business, or became aware of during and as a result of his employment with Employer, to provide the same or similar services as he provided while employed by Employer. 14. Non-Solicitation of Employees. Employee agrees that during his employment with Employer, and for twenty-four (24) months following the termination of this Agreement, without regard to how termination of such Agreement is effected, whether by himself or Employer, with or without cause, Employee shall not, directly or indirectly, solicit or induce, or attempt to solicit or induce, any employee of Employer to leave Employer for any reason whatsoever, or hire any individual then employed by Employer at the time of termination of this Agreement, or who becomes employed during the twenty-four (24) month period covered by this Section 15. 15. Injunctive Relief. 15.1 Employee acknowledges that the remedies at law for any breach by Employee of any restrictive covenant contained in this Agreement will be inadequate and that Employer shall be entitled to injunctive relief against Employee in addition to any other remedy and damages available. Employee acknowledges that the restrictions contained herein are reasonable, but agrees that if any court of competent jurisdiction shall hold such restrictions unreasonable as to time, geographic area, activities, or otherwise, such restrictions shall be deemed to be reduced to the extent necessary in the opinion of such court to make them reasonable. 15.2 Employee agrees that the non-competition, non-disclosure, and non-solicitation obligations contained herein shall be extended by the length of time which Employee shall have been in breach of any of said provisions. Employee recognizes that the time periods included in the restrictive covenants contained herein shall begin on the date a court of competent jurisdiction enters an order enjoining Employee from violating such provisions unless good cause can be shown as to why the periods described should not begin at that time. 16. Restrictive Covenants of the Essence. The restrictive covenants of the Employee set forth herein are of the essence of this Agreement; they shall be construed as independent of any other provision in this Agreement; and the existence of any claim or cause of action of the Employee against the Employer, whether predicated on this Agreement or not, shall not constitute a defense to the enforcement by the Employer of the restrictive covenants contained herein. Employer shall at all times maintain the right to seek enforcement of these provisions whether or not Employer has previously refrained from seeking enforcement of any such provision as to Employee or any other individual who has signed an agreement with similar provisions. 17. Disclosure of Materials. Employee agrees that he shall promptly disclose to Employer all processes, techniques, methods, discoveries, improvements, inventions, and/or other materials made or developed by Employee in whole or in part during the period of Employee's employment which are related in any way to the business activities of Employer. Employee recognizes that all such materials shall belong to and be the sole property of Employer, and Employee hereby assigns and agrees to assign all rights to such materials to Employer. 18. Return of Materials. Upon the termination of Employee's employment with Employer for any reason, however such termination is effected, whether by Employee or Employer, with or without cause, Employee shall promptly deliver to Employer all property, materials, documents, and copies of documents concerning Employer's operations or customers which Employee has in his possession at the time of termination. Any work performed by Employee to create, develop or improve such property, materials and/or documents shall not entitle employee to retention thereof. 19. Review by Counsel. Employee understands the nature of the burdens imposed by the restrictive covenants contained in this Agreement. Employee acknowledges that he is entering into the Agreement on his own volition, and that he has been given the opportunity to have this Agreement, including the restrictive covenants and jury waiver clause, reviewed by his legal counsel. Employee represents that upon careful review, he knows of no reason why any restrictive covenant contained in this Agreement is not reasonable and enforceable. 20. Assignability. The obligations of the parties under this Agreement shall continue for the period specified after the termination of Employee's employment with Employer for any reason, with or without cause, and shall be binding on Employee's heirs, executors, legal representatives, and assigns; and shall inure to the benefit of any successor or permitted assigns of Employer. 21. Severability. It is the intention of the parties that the provisions of the restrictive covenants herein shall be enforceable to the fullest extent permissible under the applicable law. If any clause or provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term hereof, then the remainder of this Agreement shall not be affected thereby, and in lieu of each clause or provision of this Agreement which is illegal, invalid or unenforceable, there shall be added, as a part of this Agreement, a clause or provision as similar in terms to such illegal, invalid or enforceable clause or provision as may be possible and as may be legal, valid, and enforceable. 22. Attorneys' Fees. Employee shall pay, indemnify, and save Employer harmless against all costs and expenses (including any attorneys' fees) incurred by Employer with respect to enforcement of its rights under this Agreement. 23. Consent to Jurisdiction and Venue. Employee hereby irrevocably submits to the jurisdiction of the Circuit Court of the City of Virginia Beach, Virginia, in any action or proceeding arising out of, or relating to, this Agreement, and Employee hereby irrevocably agrees that all claims in respect of any such action or proceeding may be heard and determined in such Court. Employee agrees that a final judgment in any action or proceeding shall, to the extent permitted by applicable law, be conclusive and may be enforced in other jurisdictions by suit on the judgment, or in any other manner provided by applicable law related to the enforcement of judgments. 24. Jury Waiver. Employee and Employer agree that in any litigation, action or proceeding arising out of or relating to this Agreement, trial shall be to a court of competent jurisdiction without a jury. Employee and Employer irrevocably waive any right Employee or Employer may have to a trial by jury and a copy of this Agreement may be introduced as written evidence of the waiver of the right to trial by jury. Employer has not made, and Employee has not relied upon, any oral representation regarding the enforceability of this provision. Employee and Employer have read and understand the effect of this jury waiver provision. 25. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the Commonwealth of Virginia without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Virginia or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Commonwealth of Virginia. 26. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above written. May 29, 1997 /s/ Keith E. Alessi - ---------------------------- ------------------------------------- DATE KEITH E. ALESSI JACKSON HEWITT, INC. BY: /s/ Christopher Drake DATE May 29, 1997 ----------------------- ---------------------- ITS: Chief Financial Officer ------------------------ EX-10 5 EXHIBIT 10.21 Exhibit 10.21 JACKSON HEWITT, INC. ----------------------------------- AMENDED AND RESTATED CREDIT AGREEMENT Dated as of May 30, 1997 ----------------------------------- NATIONSBANK, N.A. THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of May 30, 1997, between JACKSON HEWITT, INC., a Virginia corporation (the "Company"), and NATIONSBANK, N.A., formerly known as NationsBank of Virginia, N.A. (the "Bank"). The Company and the Bank are parties to a Credit Agreement dated as of June 28, 1994, as amended by First Amendment to Credit Agreement dated as of October 19, 1994, by Second Amendment to Credit Agreement dated as of January 4, 1995, and by an Amended and Restated Credit Agreement dated as of July 17, 1995, as amended by First Amendment to Amended and Restated Credit Agreement dated as of October 17, 1995 and by Second Amendment to Amended and Restated Credit Agreement dated as of April 30, 1996, and by an Amended and Restated Credit Agreement dated as of June 7, 1996, as amended by First Amendment to Amended and Restated Credit Agreement dated as of September 10, 1996 (the "Original Agreement"). The Company and the Bank now wish to make certain changes to the Original Agreement. The parties hereto hereby agree that the Original Agreement is amended and restated in its entirety to read as follows, from and after the date hereof: ARTICLE I DEFINITIONS Section 1.1 Defined Terms. As used in this Agreement, the following terms have the following meanings: "Accounts": the meaning assigned thereto in the Security Agreement. "Affiliate": as to the Company, (a) any Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, the Company, or (b) any Person who is a director, officer or employee (i) of the Company, (ii) of any Subsidiary of the Company or (iii) of any Person described in the preceding clause (a). For purposes of this definition, control of a Person shall mean (A) the power, direct or indirect, (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise, or (B) the ownership, direct or indirect, of 10% or more of any class of stock of such Person. "Agreement": this Amended and Restated Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Borrowing Base": at a particular time, the sum of (i) the Net Security Value of the Eligible Accounts at such time and (ii) the Net Security Value of the Eligible Notes Receivable at such time. "Borrowing Base Certificate": means a borrowing base certificate substantially in the form of Exhibit B hereto, with appropriate insertions setting forth the Borrowing Base as of a particular date, executed by a duly authorized Responsible Officer of the Company. "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in Norfolk, Virginia are authorized or required by law to close. "Capitalized Lease Obligations": as of the date of any determination thereof, the obligations of any Person, contingent or otherwise, under any agreements for the lease, hire or use of real or personal property which agreements have been, or under GAAP are required to be, capitalized whether or not such obligations are shown as liabilities or commitments on the balance sheet of such Person. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Company within the meaning of Section 414(b), (c), (m) or (n) of the Code. "Contingent Obligation": as to any Person, any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Board of Directors of the Company in good faith. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Deed of Trust": the credit line deed of trust dated January 4, 1995, executed and delivered by the Company granting the Bank a first priority Lien on the Real Property, which is recorded in the Clerk's Office for the Circuit Court of the City of Virginia Beach, Virginia in Deed Book 3465 at Page 894, as it may be amended, supplemented or otherwise modified from time to time. "Default": any of the events specified in Article VII, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Eligible Accounts": At the time of any determination thereof, all Accounts of the Company as to which the following requirements have been fulfilled to the satisfaction of the Bank: (a) the Company has lawful and absolute title to each of such Accounts; (b) each of such Accounts is a valid, legally enforceable obligation of the Person who is obligated under such Account (the "account debtor"); (c) none of such Accounts is subject to any dispute, off-set, counterclaim or other claim or defense on the part of the account debtor, or to any claim on the part of the account debtor denying liability under such Account in whole or in part; (d) the Company has the full and unqualified right to assign and grant a security interest in such Accounts to the Bank as security for the Obligations (as defined in the Security Agreement); (e) all of such Accounts are subject to a fully perfected first security interest in favor of the Bank pursuant to the Security Agreement prior to the rights of, and enforceable as such against, any other Person; (f) none of such Accounts is subject to any security interest or Lien in favor of any Person other than the Lien of the Bank pursuant to the Security Agreement and other Liens permitted hereunder; (g) each of such Accounts is evidenced by an invoice rendered to the account debtor (except for Accounts owing from the Company's franchisees pursuant to agreements with such franchisees and Accounts which are rebates from lending institutions with which the Company has tax refund anticipation loan agreements) and is not evidenced by any instrument or chattel paper; (h) each of such Accounts has arisen from the sale (on an absolute basis) of goods or services by the Company in the ordinary course of the Company's business, which have been delivered or rendered to the account debtor for such Accounts; (i) no account debtor in respect of any of the Accounts is (A) incorporated in or primarily conducting business in any jurisdiction located outside the United States of America or Puerto Rico or (B) any foreign government or any agency, department or instrumentality thereof; (j) the Company is not aware nor has the Company reason to be aware of any bankruptcy reorganization, bankruptcy, receivership, custodianship, insolvency or other like condition in respect of any account debtor for any of the Accounts; (k) the Company is not indebted to the account debtor for any of the Accounts for any goods provided or services rendered by such account debtor or otherwise; and (l) none of the Accounts has been outstanding more than 30 days from the date of billing. "Eligible Notes Receivable": At the time of any determination thereof, all Notes Receivable of the Company as to which the following requirements have been fulfilled to the satisfaction of the Bank: (a) the Company has lawful and absolute title to each of such Notes Receivable; (b) each of such Notes Receivable is a valid, legally enforceable obligation of the Person who is obligated under such Notes Receivable (the "note debtor"); (c) none of such Notes Receivable is subject to any dispute, off-set, counterclaim or other claim or defense on the part of the note debtor, or to any claim on the part of the note debtor denying liability under such Note Receivable in whole or in part; (d) the Company has the full and unqualified right to assign and grant a security interest in such Notes Receivable to the Bank as security for the Obligations (as defined in the Note Pledge Agreement); (e) all of such Notes Receivable are subject to a fully perfected first security interest in favor of the Bank pursuant to the Note Pledge Agreement prior to the rights of, and enforceable as such against, any other Person and all of such Notes Receivable have been delivered to the Bank, properly endorsed to the Bank; (f) none of such Notes Receivable is subject to any security interest or Lien in favor of any Person other than the Lien of the Bank pursuant to the Note Pledge Agreement and other Liens permitted hereunder; (g) the Company is not aware nor has the Company reason to be aware of any bankruptcy reorganization, bankruptcy, receivership, custodianship, insolvency or other like condition in respect of any note debtor for any of the Notes Receivable; (h) none of such Notes Receivable is due from an Affiliate; and (i) none of such Notes Receivable is 60 days or more overdue. