UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-1177
Beneficial Corporation
(Exact name of registrant as specified in its charter)
Delaware 51-0003820
(State of incorporation) (I.R.S. Employer Identification
No.)
301 North Walnut Street,
Wilmington, Delaware 19801
(Address of principal (Zip Code)
executive offices)
Registrants telephone number, including area code: (302)425-2500
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
Name of each
exchange
Title of each class on which
registered
Common Stock, $1 Par Value New York Stock
Exchange
5% Cumulative Preferred Stock, $50 Par Value New York Stock
Exchange
$5.50 Dividend Cumulative Convertible
Preferred Stock, No Par Value
$20 Stated Value (convertible into nine New York Stock
shares of Common Stock) Exchange
$4.50 Dividend Cumulative Preferred Stock, New York Stock
$100 Par Value Exchange
$4.30 Dividend Cumulative Preferred Stock, No New York Stock
Par Value, $100 Stated Value Exchange
Preferred Stock Purchase Rights New York Stock
Exchange
8% Debentures Maturing at Holders Option
Annually on June 15,
Commencing in 1983 and Due June 15, 2001 New York Stock
Exchange
8.40% Debentures Maturing at Holders Option
Annually on
December 15, Commencing in 1986 and Due New York Stock
May 15, 2008 Exchange
12 7/8% Debentures, Due August 1, 2013 New York Stock
Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
At March 1, 1995, there were 52,852,352 shares outstanding of the registrants
common stock. The aggregate market value of the voting stock of the registrant
held by non-affiliates of the registrant was approximately $2.0 billion.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference certain portions of the Beneficial
Corporation Proxy Statement for the 1995 Annual Meeting of Stockholders
scheduled to be held May 18, 1995.
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The purpose of this amendment is to file electronically with the
Commission Exhibit 10(l) and to revise Exhibits 10(l) and 10(m) in the
Exhibit Index to the Form 10-K for the year ended December 31, 1994.
The undersigned registrant hereby amends Item 14 of Part IV and the
Exhibit Index on pages 49-51 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 to read as follows:
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
The following represents a listing of all financial statements,
financial statement schedules and exhibits filed as part of this
report.
(1) Financial Statements
The following financial statements of Beneficial Corporation
and Subsidiaries and Independent Auditors' Report are
included in Item 8:
Independent Auditors' Report.
Balance Sheet at December 31, 1994 and 1993.
Statement of Income and Retained Earnings for the
three years ended December 31, 1994.
Statement of Cash Flows for the three years ended
December 31, 1994.
Notes to Financial Statements.
Selected Quarterly Financial Data (unaudited).
(2) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts and Reserves.
(3) Exhibits
The Exhibit Index on pages 49-51 of this Annual Report on
Form 10-K lists the exhibits that are filed as part of this
report.
The Company filed the following reports on Form 8-K during the last
quarter of the period covered by this report:
(1) A report on Form 8-K, dated December 2, 1994, was filed
relating to the Company's Medium-Term Note program and
contained as an exhibit to such filing the form of Amendment
No. 1 to the Distribution Agreement.
(2) A report on Form 8-K, dated December 19, 1994, was filed with
respect to the Company's announcement of its intent to sell
its German consumer banking subsidiary, BFK Bank AG ("BFK")
and to take a $38 million charge to reflect potential credit
losses and related expenses at BFK on a block of loans
granted to finance allegedly fraudulent purchase contracts.
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EXHIBIT INDEX
Exhibit
Number Exhibit
3.1 Copy of Beneficial Corporation's Restated Certificate of
Incorporation, as amended.
3.2 Copy of the Company's By-Laws, as amended, is
incorporated by reference to Exhibit 3.2 of the Annual
Report on Form 10-K for the year ended December 31, 1990.
4 The principal amount of debt outstanding under any one
instrument defining the rights of holders of long-term
debt of the Company and its subsidiaries does not exceed
10% of the total assets of the Company and its
subsidiaries on a consolidated basis.
10 (a) Copy of form of agreement entered into between
Beneficial Corporation and key officers of the Company
and its subsidiaries is incorporated by reference to
Exhibit 10 (e) of the Annual Report on Form 10-K for the
year ended December 31, 1981.
(b) Copy of Agreement of Amendment dated November 15,
1984 between Beneficial Corporation and key officers of
the Company and its subsidiaries, relating to Agreement
referred to in Exhibit 10(a) hereto, is incorporated by
reference to Exhibit 10(d) of the Annual Report on Form
10-K for the year ended December 31, 1984.
(c) Copy of form of letter agreement dated February 4,
1993 between Beneficial Corporation and key officers of
the Company and its subsidiaries amending the Agreement
referred to in Exhibit 10(a) hereto.
(d) Copy of Lease, dated as of June 28, 1982, between
Hamilton Associates Limited Partnership and Beneficial
Management Corporation is incorporated by reference to
Exhibit 10(f) of the Annual Report on Form 10-K for the
year ended December 31, 1982.
(e) Guaranty, dated as of June 28, 1982, of Beneficial
Corporation relating to Lease included as Exhibit 10 (d)
hereto is incorporated by reference to Exhibit 10(h) of
the Annual Report on Form 10-K for the year ended
December 31, 1982.
(f) Copies of Forms of Severance Agreements, dated August
21, 1986, and Amendments thereto dated November 19, 1986,
by and between Beneficial Corporation and its executive
officers are incorporated by reference to Exhibit 10(r)
of the Annual Report on 10-K for the year ended December
31, 1986.
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Exhibit
Number Exhibit
(g) Copy of form of letter agreement dated February 4,
1993 between Beneficial Corporation and certain executive
officers amending the Agreement referred to in Exhibit
10(f) hereto.
(h) Copy of Form of Indemnification Agreement between
Beneficial Corporation and its directors, dated August
21, 1986, is incorporated by reference to Exhibit 10(s)
of the Annual Report on Form 10-K for the year ended
December 31, 1986.
(i) Copy of Annuity Plan between Beneficial Corporation
and its directors, dated December 4, 1986, is
incorporated by reference to Exhibit 10(t) of the Annual
Report on Form 10-K for the year ended December 31, 1986.
(j) Copy of the Company's Rights Plan is incorporated by
reference to Form 8-A filed with the Securities and
Exchange Commission on November 20, 1987, with respect to
the registration of Preferred Stock Purchase Rights.
(k) Copy of the Company's Amended and Restated Rights
Agreement is incorporated by reference to Form 8 filed
with the Securities and Exchange Commission on May 25,
1990.
(l) Copy of Agreement among H&R Block, Inc., Beneficial
Tax Masters Inc., Beneficial National Bank and Beneficial
Franchise Company Inc. dated August 22, 1991, relating to
the Refund Anticipation Loan program. Confidential
treatment has been requested with respect to certain
portions of the Agreement; such portions have been
separately filed with the Securities and Exchange
Commission.
(m) Copy of letter agreement dated December 6, 1994
amending the Agreement referred to in Exhibit 10(l)
(confidential treatment has been requested with respect
to certain portions of the letter agreement; such
portions have been separately filed with the Securities
and Exchange Commission).
(n) Copy of Development Agreement between Harbour Island
Inc. (a subsidiary of the Company) and Harbour
Associates, Inc., dated as of July 1, 1992, relating to
the development of Harbour Island is incorporated by
reference to Exhibit 10(k) of the Annual Report on Form
10-K for the year ended December 31, 1992.
(o) Copy of Beneficial Corporation Key Employees Stock
Bonus Plan, as amended.
(p) Copy of Beneficial Corporation 1990 Non-Qualified
Stock Option Plan, as amended.
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Exhibit
Number Exhibit
(q) Copy of Beneficial Corporation Supplemental Pension
Plan is incorporated by reference to Exhibit 10(n) of the
Annual Report on Form 10-K for the year ended December
31, 1992.
(r) Copy of Beneficial Corporation Deferred Compensation
Plan.
11 Computation of Earnings per Common Share of Beneficial
Corporation and Subsidiaries.
12 Computation of Ratios of Earnings to Fixed Charges of
Beneficial Corporation and Subsidiaries (continuing
operations only).
21 List of the names and states of incorporation of
Beneficial's subsidiaries.
23 Consent of independent auditors.
24 Powers of Attorney.
27 Financial Data Schedule (in EDGAR filing only).
99 Form 11-K for the year ended December 31, 1994.
The Company agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of each instrument defining the
rights of holders of its long-term debt.
The Company will furnish to each stockholder, upon written request,
copies of the exhibits referred to above. Requests should be
addressed to Scott A. Siebels, Vice President and Corporate Secretary,
Beneficial Corporation, 301 North Walnut Street, Wilmington, Delaware
19801.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Amendment No. 1 to be signed on
its behalf by the undersigned, thereunto duly authorized.
BENEFICIAL CORPORATION
By /s/ Scott A. Siebels
Scott A. Siebels
Vice President
and Corporate Secretary
Date: July 7, 1995
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EXHIBIT INDEX
Exhibit
Number Exhibit
10 (l) Copy of Agreement among H&R Block, Inc., Beneficial
Tax Masters Inc., Beneficial National Bank and Beneficial
Franchise Company Inc. dated August 22, 1992, relating to
the Refund Anticipation Loan program. Confidential
treatment has been requested with respect to certain
portions of the Agreement; such portions have been
separately filed with the Securities and Exchange
Commission.
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Exhibit 10 (l)
REFUND ANTICIPATION LOAN AGREEMENT
This Agreement is made effective the 22nd day of August ,
1991 among H & R Block, Inc. a Missouri corporation, Beneficial Tax Masters Inc.
("Tax Masters") a Delaware corporation, Beneficial National Bank, a national
banking association ("BNB"), and Beneficial Franchise Company Inc., a Delaware
corporation ("Beneficial Franchise").
