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.[ ]
<TABLE>
<CAPTION>
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
=================================================================================================================
<S> <C>
Common Stock, par value 1,130,790 $11.38 $12,868,390 $3,899.51
$0.02 per share
=================================================================================================================
</TABLE>
(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.
<PAGE>
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]
<PAGE>
[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."
<PAGE>
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
<PAGE>
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."
<PAGE>
Summary Financial Information
<TABLE>
<CAPTION>
Years Ended April 30,
---------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(in thousands, except per share, office and fee data)
<S> <C>
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)
<S> <C> ----------- --------------
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
</TABLE>
---------------------------------------
(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.
<PAGE>
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.
<PAGE>
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."
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
[email protected] 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."
<PAGE>
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."
<PAGE>
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.
<TABLE>
<CAPTION>
As of April 30, 1997
---------------------------------------------------------
Actual Pro forma(1) As Adjusted
------ ------------ -----------
(in thousands)
<S> <C>
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
======= ======= ========
</TABLE>
- ------------------------
(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.
<PAGE>
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.
<PAGE>
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.
<TABLE>
<CAPTION>
Years Ended April 30,
---------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(in thousands, except per share, office and fee data)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
<S> <C>
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
</TABLE>
<TABLE>
<CAPTION>
As of April 30,
-------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(in thousands)
CONSOLIDATED BALANCE SHEET DATA:
<S> <C>
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
</TABLE>
--------------------------------------------------------------------
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.
<PAGE>
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."
<PAGE>
Results of Operations
The following table sets forth certain information regarding
the Company's consolidated statement of operations as a percentage of
total revenues:
<TABLE>
<CAPTION>
Years Ended April 30,
----------------------------------------
1995 1996 1997
---- ---- ----
<S> <C>
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%
===== ====== =====
</TABLE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
<TABLE>
<CAPTION>
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)
<S> <C>
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
</TABLE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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."
<PAGE>
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
<PAGE>
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
<PAGE>
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
=== === ===== ===== =====
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information concerning the
Company's directors and executive officers.
<TABLE>
<CAPTION>
Name Age Position Director Since
<S> <C>
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
</TABLE>
- ---------------------------------------
(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
<PAGE>
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.
<PAGE>
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 $100,000 in 1997 (collectively, the "Named Executive
Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term All Other
Annual Compensation(1) Compensation Compensation($)
Number of
Securities Underlying
Name and Principal Position Year Salary($) Bonus ($) Options (#)(2)
--------------------------- ---- --------- --------- --------------
<S> <C>
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)
</TABLE>
- --------------------------------
(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 $111,687 in connection with Mr. Hewitt's resignation
from the Company See "Certain Transactions."
(10) Mr. Czaplicki joined the Company in June 1995 and resigned in
March 1997.
<PAGE>
The following table provides a summary of compensation
related stock options granted to the Named Executive Officers during
1997.
<TABLE>
<CAPTION>
Stock Option Grants in the Last Fiscal Year
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Grant Date
Name Granted Fiscal Year ($/sh) Expiration Date Value(1)
---- ------- ----------- ------ --------------- --------
<S> <C>
Keith E. Alessi 268,065 69.0% $4.81 June 17, 2006(2) $1,065,140
Martin B. Mazer 4,000 1.0 5.75 May 1, 2006(3) 15,217
Thomas P. Czaplicki 6,500 1.7 5.75 May 1, 2006(3) 24,728
</TABLE>
- --------------------------------
(1) Value determined using the Black Scholes Option-Pricing Model
with the following weighted average assumptions: no dividend
yield, expected volatility of 73%, risk free interest rate
of 6.69% and expected life of 10 years in the case of Mr.
Alessi's options and six years in the case of Messrs. Mazer's
and Czaplicki's options. The actual value, if any, that may
be realized on the options will depend on the excess of the
stock price over the exercise price on the date the option
is exercised. Accordingly, there can be no assurance that
the value realized on the options will be at or near the
value estimated by the Black-Scholes Model.
(2) The options vest in four equal, annual increments
commencing June 18, 1997 and ending June 18, 2000. Each
increment expires June 17, 2006.
(3) The options vest in five equal, annual increments commencing
May 1, 1997 and ending May 1, 2001. Each increment expires
five years after vesting.
The following table sets forth information for the Named
Executive Officers concerning stock option exercises during 1997 and
unexercised options held as of April 30, 1997.