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Event of Default": any of the events specified in Article VII, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "GAAP": Generally Accepted Accounting Principles in the United States of America in effect from time to time. "Governmental Authority": any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing. "Guarantee": the guarantee of the Guarantors dated as of September 10, 1996, as it may be amended, supplemented or otherwise modified from time to time." "Guarantors": the collective reference to Hewfant, Inc. and Oden, Inc., individually, a "Guarantor"." "Indebtedness": as to any Person, at a particular time, (a) all indebtedness for borrowed money or for the deferred purchase price of property or services in respect of which such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which such Person otherwise assures a creditor against loss, including, without limitation, bankers' acceptances, letter of credit reimbursement obligations, accounts payable, accrued expenses and other current liabilities, and inter-company accounts, (b) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, and (c) Capitalized Lease Obligations of such Person. "Libor Rate": for any day, the fluctuating interest rate per annum obtained by dividing (i) the one month London Interbank Offered Rate quoted in the "Money Rates" section of "The Wall Street Journal" by (ii) an amount equal to 1 minus the "Floating Libor Reserve Requirement" for such day. "Floating Libor Reserve Requirement" means the rate at which reserves (including, without limitation, any marginal, supplemental or emergency reserve) are required to be maintained by the Bank by any applicable Governmental Authority, on the date for which interest is being calculated, against U.S. dollar non-personal time deposits in the United States with a term equal to one month, expressed as a decimal. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction). "Loan": any loan made to the Company pursuant to this Agreement. "Loan Documents": the collective reference to this Agreement, the Notes, the Guarantee, the Security Documents and all additional documents which may from time to time be delivered by the Company pursuant hereto; all as they may be amended from time to time; individually, a "Loan Document". "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Security Value": (a) In respect of Accounts, an amount equal to 50% of the book value of Eligible Accounts as reflected on the books of the Company in accordance with GAAP on any date of determination thereof; and (b) In respect of Notes Receivable, an amount equal to the percentage of the book value of Eligible Notes Receivable as reflected on the books of the Company in accordance with GAAP set forth below for the months specified: Period Percentage February through October 50% November and December 60% January 70% "Note Pledge Agreement": the Note Pledge Agreement dated as of June 28, 1994, from the Company to the Bank, as the same may be amended, supplemented or otherwise modified from time to time. "Notes": the collective reference to the Working Capital Note and the Term Note. "Notes Receivable": the meaning assigned thereto in the Note Pledge Agreement. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any entity succeeding to any or all of its functions under ERISA. "Person": an individual, a partnership, a corporation, a limited liability company, a business trust, a joint stock company, a trust, an unincorporated association, a joint venture, a Governmental Authority or any other entity of whatever nature. "Plan": at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Commonly Controlled Entity for employees of a member or members of the Commonly Controlled Entity, or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Commonly Controlled Entity is then making or accruing an obligation to make contributions or has within the preceding five years made contributions. "Prepayment Cost": as to each Prepayment Installment, an amount equal to (i) the present value of the interest that would be payable on the Prepayment Installment from the date of prepayment to the maturity of such installment at the interest rate payable on the Term Note, minus (ii) the present value of the interest that would be payable on the Prepayment Installment from the date of prepayment to the due date of such installment at the interest rate equal to the annualized yield on the United States Treasury security with a maturity date nearest the final maturity of the Term Note as reported on the date of prepayment. For purposes of the foregoing computation, present value shall be computed using a discount rate equal to the annualized yield on such United States Treasury security. "Prepayment Installment": any installment of principal designated as a prepayment on the Term Note. "Real Property": the real property in Virginia Beach, Virginia more particularly described in the Deed of Trust together with the improvements thereon and the appurtenances thereunto belonging. "Reportable Event": any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. "Requirement of Law": as to any Person, the Certificate of Incorporation or Articles of Incorporation and Bylaws, Articles of Organization and Operating Agreement, Partnership Agreement or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its properties or to which such Person or any of its property is subject. "Responsible Officer": the Chairman, the President or any Vice President or the Treasurer of the Company or, with respect to financial matters, the chief financial officer of the Company or the chief accounting officer of the Company or such other person designated by the Bank and the Company, in writing. "Security Agreement": the Security Agreement dated as of June 28, 1994 executed and delivered by the Company, in favor of the Bank, as the same may be amended, supplemented or otherwise modified from time to time. "Security Documents": the collective reference to the Security Agreement, the Deed of Trust, the Note Pledge Agreement and all additional deeds of trust, mortgages, security agreements and pledge agreements as may from time to time be delivered to the Bank pursuant hereto, all as they may be amended from time to time; individually a "Security Document". "Subordinated Debt": Indebtedness of the Company to a third party lender or investor which has been approved by the Bank and which has been subordinated to the Loans and all other amounts owing to the Bank by the Company on terms which are acceptable to the Bank, including, without limitation, provisions that no principal or interest payments will be made on such subordinated debt if there is any Default or Event of Default. "Subsidiary": as to any Person, a corporation of which shares of stock having ordinary voting power (other than stock having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation are at the time owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. "Tangible Net Worth": at a particular date (i) the sum of the following items (or their equivalents) set forth on a balance sheet of the Company and its consolidated Subsidiaries prepared in accordance with GAAP: the par or stated value of all outstanding capital stock, capital surplus and retained earnings less (ii) all intangible assets such as, but not limited to, goodwill (including any amounts, however designated on the balance sheet, representing the excess of the purchase price paid for assets or stock acquired over the value assigned thereto on the books of the Company), licenses, patents, trademarks, trade names, copyrights, customer lists, organizational costs, appraisal surplus, consulting agreements, covenants not to compete, officer and stockholder advances or receivables, affiliate advances or receivables, and the like, all determined in accordance with GGAP. "Term Loan": the term loan made to the Company by the Bank pursuant to Section 2.5 hereof and evidenced by the Term Note. "Term Note": the term note dated January 4, 1995, executed and delivered by the Company to the Bank, in the original principal amount of $975,000, as the same may be amended, supplemented or otherwise modified from time to time. "Unfunded Vested Liabilities": with respect to any Plan at any time, the amount (if any) by which (i) the present value of all vested nonforfeitable benefits under the Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Commonly Controlled Entity to the PBGC or the Plan under Title IV of ERISA. "Withdrawal Liability": at a particular date, the aggregate liability of the Company or any Commonly Controlled Entity (regardless of the date of payment) to any Multiemployer Plans pursuant to ss. 4201 of ERISA if, on such date, the Company or any Commonly Controlled Entity were to withdraw (partially or completely) from such Plans. "Working Capital Commitment": the Bank's obligation to make line of credit advances to the Company under the Working Capital Note pursuant to Section 2.1 hereof in the amount referred to therein. "Working Capital Commitment Period": for the Working Capital Commitment, the period from and including the date hereof to and including the Working Capital Termination Date. "Working Capital Note": the Amended and Restated Line of Credit Note dated the date hereof to be executed and delivered by the Company to the Bank in the maximum principal amount of $8,000,000, amending and restating the Line of Credit Note dated June 28, 1994, as amended by First Allonge to Line of Credit Note dated as of January 12, 1995, and as amended by Amended and Restated Line of Credit Note dated July 17, 1995, and as amended by Amended and Restated Working Capital Note dated June 7, 1996, and as amended by Amended and Restated Working Capital Note dated September 10, 1996, substantially in the form of Exhibit A, as it may be amended, supplemented or otherwise modified from time to time. "Working Capital Termination Date": June 30, 1999, or such earlier date as the Working Capital Commitment shall terminate as provided herein or such later date as may hereafter be agreed to by the Bank, in writing, provided that the Company may request that the Working Capital Commitment be renewed annually in order to provide ongoing two year commitments for financing. Section 1.2 Other Definitional Provisions. (a) All terms defined in this Agreement shall have the defined meanings when used in the Loan Documents and in any certificate or other document made or delivered pursuant hereto or thereto, unless otherwise defined therein. (b) As used herein and in the Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Company not defined in Section 1.1, and accounting terms partly defined in Section 1.1 to the extent not defined, shall have the respective meanings given to them under GAAP. ARTICLE II AMOUNT AND TERMS OF LOANS Section 2.1 Working Capital Commitment. (a) Subject to the terms and conditions hereof, the Bank agrees to make Loans to the Company from time to time during the Working Capital Commitment Period in an aggregate principal amount at any one time outstanding not to exceed: (i) Two Million Dollars ($2,000,000.00) from the date hereof through June 30, 1997; (ii) Three Million Dollars ($3,000,000.00) from July 1, 1997 through July 31, 1997; (iii) Four Million Dollars ($4,000,000.00) from August 1, 1997 through September 30, 1997; (iv) Five Million Dollars ($5,000,000.00) from October 1, 1997 through October 31, 1997; (v) Six Million Dollars ($6,000,000.00) from November 1, 1997 through November 30, 1997; (vi) Seven Million Dollars ($7,000,000.00) from December 1, 1997 through December 31, 1997; (vii) Eight Million Dollars ($8,000,000.00) from January 1, 1998 through February 28, 1998; (viii) Two Million Dollars ($2,000,000.00) from March 1, 1998 through June 30, 1998; (ix) Three Million Dollars ($3,000,000.00) from July 1, 1998 through July 31, 1998; (x) Four Million Dollars ($4,000,000.00) from August 1, 1998 through September 30, 1998; (xi) Five Million Dollars ($5,000,000.00) from October 1, 1998 through October 31, 1998; (xii) Six Million Dollars ($6,000,000.00) from November 1, 1998 through November 30, 1998; (xiii) Seven Million Dollars ($7,000,000.00) from December 1, 1998 through December 31, 1998; (xiv) Eight Million Dollars ($8,000,000.00) from January 1, 1999 through February 28, 1999; and (xv) Two Million Dollars ($2,000,000.00) from March 1, 1999 through June 30, 1999. (b) During the Working