Recitals
WHEREAS, Block is in the Income Tax Preparation business through
various company owned and participating franchised offices throughout the United
States;
WHEREAS, Tax Masters facilitates Refund Anticipation Loan(s) ("RAL(s)")
made by BNB in connection with the electronic processing of Federal Income Tax
Returns;
WHEREAS, Beneficial Franchise is the owner of the entire right, title
and interest in and to United States Letters Patent No. 4,890,228 issued on
December 26, 1989 and entitled: ELECTRONIC INCOME TAX REFUND EARLY PAYMENT
SYSTEM, together with all claims for damage by reason of past infringement by
anyone of said Letters Patent, by virtue of an assignment recorded in the U.S.
Patent and Trademark Office on April 3, 1991 on Reel 5630, Frame 34;
WHEREAS, subject to its credit underwriting criteria and prior
approval, BNB has agreed to provide RALs to certain customers of Block, to
certain customers of satellite franchisees of Block which have elected to
participate, and to certain customers of the Major Franchisees of Block which
have elected on or before August 31 of the year prior to the Tax Period (January
1 through June 30 of each year) in question to have BNB provide such loans
(collectively "RAL Customers").
1. RIGHTS, DUTIES AND OBLIGATIONS OF BLOCK.
1.1 Preparation and Filing of Returns. Block shall prepare and/or
file Federal Income Tax Returns (the "Returns") for RAL Customers and shall be
solely responsible for any liability to the taxpayer and/or the Internal Revenue
Service ("IRS") arising out of the preparation and filing of such Returns.
1.2 RAL Customers. Block will take such action as necessary with
respect to those RAL Customers electing to receive a RAL to obtain the
certification on the application pursuant to Section 1.3 below. With respect to
such customers, Block shall also follow all Qualifying Procedures for Refund
Anticipation Loans as set forth in Exhibit A to
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CONFIDENTIAL TREATMENT REQUESTED
Schedule II. The Credit Criteria for any year during the term hereof will be
set fourth on Schedules I and II (initial and final credit criteria,
respectively) pursuant to the procedure set forth in Sections 6.2 and 6.8 below.
1.3 RAL Application and Certification Process. Block shall obtain
information from each BNB RAL applicant to complete an application in a form
developed by BNB and printed at Block's expense which application shall request
from the applicant certain information concerning, without limitation, such
applicant's drivers license number, expiration date, as well as a major credit
card account number and expiration date or relevant information from some other
acceptable form of identification as described on Exhibit A. In addition, the
application shall contain an authorization signed by the applicant to use the
tax return information for the loan application process in accordance with
Section 301.7216-3(b) of the Federal Income Tax Regulations and shall also
include such additional consents as shall allow BNB or any affiliated Beneficial
Consumer Finance Group operating company to make collections on any delinquent
RAL and to solicit any RAL Customers for present and future loans and
financially related products including, without limitation, deposit products.
Consents for, and materials used in, the solicitation activities described in
the immediately preceding sentence shall not mention the RAL program, any names,
logotypes or marketing slogans related to the RAL program or any names,
logotypes or marketing slogans of Block, its subsidiaries or affiliates without
the prior written consent of Block. If an applicant is in the military, a photo
identification containing a service identification number may also be supplied
and shall satisfy all requirements for acceptable forms of identification for
such individual. The application shall also contain a certification signed by
the applicant that he or she: (a) has not previously filed any Return for the
applicable Tax Year, does not have any previous tax liabilities, delinquent
student loans, or any other delinquent federally guaranteed or sponsored loans,
or delinquent child support payments; (b) has not filed a petition (whether
voluntary or involuntary) under any federal or state bankruptcy or insolvency
laws; and (c) has not filed any power of attorney with the IRS and has no power
of attorney presently in effect to direct any federal tax refund to any third
party.
1.4 Completion of IRS Form No. 8453. Block shall be responsible for
the completion of IRS Form 8453 which shall indicate the applicable BNB check
routing number and applicable BNB client account number consisting of an eight
digit prefix followed by [
] and BNB as the name of the financial institution. This
form shall be signed by the Block Office as Electronic Return Originator and
also by the RAL Customer.
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The preprinted form shall also indicate that the account is a "checking" account
and that the source is "other". Block shall cause the same aforesaid
information to be contained in the appropriate date fields as part of the
electronically filed tax return.
1.5 Customer Copies. Block shall ensure that the
RAL Customer receives a copy of the signed application, IRS
Form 8453, together with any agreements and other documents
which BNB may reasonably require. If the IRS Form 8453 needs
to be revised, Block need not complete the application again.
1.6 Handling RAL Applications. The RAL Customer's
RAL application as described in section 1.3 above shall be
stored in the applicant's client file maintained by Block.
Upon BNB's and/or Tax Master's request, Block shall exercise
its best efforts to forward to Tax Masters or BNB completed
individual applications involving RALs requiring collection
processing. Those applications shall be sent to Tax Masters
or BNB in accordance with the notice provisions contained in
this Agreement unless Tax Masters notifies Block otherwise in
writing. Block may dispose of such applications following the
expiration of 40 months after the preparation of same.
1.7 Completion of RAL Disbursement Checks. Block
shall have the care and custody of consecutively numbered BNB
disbursement checks upon which Block may affix a BNB facsimile
signature by way of an imprint of the authorized BNB signatory
and which Block shall keep secure and safeguard from any loss
or misuse. Block shall deliver such checks to RAL Customers
only in accordance with this Agreement. Such RAL checks shall
be payable only at BNB. Block shall be responsible for loss,
alteration or misuse of such checks to the extend set forth in
Section l.14 below.
1.8 Additional Communication Equipment and Lines.
The parties agree that CompuServe, Incorporated shall order
such communication lines between Columbus, Ohio, and Peapack,
New Jersey, as are determined by CompuServe to be necessary to
support Block's projection of its maximum daily RAL volume, as
well as full loan application follow-up information within any
one 16-hour day, using such protocol and process as is
mutually agreed upon by BNB and CompuServe data processing
groups. Such communication lines shall continue in place
until such time as the parties hereto shall mutually agree to
discontinue the same. If the parties mutually agree to
discontinue the aforementioned communication lines at the
conclusion of any Tax Period, then the parties agree for each
subsequent Tax Period to order and install substantially
similar communication lines during the same time periods
heretofore mentioned. The cost of such communication lines
shall be borne equally by CompuServe and BNB. CompuServe
shall be billed directly for the entire cost of the com-
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munication lines and CompuServe shall, in turn, invoice Tax
Masters for 50% of such costs to be paid by BNB. Payment by
BNB of each such invoice shall be due 30 days after the date
of invoice. CompuServe shall be responsible for, and shall
bear the cost of, modems required for such communication lines
in Columbus and BNB shall be responsible for, and shall bear
the cost of, modems required for such communication lines in
Peapack.
1.9 Forwarding RAL requests to Tax Masters. Block
and BNB shall in good faith cooperate regarding the contents
of Block's Electronic Filing Software and BNB's software in an
effort to assure prompt and efficient transmission of data
between Block and BNB. Any requirements agreed upon between
the parties shall be set forth as Exhibit VI to this Agree-
ment. Block shall extract all RAL data from its IRS trans-
mission file each time a return is sent to the IRS in accor-
dance with the Electronic Data Processing Guidelines set
forth on Exhibit II. Such Exhibit may be revised upon mutual
agreement of the Parties from time to time to accommodate any
changes to Electronic Data Processing Systems and/or software
and shall be attached to the Agreement no later than July
15th of each year of this Agreement. Block shall not forward
a RAL application to Tax Masters and/or BNB without having
electronically transmitted or caused to be transmitted the
RAL Customer's Return to the IRS and without having received
positive acknowledgment of the return's acceptance from the
IRS for Electronic Filing which such acknowledgment shall
include the IRS's electronic acceptance and or rejection
indicator for Direct Deposit as described in Section 8 of the
IRS Revenue Procedures for Electronic Filing of Individual
Income Tax Returns (Tax Year 1989) in Publication 1345 (Rev.
6-89) as the same shall be amended from time to time ("Noti-
fication"). In the event it becomes infeasible to process
RAL applications in the manner specified above in this
section 1.9 due to circumstances or events beyond the control
of the parties hereto, including, without limitation, the
absence of Notification, then the parties shall endeavor in
good faith to take all reasonable actions necessary to
promptly modify the RAL program in a manner resolving the
problems caused by the infeasibility to process RAL applica-
tions. These modifications may include without limitation,
the RAL fee, RAL credit criteria, and a reasonable fee to
compensate BNB for any additional increase in the cost of
funds resulting from a modification of the aforesaid proce-
dures. Provided however, in all events, the parties shall
preserve all rights to terminate the Agreement in accordance
with the provisions hereinafter set forth. In addition, in
connection with the transmission of a Customers's RAL applica-
tion to Tax Masters and/or BNB, Block shall be responsible
for accurately transmittinig, on behalf of both Block Company-
Owned Offices and those Block Corporate Satellite Offices
which use Block to transmit such applications to BNB, all
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CONFIDENTIAL TREATMENT REQUESTED
material information, including, without limitation, social
security numbers, ("Information") which is a part of the
application, as received from the RAL Customer or the
Corporate Satellite, respectively. Also, Block shall notify
all other Block Offices of the importance of accurate trans-
mission of such Information and shall consult with BNB to
develop a system for eliminating, to the extent practicable,
errors in such transmission by such other offices. [
] Provided however BNB must
first show that diligent and timely efforts were made to make
such collections, such efforts to include an initial contact
of the RAL Customer within 45 days after the clearance of the
RAL check to BNB. Such initial contact may consist of the
sending of a first collection notice to the RAL Customer and
reasonable efforts thereafter to effect collection. All
amounts, if any, owed by Block under this section shall be
paid to BNB in one lump sum within 60 days after BNB verifies
that the failure of collection was caused by failure of Block
to transmit accurately the Information. Block shall have no
obligation to BNB if the failure of collection is due to
either the RAL Customer or its satellite office giving Block
inaccurate Information.