<TABLE>
<CAPTION>
Option Exercises and Fiscal Year-End Option Values
Number of Securities Underlying Value of Unexercised in the
Unexercised Options at Money Options at Fiscal
Fiscal Year-End($)(1)
Year-End(#)
Shares Acquired
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C>
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
</TABLE>
- ----------------------------
(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.
<PAGE>
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.
<PAGE>
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."
<PAGE>
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.
<TABLE>
<CAPTION>
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
------------------- ------ ------- ------ -------
<S> <C>
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
</TABLE>
- --------------
*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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
CONSOLIDATED BALANCE SHEETS
- ----------------------------
Jackson Hewitt Inc.
April 30, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
------------- --------------
<S> <C>
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
============= ==============
</TABLE>
F-3
<PAGE>
CONSOLIDATED BALANCE SHEETS (CONTINUED)
- ---------------------------------------------------------------------------
Jackson Hewitt Inc.
April 30, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
------------- -----------
<S> <C>
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
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------
Jackson Hewitt Inc.
For the years ended April 30, 1995, 1996 and 1997
1995 1996 1997
-------------------------------------------
<S> <C>
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
===========================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------
Jackson Hewitt Inc.
For the years ended April 30, 1995, 1996 and 1997
<TABLE>
<CAPTION>
COMMON STOCK STOCK
------------------------ ADDITIONAL RETAINED SUBSCRIPTION
SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE
--------------------------------------------------------------------------
<S> <C>
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)
====================================================================
</TABLE>
<TABLE>
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
----------------------
<S> <C>
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
===============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------
Jackson Hewitt Inc.
For the years ended April 30, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------------------------------------
<S> <C>
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
==========================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------- -----------------------------------
Jackson Hewitt Inc.
For the years ended April 30, 1995, 1996 and 1997
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
1995 1996 1997
-------------------------------------------------
<S> <C>
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):
<CAPTION>
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:
<CAPTION>
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
==================================================
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
3. ACQUISITION OF FRANCHISE ASSETS (CONTINUED)
<TABLE>
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C>
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
============= ============= =============
</TABLE>
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
------------------
<TABLE>
<CAPTION>
Beginning Closed or Purchased End
of Period Opened by the Company of Period
------------ -------- ------------------- --------------
<S> <C>
1995 742 381 (36) 1087
1996 1087 336 (177) 1246
1997 1246 318 (288) 1296
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C>
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
=============== =============
</TABLE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C>
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
<PAGE>
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
============ ===========
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C>
Office furniture, fixtures and equipment $1,799,779 $2,133,299
Less accumulated amortization (657,056) (1,294,869)
========== ===========
$1,142,723 $838,430
========== ===========
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
- ------------------------------------------------------------ --------------------
<S> <C>
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
====================
</TABLE>
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
<PAGE>
9. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities at
April 30, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C>
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)
=========== ===========
</TABLE>
F-20
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
1996 1997
----------------------------------------------------------
Weighted- Weighted-
Number of Average Number of Average
Options Exercise Price Options Exercise Price
----------- --------------- ----------- ------------------
<S> <C>
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
</TABLE>
F-22
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C>
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
</TABLE>
F-24
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(dollars in thousands except per share data)
<S> <C>
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
</TABLE>
F-26
<PAGE>
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.
<TABLE>
<CAPTION>
Year Ended April 30
1995 1996 1997
-------- -------- ---------
<S> <C>
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
======== ======== =========
</TABLE>
F-27
<PAGE>
- --------------------------------------------------------------------------------
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...........
<PAGE>
[INSIDE BACK COVER PAGE]
[SCHEMATIC OF TAX RETURN FILING PROCESS]
<PAGE>
Shares
[LOGO]
JACKSON HEWITT INC.
Common Stock
-----------------
PROSPECTUS
-----------------
Janney Montgomery Scott Inc.
Scott & Stringfellow, Inc.
, 1997
- --------------------------------------------------------------------------------
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Sequential
Exhibit No. Page Number
Description
<S> <C>
**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).
<PAGE>
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.)
<PAGE>
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
</TABLE>
- ------------------------------------------------
* 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.
<PAGE>
** 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.
<PAGE>
<PAGE>
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.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C>
/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)
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit No. Description Page Number
<S> <C>
**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.)
<PAGE>
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. *
<PAGE>
***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
</TABLE>
- ------------------------------------------------
* 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.
Exhibit 3.2
AMENDED AND RESTATED
(July 25, 1996)
BYLAWS
OF
JACKSON HEWITT INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
Meetings of the Shareholders
Page
<S> <C>
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>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
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
</TABLE>
<PAGE>
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
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.