Capital Commitment Period, the Company may use the Working Capital Commitment by borrowing, repaying in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof so long as (i) the aggregate principal amount outstanding does not exceed the amount set forth in Section 2.1(a) hereof, (ii) the Company maintains an outstanding balance on the Working Capital Note equal to zero for thirty consecutive days during the period (A) between March 1, 1998 and July 31, 1998 and (B) March 1, 1999 and June 30, 1999, and (iii) the Company's borrowings under the Working Capital Commitment do not exceed the Borrowing Base at any time. Section 2.2 Working Capital Note. The Loans made by the Bank pursuant to the Working Capital Commitment shall be evidenced by the Working Capital Note, payable to the order of the Bank, representing the obligation of the Company to pay the aggregate unpaid principal amount of all Loans made thereunder by the Bank. The Bank is authorized to endorse the date and amount of each Loan of the Bank and each payment of principal with respect thereto on a schedule to be annexed to the Working Capital Note or otherwise on the records of the Bank, which endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. The Working Capital Note shall (a) be dated the date hereof, (b) be stated to mature on the Working Capital Termination Date, and (c) bear interest for the period from the date thereof on the unpaid principal amount thereof from time to time outstanding at a rate per annum equal to the Libor Rate plus 250 basis points. Interest only accrued on the Working Capital Note shall be payable on the first day of each month, commencing on the first such date to occur after the date hereof and on the Working Capital Termination Date. Section 2.3 Term Loan. Subject to the terms and conditions of this Agreement, the Bank has made a term loan to the Company in an original principal amount of $975,000. Section 2.4 Term Note. The Term Loan made by the Bank pursuant hereto is evidenced by the Term Note payable to the order of the Bank, representing the obligation of the Company to pay the unpaid principal amount of the Term Loan made by the Bank. The Term Note bears interest at a rate per annum equal to ten and eighty-seven one-hundredths percent (10.87%). The Term Note is payable on the first day of each month, beginning February 1, 1995 in equal monthly installments of principal and interest in the amount of $10,995.77. Notwithstanding the amortization of the Term Note, all amounts outstanding under the Term Note shall be due and payable in full on May 15, 2000. Section 2.5. Method of Borrowing. (a) The Company shall give the Bank notice before 1:00 p.m. on any Business Day on which it is requesting a Working Capital Loan, specifying the amount of such Loan. (b) Unless the Bank determines that any applicable condition specified in this Agreement has not been satisfied, the Bank will credit the amount of the requested Loan to the general deposit account of the Company. Section 2.6. Fees. (a) The Company shall pay to the Bank a fee on the unused portion of the Working Capital Commitment equal to one-eighth percent (.125%) per annum, payable quarterly on the first day of each calendar quarter. (b) The Company shall pay to the Bank a non-refundable commitment fee of $10,664, payable $5435 at closing and $5229 on July 1, 1998. Section 2.7 Prepayments. (a) Optional. (i) The Company may, at its option, at any time and from time to time, prepay Loans made pursuant to the Working Capital Commitment, in whole or in part, without premium or penalty. (ii) In the event the Term Note is prepaid, in whole or in part, prior to maturity, whether voluntarily or by reason of acceleration, the Company shall pay a prepayment fee equal to the aggregate of the Prepayment Cost applicable to each Prepayment Installment. (b) Mandatory. The Company shall immediately repay Loans made pursuant to the Working Capital Commitment to the extent that the aggregate principal amount outstanding thereon shall at any time exceed the amount of the Borrowing Base at such time. Section 2.8 Computation of Interest and Fees. Interest and fees shall be calculated on the basis of a 360-day year for the actual days elapsed. Section 2.9 Disbursements and Payments. All proceeds of the Loans shall be disbursed by the Bank to the Company. Each payment by the Company on account of principal, interest and fees with respect to the Loans shall be made to the Bank. All payments (including prepayments) by the Company on account of principal, interest and fees shall be made without set-off or counterclaim to the Bank at the office of the Bank in lawful money of the United States of America and in immediately available funds. Whenever any payment of principal or interest on the Loans shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. Section 2.10 Use of Proceeds. The proceeds of the Loans made under the Working Capital Commitment shall be used by the Company for working capital and general purposes. The proceeds of the Term Loan were used by the Company to purchase the Real Property for use as the Company's headquarters. Section 2.11 Collateral. The Notes shall be secured by the Security Documents. Section 2.12 Late Charges; Default Interest. In the event the Company fails to pay any installment of principal and/or interest or otherwise fails to repay any Note within seven (7) days of its due date, the Company will pay the Bank on demand a late charge of five percent (5%) of the overdue payment. Any overdue principal of and, to the extent permitted by law, overdue interest on any Note shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of three percent (3%) plus the otherwise applicable rate for such day. ARTICLE III REPRESENTATIONS AND WARRANTIES In order to induce the Bank to enter into this Agreement and to make the loans herein provided for, the Company hereby covenants, represents and warrants to the Bank that: Section 3.1 Financial Condition. The consolidated balance sheet of the Company and its consolidated Subsidiaries provided to the Bank by the Company, accurately reflects the consolidated financial condition of the Company and its consolidated Subsidiaries on the date stated therein. Section 3.2 No Change. Since the date of the most recent balance sheet of the Company provided to the Bank, there has been no material adverse change in the business, operations, assets or financial or other condition of the Company. Section 3.3 Borrowing Base. The amount of the Loans outstanding under the Working Capital Commitment as of the last day of each month does not exceed the Borrowing Base at such time. Section 3.4 Corporate Existence; Compliance with Law. The Company (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (b) has the corporate power and authority to own and operate its property, to lease the property it operates and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business required such qualification, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, have a material adverse effect on the business, operations, property or financial or other condition of the Company and could not materially adversely affect the ability of the Company to perform its obligations under this Agreement, the Notes and the Security Documents and to effectuate the transactions contemplated hereby and thereby. Section 3.5 Corporate Power; Authorization; Enforceable Obligations. The Company has the corporate power and authority to make, deliver and perform the Loan Documents to which it is a party, to borrow hereunder and to effectuate the transactions contemplated hereby and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and the Notes, to grant the mortgage liens and security interests pursuant to the Security Documents and to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, or other act by or in respect of any Person or any Governmental Authority, is required or advisable in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents to which it is a party. The Loan Documents to which the Company is a party have been duly executed and delivered on behalf of the Company and constitute the legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally. Section 3.6 No Legal Bar. The execution, delivery and performance of the Loan Documents and the borrowings hereunder, the use of the proceeds thereof and the granting of the security interests pursuant to the Security Documents will not violate any Requirement of Law or any Contractual Obligation of the Company, and will not result in, or require, the creation or imposition of any Lien on any of its properties or revenues pursuant to any Requirement of Law or Contractual Obligation except as permitted in Section 6.2 hereof. Section 3.7 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Company, threatened by or against the Company, any of its employee benefit programs, policies or Plans or against any of its properties or revenues (a) with respect to the Loan Documents or any of the transactions contemplated thereby, or (b) which could have a material adverse effect on the business, operations, property or financial or other condition of the Company. Section 3.8 No Default. The Company is not in default under or with respect to any Contractual Obligation in any respect which could be materially adverse to the business, operations, property or financial or other condition of the Company, or which could materially adversely affect the ability of the Company to perform its obligations under the Loan Documents. No Default or Event of Default has occurred and is continuing. Section 3.9 Ownership of Property; Liens. The Company has good record and marketable title in fee simple to all its real property, and good title to all its other property, and none of such property is subject to any Lien, except as permitted in Section 6.2 hereof. Section 3.10 No Burdensome Restrictions. No Contractual Obligation of the Company and no Requirement of Law materially adversely affects, or insofar as the Company may reasonably foresee may so affect, the business, operations, property or financial or other condition of the Company. Section 3.11 Taxes. The Company has filed or caused to be filed all tax returns which to the knowledge of the Company are required to be filed, and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority; and no tax liens have been filed and, to the knowledge of the Company, no claims are being asserted with respect to any such taxes, fees or other charges. Section 3.12 Federal Regulations. The Company is not engaged and will not engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. No part of the proceeds of any loans hereunder will be used for "purchasing" or "carrying" "margin stock" as so defined or for any purpose which violates, or which would be inconsistent with, the provisions of the Regulations of such Board of Governors. Section 3.13 Compliance with ERISA; Prohibited Transactions. Each member of the Commonly Controlled Entity has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with provisions of ERISA and the Code and published regulations presently applicable to each Plan. No member of the Commonly Controlled Entity has incurred any liability, or has entered into any transaction that is likely to cause any liability to be incurred to the PBGC or any Plan under Title IV of ERISA. No Lien has been attached and no Person has threatened to attach a Lien on any property of the Company as a result of the Company's failure to comply with ERISA. None of the Plans is a Multiemployer Plan. With respect to each Plan, the Plan has not at any time: (a) engaged in any "prohibited transaction," as such term is defined in Section 4975 of the Code or in Section 406 of ERISA; (b) incurred any "accumulated funding deficiency," as such term is defined in Sections 302(a)(2) and 4243 of ERISA, whether or not waived; or (c) been terminated in a manner which could result in the imposition of a Lien on the property of the Company pursuant to Section 4068 of ERISA. Section 3.14 Investment Company Act. The Company is not an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. Section 3.15 Subsidiaries. The Company has no Subsidiaries except Hewfant, Inc. and Oden, Inc. Section 3.16 Operations and Business. The Company has engaged in no business other than the business currently being conducted by the Company. Section 3.17 Patents, Copyrights, Permits, Licenses, Trademarks and Leases. The Company owns all of the patents, trademarks, permits, service marks, trade names, copyrights and licenses, or rights with respect to the foregoing, and has obtained, or shall have obtained, all assignments of all leases and other rights of whatever nature, necessary for the present and planned future conduct of its business, without any known conflict with the rights of others which might result in a material adverse effect on the business, operations, property or financial or other condition of the Company. Section 3.18 The Security Documents. The provisions of the Security Documents are effective to create in favor of the Bank, a legal, valid and enforceable security interest in all right, title and interest of the Company in the collateral described therein. The Deed of Trust constitutes a fully perfected first Lien on the Real Property. Uniform Commercial Code financing statements have been filed in the offices in the jurisdictions listed in Schedule 1, and the Security Agreement has been filed in the United States Copyright Office. Therefore, the Security Agreement constitutes fully perfected security interests in all right, title and interest of the Company in such collateral superior in right to any Liens, existing or future, which the Company or any third Person may have against such collateral or interests therein, except as permitted by Section 6.2 below or specifically consented to by the Bank. When the Notes Receivable have been delivered to the Bank, the Bank shall have a perfected first priority Lien in the Notes Receivable pursuant to the Note Pledge Agreement. ARTICLE IV CONDITIONS PRECEDENT Section 4.1 Conditions to First Loan. The obligation of the Bank to make its first Loan