1.10 Proprietary and Confidentiality Rights of The
Parties. Each of the parties is informed and acknowledges
that implementation and operation of the RAL program
described in this Agreement will involve the use of certain
systems, computer programs and/or other data including busi-
ness information or trade secrets ("Proprietary Information")
that are proprietary to the respective parties. Such Pro-
prietary Information shall be identified as "confidential" or
"proprietary" by the respective parties. Each party will
retain in confidence all Proprietary Information received in
connection with this Agreement and limit access to or dis-
closure of such Proprietary Information received in connec-
tion with this Agreement solely for the purpose of operation
of the RAL Program under this Agreement.
To this end, the recipient will employ the same
degree of care to avoid disclosure of such information that
it employs with respect to its own information deemed con-
fidential. Such obligation of confidentiality shall not
extend to any information which is shown to have been known
by the receiving party prior to disclosure to it by the other
party or parties hereto or generally known to others engaged
in the same trade or business as the furnishing party, or
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that is or shall become part of public knowledge or the
literature through no act or omission by the receiving party
or its directors, officers, employees, professional advisors
or other representatives, or that shall have been lawfully
received by the receiving party from a third party other than
professional advisors and other representatives; provided
however Tax Masters and BNB upon obtaining appropriate
consents from RAL Customers may share any data from such
Customer's federal and/or state income tax returns and RAL
Customer credit applications with any of their affiliated or
associated companies.
1.11 Providing RAL Customer Returns. For collection
purposes, Block shall provide BNB with a copy of each
RAL Customer's electronically filed Return in the format
prescribed by the IRS promptly after the RAL application is
transmitted to Tax Masters but in no event later than May
30th following such Tax Period as defined below. Should
interactive processing not be available, such transmission
shall only be made after interactive processing is available
or in one batch delivery or transmission not later than May
30 following each Tax Period. In the event BNB needs any RAL
Customers' Return for collection purposes prior to May 30
following each year's Tax Period as defined below, then upon
BNB's request, and to the extent practicable, Block shall
promptly forward such RAL Customers' Returns to BNB.
1.12 Lost RAL Checks. If a RAL check disbursed by
any Block Office has become lost, or in the case where the
RAL Customer has not received the RAL check within 14 days
after such Customer's RAL check is mailed when BNB is mailing
the check in accordance with Section 7.8, Block shall notify
BNB to stop payment upon notification from the RAL Customer
that the RAL Customer has lost or not received such RAL
Check. In either case Block shall contact BNB directly to
issue a new check and an indemnifying bond in a form satis-
factory to BNB which shall be completed by the RAL Customer
holding BNB free from all costs and expenses or other losses
in the event both checks are subsequently presented for
payment.
1.13 Compliance with Laws, Rules and Regulations.
In connection with Block's preparation of Returns, Block
shall comply with all applicable laws, rules and regulations
and shall follow all instructions reasonably prescribed by
Tax Masters and BNB with respect to the preparation and
processing of RAL applications.
1.14 Indemnification. Except as otherwise limited
by this Agreement, Block shall indemnify, hold harmless and
reimburse BNB, Beneficial Franchise and/or Tax Masters and
their respective affiliates (whichever has incurred the
loss), its officers and directors and employees, for all
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expenses and costs, including without limitation, attorneys'
fees, judgments, penalties, payments of other direct expenses
and payments in settlement or other disposition of, or in
coneection with, any claims, disputes, controversies or
litigation arising out of the failure of Block to perform its
duties and responsibilities under this Agreement, including,
without limitation, liability in connection with loss,
alteration, misuse or improper completion of disbursement
checks, regardless of by whom caused, after delivery of same
to Block and prior to delivery thereof to the RAL Customer.
Block may retain attorneys of its own selection to represent
it at Block's expense. Block shall direct the defense of the
claim; provided, however, Block shall not compromise or
settle any such claim or action without prior approval of Tax
Masters, Beneficial Franchise and BNB, as applicable. If
BNB, Beneficial Franchise or Tax Masters is named a party to
any action or proceeding for which Block has a duty of
indemnification pursuant to this Section 1.14, BNB, Bene-
ficial Franchise and Tax Masters, as applicable, shall have
the right to directly defend any such action or proceeding by
retaining attorneys of its own selection to represent it at
Block's expense. Provided, however, neither BNB, Beneficial
Franchise or Tax Masters shall compromise or settle any such
claim or action without prior consultation with Block.
2. RIGHTS, DUTIES AND OBLIGATIONS OF TAX MASTERS.
2.1 Facilitating RAL Processing. Tax Masters
shall act as a facilitator in the processing of RALs between
Block and BNB in accordance with the Electronic Data Pro-
cessing Guidelines set forth on Exhibit II. Tax Masters
shall give Block access to the RAL Customer's data which is
described in greater detail in Exhibit III, Information
Accessible by Block.
2.2 Payment by Tax Masters to BNB. Tax Masters
shall pay a Transaction Fee to BNB in accordance with a
separate agreement to be entered into simultaneously herewith
by and between BNB and Tax Masters.
2.3 Compliance with Laws, Rules and Regulations.
In connection with Tax Masters facilitating the processing of
RALs, Tax Masters shall comply with all applicable laws, rules
and regulations.
2.4 Indemnification. Except as otherwise limited
by this Agreement and as specifically set forth in Section
1.14 with respect to the care and custody of disbursement
checks by Block, Tax Masters will indemnify, hold harmless
and reimburse Block, Beneficial Franchise and/or BNB or their
respective affiliates (whichever has incurred the loss), its
officers, directors and employees for all expenses and costs,
including but not limited to, attorneys' fees, judgments,
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penalties, payments of other direct expenses and payments in
settlement or other disposition of, or in connection with,
any claims, disputes, controversies or litigation arising out
of any violation of the Federal Truth in Lending Act or
Regulation Z of the Federal Reserve Board and other appli-
cable federal and state banking and consumer finance laws and
regulation, caused by either Tax Masters or BNB involving any
of the preprinted terms and disclosures set forth on the
check to RAL customers from BNB, relating to the procedures
for applying for or obtaining RALs, or relating to the RAL
applications or in any other manner to the RAL program or the
failure of Tax Masters to perform its duties and respon-
sibilities under this Agreement. Tax Masters may retain
attorneys of its own selection to represent it at Tax
Masters' own expense. Tax Masters shall direct the defense
of the claim; provided however, Tax Masters shall not com-
promise or settle any claim or action without the prior
approval of Block, Beneficial Franchise or BNB, as appli-
cable. If Block, Beneficial Franchise or BNB is named a
party to any action or proceeding for which Tax Masters has a
duty of indemnification pursuant to Section 2.4, Block,
Beneficial Franchise or BNB, as applicable, shall have the
right to directly defend any such action or proceeding by
retaining attorneys of its own selection to represent it at
Tax Masters' expense. Provided, however, neither Block,
Beneficial Franchise nor BNB shall compromise or settle any
such claim or action without prior consultation with Tax
Masters.
2.5 Clearing Account. At all times during the
terms of the Agreement, and for a period of 180 days after its
termination, Tax Masters shall maintain a segregated, ear-
marked deposit account at BNB ("Deposit Account") containing
sufficient funds for purposes of charging against the Deposit
Account any RAL disbursement check in connection with BNB's
approval of a RAL to a RAL Customer of Block. BNB shall
inform Tax Masters daily of the total amount or RAL or
disbursement checks issued and Tax Masters shall transfer the
appropriate amount to the Deposit Account which will be
transferred to the Clearing Account when checks are paid by
BNB. On Tax Master's request, BNB shall send supporting
documentation to Tax Masters with respect to any debit to the
Clearing Account established under this Section 2.5 of this
Agreement.
2.6 Review of Marketing and Collection Materials.
At Block's request, and in all cases where Tax Master's,
BNB's or Beneficial Franchise's name or tradenames are used
in such materials, Tax Masters and BNB shall review the
marketing materials in question and shall make reasonable
efforts to comment upon such materials within two (2) weeks
of receipt thereof. At BNB's request and in all cases if
8
<PAGE>
Block's name or tradenames are used in the materials, Block
shall review the materials in question and shall make reason-
able efforts to comment upon the same within two (2) weeks of
the receipt thereof. If any such materials describe perfor-
mance of obligations in connection with the RAL program
required by a party other than the party preparing same, such
other party's approval of the materials shall be obtained
prior to use thereof. Any collection letters developed by BNB
or Tax Masters shall be in a format reasonably acceptable to
Block.
2.7 Review of RAL Checks and Disclosure Statement.
Tax Masters shall review the BNB RAL checks and disclosure
statement developed by BNB and shall approve or modify such
checks and disclosure statement to the extent necessary to
comply with the Federal Truth in Lending Act and Regulation Z
requirements as Tax Masters deems necessary after consultation
and agreement with BNB. Tax Masters agrees to provide at its
cost such instruments (including the BNB RAL checks and
envelopes containing the "Rapid Refund" logo or Block's name
on the outside) in accordance with Block's specifications and
Section 5.2 below, in order that such instruments are
compatible with Block's processing equipment and standards of
trademark usage.
2.8 Assignment of Delinquent RAL Accounts. In
consideration of the payment by Tax Masters or an affiliate of
any RAL amount previously reimbursed to BNB from the Deposit
Account to the Clearing Account, any unpaid BNB RAL Account as
defined below in Section 3.1 shall be assigned by BNB to Tax
Masters for collection.
3. RIGHTS, DUTIES AND OBLIGATIONS OF BNB.
3.1 Establishment of RAL Account and Making of
Loans.
(a) Establishment of Accounts. Except as otherwise
limited by this Agreement, BNB shall process RAL applications
and provide RALs with respect to such applications received
electronically from Block according to BNB's credit criteria,
within the same day of BNB's receipt; provided, however, in
either case, such applications must be received by BNB by 9:00
a.m. Eastern Standard or Daylight Savings Time (as the case
may be). BNB shall establish an account ("RAL Account") for
the RAL Customer and shall have the right to offset against
the RAL all sums received from the IRS which are deposited in
the RAL Account in connection with such RAL Customer's refund
up to the amount of the RAL inclusive of any Transaction Fee
or other fees or charges. In the event that a RAL Customer is
mailed an IRS refund check rather than receiving the refund
electronically in the RAL Account, or receives a refund less
than the amount anticipated, BNB shall
9
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
have the right under the RAL Check Agreement with the RAL
Customer to be paid directly by such Customer. A specimen of
the BNB RAL check is attached as Exhibit IV. BNB may modify
such check from time to time to comply with regulatory
requirements.