<PAGE>
[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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
================================================================================
ITEM 6
OTHER FEES
================================================================================
<TABLE>
<CAPTION>
NAME AMOUNT DUE DATE REMARKS
<S> <C>
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
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</TABLE>
<PAGE>
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.
<PAGE>
================================================================================
ITEM 7
ESTIMATED INITIAL INVESTMENT FOR AN UNDEVELOPED STOREFRONT LOCATION
BUDGETED TO DO 500 OR FEWER RETURNS
================================================================================
<TABLE>
<CAPTION>
METHOD OF
AMOUNT PAYMENT WHEN DUE TO WHOM PAID
<S> <C>
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.)
<PAGE>
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.
<PAGE>
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 &
<PAGE>
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.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================
FRANCHISE AGREEMENT OFFERING CIRCULAR
OBLIGATION PARAGRAPH ITEM NUMBER
=====================================================================================================
<S> <C>
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
</TABLE>
<PAGE>
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
<TABLE>
<CAPTION>
INSTRUCTIONAL APPROXIMATE
SUBJECTS MATERIAL HOURS INSTRUCTORS
<S> <C>
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
</TABLE>
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.]
<PAGE>
<TABLE>
<CAPTION>
ITEM 17
RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION
====================================================================================================================================
SECTION IN
FRANCHISE
PROVISION AGREEMENT SUMMARY
====================================================================================================================================
<S> <C>
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.
</TABLE>
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.
<PAGE>
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.]
<PAGE>
================================================================================
FRANCHISED LOCATIONS
STORE STATUS SUMMARY
FOR YEARS 1997/1996/1995
================================================================================
<TABLE>
<CAPTION>
UNITS
REACQUIRED LEFT THE TOTAL OPERATING
CANCELLED OR NOT BY SYSTEM FROM LEFT AT YEAR
STATE TRANSFERS TERMINATED RENEWED FRANCHISER OTHER COLUMNS (2) END
- ----- --------- ---------- ------- ---------- ----- ----------- ---
<S> <C>
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
</TABLE>
<PAGE>
================================================================================
STATUS OF COMPANY OWNED STORES
FOR YEARS 1997/1996/1995
================================================================================
<TABLE>
<CAPTION>
STORES CLOSED STORES OPENED TOTAL STORES
STATE DURING YEAR DURING YEAR OPERATING AT YEAR END
- ----- ----------- ----------- ---------------------
<S> <C>
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
</TABLE>
<PAGE>
================================================================================
PROJECTED OPENINGS
AS OF APRIL 30, 1997
================================================================================
<TABLE>
<CAPTION>
FRANCHISE PROJECTED PROJECTED
AGREEMENTS FRANCHISED COMPANY OWNED
SIGNED BUT NEW STORES FOR OPENINGS IN
STATE STORE NOT OPEN TAX SEASON 1998 TAX SEASON 1998
- ----- -------------- --------------- ---------------
<S> <C>
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
</TABLE>
<PAGE>
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.
<PAGE>
JACKSON HEWITT TAX SERVICE
FRANCHISE AGREEMENT
Jackson Hewitt Inc.
EXHIBIT A
<PAGE>
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
<PAGE>
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
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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.
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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
<PAGE>
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.
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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:
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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.
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initials
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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.
<PAGE>
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: .
<PAGE>
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.
<PAGE>
SCHEDULE A
Your Territory
<PAGE>
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.
<PAGE>
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:
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
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.
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
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):
<PAGE>
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):
<PAGE>
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.
<PAGE>
<PAGE>
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):
<PAGE>
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):
<PAGE>
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:
<PAGE>
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):
<PAGE>
EXHIBIT A
<PAGE>
Exhibit D
CONFIDENTIAL FRANCHISE APPLICATION
4575 Bonney Road
Virginia Beach, VA 23462
(800) 277 - 3278
Fax: (757) 490-7117
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
<PAGE>
EXHIBIT E - Exhibit E is Blank
<PAGE>
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.
<PAGE>
Jackson Hewitt Tax Service
05/01/96 04/30/97
Office Locations Report
<TABLE>
<S> <C>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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*
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
</TABLE>
* = open all year
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Year Office Open Average # of Returns Average Gross Volume % Exceeded the Average
<S> <C>
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%
</TABLE>
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.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT I
TABLE OF CONTENTS OPERATING MANUAL
Approx. no. of pages
<S> <C>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
</TABLE>
<TABLE>
<CAPTION>
SELLER: PURCHASER:
JACKSON HEWITT INC.