under the Working Capital Commitment is subject to the satisfaction of the following conditions precedent: (a) Note; Guarantee. The Bank shall have received the Working Capital Note conforming to the requirements hereof, duly executed and delivered by a duly authorized officer of the Company. The Bank shall have received the Guarantee, duly executed and delivered by the Guarantors. (b) Corporate Proceedings. The Bank shall have received a copy of the resolutions (in form and substance satisfactory to the Bank) of the Board of Directors of the Company authorizing (i) the execution, delivery and performance of the Loan Documents to which it is a party, (ii) the consummation of the transactions contemplated thereby and (iii) the borrowings herein provided for and the granting of the mortgage liens and security interests pursuant to the Security Documents, certified by the Secretary or the Assistant Secretary of the Company on the date of the making of the initial Loan hereunder. Such certificate shall state that the resolutions set forth therein have not been amended, modified, revoked or rescinded as of the date of such certificate. (c) Incumbency Certificate of Company. The Bank shall have received a certificate of the Secretary or an Assistant Secretary of the Company, dated the date of the making of the initial Loan hereunder, as to the incumbency and signature of the officers of the Company executing the Loan Documents and any certificate or other document to be delivered pursuant hereto or thereto, together with evidence of the incumbency of such Secretary or Assistant Secretary. (d) Security Documents. The Bank shall have received the Security Documents, each duly executed and delivered by a duly authorized Responsible Officer of the Company, together with the originals of all Notes Receivable in existence on the date of the first Loan, properly endorsed to the Bank. (e) Filings, Registrations and Recordings. Any documents (including, without limitation, the Security Agreement and Uniform Commercial Code financing statements) required to be filed, registered or recorded in order to create, in favor of the Bank, a perfected Lien on the collateral described in the Security Documents shall have been properly filed, registered or recorded in each office in each jurisdiction in which such filings, registrations and recordations are required; the Bank shall have received acknowledgment copies of all such filings, registrations and recordations stamped by the appropriate filing, registration or recording officer (or, in lieu thereof, other evidence satisfactory to the Bank that all such filings, registrations and recordations have been made); and the Bank shall have received evidence that all necessary filing, subscription and inscription fees and all recording and other similar fees, and all taxes and other expenses related to such filings, registrations and recordings have been paid in full by or on behalf of the Company. (f) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any Governmental Authority shall have been commenced, no investigation by any Governmental Authority shall have been threatened, against the Company or any of the officers or directors of the Company, seeking to restrain, prevent or change the transactions contemplated by the Loan Documents, in whole or in part, or questioning the validity or legality of the transactions contemplated by the Loan Documents or seeking damages in connection with such transactions. (g) Insurance. The Bank shall have received evidence satisfactory to it that the Company or other appropriate party has obtained the policies of insurance required by the Security Documents and Section 5.5 of this Agreement. (h) Consents, Licenses, Approvals, etc. The Bank shall have received certified true copies of all consents, licenses and approvals required or advisable in connection with the execution, delivery, performance, validity and enforceability of the Loan Documents, and such consents, licenses and approvals shall be in full force and effect and be satisfactory in form and substance to the Bank. (i) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing hereunder or after giving effect to the making of the loans hereunder. (j) Borrowing Base. The Bank shall have received a Borrowing Base Certificate as of the date of the first Loan. (k) Additional Information. The Bank shall have received such additional information as it shall have reasonably requested, including, without limitation, copies of any debt agreements, security agreements and other material contracts. (l) Additional Matters. All corporate and other proceedings and all other documents and legal matters in connection with the transactions contemplated by the Loan Documents shall be satisfactory in form and substance to the Bank and its counsel. Section 4.2 Conditions to All Loans. The obligation of the Bank to make any Loan on any date is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. The representations and warranties made by the Company in the Loan Documents, or which are contained in any certificate, document or financial or other statement furnished at any time under or in connection herewith or therewith, shall be correct on and as of the date of such Loan as if made on and as of such date. (b) No Default or Event of Default. No Default or Event of Default shall have occurred on or before such date and/or after giving effect to the Loan to be made on such date. (c) Borrowing Base Certificate. The Bank shall have received a Borrowing Base Certificate in accordance with Section 5.2(c) hereof. (d) Maximum Amount of Loans. The aggregate amount of the Loans outstanding under the Working Capital Commitment, after giving effect to a Loan, shall not exceed the amount of the Borrowing Base at any time, as reflected on the most recent Borrowing Base Certificate furnished to the Bank. (e) Satisfaction of Conditions. Each borrowing by the Company under this Agreement shall constitute a representation and warranty by the Company as of the date of each such borrowing that the conditions contained in the foregoing paragraphs (a) through (d) of this Section 4.2 have been satisfied. Section 4.3 Conditions to Term Loan. The making of the Term Loan was subject to the satisfaction of certain conditions precedent specified in earlier agreements between the Bank and the Company, all of which have been satisfied. ARTICLE V AFFIRMATIVE COVENANTS The Company hereby agrees that, so long as the Working Capital Commitment remains in effect, any Note remains outstanding and unpaid or any other amount is owing to the Bank hereunder, the Company shall: Section 5.1 Financial Statements. Furnish to the Bank: (a) as soon as available, but in any event within one hundred twenty-five (125) days after the end of each fiscal year of the Company, a copy of the audited financial statements of the Company and its consolidated Subsidiaries, prepared in accordance with GAAP on a consolidated and consolidating basis as at the end of such year, including a balance sheet and statements of income and retained earnings and paid-in capital and changes in financial position, setting forth in each case in comparative form the figures for the previous year, certified without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by independent certified public accountants of nationally recognized standing acceptable to the Bank, and certified by a Responsible Officer of the Company as being true and correct in all material respects; (b) as soon as available, but in any event not later than fifty (50) days after the end of each accounting quarter of the Company an internally prepared financial statement for the Company and its consolidated Subsidiaries prepared on a consolidated and consolidating basis as at the end of each such quarter and for the year to date, certified by a Responsible Officer; all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods. Section 5.2 Certificates; Other Information. Furnish to the Bank: (a) concurrently with the delivery of the financial statements referred to in Sections 5.1(a) and (b) above, a certificate of a Responsible Officer of the Company (i) stating that, to the best of such officer's knowledge, the Company during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in the Loan Documents to be observed, performed or satisfied by them, and that such officers have obtained no knowledge of any Default or Event of Default except as specified in such certificate, and (ii) showing in detail satisfactory to the Bank, the calculations supporting such statement in respect of Section 5.10 hereof; (b) within five days after the same are sent, copies of all financial statements and reports which the Company sends to stockholders, and within five days after the same are filed, copies of all financial statements and reports, if any, which the Company may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; (c) on the 20th day of each month a Borrowing Base Certificate which shall reflect the required information concerning Accounts and Notes Receivable as of the last day of the preceding month; and (d) promptly, such additional financial and other information as the Bank may from time to time reasonably request. Section 5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its Indebtedness and other obligations of whatever nature, except, in the case of such other obligations, when the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Company. Section 5.4 Conduct of Business and Maintenance of Existence. Engage in business of the same general type as now conducted by the Company, and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; comply with all Contractual Obligations and Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, have a material adverse effect on the business, operations, property or financial or other condition of the Company. Section 5.5 Maintenance of Property, Insurance. Keep all property useful and necessary in its business in good working order and condition, normal wear and tear excepted; maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business, designating the Bank as loss payee, provided that, in any event, the Company shall maintain insurance at all times on its tangible personal property and real property in an amount equal to the replacement cost of such property at such time; and furnish to the Bank, upon written request, full information as to the insurance carried. Section 5.6 Inspection of Property; Books and Records; Discussions. Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of the Bank to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired, and to discuss the business, operations, properties and financial and other condition of the Company with officers and employees of the Company and with its independent certified public accountants. Section 5.7 Notices. Promptly give notice to the Bank: (a) of the occurrence of any Default or Event of Default; (b) of any (i) default or event of default under any Contractual Obligation of the Company or (ii) litigation, investigation or proceeding which may exist at any time between the Company and any Governmental Authority, which in either case could have a material adverse effect on the business, operations, property or financial or other condition of the Company; (c) of any litigation or proceeding affecting the Company or any of its employee benefit programs, policies or plans in which the amount sued for is $100,000 or more and not fully covered by insurance or in which injunctive or similar relief is sought and of any material adverse development in such litigation or proceeding; (d) of the following events, as soon as possible, and in any event no later than the date the Company gives or is required to give notice to the PBGC of (i) the occurrence of any Reportable Event with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows the Plan Administrator of any Plan has given or is required to give notice of any such Reportable Event given or required to be given to the PBGC, or (ii) the institution of proceedings or the taking or expected taking of any other action by PBGC or the Company or any Plan, and in addition to such notice, deliver to the Bank whichever of the following may be applicable (A) a certificate of the chief financial officer of the Company setting forth details as to such Reportable Event and the action that the Company or Commonly Controlled Entity proposes to take with respect thereto, together with a copy of any notice of such Reportable Event that may be required to be filed with PBGC, or (B) any notice delivered by PBGC evidencing its intent to institute such proceedings to terminate the Plan or to appoint a trustee to administer the Plan or any notice to PBGC that such Plan is to be terminated, as the case may be, or (iii) any member of the Commonly Controlled Entity receives notice of complete or partial withdrawal liability under Title IV of ERISA; (e) of the establishment of a Plan; and (f) of a material adverse change in the business, operations, property or financial or other condition of the Company. Each notice pursuant to this Section shall be accompanied by a statement of the chief executive officer or chief financial officer of the Company setting forth details of the occurrence referred to therein and stating what action the Company proposes to take with respect thereto. For all purposes of clause (d) of this Section 5.7, the Company shall be deemed to have all knowledge of all facts attributable to the administrator of such Plan. Section 5.8 Further Assurances. Execute and file all such further instruments, and perform such other acts, as the Bank may determine are necessary or advisable. Section 5.9 Outstanding Balances. Maintain an outstanding balance on the Working Capital Note equal to zero for thirty consecutive days during the period between March 1, 1998 and July 31, 1998 and between March 1, 1999 and June 30, 1999. Section 5.10 Financial Covenants. Maintain on a consolidated basis: (a) a Debt Service Coverage Ratio of not less than 1.75 to 1.0 at April 30, 1997, April 30, 1998 and April 30, 1999, calculated as an average of the immediately