(b) Making of Refund Anticipation Loans.
Notwithstanding the foregoing, BNB is not obligated to make a
loan to a RAL Customer until such Customer's RAL application
is approved by BNB in accordance with its credit criteria.
Subject to its credit criteria and approval of the loans as
aforesaid, BNB shall make RALs to all customers who make
applications for same at, or whose tax return or RAL
application is processed through, any Block office identified
on Exhibits I or IA described in Section 7.1 below.
Notwithstanding any other provision of this Agreement to the
contrary, BNB shall make such RALs on terms [
] and provide a level of services to RAL
customers which [
] If Block notifies BNB on or after January 1, but
on or before October 1 of any year during the term hereof that
the terms [
], BNB shall modify its program of making loans, [
]for the first full Tax Period follow-
ing such [ ]. If such [
] then
BNB shall not be required [
].
3.2 Deduction of Additional Charges. BNB shall upon
receipt of a Customer's check reconciliation record remit on
the same banking business day directly by way of an automated
clearing house credit to the appropriate Block Offices'
Company account the additional fees or charges authorized by
the RAL Customer for payment to the Block Office, including
without limitation, tax preparation fees and electronic filing
fees. In the event it becomes necessary to process a
significant number of RAL applications resulting in a
significant backlog in BNB's remitting to Block the aforesaid
additional fees and charges, then BNB shall notify Block and
Tax Masters of the delay and at such
10
<PAGE>
time the parties will negotiate in good faith a reasonable fee
to compensate Block for any additional increase in Block's
cost of funds resulting from such delay in remitting such fees
and charges.
3.3 Replacement Checks. In connection with section
1.12 relating to lost checks, Block shall issue a BNB
replacement check to the RAL Customer upon receipt from BNB of
an electronic approval to issue such check within twenty-four
(24) hours after receiving an electronic indication from Block
that Block has in its possession an indemnifying bond executed
by the RAL Customer. Such electronic indication shall
constitute a conclusive presumption of receipt by Block of
such indemnifying bond and Block shall indemnify and hold BNB
and Tax Masters harmless from any loss in the event such
indemnifying bond is lost or has in fact not been obtained.
3.4 Annual Establishment of RAL Fee and Credit
Criteria. Subject only to Block's rights under Sections 6.2
and 6.3 below, BNB shall in its exclusive discretion establish
the RAL Fee and credit criteria used by BNB in the RAL program
and shall set forth such RAL Fee and credit criteria on
Schedules I and II. BNB hereby establishes, in its sole
discretion, that the RAL fee for Tax Periods 1991, 1992 and
1994 shall be not more than $29.00.
3.5 Compliance with Laws, Rules and Regulations. In
connection with RAL applications and the procuring, processing
and extension of RALs, BNB shall comply with all applicable
laws, rules and regulations.
3.6 Indemnification. Except as otherwise limited by
this Agreement and except as specifically set forth in Section
1.14 with respect to the care and custody of disbursement
checks by Block, BNB will indemnify, hold harmless and
reimburse Tax Masters, Beneficial Franchise and/or Block or
their respective affiliates (whichever has incurred the loss),
its officers, directors and employees for all direct
out-of-pocket expenses and costs, including but not limited
to, attorney's fees, judgments, penalties, payments of other
direct expenses and payments in settlement or other
disposition of, or in connection with, any claims, disputes,
controversies of litigation arising out of the failure of BNB
to perform its duties and responsibilities under this
Agreement. BNB may retain attorneys of its own selection to
represent it at BNB's expense. BNB shall direct the defense
of the claim; provided, however, BNB shall not compromise or
settle any claim or action without the prior approval of Block
and Tax Masters. If Block, Tax Masters or Beneficial
Franchise is named a party to any action or proceeding for
which BNB has a duty of indemnification pursuant to this
Section 3.6, Block or Tax Masters, as applicable, shall have
the right to directly defend any such action or proceeding by
retaining
11
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
attorneys of its own selection to represent it at BNB's
expense. Provided, however, neither Block nor Tax Masters nor
Beneficial Franchise shall compromise or settle any such claim
or action without prior consultation with BNB.
4. RIGHTS, DUTIES AND OBLIGATIONS OF BENEFICIAL FRANCHISE.
4.1 License. Beneficial Franchise hereby grants to
Block a nonassignable, nonexclusive right and license under
U.S. Patent No. 4,890,228 ("Patent Rights") to use any data
processing system or any method falling within the scope of
any claim of the Patent Rights. Beneficial Franchise also
grants to Block the exclusive right to grant sublicenses [
] by Block or used by any H & R Block tax preparation
office (whether Company Owned, Company Owned Satellite
Franchisee, Major Franchisee or Major Franchise Satellite
office) for a substantial portion of such office's electronic
filings. Such person or entity shall hereinafter be referred
to as a "Block RAL Processor". [
]. Beneficial Franchise
hereby waives and fully releases Block and any Block RAL
Processor from any claims for infringement of Patent No.
4890228 arising from RALs made prior to or during the terms of
Block's rights under the license granted in this Section.
4.2 Warranties. Beneficial Franchise represents and
warrants that it is the owner of Patent Rights and has the
right to grant the rights and licenses described herein.
Beneficial Franchise represents and warrants that U.S. Patent
No. 4890228 is valid. [
]. BENEFICIAL FRANCHISE MAKES NO OTHER WARRANTIES,
12
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXPRESS OR IMPLIED, REGARDING THE SUBJECT MATTER OF THIS
LICENSE.
4.3 Absence of Waiver. Neither Block's acceptance
of the license granted in subsection 4.1 above, Block's grant
of any sublicenses under the license granted in subsection 4.1
above, nor the release of Block set forth in Section 4.1
constitutes or shall be deemed Block's acknowledgement of the
validity of U.S. Patent No. 4890228 or a waiver of the right
of Block or any sublicensee of Block to challenge such
validity whether during the term of this Agreement or
following termination hereof.
4.4 Indemnification. Except as otherwise limited by
this Agreement and as specifically set forth in Section 1.14
with respect to the care and custody of disbursement checks by
Block, Beneficial Franchise will indemnify, hold harmless and
reimburse Tax Masters, BNB and/or Block or their respective
affiliates (whichever has incurred the loss), its officers,
directors and employees for all direct out-of-pocket expenses
and costs, including but not limited to, attorneys fees,
judgments, penalties, payments of other direct expenses and
payments in settlement or other disposition of, or in
connection with, any claims, disputes, controversies or
litigation arising out of the failure of Beneficial Franchise
to perform its duties and responsibilities under this
Agreement. Beneficial Franchise may retain attorneys of its
own selection to represent it at Beneficial Franchise's
expense. Beneficial Franchise shall direct the defense of the
claim; provided, however, Beneficial Franchise shall not
compromise or settle any claim or action without the prior
approval of Block, BNB and Tax Masters. If Block, BNB or Tax
Masters is named a party to any action or proceeding for which
Beneficial Franchise has a duty of indemnification pursuant to
this Section 4.3, BNB, Block or Tax Masters, as applicable,
shall have the right to directly defend any such action or
proceeding by retaining attorneys of its own selection to
represent it at Beneficial Franchise's expense. Provided,
however, neither Block, BNB nor Tax Masters shall compromise
or settle any such claim or action without prior consultation
with Beneficial Franchise.
4.5 Expiration of License. Block's license under
Section 4.1 above shall run until [
],
except under those circumstances, set forth in Section [
], termination
of Block's license under the Patent Rights shall terminate any
sublicense granted by Block.
13
<PAGE>
5. LICENSE AND SUBLICENSE BY BLOCK TO BNB AND TAX MASTERS
OF CERTAIN RIGHTS; CERTAIN EXPENSES.
5.1 Sublicense of Rights Under Patent. Block hereby
grants to BNB and Tax Masters a non-exclusive and
non-assignable right and license under the Patent Rights to
use any data processing system or any method falling within
the scope of any claim of the Patent Rights in connection with
the making of RALs to any customer which uses an H & R Block
tax preparation office listed on Exhibit I or Exhibit IA or
and H & R Block tax preparation office operated by a Major
Franchisee which has selected BNB as the lender for its
territory (or an H & R Block tax preparation office operated
by a satellite franchisee of such Major Franchisee) for
electronic filing of a federal tax return.
5.2 License of Trademarks. Block hereby grants to
BNB and Tax Masters a non-exclusive and non-assignable right
and license to use the name and trademarks "H & R Block" and
"Rapid Refund" (collectively, the "Licensed Marks") in
connection with the making and processing of RALs for
customers of Block and its franchisees. Neither BNB nor Tax
Masters shall use either of such trademarks for any purpose
except the purposes specifically set forth herein. Any use of
either Licensed Mark and all good will generated thereby shall
inure to the benefit of Block. All uses of the Licensed Marks
shall be approved in advance by Block and shall be at all
times in compliance with any standards which Block may impose
in writing from time to time regarding such use. All rights
in and to the Licensed Marks which are not specifically
granted to BNB and Tax Masters shall remain with Block. BNB
and Tax Masters shall cooperate with Block in the protection
and defense of the Licensed Marks and in the prosecution, at
Block's sole option, of infringers of the Licensed Marks.
Neither BNB nor Tax Masters shall register or seek to register
any trademark, logotype or commercial symbol used by either of
them in the exercise of the rights licensed under this Section
or sublicensed by Block to BNB and Tax Masters pursuant to the
immediately preceding section of this Agreement. Block waives
and releases BNB and Tax Masters from and against, any and all
claims of liability arising in any manner from the use by BNB
or Tax Masters of either of the Licensed Marks prior to the
date hereof.