<S> <C>
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
</TABLE>
<PAGE>
EXHIBIT A
ASSETS:
1. Furniture, fixtures, & equipment:
2. Electronically provided customer information
3. Goodwill
<PAGE>
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.
<PAGE>
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.
<PAGE>
AGENT FOR SERVICE OF PROCESS -EXHIBIT L
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
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
<PAGE>
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)
<PAGE>
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
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
------------------------
Exhibit 10.21
JACKSON HEWITT, INC.
-----------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of May 30, 1997
-----------------------------------
NATIONSBANK, N.A.
<PAGE>
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
___________________________
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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:
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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.]
<PAGE>
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
JACKSON HEWITT INC. JHI
COMPUTATION OF EARNINGS PER SHARE STOCK PRICE ANAYLSIS
COMPUTE WEIGHTED AVERAGE COMMON SHARES: FISCAL 1997
<TABLE>
<CAPTION>
WEIGHTED
DATE SHARES WEIGHT SHARES
----------------------------------------------------------------------
Twelve months ended 04/30/97
<S> <C>
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
</TABLE>
Treasury Stock Method for Options - Before extraordinary item
Twelve months ended 04/30/97
<TABLE>
<CAPTION>
PEPS FDEPS
----------------- ---------------
Average # share under options
O/S Option price
<S> <C>
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
================
</TABLE>
- -------------------------------------------------------------------------------
EPS Computations - before extraordinary item
<TABLE>
<CAPTION>
Primary EPS Numerator Denominator Per share
---------------------------------------------------------
<S> <C>
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
======================
</TABLE>
- --------------------------------------------------------------------------------
Fully diluted EPS:
<TABLE>
<CAPTION>
Numerator Denominator Per share
-----------------------------------------------------------
<S> <C>
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
=======================
</TABLE>
<PAGE>
Treasury Stock Method for Options - After extraordinary item
Twelve months ended 04/30/97
<TABLE>
<CAPTION>
PEPS FDEPS
----------------------- -----------------------
<S> <C>
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
=======================
</TABLE>
EPS Computations - after extraordinary item
<TABLE>
<CAPTION>
Primary EPS: NUMERATOR DENOMINATOR PER SHARE
-------------------------------------------------------------
<S> <C>
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
=======================
</Table.
- -------------------------------------------------------------------------------------------------------------------------
Fully diluted EPS:
</TABLE>
<TABLE>
<CAPTION>
NUMERATOR DENOMINATOR PER SHARE
--------------------------------------------------------------
<S> <C>
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
=======================
</TABLE>
Exhibit 21
ORGANIZATIONAL CHART
-----------------------------------------------------------
| JACKSON HEWITT, INC. |
-----------------------------------------------------------
| | |
| 100% | 100% | Member/Manager
| | |
---------------- ----------------- -------------------------
| ODEN, INC. | | HEWFANT, INC. | | JH OF MEMPHIS, L.L.C. |
| ---------- | | ------------- | | --------------------- |
| Virginia | | Virginia | | Virginia |
---------------- ----------------- -------------------------
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> APR-30-1997
<CASH> 6,324
<SECURITIES> 0
<RECEIVABLES> 6,658
<ALLOWANCES> (1,204)
<INVENTORY> 0
<CURRENT-ASSETS> 13,873
<PP&E> 5,248
<DEPRECIATION> (2,572)
<TOTAL-ASSETS> 28,160
<CURRENT-LIABILITIES> 7,891
<BONDS> 0
3,236
0
<COMMON> 92
<OTHER-SE> 14,648
<TOTAL-LIABILITY-AND-EQUITY> 28,160
<SALES> 0
<TOTAL-REVENUES> 31,432
<CGS> 0
<TOTAL-COSTS> 19,664
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 119
<INTEREST-EXPENSE> (998)
<INCOME-PRETAX> 10,442
<INCOME-TAX> 6,232
<INCOME-CONTINUING> 6,232
<DISCONTINUED> 0
<EXTRAORDINARY> (1,248)
<CHANGES> 0
<NET-INCOME> 4,984
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.91
</TABLE>
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
<PAGE>
SCHEDULE II
JACKSON HEWITT INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE, AMOUNTS
BEGINNING CHARGED TO BALANCE,
OF YEAR EXPENSE DEDUCTIONS END OF YEAR
--------- ---------- ---------- -----------
<S> <C>
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
</TABLE>