preceding four (4) quarters; For purposes of this Section 5.10(a), "Debt Service Coverage Ratio" means (A) the sum of Operating Profit and depreciation, amortization and other non-cash expenses minus the sum of cash dividends and treasury stock purchases; divided by (B) the sum of current maturities of long term debt for the prior period, prior period capital lease payments and interest expense; and "Operating Profit" means the Company's profit before interest expense and interest income, extraordinary gains or losses, other income or expenses and provision or benefit for income taxes, adjusted to exclude minority interests. (b) a ratio of Indebtedness minus Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not more than (i) 1.50 to 1.00 at the end of the first, second and third quarters of the Company's fiscal year, and (ii) 1.00 to 1.00 at the end of each fiscal year of the Company. Section 5.11 Borrowing Base. Maintain an aggregate amount outstanding on the Working Capital Note which does not exceed the Borrowing Base. ARTICLE VI NEGATIVE COVENANTS The Company hereby agrees that, so long as the Working Capital Commitment remains in effect or any Note remains outstanding and unpaid or any other amount is owing to the Bank hereunder, the Company shall not, directly or indirectly, without the Bank's consent which shall not be unreasonably withheld: Section 6.1 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness in respect of the Notes; (b) Indebtedness to the Bank; (c) Indebtedness for purchase money obligations incurred in the ordinary course of business in an amount not to exceed $100,000; (d) Indebtedness incurred to purchase or repurchase the Company's tax service franchises; and (e) Indebtedness expressly consented to by the Bank in writing. Section 6.2 Limitation on Liens. Create, incur, assume or suffer to exist, any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except: (a) Liens in favor of the Bank created pursuant to the Security Documents or otherwise; (b) Liens expressly consented to by the Bank in writing; (c) Liens for taxes, assessments or governmental charges not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Company in accordance with GAAP; (d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings; (e) pledges or deposits in connection with workmen's compensation, unemployment insurance and other social security legislation; (f) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (g) easements, municipal zoning ordinances, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Company; (h) Liens securing purchase money obligations permitted by Section 6.1 above; and (i) Liens on the real property of the Company located at 224 Groveland Road, Virginia Beach, Virginia. Section 6.3 Limitation on Contingent Obligations. Agree to, or assume, guarantee, endorse or otherwise in any way, be or become responsible or liable for, directly or indirectly, any Contingent Obligation, except (a) guaranties of leases entered into by the Company's franchisees; (b) endorsements in the ordinary course of business; (c) tax refund anticipation loan arrangements entered into with other lenders in the ordinary course of business; and (d) guaranties of obligations of the Company's franchisees in an aggregate amount of up to $1,000,000. Section 6.4 Prohibition of Fundamental Changes. Enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business or assets, whether now owned or hereafter acquired (including, without limitation, receivables and leasehold interests but excluding obsolete or worn out property, or inventory disposed of in the ordinary course of business), or acquire by purchase or otherwise all or substantially all the business or assets of, or stock or other evidence of beneficial ownership of, any Person, or make any material change in its present method of conducting business; provided that the purchase or sale of a franchise to provide tax services will not violate this Section 6.4. Section 6.5 Dividends and Stock Issuance. Declare or distribute any dividends, or make any payment or distribution on account of its common stock. Section 6.6 Investments. Except as otherwise specifically permitted hereunder, make or commit to make, any advance, loan, extension of credit or capital contribution to, or purchase of any stock, bonds, notes, debentures or other securities of, or make any other investment in, any Person (all such transactions being herein called "investments") except: (a) investments in accounts, contract rights and chattel paper (as defined in the Uniform Commercial Code), and notes receivable, arising or acquired in the ordinary course of business; (b) investments in bank certificates of deposit or overnight repurchase obligations, open market commercial paper maturing within one year having the highest rating of either Standard & Poor's Corporation or Moody's Investors Service, Inc., U.S. Treasury Bills and other short term obligations issued or guaranteed by the U.S. Government or any agency thereof; (c) the Notes Receivable; and (d) loans to franchisees of the Company which are providing tax services. Section 6.7 Transactions with Affiliates and Officers. (i) Enter into any transactions, including, without limitation, the purchase, sale or exchange of property or the rendering of any services, with any Affiliate, or enter into, assume or suffer to exist any employment or consulting contract with any Affiliate or any officer thereof, except a transaction or contract which is in the ordinary course of the Company's business and which is upon fair and reasonable terms no less favorable to the Company than it would obtain in a comparable arm's length transaction with a Person not an Affiliate or (ii) make any advance or loan in excess of $100,000 in the aggregate in any fiscal year to any Affiliate or any director, officer or employee thereof or of the Company or to any trust of which any of the foregoing is a beneficiary, or to any Person on the guarantee of any of the foregoing except for loans specifically permitted by this Agreement, (iii) pay any fees or expenses to, or reimburse or assume any obligation for the reimbursement of any expenses incurred by any Affiliate except for travel advances made by the Company in the ordinary course of business. Section 6.8 Sale and Leaseback. Enter into any arrangement with any Person providing for the leasing by the Company of real or personal property which has been or is to be sold or transferred by the Company to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Company. Section 6.9 Compliance with ERISA. (a) Terminate any Plan so as to result in any material liability to PBGC or any material Withdrawal Liability, (b) engage in or permit any Person to engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan which would subject the Company to any material tax, penalty or other liability, (c) incur or suffer to exist any material "accumulated funding deficiency" (as defined in Sections 302(a)(2) and 4243 of ERISA), whether or not waived, involving any Plan, except for contingent Withdrawal Liability not in excess of $50,000, or (d) allow or permit to exist any event or condition which presents a material risk of incurring a material liability to PBGC. Section 6.10 Changes in Key Management. Make any changes in the key management of the Company. Section 6.11 No Subsidiaries. Directly or indirectly form or hold any additional Subsidiaries. Section 6.12 Refund Anticipation Loans. For a period of thirty (30) days in each fiscal year of the Company, permit any amounts to be outstanding under tax refund anticipation loan arrangements with lending institutions where such loan arrangements are Contingent Obligations of the Company. Section 6.13 Subordinated Debt. Make any payment of principal or interest on any Subordinated Debt if there is a Default or Event of Default. ARTICLE VII EVENTS OF DEFAULT Upon the occurrence of any of the following events: (a) The Company shall fail to pay any principal or interest on the Notes when due, or the Company shall fail to pay any other amount payable hereunder in accordance with the terms hereof, or (b) Any representation or warranty made or deemed made by the Company herein or in any other Loan Document, or in any certificate, document or financial or other statement furnished at any time under or in connection with any Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) The Company shall default in the observance or performance of any agreement contained in Section 5.5 or Article VI hereof; or (d) The Company shall default in the observance or performance of any other covenant or agreement contained in any Loan Document and such default shall continue unremedied for a period of thirty (30) days after written notice shall have been given by the Bank to the Company; or (e) Any Loan Document shall cease, for any reason, to be in full force and effect in accordance with its terms or any party thereto shall so assert in writing; or any Security Document shall cease, for any reason, to grant to the Bank a legal, valid and enforceable Lien on any of the collateral described therein or shall cease, for any reason, to have the priority purported to be created thereby at the time of the execution thereof; or any party to any Loan Document shall default in the observance or performance of any of the covenants or agreements contained therein; or (f) Any default or event of default shall occur and remain uncured beyond any applicable grace period under any notes, security documents, guarantees, agreements, documents or other instruments (other than the Loan Documents) between the Bank and (i) the Company or (ii) any Affiliate of the Company; or (g) The Company, shall (i) default in any payment of principal of or interest on any Indebtedness or in the payment of any Contingent Obligation, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Contingent Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur, the effect of which default or other event is (A) to cause such Indebtedness to become due prior to its stated maturity or such Contingent Obligation to become payable, or (B) to allow the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries), to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Contingent Obligation to become payable; or (h) (i) the Company shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it, or for all or any substantial part of its assets, or the Company shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Company any case, proceeding or other action of a nature referred to in clause (i) above which is not dismissed within sixty (60) days or which results in the entry of an order for relief or any such adjudication or appointment which shall not have been vacated, discharged or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (iii) there shall be commenced against the Company any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets, which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Company, shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the Company shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (i) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Sections 302(a)(2) and 4243 of ERISA), whether or not waived, shall exist with respect to any Plan, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Plan, which Reportable Event or institution of proceedings is, in the reasonable opinion of the Bank, likely to result in the termination of such Plan for purposes of Title IV of ERISA and, in the case of a Reportable Event, the continuance of such Reportable Event unremedied for ten days after the earlier of the date when the Company obtains actual knowledge of the Reportable Event or the date when notice of such Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA is given or the continuance of such proceedings for ten days after commencement thereof, as the case may be, (iv) any Plan shall terminate for purposes of Title IV of ERISA, (v) if on any date, the Withdrawal Liability exceeds $100,000, or (vi) any other event or condition shall occur or exist and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could subject the Company to any tax, penalty or other liabilities which in the aggregate are material in relation to the business, operations, property or financial or other condition of the Company; or (j) One or more judgments or decrees shall be entered against the Company and such judgments or decrees shall not have been vacated, satisfied, discharged, or stayed within 60 days from the entry thereof; or (k) The audited financial statements of the Company for the fiscal year ended April 30, 1997 shall reflect a financial condition of the Company which, in the sole opinion of the Bank, is worse, in any material respect, from the financial condition of the Company reflected on the internally prepared estimated financial statements of the Company delivered to the Bank by the Company in April, 1997; Then, and in any such event, (a) if such event is an Event of Default specified in paragraph (h) above, automatically the Working Capital Commitment then in effect shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (b) if such event is any other Event of Default which has not been cured within any applicable grace period, the Bank may, (i) by notice to the Company, declare the Working Capital Commitment to be terminated forthwith, whereupon it shall immediately terminate; and/or (ii) by notice of default to the Company, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. ARTICLE VIII MISCELLANEOUS Section 8.1 Amendments and Waivers. No provision of any Loan Document may be amended or modified in any way, nor may non-compliance therewith be waived, except pursuant to a written instrument executed by the Bank and the Company. In the case of any waiver, the Company and the Bank shall be restored to their former position and rights hereunder and under the outstanding Notes and the Security Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Section 8.