5.3 Access to Offices. Block hereby grants to BNB
and Tax Masters access to the tax preparation offices owned
and operated by Block and to the satellite franchise offices
in Block company-owned territories for the purpose of
assisting and facilitating the operation of the RAL program at
such Block offices. Access pursuant to this Section shall be
approved in advance by Block according to a procedure mutually
agreed upon by Block and BNB on or before August 1 of each
year during the term hereof.
14
<PAGE>
5.4 Certain Expenses. Block agrees in connection
with the operation of the RAL program: (i) to conduct such
advertising; (ii) to prepare forms and other written
materials; (iii) to equip its company owned offices with
computer equipment; (iv) to develop or acquire software; (v)
to maintain personnel; and (vi) to incur other expenses, in
each case as reasonably necessary to advertise and accommodate
the making of RALs to customers of Block company owned
offices.
5.5 License Fee. In consideration of the rights
granted in Sections 5.1-5.3 above, and in consideration of the
expenses incurred by Block described in Section 5.4 above, all
of which expenses are either directly or indirectly incurred
for the benefit of BNB and Tax Masters, BNB shall pay to
Block, during the Initial Term (as defined hereinafter)
hereof, the amounts set forth below (the "License Fee")
Tax Period License Fee
1992 $3 per RAL
1993 not more than $5 per RAL
1994 not more than $7 per RAL
The actual License Fee for Tax Periods l993 and l994 and for
Tax Periods occurring during any Renewal Terms hereof shall be
determined by Block in its sole discretion (subject only to
limitations for tax periods l993 and l994 set forth above) and
shall be disclosed to BNB on or before August 1 of each year
during the Term hereof. In the event that Block agrees with
any party other than BNB which makes RALs to customers of tax
preparation offices owned and operated by Block ("other
Lender") that the consideration paid by such other Lender for
the rights granted by Block to such Other Lender under terms
substantially similar to the rights granted BNB and Tax
Masters hereunder shall be less (on a per RAL basis) than the
License Fee determined as set forth above, then the License
Fee charged BNB shall be reduced to the consideration charged
such Other Lender. The License Fee shall be paid by credit to
Block's account in accordance with Section 3.2 above. The
licenses and access granted by Block to BNB and Tax Masters
shall terminate upon termination of this Agreement for
whatever reason.
6. TERM; ANNUAL DETERMINATION OF RAL FEE; TERMINATION;
EFFECT OF TERMINATION.
6.1 Term of Agreement; Renewal. The term of this
Agreement ("Term") shall commence as of August 22 , 1991
and shall expire on June 30, 1994, (the "Initial Term"),
provided, however, that unless sooner terminated, this
Agreement shall be automatically renewed and extended for 4
successive
15
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
renewal terms of three (3) years each ("Renewal Terms") or
until the expiration of U.S. Patent No. 4890228, whichever
first occurs. In the event this Agreement has not been sooner
terminated as set forth in Section 6.3 or 6.7 below, the
parties agree to review the RAL program prior to the
conclusion of the Initial Term and each Renewal Term with a
view toward entering into reasonable, good faith discussions
concerning revisions to the relationship represented by the
terms hereof, between Block, Tax Masters, Beneficial Franchise
and BNB regarding the making of RALs. Such revisions, if any,
shall be upon such terms as are mutually agreeable to the
parties thereto. If such revisions are not agreed to, the
renewal shall be on such terms and conditions as are set forth
in this Agreement.
6.2 Annual Determination of RAL Fee and Credit
Criteria. BNB shall annually establish the RAL fee
unilaterally in its sole discretion. BNB shall initially
decide upon its RAL fee no later than [ ] of each year
("Initial RAL Fee") with the actual final RAL fee to be
established by BNB no later than [ ] of each year
("Final RAL Fee") in accordance with Section 6.8 below.
BNB shall decide initially on its RAL credit criteria
no later than [ ] of any year during the Term
("Initial Credit Criteria") and shall establish final credit
criteria (which, together with the qualifying procedures on
Exhibit A) shall not be materially more restrictive of a RAL
Customer's ability to obtain a RAL than reasonable credit
criteria and qualifying procedures established by the Other
Lender whose credit criteria and qualifying procedures are
most restrictive of such ability no later than [ ]
of such year for the ensuing Tax Period ("Final Credit
Criteria").
BNB shall attach to this Agreement as Schedule I, the
Initial Credit Criteria and the Initial RAL Fee. Such
Schedule may be updated by BNB on or before [ ]
of each year during the Initial Term and each Renewal Term.
On or before [ ] and on or before
[ ] of each ensuing year of the Initial Term and
each Renewal Term, BNB agrees to attach to this Agreement as
Schedule II the Final Credit Criteria and the Final RAL Fee
for the ensuing Tax Period provided, however, that in the
event the Internal Revenue Service or an affiliated entity
("Service") ceases to electronically notify the RAL Customer,
BNB, Tax Masters or Block either contemporaneously or
subsequent to the electronic filing of a RAL Customer's
federal income tax return but prior to the disbursement of a
RAL that a Direct Deposit for a RAL Customer will not be made
("Notification") or in the event that significant external
events or occurrences beyond BNB's control become known to BNB
at
16
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
any time after BNB's determination of its Final RAL Fee each
year that are likely to affect materially net RAL revenues of
BNB for that year, BNB may after discussion with Block, and upon
not less than 10 days (2 days during any Tax Period) notice to
Block promptly modify the RAL program final credit criteria or
Final RAL Fee but only to an extent which is reasonable under
the circumstances, only if such criteria and Fee remain
reasonably competitive with the Fee and most restrictive credit
criteria of Other Lenders, if any, which are similarly situated
and similarly affected by the absence of Notification or by such
external event or occurrence and only until the effect of
absence of Notification or such event or occurrence ends or
until the end of the first Tax Period in which such absence of
Notification or event or occurrence has or is likely to have the
above-described effect, whichever comes first.
6.3 Termination and Cure.
(a) Termination. Any party may at its option
terminate this Agreement upon [ ] days prior written
notice to all other parties if (i) any other party is in
material default in the performance of any of its obligations or
duties under this Agreement and the party in default shall fail
to commence cure within such [ ] period or shall fail
thereafter diligently to prosecute cure to completion within a
reasonable time thereafter, which reasonable time shall be based
on the nature of the default and the steps required to cure, but
which in all events shall not exceed [ ] from the notice
of default [ ] from the notice of default during a Tax
Period), provided, however, that in all events any such cure
must be accomplished without substantial unreimbursed expense or
damage to any other party by reason of the cure period; (ii) the
IRS withdraws or materially changes the implementing revenue
procedures sanctioning RALs to the substantial detriment of that
party; (iii) BNB establishes a RAL Fee that [
]; (iv)
Block is permitted by then prevail- ing law and regulation to
make RALs directly, or through a lender controlled by Block.
For this purpose, control shall mean the ownership of 51% or
more of the equity or ownership interests of such lender; (v)
BNB establishes Credit Criteria or Schedule A Qualifying
Procedures which, [
]; (vi) BNB does not
modify its program in the manner or by the time required under
Section 3.1 above; or (vii) the operation of the RAL program or
the electronic filing program is made infeasible or impractical
by (x) legal or regulatory determinations, enactments or
interpretations or (y) significant external events or occur-
17
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
rences beyond that party's control provided that the parties
shall first mutually endeavor in good faith to employ reasonable
efforts to modify the program in a manner resolving the problems
caused by such legal, regulatory, or significant external events
or occurrences.
In the event that this Agreement is terminated by any
party on the basis of [
], the non-exclusive
license provided to Block by Beneficial Franchise shall
terminate effective upon the date of termination of this
Agreement. If this Agreement is terminated on the basis of
[
].
(b) Certain Cure. For purposes of Section 6.3(a), if
the default with respect to which Block gives notice of
termination is the failure or inability of BNB to make RALs as
required by this Agreement, then cure shall be accomplished, and
no termination of this Agreement shall result to the extent that
BNB arranges for a substitute performance by an Other Lender,
and such Other Lender commences, within the appropriate cure
period set forth in Section 6.3(a) (45 days, or 10 days during
the Tax Period), to make the RALs which BNB was unable to make.
Block and BNB shall use their respective best efforts in
attempting to arrange for such substitute performance. As a
means of ensuring, to the greatest extent possible, that all
customers of Block company owned and company owned satellite
offices have continued access to RALs, Block shall use its best
efforts to cause such Other Lender(s) to come to the assistance
of BNB in the circumstances described in this Section 6.3(b),
and will use its best efforts to obtain agreement from such
Other Lenders(s) to use its or their best efforts to come to the
assistance of BNB by making any RALs BNB is unable to make, in
accordance with such Other Lender(s) credit criteria, unless
such Other Lender's computer system or financial capacity
preclude the rendering of such assistance. BNB and Tax Masters
agree to use their best efforts to come to the assistance of an
Other Lender, by making RALs in accordance with BNB's credit
criteria, should such Other Lender be unable to make RALs as
required by the relationship between such Other Lender and
Block, provided BNB's and Tax Masters' computer system and
financial capcity do not preclude such assistance. The
provisions of this Section 6.3(b) shall not relieve BNB or Tax
Masters of its or their obligation to (i) diligently complete
cure under Section 6.3(a) so that BNB can again make RALs
notwithstanding substitute performance under this Section 6.3(b)
in the interim by such Other Lender; and (ii) compensate Block
for expenses and damages as described in Section 6.3(a). Also,
the provisions of this Section
18
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
6.3(b) shall be used by BNB or Tax Masters to avoid the
provisions of Section 7.5 dealing with assignment of rights and
obligations under this Agreement.
6.4 Reasonably Competitive RAL Fee. In the event that
after the Initial Term, the Base RAL fee, as defined below, is
[ ], BNB's RAL fee [
] such RAL
fee is [
]. In the event that after the Initial Term
hereof the Base RAL fee [
]. Rounding
by BNB of an RAL fee to the nearest fifty cents shall [
].
6.5 Effect of Termination. After any termination, the
RAL accounts established by BNB will continue to be the property
and responsibility of BNB. Termination shall not affect
existing obligations.
6.6 Return of Proprietary Information. Upon
termination of this Agreement, the parties will return to
any furnishing party all proprietary and confidential
information received in connection with this Agreement and
certify in writing to such furnishing party that such
receiving party has not retained any copies of such
proprietary or confidential information.
6.7 Phase-Out of RAL Program After Termination.
Upon termination of this Agreement pursuant to Section 4.2
[
] or Section 6.3(a)(iv),
the parties shall extend the term of this Agreement an
additional tow (2) years ("Phase-Out Term") during which
terms BNB shall be the RAL lender for not less than 25% and
15% in number of the Block company-owned offices during the
first and second years of the Phase-Out Term respectively.
With respect to a termination pursuant to Section
6.3(a)(iv), the Phase-Out Term shall not begin until after
the expiration of the Initial Term and the first Renewal
Term. If the party terminating the Agreement pursuant to
Section 4.2 is a party other than Block [
], BNB shall be the RAL lender for
not less than 50% in number of the Block company-owned
offices during each year of the Phase-Out Term and the
license provided to Block by Beneficial Franchise pursuant
to Section 4.1 shall terminate at the expiration of the
Phase-Out Term. During the Phase-Out Term, the parties
agree to engage in good faith discussions concerning
continuation of the relationship and revi-
19
<PAGE>
sions to the Agreement that are mutually agreeable to the
parties.
6.8 Notice of Terms Schedule. In accordance with
the requirements of this Agreement, Block and BNB shall
advise the other party of the assignment of Block Offices,
License Fee and RAL Fee determination, as applicable, for
the ensuing Tax Period pursuant to the following schedule:
July 15 - Block provides BNB with schedule
of office locations assigned to BNB
in Exhibits I, IA and IB.
August 1 - Block advises BNB of Block's
License Fee in Schedule IA.
August 15 - BNB advises Block of BNB's Initial
RAL fee and Credit Criteria in
Schedule I.
September 1 - Block advises BNB whether BNB's RAL
fee is reasonably competitive under
Section 6.4 and whether BNB's credit
criteria are materially more
restrictive than that of the most
restrictive Other Lender under
Section 6.2. If BNB's RAL fee is not
reasonably competitive, Block shall
advise BNB of the closest RAL fee
amount below which BNB's RAL fee
shall be reasonably competitive
pursuant to Section 6.4. If BNB's
Credit Criteria are materially more
restrictive pursuant to Section 6.2,
Block shall so advise BNB and provide
BNB with information concerning less
restrictive credit criteria.
September 15 - BNB advises Block of BNB's Final
RAL fee and Credit Criteria in
Schedule II.
7. MISCELLANEOUS
7.1 Offering of RALs. Except as otherwise provided
below in this Section, during the Initial Term and any Renewal
Terms, neither Block, through Company-owned or participating
Satellites as described on Exhibits I and IA, respectively,
BNB, Tax Masters nor Beneficial Franchise, shall offer directly
or indirectly any RALs to any of its customers except in
connection with a RAL program offered by or through Tax Masters
and/or BNB and Block respectively or through Company owned or
participating franchises or any affiliates of Tax Masters
and/or BNB or Block. The limitations contained in the
preceding sentence shall not apply to Tax Masters and/or BNB in
connection with their offering a RAL Program to Tax Centers of
America ("TCA"), any affiliate,
20
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
successor, or assign, or in such cities, towns or metropolitan
districts principally served by Block Major Franchisees or
Satellites who have not elected by August 31 prior to the
current Tax Period to participate in the RAL program offered in
conjunction with Block, BNB and/or Tax Masters; provided
further, however, that in the event Tax Masters and/or BNB
offers the RAL program in accordance with this Section 7.1 to
subscribers other than Block with a cost less than that
involved in its RAL program with Block, it shall provide RALs
in conjunction with its RAL program with Block with the same or
lower cost offered in conjunction with such other subscribers.
During the term of this Agreement, BNB, Tax Masters and
Beneficial Franchise agree that neither of them nor any of
their affiliates (defined to mean persons or entities
controlled by, in control of or under common control with, BNB,
Tax Masters or Beneficial Franchise) will independently, or
through any tax preparation service other than Block, offer
RALs in any city where Block or any Major Franchise or
Satellite is offering RALs or a substantially similar
refund-loan product through BNB; provided, however, that BNB
may offer RALs to customers of other tax preparation services
in cities where BNB is not the lender for the Block system.
During the term of this Agreement, Block agrees that RALs will
not be offered at Block Company-owned offices through a lender
other than BNB in any city where BNB is offering RALs or a
substantially similar refund-loan product to Block Offices.
Block agrees that for each Tax Period of the Initial
Term and any Renewal Term, BNB will be the RAL lender for not
less than 40% in number of the Block company-owned offices.
Block shall endeavor to cause BNB to be the lender for not less
than 40% of Block company-owned satellite franchisees, [
]. The
identity of the actual offices shall be determined as set forth
below.
The Block Offices for which BNB shall be the lender
shall be disclosed to BNB on or before July 15 of each year
provided, however, that additional Block Offices may be added
to the RAL Program with the mutual agreement of the parties
hereto. Block shall consult with BNB concerning the identity
of the office locations for which BNB shall be the lender, and
Block agrees to negotiate in good faith any modifications
requested by BNB to the proposed Block Offices designated by
Block, and there shall be set forth on Exhibit I and IA those
Block Offices for which BNB will be the lender and such
Exhibits shall be updated for each succeeding Tax Period during
the term of this Agreement. In making such decision regarding
Block Company owned locations, Block shall in good faith
consider the inconvenience to BNB of being the lender for
offices in territories which are principally served by
21
<PAGE>
Other Lenders, the intent of this Section being that
consideration will be given to whether (i) the offices which
are assigned to BNB are reasonably comparable to other Block
Offices in terms of volume production, (ii) BNB has affiliates
in those states where BNB is to be the lender for Block
Offices, (iii) BNB would be able to offer RALs or substantially
similar refund-loan products to tax preparers other than Block
in locations where BNB is not the lender for Block Offices, and
(iv) to the extent practicable, states and offices previously
assigned to BNB shall remain substantially unchanged from year
to year. Provided, further, however, Block shall have the
ability to delete from Exhibit I and IA any location and Block
may substitute locations (subject to the immediately preceding
sentence of this Section) as long as the net effect of the
deletions and substitutions does not result in a reduction of
the offices on Exhibits I and IA (with respect to the
anticipated number of RALs) and the number of offices in
Indiana and Ohio set forth on Exhibit I and IA. Block will
consult with BNB before making any such substitutions or
deletions and will in good faith endeavor to modify anticipated
substitutions and additions responsive to reasonable requests
for such modifications by BNB.
7.2 Audit Rights of the Parties. Each party agrees
that they will each make the applicable books and records
available to the other parties as such party may reasonably
request in connection with any of the payments to be made under
this Agreement.
7.3 Other Agreements. Each party warrants that its
execution of this Agreement does not constitute a violation of
any agreement or relationship to which it is a party.
7.4 Use of Name; Agency. Except as otherwise set
forth herein, Tax Masters, Beneficial Franchise, Block and BNB
agree not to use the trade names or service marks of any other
party without the other party's express written consent. This
Agreement does not establish or create a joint venture among
Block, Beneficial Franchise, Tax Masters or BNB and the
employees, agents or representatives of the respective parties
are not the partners, agents or representatives of each other.
7.5 Assignment. Except as set forth in Section
6.3(b), performance under this Agreement may only be assigned
by either Tax Masters, Beneficial Franchise or BNB with the
prior consent of Block upon thirty (30) days prior written
notice. Such consent shall not be unreasonably withheld.
7.6 Litigation. In the event of litigation among the
parties with respect to this Agreement, the prevailing party
shall be entitled to reasonable attorney's fees from
22
<PAGE>
the losing party or parties, including such fees incurred
during any such litigation on appeal.
7.7 Excusable Delays. If BNB's, Beneficial
Franchise's, Tax Masters' or Block's performance of any of the
obligations hereunder is prevented, restricted or interfered
with by reason of fire, or other casualty or accident; strikes
or labor disputes, war or other violence; any law, order,
proclamation, regulation, ordinance, demand, or requirement of
any government agency; or any act or condition whatsoever
beyond their reasonable control (provided however, the failure
of any computer hardware, software, or communication system
maintained by BNB in connection with the RAL program, shall not
be "excused" under this Section, to the extent such failure is
not caused by or the result of any of the above-mentioned
factors or conditions), BNB, Beneficial Franchise, Tax Masters
or Block upon giving prompt notice, shall be excused from such
performance to the extent of such prevention, restriction or
interference; and same shall not therefore constitute a default
of this Agreement, provided, however, BNB, Beneficial
Franchise, Tax Masters and Block shall use reasonable efforts,
including, without limitation, the best efforts referred to in
Section 6.3(b) to arrange for substitute performance, to avoid
or remove such causes of non-performance and shall continue
performance hereunder whenever such causes are removed.
7.8 Contingent Issuing of Checks by BNB. In the
event it becomes infeasible due to events or occurrences beyond
the parties control for Block Offices to issue RAL disbursement
checks directly to the RAL Customer, then the parties agree
that BNB shall issue such checks directly to the RAL
Customers. If any check is mailed by BNB, BNB shall mail the
RAL check to the RAL Customer within the same day of BNB's
receipt of the RAL Customer's application provided, however, in
either case, such applications must be received by BNB by 9:00
a.m. Eastern Standard or Daylight Savings Time (as the case may
be).