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing or by telefax and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or when deposited in the mail, postage prepaid, or, in the case of telefax notice, when sent, answerback received, or in the case of private courier, when delivered to such courier, addressed as follows or to such address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Company: Jackson Hewitt, Inc. Attn: Chief Financial Officer 4575 Bonney Road Virginia Beach, Virginia 23462 Fax No. (804) 473-8409 The Bank: NationsBank, N.A. Attn: Ms. Paula H. Smith Vice President One Commercial Place Norfolk, Virginia 23510 Fax No. (804)441-8599 provided that any notice, request or demand to or upon the Bank shall not be effective until received. Section 8.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Bank, any right, remedy, power or privilege hereunder or under any Loan Document, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein or therein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. Section 8.4 Survival of Representations and Warranties. All representations and warranties made under any Loan Document and in any document, certificate or statement delivered pursuant thereto or in connection therewith shall survive the execution and delivery of such Loan Document. Section 8.5 Payment of Expenses and Taxes. The Company agrees (a) to pay or reimburse the Bank for all of its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to the Loan Documents and any other documents prepared in connection therewith, and the consum mation of the transactions contemplated hereby and thereby, including, without limitation, the fees and disbursements of counsel to the Bank, (b) to pay or reimburse the Bank for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under the Loan Documents and any such other documents, including, without limitation, fees and disbursements of counsel to the Bank, (c) to pay, indemnify, and to hold the Bank harmless from, any engineering fees, any and all recording and filing fees and taxes and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery and recordation of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of the Loan Docu ments, and any such other documents, and (d) to pay, indemnify, and hold the Bank harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of the Loan Documents or any transaction financed in whole or in part directly or indirectly with the proceeds of any loans made under this Agreement (all the foregoing, collectively, the "indemnified liabilities"), provided, that the Company shall have no obligation hereunder with respect to indemnified liabilities arising from (i) the gross negligence or willful misconduct of the Bank or (ii) legal proceedings commenced against the Bank by any security holder or creditor thereof arising out of and based upon rights afforded any such security holder or creditor solely in its capacity as such or (iii) a breach of this Agreement by the Bank. The agreements in this Section shall survive repayment of the Notes and all other amounts payable hereunder. Section 8.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Company and the Bank, all future holders of the Notes and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Bank. Section 8.7 Setoff. (a) The Company agrees that the Bank shall have the right to set off and apply against all amounts owing to the Bank by the Company under the Notes or any other Loan Document any amount owing to the Company from the Bank. (b) In addition to any rights and remedies of the Bank provided by law, the Bank shall have the right, without prior notice to the Company, any such notice being expressly waived by the Company to the extent permitted by applicable law, upon the filing of a petition under any of the provisions of the federal bankruptcy act or amendments thereto, by or against; the making of an assignment for the benefit of creditors by; the application for the appointment, or the appointment of any receiver of, or of any of the property of; the issuance of any execution against any of the property of; the issuance of a subpoena or order, in supplementary proceedings, against or with respect to any of the property of; or the issuance of a warrant of attachment against any of the property of; the Company, to set off and apply against all amounts owing to the Bank by the Company under the Notes or any other Loan Documents, and against any other Indebtedness, whether matured or unmatured, of the Company to the Bank, any amount owing from the Bank to the Company, at or at any time after the happening of any of the above-mentioned events, and the aforesaid right of set off may be exercised by the Bank against the Company or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor of the Company, or any of them, or against anyone else claiming through or against the Company or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set off shall not have been exercised by the Bank prior to the making, filing or issuance, or service upon the Bank of, or of notice of, any such petition; assignment for the benefit of creditors; appointment or application for the appointment of a receiver; or issuance of execution, subpoena or order or warrant. Section 8.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Bank. Section 8.9 Governing Law. The Loan Documents and the rights and obligations of the parties thereunder shall be governed by, and construed and interpreted in accordance with, the law of the State of Virginia, except to the extent that the law of other states or of the United States governs creation and perfection of security interests in collateral. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly signed, sealed and delivered by their properly and duly authorized officers as of the day and year first above-written. JACKSON HEWITT, INC. By:/s/ Keith E. Alessi [Seal] _______________________ Title: President and CEO __________________________ NATIONSBANK, N.A. By: /s/ Paula H. Smith [Seal] ________________________ Title: Senior Vice President ___________________________ EX-10 6 EXHIBIT 10.22 Exhibit 10.22 AGREEMENT AND PLAN OF RECAPITALIZATION This Agreement and Plan of Recapitalization dated as of June 18, 1997 (the "Agreement") by and among Jackson Hewitt Inc., a Virginia corporation (the "Company"), Geocapital II, L.P., a Delaware limited partnership ("Geocapital II"), Geocapital III, L.P., a Delaware limited partnership ("Geocapital III"), JMI Equity Fund, L.P., a Delaware limited partnership ("JMI"), Charles Federman and Stephen J. Bachman (JMI, Geocapital II, Geocapital III and Messrs. Federman and Bachman, each an "Investor" and collectively the "Investors"): WITNESSETH: WHEREAS, the Company, JMI, Geocapital II and Geocapital III, among others, entered into the Series A Convertible Preferred Stock Purchase Agreement dated as of August 19, 1993 (the "Stock Purchase Agreement") pursuant to which the Investors purchased an aggregate of 504,950 shares (the "Purchased Shares") of the Company's Series A Convertible Preferred Stock, no par value per share (the "Series A Preferred Stock"); WHEREAS, the Series A Preferred Stock is convertible into shares of the Company's Common Stock, $.02 par value per share (the "Common Stock"), is redeemable in three installments on August 31 of each of 1998, 1999 and 2000, and has accruing dividends; WHEREAS, the Company desires that the Investors exchange all the Purchased Shares for shares of the Common Stock, and the Investors are willing to exchange all the Purchased Shares for shares of the Common Stock, on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, the parties intend by executing and delivering this Agreement, to adopt a plan of recapitalization within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the "Code"); NOW, THEREFORE, in consideration of these premises and the mutual agreements, provisions and covenants contained in this Agreement, the Company and the Investors hereby agree as follows: ARTICLE I EXCHANGE OF THE PURCHASED SHARES 1.1 Exchange of the Purchase Shares. At the Closing, on the terms and subject to the conditions set forth in this Agreement, each Investor shall exchange each Purchased Share held by it for, and the Company shall issue to each Investor in exchange for each Purchased Share held by such Investor, 1.3857 shares of Common Stock (all such shares of Common Stock issued in exchange for Purchased Shares, the "Exchange Shares"). 1.2 No Fractional Shares. Certificates for fractional shares of the Common Stock shall not be issued to any Investor pursuant to this Agreement. Each Investor who otherwise would have been entitled to receive a fraction of a share of the Common Stock shall receive cash in lieu thereof, without interest, in an amount determined by multiplying such Investor's fractional interest by $9.75. 1.3 Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall be held at the offices of Testa, Hurwitz & Thibeault, LLP in Boston Massachusetts on July 3, 1997 or as soon thereafter as practicable (the "Closing Date"). At the Closing, (i) the Company (or its duly authorized agent) shall deliver to the Investors the appropriate certificates representing the Exchange Shares and the appropriate amounts of cash in lieu of fractional shares, and (ii) each Investors shall deliver to the Company a certificate representing the Purchased Shares held by such Investor, duly endorsed (or accompanied by appropriate stock powers duly endorsed) for transfer. 1.4 Exchange Deemed Conversion. For all purposes of the Stock Purchase Agreement, the Stockholders Agreement dated as of August 19, 1993 by and among the Company, John T. Hewitt and the Investors (the "Stockholders Agreement") and the Registration Rights Agreement dated as of August 19, 1993 by and among the Company and the Investors (the "Registration Rights Agreement"), the issuance of the Exchange Shares in exchange for the Purchased Shares pursuant to this Agreement shall be deemed a conversion of the Purchased Shares and the Exchange Shares shall be deemed to have been issued upon conversion of the Purchased Shares. Notwithstanding anything to the contrary in the Stock Purchase Agreement or this Agreement, Section 4 (except for Section 4.12 of the Stock Purchase Agreement which shall continue in effect in accordance with its terms) and Section 5.2 of the Stock Purchase Agreement shall terminate effective as of the Closing. 1.5 Certain Tax Matters. The Company shall not take any position inconsistent with the treatment of the transactions contemplated by this Agreement as a recapitalization within the meaning of Section 368(a)(1)(E) of the Code without the prior written approval of the Investors who hold as of the date hereof at least a majority of the Purchased Shares. 1.6 Investor Representations. Each Investor hereby, severally and not jointly, represents and warrants to the Company as follows: (a) Such Investor is acquiring the Exchange Shares to be issued to it pursuant to this Agreement for its own account, for investment, and not with a view to any "distribution" thereof within the meaning of the Securities Act of 1933 (the "Securities Act") nor with any present intention of distributing or selling such Exchange Shares. (b) Such Investor is knowledgeable and experienced in the making of venture capital investments, is able to bear the economic risk of loss of its investment in the Company, has been granted the opportunity to make a thorough investigation of the affairs of the Company, and has availed itself of such opportunity to the extent it has deemed necessary, either directly or through its authorized representatives. (c) Such Investor understands that because the Exchange Shares have not been registered under the Securities Act, it cannot dispose of any or all of the Exchange Shares unless such Exchange Shares are subsequently registered under the Securities Act or exemptions from such registration are available. Such Investor further understands that the Company may, as a condition to the transfer of any of the Securities, require that the request for transfer be accompanied by opinion of counsel the identify of which is deemed reasonably acceptable to the Company, in form and substance satisfactory to the Company, to the effect that the proposed transfer does not result in violation of the Securities Act, unless such transfer is covered by an effective registration statement under the Securities Act. Such Investor understands that each certificate representing the Exchange Shares will bear the following legends or ones substantially similar thereto: These shares have not been registered under the Securities Act of 1933. These shares have been acquired for investment and not with a view to distribution or resale, and may not be sold, mortgaged, pledged, hypothecated or otherwise transferred without an effective registration statement for such shares under the Securities Act of 1933, or an opinion of counsel for the corporation that registration is not required under such act. The shares represented by this certificate are subject to the terms and conditions of a Stockholders Agreement dated August 19, 1993. A copy of such agreement is on file at the principal executive offices of Jackson Hewitt Inc., and Jackson Hewitt Inc. will furnish copies of such agreement to the holder of this certificate upon request and without charge. (d) Such Investor is an "accredited investor" as that term is defined in Rule 501 of Regulation D under the Securities Act. (e) This Agreement has been duly authorized (with respect to JMI, Geocapital II and Geocapital III only), executed and delivered by such Investor and constitutes the valid and binding obligation of such Investor, enforceable against such Investor in accordance with its terms. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Investors as follows: 2.1 Business; Organization, Corporate Power and Authority, etc. The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has full corporate power and authority to own and hold its properties and to carry on its business as presently conducted. The Company is duly licensed or qualified and in good standing as a foreign corporation authorized to do business in all jurisdictions in which the character of property owned or leased, or the nature of the activities conducted by it, makes such licensing or qualification necessary, except where the failure to so qualify would not have a material adverse effect on the business, operations, financial condition or results of operations of the Company (a "Material Adverse Effect") 2.2 Validity. The Company has all of the necessary power and authority, and has taken all action required, to execute, deliver and perform this Agreement and to issue the Exchange Shares in exchange for the Purchased Shares. This Agreement has been duly authorized, executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. All other documents and instruments executed or to be executed by the Company pursuant hereto when delivered, are and will be duly authorized, executed and delivered by the Company and are and will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. Upon the issuance of the Exchange Shares in accordance with the terms hereof, the Exchange Shares will be duly authorized, validly issued, fully paid and nonassessable and will be free and clear of all liens, charges, restrictions, claims and encumbrances of any kind, other than restrictions on transfer under Federal and state securities laws. 2.3 Capitalization; Status of Capital Stock. The Company has a total authorized capitalization consisting of (i) 10,000,000 shares of Common Stock, $.02 par value per share, of which 4,543,421 shares were issued and outstanding as of the close of business on June 17, 1997, and (ii) 1,000,000 shares of Preferred Stock, no par value, of which 504,950 shares are designated Series A Preferred Stock and are issued or outstanding. The Company has authorized and reserved a sufficient number of shares of the Common Stock for issuance in exchange for the Purchased Shares as contemplated by this Agreement. Except as set forth in the Registration Statement (as defined below) or as otherwise contemplated by this Agreement: (a) the Company has no options or rights to purchase shares of its capital stock, or securities convertible into shares of its capital stock, authorized, issued or outstanding, nor is the Company obligated in any manner to issue shares of its capital stock or securities convertible into or evidencing any right to acquire shares of its capital stock, or to distribute to holders of any of its capital stock any evidence of indebtedness or assets; (b) no entity has any preemptive right, right of first refusal or similar right to acquire additional shares of capital stock in connection with the issuance of the Exchange Shares pursuant to this Agreement or otherwise; (c) there are no restrictions on the transfer of the shares of capital stock of the Company, other than those imposed by relevant state and Federal securities laws; (d) no entity has any right to cause the Company to effect the registration under the Securities Act of any shares of capital stock or any other securities (including debt securities) of the Company; (e) the Company has no obligation to purchase, redeem or otherwise acquire any of its equity securities or any interests therein, or to pay any dividend or make any other distribution in respect thereto; and (f) there are no voting trusts, stockholders' agreements, or proxies relating to any securities of the Company. 2.4 Litigation. Except as set forth in this Registration Statement, there is no action, suit, proceeding or investigation pending or threatened in writing against or affecting the Company which might result, either in any case or in the aggregate, in any Material Adverse Effect, or which questions the validity of, or hinders the enforceability or performance of, this Agreement or any action taken or to be taken pursuant hereto; nor, to the knowledge of the Company, has there occurred any event or does there exist any condition on the basis of which any litigation, proceeding or investigation might properly be instituted which may have a Material Adverse Effect. Except as set forth in this Registration Statement, the Company is not in default with respect to any order, writ, injunction, decree, ruling or decision of any court, commission, board or other government agency that might result, either in any case or in the aggregate, in any Material Adverse Effect. 2.5 No Violations. The execution, delivery and performance of this Agreement, and any documents or instruments delivered, executed and performed (or to be delivered, executed and performed) in connection herewith, the consummation of the transactions contemplated hereby (including the issuance of the Exchange Shares), and compliance with the provisions hereof, will not violate any provision of law, the Articles of Incorporation or Bylaws, as amended, of the Company, any order of any court or other agency of government or indenture, agreement or other instrument to which the Company is bound, or conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever upon any of the properties or assets of the Company in each case which would have a Material Adverse Effect. 2.6 Governmental Consents, etc. No consents, approvals or authorizations of, or registrations, qualifications, designations, declarations or filings with, any Federal, state or local governmental authority are required in connection with the execution, delivery and performance of this Agreement by the Company, and any documents or instruments delivered, executed and performed (or to be delivered, executed and performed) by the Company in connection herewith, the consummation by the Company of the transactions contemplated hereby (including the issuance of the Exchange Shares), and compliance by the Company with the provisions hereof, other than the filing of an additional listing application for listing of the Exchange Shares on the Nasdaq National Market. The issuance of the Exchange Shares in exchange for the Purchased Shares is exempt from the registration requirements of Section 5 of the Securities Act of 1933 and all applicable state securities laws. 2.7 Reports and Financial Statements. (a) The Company has filed with the Securities and Exchange Commission (the "Commission") its (i) annual report on Form 10-KSB for the fiscal year ended April 30, 1996 (as amended on July 31, 1996), (ii) quarterly reports on Form 10-QSB for the periods ended July 31, 1996, October 31, 1996 (as amended on January 29, 1997), and January 31, 1997, (iii) proxy statement dated September 11, 1996, and (iv) all other reports, registration statements and proxy materials required to be filed by the Company with the Commission under the Securities Act or the Securities Exchange Act of 1934 since May 1, 1996, all in the form (including exhibits) so filed (collectively, the "Reports"). As of their respective dates, the Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the audited financial statements and unaudited interim financial statements included in the Reports has been prepared in accordance with GAAP applied on a consistent basis (except as may be indicated therein or in the notes thereto) and fairly presents the financial position of the Company as at its date or the results of operations, stockholders equity or cash flows, as is appropriate, of the Company for the periods then ended (subject, in the case of unaudited interim financial statements, to normal year-end adjustments and any other adjustments described therein, which adjustments will not be material in amount or effect). (b) The Company has previously furnished to each of the Investors true and complete copies of the June 25, 1997 draft of the Registration Statement on Form S-1 (without exhibits) (the "Registration Statement") to be filed by the Company with the Commission on or about June 30, 1997. As of the date hereof, the Registration Statement did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the audited financial statements included in the Registration Statement has been prepared in accordance with GAAP applied on a consistent basis (except as may be indicated therein or in the notes thereto) and fairly presents the financial position of the Company as at its date or the results of operations, stockholders equity or cash flows, as is appropriate, of the Company for the periods then ended. 2.8 Material Contracts. Except for those exhibits that will be filed with the Registration Statement, the Company has filed with the Commission all material contracts and other documents and materials required to be filed by the Company as exhibits to the Reports or the Registration Statement. 2.9 Disclosure. This Agreement, together with the Reports and the Registration Statement, does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained herein and therein not misleading in the light of the circumstances under which they are or were made. There exists no fact or circumstances which materially and adversely affects, or which in the future, has a possibility of materially and adversely affecting, the the business, operations, financial condition or results of operations of the Company, which has not been reflected in financial statements of the Company contained in, or otherwise disclosed in, the Reports or the Registration Statement. ARTICLE III CONDITIONS TO CLOSING 3.1 Conditions to Investors' Obligations. The obligations of each of the Investors under this Agreement to exchange the Purchased Shares held by such Investor for the Exchange Shares at the Closing are, at its option, subject to the satisfaction, or waiver in writing by the Investors who hold at least a majority of the Purchased Shares, of the following conditions: (a) Performance of This Agreement. All the terms, covenants and conditions of this Agreement to be complied with and performed by the Company on or before the Closing Date shall have been complied with, and performed in, all material respects. (b) Accuracy of Representations and Warranties. The representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects both on the date of this Agreement and as of the Closing Date with the same force and effect as if such representations and warranties were made anew at and as of the Closing Date, except: (i) to the extent such representations and warranties are by their express provisions made as of the date of this Agreement or another specified date; and (ii) for the effect of any activities or transactions which may have taken place after the date of this Agreement which are contemplated by this Agreement. (c) No Material Adverse Change. Since the date of this Agreement, there shall have been no material adverse change in the business, operations, financial condition or results of operations of the Company. (d) Litigation; Injunctions. No action, suit, litigation, proceeding or investigation shall (i) have been formally instituted and be pending, or (ii) be threatened by any party, which, if resolved substantially in accordance with the plaintiff's demands, would be reasonably likely to materially and adversely affect the transactions contemplated by this Agreement. On the Closing Date, there shall not be in force any order or decree restraining or enjoining consummation of the transactions contemplated by this Agreement, or placing any limitation upon such consummation or to invalidate, suspend or require modification of any provision of this Agreement. (e) Closing Certificates. The Investors shall have received a certificate dated the Closing Date, signed by the chief executive officer and the chief financial officer of each of the Company, to the effect that the conditions set forth in clauses (a) through (d) of this Section 3.1 have been satisfied. (f) Opinion of Counsel. The Investors shall have received from Kaufman & Canoles, counsel to the Company, an opinion dated the Closing Date, which shall be in form and substance satisfactory to the Investors, substantially to the following effects: (i) The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has full corporate power and authority to own and hold its properties and to carry on its business as presently conducted; (ii) The Company has all of the necessary corporate power and authority, and has taken all action required, to execute, deliver and perform this Agreement and to issue the Exchange Shares in exchange for the Purchased Shares; this Agreement has been duly authorized, executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be subject to or affected by any bankruptcy, reorganization, insolvency, moratorium or similar laws of general application from time to time in effect and relating to or affecting the rights or remedies of creditors generally; (iii) Upon the issuance of the Exchange Shares in accordance with the terms hereof, the Exchange Shares will be duly authorized, validly issued, fully paid and nonassessable and will be free and clear of all liens, charges, restrictions, claims and encumbrances of any kind imposed by or through the Company, other than restrictions on transfer under Federal and state securities laws; (iv) The execution, delivery and performance of this Agreement, and any documents or instruments delivered, executed and performed (or to be delivered, executed and performed) in connection herewith, the consummation of the transactions contemplated hereby (including the issuance of the Exchange Shares), and compliance with the provisions hereof, will not violate any provision of law, the Articles of Incorporation or Bylaws, as amended, of the Company, any order of any court or other agency of government known to such counsel or any indenture, agreement or other instrument which has been filed as an exhibit to the Reports or is currently expected to be filed as an exhibit to the Registration Statement, or conflict with, result in the breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever upon any of the properties or assets of the Company; and (v) The issuance of the Exchange Shares in exchange for the Purchased Shares is exempt from the registration requirements of Section 5 of the Securities Act of 1933 and all applicable state securities laws. (g) Authorization; Consents. The Company shall have obtained any and all consents, permits and waivers and made all filings necessary or appropriate for consummation of the transactions contemplated by this Agreement. (h) All Proceedings Satisfactory. All corporate and other proceedings taken prior to or on the Closing in connection with the transactions contemplated by this Agreement, and all documents and evidences incident thereto, shall be reasonably satisfactory in form and substance to the Investors, and the Investors shall receive such copies thereof and other materials (certified, if requested) as they may reasonably request in connection therewith. 