7.9 Disclaimers; Block's Responsibilities. TAX
MASTERS, BENEFICIAL FRANCHISE, BLOCK, AND BNB'S OBLIGATIONS
UNDER THIS AGREEMENT ARE IN LIEU OF ALL WARRANTIES, EXPRESS OR
IMPLIED, EXCEPT AS OTHERWISE PROVIDED IN SECTION 1.7 WITH
RESPECT TO BLOCK'S CARE AND CUSTODY OF THE DISBURSEMENT CHECKS,
NEITHER TAX MASTERS, BENEFICIAL FRANCHISE, BNB, NOR BLOCK WILL
BE LIABLE FOR INCIDENTAL, SPECIAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, LOSS OF PROFITS OR INCOME, LOSS OF USE OR OTHER
BENEFITS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
THE SERVICES PERFORMED HEREUNDER. PROVIDED, HOWEVER, WITH
RESPECT TO BLOCK'S RESPONSIBILITIES UNDER SECTION 1.7, THE
PARTIES AGREE THAT BLOCK WILL NOT BE LIABLE FOR INCIDENTAL,
SPECIAL, OR INDIRECT DAMAGES BUT WILL BE LIABLE FOR ANY
INTEREST CHARGES. It is the responsibility
23
<PAGE>
of Block to ensure that all of its files are adequately
duplicated and documented. Tax Masters will not be responsible
for failure to so do, nor for the cost of reconstructing data
stored on disc files, tapes, memories, etc. lost during the
course of performance of the services provided for in this
Agreement.
7.10 Applicable Law. This Agreement will be governed
by and interpreted in accordance with the laws of the State of
Delaware.
7.11 Notices. All notices required or permitted to be
given under this Agreement shall be in writing and shall be
given by registered or certified mail, return receipt
requested, addressed to each as follows:
If to Block to: H & R Block, Inc.
4410 Main Street
Kansas City, Missouri 64lll
Attention: Mr. Harry Buckley
If to BNB to: Beneficial National Bank
P.O. Box 1551
Wilmington, DE 19899-1551
Attention: President
and Wheeler K. Neff
General Counsel
If to Tax Masters to: Beneficial Tax Masters Inc.
200 Beneficial Center
Peapack, New Jersey 07977
Attention: Ross N. Longfield
Any party may change the address to which is desires
notices to be sent by giving the other parties ten (10) days
prior notices of any such change.
Any notice shall be deemed given upon its receipt by
the party to whom the notice is addressed.
7.12 Severability. If any provision of this Agreement
other than a provision dealing with fees to Block, Credit
Criteria or RAL Fees charged to customers of Block shall for
any reason be held invalid, illegal or unenforceable, same
shall not affect the validity of this Agreement or any other
provision hereof and this Agreement shall be interpreted and
construed as if such provision to the extent invalid, had not
been contained herein. The parties shall in good faith
endeavor to redesign the RAl program or the terms hereof in a
manner consistent with the intent of this Agreement before
terminating this Agreement pursuant to this Section.
24
<PAGE>
7.13 Entire Agreement. Except as provided in Section
2.2, this Agreement represents the entire agreement between the
parties with respect to the subject matter set forth herein and
each party warrants and represents that there are no oral
understandings between or among them or other written documents
that differ from the terms and conditions of this Agreement.
This Agreement may be modified only by a written agreement,
signed by all of the parties.
The parties have executed and delivered this Agreement
as of the day and year first above written.
ATTEST: BENEFICIAL NATIONAL BANK
/s/ Eileen F. Caulfield By:/s/ Wheeler K. Neff
Eileen F.Caulfield Wheeler K. Neff
Asst. Secretary Senior Vice President
ATTEST: BENEFICIAL TAX MASTERS INC.
/s/ Janice L. Lewis By:/s/ Elizabeth A. Dawson
Janice L. Lewis, Elizabeth A. Dawson,
Secretary Vice President
ATTEST: BENEFICIAL FRANCHISE COMPANY INC.
/s/ Janice L. Lewis By:/s/ Elizabeth A. Dawson
Janice L. Lewis, Elizabeth A. Dawson,
Secretary Vice President
ATTEST: H & R BLOCK, INC.
By:/s/ Thomas M. Bloch
Thomas M. Bloch, President
25
<PAGE>
Specimen Copy
Schedule I
INITIAL CREDIT CRITERIA AND INITIAL RAL FEE FOR TAX PERIOD
January 1, 1992 - June 30, 1992
Initial Credit Criteria
The RAL Applicant must:
1. Have a valid Federal Income Tax Return for Tax Year 1991
acceptable by the IRS for Electronic Filing and Direct Deposit,
and anticipate a minimum Federal Income Tax Refund of three
hundred ($300) dollars; and a maximum RAL amount of three
thousand ($3,000) dollars (inclusive of any fees or charges).
2. Be eighteen (18) years of age.
3. Comply with the Identification and Qualifying Procedures for a
Refund Anticipation Loan through Beneficial National Bank as set
forth on Exhibit A attached hereto.
4. Not previously have filed any Federal Income Tax Return for the
Tax Year 1991, not have any previous tax liabilities, delinquent
student loans, or any other delinquent federally guaranteed or
sponsored loans, or delinquent child support payments.
5. Not have a petition filed (whether voluntary or involuntary)
under any federal or state bankruptcy or insolvency laws, and
not have obtained a RAL from BNB in a prior year that has been
discharged in bankruptcy.
6. Not have a Power of Attorney that is presently in effect or on
file with the IRS to direct the Federal Tax Refund to any Third
Party.
Initial RAL Fee
The Initial RAL Fee established by BNB for the Tax Period January 1,
1992 - June 30, 1992 shall be .
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
QUALIFYING PROCEDURES FOR A REFUND ANTICIPATION LOAN
THROUGH BENEFICIAL NATIONAL BANK
Listed below are procedures for qualifying a tax client for a Refund
Anticipation Loan.
1. IDENTIFICATION
Applicant must have [
].
GROUP A GROUP B
[ ] [
]
[ ] [
]
[ [ ]
]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ]
[ ]
[ ]
[ ]
[
]
[
].
<PAGE>
2. SOCIAL SECURITY NUMBER/NAME VALIDATION
Applicant must produce one of the following, in order of
preference, and the tax preparer must initial the application
certifying they have seen it.
A. A Current Year IRS Mailing Label.
B. A current year RAL Priority Card.
C. A copy of the 1990 Tax Return, W-2's, etc.
D. A Social Security card issued by the Social
Security Administration.
E. Current Military Identification.
The purpose of the Social Security Number/Name Validation is
to insure that the tax return will successfully "post" at the
IRS. This can only be assured if the return is filed using
the same name and Social Secutiry Number that the return was
filed successfully under the previous year. If the name and
Social Security Number don't match, the refund may be frozen
or "flipped" to a paper refund issued to the taxpayer.
Therefore, if a RAL is requested, you cannot:
(1) Change the primary name on the return due to
divorce or name change from the way the return was
filed on the 1990 tax return unless the current
mailing label reflects the change.
(2) Switch the "primary taxpayer" on a joint return
from one spouses to the other. In other words, the
primary taxpayer must be the same as on the 1990
return.
(3) Accept for RAL a return for a spouse who is filing
separately, single or head of household, for the
first time, after married filing jointly. (Primary
taxpayer on the previous joint return now filing
separately, single or head of household, is
eligible.)
The safest course is to obtain the current mailing label
whenever possible. When the check digit is entered by the
data entry operator, it will validate correctness of the
Social Security Number. (Also check W-2's for consistency of
names and Social Security Numbers). Make sure the name and
Social Security Number are entered clearly and correctly on
the tax return.
2
<PAGE>
3. PHONE CONTACT
Must have at least one valid phone number (home or work) where
client can be reached. This phone number must be keyed in as
part of the computer input for the RAL application to be
accepted.
4. OUTSTANDING LIABILITIES
Make sure the client understands that no application can be
submitted if there are outstanding tax liabilities, student
loans, child support, or current bankruptcy. (See
application.)
5. ESTIMATED TAX PAYMENTS
If Estimated Tax Payments are present on the client's tax
return a RAL application must not be permitted. Many returns
with Estimated Tax Payments do not match the payment records
on the IRS Masterfile which delays the processing of the tax
return and causes a paper check to be issued to the taxpayer
rather than Direct Deposit to the account at BNB.
6. NRA OR APPLIED FOR SOCIAL SECURITY NUMBERS
If spousal social security number on a joint return is equal
to NRA or Applied For (Social Security Number), a RAL
application must not be permitted.
3
<PAGE>
Specimen Copy
Schedule II
FINAL CREDIT CRITERIA AND FINAL RAL FEE FOR TAX PERIOD
January 1, 1992 - June 30, 1992
Final Credit Criteria
The RAL Applicant must:
1. Have a valid Federal Income Tax Return for Tax Year 1991
acceptable by the IRS for Electronic Filing and Direct
Deposit, and anticipate a minimum Federal Income Tax Refund
of three hundred ($300) dollars; and a maximum RAL amount of
three thousand ($3,000) dollars (inclusive of any fees or
charges).
2. Be eighteen (18) years of age.
3. Comply with the Identification and Qualifying Procedures for
a Refund Anticipation Loan through Beneficial National Bank
as set forth on Exhibit A attached hereto. If there is
evidence of multiple surnames on the identification
presented, only a current year IRS mailing label or a current
year RAL Priority Card will be acceptable forms of name and
social security number validation.
4. Not previously have filed any Federal Income Tax Return for
the Tax Year 1991, not have any previous tax liabilities,
delinquent student loans, or any other delinquent federally
sponsored loans, or delinquent child support payments.
5. Not have a petition filed (whether voluntary or involuntary)
under any federal or state bankruptcy or insolvency laws and
not have obtained a RAL from BNB in a prior year that has
been discharged in bankruptcy.
6. Not have a Power of Attorney that is presently in effect or
on file with the Internal Revenue Service to direct the
Federal Tax Refund to any Third Party.
Final RAL Fee
The Final RAL Fee established by BNB for the Tax Period January 1,
1992 - June 30, 1992 shall be .
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
QUALIFYING PROCEDURES FOR A REFUND ANTICIPATION LOAN
THROUGH BENEFICIAL NATIONAL BANK
Listed below are procedures for qualifying a tax client for a Refund
Anticipation Loan.