3.2 Conditions to Company's Obligations. The obligations of the Company under this Agreement to exchange the Purchased Shares held by the Investors for the Exchange Shares at the Closing are, at its option, subject to the satisfaction or waiver of the following conditions: (a) Performance of This Agreement. All the terms, covenants and conditions of this Agreement to be complied with and performed by the Investors on or before the Closing Date shall have been complied with, and performed in, all material respects. (b) Accuracy of Representations and Warranties. The representations and warranties of the Investors set forth in Section 1.6 shall be true and correct in all material respects both on the date of this Agreement and as of the Closing Date with the same force and effect as if such representations and warranties were made anew at and as of the Closing Date, except for the effect of any activities or transactions which may have taken place after the date of this Agreement which are contemplated by this Agreement. (c) Litigation; Injunctions. No action, suit, litigation, proceeding or investigation shall (i) have been formally instituted and be pending, or (ii) be threatened by any party, which, if resolved substantially in accordance with the plaintiff's demands, would be reasonably likely to materially and adversely affect the transactions contemplated by this Agreement. On the Closing Date, there shall not be in force any order or decree restraining or enjoining consummation of the transactions contemplated by this Agreement, or placing any limitation upon such consummation or to invalidate, suspend or require modification of any provision of this Agreement. (d) Closing Certificates. The Investors shall have received a certificate dated the Closing Date, signed by the Investors, to the effect that the conditions set forth in clauses (a) through (c) of this Section 3.2 have been satisfied. ARTICLE IV MISCELLANEOUS 4.1 Amendments and Waivers. This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent of the Company, and the Investors who hold as of the date hereof at least a majority of the Purchased Shares. 4.2 Survival of Covenants; Assignability of Rights. The representations, warranties, covenants and agreements made by the parties hereto in this Agreement or any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing. Any investigation or other examination that may have been made at any time by or on behalf of the party to whom representations and warranties are made shall not limit, diminish or in any way affect the representations and warranties in this Agreement, and the parties may rely on the representations and warranties in this Agreement irrespective of any information obtained by them by any investigation, examination or otherwise. 4.3 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without giving effect to the principles of conflicts of law thereof. 4.4 Section Headings. The descriptive headings in this Agreement have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provision hereof. 4.5 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute but one and the same document. 4.6 Notices and Demands. All notices or other communications to either party hereunder shall be in writing (including telex, telecopy or similar writing) and shall be given, as follows: If to the Company, to: Jackson Hewitt Inc. 4575 Bonney Road Virginia Beach, VA 23462 Attn: President If to Geocapital II or Geocapital III, to such entity at: One Bridge Plaza Fort Lee, NJ 07024 Attn: Lawrence Lepard If to JMI, to: JMI Equity Fund, L.P. 1119 St. Paul Street Baltimore, MD 21202 Attn: Harry S. Gruner If to Mr. Federman or Mr. Bachman, to such person at: c/o Broadview Associates One Bridge Plaza Fort Lee, NJ 07024 4.7 Invalidity of Provisions. Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof or thereof. 4.8 Expenses. The Company shall pay all costs and expenses that (i) it incurs with respect to the negotiation, execution, delivery and performance of this Agreement and (ii) the Investors shall incur with respect to the negotiation, execution, delivery and performance of this Agreement. 4.9 Entire Agreement. This Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement among the parties with respect to the subjects contemplated hereby. 4.10 Specific Performance. Each of the parties to this Agreement hereby acknowledges that the other parties will have no adequate remedy at law if it fails to perform any of its obligations under this Agreement. In such event, each of the parties agrees that the other parties shall have the right, in addition to any other rights it may have (whether at law or in equity), to specific performance of this Agreement. 4.11 Brokers Fees. Each party to this Agreement represents and warrants to the other parties to this Agreement that no fees are payable to anyone acting in the capacity of broker or finder in connection with the transactions contemplated by this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. JACKSON HEWITT INC. By: /s/ Christopher Drake --------------------- Christopher Drake Secretary, Treasurer and Chief Financial Officer GEOCAPITAL II, L.P. By: Softven Management, L.P. Its General Partner By: /s/ James J. Harrison --------------------- James J. Harrison General Partner GEOCAPITAL III, L.P. By: Geocapital Management, L.P. Its General Partner By: /s/ Richard Vines ----------------- Richard Vines General Partner JMI EQUITY FUND, L.P. By: JMI Partners, L.P. Its General Partner By: /s/ Charles E. Noell -------------------- Charles E. Noell General Partner /s/ Charles Federman -------------------- Charles Federman /s/ Stephen J. Bachman ---------------------- Stephen J. Bachman EX-11 7 EXHIBIT 11 JACKSON HEWITT INC. JHI COMPUTATION OF EARNINGS PER SHARE STOCK PRICE ANAYLSIS COMPUTE WEIGHTED AVERAGE COMMON SHARES: FISCAL 1997
WEIGHTED DATE SHARES WEIGHT SHARES ---------------------------------------------------------------------- Twelve months ended 04/30/97 05/01/96 4,408,056 1 4,408,056 07/31/96 106,750 0.75 80,063 08/19/96 37,790 0.67 25,193 09/30/96 1 0.58 1 10/21/96 200 0.50 100 01/06/97 4,000 0.33 1,333 02/28/97 20 0.25 5 03/05/97 33,580 0.17 5,597 =================== ================ 4,590,397 4,520,347 WACS =================== ================ Monthly outstanding 4,590,397
Treasury Stock Method for Options - Before extraordinary item Twelve months ended 04/30/97
PEPS FDEPS ----------------- --------------- Average # share under options O/S Option price 0 $1.728 $0.00 $0.00 82,400 $5.75 - 473,800.00 20,000 $4.25 85,000.00 85,000.00 2,400 $4.37 10,488.00 10,488.00 20,000 $2.86 57,200.00 57,200.00 268,065 $4.81 1,289,392.65 1,289,392.65 53,220 $3.50 186,270.00 186,270.00 10,000 $0.01 100.00 100.00 ------------------- ------------------ Proceeds upon exercise of options $1,628,450.65 $2,102,250.65 =================== ================== Market price of common stock Average $5.74 Closing $10.13 Treasury shares that could be repurchased with proceeds 283,702 =================== 207,630 ================== Excess of shares under option over treasury shares that could be repurchased 373,685 + (283,702) 89,983 ================= ==================== 456,085 + (207,630) 248,455 ================
- ------------------------------------------------------------------------------- EPS Computations - before extraordinary item
Primary EPS Numerator Denominator Per share --------------------------------------------------------- Simple: Net income before taxes & ext item $10,442,284 Less taxes (4,210,108) Less PS dividends & accretion (623,379) -------------------- Net income attributable to common s/h 5,608,797 -------------------- WACS 4,520,347 ------------------- $5,608,797 4,520,347 1.2408 Treasury stock items 89,983 --------------------------------------- $5,608,797 4,610,330 1.2166 ========================================================= Note all convertible bonds are anti-dilutive & are not common stock equivalents Primary earnings per share $1.22 ======================
- -------------------------------------------------------------------------------- Fully diluted EPS:
Numerator Denominator Per share ----------------------------------------------------------- Simple: Net income before taxes & ext item $10,442,284 Less taxes (4,210,108) Less PS dividends & accretion (623,379) ---------------------- Net income attributable to common s/h 5,608,797 ---------------------- WACS 4,520,347 ------------------- $5,608,797 4,520,347 1.2408 Treasury stock items 248,455 ----------------------------------------- $5,608,797 4,768,803 1.1761 =========================================================== Note all convertible bonds are anti-dilutive & are not common stock equivalents Fully diluted earnings per share $1.18 =======================
Treasury Stock Method for Options - After extraordinary item Twelve months ended 04/30/97
PEPS FDEPS ----------------------- ----------------------- Average # share under options O/S Option price 0 $1.728 $0.00 $0.00 82,400 $5.75 - 473,800.00 20,000 $4.25 85,000.00 85,000.00 2,400 $4.37 10,488.00 10,488.00 20,000 $2.86 57,200.00 57,200.00 268,065 $4.81 1,289,392.65 1,289,392.65 53,220 $3.50 186,270.00 186,270.00 10,000 $0.01 100.00 100.00 ----------------------- ----------------------- Proceeds upon exercise of options $1,628,450.65 $2,102,250.65 ======================= ======================= Market price of common stock Average $5.74 Closing $10.13 Treasury shares that could be repurchased with proceeds 283,702 ======================= 207,630 ======================= Excess of shares under option over treasury shares that could be repurchased 373,685 + (283,702) 89,983 ======================= 456,085 + (207,630) 248,455 =======================
EPS Computations - after extraordinary item
Primary EPS: NUMERATOR DENOMINATOR PER SHARE ------------------------------------------------------------- Simple: Net income before taxes & ext item $10,442,284 Less taxes (4,210,108) Less PS dividends & accretion (623,379) Less extraordinary item (1,248,388) ----------------------- Net income attributable to common s/h 4,360,409 ----------------------- WACS 4,520,347 ------------------- $4,360,409 4,520,347 0.9646 Treasury stock items 89,983 ------------------------------------------ $4,360,409 4,610,330 0.9458 ============================================================== Note all convertible bonds are anti-dilutive & are not common stock equivalents Primary EPS: $0.95 =======================
NUMERATOR DENOMINATOR PER SHARE -------------------------------------------------------------- Simple: Net income $10,442,284 Less taxes (4,210,108) Less PS dividends & accretion (623,379) Less extraordinary item (1,248,388) ----------------------- Net income attributable to common s/h 4,360,409 ----------------------- WACS 4,520,347 ------------------- $4,360,409 4,520,347 0.9646 Treasury stock items 248,455 ------------------------------------------ $4,360,409 4,768,803 0.9144 ============================================================== Note all convertible bonds are anti-dilutive & are not common stock equivalents Fully diluted EPS: $0.91 =======================
EX-21 8 EXHIBIT 21 Exhibit 21 ORGANIZATIONAL CHART ----------------------------------------------------------- | JACKSON HEWITT, INC. | ----------------------------------------------------------- | | | | 100% | 100% | Member/Manager | | | ---------------- ----------------- ------------------------- | ODEN, INC. | | HEWFANT, INC. | | JH OF MEMPHIS, L.L.C. | | ---------- | | ------------- | | --------------------- | | Virginia | | Virginia | | Virginia | ---------------- ----------------- ------------------------- EX-23 9 EXHIBIT 23.1 Exhibit 23.1 The Board of Directors Jackson Hewitt Inc.: We consent to the use of our reports included herein and to the reference to our firm under the headings "Selected Consolidated Financial Data" and "Experts" in the prospectus. Our report covering the financial statements refers to the adoption of Statement of Financial Accounting Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF and SFAS No. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN, as amended by SFAS No. 118, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE, in 1996. KPMG PEAT MARWICK LLP Norfolk, Virginia June 30, 1997 EX-27 10 EXHIBIT 27
5 12-MOS APR-30-1997 APR-30-1997 6,324 0 6,658 (1,204) 0 13,873 5,248 (2,572) 28,160 7,891 0 3,236 0 92 14,648 28,160 0 31,432 0 19,664 0 119 (998) 10,442 6,232 6,232 0 (1,248) 0 4,984 0.95 0.91
EX-99.1 11 EXHIBIT 99.1 INDEPENDENT AUDITORS' REPORT ON SCHEDULE The Board of Directors Jackson Hewitt Inc.: Under date of June 9, 1997, except as to note 16 which is as of June 27, 1997, we reported on the consolidated balance sheets of Jackson Hewitt Inc. and subsidiaries as of April 30, 1996 and 1997 and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended April 30, 1997 which are included herein. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule, Schedule II - Valuation and Qualifying Accounts. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP Norfolk, Virginia June 9, 1997 SCHEDULE II JACKSON HEWITT INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
BALANCE, AMOUNTS BEGINNING CHARGED TO BALANCE, OF YEAR EXPENSE DEDUCTIONS END OF YEAR --------- ---------- ---------- ----------- Year Ended April 30, 1995 Allowance for doubtful accounts $ 186,493 $ 1,466,663 $ (426,432) $ 1,226,724 Year Ended April 30, 1996 Allowance for doubtful accounts $ 1,226,724 $ 2,316,595 $ (2,177,069) $ 1,366,250 Year Ended April 30, 1997 Allowance for doubtful accounts $ 1,366,250 $ 991,715 $ (1,154,366) $ 1,203,599
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