1. IDENTIFICATION
Applicant must have [
].
GROUP A GROUP B
[ ] [
]
[ ] [
]
[ [ ]
]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ]
[ ]
[ ]
[ ]
[
]
[
].
<PAGE>
2. SOCIAL SECURITY NUMBER/NAME VALIDATION
Applicant must produce one of the following, in order of
preference, and the tax preparer must initial the application
certifying they have seen it.
A. A Current Year IRS Mailing Label.
B. A current year RAL Priority Card.
C. A copy of the 1990 Tax Return, W-2's, etc.
D. A Social Security card issued by the Social
Security Administration.
E. Current Military Identification.
The purpose of the Social Security Number/Name Validation is
to insure that the tax return will successfully "post" at the
IRS. This can only be assured if the return is filed using
the same name and Social Secutiry Number that the return was
filed successfully under the previous year. If the name and
Social Security Number don't match, the refund may be frozen
or "flipped" to a paper refund issued to the taxpayer.
Therefore, if a RAL is requested, you cannot:
(1) Change the primary name on the return due to
divorce or name change from the way the return was
filed on the 1990 tax return unless the current
mailing label reflects the change.
(2) Switch the "primary taxpayer" on a joint return
from one spouses to the other. In other words, the
primary taxpayer must be the same as on the 1990
return.
(3) Accept for RAL a return for a spouse who is filing
separately, single or head of household, for the
first time, after married filing jointly. (Primary
taxpayer on the previous joint return now filing
separately, single or head of household, is
eligible.)
The safest course is to obtain the current mailing label
whenever possible. When the check digit is entered by the
data entry operator, it will validate correctness of the
Social Security Number. (Also check W-2's for consistency of
names and Social Security Numbers). Make sure the name and
Social Security Number are entered clearly and correctly on
the tax return.
2
<PAGE>
3. PHONE CONTACT
Must have at least one valid phone number (home or work) where
client can be reached. This phone number must be keyed in as
part of the computer input for the RAL application to be
accepted.
4. OUTSTANDING LIABILITIES
Make sure the client understands that no application can be
submitted if there are outstanding tax liabilities, student
loans, child support, or current bankruptcy. (See
application.)
5. ESTIMATED TAX PAYMENTS
If Estimated Tax Payments are present on the client's tax
return a RAL application must not be permitted. Many returns
with Estimated Tax Payments do not match the payment records
on the IRS Masterfile which delays the processing of the tax
return and causes a paper check to be issued to the taxpayer
rather than Direct Deposit to the account at BNB.
6. NRA OR APPLIED FOR SOCIAL SECURITY NUMBERS
If spousal social security number on a joint return is equal
to NRA or Applied For (Social Security Number), a RAL
application must not be permitted.
3
<PAGE>
EXHIBIT I
H & R BLOCK
1992 RAPID REFUND SITES
See attached
<PAGE>
EXHIBIT IA
H & R BLOCK
1992 RAPID REFUND SITES
Company-Owned Satellites
State of Indiana
Region 25
<PAGE>
Exhibits I and IA consist of a 56-page computer printout
listing the H&R Block 1992 Rapid Refund Sites
constituting the 40% of Block's sites to which this
agreement pertained. When the contract was originally
filed with the Company's 1991 10-K, confidential
treatment of the list was granted by the Securities and
Exchange Commission. The Company has not refiled
Exhibits I and IA with this 10-K/A because (1) there
have been numerous changes in such sites since 1992 and
(2) the Company now has a contract for 100% of the Block
sites, making the previous list immaterial.
The computer printout of the 1992 Rapid Refund Sites
contained the following information: District Codes,
District Names, Office Addresses; Telephone numbers,
Contact Name, Bank Name, Bank Transit Numbers, and Bank
Account Numbers.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT II
H & R BLOCK - BENEFICIAL NATIONAL BANK
ELECTRONIC DATA PROCESSING GUIDELINES
The following information describes the data processing
environment which is necessary for the completion and control
of RAL transactions. The software, data communications
facilities, hardware, data transactions, and process are
outlined to ensure that each entity produces and receives the
information necessary to process the RAL transactions in a
controlled and timely manner. The entities involved are:
H&R Block Corporate Sponsored Processing Centers - Data
Entry and Processing
(Various Sites)
Compuserve - ADS/Rapid Refund ("Compuserve")
Columbus, Ohio
Internal Revenue Service - Federal Income Tax Filing
Cincinnati, Ohio and Ogden, Utah, Andover,
Massachusetts, Austin , Texas, and Memphis Tennessee
Beneficial National Bank - Banking Services, Check
Reconciliation, Data Processing
Wilmington, Delaware
Beneficial Data Processing Corp. - Data Processing
Peapack, New Jersey
Data formats are to be agreed upon by Compuserve, Tax Masters
and BNB and are to be made available to H&R Block Corporate,
Kansas City, Missouri by July 15 of each year of this Agreement.
SOFTWARE
[
].
The software to be used by the H&R Block Corporate Processing
Centers will be developed by H&R Block according to the
specifications and record layouts agreed upon by Tax Masters/BDPC
and H & R Block/Compuserve and attached to this Exhibit II as
Schedule A such Schedule to be attached no later than August 15,
1989 and thereafter July 15 of each year of this Agreement.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
The software to be used by the IRS is their own product to
accommodate the transactions, data formats and file
specifications to be provided by the IRS. The software to be
used by BNB will be developed by BNB according to the
specifications and record layouts to be agreed upon between BNB
and Tax Masters/BDPC.
COMMUNICATION
The communication environment will involve leased phone lines
between Compuserve, Columbus, Ohio and the Tax Masters facility
in Peapack, New Jersey. Compuserve will arrange for and
administer this facility as described in Section 1.8 of the
Agreement.
Dial back-up between Columbus, Ohio and Peapack, New Jersey will
be included for use in case of leased line failure; moden sets on
each end will include a spare medium in case of a modem failure.
DATA TRANSACTIONS
[
]
- [ ]
- [ ]
[
]
- [ ]
- [
]
- [ ]
- [
].
2
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
PROCESSING
[
].
[
].
3
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT III
Information Accessible by Block
[
].
[
].
[
]
- [ ]
- [ ]
- [ ]
- [ ]
- [
]
- [ ]
<PAGE>
EXHIBIT IV
BNB
[See RAL check attached]
<PAGE>
EXHIBIT IV-a
Exhibit IV-a is a photocopy of the face of a cashier's check and
stub to be issued by Beneficial National Bank in connection with
the RAL program.
The face of the cashier's check includes the logo of the bank on
which the check is drawn (Beneficial National Bank, Member FDIC,
Wilmington, DE 19899-1551), the patent number, the check number,
a place for the payee's social security number, a section for the
payee's name and address; a section for the amount of the check;
bank routing numbers; a notice that the check is not valid for
amounts greater than $3,300 or after 60 days from date of
issuance or after Oct. 15, 1992, whichever is earlier; and a
telephone number for check verification (1-800-524-0628).
The check stub shows the following: Beneficial National Bank's
logo; the check number; a notation that the stub is
non-negotiable; spaces for the date and the payee's social
security number; a notation to see the reverse side of the stub
for a continuation of disclosures; a notation to remove the stub
and retain it before depositing the check; and the following
truth-in-lending disclosures:
Itemization of Amount Financed
1. Amount paid directly to you.
2. Amount paid to
3. Amount paid to BNB for prior year unpaid RAL
4. Amount financed (Items 1 + 2 + 3).
5. Total Prepaid Finance Charge (Itemized below):
Amount paid to BNB
6. Total RAL (Items 4 + 5).
The following additional information is shown in a box on the
stub:
1. Amount Financed (the amount of credit provided to you
or on your behalf).
2. FINANCE CHARGE (the dollar amount the credit will cost
you).
3. Total of payments (the amount you will have paid after
you have made all scheduled payments).
4. ANNUAL PERCENTAGE RATE (the cost of your credit as a
yearly rate).
<PAGE>
EXHIBIT IV-b
Exhibit IV-b is a photocopy of the reverse side of the cashier's
check and the stub.
The stub shows additional truth-in-lending disclosures as
follows:
Demand Feature: This loan has a demand feature and the
disclosures herein, including the payment schedule, are
based on an assumed maturity of one year.
Payment Schedule: Under the assumption set forth in the
previous section, a single payment in full is assumed to be
due on the first anniversary of the date of the
accompanying check, noted on the reverse side.
Security Interest: You have provided us with a security
interest in your tax refund payable by the IRS and in the
account where it is deposited.
Prepayment: If you pay off early, you will not be entitled
to a refund on part or all of the Finance Charge.
Refer to the Loan Agreement and the Application,
Certification and Authorization for other information.
** Beneficial National Bank ("BNB")
***Refund Anticipation Loan ("RAL")
The reverse side of the cashier's check provides for the payee's
signature(s) and endorsement(s) and the following loan agreement:
BENEFICIAL NATIONAL BANK
LOAN AGREEMENT
In this Loan Agreement which includes the Truth-In-Lending
Disclosure Statement on the attached check stub, the words
"you", "your" and "yours" refer to the payee(s) named on
the reverse side to whom this check is issued. The words
"we", "us" and "our" refer to Beneficial National Bank
("BNB"), the lender named on the reverse side, which issued
this check.
By endorsing this check above, you promise to pay us on
demand the amount set forth in the "Total of Payments"
section on the attached check stub. You further agree to
each of the terms of this Loan Agreement and the
Application, Certification and Authorization which are
incorporated in and hereby made a part of this Loan
Agreement.
Security: You hereby grant us a security interest in (1)
the anticipated refund to be paid to you by the Internal
Revenue Service ("IRS") for the tax year on which this
<PAGE>
check is based, (2) the account described below and (3) all
the funds deposited in such account.
You agree that an account is hereby opened in your name at
BNB to receive payment of your refund from the IRS. You
further agree that we may withdraw any and all amounts in
such account from time to time to repay any amounts under
this Loan Agreement due us or any BNB affiliate to which
your loan is assigned.
